<PAGE> 1
FORM 10-Q
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 1-11966
ALLNET COMMUNICATION SERVICES, INC.
(Exact name of registrant as specified in its charter)
MICHIGAN 36-3098226
(State of incorporation) (IRS Employer ID No.)
30300 Telegraph Road, Bingham Farms, Michigan 48025-4510
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (810) 647-6920
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
As of August 1, 1994, the registrant had 1,000 shares of Common Stock
outstanding.
OMMISSION OF INFORMATION BY CERTAIN WHOLLY-OWNED SUBSIDIARIES
The registrant meets the conditions set forth in General Instruction H(1)(a)
and (b) of Form 10-Q and is therefore filing this Form with the reduced
disclosure format.
<PAGE> 2
ALC COMMUNICATIONS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
----------- ------------
(Unaudited)
(In Thousands)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 23,006 $ 1,819
Accounts receivable, less allowance for doubtful accounts of
$3,684,000 and $3,974,000 71,466 58,761
Other current assets 7,137 4,543
-------- --------
Total Current Assets $101,609 $ 65,123
Fixed Assets:
Communication systems $ 87,653 $ 81,752
Other equipment and leasehold improvements 33,674 29,785
Construction in progress 6,852 6,722
-------- --------
$128,179 $118,259
Less accumulated depreciation and amortization 75,052 69,918
-------- --------
Total Fixed Assets $ 53,127 $ 48,341
Cost in excess of net assets acquired 48,029 48,792
Deferred income taxes 10,240 10,240
Intangibles and other assets 27,240 21,045
-------- --------
Total Assets $240,245 $193,541
======== ========
</TABLE>
See notes to consolidated financial statements
<PAGE> 3
ALC COMMUNICATIONS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
------------ -----------
(Unaudited)
(In Thousands)
<S> <C> <C>
Current Liabilities:
Accounts payable $1,213 $1,397
Accrued liabilities 25,830 16,855
Accrued network costs 41,943 33,482
Taxes other than income 10,472 11,592
Notes payable, capitalized leases and other long-term debt 285 392
-------- --------
Total Current Liabilities $79,743 $63,718
Long-term Liabilities:
Notes payable, capitalized leases and other long-term debt $3,433 $3,263
Senior Subordinated Notes 79,396 84,335
-------- --------
Total Long-Term Liabilities $82,829 $87,598
-------- --------
Total Liabilities $162,572 $151,316
Stockholders' equity:
Preferred Stock, par value $0.01; authorized -- 14,784,000
shares; issued and outstanding -- none
Common Stock, par value $0.01; authorized -- 200,000,000
shares; issued and outstanding -- 33,585,000
and 32,948,000 shares $336 $329
Capital in excess of par value 138,692 132,378
Paid-in capital -- Warrants 11,770 12,129
Accumulated deficit (73,125) (102,611)
-------- --------
Total Stockholders' Equity $77,673 $42,225
-------- --------
Total Liabilities and Stockholders' Equity $240,245 $193,541
======== ========
</TABLE>
See notes to consolidated financial statements
<PAGE> 4
ALC COMMUNICATIONS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ -----------------
June 30, June 30, June 30, June 30,
1994 1993 1994 1993
-------- -------- --------- --------
(In Thousands Except Per Share Amounts)
<S> <C> <C> <C> <C>
Revenue $135,908 $104,233 $265,697 $206,077
Operating Expenses:
Cost of communication services $74,388 $56,824 $144,398 $112,291
Sales, general and administrative 32,451 29,575 63,682 58,090
Depreciation and amortization 4,263 2,826 8,290 5,680
-------- ------- -------- --------
Total Operating Expenses $111,102 $89,225 $216,370 $176,061
-------- ------- -------- --------
Operating Income $24,806 $15,008 $49,327 $30,016
Interest expense (net of interest and other income of $330,000,
$79,000, $695,000 and $131,000) 1,615 2,866 3,241 6,520
-------- ------- -------- --------
Income Before Income Taxes, Extraordinary Item and
Cumulative Effect of Accounting Change $23,191 $12,142 $46,086 $23,496
Income taxes 8,350 3,750 16,600 7,100
-------- ------- -------- --------
Income Before Extraordinary Items and Cumulative Effect
of Accounting Change $14,841 $8,392 $29,486 $16,396
Extraordinary Item:
Loss on early retirement of debt (net of
income tax benefit of $4,000,000) (7,490) (7,490)
Cumulative effect of change in method of accounting for
income taxes 13,500
-------- ------- -------- --------
Net Income $14,841 $902 $29,486 $22,406
========= ======= ======= ========
Earnings per common and common equivalent share:
Income before extraordinary item and cumulative effect
of accounting change $0.39 $0.23 $0.77 $0.46
Extraordinary item:
Loss on early retirement of debt (0.21) (0.21)
Cumulative effect of change in method of accounting for
income taxes 0.38
-------- ------- -------- --------
Net Income $0.39 $0.02 $0.77 $0.63
========= ======= ======= ========
Weighted Average Common and Common Equivalent Shares 38,282 35,635 38,289 35,058
========= ======= ======= ========
</TABLE>
See notes to consolidated financial statements
<PAGE> 5
ALC COMMUNICATIONS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
------------------------
June 30, June 30,
1994 1993
----------- -----------
(In Thousands)
<S> <C> <C>
Operating Activities
Net income $ 29,486 $ 22,406
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 5,430 4,775
Amortization of intangible assets and bond discount 2,942 1,678
Gain (loss) on sale of assets (98) 3
Cumulative effect of change in accounting principle (13,500)
Loss on retirement of debt, net of tax 7,490
Increase in accounts receivable and
other current assets (15,298) (8,803)
Increase in current liabilities 15,564 8,340
--------- --------
Net Cash Provided by Operating Activities $ 38,026 $ 22,389
Financing Activities
Payments on revolving credit facility $ (9,931)
Proceeds from subordinated notes 84,335
Payments on long-term debt $ (490) (19,409)
Proceeds from issuance of common stock 2,811 3,305
Retirement of senior subordinated notes (72,380)
Retirement of subordinated notes (5,017)
--------- --------
Net Cash Used in Financing Activities $ (2,696) $(14,080)
Investing Activities
Expenditures for fixed assets $ (10,241) $ (4,418)
Proceeds from sale of fixed assets 121 4
Change in other non-current assets 206 (1,907)
Purchase of customer base (4,229)
--------- --------
Net Cash Used in Investing Activities $ (14,143) $ (6,321)
--------- --------
Increase in Cash and Cash Equivalents $ 21,187 $ 1,988
Cash and cash equivalents at beginning of period 1,819 112
--------- --------
Cash and cash equivalents at end of period $ 23,006 $ 2,100
========= ========
Interest paid $ 3,883 $ 5,770
========= ========
Income taxes paid $ 8,952 $ 2,188
========= ========
</TABLE>
See notes to consolidated financial statements
<PAGE> 6
ALC COMMUNICATIONS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Six Months Ended June 30, 1994
(Unaudited)
<TABLE>
<CAPTION>
Paid-in capital
Common Stock Capital in -- Warrants
---------------- excess of --------------- Accumulated
Shares Amount par value Shares Amount deficit Total
------ ------ --------- ------ ------ ------- -----
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 32,948 $329 $132,378 4,266 $12,129 $(102,611) $42,225
Exercise of stock options 278 3 1,013 1,016
Tax benefit from exercise of stock
options 3,151 3,151
Exercise of warrants 359 4 2,150 (359) (359) 1,795
Net income for the six months
ended June 30, 1994 29,486 29,486
------ ---- -------- ----- ------- -------- -------
Balance, June 30, 1994 33,585 $336 $138,692 3,907 $11,770 $(73,125) $77,673
====== ==== ======== ===== ======= ======== =======
</TABLE>
See notes to consolidated financial statements
<PAGE> 7
ALC COMMUNICATIONS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1994 AND 1993
- - ---------------------------------------
NOTE A -- MANAGEMENT'S REPRESENTATION
The consolidated financial statements included herein have been
prepared by ALC management, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
note disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. Certain prior year amounts
have been reclassified to conform to current year presentation. In the opinion
of ALC management, all adjustments considered necessary for a fair presentation
have been included and are of a normal recurring nature, and the accompanying
consolidated financial statements present fairly the financial position as of
June 30, 1994 and December 31, 1993, and the results of operations and cash
flows for the three and six month periods ended June 30, 1994 and 1993.
The balance sheet at December 31, 1993 has been derived from the
audited financial statements at that date but does not include all of the
information and accompanying footnotes required by generally accepted
accounting principles for complete financial statements. It is suggested that
these consolidated financial statements be read in conjunction with the
financial statements and notes included in the Company's Form 10-K for the
fiscal year ended December 31, 1993.
NOTE B -- PURCHASE OF CUSTOMER BASE
During July 1993, the Company acquired the specialized 800 customer
base of Call Home America, Inc. for $15.5 million plus a payment to be made in
August 1994 based on revenue in April, May and June 1994. The Company recorded
a liability of $4.2 million related to this payment.
NOTE C -- LONG TERM DEBT
In April 1994, the Company acquired, on the open market, $5.0 million
of its 9.0% Senior Subordinated Debentures at the Company's approximate book
value.
NOTE D -- SUBSEQUENT EVENT
In August 1994, the Company completed a series of contracts which will
result in a reduction of the Company's Michigan network costs by over $2
million per year. The transactions included loans of approximately $9 million
in exchange for notes receivable to be
<PAGE> 8
0NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
repaid over 5 years and a 15% minority ownership position in a
company owning this Michigan-based digital fiber optic network.
<PAGE> 9
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company reported net income of $14.8 million on revenue of $135.9
million for the three month period ended June 30, 1994. This compares to
income before extraordinary loss (related to early retirement of debt) of $8.4
million on revenue of $104.2 million for the same period in 1993. For the six
months ended June 30, 1994, the Company reported net income of $29.5 million on
revenue of $265.7 million. This compares to income before extraordinary item
and cumulative effect of an accounting change of $16.4 million on revenue of
$206.1 million for the six months ended June 30, 1993. Gross margin as a
percent of net revenue remained relatively constant for both the three and six
months ended June 30, 1994 compared to the year earlier period. The Company's
continued strong performance was reflected by the increase in operating income
of $9.8 million for the three months and $19.3 million for the six months ended
June 30, 1994 over the same periods one year earlier. The improved operating
results for 1994 were primarily due to an increase in long distance traffic and
operating expense reductions as a percent of revenue.
