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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the Quarterly Period Ended March 31, 1997.
OR
[ ] 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: 000-26118
_____________________________
MIDCOM COMMUNICATIONS INC.
(Exact name of registrant as specified in its charter)
WASHINGTON 91-1438806
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1111 THIRD AVENUE, SEATTLE WA 98101
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (206) 628-8000
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 ___.
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date.
Class Outstanding at April 30, 1997
----- -----------------------------
Common Stock, $0.0001 par value 15,225,621
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MIDCOM COMMUNICATIONS, INC.
FORM 10-Q
For the Quarterly Period Ended March 31, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 6. Exhibits and Reports on Form 8-K 15
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MIDCOM COMMUNICATIONS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(In thousands) March 31, 1997 December 31 1996
- -------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 12,247 $ 30,962
Accounts receivable, less allowance for doubtful accounts
of $6,004 and $7,802, respectively 17,667 16,969
Prepaid expenses and other current assets 1,989 1,548
--------- ---------
Total current assets 31,903 49,479
Property, plant and equipment, net 19,145 11,045
Intangible assets, less accumulated amortization
of $43,991 and $39,532, respectively 12,063 15,547
Other assets and deferred charges, net 4,065 3,852
--------- ---------
$ 67,176 $ 79,923
========= =========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 2,689 $ 3,179
Carrier accounts payable 19,172 17,143
Accrued expenses and other current liabilities 9,976 10,006
Notes payable 9,680 9,680
Interest payable 1,008 2,932
Current portion of long-term obligations 3,267 3,314
--------- ---------
Total current liabilities 45,792 46,254
Long-term obligations, less current portion 105,826 99,153
Other long-term liabilities 3,800 3,800
Shareholders' deficit:
Common stock 68,974 68,330
Deferred compensation (1,578) (1,707)
Accumulated deficit (155,638) (135,907)
--------- ---------
(88,242) (69,284)
--------- ---------
$ 67,176 79,923
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
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MIDCOM COMMUNICATIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
(In thousands, except per share data) 1997 1996
- ------------------------------------- -------- --------
<S> <C> <C>
Revenue $ 24,306 $ 53,055
Cost of revenue 17,977 37,947
-------- --------
Gross profit 6,329 15,108
Operating expenses:
Selling, general and administrative 18,313 16,471
Depreciation 1,406 1,351
Amortization 4,317 8,678
Restructuring charge -- 1,620
-------- --------
24,036 28,120
-------- --------
Operating loss (17,707) (13,012)
Other expense (income)
Interest expense, net 2,307 1,366
Other expense (income), net (283) 122
-------- --------
Loss before provision for income taxes (19,731) (14,500)
Provision for income taxes -- --
-------- --------
Net loss $(19,731) $(14,500)
-------- --------
Net loss per share $( 1.24) $( 0.95)
======== ========
Weighted average common
shares outstanding 15,852 15,199
======== ========
</TABLE>
See notes to condensed consolidated financial statements
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MIDCOM COMMUNICATIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
(In thousands) 1997 1996
- -------------- -------- --------
<S> <C> <C>
Net cash used in operating activities $(15,326) $( 3,829)
-------- --------
Investing activities:
Purchases of property, plant and equipment (9,506) (709)
Net assets acquired in acquisition (238) --
Other, net -- 3
-------- --------
Net cash used in investing activities (9,744) (706)
-------- --------
Financing activities:
Repayment of notes payable -- (3,068)
Proceeds from long-term obligations 6,986 17,168
Repayment of long-term obligations (360) (10,132)
Deferred financing costs (320) --
Proceeds from common stock issued for stock
purchase plan and stock options 49 60
-------- --------
Net cash provided by financing activities 6,355 4,576
-------- --------
Net (decrease) increase in cash (18,715) 4,576
Cash and cash equivalents at beginning of period 30,962 1,083
-------- --------
Cash and cash equivalents at end of period $ 12,247 $ 1,124
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
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MIDCOM COMMUNICATIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements include
the accounts of MIDCOM Communications Inc. and its wholly-owned subsidiaries,
collectively referred to as "Midcom" or the "Company." The unaudited interim
condensed consolidated financial statements and related notes have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission (the "Commission"). Accordingly, certain information and footnote
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. The accompanying condensed
consolidated financial statements and related notes should be read in
conjunction with the consolidated financial statements and related notes
thereto included in the Company's Form 10-K as filed with the Commission on
March 31, 1997.
The information furnished reflects, in the opinion of management, all
adjustments, consisting of only normal recurring items, necessary for a fair
presentation of the results for the interim periods presented. Interim results
are not necessarily indicative of results for a full year.
The Company incurred operating losses during each of the three years
ended December 31, 1996 and, as of March 31, 1997, had an accumulated deficit
of $155.6 million. The report of the Company's independent auditors with
respect to the Company's Consolidated Financial Statements for the year ended
December 31, 1996 states that the Company's recurring operating losses, working
capital deficiency and past credit facility defaults raise substantial doubt
about the Company's ability to continue as a going concern. The Company's
condensed consolidated financial statements have been prepared assuming that
the Company will continue as a going concern and do not include any adjustments
that might result from the outcome of this uncertainty. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
2. BUSINESS COMBINATIONS
In connection with acquisitions of smaller providers of
telecommunications services in 1995, the Company has an obligation to issue or
release from escrow up to a maximum of 151,675 additional shares of its common
stock upon the satisfaction of certain contingencies. Such contingencies
include maintenance of specified revenue levels for the acquired customer
base and satisfaction of general representations and warranties.
In accordance with applicable accounting standards, the common stock
or other consideration payable under the contingency arrangements has not been
included in the determination of purchase price, nor have the shares been
considered outstanding for purposes of earnings per share calculations.
Additional consideration will be recorded when the outcome of the contingency
is determined.
The Company is also obligated to issue additional shares of its common
stock in the event that the market price of such stock, when the shares become
registerable, is less than the price at the acquisition dates. Based on a
closing stock price of $7.25 as of April 30, 1997 for the Company's common
stock, approximately 399,228 additional shares would be issuable as a result of
these obligations.
3. RESTRUCTURING CHARGES
In April 1997, the Company announced that it will begin to transition
its Seattle-based corporate headquarters to Southfield, Michigan, with expected
completion in early fall 1997. Corporate support functions currently located in
Seattle include human resources, legal, finance and information services. Of
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MIDCOM COMMUNICATIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
the Company's total employee base of 684 on April 30, 1997, the relocation plan
will affect approximately 130 employees. The Company expects to record a
restructuring charge during the second quarter of 1997 which will include the
estimated cost of severance and relocation, net of the anticipated benefit of
subleasing its Seattle office space.
In March 1996, the Company made announcements regarding changes in
senior management and the restructuring of its operations in order to reduce
expenses to the level of available capital. These actions included the layoff
of certain employees and contractors and the closure of 6 sales offices. As a
result, the Company recorded a charge of $1.6 million during the first quarter
of 1996, the components of which relate primarily to severance and lease
cancellation charges. Included in the first quarter restructuring charge is
approximately $0.4 million relating to the extension of the time period to
exercise outstanding stock options. As of March 31, 1997, $0.6 million of
this restructuring charge remained in accrued liabilities.
4. NET LOSS PER SHARE
Net loss per share is based on the weighted average number of common
and equivalent shares outstanding using the treasury stock method. Common
stock equivalents are excluded from the calculation of net loss per share due
to their antidilutive effect.
5. DISPUTES AND LITIGATION
CLASS ACTION LAWSUIT. The Company, its Vice Chairman of the Board of
Directors and largest shareholder, the Company's former President, Chief
Executive Officer and Director and the Company's former Chief Financial Officer
were named as defendants in a securities action filed in the U.S. District
Court for the Western District of Washington (the "Complaint"). The Complaint
was filed on behalf of a class of purchasers of the Company's Common Stock
during the period beginning on July 6, 1995, the date of the Company's initial
public offering, and ending on March 4, 1996 (the "Class Period"). In April
1997, the Board of Directors of the Company unanimously approved the terms of a
settlement of all claims against the Company and all of the individual
defendants. The settlement, which is subject to Court approval and which
admits no liability or fault, provides for the payment of $1.0 million in cash
and the issuance of approximately 420,000 shares of the Company's common stock,
subject to adjustments depending upon the fair market value of the stock on the
date that the settlement is approved by the Court.
SEC INVESTIGATION. The Company was informed in May 1996 that the
Commission was conducting an informal inquiry regarding the Company. In May
1997 the Company learned that a formal order of investigation had been entered
by the Commission. While the Company has not been provided a copy of this
order, the Company believes that the focus of the investigation is on (i) the
accuracy of disclosures in certain documents filed by the Company with the
Commission; (ii) whether the Company had maintained adequate books and records
and had adequate internal controls; and (iii) whether records had been
falsified. While the Commission has not indicated its intent to limit the scope
of its investigation, the Company believes that the investigation is focused on
time periods prior to May 1996. The Company has voluntarily provided documents
requested by the Commission, and has cooperated with the Commission in
scheduling interviews with certain current and former Company personnel. The
Company is unable to predict the ultimate outcome of the investigation. The
Company and certain of its current and/or former employees could be subject to
civil or criminal sanctions including monetary penalties and injunctive
measures. If imposed on the Company, such penalties and injunctive measures
could have a material adverse effect on the Company's business, financial
condition and results of operation.
FRONTIER LAWSUITS. On August 19, 1996 the Company was served with a
complaint filed in the U.S. District Court for the Eastern District of Michigan
by Frontier Corporation ("Frontier"). The complaint named as defendants the
Company and eleven individuals, all of whom are former employees of Frontier
who
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MIDCOM COMMUNICATIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
resigned their positions with Frontier. Frontier has recently agreed to
dismiss all of the individual defendants in the case except William H.
Oberlin, the Company's President and CEO, and it dropped certain of its causes
of action against Midcom. The surviving claims are that: (i) Mr. Oberlin
breached fiduciary duties as a former employee and officer of Frontier and
breached obligations under an employment agreement with Frontier, (ii) Midcom
is in violation of a non-disclosure agreement between Frontier and Midcom by
virtue of its alleged use of confidential information of Frontier obtained
through employees hired from Frontier and otherwise; (iii) Midcom aided and
abetted Mr. Oberlin's alleged breaches of fiduciary duties and (iv) Midcom and
Mr. Oberlin tortuously interfered in Frontier's contractual relationships with
various Frontier employees and contractors. The complaint seeks: (i) that the
defendants be preliminarily and permanently enjoined from breaching their
respective agreements with Frontier; (ii) that Midcom be enjoined from aiding
and abetting certain alleged breaches of fiduciary duties; (iii) an order that
Midcom hold all profits which it earns as a result of its hiring of the
individual defendants and other Frontier employees as constructive trustees for
the benefit of Frontier; (iv) an accounting of all profits realized by Midcom
as a result of its hiring of the defendants and other Frontier employees; (v) a
declaratory judgment on its various claims; (vi) damages in an unspecified
amount; (vii) Frontier's costs, including reasonable attorney's fees, incurred
in bringing the action; and (viii) other appropriate relief. The Company
intends to continue to defend this action and is seeking dismissal of the
remaining claims.
An affiliate of Frontier has also filed a complaint in the same U.S.
Federal District Court claiming $515,000 for unpaid amounts under a supply
agreement. The Company believes this claim to be without substantial merit and
is vigorously defending it.
CHERRY COMMUNICATIONS LAWSUIT. In September and December 1995, the
Company acquired two significant customer bases from Cherry Communications.
The first transaction ("Cherry I") provided for the purchase of long distance
customer accounts having monthly revenue for the three months preceding the
date of closing of $2.0 million, net of taxes, customer credits and bad debt.
The second transaction ("Cherry II") provided for the purchase of long distance
customer accounts having monthly revenue which were to average $2.0 million per
month over the 12 months following the transaction, net of taxes, customer
credits and bad debt. The purchase price payable with respect to Cherry I was
a total of $10.5 million, of which $5.5 million was paid in cash and the
balance was paid by the delivery of 317,460 shares of Common Stock (subject to
a possible increase in such number based on the future value of the Common
Stock), of which 126,984 shares are held in escrow to be applied to indemnify
claims or to cover shortfalls in revenue from the $2.0 million monthly average.
The purchase price for Cherry II was $18.0 million, of which $7.0 million has
been paid in cash. Additional installments of $3.4 million were due in
February, March and April of 1996, of which $400,000 of each installment was to
be placed in an escrow account for satisfaction of indemnity claims or to cover
shortfalls in revenue from the $2.0 million monthly average. The parties later
agreed that the Company could pay up to $9.0 million of the Cherry II payments
either in cash or by delivery of shares of Common Stock. Separately, the
Company also agreed to pay Cherry Communications for servicing customer
accounts on behalf of the Company. The acquired customer bases have not
generated the required minimum revenue levels and Cherry Communications has
failed to remit to the Company collections received by Cherry Communications
from a portion of the acquired customers. Accordingly, the Company has
withheld the final three installment payments for Cherry II (a total of $9.0
million excluding escrowed sums), payment of invoices for carrier service for
the acquired bases (up to $11.0 million) and accrued customer service charges
of $840,000. Negotiations between Cherry Communications and the Company failed
to produce a settlement of these disputes.
Cherry Communications filed a lawsuit against the Company in the
United States District Court for the Northern District of Illinois, Eastern
Division. In its First Amended Complaint filed on July 18, 1996, Cherry
Communications seeks recovery of (i) approximately $7.2 million plus interest
and attorneys' fees alleged to
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MIDCOM COMMUNICATIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
be due and owing under a Rebiller/Reseller Agreement for Switched Services
between Cherry Communications and the Company, (ii) approximately $9.0 million
plus interest and attorney's fees alleged to be due and owing under the Purchase
Agreement relating to Cherry II and a Promissory Note executed in connection
with that purchase agreement, (iii) customer service charges of $840,000. It is
the position of the Company that Cherry Communications has breached its
obligations under the purchase agreements relating to Cherry I and Cherry II by
among other breaches (i) failing to sell Midcom customer bases having the
average monthly revenues required by the customer base agreements, and (ii)
failing to remit to Midcom monies collected from the customer bases. It is also
the position of the Company that, as a result of Cherry Communication's breaches
of such purchase agreements, the Company has offsets and counterclaims against
Cherry Communications in excess of the sums it has withheld from Cherry
Communications. The Company is attempting to negotiate a resolution of the
disputes. In the event that a settlement is not reached, the Company intends to
vigorously defend the lawsuit filed by Cherry Communications. However, the
Company is unable to predict the outcome of this lawsuit. As a result of this
litigation, as of September 1, 1996, the Company discontinued booking revenue
generated by the customer bases acquired from Cherry Communications.
OTHER LITIGATION. The Company is also party to other routine
litigation incidental to its business and to which its property is subject.
The Company's management believes the ultimate resolution of these matters will
not have a material adverse effect on the Company's business, financial
condition or results of operations.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS AND THE PRIVATE SECURITIES LITIGATION REFORM ACT
Statements herein concerning expectations for the future constitute
forward-looking statements which are subject to a number of known and unknown
risks, uncertainties and other factors which might cause actual results to
differ materially from those expressed or implied by such forward-looking
statements. Forward-looking statements herein include, but are not limited to,
those concerning anticipated growth in sales and profitability; deployment of a
network of high capacity local and long distance switching facilities;
introduction of local and other additional telecommunications services;
geographic expansion; increases in sales, customer service and other personnel;
improvements in customer service; sales through new sales channels; adequacy of
available sources of working capital to implement strategies; and expectations
for growth in the telecommunications industry. Relevant risks and uncertainties
include, but are not limited to, unanticipated actions by competitors,
regulatory or other obstacles which restrict the Company's ability to implement
local or other services, greater than expected costs to open new offices,
install switching equipment or execute other aspects of the Company's growth
strategy, greater than expected declines in sales, inability to hire and retain
key personnel, unfavorable determinations of pending lawsuits or other disputes,
inability to secure additional sources of working capital if and when needed,
inability to manage growth or integrate acquired operations and regulatory
changes. Additional risks and uncertainties include those described in the
Company's Form 10-K and other filings with the Commission, press releases and
other communications.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended
----------------------------------------
(In millions) Mar 31, 1997 Dec 31, 1996 Mar 31, 1996
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue $ 24.3 $ 24.2 $ 53.1
Gross profit 6.3 6.1 15.1
Selling, general and administrative 18.3 17.0 16.5
Depreciation and amortization 5.7 6.5 10.0
Operating loss (17.7) (17.4) (13.0)
Net loss $( 19.7) $( 19.9) $( 14.5)
Net loss per share $( 1.24) $( 1.26) $( 0.95)
-------------------------------------------------------------------------------------
</TABLE>
REVENUE. Revenue for the quarter ended March 31, 1997 decreased by
54.2% from $53.1 million in the first quarter of 1996 to $24.3 million. The
decrease is attributable to customer attrition in acquired customer bases and
loss of revenue from a customer base which is the subject of a dispute. Revenue
increased in the quarter compared to the $24.2 reported for the fourth quarter
of 1996. The Company expects that quarterly revenue will continue to increase
due to sales generated by its direct sales force.
GROSS MARGIN. The Company's cost of revenue consists of the cost of
service provided by local and interexchange carriers. Gross margin was 26.0%
and 28.5% for the quarters ended March 31, 1997 and 1996, respectively. The
decline in gross margin from the first quarter of 1996 is the result of changes
in the mix of customers, and an increase in fixed costs as a percentage of
overall costs due to the decline in
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revenue. These factors were offset in part by negotiation of price reductions
with some of the Company's major suppliers, the full impact of which is not yet
fully reflected in results of operations. Gross margin improved from 25.1% for
the quarter ended December 31, 1996 due to the price reductions obtained from
the Company's major suppliers.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses consist primarily of payroll and related expenses for
administrative, customer support and marketing personnel, compensation costs for
direct sales personnel, commissions and bad debt expense. Selling, general and
administrative expenses increased to $18.3 million for the quarter ended March
31, 1997 compared to $16.5 million for the same period in 1996 and $17.0 million
for the quarter ended December 31, 1996. The increase is due to several
factors, including an increase in payroll, travel and entertainment, commissions
and other expenses related to the hiring of additional personnel, primarily to
expand the sales departments. These increases were offset by decreases in
billing fees and bad debt expense. The Company employed 666 and 387 persons on
a full-time basis as of March 31, 1997 and 1996, respectively.
DEPRECIATION. Depreciation expense remained relatively constant at
$1.4. The Company is currently installing six state-of- the-art high capacity
switches at an estimated aggregate cost of $15.0 million. The Company expects
that, as a result of the deployment of its switches, depreciation expense will
increase.
AMORTIZATION. Amortization expense decreased to $4.3 million for the
quarter ended March 31, 1997 from $8.7 million in 1996. The decrease is due to
the write-down of customer bases in June 1996 due to an impairment loss and
certain other customer bases becoming fully amortized. The Company expects
that as a result of these factors, amortization expense will decrease.
RESTRUCTURING CHARGES. In April 1997, the Company announced that it
will begin to transition its Seattle-based corporate headquarters to
Southfield, Michigan, with expected completion in early Fall 1997. Corporate
support functions located in Seattle include human resources, legal, finance
and information services. Of the Company's total employee base of 684 at April
30,1997, the relocation plan will affect approximately 130 employees. The
Company expects to record a restructuring charge during the second quarter of
1997 which will include the estimated cost of severance and relocation, net of
the anticipated benefit of subleasing its Seattle office space.
In March 1996, the Company made announcements regarding changes in
senior management and the restructuring of its operations in order to reduce
expenses. These actions included the layoff of certain employees and
contractors and the closure of 6 sales offices. As a result, the Company
recorded a charge of $1.6 million during the first quarter of 1996, the major
components of which relate to severance and lease cancellation charges. As of
March 31, 1997, $0.6 million of this restructuring charge remained in accrued
liabilities to cover payments to be made in the future.
OTHER EXPENSES. Interest expense increased over 1996 primarily due to
an increase in average borrowings outstanding. At March 31, 1997, December
31, 1996 and March 31, 1996, the Company had outstanding interest-bearing
obligations of $118.8 million, $112.1 million and $62.1 million, respectively.
INCOME TAXES. The Company has incurred losses for all periods
presented. No tax benefit has been recorded with respect to these losses due
to the uncertainty as to the utilization of Company's net operating loss
carryforward.
NET LOSS. The substantial increase in net loss for the quarter ended
March 31, 1997 period over the corresponding period in 1996 is attributable to
the declines in revenue and gross margin, as well as increases in operating
expenses.
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11
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LIQUIDITY AND CAPITAL RESOURCES
The Company has experienced significant losses since its inception,
with net losses of approximately $19.7 million, $97.3 million and $33.4 million
for the quarter ended March 31, 1997 and for the years ended December 31, 1996,
and 1995, respectively. As a result of these losses, the billing and
collection cycle with its customers, prior acquisition strategy and other
factors, the Company has required substantial external working capital. Given
the Company's billing and collection cycle with its customers and the timing of
its payments to its suppliers, the Company generally pays its suppliers from
thirty to forty-five days prior to the time it is paid by its customers for the
same services. The Company has financed its growth with the proceeds from its
July 1995 initial public offering, bank borrowings, subordinated debt, capital
leases, cash flow from operations, and the issuance of Common Stock and
assumption of indebtedness in connection with acquisitions of businesses and
customer bases.
The Company's cash and cash equivalents balance were $12.2 million at
March 31, 1997 versus $31.0 million at December 31, 1996. During the three
months ended March 31, 1997, the Company used $15.3 million of cash in
operations compared to $3.8 million during the same period in 1996. In
February 1997, the Company made a $3.9 million interest payment in connection
with the convertible subordinated notes payable. During 1997 and 1996, the
Company experienced significant operating losses which resulted in a use of
cash in operating activities.
The Company invested $9.5 million for furniture, equipment and
leasehold improvements during the first three months of 1997, compared to $0.7
million for the same period of 1996. The increase is due primarily to
expenditures related to the purchase and installation of the high-capacity
switches. During 1997, the Company used $0.2 million related to a prior
acquisition.
During the first three months of 1997, the Company received $6.9
million in proceeds from long-term obligations, which is primarily comprised of
accrued lease liabilities associated with the acquisition of the switches.
During the first three months of 1997, the Company received $49,000 in proceeds
in connection with the exercise of stock options, compared to $0.6 million
received in connection with the exercise of stock options during the same
period in 1996.
In August and September of 1996, the Company completed a private
placement (the "Private Placement") of $97.7 million in aggregate principal
amount of 8-1/4% Convertible Subordinated Notes due 2003 (the "Notes"). The
Notes were sold to qualified institutional buyers pursuant to Rule 144A under
the Securities Act, certain "accredited investors" pursuant to Regulation D
under the Securities Act and certain non-U.S. person pursuant to Regulation S
under the Securities Act.
Interest on the Notes is due semi-annually, on February 15 and August
15 of each year, commencing February 15, 1997, in the aggregate amount of
approximately $4.0 million per payment. Interest payments will adversely
affect the Company's liquidity. On February 15, 1997, the Company made an
interest payment in the aggregate amount of $3.9 million. In addition, in the
event of a "change of control" of the Company, as defined in the indenture
pursuant to which the Notes were issued (the "Indenture"), holders of the Notes
have the right to require the Company to repurchase the Notes in whole or in
part at a repurchase price equal to 101% of the principal amount thereof, plus
accrued interest, if any, to the date of repurchase. If the Company is
required to repurchase the Notes upon a change of control, payment of the
repurchase price could have a material adverse effect on the Company's
liquidity, results of operation and financial condition. Also, if the Company
is in default under the Indenture, holders of the Notes have the right to
demand immediate repayment of the Notes. If the Company were required to repay
the Notes upon default, such repayment could have a material adverse effect on
the Company's liquidity, results of operation and financial condition.
In connection with the April 1996 resignation of Ashok Rao, the
Company's former President and Chief Executive Officer, in April 1997, the
Company redeemed 885,360 shares of Common Stock held by Mr. Rao and certain
trusts established by him at a price of $6.80 (plus interest at 8% from April
1996),
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12
<PAGE> 13
to be paid ratably over a period of 36 months, beginning May 1997. The
Company's election to redeem such shares of Common Stock will adversely affect
the Company's liquidity. In addition, the unpaid balance of a promissory note
delivered to Cherry Communications in connection with the acquisitions of two
customer bases is approximately $10.2 million, of which $9.0 million may be
paid in cash or by delivery of Common Stock, as the Company may elect, and the
remaining $1.2 million is subject to certain hold-back arrangements. The
acquired customer bases have not generated required minimum revenue levels and
Cherry Communications has failed to remit to the Company collections received
by Cherry Communications from a portion of the acquired customers.
Accordingly, the Company has withheld the final three installment payments for
the second of the two acquisitions, payment of invoices for carrier services
for the acquired bases (up to $11.4 million) and accrued customer service
charges of $0.8 million. Negotiations between Cherry Communications and the
Company failed to produce a settlement of these disputes which are now the
subject of litigation. As of September 1, 1996, the Company discontinued
booking revenue generated by the customer bases acquired from Cherry
Communications. See "Note 5 -- Disputes and Litigation" in Item 1 of Part I
above.
The Company's available sources of working capital at April 30, 1997
consisted of cash flow from operations and approximately $10.3 million in cash
and short-term, investment grade, interest-bearing securities, which funds
represented the remaining net proceeds from the Private Placement. The report
of the Company's independent auditors with respect to the Company's 1996
Consolidated Financial Statements states that the Company's recurring operating
losses and shareholders' deficit raise substantial doubt about the Company's
ability to continue as a going concern. Similar going concern disclosure was
included in the report of the Company's independent auditors with respect to
the Company's 1995 Consolidated Financial Statements. The Consolidated
Financial Statements included with this Report have been prepared assuming the
Company would continue as a going concern and do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets and liabilities that may result from this uncertainty.
In February 1997, the Company entered into a new revolving credit
facility with Foothill Capital Corporation (the "Foothill Credit Facility")
which will permit borrowings of up to $30.0 million subject to a borrowing base
limitation of 85% of eligible billed and 75% of eligible unbilled receivables.
Borrowings under this facility will bear interest at a prime rate, plus one
percent, and will be secured by substantially all of the assets of the Company.
Under the terms of the Foothill Credit Facility, the Company is required to
maintain minimum levels of adjusted net worth and is subject to a number of
negative covenants which place limitations on, among other things, capital
expenditures, investments and additional debt. Other covenants preclude
payment of cash dividends and require the Company to obtain the lenders'
consent prior to making any acquisitions. Borrowings under the Foothill Credit
Facility will not be available until satisfaction of a number of conditions
precedent, consisting primarily of final documentation of security
arrangements, which is expected to occur by the end of May 1997. In addition,
in February 1997 the Company entered into a lease facility under which
approximately $13.0 million is available for purchases of capital equipment,
which the Company expects to use primarily to finance the purchase of its high
capacity switching equipment.
As of April 30, 1997, the Company estimated that it will require
between $40.0 million and $50.0 million in order to fund operating losses,
working capital requirements and capital expenditures during the remainder of
1997. Assuming borrowings become and remain available under the Foothill Credit
Facility and the Company achieves anticipated revenue growth, the Company
believes that the remaining proceeds from the Private Placement together with
funds available under the Foothill Credit Facility, leasing facilities and cash
flow from operations will be sufficient to fund the Company's expected working
capital requirements. However, the exact amount and timing of these working
capital requirements and the Company's ability to continue as a going concern
will be determined by numerous factors, including the level of, and gross margin
on, future sales, the outcome of outstanding contingencies and disputes such as
pending lawsuits, payment terms obtained from the Company's suppliers and the
timing of capital expenditures. Furthermore, there can be no assurance that
borrowings
- --------------------------------------------------------------------------------
13
<PAGE> 14
under the Foothill Credit Facility will become and remain available or that
this facility together with the Company's other anticipated sources of working
capital will be sufficient to implement the Company's operating strategy or
meet the Company's other working capital requirements. If (i) the Company
experiences greater than anticipated capital requirements, (ii) the Company is
determined to be liable for, or otherwise agrees to settle or compromise, any
material claim against it, (iii) the Company is unable to make future
borrowings under any of its credit facilities for any reason, (iv) the
implementation of the Company's operating strategy fails to produce the
anticipated revenue growth and cash flows or (v) additional working capital is
required for any other reason, the Company will be required to refinance all or
a portion of its existing debt, sell assets, curtail operations or obtain
additional equity or debt financing. There can be no assurance that any such
refinancing or asset sales would be possible or that the Company would be able
to obtain additional equity or debt financing, if and when needed, on terms
that the Company finds acceptable. Any additional equity or debt financing may
involve substantial dilution to the interests of the Company's shareholders as
well as the holders of the Notes. If the Company is unable to obtain
sufficient funds to satisfy its cash requirements, it will be forced to curtail
operations, dispose of assets or seek extended payment terms from its vendors.
There can be no assurance that the Company would be able to reduce expenses or
successfully complete other steps necessary to continue as a going concern.
Such events would materially and adversely affect the value of the Company's
debt and equity securities.
ADOPTION OF ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share, which is required to be adopted on
December 31, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per
share, the dilutive effect of stock options will be excluded. There is no
expected impact on primary earnings per share. The Company has not yet
determined what the impact of Statement 128 will be on the calculation of fully
diluted earnings per share.
- --------------------------------------------------------------------------------
14
<PAGE> 15
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See the information contained in "Note 5 -- Disputes and Litigation"
in Item 1 of Part I above which information is, by this reference, incorporated
herein.
ITEM 2. CHANGES IN SECURITIES
On January 27 1997, the Company issued to the assignee of
Communications Services of America, Inc. 10,522 shares of common stock
valued at $10.38 per share, and in April 1997, the Company issued an additional
18,536 additional shares to compensate for the decrease in value of the common
stock since the closing of the acquisition. The Company believes that the
issuance of these shares was exempt from registration by virtue of Section
4(2) of the Securities Act as a transaction not involving a public offering.
The Company has committed to register these shares under the Securities Act
under certain circumstances.
On January 22, 1997, the Company issued to the shareholders of
Fairfield Counting Telephone Corporation ("Fairfield") 38,711 shares of common
stock valued at $10.25, and in April 1997 the Company issued an additional
59,631 shares to compensate for the decrease in value of the common stock since
the closing of the acquisition. The Company believes that the issuance of these
shares was exempt from registration by virtue of Section 4(2) of the
Securities Act as a transaction not involving a public offering. The Company
has committed to register these shares under the Securities Act under certain
circumstances.
In January 1997, the Company issued to Richard John 9,457 shares of
common stock valued at $9.38 per share in connection with the acquisition of
Cel-Tech International Corp. The Company believes that the issuance of these
shares was exempt from registration by virtue of Section 4(2) of the
Securities Act as a transaction not involving a public offering. The Company
has committed to register these shares under the Securities Act under certain
circumstances.
In connection with the Comdisco Master Lease Agreement dated January
15, 1997, the Company issued a warrant to purchase 117,000 shares the Company's
common stock at an exercise price of $10.00 per share. The Company believes that
the issuance of this warrant is exempt from registration by virtue of Section
4(2) of the Securities Act as a transaction not involving a public offering. The
Company has committed to register the shares issuable upon exercise of the
warrant under the Securities Act under certain circumstances.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Number
(Referenced to Item
601 of Registration
S-K)* Exhibit Description
- ------------------- -------------------
10.1 Network Products Purchase Agreement dated February 3,
1997 between the Company and Northern Telecom Inc.
10.2 Master Lease Agreement dated January 15, 1997 between the
Company and Comdisco, Inc. (the "Comdisco Master Lease
Agreement").
10.3 Form of Assignment and Delegation Contract among the
Company, Northern Telecom Inc. and Comdisco, Inc. with
respect to Schedules No. 2 through 7 to the Comdisco
Master Lease Agreement.
10.4 Warrant dated March 13, 1997 issued by the Company to
Comdisco, Inc.
- --------------------------------------------------------------------------------
15
<PAGE> 16
10.5 Master Forbearance Agreement between the Company, PacNet
Inc. and KeyBank National Association.
10.6 Settlement Agreement and Release dated March 1, 1997
between the Company, numerous other named defendants and
Richard E. John.
10.7 Revised Registration Rights Agreement dated March 18,
1997 between the Company and Richard E. John.
10.8 Resale Solutions Switched Services Agreement signed
February 11, 1997 between Sprint Communications Company
L.P. and the Company. Portions of this exhibit have
been omitted pursuant to an application for an order
granting confidential treatment. The omitted portions
have been separately filed with the Comission.
10.9 DS-1 Private Line Agreement effective September 1, 1996
between Sprint Communications Company L.P and the
Company. Portions of this exhibit have been omitted
pursuant to an application for an order granting
confidential treatment. The omitted portions have been
separately filed with the Commission.
10.10 Loan and Security Agreement dated as of February 27, 1997
by and among the Company Adval, Inc., Adval Data
Corporation, Advanced Network Design, Cel-Tech
International Corp., PacNet Inc. and Foothill Capital
Corporation.
10.11 Pledge Agreement dated as of February 27, 1997 by and
among the Company, Adval, Inc., Adval Data Corporation,
Advanced Network Design, Cel-Tech International Corp.,
PacNet Inc. and Foothill Capital Corporation.
10.12 Trademark Security Agreement dated as of February 27,
1997 by and among the Company Adval, Inc., Adval Data
Corporation, Advanced Network Design, Cel-Tech
International Corp., PacNet Inc. and Foothill Capital
Corporation.
10.13 Suretyship Agreement dated as of March 14, 1997, by and
among the Company, Adval, Inc., Adval Data Corporation,
Advanced Network Design, Cel-Tech International Corp.,
PacNet Inc. and Foothill Capital Corporation.
11.1 Statement re: computation of net loss per share.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K
None.
---------
* Unless otherwise indicated, exhibit is filed herewith.
- --------------------------------------------------------------------------------
16
<PAGE> 17
SIGNATURE
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.
MIDCOM Communications Inc.
(Registrant)
/s/ ROBERT J. CHAMBERLAIN
-----------------------------------
Date: May 12, 1997 Robert J. Chamberlain
Executive Vice President &
Chief Financial Officer
(Principal Financial Officer)
- --------------------------------------------------------------------------------
17
<PAGE> 18
MIDCOM COMMUNICATIONS INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
(REFERENCED TO
ITEM 601 OF EXHIBIT
REGULATION S-K) DESCRIPTION
- --------------- -----------
<S> <C>
10.1 Network Products Purchase Agreement dated February 3, 1997 between the Company and Northern Telecom Inc.
10.2 Master Lease Agreement dated January 15, 1997 between the Company and Comdisco, Inc. (the "Comdisco
Master Lease Agreement").
10.3 Form of Assignment and Delegation Contract among the Company, Northern Telecom Inc. and Comdisco, Inc.
with respect to Schedules No. 2 through 7 to the Comdisco Master Lease Agreement.
10.4 Warrant dated March 13, 1997 issued by the Company to Comdisco, Inc.
10.5 Master Forbearance Agreement between the Company, PacNet Inc. and KeyBank National Association.
10.6 Settlement Agreement and Release dated March 1, 1997 between the Company, numerous other named defendants
and Richard E. John.
10.7 Revised Registration Rights Agreement dated March 18, 1997 between the Company and Richard E. John.
10.8 Resale Solutions Switched Services Agreement signed February 11, 1997 between Sprint Communications
Company L.P. and the Company. Portions of this exhibit have been omitted pursuant to an application for
an order granting confidential treatment. The omitted portions have been separately filed with the
Comission.
10.9 DS-1 Private Line Agreement effective September 1, 1996 between Sprint Communications Company L.P and
the Company. Portions of this exhibit have been omitted pursuant to an application for an order granting
confidential treatment. The omitted portions have been separately filed with the Commission.
10.10 Loan and Security Agreement dated as of February 27, 1997 by and among the Company Adval, Inc., Adval
Data Corporation, Advanced Network Design, Cel-Tech International Corp., PacNet Inc. and Foothill
Capital Corporation.
10.11 Pledge Agreement dated as of February 27, 1997 by and among the Company, Adval, Inc., Adval Data
Corporation, Advanced Network Design, Cel-Tech International Corp., PacNet Inc. and Foothill Capital
Corporation.
10.12 Trademark Security Agreement dated as of February 27, 1997 by and among the Company Adval, Inc., Adval
Data Corporation, Advanced Network Design, Cel-Tech International Corp., PacNet Inc. and Foothill Capital
Corporation.
</TABLE>
- --------------------------------------------------------------------------------
18
<PAGE> 19
<TABLE>
<S> <C>
10.13 Suretyship Agreement dated as of March 14, 1997, by and among the Company, Adval, Inc., Adval Data
Corporation, Advanced Network Design, Cel-Tech International Corp., PacNet Inc. and Foothill
Capital Corporation.
11.1 Statement re: computation of net loss per share.
27.1 Financial Data Schedule.
</TABLE>
- --------------------------------------------------------------------------------
19
<PAGE> 1
AGREEMENT NO. MC-10/96-DM
PAGE 1
(4/8/96 NPPA)
NETWORK PRODUCTS PURCHASE AGREEMENT
NUMBER MC-10/96-DM
Northern Telecom Inc., a Delaware corporation having offices at 2350 Lakeside
Blvd., Richardson, Texas 75083 ("Nortel") and MIDCOM Communications Inc., a
state of Washington corporation, having its principal offices and place of
business at MIDCOM Tower, Suite 1600, 1111 Third Avenue, Seattle Washington
98101 ("Buyer") agree as follows:
1. SCOPE
1.1 Certain terms used in this Agreement shall be defined as set
forth in Exhibit A.
1.2 The terms and conditions of this Agreement shall apply to the
purchase by Buyer and the sale by Nortel of Equipment and
Services and the licensing of Software furnished in connection
with such Equipment. The terms and conditions contained in a
Product Attachment shall modify and/or supplement the other
terms and conditions of this Agreement, only with respect to the
Product Line and Services described in the Product Attachment.
1.3 All Products and Services obtained by Buyer pursuant to this
Agreement shall be obtained by Buyer solely for initial use by
Buyer in its internal business to provide services available
through its networks, and not as stock in trade or inventory
which is intended for resale by Buyer to any third party as new
and unused material. All such Products shall be installed in the
United States.
2. TERM
2.1 This Agreement shall be in effect during the period that any
Product Attachment is in effect. Each Product Attachment shall
be in effect during its Product Attachment Term. This Agreement
or any part thereof may be terminated in accordance with the
express provisions of this Agreement concerning termination or
by written agreement of the parties.
2.2 The termination of this Agreement or any part thereof shall
not affect the obligations of either party thereunder which have
not been fully performed with respect to any accepted Order,
unless such Order is expressly terminated in accordance with
this Agreement or by written agreement of the parties.
<PAGE> 2
AGREEMENT NO. MC-10/96-DM
PAGE 2
3. ORDERING
All purchases pursuant to this Agreement shall be made by means of
Orders issued from time to time by Buyer, and executed by a Vice
President of Buyer, and accepted by Nortel in writing within fifteen
(15) days. Otherwise, any such Order shall be deemed to be void. All
Orders shall reference this Agreement and the applicable Product
Attachment and shall be governed solely by the terms and conditions set
forth herein as modified and/or supplemented pursuant to Section 1.2 by
the terms and conditions of any applicable Product Attachments.
4. PRICES
4.1 The prices, charges, and fees applicable to Orders shall be set
forth in the appropriate Product Attachments and may be revised
in accordance with the provisions stated therein. Buyer shall
pay transportation charges, including insurance, in accordance
with the applicable Product Attachment.
4.2 Until the total of all prices, charges and fees for Products and
related Services furnished hereunder shall have been paid to
Nortel, Buyer shall cooperate with Nortel in perfecting Nortel's
purchase money security interest in such Products and Buyer
shall promptly execute all documents and take all actions
required by Nortel in connection therewith. Buyer shall not
sell, lease or otherwise transfer such Products or any portion
thereof or allow any liens or encumbrances to attach to such
Products or any portion thereof prior to payment in full to
Nortel of the total of all such prices, charges, and fees.
5. TERMS OF PAYMENT
5.1 The amounts payable for Products and/or Services shall be
invoiced by Nortel to Buyer in accordance with the applicable
Product Attachments. All amounts payable and properly invoiced
pursuant to this Agreement shall be paid by Buyer to Nortel
within thirty (30) days from the date of Nortel's invoice in
accordance with the payment instructions contained in such
invoice.
5.2 Overdue payments, excluding those which are the subject of a
good faith dispute, shall be subject to interest charges,
calculated daily commencing on the 31st day after the date of
the invoice, at one percent (1%) per month or such lesser rate
as may be the maximum permissible rate under applicable law.
<PAGE> 3
AGREEMENT NO. MC-10/96-DM
PAGE 3
6. TAXES
Buyer shall at Nortel's appropriate direction promptly reimburse Nortel,
file an appropriate exemption certificate or notice of exemption, or pay
directly to the applicable government or taxing authority all taxes and
charges arising hereunder, including, without limitation, penalties and
interest resulting from the actions or failure to act by Buyer, except
for taxes computed upon the net income of Nortel. The provisions of this
Section 6 shall survive any termination of this Agreement.
7. RISK OF LOSS, TITLE
7.1 Risk of loss or damage to Products shall pass to Buyer upon
delivery to the loading dock at the installation site or other
delivery location specified by Buyer in its Order, and Buyer
shall keep such Products fully insured for the total amount then
due Nortel for such Products.
7.2 Good title to Equipment furnished hereunder which shall be free
and clear of all liens and encumbrances shall vest in Buyer upon
full payment by Buyer of the total prices, charges and fees
payable by Buyer for such Equipment and any related Software or
Services furnished by Nortel in connection with such Equipment.
7.3 Buyer shall receive a license to use Software subject to the
terms set forth in Exhibit B.
8. TESTING, TURNOVER AND ACCEPTANCE
8.1 If Nortel installs any Products furnished hereunder, the rights
and obligations of the parties with respect to testing, turnover
and acceptance of such Products shall be as set forth in the
applicable Product Attachment.
8.2 If Nortel does not install Products furnished hereunder, Nortel
shall prior to delivery of the Products perform such factory
tests as Nortel determines to be appropriate in order to confirm
that such Products shall be in accordance with the applicable
Specifications. Buyer shall be deemed to have accepted the
Products upon completion of such tests.
8.3 In the event that Buyer places Products into revenue-generating
service, such Products shall be deemed to have been accepted by
Buyer without limitation or restriction.
<PAGE> 4
AGREEMENT NO. MC-10/96-DM
PAGE 4
9. DISCLAIMERS OF WARRANTIES AND REMEDIES
THE WARRANTIES AND REMEDIES SET FORTH IN EXHIBIT D AND IN ANY PRODUCT
ATTACHMENT CONSTITUTE THE ONLY WARRANTIES OF NORTEL WITH RESPECT TO THE
PRODUCTS AND SERVICES AND BUYER'S EXCLUSIVE REMEDIES IN THE EVENT SUCH
WARRANTIES ARE BREACHED. THEY ARE IN LIEU OF ALL OTHER WARRANTIES,
WRITTEN OR ORAL, STATUTORY, EXPRESS OR IMPLIED, INCLUDING, WITHOUT
LIMITATION ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE. NORTEL SHALL NOT BE LIABLE FOR ANY INCIDENTAL OR CONSEQUENTIAL
DAMAGES OF ANY NATURE WHATSOEVER, BEFORE OR AFTER THE PLACING OF ANY
PRODUCT INTO SERVICE.
10. LIABILITY FOR PERSONAL INJURY, PROPERTY DAMAGE AND PATENT INFRINGEMENT
10.1 A party hereto shall defend the other party against any suit,
claim, or proceeding brought against the other party for direct
damages due to personal injuries (including death) or damage to
tangible property which allegedly result from the negligence or
willful misconduct of the defending party in the performance of
this Agreement. The defending party shall pay all litigation
costs, reasonable attorney's fees, settlement payments and such
direct damages awarded or resulting from any such suit, claim or
proceeding.
10.2 Nortel shall defend Buyer against any suit, claim or proceeding
brought against Buyer alleging that any Products, excluding
Vendor Items, furnished hereunder infringe any United States
patent. Nortel shall pay all litigation costs, reasonable
attorney's fees, settlement payments and any damages awarded or
resulting from any such suit, claim or proceeding. With respect
to Vendor Items, Nortel shall assign any rights with respect to
infringement of U.S. patents granted to Nortel by the supplier
of such Vendor Items to the extent of Nortel's right to do so.
10.3 The party entitled to defense pursuant to Section 10.1 or 10.2
shall promptly advise the party required to provide such defense
of the applicable suit, claim, or proceeding and shall cooperate
with such party in the defense or settlement thereof. The party
required to provide such defense shall have sole control of the
defense of the applicable suit, claim, or proceeding and of all
negotiations for its settlement or compromise.
10.4 If an injunction is obtained against Buyer's use of any Products
as a result of any suit, claim, or proceeding described in
Section 10.2, Nortel shall at Nortel's option either:
<PAGE> 5
AGREEMENT NO. MC-10/96-DM
PAGE 5
10.4.1 promptly procure for Buyer the right to continue using
the portions of the Products enjoined from use; or
10.4.2 promptly replace or modify the same with equivalent or
better Products so that Buyer's use is not subject to
any such injunction.
10.5 If Nortel cannot perform under Section 10.4.1 or 10-4.2, Buyer
shall have the right to return the infringing Products to Nortel
upon written notice to Nortel, and in the event of such return,
neither party shall have any further liabilities or obligations
under this Agreement on account of such infringement or return,
except Nortel shall refund the full price of the Products
ordered during the period defined as twenty-four (24) months
from the in service date of the Products and thereafter the
depreciated value of such Products carried on Buyer's books at
the time of such return, less any outstanding monies due Nortel
hereunder.
10.6 The obligations of Nortel hereunder with respect to any suit,
claim, or proceeding described in Section 10.2 shall not apply
with respect to Products which are (a) manufactured or supplied
by Nortel in accordance with any design or any special
instruction furnished by Buyer, (b) used by Buyer in a manner or
for a purpose not contemplated by this Agreement, (c) located by
Buyer outside the United States, or (d) used by Buyer in
combination with other products not provided by Nortel,
including, without limitation, any software developed solely by
Buyer through the permitted use of Products furnished hereunder,
provided the infringement arises from such combination or the
use thereof. Buyer shall indemnify and hold Nortel harmless
against any loss, cost, expense, damage, settlement or other
liability, including, but not limited to, attorneys' fees, which
may be incurred by Nortel with respect to any suit, claim, or
proceeding described in this Section 10.6.
10.7 Notwithstanding the above, Nortel shall have no obligation or
liability with regard to any patent infringement suit, claim, or
proceeding that may be made or brought against Buyer (i)
alleging that method of use claims in such patent are infringed
by any service offering and/or by any use by Buyer of Products
furnished hereunder to make such service offering available or
(ii) resulting in a settlement payment, or award of damages, or
accounting of profits, where such settlement, award, or
accounting is based on the revenues or profits earned or other
value obtained by Buyer from its use of such Products and/or is
based on the lost revenues or profits of third parties arising
from Buyer's use of such Products.
10.8 If Nortel determines that any Products are or may become the
subject of a suit, claim, or proceeding as described in Section
10.7, Nortel may provide Buyer with notice to that effect.
Nortel shall have no liability to Buyer pursuant to Section
10.22, 10.4, or 10.5 with respect to Buyer's use of such
<PAGE> 6
AGREEMENT NO. MC-10/96-DM
PAGE 6
Products which occurs subsequent to such notice. In addition to
its obligations pursuant to Section 10.3, if Buyer becomes aware
that any Products may become the subject of any such suit,
claim, or proceeding before receiving any such notice from
Nortel, Buyer shall provide Nortel with notice to that effect.
10.9 After receipt of notice from Nortel pursuant to Section 10.8,
Buyer shall have the option to return to Nortel the applicable
Products identified in such notice and Nortel shall refund the
depreciated value (as carried on the books of Buyer) of the
returned Products to Buyer as more fully set forth in Section
10-5.
10.10 The provisions of Sections 10.2 through 10.9 state the entire
liability of Nortel and its suppliers and the exclusive remedy
of Buyer with respect to any suits, claims, or proceedings of
the nature described in Section 10.2.
10.11 Each party's respective obligations pursuant to this Section
shall survive any termination of this Agreement.
11. REMEDIES AND LIMITATION OF LIABILITY
11.1 Nortel shall have the right to suspend its performance by
written notice to Buyer and forthwith remove and take possession
of all Products that shall have been delivered to Buyer, if,
prior to payment to Nortel of any amounts due pursuant to this
Agreement with respect to such Products, Buyer shall (a) become
insolvent or bankrupt or cease, be unable, or admit in writing
its inability, to pay all debts as they mature, or make a
general assignment for the benefit of, or enter into any
arrangement with, creditors, (b) authorize, apply for, or
consent to the appointment of, a receiver, trustee, or
liquidator of all or a substantial part of its assets or have
proceedings seeking such appointment commenced against it which
are not terminated within ninety (90) days of such commencement,
or (c) file a voluntary petition under any bankruptcy or
insolvency law or under the reorganization or arrangement
provisions of the United States Bankruptcy Code or any similar
law of any jurisdiction or have proceedings under any such law
instituted against it which are not terminated within ninety
(90) days of such commencement.
11.2 In the event of any material breach of this Agreement which
shall continue for thirty (30) or more days after written notice
of such breach (including a reasonably detailed statement of the
nature of such breach) shall have been given to the breaching
party by the aggrieved party, the aggrieved party shall be
entitled at its option to avail itself of any and all remedies
available at law or equity, except as otherwise provided in this
Agreement.
<PAGE> 7
AGREEMENT NO. MC-10/96-DM
PAGE 7
11.3 Nothing contained in Section 11.2 or elsewhere in this Agreement
shall make either party liable for any incidental, indirect,
consequential or special damages of any nature whatsoever for
any breach of this Agreement whether the claims for such damages
arise in tort, contract, or otherwise, or shall increase the
liability of the breaching party under this Agreement, including
all Exhibits thereto, beyond that prescribed therein except that
the foregoing shall not operate to limit Buyer's liability for a
breach by it of its obligation under the Software License in
Exhibit B.
11.4 Any action for breach of this Agreement or to enforce any right
hereunder shall be commenced within two (2) years after the
cause of action accrues or it shall be deemed waived and barred.
11.5 The limitations on either party's liability and other
obligations set forth in Sections 9, 10, and 11 shall survive
any termination of this Agreement.
12. FORCE MAJEURE
If the performance by a party of any of its obligations under this
Agreement shall be interfered with by reason of any circumstances beyond
the reasonable control of that party, including without limitation,
unavailability of supplies or sources of energy, power failure,
breakdown of machinery, or labor difficulties, including without
limitation, strikes, slowdowns, picketing or boycotts, then that party
shall be excused from such performance for a period equal to the delay
resulting from the applicable circumstances and such additional period
as may be reasonably necessary to allow that party to resume its
performance. With respect to labor difficulties as described above, a
party shall not be obligated to accede to any demands being made by
employees or other personnel.
13. CONFIDENTIAL INFORMATION
13.1 Each party which receives the other party's Confidential
Information shall use reasonable care to hold such Confidential
Information in confidence and not disclose such Confidential
Information to anyone other than to its employees and employees
of its affiliates with a need to know. A party that receives the
other party's Confidential Information shall not reproduce such
Confidential Information, except to the extent reasonably
required for the performance of its obligations pursuant to this
Agreement and in connection with any permitted use of such
Confidential Information.
13.2 Buyer shall take reasonable care to use Nortel's Confidential
Information only for study, operating, or maintenance purposes
in connection with Buyer's use of Products furnished by Nortel
pursuant to this Agreement.
<PAGE> 8
AGREEMENT NO. MC-10/96-DM
PAGE 8
13.3 Nortel shall take reasonable care to use Buyer's Confidential
Information only to perform Nortel's obligations to provide
Products and/or Services to Buyer, provided Nortel may use any
of Buyer's Confidential Information for the development,
manufacture, marketing and maintenance of new products and/or
services and/or changes or modifications to the existing
Products and/or Services, which Nortel may, in either case,
provide to third parties without restriction.
13.4 The obligations of either party pursuant to this Section 13
shall not extend to any Confidential Information which recipient
can demonstrate through written documentation was already known
to the recipient prior to its disclosure to the recipient, was
known or generally available to the public at the time of
disclosure to the recipient, becomes known or generally
available to the public (other than by act of the recipient)
subsequent to its disclosure to the recipient, is disclosed or
made available in writing to the recipient by a third party
having a bona fide right to do so, or is required to be
disclosed by process of law, provided that the recipient shall
notify the disclosing party promptly upon any request or demand
for such disclosure.
13.5 The parties' obligations pursuant to this Section 13 shall
survive any termination of this Agreement for a period of twelve
(12) months.
14. BUYER'S RESPONSIBILITIES
14.1 All sites at which the Products shall be delivered or installed
shall be prepared by Buyer in accordance with Nortel's
standards, communicated to Buyer, including, without limitation,
environmental requirements.
14.2 Buyer shall provide Nortel-designated personnel reasonable
access to the Products during the times deemed reasonably
necessary by Nortel to install, maintain and service the
Products in accordance with Nortel's obligations. Nortel
personnel shall comply with Buyer's reasonable site and security
regulations, provided Nortel receives written notice of any such
regulations reasonably in advance of the arrival of Nortel's
personnel at the site.
14.3 Buyer shall provide reasonable working space and facilities,
including heat, light, ventilation, telephones, electrical
current, trash removal and other necessary utilities for use by
Nortel-designated maintenance personnel, and adequate secure
storage space, if required by Nortel, for Products and
materials, provided Nortel gives written notice of the identity
of its designated maintenance personnel. Buyer shall also
provide adequate security for the Products while on Buyer's
site.
<PAGE> 9
AGREEMENT NO. MC-10/96-DM
PAGE 9
14.4 Buyer shall obtain all necessary governmental permits applicable
to Buyer in connection with the installation, operation, and
maintenance of Products furnished hereunder, excluding any
applicable permits required in the normal course of Nortel's
doing business.
14.5 Upon written request by Nortel, information which Nortel
reasonably requests from Buyer and which is necessary for Nortel
to properly install or maintain the Products shall be provided
by Buyer to Nortel in a timely fashion and in a form reasonably
specified by Nortel.
15. HAZARDOUS MATERIALS
15.1 Prior to issuing any Order for Services to be performed at
Buyer's facilities, Buyer shall identify and notify Nortel in
writing of the existence of all Hazardous Materials which Nortel
may encounter during the performance of such Services,
including, without limitation, any Hazardous Materials contained
within any equipment to be removed by Nortel.
15.2 If Buyer breaches its obligations pursuant to Section 15.1, (a)
Nortel may discontinue the performance of the appropriate
Services until all the applicable Hazardous Materials have been
removed or abated to Nortel's satisfaction by Buyer at Buyer's
sole expense, and (b) Buyer shall defend, indemnify and hold
Nortel harmless from any and all damages, claims, losses,
liabilities and expenses, including, without limitation,
attorneys' fees, which arise out of Buyer's breach of such
obligations. Buyer's obligations pursuant to this Section 15.2
shall survive any termination of this Agreement.
16. SUBCONTRACTING
Nortel may subcontract any of its obligations under this Agreement, but
no such subcontract shall relieve Nortel of primary responsibility for
performance of its obligations.
17. REGULATORY COMPLIANCE
In the event of any change in the Specifications or Nortel's
manufacturing or delivery processes for any Products as a result of the
imposition of requirements by any government, Nortel may upon notice to
Buyer, increase its prices, charges and fees to cover the added costs
and expenses directly and indirectly incurred by Nortel as a result of
such change.
<PAGE> 10
AGREEMENT NO. MC-10/96-DM
PAGE 10
18. GENERAL
18.1 If any of the provisions of this Agreement shall be invalid or
unenforceable under applicable law and a party deems such
provisions to be material, that party may terminate this
Agreement upon notice to the other party. Otherwise, such
invalidity or unenforceability of any nonmaterial provision
shall not invalidate or render this Agreement unenforceable, but
this Agreement shall be construed as if not containing the
particular invalid or unenforceable provision and the rights and
obligations of the parties shall be construed and enforced
accordingly.
18.2 A party shall not release without the prior written approval of
the other party any advertising or other publicity relating to
this Agreement wherein such other party may reasonably be
identified. In addition each party shall take reasonable
precautions to keep the existence and the contents of this
Agreement confidential so long as this Agreement remains in
effect and for a period of one (1) year thereafter, except as
may be reasonably required to enforce this Agreement or by law.
18.3 The construction, interpretation and performance of this
Agreement shall be governed by the laws of the State of North
Carolina, except for its rules with respect to the conflict of
laws.
18.4 Except as set forth in Section 16 hereof, neither party may
assign or transfer this Agreement or any of its rights hereunder
without the prior written consent of the other party, such
consent not to be unreasonably withheld.
18.5 Notices and other communications shall be transmitted in writing
by certified United States Mail, postage prepaid, return receipt
requested, by guaranteed overnight delivery, or by facsimile
addressed to the parties as follows:
To Buyer: MIDCOM Communications Inc.
MIDCOM Tower, Suite 1600
1111 Third Avenue
Seattle, Washington 98101
Attention: VPA Network
with copy to Law Dept., attention
General Counsel
Facsimile: (206) 628-8295
To Nortel: Northern Telecom Inc.
350 Lakeside Blvd., Suite 200
Richardson, Texas 75083
Attention: Vice President & General Manager
Facsimile: (972) 685-8845
<PAGE> 11
AGREEMENT NO. MC-10/96-DM
PAGE 11
In addition, notices submitted by Buyer to Nortel specific to
any Product Attachment shall be delivered to the address stated
in the applicable Product Attachment along with a copy submitted
to Nortel at the address stated above.
Any notice or communication sent under this Agreement shall be
deemed given upon receipt, as evidenced by the United States
Postal Service return receipt Mail if given by certified United
States Mail, on the following business day if sent by guaranteed
overnight delivery, or on the transmission date if given by
facsimile during the receiving party's normal business hours.
The address information listed for a party in this Section or
any Product Attachment may be changed from time to time by that
party by giving notice to the other as provided above.
18.6 In the event of a conflict between the provisions of this
Agreement which are not contained in a Product Attachment and
the provisions of a Product Attachment, the provisions of the
Product Attachment shall prevail only with respect to the
Product Line and Services described in that Product Attachment.
18.7 All headings used herein are for index and reference purposes
only, and shall not be given any substantive effect. This
Agreement has been created jointly by the parties, and no rule
of construction requiring interpretation against the drafter of
this Agreement shall apply in its interpretation.
18.8 Buyer shall not export any technical data received from Nortel
pursuant to this Agreement, or release any such technical data
with the knowledge or intent that such technical data will be
exported or transmitted to any country or to foreign nationals
of any country, except in accordance with applicable U.S. law
concerning the exporting of such technical data. Buyer shall
obtain all authorizations from the U.S. government in accordance
with applicable law prior to exporting or transmitting any such
technical data as described above.
18.9 Any changes to this Agreement may only be effected if agreed
upon in writing by duly authorized representatives of the
parties hereto. No agency, partnership, joint venture, or other
similar business relationship shall be or is created by this
Agreement.
<PAGE> 12
AGREEMENT NO. MC-10/96-DM
PAGE 12
18.10 This Agreement, including all Product Attachments and Exhibits
constitutes the entire agreement of the parties with respect to
the subject matter hereof.
NORTHERN TELECOM INC. MIDCOM COMMUNICATIONS INC.
By: /s/ VICKIE YOHE By: /s/ ROBERT J. CHAMBERLAIN
------------------------------- ----------------------------------
(Signature) (Signature)
Name: Vickie Yohe Name: Robert J. Chamberlain
------------------------------- ----------------------------------
(Print) (Print)
Title: VP & General Manager Title: Executive Vice President & CFO
------------------------------- ----------------------------------
Date. 3 FEB 97 Date: 1/27/97
------------------------------- ----------------------------------
<PAGE> 13
AGREEMENT NO. MC-10/96-DM
PAGE 1
EXHIBIT A
DEFINITIONS
As used in the Agreement (as defined below), the following initially capitalized
terms shall have the following meanings:
"Affiliate" shall mean Nortel's parent corporation, Northern Telecom Limited and
any corporation controlled directly or indirectly by Northern Telecom Limited or
Midcom Communications Inc., as the case may be, through the ownership or control
of shares or other securities in such corporation.
"Agreement" shall mean the Agreement to which this Exhibit is attached, and all
Exhibits and Product Attachments.
"Confidential Information" shall mean all information, including, without
limitation, specifications, drawings, documentation, know-how and pricing
information, of every kind or description which may be disclosed by either party
or an Affiliate to the other party in connection with this Agreement, provided
the disclosing party shall clearly mark any such information which is disclosed
in writing as the confidential property of the disclosing party and the
disclosing party shall identify the confidential nature of any such information
which it orally discloses at the time of such disclosure and shall provide a
written summary of the orally disclosed information to the recipient within
fifteen (15) days of such disclosure.
"Equipment" shall mean the hardware listed or otherwise identified in, or
pursuant to, any Product Attachment.
"Exhibits" shall mean Exhibits A, B, C, and D attached hereto, and any
additional Exhibits which Nortel and Buyer subsequently agree in writing shall
be incorporated into, and made a part of the Agreement by reference.
"Hazardous Materials" shall mean any pollutants or dangerous, toxic or hazardous
substances (including, without limitation, asbestos) as defined in, or pursuant
to, the OSHA Hazard Communication Standard (29 CFR Part 1910, Subpart Z), the
Resource Conservation and Recovery Act of 1976 (42 USC Section 6901, et seq.),
the Toxic Substances Control Act (15 USC Section 2601, et seq.), the
Comprehensive Environmental Response Compensation and Liability Act (42 USC
Section 9601, et seq.), and any other federal, state or local environmental law,
ordinance, rule or regulation.
"Order" shall mean a written purchase order issued by Buyer to Nortel. Each
Order shall specify on the face of the Order the types and quantities of
Products and/or Services to be furnished by Nortel pursuant to the Order, the
applicable prices, charges and/or fees with respect to such Products and/or
Services,
<PAGE> 14
AGREEMENT NO. MC-10/96-DM
PAGE 2
Buyer's facility to which the Products are to be delivered, the delivery and/or
completion schedule, and any other information which may be required to be
included in an Order in accordance with the provisions of this Agreement
"Product Attachments" shall mean any Product Attachments which the parties agree
in writing shall be incorporated into, and made a part of, this Agreement.
"Product Attachment Term" shall mean the period specified in a Product
Attachment during which that Product Attachment shall be in effect.
"Product Line" shall mean the Products described in and which may be furnished
pursuant to a specific Product Attachment.
"Products" shall mean any Equipment and/or Software which may be provided under
this Agreement.
"Services" shall mean all services listed or otherwise identified in, or
pursuant to, any Product Attachment which may be purchased from or provided by
Nortel and which are associated with the Product Line described in that Product
Attachment.
"Software" shall mean (a) programs in machine-readable code or firmware which
(i) are owned by, or licensed to, Nortel or any of its Affiliates, (ii) reside
in Equipment memories, tapes, disks or other media, and (iii) provide basic
logic operating instructions and user-related application instructions, and (b)
documentation associated with any such programs which may be furnished by Nortel
to Buyer from time to time.
"Specifications" shall mean, with respect to any Product Line, the
specifications identified in the applicable Product Attachment, provided Nortel
shall have the right at its sole discretion to modify, change or amend such
specifications at any time.
"Third Party Software Vendor" shall mean any supplier of programs contained in
the Software which is not an Affiliate.
"Vendor Items" shall mean, with respect to a Product Line, those portions of the
Product which are identified in the applicable Product Attachment as Vendor
Items.
"Warranty Period" shall mean, with respect to a Product Line, the Warranty
Period specified in the applicable Product Attachment.
<PAGE> 15
AGREEMENT NO. MC-10/96-DM
PAGE 1
EXHIBIT B
SOFTWARE LICENSE
1. Buyer acknowledges that the Software may contain programs which have
been supplied by, and are proprietary to, Third Party Software Vendors.
In addition to the terms and conditions herein, Buyer shall abide by
any additional terms and conditions provided by Nortel to Buyer in
writing with respect to any Software provided by any Third Party
Software Vendor.
2. Upon Buyer's payment to Nortel of the applicable fees with respect to
any Software furnished to Buyer pursuant to this Agreement, Buyer shall
be granted a personal, non-exclusive, paid-up license to use the version
of the Software furnished to Buyer only in conjunction with Buyer's use
of the Equipment with respect to which such Software was furnished for
the life of that Equipment as it may be repaired or modified. Buyer
shall be granted no title or ownership rights to the Software, which
rights shall remain in Nortel or its suppliers.
3. As a condition precedent to this license and to the supply of Software
by Nortel pursuant to the Agreement, Nortel requires Buyer to give
proper assurances to Nortel for the protection of the Software.
Accordingly, all Software supplied by Nortel under or in implementation
of the Agreement shall be treated by Buyer as the exclusive property,
and as proprietary and a TRADE SECRET, of Nortel and/or its suppliers,
as appropriate, and Buyer shall: a) hold the Software, including,
without limitation, any methods or concepts utilized therein in
confidence for the benefit of Nortel and/or its suppliers, as
appropriate; b) not provide or make the Software available to any person
except to its employees on a 'need to know' basis; c) not reproduce,
copy, or modify the Software in whole or in part except as authorized by
Nortel; d) not attempt to decompile, reverse engineer, disassemble,
reverse translate, or in any other manner decode the Software; e) issue
adequate instructions to all persons, and take all actions reasonably
necessary to satisfy Buyer's obligations under this license; and f)
forthwith return to Nortel, or with Nortel's consent destroy, any
magnetic tape, disc, semiconductor device or other memory device or
system and/or documentation or other material, including, but not
limited to all printed material furnished by Nortel to Buyer which shall
be replaced, modified or updated.
4. The obligations of Buyer hereunder shall not extend to any information
or data relating to the Software which is now available to the general
public or becomes available by reason of acts or failures to act not
attributable to Buyer.
<PAGE> 16
AGREEMENT NO. MC-10/96-DM
PAGE 2
5. Buyer shall not assign this license or sublicense any rights herein
granted to any other party except an Affiliate of Buyer without Nortel's
prior written consent, provided such Affiliate agrees in writing to be
bound by the terms of this Software License.
6. Each party shall indemnify and hold the other and its suppliers, as
appropriate, harmless from any loss or damage resulting from a breach of
this Exhibit B. The obligations of the parties under this Exhibit B
shall survive the termination of the Agreement and shall continue if the
Software is removed from service.
<PAGE> 17
AGREEMENT NO. MC-10/96-DM
PAGE 1
EXHIBIT C
STORAGE
If Buyer notifies Nortel prior to the scheduled shipment date of Products that
Buyer does not wish to receive such Products on the date agreed by the parties,
or the installation site or other delivery location is not prepared in
sufficient time for Nortel to make delivery in accordance with such date, or
Buyer fails to take delivery of any portion of such Products, Nortel may place
the applicable Products in storage. In that event Buyer shall be liable for all
additional costs thereby incurred by Nortel. Delivery by Nortel of any Products
to a storage location as provided above shall be deemed to constitute delivery
of the Products to Buyer for purposes of this Agreement, including, without
limitation, provisions for payment, invoicing, passage of risk of loss,
and commencement of the Warranty Period.
<PAGE> 18
AGREEMENT NO. MC-10/96-DM
PAGE 1
EXHIBIT D
LIMITED WARRANTIES AND REMEDIES
1. Nortel warrants that the Equipment supplied hereunder will under normal
use and service be free from defective material and faulty workmanship
and will conform to the applicable Specifications for the Warranty
Period specified in the Product Attachment with respect to such
Equipment. The foregoing warranty shall not apply to items normally
consumed in operation, such as, but not limited to, lamps and fuses or
to Vendor Items. Nortel covenants and warrants that any installation
Services performed by Nortel with respect to such Equipment shall be
free from defects in workmanship for the Warranty Period set forth in
the applicable Product Attachment.
2. Nortel's sole obligation and Buyer's exclusive remedy under the warranty
and covenants set forth in Section 1 above shall be limited to the
replacement or repair, at Nortel's option and expense, of the defective
Equipment, or correction of the defective installation Services.
Replacement Equipment may be new or reconditioned at Nortel's option.
3. Nortel covenants and warrants that any Software licensed by Nortel to
Buyer under this Agreement shall function during the Warranty Period of
the Equipment with respect to which such Software is furnished without
any material, service-affecting nonconformance to the applicable
Specifications, provided that Buyer shall have paid all Software support
fees specified in the applicable Product Attachment. If the Software
fails to so function, Buyer's sole remedy and Nortel's sole obligation
under this covenant and warranty is for Nortel to correct such failure
through, at Nortel's option, the replacement or modification of the
Software or such other actions as Nortel reasonably determines to be
appropriate.
4. Unless otherwise stated in a Product Attachment, (a) Nortel's covenant
and warranty in Section 3 above shall only apply to the portion of the
Software actually developed by Nortel or its Affiliates, (b) all other
Software shall be provided by Nortel "AS IS", (c) Nortel shall assign to
Buyer on a nonexclusive basis any warranty on such other Software
provided to Nortel by the developer of such other Software to the extent
of Nortel's legal right to do so.
5. The obligations and remedies set forth in Sections 1, 2, and 3 above
shall be conditional upon: the Equipment not having been altered or
repaired, the Software not having been modified, and the Products not
having been installed outside the United States; any defect or
nonconformance not being the result of mishandling, abuse, misuse,
improper storage, improper performance of installation, other services,
maintenance or operation by other than Nortel (including use in
conjunction with any product which is incompatible with the applicable
Equipment or Software or of inferior performance), and/or any error,
<PAGE> 19
AGREEMENT NO. MC-10/96-DM
PAGE 2
act, or omission of Buyer described in Section 11.4; the Product not
having been damaged by fire, explosion, power failure, power surge, or
other power irregularity, lightning, failure to comply with all
applicable environmental requirements for the Products specified by
Nortel or any other applicable supplier, such as but not limited to
temperature or humidity ranges, or any act of God, nature or public
enemy; and written notice of the defect having been given to Nortel
within the applicable Warranty Period.
6. The performance by Nortel of any of its obligations described in Section
2 or 3 of this Exhibit D shall not extend the applicable Warranty Period
except to the extent specified in the applicable Product Attachment.
7. Upon expiration of the applicable Warranty Period for Equipment
furnished hereunder, repair and replacement Service for such Equipment
shall be available to Buyer from Nortel in accordance with Nortel's
then-current terms, conditions and prices. Such repair and replacement
Service and notice of any discontinuance of such repair and replacement
Service shall be available for a minimum period set forth in the Product
Attachment applicable to such Equipment. This provision shall survive
the expiration of this Agreement.
8. Unless Nortel elects to repair or replace defective Equipment at Buyer's
facility, all Equipment to be repaired or replaced, whether in or out of
warranty, shall be packed by Buyer in accordance with Nortel's
instructions stated in the applicable Product Attachment and shipped at
Buyer's expense and risk of loss to a location designated by Nortel.
Replacement Equipment shall be returned to Buyer at Nortel's expense and
risk of loss. Buyer shall ship the defective Equipment to Nortel within
thirty (30) days of receipt of the replacement Equipment. In the event
Nortel fails to receive such defective Equipment within such thirty (30)
day period, Nortel shall invoice Buyer for the replacement Equipment at
the then current Nortel price for such.
9. With respect to any Vendor Item furnished by Nortel to Buyer pursuant to
this Agreement, Nortel shall assign to Buyer on a nonexclusive basis any
warranty granted by the party that supplied such Vendor Item to Nortel
to the extent of Nortel's right to do so.
10. Neither Nortel nor Nortel's suppliers, as appropriate, shall have any
responsibility for warranties offered by Buyer to any of its customers.
Buyer shall indemnify Nortel and Nortel's suppliers, from and against
all claims, losses and actual damages, reasonable costs and expenses
(including ordinary and necessary attorneys fees) ("Losses") arising
directly out of a warranty offered by Buyer to its customers. Nortel or
Nortel's suppliers shall first give written notice of any claim and
tender the defense of the applicable suit, claim or proceeding to Buyer.
<PAGE> 20
Product Attachment
Page 1
st7286h
PRODUCT ATTACHMENT
CARRIER NETWORKS PRODUCTS
Northern Telecom Inc. ("Nortel") and MIDCOM Communications Inc., ("Buyer") agree
as follows:
1. INCORPORATION BY REFERENCE
This Product Attachment ("Attachment") shall be incorporated into and
made a part of the Network Products Purchase Agreement No. MC-10/96-DM
(the "Agreement") between Nortel and Buyer.
2. DEFINITIONS
For purposes of this Attachment:
"Acceptance Criteria" shall mean, with respect to any Products installed
by Nortel hereunder, the standards and specifications contained in the
Nortel Installation Manuals which are applicable to such Products.
"Equipment" shall mean the equipment listed in Schedule A.
"Extension" shall mean Equipment and/or Software which Nortel engineers
and installs and which is added to an Initial System after the Turnover
Date of the Initial System.
"Initial System" shall mean the Equipment and Software which is included
in any configuration identified in Schedule A as an "Initial System."
"Installation Site" shall mean Buyer's facility identified in an Order
to which the applicable Products identified in such Order shall be
delivered or at which the applicable Services, if any, are to be
performed, respectively.
"Merchandise" shall mean any Equipment which is not part of a System and
with respect to which no engineering or installation Services shall be
provided by Nortel.
"Attachment Term" shall mean the period which shall commence on the date
this Attachment is executed by the latter of the parties and shall
expire sixty (60) months thereafter.
"Services" shall mean the services described in Schedule B.
<PAGE> 21
Product Attachment
Page 2
"Software" shall mean the software listed in Schedule A.
"Specifications" shall mean with respect to any Products furnished
hereunder, the specifications published by Nortel which Nortel
identifies as its standard performance specifications for such Products
as of the date of Buyer's Order for such Products.
"System" shall mean any Initial System or Extension.
"Turnover Date" shall mean, with respect to any Products installed by
Nortel hereunder, the date on which Nortel provides the Turnover Notice
to Buyer pursuant to Section 7.a. of this Attachment.
"Warranty Period" shall mean, with respect to:
(a) Any System, the period which shall commence upon the Turnover
Date with respect to such System and shall expire twelve (12)
months thereafter,
(b) Merchandise, the period which shall commence upon the date of
shipment with respect to such Merchandise by Nortel to Buyer
and shall expire ninety (90) days thereafter,
(c) Installation Services involving any System, the period which
shall commence upon the Turnover Date with respect to such
System and shall expire twelve (12) months thereafter,
(d) Equipment which is repaired or replaced pursuant to Nortel's
obligations under Exhibit D to the Agreement, the period
commencing five (5) days after (i) shipment of the replacement
Equipment to Buyer or (ii) completion of the repair at the
Installation Site of the applicable Equipment and which shall
expire on the later of thirty (30) days. thereafter or the
last day of the original Warranty Period with respect to the
Equipment which was repaired or replaced, and
(e) Software which was corrected pursuant to Nortel's obligations
under Exhibit D to the Agreement, the period commencing upon
delivery of the corrected Software by Nortel to Buyer and
expiring on the later of thirty (30) days thereafter or the
last day of the original Warranty Period with respect to such
Software.
3. SCHEDULES
The following Schedules which are attached hereto are an integral part
of the Attachment and are incorporated herein by reference:
<PAGE> 22
Product Attachment
Page 3
Schedule A - Products, Prices, and Fees
Schedule B - Services and Charges
Schedule C - Delivery
Schedule D - Documentation
4. ORDERING
With respect to Section 3, ORDERING of the Agreement the following
additional terms shal1 apply:
a. Buyer shall identify in each Order for Products whether the Products
constitute an Initial System, Extension, or Merchandise. All Orders for
Extensions, Merchandise, or any Services other than engineering and
installation Services provided by Nortel in connection with an Order for
an Initial System shall be subject to written agreement of Buyer and
Nortel on the applicable prices, charges and fees with respect thereto
as required pursuant to Section 5, PRICING, of this Attachment.
b. Notwithstanding Exhibit C to the Agreement, Buyer may by written notice
to Nortel cancel without charge any Order for Products and/or Services
prior to the delivery date of the applicable Products set forth in such
Order or the agreed date for the commencement by Nortel of the
applicable Services ("Service Commencement Date"), except that if Buyer
cancels such Order within five (5) weeks or less of any such date, a
cancellation fee of eight percent (8%) of the aggregate price of all
Products and/or Services included in such cancelled Order shall be
payable by Buyer. Nortel may invoice such amount upon receipt of Buyer's
notice of cancellation of the Order.
C. Notwithstanding Exhibit C to the Agreement, Buyer may by written notice
to Nortel not less than six (6) weeks prior to the delivery date of any
Products set forth in an Order and/or the Service Commencement Date of
the applicable Services, delay the delivery date of such Products and/or
the Service Commencement Date of such Services for a period which shall
not exceed ninety (90) days from the date such Products were originally
scheduled to be delivered or ninety (90) days from the Service
Commencement Date, subject to the availability from Nortel of the
applicable Products and/or Services after such period of delay.
d. Except as set forth in Sections 4.b. and 4.c. of this Attachment, any
change to an Order after Nortel's acceptance of such Order shall require
written agreement of Nortel and Buyer upon a written change to the Order
("Change Order") which shall reference the original Order and be
executed by the parties. No such changes shall be implemented until the
applicable Change Order has been executed by the parties.
<PAGE> 23
Product Attachment
Page 4
e. With respect to each Order for Products which is accepted by Nortel,
Buyer may make a written request at least ninety (90) days prior to the
scheduled shipment date of such Products for a change ("Change")
consisting of certain addition(s) or deletion(s) to such Products. After
receipt of such request, Nortel shall submit a Job Change Order ("JCO")
to Buyer for Buyer's approval with respect to the requested Change,
except that Nortel shall be under no obligation to submit such JCO to
Buyer if Nortel determines that the Price applicable to such Order would
be reduced by more than ten percent (10%) as a result of the
implementation of the Change. Each JCO shall state whether the
requested Change shall increase or decrease the Price and/or time
required by Nortel for any aspect of its performance under the Agreement
with respect to such Order. Buyer shall accept or reject the JCO in
writing within ten (10) days of receipt thereof. Failure of the Buyer to
accept or reject the JCO in writing as described above shall be deemed a
rejection of the JCO by Buyer. In the event an accepted JCO involves the
return to Nortel of any Equipment which shall have been previously
delivered to Buyer, Nortel may invoice and Buyer shall pay the
transportation costs and Nortel's then-current restocking charge for the
returned Equipment.
f. Any increase or decrease in the Price with respect to an Order hereunder
which is occasioned by an accepted JCO shall be added to or subtracted
from, as applicable, the amount of the last payment due pursuant to
Section 6 with respect to such Order.
g. If Buyer rejects a proposed JCO, then the rights and obligations of the
parties with respect to the applicable Order shall not be subject to
Buyer's requested Changes, provided that Buyer shall promptly pay to
Nortel all of Nortel's additional costs and expenses incurred hereunder
in accordance with Buyer's requested Changes and Nortel's additional
costs and expenses subsequently incurred in order that Nortel may be
able to perform Nortel's obligations without modification by the
requested Changes, and Nortel shall be entitled to an extension of the
dates for performance of its obligations with respect to the applicable
Order as a result of any delays in such performance which result from
the foregoing.
5. PRICING
With respect to Section 4, PRICES of the Agreement, the following
additional terms shall apply:
a. The prices set forth in Schedule A with respect to any Initial System
shall be in effect for a period which shall commence upon the effective
date of this Attachment and shall expire after six (6) months. Nortel
may in its sole discretion, thereafter, increase any prices set forth in
Schedule A upon sixty (60) days prior written notice to Buyer. The
prices listed in Schedule A shall apply to
<PAGE> 24
Product Attachment
Page 5
any Order for an Initial System listed in Schedule A which shall be
received by Nortel prior to the effective date of any change in such
prices as permitted by this Section, provided that delivery date for
such Initial System as set forth in the applicable Order shall be not
more than one-hundred twenty (120) days after Nortel's acceptance of
such Orders.
b. The prices for Equipment and the fees for the right to use the Software
included in any Extension, prices for any Merchandise, and charges for
any Services, other than engineering and installation Services provided
with any Initial System shall be as subsequently agreed in writing by
Nortel and Buyer.
c. All transportation charges associated with the shipment of the Products
to Buyer shall be payable by Buyer. Buyer shall promptly reimburse
Nortel for any such charges which may be incurred by Nortel.
6. TERMS OF PAYMENT
With respect to Section 5, TERMS OF PAYMENT, the following additional
terms shall apply:
a. With respect to each Initial System furnished hereunder by Nortel to
Buyer the price listed in Schedule A shall be invoiced by Nortel in
accordance with the following schedule:
(i) Twenty percent (20%) of such price may be invoiced upon Nortel's
acceptance of the Order for such Initial System,
(ii) Fifty percent (50%) of such price may be invoiced on the date of
shipment by Nortel to Buyer of the switch component of such
Initial System,
(iii) Twenty percent (20%) of such price may be invoiced on the
Turnover Date of such Initial System, and
(iv) Ten percent (10%) of such price may be invoiced on the date of
Acceptance of such Initial System.
b. With respect to each Extension furnished hereunder by Nortel to Buyer,
the applicable price determined in accordance with Section 5.b. of this
Attachment shall be invoiced by Nortel in accordance with the following
schedule:
(i) Twenty percent (20%) of such price may be invoiced upon Nortel's
acceptance of the Order for such Extension,
(ii) Fifty percent (50%) of such price may be invoiced on the date
of shipment by Nortel to Buyer of the Equipment included in such
Extension,
<PAGE> 25
Product Attachment
Page 6
(iii) Twenty percent (20%) of such price may be invoiced on the
Turnover Date with respect to such Extension, and
(iv) Ten percent (10%) of such price may be invoiced on the date of
Acceptance of such Extension.
c. Except as may be otherwise agreed in writing by the parties Nortel's
prices for Merchandise and charges for any Services determined in
accordance with Section 5.b. above may be respectively invoiced upon
delivery of such Merchandise and upon performance of such Services by
Nortel.
7. TESTING, TURNOVER, AND ACCEPTANCE
Pursuant to Section 8.1 of the Agreement, the rights and obligations of
the parties with respect to testing, turnover and acceptance of any
Products furnished hereunder and installed by Nortel shall be as
follows:
a. Nortel shall provide Buyer with five (5) days written notice prior to
commencing final commissioning and testing of any Products installed by
Nortel. Buyer shall cause an authorized representative of Buyer to be
present at the applicable Installation Site to witness such final
commissioning and testing, provided that in the event such
representative fails to be present for any reason, Nortel shall not be
required to delay performance of such final commissioning and testing.
In connection with the final commissioning and testing of such Products,
Nortel shall test the Products for conformity with the applicable
Acceptance Criteria. When such tests have been successfully completed,
Nortel shall provide Buyer with written notice ("Turnover Notice") that
the applicable Products meet such Acceptance Criteria and are ready for
Buyer's testing for compliance with such Acceptance Criteria. Buyer
shall promptly complete and return to Nortel Buyer's acknowledgment of
receipt of such Turnover Notice.
b. Following the Turnover Date, Buyer may test the applicable Products for
compliance with the Acceptance Criteria using the tests and test
procedures contained in Nortel's Installation Manuals with respect to
such Products. Within fifteen (15) business days following the Turnover
Date of the applicable Products, Buyer shall notify Nortel either that
Buyer has accepted such Products in writing using Nortel's standard
Acceptance Notice form or that Buyer has not accepted such Products in
which case Buyer shall also provide Nortel with a written notice
("Notice of Deficiency") which shall provide in reasonable detail the
manner in which Buyer asserts that the Products failed to meet the
Acceptance Criteria. With respect to any such details with which Nortel
agrees, Nortel shall promptly proceed to take appropriate corrective
action and following correction, Buyer may retest the Products in
accordance with this Section. Buyer shall accept the Products in writing
without delay when the tests
<PAGE> 26
Product Attachment
Page 7
pursuant to this Section indicate that the Products comply with the
Acceptance Criteria.
c. With respect to any points of disagreement between Nortel and Buyer
concerning any Notice of Deficiency which are not resolved by Nortel and
Buyer within fifteen (15) business days after the effective date of the
Notice of Deficiency, Buyer, at its option, may waive any rights it may
have on account of any such points of disagreement, or require that the
disputed points be resolved by arbitration.
d. Buyer shall notify Nortel in writing of its election pursuant to Section
7.c. not later than fifteen (15) days after the effective date of the
Notice of Deficiency, if any, given to Nortel by Buyer. Upon expiration
of such fifteen (15) day period unless Buyer has notified Nortel to the
contrary, Buyer shall be deemed to have elected to waive its right with
respect to any points of disagreement then existing between it and
Nortel with respect to such Notice of Deficiency.
e. If Buyer makes timely election to require arbitration of such disputed
points, the arbitrator shall be chosen by mutual agreement. If the
parties cannot agree upon an arbitrator within three (3) days of Buyer's
election to arbitrate, each party shall within three (3) days thereafter
select an independent and an unaffiliated person to be an arbitrator.
These two (2) persons selected shall select a third person, independent
and unaffiliated with either party, as a third arbitrator. The
arbitration shall be conducted in accordance with the Rules of the
American Arbitration Association, provided, however that the
Arbitrator(s) shall be empowered to reduce the Prices of Products only
to the extent that the Arbitrator(s) find that the benefit of Buyer's
bargain has been reduced. The Arbitrator(s) shall not have any authority
to grant partial or total rescission unless the Arbitrator(s) determine
that (i) Buyer has not substantially received the benefit of its
bargain; and (ii) money damages will not provide an adequate remedy.
Judgment upon the award rendered by the Arbitrator(s) may be entered in
any Court of competent jurisdiction.
f. For purposes of this Attachment, "Acceptance" of the applicable
Products shall occur upon the earliest of the following and Buyer shall
upon request sign Nortel's Acceptance Notice confirming such Acceptance
without any conditions, restrictions, or limitations of any nature
whatsoever:
(i) The date on which Buyer accepts such Products pursuant to
Section 7.b. of this Attachment;
(ii) The failure of Buyer to provide Nortel with any notice required
by Section 7.b. of this Attachment, with respect to such
Products;
<PAGE> 27
Product Attachment
Page 8
(iii) Use by Buyer of such Products or any portion thereof in revenue-
producing service at any time; or
(iv) Waiver by Buyer of its rights pursuant to Section 7.c. or 7.d.
g. Acceptance by Buyer of such Products pursuant to Section 7.f. of this
Attachment above shall not be withheld or postponed due to:
(i) Deficiencies of such Products resulting from causes (A)
attributable to Buyer, such as, but not limited to (1)
inaccuracy of information provided by Buyer or, (2) inadequacy
or deficiencies of any materials, facilities or services
provided directly or indirectly by Buyer and tested in
conjunction with the applicable Products, and (B) other
conditions external to the Products which are beyond the limits
specified by Nortel in the Specifications for the Products and
which are used by Nortel in performance calculations with
respect to the Acceptance Criteria, or spurious outputs from
adjacent material; or
(ii) Minor deficiencies or shortages with respect to such Products
which are attributable to Nortel, but of a nature that do not
prevent full and efficient operation of the Products.
h. With respect to any deficiencies of the type described in Section
7.g.(i), Nortel shall at Buyer's request and expense assist Buyer in the
elimination or minimization of any such deficiencies. With respect to
any deficiencies or shortages as described in the Section 7.g.(ii),
Nortel shall, at Nortel's expense, take prompt and effective action to
correct any such deficiencies or shortages.
i. In the event Buyer's Acceptance of any Products is withheld or postponed
due to any deficiencies of the type described in Section 7.g.(i), Nortel
shall invoice and Buyer shall pay Nortel's ordinary and necessary
charges and expenses incurred by Nortel associated with Nortel's
investigation of the reasons for Buyer's withholding or postponement of
such Acceptance.
8. WARRANTIES AND REMEDIES
With respect to Exhibit D of the Agreement, LIMITED WARRANTIES AND
REMEDIES, the following additional terms shall apply:
a. Except as set forth in Section 8.b. below, Nortel shall in performance
of its obligations under Section 2 of Exhibit D to the Agreement, (i)
ship replacement Equipment or complete the repair within thirty (30)
days of Nortel's receipt of the Equipment to be replaced or repaired,
and (ii) commence the correction of the applicable installation Services
within thirty (30) days of receipt of notice from Buyer pursuant to
Section 5 of Exhibit D to the Agreement.
<PAGE> 28
Product Attachment
Page 9
b. For emergency warranty service situations involving the Equipment,
Nortel shall during the applicable Warranty Period use all reasonable
efforts to ship replacement Equipment within twenty-four (24) hours of
notification of the applicable warranty defect by Buyer pursuant to
Section 5 of Exhibit D to the Agreement, provided that Buyer shall have
requested such emergency service. Nortel may invoice Buyer and Buyer
shall pay Nortel's surcharge for emergency warranty services. If Nortel
determines that due to the particular circumstances, onsite technical
assistance is necessary, Nortel shall use all reasonable efforts to
dispatch emergency service personnel to the applicable Installation Site
within twenty-four (24) hours of receipt of notice from Buyer as
described above.
c. All Products to be repaired or replaced, both within and outside of the
applicable Warranty Period, shall be packed by Buyer in accordance with
Nortel's then current instructions.
d. No later than ninety (90) days prior to the expiration of the Warranty
Period with respect to any Initial System, Nortel shall offer to Buyer
post-warranty support by means of an extended service plan or other
terms, provided that neither party shall have any obligation with
respect thereto except as may be agreed upon in writing by the parties.
9. NOTICES
Pursuant to Section 18.5 of the Agreement, any notices by Buyer to
Nortel which are specific to this Attachment shall be delivered to the
following address:
Northern Telecom Inc.
2350 Lakeside Blvd.
Richardson, Texas 75082-4399
Attn: Vice President & General Manager, Carrier Networks
10. ADDITIONAL TERMS
The following additional terms shall apply to the Agreement:
(a) With respect to Section 14, BUYER'S RESPONSIBILITIES, the following
additional terms shall apply:
(i) Buyer shall be responsible for ordering and coordinating with
each applicable local telephone company the installation of all
central office trunks and test trunks and Buyer shall be
responsible for all utility charges associated with the
installation, testing, operation and maintenance of Products
furnished hereunder, including, but not limited to, all
applicable charges for such central office trunks, test trunks
and any tie lines.
<PAGE> 29
Product Attachment
Page 10
(b) Nortel shall provide documentation with respect to the Products in
accordance with Schedule D to this Attachment
(c) Upon execution of this Product Attachment, Buyer shall issue Orders to
Nortel for Product(s) and/or Services, as identified herein, for
delivery during the Product Attachment Term, with an aggregate dollar
value of no less than that associated with Commitment Level 4, as
defined in Schedule A, Section VI, subparagraph 1.0 ("Commitment Level
4"). In the event Buyer fails to satisfy this commitment by the
expiration or earlier termination of this Product Attachment Term,
Nortel shall invoice Buyer, and Buyer shall pay, the difference between
the prices, charges and/or fees Buyer paid for the Product and/or
Services and the prices, charges and/or fees that Buyer would have paid
for the Products and/or Services actually ordered by Buyer, based upon
the prices, fees and/or charges associated with the Commitment Level,
-for the aggregate dollar value of Products and/or Services which were
actually ordered by Buyer ("Actual Orders"). Buyer shall pay such
invoice, including all applicable taxes associated therewith, within
thirty (30) days from the date of such invoice.
(d) In consideration for the commitment made by Buyer under subparagraph (c)
above, the prices, charges and/or fees for the Products and/or Services
shall be based upon the prices, charges and/or fees, and/or applicable
discounts set forth in Schedule A.
(e) In order to begin to satisfy its commitment under subsection (c) above,
Buyer shall issue an Order or Orders for either (1) six (6) Initial
Systems, as defined in Schedule A, Section I, subparagraphs 1.0 through
6.0, at the prices set forth in Schedule A, Section VI, subparagraph
2.0; or (2) five (5) DMS-250 to DMS-500 Upgrades as defined in Schedule
A, Section V, subparagraph 1.0, at the prices set forth in Schedule A,
Section VI, subparagraph 8.0. To the extent Buyer's Order or Orders for
the foregoing are not sufficient to satisfy Buyer's commitment under
subsection (c) above, Buyer shall issue an Order of Order(s) to Nortel
for the Product(s) identified below:
Product Schedule A Section
Link Peripheral Processor II
Add-On Port Extension III
Extension Ports IV
DMS-500 Optional Features VIII
DMS-250 Optional Features X
Notwithstanding the foregoing, in the event Buyer issues an Order or
Orders for Product(s) and/or Services in excess of the aggregate dollar
value associated with Commitment Level 4 during the Attachment Term, or
in the event Buyer invoices its commitment, the prices, charges, fees
and/or discounts associated with Commitment Level 4 shall not be
adjusted retroactively. An Order or Orders for Products and/or Services
in excess of the dollar value associated with Commitment Level 4 shall
be subject to the prices, charges, fees and/or applicable discounts
associated with the appropriate Commitment Level.
With respect to Schedule A, Section 11, subparagraph 1.0, Link
Peripheral Processor(s), the prices for such Link Peripheral Processors
do not include engineering or installation.
<PAGE> 30
Product Attachment
Page 11
(f) In respect to Schedule A, Section II, subparagraph 1.0, Link Peripheral
Processor(s) if Ordered, such Link Peripheral Processors are furnished
less any Nortel engineering or installation.
(g) Buyer shall not issue any Order for Product hereunder until such time as
Buyer has secured financing sufficient to cover any such Order. Buyer
shall have no commitment pursuant to paragraph 10 (c), (d) or (e) above
until such time as Buyer has issued its first Order for Product
hereunder.
NORTHERN TELECOM INC. MIDCOM COMMUNICATIONS INC.
By: /s/ VICKIE YOHE By: /s/ ROBERT J. CHAMBERLAIN
------------------------------- ----------------------------------
(Signature) (Signature)
Name: Vickie Yohe Name: Robert J. Chamberlain
------------------------------- ----------------------------------
(Print) (Print)
Title: VP & General Manager Title: Executive Vice President & CFO
------------------------------- ----------------------------------
Date: 3 FEB 97 Date: 1/27/97
------------------------------- ----------------------------------
<PAGE> 31
Product Attachment
Page 12
SCHEDULE A
PRODUCTS PRICES AND FEES
<PAGE> 32
MIDCOM Product Attachment
SCHEDULE A
I. INITIAL SYSTEMS
NORTEL SHALL ENGINEER EACH OF THE INITIAL SYSTEM(S) ORDERED HEREUNDER IN
ACCORDANCE WITH NORTEL'S STANDARD ENGINEERING PRACTICES AND PROCEDURES, AND
THEREAFTER NORTEL SHALL PROVIDE BUYER WITH A DETAILED LIST OF THE COMPONENTS OF
SUCH INITIAL SYSTEM(S).
1.0 INITIAL SYSTEM DMS-500 13440 PORT MODEL (MODEL A-NEW YORK)
1.1 The following represents the SuperNode equipment that will be
delivered with the Initial System DMS-500 13440 Port Model equipped
with 11040 and wired for 11520 DTEI trunking ports, and equipped
and wired for 1920 LTEI trunking ports:
a) SuperNode front end, Link Peripheral Processor, Enhanced
Network and other common equipment as follows:
- SuperNode equipped with BRISC60 processor, five (5) 96 meg
memory cps per plane and SLM III.
- Link Peripheral Processor equipped with eight (8) Link
Interface Units, (2) Ethernet Interface Units and wired for
thirty six (36) Link Interface Units (LIUs). Four of the
eight equipped LIUs will be utilized for interworking.
- V.35 Link Peripheral Processor Interface equipment to
support an equipped configuration of eight (8) Interface
Units and a wired configuration of thirty six (36) Interface
Units.
- Twelve (12) Digital Trunk equipment ISDN Ready (DTEI)
frames equipped with 11040 and wired for 11520 total
trucking ports. Ten thousand five hundred sixty (10560)
ports are equipped for SS7 and eleven thousand forty ports
(11,040) are wired for SS7. Four hundred eighty (480) ports
are equipped and wired for PRI functionality. Nine hundred
and sixty (960) ports of the ten thousand five hundred and
sixty (10560) equipped SS7 ports will be used for
interworking. All DTCIs are equipped with the latest XPM and
Universal Tone Receivers for digit collection. Ten thousand
five hundred sixty (10560) trunks are equipped with Special
Tone Receivers for Reorigination, and Continuity Tone
Detectors for SS7 functionality.
- Two (2) Line Trunk equipment ISDN Ready (LTEI) frames
wired and equipped with 1920 SS7 ports.
- Two (2) Integrated Services Module (ISM) frames equipped
with DMS-500 service and test circuits providing DMS-500
functionality, as well as, six (6) Enhanced Digital Recorded
Announcement Machine circuit-packs.
- Two (2) Input Output equipment (IOE) frames equipped with:
- One (1) Mag Tape Device
- Four (4) SCSI Disk Drive Units
- Three (3) IOC Shelves
- Three (3) I/O Controllers providing eight (12) switch
interface ports
- Four (4) X-25 Automatic File Transfer circuit packs
- Two (2) MIS frames equipped with the required 500W inverters
and terminal block assemblies.
- Two (2) Meridian Cabinet Spare Storage (MCSS) cabinets
to house switch spares.
- Two (2) Power Distribution Center (PDC) frames equipped
with "A" and "B" feed fuse panels & fuses as required.
December 3, 1996
<PAGE> 33
MIDCOM Product Attachment
SCHEDULE A
I. INITIAL SYSTEMS
1.1 INITIAL SYSTEM DMS-500 13440 PORT MODEL-A NEW YORK CONT.
- Miscellaneous equipment as follows:
- Two (2) Maintenance Administration
Positions & one set of Furniture
- Five (5) UDS 2440 Modems
- One (1) Norstar Key System
- Two (2) M7310 Feature sets to support
Norstar Key System
- Two (2) RTIF Terminals
- One (1) MAP Printer
- One (1) Helmsman Workstation, CD ROM
Software and Printer
- DSX panels to support an eleven thousand forty
(11040) equipped port DMS-500 Initial System.
b) Single frame enhanced network to support an eleven
thousand forty (11040) equipped port DMS-500 Initial
System.
c) Initial System DMS-500 Port Model Standard Features
(Base and Optional) as set forth in Section VII of this
Schedule A.
d) Nortel's standard complement of DMS-500 Initial System
spares.
1.2 INITIAL SYSTEM DMS-500 13440 PORT MODEL A NEW YORK PRICING
Refer to Section VI of this Schedule A for detailed Initial
System Model Pricing.
1.3 INITIAL SYSTEM DMS-500 13440 PORT MODEL A NEW YORK OPTIONAL
POWER PLANT PRICING
The price for Optional Power Plant to support the Initial System
DMS-500 13440 Port Model described in Section 1.1 above shall be
One hundred thirty-three thousand four hundred thirteen dollars
($133,413). The Optional Power Plant includes batteries,
rectifiers and power board equipment. The batteries are
provisioned for a four (4) hour reserve period.
December 3, 1996
<PAGE> 34
MIDCOM Product Attachment
SCHEDULE A
I. INITIAL SYSTEMS
2.0 INITIAL SYSTEM DMS-500 12480 PORT MODEL (MODEL B-CHICAGO)
2.1 The following represents the SuperNode equipment that will be
delivered with the Initial System DMS-500 12480 Port Model
equipped and wired for 10560 DTEI trunking ports, and equipped
and wired for 1920 LTEI trunking Ports:
a) SuperNode front end, Link Peripheral Processor, Enhanced
Network and other common equipment as follows:
- SuperNode equipped with BRISC60 processor, five
(5) 96 meg memory cps per plane and SLM III.
- Link Peripheral Processor equipped with eight
(8) Link Interface Units, (2) Ethernet Interface
Units and wired for thirty six (36) Link
Interface Units (LIUs). Four of the eight
equipped LIUs will be utilized for interworking.
- V.35 Link Peripheral Processor Interface
equipment to support an equipped configuration
of eight (8) Interface Units and a wired
configuration of thirty six (36) Interface
Units.
- Eleven (11) Digital Trunk equipment ISDN Ready
(DTEI) frames equipped and wired for 10560
trunking ports. Ten thousand eighty (10080)
ports are equipped and wired for SS7. Four
hundred eighty (480) ports are equipped and
wired for PRI functionality. Nine hundred and
sixty (960) of the ten thousand eighty SS7 ports
are interworking. All DTCIs are equipped with
the latest XPM and Universal Tone Receivers for
digit collection. Ten thousand eighty (10080)
trunks are wired with Special Tone Receivers for
Reorigination, and Continuity Tone Detectors for
SS7 functionality.
- Two (2) Line Trunk equipment ISDN Ready (LTEI)
frames wired and equipped with 1920 SS7 ports.
- Two (2) Integrated Services Module (ISM) frames
equipped with DMS-500 service and test circuits
providing DMS-500 functionality, as well as six
(6) Enhanced Digital Recorded Announcement
Machine circuit packs.
- Two (2) Input Output equipment (IOE) frames
equipped with:
- One (1) Mag Tape Device
- Four (4) SCSI Disk Drive Units
- Three (3) IOC Shelves
- Three (3) I/O Controllers providing
eight (12) switch interface ports
- Four (4) X.25 Automatic File Transfer
circuit packs
- Two (2) MIS frames equipped with required 500W
inverters and terminal block assemblies.
- Two (2) Meridian Cabinet Spare Storage (MCSS)
cabinets to house switch spares.
- Two (2) Power Distribution Center (PDC) frames
equipped with "A" and "B" feed fuse panels &
fuses as required.
- Miscellaneous equipment as follows:
- Two (2) Maintenance Administration
Positions & one set of Furniture
- Five (5) UDS 2440 Modems
- One (1) Norstar Key System
- Two (2) M7310 Feature sets to support
Norstar Key System
- Two (2) RTIF Terminals
- One (1) MAP Printer
- One (1) Helmsman Workstation, CD ROM
Software and Printer
- DSX panels to support a twelve thousand four
hundred eighty (12480) port DMS-500 Initial
System.
December 3, 1996
<PAGE> 35
MIDCOM Product Attachment
SCHEDULE A
I. INITIAL SYSTEMS
2.1 INITIAL SYSTEM DMS-500 12480 PORT MODEL B CHICAGO CONT.
b) Single frame enhanced network to support a twelve
thousand four hundred eighty (12480) port DMS-500
Initial System.
c) Initial System DMS-500 Port Model Standard Features
(Base and Optional) as set forth in Section VII of this
Schedule A.
d) Nortel's standard complement of DMS-500 Initial System
spares.
2.2 INITIAL SYSTEM DMS-500 12480 PORT MODEL B CHICAGO PRICING
Refer to Section VI of this Schedule A for detailed Initial
System Model Pricing.
2.3 INITIAL SYSTEM DMS-500 12480 PORT MODEL B CHICAGO OPTIONAL POWER
PLANT PRICING
The price for Optional Power Plant to support the Initial System
DMS-500 12480 Port Model described in Section 2.1 above shall be
one hundred thirty-three thousand four hundred thirteen dollars
($133,413). The Optional Power Plant includes batteries,
rectifiers and power board equipment. The batteries are
provisioned for a four (4) hour reserve period.
December 3, 1996
<PAGE> 36
MIDCOM Product Attachment
SCHEDULE A
I. INITIAL SYSTEMS
3.0 INITIAL SYSTEM DMS-500 14400 PORT MODEL (MODEL C-L.A.)
3.1 The following represents the SuperNode equipment that will be
delivered with the Initial System DMS-500 14400 Port Model
equipped with 12000 and wired for 12480 DTEI trunking ports, and
equipped and wired for 1920 LTEI trunking ports:
a) SuperNode front end, Link Peripheral Processor, Enhanced
Network and other common equipment as follows:
- SuperNode equipped with BRISC60 processor, five
(5) 96 meg memory cps per plane and SLM III.
- Link Peripheral Processor equipped with eight
(8) Link Interface Units, (2) Ethernet Interface
Units and wired for thirty six (36) Link
Interface Units (LIUs). Four of the eight
equipped LIUs will be utilized for interworking.
- V.35 Link Peripheral Processor Interface
equipment to support an equipped configuration
of eight (8) Interface Units and a wired
configuration of thirty six (36) Interface
Units.
- Thirteen (13) Digital Trunk equipment ISDN Ready
(DTEI) frames equipped with 12000 and wired for
12480 total trunking ports. Eleven thousand five
hundred and twenty (11520) ports are equipped
for SS7 and twelve thousand (12000) ports are
wired for SS7. Four hundred eighty (480) ports
are equipped and wired for PRI functionality.
Nine hundred and sixty (960) ports of the eleven
thousand five hundred and twenty (11520)
equipped SS7 ports will be used for
interworking. AR DTCIs are equipped with the
latest XPM and Universal Tone Receivers for
digit collection. Eleven thousand five hundred
and twenty (11520) trunks are equipped with
Special Tone Receivers for Reorigination, and
Continuity Tone Detectors for SS7 functionality.
- Two (2) Line Trunk equipment ISDN Ready (LTEI)
frames wired and equipped with 1920 SS7 ports.
- Two (2) Integrated Services Module (ISM) frames
equipped with DMS-500 service and test circuits
providing DMS-500 functionality, as well as, six
(6) Enhanced Digital Recorded Announcement
Machine circuit packs.
- Two (2) Input Output equipment (IOE) frames
equipped with:
- One (1) Mag Tape Device
- Four (4) SCSI Disk Drive Units
- Three (3) IOC Shelves
- Three (3) 1/0 Controllers providing
eight (12) switch interface ports
- Four (4) X.25 Automatic File Transfer
circuit packs
- Two (2) MIS frames equipped with required 500W
inverters and block assemblies.
- Two (2) Meridian Cabinet Spare Storage (MCSS)
cabinets to house switch spares.
- Two (2) Power Distribution Center (PDC) frames
equipped with "A" and "B" feed fuse panels &
fuses as required.
- Miscellaneous equipment as follows:
- Two (2) Maintenance Administration
Position & one set of Furniture
- Five (5) UDS 2440 Modems
- One (1) Norstar Key System
- Two (2) M7310 Feature sets to support
Norstar Key System
- Two (2) RTIF Terminals
- One (1) MAP Printer
- One (1) Helmsman Workstation, CD ROM
Software and Printer
December 3, 1996
<PAGE> 37
MIDCOM Product Attachment
SCHEDULE A
I. INITIAL SYSTEMS
3.1 INITIAL SYSTEM DMS-500 14400 PORT MODEL C L.A. CONT.
- DSX panels to support a twelve thousand (12000)
equipped port DMS-500 Initial System.
b) Single frame enhanced network to support a twelve
thousand (12000) equipped port DMS-500 Initial System.
c) Initial System DMS-500 Port Model Standard Features
(Base and Optional) as set forth in Section VII of this
Schedule A.
d) Nortel's standard complement of DMS-500 Initial System
spares.
3.2 INITIAL SYSTEM DMS-500 14400 PORT MODEL C LA. PRICING
Refer to Section VI of this Schedule A for detailed Initial
System Model Pricing.
3.3 INITIAL SYSTEM DMS-500 14400 PORT MODEL B L.A. OPTIONAL POWER
PLANT PRICING
The price for Optional Power Plant to support the Initial
System DMS-500 14400 Port Model described in Section 3.1
above shall be one hundred thirty-three thousand four hundred
thirteen dollars ($133,413). The Optional Power Plant includes
batteries, rectifiers and power board equipment. The batteries
are provisioned for a four (4) hour reserve period.
December 3, 1996
<PAGE> 38
MIDCOM PRODUCT ATTACHMENT
SCHEDULE A
I. INITIAL SYSTEMS
4.0 INITIAL SYSTEM DMS-250 5760 PORT MODEL (MODEL D-ATLANTA)
4.1 The following represents the SuperNode equipment that will be
delivered with the Initial System DMS-250 5760 Port Model
equipped and wired for 5760 ports:
a) SuperNode front end, Link Peripheral Processor, Enhanced
Network and other common equipment as follows.
- SuperNode equipped with BRISC60 processor, four
(4) 96 meg memory circuit packs per plane and
SLM III.
- Link Peripheral Processor equipped with twelve
(12) Link Interface Units, (2) Ethernet
Interface Units and wired for thirty six (36)
Link Interface Units (LIUs).
- V.35 Link Peripheral Processor Interface
equipment to support an equipped configuration
of twelve (12) Interface Units and a wired
configuration of thirty six (36) Interface
Units.
- Six (6) Digital Trunk equipment ISDN Ready
(DTEI) frames equipped and wired for 5760
trunking ports. Five thousand two hundred eighty
(5280) ports are equipped for SS7. Four hundred
eighty (480) ports are equipped and wired for
PRI functionality. All DTCIs are equipped with
the latest XPM and Universal Tone Receivers for
digit collection. Five thousand two hundred
eighty (5280) trunks are equipped with Special
Tone Receivers for Reorigination, and Continuity
Tone Detectors for SS7 functionality.
- Two (2) Integrated Services Module (ISM) frames
equipped with DMS-250 service and test circuits
providing DMS-250 functionality, as well as
Enhanced Digital Recorded Announcement Machine
equipment.
- Two (2) Input Output equipment (IOE) frames
equipped with:
- One (1) Mag Tape Device
- Four (4) SCSI Disk Drive Units
- Two (2) IOC Shelves
- Three (3) I/O Controllers providing
twelve (12) switch interface ports
- Two (2) X.25 Automatic File Transfer
circuit packs
- Two (2) MIS frames equipped with required 500W
inverters and terminal block assemblies.
- One (1) Meridian Cabinet Spare Storage (MCSS)
cabinet to house switch spares.
- Two (2) Power Distribution Center (PDC) frames
equipped with "A" and "B" feed fuse panels &
fuses as required.
- Miscellaneous equipment as follows:
- Two (2) Maintenance Administration
Position & one set of Furniture
- Five (5) UDS 2440 Modems
- One (1) Norstar Key System
- Two (2) M7310 Feature sets to support
Norstar Key System
- Two (2) RTIF Terminals
- One (1) MAT Printer
- One (1) Helmsman Workstation, CD ROM
Software and Printer
- DSX panels to support a DMS-250 Initial System
equipped and wired for five thousand seven
hundred sixty (5760) ports.
b) Single frame enhanced network to support a DMS-250
Initial System equipped and wired for five thousand
seven hundred sixty (5760) ports.
December 3, 1996
<PAGE> 39
MIDCOM Product Attachment
SCHEDULE A
I. INITIAL SYSTEMS
4.1 INITIAL SYSTEM DMS-250 5760 PORT MODEL D ATLANTA CONT.
c) Initial System DMS-250 5760 Port Model Standard Features
(Base and Optional) as set forth in Section IX of this
Product Attachment.
d) Nortel's standard complement of DMS-250 Initial System
spares.
4.2 INITIAL SYSTEM DMS-250 5760 PORT MODEL D ATLANTA PRICING
Refer to Section VI of this Schedule A for detailed Initial
System Model Pricing.
4.3 INITIAL SYSTEM DMS-250 5760 PORT MODEL D ATLANTA OPTIONAL POWER
PLANT PRICING
The price for Optional Power Plant to support the Initial System
DMS-250 5760 Port Model described in Section 4.1 above shall be
seventy-four thousand nine hundred ninety dollars ($74,990). The
Optional Power Plant includes batteries, rectifiers and power
board equipment. The batteries are provisioned for a four (4)
hour reserve period.
December 3, 1996
<PAGE> 40
MIDCOM Product Attachment
SCHEDULE A
I. INITIAL SYSTEMS
5.0 INITIAL SYSTEM DMS-250 3840 PORT MODEL (MODEL E DALLAS)
5.1 The following represents the SuperNode equipment that will be
delivered with the Initial System DMS-250 3840 Port (Model E
Dallas) equipped with 3360 and wired for 3840 ports:
a) SuperNode front end, Link Peripheral Processor, Enhanced
Network and other common equipment as follows:
o SuperNode equipped with BRISC60 processor, four (4) 96
meg memory cps per plane and SLM III.
o Link Peripheral Processor equipped with twelve (12)
Link Interface Units, (2) Ethernet Interface Units
and wired for thirty six (36) Link Interface Units
(LIUs).
o V.35 Link Peripheral Processor Interface equipment to
support an equipped configuration of twelve (12) Link
Interface Units and a wired configuration of thirty
six (36) Interface Units.
o Four (4) Digital Trunk equipment ISDN Ready (DTEI)
frames equipped with 3360 and wired for 3840 trunking
ports. Two thousand eight hundred eighty (2880)
ports are equipped for SS7. Four hundred eighty
(480) ports are equipped and wired for PRI
functionality. All DTCIs are equipped with the
latest XPM and Universal Tone Receivers for digit
collection. Two thousand eight hundred eighty (2880)
trunks are equipped with Special Tone Receivers for
Reorigination, and Continuity Tone Detectors for SS7
functionality.
o Two (2) Integrated Services Module (ISM) frames
equipped with DMS-250 service and test circuits
providing DMS-250 functionality, as well as Enhanced
Digital Recorded Announcement Machine equipment.
o Two (2) Input Output equipment (IOE) frames equipped
with:
- One (1) Mag Tape Device
- Four (4) SCSI Disk Drive Units
- Two (2) IOC Shelves
- Three (3) I/O Controllers providing twelve
(12) switch interface ports
- Two (2) X-25 Automatic File Transfer circuit
packs
o Two (2) MIS frames equipped with required 500W
inverters and terminal block assemblies.
o One (1) Meridian Cabinet Spare Storage (MCSS) cabinet
to house switch spares.
o One (1) Power Distribution Center (PDC) frame equipped
with "A" and "B" feed fuse panels & fuses as
required.
o Miscellaneous equipment as follows:
- Two (2) Maintenance Administration Positions
& one set of Furniture
- Five (5) UDS 2440 Modems
- One (1) Norstar Key System
Two (2) M7310 Feature sets to support Norstar
Key System
- Two (2) RTIF Terminals
- One (1) MAP Printer
- One (1) Helmsman Workstation, CD ROM Software
and Printer
o DSX panels to support a DMS-250 Initial System
equipped for three thousand three hundred sixty (3360)
ports
b) Single frame enhanced network to support a DMS-250 Initial
System equipped for three thousand three hundred sixty (3360)
ports.
December 3, 1996
<PAGE> 41
MIDCOM Product Attachment
SCHEDULE A
I. INITIAL SYSTEM
5.1 INITIAL SYSTEM DMS-250 3840 PORT (MODEL E DALLAS) CONT.
c) Initial System DMS-250 Port Model Standard Features (Base and
Optional) as set forth in Section IX of this Product
Attachment
d) Nortel's standard complement of DMS-250 Initial System spares
5.2 INITIAL SYSTEM DMS-250 3840 PORT (MODEL E DALLAS) PRICING
Refer to Section VI of this Schedule A for detailed Initial System
Model Pricing.
5.3 INITIAL SYSTEM DMS-250 3840 PORT (MODEL E DALLAS) OPTIONAL POWER PLANT
PRICING
The price for Optional Power Plant to support the Initial System
DMS-250 3840 Port Model described in Section 5.1 above shall be
seventy-four thousand nine hundred ninety dollars ($74,990). The
Optional Power Plant includes batteries, rectifiers and power board
equipment. The batteries are provisioned for a four (4) hour reserve
period.
December 3, 1996
<PAGE> 42
MIDCOM Product Attachment
SCHEDULE A
I. INITIAL SYSTEMS
6.0 INITIAL SYSTEM DMS-250 3840 PORT MODEL (MODEL F SEATTLE)
6.1 The following represents the SuperNode equipment that will be
delivered with the Initial System DMS-250 3840 Port (Model F
Seattle) equipped with 3360 and wired for 3840 ports:
a) SuperNode front end, Link Peripheral Processor,
Enhanced Network and other common equipment as
follows:
o SuperNode equipped with BRISC60 processor,
four (4) 96 meg memory cps per plane and SLM
III.
o Link Peripheral Processor equipped with
twelve (12) Link Interface Units, (2)
Ethernet Interface Units and wired for thirty
six (36) Link Interface Units (LIUs)
o V.35 Link Peripheral Processor Interface
equipment to support an equipped
configuration of twelve (12) Link Interface
Units and a wired configuration of thirty six
(36) Interface Units.
o Four (4) Digital Trunk equipment ISDN Ready
(DTEI) frames equipped with 3360 and wired
for 3840 trunking ports. Two thousand eight
hundred eighty (2880) ports are equipped for
SS7. Four hundred eighty (480) ports are
equipped and wired for PRI functionality. AR
DTCIs are equipped with the latest XPM and
Universal Tone Receivers for digit
collection. Two thousand eight hundred
eighty (2880) trunks are equipped with
Special Tone Receivers for Reorigination, and
Continuity Tone Detectors for SS7
functionality.
o Two (2) Integrated Services Module (ISM)
frames equipped with DMS-250 service and test
circuits providing DMS-250 functionality, as
well as Enhanced Digital Recorded
Announcement Machine equipment.
o Two (2) Input Output equipment (IOE) frames
equipped with:
- One (1) Mag Tape Device
- Four (4) SCSI Disk Drive Units
- Two (2) IOC Shelves
- Three (3) I/O Controllers providing
twelve (12) switch interface ports
- Two (2) X.25 Automatic File Transfer
circuit packs
o Two (2) MIS frames equipped with required 500W
inverters and terminal block assemblies.
o One (1) Meridian Cabinet Spare Storage (MCSS)
cabinet to house switch spares.
o One (1) Power Distribution Center (PDC) frame
equipped with "A" and "B" feed fuse panels &
fuses as required.
o Miscellaneous equipment as follows:
- Two (2) Maintenance Administration
Positions & one set of Furniture
- Five (5) UDS 2440 Modems
- One (1) Norstar Key System
- Two (2) M7310 Feature sets to
support Norstar Key System
- Two (2) RTIF Terminals
- One (1) MAP Printer
- One (1) Helmsman Workstation, CD ROM
Software and Printer
o DSX panels to support a DMS-250 Initial System
equipped for three thousand three hundred
sixty (3360) ports .
b) Single frame enhanced network to support a DMS-250 Initial
System equipped for three thousand three hundred sixty (3360)
ports.
December 3, 1996
<PAGE> 43
MIDCOM Product Attachment
SCHEDULE A
I. INITIAL SYSTEMS
6.1 INITIAL SYSTEM DMS-250 3840 PORT (MODEL F SEATTLE) CONT.
c) Initial System DMS-250 Port Model Standard Features
(Base and Optional) as set forth in Section IX of
this Product Attachment.
d) Nortel's standard complement of DMS-250 Initial
System spares.
6.2 INITIAL SYSTEM DMS-250 3840 PORT (MODEL F SEATTLE) PRICING
Refer to Section VI of this Schedule A for detailed Initial
System Model Pricing.
6.3 INITIAL SYSTEM DMS-250 3840 PORT (MODEL F SEATTLE) OPTIONAL
POWER PLANT PRICING
The price for Optional Power Plant to support the Initial
System DMS-250 3840 Port Model described in Section 5.1 above
shall be seventy-four thousand nine hundred ninety dollars
($74,990). The Optional Power Plant includes batteries,
rectifiers and power board equipment. The batteries are
provisioned for a four (4) hour reserve period.
December 3, 1996
<PAGE> 44
MIDCOM Product Attachment
SCHEDULE A
II. LINK PERIPHERAL PROCESSOR
1.0 LINK PERIPHERAL PROCESSOR (LPP)
Link Peripheral Processor ("LPP") Extensions to a DMS-500 Initial
System or DMS-250 Initial System Model include the following and shall
be priced as set forth below:
1.1 LINK PERIPHERAL PROCESSOR EXTENSIONS
The price for an LPP Extension to an existing DMS-500 Initial System
(either equipped with LPP hardware or not equipped with LPP Extension)
is three hundred thousand dollars ($300,000) for the first thirty-six
(36) wired and four (4) equipped links ordered.
The price for an LPP Extension configured as above includes the
following:
a) Link Peripheral Processor Equipment including LIU7s and/or EIU
circuit packs;
b) Any required NIS expansions;
c) V.35 or DS-0A interface equipment to support wired
configurations;
d) Spare unique circuit packs, if any, per standard Nortel's
standard engineering sparing rules;
1.2 LINK INTERFACE UNIT (LIU) CARDS TO EQUIP A WIRED LPP EXTENSION
PRICING
Refer to Section VI of this Schedule for detailed Link Peripheral
Processor Optional Equipment Pricing.
1.3 ETHERNET INTERFACE UNIT (EIU) CARDS TO EQUIP A WIRED LPP
EXTENSION
Refer to Section VI of this Schedule for detailed Link Peripheral
Processor Optional Equipment Pricing.
December 3, 1996
<PAGE> 45
MIDCOM Product Attachment
SCHEDULE A
II. ADD-ON PORT EXTENSION
1.0 ADD-ON PORT EXTENSION
1.1 ADD-ON PORT EXTENSION
In the event Buyer orders ports to be added to any Initial System,
such ports shall be treated as an Extension to such Initial System
("Add-On Port Extension") and takes delivery of such Add-On Port
Extension before the Turnover Date applicable to such Initial System,
such Add-on Port Extension shall be ordered at the prices set forth in
Section VI, 4.0 ("Add-on Port Prices") of this Schedule A, provided
that Buyer orders such Add-on Port Extension(s) in minimum increments
of nine hundred sixty (960) ports per Initial System.
Such Add-On Port Prices include engineering, installation and/or
testing associated with such Add-On Port Extension. In the event
Buyer orders less than the minimum increments of nine hundred sixty
(960) ports per Initial System, such ports shall be at Nortel's
then-current prices.
Refer to Section IV of this Schedule A for a detailed description of
the equipment included in each Add-On Port extension.
December 3, 1996
<PAGE> 46
MIDCOM Product Attachment
SCHEDULE A
IV. EXTENSION PORTS
1.0 DTEI EXTENSION
1.1 DTEI EXTENSION, FULLY WIRED AND FULLY EQUIPPED ("DTEI
EXTENSION")
A DTEI Extension is configured in minimum increments of 960 ports. Each
DTEI Extension includes the following:
a) XPM+, or Nortel's then-current common control;
b) A quantity of NT6X50AB circuit packs, based on Nortel's
engineering rules for the DTEI Extension;
c) Either UTR, STR, CTD for DTCs configured for SS7 or PTS
capability; or UTR and ISDN pre-processor circuit packs
configured for ISDN PRI capability, as ordered by Buyer;
d) ENET, MS or processor memory Equipment, as required for the
DTEI Extension;
e) DMS-500 or DMS-250 Service/Test Circuits, as required for the
DTEI Extension;
f) Power Distribution Center (PDC) Equipment, as required for the
DTEI Extension; and
g) Spare circuit packs, if required, based on Nortel's standard
sparing guidelines.
1.2 DTEI FULLY WIRED AND FULLY EQUIPPED PORT EXTENSION PRICE
Refer to Section VI, 5.0 ("Extension Port Pricing") for detailed port
Extension pricing.
1.3 DTEI EXTENSION OPTIONAL EQUIPMENT
1.3.1 DIALABLE WIDEBAND
Buyer may order 2 NTAX78AA circuit packs per DTC instead of
the NT6X44AA circuit packs with which a DTEI Extension is
equipped for an additional price of Five Thousand Dollars
($5,000) per DTC or Ten Thousand Dollars ($10,000) per DTEI
frame.
1.3.2 ECHO CANCELLATION
Buyer may order NT6X50EC circuit packs for a DTEI Extension
for installation prior to its Turnover Date for an additional
price of Seventy Dollars ($70) per port.
December 3, 1996
<PAGE> 47
MIDCOM Product Attachment
SCHEDULE A
IV. EXTENSION PORTS
2.0 LTEI PORT EXTENSIONS
2.1 LTEI EXTENSION, FULLY WIRED AND FULLY EQUIPPED ("LTEI
EXTENSION")
An LTEI Extension is configured in minimum increments of 960
Ports. Each LTEI Extension includes the following:
a) XPM+, or Nortel's then-current common control;
b) ENET, NIS or processor memory Equipment, as required for the
LTEI Extension;
c) DMS-500 Service/Test Circuits, as required for the LTEI
Extension;
d) Power Distribution Center (PDC) Equipment, as required for the
LTEI Extension; and
e) Spare circuit packs, if required, based on Nortel's standard
sparing guidelines.
2.2 LTEI FULLY WIRED AND FULLY EQUIPPED PORT EXTENSION PRICE
Refer to Section VI, 5.0 ("Extension Port Pricing") for
detailed port Extension pricing.
December 3, 1996
<PAGE> 48
MIDCOM Product Attachment
SCHEDULE A
IV. EXTENSION PORTS
3.0 ESMA PORT EXTENSIONS
3.1 ESMA EXTENSION, FULLY WIRED AND FULLY EQUIPPED ("ESMA
EXTENSION")
An ESMA Extension is configured in minimum increments of 960
ports. Each ESMA Extension includes the following:
a) Nortel's then-current common control;
b) Universal Tone Receivers (UTRs) and ISDN pre-processor circuit
packs when ISDN PRI capability be required;
c) ENET, MS or processor memory Equipment, as required for the
ESMA Extension;
d) DMS-500 Service/Test Circuits, as required for the ESMA
Extension;
e) Power Distribution Center (PDC) Equipment, as required for the
ESMA Extension;
f) Optional Class Modem Resource circuit packs (N6X78AA), one (1)
per ESMA module; and
g) Spare circuit packs, if required, based on Nortel's standard
sparing guidelines.
3.2 ESMA FULLY WIRED AND FULLY EQUIPPED PORT EXTENSION PRICE
Refer to Section VI, 5.0 ("Extension Port Pricing") for
detailed port Extension pricing.
December 3, 1996
<PAGE> 49
MIDCOM Product Attachment
SCHEDULE A
V. DMS-250 TO DMS-500 UPGRADE
1.0 DMS-250 TO DMS-500 SYSTEM UPGRADE
1.1 DMS-250 TO DMS-500 SYSTEM UPGRADE INCLUDES:
As used in this Product Attachment, the DMS-250 to DMS-500
System Upgrade shall consists of the following configuration
of Equipment and Software:
a) DMS-500 Common and Peripheral equipment as follows:
o One (1) DTEI frame equipped and wired for 960
SS7 Interworking Ports.
o Two (2) LTEI frames equipped and wired for
1920 Trunking Ports.
o ENET Equipment as required for the DMS250 to
DMS-500 System Upgrade.
o One (1) Integrated Services Module (ISME)
frame equipped with DMS-100 service circuits.
(DMS-250 service circuits already exist).
o Two (2) SCSI Disk Drive Units.
o Four X.25 Automatic File Transfer circuit
packs.
o Two (2) 96mb memory circuit packs, as
required, to support the additional DMS-500
Base Software being added.
o Two (2) X.25 Automatic FileTransfer circuit
packs
o Four (4) Link Interface Units to be
engineered in existing LPP frame. The four
(4) link interface units are being provided
for interworking.
o Two (2) Ethernet Interface Units (EIUs)
o DMS-500 Base Software.
o Nortel's standard complement of DMS-500
system spares for the above defined
equipment. Spares are only being provided
for unique circuit packs engineered for this
DMS-250 to DMS-500 System Upgrade.
1.2 DMS-250 TO DMS-500 UPGRADE PRICING
Refer to Section VI, 8.0 ("DMS-250 to DMS-500 Upgrade
Pricing") for detailed Upgrade pricing.
December 3, 1996
<PAGE> 50
MIDCOM Product Attachment
SCHEDULE A
VI. DMS-250 AND DMS-500 PRICING MATRIX
1.0 COMMITMENT LEVEL TABLE
Commitment Level
<TABLE>
<S> <C>
1 $0- $9,999,999M
2 $10-$19,999,999M
3 $20-$29,999,999M
4 $30-$39,999,999M
</TABLE>
2.0 PRICE MATRIX FOR INITIAL SYSTEM MODELS
<TABLE>
<CAPTION>
Commitment NYC-500 Chi-500 LA-500 Atl. 250
Level Model A Model B Model C Model D
- ---------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
1 $ 3,019,875 $2,961,315 $3,136,995 $1,850,220
2 $ 2,819,500 $2,763,820 $2,930,860 $1,727,160
3 $ 2,607,125 $2,554,805 $2,711,765 $1,598,340
4 $ 2,394,750 $2,345,790 $2,492,670 $1,469,520
Dls-250 Seattle-250
Model E Model F
------- -------
$1,557,420 $1,557,420
$1,448,760 $1,448,760
$1,336,740 $1,336,740
$1,224,720 $1,224,720
</TABLE>
NOTES:
Power for the above Systems is not included in the price and should be added
per Section I.1.0 through 6.0 of this Schedule A.
3.0 LINK PERIPHERAL PROCESSOR PRICING
<TABLE>
<CAPTION>
Commitment
Level LIU Addition EIU Addition
------ ------------ ------------
<S> <C> <C>
1 $ 11,000 $ 14,000
2 $ 10,500 $ 13,500
3 $ 10,000 $ 12,500
4 $ 9,500 $ 11,500
</TABLE>
December 3, 1996
<PAGE> 51
MIDCOM Product Attachment
SCHEDULE A
VI. DMS-250 AND DMS-500 PRICING MATRIX
4.0 ADD-ON PORT PRICES (PER EACH PORT)
<TABLE>
<CAPTION>
Commitment
Level DTC7/LTC DTC1 LD DTCI Local ESMA
----- -------- ------- ---------- ----
<S> <C> <C> <C> <C>
1 $ 136 $ 154 $ 278 $ 168
2 $ 129 $ 146 $ 264 $ 160
3 $ 123 $ 139 $ 250 $ 151
4 $ 116 $ 131 $ 236 $ 143
</TABLE>
5.0 EXTENSION PORT PRICING (PER EACH PORT)
<TABLE>
<CAPTION>
Commitment
Level DTC7/LTC DTCI LD DTCI Local ESMA
----- -------- ------- ---------- ----
<S> <C> <C> <C> <C>
1 $ 204 $ 240 $ 417 $ 252
2 $ 194 $ 228 $ 396 $ 239
3 $ 184 $ 216 $ 375 $ 226
4 $ 174 $ 204 $ 354 $ 214
</TABLE>
6.0 Discount Matrix - Initial System Optional Software License
Fees (Pre-Turnover)
In the event Buyer elects to license during the Product Attachment Term,
Optional Software, listed in Sections VIII and X of this Schedule A,
prior to the Turnover Date associated with an Initial System on which
such Optional Software is to be installed, the Software Discount
associated with the applicable Commitment Level set forth below shall be
applied to the Optional Software License Fees listed in Sections VIII
and X of this Schedule A.
<TABLE>
<CAPTION>
Software
Commitment Level Discount
---------------- --------
<S> <C>
1 65%
2 70%
3 75%
4 80%
</TABLE>
7.0 DISCOUNT MATRIX - INITIAL SYSTEM OPTIONAL SOFTWARE LICENSE FEES
(POSTTURNOVER)
In the event Buyer elects to license during the Product Attachment Term,
Optional Software listed in Sections VIII and X of this Schedule A,
during the twelve (12) month period following the Turnover Date
associated with the Initial System on which such Optional Software is to
be installed, the Software Discount associated with the applicable
Commitment Level set forth below shall be applied to the Optional
Software License Fees listed in, as applicable, Sections VIII and X of
this Schedule A, during the term of the contract.
<TABLE>
<CAPTION>
Software
Commitment Level Discount
---------------- --------
<S> <C>
1 30%
2 35%
3 40%
4 45%
</TABLE>
December 3, 1996
<PAGE> 52
MIDCOM Product Attachment
SCHEDULE A
VI. DMS-250 AND DMS-500 PRICING MATRIX
8.0 DMS-250 TO DMS-500 UPGRADE PRICING
Nortel shall make available to Buyer a DMS-250 to DMS-500 Software and
Equipment upgrade to include those items listed in Section V of this
Schedule A, for the prices set forth below:
<TABLE>
<CAPTION>
Commitment DMS-250 to DMS-500
Level Upgrade Price
----- -------------
<S> <C>
1 $ 571,875
2 $ 518,750
3 $ 465,625
4 $ 412,500
</TABLE>
9.0 DMS-250 IEC02 TO UCS05 SOFTWARE UPGRADE PRICING
Nortel shall make available to Buyer a DMS-250 IEC02 to UCS05 Software
Upgrade, when Generally Available, at the price set forth below.
<TABLE>
<CAPTION>
Commitment
Level Upgrade Price
----- -------------
<S> <C>
1-4 $ 65,000
</TABLE>
December 3, 1996
<PAGE> 53
MIDCOM Product Attachment
SCHEDULE A
VII DMS-500 STANDARD FEATURES
1. DMS-500 INITIAL SYSTEM STANDARD FEATURES
1.1 DMS-500 INITIAL SYSTEM BASE AND OPTIONAL SOFTWARE PACKAGES
The following represents the DMS-500 LLT0B005 base and optional
Software packages that are included in the price of a DMS-500 Initial
System Model A, Model B and Model C, ("Standard Features"). The
following is a list of Software only included in the Schedule A
Initial System(s); this list does not include any/all required
Equipment to provide feature functionality.