OPERATING RESULTS AS A PERCENT OF REVENUE
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- -------------------------
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue 100.0% 100.0% 100.0% 100.0%
Communication svcs. (54.7) (54.5) (54.3) (54.5)
------ ------ ------ ------
Gross Margin 45.3% 45.5% 45.7% 45.5%
Sales, gen'l & admin. (23.9) (28.4) (24.0) (28.2)
Depreciation & amort. ( 3.1) ( 2.7) ( 3.1) ( 2.7)
------ ------ ------ ------
Operating income 18.3% 14.4% 18.6% 14.6%
====== ====== ====== ======
</TABLE>
Results for 1993 included both the cumulative effect of the change in
method of accounting for income taxes which resulted in an increase in income of
$13.5 million in the first quarter of 1993 and an extraordinary loss on the
early retirement of debt of $7.5 million, net of tax, recorded in the second
quarter of 1993.
Billable minutes have continued to increase since the third quarter of
1990 when compared to the same quarter in the prior year. Billable minutes have
continued to grow, reaching record levels for the fourth consecutive quarter.
The increase in billable minutes results from traffic growth generated by new
customers, minutes from the acquisition of a customer base, increased sales
productivity, the introduction of new products and
<PAGE> 10
increased minutes per customer offset by billable minutes lost through
attrition of existing customers. The results of operations for the three
months ended June 30, 1994 reflect a continuation of the trend of strong
financial performance as indicated by a 76.8% increase in income before the
extraordinary item and the cumulative effect of the accounting change from the
comparable quarter of 1993.
REVENUE
Revenue increased by 30.4% and 28.9% for the three and six months ended
June 30, 1994 from the comparable periods of 1993. Billable minutes again
reached the highest level in the history of the Company, increasing by 41.4%
and 37.2% for the three and six months ended June 30, 1994 over the comparable
period in 1993. The first full month revenue from new sales in the second
quarter of 1994 was significantly higher than the same period one year earlier.
The Company's revenue per minute of 17.5 cents continues to be strong, though it
has decreased from the prior year quarter level of 19.0 cents primarily due to
changes in the sales mix. Reseller revenue has continued to grow significantly
from prior year periods. This growth includes the impact of a major customer
whose revenue has increased substantially in the last six months to a level of
approximately 8% of total revenue in the second quarter. Although reseller
revenue per minute is lower than regular commercial traffic (between 11 cents
and 12 cents per minute), the increased reseller traffic has a positive impact
on operating income due to low incremental sales, general and administrative
costs.
The provision for uncollectible revenue was 1.5% and 1.7% of gross
revenue for the three and six months ended June 30, 1994 and 1.5% and 2.0% for
the same periods of 1993. Strong controls and procedures have enabled the
Company to improve the collection process and provide earlier detection of
credit risks.
OPERATING EXPENSES
The Company's primary cost is for communication services, which
represents the costs of originating and terminating calls via local exchange
carriers (primarily Bell Operating Companies). Also included in communication
services are the costs of owning and leasing long-haul transmission capacity.
The cost of communication services increased $17.6 million and $32.1
million during the three and six month periods ended June 30, 1994 compared to
the same periods in 1993. This cost, however, remained relatively constant as
a percent of net revenue for the comparable periods. By the use of high volume
fixed price leased facilities to transmit traffic and lower prevailing unit
prices for
<PAGE> 11
such capacity, the Company has successfully reduced its long-haul transmission
costs as a percent of revenue.
Sales, general and administrative expenses increased by 9.7% and 9.6%
for the three and six month periods ended June 30, 1994 from the same periods
one year earlier (but was significantly reduced as a percentage of revenue).
The increase reflects increased commissions, new sales channel program costs
and other expenses related to greater sales activity. 1994 results include a
$1.2 million addition to pre-tax income, recorded in the first quarter of the
year, resulting from the favorable settlement of a state telecommunications
excise tax dispute.
Depreciation and amortization increased 50.8% and 46.0% from the second
quarter and the first half of 1993 to the same periods in 1994. This is
primarily due to the amortization of the costs related to the acquisition of
the Call Home America customer base.
INTEREST EXPENSE
Net interest expense decreased 43.6% and 50.3% for the three and six
months ended June 30, 1994 compared to the same periods in 1993. This resulted
from principal payments in 1993, reduced interest related to the replacement of
the 1992 Notes with the 1993 Notes, increased interest income due to higher
cash balances, the elimination of borrowings under the Revolving Credit
Facility as well as capital lease expirations.
INCOME TAXES
The effective tax rate increased from 30.2% for the first half of 1993
to 36.0% for the first half of 1994, due to the increase in the federal income
tax rate and the increase in taxable income (which results in a decrease in the
impact of the Company's annual available $10 million net operating loss
carryforward on the effective tax rate).
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended June 30, 1994 and 1993, the Company generated
positive cash flow from operations of $38.0 million and $22.4 million,
respectively. The positive cash flow reflects sixteen consecutive quarters of
increased revenue and operating profits compared to prior year comparable
quarters.
The positive cash flow from operations resulted in working capital of
$21.9 million at June 30, 1994 compared to $1.4 million at December 31, 1993.
The increase in working capital is largely attributable to: (a) the increase
in accounts receivable due to the increase in revenue and (b) the increase in
cash attributable to the increased cash flow, offset by the increase in
<PAGE> 12
accrued liabilities and accrued network costs also related to higher traffic
volumes.
In addition to the positive cash flow from operations, the Company's
liquidity position is further strengthened by the availability under the
Revolving Credit Facility ("Facility"). The Facility provides for borrowings
up to $40.0 million based on the level of accounts receivable and expires June
30, 1995. Under this Facility, the Company is able to minimize interest
expense by structuring the borrowings under three alternatives. The effective
rate under the Facility during 1993 approximated 5.8%. There have been no
borrowings under the Facility during 1994. As of June 30, 1994, the Company
had borrowing availability of $40.0 million and no balance outstanding.
Further evidence of the Company's strong liquidity position was the
Company's ability to finance the purchase, in April 1994, of $5.0 million of
the Company's 1993 Notes from cash flow from operations. Additionally, in
August 1994, the Company completed a series of contracts which will result in a
reduction of the Company's Michigan network costs by over $2 million per year.
The transactions included loans of approximately $9 million in exchange for
notes receivable to be repaid over 5 years and a 15% minority
ownership position in a company owning this Michigan-based digital fiber optic
network.
Because the Company has chosen to lease rather than own its
transmission facilities, the Company's requirements for capital expenditures
are modest. Capital expenditures totaled $10.2 million for the first half of
1994 and are expected to be $20 - $25 million for the year ended December 31,
1994. Capital expenditures during the first half of 1994 included projects for
enhanced efficiency and technical advancement in the network, information
systems and customer service. Future investment requirements for capital
expenditures relate directly to traffic growth which necessitates the purchase
of switching and related equipment. In addition, a major component of the
capital budget relates to technological advancements as the Company continually
updates its network capabilities to offer enhanced products and services.
Management believes that the Company's cash flow from operations will
provide adequate sources of liquidity to meet the Company's anticipated short
and long term liquidity needs.
<PAGE> 13
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation S-K
EXHIBIT INDEX
[refer to definitions at end of Index]
<TABLE>
<CAPTION>
Incorporated Page
Exhibit Filed Herein by Number
Number Description Herewith Reference to: Herein
- - ------ ----------- -------- ------------ ------
<S> <C> <C> <C> <C>
10.1 Amended & Restated X
Fiber Optic Lease
Agrmt. between MSM
and Allnet
August 1, 1994
(CONFIDENTIAL TREATMENT
REQUESTED)
10.2 Digital Service X
Agrmt. between MSM
and Allnet
August 5, 1994
(CONFIDENTIAL TREATMENT
REQUESTED)
11.1 Computation of Exhibit 11.1 to
Earnings Per Share ALC Second Quarter
(ALC) 1994 10-Q
</TABLE>
DEFINITIONS: ALC: ALC Communications Corporation
ALLNET: Allnet Communication Services, Inc.
MSM: MSM Associates, Limited Partnership
The Registrant hereby agrees to furnish the Commission a copy of each of the
Indentures or other instruments defining the rights of security holders of the
long-term debt securities of the Registrant and any of its subsidiaries for
which consolidated or unconsolidated financial statements are required to be
filed.
Exhibits 10.1 through 10.2 are included pursuant to SEC Regulation S-K, Item
601(b)(19).
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the second quarter of 1994.
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALLNET COMMUNICATION SERVICES, INC.
(Registrant)
By:/s/ Marvin C. Moses
__________________________
Marvin C. Moses, Executive
Vice President and Chief
Financial Officer
By:/s/ Marilyn M. Lesnau
__________________________
Marilyn M. Lesnau, Vice
President, Controller and
Chief Accounting Officer
Dated: August 12, 1994
<PAGE> 1
EXHIBIT 10.1
AMENDED & RESTATED
FIBER OPTIC LEASE AGREEMENT
BETWEEN
MSM ASSOCIATES, LIMITED PARTNERSHIP
AND
ALLNET COMMUNICATION SERVICES, INC.