<TABLE>
<CAPTION>
FEATURE/
MASTER PKG S/W PACKAGE DESCRIPTION
- -------------- ----------- -----------
<S> <C> <C>
UCS0005 UCS TANDEM SERVICES BASE
NTX292BA Enhanced Security-without Password Encryption
NTX702BB DMS-500 Universal Master Package (UCS)
NTXOOOAA Bilge
NTX001AA Common Basic
NTX048AA Synchronization
NTX051AA Automatic Trunk Testing
NTX053AA Maintenance Assistance Package
NTX055AA Trunk Test Position (TTP)
NTX055AB TTP Digit Verification
NTX055AC TIP Transmission Measurement
NTX056AA Enhanced Administration
NTX060AB Network Management
NTX060BB Network Management - Enhanced
NTX072AA International Direct Distance Dialing (IDDD)
NTX074AA Disk Data Storage Storage System
NTX085AA Traffic Separation Peg Count
NTX087AA Traffic Separation Usage
NTX088AA Traffic Separation Report
NTX099AA Operational Measurements Enhancements
NTX122AA OM Call Attempts Summary
NTX136AA Automatic Transmission Measuring System
NTX202AA DMS-250 Operational Measurements on Tape
NTX203AA DMS-250 104 Testlines
NTX220BA DMS-250 Base Package (Type II)
NTX221BA DMS-250 Call Detail Recording (Type II) Billing
NTX222BA DMS-250 Call Processing (Type II)
NTX227BA DMS,250 Time Of Day Routing
NTX228BA DMS-250 DCM Channel Unit Cross Reference
NTX230BA DMS-250 Speed Numbers (Public/Private)
NTX231BA DMS-250 Incoming Exclusion
NTX234BA DMS-250 Authcodes (Type II)
NTX235BA DMS-250 Restricted Usage By Date and Time
NTX236BA DMIS-250 Alternate Trunk Group Treatments
NTX239BA DMS-250 Translation Verification
NTX244AB Enhanced Sequential Trunk Hunting
NTX269AA Universal Tone Receivers
NTX270AA New Peripheral Maintenance Package
NTX291AA Enhanced Real Time Indicator
NTX321BA DMS-500 Generic Offnet Access Trunks (FG-B)
</TABLE>
December 3, 1996
<PAGE> 54
MIDCOM Product Attachment
Schedule A
VII. DMS-500 Standard Features
1.1 DMS-500 INITIAL SYSTEM BASE AND OPTIONAL SOFTWARE PACKAGES (CONT.)
<TABLE>
<CAPTION>
FEATURE/
MASTER PKG S/W PACKAGE DESCRIPTION
- -------------- ----------- -----------
<S> <C> <C>
UCS00005 UCS TANDEM SERVICES BASE
NTX702BB DMS-250 Universal Master Package (UCS)
NTX342BA DMS-250 Equal Access Base Package (FG-D)
NTX343BA DMS-250 Equal Access (Type II) - ANI Scrn
NTX347AA DMS, Base Data Communication Software
NTX351BA DMS-250 Automatic Trunk Routining
NTX445AB Operational Measurement Selective Output
NTX738AC Switch Performance Monitoring System (SPMS)
NTX801AA Toll Features I
NTX827AA New Peripherals Performance Measurements
NTX903AA Transmission Measurements
NTXA11AA Patch Administration & Downloading via X.25
NTXG22AA DMS-250 UCS Outgoing FG-D Enhancements
NTXG24AA DMS-250 Integrated Echo Cancellor
NTXJ35AA Maintenance Managers Report
NTXL02AA DMS-250 UCS Dialing Plan Enhancements
NTXL05AA DMS-250 Roaming PINs
NTXL79AA DMS-250 XPM+ for DTC7/DTCI
NTXR34AB XPM Plus Basic
NTXR42AA Firmware Downloading
NTXG18AA DMS-250 Safe Store TAP (X.25 Applications)
NTXM70AA UCS Tandem Services Base
NTX065AA Service Analysis
NTX142AA DS-1 64 KBPS Clear
NTX143AA DS-1 ESF
NTX167AB CCS7 Trunk Signalling
NTX226BA DMS-250 ATB by NPA Using Operational Meas.
NTX232BA DMS-250 ATB by NPA Using Logs
NTX233BA DMS-250 Off Hook Queuing
NTX237AA DMS-250 Nailed Up Connections
NTX340BA DMS-250 Adaptive Routing
NTX346BA DMS-250 Intra Lata Intra State Screening
NTX361BA DMS-250 CCS7 IMTS
NTX368BA DMS-250 Multiple Authcode Sets
NTX437AA Random Conditional Routing
NTX550AA CCS7 Transaction Service Support
NTX836AA LPP V.35 Subrate Links
NTX839AB LPP Enhanced Maintenance and Bert
NTX840AA LIU7 Gateway Message Screening
NTX882AA Bit Error Ratio Indicator for Toll Switches
NTX883AA Inter Office Trunk Bit Error Rate
NTX885AB Switch Pat Diagnostics
NTX945AA MS Base Link Maintenance
NTXA67AA Extended XPM Diagnostics
NTXE01AA Enhanced Network Basic (ENET)
</TABLE>
December 3, 1996
<PAGE> 55
MIDCOM Product Attachment
SCHEDULE A
VII. DMS-500 STANDARD FEATURES
1.1 DMS-500 INITIAL SYSTEM BASE AND OPTIONAL SOFTWARE PACKAGES (CONT.)
<TABLE>
<CAPTION>
FEATURE/
MASTER PKG S/W PACKAGE DESCRIPTION
- -------------- ----------- -----------
<S> <C> <C>
UCS00005 UCS TANDEM SERVICES BASE
NTXM70AA UCS Tandem Services Base Cont.
NTXE32AA CCS7 Preventative Cyclical Retransmission
NTXE65AA MPC X25 Interface
NTXE98AA High Speed MPC
NTXF05AA Ethernet Interface Unit
NTXF19AA TCP/IP Protocols
NTCF20AA LMS on LPP
NTXF71AB SuperNode Enhanced Messaging
NTXG10AA DMS-250 CNS CCITT 1984 X.25 Datacom
NTXG13AA DMS Base Data Access Interface Session
NTXG18BA DMS-250 Safe Store Tap
NTXG20AA DMS-250 SS7 FG-D
NTXG28AA DMS-250 Enhanced COS Screening
NTXG34AA DMS-250 Trunk Group and CLLI name analysis
NTXG35AA DMS-250 Paystation Pretranslator
NTXG42AA DMS-250 SS7 IMT Terminations to DTU
NTXG46AA DMS-250 Direct Termination Service
NTXG49AA DMS-250 UCS SS7 UCP (Base ISUP)
NTXJ40AA LIU7 Gateway Verification Tools
NTXJ41AA CCS7 Test Tools
NTXJ44AA SLM File System
NTXJ94AA Mandatory Parallel AMA
NTXL01AB DMS-250 UCS, Account Code Screening Enh.
NTXL03AA DMS-250 UCS to USP ISUP Interworking
NTXL04AA DMS-250 UCS SS7 Intra/Inter Networking
NTXL08AA DMS-250 UCS X.25 Transport
NTXL09AA DMS-250 UCS PRA
NTXL11AA DMS-250 UCS to MCI ISUP Interworking
NTXL124A DMS-250 UCS to FGD ISUP Interworking
NTXL14AA DMS-250 UCS International Partitioning
NTXL47AA DMS-250 Lower Layer Compatibility
NTXN16AA Enhanced Dram
NTXN18AA FBUS LIU Base
NTXN19AA LIU7 for LPP Based CCS7 Applications
NTXN68AA XPM Broadcast Patching
NTXN83AA LIS Common
NTXP10AA Network Module Software
NTXP13AA Enet Switch Path Diagnostics
NTXP14AA Dirp Parallel Storage Size Increase
NTXQ51AA MS SR512 Lis Controller
NTXR70AA CM Base for OPC
NTXR72AA CCS7 MTP/SCCP for LPP
NTXS11AA File Transfer Protocol
</TABLE>
December 3, 1996
<PAGE> 56
MIDCOM Product Attachment
SCHEDULE A
VII. DMS-500 STANDARD FEATURES
1.1 DMS-500 INITIAL SYSTEM BASE AND OPTIONAL SOFTWARE PACKAGES (CONT.)
<TABLE>
<CAPTION>
FEATURE/
MASTER PKG S/W PACKAGE DESCRIPTION
- ---------- ----------- -----------
<S> <C> <C>
UCS00005 UCS TANDEM SERVICES BASE
NTXM70AA UCS Tandem Services Base Cont.
NTXX26AA DMS-250 UCS X-25 Data Transport
Enhancements
NTXX30AA UCS Enhanced Dialing Plan Phase II
NTXX32AA Enhanced PANI on UCS
NTXX42AA Disallow Reorigination on EANT FG-D
Trunks
DMS-500 LOCAL
BAS00001 Base COOK
NTX243AA AMA Teleprocessing System
BAS00002 Base ANI
NTX986AA Automatic Number Identification with AMA
BAS00003 Base Generic
NTX000AA Bilge
NTX001AA Common Basic
NTX006AA Business Lines
NTX007AB PBX Interface I
NTX008AB PBX Interface II
NTX019AA Civic Services
NTX020AC Vert. Services (POTS)
NTX021AA Remote Call Forward
NTX029AA Direct Dialing Overseas, Toll
NTX041AB CCS7 MTP/SCCP
NTX042AA Local AMA
NTX043AA Local CDR
NTX044AA CAMA
NTX045AA Usage Sen Pricing
NTX048AA Synchronization
NTX048AB Synchronization Censium Master Clock
NTX048BA Synchronization Stratum 3
NTX048CA Synchronization Stratum 2
NTX049AC Circle Digit ID
NTX049AD Sgl Pty Rev Call
NTX049AE North Elec ANI Frmt
NTX049AG ITT ANI Format
NTX049AH Come Again Signaling
NTX049AL Time and Temperature
NTX051AA Automatic Trunk Testing
NTX052AB ROTL
NTX053AA Maintenance Assistance Package
NTX054AA Line Test Position (LTP)
NTX055AA Trunk Test Position (TTP)
NTX055AB TTP Digit Verification
NTX055AC TTP Transmission Measurement
NTX055BA RONI Trunk Testing
NTX056AA Enhanced Administration
NTX059AB Poll OM Data via Dpk
</TABLE>
December 3, 1996
<PAGE> 57
MIDCOM Product Attachment
SCHEDULE A
VII. DMS-500 STANDARD FEATURES
1.1 DMS-500 INITIAL SYSTEM BASE AND OPTIONAL SOFTWARE PACKAGES (CONT.)
<TABLE>
<CAPTION>
FEATURE/
MASTER PKG S/W PACKAGE DESCRIPTION
- ---------- ------------ -----------
<S> <C> <C>
BAS0003 Cont.
NTX060AB Network Management
NTX060BB Enhanced Network Management
NTX063AA Echo Suppresser
NTX065AA Service Analysis
NTX066AB Bilingual Interface
NTX074AA Disk Data Storage System
NTX076AA AMA Enhanced
NTX077AA Online Peripheral Software
NTX080AA LAMA Enhanced
NTX080BA Term Call Blng
NTX082AA Sub Line Usage
NTX083AA Feature Group A
NTX085AA Traffic Sep Peg Count
NTX087AA Traffic Sep Usage
NTX088AA Traffic Sep Report
NTX089AA Enhanced Coin Services
NTX090AA Coin Services
NTX094AA Digital Sub Svcs
NTX098AA Bellcore CAMA Format
NTX099AA OM Enhancements
NTX120AA Office Hardware Inv. Pkg
NTX121AA Overlap Outpulsing (Trunk to Trunk)
NTX122AA OM Call Attempts Summary
NTX129AA 2Way Opr Office Trunk
NTX136AA Automatic Transmission Measuring System
NTX139AA Revert Pulse Dig Ln
NTX142AA DS-1 64 Kbps Clear
NTX143AA DS-1 ESF
NTX159AA Bellcore LAMA Format
NTX160AA Multiunit Msg Rt Svc
NTX174AA Automatic Identification of Outward Dialing
NTX190AA FGB, AMA Tandem NT Fmt
NTX192AA 4X Opr Bell Format ANI
NTX193AA 4X Opr AMR5 Format ANI
NTX195AA Mech Loop Test Interface
NTX196AA Clng No Announcement
NTX202AA DMS-500 Operational Measurements
NTX206AA Unauthorized Digit Service Detection
NTX209AB FGB AMA End AT&T Format
NTX210AA No 2 SCC Interface
NTX211AB FGB, AMA. Tandem AT&T Format
NTX215AA SES No 2 Interface
NTX218AA 1A/1B EADAS I/F
NTX227AA DMS-500 Time of Day Routing
NTX237AA DMS-500 Conference Calling
</TABLE>
December 3, 1996
<PAGE> 58
MIDCOM Product Attachment
SCHEDULE A
VII. DMS-500 STANDARD FEATURES
1.1 DMS-500 INITIAL SYSTEM BASE AND OPTIONAL SOFTWARE PACKAGES (CONT.)
<TABLE>
<CAPTION>
FEATURE/
MASTER PKG S/W PACKAGE DESCRIPTION
- ---------- ------------ -----------
<S> <C> <C>
BAS0003 Cont.
NTX244AB Enhanced Sequential Trunk Hunting
NTX268AA FGB AMA End NT Format
NTX269AA Uuniversal Tone Receivers
NTX270AA New Peripheral Maint. Package
NTX272AA XPM Maintenance
NTX273AA Multi Protocol Controller BX.25
NTX274AA DTC 30 Carrier Maintenance
NTX277AA Dialable Line Ckt ID
NTX290AA Tanderming Supervision and Treatment
NTX291AA Enhanced Real Time Indicator
NTX292AB Enhanced Security with password
NTX293AA Enhanced Security Package II
NTX385AA OM Thresholding and Alarms
NTX395AA Remote MB via Scan Point
NTX437AA Random Conditional Routing
NTX445AB OM Selective Output
NTX445AB 1A EADAS Network Mgmt.
NTX479AA Intl. Univ. Tone ACUR Support
NTX488AA International Tune of Day Routing
NTX558AA CC EO DP/DTMF Genrtn
NTX559AA CC SSP DP/DTMF Sprtn
NTX560AB NOP Generic RO Service
NTX562AA NOS Data Collection
NTX712AA CCS7 Data Port
NTX721AA Interval Announcement Response Capability
NTX730AA Multilink, ASCII Driver
NTX738AC Switch Performance Monitoring System
NTX801AA Toll Features I
NTX802AA Toll Features II
NTX806AA Enhanced Call FWD (POTS)
NTX807AB Call Waiting (POTS)
NTX808AA Enhanced TWC (POTS)
NTX812AA Centralized MAP
NTX813AA Centralized Alarms
NTX827AA New Peripherals Performance Measurements
NTX881AC Sw Bit Error Ratio Maintenance
NTX882AA Bit Error Ratio Indicator for Toll Switches
NTX883AA Interoffice Trk Bit Error Ratio Testing
NTX885AB Switch Path Diagnostics
NTX892AA MPC Multilink Management
NTX901AA Local Features II
NTX902AA Local Features II
NTX903AA Transmission Measurements
NTX925AA ISC Time of Day and Percentage Routing
</TABLE>
December 3, 1996
<PAGE> 59
MIDCOM Product Attachment
SCHEDULE A
VII. DMS-500 STANDARD FEATURES
1.1 DMS-500 INITIAL SYSTEM BASE AND OPTIONAL SOFTWARE PACKAGES (CONT.)
<TABLE>
<CAPTION>
FEATURE/
MASTER PKG S/W PACKAGE DESCRIPTION
- ---------- ------------ -----------
<S> <C> <C>
BAS0003 Cont.
NTX940AA CM Bilge
NTX941AA CMCommcn
NTX942AB DMS SuperNode System Load Module
NTX944AA Base Mode Maintenance
NTX945AA MS Base Link Maintenance
NTX950AA MS Bilge
NTX951AA MS Common
NTX987AA Fiber Mtc Basic Mode
NTX989AA Cxr Access Code Blocking
NTXA11AA Patch Administration and Downloading
NTXA15AA Call Progress Comfort Tones
NTXA67AA Extended XPM Diagnostics
NTXA89AA SMDR Time Dump for BNM
NTXB01AA Intl Traffic Separation Report
NTXB74AA EBI A-Law
NTXB91AA 411 Rec on Mag Tape
NTXE01AA Enhanced Network Basic
NTXE30AA CCS7 Signaling Link Enhanced Maint MSB7
NTXE54AA System Load Module II
NTXE65AA MPC X.25 Interface
NTXE98AA High Speed MPC
NTXF04AA File Processor
NTXF05AA Ethernet Interface Unit (EIU)
NTXF06AA Application Processor Base
NTXF07AA Fault Tolerant File System
NTXF19AA TCP/IP Protocols
NTXF20AA LMS on LPP
NTXF26AA Synchronization BITS Composite Master
NTXF27AA Synchronization Cesium Loran CMA
NTXF46AA Base SCM Access
NTXF71AB SuperNode Enhanced Messaging
NTXG13AA DMS Base Data Access Interface Session (DAIS)
NTXG18BA DMS-500 Safe Store Tap
NTXH10AA PCM-30 Maintenance Enhancements
NTXH11AA M20 Enhancements
NTXH51AA PCM30 LGO/DTCO Spt.
NTXH62AA Perform on PLGC/PDTC/PRCC
NTXH63AA DMS-300 ANSI ISUP to CCITT TUP Interworking
NTXH77AA Channelized Access on LPP/Lis
NTXH91AA DMS-300 Real Time File Transfer
NTXJ35AA Maintenance Managers Report
NTXJ44AA SLM File System
NTXJ58AA Cancel Call Waiting
NTXJ94AA Mandatory Parallel AMA
</TABLE>
December 3, 1996
<PAGE> 60
MIDCOM Product Attachment
SCHEDULE A
VII. DMS-500 STANDARD FEATURES
1.1 DMS-500 Initial System Base and Optional Software Packages (Cont.)
<TABLE>
<CAPTION>
FEATURE/
MASTER MG S/W PACKAGE DESCRIPTION
- --------- ----------- -----------
<S> <C> <C>
BAS0003 Cont.
NTXP17AA DMS-500 Billing Server Base
NTXP72AA ENET 16K Configuration
NTXP81AA Remote Act of LLC
NTXP90AA Meridian SuperNode Option 201
NTXP94AA FITS Disk Shadowing
NTXP97AA IEM Basic Event Consolidation
NTXQ32AA Digital Audio Tape (DAT) Storage
NTXQ51AA MS SR512 LIS Controller
NTXQ52AA Support for MS Resident LIS Controller
NTXQ96AA IEM Base Phase III
NTXR21AA EADAS Hardware Inventory Control
NTXR34AB XPM Plus
NTXR42AA Firmware Downloading
NTXR46AA Robustness Enhancements
NTXR70AA CM Base for DMS SuperNode Data Manager
NTXS00AA Interchangeable NPA
NTXS07AA Telco Defined Login Banner
NTXS11AA File Transfer Protocol (DARPA)
NTXS29AA APU Maintenance
NTXS72AA Software Support for EDRAM Uploading
NTXVOOAA DN Screening Database - Base
NTXV11AA PCM-30 Digital Trunk controller Interface
NTXV18AA Message Transfer Part (MTP)
NTXV20AA DMS-100 Automatic File Transfer (AFT)
NTXV26AA DN Screen Enhancement III
NTXW00AA World Line Card - Basic
NTXX98AA DMS-MTX MNP
BAS00004 Base OA&M
NTXN31AA Operations System Interface Enhancement
BAS00007 Base Logs
NTXQ95AA Line Log Reduction
BASE0001 Base 0001
NTX243AA AMA Teleprocessing
BASE0006 Base SN Series 60 Processor
NTXR61AA SN SR60 Processor
TEL00001 Telecom Layer
Refer to "BAS00003" above
BAS00020 Base Flexible Bellcore AMA
NTX737AB Flexible Bellcore AMA
BAS00028 Base DPP
NTXF14AA High Capacity DPP
</TABLE>
December 3, 1996
<PAGE> 61
MIDCOM Product Attachment
SCHEDULE A
VII. DMS-500 STANDARD FEATURES
1.1 DMS-500 INITIAL SYSTEM BASE AND OPTIONAL SOFTWARE PACKAGES (CONT.)
<TABLE>
<CAPTION>
FEATURE/
MASTER PKG S/W PACKAGE DESCRIPTION
- ---------- ----------- -----------
<S> <C> <C>
LOC00001 Local Services
NTX297AA Bridged Services
SS700001 SS7 Trunk Signalling
NTX167AB SS7 Trunk Signaling Base
NTX875AA SS7 Mass Trunk Conversion
NTXE66AA SS7 ISUP Option Controls
NTXJ54AA SS7 FGD MF/SS7 Interworking
NTXP48AA SS7 2-Wire Emulation
UDD00001 UDD Services
NTX072AA US DDD International DDD
NTX735AA U.S. DDD Flexible Automatic Number Ident.
WLC00001 World Line Card Enhanced
NTXW03AA Over Voltage Reporting
NTXW20AA North American 900 +2 Type A Template
NTXW21AA North American 900 +2 Type B Template
NTXD26AA SuperNode Series 60 Processor Master
EQA00006 EQA C71SUP IRLTA, CNTN EAEO
EQA00008 EQA POTS IRALATA PIC EAEO
EQA00009 EQA IBN IRALATA PIC EAEO
ENS00005 ENS ENHANCED 911
ENS00001 ENS LDT PSAP
MDC00004 MODC CLASS ON MDC
MDC00008 MDC MBS STANDARD
MDC00009 MDCPRO
MDC00010 MDC CLASS ON MDC/MPV II
MDC00035 MDC TEEN SERVICE
MDC00035-Vl MDC Teen Svc per 100 Line Fee
</TABLE>
Right to Use Software License for the following packages is based on the number
of LGCs (Local) ot DTCs (Long Distance) required to support equal access
functionality. Software Right to Use for these packages is provided as part of
the DMS-500 Initial System price and DMS-250 to DMS-500 upgrade price based on
the equipment configurations as defined in this Schedule A, Sections I and V.
Extensions past the equipment engineered with the DMS-250 to DMS-500 Upgrade
and the DMS-500 Initial System would incur additional Right to Use Software
License fees as defined in below:
<TABLE>
<S> <C> <C>
EQA00001 EQUAL ACCESS LOCAL
EQA00001-VI Equal Access Local per LGC fee $ 4,800
EQA00002 EQUAL ACCESS TOLL
EQA00002-VI EA Toll per DTC fee $ 4,800
</TABLE>
December 3, 1996
<PAGE> 62
MIDCOM Product Attachment
SCHEDULE A
VII. DMS-500 STANDARD FEATURES
Right to Use Software License for the following packages is based on a per line
basis, based on the type of line (Class, Centrex or BRI) that is ordered.
Equipment engineered, furnished and install in addition to that which is
included with the DMS-250 to DMS-500 Upgrade configurations as defined in this
Schedule A, Section V, subparagraph 1.0 and the DMS-500 Initial System are
subject to the additional Right to Use Software License fees as defined below:
Centrex: The Software Right to Use Fee for the following Centrex Software
packages on a per line charge basis is $14 for Extensions and $9 for Initial
Systems:
<TABLE>
<S> <C>
MDC00001 MERIDIAN DIGITAL CENTREX MIN.
MDC00003 MDC-MDC STANDARD
MDIC00007 MDC MBS MINIMUM
</TABLE>
BRI: The Software Right to Use Fee for the following BRI Software packages
on a per line charge basis is $300 for Extensions and $250 for Initial Systems:
<TABLE>
<S> <C>
NIO00007 NIO ISDN BASE (REQD ALL ISDN)
NIO00008 NIO NI-1 BRI
NIO00010 NIO NI-1 PACKET SERVICES
</TABLE>
CLASS The Software Right to Use Fee for the following CLASS Software
packages on a per line charge basis is $29 for Extensions and $19 for
Initial Systems:.
<TABLE>
<S> <C>
RES00003 RES DISPLAY FUNCT. & PRIVACY
RES00005 RES NON-DISPLAY SERVICES
RES00006 RES SERVICE ENABLER
RES00021 RES ANONYMOUS CALLER REJECTION
RES00030 RES CUSTOMER ORIGINATED TRACE
RES00032 RES SELECTIVE CALL FORWARDING
RES00033 RES SELECTIVE CALL REJECTION
RES00034 RES DISTINCTIVE RINGING/CALL WAITING
RES00035 RES SELECTIVE CALL ACCEPTANCE
</TABLE>
December 3, 1996
<PAGE> 63
MIDCOM Product Attachment
SCHEDULE A
VII. DMS-500 STANDARD FEATURES
1.1 DMS-500 INITIAL SYSTEM BASE AND OPTIONAL SOFTWARE PACKAGES (CONT.)
<TABLE>
<CAPTION>
FEATURE/
MASTER PACKAGE S/W PACKAGE DESCRIPTION
- -------------- ----------- -----------
<S> <C> <C> <C>
NTS00005 EQUAL ACCESS 800
NTS00012 NTS EXTENDED CAPABILITY
NIO00022 NIO ISDN PRI BASE
NIO00022-VI NIO ISDN PRI Base per PRI link $ 2,000
RES00002 RES ADV. CUSTOM CALLING FEAT.
RES00002-VI RES ACCF per 100 lines $ 2,500
RES00004 RES INTERFACE FUNCTIONALITY
RES00004-VI RES I/F Funct. per 25 links $25,000
RES00017 RES TEEN SERVICE
RES00019 RES CALL FWD REMOTE ACTIVATION
N00R00001 N00 ROUTING
N00 Routing
Info Digit 24 Functionality
NOOR00002 N00/NXX TCAP SERVICES
TCAP Based N00 Routing
TCAP Based NXX Dialing Plan
Auto Code Gapping
N00 TCAP Route Advance
NSER0001 NETWORK SERVICES
ANI Delivery on DALTIE
STS/Netinfo Mapping
NSER0003 INTER/INTRA IMT SUPPORT
Inter/Intra IMT Support
NPRI0001 NETWORK INTERFACES PRI
PRI D-Channel Backup
Access Transport
UDWS0001 UCS DWS
DWS FG-D ISUP
DWS IMT ISUP
DWS PRI
CRDS0001 CARD SERVICES
Calling Card
Enhanced Calling Card
TCN Log Enhancements
MCCS Dedicated
</TABLE>
December 3, 1996
<PAGE> 64
MIDCOM Product Attachment
SCHEDULE A
VII. DMS-500 STANDARD FEATURES
1.1 DMS-500 INITIAL SYSTEM BASE AND OPTIONAL SOFTWARE PACKAGES (CONT.)
<TABLE>
<CAPTION>
FEATURE/
MASTER PKG S/W PACKAGE DESCRIPTION
- ---------- ----------- -----------
<S> <C>
CRDS0002 TCAP BASED CARD SERVICES
CI Command TESTSS
TCAP Based TCN
UTRS0001 ROUTING
Carrier ID Code Routing
</TABLE>
December 3, 1996
<PAGE> 65
MIDCOM Product Attachment
SCHEDULE A
VIII. DMS-500 OPTIONAL FEATURES
1.0 DMS-500 INITIAL SYSTEM OPTIONAL FEATURES
1.1 DMS-500 INITIAL SYSTEM INTEREXCHANGE OPTIONAL SOFTWARE PACKAGES
The following represents the DMS-500 LLT0B005 base and optional
software packages that are not included in the price of a DMS-500
Initial System Model A, Model B and Model C, ("Standard Features").
The following is a list of Software only (not included in the Schedule
A Initial System(s); this list does not include any/all required
Equipment to provide feature functionality.
<TABLE>
<CAPTION>
FEATURE/
MASTER PKG S/W PACKAGE DESCRIPTION LIST PRICE
- ---------- ----------- ----------- ----------
<S> <C> <C>
CRDS0003 MCCS, MVP CARD SERVICES $ 50,000
MCCS, Mechanized Voice Prompts
NSER0002 TCAP BASED AUTHCODE AND
ACCOUNT CODE VALIDATION $ 20,000
TCAP Based Account Code and
Private Speed Validation
TCAP Based Authorization Code
Validation
CAIN0200 CARRIER AIN EXTENSION PARAMETERS $ 50,000
Carrier AIN Extension Parms.
CAIN0300 CARRIER AIN SCP SIMULATOR $ 30,000
Carrier AIN SCP Simulator
CAIN0400 CARRIER AIN TEST QUERY $ 30,000
Carrier AIN Test Query
CAIN0500 CARRIER AIN CUSTOMIZED
DIALING PLAN TRIGGER $ 100,000
Carrier AIN Customized Dialing
Plan Trigger
CAIN0501 CARRIER AIN SPECIFIC DIGIT
TRIGGER $ 100,000
Carrier AIN Specific Digit Trigger
</TABLE>
December 3, 1996
<PAGE> 66
MIDCOM Product Attachment
SCHEDULE A
VIII. DMS-500 OPTIONAL FEATURES
1.2 DMS-500 INITIAL SYSTEM LOCAL OPTIONAL SOFTWARE PACKAGES (CONT.)
<TABLE>
Feature/
Master Pkg S/W Package Description List Price
- ---------- ----------- ----------- ----------
<S> <C> <C> <C>
Automatic Call Distribution
- ---------------------------
ACD00001 Meridian ACD Base $ 0
ACD00001-V1 ACD Base per Line Fee $ 500
ACD00001-V2 ACD Base per ACD Group Fee $ 5,000
ACD00005 ACD Management Information Sys $ 0
ACD00005-V1 ACD MIS per ACD Line Fee $ 250
ACD00006 ACD Enhanced $ 52,000
ACD00004 ACD Networking first 100 Lines $105,000
ACD00004-V1 ACD Ntwking Per ACD Line Fee after
first 100 lines $ 1,300
ACD00009 ACD Networking on CCS7 $ 0
ACD00009-V1 ACD Ntwking on CCS7 per ACD Line $ 400
ACD00010 ACD Networking on PRI $ 0
ACD00010-V1 ACD Ntwking on PRI per ACD Line $ 400
ACD00002 CompuCALL Base $ 0
ACD00002-V1 CompuCALL per SVC Fee $ 7,500
ACD00007 CompuCALL for ACD $ 0
ACD00007-V1 CompuCALL for ACD per SVC fee $ 42,000
ACD00008 Centrex Coordinated Voice and Data $ 0
ACD00008-V1 Centrex CVD per CTX Line Fee $ 5,000
Advanced Intelligent Networking (AIN)
- ------------------------------------
AIN00002 AIN Essentials Release 0.1 $700,000
AIN00001 AIN Primer $ 0
AIN00001-A1 A IN Primer Annual Fee $ 80,000
Datapath
- --------
DTP00001 Datapath $ 17,500
DTP00002 CLASS on Datapath 1st 100 Datapath Lines $ 4,000
DTP00002-V1 CLASS on DTP each addtl. 100 Lines $ 1,000
DTP00003 Data Call Tester $ 0
</TABLE>
December 3, 1996
<PAGE> 67
MIDCOM Product Attachment
SCHEDULE A
VIII. DMS-500 OPTIONAL FEATURES
1.2 DMS-500 INITIAL SYSTEM OPTIONAL SOFTWARE PACKAGES (CONT.)
<TABLE>
<CAPTION>
FEATURE/
MASTER PKG S/W PACKAGE DESCRIPTION LIST PRICE
- ---------- ----------- ----------- ----------
<S> <C> <C>
DIALABLE WIDEBAND-SERVICES
- --------------------------
NIO00004 NIO DIALABLE WIDEBAND SVC BASE $ 50,000
NIO00004-Vl NIO DWS per Access Loop Fee $ 11,500
NIO00023 NI0 INTERTOL ISUP & SS7 $200,000
NIO00027 NIO DWS FLEXIBLE ACC $ 71,500
NIO00028 NIO DWS CARRIER ACC $200,000
EMERGENCY NUMBER-SERVICES
- -------------------------
ENS00002 ENS ACD PSAP $ 47,000
ENS00002-VI ENS ACD per Agent Fee $ 2,000
ENS00003 ENS STANDARD SELECTIVE ROUTINGDB $145,000
EQUAL ACCESS
- ------------
EQA00003 EQA CELULAR INTRCNECT-EO $ 15,000
EQA00004 EQA CELLULAR INTERCONNECT-TANDEM $ 25,000
EQA00007 EQA EA ALT SW POINT $ 35,000
EQA00010 EQA ENWATS OPRATN(POTS) $ 20,000
EQA00011 EQA EQUAL ACCESS OSS $ 8,000
EQA00005 EQA INTERMEDIATE TANDEM $ 20,000
EQA00012 EQA C7ISUP INTERLATA CONN AT $120,000
LATA EGUAL ACCESS SYSTEM
- ------------------------
LEA00001 LEAS TOLL 1ST 50K DIRECTORY NO $145,000
LEA00001-V1 LEAS Toll each addtl 10K DN's $ 20,000
LEA00002 LEAS LOCAL $ 22,500
MERIDIAN DIGITAL CENTREX
- ------------------------
MDC00034 MDC PRO ENHANCED WATS $ 20,000
MDC00018 MDC PRO MDR VIA AMA STREAM $ 20,000
MDC00002 MDC MERIDIAN SPECIAL ATTENDANT
CONSOLE $ 21,733
MDC00012 MDC TAILORED MDC 1 $ 26,500
NMC00013 MDC TAILORED MDC 2 $ 40,000
MDC00016 MDC TAILORED NTWK ADDRESS
REGISTERS $ 50,000
MDC00035 MDC TEEN SERVICE $ 0
MDC00035-VI MDC Teen Svc per 100 Line Fee $ 5,000
MDC00033 MDC NAME/NUMBER
BLOCKING $ 15,000
NMC00005 MDC MBG MINIMUM $ 73,500
MDC00006 MDC MBG STANDARD $175,000
MDC00011 MDC PRIVATE VIRTUAL NTWKING $195,000
MDC00036 MDC SMDR FOR PVN $ 15,000
</TABLE>
December 3, 1996
<PAGE> 68
MIDCOM Product Attachment
SCHEDULE A
VIII. DMS-500 OPTIONAL FEATURES
1.2 DMS-500 INITIAL SYSTEM OPTIONAL SOFTWARE PACKAGES (CONT.)
<TABLE>
<CAPTION>
Feature/
Master Pkg S/W Package Description List Price
- ---------- ----------- ----------- ----------
<S> <C> <C> <C>
National ISDN NI0-NI1
NIO00007 NIO ISDN BASE (Reqd all ISDN) $ 68,500
NIO00007-VI ISDN Base Per 100 ISDN Lines $ 500
NIO00007-V2 ISDN Base per 1B+D Line fee $ 100
NIO00007-V3 ISDN Base per 2B+D Line Fee $ 250
NIO00008 NIO NI-1 BRI $251,000
NIO00008-VI NI0 NI-1 BRI per LCMI fee $ 7,200
NIO00009 NIO NI-1 BRI Enh. Maintenance $ 68,000
NIO00022 NIO ISDN PRI Base $ 30,000
NIO000022-VI NIO ISDN PRI Base per PRI
link fee $ 2,000
NIO00011 NIO NI-1 PRI $ 66,500
NIO00011-VI NIO NI-1 PRI per link fee $ 4,800
NIO00012 NIO NI-1 PRI Interworking with
4ESS/5ESS $ 50,000
NIO00013 NIO NI-1 PRI Networking $ 28,000
NIO00013-VI NIO NI-1 PRI Ntwking per link $ 3,750
DataSPAN $ 0
NIO00002 NIO00002-VI DataSPAN per LPP fee $ 20,000
NIO00010 NIO NI-1 Packet Services $ 75,000
Remote services
BAS00012 BAS Remote $ 22,500
BAS00012-V1 BAS Remote per Remote Fee $ 5,500
BAS00012-V2 BAS Remote per LCM Fee $ 700
BAS00009 BASE RSC-S Sync $ 30,000
BAS00009-V1 BAS Remote per RSCS Fee $120,000
Residential enhanced services
RES00001 RES Access Management $ 8,000
RES00002 RES Adv. Custom Calling Feat. $ 12,500
RES00002-V1 RES ACCF per 100 lines $ 2,500
RES00011 RES Unvsl Access to CLASS
First 5K Equipped Lines $115,500
RES00013 RES Ext. Bridged Services $ 7,500
RES00014 RES Call Wake-up Service $ 5,000
RES00014-V1 RES CWUS per 100 RES Lines $ 2,000
RES00015 RES Sub. Activated Call $ 20,000
Blocking
RES00016 RES Expansion Services $ 20,000
RES00018 RES & MDC Warm Line $ 5,000
RES00003 RES Display Funct. & Privacy $ 30,000
RES00003-V1 Per 100 CLASS Lines Fee $ 1,500
</TABLE>
December 3, 1996
<PAGE> 69
MIDCOM Product Attachment
SCHEDULE A
VIII. DMS-500 OPTIONAL FEATURES
1.2 DMS-500 INITIAL SYSTEM OPTIONAL SOFTWARE PACKAGES (CONT.)
<TABLE>
<CAPTION>
FEATURE/
MASTER PKG. S/W PACKAGE DESCRIPTION LIST PRICE
- ----------- ----------- ----------- ----------
Residential Enhanced Services Cont.
- -----------------------------------
<S> <C> <C> <C>
RES00021 RES ANONYMOUS CALLER REJ. $30,000
RES00021-V1 Per 100 CLASS Lines Fee $ 3,000
RES00022 RES CALLING NAME DELIVERY BLK $ 8,000
RES00023 RES CALLING NAME DISPLAY SW. $20,000
RES00024 RES VSLE & CALL LOGGING $50,000
RES00025 RES CALL WAITING DISPLAY $ 0
RES00025-V1 Per 5K equipped switch lines $15,000
RES00026 RES ENH. CALL WAITING DISPLAY $ 0
RES00026-V1 Per 5K equipped switch lines $10,000
RES00027 RES VISUAL MSG. WAITING $10,000
RES00004 RES INTERFACE FUNCTIONALITY $75,000
RES00004-V1 RES I/F Funct. per 25 LINKS $10,000
RES00028 RES BULK CALL LINE ID FIRST
50 LINKS $20,000
RES00028-V1 RES BCL ID each addtl 25 link $10,000
RES00039 RES SMDI CLID SUPPRESSION $24,000
RES00029 RES AUTOMATIC RECALL $ 5,000
RES00030 RES CUSTOMER TRACING $ 3,500
RES00030-V1 RES CT per 100 Class Lines $ 1,500
RES00031 RES CUSTOMER TRACING ENHANCED $ 3,500
RES00032 RES SELECTIVE CALL FORWARD $10,000
RES00032-V1 RES SCF per 100 Class Lines $ 1,500
RES00033 RES SELECTIVE CALL REJECTION $10,000
RES00034 RES DIST. RINGING CALL WAITING $10,000
RES00034-V1 RES DRCW per 100 Class Lines $ 3,000
RES00035 RES SELECTIVE CALL ACCEPTANCE $ 0
RES00035-V1 RES SCA per 100 SCA lines $ 3,000
RES00007 RES SIGNALING, ROUTING
AND OAM $20,000
</TABLE>
1.3 DMS-500 SYSTEM OPTIONAL FEATURES -- PRICING
Refer to Section VII of this Product Attachment for DMS-500 Optional
Software Pricing Discounts.
December 3, 1996
<PAGE> 70
MIDCOM Product Attachment
SCHEDULE A
IX. DMS-250 STANDARD FEATURES
I. DMS-250 INITIAL SYSTEM STANDARD FEATURES
1.1 DMS-250 INITIAL SYSTEM BASE AND OPTIONAL SOFTWARE PACKAGES
The following represents the DMS-250 UCS05 base and optional Software packages
that are included in the price of a DMS-250 Initial System Model D, Model E and
Model F, ("Standard Features"). The following is a list of Software only
included in the Schedule A DMS-250 Initial System(s); this list does not
include any/all required Equipment to provide feature functionality.
<TABLE>
<CAPTION>
FEATURE/
MASTER PKG S/W PACKAGE DESCRIPTION
- ---------- ------------ -----------
<S> <C> <C>
UCS00005 UCS TANDEM SERVICES BASE
- -------- ------------------------
NTX292BA Enhanced Security-without Password Encryption
NTX702BB DMS-500 Universal Master Package (UCS)
NTX000AA Bilge
NTX001AA Common Basic
NTX048AA Synchronization
NTX051AA Automatic Trunk Testing
NTX053AA Maintenance Assistance Package
NTX055AA Trunk Test Position (TTP)
NTX055AB TTP Digit Verification
NTX055AC TTP Transmission Measurement
NTX056AA Enhanced Administration
NTX060AB Network Management
NTX060BB Network Management - Enhanced
NTX072AA International Direct Distance Dialing (IDDD)
NTX074AA Disk Data Storage Storage System
NTX085AA Traffic Separation Peg Count
NTX087AA Traffic Separation Usage
NTX088AA Traffic Separation Report
NTX099AA Operational Measurements Enhancements
NTX122AA OM Call Attempts Summary
NTX136AA Automatic Transmission Measuring System
NTX202AA DMS-250 Operational Measurements on Tape
NTX203AA DMS-250 104 Testlines
NTX220BA DMS-250 Base Package (Type II)
NTX221BA DMS-250 Call Detail Recording (Type II) Billing
NTX222BA DMS-250 Call Processing (Type II)
NTX227BA DMS-250 Time Of Day Routing
NTX228BA DMS-250 DCM Channel Unit Cross Reference
NTX230BA DMS-250 Speed Numbers (Public/Private)
NTX231BA DMS-250 Incoming Exclusion
NTX234BA DMS-250 Authcodes (Type II)
NTX235BA DMS-750 Restricted Usage By Date and Time
NTX236BA DMS-250 Alternate Trunk Group Treatments
NTX239BA DMS-250 Translation Verification
NTX244AB Enhanced Sequential Trunk Hunting
NTX269AA Universal Tone Receivers
NTX270AA New Peripheral Maintenance Package
NTX291AA Enhanced Real Time Indicator
NTX321BA DNIS-250 Generic Offnet Access Trunks (FG-B)
</TABLE>
December 3, 1996
<PAGE> 71
MIDCOM Product Attachment
SCHEDULE A
IX. DMS-250 STANDARD FEATURES
1.1 DMS-250 INITIAL SYSTEM BASE AND OPTIONAL SOFTWARE PACKAGES (CONT.)
<TABLE>
<CAPTION>
FEATURE/
MASTER PKG S/W PACKAGE DESCRIPTION
- ---------- ------------ -----------
<S> <C> <C>
UCS00005 UCS TANDEM SERVICES BASE
- -------- ------------------------
NTX702BB DMS-250 Universal Master Package (UCS)
NTX342BA DMS-250 Equal Access Base Package (FG-D)
NTX343BA DMS-250 Equal Access (Type II) - ANI Scrn
NTX347AA DMS Base Data Communication Software
NTX351BA DMS-250 Automatic Trunk Routining
NTX445AB Operational Measurement Selective Output
NTX738AC Switch Performance Monitoring System (SPMS)
NTX801AA Toll Features I
NTX827AA New Peripherals Performance Measurements
NTX903AA Transmission Measurements
NTXA11AA Patch Administration & Downloading via X.25
NTXG22AA DMS-250 UCS Outgoing FG-D Enhancements
NTXG24AA DMS-250 Integrated Echo Cancellor
NTXJ35AA Maintenance Managers Report
NTXL02AA DMS-250 UCS Dialing Plan Enhancements
NTXL05AA DMS-250 Roaming PINs
NTXL79AA DMS-250 XPM+ for DTC7/DTCI
NTXR34AB XPM Plus Basic
NTXR42AA Firmware Downloading
NTXG18AA DMS-250 Safe Store TAP (X.25 Applications)
NTXM70AA UCS Tandem Services Base
NTX065AA Service Analysis
NTX142AA DS-1 64 KBPS Clear
NTX143AA DS-1 ESF
NTX167AB CCS7 Trunk Signalling
NTX226BA DMS-250 ATB by NPA Using Operational Meas.
NTX232BA DMS-250 ATB by NPA Using Logs
NTX233BA DMS-250 Off Hook Queuing
NTX237AA DMS-250 Nailed Up Connections
NTX340BA DMS-250 Adaptive Routing
NTX346BA DMS-250 Intra Lata Intra State Screening
NTX361BA DMS-250 CCS7 IMTS
NTX368BA DMS-250 Multiple Authcode Sets
NTX437AA Random Conditional Routing
NTX550AA CCS7 Transaction Service Support
NTX836AA LPP V.35 Subrate Links
NTX839AB LPP Enhanced Maintenance and Bert
NTX840AA LIU7 Gateway Message Screening
NTX882AA Bit Error Ratio Indicator for Toll Switches
NTX883AA Inter Office Trunk Bit Error Rate
NTX885AB Switch Pat Diagnostics
NTX945AA MS Base Link Maintenance
NTXA67AA Extended XPM Diagnostics
NTXE01AA Enhanced Network Basic (ENET)
</TABLE>
December 3, 1996
<PAGE> 72
MIDCOM Product Attachment
SCHEDULE A
IX. DMS-250 STANDARD FEATURES
1.1 DMS-250 INITIAL SYSTEM BASE AND OPTIONAL SOFTWARE PACKAGES (CONT.)
<TABLE>
<CAPTION>
FEATURE/
MASTER PKG S/W PACKAGE DESCRIPTION
- ---------- ------------ -----------
<S> <C> <C>
UCS00005 UCS TANDEM SERVICES BASE
- -------- ------------------------
NTXM70AA UCS Tandem Services Base Cont.
NTXE32AA CCS7 Preventative Cyclical Retransmission
NTXE65AA MPC X25 Interface
NTXE98AA High Speed MPC
NTXF05AA Ethernet Interface Unit
NTXF19AA TCP/IP Protocols
NTXF20AA LMS on LPP
NTXF71AB SuperNode Enhanced Messaging
NTXG10AA DMS-500 CNS CCITT 1984 X.25 Datacom
NTXG13AA DMS BASE Data Access Interface Session
NTXG18BA DMS-250 Safe Store Tap
NTXG20AA DMS-250 SS7 FG-D
NTXG28AA DMS-250 Enhanced COS Screening
NTXG34AA DMS-250 Trunk Group and CLLI name analysis
NTXG35AA DMS-250 Paystation Pretranslator
NTXG42AA DMS-250 SS7 IMT Terminations to DTU
NTXG46AA DMS-250 Direct Termination Service
NTXG49AA DMS-250 UCS SS7 UCP (Base ISUP)
NTXJ40AA LIU7 Gateway Verification Tools
NTXJ41AA CCS7 Test Tools
NTXJ44AA SLM File System
NTXJ94AA Mandatory Parallel AMA
NTXL01AB DMS-250 UCS Account Code Screening Enh.
NTXL03AA DMS-250 UCS to USP ISUP Interworking
NTXL04AA DMS-250 UCS SS7 Intra/Inter Networking
NTXL08AA DMS-250 UCS X.25 Transport
NTXL09AA DMS-250 UCS PRA
NTXL11AA DMS-250 UCS to MCI ISUP Interworking
NTXL12AA DMS-250 UCS to FGD ISUP Interworking
NTXL14AA DMS-250 UCS International Partitioning
NTXL47AA DMS-250 Lower Layer Compatibility
NTXN16AA Enhanced Dram
NTXN18AA FBUS LIU Base
NTXN19AA LIU7 for LPP Based CCS7 Applications
NTXN68AA XPM Broadcast Patching
NTXN83AA LIS Common
NTXP10AA Network Module Software
NTXP13AA Enet Switch Path Diagnostics
NTXP14AA Dirp Parallel Storage Size Increase
NTXQ51AA MS SR512 Lis Controller
NTXR70AA CM Base for OPC
NTXR72AA CCS7 MTP/SCCP for LPP
NTXS11AA File Transfer Protocol
</TABLE>
December 3, 1996
<PAGE> 73
MIDCOM Product Attachment
SCHEDULE A
IX. DMS-250 STANDARD FEATURES
1.1 DMS-250 INITIAL SYSTEM BASE AND OPTIONAL SOFTWARE PACKAGES (CONT.)
<TABLE>
<CAPTION>
FEATURE/
MASTER PACKAGE S/W PACKAGE DESCRIPTION
- -------------- ----------- -----------
<S> <C> <C>
UCS00005 UCS TANDEM SERVICES BASE
NTXM70AA UCS TANDEM SERVICES BASE CONT.
NTXX26AA DMS-250 UCS X.25 Data Transport
Enhancements
NTXX30AA UCS Enhanced Dialing Plan Phase II
NTXX32AA Enhanced PANI on UCS
NTXX42AA Disallow Reorigination on EANT FG-D
Trunks
CRDS0001 CARD SERVICES
Calling Card
Enhanced Calling Card
TCN Log Enhancements
MCCS Dedicated
CRDS0002 TCAP BASED CARD SERVICES
CI Command TESTSS
TCAP Based TCN
N00R00001 N00 ROUTING
N00 Routing
Info Digit 24 Functionality
N00R00002 N00/NXX TCAP SERVICES
TCAP Based N00 Routing
TCAP Based NXX Dialing Plan
Auto Code Gapping
N00 TCAP Route Advance
NSER0001 NETWORK SERVICES
ANI Delivery on DALTIE
STS/Netinfo Mapping
NSER0003 INTER/INTRA IMT Support
Inter/Intra IMT Support
NPRI0001 NETWORK INTERFACES PRI
PRI D-Channel Backup
Access Transport
UDWS0001 UCS DWS
DWS FG-D ISUP
DWS IMT ISUP
DWS PRI
UTRS0001 ROUTING
Carrier ID Code Routing
</TABLE>
December 3, 1996
<PAGE> 74
MIDCOM Product Attachment
SCHEDULE A
X. DMS-250 OPTIONAL FEATURES
1.0 DMS-250 INITIAL SYSTEM OPTIONAL FEATURES - INTEREXCHANGE
The following represents the DMS-250 UCS05 optional InterExchange Features
("DMS-250 Optional Feature - InterExchange") that are not included in the
DMS-250 Initial System Models D, E or F. Such DMS-250 Optional Feature -
InterExchange may be ordered by Buyer for the DMS-250 Initial System Models D,
E and F or with a Software Upgrade at the fees specified below.
<TABLE>
<CAPTION>
FEATURE/
MASTER PKG S/W PACKAGE DESCRIPTION LIST PRICE
- ---------- ----------- ----------- ----------
<S> <C> <C>
CRDS0003 MCCS MVP CARD SERVICES $ 50,000
MCCS Mechanized Voice Prompts
NSER0002 TCAP BASED AUTHCODE AND
ACCOUNT CODE VALIDATION $ 20,000
TCAP Based Account Code and
Private Speed Validation
TCAP Based Authorization Code
Validation
CAIN0200 CARRIER AIN EXTENSION PARAMETERS $ 50,000
Carrier AIN Extension Parms.
CAIN0300 CARRIER AIN SCP SIMULATOR $ 30,000
Carrier AIN SCP Simulator
CAIN0400 CARRIER AIN TEST QUERY $ 30,000
Carrier AIN Test Query
CAIN0500 CARRIER AIN CUSTOMIZED
DIALING PLAN TRIGGER $ 100,000
Carrier AIN Customized Dialing
Plan Trigger
CAIN0501 CARRIER AIN SPECIFIC DIGIT
TRIGGER $ 100,000
Carrier AIN Specific Digit Trigger
</TABLE>
1.1 DMS-250 SYSTEM OPTIONAL FEATURES - INTEREXCHANGE PRICING
Refer to Section V of this Product Attachment for DMS-250 Optional
Software Pricing Discounts.
December 3, 1996
<PAGE> 75
Product Attachment
Page 13
SCHEDULE B
SERVICES AND CHARGES
ENGINEERING
1. Nortel shall engineer each System furnished hereunder in accordance with
Nortel's engineering practices applicable to such Initial System at the
time such engineering is performed.
2. Nortel's charges for engineering each Initial System are included in the
prices and fees for the Initial System set forth in Schedule A.
3. The provision of any other engineering by Nortel and the charges
associated therewith shall be as subsequently agreed in writing by
Nortel and Buyer.
INSTALLATION
1. Nortel shall install each Initial System furnished hereunder at the
applicable Installation Site in accordance with Nortel's installation
practices applicable to such Initial System at the time such
installation is performed.
2. Nortel's charges for performance of such installation are included in
the prices and fees for the Initial System set forth in Schedule A.
3. The provision of any other installation by Nortel and the charges
associated therewith shall be as subsequently agreed in writing by
Nortel and Buyer.
TRAINING
1. As applicable, with each Initial System or DMS-250 to DMS-500 Upgrade
furnished hereunder, Nortel shall provide to Buyer at no additional
charge the following number of training days at Nortel's Training Center
currently located in Raleigh, North Carolina:
Initial System Model A through C, one hundred (100) days.
Initial System Model D through F, fifty (50) days.
DMS-250 to DMS-500 Upgrade, fifty (50) days.
(Note: Initial System models are defined in Schedule A, Section II, as
appropriate.)
Such training shall be in any of the courses scheduled to be provided at
that Training Center as set forth in NTI's applicable Technical Training
Course catalog with respect to the Products described in Schedule A to
this Attachment.
<PAGE> 76
Product Attachment
Page 14
2. Buyer shall be responsible for the payment of all travel and living
expenses of its employees whom Buyer sends to receive such training.
3. Additional Training in such courses shall be provided by Nortel to
Buyer subject to availability and scheduling of such courses. NTI may
change the schedule of such courses at any time. Such additional
training shall be provided at NTI's then-current charges.
4. All training provided by NTI shall consist of such materials and cover
such subject as NTI in its sole discretion determines to be
appropriate. Nortel makes no representation concerning the ability of
anyone to satisfactorily complete any training.
5. Nortel may add to, or delete from, the subject matter and or medium of
any of the training courses which NTI provides. In addition, NTI may
reschedule such courses as NTI determines to be appropriate.
6. The availability of any training to Buyer as set forth above shall be
subject to any prerequisites identified by NTI in its training catalog
or other documentation with respect to such training.
ADDITIONAL SERVICES
1. All other services to be furnished hereunder shall be subject to
written agreement of the parties which shall set forth the terms and
conditions applicable to the provision of such services and a
description of such services and the charges for such services.
<PAGE> 77
Product Attachment
Page 15
SCHEDULE C
DELIVERY
The delivery schedule shall be mutually agreed to by the parties and set forth
in any Order for Products.
<PAGE> 78
Product Attachment
Page 16
SCHEDULE D
DOCUMENTATION
Certain documentation with respect to the Products may be made available to
Buyer on CD-ROM pursuant to the terms and conditions set forth below.
In addition, Nortel may furnish to Buyer such other documentation with respect
to the Products as Nortel deems appropriate.
HELMSMAN TERMS AND CONDITIONS
1. DEFINITIONS
"CD-ROM" shall mean a compact disk with read-only memory.
"CD-ROM Software" shall mean the computer programs which provide basic logic,
operating instructions or user-related application instructions with respect to
the retrieval of CD-ROM Documentation, along with the documentation used to
describe, maintain and use such computer programs.
"CD-ROM Documentation" shall mean the documentation that Nortel makes available
to its customers on CD-ROM with respect to DMS-250, DMS-300, and/or DMS-STP
Systems.
2. SCOPE
With the delivery of each Initial System ordered by Buyer, Nortel shall deliver
a CD-ROM on which the appropriate CD-ROM Documentation is contained and a user
manual which shall set forth the procedures by which Buyer may use the CD-ROM
Software to access to the CD-ROM Documentation.
Buyer shall be solely responsible for obtaining, at its cost and expense, any
computer or other equipment and software required to use the CD-ROM, CD-ROM
Software and/or CD-ROM Documentation.
Buyer may order additional CD-ROMs from Nortel at Nortel's then current fees
therefor, and any such additional CD-ROMs shall be subject to these terms and
conditions.
3. LICENSE
Upon delivery of the CD-ROM, Nortel shall grant to Buyer a non-exclusive,
non-transferable and non-assignable license, subject to these terms and
conditions:
<PAGE> 1
EXHIBIT 10.2
[MIDCOM LOGO]
MASTER LEASE AGREEMENT dated January 15, 1997 by and between COMDISCO, INC.
("Lessor") and MIDCOM Communications Inc. ("Lessee").
IN CONSIDERATION of the mutual agreements described below, the parties agree as
follows (all capitalized terms are defined in Section 14.13):
1. Property Leased.
Lessor leases to Lessee all of the Equipment described on each
Schedule. In the event of a conflict, the terms of a Schedule prevail over this
Master Lease.
2. Term.
On the Commencement Date Lessee will be deemed to accept the Equipment,
will be bound to its rental obligations for each item of Equipment and the term
of a Schedule will begin and continue through the Initial Term and thereafter
until terminated by either party upon prior written notice received during the
Notice Period. No termination may be effective prior to the expiration of the
initial Term.
3. Rent and Payment.
Rent is due and payable in advance, in immediately available funds, on
the first day of each Rent Interval to the payee and at the location specified
in Lessor's invoice. Interim Rent is due and payable when invoiced. If any
payment is not made when due, Lessee will pay interest at the Overdue Rate.
4. Selection: Warranty and Disclaimer of Warranties.
4.1 Selection. Lessee acknowledges that it has selected the Equipment
and disclaims any reliance upon statements made by the Lessor.
4.2 Warranty and Disclaimer of Warranties. Lessor warrants to Lessee
that, so long as Lessee is not in default, Lessor will not disturb Lessee's
quiet and peaceful possession, and unrestricted use of the Equipment. To the
extent permitted by the manufacturer, Lessor assigns to Lessee during the term
of the Schedule any manufacturer's warranties for the Equipment. Lessor MAKES
NO OTHER WARRANTY, EXPRESS OR IMPLIED AS TO ANY MATTER WHATSOEVER, INCLUDING,
WITHOUT LIMITATION, THE MERCHANTABILITY OF THE EQUIPMENT OR ITS FITNESS FOR A
PARTICULAR PURPOSE. Lessor is not responsible for any liability, claim, loss,
damage or expense of any kind (including strict liability in tort) caused by
the Equipment except for any loss or damage caused by the negligent acts of
Lessor. In no event is Lessor responsible for special, incidental or
consequential damages.
5. Title and Assignment.
5.1 Title. Lessee holds the Equipment subject and subordinate to the
rights of the Owner, Lessor, any Assignee and any Secured Party. Lessee
authorizes Lessor, as Lessee's agent, to prepare, execute and file in Lessee's
name precautionary Uniform Commercial Code financing statements showing the
interest of the Owner. Lessor, and any Assignee or Secured Party in the
Equipment and to insert serial numbers in Schedules as appropriate. Except as
provided in Sections 5.2 and 7.2, Lessee will, at its expense, keep the
Equipment free and clear from any liens or encumbrances of any kind (except any
caused by Lessor) and will indemnify and hold Lessor, Owner, any Assignee and
Secured Party harmless from and against any loss caused by Lessee's failure to
do so.
5.2 Relocation or Sublease. Upon prior written notice, Lessee may
relocate Equipment to any location within the continental United States provided
(i) the Equipment will not be used by an entity exempt from federal income tax,
(ii) all additional costs (including any administrative fees, additional taxes
and insurance coverage) are reconciled and promptly paid by Lessee.
Lessee may sublease the Equipment upon the reasonable consent of the
Lessor and the Secured Party. Such consent to sublease will be granted if (i)
Lessee meets the relocation requirements set out above, (ii) the sublease is
expressly subject and subordinate to the terms of the Schedule., (iii) Lessee
assigns its rights in the sublease to Lessor and the Secured Party as
additional collateral and security, (iv) Lessee's obligation to maintain and
insure the Equipment is not altered, (v) all financing statements required to
continue the Secured Party's prior perfected security interest are filed, and
(vi) the sublease is not to a leasing entity affiliated with the manufacturer
of the Equipment described on the Schedule. Lessor acknowledges Lessee's right
to sublease for a term which extends beyond the expiration of the Initial Term.
If Lessee subleases the Equipment for a term extending beyond the expiration of
such Initial Term of the applicable Schedule, Lessee shall remain obligated
upon the expiration of the Initial Term to return such Equipment, or, at
Lessor's option to (i) return Like Equipment or (ii) negotiate a mutually
acceptable lease extension or purchase. If the parties cannot mutually agree
upon the terms of an extension or purchase, the term of the Schedule will
extend upon the original terms and conditions until terminated pursuant to
Section 2.
No relocation or sublease will relieve Lessee from any of its obligations under
this Master Lease and the applicable Schedule.
5.3 Assignment by Lessor. The terms and conditions of each Schedule
have been fixed by Lessor in order to permit Lessor to sell and/or assign or
transfer its interest or grant a security interest in each Schedule and/or the
Equipment to a Secured Party or Assignee. In that event the term Lessor will
mean the Assignee and any Secured Party. However, any assignment, sale, or
other transfer by Lessor will not relieve Lessor of its obligations to Lessee
and will not materially change Lessee's duties or materially increase the
burdens or risks imposed on Lessee. The Lessee consents to and will acknowledge
such assignments in a written notice given to Lessee. Lessee also agrees that:
(a) The Secured Party will be entitled to exercise all of Lessor's
rights, but will not be obligated to perform any of the
obligations of Lessor. The Secured Party will not disturb
Lessee's quiet and peaceful possession and unrestricted use of
the Equipment so long as Lessee is not in default and the
Secured Party continues to receive all Rent payable under the
Schedule:
(b) Lessee will pay all Rent and all other amounts payable to the
Secured Party, despite any defense or claim which it has against
Lessor. Lessee reserves its right to have recourse directly
against Lessor for any defense or claim; and
(c) Subject to and without impairment of Lessee's leasehold rights
in the Equipment, Lessee holds the Equipment for the Secured
Party to the extent of the Secured Party's rights in that
Equipment.
6. Net Lease, Taxes and Forms.
6.2 Net Lease.
Each Schedule constitutes a net lease. Lessee's obligation to pay Rent
and all other amounts is absolute and unconditional and is not subject to any
abatement, reduction, set-off, defense, counterclaim, interruption, deferment
or recoupment for any reason whatsoever.
6.2 Taxes and Fees. Lessee will pay when due or reimburse Lessor for
all taxes, fees or any other charges (together with any retained interest or
penalties not arising from the negligence of Lessor) accrued for or arising
during the term of each Schedule against Lessor, Lessee or the Equipment by any
governmental authority (except only Federal, state and local taxes on the
capital or the net income of Lessor). Lessor will file all personal property
tax returns for the Equipment and pay all property taxes due. Lessee will
reimburse Lessor for property taxes within thirty (30) days of receipt of an
invoice.
7. Care, Use, Maintenance, Attachments, Reconfigurations and inspections
by Lessor.
7.1 Care, Use and Maintenance. Lessee will maintain the Equipment in
good operating order and appearance, protect the Equipment from deterioration,
other than normal wear and tear, and will not use the Equipment for any purpose
other than that for which it was designed. If commercially available, Lessee
will maintain in force a standard maintenance contract with the manufacturer of
the Equipment, or another party acceptable to Lessor, and upon request will
provide Lessor with a complete copy of that contract. If Lessee has the
Equipment maintained by a party other than the manufacturer, Lessee agrees to
pay any costs necessary for the manufacturer to bring the Equipment to then
current release, revision and engineering change levels, and to re-certify the
Equipment as eligible for manufacturer's maintenance at the expiration of the
lease term. The lease term will continue upon the same terms and conditions
until recertification has been obtained.
7.2 Attachments and Reconfigurations. Upon prior written notice to
Lessor, Lessee may reconfigure and install Attachments on the Equipment. In the
event of such a Reconfiguration or Attachment, Lessee shall, upon return of the
Equipment, at its expense, restore the Equipment to the original configuration
specified on the Schedule in accordance with the manufacturer's specifications
and in the same operating order, repair and appearance as when installed
(normal wear and tear excluded). If any parts are removed from the Equipment
during the Reconfiguration or Attachment, the restoration will include, at
Lessee's option, the installation of either the original removed parts or like
parts. Alternatively, with Lessors prior written consent which will not be
unreasonably withheld, Lessee may return the Equipment with any Attachment or
upgrade. If any parts of the Equipment are removed during a Reconfiguration or
Attachment, Lessor may require Lessee to provide additional security,
satisfactory to the Lessor, in order to ensure performance of Lessee's
obligations set forth in this subsection. Neither Attachments nor parts
installed on Equipment in the course of Reconfiguration shall be accessions to
the Equipment.
However, if the Reconfiguration or Attachment (i) adversely affects
Lessor's tax benefits relating to the Equipment: (ii) is not capable of being
removed without causing material damage to the Equipment; or (iii) if at the
time of the reconfiguration or attachment the manufacturer does not offer on a
commercial
<PAGE> 2
basis a means for the removal of the additional items: then such Reconfiguration
or Attachment is subject to the prior written consent of Lessor.
7.3 Inspection by Lessor. Upon request, Lessee, during reasonable
business hours and subject to Lessee's security requirements, will make the
Equipment and its related log and maintenance records available to Lessor for
inspection.
8. Representations and Warranties of Lessee.
Lessee represents and warrants that for the Master Lease and each
Schedule:
(a) The execution, delivery and performance of the Lessee have been
duly authorized by all necessary corporate action;
(b) The individual executing was duly authorized to do so;
(c) The Master Lease and each Schedule constitute legal, valid and
binding agreements of the Lessee enforceable in accordance with
their terms;
(d) The Equipment is personal property and when subjected to use by
the Lessee will not be or become fixtures under applicable law.
9. Delivery and Return of Equipment.
Lessee assumes the full expense of transportation and in-transit
insurance to Lessee's premises and for installation of the Equipment. Upon
expiration or termination of each Schedule, Lessee will, at Lessor's
instructions and at Lessee's expense (including transportation and in-transit
insurance), have the Equipment deinstalled, audited by the manufacturer, packed
and shipped in accordance with the manufacturer's specifications and returned
to Lessor in the same operating order, repair and appearance as when installed
(ordinary wear and tear excluded), to a location within the continental United
States as directed by Lessor. All items returned to Lessor in addition to the
Equipment become property of Lessor.
10. Labeling.
Upon request, Lessee will mark the Equipment indicating Lessor's
interest. Lessee will keep all Equipment free from any other marking or labeling
which might be interpreted as a claim of ownership.
11. Indemnity.
Lessee will indemnify and hold Lessor, any Assignee and any Secured
Party harmless from and against any and all claims, costs, expenses, damages
and liabilities, including reasonable attorney's fees, arising out of the
ownership (for strict liability in tort only), selection, possession, leasing,
operation, control, use, maintenance, delivery, return or other disposition of
the Equipment. However, Lessee is not responsible to a party indemnified
hereunder for any claims, costs, expenses, damages and liabilities occasioned
by the negligent acts of such indemnified party. Lessee agrees to carry bodily
injury and property damage liability insurance during the term of the Master
Lease in amounts and against risks customarily insured against by the Lessee on
equipment owned by it. Any amounts received by Lessor under that insurance will
be credited against Lessee's obligations under this Section.
12. Risk of Loss.
12.1 Lessee's Risk of Loss. If the Schedule indicates that the Lessee
has responsibility for the risk of loss of the Equipment, then the following
terms will apply:
Effective upon delivery and until the Equipment is returned, Lessee
relieves Lessor of responsibility for all risks of physical damage to or loss
or destruction of the Equipment. Lessee will carry casualty insurance for
each item of Equipment in an amount not less than the Casualty Value. All
policies for such insurance will name the Lessor and any Secured Party as
additional insured and as loss payee, and will provide for at least thirty (30)
days prior written notice to the Lessor of cancellation or expiration. The
Lessee will furnish appropriate evidence of such insurance.
Lessee shall promptly repair any damaged item of Equipment unless such
Equipment has suffered a Casualty Loss. Within fifteen (15) days of a Casualty
Loss, Lessee will provide written notice of that loss to Lessor and Lessee
will, at Lessor's option, either (a) replace the item of Equipment with Like
Equipment and marketable title to the Like Equipment will automatically vest in
Lessor or (b) pay the Casualty Value and after that payment and the payment of
all other amounts due and owing, Lessee's obligation to pay further rent for
the item of Equipment will cease.
12.2 Lessor's Risk of Loss. If the Schedule indicates that the Lessor
has responsibility for the risk of loss of the Equipment, then the following
terms will apply:
Effective upon delivery and throughout the Initial Term of a Schedule
and any extension, Lessor agrees to insure the Equipment against physical
damage to or loss or destruction due to external cause as specified by the
terms of the Lessor's then current insurance policy. Lessor relieves Lessee of
responsibility for physical damage to or loss or destruction of Equipment
reimbursed by that insurance. Lessee will give Lessor prompt notice of any
damage, loss or destruction to any item of Equipment and Lessor will determine
within fifteen (15) days of its receipt of that notice whether the item has
suffered a Casualty Loss.
If any item of Equipment suffers damage or a Casualty Loss which is
reimbursable under Lessor's insurance, upon payment by Lessee of Lessor's
deductible, Lessor will: (i) (for damaged equipment) arrange and pay for the
repair of any damaged item of Equipment or (ii) for any Casualty Loss) at
Lessor's option either replace the item of Equipment with Like Equipment, or
upon payment of all other amounts due by Lessee terminate the relevant Schedule
as it relates to that item of Equipment.
If any item of Equipment suffers damage or a Casualty Loss which is not
reimbursable under Lessor's insurance, then Lessee will comply with the
provisions of the last paragraph of Section 12.1 regarding repair, replacement
or payment of Casualty Value.
If Lessor fails to maintain insurance coverage as required by this
subsection 12.2, Lessee will assume such risk of loss and, at the request of
any Assignee or Secured Party, will promptly provide insurance coverage. This
paragraph does not relieve Lessor of its obligations to maintain coverage of
the Equipment.
13. Default, Remedies and Mitigation.
13.1 Default. The occurrence of any one or more of the following
Events of Default constitutes a default under a Schedule:
(a) Lessee's failure to pay Rent or other amounts payable by Lessee
when due if that failure continues for ten (10) days after written
notice; or
(b) Lessee's failure to perform any other term or condition of the
Schedule or the material inaccuracy of any representation or
warranty made by the Lessee in the Schedule or in any document or
certificate furnished to the Lessor hereunder if that failure or
inaccuracy continues for fifteen (15) days after written notice; or
(c) An assignment by Lessee for the benefit of its creditors, the
failure by Lessee to pay its debts when due, the insolvency of
Lessee, the filing by Lessee or the filing against Lessee of any
petition under any bankruptcy or insolvency law or for the
appointment of a trustee or other officer with similar powers, the
adjudication of Lessee as insolvent, the liquidation of Lessee, or
the making of any action for the purpose of the foregoing; or
(d) The occurrence of an Event of Default under any Schedule or other
agreement between Lessee and Lessor or its Assignee or Secured
Party.
13.2 Remedies. Upon the occurrence of any of the above Events of
Default, Lessor, at its option, may:
(a) enforce Lessee's performance of the provisions of the applicable
Schedule by appropriate court action in law or in equity;
(b) recover from Lessee any damages and or expenses, including Default
Costs;
(c) with notice and demand, recover all sums due and accelerate and
recover the present value of the remaining payment stream of all
Rent due under the defaulted Schedule (discounted at the same rate
of interest at which such defaulted Schedule was discounted with a
Secured Party plus any prepayment fees charged to Lessor by the
Secured Party of, if there is no Secured Party, then discounted at
6%) together with all Rent and other amounts currently due as
liquidated damages and not as a penalty;
(d) with notice and process of law and in compliance with Lessee's
security requirements, Lessor may enter Lessee's premises to remove
and repossess the Equipment without being liable to Lessee for
damages due to the repossession, except those resulting from
Lessor's, its assignees', agents' or representatives' negligence;
(e) Lessor may pursue any other remedy permitted by law or equity.
The above remedies, in Lessor's discretion and to the extent permitted
by law, are cumulative and may be exercised successively or concurrently.
13.3 Mitigation. Upon return of the Equipment pursuant to the terms
of Section 13.2, Lessor will use its best efforts in accordance with its normal
business procedures (and without obligation to give any priority to such
Equipment) to mitigate Lessor's damages as described below. EXCEPT AS SET
FORTH IN THIS SECTION, LESSEE HEREBY WAIVES ANY RIGHTS NOW OR HEREAFTER
CONFERRED BY STATUTE OR OTHERWISE WHICH MAY REQUIRE LESSOR TO MITIGATE ITS
DAMAGES OR MODIFY ANY OF LESSOR'S RIGHTS OR REMEDIES STATED HEREIN. Lessor may
sell, lease or otherwise dispose of all or any part of the Equipment at a
public or private sale for cash or credit with the privilege of purchasing the
Equipment. The proceeds from any sale, lease or other disposition of the
Equipment are defined as either:
(a) if sold or otherwise disposed of, the cash proceeds less the Fair
Market Value of the Equipment at the expiration of the Initial Term
less the Default Costs;
(b) if leased, the present value (discounted at three points over the
prime rate as referenced in the Wall Street Journal at the time
of the mitigation) of the rentals for a term not to exceed the
Initial Term, less the Default Costs.
Any proceeds will be applied against liquidated damages and any other
sums due to Lessor from Lessee. However, Lessee is liable to Lessor for, and
Lessor may recover, the amount by which the proceeds are less than the
liquidated damages and other sums due to Lessor from Lessee.
<PAGE> 3
14. Agreement provisions.
14.1 Entire Agreement. This Master Lease and associated Schedules
supersede all other oral or written agreements or understandings between the
parties concerning the Equipment including, for example, purchase orders. ANY
AMENDMENT OF THIS MASTER LEASE OR A SCHEDULE MAY ONLY BE ACCOMPLISHED BY A
WRITING SIGNED BY THE PARTY AGAINST WHOM THE AMENDMENT IS SOUGHT TO BE ENFORCED.
14.2 No Waiver. No action taken by Lessor or Lessee shall be deemed to
constitute a waiver of compliance with any representation, warranty or
covenant contained in this Master Lease or a Schedule. The waiver by Lessor or
Lessee of a breach of any provision of this Master Lease or a Schedule will not
operate or be construed as a waiver of any subsequent breach.
14.3 Binding Nature. Each Schedule is binding upon, and inures to the
benefit of Lessor and its assigns. LESSEE MAY NOT ASSIGN ITS RIGHTS OR
OBLIGATIONS.
14.4 Survival of Obligations. All agreements, obligations including,
but not limited to those arising under Section 6.2, representations and
warranties contained in this Master Lease, any Schedule or in any document
delivered in connection with those agreements are for the benefit of Lessor and
any Assignee or Secured Party and survive the execution, delivery, expiration
or termination of this Master Lease.
14.5 Notices. Any notice, request or other communication to either
party by the other will be given in writing and deemed received upon the
earlier of actual receipt or three days after mailing if mailed postage
prepaid by regular or airmail to Lessor (to the attention of "Lease
Administrator") or Lessee, at the address set out in the Schedule or, one day
after it is sent by courier or facsimile transmission if receipt is verified
by the receiving party.
14.6 Applicable Law. THIS MASTER LEASE HAS BEEN, AND EACH SCHEDULE WILL
HAVE BEEN MADE, EXECUTED AND DELIVERED IN THE STATE OF ILLINOIS AND WILL BE
GOVERNED AND CONSTRUED FOR ALL PURPOSES IN ACCORDANCE WITH THE LAWS OF THE STATE
OF ILLINOIS WITHOUT GIVING EFFECT TO CONFLICT OF LAW PROVISIONS. NO RIGHTS OR
REMEDIES REFERRED TO IN ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE WILL BE
CONFERRED ON LESSEE UNLESS EXPRESSLY GRANTED IN THIS MASTER LEASE OR A SCHEDULE.
14.7 Severability. If any one or more of the provisions of this Master
Lease or and Schedule is for any reason held invalid, illegal or unenforceable,
the remaining provisions of this Master Lease and any such Schedule will be
unimpaired, and the invalid, illegal or unenforceable provision replaced by a
mutually acceptable valid, legal and enforceable provision that is closest to
the original intention of the parties.
14.8 Counterparts. This Master Lease and any Schedule may be executed
in any number of counterparts, each of which will be deemed an original, but all
such counterparts together constitute one and the same instrument. If Lessor
grants a security interest in all or any part of a Schedule, the Equipment or
sums payable thereunder, only that counterpart Schedule marked "Secured
Party's Original" can transfer Lessor's rights and all other counterparts will
be marked "Duplicate".
14.9 Nonspecified Features and Licensed Products. If the Equipment is
supplied from Lessor's inventory and contains any features not specified in the
Schedule, Lessee grants Lessor the right to remove any such features. Any
removal will be performed by the manufacturer or another party acceptable to
Lessee, upon the request of Lessor, at a time convenient to Lessee, provided
that Lessee will not unreasonably delay the removal of such features.
Lessee shall obtain no title to Licensed Products which will at all
times remain the property of the owner of the Licensed Products. A license from
the owner may be required and it is Lessee's responsibility to obtain any
required license before the use of the Licensed Products. Lessee agrees to treat
the Licensed Products as confidential information of the owner, to observe all
copyright restrictions, and not to reproduce or sell the Licensed Products.
14.10 Additional Documents. Lessee will, upon execution of this Master
Lease and as may be requested thereafter, provide Lessor with a secretary's
certificate of incumbency and authority and any other documents reasonably
requested by Lessor. Upon the execution of each Schedule with an aggregate Rent
in excess of $2,000,000, Lessee will provide Lessor with an opinion from
Lessee's counsel regarding the representations and warranties in Section 9.
Lessee will furnish, upon request, audited financial statements for the most
recent period.
14.11 Electronic Communications. Each of the parties may communicate
with the other by electronic means under mutually agreeable terms.
14.12 Lessor's Right to Match. Lessee's rights under Section 5.2 and
7.2 are subject to Lessor's right to match any sublease or upgrade proposed by
a third party. Lessee will provide Lessor with the terms of the third party
offer and Lessor will have three (3) business days to match the offer. Lessee
shall obtain such upgrade from or sublease the Equipment to Lessor if Lessor
has timely matched the third party offer.
14.13 Definitions.
ASSIGNEE - means an entity to whom Lessor has sold or assigned its rights as
owner and Lessor of Equipment.
ATTACHMENT - means any accessory, equipment or device and the installation
thereof that does not impair the original function or use of the Equipment and
is capable of being removed without causing material damage to the Equipment
and is not an accession to the Equipment.
CASUALTY LOSS - means the irreparable loss or destruction of Equipment.
CASUALTY VALUE - means the greater of the aggregate Rent remaining to be paid
for the balance of the lease term or the Fair Market Value of the Equipment
immediately prior to the Casualty Loss. However, if a Casualty Value Table is
attached to the relevant Schedule its terms will control.
COMMENCEMENT CERTIFICATE - means the Lessor provided certificate which must be
signed by Lessee within ten days of the Commencement Date as requested by
Lessor.
COMMENCEMENT DATE - is defined in each Schedule.
DEFAULT COSTS - means reasonable attorney's fees and remarketing costs
resulting from a Lessee default or Lessor's enforcement of its remedies.
EQUIPMENT - means the property described on a Schedule and any replacement for
that property required or permitted by this Master Lease or a Schedule but not
including any Attachment.
EVENT OF DEFAULT - means the events described in Subsection 13.1.
FAIR MARKET VALUE - means the aggregate amount which would be obtainable in an
arm's-length transaction between an informed and willing buyer/user and an
informed and willing seller under no compulsion to sell.
INITIAL TERM - means the period of time beginning on the first day of the first
full Rent Interval following the Commencement Date for all items of Equipment
and continuing for the number of Rent intervals indicated on a Schedule.
INSTALLATION DATE - means the day on which Equipment is installed and
qualified for a commercially available manufacturer's standard maintenance
contract or warranty coverage, if available.
INTERIM RENT - means the pro-rata portion of Rent due for the period from the
Commencement Date through but not including the first day of the first full
Rent Interval included in the initial Term.
LICENSED PRODUCTS - means any software or other licensed products attached to
the Equipment.
LIKE EQUIPMENT - means replacement Equipment which is lien free and of the same
model, type, configuration and manufacture as Equipment.
LIKE PART - means a substituted part which is lien free and of the same
manufacturer and part number as the removed part, and which when installed on
the Equipment will be eligible for maintenance coverage with the manufacturer of
the Equipment
NOTICE PERIOD - means the time period described in a Schedule during which
Lessee may give Lessor notice of the termination of the term of that Schedule.
OVERDUE RATE - means the lessor of 18% per year of the maximum rate permitted
by the law of the state where the Equipment is located.
OWNER - means the owner of Equipment.
RECONFIGURATION - means any change to Equipment that would upgrade or downgrade
the performance capabilities of the Equipment in any way.
RENT - means the ret, including interim Rent. Lessee will pay for each item of
Equipment expressed in a Schedule either as a specific amount or an amount
equal to the amount which Lessor pays for an item of Equipment multiplied by a
lease rate factor plus all other amounts due to Lessor under this Master Lease
or a Schedule.
RENT INTERVAL - means a full calendar month or quarter as indicated on a
Schedule.
SCHEDULE - means an Equipment Schedule which incorporates all of the terms and
conditions of this Master Lease and, for purposes of Section 14.8, its
associated Commencement Certificate(s).
SECURED PARTY - means an entity to whom Lessor has granted a security
interest in a Schedule and related Equipment for the purpose of securing a loan.
<PAGE> 4
EQUIPMENT SCHEDULE NO. 2
DATED FEBRUARY 17, 1997
TO MASTER LEASE AGREEMENT DATED JANUARY 15, 1997 ("MASTER
LEASE")
LESSEE: MIDCOM COMMUNICATIONS INC. LESSOR:
COMDISCO, INC.
ADDRESS FOR LEGAL NOTICES: ADDRESS FOR ALL
NOTICES:
1111 Third Avenue 6111 North River Road
Seattle, WA 98101 Rosemont, Illinois
60018
Attn: Communications
Product Group
ATTN: General Counsel
PHONE: (206) 628-8000
FAX: (206) 628-8295
ADDRESS FOR ADMINISTRATIVE CORRESPONDENCE: ADDRESS FOR INVOICES:
Same as Above Same as Administrative
Correspondence
ATTN: Chief Financial Officer ATTN: Chief Financial
Officer
PHONE: (206) 628-8000
FAX: (206) 628-8295 LESSEE REFERENCE NO:
NY Office
(24 digits maximum)
INITIAL TERM/
1
<PAGE> 5
RENT INTERVAL: 60
Months
LOCATION OF EQUIPMENT:
LEASE RATE FACTOR:
32 Old Slip, 4th Floor
New York, NY 10005 Hardware: .0198213
Softcosts: .021976
ATTN: Mr. Mike Pirot
PHONE: (212) 797-9840
EQUIPMENT (AS DEFINED BELOW):
<TABLE>
<CAPTION>
ITEM MACHINE MODEL/
SERIAL
NO. QTY. MFG. TYPE FEATURE DESCRIPTION
- --- ---- ---- ---- ------- -----------
NUMBER
------
<S> <C> <C> <C> <C> <C>
1. 1 NTEL DMS 500 PBX System
</TABLE>
2
<PAGE> 6
RISK OF LOSS: Pursuant to the Master Lease, Lessor and Lessee agree that the
risk of loss is the responsibility of the Lessee.
NOTICE PERIOD: Not less than ninety (90) days nor more than twelve (12) months
prior to the expiration of the lease term. If Lessee gives written notice of
termination, in accordance with the terms of the preceding sentence, but fails
to return the Equipment on the expiration date of the Initial Term, the Lease
will be reinstated and an additional sixty (60) days written notice of
termination will be required, which termination will be effective at the end of
the month following the 60 day notice requirement. The periodic Rent will
continue at the current rate until the effective date of the written notice of
termination and the Equipment is returned.
SPECIAL TERMS: The following additional terms are a part of this Equipment
Schedule. The terms and conditions of the Master Lease Agreement as they pertain
to this Equipment Schedule are modified and amended as follows:
1. SOFTWARE
In addition to leasing the Equipment described herein, Lessor agrees to
finance software license fees ("License Fees") of approximately
$746,291.00, for the Software described in this Equipment Schedule (the
"Software").The Software is licensed by Northern Telecom Inc., the vendor
of the Software (the "Vendor") directly to the Lessee pursuant to the
terms and conditions of the license agreement between Vendor and Lessee
(the "LicenseAgreement"). Lessor is not a party to nor has any
obligations under the License Agreement and has no interest in the
Software except as described in this Equipment Schedule.
2 ADDITIONAL SOFT COSTS
Lessee and Lessor acknowledge that the Equipment Schedule contains
approximate softcosts of $444,591.00 for labor, freight and handling
costs, and OEM charges charged by Vendor.
3. COMMENCEMENT DATE
The Commencement Date for each item of Equipment and/or Software (as
applicable) will be the day on which that item of Equipment and/or
Software (as applicable) is installed and qualified for a commercially
available manufacturer's standard maintenance contract or warranty
coverage, if available. Lessee agrees to confirm theCommencement Date by
providing Lessor with either a Commencement Certificate in the form
provided by Lessor or the Vendor's invoice
3
<PAGE> 7
containing the Equipment and/or Software location (as applicable),
description, serial number (if applicable), cost, the Commencement Date
and Lessee's signature, within ten (10) days of the Commencement Date.
For purposes of this Equipment Schedule, the Initial Term will begin on
July 1, 1997 for all items of Equipment and Software.
Lessee's obligations under this Equipment Schedule and the periodic Rent
described in this Equipment Schedule are contingent upon Lessor
purchasing the Equipment, including the softcosts for an aggregate amount
of $1,798,025.00 in addition to financing the Software License Fees of
approximately $746,291.00 pursuant to satisfactory purchase
documentation. Lessee acknowledges that it has either received or
approved Lessor's purchase documentation for the Equipment and/or
Software. If the Commencement Date occurs later than June 30, 1997
("Outside Date"), if the Commencement Certificate or Vendor invoices are
not provided within ten (10) days of the Commencement Date, or if the
cost or configuration of the Equipment and/or Software or actual
softcosts changes, Lessor may adjust the Lease Rate Factors or the
periodic Rent to reflect any additional costs or expenses resulting from
those changes.
4
<PAGE> 8
4. RENT AND PAYMENT
Lessee acknowledges that in addition to its obligations under Section 6.1
of the Master Lease, Lessee's obligation to pay the periodic Rent
described in this Equipment Schedule will not be affected by any
representations made by the Vendor, or by any discontinuance, return,
destruction or failure of the Software. If the Software is unsatisfactory
for any reason, Lessee will make any claims solely against the Vendor and
will continue to pay Lessor all amounts payable under this Equipment
Schedule.
5. DEFAULT
Any violation by Lessee of any of its covenants or representations in the
License Agreement or any failure by Lessee to perform any provision of
the License Agreement will also be an Event of Default under this
Equipment Schedule.
6. MISCELLANEOUS
Upon an Event of Default, expiration or termination of this Equipment
Schedule, Lessee will assign to Lessor all of Lessee's rights and
interests in the Software subject to the prior consent of the Vendor if
required by the License Agreement.
7. EQUIPMENT PROCUREMENT CHARGES (PROGRESS PAYMENTS-LEASE RATE FACTOR)
Because items of Equipment and/or Software will be delivered to Lessee
prior to the Commencement Date, progress payments will be required to be
paid to the Vendor prior to the Commencement Date ("Progress Payments").
With respect to any items of Equipment and/or Software delivered prior to
the Commencement Date, all terms and conditions of this Equipment
Schedule will be applicable except the Lessee's rental obligations
However, Lessee agrees to pay Lessor "Equipment Procurement Charges"
equal to a daily lease rate factor of .0208298 multiplied by the
aggregate of the Progress Payments paid by Lessor for each day from the
date Progress Payments are made until the Commencement Date. Accrued
Equipment Procurement Charges are payable when invoiced.
If the Commencement Date occurs after the Outside Date, the daily lease
rate factor applicable from the Outside Date until the Commencement Date
will be equal to .0208298. If Lessee rejects the Equipment and/or
Software prior to the Commencement Date pursuant to the purchase
agreement with the Equipment vendor or if Lessee is in default of this
Equipment Schedule, then this Equipment Schedule will terminate and
Lessee will (i) reimburse Lessor for all amounts paid
5
<PAGE> 9
by Lessor for the purchase of the Equipment and/or Software and (ii) pay
all Equipment Procurement Charges due through the date of termination.
Upon payment of all amounts due and owing by Lessee, Lessor will transfer
to Lessee all of Lessor's interest in the Equipment and/or Software and
under any purchase agreement including any remedies that Lessor may have
against Vendor with respect to said Equipment and/or Software.
8. INTEREST RATE CHANGE
The Lease Rate Factors or the periodic Rent described in this Equipment
Schedule have been calculated using an interest rate based on the 5-year
U.S. Treasury Constant Maturity of 6.37% as described in the Federal
Reserve Statistical Release H.15 ("Treasury Rate"). If on the
Commencement Date for the last item of Equipment and/or Software prior to
the beginning of the Initial Term, the Treasury Rate is greater or there
is an adverse change in Lessee's credit standing, Lessor may adjust the
Lease Rate Factors or the periodic Rent accordingly.
6
<PAGE> 10
9. GENERAL UPGRADE PROVISION
If Lessee is not in default, there has been no material adverse change in
Lessee's credit standing at the time and assuming all required third
party consents are obtained, Lessor will, on Lessee's request enter into
negotiation of a contract in which Lessor would on mutually agreeable
terms and conditions lease to Lessee standard feature and/or equipment
model upgrades to the Equipment and/or Software (as applicable) offered
either by the Equipment manufacturer or by another manufacturer (the
"Upgrade"), provided, however, that (a) the Initial Term for the Upgrade
will be coterminous with the Initial Term of this Equipment Schedule; and
(b) the periodic Rent for the Upgrade will be equal to 100% of the
present value of the acquisition cost of the Upgrade amortized over the
remaining Initial Term of this Equipment Schedule using then prevailing
interest rates for similar transactions and with Lessees of similar
credit rating. If the parties cannot mutually agree upon terms and
conditions with respect to the Upgrade, this Equipment Schedule will
continue in full force and effect.
10. EARLY TERMINATION
As long as Lessee is not in default and upon not less than ninety (90)
days prior written notice to Lessor, Lessee may terminate this Equipment
Schedule with respect to all, but not less than all, of the Equipment
and/or Software (as applicable) effective upon the expiration of the 12th
month of the Initial Term or upon the expiration of any month of the
Initial Term thereafter as specified in the termination notice (the
"Termination Date"), provided that on or before the Termination Date
Lessee pays to Lessor an amount equal to (i) (a) the remaining Rent for
the balance of the Initial Term, (determined as of the Termination Date),
and (b) $966,840.08 which equals thirty-eight percent (38%) of the
original acquisition cost, each discounted to present value in accordance
with the formula set below, plus an amount which would be obtainable in
an arm's-length transaction between an informed and willing lessee/user
and an informed and willing lessor/dealer under no compulsion to lease as
determined by Lessor (as of the Termination Date) in its reasonable
discretion, exercised in good faith, for any upgrades or additions with
respect to such Equipment and/or Software (as applicable), and (ii) all
other outstanding amounts due and owing on the Termination Date
(collectively, the "Termination Amount").
For purposes of calculating the Termination Amount, any amounts
discounted shall be discounted at the lesser of:
7
<PAGE> 11
(a) the Secured Party's interest rate, if any, (b) the then current U.S.
Treasury Rate for a term which most closely approximates the Initial
Term, or (c) six percent (6%).
11. END OF TERM OPTIONS
If Lessee is not in default and gives Lessor at least ninety (90) days
prior written notice, Lessee will have the option at the expiration of
the Initial Term to (a) purchase all, but not less than all, Equipment
and/or Software (as applicable) for an amount equal to thirty-eight
percent (38%) of the original acquisition cost, plus an amount which
would be obtainable at the end of the Initial Term in an arm's-length
transaction between an informed and willing buyer/user and an informed
and willing seller under no compulsion to sell as determined by Lessor in
its reasonable discretion, exercised in good faith, for any upgrades or
additions with respect to such Equipment and/or Software (as applicable),
plus taxes or (b) extend the Initial Term for all, but not less than all,
Equipment and/or Software (as applicable) for a mutually agreed upon
renewal period at a periodic Rent equal to an amount which would be
obtainable at the commencement of the extended Initial Term in an
arm's-length transaction between an informed and willing lessee/user and
an informed and willing lessor/dealer under no compulsion to lease, plus
taxes amortized over the renewal period , or (c) return the Equipment
and/or Software (as applicable) in accordance with the terms and
conditions of the Master Lease. If Lessee fails to provide written notice
then the Equipment Schedule will continue in full force and effect until
terminated in accordance with its terms.
12. STOCK WARRANT CONTINGENCY
This Equipment Schedule is contingent upon receipt by Lessor of a Warrant
Agreement in form and substance satisfactory to Lessor for 117,000 shares
of Common Stock of the Lessee at an exercise price of $10.00 per share,
exercisable for ten (10) years from the date of issuance by (i) cash or
check, or (ii) net issuance and containing anti-dilution and registration
rights in parity with those provided to other investors.
MASTER LEASE: This Equipment Schedule is issued pursuant to the Master Lease
identified on page 1 of this Equipment Schedule. All of the terms and conditions
of the Master Lease are incorporated in and made a part of this Equipment
Schedule as if expressly described in this Equipment Schedule, and this
Equipment Schedule constitutes a separate lease for the Equipment. The parties
reaffirm all of the terms and conditions of the Master Lease (including, without
limitation, the representations and warranties set forth in the Master Lease)
except as modified by this Equipment Schedule. This
8
<PAGE> 12
Equipment Schedule may not be amended or rescinded except by a writing signed by
both parties.
MIDCOM COMMUNICATIONS INC. COMDISCO, INC.
as Lessee as Lessor
By:_________________________________ By:_________________________________
Title:______________________________ Title:______________________________
Date:_______________________________ Date:_______________________________
9
<PAGE> 13
EQUIPMENT SCHEDULE NO. 2
DATED FEBRUARY 17, 1997
TO MASTER LEASE AGREEMENT DATED JANUARY 15, 1997 ("MASTER
LEASE")
LESSEE: MIDCOM COMMUNICATIONS INC. LESSOR:
COMDISCO, INC.
ADDRESS FOR LEGAL NOTICES: ADDRESS FOR ALL
NOTICES:
1111 Third Avenue 6111 North River Road
Seattle, WA 98101 Rosemont, Illinois
60018
Attn: Communications
Product Group
ATTN: General Counsel
PHONE: (206) 628-8000
FAX: (206) 628-8295
ADDRESS FOR ADMINISTRATIVE CORRESPONDENCE: ADDRESS FOR INVOICES:
Same as Above Same as Administrative
Correspondence
ATTN: Chief Financial Officer ATTN: Chief Financial
Officer
PHONE: (206) 628-8000
FAX: (206) 628-8295 LESSEE REFERENCE NO:
NY Office
(24 digits maximum)
INITIAL TERM/
1
<PAGE> 14
RENT INTERVAL: 60
Months
LOCATION OF EQUIPMENT:
LEASE RATE FACTOR:
32 Old Slip, 4th Floor
New York, NY 10005 Hardware: .0198213
Softcosts: .021976
ATTN: Mr. Mike Pirot
PHONE: (212) 797-9840
EQUIPMENT (AS DEFINED BELOW):
<TABLE>
<CAPTION>
ITEM MACHINE MODEL/
SERIAL
NO. QTY. MFG. TYPE FEATURE DESCRIPTION
- --- ---- ---- ---- ------- -----------
NUMBER
------
<S> <C> <C> <C> <C> <C>
1. 1 NTEL DMS 500 PBX System
</TABLE>
2
<PAGE> 15
RISK OF LOSS: Pursuant to the Master Lease, Lessor and Lessee agree that the
risk of loss is the responsibility of the Lessee.
NOTICE PERIOD: Not less than ninety (90) days nor more than twelve (12) months
prior to the expiration of the lease term. If Lessee gives written notice of
termination, in accordance with the terms of the preceding sentence, but fails
to return the Equipment on the expiration date of the Initial Term, the Lease
will be reinstated and an additional sixty (60) days written notice of
termination will be required, which termination will be effective at the end of
the month following the 60 day notice requirement. The periodic Rent will
continue at the current rate until the effective date of the written notice of
termination and the Equipment is returned.
SPECIAL TERMS: The following additional terms are a part of this Equipment
Schedule. The terms and conditions of the Master Lease Agreement as they pertain
to this Equipment Schedule are modified and amended as follows:
1. SOFTWARE
In addition to leasing the Equipment described herein, Lessor agrees to
finance software license fees ("License Fees") of approximately
$746,291.00, for the Software described in this Equipment Schedule (the
"Software").The Software is licensed by Northern Telecom Inc., the vendor
of the Software (the "Vendor") directly to the Lessee pursuant to the
terms and conditions of the license agreement between Vendor and Lessee
(the "LicenseAgreement"). Lessor is not a party to nor has any
obligations under the License Agreement and has no interest in the
Software except as described in this Equipment Schedule.
2 ADDITIONAL SOFT COSTS
Lessee and Lessor acknowledge that the Equipment Schedule contains
approximate softcosts of $444,591.00 for labor, freight and handling
costs, and OEM charges charged by Vendor.
3. COMMENCEMENT DATE
The Commencement Date for each item of Equipment and/or Software (as
applicable) will be the day on which that item of Equipment and/or
Software (as applicable) is installed and qualified for a commercially
available manufacturer's standard maintenance contract or warranty
coverage, if available. Lessee agrees to confirm theCommencement Date by
providing Lessor with either a Commencement Certificate in the form
provided by Lessor or the Vendor's invoice
3
<PAGE> 16
containing the Equipment and/or Software location (as applicable),
description, serial number (if applicable), cost, the Commencement Date
and Lessee's signature, within ten (10) days of the Commencement Date.
For purposes of this Equipment Schedule, the Initial Term will begin on
July 1, 1997 for all items of Equipment and Software.
Lessee's obligations under this Equipment Schedule and the periodic Rent
described in this Equipment Schedule are contingent upon Lessor
purchasing the Equipment, including the softcosts for an aggregate amount
of $1,798,025.00 in addition to financing the Software License Fees of
approximately $746,291.00 pursuant to satisfactory purchase
documentation. Lessee acknowledges that it has either received or
approved Lessor's purchase documentation for the Equipment and/or
Software. If the Commencement Date occurs later than June 30, 1997
("Outside Date"), if the Commencement Certificate or Vendor invoices are
not provided within ten (10) days of the Commencement Date, or if the
cost or configuration of the Equipment and/or Software or actual
softcosts changes, Lessor may adjust the Lease Rate Factors or the
periodic Rent to reflect any additional costs or expenses resulting from
those changes.
4
<PAGE> 17
4. RENT AND PAYMENT
Lessee acknowledges that in addition to its obligations under Section 6.1
of the Master Lease, Lessee's obligation to pay the periodic Rent
described in this Equipment Schedule will not be affected by any
representations made by the Vendor, or by any discontinuance, return,
destruction or failure of the Software. If the Software is unsatisfactory
for any reason, Lessee will make any claims solely against the Vendor and
will continue to pay Lessor all amounts payable under this Equipment
Schedule.
5. DEFAULT
Any violation by Lessee of any of its covenants or representations in the
License Agreement or any failure by Lessee to perform any provision of
the License Agreement will also be an Event of Default under this
Equipment Schedule.
6. MISCELLANEOUS
Upon an Event of Default, expiration or termination of this Equipment
Schedule, Lessee will assign to Lessor all of Lessee's rights and
interests in the Software subject to the prior consent of the Vendor if
required by the License Agreement.
7. EQUIPMENT PROCUREMENT CHARGES (PROGRESS PAYMENTS-LEASE RATE FACTOR)
Because items of Equipment and/or Software will be delivered to Lessee
prior to the Commencement Date, progress payments will be required to be
paid to the Vendor prior to the Commencement Date ("Progress Payments").
With respect to any items of Equipment and/or Software delivered prior to
the Commencement Date, all terms and conditions of this Equipment
Schedule will be applicable except the Lessee's rental obligations
However, Lessee agrees to pay Lessor "Equipment Procurement Charges"
equal to a daily lease rate factor of .0208298 multiplied by the
aggregate of the Progress Payments paid by Lessor for each day from the
date Progress Payments are made until the Commencement Date. Accrued
Equipment Procurement Charges are payable when invoiced.
If the Commencement Date occurs after the Outside Date, the daily lease
rate factor applicable from the Outside Date until the Commencement Date
will be equal to .0208298. If Lessee rejects the Equipment and/or
Software prior to the Commencement Date pursuant to the purchase
agreement with the Equipment vendor or if Lessee is in default of this
Equipment Schedule, then this Equipment Schedule will terminate and
Lessee will (i) reimburse Lessor for all amounts paid
5
<PAGE> 18
by Lessor for the purchase of the Equipment and/or Software and (ii) pay
all Equipment Procurement Charges due through the date of termination.
Upon payment of all amounts due and owing by Lessee, Lessor will transfer
to Lessee all of Lessor's interest in the Equipment and/or Software and
under any purchase agreement including any remedies that Lessor may have
against Vendor with respect to said Equipment and/or Software.
8. INTEREST RATE CHANGE
The Lease Rate Factors or the periodic Rent described in this Equipment
Schedule have been calculated using an interest rate based on the 5-year
U.S. Treasury Constant Maturity of 6.37% as described in the Federal
Reserve Statistical Release H.15 ("Treasury Rate"). If on the
Commencement Date for the last item of Equipment and/or Software prior to
the beginning of the Initial Term, the Treasury Rate is greater or there
is an adverse change in Lessee's credit standing, Lessor may adjust the
Lease Rate Factors or the periodic Rent accordingly.
6
<PAGE> 19
9. GENERAL UPGRADE PROVISION
If Lessee is not in default, there has been no material adverse change in
Lessee's credit standing at the time and assuming all required third
party consents are obtained, Lessor will, on Lessee's request enter into
negotiation of a contract in which Lessor would on mutually agreeable
terms and conditions lease to Lessee standard feature and/or equipment
model upgrades to the Equipment and/or Software (as applicable) offered
either by the Equipment manufacturer or by another manufacturer (the
"Upgrade"), provided, however, that (a) the Initial Term for the Upgrade
will be coterminous with the Initial Term of this Equipment Schedule; and
(b) the periodic Rent for the Upgrade will be equal to 100% of the
present value of the acquisition cost of the Upgrade amortized over the
remaining Initial Term of this Equipment Schedule using then prevailing
interest rates for similar transactions and with Lessees of similar
credit rating. If the parties cannot mutually agree upon terms and
conditions with respect to the Upgrade, this Equipment Schedule will
continue in full force and effect.
10. EARLY TERMINATION
As long as Lessee is not in default and upon not less than ninety (90)
days prior written notice to Lessor, Lessee may terminate this Equipment
Schedule with respect to all, but not less than all, of the Equipment
and/or Software (as applicable) effective upon the expiration of the 12th
month of the Initial Term or upon the expiration of any month of the
Initial Term thereafter as specified in the termination notice (the
"Termination Date"), provided that on or before the Termination Date
Lessee pays to Lessor an amount equal to (i) (a) the remaining Rent for
the balance of the Initial Term, (determined as of the Termination Date),
and (b) $966,840.08 which equals thirty-eight percent (38%) of the
original acquisition cost, each discounted to present value in accordance
with the formula set below, plus an amount which would be obtainable in
an arm's-length transaction between an informed and willing lessee/user
and an informed and willing lessor/dealer under no compulsion to lease as
determined by Lessor (as of the Termination Date) in its reasonable
discretion, exercised in good faith, for any upgrades or additions with
respect to such Equipment and/or Software (as applicable), and (ii) all
other outstanding amounts due and owing on the Termination Date
(collectively, the "Termination Amount").
For purposes of calculating the Termination Amount, any amounts
discounted shall be discounted at the lesser of:
7
<PAGE> 20
(a) the Secured Party's interest rate, if any, (b) the then current U.S.
Treasury Rate for a term which most closely approximates the Initial
Term, or (c) six percent (6%).
11. END OF TERM OPTIONS
If Lessee is not in default and gives Lessor at least ninety (90) days
prior written notice, Lessee will have the option at the expiration of
the Initial Term to (a) purchase all, but not less than all, Equipment
and/or Software (as applicable) for an amount equal to thirty-eight
percent (38%) of the original acquisition cost, plus an amount which
would be obtainable at the end of the Initial Term in an arm's-length
transaction between an informed and willing buyer/user and an informed
and willing seller under no compulsion to sell as determined by Lessor in
its reasonable discretion, exercised in good faith, for any upgrades or
additions with respect to such Equipment and/or Software (as applicable),
plus taxes or (b) extend the Initial Term for all, but not less than all,
Equipment and/or Software (as applicable) for a mutually agreed upon
renewal period at a periodic Rent equal to an amount which would be
obtainable at the commencement of the extended Initial Term in an
arm's-length transaction between an informed and willing lessee/user and
an informed and willing lessor/dealer under no compulsion to lease, plus
taxes amortized over the renewal period , or (c) return the Equipment
and/or Software (as applicable) in accordance with the terms and
conditions of the Master Lease. If Lessee fails to provide written notice
then the Equipment Schedule will continue in full force and effect until
terminated in accordance with its terms.
12. STOCK WARRANT CONTINGENCY
This Equipment Schedule is contingent upon receipt by Lessor of a Warrant
Agreement in form and substance satisfactory to Lessor for 117,000 shares
of Common Stock of the Lessee at an exercise price of $10.00 per share,
exercisable for ten (10) years from the date of issuance by (i) cash or
check, or (ii) net issuance and containing anti-dilution and registration
rights in parity with those provided to other investors.
MASTER LEASE: This Equipment Schedule is issued pursuant to the Master Lease
identified on page 1 of this Equipment Schedule. All of the terms and conditions
of the Master Lease are incorporated in and made a part of this Equipment
Schedule as if expressly described in this Equipment Schedule, and this
Equipment Schedule constitutes a separate lease for the Equipment. The parties
reaffirm all of the terms and conditions of the Master Lease (including, without
limitation, the representations and warranties set forth in the Master Lease)
except as modified by this Equipment Schedule. This
8
<PAGE> 21
Equipment Schedule may not be amended or rescinded except by a writing signed by
both parties.
MIDCOM COMMUNICATIONS INC. COMDISCO, INC.
as Lessee as Lessor
By:_________________________________ By:_________________________________
Title:______________________________ Title:______________________________
Date:_______________________________ Date:_______________________________
9
<PAGE> 22
EQUIPMENT SCHEDULE NO. 4
DATED FEBRUARY 17, 1997
TO MASTER LEASE AGREEMENT DATED JANUARY 15, 1997 ("MASTER
LEASE")
LESSEE: MIDCOM COMMUNICATIONS INC. LESSOR:
COMDISCO, INC.
ADDRESS FOR LEGAL NOTICES: ADDRESS FOR ALL
NOTICES:
1111 Third Avenue 6111 North River Road
Seattle, WA 98101 Rosemont, Illinois
60018
Attn: Communications
Product Group
ATTN: General Counsel
PHONE: (206) 628-8000
FAX: (206) 628-8295
ADDRESS FOR ADMINISTRATIVE CORRESPONDENCE: ADDRESS FOR INVOICES:
Same as Above Same as Administrative
Correspondence
ATTN: Chief Financial Officer ATTN: Chief Financial
Officer
PHONE: (206) 628-8000
FAX: (206) 628-8295 LESSEE REFERENCE NO:
CA Office
(24 digits maximum)
INITIAL TERM/
1
<PAGE> 23
RENT INTERVAL: 60 Months
LOCATION OF EQUIPMENT:
LEASE RATE FACTOR:
624 S. Grand Ave - Suite 2800
Los Angeles, CA 90017 Hardware: .0198213
Softcosts: .021976
ATTN: Mr. Mark Messana
PHONE: (213) 629-4831
EQUIPMENT (AS DEFINED BELOW):
ITEM MACHINE MODEL/ SERIAL
NO. QTY. MFG. TYPE FEATURE DESCRIPTION NUMBER
- ---- ----- ---- ---- ------- ----------- ------
1. 1 NTEL DMS 500 PBX System
2
<PAGE> 24
RISK OF LOSS: Pursuant to the Master Lease, Lessor and Lessee agree that the
risk of loss is the responsibility of the Lessee.
NOTICE PERIOD: Not less than ninety (90) days nor more than twelve (12) months
prior to the expiration of the lease term. If Lessee gives written notice of
termination, in accordance with the terms of the preceding sentence, but fails
to return the Equipment on the expiration date of the Initial Term, the Lease
will be reinstated and an additional sixty (60) days written notice of
termination will be required, which termination will be effective at the end of
the month following the 60 day notice requirement. The periodic Rent will
continue at the current rate until the effective date of the written notice of
termination and the Equipment is returned.
SPECIAL TERMS: The following additional terms are a part of this Equipment
Schedule. The terms and conditions of the Master Lease Agreement as they pertain
to this Equipment Schedule are modified and amended as follows:
1. SOFTWARE
In addition to leasing the Equipment described herein, Lessor agrees to
finance software license fees ("License Fees") of approximately
$760,539.00, for the Software described in this Equipment Schedule (the
"Software"). The Software is licensed by Northern Telecom Inc., the
vendor of the Software (the "Vendor") directly to the Lessee pursuant to
the terms and conditions of the license agreement between Vendor and
Lessee (the "LicenseAgreement"). Lessor is not a party to nor has any
obligations under the License Agreement and has no interest in the
Software except as described in this Equipment Schedule.
2 ADDITIONAL SOFT COSTS
Lessee and Lessor acknowledge that the Equipment Schedule contains
approximate softcosts of $448,936.00 for labor, freight and handling
costs, and OEM charges charged by Vendor.
3. COMMENCEMENT DATE
The Commencement Date for each item of Equipment and/or Software (as
applicable) will be the day on which that item of Equipment and/or
Software (as applicable) is installed and qualified for a commercially
available manufacturer's standard maintenance contract or warranty
coverage, if available. Lessee agrees to confirm the Commencement Date by
providing Lessor with either a Commencement Certificate in the form
provided by Lessor or the Vendor's invoice
3
<PAGE> 25
containing the Equipment and/or Software location (as applicable),
description, serial number (if applicable), cost, the Commencement Date
and Lessee's signature, within ten (10) days of the Commencement Date.
For purposes of this Equipment Schedule, the Initial Term will begin on
July 1, 1997 for all items of Equipment and Software.
Lessee's obligations under this Equipment Schedule and the periodic Rent
described in this Equipment Schedule are contingent upon Lessor
purchasing the Equipment, including the softcosts for an aggregate amount
of $1,889,175.30 in addition to financing the Software License Fees of
approximately $760,539.00 pursuant to satisfactory purchase
documentation. Lessee acknowledges that it has either received or
approved Lessor's purchase documentation for the Equipment and/or
Software. If the Commencement Date occurs later than June 30, 1997
("Outside Date"), if the Commencement Certificate or Vendor invoices are
not provided within ten (10) days of the Commencement Date, or if the
cost or configuration of the Equipment and/or Software or actual
softcosts changes, Lessor may adjust the Lease Rate Factors or the
periodic Rent to reflect any additional costs or expenses resulting from
those changes.
4
<PAGE> 26
4. RENT AND PAYMENT
Lessee acknowledges that in addition to its obligations under Section 6.1
of the Master Lease, Lessee's obligation to pay the periodic Rent
described in this Equipment Schedule will not be affected by any
representations made by the Vendor, or by any discontinuance, return,
destruction or failure of the Software. If the Software is unsatisfactory
for any reason, Lessee will make any claims solely against the Vendor and
will continue to pay Lessor all amounts payable under this Equipment
Schedule.
5. DEFAULT
Any violation by Lessee of any of its covenants or representations in the
License Agreement or any failure by Lessee to perform any provision of
the License Agreement will also be an Event of Default under this
Equipment Schedule.
6. MISCELLANEOUS
Upon an Event of Default, expiration or termination of this Equipment
Schedule, Lessee will assign to Lessor all of Lessee's rights and
interests in the Software subject to the prior consent of the Vendor if
required by the License Agreement.
7. EQUIPMENT PROCUREMENT CHARGES (PROGRESS PAYMENTS-LEASE RATE FACTOR)
Because items of Equipment and/or Software will be delivered to Lessee
prior to the Commencement Date, progress payments will be required to be
paid to the Vendor prior to the Commencement Date ("Progress Payments").
With respect to any items of Equipment and/or Software delivered prior to
the Commencement Date, all terms and conditions of this Equipment
Schedule will be applicable except the Lessee's rental obligations
However, Lessee agrees to pay Lessor "Equipment Procurement Charges"
equal to a daily lease rate factor of .0208298 multiplied by the
aggregate of the Progress Payments paid by Lessor for each day from the
date Progress Payments are made until the Commencement Date. Accrued
Equipment Procurement Charges are payable when invoiced.
If the Commencement Date occurs after the Outside Date, the daily lease
rate factor applicable from the Outside Date until the Commencement Date
will be equal to .0208298. If Lessee rejects the Equipment and/or
Software prior to the Commencement Date pursuant to the purchase
agreement with the Equipment vendor or if Lessee is in default of this
Equipment Schedule, then this Equipment Schedule will terminate and
Lessee will (i) reimburse Lessor for all amounts paid
5
<PAGE> 27
by Lessor for the purchase of the Equipment and/or Software and (ii) pay
all Equipment Procurement Charges due through the date of termination.
Upon payment of all amounts due and owing by Lessee, Lessor will transfer
to Lessee all of Lessor's interest in the Equipment and/or Software and
under any purchase agreement including any remedies that Lessor may have
against Vendor with respect to said Equipment and/or Software.
8. INTEREST RATE CHANGE
The Lease Rate Factors or the periodic Rent described in this Equipment
Schedule have been calculated using an interest rate based on the 5-year
U.S. Treasury Constant Maturity of 6.37% as described in the Federal
Reserve Statistical Release H.15 ("Treasury Rate"). If on the
Commencement Date for the last item of Equipment and/or Software prior to
the beginning of the Initial Term, the Treasury Rate is greater or there
is an adverse change in Lessee's credit standing, Lessor may adjust the
Lease Rate Factors or the periodic Rent accordingly.
6
<PAGE> 28
9. GENERAL UPGRADE PROVISION
If Lessee is not in default, there has been no material adverse change in
Lessee's credit standing at the time and assuming all required third
party consents are obtained, Lessor will, on Lessee's request enter into
negotiation of a contract in which Lessor would on mutually agreeable
terms and conditions lease to Lessee standard feature and/or equipment
model upgrades to the Equipment and/or Software (as applicable) offered
either by the Equipment manufacturer or by another manufacturer (the
"Upgrade"), provided, however, that (a) the Initial Term for the Upgrade
will be coterminous with the Initial Term of this Equipment Schedule; and
(b) the periodic Rent for the Upgrade will be equal to 100% of the
present value of the acquisition cost of the Upgrade amortized over the
remaining Initial Term of this Equipment Schedule using then prevailing
interest rates for similar transactions and with Lessees of similar
credit rating. If the parties cannot mutually agree upon terms and
conditions with respect to the Upgrade, this Equipment Schedule will
continue in full force and effect.
10. EARLY TERMINATION
As long as Lessee is not in default and upon not less than ninety (90)
days prior written notice to Lessor, Lessee may terminate this Equipment
Schedule with respect to all, but not less than all, of the Equipment
and/or Software (as applicable) effective upon the expiration of the 12th
month of the Initial Term or upon the expiration of any month of the
Initial Term thereafter as specified in the termination notice (the
"Termination Date"), provided that on or before the Termination Date
Lessee pays to Lessor an amount equal to (i) (a) the remaining Rent for
the balance of the Initial Term, (determined as of the Termination Date),
and (b) $1,006,891.40 which equals thirty-eight percent (38%) of the
original acquisition cost, each discounted to present value in accordance
with the formula set below, plus an amount which would be obtainable in
an arm's-length transaction between an informed and willing lessee/user
and an informed and willing lessor/dealer under no compulsion to lease as
determined by Lessor (as of the Termination Date) in its reasonable
discretion, exercised in good faith, for any upgrades or additions with
respect to such Equipment and/or Software (as applicable), and (ii) all
other outstanding amounts due and owing on the Termination Date
(collectively, the "Termination Amount").
For purposes of calculating the Termination Amount, any amounts
discounted shall be discounted at the lesser of:
7
<PAGE> 29
(a) the Secured Party's interest rate, if any, (b) the then current U.S.
Treasury Rate for a term which most closely approximates the Initial
Term, or (c) six percent (6%).
11. END OF TERM OPTIONS
If Lessee is not in default and gives Lessor at least ninety (90) days
prior written notice, Lessee will have the option at the expiration of
the Initial Term to (a) purchase all, but not less than all, Equipment
and/or Software (as applicable) for an amount equal to thirty-eight
percent (38%) of the original acquisition cost, plus an amount which
would be obtainable at the end of the Initial Term in an arm's-length
transaction between an informed and willing buyer/user and an informed
and willing seller under no compulsion to sell as determined by Lessor in
its reasonable discretion, exercised in good faith, for any upgrades or
additions with respect to such Equipment and/or Software (as applicable),
plus taxes or (b) extend the Initial Term for all, but not less than all,
Equipment and/or Software (as applicable) for a mutually agreed upon
renewal period at a periodic Rent equal to an amount which would be
obtainable at the commencement of the extended Initial Term in an
arm's-length transaction between an informed and willing lessee/user and
an informed and willing lessor/dealer under no compulsion to lease, plus
taxes amortized over the renewal period , or (c) return the Equipment
and/or Software (as applicable) in accordance with the terms and
conditions of the Master Lease. If Lessee fails to provide written notice
then the Equipment Schedule will continue in full force and effect until
terminated in accordance with its terms.
8
<PAGE> 30
MASTER LEASE: This Equipment Schedule is issued pursuant to the Master Lease
identified on page 1 of this Equipment Schedule. All of the terms and conditions
of the Master Lease are incorporated in and made a part of this Equipment
Schedule as if expressly described in this Equipment Schedule, and this
Equipment Schedule constitutes a separate lease for the Equipment. The parties
reaffirm all of the terms and conditions of the Master Lease (including, without
limitation, the representations and warranties set forth in the Master Lease)
except as modified by this Equipment Schedule. This Equipment Schedule may not
be amended or rescinded except by a writing signed by both parties.
MIDCOM COMMUNICATIONS INC. COMDISCO, INC.
as Lessee as Lessor
By:______________________________ By:______________________________
Title:___________________________ Title:___________________________
Date:____________________________ Date:____________________________
9
<PAGE> 1
EXHIBIT 10.3
ASSIGNMENT AND DELEGATION - CONTRACT
WHEREAS, MIDCOM Communications Inc., a Washington corporation ("Assignor") and
Northern Telecom Inc., a Delaware corporation ("NT") are parties to the Network
Products Purchase Agreement, Number MC-10/96-DM, dated February 3, 1997, and its
related attachments ("Agreement") providing, among other undertakings, for the
sale and installation of "Equipment", provision of "Services" and the licensing
of "Software" (as those terms are defined in the Agreement, collectively
"Products") to Assignor, and Assignor hereby wishes to assign certain of the
Assignor's rights and obligations under the Agreement, all as set forth below,
to Comdisco, Inc., a Delaware corporation ("Assignee") and hereby requests NT's
consent to such assignment and delegation;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
1. The Products shall be leased by Assignee to Assignor pursuant to
Equipment Schedule No. 2 (01-SL78683-00) to the Master Lease Agreement
dated as of January 15, 1997 by and between the Assignor and Assignee
(collectively the "Lease").
2. Assignor hereby assigns, transfers and sets over to Assignee all of
Assignor's rights under the Agreement except as described in paragraph
4 below. NT hereby consents to such assignment. The rights being
assigned shall include, but are not limited to, all rights of the
Assignor under the Agreement to purchase the Equipment and to receive
the license to use the Software.
3. Assignor hereby delegates and Assignee hereby agrees to perform all of
Assignor's obligations under the Agreement as such obligations relate
to payment of the "Price" (defined as the purchase price of the
Equipment, Services and the license charges for the Software) and any
applicable taxes to the same extent as if the Assignor were the
purchaser under the Agreement. NT agrees that Assignee shall have no
duty to perform any of Assignor's obligations under the Agreement, and
shall not assume any responsibility for any Risk of Loss prior to
delivery of the Equipment and Software to Assignee and any cancellation
or other penalties which may arise under the Agreement, other than the
obligation to pay the Price and any applicable taxes.
4. NT agrees that upon the "Turnover Date" (with respect to any Products
installed by NT, the date on which NT provides the Turnover Notice to
Lessee) rights under the Software license shall vest in Assignor, as
applicable in respect to testing, turnover and acceptance of the
Product(s). NT agrees that title to the Equipment shall vest in
Assignee upon full payment to NT for such Product(s) and that upon full
payment to NT, Assignor shall be granted a personal, non-exclusive,
paid up license to use the version of the Software furnished to
Assignor only in conjunction with Assignor's use of the Equipment with
respect to which such Software was furnished for the life of that
Equipment as it may be repaired or modified. Assignor agrees to abide
by all of the terms and conditions of the Software license as set forth
in Exhibit B of the Network Product Purchase Agreement Number
MC-10/96-DM referenced above between Assignor and NT.
<PAGE> 2
ASSIGNMENT AND
DELEGATION CONTRACT
DATED FEBRUARY 3, 1997
PAGE 2
5. Nothing contained herein or elsewhere shall be deemed to modify, limit
or expand the rights, warranties, remedies, liabilities and/or any
limitation of right, warranties, remedies and liabilities contained in
the Agreement. Notwithstanding anything in this Assignment and
Delegation to the contrary, neither the Assignor nor the Assignee shall
have any greater rights, warranties or remedies than are provided to
the Buyer under the Agreement. Any rights pertaining to the enforcement
of warranties or remedies under the Agreement shall be for the benefit
of and enforceable solely by Assignor as against NT during the term of
the Lease.
6. NT hereby represents and warrants that the Equipment is "New". NT
hereby agrees to provide Assignee with a bill of sale upon written
request following the full payment of the Price to evidence the passage
of title to the Equipment to Assignee free and clear of all claims,
liens and encumbrances.
7. NT, Assignor and Assignee further agree, that after full payment for
Products has been made to NT, with respect to the Software:
(i) NT will look solely to Assignor and relieve Assignee for the
performance of any terms and conditions of the Network Product
Purchase Agreement, Attachments and Exhibit B, the associated
Software License Agreement
(ii) Assignee will obtain no title in the Software except that upon
written request to NT and NT's consent, which consent shall not
be unreasonably withheld, NT grants to Assignee and any successor
to Assignee's title to the Equipment, the right to remarket the
Software upon the occurrence of an Event of Default by the
Assignor under the Lease or upon termination or expiration of the
Lease, provided that NT will have no further obligation to either
Assignee or any subsequent user except to permit the use of the
Software provided that any such subsequent user agrees in writing
to abide by the terms and conditions of the Software license in
full and without any reservation whatsoever.
8. Assignor and NT shall not amend, modify, supplement, rescind, cancel or
terminate any material term of the Agreement without the prior written
consent of Assignee.
<PAGE> 3
ASSIGNMENT AND
DELEGATION CONTRACT
DATED FEBRUARY 3, 1997
PAGE 3
9. NT agrees to provide Assignee prompt written notice of any change in
configuration (and associated cost) of the Equipment and Software which
occurs prior to the date the Equipment and Software is placed into
service (the "Cutover Date"). NT also agrees to provide Assignee with
prompt written notice of the Cutover Date.
ASSIGNOR: ASSIGNEE:
MIDCOM COMMUNICATIONS INC. COMDISCO, INC.
By:_______________________________ By:____________________________________
Name:_____________________________ Name:__________________________________
printed printed
Title:____________________________ Title:_________________________________
VENDOR:
NORTHERN TELECOM INC.
By:______________________________
Name:____________________________
printed
Title:___________________________
<PAGE> 1
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER STATE OR FEDERAL
SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED
OR OTHERWISE TRANSFERRED IN A MANNER THAT WOULD VIOLATE THE
REGISTRATION PROVISIONS OF FEDERAL OR STATE SECURITIES LAWS,
SUCH COMPLIANCE TO BE EVIDENCED, IF REASONABLY REQUESTED BY THE
ISSUER OF THIS WARRANT, BY AN OPINION OF COUNSEL OF THE HOLDER,
CONCURRED IN BY COUNSEL FOR THE ISSUER, THAT NO VIOLATION OF
SAID REGISTRATION PROVISIONS WOULD RESULT FROM THE PROPOSED
TRANSFER.
STOCK PURCHASE WARRANT
MIDCOM COMMUNICATIONS INC.
COMMON STOCK
Par Value $0.0001
Date of Issuance: March 13, 1997 Certificate No. W-5
Expiration: March 13, 2007
FOR VALUE RECEIVED, MIDCOM Communications Inc., a Washington corporation
(the "Company"), hereby grants to COMDISCO Inc. or its registered assigns (the
"Registered Holder") the right to purchase from the Company 117,000 shares of
the Company's Common Stock at a price per share of $10.00 (as adjusted from time
to time hereunder, the "Exercise Price". Certain capitalized terms used herein
are defined in Section 4 hereof. The amount and kind of securities purchasable
pursuant to the rights granted hereunder and the purchase price for such
securities are subject to adjustment pursuant to the provisions contained in
this Warrant.
This Warrant is subject to the following provisions:
1. Exercise of Warrant.
1.1 Exercise Period. The Registered Holder may exercise, in
whole or in part (but not as to a fractional share of Common Stock), the
purchase rights represented by this Warrant at any time and from time to time
after the Date of Issuance to and including the tenth anniversary thereof (the
"Exercise Period").
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1.2 Exercise Procedure.
(i) This Warrant will be deemed to have been
exercised when the Company has received all of the following items (the
"Exercise Time"):
(a) a completed Exercise Agreement, as described
in Section 1.3 below and Exhibit 1.3 attached, executed by the
Person exercising all or part of the purchase rights represented
by this Warrant (the "Purchaser");
(b) this Warrant;
(c) if this Warrant is not registered in the
name of the Purchaser, an Assignment or Assignments in the form
set forth in Exhibit 1.2 hereto evidencing the assignment of
this warrant to the Purchaser, in which case the Registered
Holder will have complied with the provisions set forth in
Section 6 hereof; and
(d) a check payable to the Company in an amount
equal to the product of the Exercise Price multiplied by the
number of shares of Common Stock being purchased upon such
exercise or by the surrender of warrants ("Net Issuance") as
determined below.
(ii) If the Registered Holder or the Purchaser elects
the Net Issuance method, the Company will issue Warrant Shares in accordance
with the following formula:
X = Y(A-B)
Where: X = the number of Warrant Shares to be issued to the
Registered Holder or Purchaser
Y = the number of Warrant Shares requested to be
exercised under this Warrant Agreement
A = the fair market value of one (1) share of Common
Stock
B = the Exercise Price
For purposes of the above calculation, current fair market value of Common Stock
shall mean with respect to each share of Common Stock:
(a) if traded on a securities exchange, the
fair market value shall be deemed to be the weighted average of
the closing prices over five (5) consecutive trading days
commencing one day after the Company has received an executed
copy of the Exercise Agreement from the Holder, wherein
weighting
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<PAGE> 3
shall be determined by the number of shares traded on each such
trading day times the closing price for such day; or
(b) if actively traded over-the-counter, the
fair market value shall be deemed to be the average of the
closing bid and asked prices quoted on the NASDAQ system (or
similar system) over the twenty-one (21) day period ending three
days before the day the current fair market value of the
securities is being determined; or
(c) if at any time the Common Stock is not
listed on any securities exchange or quoted in the NASDAQ System
or the over-the-counter market, the current fair market value of
Common Stock shall be the highest price per share which the
Company could obtain from a willing buyer (riot a current
employee or director) for shares of Common Stock sold by the
Company, from authorized but unissued shares, as determined in
good faith by its Board of Directors.
(iii) Certificates for Warrant Shares purchased upon
exercise of this Warrant will be delivered by the Company to the Purchaser
within five days after the date of the Exercise Time. Unless this Warrant has
expired or all of the purchase rights represented hereby have been exercised,
the Company will prepare a new Warrant, substantially identical hereto,
representing the rights formerly represented by this Warrant which have not
expired or been exercised and will, within such five-day period, deliver such
new Warrant to the Person designated for delivery in the Exercise Agreement.
(iv) The Warrant Shares issuable upon the exercise of
this Warrant will be deemed to have been issued to the Purchaser at the Exercise
Time, and the Purchaser will be deemed for all purposes to have become the
record holder of such Warrant Shares at the Exercise Time.
(v) The issuance of certificates for Warrant Shares
upon exercise of this Warrant will be made without charge to the Registered
Holder or the Purchaser of any issuance or transfer tax in respect thereof or
other cost incurred by the Company in connection with such exercise and the
related issuance of Warrant Shares. Each Warrant Share issuable upon exercise of
this Warrant will, upon payment of the Exercise Price, be fully paid and
nonassessable and free from all liens and charges with respect to the issuance
thereof.
(vi) The Company will not close its books against the
transfer of this Warrant or of any Warrant Share issued or issuable upon the
exercise of this Warrant in any manner which interferes with the timely exercise
of this Warrant. The Company will from time to time take all such action as may
be necessary to assure that the par value per share of the unissued Warrant
Shares acquirable upon exercise of this Warrant is at all times equal to or less
than the Exercise Price then in effect.
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<PAGE> 4
(vii) The Company shall assist and cooperate with any
Registered Holder or any Purchaser required to make any Governmental filings or
obtain any governmental approvals prior to or in connection with any exercise of
this Warrant (including, without limitation, making any filings required to be
made by the Company), except that the Company shall not be required to register
the Warrant Shares under the Securities Act or under any other securities laws
in connection with the exercise of this Warrant.
(viii) The Company shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock solely for
the purpose of issuance upon the exercise of the Warrants, such number of shares
of Common Stock issuable upon the exercise of all outstanding Warrants. All
shares of Common Stock which are so issuable shall, when issued, be duly and
validly issued, fully paid and nonassessable without charge to Registered Holder
or Purchaser for the payment of taxes, and free from all other liens and other
charges. The Company shall take all such actions as may be necessary to assure
that all such shares of Common Stock may be so issued without violation of any
applicable law or Governmental regulation or any requirements of any domestic
securities exchange upon which shares of Common Stock may be listed (except for
official notice of issuance which shall be immediately delivered by the Company
upon each such issuance).
(ix) Upon any exercise of this warrant, the Company
may require customary representations from the Registered Holder and the
Purchaser to assure that the issuance of the Common stock hereunder shall not
require registration or qualification under the Securities Act or any state
securities laws.
1.3 Exercise Agreement. Upon any exercise of this Warrant,
the Exercise Agreement will be substantially in the form set forth in Exhibit
1.3 hereto, except that if the Warrant Shares are not to be issued in the name
of the Person in whose name this Warrant is registered, the Exercise Agreement
will also state the name of the Person to whom the certificates for the Warrant
Shares are to be issued, and if the number of Warrant Shares to be issued does
not include all the shares of Common stock purchasable hereunder, it will also
state the name of the Person to whom a new Warrant for the unexercised portion
of the rights hereunder is to be delivered. Such Exercise Agreement will be
dated the actual date of execution thereof. Notwithstanding the foregoing,
Warrant Shares will not be issued in the name of a Person other than the
Registered Holder, nor will replacement Warrants or the balance of a Warrant be
issued in the name of a Person other than the Registered Holder, except pursuant
to the procedure set forth in Section 6 below.
1.4 Fractional Shares. If a fractional share of Common Stock
would, but for the provisions of Section 1.1, be issuable upon exercise of the
rights represented by this Warrant, the Company will, within five days after the
date of the Exercise Time, deliver to the Purchaser a check payable to the
Purchaser in lieu of such fractional share in an amount equal to the difference
between market price of such fractional share as of the date of the Exercise
Time and the Exercise Price of such fractional share.
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<PAGE> 5
2. Adjustment of Exercise Price and Number of Shares. In order to
prevent dilution of the rights granted under his Warrant, the Exercise Price
shall be subject to adjustment from time to time as provided in his Section 2,
and the number of Warrant Shares obtainable upon exercise of this Warrant shall
be subject to adjustment from time to time as provided in this Section 2.
2.1 Subdivision or Combination of Common Stock. If the
Company at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) the Common Stock into a greater number of shares,
the Exercise Price in effect immediately prior to such subdivision will be
proportionately reduced and the number of Warrant Shares obtainable upon
exercise of this warrant will be proportionately increased so as to prevent the
reduction or enlargement of rights under this Warrant. If the Company at any
time combines (by reverse stock split or otherwise) the Common Stock into a
smaller number of shares, the Exercise Price in effect immediately prior to such
combination will be proportionately increased and the number of Warrant Shares
obtainable upon exercise of this Warrant will be proportionately decreased so as
to prevent the reduction or enlargement of rights under this Warrant.
2.2 Reorganization, Reclassification, Consolidation Merger
or Sale. Any recapitalization, reorganization, reclassification, consolidation,
merger, sale of all or substantially all of the Company's assets to another
Person or other transaction which is effected in such a way that holders of
Common Stock are entitled to receive (either directly or upon subsequent
liquidation) stock, securities or assets with respect to or in exchange for
Common Stock by reason of the Company's participation therein is referred to
herein as an "Organic Change." Prior to the consummation of any organic Change,
the Company will make appropriate provision (in form and substance satisfactory
to the holders of a majority of the Warrant Shares) to insure that each of the
Registered Holders of the Warrants will thereafter have the right to acquire and
receive in lieu of or addition to (as the case may be) the Warrant shares
immediately theretofore acquirable and receivable upon the exercise of such
holder's Warrant, such shares of stock, securities or assets as may be issued or
payable with respect to or in exchange for the number of Warrant Shares
immediately theretofore acquirable and receivable upon exercise of such holder's
Warrant had such Organic Change not taken place. In any such case, the Company
will make appropriate provision (in form and substance satisfactory to the
holders of a majority of the warrant Shares) with respect to such holders,
rights and interests to insure that the provisions of this Section 2 hereof will
thereafter be applicable to the Warrants. The Company will not effect any such
Organic Change, unless prior to the consummation thereof, the successor entity
(if other than the Company) resulting from such Organic Chancre (including,
without limitation, a purchaser of all or substantially all the Company's
assets) assumes by written instrument, the obligation to deliver to each such
holder such shares of stock, securities or assets as, in accordance with the
foregoing provisions, such holder may be entitled to acquire upon exercise of
Warrants.
2.3 Certain Events. If any event occurs of the type
contemplated by the provisions of this Section 2 but not expressly provided for
by such provisions (including, without limitation, the granting of stock-
appreciation rights, phantom stock rights or other rights with
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<PAGE> 6
equity features), then the Company's Board of Directors will make an appropriate
adjustment in the Exercise Price and the number of Warrant Shares obtainable
upon exercise of this Warrant so as to protect the rights of the holders of the
Warrants; provided that no such adjustment will increase the Exercise Price or
decrease the number of Warrant Shares except as described in subsection 2.1
(reverse stock split).
2.4 Notices.
(i) Promptly following the occurrence of any event
requiring any adjustment of the Exercise Price pursuant to this Section 2, the
Company will give written notice thereof to the Registered Holder, setting forth
in reasonable detail and certifying the calculation of such adjustment.
(ii) The Company will give written notice to the
Registered Holder at least 20 days prior to the date on which the Company closes
its books or takes a record (A) with respect to any dividend or distribution
upon the Common Stock, (B) with respect to any pro rata subscription offer to
holders of Common Stock or (C) for determining rights to vote with respect to
any Organic Change, dissolution or liquidation.
(iii) The Company will also give written notice to the
Registered Holder at least 20 days prior to the date on which any Organic
Change, dissolution or liquidation takes place.
3. Liquidating Dividends. If the Company declares or pays a
dividend upon the Common Stock payable otherwise than in cash out of earnings or
earned surplus (determined in accordance with generally accepted accounting
principles, consistently applied) except for a stock dividend payable in shares
of Common Stock (a ("Liquidating Dividend"), then the Company will pay to the
Registered Holder of this Warrant at the time of payment thereof the Liquidating
Dividend which would have been paid to such Registered Holder on the Common
Stock had this Warrant been fully exercised immediately prior to the date on
which a record is taken for such Liquidating Dividend, or, if no record is
taken, the date as of which the record holders of Common Stock entitled to such
dividends are to be determined.