This Agreement (the "Agreement") is made as of the first
day of August, 1994 among MSM Associates, Limited Partnership, a Delaware
limited partnership with principal offices at 5000 Plaza on the Lake, Suite
200, Austin, Texas 78746 and assigns ("Lessor" or "MSM") and Allnet
Communication Services, Inc., a Michigan corporation with principal offices at
30300 Telegraph Road, Suite 350, Bingham Farms, Michigan 48025 ("Lessee").
WHEREAS, Mutual Signal Corp., a New York corporation, and
Lexitel Corporation, a Michigan corporation, have entered into that certain
Fiber Optic Lease Agreement dated December 5, 1985, as amended by an Amendment
thereto made as of January 31, 1986 and an Amendment No. 2 thereto made as of
February 5, 1987 and an Amendment No. 3 thereto made as of July 31, 1989 and an
Amendment No. 4 thereto made as of August 7, 1992 and an Amendment No. 5
thereto made as of November 23, 1992 to provide for the lease of specified
circuit capacity on the Fiber Optic System (the "Prior Agreement"); and
WHEREAS, Lessor is a successor by assignment to Mutual
Signal Corp. and Lessee is a successor by merger with Lexitel Corporation; and
WHEREAS, the parties have an established relationship and
have operated under the terms of the Prior Agreement over a long period of
time; and
WHEREAS, the parties desire to modify certain specific terms
in the Prior Agreement and deem it to be in their best interests and to their
mutual advantage to amend and restate the Prior Agreement with respect to
Lessor's lease of circuit capacity of the Fiber Optic System to Lessee pursuant
thereto.
NOW THEREFORE, the Prior Agreement is hereby amended and
restated as follows:
ARTICLE I DEFINITIONS
A. AFFILIATE: See Article XV B.
B. DS-3 shall refer to a digital signal with a bit rate of
44.736 Mb/s in accordance with Attachment C to the Prior Agreement incorporated
herein in its entirety. Each DS-3 shall include 672 voice grade channels
(also known as DS-0s).
C. EFFECTIVE DATE is August 1, 1994.
<PAGE> 2
D. FIBER OPTIC SYSTEM is the telecommunications system owned
and operated by Lessor, as of the date hereof, *
E. LEASE CAPACITY is defined in Exhibit B attached hereto and
made a part hereof.
F. *
G. RIGHTS-OF-WAY means the rights-of-way, licenses, leases,
easements, or other rights of use acquired by Lessor for purposes of the Fiber
Optic System.
H. SERVICE(S) means the digital telecommunications transmission
service including Support provided hereunder.
I. SUPPORT: See Article II G.
J. TERMINAL(S) means the facilities installed on the Fiber
Optic System at the addresses or approximate locations specified in Attachment
D to the Prior Agreement incorporated herein in its entirety (except with
respect to charges set forth therein which have been expressly waived by
Lessor) for the origination and termination of transmissions across the Fiber
Optic System at DS-3 (45 Mbps) or multiples thereof, and include the junctions
between transmission lines but do not include the four repeaters to be
installed by Lessor on the Fiber Optic System. Terminals include DSX-3
interfaces and as practicable are to be constructed by Lessor near the edge of
the Rights-of-Way.
L. TOTAL LEASED CAPACITY: See Article II D.
ARTICLE II SCOPE
Lessor shall lease to Lessee circuit capacity as set forth
in Exhibit B upon the terms and conditions set forth below:
A. Lessor hereby agrees to lease to Lessee and Lessee
hereby agrees to lease from Lessor the Lease Capacity as set forth in Exhibit B
through the Lease Term. *
B. Lessee shall have the right to request that Lessor
reconfigure the Total Leased Capacity on the Fiber Optic System, and Lessor
shall not unreasonably withhold its consent to any such reconfiguration so long
as such reconfiguration shall not result in Lessor, in its reasonable judgment,
being required to make any
* Confidential Treatment Applied For
2
<PAGE> 3
substantive incremental investment in the Fiber Optic System to serve other
customers. In addition, any reconfiguration of usage pursuant to this
provision shall result in the same aggregate monthly rental payment to Lessor
by Lessee for the circuit capacity as that payable prior to such
reconfiguration and for approximately the same route miles as prior to such
reconfiguration. Lessor shall provide Lessee in June and December of each
year, and as otherwise additionally requested by Lessee (but not more than once
per calendar quarter), a report of availability of circuit capacity on the
Fiber Optic System for reconfiguration. Upon acceptance by Lessor of Lessee's
request to reconfigure the Total Leased Capacity, Lessor shall use its best
efforts to complete such reconfiguration within 90 days of Lessee's request.
C. Lessee may sublease all or a portion of the Service
leased hereunder or pursuant hereto to any third person other than *
or * any of their affiliates; provided, however, that any such
sublease shall not relieve Lessee of any of its obligations hereunder.
D. The circuit capacity leased pursuant to Sections A
and B of this Article II is hereinafter referred to as "TOTAL LEASED CAPACITY."
E. Lessor shall test and use its reasonable best
efforts to maintain the Total Leased Capacity in accordance with the standards
set forth in the Exhibits attached hereto and made a part hereof.
F. Unless otherwise specified in Lessee's request for
reconfiguration, Service shall terminate in a DS-3 jackfield and all Service
shall consist of that Service between DS-3 jackfields located in Lessor's
serving terminals as outlined in the Purchase Order.
G. Lessee may, subject to availability, order other
associated customer maintenance support ("SUPPORT") offered by Lessor and
listed in Exhibit A, attached hereto and made a part hereof, as the same may be
modified by the parties by signing and exchanging copies of a supplement(s)
which shall become part of this Agreement.
H. Lessee shall be solely responsible for
interconnecting with its leased circuit capacity at Terminals, including
construction of conduit or duct work as needed from each Terminal to the edge
of the Right-of-Way for use by Lessee in running its local communication
facilities, and Lessee shall provide at its sole expense all interconnection
equipment therefor.
I. Lessor or its designee shall control and operate the
Fiber Optic System. Lessor shall be responsible for maintaining the Fiber
Optic System in a manner within its sole discretion, and
* Confidential Treatment Applied For
3
<PAGE> 4
shall comply with all applicable FCC and other governmental rules and
regulations. Lessee shall be subject to and agrees to abide by all reasonable
technical and operational requirements imposed by Lessor on Lessee's use of the
Fiber Optic System.
J. Lessor shall provide the circuit capacity leased by
Lessee hereunder from a point of origin at a Terminal on the Fiber Optic System
to a point of termination at a Terminal on the Fiber Optic System. Lessor
shall have no liability or responsibility for providing, maintaining, or
repairing interconnection facilities or other Lessee equipment. Any apparatus
and equipment provided by Lessee in connection with its leased circuit capacity
shall be maintained by Lessee at its sole expense.
K. Lessor shall not be liable for any act or omission
of any other entity furnishing facilities or equipment to the Lessee used with
respect to or in conjunction with Lessee's use of the Fiber Optic System, or
for any act or omission of any sublessee of Lessee of the Fiber Optic System.
Lessor shall not be liable for any damage or loss due to the fault or
negligence of the Lessee, its contractors, subcontractors, agents or employees,
or the failure of Lessee-provided equipment or facilities, or the breach by
Lessee of any provision of this Agreement.
L. Lessee's transmissions through the Fiber Optic
System shall comply with Federal Communications Commission and other applicable
governmental rules and regulations, and shall not interfere with the use by any
other lessee of circuit capacity on the Fiber Optic System in any manner which
will or may interfere with the use of or cause physical harm to, any fiber
optic pair or related equipment, or the Fiber Optic System as a whole.
ARTICLE III LEASE RATES AND TERMS OF PAYMENT
A. LEASE RATES
1. DIGITAL SERVICE
a. For the circuit capacity leased during the
Initial Lease Term pursuant to Section A of Article II hereof, Lessee agrees to
pay to Lessor, as rental, commencing on the Effective Date, * per
month.
b. Lessee agrees to pay Lessor the Support fees
listed in Exhibit A.
2. TARIFF
In the event a tariff is required to be filed by
Lessor with any governmental agency concerning any of the Service(s) provided
under this Agreement, the parties agree that such tariff will be filed so as to
reflect the terms and conditions of this Agreement including, without
limitation, the rates and charges set
* Confidential Treatment Applied For
4
<PAGE> 5
forth in this Article III.
B. PAYMENT TERMS
1. Beginning on the Effective Date, Lessor shall
invoice Lessee in advance on the first of each month. Payments shall be due
upon receipt and shall be deemed past due * after the date of receipt of
the invoice by Lessee (the "PAYMENT PERIOD"). Lessor shall deliver or mail
each invoice on a timely basis. The first invoice shall be for the first month
of service, * Each monthly invoice thereafter, shall be for the
following month. In case an amount is or becomes subject to dispute, Lessee
shall provide written notice to Lessor of such dispute within the Payment
Period. Except with respect to disputed items, in the event Lessee fails to
pay Lessor's invoice in full within the Payment Period, and provided that
Lessor shall have given written notice to Lessee and a period of * days in
which to cure such failure to pay, Lessee shall also pay a late fee in the
amount of the lesser of one and one-half (1-1/2%) of the unpaid and undisputed
balance per month or the maximum lawful rate thereon under applicable state law
from the date of receipt of the invoice.
2. The lease charge for any fractional portion of a
month shall be pro-rated according to the number of days for which Service was
provided.
3. In the event that: (i) Lessee fails to pay when
due any invoice issued by Lessor under the Agreement with respect to Total
Leased Capacity used by Lessee as of the date hereof; and (ii) the amount
outstanding under the Senior-Subordinated Promissory Note dated as of August 1,
1994 (the "Note") by Lessor in favor of Lessee is at such time no less than the
amount of such invoice, such amount shall be deemed to have been timely paid by
Lessee to Lessor under the Agreement and then timely paid by Lessor to Lessee
pursuant to Section 3 of the Note. In such event, both Lessee's obligation to
Lessor for the payment of such amount under the Agreement and Lessor's
obligation to Lessee to make such payment of such amount under the Note shall
be deemed to be satisfied.
ARTICLE IV TERMINATION
This Agreement may be terminated by either party in the
event that the other party defaults on its obligations hereunder and does not
cure such default as set forth below: (i) in case of a default in payment by
Lessee, within * of Lessee's receipt of Lessor's written notice to
Lessee; and (ii) in case of any deficiency in performance, Lessee shall give
written notice to Lessor of any deficiency in performance. Lessor shall have
* after receipt of notice to cure any deficiency, which Lessor may, at
its option, do by providing Replacement Services at Lessor's
* Confidential Treatment Applied For
5
<PAGE> 6
expense. "Replacement Services" shall mean service: (i) if available, from an
established fiber optic carrier which service meets the technical and
operational specifications set forth in Attachment C to the Prior Agreement; or
(ii) if an alternative fiber optic carrier is not available, from an
established digital microwave carrier with service meeting the technical and
operational specifications equivalent to those of the digital service provided
by Communications Transmission Group, Inc. to Lessee. If after the *
period, Lessor fails to meet its material obligations under this Agreement,
including but not limited to, the technical and operational specifications set
forth in Attachment C to the Prior Agreement, Lessee may terminate the smallest
incremental portion (i.e between two points of presence) of the Fiber Optic
System which must be practically replaced to restore Service to such technical
and operational specifications (the "Affected Service"). In the event of
termination under this provision, Lessee's liability for payment for Service
hereunder shall be limited to the monthly lease rate for the Affected Service
which was properly rendered prior to the effective date of termination. If for
any reason, any Services provided under this Agreement should become
unavailable and Lessor fails to restore such service (which Lessor may, at its
option, do by providing Replacement Services at Lessor's expense) within *
for Affected Service, then Lessee may terminate the Affected Service
without further liability.
ARTICLE V FORCE MAJEURE
Lessor is not liable for any interruptions of Service to the
extent attributable to causes outside its reasonable control or to Force
Majeure causes including but not limited to fires, floods, national
emergencies, insurrections, riots, civil disorders, wars, or acts of God so
long as it uses its best efforts to restore Service and does restore Service
(which Lessor may, at its option, do by providing Replacement Services at
Lessor's expense) within * after the initiation of the interruption.
Should Lessor fail to restore Service within said * Lessee may terminate
the Affected Service without further liability. In addition, Lessee is
entitled to service credits under Article VI for outages caused by Force
Majeure conditions.
ARTICLE VI ALLOWANCE FOR SERVICE OUTAGE PERIODS
A. A circuit is deemed to be in an outage condition
under this Agreement if, while Lessee is actually using or attempting to use
such circuit, the circuit loses continuity and fails to comply with the
standards set out in Attachment C to the Prior Agreement. An outage period
starts when a report is received by Lessor's Customer Service Group from Lessee
by telephone that Service has been interrupted and that such circuit is
released for repair. An outage period ends when Lessor restores the affected
Service and notifies Lessee by telephone that the Service is restored to the
level set forth in Attachment C to the Prior
* Confidential Treatment Applied For
6
<PAGE> 7
Agreement.
B. A credit for each outage period shall be allowed and
calculated as follows:
1. Lessee is credited for any outage period at the
rate of 1/1440 of the monthly rate or charge applicable to the actual Service
for the circuit which is subject to the outage period for each 1/2 hour or
major fraction thereof that an outage period continues.
2. A credit allowance is not applicable for any
period during which Lessee fails to afford access to any facilities provided by
Lessor for the purpose of investigating and correcting any interruption in
Service.
3. The monthly charges used to determine the credit
will be the then current monthly charge being assessed for the circuit
affected, calculated as a portion of the entire rental payment based on circuit
miles.
4. In no event shall any credit be allowed
hereunder (1) in excess of the then current charge being paid for the
applicable Service or (2) with respect to any Service for which Lessee (A)
fails to make or (B) is excused from making any payment because of operation of
law or any other reason.
C. Calculations of credits shall be based upon Lessor's
Customer Service Group Log as maintained in the Lessor's Network Status Center.
D. No credit allowance shall be made for outage periods:
1. caused by Lessee.
2. caused by the failure of equipment or systems
provided by Lessee or persons other than Lessor (unless Lessor has engaged such
persons to provide the equipment or systems which failed), in particular, any
provider of local access service to Lessee.
3. occurring with respect to Service released by
Lessee to Lessor to perform maintenance, to make rearrangements, or to
implement an order for a change in the Service during the time that was
negotiated with Lessee prior to the release of that Service. Thereafter, a
credit allowance as set forth in this Article VI applies.
4. occurring with respect to Service which Lessee
elects not to release for testing or repair and continues to use on an impaired
basis.
7
<PAGE> 8
E. The credit provided for hereunder is Lessor's sole
liability and Lessee's sole remedy in the event of any outage periods or
interruption of Service, except for the termination rights as set forth in
Articles IV and V.
F. In the event of an outage period that is required
for maintenance by Lessor, Lessor shall use its best efforts to give Lessee
adequate prior notice by telephone so that adequate alternative measures can be
taken by Lessee. Lessor will make every effort to schedule Service
interruptions on weekends between midnight and 3:00 a.m. Service credits shall
not apply to scheduled Service interruptions. Lessor shall use all reasonable
efforts to give Lessee two weeks notice of scheduled maintenance when possible
but in no event less than 72 hours where such maintenance would require a
Service interruption.
ARTICLE VII REPRESENTATIONS & WARRANTIES OF LESSOR AND LESSEE
A. Lessor hereby represents and warrants to Lessee that
this Agreement has been validly authorized, executed and delivered by Lessor
and represents a valid and binding obligation of Lessor.
B. Lessee hereby represents and warrants to Lessor that
this Agreement has been validly authorized, executed and delivered by Lessee
and represents a valid and binding obligation of Lessee.
C. Except as set forth in Sections A and B of this
Article VII:
(i) ALL EXPRESS AND IMPLIED WARRANTIES, INCLUDING
BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OR USE ARE
EXPRESSLY EXCLUDED AND DISCLAIMED. LESSEE
ACKNOWLEDGES THAT IT HAS NOT RELIED ON ANY WRITTEN
OR ORAL REPRESENTATION BY LESSOR CONCERNING THE
SUBJECT OF THIS AGREEMENT OTHER THAN THOSE EXPRESSED
IN THIS AGREEMENT;
(ii) EXCEPT TO THE EXTENT THE INDEMNIFICATION
PROVIDED IN ARTICLE XV MAY INCLUDE COVERAGE OF
INCIDENTAL OR CONSEQUENTIAL DAMAGES, IN NO EVENT
SHALL EITHER PARTY BE LIABLE FOR ANY SPECIAL,
INCIDENTAL, PUNITIVE, RELIANCE OR CONSEQUENTIAL
DAMAGES, WHETHER FORESEEABLE OR NOT, INCLUDING BUT
NOT LIMITED TO, DAMAGE OR LOSS OF PROPERTY OR
EQUIPMENT, LOSS OF PROFITS OR REVENUE, COST OF
CAPITAL, OR CLAIMS OF CUSTOMERS FOR SERVICE
INTERRUPTIONS OR TRANSMISSION PROBLEMS, OCCASIONED
BY ANY DEFECT IN THE SERVICE PROVIDED HEREUNDER,
DELAY IN AVAILABILITY OF THE SERVICE PROVIDED
8
<PAGE> 9
HEREUNDER, FAILURE OF THE SERVICE PROVIDED HEREUNDER
OR ANY OTHER CAUSE WHATSOEVER; and
(iii) LESSOR MAKES NO WARRANTY OR REPRESENTATION,
EXPRESS OR IMPLIED, TO ANY OTHER PERSON OR ENTITY
CONCERNING THE SERVICE PROVIDED HEREUNDER AND LESSEE
SHALL DEFEND AND INDEMNIFY LESSOR FROM ANY CLAIMS
MADE UNDER ANY WARRANTY OR REPRESENTATION BY LESSEE
TO ANY THIRD PARTY.
ARTICLE VIII FCC PERMITS, AUTHORIZATION AND FILINGS
Lessor shall take all necessary and appropriate steps, as
soon as possible, to (i) procure from the Federal Communications Commission the
necessary authorizations, if any, to deliver Service to Lessee and (ii) seek
whatever approval is necessary from any other Federal, State or Local agency.
If Lessor cannot obtain all necessary Federal, State or Local authority to
provide the Service under the Agreement, Lessor shall promptly give written
notice thereof to Lessee and such notice will constitute termination without
liability of either party hereto of all obligations hereunder. All expenses
relative to securing authority to construct and maintain the Fiber Optic System
shall be borne by Lessor.
ARTICLE IX GOVERNING LAW
This Agreement shall be construed and enforced in accordance
with, and the validity and performance hereof governed by, the laws of the
state of Michigan.
ARTICLE X CONVENIENCE OF TITLES
Headings contained herein are for convenience only and do
not modify, enlarge or limit the scope of the body of the sections hereof in
any manner.
ARTICLE XI NOTICES
All notices and other communications hereunder must be in
writing and are deemed to have been duly given as of the date of delivery,
facsimile transmission or mailing, if mailed, first class postage prepaid,
certified or registered mail, return receipt requested to the following
persons, unless contrary instructions are given by the parties in writing:
If to Lessor: MSM Associates Limited Partnership
5000 Plaza on the Lake, Suite 200
Austin, TX 78746
ATTN: Vice President, Sales and Marketing
and a copy to: Riordan & McKinzie
9
<PAGE> 10
300 S. Grand Ave. 29th Floor
Los Angeles, CA 90071
ATTN: Carl McKinzie
If to Lessee: Allnet Communication Services, Inc.
30300 Telegraph Rd., Suite 350
Bingham Farms, MI 48025-4510
ATTN: Vice President, ATS
and a copy to: Allnet Communication Services, Inc.
30300 Telegraph Rd., Suite 350
Bingham Farms, MI 48025-4510
ATTN: General Counsel
ARTICLE XII WAIVER OF BREACH OR VIOLATION NOT DEEMED CONTINUING
The waiver by either party of a breach or violation of any
provision of this Agreement shall not operate as or be construed to be a waiver
of any subsequent breach hereof.
ARTICLE XIII BANKRUPTCY
In the event of the bankruptcy of either party hereto or if
either party hereto shall make an assignment for the benefit of creditors or
take advantage of any act or law for relief of debtors, the other party to this
Agreement may terminate this Agreement without further obligation or liability
on its part.
ARTICLE XIV LIMITS OF LIABILITY
Unless specified otherwise, Lessor's sole duty under this
Agreement is the provision of Service to Lessee under the terms and conditions
set forth herein.