4. Definitions. The following terms have meanings set forth below:
"Common" means the Company's Common Stock, par value $0.0001 per
share.
"Common Stock" means the Company's Common Stock, except for
purposes of the shares obtainable upon exercise of this Warrant, any capital
stock of the Company hereafter authorized which is not limited to a fixed sum or
percentage of par or stated value in respect to the rights of the holders
thereof to participate in dividends or in the distribution of assets upon any
liquidation, dissolution or winding up of the Company.
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<PAGE> 7
"Registered Holder" means the holder of this warrant as
reflected in the records of the Company maintained pursuant to Section II
below.
"Warrant" is defined in Section 7 below.
"Warrant Shares" means shares of Common Stock issued or issuable
directly or indirectly upon exercise of the Warrant; provided, however, that if
the securities issuable upon exercise of the Warrant are issued by an entity
other than the Company or there is a chancre in the class of securities so
issuable, then the term "Warrant Shares" shall mean shares of the security
issuable upon exercise of the Warrant if such security is issuable in shares, or
shall mean the equivalent units in which such security is issuable if such
security is not issuable in shares.
5. No Voting Rights: Limitations of Liability. This Warrant will
not entitle the holder hereof to any voting rights or other rights as a
stockholder of the Company. No provision hereof, in the absence of affirmative
action by the Registered Holder to purchase Common Stock, and no enumeration
herein of the rights or privileges of the Registered Holder shall give rise to
any liability of such holder for the Exercise Price of Common Stock acquirable
by exercise hereof or as a stockholder of the Company.
6. Warrant Transferable. Subject to the transfer conditions
referred to in the legend endorsed hereon, this warrant and all rights hereunder
are transferable upon the prior written consent of the Company (which consent
shall not be unreasonably withheld), in whole or in part, without charge to the
Registered Holder, upon surrender of this Warrant with a properly executed
Assignment (in the form of Exhibit 1.2 hereto) at the principal office of the
Company; provided, however, that the Registered Holder may transfer this Warrant
and all rights hereunder to an Affiliate without the prior written consent of
the Company. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of this Warrant or Warrant Shares acquired pursuant to the
exercise of this Warrant do not apply to transfers from the beneficial owner of
any of the aforementioned securities to its nominee or from such nominee to its
beneficial owner, and shall terminate as to any particular Warrant Shares when
(1) such security shall have been effectively registered under the 1933 Act and
sold by the Registered Holder or Purchaser thereof in accordance with such
registration or (2) such Warrant Shares shall have been sold without
registration in compliance with Rule 144 under the Securities Act, or (3) a
letter shall have been issued to the Registered Holder or Purchaser at its
request by the staff of the Securities and Exchange Commission or a ruling shall
have been issued to the Holder at its request by such Commission stating that no
action shall be recommended by such staff or taken by such Commission as the
case may be, if such security is transferred without registration under the
Securities Act in accordance with the conditions set forth in such letter or
ruling and such letter or ruling specifies that no subsequent restrictions on
transfer are required. Whenever the restrictions imposed hereunder shall
terminate, as hereinabove provided, the Registered Holder or Purchaser of
Warrant Shares then outstanding as to which such restrictions have terminated
shall be entitled to receive from the Company, without expense to such
Registered Holder or Purchaser, one or more new certificates for the Warrant or
for such Warrant Shares not bearing any restrictive legend.
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<PAGE> 8
7. Warrant Exchangeable for Different Denominations. This Warrant
is exchangeable, upon the surrender hereof by the Registered Holder at the
principal office of the Company, for new Warrants of like tenor representing in
the aggregate the purchase rights hereunder, and each of such new warrants will
represent such portion of such rights as is designated by the Registered Holder
at the time of such surrender. The date the Company initially issues this
Warrant will be deemed to be the "Date of Issuance" hereof regardless of the
number of times new certificates representing the unexpired and unexercised
rights formerly represented by this warrant shall be issued. All Warrants
representing portions of the rights hereunder are referred to herein as the
"Warrants."
8. Replacement. Upon receipt of evidence reasonably satisfactory to
the Company (an affidavit of the Registered Holder will be satisfactory) of the
ownership and the loss, theft, destruction or mutilation of any certificate
evidencing this Warrant, and in the case of any such loss, theft or destruction,
upon receipt of indemnity reasonably satisfactory to the Company (provided that
if the holder is a financial institution or other institutional investor its own
agreement will be satisfactory), or, in the case of any such mutilation upon
surrender of such certificate, the Company will at its expense (execute and
deliver in lieu of such certificate a new certificate of like kind representing
the same rights represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate.
9. Accredited Investor. Registered Holder represents and warrants
it (i) has such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of its investment, and has the
ability to bear the economic risks of its investment; and (ii) is an "accredited
investor" within the meaning of the Securities and Exchange Rule 501 of
Regulation D, as presently in effect.
10. Representations, Warranties and Covenants of the Company.
(a) Due Authority. The execution and delivery by the Company
of this Warrant and the performance of all obligations of the Company hereunder,
including the issuance to Registered Holder or Purchaser of the right to acquire
Warrant Shares, have been duly authorized by all necessary corporate action on
the part of the Company, and this Warrant is not inconsistent with the Company's
Amended and Restated Articles of Incorporation, does not contravene any law or
governmental rule, regulation or order applicable to it, does not and will not
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument to which it is a party or by which it is
bound, and this Warrant constitutes a legal, valid and binding agreement of the
Company, enforceable in accordance with its respective terms.
(b) Consents and Approvals. No consent or approval of,
giving of notice to, registration with, or taking of any other action in respect
of any state, Federal or other governmental authority or agency is required with
respect to the execution, delivery and performance by the Company of its
obligations under this Warrant, except for the filing of notices
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<PAGE> 9
pursuant to Regulation D under the 1933 Act and any filing required by
applicable state securities law, which will be effective by the time required
thereby.
(c) Issued Securities. All issued and outstanding shares of
Common Stock, or any other securities of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. All outstanding shares
of Common Stock, and any other securities were issued in full compliance with
all Federal and state securities laws.
(d) Exempt Transaction. Subject to the accuracy of the
Registered Holder's representations in Section 9 hereof, the issuance of Warrant
Shares upon exercise of this Warrant will constitute a transaction exempt
from (i) the registration requirements of Section 5 of the Securities Act, in
reliance upon Section 4(2) thereof, and (ii) the qualification requirements of
the applicable state securities law.
(e) Compliance with Rule 144. At the written request of
Registered Holder or Purchaser, who proposes to sell Warrant Shares issuable
upon the exercise of this Warrant in compliance with Rule 144 promulgated by the
Securities and Exchange Commission, the Company shall use all commercially
reasonable efforts to furnish to the Registered Holder or Purchaser, in due
course after receipt of such request, a written statement confirming the
Company's compliance with the filing requirements of the Securities and Exchange
Commission as set forth in such Rule, as such Rule may be amended from time to
time.
11. Notices. Except as otherwise expressly provided herein, all
notices referred to in this Warrant will be in writing and will be delivered
personally, sent by reputable express courier service (charges prepaid) or sent
by registered or certified mail, return receipt requested, postage prepaid and
will be deemed to have been given when so delivered (or when received, if
delivered by any other method) if sent (i) to the Company, at its principal
executive offices and (ii) to a Registered Holder of this Warrant, 6111 North
River Road, Rosemont, Illinois 60018, attention: Rick Finocchi, with a copy to
attention: General Counsel (facsimile (847) 518-5440 and (847) 518-5088) (unless
otherwise indicated in writing by any such holder).
12. Amendment and Waiver. Except as otherwise provided herein, the
provisions of the Warrants may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, if, but only if, the Company has obtained the written consent of the holders
of Warrants representing a majority of the Warrant Shares issuable upon exercise
of all outstanding Warrants, issued hereunder. Nothing herein shall otherwise
prevent the Company and COMDISCO, Inc. (as long as it remains the Registered
Holder of a majority of the Warrant Shares) from entering into an amendment of
this Stock Purchase Warrant provided such amendment is by written instrument
signed by the Company and such Registered Holder.
13. Warrant Register. The Company shall maintain at its principal
executive offices books for the registration and the registration of transfer
of warrants. The Company may deem and treat the Registered Holder as the
absolute owner hereof (notwithstanding any notation of
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<PAGE> 10
ownership or other writing thereon made by anyone) for all purposes and shall
not be affected by any notice to the contrary, other than a transfer in
accordance with the provisions of Section 6 hereof.
14. Registration Rights. If (i) on or before June 30, 1998, or (ii)
until such time as all of the Warrant Shares can be sold within three months
without compliance with the registration requirements of the Securities Act
pursuant to Rule 144 promulgated thereunder (whichever is earlier), the Company
proposes to register any of its shares of Common Stock under the Securities Act
of 1933, as amended (the "Securities Act") in connection with an underwritten
public offering of such Common Stock for the account of the Company solely for
cash on a form that would also permit registration of the Warrant Shares, it
will promptly give written notice to Holder of its intention to do so and, upon
the written request of Holder given within twenty (20) days after receipt of any
such notice (which request shall specify the number of Shares desired to be
included in such underwritten public offering by Holder), the Company will use
its reasonable best efforts to cause all Warrant Shares requested by Holder to
be included in such underwritten public offering; provided, however, that the
Company shall not be required to cause any Shares to be so registered or
included or to give notice of registration (i) if in the underwriters' opinion
the inclusion will jeopardize the success of the offering of shares of Common
Stock by the Company or (ii) in the case of a registration on any form which
does not include substantially the same information as would be required to be
included in the registration statement covering the sale of Shares for cash. If
some but not all shares of Common Stock with respect to which the Company shall
have received requests for registration pursuant to piggyback registration
rights granted hereunder or pursuant to any other agreement shall be excluded
from such registration, the Company shall make appropriate allocation of shares
to be registered among all holders of Common Stock having a contractual right to
register their shares and at the time desiring to register their shares pro rata
in the proportion that the number of shares of Common Stock held by all such
holders then desiring to have their shares registered for sale. With respect to
the Warrant Shares so included, Holder shall bear the cost of any underwriting
discount or selling expenses for the sale of such Shares and the cost of the
attorneys' fees for Holder's own attorney, if any, and the Company shall bear
all other costs and expenses of the registration, including attorneys and
accountants fees, printing costs, SEC and blue sky filing fees and transfer
agent fees and expenses. The Company shall not be required under this Section 14
to include any of the Warrant Shares in an underwriting of shares unless Holder
(i) accepts the terms of the underwriting as agreed upon between the Company and
the underwriters selected by it, assuming normal and customary underwriting
terms and (ii) furnishes to the Company such information regarding itself as
shall be reasonably required to effect the registration of the Warrant Shares.
The rights granted pursuant to this Section 14 may not be assigned by Holder
without the Company's prior written consent which shall not be unreasonably
withheld. In the event Holder elects to participate in such registration, Holder
hereby agrees that it shall not, to the extent required by the Company and the
underwriter of the offering giving rise to piggyback rights hereunder sell or
otherwise transfer or dispose of (other than to donees who agree to be similarly
bound) any shares of Common Stock during the one-hundred-twenty day period
following the effective date of a registration statement filed by the Company
under the Securities Act with respect to such offering provided that the
Company's insider executive officers and directors have
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<PAGE> 11
entered into similar lock up agreements with respect to their shares and stock
options, where applicable, for a like period with the underwriter. The Company
retains the right in its sole discretion to abandon or withdraw any registration
statement at any time.
15. Descriptive Headings: Governing Law. The descriptive headings of
the several Sections and paragraphs of this warrant are inserted for convenience
only and do not constitute a part of this Warrant. The enforcement,
construction, validity and interpretation of this Warrant will be governed by
the internal law, and not the conflicts law, of Washington.
IN WITNESS WHEREOF the Company has caused this Warrant to be signed and
attested by its duly authorized officers under its corporate seal and to be
dated the Date of Issuance hereof.
MIDCOM Communications Inc..
By: /s/ ROBERT J. CHAMBERLAIN
-------------------------------
Its: CFO
-------------------------------
[Corporate Seal]
Attest:
/s/ PAUL P. SENIO
- -------------------------------
Title: SECRETARY
-------------------------------
11
<PAGE> 12
EXHIBIT 1.3
EXERCISE AGREEMENT
To: Dated:
The undersigned, pursuant to the provisions set forth in the attached
Warrant (Certificate No. W-5), hereby agrees to subscribe for the purchase of
shares of the Common Stock covered by such Warrant and makes payment herewith in
full therefor at the price per share provided by such Warrant.
Signature
-------------------------------
Address
-------------------------------
12
<PAGE> 13
EXHIBIT 1.2
ASSIGNMENT
FOR VALUE RECEIVED, hereby sells, assigns
------------------------------
and transfers all of the rights of the undersigned under the attached Warrant
(Certificate No. W-5) with respect to the number of shares of the Common Stock
covered thereby set forth below, unto:
Names of Assignee Address No. of Shares
- ----------------- ------- -------------
Signature
-------------------------------
Witness
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13
<PAGE> 1
MASTER FORBEARANCE AGREEMENT
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.
This Master Forbearance Agreement (the "Agreement") is made as of this
_____ day of March, 1997 between KEYBANK NATIONAL ASSOCIATION, f/k/a KEY BANK OF
WASHINGTON INC. ("Lessor") and MIDCOM COMMUNICATIONS, INC. ("Lessee"), a
Washington corporation and PACNET INC. ("Guarantor"), a Washington corporation.
I.
RECITALS
A. On or about September 12, 1995, Lessor and Lessee entered into a
Master Equipment Lease Agreement ("Master Lease") for the lease of certain
equipment. The Master Lease provides for the execution and delivery of Equipment
Schedules that more particularly describes the leased equipment. The Master
Lease and Equipment Schedules are hereafter collectively described as "Lease
Documents".
B. On or about September 12, 1995, four (4) Equipment Schedules
("leases") were executed as follows:
Equipment Schedule No. 1, Lease No. 9212, for equipment with a total
cost of $908,649.97. Lease payments for the first fifty-nine (59)
months equal $17,047.61 per month. The final payment equals $17,047.61
plus a balloon payment of $136,297.50.
Equipment Schedule No. 2, Lease No. 9369, for equipment with a total
cost of $840,708.71. Lease payments for the first fifty-nine (59)
months equal $15,714.25 per month. The final payment equals $15,714.25
plus a balloon payment of $126,106.31.
Equipment Schedule No. 3, Lease No. 9515, for equipment with a total
cost of $706,453.33. Lease payments for the first fifty-nine (59)
months equal $13,147.96 per month. The final payment equals $13,147.96
plus a balloon payment of $105,967.99.
Equipment Schedule No. 4, Lease No. 9762, for equipment with a total
cost of $277,012.32. Lease payments for the sixty (60) month term equal
$4,832.54 per month.
C. Lessee's performance of the terms and conditions contained in the
Lease Documents is guaranteed by Guarantor in a corporate guaranty
("Guaranties").
<PAGE> 2
D. On or about September 26, 1996, Lessor advised Lessee of certain
existing defaults under the Lease Documents. Specifically, Lessor informed
Lessee it was in default with respect to Lessee's financial performance
covenants and with respect to the inadequate value of the leased equipment
securing the outstanding lease balances.
E. Over the next four months, Lessor and Lessee negotiated to resolve
the existing defaults under the Lease Documents.
F. Lessee has requested of Lessor certain forbearances and extensions
under the Lease Documents. To the extent set forth in this Agreement, Lessor has
agreed to indulge Lessee in its request.
G. At the present time, the payoffs for the leases are as follows:
Lease No. 9212 $812,643.26 through January 29, 1997;
Lease No. 9369 $791,861.97 through January 26, 1997;
Lease No. 9515 $658,297.81 through January 31, 1997;
Lease No. 9762 $275,097.41 through February 7, 1997.
Therefore, in consideration of the mutual promises and covenants
contained herein, the sufficiency of which is acknowledged, Lessor, Guarantor
and Lessee hereby agree to the terms and conditions of this Agreement as
follows:
II.
AGREEMENT
A. Conditions to Effectiveness.
This Agreement is conditioned upon the fulfillment of the following
conditions precedent to be performed to the Lessor's satisfaction:
1. Subject to paragraph II.A.2.(i) below, lessee shall place Lessor in
a senior lien position as to all of Lessee's equipment, replacement equipment
and proceeds ("personal property"), excepting personal property in which
existing lien holders have properly perfected purchase money security interests
pursuant to RCW 62A.9-107 and RCW 62A.9-312.
2. Subject to paragraph II.A.2.(i) below, the total value of Lessee's
personal property subject to purchase money security interests shall not exceed
$2,000,000.00, based on the Lessee's book value of such personal property, on
the earlier of the date Lessor is place in a senior lien position as to Lessee's
personal property, or April 30, 1997.
- 2 -
<PAGE> 3
i. The assets leased by MidCom Communications, Inc. ("MidCom")
pursuant to that certain Master Lease Agreement between MidCom
and Comdisco, Inc. dated January 15, 1997, are specifically
excluded from the pledge of collateral under this Agreement.
3. In order to place Lessor in such senior lien position, the following
steps shall be taken:
a. Lessee shall provide Lessor with written documentation
identifying the states where Lessee has personal property
located by no later than February 14, 1997. Lessee shall fully
and continuously cooperate with Lessor in ensuring that the
list of states is complete, including providing Lessor with
reasonable access to its employees who are familiar with the
location of Lessee's personal property.
b. Lessee shall execute and deliver a Key Bank Security Agreement
to Lessor granting Lessor a security interest in all of
Lessee's personal property, as defined in paragraph II.A.1
herein, by no later than April 7, 1997.
C. Lessee shall execute UCC-1 Financing Statements in favor of
Lessor for each state in which Lessee has personal property
located, including but not limited to Arizona, California,
Connecticut, Florida, Georgia, Illinois, Indiana,
Massachusetts, Michigan, Nevada, New York, North Carolina,
Ohio, Oregon, Pennsylvania, Tennessee, Texas, Utah,
Washington, Washington, D.C., and Wisconsin by no later than
April 7, 1997.
d. Lessor may conduct UCC searches in each state in which Lessee
has identified it has personal property located so that Lessor
may obtain the names and addresses of each party holding a
lien against Lessee's personal property. Subject to any
unforeseen search delays, this shall be completed by February
7, 1997.
e. Lessor shall provide Lessee with copies of the UCC results and
a list of the secured parties in each state searched by no
later than February 14, 1997 (subject to such searches being
completed).
f. Lessee shall contact each secured party in each state in which
Lessee has personal property located and request and obtain
from such secured party an executed Key Bank subordination
agreement and UCC-3 change statement. The subordination
- 3 -
<PAGE> 4
agreement will provide, in part, that each such secured party
agrees to subordinate its security interest to the security
interest granted to Lessor. Each subordination agreement and
accompanying UCC-3 change statement will be delivered to
Lessor for recording purposes.
g. Lessee shall have until April 30, 1997 in which to obtain all
of the executed subordination agreements and UCC-3 changes
statements, and complete the process of placing Lessor in a
senior lien position as to all of Lessee's personal property.
h. After all subordination agreements and UCC-3 change statement
are executed and the UCC-1 financing statements and UCC-3
changes statements are filed, Lessor shall perform a secondary
UCC-1 in each state in which Lessee has identified it has
personal property located in order to ensure that there have
been no interim grants of security interest or other
intervening liens. In the event one or more interim security
interests or intervening liens is discovered, Lessee shall
have fifteen (15) days from notification by Lessor to obtain a
subordination agreement from such party or parties.
i. In the event Lessee requests the deletion or exclusion of any
personal property from the security interest granted to Lessor
under this Agreement, Lessee shall submit such a written
request to Lessor for evaluation. Lessor shall evaluate such
request on a case-by-case basis and shall provide Lessee with
a response to such request within ten (10) calendar days of
receiving such a request. In the event Lessor consents to
Lessee's request, in Lessor's sole discretion, Lessor agrees
to execute such documentation as may be necessary and
appropriate for accommodating such request of Lessee.
4. The entire process of placing Lessor in a senior lien position for
Lessee's personal property must in all material respects be completed by April
30, 1997.
B. Forbearance.
So long as Lessee performs the conditions precedent described in
section II.A herein, and Lessee otherwise fully and completely complies with the
terms of this Agreement and the Lease Documents, Lessor shall:
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<PAGE> 5
1. Forbear from asserting all of the existing defaults under the
Lease Documents, including but not limited to:
a. defaults with respect to the lessee's financial
performance;
b. defaults with respect to the inadequate value of the
leased equipment securing the outstanding lease
balances.
2. Forbear from asserting its rights and remedies for the
existing defaults under the Lease Documents, including but not
limited to the rights and remedies described in section 22 of
the Master Lease.
3. Waive all existing defaults under the Lease Documents on the
later of the 91st day following the date when Lessor is placed
in first lien position on all of the Lessee's personal
property and such first lien position is property perfected,
or on August 1, 1997.
C. Additional Actions to be Taken by Lessee.
Lessee shall take the following additional actions:
1. Execute this Agreement by February 6, 1997.
2. Execute any and all additional documentation as may be
required from time to time by Lessor, in order to fulfill the
purposes and intents of this Agreement.
3. Timely pay Lessor the monthly lease payments pursuant to the
terms of the Lease Documents.
4. Reimburse Lessor for all of its attorneys' fees and costs
associated with the execution of this Agreement pursuant to
section III.1 herein.
D. Events of Default.
Lessee shall be in default of this Agreement if any of the following
shall occur:
1. Lessee fails in any way to fully and completely perform its
obligations under the terms of this Agreement, including but
not limited to the provisions in II.A, to fully and completely
perform its obligations under the terms of the Lease
Documents, or to fully and completely perform its obligations
under the terms of the Security Agreement to be executed in
conjunction with this Agreement.
- 5 -
<PAGE> 6
2. Lessee fails in any respect to place Lessor in a senior lien
position as to all of Lessee's personal property by April 30,
1997.
3. There is a failure of any warranty or representation made by
the Lessee herein.
4. Lessee fails to make the monthly lease payments to Lessor when
due pursuant to the terms of the Lease Documents.
5. Lessee fails to reimburse Lessor for all of Lessor's attorneys
fees and costs associated with the execution of this Agreement
pursuant to section III.1 herein.
6. Lessee files a petition in bankruptcy, is subject to an
involuntary bankruptcy petition, is the subject of a state
receivership or is involved in any other form of insolvency
proceeding.
E. Remedies.
If Lessee fails in any way to fully and completely perform all its
obligations under the terms of this Agreement and the Lease Documents, and an
event of default arises, Lessor shall be entitled to:
1. Rescind this Agreement.
2. Assert all of the existing defaults under the Lease Documents,
including but not limited to:
a. defaults with respect to the lessee's financial
performance;
b. defaults with respect to the inadequate value of the
leased equipment securing the outstanding lease
balances.
3. Pursue all rights and remedies for the existing defaults under
the Lease Documents pursuant to section 22 of the Master
Lease.
4. Pursue any and all other rights and remedies Lessor may have
under this Agreement, the Lease Documents, applicable law, or
otherwise.
- 6 -
<PAGE> 7
III
GENERAL PROVISIONS.
A. Attorneys' Fees and Costs.
1. Lessee has paid Lessor $10,000.00 towards Lessor's reasonable costs,
fees, and expenses to be incurred in connection with this Agreement, including
but not limited to Lessor's attorneys' fees, UCC search fees, recording fees and
out-of-pocket costs. If or when this sum of $10,000.00 is fully expended, Lessor
shall invoice Lessee for all of Lessor's additional reasonable costs, fees, and
expenses incurred in connection with this Agreement, including but not limited
to Lessor's attorneys' fees, UCC search fees, recording fees and out-of-pocket
costs. Lessee shall pay Lessor the total amount of the invoice within ten (10)
days of the invoice date. Failure to pay such invoice within ten (10) days shall
constitute an event of default under section II.D. herein.
2. In the event Lessor is required to enforce any preserved default or
default under this Agreement, Lessee agrees to pay to Lessor all of Lessor's
attorney fees, expenses and costs incurred to enforce any and all rights of
Lessor in any forum, including without limitation those fees and costs incurred
with or without suit; in any appeal, bankruptcy, insolvency or receivership
proceeding, including Lessor's participation in any bankruptcy proceeding,
whether such bankruptcy participation is for protection of Lessor, monitoring
such proceedings, or for such other purposes as Lessor deems appropriate; any
recording fees and title insurance; and in any post-judgment collection
proceedings.
B. Acknowledgement and Preservation of Defaults.
1. Lessee acknowledges, admits and agrees that defaults exist under the
terms of the Lease Documents as follows:
a. defaults with respect to the lessee's financial performance;
b. defaults with respect to the inadequate value of the leased
equipment securing the outstanding lease balances.
2. Lessee acknowledges and agrees that all existing defaults are
preserved, and that nothing in this Agreement or the Lease Documents shall be
construed as a waiver by Lessor of its right to assert such defaults until the
later of the 91st day following the date when Lessor is placed in first lien
position on all of the Lessee's personal property and such first lien position
is property perfected, or on August 1, 1997.
- 7 -
<PAGE> 8
C. Confirmation of Debt/Ratification of Lease Documents.
All Lease Documents are hereby confirmed and ratified by Lessee and
Lessor as being in full force and effect on this date, except as modified or
superseded pursuant to this Agreement. Lessee acknowledges it is liable under
the Lease Documents in accordance with their terms.
D. Ratification and Revival of Guaranties.
All prior Guaranties executed by Guarantor, including but not limited
to the Corporate Guaranty contained in the Master Lease, are hereby ratified and
revived as if fully set forth herein. Guarantor consents to the execution of
this Agreement and agrees that this Agreement does not modify its respective
responsibilities under the Guaranties, other than entitling the Lessee to the
benefit of the forbearance period.
Upon Lessor's being paid in full pursuant to the terms of the Lease
Documents, this Agreement shall be deemed satisfied and Lessor shall release all
UCC financing statements; except, however, all of Lessor's rights under the
Guaranties, under the Lease Documents and under this Agreement shall be
automatically reinstated if any payment is reclaimed in a bankruptcy or
receivership proceeding, until Guarantors pay Lessor the amount reclaimed or the
amount is otherwise paid to Lessor and is not subject to further reclamation.
E. No Modification.
This Agreement is intended merely as an indulgence by Lessor to allow
Lessee a period of time in which to pay Lessor the full amount due and owing
under the terms of the Lease Documents. This Agreement does not constitute a
novation as to any of the Lease Documents or Guaranty and does not modify,
alter, amend or in any way affect the terms and conditions of the Lease
Documents or Guaranty, except as expressly and specifically stated herein.
F. Controlling Terms.
In the event of a conflict between the terms of this Agreement and the
terms of the existing Lease Documents or Guaranty, the terms of this Agreement
control, subject to all applicable laws.
G. Severability.
The invalidity of all or any part of any section of this Agreement, the
Loan Documents or the Guaranties shall not render invalid the remainder of this
Agreement, or the Lease Documents to the extent it represents the intent of the
parties in all material respects if interpreted without the invalid provision.
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<PAGE> 9
H. No Defenses/Release.
Lessee and Guarantor hereby acknowledge and agree that they have no
defenses, setoffs or counterclaims against Lessor based upon any events or
transactions occurring, or failing to occur, prior to the date of this
Agreement. To the extent Lessee or Guarantor may have any such defenses, setoffs
or counterclaims against Lessor, they hereby forever waive, release and
relinquish the same.
1. Further Description of Claims. The release is intended to be, and
is, a full, complete and general release in favor of Lessor, with respect to all
claims, demands, actions, causes of action and other matters described above,
including, without limitation, any claims, demands or causes of actions based
upon allegations of, for, or in connection with, but not limited to, breach of
fiduciary duty, breach of any alleged duty of fair dealing or good faith, breach
of confidence, undue influence, duress, economic coercion, usury, conflict of
interest, intentional tort, negligence, gross negligence, bad faith,
malpractice, violations of the Racketeer Influenced and Corrupt Organizations
Act, intentional or negligent infliction of mental distress, tortuous
interference with contractual relations or prospective business advantage,
breach of contract, deceptive trade practices, libel, slander, fraud,
misrepresentation, conspiracy or any other theory, cause of action, occurrence,
matter or thing which might give rise to liability upon Lessor.
2. No Other Consideration. The foregoing release is in full
satisfaction for the agreements of the Lessor, Lessee, and Guarantor contained
herein, and Lessor will not receive any further consideration for the release.
I. Entire Agreement.
This Agreement sets forth the full and complete agreement of Lessor,
Lessee and Guarantor with respect to its subject matter. This Agreement
supersedes and replaces any earlier representations, inducements, promises,
settlements, compromises, agreements, or understandings, written or oral,
between the parties hereto. Any such earlier undertakings shall have no force or
effect after the execution of this Agreement. This Agreement may not be amended,
modified or revoked except by means of a supplemental writing that is signed by
the party against whom the amendment, modification or revocation is to be
enforced.
J. Time.
Time is of the essence for this Agreement. Any failure by any party to
fully perform that party's obligations at or prior to the time required by this
Agreement shall be conclusively deemed a material breach of this Agreement.
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<PAGE> 10
K. Governing Law and Venue.
This Agreement has been executed under and shall be construed and
enforced in accordance with the laws of the State of Washington. If there is any
litigation or other proceeding to enforce or interpret any provision of this
Agreement, jurisdiction shall be in a court in King County, State of Washington.
L. Binding Effect.
This Agreement shall be binding upon the parties hereto and each
party's, successors and assigns.
M. Execution in Counterparts.
This Agreement may be executed in any number of counterparts and by
each party on separate counterparts, each of which when so executed and
delivered shall be deemed an original and all of which when taken together shall
constitute but one and the same instrument.
N. Captions.
The paragraph headings used in this Agreement are for convenience of
reference only and shall not affect the construction of any provision of this
Agreement.
O. Independent Legal Counsel.
The undersigned parties acknowledge, represent and agree that they have
read this Agreement and fully understand the terms hereof, that they have been
fully advised by their legal counsel with respect hereto, and that the same is
executed by them upon the advice and recommendation and with the approval of
their independent legal counsel.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed the day and year first above written.
LENDER:
KEYBANK NATIONAL ASSOCIATION
By
-----------------------------
Its
---------------------------
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<PAGE> 11
BORROWER:
MIDCOM COMMUNICATIONS INC., a
Washington corporation
By
-----------------------------
Its
---------------------------
GUARANTOR:
PACNET INC.
By
-----------------------------
Its
---------------------------
STATE OF WASHINGTON)
) ss.
COUNTY OF KING )
I certify that I know or have satisfactory evidence that
____________________ is the person who appeared before me, and said person
acknowledged that he signed this instrument, on oath stated that he was
authorized to execute the instrument and acknowledged it as the ________________
of KEYBANK NATIONAL ASSOCIATION to be the free and voluntary act of such parties
for the uses and purposes mentioned in this instrument.
DATED:
------------------------------------ -------------------------------------
[Notary Signature]
-------------------------------------
[Type or Print Name of Notary]
NOTARY PUBLIC for the State of
Washington, residing
at
----------------------------------
My appointment expires:
------------------------------------
- 11 -
<PAGE> 12
STATE OF WASHINGTON)
) ss.
COUNTY OF KING )
I certify that I know or have satisfactory evidence that
____________________ is the person who appeared before me, and said person
acknowledged that he signed this instrument, on oath stated that he was
authorized to execute the instrument and acknowledged it as the ________________
of MIDCOM COMMUNICATIONS INC. to be the free and voluntary act of such parties
for the uses and purposes mentioned in this instrument.
DATED:
------------------------------------ -------------------------------------
[Notary Signature]
-------------------------------------
[Type or Print Name of Notary]
NOTARY PUBLIC for the State of
Washington, residing
at
----------------------------------
My appointment expires:
------------------------------------
STATE OF WASHINGTON)
) ss.
COUNTY OF KING )
I certify that I know or have satisfactory evidence that
____________________ is the person who appeared before me, and said person
acknowledged that he signed this instrument, on oath stated that he was
authorized to execute the instrument and acknowledged it as the ________________
of PACNET INC. to be the free and voluntary act of such parties for the uses and
purposes mentioned in this instrument.
DATED:
------------------------------------ -------------------------------------
[Notary Signature]
-------------------------------------
[Type or Print Name of Notary]
NOTARY PUBLIC for the State of
Washington, residing
at
----------------------------------
My appointment expires:
------------------------------------
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<PAGE> 1
SETTLEMENT AGREEMENT AND RELEASE
THIS SETTLEMENT AGREEMENT AND RELEASE ("Release"), entered into this
l8th day of March, 1997, is by and between MIDCOM Communications Inc. a
Washington corporation (the "Company"), on its own behalf, on behalf of
Cel-Tech International Corp., a Washington corporation ("Cel-Tech"); on behalf
of CTI Acquisition Corporation, a Washington corporation ("CTIA"); on behalf of
each of its and their past and present assigns, affiliates, including parents,
subsidiaries, predecessors and successors and their respective officers,
directors, indemnitees, employees, attorneys, partners and agents, including
without limitation, Ashok and Sheela Rao, husband and wife and the marital
community composed thereof, Paul and Mary Senio, husband and wife and the
marital community composed thereof, Paul and Margaret Pfleger, husband and wife
and the marital community composed thereof, Betti A. Fujikado and Dereck Soo,
wife and husband and the marital community composed thereof; and on behalf of
each and all of his, her, its and their respective heirs, executors, legatees,
representatives, receivers, trustees, transferees, predecessors, successors, and
assigns (all of the foregoing being hereinafter collectively referred to as the
"MIDCOM Group") and Richard John, an unmarried man, on his own behalf and on
behalf of each and all of his heirs, executors, legatees, representatives,
receivers, trustees, transferees, predecessors, successors and assigns (all of
the foregoing being herein referred to as "John") (John and the Company are
hereinafter collectively referred to as the "Signators".)
BACKGROUND
A. The Company, Cel-Tech, CTIA and John previously entered into an
Agreement and Plan of Reorganization dated August 19, 1995, providing for the
merger of CTIA into Cel-Tech with Cel-Tech as the survivor corporation (the
"Agreement") . The merger was effected on September 12, 1995 by the filing of
articles of merger and plan of merger with the Secretary of State of Washington
(the "Merger") . The Agreement was amended upon the execution by the Company,
Cel-Tech, CTIA, and John of the amendment and modification of agreement and plan
of reorganization dated September 12, 1995 (the "Amendment") (The Agreement, as
amended, together with various schedules referenced therein, is hereinafter
referred to as the "Amended Agreement".)
B. Immediately prior to the consummation Merger, John was the sole
shareholder of Cel-Tech. Pursuant to the Amended Agreement, one hundred percent
(100%) of Cel-Tech's common stock was converted into and exchanged for shares of
nonregistered common stock of the Company John received 127,742
SETTLEMENT AGREEMENT AND RELEASE - 1
<PAGE> 2
shares of non-registered common stock of the Company (the "Merger Shares")
through a certificate dated August 24, 1995. An additional 14,193 shares of
non-registered common stock of the Company (the "Holdback Shares") were subject
to a certain Holdback Agreement between John and the Company (the "Holdback
Agreement") and were to be issued by the Company to John upon the occurrence of
certain events.
C. The Merger Shares and Holdback Shares were issued or were to be
issued without registration under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance on certain exemptions from registration that
were based, in part, on the representations of John made in a Representation
Letter dated September 1, 1995 (the "Representation Letter"). The Company and
John also entered into a Registration Rights Agreement dated September 12, 1995
(the "Registration Rights Agreement"), which required the Company to register
the Merger Shares and the Holdback Shares (if any so issued to John) under the
Securities Act on certain terms and conditions set forth therein.
D. The Company and John entered into an agreement for consulting
services of John dated September 12, 1995 (the "Consulting Services Agreement"),
providing for payment of a consulting fee to John of $5,000 per month, plus
ordinary and necessary business expenses, for a period of sixty (60) months in
exchange for John providing part-time services to the Company and Cel-Tech.
E. John executed a non-competition agreement dated September 12,
1995 (the "Non-Competition Agreement") in favor of the Company for a period of
five (5) years upon the advance payment by the Company of the consideration for
such 60-month period. In the Non-Competition Agreement, John agreed, inter alia,
to be bound by certain restrictive covenants, including but not limited to, the
non-disclosure of confidential information for such period.
F. The Company, Cel-Tech, CTIA, John and/or their respective
counsel or agents also executed the following additional documents in connection
with the Merger and pursuant to the Amended Agreement: plan of merger; articles
of merger; MIDCOM opinion letter of counsel; Cel-Tech opinion letter of counsel;
unanimous written consent of MIDCOM; CTIA consent of board of directors; consent
of sole director and shareholder of Cel-Tech; certificate of president of
MIDCOM; certificate of president of CTIA; certificate of President of Cel-Tech.
(All of the contracts and other documents referred to hereinabove in paragraphs
A through F are sometimes collectively referred to hereinafter as the "Closing
Documents".)
G. On September 20, 1996, the Company authorized the release of
12,236 of the Holdback Shares (the "Issued Holdback
SETTLEMENT AGREEMENT AND RELEASE - 2
<PAGE> 3
Shares") to John, and the Company claimed offsets pursuant to the Holdback
Agreement and the Amended Agreement for the balance consisting of 1,957 Holdback
Shares.
H. John filed a complaint for damages and rescission of the Merger
against the MIDCOM Group on or about April 30, 1996, a first amended complaint
on or about July 2, 1996, a second amended complaint on July 23, 1996, and a
third amended complaint for damages on or about August 30, 1996, in King County
Superior Court under Cause No. 96-2-11985-7SEA captioned, Richard E. John v.
Midcom Communications, Inc. et al., et ux., (the "Litigation") . The Company
filed a counterclaim in the Litigation against John for rescission and damages.
I. The MIDCOM Group disputes any and all liability to John.
J. Contemporaneous with the execution of this Release, John and the
Company shall enter into amendments to a Revised Registration Rights Agreement
and a revised Representation Letter. In addition, John shall submit a Selling
Security Holder Information Questionnaire to the Company. At the same time, the
Holdback Agreement and the Consulting Agreement shall be canceled, and John
shall acknowledge the continuation of his obligations under the Non-Competition
Agreement for its remaining term.
K. Except as provided for herein, each member of each party
identified herein now wishes to release any and all claims it may have against
each member of the other party arising out of or in connection with the Merger
and the Closing Documents.
AGREEMENT
In consideration of the mutual undertakings set forth herein, the
parties hereto do hereby agree to the following:
1. OBLIGATIONS OF THE COMPANY AND JOHN
1.1 Obligations of the Company
1.1.1 PAYMENT OF CONSULTING FEE. Subject to the terms
and conditions contained in this Release, the Company shall pay John an
aggregate amount equal to the present value with interest accrued at an annual
rate of 10.596 for unpaid payments of $5,000 per month due from July 1, 1996
through the date of this Release, and discounted at 10.5%; for unpaid but not
yet due monthly consulting fee payments through September 1, 2000 (the
"Consulting Agreement Payment The Company shall pay John fifty percent: (50%) of
the Consulting Agreement Payment within three (3) business days of the execution
of this Release and shall pay the balance in accordance with the terms and
SETTLEMENT AGREEMENT AND RELEASE - 3
<PAGE> 4
conditions of the Company's Promissory Note essentially in the form attached
hereto as Exhibit 1.
1.1.2 CONSULTING AGREEMENT. The Company agrees that
John's obligations under the Consulting Agreement shall terminate on the
effective date of this Release and the Consulting Agreement is hereby
terminated.
1.1.3 ISSUANCE OF SHARES.
(a) Within three (3) business days of the execution
of this Release, the Company shall issue 7,500 shares of its non-registered
common stock to John (the "Release Shares").
(b) The term "Trigger Date" shall mean the later
of July 31, 1997, or such other time as the Company's second quarter financial
results are announced for 1997. The Company shall issue to John additional
shares of non-registered common stock of the Company (the "True Up Shares")
equal to the lesser of (1) 60,000 shares, or (2) the difference between $15.00
and the weighted (by number of shares traded) average closing price per share of
the Company's common stock for five (5) consecutive trading days following the
Trigger Date (the "Average Closing Price"), multiplied times 139,978 and
divided by the Average Closing Price. By way of example only, assume $11/share
represents the Average Closing Price, then:
True Up Shares = ($15.00-$11) x 139,978 = 50,901 shares
----------------------
$11
If the Average Closing Price is equal to or in excess of $15 per share, no True
Up Shares shall be issued to John. The Company shall issue to John the True Up
Shares within fifteen (15) days of the Trigger Date.
(c) At such time as John delivers to the Company the
personal property as defined below, the Company shall issue and deliver to
John within three (3) days of such tender an additional 1,957 of its
nonregistered common stock which for purposes of this Agreement, the Revised
Registration Rights Agreement and the Representation Letter shall be deemed to
be additional "Release Shares" as defined in subsection 1. 1. 3 (a) , above. The
personal property shall mean the agreement defined in Schedule 1. 1. 3 (c)
attached hereto, together with pre-loaded software, if any, all of which shall
be in normal operating condition, normal wear and tear excepted. John shall
execute all documents reasonably requested by the Company to transfer or assign
all of his right, title and interest in the personal property to the Company,
including without limitation, assignment of all applicable software licenses.
SETTLEMENT AGREEMENT AND RELEASE - 4
<PAGE> 5
1.1.4 REVISED REGISTRATION RIGHTS AGREEMENT. The
Company shall issue a Revised Registration Rights Agreement, in
essentially the form attached hereto as Exhibit 2, providing for
inclusion of the True Up Shares, the Issued Holdback Shares, and the
Release Shares in the Company's form S-3 registration statement until
December 31, 1997, and additional demand rights, subject to subsequent
exclusion when shares can be sold under Rule 144 and the Company's right
to suspend sales as set forth more fully in the Revised Registration
Rights Agreement. The original Registration Rights Agreement and
Holdback Agreement shall be null and void as of the effective date
specified in Section 3.1 of this Release.
1.2 Obligations of John
1.2.1 Non-Compete Agreement. John's obligations under
the Non-Competition Agreement shall continue until its termination date.
1.2.2 Executed Revised Registration Rights Agreement.
John shall execute a Revised Registration Rights Agreement essentially
in the form attached hereto as Exhibit 2.
1.2.3 Representation Letter. John shall execute a
revised Representation Letter essentially in the form attached hereto as
Exhibit 3.
1.2.4 Selling Security Holder Information
Questionnaire. John shall complete and submit to the Company a Selling
Security Holder Information Questionnaire essentially in the form
attached hereto as Exhibit 4.
1.2.5 Certification for Issued Holdback Shares. John
shall complete and submit to the Company or its stock transfer agent a
notarized affidavit certifying that he has not received a certificate
for the Issued Holdback Shares. The Company or its stock transfer agent
shall issue a substitute certificate to John for the 12,236 Issued
Holdback Shares within ten (10) days of receipt of said affidavit.
2. Mutual Releases
Except as set forth in this Agreement, the Company hereby fully,
finally and forever releases, acquits and discharges John, and John hereby
fully, finally and forever releases, acquits and discharges each member of the
MIDCOM Group from any and all claims, debts, actions, claims or causes of
action, demands, rights, liabilities of any kind or nature at law or equity for
any relief based on statute, code, regulatory or common or case law, whether
known or unknown, asserted or not, arising out of or in any manner related to
(i) the subjects of the complaint in and the settlement of this Litigation, (ii)
SETTLEMENT AGREEMENT AND RELEASE - 5
<PAGE> 6
all claims that are in any way related to the Closing Documents, or (iii) any
other transaction, agreement or relationship between the parties predating this
Release. The Signators shall promptly upon request execute and or direct their
attorneys to execute any and all instruments reasonably requested for purposes
of dismissing the Litigation with prejudice.
3. CONDITIONS TO RELEASE
3.1 Effective Date
The release of claims by the Company pursuant to Section 2 shall
be effective upon the later of (i) the date of execution of this Release by the
Company, (ii) the first payment and the issuance of the Company's Promissory
Note to John pursuant to subsection 1.1.1, and (iii) the issuance of the Release
Shares to John. The release of claims by John pursuant to Section 2 shall he
effective upon John's execution of this Release and agreements identified in
subsections 1.2.2, 1.2.3, and 1.2.4.
3.2 Exception to Release
Notwithstanding any other term or provision of this Release to
the contrary, John does not release the Company and the Company does not release
John from any obligation required to be performed after the date of this Release
or under any executory contract identified herein.
4. UNKNOWN CLAIMS.
Each Signator hereto acknowledges that there is a risk that
subsequent to the execution of this Release it will discover, incur or suffer
claims that were unknown or unanticipated at the time this Release was executed,
and that arose from, or are based upon, or are related to the claims released by
it pursuant to Section 2 hereof, which claims, if known upon execution of this
Release, might have materially affected its, his, or their decision to execute
this Release. Each Signator hereby expressly assumes the risk of such unknown
and unanticipated claims and agrees that this Release applies to all such
claims. The parties expressly waive the rights, benefits and protection afforded
by any state's statutory, common or case law which may exempt from a general
release claims that a creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him must have materially
affected his settlement with the debtor.
5. ASSIGNMENTS.
Each Signator represents and warrants to the other that it has
not assigned or otherwise transferred or subrogated
SETTLEMENT AGREEMENT AND RELEASE - 6
<PAGE> 7
any interest in any claims that are related in any way to the subject matter of
this Release. Each Signator agrees to indemnify, defend and hold the other fully
and completely harmless from any liability, loss, claim, demand, damage, cost,
expense and or attorneys' fees it incurs as a result of any person or entity
asserting such assignment, transfer or subrogation from such Signator.
6. REPRESENTATIONS.
Each Signator acknowledges that no other party or person, nor
any agent or attorney of any party or person, has made any promise,
representation or warranty whatsoever, express or implied, not contained herein
concerning the subject matter hereof, to induce any Signator to execute this
instrument, and each Signator acknowledges that it has not executed this
Release in reliance on any such promise, representation or warranty not
contained herein.
7. NO ADMISSION OF LIABILITY.
Each Signator agrees that this Release is a result of
compromise and shall not be construed as an admission by it of (i) liability to
any person and or entity, or (ii) breach of any agreement, or (iii) violation of
any law or regulation.
8. VOLUNTARY EXECUTION.
In executing this Release, each Signator fully, completely and
unconditionally acknowledges and agrees that (i) it has consulted with, and had
the advice of, counsel of duly licensed and competent attorneys and that it has
executed this Release after independent investigation, voluntarily and without
fraud, duress or undue influence, and (ii) expressly consents that this Release
be given full force and effect according to each and every of its express terms
and provisions.
9. AUTHORITY TO EXECUTE.
Each Signator executing this Release on behalf of another
person or organization represents and warrants to the other Signator that it is
fully authorized to execute and deliver this Release on behalf of such person or
organization. Each Signator warrants to all other Signators that no consent of
any person not a party to this Release is necessary in order for this Release to
be fully and completely binding upon each member of the parties hereto.
10. NOTICE.
Any demand, request or notice that any Signator hereto desires
or may be required to make or deliver to the other shall be in writing and shall
be deemed delivered when personally
SETTLEMENT AGREEMENT AND RELEASE - 7
<PAGE> 8
delivered, or when delivered by private courier service (such as Federal
Express), or three days after being deposited in the United States Mail, in
registered or certified form, postage prepaid, return receipt requested and
addressed as follows:
To the MIDCOM GROUP:
General Counsel
MIDCOM Communications Inc.
MIDCOM Tower
1111 Third Avenue, Suite 1600
Seattle, WA 98101
To JOHN:
Richard E. John
69050 Barclay Place
P.O. Box 1931
Sisters, OR 97759
or to such other single address or person as a Signator may communicate to the
other by like written notice. Each Signator hereby fully, completely and
unconditionally agrees that (i) any notice to any or all of the parties
constituting its group shall be sufficient for any and all purposes hereof if
delivered as aforesaid to the single person and address set forth above or
hereafter designated pursuant to the foregoing provisions of this Section; and
(ii) any party sending notice to any of the group of which it is a part shall
have no obligation whatsoever to send duplicate or concurrent copies of any
notice to the other parties constituting the group.
11. CONFIDENTIALITY; NO RECORDING.
Each Signator hereby agrees that it could be materially injured
if this Release is either recorded or publicly disclosed, and that, accordingly,
this Release is intended to be confidential between all the parties and each
Signator shall use its best efforts to keep the provisions of this Release, and
all exhibits and attachments, confidential. No Signator shall disclose the terms
of this Release to any person, firm, entity or corporation not a party hereto
without the other Signator's prior written consent except (i) within any
Signator's organization for internal purposes, (ii) to Signators' legal counsel
or accountants, (iii) as required in any Signator's credit relationships, or
(iv) in any Judicial or administrative proceedings, where such disclosure is
compelled. Each Signator also agrees not to record this Release or any document
or instrument referring to or arising out of this Release without the prior
written consent of the other Signator, which consent may be withheld in its sole
and absolute discretion of any Signator.
SETTLEMENT AGREEMENT AND RELEASE - 8
<PAGE> 9
12. MISCELLANEOUS.
12.1 Entire Agreement. This Release (including all exhibits
hereto, the Company's Promissory Note referenced at Subsection 1.1.1, the
agreements referenced at Subsections 1.1.5, 1.2.2, 1.2.3, and the questionnaire
referenced at Subsection 1.2.4, which are all material parts of this Release)
contains the entire understanding between the Signators and supersedes any prior
understandings and agreements between them respecting the subject matter hereof.
There are no other representations, agreements, arrangements or understandings,
oral or written, between and among the parties hereto, or any of them, relating
to the subject matter of this Release. No amendment of or supplement to this
Release shall be valid or effective unless made in writing and executed by the
parties hereto subsequent to the date of this Release.
12.2 Construction. Any titles or captions of paragraphs
contained in this Release are for convenience and reference only and the words
contained in them shall not be held to expand, modify, amplify or aid in the
interpretation, construction or meaning of this Release. All pronouns and any
variations thereof shall be deemed to refer to the masculine, feminine, neuter,
singular or plural as the identification of the person or persons, firm or
firms, corporation or corporations may require. The locative adverbs "herein,"
"hereunder," "hereto," "hereby," "hereinafter" and the like, wherever the same
appear herein, mean and refer to this Release in its entirety and not to any
specific article, section, subsection, paragraph or subparagraph hereof. The
general rule of construction that an agreement will be construed against the
party who drafted it will not apply to any disputes over the provisions of this
Release. Any reference herein to "days" means consecutive calendar days.
12.3 Attorneys' Fees. In the event of litigation, arbitration or
mediation between any or all members of either party hereto, declaratory or
otherwise, in connection with or arising out of this Release, the prevailing
parties shall recover from the non-prevailing parties all actual costs, actual
damages and actual expenses, including attorneys' fees, paralegals' fees and
other professional or consultants' fees expended or incurred in connection
therewith, including for appeals, which shall be determined and fixed by the
court as part of the judgment.
12.4 Binding. Except as otherwise herein provided, this Release
shall be binding upon and inure to the benefit of each Signator hereto, their
respective heirs, executors, administrators, successors, assigns, and all
persons now or hereafter holding or having all or any part of the interest of a
party herein.
SETTLEMENT AGREEMENT AND RELEASE - 9
<PAGE> 10
12.5 Severability. The invalidity or unenforceability of any
particular nonmaterial provision in this Release shall not affect the other
material provisions hereof.
12.6 Applicable Law. This Release shall be construed and
interpreted under the laws of the State of Washington.
12.7 Venue. In the event of litigation, arbitration or
mediation, each Signator agrees that exclusive venue for such action shall be in
any court of general jurisdiction located in King County, Washington, and
further agrees that the King County Superior Court shall have jurisdiction over
each Signator.
12.8 Counterparts. This Release may be executed in any number of
counterparts each of which shall be deemed to constitute an original Release,
and all of which shall constitute one Release. The execution of one counterpart
by any Signator shall have the same force and effect as if that Signator had
signed all other counterparts.
12.9 Introduction into Evidence. This Release may not be
offered, introduced or received into evidence for any purpose except in an
action to enforce or interpret the terms hereof.
12.10 No Waiver. The failure of any member of any party hereto
to enforce at any time any provision of this Release shall not be construed to
be a waiver of such a provision, nor in any way to affect the validity of this
Release or any part hereof or the right of any party thereafter to enforce each
and every such provision. No waiver of any breach of this Release shall
constitute or be deemed a waiver of any other breach.
12.11 Ambiguity Not To Be Construed Against Any Party. For the
purpose of construing or interpreting this Release, the Release is deemed to
have been drafted equally by all parties hereto, and shall not be construed
strictly for or against any party.
12.12 Independent Advice of Counsel. Each Signator hereto has
read and understands all the terms and provisions of this Release, has been
given the opportunity to discuss it with its own counsel, and it has not been
influenced to any extent whatsoever in executing this Release by any
representations or statements not expressly recited or referred to in this
Release.
SETTLEMENT AGREEMENT AND RELEASE - 10
<PAGE> 11
IN WITNESS WHEREOF, the parties to this Release have set forth
their signatures effective the date first set forth above.
JOHN:
By: /s/ RICHARD JOHN
-----------------------------------
RICHARD JOHN
MIDCOM COMMUNICATIONS INC., a
Washington Corporation
BY: /s/ ROBERT J. CHAMBERLAIN
-----------------------------------
Robert J. Chamberlain
-----------------------------------
ITS: EXECUTIVE VICE PRESIDENT-CFO
-----------------------------------
SETTLEMENT AGREEMENT AND RELEASE - 11
<PAGE> 12
STATE OF OREGON )
)ss.
COUNTY OF )
I certify that I know or have satisfactory evidence that Richard
E. John is the person who appeared before me, and said person acknowledged that
he signed this instrument and acknowledged it to be his free and voluntary act
for the uses and purposes mentioned in the instrument
Dated:______________________
_______________________________
(Signature of Notary Public)
_______________________________
(Printed Name of Notary Public)
My Appointment expires _____________________
STATE OF WASHINGTON )
)ss.
COUNTY OF KING )
I certify that I know or have satisfactory evidence that Robert
Chamberlain is the person who appeared before me, and said person acknowledged
that he signed this instrument, on oath stated that he was authorized to execute
the instrument and acknowledged it as the ________________ to be the free and
voluntary act of such party for the uses and purposes mentioned in the
instrument
Dated: March 1997
_______________________________
(Signature of Notary Public)
[SEAL]
_______________________________
(Printed Name of Notary Public)
1/19/96
My Appointment expires _____________________
SETTLEMENT AGREEMENT AND RELEASE - 12
<PAGE> 13
SCHEDULE 1.1.3(c)
<TABLE>
<CAPTION>
Quantity Item Item Description Price Extension
------------ ----------- ------------------------------------ ------- ---------
<S> <C> <C> <C> <C>
1 NOTEBOOK NoteBook computer - Texas Inst. 3995.00 3995.00
1 MODEM PCMCIA 14400 U.S. Robotics Fax Mod. 195.00 195.00
1 VGAMON VGA Monitor 15" KFC non-Int. .28 325.00 325.00
1 KEYBOARD Liteon Keyboard 35.00 35.00
1 SPEAKERS PC Speakers SONY 3 piece system. 175.00 175.00
1 PRINTER Brother HL-645 Laser Printer w/1 1MB 550.00 550.00
</TABLE>
<PAGE> 14
March ___ , 1997
Representation Letter
MIDCOM Communications Inc.
1600 MIDCOM Tower
1111 Third Avenue
Seattle, WA 98101
Ladies & Gentlemen:
In connection with the closing of that certain Agreement and Plan of
Reorganization (the "Merger Agreement") dated as of August 19, 1995 as Amended
on September 12, 1995 -and the Settlement and Release Agreement of even date
herewith, pursuant to which I will receive up to an additional 69,457 shares of
the voting common stock of MIDCOM Communications Inc., a Washington corporation
(the "Company" or "MIDCOM"), plus 12,236 shares that the Company authorized to
be issued to me on September 20, 1996 from the Holdback Reserve ("Additional
Shares"), the undersigned represents as follows:
(a) I have received or have been given copies of the Company's Annual
Report for 1995, and its Quarterly Financials for the First, Second and Third
Quarters of 1996, and a draft of the Company's Annual Report for 1996 (which I
agree to keep confidential);
(b) I have obtained, to the extent I deem necessary, professional advice
with respect to the risks inherent in investment in the Additional Shares and
the suitability of investment in the Shares in light of my financial condition
and investment needs;
(c) I acknowledge the acquisition of the Additional Shares involves a high
degree of risk, including the possibility of a complete loss of my investment;
(d) I am acquiring the Additional Shares for my own account and not for the
account or on behalf of others, and I am doing so with the intent of retaining
the Additional Shares as an investment;
(e) By virtue of my prior experience and/or the advice available to me
(which advice is furnished by persons who are neither affiliated with nor
directly or indirectly compensated by the Company or any affiliate or agent of
the Company), I have extensive knowledge and experience in financial and
business matters and the capability to evaluate the merits and risks of my
investment in the Additional Shares;
(f) I realize that (i) the acquisition of the Additional Shares is a
long-term investment, (ii) I must bear the economic risk of investment in the
Additional Shares for an indefinite period of time because the Shares have not
been registered under the Securities Act of 1933, as amended, or any state
securities law and, therefore, cannot be sold unless they are subsequently
registered under
1
<PAGE> 15
federal and applicable state securities laws or an exemption from such
registration is available, (iii) the Additional Shares may not be resold or
transferred on the official stock transfer records of the Company without
furnishing to the Company an opinion of the undersigned's counsel, concurred in
by counsel for the Company, that such sale or transfer of the Additional Shares
will not violate the registration provisions of federal or state securities
laws; and (iv) certificates representing any of the Additional Shares shall have
endorsed on them a restrictive legend to the effect of this paragraph;
(g) I agree that I will not transfer the Additional Shares in violation of
the provisions of any applicable securities laws;
(h) I have sufficient liquid assets so that the illiquidity associated with
the Additional Shares will not cause undue financial difficulties or affect my
ability to provide for my current needs and possible financial contingencies;
and
(i) I am a citizen of the United States with my sole residence in the State
of Washington. I have no present intention of becoming a resident of any other
state or jurisdiction.
(j) I have read this Representation Letter, the Revised Registration Rights
Agreement, and the Settlement and Release Agreement ("Release") and have
discussed their requirements and other applicable limitations upon my ability to
sell, transfer or otherwise dispose of MIDCOM Common Shares, to the extent I
believe necessary, with my counsel or counsel for MIDCOM. I have completed and
executed the Selling Security Holder Information Questionnaire sent to me by the
Company and to the best of my knowledge believe my responses therein are true
and correct.
(k) I also understand that stop transfer instructions will be given to
MIDCOM's transfer agent with respect to MIDCOM Common Shares and that a legend
will be placed on the certificates for the MIDCOM Common Shares issued to me in
compliance with the Release, or any substitutions therefor, and that any
transfer in contradiction of this agreement will be void ab initio.
(l) I represent and warrant to MIDCOM that the representations set forth
herein are true as of the date hereof and if there is any change I will advise
the Company forthwith.
I UNDERSTAND THE SIGNIFICANCE TO THE COMPANY OF THE FOREGOING
REPRESENTATIONS AND THAT THEY WILL BE RELIED UPON BY THE COMPANY.
Dated: March 19, 1997.
/s/ RICHARD E. JOHN RICHARD E. JOHN
- ------------------------------- -------------------------------
Signature Name - Typed or Printed
P.O. Box 1931; 69050 Barclay Place, Sisters, OR 97759
- -------------------------------------------------------------------
Address
541-549-1270 ###-##-####
- ------------------------------- -------------------------------
Telephone Number Social Security Number
[SEAL]
2
<PAGE> 16
EXHIBIT 1
PROMISSORY NOTE
$125,374.33 Seattle, Washington
March 18, 1997
FOR VALUE RECEIVED, undersigned promises to pay to the order of Richard
E. John, whose address is 69050 Barclay Place, P.O. Box 1931, Sisters, OR 97759
the sum of One Hundred Twenty-Five Thousand, Three Hundred Seventy-Four and
33/100 United States Dollars ($125,374.33), on September 19, 1997 ("Due Date")
with interest thereafter computed at the Default Rate identified herein.
The entire balance owing on this Note shall be paid in one payment. In
the event not paid on the Due Date, all payments thereafter shall be applied
first to interest on the unpaid principal balance and the balance to principal
until all principal and interest is fully paid. If any payment is less than the
accrued interest when due, such accrued but unpaid interest shall be added to
and become part of the principal and it shall bear interest therewith.
If undersigned fails to pay on the Due Date or fails to perform any
material obligations under the Settlement Agreement dated concurrently herewith,
the whole sum shall become due and payable at once at the option of the holder
hereof upon three (3) days written notice to the undersigned. If the holder of
this Promissory Note elects to exercise this option, unpaid balance shall
thereafter bear interest at the rate of fifteen percent (15%) per annum
compounded annually, provided that in no event shall interest payable hereunder
exceed an amount equivalent to the highest rate of interest then permitted by
law.
This Promissory Note may be prepaid in whole or in part at any time and
from time to time. All payments hereunder shall be made at the address of payee
set forth above, or at such other place as the holder of this Promissory Note
may from time to time designate in writing.
As a material inducement to payee to accept this Promissory Note,
undersigned warrants the transaction out of which this Note arises is for
business purposes only and is not a transaction with respect to which Washington
law imposes interest limitations.
1
<PAGE> 17
In case of suit or if this Note is placed in an attorney's hands for
collection, undersigned shall pay the ordinary, necessary and reasonable costs
of collection and of suit, including ordinary, necessary and reasonable
attorneys' fees incurred by the holder of this Promissory Note.
Undersigned executes this Promissory Note as a principal and not as a
surety. Undersigned covenants, guarantees and warrants that undersigned is
authorized to execute this Promissory Note, and undersigned agrees that all
obligations hereunder are joint and several.
Undersigned hereby waives presentment, demand, protest, notice of
protest, dishonor, and nonpayment of this Promissory Note, all notices of every
kind and filing of suit and diligence in collecting this Promissory Note.
This Promissory Note has been executed for value in Seattle,
Washington, on the date first written above. The rights of the parties shall be
governed and construed in accordance with the law of the State of Washington.
Undersigned agrees that the exclusive venue for any legal action arising out of
this Note shall be the Superior Court for King County, Washington, which shall
have jurisdiction over undersigned.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND
CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE
NOT ENFORCEABLE UNDER WASHINGTON LAW.
MIDCOM Communications Inc.,
a Washington corporation
By:
-------------------------------------
Its:
---------------------------------
2
<PAGE> 18
EXHIBIT 2
REVISED
REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT made as of the 18th day of March, 1997 by and between
MIDCOM COMMUNICATIONS INC., a Washington corporation ("MIDCOM") and RICHARD E.
JOHN ("Holder").
WHEREAS, concurrent with the execution of this Agreement, MIDCOM and
Holder entered into agreements to consummate a settlement of the existing
disputes between Holder and MIDCOM ("Release"); and
WHEREAS, in connection with entering into the Release, MIDCOM has
agreed to issue up to Holder up to 9,457 Common Shares (the "Release Shares")
and up to 60,000 Common Shares (the "True-Up Shares"); and
WHEREAS, MIDCOM authorized the issuance to John of 12,236 Issued
Holdback Shares on September 20, 1996; that term is as defined in the Release;
and
WHEREAS, MIDCOM is willing to grant certain registration rights to
Holder with respect to the Issued Holdback Shares, the Release Shares and the
True-Up Shares (together called the "Additional Shares");
NOW, THEREFORE, in consideration of the Release and other valuable
consideration, receipt of which is hereby acknowledged, MIDCOM and Holder agree
as follows:
1. Definitions. The following terms shall have the following
respective meanings:
1.1 "Commission" or "SEC" means the United States Securities
and Exchange Commission.
1.2 "Common Shares" means the voting common capital stock,
$.0001 par value, of MIDCOM.
1.3 "Exchange Act" means the Securities Exchange Act of
1934, as amended, or any similar federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
1.4 "Form S-3" means such form under the Securities Act as
is in effect on the date hereof or any registration form under the Securities
Act subsequently adopted by the SEC that similarly permits inclusion or
incorporation of substantial information by reference to other documents filed
by MIDCOM with the SEC.
1
<PAGE> 19
1.5 "Holder" shall mean Richard E. John or, in the case of
John's death, his personal representative and successors in interest.
1.6 "Opening Date" means the first date on which MIDCOM is
eligible to make use of Form S-3 or any successor form to register the
Registrable Shares for resale.
1.7 "Registrable Shares" means the Additional Shares
together with any securities issued or issuable as a dividend, stock split or
other distribution directly or indirectly with respect to Additional Shares. Any
Registrable Share shall cease to be a Registrable Share when (i) it has been
disposed of pursuant to an effective Registration Statement, (ii) such time as
all of the Registrable Shares can be sold within three months without compliance
with the registration requirements of the Securities Act pursuant to Rule 144
promulgated thereunder (or any similar provisions then in force) or (iii) it is
no longer beneficially owned by Holder.
1.8 "Registration Statement" means a registration covering
Registrable Shares.
1.9 The terms "register," "registered" and "registration"
refer to a registration effected by preparing and filing a Registration
Statement in compliance with the Securities Act, and the declaration or ordering
of the effectiveness of such Registration Statement.
1.10 "Resale Shelf" means the registration statement on SEC
Form S-1, SEC file No. 333-16681, filed by MIDCOM with the SEC on November 25,
1996 to register for resale Common Shares held by a number of shareholders of
MIDCOM including any amendments thereto filed from time to time hereafter and
any registration statement on Form S-3 filed in place of such S-1 registration
statement.
1.11 "Securities Act" means the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations
thereunder, all as shall be in effect at the time.
1.12 "Shelf Registration Statement" means the Registration
Statement filed pursuant to Section 2 below.
2. Shelf Registration.
2.1 Not later than April 10, 1997, MIDCOM shall file an
amendment to the Resale Shelf or shall file a separate registration statement on
the least burdensome SEC form then available to MIDCOM to register the
Registrable Shares under the Securities Act for resale, and shall use its
reasonable best efforts to secure the effectiveness of such Registration
Statement as soon as practicable thereafter (the Registration Statement filed
pursuant to this Section referred to herein as the "Shelf Registration
Statement").
2.2 Subject to the conditions and limitations set forth in
subsection 2.3 below, MIDCOM will use its reasonable best efforts to keep the
Shelf Registration Statement effective until the earlier of (A) December 31,
1997, (B) such date as all of the Registrable Shares have been resold or (C)
such time as all of the Registrable Shares can be sold within three months
without
2
<PAGE> 20
compliance with the registration requirements of the Securities Act pursuant to
Rule 144 promulgated thereunder.