ARTICLE XV INDEMNITY
A. Each party, its officers, agents or employees
engaged in performance under this Agreement shall at no time be deemed to be
performing as agents or employees of the other party, and any acts, errors or
omissions of such party, officers, agents and employees shall not be deemed to
be those of the other party.
B. Each party hereto shall indemnify and hold the other
and/or all of its officers, agents, servants, subcontractors, subsidiaries,
employees and other affiliates (collectively "Affiliates"), and each of them,
harmless from and against any and all losses, claims, damages, liabilities,
costs and expenses (including reasonable attorneys fees) (collectively, the
"Claims") imposed upon either party by reason of damages to property or
injuries, including death, as a result of an intentional or a negligent act or
omission on the part of the indemnifying party or
10
<PAGE> 11
its Affiliates in connection with the performance of this Agreement.
C. In the event any action is brought against the
indemnified party, such party shall immediately notify the indemnifying party
in writing, and the indemnifying party, upon the request of the indemnified
party, shall assume the defense thereof on behalf of the indemnified party and
its Affiliates and shall pay all expenses and satisfy all judgments which may
be incurred by or rendered against the indemnified party or its Affiliates in
connection therewith, provided that the indemnified party is not liable for any
settlement of any such action effected without its written consent.
ARTICLE XVI ASSIGNMENT
Except for collateral assignments to institutional lenders,
for which no consent is required, neither party hereto may assign this
Agreement without the express written consent of the other party hereto.
Consent by either party shall not be unreasonably withheld. Provided further,
any language to the contrary notwithstanding, either party may assign the
Agreement to a parent, subsidiary or affiliate corporation without the consent
of the other party. Nothing contained herein shall be construed to release the
assigning party from any obligations or liabilities unless the other party
expressly consents to such release.
ARTICLE XVII CONFIDENTIAL RELATIONSHIP
Unless required by law, the parties hereto shall not
disclose, duplicate, or copy, or use for any purpose other than the performance
of this Agreement, and shall treat as confidential and as proprietary all
information, specifications, drawings, blueprints, nomenclature, samples and
models supplied or disclosed to each other in connection with this Agreement,
all of which shall be returned to the respective owners thereof upon completion
of this Agreement. Notwithstanding the foregoing, however, either party may
make such information available to its lenders. Neither party shall in any
manner advertise or publish or release for publication any statement mentioning
the other party or the fact that the other party has furnished or contracted to
furnish goods and services hereunder or quote the opinion of any employees of
such other party, unless written consent of such other party shall first be
obtained or unless required by law. The parties shall not have any obligation
to keep confidential any information obtained lawfully from third parties and
any information which is available in the public domain, and any information
already in their possession without an obligation of confidentiality.
ARTICLE XVIII TAXES
The amounts payable by Lessee under this Agreement do not
include any State or local sales or use taxes, or utility taxes,
11
<PAGE> 12
however designated, which may be levied on the goods and services provided by
Lessor hereunder. With respect to such taxes, if applicable, Lessee shall
furnish Lessor with an appropriate exemption certificate or pay to Lessor, upon
timely presentation of invoices therefore (i.e. within 90 days after the
provision of the goods or services relating to the invoice), such amounts
thereof as Lessor may be by law required to collect or pay. Any and all other
taxes, including but not limited to franchise, net or gross income, license,
occupation, and real or personal property taxes, shall be timely paid by
Lessor.
ARTICLE XIX ARBITRATION
Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by arbitration in accordance
with the rules of the American Arbitration Association. Any such proceedings
shall take place in Detroit, Michigan unless otherwise agreed to by the
parties. A three person panel of arbitrators shall interpret this Agreement in
accordance with the substantive laws of the State of Michigan. Each party
shall select one arbitrator and the two arbitrators shall then select a third
member of the arbitration panel. The panel of arbitrators shall have the power
to order specific performance if requested. Any award, order, or judgment
pursuant to such arbitration shall be deemed final and may be enforceable in
any court of competent jurisdiction for purposes of enforcement of the
arbitrators' decision and for no other purpose. The parties agree that any
arbitration proceedings shall be conducted on a confidential basis. Lessee
may, at its option, continue to accept what it considers to be below-standard
Service and pay the charges hereunder relating thereto during such pendency of
such arbitration, without prejudice thereto.
ARTICLE XX LEGAL CONSTRUCTION
In case any one or more of the provisions contained in this
Agreement shall, for any reason be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality or unenforceability
does not affect any other provision hereof, and this Agreement will be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein.
ARTICLE XXI SURVIVAL
Rights and obligations of the parties relating to monies
owed and other rights and obligations of the parties that by their nature
extend beyond termination or expiration of this Agreement, such as without
limitation, the parties' rights and obligations under the confidentiality,
indemnification and limitation on liability provisions, survive termination or
expiration of this Agreement.
12
<PAGE> 13
ARTICLE XXII ENTIRE AGREEMENT
This Agreement amends and restates and supercedes the Prior Agreement
(except to the extent that the Attachments of the Prior Agreement are expressly
incorporated herein) and constitutes the entire agreement among the parties
pertaining to the Service leased hereunder. This Agreement may be modified or
supplemented only by a written instrument executed by each party hereto.
In witness to the foregoing, the parties hereto have executed this
Agreement below.
Signed as of this 1st day of August, 1994.
MSM Associates, Limited Partnership
By: Mutual Signal Corporation of Michigan,
its General Partner
JOHN J. WILLINGHAM
- - --------------------------------------------------------
By: Title:
Allnet Communication Services, Inc.
MARVIN C. MOSES
- - --------------------------------------------------------
By: Marvin C. Moses Title: Executive Vice President
Chief Financial Officer
8/4/94
13
<PAGE> 14
EXHIBIT A
EXHIBIT D
CUSTOMER MAINTENANCE SUPPORT
MSM's standard fees for customer maintenance support services
are as follows (unless set by precedence in a service contract):
Maintenance services shall be defined as all work performed by
MSM on equipment provided by or on behalf of the Customer, or supervision of the
Customer's work within MSM's terminate facilities. Maintenance Service
charges are not billed for troubles found within that portion of a circuit
provided by MSM. The following billing rates apply for these services:
A. $75 per hour (4 hour minimum-if dispatch is required)
Monday through Friday during the business hours of 8:00 a.m. - 5:00 p.m. local
time, exclusive of the following holidays:
New Years Day
President's Day
Memorial Day
Independence Day
Labor Day
Thanksgiving Day and the day after Thanksgiving
Christmas Day
B. $95 per hour (4 hour minimum) for overtime work done after
business hours (defined above) and/or on holidays (defined above) and/or all
day on Saturdays and Sundays.
C. As requests for maintenance services are typically made via
telephone, MSM must be advised, in writing as to the person(s) who are
authorized to request service. It is the Customer's responsibility to keep MSM
apprised of any changes to its list of representative(s).
D. To request technical assistance and help under the
maintenance services, a call must be made to our Network Control Center at
1-800-526-2488. This
EXHIBIT D
<PAGE> 15
MAINTENANCE POLICY & ANCILLARY PRICING
Exhibit D
Page 2
number should be used for MSM technical assistance, troubleshooting or testing
of circuits, not for service impairment or outages. The person calling in must
be on the authorized list in order to commit for charges for this technical
assistance. If that person is not on the list, the request cannot be
accommodated.
1. The Network Control Center personnel will take the call,
record the caller's name and phone number along with facts concerning the
assistance and support needed. The caller will then be given the number of the
"Assistance Ticket."
2. Upon completion of work, this "Assistance Ticket" will be
given to MSM's Accounting Department, and the customer will subsequently be
billed based upon the information on that ticket. A copy will be attached to
the invoice.
E. Except for emergencies, MSM technicians cannot be dispatched unless
requests are made in accordance with the above call-out procedure.
EXHIBIT D
<PAGE> 16
MAINTENANCE POLICY & ANCILLARY PRICING
Exhibit D
Page 3
<TABLE>
<CAPTION>
NONRECURRING CHARGES DS-1 DS-3
- - -------------------- ---- ----
<S> <C> <C>
New Order Installation * *
DS-1 RampUp Per DSO
Order Change (prior to circuit turnup)
Order Cancellation (prior to circuit turnup)
plus additional charges incurred
ASR (new or disconnect)
ASR Supplement
Order Expedite
Reconfiguration (city pair remains the same)
Ramped DS-3 Installation Per DS1
Distributed DS-3 Installation Per DS1
<CAPTION>
MONTHLY RECURRING CHARGES
- - -------------------------
<S> <C> <C>
Cross-connect Charge * *
Other IXC to MSM local access or bypass
facility (CTI long haul involved)
Local bypass - charge CTI POP to CTI POP in
same city, with no CTI long haul attached
at either CTI POP
Transit Cross-connect (CTI long haul not
included)
<CAPTION>
MISCELLANEOUS
- - -------------
<S> <C> <C>
M13 1 yr Term * *
2+ yr Term
3+ yr Term
ECHO CANCELLERS
SECOND END LOOP (Ex: for ADPCM)
<CAPTION>
DEMAND MAINTENANCE
CIF FLOOR SPACE
CIF SHELF SPACE
CIF DC POWER
<S> <C> <C>
CIF AC/DC POWER
ALL OTHER SERVICES
</TABLE>
(1) All of the above charges are subject to change with a 30-day notice.
(2) Services not described above will be considered special handling and
charges will be assessed on an individual basis.
* Confidential Treatment Applied For
<PAGE> 17
EXHIBIT B
MSM SYSTEM MILEAGE/LEASED CAPACITY RECONCILIATION
<TABLE>
<CAPTION>
Actual 1986K Invoice Invoice Reconfig Reconfig Reconfig
City Pair Miles Miles Capacity DS-3 Miles Capacity 1986 K Miles Actual Miles
- - ----------------------- ------ ------ -------- ---------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
* * * * * * * *
</TABLE>
Reconfigure miles does not equal contracted miles due to "inexact"
reconfiguration swaps.
* Confidential Treatment Applied For
<PAGE> 1
EXHIBIT 10.2
EXECUTION COPY
DIGITAL SERVICE AGREEMENT
This Digital Service Agreement (the "Agreement") is entered into as of August
5, 1994, by and between MSM Associates, Limited Partnership, a Delaware limited
partnership ("Lessor"), and Allnet Communications Services, Inc., a Michigan
corporation ("Lessee").
In consideration of the mutual promises set forth below and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Definitions.
(a) "Accepted" shall mean, with respect to a Circuit, that Lessee has
performed whatever tests it deems necessary to confirm that such Circuit
operates in accordance with MCI's Specifications and has so informed Lessor. A
Circuit shall be deemed to be Accepted by Lessee 48 hours after notice from
Lessor to Lessee that such Circuit is Available, unless Lessee has theretofore
given notice to Lessor that such Circuit does not operate in accordance with
MCI's Specifications.
(b) "Affiliate" See Section 16(b).
(c) "Available" shall mean, with respect to any Circuit, that all
necessary equipment with respect to such Circuit has been installed, connected,
tested in accordance with MCI's acceptance testing criteria and confirmed by
Lessor to be operating in accordance with MCI's Specifications.
(d) "Activation Date" shall mean, with respect to any Circuit, the date
such Circuit is first made Available to, and Accepted by, Lessee.
(e) "Circuit" shall mean a DS-3.
(f) "Circuit Lease Term" shall mean, with respect to any Circuit, the term
in months for which Lessee desires to obtain Service on such Circuit from the
Activation Date of such Circuit, as specified in the Purchase Order for such
Circuit.
(g) "Circuit Mileage" shall mean, with respect to any Circuit, the length
of such Circuit in airline miles computed according to industry standard V&H
coordinates, as specified in the Purchase Order for such Circuit.
<PAGE> 2
(h) "City Pair" shall mean, with respect to any Circuit, the two cities in
which such Circuit terminates, as specified in the Purchase Order for such
Circuit.
(i) "DS-0 Circuit Mile Rate" shall mean, with respect to any Circuit, the
rate, if any, so designated with respect to such Circuit in the Purchase Order
pursuant to which such Circuit is ordered.
(j) "DS-3" shall mean a fiber optic circuit leased by Lessor from MCI
pursuant to the MCI Agreement meeting MCI's Specifications.
(k) "MCI" shall mean MCI Telecommunications Corporation, a Delaware
corporation.
(l) "MCI Agreement" shall mean that certain Construction and Use Agreement
dated as of July _____, 1994 between Lessor and MCI.
(m) "MCI's Specifications" shall mean the technical specifications set
forth in the MCI Agreement for the MSM Capacity (as such term is defined
therein) as set forth in Exhibit G thereto.
(n) "Monthly Lease Rate" shall mean, with respect to any Circuit, the
amount so designated in the Purchase Order pursuant to which such Circuit is
ordered. In the event no such amount is so designated, such term shall mean
the product of (i) 672, (ii) the DS-0 Circuit Mile Rate for such DS-3 and (iii)
the Circuit Mileage for such DS-3.
(o) "Purchase Order" shall mean any written purchase order in
substantially the form as those attached hereto as Exhibit B made hereunder by
Lessee and accepted by Lessor.
(p) "Requested Service Commencement Date" shall mean, with respect to any
Circuit, the date Service on such Circuit is requested by Lessee to commence as
specified in the Purchase Order for such Circuit.
(q) "Service" shall mean the digital telecommunications transmission
service leased by Lessor from MCI pursuant to the MCI Agreement and provided by
Lessor to Lessee hereunder. Service hereunder specifically does not include
leased circuit capacity and related support provided by Lessor to Lessee on
Lessor's Fiber Optic System (as described in that certain Amended & Restated
Fiber Optic Lease Agreement between Lessor and Lessee dated August 1, 1994) in
Michigan.
(r) "Support" See Section 2(g).
2. Scope and Lease Rates. Lessor shall provide Service to Lessee upon the
terms and conditions set forth below:
-2-
<PAGE> 3
(a) Service shall be provided with respect to each Circuit set forth in
each Purchase Order between Lessor's locations in each city of the City Pair
specified in such Purchase Order with respect to such Circuit.
(b) Lessor shall provide maintenance for all digital transmission
equipment owned by Lessor used in connection herewith. MCI shall provide
maintenance for all its digital transmission equipment used in connection
herewith.
(c) Lessor shall use its best efforts consistent with its obligations to
its other customers and availability of Circuits from MCI under the MCI
Agreement to provide Service on each Circuit for which it has accepted a
Purchase Order, commencing on the Requested Service Commencement Date specified
with respect to such Circuit.
(d) Except as otherwise provided herein, Lessor shall provide Service on
each Circuit ordered hereunder from the Activation Date of such Circuit for the
Circuit Lease Term of such Circuit.
(e) Lessee hereby makes, and Lessor hereby accepts, the Purchase Order
attached hereto as Exhibit A for Service on Lessor's available DS-3's from MCI
under the MCI Agreement between the City Pairs listed therein.
(f) Each additional DS-3 provided by Lessor hereunder shall have a DS-0
Circuit Mile Rate of: (i) * from the first Activation Date
of any Circuit hereunder; and (ii) a mutually agreeable rate thereafter.
(g) Lessee may, subject to availability, order other services or
associated customer maintenance support (collectively "Support") offered by
Lessor as set forth in Exhibit C.
3. Payments.
(a) Lessee agrees to pay in advance to Lessor each month during the term
of this Agreement the Monthly Lease Rate for each Circuit ordered by Lessee
hereunder which has been made Available to, and Accepted by, Lessee, and the
applicable charges, including installation charges, if any, for any associated
services listed in Exhibit C hereto delivered to Lessee.
(b) Lessor's invoices for amounts payable hereunder shall be due *
after Lessee's receipt of invoice. The first such invoice shall be for the
first two months' Service and each monthly invoice thereafter shall be for the
following month.
(c) In the event the Activation Date for a Circuit is on any day other
than the first day of the month, the Monthly Lease Rate for that month shall be
pro-rated according to the number of days for which such Circuit was activated.
* Confidential Treatment Applied For
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<PAGE> 4
(d) In case an amount is or becomes subject to dispute, Lessee shall
provide written notice to Lessor of such dispute within * following
Lessee's receipt of the invoice. In the event that any undisputed portion of
such invoice remains unpaid after * following Lessee's receipt of the
invoice, such undisputed portion of such invoice shall be subject to a late
payment charge equal to the lesser of (1) one and one-half percent of the
unpaid balance per month or (2) the maximum rate allowed under applicable state
law. In the event that any undisputed portion of any invoice is unpaid thirty
days following the date of the invoice for such payment, in addition to any
other remedies available to Lessor at law or otherwise, Lessor may terminate
the Service after providing Lessee written notice and allowing Lessee a 15-
calendar-day period to remit payment.
4. Term. The term of this Agreement shall commence upon the date hereof and
shall continue until the end of the Circuit Lease Term of each of the Circuits
ordered hereunder. *
5. Termination.
(a) Lessee may terminate Service with respect to any Circuit prior to
expiration of the Circuit Lease Term for the Circuit upon * prior
written notice thereof to Lessor and payment of all termination charges set
forth below. Such termination charges shall include:
(i) In the event such termination occurs prior to the Activation Date
specified with respect to such Circuit, all nonrecoverable costs of the
implementation of, and expenditures or liabilities reasonably incurred and
directly connected with, the provision of Service, including, but not limited
to, all professional, consulting and other costs incurred by Lessor in
furtherance of implementing such Service provided that total costs do not
exceed one month's recurring cost for the Circuit; and
(ii) In the event such termination occurs at or after the Activation Date
specified with respect to such Circuit, Lessee shall pay all charges hereunder
for the period during which Service is rendered on such Circuit. If Service on
a Circuit is terminated prior to the expiration of the Circuit Lease Term for
such Circuit, Lessor shall make its best efforts to lease Service on such
Circuit at no less than the Monthly Lease Rate for such Circuit. In the event
Lessor cannot lease Service on such Circuit on the same or substantially
similar terms and conditions as set forth herein, Lessee shall be liable to
Lessor for payment (1) for the total amount due through the end of the term of
the Circuit Lease
* Confidential Treatment Applied For
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<PAGE> 5
Term for such Circuit with respect to such Circuit less (2) the total amount
collected by Lessor from any other lessee with respect to such Circuit.
(b) Lessee shall give written notice to Lessor of any material breach in
performance hereunder. Lessor shall have * after such notice to cure
such breach. If after such * period, Lessor fails to cure such breach,
including but not limited to, compliance with the material technical and
operational MCI Specifications, Lessee may terminate Service on the affected
Circuits. In the event of such termination, Lessee's liability with respect to
such Circuits shall be limited to the Monthly Lease Rate for the affected
Service which was properly rendered prior to the effective date of such
termination.
(c) In the event Lessor fails to provide (after using its best efforts as
set forth in Section 2(c)) the Service with respect to any Circuit within *
* of the Requested Service Commencement Date for such Circuit, then
Lessee, at its option, may terminate that Service on the affected Circuit
without any further liability of either party whatsoever with respect to such
Circuit. In the event any Circuit ordered hereunder is not made available by
MCI, Lessor may terminate this Agreement with respect to such Circuit without
liability to Lessee.
6. Force Majeure. Lessor shall not be liable for any interruptions of
Service which are solely attributable to interruptions of Service by MCI or to
causes outside Lessor's reasonable control, including fires, floods, national
emergencies, insurrections, riots, civil disorders, wars, or acts of God so
long as it uses its best efforts to restore Service within * after the
initiation of the interruption. Should Lessor fail to restore the service
within such * Lessee may, as its sole remedy hereunder, terminate
the affected Service without further liability for the termination of such
affected Service.
7. Allowance for Service Outage Periods.
(a) A Circuit shall be deemed to be in an outage condition under this
Agreement if, while Lessee is using or attempting to use such Circuit, such
Circuit loses continuity and fails to comply with MCI's Specifications. An
outage period begins when a report is received by Lessor's Customer Service
Group from Lessee by telephone that Service has been interrupted and that such
Circuit is released for repair. An outage period ends when Lessor notifies
Lessee by telephone that Service has been restored to the level set forth in
MCI's Specifications.