2.3 If Holder shall propose to sell any Registrable Shares
pursuant to the Shelf Registration Statement, he shall notify MIDCOM in writing
of his intent to do so at least five (5) full business days prior to such sale
(a "Sale Notice:). A Sale Notice shall be deemed to constitute a representation
that any information previously supplied by Holder is accurate as of the date of
such notice. Following receipt of a Sale Notice, and except as set forth in the
following sentence, MIDCOM shall use its commercially reasonable efforts to
amend the Shelf Registration Statement if necessary and to take all other
actions necessary to allow such sale, and shall notify Holder promptly after it
has determined that such sale has become permissible. At any time within the
five (5) business-day period following receipt by MIDCOM of a Sale Notice,
MIDCOM may refuse to permit Holder to resell any Registrable Shares pursuant to
the Shelf Registration Statement for an initial period not to exceed sixty (60)
days; provided, however, that in order to exercise this right, MIDCOM must give
Holder written notice that a delay in such sale is necessary because either (i)
in the good faith judgment of MIDCOM, a sale pursuant to the Shelf Registration
Statement in its then-current form would not be in the best interests of MIDCOM
and its shareholders due to disclosure obligations of MIDCOM or (ii) MIDCOM in
good faith is planning an underwritten registered public offering of Common
Shares which reasonably is expected to be offered within thirty (30) days of
receipt by MIDCOM of the Sale Notice (in either case, a "Permitted Deferral").
Notwithstanding the foregoing, MIDCOM shall not be entitled to exercise its
right to suspend sales pursuant to the Shelf Registration Statement more than
three (3) times or for more than ninety (90) consecutive days. Holder hereby
covenants and agrees that he will not sell any Registrable Shares pursuant to
the Shelf Registration Statement during any Permitted Deferral period. Nothing
in this subsection shall require Holder to give a Sale Notice prior to selling
Registrable Shares pursuant to Rule 144 promulgated under the Securities Act (or
any similar provisions then in force).
3. Form S-3 Demand Rights. At any time after December 31, 1997 and
continuing until the earlier of (i) such time as Holder is entitled to dispose
of all of the Registrable Shares within three months pursuant to Rule 144 or
(ii) December 31, 1998, Holder may make written demand on one occasion for
registration under the Securities Act of Holder's Registrable Shares on Form
S-3, provided that the Registrable Shares requested to be registered in such
Form S-3 Registration Statement have an aggregate expected selling price of at
least $200,000 (a "Demand Notice"). The request pursuant to this Section 3 will
specify the number of Registrable Shares requested to be registered and the
anticipated per share price range for such offering. MIDCOM shall not be
obligated to effect any registration or compliance pursuant to this Section 3
for a period of up to ninety (90) days if MIDCOM shall within twenty (20) days
of its receipt of a Demand Notice give Holder written notice that a delay in
such sale is necessary because either (i) in the good faith judgment of MIDCOM
the filing and/or effectiveness of a registration at that time would not be in
the best interests of MIDCOM and its shareholders due to disclosure obligations
of MIDCOM or (ii) MIDCOM in good faith is planning all underwritten registered
public offering of Common Shares which reasonably is expected to be offered
within thirty (30) days of receipt by MIDCOM of the Demand Notice.
4. Conditions of Obligations to Register Shares. The obligations of
MIDCOM hereunder are subject to the following conditions:
3
<PAGE> 21
4.1 Holder shall cooperate with MIDCOM in connection with
the preparation of any Registration Statement, and for so long as MIDCOM is
obligated to file and keep effective the Registration Statement, shall provide
to MIDCOM, in writing, for use in the Registration Statement, all such
information regarding Holder as MIDCOM from time to time may reasonably request
to prepare the Registration Statement and any prospectus covering the
Registrable Shares, to maintain the currency and effectiveness thereof and
otherwise to comply with all applicable requirements of law in connection
therewith. Holder covenants that he will promptly notify MIDCOM in writing of
any changes in the information set forth in a Registration Statement regarding
Holder or his plan of distribution of Registrable Shares covered thereby.
4.2 To the extent required by the Securities Act, Holder
shall cause to be furnished to each broker through whom the Registrable Shares
may be offered, or to the offeree if an offer is not made through a broker, such
copies of the prospectus covering the Registrable Shares and any amendment or
supplement thereto and documents incorporated by reference therein as may be
required by law and he shall not bid for or purchase any securities of MIDCOM or
attempt to induce any other person to purchase any securities of MIDCOM other
than as permitted under the Exchange Act.
5. Registration Procedures. If and whenever MIDCOM is required by
the provisions of this Agreement to include any of the Registrable Shares in a
Registration Statement filed under the Securities Act, MIDCOM shall use its
reasonable commercial efforts to effect such registration, and MIDCOM shall, as
expeditiously as possible:
5.1 Prepare and file with the SEC such amendments and
supplements to any such Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration Statement
effective for a period of 30 days from the date of its effectiveness in the case
of a registration pursuant to Section 3 hereof or (unless otherwise required by
the Securities Act) until the Registrable Shares covered thereunder have been
sold, whichever is earlier.
5.2 Furnish to Holder such number of copies of any
prospectus contained in such Registration Statement in conformity with the
requirements of the Securities Act, and such other documents as Holder may
reasonably request in order to facilitate the disposition of the Registrable
Shares, but only while MIDCOM is required under the provisions hereof to cause a
Registration Statement to remain effective.
5.3 Use its commercially reasonable efforts to register or
qualify the Registrable Shares covered by such Registration Statement under the
securities or blue sky laws of such jurisdictions as the selling Holder or the
underwriter for such offering may reasonably request; provided that MIDCOM shall
in no event be required to qualify to do business as a foreign corporation or as
a dealer in any jurisdiction where it is not so qualified, to amend its Articles
of Incorporation or to change the composition of its assets at the time to
conform with the securities or blue sky laws of such jurisdictions, to take any
action that would subject it to service of process in suits other than those
arising out of the offer and sale of the Registrable Shares covered by the
4
<PAGE> 22
Registration Statement or to subject itself to taxation in any jurisdiction
where it has not theretofore done so.
5.4 Notify Holder at any time when any prospectus relating
to the Registrable Shares is required to be delivered under the Securities Act
of the happening of an event as a result of which, or upon the discovery that,
the prospectus contained in such Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances under which they were made.
Holder agrees, upon receipt of such notice, forthwith to cease making offers and
sales of the Registrable Shares pursuant to such registration statement or
deliveries of the prospectus contained therein for any purpose and to return to
MIDCOM, for modification and exchange, the copies of such prospectus not
theretofore delivered by Holder, provided, that MIDCOM shall forthwith prepare
and furnish, after securing such approvals as may be necessary, to Holder a
reasonable number of copies of any supplement to or amendment of such prospectus
that may be necessary so that, as thereafter delivered to the purchasers of such
Registrable Shares, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made.
5.5 Promptly notify Holder of any stop order or similar
proceeding initiated by state or federal regulatory bodies and use its best
efforts to expeditiously remove such stop order or similar proceeding.
5.6 Provide a transfer agent and registrar for all such
Registrable Shares not later than the effective date of such Registration
Statement.
6. Description of Expenses. Except as set forth below, MIDCOM shall
pay all costs and expenses incurred in connection with registration of the
Registrable Shares pursuant to this Agreement including, without limitation, all
registration and filing fees, printing expenses, fees and costs of counsel to
MIDCOM, and blue sky fees and expenses. Notwithstanding the foregoing, Holder
shall pay all fees and disbursements of Holder's attorneys and accountants, as
well as all transfer taxes and brokerage and underwriters' discounts and
commissions attributable to the Registrable Shares offered and sold by Holder.
7. Indemnification; Underwriting Agreements.
7.1 In the event that, pursuant to this Agreement, MIDCOM
registers under the Securities Act any Registrable Shares held by Holder:
7.1.1 MIDCOM agrees to indemnify, defend and hold
harmless Holder against any and all loss, claim, liability or expense (a
"Claim") arising out of or based upon any untrue statement or alleged untrue
statement of a material fact in any related Registration Statement, any omission
or alleged omission of any material fact required to be stated therein or
necessary to make the statements therein not misleading, unless such statement,
alleged statement or omission was made in reliance upon, and in conformity with,
information provided by Holder to MIDCOM expressly for use therein.
5
<PAGE> 23
7.1.2 Holder hereby agrees to indemnify and hold
harmless MIDCOM, each person who controls MIDCOM within the meaning of the
Securities Act and the officers, directors, shareholders, employees and agents
of MIDCOM, against any Claim arising out of or based upon any untrue statement
or alleged untrue statement of a material fact in any Registration Statement or
alleged omission of any material fact required to be stated therein or necessary
to make the statements therein not misleading, but only with reference to
statements or omissions made in reliance upon, and in conformity with,
information provided by Holder to MIDCOM expressly for use therein.
7.2 A party required to indemnify another party pursuant to
this Section 7 ("Indemnifying Party") shall not be liable for any settlement of
any action or claim relating to such liability or expense effected without its
consent, but if any settlement is effected with its consent or if a final
judgment for the plaintiff is entered in any such action, such Indemnifying
Party agrees to indemnify and hold harmless the indemnified party from and
against any loss or liability by reason of any such settlement or judgment.
7.3 The obligations of the parties hereto to indemnify one
another pursuant to this Section 7 are expressly conditioned upon the
Indemnifying Party being given written notice of any claim for which
indemnification will be sought within twenty (20) days after the indemnified
party learns thereof and that the Indemnifying Party is given full control over
the defense and settlement of the claim and provided, further, that the
Indemnified Party cooperates fully with the Indemnifying Party in the defense of
such claim.
8. Restrictions on Transferability of Registrable Shares,
Compliance with Securities Act.
8.1 The Registrable Shares are not transferable in the
absence of registration under the Securities Act or an exemption therefrom.
MIDCOM shall be entitled to give stop transfer instructions to its transfer
agent with respect to the Registrable Shares in order to enforce such
restrictions.
8.2 Each certificate representing the Registrable Shares not
previously issued to Holder shall bear substantially the following legends (in
addition to any legends required under applicable state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR
INVESTMENT PURPOSES ONLY AND HAVE NOT BEEN REGISTERED UNDER
UNITED STATES FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE
OFFERED FOR SALE, SOLD, PLEDGED OR OTHERWISE TRANSFERRED OR
ASSIGNED FOR VALUE, DIRECTLY OR INDIRECTLY, NOR MAY THE
SECURITIES BE TRANSFERRED ON THE BOOKS OF THE CORPORATION,
WITHOUT REGISTRATION OF SUCH SECURITIES UNDER ALL APPLICABLE
FEDERAL AND STATE SECURITIES
6
<PAGE> 24
LAWS OR COMPLIANCE WITH AN APPLICABLE EXEMPTION THEREFROM, SUCH
COMPLIANCE, AT THE OPTION OF THE CORPORATION, TO BE EVIDENCED BY
AN OPINION OF SHAREHOLDER'S COUNSEL, IN FORM ACCEPTABLE TO THE
CORPORATION, THAT NO VIOLATION OF SUCH REGISTRATION PROVISIONS
WOULD RESULT FROM ANY PROPOSED TRANSFER OR ASSIGNMENT.
8.3 Holder hereby covenants with MIDCOM not to make any sale
of the Registrable Shares except either (i) a sale of Registrable Shares in
accordance with a Registration Statement, in which case Holder covenants to
comply with the requirement of delivering a current prospectus, (ii) a sale of
Registrable Shares in accordance with Rule 144, in which case Holder covenants
to comply with Rule 144, or (iii) subject to such conditions as MIDCOM in its
sole discretion shall impose, in accordance with another exemption from the
registration requirements of the Securities Act. Holder further acknowledges and
agrees that the Registrable Shares are not transferable on the books of MIDCOM
unless the certificate submitted to MIDCOM's transfer agent evidencing such
Registrable Shares is accompanied by such additional certification,
documentation or information as MIDCOM shall reasonably require in order to
effect such sale in accordance with a Registration Statement, Rule 144, or such
other exemption from the registration requirements of the Securities Act.
9. Miscellaneous Provisions
9.1 Notices. All notices, demands and other communications
called for or required by this Agreement shall be in writing and shall be
addressed to the parties at their respective addresses stated below or to such
other address as a party may subsequently designate by written notice to the
other parties. Communications hereunder shall be deemed to have been received
(i) upon delivery in person, (ii) the third business day after deposit with the
United States Postal Service for delivery by certified mail, return receipt
requested and postage prepaid, (iii) the first business day after depositing it
with a commercial overnight carrier which provides written verification of
delivery or (iv) the day of transmission by telefacsimile if sent before 2:00
p.m. recipient's time provided that a copy of such notice is sent on the same
day by U.S. certified mail, return receipt requested and postage prepaid, with
an indication that the original was sent by facsimile and the date of its
transmittal.
To: MIDCOM Communications Inc.
Attention: President
1111 Third Avenue, Suite 1600
Seattle, WA 98101
Phone: (206) 628-8000
Fax: (206) 628-8769
With copy to:
Law Department
Attn: General Counsel
7
<PAGE> 25
To: Richard E. John
c/o Thomas J. Greenan
Gordon, Thomas, Honeywell
Malanca, Peterson & Daheim, P.L.L.C.
2101 One Union Square
600 University Street
Seattle, WA 98101
Phone: (206) 447-9505
Fax: (206) 622-9779
9.2 Amendment or Waiver. No amendment of this Agreement or
waiver of any provision contained herein shall be valid unless in writing and
duly executed by MIDCOM and Holder. No evidence of any waiver or amendment shall
be offered or received in evidence in any proceedings, arbitration, or
litigation between the parties hereto arising out of or affecting this
Agreement, or the rights or obligations of the parties hereunder, unless such
waiver or amendment is in writing and duly executed. Waiver of any term or
condition of this Agreement by any party shall not be construed as a waiver of a
subsequent breach or failure of the same term or condition, or a waiver of any
other term or condition of this Agreement.
9.3 Assignment. The rights of the Holder hereunder may not
be assigned without the prior written consent of MIDCOM.
9.4 Governing Law. This Agreement, including all matters of
construction, validity and performance, shall be governed by and construed and
enforced in accordance with the laws of the State of Washington, without regard
to its conflict of law provisions which might otherwise require the application
of the law of any other jurisdiction. The parties agree that the exclusive
jurisdiction and venue of any lawsuit between them arising under this Agreement
or out of the transactions contemplated herein shall be the Superior Court of
Washington for King County, or the United States District Court for the Western
District of Washington at Seattle, and each of the parties hereby irrevocably
agrees, acknowledges and submits itself to the exclusive jurisdiction and venue
of such courts for the purposes of such lawsuit. The terms of this Agreement are
deemed to have been mutually agreed upon by all parties hereto, and
interpretation will not be for or against any party if any ambiguity exists.
9.5 Entire Agreement. This Agreement together with the
Release and all agreements and documents referenced in Section 12.1 of the
Release, contain all of the terms and conditions agreed upon by the parties
relating to the subject matter thereof and supersedes and cancels all prior
agreements, negotiations, correspondence, undertakings, and communications of
the parties, whether oral or written, respecting that subject matter including
the Registration Rights Agreement between MIDCOM and Holder dated September 12,
1995.
8
<PAGE> 26
9.6 Execution in Counterparts. This Agreement may be
executed in one or more counterparts, all of which shall be considered one and
the same agreement, and shall become a binding agreement when one or more
counterparts have been signed by each of the parties and either original or
facsimile counterparts have been delivered to the other party.
9.7 Captions. The captions in this Agreement are inserted
solely for the purpose of facilitating easy reference and shall not be construed
in any way as part of the text, or as altering the provisions of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Amended Registration
Rights Agreement to be duly executed on the date fast set forth above.
MIDCOM COMMUNICATIONS INC.
By:
-------------------------------
W. H. Oberlin
Its President
RICHARD E. JOHN
----------------------------------
9
<PAGE> 27
EXHIBIT 4
MIDCOM COMMUNICATIONS INC.
SELLING SECURITY HOLDER INFORMATION QUESTIONNAIRE
NAME:
-----------------------
Heller, Ehrman, White & McAuliffe
6100 Columbia Center
701 Fifth Avenue
Seattle, Washington 98104-7098
Attention: Michael A. Skinner, Esq.
Ladies and Gentlemen:
The following information is furnished by the undersigned for use in
connection with the preparation of the Registration Statement on Form S-1 (the
"Registration Statement") for MIDCOM Communications Inc. (the "Company") to be
filed with the Securities and Exchange Commission (the "SEC") for purposes of
registering the public offer and sale of shares of the Company's common stock,
par value $.0001 per share (the "Common Stock") held by the undersigned and
certain other shareholders. The undersigned will promptly notify you of any
changes in such information which may occur subsequent hereto. The undersigned
understands and agrees that this Questionnaire, as completed by the undersigned,
and further communications by the undersigned regarding the matters contemplated
herein, will be relied upon by the Company in connection with preparation of the
Registration Statement. Italicized terms in this Questionnaire have the meanings
set forth on the last two pages of this document.
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS QUESTIONNAIRE TO
MICHAEL A. SKINNER, ESQ. AT THE ADDRESS SET
FORTH ABOVE ON OR BEFORE DECEMBER 13, 1996.
<PAGE> 28
PLEASE FEEL FREE TO ATTACH ADDITIONAL PAGES OR ANSWER ON THE BACK, IF NECESSARY.
A. MATERIAL RELATIONSHIPS
1. Positions with the Company and/or Subsidiaries
Describe below all positions and offices (including director) which you
or any associate of yours currently hold or have held with the Company and/or
any subsidiary within the last three years, including the position and the
length of time the position was held:
Time Period Held
(Month and Year)
List of Positions From To
2. (a) Describe below any transaction or series of similar transactions
during the last three years or which are currently proposed which involve the
Company or any of its subsidiaries and in which you or any associate or spouse,
parent, child, sibling, mother- or father-in-law, son- or daughter-in-law,
brother- or sister-in-law of yours had, has or will have any material financial
or other interest, direct or indirect. If any such transaction involved or is to
involve the purchase or sale of assets by or to the company or any of its
subsidiaries, other than in the ordinary course of business, state the cost of
the assets to the purchaser and the cost thereof to the seller if acquired by
the seller within two years prior to the transaction. Note: Include purchases
and sales of property, leases, loans, guarantees, provision of services to the
Company or its subsidiaries, etc. Description should include the dollar value of
any such transaction(s), the name of your relative or associate involved and
nature of your relationship with such relative or associate, if applicable. IF
NONE, SO STATE.
-2-
<PAGE> 29
(b) Describe below any material relationship that existed at any time
during the last three years between the Company or any of its subsidiaries and
you or any associate or spouse, parent, child, sibling, mother- or
father-in-law, son- or daughter-in-law, brother- or sister-in-law of yours. IF
NONE, SO STATE.
-3-
<PAGE> 30
B. SECURITY OWNERSHIP
3. Ownership of MIDCOM Shares of Common Stock
(a) Furnish below information as to the number of shares of
Common Stock beneficially owned by you as of the date of this Questionnaire. IF
THERE IS ANY CHANGE IN YOUR OWNERSHIP OF SHARES OF COMMON STOCK BETWEEN THE DATE
HEREOF AND THE DATE ON WHICH THE EFFECTIVENESS OF THE REGISTRATION STATEMENT IS
TERMINATED BY THE COMPANY OR ON WHICH YOU NO LONGER HOLD ANY SHARES OF COMMON
STOCK, WHICHEVER OCCURS EARLIER, YOU HEREBY AGREE TO PROMPTLY NOTIFY THE
COMPANY. Include all shares of Common Stock which are (i) registered in your
name, including shares of Common Stock registered in your name as trustee,
executor, custodian, pledgee, agent or nominee, either alone or with others,
(ii) owned beneficially by you or any associate of yours or (iii) registered in
the name of a nominee or in street name, including any such shares held for the
account of any of the above. If your voting and/or investment control over any
Shares of Common Stock is shared, you should so indicate in the Remarks column,
and you should provide a brief description of any arrangement concerning such
shared control.
If you wish to disclaim beneficial ownership of any
shares of Common Stock listed, indicate so by writing the word "Disclaim" in the
Remarks column below. As to any shares of Common Stock for which you disclaim
ownership but over which you have shared or sole voting or investment control,
indicate the nature of such control in the Remarks column and provide a brief
description of any arrangement concerning such shared voting and/or investment
control. In the Registration Statement, an appropriate disclaimer will be
included. If any co-trustee, etc., acting with you is an officer or director of
the Company, set forth his or her name in the Remarks column. If any of the
shares of Common Stock listed are subject to any claim, encumbrance, pledge or
lien, indicate so in the Remarks column.
<TABLE>
<CAPTION>
Number of Registered in the Beneficial Owner
Shares Name of Address and Relationship Remarks
------ ------- ------- ---------------- -------
<S> <C> <C> <C> <C>
</TABLE>
Description of arrangements concerning shared voting and/or investment control:
-4-
<PAGE> 31
(b) Indicate below whether you have the right to acquire
(other than through the exercise of options), beneficial ownership of Common
Stock of the Company:
(i) You have no such right .
(ii) You have such a right . Describe the type of
right (e.g., warrants, power to revoke a trust,
discretionary account or similar arrangement,
etc.) and exercisability, including with respect
to each of the rights described below the date
or dates on which the right becomes or became
exercisable, and the number of shares for which
the right is exercisable on each such date:
Number of Shares
Type of Date(s) for which Right
Right Exercisable is Exercisable
----- ----------- --------------
4. Interest in Subsidiaries
You do not beneficially own any equity securities of any
subsidiary of the Company.
(a) No exception .
(b) Exception . Description of subsidiary securities:
-5-
<PAGE> 32
5. Stock Options
The following is a list of all stock options to acquire securities
of the Company held by you as of the date of this Questionnaire including the
date or dates such stock options become or will become exercisable, and the
number of shares for which such stock option is exercisable on such date:
Total Type of
Number Exercise Date Option/
Date of of Dates Price of Name
Grant* Shares Exercisable Per Share Expiration of Plan
- ------ ------ ----------- --------- ---------- -------
- -------
*The extension of the term of an option is deemed to be a grant of a new option.
-6-
<PAGE> 33
C. MISCELLANEOUS
6. Indebtedness to the Company.
Except as described below, neither you nor any associate or
parent, child, sibling, mother- or father-in-law, son- or daughter-in-law,
brother- or sister-in-law of yours has, at any time in the last three years,
been indebted to the Company or any of its subsidiaries, except for amounts due
for purchases subject to usual trade terms, for ordinary travel and expense
advances and for other transactions in the ordinary course of business.
(a) No exception .
(b) Exception . Description of such indebtedness:
(i) The name of such person and the nature of your
relationship to such person:
(ii) The largest total amount of indebtedness at any
time during the Company's last fiscal year:
(iii) The nature of the indebtedness and of the
transaction in which it was incurred:
(iv) The amount outstanding as of the end of the
Company"s last fiscal year:
(v) The amount currently outstanding and the date as
of which you determined such amount:
(vi) The rate of interest paid or charged thereon:
-7-
<PAGE> 34
7. Do you now owe any amounts to the Company pursuant to Section
16(b) of the Securities Exchange Act of 1934 as a result of profits realized
from any purchase and sale, or sale and purchase, of the Company's shares within
any six-month period made at any time in the past?
None Known _________ .
Yes _________ . If yes, please provide date of purchase, date of
sale, purchase and sale prices, and number of shares involved:
8. Identity of Associates
The full name, form (e.g., partnership, corporation, etc.),
nature of business done by, and principal place of business of each associate of
yours referred to in the answers to this Questionnaire and your relationship
with such associate are as follows, if applicable:
(a) Not applicable
(b) Applicable . Description:
9. Additional Information
Is there any other information concerning your relationship or
dealings with the Company that could be of significance to investors or
shareholders of the Company that you believe should be disclosed in the
Registration Statement?
No .
Yes . Please provide information:
-8-
<PAGE> 35
10. Affidavit.
The undersigned understands that this information is furnished
to the Company for use in connection with the Registration Statement filed by
the Company with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), to register the
public offer and sale of the shares of Common Stock held by the undersigned and
certain other shareholders. The information set forth above is true and accurate
to the best of the undersigned's information and belief.
The undersigned will promptly notify the Company of any changes
in such information that may occur subsequent hereto and prior to the date on
which the effectiveness of the Registration Statement is terminated by the
Company or on which the undersigned no longer holds shares of Common Stock,
whichever occurs earlier. The undersigned understands and agrees that this
Questionnaire and the undersigned's further communications regarding the matters
contemplated herein, will be relied upon by the Company, counsel to the Company,
and representatives of underwriters and their counsel, if any, in connection
with the Preparation of the Registration Statement.
The undersigned confirms that the undersigned will not sell any
shares of Common Stock pursuant to the Registration Statement before it has been
declared effective by the SEC unless the sale is exempt from the registration
requirements of the Securities Act. The undersigned further confirms that, after
the Registration Statement has been declared effective by the SEC, the
undersigned will not sell any shares of Common Stock pursuant to the
Registration Statement except by means of a prospectus meeting the requirements
of Section 10(a) of the Securities Act and except in transactions in the
over-the-counter market, in negotiated transactions, or by a combination of
these methods, at fixed prices that may be changed, at market prices prevailing
at the time of the sale, at prices related to such market prices or at
negotiated prices, and the undersigned will notify the Company in advance of any
transaction by any other method or on any other terms.
-9-
<PAGE> 36
IN WITNESS WHEREOF, the undersigned hereby, certifies that the
foregoing answers to each of the foregoing questions are accurate and complete.
FOR INDIVIDUALS
DATED: _________________, 1996.
------------------------------------
(Signature)
------------------------------------
(Printed or Typed Name)
FOR CORPORATIONS OR OTHER ENTITIES
DATED: _________________, 1996. ------------------------------------
(Name of Entity)
------------------------------------
By
Name:
Title:
-10-
<PAGE> 37
Definitions
The term "associate" as used throughout this Questionnaire, means (a)
any corporation or organization other than the Company or any of its
subsidiaries of which you are, or were at the time of the event or transaction
in question, an officer, director or partner or of which you are, or were at the
time of the event or transaction in question, directly or indirectly, the
beneficial owner of 5% or more of any class of equity securities, (b) any trust
or other estate in which you have, or had at the time of the event or
transaction in question, a substantial beneficial interest or as to which you
serve as trustee or in a similar capacity, (c) your spouse, (d) any relative of
your spouse or any relative of yours who has, or had at the time of the event or
transaction in question, the same home as you or who is, or was at the time of
the event or transaction in question, a director or officer or key executive of
the Company or any of its subsidiaries, (e) any partner, syndicate member or
person with whom you have agreed to act in concert with respect to the
acquisition, holding, voting or disposition of shares of the Company's
securities.
The term "beneficially", when used in connection with the ownership of
securities, means (a) any interest in a security which entitles you to any of
the rights or benefits of ownership even though you may not be the owner of
record or (b) securities owned by you directly or indirectly, including those
held by you for your own benefit (regardless of how registered) and securities
held by others for your benefit (regardless of how registered), such as by
custodians, brokers, nominees, pledgees, etc., and including securities held by
an estate or trust in which you have an interest as legatee or beneficiary,
securities owned by a partnership of which you are a partner, securities held by
a personal holding company of which you are a shareholder, etc., securities held
in the name of your spouse, minor children and any other family member (sharing
the same home) and securities held by you as trustee for the benefit of family
members (whether or not sharing the same household). A "beneficial owner" of a
security includes any person who, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise has or shares:
(1) voting power which includes the power to vote, or to direct the
voting of, such security; and/or
(2) investment power which includes the power to dispose, or to
direct the disposition, of such security.
The term "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
person, whether through the ownership of voting securities, by contract or
otherwise.
<PAGE> 38
The term "family relationship" means any relationship by blood,
marriage or adoption, not more remote than first cousin.
The term "material", when used in this questionnaire to qualify a
requirement for the furnishing of information as to any subject, limits the
information required to those matters as to which an average prudent investor
ought reasonably to be informed before purchasing the shares of Common Stock.
Factors to be considered in determining whether an interest in a transaction is
material are: the importance of the interest to the person having the interest,
the relationship of the parties to the transaction with each other and the
amount involved in the transaction.
The term "material relationship" has not been defined by the Securities
and Exchange Commission. However, the Commission has indicated that it will
probably construe as a "material relationship" any relationship which tends to
prevent arms-length bargaining in dealings with a company, whether arising from
a close business connection or family relationship, a relationship of control or
otherwise. It seems prudent, therefore, to consider that you would have such a
relationship, for example, with any organization of which you are an officer,
director, trustee or partner or in which you own, directly or indirectly, 10%
or more of the outstanding voting shares, or in which you have some other
substantial interest, and with any person or organization with whom you have, or
with whom any relative or spouse (or any other person or organization as to
which you have any of the foregoing other relationships) has, a contractual
relationship.
The term "stock options" includes all options, warrants, or rights to
purchase securities of the Company or any of its subsidiaries, other than those
issued to security holders as such on a pro rata basis.
The term "subsidiary" means a corporation controlled by the Company
directly, or indirectly through one or more intermediaries.
-2-
<PAGE> 39
SCHEDULE 1.1.3(c)
<TABLE>
<CAPTION>
Quantity Item Description Price Extension
- -------- ----- ----------- ----- ---------
<S> <C> <C> <C> <C>
1 NOTEBOOK NoteBook computer - Texas Inst. 3995.00 3995.00
1 MODEM PCMCIA 14400 U.S. Robotics Fax Mod. 195.00 195.00
1 COMPEX Ethernet Card PCMCIA Lan Adapter 155.00 155.00
1 VGAMON VGA Monitor 15" KFC Non-Int. .28 325.00 325.00
1 KEYBOARD Liteon Keyboard 35.00 35.00
1 SPEAKERS PC Speakers SONY 3 piece system. 175.00 175.00
1 PRINTER Brother HL-645 Laser Printer w/1MB 550.00 550.00
</TABLE>
<PAGE> 1
REVISED
REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT made as of the 18th day of March, 1997 by and between
MIDCOM COMMUNICATIONS INC., a Washington corporation ("MIDCOM") and RICHARD E.
JOHN ("Holder").
WHEREAS, concurrent with the execution of this Agreement, MIDCOM and
Holder entered into agreements to consummate a settlement of the existing
disputes between Holder and MIDCOM ("Release"); and
WHEREAS, in connection with entering into the Release, MIDCOM has
agreed to issue to Holder up to 9,457 Common Shares (the "Release Shares") and
up to 60,000 Common Shares (the "True-Up Shares"); and
WHEREAS, MIDCOM authorized the issuance to John of 12,236 Issued
Holdback Shares on September 20, 1996; that term is as defined in the Release;
and
WHEREAS, MIDCOM is willing to grant certain registration rights to
Holder with respect to the Issued Holdback Shares, the Release Shares and the
True-Up Shares (together called the "Additional Shares");
NOW, THEREFORE, in consideration of the Release and other valuable
consideration, receipt of which is hereby acknowledged, MIDCOM and Holder agree
as follows:
1. Definitions. The following terms shall have the following
respective meanings:
1.1 "Commission" or "SEC" means the United States
Securities and Exchange Commission.
1.2 "Common Shares" means the voting common capital
stock, $.0001 par value, of MIDCOM.
1.3 "Exchange Act" means the Securities Exchange Act of
1934, as amended, or any similar federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
1.4 "Form S-3" means such form under the Securities Act
as is in effect on the date hereof or any registration form under the
Securities Act subsequently adopted by the SEC that similarly permits inclusion
or incorporation of substantial information by reference to other documents
filed by MIDCOM with the SEC.
1
<PAGE> 2
1.5 "Holder" shall mean Richard E. John or, in the case
of John's death, his personal representative and successors in interest.
1.6 "Opening Date" means the first date on which MIDCOM
is eligible to make use of Form S-3 or any successor form to register the
Registrable Shares for resale.
1.7 "Registrable Shares" means the Additional Shares
together with any securities issued or issuable as a dividend, stock split or
other distribution directly or indirectly with respect to Additional Shares.
Any Registrable Share shall cease to be a Registrable Share when (i) it has
been disposed of pursuant to an effective Registration Statement, (ii) such
time as all of the Registrable Shares can be sold within three months without
compliance with the registration requirements of the Securities Act pursuant to
Rule 144 promulgated thereunder (or any similar provisions then in force) or
(iii) it is no longer beneficially owned by Holder.
1.8 "Registration Statement" means a registration
covering Registrable Shares.
1.9 The terms "register," "registered" and "registration"
refer to a registration effected by preparing and filing a Registration
Statement in compliance with the Securities Act, and the declaration or
ordering of the effectiveness of such Registration Statement.
1.10 "Resale Shelf" means the registration statement on
SEC Form S-1, SEC file No. 333-16681, filed by MIDCOM with the SEC on November
25, 1996 to register for resale Common Shares held by a number of shareholders
of MIDCOM including any amendments thereto filed from time to time hereafter
and any registration statement on Form S-3 filed in place of such S-1
registration statement.
1.11 "Securities Act" means the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations
thereunder, all as shall be in effect at the time.
1.12 "Shelf Registration Statement" means the Registration
Statement filed pursuant to Section 2 below.
2. Shelf Registration.
2.1 Not later than April 10, 1997, MIDCOM shall file an
amendment to the Resale Shelf or shall file a separate registration statement
on the least burdensome SEC form then available to MIDCOM to register the
Registrable Shares under the Securities Act for resale, and shall use its
reasonable best efforts to secure the effectiveness of such Registration
Statement as soon as practicable thereafter (the Registration Statement filed
pursuant to this Section referred to herein as the "Shelf Registration
Statement").
2.2 Subject to the conditions and limitations set forth
in subsection 2.3 below, MIDCOM will use its reasonable best efforts to keep
the Shelf Registration Statement effective until the earlier of (A) December
31, 1997, (B) such date as all of the Registrable Shares have been resold or
(C) such time as all of the Registrable Shares can be sold within three months
without
2
<PAGE> 3
compliance with the registration requirements of the Securities Act pursuant to
Rule 144 promulgated thereunder.
2.3 If Holder shall propose to sell any Registrable
Shares pursuant to the Shelf Registration Statement, he shall notify MIDCOM in
writing of his intent to do so at least five (5) full business days prior to
such sale (a "Sale Notice"). A Sale Notice shall be deemed to constitute a
representation that any information previously supplied by Holder is accurate
as of the date of such notice. Following receipt of a Sale Notice, and except
as set forth in the following sentence, MIDCOM shall use its commercially
reasonable efforts to amend the Shelf Registration Statement if necessary and
to take all other actions necessary to allow such sale, and shall notify Holder
promptly after it has determined that such sale has become permissible. At any
time within the five (5) business-day period following receipt by MIDCOM of a
Sale Notice, MIDCOM may refuse to permit Holder to resell any Registrable
Shares pursuant to the Shelf Registration Statement for an initial period not
to exceed sixty (60) days; provided, however, that in order to exercise this
right, MIDCOM must give Holder written notice that a delay in such sale is
necessary because either (i) in the good faith judgment of MIDCOM, a sale
pursuant to the Shelf Registration Statement in its then-current form would not
be in the best interests of MIDCOM and its shareholders due to disclosure
obligations of MIDCOM or (ii) MIDCOM in good faith is planning an underwritten
registered public offering of Common Shares which reasonably is expected to be
offered within thirty (30) days of receipt by MIDCOM of the Sale Notice (in
either case, a "Permitted Deferral"). Notwithstanding the foregoing, MIDCOM
shall not be entitled to exercise its right to suspend sales pursuant to the
Shelf Registration Statement more than three (3) times or for more than ninety
(90) consecutive days. Holder hereby covenants and agrees that he will not
sell any Registrable Shares pursuant to the Shelf Registration Statement during
any Permitted Deferral period. Nothing in this subsection shall require Holder
to give a Sale Notice prior to selling Registrable Shares pursuant to Rule 144
promulgated under the Securities Act (or any similar provisions then in force).
3. Form S-3 Demand Rights At any time after December 31, 1997 and
continuing until the earlier of (i) such time as Holder is entitled to dispose
of all of the Registrable Shares within three months pursuant to Rule 144 or
(ii) December 31, 1998, Holder may make written demand on one occasion for
registration under the Securities Act of Holder's Registrable Shares on Form
S-3, provided that the Registrable Shares requested to be registered in such
Form S-3 Registration Statement have an aggregate expected selling price of at
least $200,000 (a "Demand Notice"). The request pursuant to this Section 3
will specify the number of Registrable Shares requested to be registered and
the anticipated per share price range for such offering. MIDCOM shall not be
obligated to effect any registration or compliance pursuant to this Section 3
for a period of up to ninety (90) days if MIDCOM shall within twenty (20) days
of its receipt of a Demand Notice give Holder written notice that a delay in
such sale is necessary because either (i) in the good faith judgment of MIDCOM
the filing and/or effectiveness of a registration at that time would not be in
the best interests of MIDCOM and its shareholders due to disclosure obligations
of MIDCOM or (ii) MIDCOM in good faith is planning an underwritten registered
public offering of Common Shares which reasonably is expected to be offered
within thirty (30) days of receipt by MIDCOM of the Demand Notice.
4. Conditions of Obligations to Register Shares. The obligations
of MIDCOM hereunder are subject to the following conditions:
3
<PAGE> 4
4.1 Holder shall cooperate with MIDCOM in connection with
the preparation of any Registration Statement, and for so long as MIDCOM is
obligated to file and keep effective the Registration Statement, shall provide
to MIDCOM, in writing, for use in the Registration Statement, all such
information regarding Holder as MIDCOM from time to time may reasonably request
to prepare the Registration Statement and any prospectus covering the
Registrable Shares, to maintain the currency and effectiveness thereof and
otherwise to comply with all applicable requirements of law in connection
therewith. Holder covenants that he will promptly notify MIDCOM in writing of
any changes in the information set forth in a Registration Statement regarding
Holder or his plan of distribution of Registrable Shares covered thereby.
4.2 To the extent required by the Securities Act, Holder
shall cause to be furnished to each broker through whom the Registrable Shares
may be offered, or to the offeree if an offer is not made through a broker,
such copies of the prospectus covering the Registrable Shares and any amendment
or supplement thereto and documents incorporated by reference therein as may
be required by law and he shall not bid for or purchase any securities of
MIDCOM or attempt to induce any other person to purchase any securities of
MIDCOM other than as permitted under the Exchange Act.
5. Registration Procedures. If and whenever MIDCOM is required
by the provisions of this Agreement to include any of the Registrable Shares in
a Registration Statement filed under the Securities Act, MIDCOM shall use its
reasonable commercial efforts to effect such registration, and MIDCOM shall, as
expeditiously as possible:
5.1 Prepare and file with the SEC such amendments and
supplements to any such Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration Statement
effective for a period of 30 days from the date of its effectiveness in the
case of a registration pursuant to Section 3 hereof or (unless otherwise
required by the Securities Act) until the Registrable Shares covered thereunder
have been sold, whichever is earlier.
5.2 Furnish to Holder such number of copies of any
prospectus contained in such Registration Statement in conformity with the
requirements of the Securities Act, and such other documents as Holder may
reasonably request in order to facilitate the disposition of the Registrable
Shares, but only while MIDCOM is required under the provisions hereof to cause
a Registration Statement to remain effective.
5.3 Use its commercially reasonable efforts to register
or qualify the Registrable Shares covered by such Registration Statement under
the securities or blue sky laws of such jurisdictions as the selling Holder or
the underwriter for such offering may reasonably request; provided that MIDCOM
shall in no event be required to qualify to do business as a foreign
corporation or as a dealer in any jurisdiction where it is not so qualified, to
amend its Articles of Incorporation or to change the composition of its assets
at the time to conform with the securities or blue sky laws of such
jurisdictions, to take any action that would subject it to service of process
in suits other than those arising out of the offer and sale of the Registrable
Shares covered by the
4
<PAGE> 5
Registration Statement or to subject itself to taxation in any jurisdiction
where it has not theretofore done so.
5.4 Notify Holder at any time when any prospectus
relating to the Registrable Shares is required to be delivered under the
Securities Act of the happening of an event as a result of which, or upon the
discovery that, the prospectus contained in such Registration Statement, as
then in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under which
they were made. Holder agrees, upon receipt of such notice, forthwith to cease
making offers and sales of the Registrable Shares pursuant to such registration
statement or deliveries of the prospectus contained therein for any purpose and
to return to MIDCOM, for modification and exchange, the copies of such
prospectus not theretofore delivered by Holder, provided, that MIDCOM shall
forthwith prepare and furnish, after securing such approvals as may be
necessary, to Holder a reasonable number of copies of any supplement to or
amendment of such prospectus that may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Shares, such prospectus shall
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances under which they were made.
5.5 Promptly notify Holder of any stop order or similar
proceeding initiated by state or federal regulatory bodies and use its best
efforts to expeditiously remove such stop order or similar proceeding.
5.6 Provide a transfer agent and registrar for all such
Registrable Shares not later than the effective date of such Registration
Statement.
6. Description of Expenses. Except as set forth below, MIDCOM
shall pay all costs and expenses incurred in connection with registration of
the Registrable Shares pursuant to this Agreement including, without
limitation, all registration and filing fees, printing expenses, fees and costs
of counsel to MIDCOM, and blue sky fees and expenses. Notwithstanding the
foregoing, Holder shall pay all fees and disbursements of Holder's attorneys
and accountants, as well as all transfer taxes and brokerage and underwriters'
discounts and commissions attributable to the Registrable Shares offered and
sold by Holder.
7. Indemnification, Underwriting Agreements.
7.1 In the event that, pursuant to this Agreement, MIDCOM
registers under the Securities Act any Registrable Shares held by Holder:
7.1.1 MIDCOM agrees to indemnify, defend and hold
harmless Holder against any and all loss, claim, liability or expense (a
"Claim") arising out of or based upon any untrue statement or alleged untrue
statement of a material fact in any related Registration Statement, any
omission or alleged omission of any material fact required to be stated therein
or necessary to make the statements therein not misleading, unless such
statement, alleged statement or omission was made in reliance upon, and in
conformity with, information provided by Holder to MIDCOM expressly for use
therein.
5
<PAGE> 6
7.1.2 Holder hereby agrees to indemnify and hold
harmless MIDCOM, each person who controls MIDCOM within the meaning of the
Securities Act and the officers, directors, shareholders, employees and agents
of MIDCOM, against any Claim arising out of or based upon any untrue statement
or alleged untrue statement of a material fact in any Registration Statement or
alleged omission of any material fact required to be stated therein or
necessary to make the statements therein not misleading, but only with
reference to statements or omissions made in reliance upon, and in conformity
with, information provided by Holder to MIDCOM expressly for use therein.
7.2 A party required to indemnify another party pursuant
to this Section 7 ("Indemnifying Party") shall not be liable for any settlement
of any action or claim relating to such liability or expense effected without
its consent, but if any settlement is effected with its consent or if a final
judgment for the plaintiff is entered in any such action, such Indemnifying
Party agrees to indemnify and hold harmless the indemnified party from and
against any loss or liability by reason of any such settlement or judgment.
7.3 The obligations of the parties hereto to indemnify
one another pursuant to this Section 7 are expressly conditioned upon the
Indemnifying Party being given written notice of any claim for which
indemnification will be sought within twenty (20) days after the indemnified
party learns thereof and that the Indemnifying Party is given full control over
the defense and settlement of the claim and provided, further, that the
Indemnified Party cooperates fully with the Indemnifying Party in the defense
of such claim.
8. Restrictions on Transferability of Registrable Shares;
Compliance with Securities Act.
8.1 The Registrable Shares are not transferable in the
absence of registration under the Securities Act or an exemption therefrom.
MIDCOM shall be entitled to give stop transfer instructions to its transfer
agent with respect to the Registrable Shares in order to enforce such
restrictions.
8.2 Each certificate representing the Registrable Shares
not previously issued to Holder shall bear substantially the following legends
(in addition to any legends required under applicable state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR
INVESTMENT PURPOSES ONLY AND HAVE NOT BEEN REGISTERED UNDER
UNITED STATES FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE
OFFERED FOR SALE, SOLD, PLEDGED OR OTHERWISE TRANSFERRED OR
ASSIGNED FOR VALUE, DIRECTLY OR INDIRECTLY, NOR MAY THE
SECURITIES BE TRANSFERRED ON THE BOOKS OF THE CORPORATION,
WITHOUT REGISTRATION OF SUCH SECURITIES UNDER ALL APPLICABLE
FEDERAL AND STATE SECURITIES
6
<PAGE> 7
LAWS OR COMPLIANCE WITH AN APPLICABLE EXEMPTION THEREFROM,
SUCH COMPLIANCE, AT THE OPTION OF THE CORPORATION, TO BE
EVIDENCED BY AN OPINION OF SHAREHOLDER'S COUNSEL, IN FORM
ACCEPTABLE TO THE CORPORATION, THAT NO VIOLATION OF SUCH
REGISTRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED
TRANSFER OR ASSIGNMENT.
8.3 Holder hereby covenants with MIDCOM not to make any
sale of the Registrable Shares except either (i) a sale of Registrable Shares
in accordance with a Registration Statement, in which case Holder covenants to
comply with the requirement of delivering a current prospectus, (ii) a sale of
Registrable Shares in accordance with Rule 144, in which case Holder covenants
to comply with Rule 144, or (iii) subject to such conditions as MIDCOM in its
sole discretion shall impose, in accordance with another exemption from the
registration requirements of the Securities Act. Holder further acknowledges
and agrees that the Registrable Shares are not transferable on the books of
MIDCOM unless the certificate submitted to MIDCOM's transfer agent evidencing
such Registrable Shares i s accompanied by such additional certification,
documentation or information as MIDCOM shall reasonably require in order to
effect such sale in accordance with a Registration Statement, Rule 144, or such
other exemption from the registration requirements of the Securities Act.
9. Miscellaneous Provisions
9.1 Notices. All notices, demands and other
communications called for or required by this Agreement shall be in writing and
shall be addressed to the parties at their respective addresses stated below or
to such other address as a party may subsequently designate by written notice
to the other parties. Communications hereunder shall be deemed to have been
received (i) upon delivery in person, (ii) the third business day after deposit
with the United States Postal Service for delivery by certified mail, return
receipt requested and postage prepaid, (iii) the first business day after
depositing it with a commercial overnight carrier which provides written
verification of delivery or (iv) the day of transmission by telefacsimile if
sent before 2:00 p.m. recipient's time provided that a copy of such notice is
sent on the same day by U.S. certified mail, return receipt requested and
postage prepaid, with an indication that the original was sent by facsimile and
the date of its, transmittal.
To: MIDCOM Communications Inc.
Attention: President
1111 Third Avenue, Suite 1600
Seattle, WA 98101
Phone: (206) 628-8000
Fax: (206) 628-8769
With copy to:
Law Department
Attn: General Counsel
7
<PAGE> 8
To: Richard E. John
c/o Thomas J. Greenan
Gordon, Thomas, Honeywell
Malanca, Peterson
& Daheim, P.L.L.C.
2101 One Union Square
600 University Street
Seattle, WA 98101
Phone: (206) 447-9505
Fax: (206) 622-9779
9.2 Amendment or Waiver. No amendment of this Agreement
or waiver of any provision contained herein shall be valid unless in writing
and duly executed by MIDCOM and Holder. No evidence of any waiver or amendment
shall be offered or received in evidence in any proceedings, arbitration, or
litigation between the parties hereto arising out of or affecting this
Agreement, or the rights or obligations of the parties hereunder, unless such
waiver or amendment is in writing and duly executed. Waiver of any term or
condition of this Agreement by any party shall not be construed as a waiver of
a subsequent breach or failure of the same term or condition, or a waiver of
any other term or condition of this Agreement.
9.3 Assignment. The rights of the Holder hereunder may
not be assigned without the prior written consent of MIDCOM.
9.4 Governing Law. This Agreement, including all matters
of construction, validity and performance, shall be governed by and construed
and enforced in accordance with the laws of the State of Washington, without
regard to its conflict of law provisions which might otherwise require the
application of the law of any other jurisdiction. The parties agree that the
exclusive jurisdiction and venue of any lawsuit between them arising under this
Agreement or out of the transactions contemplated herein shall be the Superior
Court of Washington for King County, or the United States District Court for
the Western District of Washington at Seattle, and each of the parties hereby
irrevocably agrees, acknowledges and submits itself to the exclusive
jurisdiction and venue of such courts for the purposes of such lawsuit. The
terms of this Agreement are deemed to have been mutually agreed upon by all
parties hereto, and interpretation will not be for or against any party if any
ambiguity exists.
9.5 Entire Agreement. This Agreement together with the
Release and all agreements and documents referenced in Section 12.1 of the
Release, contain all of the terms and conditions agreed upon by the parties
relating to the subject matter thereof and supersedes and cancels all prior
agreements, negotiations, correspondence, undertakings, and communications of
the parties, whether oral or written, respecting that subject matter including
the Registration Rights Agreement between MIDCOM and Holder dated September 12,
1995.
8
<PAGE> 9
9.6 Execution in Counterparts. This Agreement may be
executed in one or more counterparts, all of which shall be considered one and
the same agreement, and shall become a binding agreement when one or more
counterparts have been signed by each of the parties and either original or
facsimile counterparts have been delivered to the other party.
9.7 Captions. The captions in this Agreement are
inserted solely for the purpose of facilitating easy reference and shall not be
construed in any way as part of the text, or as altering the provisions of this
Agreement.
IN WITNESS WHEREOF, the parties have caused this Amended Registration
Rights Agreement to be duly executed on the date first set forth above.
MIDCOM COMMUNICATIONS INC.
By: /s/ ROBERT J. CHAMBERLAIN
---------------------------------------------
Its: EXECUTIVE VICE PRESIDENT-CFO
----------------------------------------
RICHARD E. JOHN
/s/ RICHARD E. JOHN
------------------------------------------------
9
<PAGE> 1
EXHIBIT 10.8
[*] DESIGNATES MATERIAL FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED, WHICH MATERIAL HAS BEEN SEPARATELY FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION
RESALE SOLUTIONS SWITCHED SERVICES AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into by and between SPRINT
COMMUNICATIONS COMPANY L.P. ("Sprint"), and MIDCOM Communications Inc.
("Customer"). Sprint and Customer are "Parties" hereto.
In consideration of the mutual promises contained herein, the Parties agree as
follows:
1. DEFINITIONS. Capitalized terms appearing in bold print are defined in
Exhibit 1.
2. CONFIDENTIALITY. During the Term and for one year thereafter, neither
Party shall disclose any terms of this Agreement, including pricing, or
Proprietary Information of the other Party. Proprietary Information shall
remain the property of the disclosing Party. A Party receiving Proprietary
Information shall: (i) use or reproduce such information only when necessary to
perform this Agreement; (ii) provide at least the same care to avoid disclosure
or unauthorized use of such information as it provides to protect its own
Proprietary Information; (iii) limit access to such information to its
employees or agents who need such information to perform this Agreement; and
(iv) return or destroy all such information, including copies, after the need
for it has expired, upon request of the disclosing Party, or upon termination
of this Agreement.
Because of the unique nature of Proprietary Information, a breach of this
paragraph may cause irreparable harm for which monetary damages may be
inadequate compensation. Accordingly, in addition to other available remedies,
a Party may seek injunctive relief to enforce this paragraph.
3. TERM. The Term begins September 1, 1996, and runs for 42 months through
March 31, 2000.
4. TERMINATION FOR CAUSE.
4.1. A Party may terminate this Agreement upon the other Party's failure to
cure any of the following within 30 days following written notice thereof: (a)
the (i) insolvency, corporate reorganization, arrangement with creditors,
receivership or dissolution of the other Party; or (ii) institution of
bankruptcy proceedings by or against the other Party; (b) assignment or
attempted assignment of the Agreement or any interest therein, except as
permitted by Paragraph 24 hereof; (c) change in control of the defaulting Party
without the other Party's prior written consent, which consent shall not be
unreasonably withheld; (d) a final order by a government entity with
appropriate jurisdiction that a Service or the relationship hereunder is
contrary to law or regulation; or (e) breach of any provision herein not
otherwise referred to in Paragraph 4.
4.2. Sprint may terminate this Agreement immediately and without notice if
Customer fails to cure a material breach as provided in Paragraph 8 or
materially breaches a provision of Paragraph 17 or 18.
4.3. Customer may terminate the Agreement upon 30 days written notice if
special rate adjustments exceed the maximum provided in Paragraph 16. Customer
shall notify Sprint in writing of (a) any material breach of the Agreement by
Sprint or (b) Sprint's failure to provide Services for which it has been
designated the Primary carrier. If Sprint fails to cure the condition giving
rise to such notice within 30 days, Customer may terminate the Agreement upon 10
days written notice to Sprint.
4.4. Upon termination of this Agreement a Party may recover from the other all
sums it is owed at the time of termination, but without payment of Early
Termination Charges or Minimum Commitment Surcharge if such termination is
pursuant to Subparagraph 4.3.
5. TERMINATION WITHOUT CAUSE; EARLY TERMINATION CHARGE.
5.1. Customer may terminate this Agreement at any time without cause upon 90
days prior written notice to Sprint and payment to Sprint of the Early
Termination Charge in Subparagraph 5.2. Service will be discontinued the first
business day of the fourth month after such notice of termination.
5.2. Carrier Transport Base Rates and Promotional Discounts are based on
Customer's agreement to purchase Service for the entire Term. It is difficult
if not impossible to calculate Sprint's loss if Customer terminates the
Agreement pursuant to Subparagraph 5.1 prior to the end of the Term.
Therefore, to compensate Sprint for such loss, and not as a penalty. Customer
shall pay Sprint an Early Termination Charge in the event of such termination.
The Early Termination Charge shall equal 50% of the sum of the Minimum
Commitment for each month remaining in the Term when Service is discontinued
pursuant to Subparagraph 5.1. The Early Termination Charge shall be paid
within 30 days after the notice provided pursuant to Subparagraph 5.1.
6. APPLICATION OF TARIFFS; INTERSTATE ADJUSTMENT.
6.1. Interstate and international Service shall be provided pursuant to Tariff
as supplemented by this Agreement. In the event of a conflict between this
Agreement and any Tariff, the Tariff shall control.
6.2. Intrastate Service is provided pursuant to Tariff in every respect.
Promotional Discounts will not apply to intrastate Service. An Interstate
Adjustment may be applied based on intrastate usage as provided in Attachment
D. The Interstate Adjustment shall be based on intrastate usage at the Product
Hierarchy Level and will equal the difference between (a) such usage priced at
the Interstate Adjustment Rate in Attachment D less Discount One discounts.
The Interstate Adjustment for a given month shall not exceed interstate billing
for such month.
6.3. Except as may be limited to Section 16, Customer shall pay all Tariff
charges including, without limitation, fixed charges, feature charges, enhanced
800 charges, access facility charges, installation and other non-recurring
charges.
6.4. Sprint may modify or withdraw Tariffs from time to time, which may
include discontinuation of any Service without Sprint's liability.
7. RELATIONSHIP OF PARTIES. Neither this Agreement nor the provision of
Service creates a joint venture, partnership or agency between Sprint and
Customer. Customer is the service provider with respect to End Users. Sprint
is merely a supplier to Customer with no relationship to End Users.
SPRINT PROPRIETARY INFORMATION - RESTRICTED
1
<PAGE> 2
8. USE OF NAME AND MARKS. This Agreement confers no right to use the name,
service marks, trademarks, copyrights, patents or CIC of either Party except as
expressly provided herein. Neither Party shall take any action which would
compromise the registered copyrights or service marks of the other.
Sprint's name is proprietary and nothing herein constitutes a general license
authorizing its use. Customer may not: (a) promote or advertise Sprint's name or
capabilities to End Users or prospective End Users; (b) attempt to sell its
service using Sprint's name; or (c) represent to End Users or prospective End
Users that they would be Sprint customers or that they may obtain Sprint service
from Customer.
Sprint shall provide Customer written notice of a breach of this paragraph.
Customer shall use its best efforts to immediately cure such breach, advising
Sprint of its actions. If, in Sprint's opinion, Customer fails to effect a cure
within 30 days of Sprint's notice, then Sprint may, at its option, terminate the
Agreement pursuant to Subparagraph 4.2.
Sprint's provision of Network Extension Service may result in End Users being
notified by their LEC that Sprint is their designated PIC. Therefore, to avoid
confusion and potential "slamming" complaints, Sprint hereby authorizes Customer
to use Sprint's name under the following conditions to provide End Users from
whom Customer has obtained a PIC Authorization with a fulfillment piece
containing the following Notice (the "Notice"):
We want to affirm how _____ will provide your long distance service.
Although _____ will provide your invoice and customer service, we use
major national carriers to actually carry your long distance calls.
After subscribing to our service, you may receive a notice from your
local phone company which says that your long distance "Carrier of
Choice" is Sprint. _____ has selected Sprint as the long distance
network provider it will use to handle your calls. That selection was
based on your quality and price requirements. If you have any questions
about your order, please call our toll free customer service number,
1-800-___-____.
If Customer subscribes to Sprint Express, calls placed by End Users to the
Sprint ITFS number will be answered "Sprint operator." This may cause confusion
if the End User does not know its calls are being carried on the Sprint network.
Therefore, to avoid such confusion, Sprint hereby authorizes Customer to provide
End Users who use Sprint Express with a fulfillment piece containing the
following notice (the "Sprint Express Notice"): "International call origination
may be provided by a Sprint operator." Sprint may withdraw consent to use the
Sprint Express Notice upon 10 days written notice.
Customer shall obtain Sprint's prior written approval of any fulfillment piece
in which the Notice or the Sprint Express Notice will appear.
9. SERVICE. Services provided hereunder are described in Exhibit 2.
10. LEGAL COMPLIANCE: REMEDIES FOR NON-COMPLIANCE.
10.1. Customer represents and warrants that (a) it has obtained all licenses
and regulatory authority necessary to operate as contemplated herein and (b) it
will not submit an End User ANI for activation without obtaining and maintaining
a proper PIC Authorization.
10.2. If, in Sprint's opinion reasonably exercised and determined, Customer
materially breaches this paragraph, Sprint may (a) terminate this Agreement
pursuant to Subparagraph 4.1(e), (b) reject End User ANIs submitted by Customer
for placement under its account, and/or (c) discontinue Promotional Discounts;
provided, however, that Sprint's shall give Customer 30 days notice and an
opportunity to cure prior to electing option (a) or (c) above. If Sprint elects
option (b) or (c), it will resume accepting ANIs and/or reinstate Promotional
Discounts only after Customer produces evidence satisfactory to Sprint that it
has cured its breach.
11. CUSTOMER RESPONSIBILITIES.
11.1. Customer shall not be relieved of any obligation hereunder by virtue of
the fact that Service is ultimately used by End Users.
11.2. Customer shall produce for Sprint's inspection, at Customer's expense,
any PIC Authorization within 48 hours after Sprint's written request (which may
be provided by fax), or within any shorter period required by a LEC or
regulatory agency. If Customer fails to comply with this subparagraph then
Spring may (a) discontinue Promotional Discounts and/or (b) refuse to activate
additional ANIs under Customer's account.
11.3. Customer shall reimburse Spring for any charge assessed by a LEC for
processing a PIC request initiated by Customer and pay Sprint a PIC Assessment
Fee equal to 25% of such charge.
11.4. Customer shall be solely responsible for End User solicitation, service
requests, creditworthiness, customer service, billing and collection.
11.5. Customer shall be financially liable for usage excluding 700/900 calls
generated by each End User ANI activated by Sprint until such ANI is
presubscribed to another IXC. Customer may request Sprint to block Network
Extension Service to an ANI upon the End User's failure to pay Customer, subject
to Customer's prior certification to Sprint that it has given the End User any
notice required by law.
11.6. Customer shall be solely liable for amounts it cannot collect from End
Users, and billing adjustments it grants End Users, including adjustments for
fraudulent charges, directory assistance or any other form of credit.
11.7. Customer shall comply with Sprint's network interface procedures when it
orders its own access facilities.
12. SERVICE ACTIVATION. Sprint will use reasonable efforts to provide switched
Service within 15 days, and dedicated Service within 30 days, following
Customers order, or the requested delivery date, whichever is later. These
deadlines will be extended by the time it takes to address activation errors or
obtain from Customer a complete and accurate order or PIC Authorization.
Customer shall reimburse Sprint for LEC imposed fees resulting from a request to
expedite Service.
13. PRICING; FORWARD PRICING; GENERAL CONDITIONS.
13.1. Pricing. Resale Solutions Base Rates and Promotional Discounts are
contained in the Attachments hereto.
13.2. Prices in Lieu of Other Discounts. Resale Solutions Base Rates and
Promotional Discounts are extended in lieu of any other Tariff or
SPRINT PROPRIETARY INFORMATION - RESTRICTED
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contractual discount, special pricing, or discount term plan. Discounts upon
discounts are only permitted if expressly provided for herein.
13.3. Prices Contingent on Performance. Resale Solutions Base Rates and
Promotional Discounts are contingent on Customer's full performance of all terms
of the Agreement. If Customer fails to pay the undisputed portion of an invoice
pursuant to Paragraph 17, all Service for which payment is past due may, at
Sprint's option, be priced at Resale Solutions Base Rates.
13.4. Per Minute Charges. Resale Solutions Base Rates are invoiced based on Per
Minute Charges utilizing the Rate Periods and Billing Increments in Attachment
B.
13.5. Non-Bell Switched Origination, Termination and 800 Origination Charges.
Customer shall pay the charges specified in Attachment B for each originating
minute and each terminating minute of an interstate call that originates and/or
terminates in a Non-Bell Service Area.
13.6. Switched Origination, and Termination Charges. Customer shall pay the
charges specified in Attachment B for each originating minute and each
terminating minute of an interstate call.
13.7. Promotional Pricing Levels. Customer will receive Discount One and
Discount Two discounts applied only to Rate Elements as provided in Attachments
C and D.
13.8. Forward Pricing. As a transition to the pricing hereunder, Discount Two
discounts may be based for a period of time on the greater of Customer's actual
Discount Two Monthly Volume of Service or a specified Forward Pricing Volume of
Service. The Forward Pricing Volume of Service and the period during which it
may be applied are specified in Attachment A.
13.9. Pricing Contingent on Primary Carrier Status. Pricing hereunder is
contingent on Customer utilizing Sprint as its Primary Carrier for the Primary
Carrier Services listed in Attachment A.
If 800 Service is a Primary Carrier Service then Customer shall designate Sprint
as its Primary Carrier in the 800 Service Management System database for all
interstate 800 traffic that is not originated directly by Customer.
Customer shall maintain adequate connectivity to Sprint during the Term to
insure that, on a monthly basis, 95% of Customer's qualified usage is delivered
to Sprint for (a) domestic originations and terminations and (b) international
terminations subject to Primary Carrier Status. Upon written notice by Sprint
that Customer is in breach of this section, Customer shall use best efforts to
place orders with Sprint for adequate access facilities to promptly cure such
breach. If Customer fails to comply with the requirements of this section within
30 days following notice from Sprint, then Customer shall, at Sprint's option,
pay a 20% surcharge on all Service purchased under this Agreement until cured.
Customer will only provision orders on Customer's CIC, and those CICs will only
be pointed at either Sprint or Midcom switches, excluding orders subject to
Primary Carrier Status.
14. SURCHARGES.
14.1. Minimum Commitment Surcharge. If Customer fails to generate Net Usage of
at least $75,000,000 by March 31, 2000, Customer shall pay Sprint a surcharge
for Service purchased prior to that date under the Agreement (the "Minimum
Commitment Surcharge"). The Minimum Commitment Surcharge shall be equal to 25%
of the difference between (a) the Net Usage actually generated by customer
between September 31, 1996, and March 31, 2000, and (b) $75,475,000. Any Minimum
Commitment Surcharge owed by Customer shall be invoiced by Sprint, and paid by
Customer, as part of the final invoice issued for Service provided under the
Agreement.
14.2. LEC Cap Surcharge. Any month Customer exceeds the Maximum Non-Bell
Traffic Percentage specified in Attachment B for any Service type, Customer
shall pay Sprint the per minute surcharge for such Service specified in
Attachment B for each minute above the Maximum Non-Bell Traffic Percentage that
originates from or terminates to a Non-Bell Service Area. Maximum Non-Bell
Traffic Percentages will be calculated independently for originating and
terminating minutes at each Product Hierarchy Level.
14.3. Minimum Average Time Requirement Surcharge. Any month Customer fails to
equal or exceed the Minimum Average Time Requirement specified in Attachment B
for Services specified in Attachment B, then Customer shall pay Sprint a per
minute surcharge on such usage equal to (a) the per minute surcharge specified
in Attachment B multiplied by (b) the difference between (i) the number of
minutes the Service was used and (ii) the number of calls using the Service
multiplied by the Minimum Average Time Requirement. This surcharge shall be
calculated at each Product Hierarchy Level.
14.4. Noncomplete Call Surcharge. Any month Customer exceeds the Maximum
Noncomplete 800 Call Percentage for interstate Resale Direct Toll Free, Resale
Direct Toll Free Extension, and/or interstate Resale Connect Toll Free traffic
as stated on Attachment B, Customer shall pay Sprint a surcharge equal to the
amount stated in Attachment B for each Noncomplete 800 Call in excess of the
Maximum Noncomplete 800 Call Percentage. This surcharge shall be calculated at
each Product Hierarchy Level.
14.5 Minimum Port Usage Surcharge. Any month Customer fails to equal or exceed
the Minimum Port Usage per Active Resale Direct Port as stated on Attachment A,
Customer shall pay Sprint a surcharge on its Ultra WATS usage equal to the
difference between (a) Customer's actual Net Usage for Resale Direct Service and
(b) the Minimum Port Usage multiplied by the total number of Active Resale
Direct Ports. This surcharge shall be calculated at each Product Hierarchy
Level.
15. SERVICE CHARGES. Customer shall pay Sprint a $25 service charge for each
End User ANI or 800 number Customer submits for activation (a) that Sprint
determines lacks a proper PIC Authorization or (b) that requires Sprint to
disconnect or transfer such ANI or 800 number from Sprint's data base before
placing it within Customer's CTIS hierarchy. However, the service charge
provided for in 15(b) will be waived if such End User ANIs, or 800 numbers, do
not exceed 15% of the total ANIs, or 800 numbers, submitted by Customer during
the previous 90 days.
16. SPECIAL RATE ADJUSTMENTS.
16.1 Sprint may, after 60 days notice to Customer, adjust the price of any
terminating international country provided hereunder to reflect changes in
international net settlements or currency exchange rates on a specific country
by country basis, provided, however, in the event Sprint increases the price of
Services, Sprint will reduce Customer's minimum commitment for outbound
international Services by an amount
<PAGE> 4
equal to (1) the average monthly amount billed by Sprint to Customer for such
Services over the three previous months multiplied by (2) the number of months
remaining in the term of the overall commitment.
16.2. From September 1, 1996 through March 31, 1997, the price of Service
provided hereunder is capped by [*]. Effective April 1, 1997, Sprint will match
[*]. Since [*] fluctuate. Customer shall notify Sprint of increases and
decreases in such rates. This notice shall include documentation acceptable to
Sprint to substantiate that the change has occurred. [*].
17. PAYMENT FOR SERVICE.
17.1. Payment Obligation. Customer shall pay Sprint for Service pursuant to
the terms of this Agreement and applicable Tariffs.
17.2. Call Detail. Sprint daily will provide Customer with the prior day's
daily call detail via NDM, as well as weekly Carrier Transport tapes containing
Customer's Service usage. Sprint may, at it's option, and without liability to
Customer, modify the format of the call detail media following 30 days written
notice to Customer.
17.3. Payment Procedure. Sprint will invoice Customer monthly for Service
provided hereunder. Invoices shall be due and payable upon receipt.
Undisputed charges for Service that are not paid within 45 days after
Customer's receipt of the invoice shall be past due. Interest will be charged
on past due amounts beginning the 46th day following Customer's receipt of the
invoice at a rate equal to the lesser of 18% per annum of the maximum rate
allowed by law.