(b) A credit for each outage period shall be allowed and calculated as
follows:
(i) Lessee is credited for any outage period at the rate of 1/1440 of the
monthly rate or charge applicable to the actual Service which is subject to the
outage period for each 1/2 hour or major fraction thereof that an outage period
continues.
* Confidential Treatment Applied For
-5-
<PAGE> 6
(ii) No credit shall be allowed with respect to any period during which
Lessee fails to afford access to any facilities provided by Lessor for the
purpose of investigating and correcting an interruption to Service.
(iii) The Monthly Lease Rates used to determine any credit hereunder
shall be the then current Monthly Lease Rates being assessed.
(iv) In no event shall any credit be allowed hereunder (1) in excess of
the then current Monthly Lease Rate for the applicable Circuit or (2) with
respect to any Circuit for which Lessee (A) fails to make or (B) is excused
from making any payment because of operation of law or any other reason.
(c) Calculations of credits shall be based upon Lessor's Customer Service
Group Log maintained in Lessor's Network Status Center.
(d) No credit allowance will be made for outage periods:
(i) caused by Lessee;
(ii) caused by the failure of equipment or systems provided by Lessee or
persons other than Lessor (unless Lessor has engaged such persons to provide
the equipment or systems which failed), in particular, any provider of local
access service;
(iii) occurring with respect to a Circuit released by Lessee to Lessor to
perform maintenance, to make rearrangements, or to implement an order for a
change in the Circuit during the time that was agreed with Lessee prior to the
release of such Circuit (thereafter, a credit allowance as set forth above will
be applied), or
(iv) occurring with respect to a Circuit which Lessee elects not to
release for testing or repair and continues to use on an impaired basis.
(e) The credit provided for hereunder shall be Lessor's sole liability and
Lessee's sole remedy in the event of any outage periods or interruption of
Service, except as set forth in Section 5.
(f) In the event of an outage period that is required for maintenance by
Lessor, Lessor shall use its best efforts to give Lessee notice thereof by
telephone so that adequate alternative measures can be taken by Lessee. Lessor
will use its best efforts to schedule such Service interruptions on weekends
between midnight and 3:00 a.m. Service credits will not apply to scheduled
Service interruptions. Lessor shall use all reasonable efforts to give Lessee
two weeks' notice of scheduled maintenance when possible but in no event less
than 72 hours where such maintenance will require a Service interruption.
8. Representations and Warranties of Lessor and Lessee.
-6-
<PAGE> 7
(a) Lessor hereby represents and warrants to Lessee that this Agreement
has been validly authorized, executed and delivered by Lessor and represents a
valid and binding obligation of Lessor.
(b) Lessee hereby represents and warrants to Lessor that this Agreement
has been validly authorized, executed and delivered by Lessee and represents a
valid and binding obligation of Lessee.
(c) Except as set out in Paragraphs (a) and (b) above:
(i) ALL EXPRESS AND IMPLIED WARRANTIES, INCLUDING BUT NOT LIMITED TO,
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PURPOSE OR USE ARE EXPRESSLY
EXCLUDED AND DISCLAIMED. LESSEE ACKNOWLEDGES THAT IT HAS NOT RELIED ON ANY
WRITTEN OR ORAL REPRESENTATIONS BY LESSOR CONCERNING THE SUBJECT OF THIS
AGREEMENT OTHER THAN THOSE EXPRESSED IN THIS AGREEMENT;
(ii) EXCEPT TO THE EXTENT THE INDEMNIFICATION PROVIDED IN SECTION 16 MAY
INCLUDE COVERAGE OF INCIDENTAL OR CONSEQUENTIAL DAMAGES, IN NO EVENT SHALL
EITHER PARTY BE LIABLE FOR ANY SPECIAL, INCIDENTAL, PUNITIVE, RELIANCE OR
CONSEQUENTIAL DAMAGES, WHETHER FORESEEABLE OR NOT, INCLUDING BUT NOT LIMITED
TO, DAMAGE OR LOSS OF PROPERTY OR EQUIPMENT, LOSS OF PROFITS OR REVENUE, COST
OF CAPITAL, OR CLAIMS OF CUSTOMERS FOR SERVICE INTERRUPTIONS OR TRANSMISSION
PROBLEMS, OCCASIONED BY ANY DEFECT IN THE SERVICE PROVIDED HEREUNDER, DELAY IN
AVAILABILITY OF THE SERVICE PROVIDED HEREUNDER, FAILURE OF THE SERVICE PROVIDED
HEREUNDER OR ANY OTHER CAUSE WHATSOEVER; and
(iii) LESSOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, TO
ANY OTHER PERSON OR ENTITY CONCERNING THE SERVICE PROVIDED HEREUNDER AND LESSEE
SHALL DEFEND AND INDEMNIFY LESSOR FROM ANY CLAIMS MADE UNDER ANY WARRANTY OR
REPRESENTATION BY LESSEE TO ANY THIRD PARTY.
9. FCC Permits, Authorization and Filings. Lessor shall take all necessary
and appropriate steps, as soon as possible, to procure from the Federal
Communications Commission the necessary authorizations, if any, to deliver
Service hereunder to Lessee and whatever approvals are necessary from any other
federal or state agency. In the event that Lessor cannot obtain all necessary
federal, state or local authority to provide Service hereunder, Lessor shall
promptly give written notice thereof to Lessee, and such notice shall
constitute termination without liability of either party hereto of all
obligations hereunder.
-7-
<PAGE> 8
10. Governing Law. This Agreement shall be construed and enforced in
accordance with, and the validity and performance hereof, shall be governed by
the internal laws, and not the conflicts law, of the State of Michigan.
11. Convenience of Titles. Headings contained herein are for convenience
only and do not modify, enlarge or limit the scope of the body of the sections
hereof in any manner.
12. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given as of the date of delivery,
facsimile transmission or mailing, and if mailed, first class postage prepaid,
certified or registered mail, return receipt requested to the following
persons, unless contrary instructions are given by the parties in writing:
If to Lessee: Allnet Communications Services, Inc.
30300 Telegraph Road, Suite 350
Bingham Farms, Michigan 48025-4510
Attention: Vice President, ATC
and a copy to: Allnet Communication Services, Inc.
30300 Telegraph Rd., Suite 350
Bingham Farms, MI 48025-4510
Attention: General Counsel
If to Lessor: MSM Associates, Limited Partnership
5000 Plaza on the Lake, Suite 200
Austin, Texas 78746
Attention: Vice President, Sales and
Marketing
13. Waiver of Breach or Violation not Deemed Continuing. The waiver by
either party hereto of a breach or violation of any provision of this Agreement
shall not operate as or be construed to be a waiver of any subsequent breach
hereof.
14. Bankruptcy. In the event of the bankruptcy of either party hereto or if
either party hereto shall make an assignment for the benefit of creditors or
take advantage of any act or law for relief of debtors, the other party to this
Agreement shall have the right to terminate this Agreement without further
obligation or liability on its part.
15. Limits of Liability. Lessor's sole duty under this Agreement shall be
the provision of Service to Lessee under the terms and conditions set forth
herein. Lessee's
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<PAGE> 9
sole remedy for Lessor's failure to perform its obligations hereunder shall be
Lessee's right to credit with respect to outage periods.
16. Indemnity.
(a) Each party hereto and its officers, agents and employees engaged in
performance under this Agreement, shall at no time be deemed to be performing
as agents or employees of the other party, and any acts, errors or omissions of
such party, officers, agents and employees shall not be deemed to be those of
the other party.
(b) Each party hereto shall indemnify and hold the other and/or all of its
officers, agents, servants, subcontractors, subsidiaries, employees and other
affiliates (collectively "Affiliates"), and each of them, harmless, from and
against any and all losses, claims, damages, liabilities, costs, attorneys'
fees and expenses ("Claims") imposed upon either party by reason of damages to
property or injuries, including death, as a result of an intentional or a
negligent act or omission on the part of the indemnifying party or its
Affiliates in connection with the performance of this Agreement.
(c) In the event any action shall be brought against the indemnified
party, such party shall immediately notify the indemnifying party in writing,
and the indemnifying party, upon the request of the indemnified party, shall
assume the defense thereof on behalf of the indemnified party and its
Affiliates and shall pay all expenses and satisfy all judgments which may be
incurred by or rendered against the indemnified party or its Affiliates in
connection therewith, provided that the indemnified party shall not be liable
for any settlement of any such action effected without its written consent.
17. Assignment. Neither party hereto may assign this Agreement without the
express written consent of the other party hereto. Consent by either party
shall not be unreasonably withheld. Provided further, any language to the
contrary notwithstanding, either party may assign the Agreement to a parent,
subsidiary or affiliate corporation without the consent of the other party.
Nothing contained herein shall be construed to release the assigning party from
any obligations or liabilities unless the other party expressly consents to
such release.
18. Confidential Relationship. Unless required by law, the parties hereto
shall not disclose, duplicate, or copy, or use for any purpose other than the
performance of this Agreement, and shall treat as confidential and as
proprietary all information, specifications, drawings, blueprints,
nomenclature, samples, and models supplied or disclosed to each other in
connection with this Agreement, all of which shall be returned to the
respective owners thereof upon completion of this Agreement. Notwithstanding
the foregoing, however, either party may make such information available to its
lenders. Neither party shall in any manner advertise or publish or release for
publication any statement mentioning the other party or the fact that the other
party has furnished or contracted to furnish goods and services hereunder or
quote the opinion of any employees of
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<PAGE> 10
such other party, unless written consent of such other party shall first be
obtained or unless required by law.
19. Taxes. The amounts payable by Lessee under this Agreement do not
include any State or local sales or use taxes, or utility taxes, however
designated, which may be levied on the goods and services provided by Lessor
hereunder. With respect to such taxes, if applicable, Lessee shall furnish
Lessor with an appropriate exemption certificate or pay to Lessor, upon timely
presentation of invoices therefore (i.e. within 90 days after the provisions
of the goods or services relating to the invoice), such amounts thereof as
Lessor may be by law required to collect or pay. Any and all other taxes,
including but not limited to franchise, net or gross income, license,
occupation, and real or personal property taxes, shall be timely paid by
Lessor.
20. Binding Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled by
arbitration in accordance with the rules of the American Arbitration
Association. Any such proceedings shall take place in Austin, Texas unless
otherwise agreed to by the parties. A three person panel of arbitrators shall
interpret this Agreement in accordance with the substantive laws of the State
of Michigan. Each party shall select one arbitrator and the two arbitrators
shall then select a third member of the arbitration panel. The panel of
arbitrators shall have the power to order specific performance if requested.
Any award, order, or judgment pursuant to such arbitration shall be deemed
final and may be enforceable in any court of competent jurisdiction for
purposes of enforcement of the arbitrators' decision and for no other purpose.
The parties agree that any arbitration proceedings shall be conducted on a
confidential basis. Lessee may, at its option, continue to accept what it
considers to be below-standard Service and pay the charges hereunder relating
thereto during such pendency of such arbitration, without prejudice thereto.
21. Survival. Rights and obligations of the parties relating to monies owed
and other rights and obligations of the parties that by their nature extend
beyond termination or expiration of this Agreement, such as without limitation,
the parties' rights and obligations under the confidentiality, indemnification
and limitation on liability provisions, survive termination or expiration of
this Agreement.
22. Legal Construction. In case any one or more of the provisions contained
in this Agreement shall, for any reason be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof, and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein.
23. Entire Agreement. This Agreement constitutes the entire agreement among
the parties pertaining to the Circuits leased hereunder. This Agreement may be
modified or supplemented only by a written instrument executed by each party
hereto.
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<PAGE> 11
In witness to the foregoing, the parties hereto have executed this Agreement
below.
Allnet Communications Services, Inc. MSM Associates, Limited Partnership
By: Mutual Signa Corporation of Michigan
Its: General Partner
By: Marvin C. Moses By: John J. Willingham
Title: Executive Vice President Title: Vice President
Chief Financial Officer
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<PAGE> 12
LIST OF ATTACHMENTS
Exhibit A Initial Purchase Order
Exhibit B Form of Purchase Order
Exhibit C Schedule of Other Services
-12-
<PAGE> 13
EXHIBIT A
Initial Purchase Order
<TABLE>
<CAPTION>
CITY PAIR CIRCUIT MILEAGE
--------- ---------------
<S> <C>
* *
</TABLE>
*
The Requested Service Commencement Date of each of the above Circuits
is as soon as possible after the date MCI makes such Circuits available to
Lessor.
The Circuit Lease Term of each of the above Circuits will be *
from the Activation Date thereof.
* Confidential Treatment Applied For
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<PAGE> 14
EXHIBIT B
OFFICE USE ONLY
REQ'ST SERVICE DATE:______ MSM ASSOCIATES _________________
ACCEPTED EARLIER ACTIVATION: LIMITED PARTNERSHIP |MSO#_____________|
Y___________ N_________ | |
CKT ID:____________________ |RELATED MSO:____ |
|_________________|
PURCHASE ORDER FORM FOR CUSTOMER ORDER NO:_____________
Pursuant to the DIGITAL SERVICE AGREEMENT by and between MSM ASSOCIATES LIMITED
PARTNERSHIP as LESSOR and ________________________________________________ as
LESSEE, dated___________,19_____, LESSEE orders and LESSOR shall provide the
following Digital Transmission Service:
NEW__________ RENEW________________ QTY RATE TERM MILES
CANCEL_______ DISCONNECT___________ DS-3 _____ _____ _____ _____
CHANGE_______ EXPEDITE Y___ N ____ DS-1 _____ _____ _____ _____
ON NET_______ OFF NET______________ DSO _____ _____ _____ _____
PROTOCOL_____ RECONFIGURE__________ CIF _____ _____ _____ _____
OTHER:_______________________________ OTHER _____ _____ _____ _____
CUSTOMER CONTACT:____________________ PHONE # _____________ FAX # __________
TECHNICAL CONTACT:___________________ PHONE # _____________ FAX # __________
CITY LOCATION A:_____________________ CITY LOCATION B:_______________________
_____________________________________ _______________________________________
Special _____ Switched____ Special _____ Switched______
Bypass Y ___ N ___ Owner_______ Bypass Y ___ N ___ Owner_________
LESSOR TO PROVIDE: CFA: Y ___ N ___ LESSOR TO PROVIDE: CFA: Y ___ N ___
LOA: Y ___ N ___ ASR: Y ___ N ___ LOA: Y ___ N ___ ASR: Y ___ N ___
CUSTOMER (LESSEE) TO PROVIDE: CUSTOMER (LESSEE) TO PROVIDE:
LOA: Coordinated LOA: Y__ N__ Coordinated Y ___ N ___
Y__ N__ Conversion: Y ___ N ___ Conversion:
CIF CIF Attached CIF arrangement Y___ N___ CIF Attached
arrangement Y___ N___ Y___ N ___ Y___ N ___
SPECIAL INSTRUCTIONS__________________ SPECIAL INSTRUCTIONS___________________
______________________________________ _______________________________________
______________________________________ _______________________________________
MONTHLY LEASE RATE: NON RECURRING CHARGES:
Monthly IXC Charge: $________ Installation: $____ ASR: $____
EQPT. Lease Charge: $________ Installation: $____ Reconfigure: $____
Echo Canceller: $________ Installation: $____ Expedite: $____
CIF Racks: $________ Installation: $____
CIF Power: $________ Installation: $____
Other: $________ Installation: $____
TOTAL: $________ TOTAL OF NON RECURRING CHARGES: $____
Notwithstanding anything in the Digital Service Agreement to the
contrary, (1) a security interest in this Agreement may be granted
by Lessor to any Lender and (2) Lessor may from time to time assign
all its rights and obligations hereunder with respect to any Circuits
to any Affiliate. Upon such assignment, this Agreement shall be deemed
to be multiple agreements, each upon the terms and conditions set forth
herein by and between Lessee and such affiliate with respect to such
circuit between Lessor and Lessee with respect to the circuit not so
assigned.
IN WITNESS WHEREOF, the parties have executed this PURCHASE ORDER on
the________day of_________19__
______________________________ ______________________________________
LESSOR APPROVAL/TITLE LESSEE AUTHORIZED REPRESENTATIVE/TITLE
Please fax this document to Sales and Marketing Department FAX # (512) 328-7632
____________________________________________________________________________
| FOR OFFICE USE ONLY |
| VERSION 1.2/7.19.93 |
|____________________________________________________________________________|
<PAGE> 15
EXHIBIT C
CUSTOMER MAINTENANCE SUPPORT
----------------------------
MSM's standard fees for customer maintenance support services are as
follows (unless set by precedence in a service contract):
Maintenance services shall be defined as all work performed by MSM on
equipment provided by or on behalf of the Customer, or supervision of the
Customer's work within MSM's terminate facilities. Maintenance Service charges
are not billed for troubles found within that portion of a circuit provided by
MSM. The following billing rates apply for these services:
A. $75 per hour (4 hour minimum-if dispatch is required) Monday
through Friday during the business hours of 8:00 a.m. - 5:00 p.m. local time,
exclusive of the following holidays:
New Years Day
President's Day
Memorial Day
Independence Day
Labor Day
Thanksgiving Day and the day after Thanksgiving
Christmas Day
B. $95 per hour (4 hour minimum) for overtime work done after business
hours (defined above) and/or on holidays (defined above) and/or all day on
Saturdays and Sundays.
C. As requests for maintenance services are typically made via
telephone, MSM must be advised, in writing as to the person(s) who are
authorized to request service. It is the Customer's responsibility to keep MSM
apprised of any changes to its list of representative(s).
D. To request technical assistance and help under the maintenance
services, a call must be made to our Network Control Center at 1-800-526-2488.
This number should be used for MSM technical assistance, troubleshooting or
testing of circuits, not for service impairment or outages. The person calling
in must be on the authorized list in order to commit for charges for this
technical assistance. If that person is not on the list, the request cannot be
accommodated.
1. The Network Control Center personnel will take the call,
record the caller's name and phone number along with facts concerning the
assistance and support needed. The caller will then be given the number of the
"Assistance Ticket."
2. Upon completion of work, this "Assistance Ticket" will be
given to MSM's Accounting Department, and the customer will subsequently be
billed based upon the information on that ticket. A copy will be attached to
the invoice.
E. Except for emergencies, MSM technicians cannot be dispatched
unless requests are made in accordance with the above call-out procedure.
<PAGE> 16
EXHIBIT C
MAINTENANCE POLICY & ANCILLARY PRICING
NONRECURRING CHARGES DS-1 DS-3
- - -------------------- ---- ----
New Order Installation * *
Order Change (prior to circuit turnup)
Order Cancellation (prior to circuit turnup)
plus additional charges incurred
ASR (new or disconnect)
ASR Supplement
Order Expedite
Reconfiguration (city pair remains the same)
Ramped DS-3 Installation Per DS1
Distributed DS-3 Installation Per DS1
MONTHLY RECURRING CHARGES
- - -------------------------
* *
IXC Minimum circuit charge
Cross-connect Charge
Other IXC to MSM local access or bypass
facility (CTI long haul involved)
Local bypass - charge MSM POP to MSM POP in
same city, with no MSM long haul attached
at either MSM POP
Transit Cross-connect (MSM long haul not
included)
MISCELLANEOUS
- - ------------- * *
M13 1 yr Term
2+ yr Term
3+ yr Term
ECHO CANCELLERS
SECOND END LOOP (Ex: for ADPCM)
MAINTENANCE
* *
CIF FLOOR SPACE
CIF SHELF SPACE
CIF DC POWER
CIF AC/DC POWER
ALL OTHER SERVICES
(1) All of the above charges are subject to change with a 30-day notice.
(2) Services not described above will be considered special handling and
charges will be assessed on an individual basis.
* Confidential Treatment Applied For