The price of Service is exclusive of applicable taxes. Resale Solutions Base
Rates and Promotional Discounts are contingent on Customer providing Sprint
with certificates from appropriate taxing authorities exempting Customer from
taxes that would otherwise be invoiced hereunder.
17.4. Billing Disputes. If Customer in good faith disputes any invoiced
amount, it shall submit to Sprint, within 30 days following receipt of the
invoice, full payment of the undisputed portion of the invoice and written
documentation indentifying and substantiating the disputed amount. If the
Parties, in good faith, cannot resolve the dispute within a reasonable period
of time, then the dispute shall be settled by arbitration pursuant to Paragraph
22.
18. PAYMENT SECURITY. Provision of Service is contingent on credit approval
by Sprint. Upon request by Sprint, Customer shall provide Sprint with
financial statements, or other indications of Customer's financial
circumstances. If Customer's financial circumstances or payment history is or
becomes unacceptable to Sprint, then Sprint may require a deposit, irrevocable
letter of credit or other form of security acceptable to Sprint. Sprint's
acceptance of the form and amount of security offered by Customer shall be
based on usual commercial practices and standards. Customer's failure to
provide such security within 20 days following Sprint's request shall
constitute a default under Subparagraph 4.2.
19. INDEMNIFICATION. Each Party (as "Indemnitor") shall indemnify, defend and
hold harmless the other Party (as "Indemnitee") from and against any and all
liabilities, costs, damages, fines, assessments, penalties and expenses
(including ordinary, necessary and reasonable attorney's fees) resulting from
(a) breach of any provision in this Agreement by Indemnitor, its employees or
agents, or (b) any misrepresentation or illegal act of Indemnitor, its employees
or agents, arising out of the Indemnitor's performance hereunder.
Except as the result of a negligent act of omission or commission by Sprint,
Customer shall indemnify, defend and hold Sprint harmless from and against any
and all liabilities, costs and damages (including ordinary, necessary and
reasonable attorney's fees) resulting from any claim arising out of: (i) use of
Service by Customer to extend its service to End Users; (ii) use of Service by
Customer or End Users; (iii) libel, slander, or patent or trademark infringement
arising from the combination or use of Service with Customer provided service or
facilities; or (iv) Customer's marketing, advertising, sales or promotional
activities.
20. LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR
SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR EXEMPLARY DAMAGES, INCLUDING
LOSS OF PROFITS, LOSS OF CUSTOMERS OR GOODWILL ARISING FROM THE RELATIONSHIP OR
CONDUCT OF BUSINESS HEREUNDER.
21. WARRANTIES. WARRANTIES AND REMEDIES SET FORTH IN THE AGREEMENT AND
SPRINT'S TARIFFS ARE THE ONLY WARRANTIES AND REMEDIES WITH RESPECT TO THE
SERVICE, AND ARE IN LIEU OF ANY OTHER WARRANTY, WRITTEN OR ORAL, STATUTORY
EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
22. ARBITRATION. Any dispute arising out of or relating to the Agreement will
be finally settled by arbitration in accordance with the rules of the American
Arbitration Association. The arbitration will be governed by the United States
Arbitration Act, 9 U.S.C. Sec. 1, et. seq., and judgment upon the award
rendered by the arbitrator(s) may be entered by any court with jurisdiction.
The arbitration will be held in the Kansas City, MO metropolitan area.
23. NOTICES. Notices, requests or other communications (excluding invoices)
hereunder shall be in writing and sent by certified mail addressed as follows:
If to Sprint: Sprint Communications Company
5420 LBJ Freeway, Suite 1700
Dallas, TX 75240
Attention: Vice President-Wholesale Services
SPRINT PROPRIETARY INFORMATION - RESTRICTED
4
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With copy to: Sprint Communication Company
8140 Ward Parkway
Kansas City, MO 64114
Attention: Vice President Law-Marketing/Sales
If to Customer: MIDCOM Communications, Inc.
1111 Third Avenue, Suite 1600
Seattle, WA 98101
Attention: President and Chief Executive Officer
With copy to: MIDCOM Communications Inc.
1111 Third Avenue, Suite 1600
Seattle, WA 98101
Attention: General Counsel
24. ASSIGNMENT. Neither this Agreement nor any right or obligation hereunder
may be assigned or delegated to any other entity without the prior written
consent of the other Party, which consent shall not be unreasonably withheld.
25. EXCUSABLE DELAY. In the event of an Excusable Delay the performance
obligations of the Parties hereunder shall be suspended and the Term shall be
extended for a period of time equal to the length of such delay; provided,
however, the affected Party shall promptly notify the other Party of the nature
of the delay and the estimated time that it will continue. If an Excusable
Delay continues for more than 90 days and has a material adverse impact on the
other Party, such other Party may, at its option and upon written notice to the
other Party, terminate this Agreement without liability other than payment for
Service provided prior to termination. Notwithstanding the foregoing, neither
Party may invoke this paragraph with regard to any event listed in Paragraph 4
or to delay performance of Paragraphs 17 or 18.
26. CAPTIONS. Captions of the paragraphs and subparagraphs herein are for
convenience only, are not part of the Agreement and shall not define or limit
any of the Agreement's terms.
27. CHOICE OF LAW. This Agreement shall be construed in accordance with, and
governed by, the laws of the State of Kansas.
28. RULES OF CONSTRUCTION. No rule of construction requiring interpretation
against the draftsman shall apply in the interpretation of this Agreement.
29. ENTIRE AGREEMENT. This Agreement, together with the attached Exhibits and
Attachments, represents the entire agreement of the Parties with respect to the
subject matter hereof and supersedes all other agreements between the Parties
relating to the Service.
30. MODIFICATION OF AGREEMENT. This Agreement, including its Exhibits and
Attachments, may be amended, modified or supplemented only by a separate
written document executed by both Parties with the formality of this Agreement.
31. WAIVER OF TERMS. No term or provision herein shall be waived, and no
breach or default excused, unless such waiver or consent is in writing and
signed by the Party to which it is attributed. No consent by a Party to, or
waiver of, a breach or default by the other, whether express or implied, shall
constitute a consent to, or waiver of, any subsequent breach or default.
32. PARTIAL INVALIDITY. If any provision of this Agreement shall be invalid
or unenforceable, such invalidity or unenforceability shall not invalidate or
render the Agreement unenforceable, but rather the Agreement shall be construed
as if not containing the invalid or unenforceable provision. However, if such
provision is an essential element of this Agreement, the Parties shall promptly
attempt to negotiate a substitute therefor.
33. CUMULATIVE REMEDIES. Except as otherwise provided herein, the remedies
provided for in this Agreement are in addition to any other remedies available
at law or in equity.
34. [*]
35. [*]
SPRINT PROPRIETARY INFORMATION - RESTRICTED
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[*]
[*]
36. EXPIRATION OF OFFER. Sprint's offer to enter into this Agreement shall be
withdrawn if the Agreement is not executed by both Parties within 45 days after
the Proposal Date stated on Attachment A.
EXECUTED and made effective as provided herein.
MIDCOM COMMUNICATIONS, INC. SPRINT COMMUNICATIONS COMPANY L.P.
- ------------------------------
(Customer)
By: /s/ J. T. CALDWELL By: /s/ R. MICHAEL FRANZ
--------------------------- -----------------------------------
R. Michael Franz
Title: Senior Vice President President, Wholesale Services Group
------------------------
Date: January 20, 1997 Date: February 11, 1997
------------------------- -------------------------
APPROVED
SPRB
SPRINT PROPRIETARY INFORMATION - RESTRICTED
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EXHIBIT 1
DEFINITIONS
Capitalized terms appearing in bold print in the Agreement, its Exhibits and
Attachments are defined as follows:
"ACTIVE RESALE DIRECT PORT" means a Customer access port (DS-0 equivalent)
connected to Sprint and activated as Resale Direct SERVICE.
"ANI" means a calling telephone number identification which is forwarded to an
IXC by a LEC as a call is placed.
"ASSOCIATED LOCATION" means a physical premise to or from which Sprint provides
SERVICE which is: (a) owned or leased by Customer; (b) occupied by a business
in which Customer has an equity interest of at least a 25%; or (c) occupied by
a franchisee of Customer.
"ATTACHMENT" means a supplement attached to, and a part of, the Agreement.
"BILLING INCREMENT" means a TARIFFED billing increment, unless otherwise stated
in ATTACHMENT B.
"BONA FIDE OFFER" means at least two current, independent, written offers to
provide Direct international outbound service to a TOP 30 COUNTRY that: (i) are
submitted to Customer by separate QUALIFIED CARRIERS, one of which must be a
TIER A CARRIER: and (ii) contain rates for outbound international services that
are at least 5% lower than the rates for such services provided in the
Agreement.
"CALLING CARD" means a card issued to an END USER in Customer's name containing
an authorization code that the END USER may use to originate calls over
Sprint's network as provided in EXHIBIT 2.
"RESALE CONNECT FONCARD SERVICE" means a SERVICE consisting of a Sprint
authorization code incorporated into Customer's CALLING CARD which, together
with Customer's service enhancements, is provided to End Users for use in
originating calls over Sprint's network as provided in EXHIBIT 2.
"RESALE SOLUTIONS BASE RATES" means the prices provided herein for Resale
Solutions Service.
"RESALE SOLUTIONS SERVICE" means switched Service purchased under the Agreement
and invoiced under CTIS.
"CIC" means an IXC carrier identification code.
"CTIS" means Sprint's Carrier Transport Invoicing System.
"DAY RATE PERIOD" means the TARIFF day rate period unless otherwise specified
herein.
"DISCOUNT ONE" means a RATE ELEMENT specific discount that (1) is based on
Customer's DISCOUNT ONE MONTHLY VOLUME OF SERVICE and (2) is applied to usage at
the SERVICE HIERARCHY LEVEL that has been priced at RESALE SOLUTIONS BASE RATES.
"DISCOUNT ONE MONTHLY VOLUME OF SERVICE" means the volume of Customer's
monthly usage, at each PRODUCT HIERARCHY LEVEL, for a specific RATE ELEMENT
priced at RESALE SOLUTIONS BASE RATES.
"DISCOUNT RATE PERIOD" means the TARIFF international discount rate period
unless otherwise specified herein.
"DISCOUNT THREE" means a RATE ELEMENT specific discount that (1) is based on
Customer's DISCOUNT THREE MONTHLY VOLUME OF SERVICE and (2) is applied at the
PRODUCT HIERARCHY LEVEL or the SERVICE HIERARCHY LEVEL to interstate or
international usage to the LATAs or countries specified in ATTACHMENT C.
"DISCOUNT THREE MONTHLY VOLUME OF SERVICE" means the volume of Customer's
monthly usage, at the PRODUCT HIERARCHY LEVEL or SERVICE HIERARCHY LEVEL, of
interstate or international minutes to the specific LATAs or countries
identified in ATTACHMENT C and priced based on the usage levels and RATE
PERIODS specified in ATTACHMENT C.
"DISCOUNT TWO" means a RATE ELEMENT specific discount that (1) is based on
Customer's DISCOUNT TWO MONTHLY VOLUME OF SERVICE and (2) is applied to usage
at the SERVICE HIERARCHY LEVEL that has been priced at RESALE SOLUTIONS BASE
RATES less DISCOUNT ONE discounts.
"DISCOUNT TWO MONTHLY VOLUME OF SERVICE" means the volume of Customer's monthly
usage, at the MASTER HIERARCHY LEVEL, of all (1) RESALE SOLUTIONS SERVICES,
including directory assistance SERVICES, priced at RESALE SOLUTIONS BASE RATES
after the application of DISCOUNT ONE discounts, but prior to the application
of DISCOUNT TWO discounts, of all (2) CLEARLINE DS1 AND DS3 Private Line IXC
charges, and of all (3) OPERATOR SERVICES charges. DISCOUNT TWO MONTHLY VOLUME
OF SERVICE does not include RESALE SOLUTIONS SERVICE charges that are not based
on usage, any charge associated with access (dedicated or non-dedicated),
facilities charges, any usage related fixed charge, any non-recurring charge
such as installation charges, taxes, surcharges, transfer fees, or interest.
Clearline DS1 and DS3 Private Line IXC charges and Operator Service charges will
contribute to the DISCOUNT TWO MONTHLY VOLUME OF SERVICES one month in arrears.
"EARLY TERMINATION CHARGE" means the charge imposed for terminating the
Agreement prior to expiration of the Term as provided in Paragraph 5 thereof.
"ECONOMY RATE PERIOD" means the Tariff international economy rate period.
[*]
"END USER" means a customer of Customer to whom Sprint extends NETWORK
EXTENSION SERVICE at a NON-ASSOCIATED LOCATION.
- -----------------------------
SPRINT PROPRIETARY INFORMATION - RESTRICTED
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"EVENING RATE PERIOD" means the Tariff evening rate period unless otherwise
specified herein.
"EXCUSABLE DELAY" means any event that prevents a Party from performing its
obligations hereunder and that is beyond the reasonable control and without the
fault or negligence of such Party.
"EXHIBIT" means a supplement attached to, and a part of, the Agreement.
"FORWARD PRICING VOLUME OF SERVICE" means the volume of service specified in
ATTACHMENT A upon which DISCOUNT TWO discounts may be based as provided in
Subparagraph 13.8 of the Agreement.
"INTERSTATE ADJUSTMENT" means the adjustment under Subparagraph 6.2 to the
invoice for interstate usage that is based on the level of intrastate usage.
"INTERSTATE ADJUSTMENT RATE" means the rate identified in ATTACHMENT D that is
used to determine the INTERSTATE ADJUSTMENT as provided in Subparagraph 6.2.
"IXC" means interexchange carrier.
"LEC" means local exchange carrier.
"MASTER HIERARCHY LEVEL" means billing hierarchy level 1.
"MAXIMUM NONCOMPLETE 800 CALL PERCENTAGE" means, for each month, for each
Service type, the ratio, expressed as a percentage, of (i) the aggregate number
of NONCOMPLETE 800 CALLS during such period divided by (ii) the aggregate
number of 800 calls during such period. This percentage shall be calculated at
each PRODUCT HIERARCHY LEVEL.
"MAXIMUM NON-BELL TRAFFIC PERCENTAGE" means, for each month, the ratio,
expressed as a percentage, of (i) the number of minutes during such period that
originate from, or terminate in, a NON-BELL SERVICE AREA, divided by (ii) the
total number of minutes during such period. MAXIMUM NON-BELL TRAFFIC
PERCENTAGES will be calculated independently for originating and terminating
minutes at the PRODUCT HIERARCHY LEVEL.
"MINIMUM AVERAGE TIME REQUIREMENT" means the minimum average call duration,
expressed in minutes, for SERVICES as specified in ATTACHMENT B. MINIMUM AVERAGE
TIME REQUIREMENT calculations will be made at each PRODUCT HIERARCHY LEVEL.
"MINIMUM COMMITMENT" means the minimum monthly usage commitment stated on
ATTACHMENT A. The calculation to determine whether Customer has met the MINIMUM
COMMITMENT shall be based on Customer's invoiced NET USAGE.
"MINIMUM PORT USAGE" means the minimum NET USAGE for Resale Direct Service
stated on ATTACHMENT A that Customer shall generate per ACTIVE RESALE DIRECT
PORT.
"NETWORK EXTENSION SERVICE" means SERVICE that Sprint extends to the
NON-ASSOCIATED LOCATION of an END USER.
"NET USAGE" means the monthly amount invoiced for use of a SERVICE net of
DISCOUNT ONE, DISCOUNT TWO and DISCOUNT THREE discounts. NET USAGE includes the
following as they apply to particular SERVICES: monthly per-minute usage
charges invoiced under the Agreement; route advance charges; real time ANI
charges; switched origination and termination charges; directory assistance
charges; MINIMUM AVERAGE TIME REQUIREMENT SURCHARGES; Noncomplete Call
Surcharges; FONcard surcharges; and LEC Cap Surcharges.
"NIGHT/WEEKEND RATE PERIOD" means the TARIFF night/weekend rate period unless
otherwise specified herein.
"NONCOMPLETE 800 CALL" means an attempted Resale Connect Toll Free, Resale
Direct Toll Free, or Resale Direct Toll Free Extension call that is not
completed to the called number for any reason.
"NON-ASSOCIATED LOCATION" means any physical premise to or from which Spring
provides SERVICE that is not an ASSOCIATED LOCATION.
"NON-BELL SERVICE AREA" means the geographic service area of any "independent"
LEC which is not a Bell Operating Company.
"OFF PEAK RATE PERIOD" means (a) the EVENING RATE PERIOD and the NIGHT/WEEKEND
RATE PERIOD for interstate traffic and (b) the DISCOUNT RATE PERIOD and ECONOMY
RATE PERIOD for international traffic.
"PEAK RATE PERIOD" means (a) the DAY RATE PERIOD for interstate traffic and
(b) the STANDARD RATE PERIOD for international traffic.
"PER MINUTE CHARGE" means the per minute charge for SERVICE as set forth in
EXHIBIT C based on RATE PERIODS and BILLING INCREMENTS stated in ATTACHMENT B.
"PIC" means primary interexchange carrier.
"PIC AUTHORIZATION" means an END USER'S selection of a PIC that meets the
requirements of federal and state law.
"PRIMARY CARRIER" means the IXC designated by Customer as its first routing
choice and primary overflow carrier; provided, however, that Sprint will not be
designated as customer's "PRIMARY CARRIER" for (i) services which Customer is
obligated to place under pre-existing contracts with other interexchange
carriers; until such time that the initial term expires (i.e., Customer agrees
not to renew the term of these agreements and will transition all services to
Sprint upon expiration or termination of these agreements), (ii) services
carried on Customer's own private line network connected to customers switching
platform, (iii) local access/egress used to transport calls to or/and from
customers switching platform, (iv) services which Sprint elects not to provide
to Customer including the provisions of Section 35 herein. For purposes of this
Agreement, the PRIMARY CARRIER requirement will commence November 1, 1996 and
continue throughout the remainder of the TERM.
"PRIMARY CARRIER SERVICE" means the Service specified in ATTACHMENT A for which
sprint shall be Customer's PRIMARY CARRIER.
"PRODUCT HIERARCHY LEVEL" means the fifth level in the Customer billing
hierarchy, and is directly above the SERVICE HIERARCHY LEVEL which ties like
SERVICES together for purposes of reporting. Each PRODUCT HIERARCHY LEVEL is
considered independently for calculation and application of DISCOUNT ONE, LEC
Cap Surcharges, MINIMUM AVERAGE TIME REQUIREMENT Surcharges, NONCOMPLETE 800
Call Surcharges and MINIMUM PORT USAGE Surcharges.
SPRINT PROPRIETARY INFORMATION - RESTRICTED
8
<PAGE> 9
"PROMOTIONAL DISCOUNTS" is a collective reference to Discount One, Discount
Two, Discount Three and Interstate Adjustments.
"PROPOSAL DATE" means the date indicated on Attachment A that the Agreement is
offered by Spring to Customer.
"PROPRIETARY INFORMATION" means (a) written information of a Party which is
clearly and conspicuously marked as proprietary or confidential or which is
accompanied by written notice that such information is confidential, or (b) a
verbal communication which is subsequently confirmed in writing to the other
Party as confidential or proprietary information which (i) is maintained in
confidence and secrecy by the disclosing Party, (ii) is valuable to the
disclosing Party because of such confidence or secrecy, and (iii) is subject to
the disclosing Party's reasonable efforts to maintain such confidentiality and
secrecy. PROPRIETARY INFORMATION shall not include information which (1) is at
any time in the public domain other than through wrongdoing on the part of an
entity owing a duty of confidentiality to the disclosing Party, (2) is within
legitimate possession of the receiving Party without obligation of
confidentiality, (3) is lawfully received from a third party having rights
therein without restriction of the right to disseminate the information, (4) is
independently developed without breach of any obligation of confidentiality
through parties without access to or knowledge of such PROPRIETARY INFORMATION,
(5) is disclosed with prior written approval of the other Party, (6) is
transmitted after the disclosing Party has received written notice from the
receiving Party that it does not desire to receive further PROPRIETARY
INFORMATION, or (7) is obligated to be produced under order of a court of
competent jurisdiction.
"QUALIFIED CARRIER" means either a TIER A CARRIER or TIER B CARRIER.
"RATE ELEMENT" means a jurisdictional element of the rate for a particular
Service. For example, RESALE DIRECT rates consist of separate RATE ELEMENTS for
interstate, intrastate, Canada, Mexico domestic, Mexico international, other
international, and directory assistance usage.
"RATE PERIODS" is a collective reference to the DAY RATE PERIOD, DISCOUNT RATE
PERIOD, ECONOMY RATE PERIOD, EVENING RATE PERIOD, NIGHT/WEEKEND RATE PERIOD,
OFF PEAK RATE PERIOD, PEAK RATE PERIOD, and STANDARD RATE PERIOD.
"SERVICE" means the service identified in the EXHIBITS and ATTACHMENTS that
Sprint shall provide and Customer shall purchase hereunder.
"SERVICE HIERARCHY LEVEL" means the sixth and lowest level in the Customer's
billing hierarchy.
"STANDARD RATE PERIOD" means the Tariff standard rate period for international
Service unless otherwise specified herein.
"TARIFF(S)" means any applicable tariff filed by Sprint with the Federal
Communications Commission for interstate or international Service (including
Tariff revisions) and/or any applicable tariff filed with a state regulatory
commission for INTRASTATE SERVICE. Should Sprint no longer file TARIFFS in
order to provide SERVICE, the TARIFF shall mean the standard rate tables and
terms and conditions that replace such TARIFFS.
"TERMS" means the term of the Agreement as provided in Paragraph 3 thereof.
"TIER A CARRIER" means AT&T, MCI, WorldCom, Cable & Wireless and LCI.
"TIER B CARRIER" means one of the three interexchange carriers providing
international service, other than a TIER A CARRIER, that Customer designates as
the three TIER B CARRIERS for a particular quarter.
"TOP 30 COUNTRY" means a country identified by Customer on or before April 1,
of each year as one of the top 30 countries to which customer has available
Direct international outbound traffic as billed under Carrier Transport
Invoicing System. Each Mexico rating band will be considered a country.
SPRINT PROPRIETARY INFORMATION - RESTRICTED
9
<PAGE> 10
EXHIBIT 2
SERVICES
--------
The following Services are provided pursuant to the Agreement.
1. OUTBOUND SERVICE.
1.1 RESALE DIRECT and RESALE DIRECT EXTENSION. Resale Direct and Resale Direct
Extension is provided hereunder for switched outbound traffic with interstate
or international termination that originates over dedicated special access
(DS-1 or DS-3) circuits.
1.2. RESALE DIRECT. Resale Direct is Service subscribed to, and paid for, by
Customer that originates from an Associated Location. Carrier Ultra WATS may be
obtained only by a carrier with its own CIC.
1.3. RESALE DIRECT EXTENSION. Resale Direct Extension is Service subscribed
to, and paid for, by Customer but connected directly to a Non-Associated
Location.
1.4. RESALE CONNECT ONE PLUS. Resale Connect One Plus is provided hereunder
for switched access outbound traffic utilizing Feature Group D protocol having
interstate or international termination.
2. TOLL FREE SERVICE.
2.1. RESALE DIRECT TOLL FREE and RESALE DIRECT TOLL FREE EXTENSION. Resale
Direct Toll Free and Resale Direct Toll Free Extension is provided hereunder
for Customer switched inbound traffic with interstate or international
origination that terminates over dedicated special access (DS-1 or DS-3)
circuits.
2.2. RESALE DIRECT TOLL FREE. Resale Direct Toll Free is Toll Free Service
subscribed to, and paid for, by Customer that terminates to an Associated
Location. Resale Direct Toll Free may be obtained only by a carrier with its
own CIC.
2.3. RESALE CONNECT TOLL FREE EXTENSION. Resale Connect Toll Free Extension is
Toll Free Service subscribed to, and paid for, by Customer but connected
directly to an Non-Associated Location.
2.4. RESALE CONNECT TOLL FREE. Resale Connect Toll Free is provided hereunder
for switched inbound traffic, terminating on Feature Group D protocol, having
interstate or international origination.
2.5. INTERNATIONAL TOLL FREE ORIGINATION. International Toll Free Service
("ITFS") shall be provided subject to availability. Because of a limited
quantity of Toll Free numbers in some countries, Sprint may, as it deems
appropriate, after 30 days notice, disconnect any ITFS number which does not
generate at least 60 minutes of usage during any period of three consecutive
months. ITFS traffic must be terminated directly in the continental U.S. If
reorigination occurs, ITFS traffic is subject to foreign PTT interruption and
is beyond Sprint's control. ITFS Service shall be provided pursuant to Tariff,
including rates, discounts and Toll Free number charges, unless otherwise
provided herein.
3. FONVIEW. FONview is not available for Service billed under CTIS.
4. DIRECTORY ASSISTANCE.
4.1. INTERSTATE. Interstate directory assistance provided hereunder must have
a domestic origination over Customer's circuits. Sprint may modify directory
assistance prices provided in the Agreement to reflect changes in LEC directory
assistance charges.
4.2. INTERNATIONAL. International directory assistance is provided pursuant
to Tariff. International directory assistance must have a domestic origination
over Customer's circuits and request numbers must be located in the countries
listed in Sprint's FCC Tariff 1, Section 2.1. International directory
assistance may be obtained by calling a Sprint operator who will request the
number from the appropriate country's international operator. Sprint may modify
directory assistance prices provided in the Agreement to reflect changes in
directory assistance charges of other countries.
4.3. TOLL-FREE DIRECTORY LISTINGS. Customer's Toll Free numbers shall not be
eligible for any toll-free directory listing at Sprint's expense.
5. RESALE CONNECT FONCARD SERVICE
5.1 Resale Connect FONCard Service consists of an authorization code issued by
Sprint which Customer will incorporate into a Calling Card. The Calling Card,
together with Customer provided service enhancements, will be provided in
Customer's name to End Users who may use the card to originate calls over
Sprint's network in the contiguous U.S. and selected countries. Sprint will
transport Customer's Calling Card traffic with the same quality as Sprint
FONcard traffic.
5.2. Availability. Resale Connect FONCARD Service is provided subject to (a)
availability and compatibility of facilities, (b) Customer fulfillment, and (c)
800 access origination, which Customer agrees may be withheld by Sprint in
certain LATAs because of facility constraints.
5.3. Activation. Sprint will provide Customer with activated authorization
codes to be imprinted on Customer's Calling Cards. The codes will be provided
within 30 days following Customer's request and notice to Sprint of Customer's
fulfillment vendor.
5.4. Toll Free Access. Customer may elect Calling Card access to a Sprint
operator using either a "Generic" or "Branded" Toll Free access number. The
operator response to a Generic Toll Free call will be similar to: "Long
Distance, may I help you?" Calls to a Branded access number will be answered by
an operator assigned exclusively to Customer. Operator response to Branded
access calls will be similar to "(Customer) Long Distance Operator."
Customer shall pay a non-recurring charge for establishing account access as
provided in Attachment B.
5.5. Service Representative. Sprint will designate a representative to
provide Customer service. This representative will not be available for direct
contact by End Users.
5.6. Non-Emergency Deactivation. Sprint will advise Customer of the process
for requesting non-emergency deactivation of an authorization
SPRINT PROPRIETARY INFORMATION - RESTRICTED
10
<PAGE> 11
code. Sprint may periodically deactivate unused authorization codes to minimize
potential fraud. Sprint will notify Customer of any such deactivation.
Emergency deactivation is provided for in Subparagraph 5.9 of this Attachment.
5.7. Remedy for Service Failure. Notwithstanding anything to the contrary
in Subparagraph 4.1(e) of the Agreement, Customer's sole and exclusive remedy
for failure of a particular Resale Connect FONcard Service shall be
discontinuation of the affected Service subject to Paragraph 25 of the
Agreement.
5.8. Customer Obligations. Customer shall, at Customer's expense: (a)
design, manufacture and distribute its Calling Cards; (b) solicit End Users in
its own name in compliance with Paragraph 8 of the Agreement; (c) address End
User service requests; (d) determine End User creditworthiness; (e) define its
relationship with End Users relative to its Calling Card Service by tariff or
contract; (f) provide Calling Card fulfillment using a bonded fulfillment
vendor; (g) supply its fulfillment vendor with necessary End User information;
(h) maintain its own End User data base; (i) provide End User customer service,
billing and collection; (j) maintain its own End User customer service number,
which shall be printed on each Calling Card; (k) establish internal Calling
Card management procedures; (l) monitor for fraud and code abuse; and (m)
cooperate and interface with Sprint to prevent fraud or code abuse as provided
herein.
Customer shall provide Sprint with all order authorizations, service
applications and information that Sprint requires to establish and maintain
Resale Connect FONcard Service and proper invoicing.
Customer shall be liable for (a) all usage charged to an activated authorization
code after the code is provided to Customer or its agent, (b) non payment by
End Users, and (c) billing adjustments granted to End Users as provided in
Subparagraph 11.6 of the Agreement.
Customer shall indemnify and hold Sprint harmless from any claim or damages
resulting from Sprint's deactivation of an authorization code at Customer's
request.
5.9. Code Abuse: Fraud: Emergency Deactivation. Sprint and Customer will
cooperate to deter Calling Card fraud and code abuse. Sprint will monitor usage
of Customer Calling Cards to detect fraud or code abuse in the same manner that
it monitors FONcard usage of its own customers. This activity will not create
any liability on the part of Sprint resulting from code abuse or fraud.
Customer shall be liable for all usage charged to an activated authorization
code that results from fraud or code abuse.
Spring will notify Customer of (a) the process Customer may use to obtain
emergency deactivation of a lost or stolen Calling Card and (b) the process
Sprint will use to notify Customer of suspected fraud or code abuse.
Customer shall maintain a 7 day per week, 24 hour per day, contact that Sprint
will immediately notify if fraud or code abuse is suspected. Customer shall
advise Sprint within 30 minutes after receiving such notice whether it wants
the authorization code deactivated. If Sprint is unable to reach Customer's
contact, or if Customer fails to respond to Sprint's notice within 30 minutes.
Sprint may, in its discretion deactivate the authorization code and advise
Customer of its actions. Sprint shall incur no liability for such deactivation.
Sprint shall be liable for calls charged to an authorization code after a
period of 4 hours following an appropriate emergency deactivation request.
Requests for credit pursuant to this subparagraph shall be supported by
appropriate documentation. Sprint will investigate and, in its discretion,
either approve or reject such requests. Notwithstanding anything in Paragraph
18 of the Agreement, the amount of any credit request under this subparagraph
shall not be deducted as a disputed charge prior to payment of an invoice.
SPRINT PROPRIETARY INFORMATION - RESTRICTED
11
<PAGE> 12
ATTACHMENT A-1
A.3. TERM OF AGREEMENT: 42 months. (effective September 1, 1996 through March
31, 2000) If the Agreement is executed by Customer prior to January 9,
1997, the price for Services provided hereunder will be applied
systematically effective with the February 1997 usage invoice. Sprint
will apply benchmark style credits for the September through January
usage periods in order to approximate discounts due for these periods.
Sprint and the Customer will work cooperatively to calculate these
figures.
A.13.8. FORWARD PRICING - FORWARD PRICING VOLUME OF SERVICE
Not Applicable
A.13.9. PRIMARY CARRIER REQUIREMENT. Customer shall utilize Sprint as its
PRIMARY CARRIER for the following PRIMARY CARRIER SERVICES
Direct
Direct Toll Free
Direct Extension
Direct Toll Free Extension
Connect One Plus
Connect Toll Free
International Toll Free Service
A.14.1 MINIMUM COMMITMENT:
Cumulative**
Months Net Usage Commitment
------ --------------------
1-7 $0
8-42 [*] ***
** All services sold by Sprint to Customer apply to this
commitment, including Clearline Private Lines and Operator
Services charges.
*** Under no circumstances, shall the portion of the Cumulative
Net Usage Commitment related to the $25,000 Monthly Account
Charge be retired (especially by invoking an international
commitment reduction as provided for in Paragraph 35,) except by
payment of the outstanding Monthly Account Charges in full.
A.14.5. MINIMUM PORT USAGE: $100 Minimum Net Direct Usage Per Port
MONTHLY ACCOUNT CHARGE: Monthly recurring Account charge will be $25,000 until
August 1, 1998.
PROMOTIONAL NDM CDR CHARGE; NDM CDR charges will be waived for one location
only.
REPORTING REQUIREMENT
Customer will send on a monthly basis a report summarizing the number of
minutes by service type, jurisdiction and Carrier.
PROPRIETARY INFORMATION
[SPRINT LOGO] RESTRICTED 12/20/96
<PAGE> 13
Attachment A-2
PROMOTIONAL ACF/COC/EFC CHARGES
All ACF Charges will be waived.
Monthly recurring COC charges will be waived.
Monthly recurring EFC charges will be $5.50 per port when Customer
utilizes Sprint's entrance facilities.
CIC DEPLOYMENT CHARGES
All CIC deployment charges will be per Attachment A-4. These charges
will be applied on a LATA by LATA basis as ordered by Customer.
T-1 INSTALLATION CHARGES
Direct and Direct Extension T1 access installation charges (local loop,
COC, and ACF) for New Accounts will be waived provided such T1s
remain in service for a period of at least 12 months. Customer's
applicable T1 installation charges will be credited to zero when
installed, however, if an eligible T1 is taken out of service
for any reason within 12 months of installation, Customer will
be debited back a prorated portion of the amount that was
originally credited up to $400.
A.14.6. INTERNATIONAL FORECAST SURCHARGE. To enable Sprint to adequately
forecast demand for international capacity, Customer, beginning May 1,
1997, must provide Sprint with a forecast of projected usage (referred
to as the "International Usage Forecast") to any country to which
Customer anticipates generating more than 50,000 MOUs during any month
(referred to as a "High Usage Country").
During the Term of the Agreement the Customer may submit in writing an
amended International Usage Forecast showing any increase in anticipated
usage. Sprint shall have thirty (30) days to review the amendment and
notify Customer in the event any of the increased usage projections
exceed Sprint's network capacity to a particular country. As part of
said notification, for each country, Sprint shall inform Customer of how
many MOUs are available to the Customer on Sprint's network.
If during the term of the Agreement, Sprint's network is not able to
handle the traffic volume to any country as agreed to in response to
Customer's International Usage Forecast, then the Minimum Usage
Commitments shall be reduced as by an amount equal to (1) the average
monthly amount billed by Sprint to Customer for such Services over the
three previous months multiplied by (2) the number of months remaining
in the term of the overall commitment.
In the event the Customer exceeds Sprint's network capacity to a
particular country, Sprint reserves the right, to impose a monthly
surcharge on usage to each High Usage Country equal to $0.10 for each
MOU (a) above 62,500 MOUs to such country if Customer does not submit an
International Usage Forecast, or (b) above 125% of the usage to such
country that is forecasted in Customer's International Usage Forecast.
Sprint will give Customer at least 30 days written notification prior to
imposing the surcharge.
A.36 PROPOSAL DATE: December 20, 1996
PROPRIETARY INFORMATION
[SPRINT LOGO] RESTRICTED 12/20/96
<PAGE> 14
Attachment A-3
International Usage Forecast
Country Minutes/Month
------- -------------
Proprietary Information
RESTRICTED
<PAGE> 15
Attachment A-4
CIC Loading Charges By LATA
<TABLE>
<CAPTION>
LATA Charge LATA Charge LATA Charge LATA Charge
- ---- ------ ---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C> <C>
120 $ [*] 354 $ [*] 520 $ [*] 668 $ [*]
122 $ [*] 356 $ [*] 521 $ [*] 670 $ [*]
124 $ [*] 358 $ [*] 522 $ [*] 672 $ [*]
126 $ [*] 360 $ [*] 524 $ [*] 674 $ [*]
128 $ [*] 362 $ [*] 526 $ [*] 676 $ [*]
130 $ [*] 364 $ [*] 528 $ [*] 720 $ [*]
132 $ [*] 366 $ [*] 530 $ [*] 721 $ [*]
133 $ [*] 368 $ [*] 532 $ [*] 722 $ [*]
134 $ [*] 370 $ [*] 534 $ [*] 724 $ [*]
136 $ [*] 374 $ [*] 536 $ [*] 726 $ [*]
138 $ [*] 376 $ [*] 538 $ [*] 728 $ [*]
140 $ [*] 420 $ [*] 540 $ [*] 730 $ [*]
220 $ [*] 422 $ [*] 542 $ [*] 732 $ [*]
222 $ [*] 424 $ [*] 544 $ [*] 734 $ [*]
224 $ [*] 426 $ [*] 546 $ [*] 736 $ [*]
226 $ [*] 428 $ [*] 548 $ [*] 738 $ [*]
228 $ [*] 430 $ [*] 550 $ [*] 740 $ [*]
230 $ [*] 432 $ [*] 552 $ [*] 820 $ [*]
232 $ [*] 434 $ [*] 554 $ [*] 822 $ [*]
234 $ [*] 436 $ [*] 556 $ [*] 832 $ [*]
236 $ [*] 438 $ [*] 558 $ [*] 834 $ [*]
238 $ [*] 440 $ [*] 560 $ [*] 920 $ [*]
240 $ [*] 442 $ [*] 562 $ [*] 922 $ [*]
242 $ [*] 444 $ [*] 564 $ [*] 923 $ [*]
244 $ [*] 446 $ [*] 566 $ [*] 924 $ [*]
246 $ [*] 448 $ [*] 568 $ [*] 927 $ [*]
248 $ [*] 450 $ [*] 570 $ [*] 928 $ [*]
250 $ [*] 452 $ [*] 620 $ [*] 929 $ [*]
252 $ [*] 454 $ [*] 624 $ [*] 932 $ [*]
254 $ [*] 456 $ [*] 626 $ [*] 937 $ [*]
256 $ [*] 458 $ [*] 628 $ [*] 938 $ [*]
320 $ [*] 460 $ [*] 630 $ [*] 939 $ [*]
322 $ [*] 462 $ [*] 632 $ [*] 949 $ [*]
324 $ [*] 464 $ [*] 634 $ [*] 951 $ [*]
325 $ [*] 466 $ [*] 635 $ [*] 952 $ [*]
326 $ [*] 468 $ [*] 636 $ [*] 953 $ [*]
328 $ [*] 470 $ [*] 638 $ [*] 956 $ [*]
330 $ [*] 472 $ [*] 640 $ [*] 958 $ [*]
332 $ [*] 474 $ [*] 644 $ [*] 960 $ [*]
334 $ [*] 476 $ [*] 646 $ [*] 961 $ [*]
336 $ [*] 477 $ [*] 648 $ [*] 973 $ [*]
338 $ [*] 478 $ [*] 650 $ [*] 974 $ [*]
340 $ [*] 480 $ [*] 652 $ [*] 976 $ [*]
342 $ [*] 482 $ [*] 654 $ [*] 977 $ [*]
344 $ [*] 484 $ [*] 656 $ [*] 978 $ [*]
346 $ [*] 486 $ [*] 658 $ [*] 980 $ [*]
348 $ [*] 488 $ [*] 660 $ [*] -----
350 $ [*] 490 $ [*] 664 $ [*] Total $ [*]
352 $ [*] 492 $ [*] 666 $ [*] =====
</TABLE>
Proprietary Information
HIGHLY RESTRICTED
<PAGE> 16
Attachment B - 1
B.13.4. Billing Increments/Usage Periods for Per Minute Charges.
Service will be invoiced based on Per Minute Charges utilizing Tariffed
Rate Periods and Tariffed Increments, unless specifically set forth below:
<TABLE>
<CAPTION>
Initial Additional
Service Type/ Billing Increment Billing Increment
Rate Element (sec) (sec)
<S> <C> <C>
Interstate Direct & Direct Extension 6 6
Intrastate Direct & Direct Extension 6 6
Canada Term. Direct & Direct Extension 30 6
Mexico US Element Direct & Direct Extension 30 6
Mexico Int'l Element Direct & Direct Extension 60 60
Other Int'l Direct & Direct Extension 30 6
Interstate Connect One Plus 6 6
Intrastate Connect One Plus 6 6
Canada Term. Connect One Plus 30 6
Mexico US Element Connect One Plus 30 6
Mexico Int'l Element Connect One Plus 60 60
Other Int'l Connect One Plus 30 6
Interstate Direct Toll Free & Direct Toll Free Ext. 6 6
Intrastate Direct Toll Free & Direct Toll Free Ext. 6 6
Canada Orig. Direct Toll Free & Direct Toll Free Ext. 30 6
Mexico Direct Toll Free & Direct Toll Free Ext. 60 60
Other Int'l Direct Toll Free & Direct Toll Free Ext. 30 6
Caribbean Direct Toll Free & Direct Toll Free Ext. 30 6
Interstate Connect Toll Free 6 6
Intrastate Connect Toll Free 6 6
Canada Orig. Connect Toll Free 30 6
Mexico Connect Toll Free 60 60
Other Int'l. Connect Toll Free 30 6
Caribbean Connect Toll Free 30 6
Interstate Connect FONcard 18 6
Intrastate Connect FONcard 18 6
Canada Connect FONcard 30 6
Other Int'l Connect FONcard 30 6
</TABLE>
B.13.5. NON-BELL SWITCHED ORIGINATION/TERMINATION/800 ORIGINATION CHARGE.
Customer shall pay the following charges for each minute of a switched
interstate call originating or terminating in a Non-Bell Service Area:
Not Applicable
B.13.6. SWITCHED ORIGINATION/TERMINATION/800 ORIGINATION CHARGE. Customer shall
pay the following charges for each minute of a switched interstate and
intrastate/intraLATA:
Direct & Direct Extension - The Termination Charge on
Attachments B-3 and B-4 will be applied to all minutes.
Direct Toll Free & Direct Toll Free Extension - The Origination
Charge on Attachments B-3 and B-4 will be applied to all minutes.
PROPRIETARY INFORMATION
[SPRINT LOGO] RESTRICTED
<PAGE> 17
Attachment B - 2
Connect One Plus & Connect Toll Free - The Termination and the
Origination Charge on Attachments B-3 and B-4 will be applied to all minutes.
Connect Toll Free - The Termination and the Origination Charge
on Attachments B-3 and B-4 will be applied to all minutes.
Connect FONcard - Not Applicable
B.14.2. LEC Cap Maximum Non-Bell Traffic.
<TABLE>
<CAPTION>
Maximum Originating Maximum Terminating Non-Bell
Service Type Non-Bell Traffic % Non-Bell Traffic % Surcharge
<S> <C> <C> <C>
Direct N/A N/A N/A
Direct Toll Free N/A N/A N/A
Connect One Plus N/A N/A N/A
Connect Toll Free N/A N/A N/A
Connect FONcard 30% 30% $0.050
Direct Extension N/A N/A N/A
Direct Toll Free Ext N/A N/A N/A
</TABLE>
B.14.3. Minimum Average Call Duration: Minimum Average Time Requirement (MATR)
shall not apply unless specifically set forth below:
Not Applicable
B.14.4. Maximum Noncomplete Call Percentage.
<TABLE>
<CAPTION>
Direct Toll Free, Direct Toll Free Maximum
Extension, and Connect Toll Free Noncomplete 800 Per Call
Usage Type (Rate Element) Call Percentage Surcharge
<S> <C> <C>
Intrastate/Interstate 10% [*]
International/Canadian 10% [*]
</TABLE>
Promotional Monthly Recurring 800 Charges:
Customer's Monthly Recurring Connect Toll Free service charge will be
[*] per Connect Toll Free account per month.
Customer's 800 numbers (Connect Toll Free, Direct Toll Free, and Direct
Toll Free Extension) requiring 800 Toll-free Directory Assistance
Listings will be charged an additional Monthly Recurring Charge of [*]
per month per 800 number requiring such listing.
Toll Free Database Query Charge
Customer's Toll Free Database Query charge will be [*] per domestic
Direct Toll Free, Direct Toll Free Extension, and Connect Toll Free
Call.
PROPRIETARY INFORMATION
[SPRINT LOGO] RESTRICTED
<PAGE> 18
Attachment B - 3
Interstate Switched Origination and Switched Termination per Minute Charges
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Origination Termination
State Group Vendor (LEC) Charge Charge
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AK 7 LEC OTHER [*] [*]
AL 1 BELL SOUTH [*] [*]
AL 3 GTE [*] [*]
AL 7 LEC OTHER [*] [*]
AR 1 SWBT [*] [*]
AR 3 GTE [*] [*]
AR 4 ALLTEL [*] [*]
AR 5 CENTURY [*] [*]
AR 7 LEC OTHER [*] [*]
AZ 1 US WEST [*] [*]
AZ 4 CITIZENS [*] [*]
AZ 7 LEC OTHER [*] [*]
CA 1 PACIFIC TEL [*] [*]
CA 3 GTE [*] [*]
CA 4 CONTEL/CA [*] [*]
CA 7 LEC OTHER [*] [*]
CO 1 US WEST [*] [*]
CO 4 PTI [*] [*]
CO 7 LEC OTHER [*] [*]
CT 1 SNET [*] [*]
CT 1 NYNEX [*] [*]
CT 7 LEC OTHER [*] [*]
DC 1 BELL ATL [*] [*]
DC 7 LEC OTHER [*] [*]
DE 1 BELL ATL [*] [*]
DE 7 LEC OTHER [*] [*]
FL 1 BELL SOUTH [*] [*]
FL 2 SPRINT LTD [*] [*]
FL 3 GTE [*] [*]
FL 7 LEC OTHER [*] [*]
GA 1 BELL SOUTH [*] [*]
GA 4 ALLTEL [*] [*]
GA 7 LEC OTHER [*] [*]
HI 3 GTE [*] [*]
HI 7 LEC OTHER [*] [*]
IA 1 US WEST [*] [*]
IA 3 GTE [*] [*]
IA 4 CEA-INS [*] [*]
IA 5 ROCHESTER [*] [*]
IA 7 LEC OTHER [*] [*]
ID 1 US WEST [*] [*]
ID 3 GTE [*] [*]
ID 4 CITIZENS [*] [*]
ID 7 LEC OTHER [*] [*]
IL 1 AMERITECH [*] [*]
IL 2 SPRINT LTD [*] [*]
IL 3 GTE [*] [*]
IL 4 TCG [*] [*]
IL 7 LEC OTHER [*] [*]
IN 1 AMERITECH [*] [*]
IN 2 SPRINT LTD [*] [*]
IN 3 GTE [*] [*]
IN 7 LEC OTHER [*] [*]
KS 1 SWBT [*] [*]
KS 2 SPRINT LTD [*] [*]
KS 7 LEC OTHER [*] [*]
KY 1 BELL SOUTH [*] [*]
KY 4 CINN BELL [*] [*]
KY 7 LEC OTHER [*] [*]
KY 3 GTE [*] [*]
LA 1 BELL SOUTH [*] [*]
LA 4 CENTURY [*] [*]
LA 7 LEC OTHER [*] [*]
MA 1 NYNEX [*] [*]
MA 7 LEC OTHER [*] [*]
MD 1 BELL ATL [*] [*]
MD 7 LEC OTHER [*] [*]
ME 1 NYNEX [*] [*]
ME 4 TDS [*] [*]
ME 7 LEC OTHER [*] [*]
MI 1 AMERITECH [*] [*]
MI 3 GTE [*] [*]
MI 4 CENTURY [*] [*]
MI 7 LEC OTHER [*] [*]
MN 1 US WEST [*] [*]
MN 2 SPRINT LTD [*] [*]
MN 3 GTE [*] [*]
MN 4 CEA-MEANS [*] [*]
MN 5 ROCHESTER [*] [*]
MN 7 LEC OTHER [*] [*]
MO 1 SWBT [*] [*]
MO 2 SPRINT LTD [*] [*]
MO 3 GTE [*] [*]
MO 4 ALLTEL [*] [*]
MO 7 LEC OTHER [*] [*]
MS 1 BELL SOUTH [*] [*]
MS 4 CENTURY [*] [*]
MS 7 LEC OTHER [*] [*]
MT 1 US WEST [*] [*]
MT 4 PTI [*] [*]
MT 5 CITIZENS [*] [*]
MT 7 LEC OTHER [*] [*]
NC 1 BELL SOUTH [*] [*]
NC 2 SPRINT LTD [*] [*]
NC 3 GTE [*] [*]
NC 4 ALLTEL [*] [*]
NC 7 LEC OTHER [*] [*]
ND 1 US WEST [*] [*]
ND 7 LEC OTHER [*] [*]
NE 1 US WEST [*] [*]
NE 2 SPRINT LTD [*] [*]
NE 3 GTE [*] [*]
NE 4 LINCOLN [*] [*]
NE 7 LEC OTHER [*] [*]
NH 1 NYNEX [*] [*]
NH 7 LEC OTHER [*] [*]
NJ 1 BELL ATL [*] [*]
NJ 2 SPRINT LTD [*] [*]
NJ 7 LEC OTHER [*] [*]
NM 1 US WEST [*] [*]
NM 3 GTE [*] [*]
NM 7 LEC OTHER [*] [*]
NV 1 PACIFIC TELESIS [*] [*]
NV 2 SPRINT LTD [*] [*]
NV 4 CONTEL/CA [*] [*]
NV 5 ALLTEL [*] [*]
NV 7 LEC OTHER [*] [*]
NY 1 NYNEX [*] [*]
NY 4 TCG [*] [*]
NY 5 ROCHESTER [*] [*]
NY 6 CITIZENS [*] [*]
NY 7 LEC OTHER [*] [*]
OH 1 AMERITECH [*] [*]
OH 2 SPRINT LTD [*] [*]
OH 3 GTE [*] [*]
OH 4 CINN BELL [*] [*]
OH 5 ALLTEL [*] [*]
OH 6 CENTURY [*] [*]
OH 7 LEC OTHER [*] [*]
OK 1 SWBT [*] [*]
OK 3 GTE [*] [*]
OK 4 ALLTEL [*] [*]
OK 7 LEC OTHER [*] [*]
OR 1 US WEST [*] [*]
OR 2 SPRINT LTD [*] [*]
OR 3 GTE [*] [*]
OR 4 PTI [*] [*]
OR 7 LEC OTHER [*] [*]
PA 1 BELL ATL [*] [*]
PA 2 SPRINT LTD [*] [*]
PA 3 GTE [*] [*]
PA 4 ALLTEL [*] [*]
PA 7 LEC OTHER [*] [*]
PR 7 LEC OTHER [*] [*]
RI 1 NYNEX [*] [*]
RI 7 LEC OTHER [*] [*]
SC 1 BELL SOUTH [*] [*]
SC 2 SPRINT LTD [*] [*]
SC 3 GTE [*] [*]
SC 4 ALLTEL [*] [*]
SC 7 LEC OTHER [*] [*]
SD 1 US WEST [*] [*]
SD 4 CEA-SDN [*] [*]
SD 7 LEC OTHER [*] [*]
TN 1 BELL SOUTH [*] [*]
TN 2 SPRINT LTD [*] [*]
TN 4 TDS [*] [*]
TN 5 CITIZENS [*] [*]
TN 7 LEC OTHER [*] [*]
TX 1 SWBT [*] [*]
TX 2 SPRINT LTD [*] [*]
TX 3 GTE [*] [*]
TX 7 LEC OTHER [*] [*]
UT 1 US WEST [*] [*]
UT 4 CITIZENS [*] [*]
UT 7 LEC OTHER [*] [*]
VA 1 BELL ATL [*] [*]
VA 2 SPRINT LTD [*] [*]
VA 3 GTE [*] [*]
VA 7 LEC OTHER [*] [*]
VI 7 LEC OTHER [*] [*]
VT 1 NYNEX [*] [*]
VT 4 TDS [*] [*]
VT 7 LEC OTHER [*] [*]
WA 1 US WEST [*] [*]
WA 2 SPRINT LTD [*] [*]
WA 3 GTE [*] [*]
WA 4 PTI [*] [*]
WA 7 LEC OTHER [*] [*]
WI 1 AMERITECH [*] [*]
WI 3 GTE [*] [*]
WI 4 CENTURY [*] [*]
WI 5 PTI [*] [*]
WI 6 TDS [*] [*]
WI 7 LEC OTHER [*] [*]
WV 1 BELL ATL [*] [*]
WV 4 CITIZENS [*] [*]
WV 7 LEC OTHER [*] [*]
WY 1 US WEST [*] [*]
WY 2 SPRINT LTD [*] [*]
WY 4 PTI [*] [*]
WY 7 LEC OTHER [*] [*]
</TABLE>
- --------------------------------------------------------------------------------
PROPRIETARY INFORMATION
<PAGE> 19
Attachment B - 4
Intrastate Switched Origination and Switched Termination per Minute Charges
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Origination Termination
State Group Vendor (LEC) Charge Charge
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AK 7 LEC OTHER [*] [*]
AL 1 BELL SOUTH [*] [*]
AL 3 GTE [*] [*]
AL 7 LEC OTHER [*] [*]
AR 1 SWBT [*] [*]
AR 3 GTE [*] [*]
AR 4 ALLTEL [*] [*]
AR 5 CENTURY [*] [*]
AR 7 LEC OTHER [*] [*]
AZ 1 US WEST [*] [*]
AZ 4 CITIZENS [*] [*]
AZ 7 LEC OTHER [*] [*]
CA 1 PACIFIC TEL [*] [*]
CA 3 GTE [*] [*]
CA 4 CONTEL/CA [*] [*]
CA 7 LEC OTHER [*] [*]
CO 1 US WEST [*] [*]
CO 4 PTI [*] [*]
CO 7 LEC OTHER [*] [*]
CT 1 SNET [*] [*]
CT 1 NYNEX [*] [*]
CT 7 LEC OTHER [*] [*]
DC 1 BELL ATL [*] [*]
DC 7 LEC OTHER [*] [*]
DE 1 BELL ATL [*] [*]
DE 7 LEC OTHER [*] [*]
FL 1 BELL SOUTH [*] [*]
FL 2 SPRINT LTD [*] [*]
FL 3 GTE [*] [*]
FL 7 LEC OTHER [*] [*]
GA 1 BELL SOUTH [*] [*]
GA 4 ALLTEL [*] [*]
GA 7 LEC OTHER [*] [*]
HI 3 GTE [*] [*]
HI 7 LEC OTHER [*] [*]
IA 1 US WEST [*] [*]
IA 3 GTE [*] [*]
IA 4 CEA-INS [*] [*]
IA 5 ROCHESTER [*] [*]
IA 7 LEC OTHER [*] [*]
ID 1 US WEST [*] [*]
ID 3 GTE [*] [*]
ID 4 CITIZENS [*] [*]
ID 7 LEC OTHER [*] [*]
IL 1 AMERITECH [*] [*]
IL 2 SPRINT LTD [*] [*]
IL 3 GTE [*] [*]
IL 4 TCG [*] [*]
IL 7 LEC OTHER [*] [*]
IN 1 AMERITECH [*] [*]
IN 2 SPRINT LTD [*] [*]
IN 3 GTE [*] [*]
IN 7 LEC OTHER [*] [*]
KS 1 SWBT [*] [*]
KS 2 SPRINT LTD [*] [*]
KS 7 LEC OTHER [*] [*]
KY 1 BELL SOUTH [*] [*]
KY 4 CINN BELL [*] [*]
KY 7 LEC OTHER [*] [*]
KY 3 GTE [*] [*]
LA 1 BELL SOUTH [*] [*]
LA 4 CENTURY [*] [*]
LA 7 LEC OTHER [*] [*]
MA 1 NYNEX [*] [*]
MA 7 LEC OTHER [*] [*]
MD 1 BELL ATL [*] [*]
MD 7 LEC OTHER [*] [*]
ME 1 NYNEX [*] [*]
ME 4 TDS [*] [*]
ME 7 LEC OTHER [*] [*]
MI 1 AMERITECH [*] [*]
MI 3 GTE [*] [*]
MI 4 CENTURY [*] [*]
MI 7 LEC OTHER [*] [*]
MN 1 US WEST [*] [*]
MN 2 SPRINT LTD [*] [*]
MN 3 GTE [*] [*]
MN 4 CEA-MEANS [*] [*]
MN 5 ROCHESTER [*] [*]
MN 7 LEC OTHER [*] [*]
MO 1 SWBT [*] [*]
MO 2 SPRINT LTD [*] [*]
MO 3 GTE [*] [*]
MO 4 ALLTEL [*] [*]
MO 7 LEC OTHER [*] [*]
MS 1 BELL SOUTH [*] [*]
MS 4 CENTURY [*] [*]
MS 7 LEC OTHER [*] [*]
MT 1 US WEST [*] [*]
MT 4 PTI [*] [*]
MT 5 CITIZENS [*] [*]
MT 7 LEC OTHER [*] [*]
NC 1 BELL SOUTH [*] [*]
NC 2 SPRINT LTD [*] [*]
NC 3 GTE [*] [*]
NC 4 ALLTEL [*] [*]
NC 7 LEC OTHER [*] [*]
ND 1 US WEST [*] [*]
ND 7 LEC OTHER [*] [*]
NE 1 US WEST [*] [*]
NE 2 SPRINT LTD [*] [*]
NE 3 GTE [*] [*]
NE 4 LINCOLN [*] [*]
NE 7 LEC OTHER [*] [*]
NH 1 NYNEX [*] [*]
NH 7 LEC OTHER [*] [*]
NJ 1 BELL ATL [*] [*]
NJ 2 SPRINT LTD [*] [*]
NJ 7 LEC OTHER [*] [*]
NM 1 US WEST [*] [*]
NM 3 GTE [*] [*]
NM 7 LEC OTHER [*] [*]
NV 1 PACIFIC TELESIS [*] [*]
NV 2 SPRINT LTD [*] [*]
NV 4 CONTEL/CA [*] [*]
NV 5 ALLTEL [*] [*]
NV 7 LEC OTHER [*] [*]
NY 1 NYNEX [*] [*]
NY 4 TCG [*] [*]
NY 5 ROCHESTER [*] [*]
NY 6 CITIZENS [*] [*]
NY 7 LEC OTHER [*] [*]
OH 1 AMERITECH [*] [*]
OH 2 SPRINT LTD [*] [*]
OH 3 GTE [*] [*]
OH 4 CINN BELL [*] [*]
OH 5 ALLTEL [*] [*]
OH 6 CENTURY [*] [*]
OH 7 LEC OTHER [*] [*]
OK 1 SWBT [*] [*]
OK 3 GTE [*] [*]
OK 4 ALLTEL [*] [*]
OK 7 LEC OTHER [*] [*]
OR 1 US WEST [*] [*]
OR 2 SPRINT LTD [*] [*]
OR 3 GTE [*] [*]
OR 4 PTI [*] [*]
OR 7 LEC OTHER [*] [*]
PA 1 BELL ATL [*] [*]
PA 2 SPRINT LTD [*] [*]
PA 3 GTE [*] [*]
PA 4 ALLTEL [*] [*]
PA 7 LEC OTHER [*] [*]
PR 7 LEC OTHER [*] [*]
RI 1 NYNEX [*] [*]
RI 7 LEC OTHER [*] [*]
SC 1 BELL SOUTH [*] [*]
SC 2 SPRINT LTD [*] [*]
SC 3 GTE [*] [*]
SC 4 ALLTEL [*] [*]
SC 7 LEC OTHER [*] [*]
SD 1 US WEST [*] [*]
SD 4 CEA-SDN [*] [*]
SD 7 LEC OTHER [*] [*]
TN 1 BELL SOUTH [*] [*]
TN 2 SPRINT LTD [*] [*]
TN 4 TDS [*] [*]
TN 5 CITIZENS [*] [*]
TN 7 LEC OTHER [*] [*]
TX 1 SWBT [*] [*]
TX 2 SPRINT LTD [*] [*]
TX 3 GTE [*] [*]
TX 7 LEC OTHER [*] [*]
UT 1 US WEST [*] [*]
UT 4 CITIZENS [*] [*]
UT 7 LEC OTHER [*] [*]
VA 1 BELL ATL [*] [*]
VA 2 SPRINT LTD [*] [*]
VA 3 GTE [*] [*]
VA 7 LEC OTHER [*] [*]
VI 7 LEC OTHER [*] [*]
VT 1 NYNEX [*] [*]
VT 4 TDS [*] [*]
VT 7 LEC OTHER [*] [*]
WA 1 US WEST [*] [*]
WA 2 SPRINT LTD [*] [*]
WA 3 GTE [*] [*]
WA 4 PTI [*] [*]
WA 7 LEC OTHER [*] [*]
WI 1 AMERITECH [*] [*]
WI 3 GTE [*] [*]
WI 4 CENTURY [*] [*]
WI 5 PTI [*] [*]
WI 6 TDS [*] [*]
WI 7 LEC OTHER [*] [*]
WV 1 BELL ATL [*] [*]
WV 4 CITIZENS [*] [*]
WV 7 LEC OTHER [*] [*]
WY 1 US WEST [*] [*]
WY 2 SPRINT LTD [*] [*]
WY 4 PTI [*] [*]
WY 7 LEC OTHER [*] [*]
</TABLE>
- --------------------------------------------------------------------------------
PROPRIETARY INFORMATION
<PAGE> 20
ATTACHMENT C-1
INTERSTATE/INTRASTATE SWITCHED NETWORK EXTENSION
BASE RATES
- --------------------------------------------------------------------------------
Connect One Plus Connect Toll Free
LATA Group Peak OffPeak Peak Offpeak
- --------------------------------------------------------------------------------
All (except the following) [*] [*] [*] [*]
California Intrastate [*] [*] [*] [*]
Puerto Rico 820 [*] [*] [*] [*]
US Virgin Island 822 [*] [*] [*] [*]
Alaska 832 [*] [*] [*] [*]
Hawaii 834 [*] [*] [*] [*]
Wake & Midway 836 [*] [*] [*] [*]
- --------------------------------------------------------------------------------
Interstate/Intrastate usage originating from/terminating to all exchanges will
incur an additional per minute Interstate Switched Origination/Termination
Charge as indicated on Attachment B.
The above listed base rates are not eligible for any tariff or contractual
discounts.
INTERSTATE/INTRASTATE DEDICATED NETWORK EXTENSION
BASE RATES
- --------------------------------------------------------------------------------
Direct Extension Direct Toll Free Ext
LATA Group Peak OffPeak Peak Offpeak
- --------------------------------------------------------------------------------
All (except the following) [*] [*] [*] [*]
California Intrastate [*] [*] [*] [*]
Puerto Rico 820 [*] [*] [*] [*]
US Virgin Island 822 [*] [*] [*] [*]
Alaska 832 [*] [*] [*] [*]
Hawaii 834 [*] [*] [*] [*]
Wake & Midway 836 [*] [*] [*] [*]
- --------------------------------------------------------------------------------
Interstate/Intrastate usage originating from/terminating to all exchanges will
incur an additional per minute Interstate Switched Origination/Termination
Charge as indicated on Attachment B.
The above listed base rates are not eligible for any tariff or contractual
discount 2s.
NEW CUSTOMER PROMOTION
DISCOUNT 1
BASE RATES
- --------------------------------------------------------------------------------
Discount 1 Monthly Direct Extension Direct Toll Free Ext
Volume of Service Peak OffPeak Peak Offpeak
- --------------------------------------------------------------------------------
$0 + [*] [*] [*] [*]
- --------------------------------------------------------------------------------
For dedicated Network Extension Service (Direct Extension and Direct Toll Free
Extension), Customer will be eligible for the New Customer Promotion Discount 1
above (applied to the interstate base rate usage) for all existing accounts and
new accounts that were not dedicated access users on the Sprint network for the
six (6) months immediately preceding receipt of order. Any new accounts that
were dedicated access users on the Sprint network for the six (6) months
preceding receipt of order will be billed in a separate billing product
hierarchy level and will not receive the New Customer Promotion discount.
Proprietary Information
RESTRICTED 12/20/96
<PAGE> 21
Attachment C-2
INTERSTATE/INTRASTATE CARRIER DEDICATED SERVICE
BASE RATES
- --------------------------------------------------------------------------------
Direct Direct Toll Free
LATA Group Peak OffPeak Peak OffPeak
- --------------------------------------------------------------------------------
All (except the following) [*] [*] [*] [*]
California Intrastate [*] [*] [*] [*]
Puerto Rico 820 [*] [*] [*] [*]
US Virgin Islands 822 [*] [*] [*] [*]
Alaska 832 [*] [*] [*] [*]
Hawaii 834 [*] [*] [*] [*]
Wake & Midway 836 [*] [*] [*] [*]
- --------------------------------------------------------------------------------
Interstate usage originating from/terminating to all exchanges will incur an
additional per minute Interstate Switched Origination/Termination Charge as
indicated on Attachment B. The above listed base rates are not eligible for any
tariff or contractual discounts.
Proprietary Information
RESTRICTED 12/20/96
<PAGE> 22
Attachment C-3
DIRECTORY ASSISTANCE
BASE RATES
- --------------------------------------------------------------------------------
Jurisdiction Connect One Plus Direct Extension Direct
- --------------------------------------------------------------------------------
All Domestic [*] [*] [*]
Canada [*] [*] [*]
Puerto Rico [*] [*] [*]
US Virgin Islands [*] [*] [*]
Alaska [*] [*] [*]
Hawaii [*] [*] [*]
Wake & Midway [*] [*] [*]
- --------------------------------------------------------------------------------
The above Directory Assistance rates not eligible for Discounts
Proprietary Information
RESTRICTED 12/20/96
<PAGE> 23
ATTACHMENT C-4
CANADA TERMINATING SERVICE
BASE RATES
- --------------------------------------------------------------------------------
Connect One Plus Direct Extension Direct
Canada NPA's Peak OffPeak Peak OffPeak Peak OffPeak
- --------------------------------------------------------------------------------
ALL [*] [*] [*] [*] [*] [*]
- --------------------------------------------------------------------------------
CANADA ORIGINATING SERVICE
BASE RATES
- --------------------------------------------------------------------------------
Connect Toll Free Direct Toll Free Ext Direct Toll Free
Canada NPA's Peak OffPeak Peak OffPeak Peak OffPeak
- --------------------------------------------------------------------------------
ALL [*] [*] [*] [*] [*] [*]
- --------------------------------------------------------------------------------
The above listed base rates are not eligible for any tariff or contractual
discounts.
Proprietary Information
RESTRICTED 12/20/96
<PAGE> 24
Attachment C-5
MEXICO TERMINATING SERVICE
BASE RATES - DOMESTIC ELEMENT
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Connect One Plus Direct Extension Direct
Mileage Peak OffPeak Peak OffPeak Peak OffPeak
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ALL $ [*] $ [*] $ [*] $ [*] $ [*] $ [*]
- ---------------------------------------------------------------------------------------
</TABLE>
BASE RATES - INTERNATIONAL ELEMENT
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Connect One Plus Direct Extension Direct
Mexico Rate Step Peak OffPeak Peak OffPeak Peak OffPeak
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 $ [*] $ [*] $ [*] $ [*] $ [*] $ [*]
2 $ [*] $ [*] $ [*] $ [*] $ [*] $ [*]
3 $ [*] $ [*] $ [*] $ [*] $ [*] $ [*]
4 $ [*] $ [*] $ [*] $ [*] $ [*] $ [*]
5 $ [*] $ [*] $ [*] $ [*] $ [*] $ [*]
6 $ [*] $ [*] $ [*] $ [*] $ [*] $ [*]
7 $ [*] $ [*] $ [*] $ [*] $ [*] $ [*]
8 $ [*] $ [*] $ [*] $ [*] $ [*] $ [*]
- ---------------------------------------------------------------------------------------
</TABLE>
Mexico Rate Steps are defined in Sprint FCC Tariff #2.
The above listed base rates are not eligible for any tariff or contractual
discounts.
Proprietary Information
RESTRICTED
<PAGE> 25
Attachment C-6
MEXICO ORIGINATING SERVICE
BASE RATES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Direct Toll Free Direct Toll Free Ext Connect Toll Free
Mexico Zone # Peak OffPeak Peak OffPeak Peak OffPeak
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 $ [*] $ [*] $ [*] $ [*] $ [*] $ [*]
2 $ [*] $ [*] $ [*] $ [*] $ [*] $ [*]
3 $ [*] $ [*] $ [*] $ [*] $ [*] $ [*]
4 $ [*] $ [*] $ [*] $ [*] $ [*] $ [*]
- ---------------------------------------------------------------------------------------------
</TABLE>
US Rate Area and Mexico Rate Zone are defined in Sprint FCC Tariff #2.
DISCOUNT 1 The above listed base rates are not eligible for any tariff or
contractual discount ls.
DISCOUNT 2
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Monthly Volume of Direct Toll Free Direct Toll Free Ext Connect Toll Free
Carrier Transport Service Peak OffPeak Peak OffPeak Peak OffPeak
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$0 - $999,999 $ [*] $ [*] $ [*] $ [*] $ [*] $ [*]
$1,000,000 + $ [*] $ [*] $ [*] $ [*] $ [*] $ [*]
- ----------------------------------------------------------------------------------------------
</TABLE>
Proprietary Information
RESTRICTED
<PAGE> 26
Attachment C-7
Other International Base Rates
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Direct Direct Extension Connect One Plus
Country Ctry Code Std Disc Econ Std Disc Econ Std Disc Econ
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALBANIA 355 [*] [*] [*] [*] [*] [*] [*] [*] [*]
ALGERIA 213 [*] [*] [*] [*] [*] [*] [*] [*] [*]
AM SAMOA 684 [*] [*] [*] [*] [*] [*] [*] [*] [*]
ANDORRA 376 [*] [*] [*] [*] [*] [*] [*] [*] [*]
ANGOLA 244 [*] [*] [*] [*] [*] [*] [*] [*] [*]
ANGUILLA 809497 [*] [*] [*] [*] [*] [*] [*] [*] [*]
ANTIGUA 809460 [*] [*] [*] [*] [*] [*] [*] [*] [*]
ARGENTINA 540 [*] [*] [*] [*] [*] [*] [*] [*] [*]
ARMENIA 374 [*] [*] [*] [*] [*] [*] [*] [*] [*]
ARUBA 297 [*] [*] [*] [*] [*] [*] [*] [*] [*]
ASCENSION ISLANDS 247 [*] [*] [*] [*] [*] [*] [*] [*] [*]
AUSTRALIA 610 [*] [*] [*] [*] [*] [*] [*] [*] [*]
AUSTRALIA TERRITORY 672 [*] [*] [*] [*] [*] [*] [*] [*] [*]
AUSTRIA 430 [*] [*] [*] [*] [*] [*] [*] [*] [*]
AZERBAIJAN 994 [*] [*] [*] [*] [*] [*] [*] [*] [*]
B. VIRGIN ISLAND 809275 [*] [*] [*] [*] [*] [*] [*] [*] [*]
BAHAMAS 809321 [*] [*] [*] [*] [*] [*] [*] [*] [*]
BAHRAIN 973 [*] [*] [*] [*] [*] [*] [*] [*] [*]
BANGLADESH 880 [*] [*] [*] [*] [*] [*] [*] [*] [*]
BARBADOS 809228 [*] [*] [*] [*] [*] [*] [*] [*] [*]
BELARUS 375 [*] [*] [*] [*] [*] [*] [*] [*] [*]
BELGIUM 320 [*] [*] [*] [*] [*] [*] [*] [*] [*]
BELIZE 501 [*] [*] [*] [*] [*] [*] [*] [*] [*]
BENIN 229 [*] [*] [*] [*] [*] [*] [*] [*] [*]
BERMUDA 809231 [*] [*] [*] [*] [*] [*] [*] [*] [*]
BHUTAN 975 [*] [*] [*] [*] [*] [*] [*] [*] [*]
BOLIVIA 591 [*] [*] [*] [*] [*] [*] [*] [*] [*]
BOSNIA/HERZEGOVINA 387 [*] [*] [*] [*] [*] [*] [*] [*] [*]
BOTSWANA 267 [*] [*] [*] [*] [*] [*] [*] [*] [*]
BOURKINA FASSO 226 [*] [*] [*] [*] [*] [*] [*] [*] [*]
BRAZIL 550 [*] [*] [*] [*] [*] [*] [*] [*] [*]
BRUNEI 673 [*] [*] [*] [*] [*] [*] [*] [*] [*]
BULGARIA 359 [*] [*] [*] [*] [*] [*] [*] [*] [*]
BURMA (MYANMAR) 950 [*] [*] [*] [*] [*] [*] [*] [*] [*]
BURUNDI 257 [*] [*] [*] [*] [*] [*] [*] [*] [*]
CAMBODIA 855 [*] [*] [*] [*] [*] [*] [*] [*] [*]
CAMEROON 237 [*] [*] [*] [*] [*] [*] [*] [*] [*]
CAPE VERDE ISLAND 238 [*] [*] [*] [*] [*] [*] [*] [*] [*]
CAYMAN ISLANDS 809945 [*] [*] [*] [*] [*] [*] [*] [*] [*]
CENTRAL AFRICAN REP. 236 [*] [*] [*] [*] [*] [*] [*] [*] [*]
CHAD REPUBLIC 235 [*] [*] [*] [*] [*] [*] [*] [*] [*]
CHILE 560 [*] [*] [*] [*] [*] [*] [*] [*] [*]
CHINA 860 [*] [*] [*] [*] [*] [*] [*] [*] [*]
COLOMBIA 570 [*] [*] [*] [*] [*] [*] [*] [*] [*]
CONGO REP. 242 [*] [*] [*] [*] [*] [*] [*] [*] [*]
COOK ISLANDS 682 [*] [*] [*] [*] [*] [*] [*] [*] [*]
COSTA RICA 506 [*] [*] [*] [*] [*] [*] [*] [*] [*]
CROATIA, REPUB OF 384 [*] [*] [*] [*] [*] [*] [*] [*] [*]
CUBA 530 [*] [*] [*] [*] [*] [*] [*] [*] [*]
CYPRUS 357 [*] [*] [*] [*] [*] [*] [*] [*] [*]
CZECH REPUBLIC 420 [*] [*] [*] [*] [*] [*] [*] [*] [*]
DENMARK 450 [*] [*] [*] [*] [*] [*] [*] [*] [*]
DIEGO GARCIA 246 [*] [*] [*] [*] [*] [*] [*] [*] [*]
DJIBOUTI 253 [*] [*] [*] [*] [*] [*] [*] [*] [*]
DOMINICA 809445 [*] [*] [*] [*] [*] [*] [*] [*] [*]
DOMINICAN REPUBLIC 809220 [*] [*] [*] [*] [*] [*] [*] [*] [*]
ECUADOR 593 [*] [*] [*] [*] [*] [*] [*] [*] [*]
EGYPT 200 [*] [*] [*] [*] [*] [*] [*] [*] [*]
EL SALVADOR 503 [*] [*] [*] [*] [*] [*] [*] [*] [*]
EQUATORIAL GUINEA 240 [*] [*] [*] [*] [*] [*] [*] [*] [*]
- --------------------------------------------------------------------------------------------------------
</TABLE>
Note: The Other International Base Rates listed above are not eligible for any
tariff or contractual discounts.
Proprietary Information
RESTRICTED
<PAGE> 27
Attachment C-8
Other International Base Rates
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Direct Direct Extension Connect One Plus
Country Ctry Code Std Disc Econ Std Disc Econ Std Disc Econ
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ERITREA 291 [*] [*] [*] [*] [*] [*] [*] [*] [*]
ESTONIA 372 [*] [*] [*] [*] [*] [*] [*] [*] [*]
ETHIOPIA 251 [*] [*] [*] [*] [*] [*] [*] [*] [*]
FAEROE ISLANDS 298 [*] [*] [*] [*] [*] [*] [*] [*] [*]
FALKLAND ISLANDS 500 [*] [*] [*] [*] [*] [*] [*] [*] [*]
FIJI 679 [*] [*] [*] [*] [*] [*] [*] [*] [*]
FINLAND 358 [*] [*] [*] [*] [*] [*] [*] [*] [*]
FRANCE 330 [*] [*] [*] [*] [*] [*] [*] [*] [*]
FRENCH ANTILLES/GUA 596 [*] [*] [*] [*] [*] [*] [*] [*] [*]
FRENCH GUIANA 594 [*] [*] [*] [*] [*] [*] [*] [*] [*]
FRENCH POLYNESIA 689 [*] [*] [*] [*] [*] [*] [*] [*] [*]
GABON 241 [*] [*] [*] [*] [*] [*] [*] [*] [*]
GAMBIA 220 [*] [*] [*] [*] [*] [*] [*] [*] [*]
GEORGIA 995 [*] [*] [*] [*] [*] [*] [*] [*] [*]
GERMANY 490 [*] [*] [*] [*] [*] [*] [*] [*] [*]
GHANA 233 [*] [*] [*] [*] [*] [*] [*] [*] [*]
GIBRALTAR 350 [*] [*] [*] [*] [*] [*] [*] [*] [*]
GRANDTURK TC 809941 [*] [*] [*] [*] [*] [*] [*] [*] [*]
GREECE 300 [*] [*] [*] [*] [*] [*] [*] [*] [*]
GREENLAND 299 [*] [*] [*] [*] [*] [*] [*] [*] [*]
GRENADA 809440 [*] [*] [*] [*] [*] [*] [*] [*] [*]
GUAM 671 [*] [*] [*] [*] [*] [*] [*] [*] [*]
GUANTANAMO BAY 539 [*] [*] [*] [*] [*] [*] [*] [*] [*]
GUATEMALA 502 [*] [*] [*] [*] [*] [*] [*] [*] [*]
GUINEA PEOP REP 224 [*] [*] [*] [*] [*] [*] [*] [*] [*]
GUINEA-BISSAU 245 [*] [*] [*] [*] [*] [*] [*] [*] [*]
GUYANA 592 [*] [*] [*] [*] [*] [*] [*] [*] [*]
HAITI 509 [*] [*] [*] [*] [*] [*] [*] [*] [*]
HONDURAS 504 [*] [*] [*] [*] [*] [*] [*] [*] [*]
HONG KONG 852 [*] [*] [*] [*] [*] [*] [*] [*] [*]
HUNGARY 360 [*] [*] [*] [*] [*] [*] [*] [*] [*]
ICELAND 354 [*] [*] [*] [*] [*] [*] [*] [*] [*]
INDIA 910 [*] [*] [*] [*] [*] [*] [*] [*] [*]
INDONESIA 620 [*] [*] [*] [*] [*] [*] [*] [*] [*]
IRAN 980 [*] [*] [*] [*] [*] [*] [*] [*] [*]
IRAQ 964 [*] [*] [*] [*] [*] [*] [*] [*] [*]
IRELAND 353 [*] [*] [*] [*] [*] [*] [*] [*] [*]
ISRAEL 972 [*] [*] [*] [*] [*] [*] [*] [*] [*]
ITALY 390 [*] [*] [*] [*] [*] [*] [*] [*] [*]
IVORY COAST 225 [*] [*] [*] [*] [*] [*] [*] [*] [*]
JAMAICA 809287 [*] [*] [*] [*] [*] [*] [*] [*] [*]
JAPAN 810 [*] [*] [*] [*] [*] [*] [*] [*] [*]
JORDAN 962 [*] [*] [*] [*] [*] [*] [*] [*] [*]
KAZAKHSTAN 732 [*] [*] [*] [*] [*] [*] [*] [*] [*]
KENYA 254 [*] [*] [*] [*] [*] [*] [*] [*] [*]
KIRGISTAN 733 [*] [*] [*] [*] [*] [*] [*] [*] [*]
KIRIBATI 686 [*] [*] [*] [*] [*] [*] [*] [*] [*]
KOREA (SOUTH) 820 [*] [*] [*] [*] [*] [*] [*] [*] [*]
KUWAIT 965 [*] [*] [*] [*] [*] [*] [*] [*] [*]
LAOS 856 [*] [*] [*] [*] [*] [*] [*] [*] [*]
LATVIA 371 [*] [*] [*] [*] [*] [*] [*] [*] [*]
LEBANON 961 [*] [*] [*] [*] [*] [*] [*] [*] [*]
LESOTHO 266 [*] [*] [*] [*] [*] [*] [*] [*] [*]
LIBERIA 231 [*] [*] [*] [*] [*] [*] [*] [*] [*]
LIBYA APSJ 218 [*] [*] [*] [*] [*] [*] [*] [*] [*]
LITHUANIA 370 [*] [*] [*] [*] [*] [*] [*] [*] [*]
LUXEMBOURG 286 [*] [*] [*] [*] [*] [*] [*] [*] [*]
MACAO 853 [*] [*] [*] [*] [*] [*] [*] [*] [*]
MACEDONIA 386 [*] [*] [*] [*] [*] [*] [*] [*] [*]
MADAGASCAR 261 [*] [*] [*] [*] [*] [*] [*] [*] [*]
- --------------------------------------------------------------------------------------------------------
</TABLE>
Note: The Other International Base Rates listed above are not eligible for any
tariff or contractual discounts.
Proprietary Information
RESTRICTED
<PAGE> 28
Attachment C-9
Other International Base Rates
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Direct Direct Extension Connect One Plus
Country Ctry Code Std Disc Econ Std Disc Econ Std Disc Econ
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MALAWI 265 [*] [*] [*] [*] [*] [*] [*] [*] [*]
MALAYSIA 600 [*] [*] [*] [*] [*] [*] [*] [*] [*]
MALDIVES REP 960 [*] [*] [*] [*] [*] [*] [*] [*] [*]
MALI REP 223 [*] [*] [*] [*] [*] [*] [*] [*] [*]
MALTA REP 356 [*] [*] [*] [*] [*] [*] [*] [*] [*]
MARSHALL ISLANDS 692 [*] [*] [*] [*] [*] [*] [*] [*] [*]
MAURITANIA 222 [*] [*] [*] [*] [*] [*] [*] [*] [*]
MAURITIUS 230 [*] [*] [*] [*] [*] [*] [*] [*] [*]
MAYOTTE ISLAND 269 [*] [*] [*] [*] [*] [*] [*] [*] [*]
MICRONESIA 691 [*] [*] [*] [*] [*] [*] [*] [*] [*]
MOLDOVA 373 [*] [*] [*] [*] [*] [*] [*] [*] [*]
MONGOLIA PEOP REP 976 [*] [*] [*] [*] [*] [*] [*] [*] [*]
MONTSERRAT 809491 [*] [*] [*] [*] [*] [*] [*] [*] [*]
MOROCCO 210 [*] [*] [*] [*] [*] [*] [*] [*] [*]
MOZAMBIQUE 258 [*] [*] [*] [*] [*] [*] [*] [*] [*]
NAMIBIA 264 [*] [*] [*] [*] [*] [*] [*] [*] [*]
NAURU 674 [*] [*] [*] [*] [*] [*] [*] [*] [*]
NEPAL 977 [*] [*] [*] [*] [*] [*] [*] [*] [*]
NETHERLANDS 310 [*] [*] [*] [*] [*] [*] [*] [*] [*]
NETHERLANDS ANTIL 599 [*] [*] [*] [*] [*] [*] [*] [*] [*]
NEVIS ISLAND 809469 [*] [*] [*] [*] [*] [*] [*] [*] [*]
NEW CALEDONIA 687 [*] [*] [*] [*] [*] [*] [*] [*] [*]
NEW ZEALAND 640 [*] [*] [*] [*] [*] [*] [*] [*] [*]
NICARAGUA 505 [*] [*] [*] [*] [*] [*] [*] [*] [*]
NIGER REPUBLIC 227 [*] [*] [*] [*] [*] [*] [*] [*] [*]
NIGERIA 283 [*] [*] [*] [*] [*] [*] [*] [*] [*]
NIUE 683 [*] [*] [*] [*] [*] [*] [*] [*] [*]
NORTH KOREA 850 [*] [*] [*] [*] [*] [*] [*] [*] [*]
NORWAY 470 [*] [*] [*] [*] [*] [*] [*] [*] [*]
OCEAN ATLANTIC E 871 [*] [*] [*] [*] [*] [*] [*] [*] [*]
OCEAN ATLANTIC W 874 [*] [*] [*] [*] [*] [*] [*] [*] [*]
OCEAN INDIAN 873 [*] [*] [*] [*] [*] [*] [*] [*] [*]
OCEAN PACIFIC 872 [*] [*] [*] [*] [*] [*] [*] [*] [*]
OMAN 968 [*] [*] [*] [*] [*] [*] [*] [*] [*]
PAKISTAN 920 [*] [*] [*] [*] [*] [*] [*] [*] [*]
PALAU REPUBLIC 680 [*] [*] [*] [*] [*] [*] [*] [*] [*]
PANAMA 507 [*] [*] [*] [*] [*] [*] [*] [*] [*]
PAPUA N. GUINEA 675 [*] [*] [*] [*] [*] [*] [*] [*] [*]
PARAGUAY 287 [*] [*] [*] [*] [*] [*] [*] [*] [*]
PERU 510 [*] [*] [*] [*] [*] [*] [*] [*] [*]
PHILIPPINES 630 [*] [*] [*] [*] [*] [*] [*] [*] [*]
POLAND 480 [*] [*] [*] [*] [*] [*] [*] [*] [*]
PORTUGAL 351 [*] [*] [*] [*] [*] [*] [*] [*] [*]
QATAR 974 [*] [*] [*] [*] [*] [*] [*] [*] [*]
REUNION ISLAND 262 [*] [*] [*] [*] [*] [*] [*] [*] [*]
ROMANIA 400 [*] [*] [*] [*] [*] [*] [*] [*] [*]
RUSSIA 700 [*] [*] [*] [*] [*] [*] [*] [*] [*]
RWANDA 250 [*] [*] [*] [*] [*] [*] [*] [*] [*]
SAIPAN 670 [*] [*] [*] [*] [*] [*] [*] [*] [*]
SAN MARINO 378 [*] [*] [*] [*] [*] [*] [*] [*] [*]
SAO TOME 239 [*] [*] [*] [*] [*] [*] [*] [*] [*]
SAUDI ARABIA 966 [*] [*] [*] [*] [*] [*] [*] [*] [*]
SENEGAL 221 [*] [*] [*] [*] [*] [*] [*] [*] [*]
SERBIA/MONTENEGRO 381 [*] [*] [*] [*] [*] [*] [*] [*] [*]
SEYCHELLES 248 [*] [*] [*] [*] [*] [*] [*] [*] [*]
SIERRA LEONE 232 [*] [*] [*] [*] [*] [*] [*] [*] [*]
SINGAPORE 650 [*] [*] [*] [*] [*] [*] [*] [*] [*]
SLOVAKIA 42 [*] [*] [*] [*] [*] [*] [*] [*] [*]
SLOVENIA 386 [*] [*] [*] [*] [*] [*] [*] [*] [*]
SOLOMON ISLANDS 677 [*] [*] [*] [*] [*] [*] [*] [*] [*]
- --------------------------------------------------------------------------------------------------------
</TABLE>
Note: The Other International Base Rates listed above are not eligible for any
tariff or contractual discounts.
Proprietary Information
RESTRICTED
<PAGE> 29
Attachment C-10
Other International Base Rates
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Direct Direct Extension Connect One Plus
Country Ctry Code Std Disc Econ Std Disc Econ Std Disc Econ
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SOMALIA 252 [*] [*] [*] [*] [*] [*] [*] [*] [*]
SOUTH AFRICA 270 [*] [*] [*] [*] [*] [*] [*] [*] [*]
SPAIN 340 [*] [*] [*] [*] [*] [*] [*] [*] [*]
SRI LANKA 940 [*] [*] [*] [*] [*] [*] [*] [*] [*]
ST. HELENA 290 [*] [*] [*] [*] [*] [*] [*] [*] [*]
ST. KITTS 809465 [*] [*] [*] [*] [*] [*] [*] [*] [*]
ST. LUCIA 809450 [*] [*] [*] [*] [*] [*] [*] [*] [*]
ST. PIERRE 508 [*] [*] [*] [*] [*] [*] [*] [*] [*]
ST. VINCENT 809456 [*] [*] [*] [*] [*] [*] [*] [*] [*]
SUDAN 249 [*] [*] [*] [*] [*] [*] [*] [*] [*]
SURINAME 597 [*] [*] [*] [*] [*] [*] [*] [*] [*]
SWAZILAND 268 [*] [*] [*] [*] [*] [*] [*] [*] [*]
SWEDEN 460 [*] [*] [*] [*] [*] [*] [*] [*] [*]
SWITZERLAND 410 [*] [*] [*] [*] [*] [*] [*] [*] [*]
SYRIAN ARABREP 963 [*] [*] [*] [*] [*] [*] [*] [*] [*]
TAIWAN 886 [*] [*] [*] [*] [*] [*] [*] [*] [*]
TAJIKISTAN [*] [*] [*] [*] [*] [*] [*] [*] [*]
TANZANIA 255 [*] [*] [*] [*] [*] [*] [*] [*] [*]
THAILAND 660 [*] [*] [*] [*] [*] [*] [*] [*] [*]
TOGO 228 [*] [*] [*] [*] [*] [*] [*] [*] [*]
TONGA 676 [*] [*] [*] [*] [*] [*] [*] [*] [*]
TRINIDAD 809622 [*] [*] [*] [*] [*] [*] [*] [*] [*]
TUNISIA 216 [*] [*] [*] [*] [*] [*] [*] [*] [*]
TURKEY 900 [*] [*] [*] [*] [*] [*] [*] [*] [*]
TURKMENISTAN [*] [*] [*] [*] [*] [*] [*] [*] [*]
TUVALU 688 [*] [*] [*] [*] [*] [*] [*] [*] [*]
UGANDA 256 [*] [*] [*] [*] [*] [*] [*] [*] [*]
UKRAINE 285 [*] [*] [*] [*] [*] [*] [*] [*] [*]
UNITED A. E. 971 [*] [*] [*] [*] [*] [*] [*] [*] [*]
UNITED KINGDOM 440 [*] [*] [*] [*] [*] [*] [*] [*] [*]
URUGUAY 598 [*] [*] [*] [*] [*] [*] [*] [*] [*]
UZBEKISTAN [*] [*] [*] [*] [*] [*] [*] [*] [*]
VANUATU 678 [*] [*] [*] [*] [*] [*] [*] [*] [*]
VENEZUELA 580 [*] [*] [*] [*] [*] [*] [*] [*] [*]
VIETNAM 840 [*] [*] [*] [*] [*] [*] [*] [*] [*]
WALLIS ISL 681 [*] [*] [*] [*] [*] [*] [*] [*] [*]
WESTERN SAMOA 685 [*] [*] [*] [*] [*] [*] [*] [*] [*]
YEMEN 969 [*] [*] [*] [*] [*] [*] [*] [*] [*]
ZAIRE 243 [*] [*] [*] [*] [*] [*] [*] [*] [*]
ZAMBIA 260 [*] [*] [*] [*] [*] [*] [*] [*] [*]
ZIMBABWE 263 [*] [*] [*] [*] [*] [*] [*] [*] [*]
- --------------------------------------------------------------------------------------------------------
</TABLE>
Note: The Other International Base Rates listed above are not eligible for any
tariff or contractual discounts.
Proprietary Information
RESTRICTED
<PAGE> 30
Attachment C-11
OTHER INTERNATIONAL TOLL FREE SERVICE (ITFS - US INBOUND)
BASE RATES
- ----------------------------------------------------------
COUNTRY Ctry Code Direct Toll Free
- ----------------------------------------------------------
ANTIGUA 809460 [*]
ARUBA 297 [*]
AUSTRALIA 610 [*]
BAHAMAS 809321 [*]
BAHRAIN 973 [*]
BARBADOS 809228 [*]
BELGIUM 320 [*]
BERMUDA 809231 [*]
BOLIVIA 591 [*]
BRAZIL 550 [*]
CAYMAN ISLANDS 809945 [*]
CHILE 580 [*]
CHINA 880 [*]
COLOMBIA 570 [*]
COSTA RICA 506 [*]
CYPRUS 357 [*]
DENMARK 450 [*]
DOMINICAN REPUBLIC 809220 [*]
ECUADOR 593 [*]
EGYPT 200 [*]
EL SALVADOR 503 [*]
FIJI 679 [*]
FINLAND 358 [*]
FRANCE 330 [*]
GERMANY 490 [*]
GUAM 671 [*]
GUATEMALA 502 [*]
HONG KONG 852 [*]
HUNGARY 360 [*]
ICELAND 354 [*]
INDONESIA 620 [*]
IRELAND 353 [*]
ISRAEL 972 [*]
ITALY 390 [*]
JAMAICA 809287 [*]
JAPAN 810 [*]
KOREA (SOUTH) 820 [*]
LIECHTENSTEIN 410 [*]
LUXEMBOURG 352 [*]
MACAO 853 [*]
MALAYSIA 600 [*]
MARSHALL ISLANDS 692 [*]
NETHERLAND ANTIL 599 [*]
NETHERLANDS 310 [*]
NEW ZEALAND 640 [*]
NICARAGUA 505 [*]
NORWAY 470 [*]
PANAMA 507 [*]
PHILIPPINES 630 [*]
PORTUGAL 351 [*]
RUSSIA 700 [*]
SAIPAN 670 [*]
SAN MARINO 378 [*]
SAUDI ARABIA 966 [*]
SINGAPORE 650 [*]
SOUTH AFRICA 270 [*]
SPAIN 340 [*]
SWEDEN 460 [*]
SWITZERLAND 410 [*]
SYRIAN ARAB REP. 963 [*]
TAIWAN 886 [*]
THAILAND 660 [*]
TRINIDAD 809622 [*]
TURKEY 900 [*]
UNITED KINGDOM 440 [*]
VENEZUELA 580 [*]
- ----------------------------------------------------------
DISCOUNT 1
- ----------------------------------------------------------
Monthly Volume of
ITFS Service Direct Toll Free
- ----------------------------------------------------------
$0 - $999 [*]
$1,000 - $9,999 [*]
$10,000 - $49,999 [*]
$50,000 - [*]
- ----------------------------------------------------------
Proprietary Information
RESTRICTED 12/20/96
<PAGE> 31
Attachment C - 12
INTERSTATE SWITCHED NETWORK EXTENSION
Base Rates
<TABLE>
<CAPTION>
- -------------------------------------------------
Connect FONcard
LATA Group Peak OffPeak
- -------------------------------------------------
<S> <C> <C>
All [*] [*]
- -------------------------------------------------
</TABLE>
The above listed base rates are not eligible for any tariff or contractual
discounts.
INTERSTATE FONCARD BONG SURCHARGE (PER CALL)
<TABLE>
<CAPTION>
- -------------------------------------------------
State Rate
- -------------------------------------------------
<S> <C>
All [*]
- -------------------------------------------------
</TABLE>
FONCARD SURCHARGE NOT ELIGIBLE FOR DISCOUNTS
- ------------------------------------------------
Proprietary Information
RESTRICTED
<PAGE> 32
Attachment C - 13
CANADA TERMINATING SERVICE
Base Rates
<TABLE>
<CAPTION>
- -------------------------------------------------
Connect FONcard
Canada NPA's Peak OffPeak
- -------------------------------------------------
<S> <C> <C>
All [*] [*]
- -------------------------------------------------
</TABLE>
The above listed base rates are not eligible for any tariff or contractual
discounts.
CANADA ORIGINATING SERVICE
Base Rates
<TABLE>
<CAPTION>
- -------------------------------------------------
Connect FONcard
Canada NPA's Peak OffPeak
- -------------------------------------------------
<S> <C> <C>
All [*] [*]
- -------------------------------------------------
</TABLE>
The above listed base rates are not eligible for any tariff or contractual
discounts.
Canada FONcard Bong Surcharge (per call)
<TABLE>
<CAPTION>
- -------------------------------------------------
Canada NPA's Rate
- -------------------------------------------------
<S> <C>
All [*]
- -------------------------------------------------
</TABLE>
FONcard Surcharge not eligible for Discounts, and applies to both Terminating
and Originating calls.
Proprietary Information
RESTRICTED
<PAGE> 33
Attachment C - 14
MEXICO TERMINATING SERVICE
MEXICO TERMINATING FONCARD
Base Rates
<TABLE>
<CAPTION>
- -------------------------------------------------
Connect FONcard
Peak OffPeak
- -------------------------------------------------
<S> <C>
[*] [*]
- -------------------------------------------------
</TABLE>
Mexico Terminating FONcard rates not eligible for discounts
MEXICO ORIGINATING FONCARD
Base Rates
<TABLE>
<CAPTION>
- -------------------------------------------------
Connect FONcard
Peak OffPeak
- -------------------------------------------------
<S> <C>
[*] [*]
- -------------------------------------------------
</TABLE>
Mexico Originating FONcard rates not eligible for discounts
INTERNATIONAL FONCARD BONG SURCHARGE (PER CALL)
<TABLE>
<CAPTION>
- -------------------------------------------------
Country Rate
- -------------------------------------------------
<S> <C>
All [*]
- -------------------------------------------------
</TABLE>
Proprietary Information
RESTRICTED
<PAGE> 34
Attachment C-15
Other International Base Rates
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Connect FONcard
1st 30 Sec. Addtn'l 6 1st 30 Sec. Addtn'l 6
Country Ctry Code Std Std Disc/Econ Disc/Econ
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ALBANIA 355 [*] [*] [*] [*]
ALGERIA 213 [*] [*] [*] [*]
AM SAMOA 684 [*] [*] [*] [*]
ANDORRA 376 [*] [*] [*] [*]
ANGOLA 244 [*] [*] [*] [*]
ANGUILLA 809497 [*] [*] [*] [*]
ANTIGUA 809460 [*] [*] [*] [*]
ARGENTINA 540 [*] [*] [*] [*]
ARMENIA 374 [*] [*] [*] [*]
ARUBA 297 [*] [*] [*] [*]
ASCENSION ISLANDS 247 [*] [*] [*] [*]
AUSTRALIA 610 [*] [*] [*] [*]
AUSTRALIA TERRITORY 672 [*] [*] [*] [*]
AUSTRIA 430 [*] [*] [*] [*]
AZERBAIJAN 994 [*] [*] [*] [*]
B. VIRGIN ISLAND 809275 [*] [*] [*] [*]
BAHAMAS 809321 [*] [*] [*] [*]
BAHRAIN 973 [*] [*] [*] [*]
BANGLADESH 880 [*] [*] [*] [*]
BARBADOS 809228 [*] [*] [*] [*]
BELARUS 375 [*] [*] [*] [*]
BELGIUM 320 [*] [*] [*] [*]
BELIZE 501 [*] [*] [*] [*]
BENIN 229 [*] [*] [*] [*]
BERMUDA 809231 [*] [*] [*] [*]
BHUTAN 975 [*] [*] [*] [*]
BOLIVIA 591 [*] [*] [*] [*]
BOSNIA/HERZEGOVINA 387 [*] [*] [*] [*]
BOTSWANA 267 [*] [*] [*] [*]
BOURKINA FASSO 226 [*] [*] [*] [*]
BRAZIL 550 [*] [*] [*] [*]
BRUNEI 673 [*] [*] [*] [*]
BULGARIA 359 [*] [*] [*] [*]
BURMA (MYANMAR) 950 [*] [*] [*] [*]
BURUNDI 257 [*] [*] [*] [*]
CAMBODIA 855 [*] [*] [*] [*]
CAMEROON 237 [*] [*] [*] [*]
CAPE VERDE ISLAND 238 [*] [*] [*] [*]
CAYMAN ISLANDS 809945 [*] [*] [*] [*]
CENTRAL AFRICAN REP. 236 [*] [*] [*] [*]
CHAD REPUBLIC 235 [*] [*] [*] [*]
CHILE 560 [*] [*] [*] [*]
CHINA 860 [*] [*] [*] [*]
COLOMBIA 570 [*] [*] [*] [*]
CONGO REP 242 [*] [*] [*] [*]
COOK ISLANDS 682 [*] [*] [*] [*]
COSTA RICA 506 [*] [*] [*] [*]
CROATIA, REPUB OF 384 [*] [*] [*] [*]
CUBA 530 [*] [*] [*] [*]
CYPRUS 357 [*] [*] [*] [*]
CZECH REPUBLIC 420 [*] [*] [*] [*]
DENMARK 450 [*] [*] [*] [*]
DIEGO GARCIA 246 [*] [*] [*] [*]
DJIBOUTI 253 [*] [*] [*] [*]
DOMINICA 809445 [*] [*] [*] [*]
DOMINICAN REPUBLIC 809220 [*] [*] [*] [*]
ECUADOR 593 [*] [*] [*] [*]
EGYPT 200 [*] [*] [*] [*]
EL SALVADOR 503 [*] [*] [*] [*]
</TABLE>
Note: The Other International Base Rates listed above are not eligible for any
tariff or contractual discounts
Proprietary Information
RESTRICTED
<PAGE> 35
Attachment C - 16
Other International Base Rates
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Connect FONcard
1st 30 Sec. Addtn'l 6 1st 30 Sec. Addtn'l 6
Country Ctry Code Std Std Disc/Econ Disc/Econ
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EQUATORIAL GUINEA 240 [*] [*] [*] [*]
ERITREA 291 [*] [*] [*] [*]
ESTONIA 372 [*] [*] [*] [*]
ETHIOPIA 251 [*] [*] [*] [*]
FAEROE ISLANDS 298 [*] [*] [*] [*]
FALKLAND ISLANDS 500 [*] [*] [*] [*]
FIJI 679 [*] [*] [*] [*]
FINLAND 358 [*] [*] [*] [*]
FRANCE 330 [*] [*] [*] [*]
FRENCH ANTILLES/GUADE 596 [*] [*] [*] [*]
FRENCH GUIANA 594 [*] [*] [*] [*]
FRENCH POLYNESIA 689 [*] [*] [*] [*]
GABON 241 [*] [*] [*] [*]
GAMBIA 220 [*] [*] [*] [*]
GEORGIA 995 [*] [*] [*] [*]
GERMANY 490 [*] [*] [*] [*]
GHANA 233 [*] [*] [*] [*]
GIBRALTAR 350 [*] [*] [*] [*]
GRANDTURK TC 809941 [*] [*] [*] [*]
GREECE 300 [*] [*] [*] [*]
GREENLAND 299 [*] [*] [*] [*]
GRENADA 809440 [*] [*] [*] [*]
GUAM 671 [*] [*] [*] [*]
GUANTANAMO BAY 539 [*] [*] [*] [*]
GUATEMALA 502 [*] [*] [*] [*]
GUINEA PEOP REP 224 [*] [*] [*] [*]
GUINEA-BISSAU 245 [*] [*] [*] [*]
GUYANA 592 [*] [*] [*] [*]
HAITI 509 [*] [*] [*] [*]
HONDURAS 504 [*] [*] [*] [*]
HONG KONG 852 [*] [*] [*] [*]
HUNGARY 360 [*] [*] [*] [*]
ICELAND 354 [*] [*] [*] [*]
INDIA 910 [*] [*] [*] [*]
INDONESIA 620 [*] [*] [*] [*]
IRAN 980 [*] [*] [*] [*]
IRAQ 964 [*] [*] [*] [*]
IRELAND 353 [*] [*] [*] [*]
ISRAEL 972 [*] [*] [*] [*]
ITALY 390 [*] [*] [*] [*]
IVORY COAST 225 [*] [*] [*] [*]
JAMAICA 809287 [*] [*] [*] [*]
JAPAN 810 [*] [*] [*] [*]
JORDAN 962 [*] [*] [*] [*]
KAZAKHSTAN 732 [*] [*] [*] [*]
KENYA 254 [*] [*] [*] [*]
KIRGISTAN 733 [*] [*] [*] [*]
KIRIBATI 686 [*] [*] [*] [*]
KOREA (SOUTH) 820 [*] [*] [*] [*]
KUWAIT 965 [*] [*] [*] [*]
LAOS 856 [*] [*] [*] [*]
LATVIA 371 [*] [*] [*] [*]
LEBANON 961 [*] [*] [*] [*]
LESOTHO 266 [*] [*] [*] [*]
LIBERIA 231 [*] [*] [*] [*]
LIBYA APSJ 218 [*] [*] [*] [*]
LITHUANIA 370 [*] [*] [*] [*]
LUXEMBOURG 352 [*] [*] [*] [*]
MACAO 853 [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------
</TABLE>
NOTE: The Other International Base Rates listed above are not eligible for any
tariff or contractual discounts.
Proprietary Information
RESTRICTED
<PAGE> 36
ATTACHMENT C-17
OTHER INTERNATIONAL BASE RATES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Connect FONcard
1st 30 Sec. Addtn'l 6 1st 30 Sec. Addtn'l 6
Country Ctry Code Std Std Disc/Econ Disc/Econ
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MACEDONIA 389 [*] [*] [*] [*]
MADAGASCAR 261 [*] [*] [*] [*]
MALAWI 265 [*] [*] [*] [*]
MALAYSIA 600 [*] [*] [*] [*]
MALDIVES REP 960 [*] [*] [*] [*]
MALI REP 223 [*] [*] [*] [*]
MALTA REP 356 [*] [*] [*] [*]
MARSHALL ISLANDS 692 [*] [*] [*] [*]
MAURITANIA 222 [*] [*] [*] [*]
MAURITIUS 230 [*] [*] [*] [*]
MAYOTTE ISLAND 269 [*] [*] [*] [*]
MICRONESIA 691 [*] [*] [*] [*]
MOLDOVA 373 [*] [*] [*] [*]
MONGOLIA PEOP REP 976 [*] [*] [*] [*]
MONTSERRAT 809491 [*] [*] [*] [*]
MOROCCO 210 [*] [*] [*] [*]
MOZAMBIQUE 258 [*] [*] [*] [*]
NAMIBIA 264 [*] [*] [*] [*]
NAURU 674 [*] [*] [*] [*]
NEPAL 977 [*] [*] [*] [*]
NETHERLANDS 310 [*] [*] [*] [*]
NETHERLANDS ANTIL 599 [*] [*] [*] [*]
NEVIS ISLAND 809469 [*] [*] [*] [*]
NEW CALEDONIA 687 [*] [*] [*] [*]
NEW ZEALAND 640 [*] [*] [*] [*]
NICARAGUA 505 [*] [*] [*] [*]
NIGER REPUBLIC 227 [*] [*] [*] [*]
NIGERIA 283 [*] [*] [*] [*]
NIUE 683 [*] [*] [*] [*]
NORTH KOREA 850 [*] [*] [*] [*]
NORWAY 470 [*] [*] [*] [*]
OCEAN ATLANTIC E 871 [*] [*] [*] [*]
OCEAN ATLANTIC W 874 [*] [*] [*] [*]
OCEAN INDIAN 873 [*] [*] [*] [*]
OCEAN PACIFIC 872 [*] [*] [*] [*]
OMAN 968 [*] [*] [*] [*]
PAKISTAN 920 [*] [*] [*] [*]
PALAU REPUBLIC 680 [*] [*] [*] [*]
PANAMA 507 [*] [*] [*] [*]
PAPUA N. GUINEA 675 [*] [*] [*] [*]
PARAGUAY 595 [*] [*] [*] [*]
PERU 510 [*] [*] [*] [*]
PHILIPPINES 630 [*] [*] [*] [*]
POLAND 480 [*] [*] [*] [*]
PORTUGAL 351 [*] [*] [*] [*]
QATAR 974 [*] [*] [*] [*]
REUNION ISLAND 262 [*] [*] [*] [*]
ROMANIA 400 [*] [*] [*] [*]
RUSSIA 700 [*] [*] [*] [*]
RWANDA 250 [*] [*] [*] [*]
SAIPAN 670 [*] [*] [*] [*]
SAN MARINO 378 [*] [*] [*] [*]
SAO TOME 239 [*] [*] [*] [*]
SAUDI ARABIA 966 [*] [*] [*] [*]
SENEGAL 221 [*] [*] [*] [*]
SERBIA/MONTENEGRO 381 [*] [*] [*] [*]
SEYCHELLES 248 [*] [*] [*] [*]
SIERRA LEONE 232 [*] [*] [*] [*]
SINGAPORE 650 [*] [*] [*] [*]
</TABLE>
Note: The Other International Base Rates listed above are not eligible for any
tariff or contractual discounts.
Proprietary Information
RESTRICTED
<PAGE> 37
Attachment C - 18
Other International Base Rates
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Connect FONcard
1st 30 Sec. Addtn'l 6 1st 30 Sec. Addtn'l 6
Country Ctry Code Std Std Disc/Econ Disc/Econ
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SLOVAKIA 427 [*] [*] [*] [*]
SLOVENIA 386 [*] [*] [*] [*]
SOLOMON ISLANDS 677 [*] [*] [*] [*]
SOMALIA 252 [*] [*] [*] [*]
SOUTH AFRICA 270 [*] [*] [*] [*]
SPAIN 340 [*] [*] [*] [*]
SRI LANKA 940 [*] [*] [*] [*]
ST. HELENA 290 [*] [*] [*] [*]
ST. KITTS 809465 [*] [*] [*] [*]
ST. LUCIA 809450 [*] [*] [*] [*]
ST. PIERRE 508 [*] [*] [*] [*]
ST. VINCENT 809456 [*] [*] [*] [*]
SUDAN 249 [*] [*] [*] [*]
SURINAME 597 [*] [*] [*] [*]
SWAZILAND 268 [*] [*] [*] [*]
SWEDEN 460 [*] [*] [*] [*]
SWITZERLAND 410 [*] [*] [*] [*]
SYRIAN ARABREP 963 [*] [*] [*] [*]
TAIWAN 886 [*] [*] [*] [*]
TAJIKISTAN 700 [*] [*] [*] [*]
TANZANIA 255 [*] [*] [*] [*]
THAILAND 660 [*] [*] [*] [*]
TOGO 228 [*] [*] [*] [*]
TONGA 676 [*] [*] [*] [*]
TRINIDAD 809622 [*] [*] [*] [*]
TUNISIA 216 [*] [*] [*] [*]
TURKEY 900 [*] [*] [*] [*]
TURKMENISTAN 700 [*] [*] [*] [*]
TUVALU 688 [*] [*] [*] [*]
UGANDA 256 [*] [*] [*] [*]
UKRAINE 285 [*] [*] [*] [*]
UNITED A.E. 971 [*] [*] [*] [*]
UNITED KINGDOM 440 [*] [*] [*] [*]
URUGUAY 598 [*] [*] [*] [*]
UZBEKISTAN 700 [*] [*] [*] [*]
VANUATU 678 [*] [*] [*] [*]
VENEZUELA 580 [*] [*] [*] [*]
VIETNAM 840 [*] [*] [*] [*]
WALLIS ISL 681 [*] [*] [*] [*]
WESTERN SAMOA 685 [*] [*] [*] [*]
YEMEN 969 [*] [*] [*] [*]
ZAIRE 243 [*] [*] [*] [*]
ZAMBIA 260 [*] [*] [*] [*]
ZIMBABWE 263 [*] [*] [*] [*]
- ----------------------------------------------------------------------------------------------
</TABLE>
INTERNATIONAL FONCARD BONG SURCHARGE (PER CALL)
- ----------------------------------------------------
Country Rate
- ----------------------------------------------------
All [*]
- ----------------------------------------------------
NOTE: The other International Base Rates listed above are not eligible for any
tariff or contractual discounts.
Proprietary Information
RESTRICTED
<PAGE> 38
ATTACHMENT D-1
INTERSTATE ADJUSTMENT (INTRASTATE)
BASE RATES
- -------------------------------------
Connect FONcard
State Day Eve N/W
- -------------------------------------
AK [*] [*] [*]
AL [*] [*] [*]
AR [*] [*] [*]
AZ [*] [*] [*]
CA [*] [*] [*]
CA [*] [*] [*]
CO [*] [*] [*]
CT [*] [*] [*]
DE [*] [*] [*]
FL [*] [*] [*]
GA [*] [*] [*]
HI [*] [*] [*]
IA [*] [*] [*]
ID [*] [*] [*]
IL [*] [*] [*]
IN [*] [*] [*]
KS [*] [*] [*]
KY [*] [*] [*]
LA [*] [*] [*]
MA [*] [*] [*]
MD [*] [*] [*]
ME [*] [*] [*]
MI [*] [*] [*]
MN [*] [*] [*]
MO [*] [*] [*]
MS [*] [*] [*]
MT [*] [*] [*]
NC [*] [*] [*]
ND [*] [*] [*]
NE [*] [*] [*]
NH [*] [*] [*]
NJ [*] [*] [*]
NM [*] [*] [*]
NV [*] [*] [*]
NY [*] [*] [*]
OH [*] [*] [*]
OK [*] [*] [*]
OR [*] [*] [*]
PA [*] [*] [*]
RI [*] [*] [*]
SC [*] [*] [*]
SD [*] [*] [*]
TN [*] [*] [*]
TX [*] [*] [*]
UT [*] [*] [*]
VA [*] [*] [*]
VT [*] [*] [*]
WA [*] [*] [*]
WI [*] [*] [*]
WV [*] [*] [*]
WY [*] [*] [*]
- -------------------------------------
a. Interstate Adjustment Base Rate
for California Intrastate/
Intralata traffic.
- -------------------------------------
The above listed base rates are not eligible for any tariff or contractual
discounts 1s.
** All states are intrastate/Interlata traffic unless otherwise specified.
FONCARD BONG SURCHARGE (PER CALL)
- --------------------
STATE RATE
- --------------------
All [*]
- --------------------
FONcard Surcharge not eligible for Discounts
Sprint Proprietary Information
RESTRICTED 12/20/96
<PAGE> 1
EXHIBIT 10.9
[*] DESIGNATES MATERIAL FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED, WHICH MATERIAL HAS BEEN SEPARATELY FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION
Sprint
DS-1 Private Line Agreement
Volume Plan
By this Agreement Sprint Communications Company L.P. (Sprint) agrees to provide
the undersigned Carrier (Customer) DS-1 Private Line Services in accordance
with the stated terms and Customer agrees to purchase said Services in
compliance with this Agreement. Sprint and Customer are the Parties to this
Agreement and in consideration of mutual promises agree as follows:
ARTICLE 1: Tariffs. Sprint is a common carrier offering digital private line
services under Tariffs, including Tariff FCC No. 7. Sprint amends its Tariffs
from time to time. DS-1 Services under this Agreement are digital, point to
point (Sprint POP to Sprint POP) private lines offered under Sprint Tariff FCC
No. 7 (or successor tariff) general terms and conditions, except for terms and
conditions specifically set forth in this Agreement as terms of the
relationship between Sprint and Customer. Should Sprint no longer file tariffs
in order to provide services, then Sprint "Tariffs" will mean the standard rate
tables and terms and conditions that Sprint uses to replace such filed tariffs.
In addition to the foregoing, when Customer orders access or Sprint orders
access as Customer's agent for Private Line Service hereunder, all tariffs of
the Local Exchange Carrier respecting access are applicable to the Service
ordered. Customer is responsible for all compliance with said LEC tariffs.
ARTICLE 2: Provision of Services.
2.1 The Effective Date of this Agreement will be the first day of September
1996. The Pricing under this Agreement is for all DS-1s ordered and
installation requested, or renewed, after the effective date and prior to the
termination of the Agreement. The Expiration Date of this Agreement shall be
stated on Attachment A. No circuits can be ordered or renewed hereunder unless
this Agreement is fully executed by both Parties.
2.2 Sprint provides Customer domestic POP-to-POP DS-1 Private Line Services
under terms and conditions of Sprint tariffs. In consideration of Customer
complying with the special terms herein for DS-1 services, Customer's DS-1
Private Line IXE (POP-to-POP) pricing will be according to the Pricing stated
in Attachment A at Sprint's sole discretion and subject to network
availability. Sprint reserves the right on a case by case basis to preclude
application of Attachment A Pricing to new orders and only provide specified
DS-1 routes having special circumstances under Tariff and Tariff pricing.
Further Attachment A does not apply to circuits with Customer Specified Routing
or Diverse Routing.
2.3 "Customer" means the undersigned Carrier and does not include any
subscriber, customer, or end user of the undersigned carrier to whom it
provides services. Customer includes Customer's majority-owned subsidiaries,
for whom Customer assumes payment responsibility, but does not include any
other reselling entity that Customer may have an arrangement with to increase
Customer's Monthly Volume Private Line Services. Customer is responsible for
payment of charges under this Agreement. All services ordered under this
Agreement shall be subject to approval by Sprint's credit department.
2.4 Customer shall complete DS-1 Service Order forms requesting DS-1 services.
Order forms shall be signed by a duly authorized representative of Customer and
submitted to Sprint. Service orders are subject to acceptance by Sprint.
2.5 Sprint provision of services hereunder grants no express or implied rights
to Customer, particularly licenses to trademarks, inventions, copyrights, or
patent, and creates no joint understanding or joint venture with Sprint.
2.6 There is a Minimum Service Period of twelve months for all Private Lines
ordered hereunder. Pricing and terms of this Agreement are only
offered/available to Customer during the Effective Term of this Agreement. The
Term of each circuit is stated on the Service Order.
In the event Customer selects a Term for a DS-1 (for example, 3 years) that
extends beyond the Expiration of this Agreement, this Agreement and Pricing for
the circuit will remain in effect for the affected DS-1 circuit until the Term
for that circuit expires. When a Term for a DS-1 circuit expires and there is
no successor DS-1 Private Line Agreement executed by the Parties or Customer
Service has not been established under a Volume Tariff Plan, the DS-1 circuit
will be invoiced on month-to-month tariff rates.
2.7 When ordering Private Line Service under this Agreement, Customer must
specify on the Service Order the type of access being ordered with the Private
Line being installed or renewed. When Sprint acts as Customer's agent and
orders access facilities connecting Customer's Facilities to Sprint POPs,
Customer must execute the appropriate Service Orders and a Letter of Agency,
plus Customer is responsible for all charges, including, without limitation,
monthly charges, installation charges, non recurring charges,
termination/cancellation liabilities of the provider of the facilities (LEC or
other Vendor) and for all Sprint terms, procedures, and charges for interfacing
with Sprint's Network. Attachment B states the charges for access for Private
Line installed or renewed hereunder until the expiration of this Agreement.
SPRINT PROPRIETARY INFORMATION - RESTRICTED
<PAGE> 2
2.8 Attachments A and B are only for interstate and intrastate circuits
certified as interstate circuits under applicable regulations. In the event
Customer fails to designate whether a circuit carries interstate traffic under
applicable federal regulation, (i) Sprint will rate the circuit as intrastate
for the term of the circuit; (ii) this Agreement will not apply; and (iii)
Customer cannot later claim that the intrastate circuit was really interstate
and request adjusted billing.
ARTICLE 3 Payment.
3.1 Customer shall pay to Sprint invoiced amounts for DS-1 services, without
any right of set-off or counterclaim. DS-1 Service charges are exclusive of
any applicable taxes or tariff surcharges.
3.2 Sprint invoices shall state separately from the communications charges any
tax or surcharge (or related charge by a government) imposed or based on the
provision, sale, or use of DS-1 services or imposed or based upon this
Agreement or any activities hereunder. Unless prohibited by law, taxes or
surcharges shall include, without limitation, state and local gross revenue
taxes, sales, utility users and use taxes, federal excise tax and gross
receipts surcharges.
3.3 All amounts stated on each monthly invoice are due and payable upon
receipt. Charges that are not paid for a period of 30 days after receipt of
invoice, will be subject to interest from the date of the receipt of the
invoice at a rate that is the lesser of 18% per annum (1 1/2% per month) or the
maximum rate allowed by applicable law. If Customer permits any DS-1 charges to
become 60 days past due, Customer's DS-1 IXE (POP-to-POP) charges will be
rebilled at the full tariffed, non-discounted month-to-month rate. In the event
that Customer shall in good faith dispute Sprint's computation of amounts due
and owing by Customer to Sprint hereunder, Customer shall not be relieved of
any obligation to pay such undisputed amounts on or before the due dates
therefore. If Customer disputes amounts, Customer must submit complete
documentation of the disputed amount to the Carrier Service Center by the due
date, along with payment for the undisputed amount that is due. Each party
shall use its respective best reasonable efforts to resolve any dispute as
expeditiously as possible.
3.4 Sprint may terminate this Agreement for a material breach if:
a. Customer fails to make payments and then fails to cure the
nonpayment within ten (10) days after receipt of a Sprint notice of nonpayment;
fails to cure other breaches within 30 days of receipt of notice thereof; or
b. Customer is adjudicated bankrupt, has a receiver appointed, or
participates in an act constituting a general assignment of its properties and
interests for the benefit of its creditors.
If there is a termination for (a) or (b) above, Sprint may immediately
recover all sums owed Sprint through the remainder of the term and Customer
agrees Sprint may take steps to promptly conclude providing services to
Customer in an orderly manner so as to minimize any adverse impact on Customer
or Sprint.
3.5 Upon request by Sprint, Customer agrees to provide financial statements or
other indications of financial circumstances. As may be determined by Sprint,
if the financial circumstances or payment history of Customer is or becomes
unacceptable, Sprint may require a deposit or irrevocable letter of credit, at
Sprint's option, to secure Customer payments for the term of the Agreement.
ARTICLE 4: Service. Under this Agreement Sprint will provide DS-1 Private Line
Service from Sprint POP to Sprint POP as stated herein and as priced on the
attached Attachment A. If Customer does not comply with the terms and
conditions of this Agreement (including the Payment terms), the Special Pricing
herein is inapplicable. The Paragraph numbers stated below correspond to the
Line Items stated on Attachment A. If at any time before the expiration of this
Agreement the Parties modify any term or condition, including those on
Attachment A, the modification of this Agreement is not effective until the
Parties execute an Amendment hereto.
4.1 Each month Customer's "Monthly Volume of Private Line Services"
("Monthly Volume") will be calculated, and according to the Monthly Volume a
price per voice grade V and H mile per month (cents per mile times the V and H
Coordinate Miles times 24 circuits in a DS-1 equals a DS-1 Monthly price) will
be determined by the Term of the DS-1 circuit (one-two-three years) and a
"Minimum Charge Per Circuit" designated. "Monthly Volume of Private Line
Services" consists of (1) DS-1 Clearline revenues (IXE, POP-to-POP charges);
(2) DS-0 Clearline revenues (IXE, POP-to-POP charges); and (3) DS-3 revenues
(IXE, POP-to-POP charges). Monthly Volume excludes such charges as access, COC,
other recurring and non recurring charges, and taxes. For purposes of
calculating the Monthly Volume (the installed base of Customer's Circuits under
this Agreement) the "Base Rate" is the price per voice grade mile for the one
year, lowest Monthly Volume Level on the Schedule, or the applicable Minimum
Charge for any individual circuits. For Customer's installed base under other
Sprint Private Line Agreement(s), the Monthly Volume calculation is the billed
amount. For purposes of calculating the Monthly Volume, the DS-0 Monthly
Revenues are the applicable Tariff Rate for the DS-0 circuits.
4.2 Sprint will charge a Circuit (POP-to-POP) Installation Fee as stated on
Attachment A.
SPRINT PROPRIETARY INFORMATION - RESTRICTED
<PAGE> 3
ARTICLE 5: Limitation of Liability.
5.1 The warranties and remedies set forth in this Agreement and Sprint tariffs
constitute the only warranties and remedies with respect to Sprint service
provided. Such warranties are in lieu of all other warranties, written or oral,
statutory, express or implied, including without limitation the warranty of
merchantability and the warranty of fitness for a particular purpose of use.
5.2 NEITHER PARTY HERETO IS LIABLE TO THE OTHER PARTY FOR ANY INDIRECT,
SPECIAL, INCIDENTAL OR CONSEQUENTIAL LOSSES OR DAMAGES, INCLUDING, WITHOUT
LIMITATION, LOSS OF REVENUE, LOSS OF CUSTOMERS OR CLIENTS. LOSS OF GOODWILL OR
LOSS OF PROFITS, ARISING IN ANY MANNER FROM THIS AGREEMENT AND THE PERFORMANCE
OR NONPERFORMANCE OF OBLIGATIONS HEREUNDER.
ARTICLE 6: Notices. All notices, requests, or other communications (excluding
invoices) shall be in writing, effective when received, to the following
addresses, unless subsequently changed in writing:
If to Sprint: Copy to:
Sprint Communications Company L.P. Sprint Communications Company L.P.
5420 L.B.J. Freeway, Suite 1700 140 Ward Parkway
Dallas, Texas 75240 Kansas City, Missouri 64114
ATTN: V.P. WSG ATTN: LAW DEPARTMENT
If to Customer: Customer will designate in Article 12 the Notice
Address for Customer.
ARTICLE 7: Assignment. This Agreement, the rights, obligations, or duties of
Customer hereunder may not be assigned or delegated to any other party, person,
or entity. Sprint shall and does have the right to assign this Agreement and
all of its rights and duties hereunder to any subsidiary or affiliated entity
without the prior consent of Customer.
ARTICLE 8: Termination Liability. In the event of early termination by
Customer, there will be termination liability imposed in accordance with
tariffed provisions and this Agreement. Customer will not be liable for
termination charges for a DS-1 circuit hereunder if a new DS-1 circuit of equal
or greater value is ordered during the same calendar month under this Agreement
in which the circuit disconnect notice is received, provided Customer notifies
Carrier Services in writing that the disconnection and new circuit order are
requested in the same month to be eligible for termination liability exemption.
If Customer does not provide the written notice, Customer will be liable for
termination charges on the disconnected circuit. If Customer does order a
"replacement circuit" under this paragraph, this ordered replacement circuit
must be installed within 60 days of the disconnect date or Customer will be
liable for termination charges. The "replacement circuit" under this paragraph
must have a minimum service term of one year under this Agreement or
termination charges are applicable to the disconnected circuit.
ARTICLE 9: Confidentiality. During the Term, the Parties may disclose to each
other certain "Proprietary" or "Confidential" Information (hereinafter
"Proprietary Information"). The Parties desire to assure the confidential and
proprietary status of the information which may be disclosed to each other and
therefore for themselves, their subsidiaries and their affiliates, agree as
follows:
9.1 All information disclosed shall be deemed Proprietary, provided that
written information is clearly marked in a conspicuous place as Proprietary,
and verbal information is immediately confirmed in writing as Proprietary.
9.2 Each Party agrees to use the Proprietary Information received from the
other Party only for the purpose of this Agreement. No other rights, and
particularly licenses, to trademarks, inventions, copyrights, or patents are
implied or granted.
9.3 Proprietary Information supplied shall not be reproduced in any form except
as required to accomplish the intent of this Agreement.
9.4 The receiving Party shall provide the same care to avoid disclosure or
unauthorized use of the Proprietary Information as it utilizes to protect its
own proprietary information. It is agreed that all Proprietary Information
shall be retained by the receiving Party in a secure place with access limited
to only such of the receiving Party's employees or agents who need to know such
information.
9.5 All Proprietary Information, unless otherwise specified in writing, shall
remain the property of the disclosing Party. Proprietary Information,
including all copies thereof, shall be returned to the disclosing Party or
destroyed after the receiving Party's need for its has expired or upon request
of the disclosing Party, and in any event, upon termination of this Agreement.
9.6 It is understood that the term "Proprietary Information" does not include
information which:
a. has been or may in the future be published or is now or may in the
future be otherwise in the public domain through no fault of the
Parties;
b. prior to disclosure is properly within the legitimate possession of
the receiving Party:
SPRINT PROPRIETARY INFORMATION - RESTRICTED
<PAGE> 4
c. subsequent to disclosure is lawfully received from a third Party
having rights therein without restriction of the third Party's right to
disseminate the information and without notice of any restriction
against its further disclosure;
d. is independently developed by the receiving Party through Parties
who have not had, either directly or indirectly, access to or knowledge
of such Proprietary Information;
e. is disclosed with the prior written approval of the other Party;
f. is transmitted to the receiving Party after the disclosing Party has
received written notice from the receiving Party that it does not desire
to receive further Proprietary Information; or
g. is obligated to be produced under order of a court of competent
jurisdiction.
9.7 Each Party agrees not to reveal its relationship with the other Party to
any third parties except as contemplated by this Agreement.
9.8 Damages, being difficult to ascertain in the event of violation of this
Article, the Parties agree that, without limiting any other rights and remedies
of each other, upon breach hereof, an injunction may be obtained against the
other Party improperly disclosing information. Each Party further agrees to
indemnify and hold the other Party harmless from any and all direct foreseeable
loss which may result from breach of this Article.
9.9 The restrictions and obligations imposed by this Article shall continue in
full force and effect for a period of three (3) years from the date of
disclosure. The restrictions and obligations of this Section may be terminated
at any time during the period of the Agreement by giving sixty (60) days
written notice to the other Party; provided that early termination shall not
relieve the obligations under this Article with respect to Proprietary
Information exchanged prior to the effective date of termination.
ARTICLE 10: Advertising Or Information Release. Customer agrees that it will
not use the name, service marks or trademarks of Sprint or of any of its
affiliated companies in any advertising, publicity releases or sales
presentations nor reveal the existence or terms or conditions of this Agreement
and Attachment. Customer shall not take any actions which will in any manner
compromise Sprint's registered trademarks and/or service marks. Customer agrees
that this Agreement and Attachment, its terms, conditions or pricing, or
information concerning this Agreement and Attachment, its terms, conditions or
pricing will not be released to any third Party or entity at any time, except
as provided in this Agreement. Either Party may make any disclosure required by
any governmental laws or regulations, provided that the disclosing Party gives
the other Party a reasonable opportunity to defend against such disclosure.
ARTICLE 11: General Terms and Conditions.
11.1 This Agreement may not be modified, or amended, except upon the execution
of a written agreement signed by both Parties.
11.2 The captions of the respective paragraphs of this Agreement are for
convenience only, and shall not be deemed to define or limit any of its terms
or provisions.
11.3 This Agreement represents the final terms and conditions upon which the
activities of the Parties will be based, and no negotiations, promises or
discussions conducted prior to execution and not specifically set forth herein
shall be of any force or effect.
11.4 It is agreed by the Parties that this Agreement shall, in all respects,
be governed by and interpreted in accordance with the laws of the state of
Kansas unless preempted by applicable federal law regulation. Sprint is
registered to do business in Kansas as Sprint Communications Company L.P.
11.5 No term or provision of this Agreement shall be deemed waived, and no
breach or default shall be deemed excused, unless such waiver or consent shall
be in writing and signed by the Party claimed to have waived or consented. No
consent by any Party to, or waiver of, a breach or default by the other,
whether express or implied, shall constitute a consent to, waiver of, or excuse
for any different or subsequent breach or default.
11.6 If any term or provision of this Agreement shall be found to be illegal or
unenforceable, then, such term or provision shall be deemed deleted and this
Agreement shall remain in full force and effect.
11.7 Except as otherwise provided herein and Sprint tariffs, the remedies
provided for in this Agreement are in addition to any other remedies available
at law or in equity by statute or otherwise.
11.8 The terms and provisions hereof, that by their sense and context are
intended to survive the performance hereunder shall so survive the completion
or performance and termination of this Agreement, including, without
limitation, the making of payments for services.
SPRINT PROPRIETARY INFORMATION - RESTRICTED
<PAGE> 5
11.9 THIS AGREEMENT MUST BE EXECUTED WITHIN 30 DAYS OF RECEIPT AND RETURNED TO
SPRINT'S CARRIER SERVICES FOR EXECUTION BY THE PRESIDENT OF SPRINT'S CARRIER
SERVICES (WSG). CUSTOMER'S FAILURE TO EXECUTE AND RETURN WITHIN THE 30 DAYS MAY
RESULT IN SPRINT VOIDING THE SPECIAL PRICING HEREIN AND SPRINT APPLYING FULL,
NON-DISCOUNTED MONTH-TO-MONTH TARIFF RATES TO CUSTOMER CIRCUIT. The date the
Customer receives this contract is __________________________, 1996.
ARTICLE 12: Customer Certification. Customer hereby directs, until changed by
Customer in writing, that Sprint send notices to:
If to Customer: Copy to:
MIDCOM Communications, Inc. MIDCOM Communications, Inc.
111 Third Avenue, Suite 1600 1111 Third Avenue, Suite 1600
Seattle, WA 98101 Seattle, WA 98101
ATTN: President and Chief Executive ATTN: General Counsel
Officer
ARTICLE 13: Attachments.
13.1 Attachment A. Attached to this Agreement and made a part hereof by
incorporation is Attachment A stating the Expiration Date of this Agreement and
stating the Pricing for Service hereunder. Any other written terms, conditions
or legends typed, printed, or otherwise included on the Attachment is deemed
solely for the convenience of the Parties and ARE NOT BINDING ON SPRINT
COMMUNICATIONS COMPANY L.P.
13.2 Attachment B. Attached to this Agreement and made part hereof by
incorporation is Attachment B stating charges for access services that may be
requested by Customer for circuits ordered or renewed under this Agreement. NO
ADDITIONS, DELETIONS, CHANGES, NOTATIONS OR MODIFICATIONS THAT MAY APPEAR ON
ATTACHMENT B ARE BINDING ON SPRINT COMMUNICATIONS COMPANY L.P.
IN WITNESS WHEREOF, the Parties have executed this Agreement and made it
effective as stated herein.
SPRINT COMMUNICATIONS MIDCOM Communications, Inc.
By: /s/ R. MICHAEL FRANZ By: /s/ JAY T. CALDWELL
----------------------------- -----------------------------
(Signature) (Signature)
Name: R. Michael Franz Name: Jay T. Caldwell
---------------------------
(Printed)
Title: President, Wholesale Services Title: Sr. Vice President
Group --------------------------
Business Address: Business Address:
8140 Ward Parkway 111 Third Ave., Suite 1600
Kansas City, MO 64114 Seattle, WA 98101
SPRINT PROPRIETARY INFORMATION -- RESTRICTED
<PAGE> 6
ATTACHMENT A
VOLUME PLAN*
Expiration Date March 31, 2000
4.1 Cents Per Voice
Monthly Volume of Grade Mile Per Monthly Minimum Charge
Private Line Services Month Per Circuit
--------------------- ---------------- ----------------------
$0+ $[*] $[*]
Note: The Monthly Volume of Private Line Services contribute to the Minimum
Commitment requirements in Section A.14.1. of the Resale Solutions Switched
Services Agreement.
4.2 per the application tariff
--------------------------------
* CUSTOMER MUST INITIAL EACH BLANK THAT HAS AN ENTRY. IF ANY BLANK HAS NO
ENTRY, CUSTOMER MUST CROSS-OUT THE BLANK AND INITIAL THE CROSS-OUT.
SPRINT PROPRIETARY INFORMATION - RESTRICTED
<PAGE> 1
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (THIS "AGREEMENT"), is entered into as
of February 27, 1997, by and among FOOTHILL CAPITAL CORPORATION, a California
corporation ("Foothill"), with a place of business located at 11111 Santa Monica
Boulevard, Suite 1500, Los Angeles, California 90025-3333, MIDCOM COMMUNICATIONS
INC., a Washington corporation ("Midcom"), with its chief executive office
located at 1111 Third Avenue, Suite 1600, Seattle, Washington 98101, ADVAL,
INC., an Oregon corporation ("AdVal"), with its chief executive office located
at 200 Galeria Officentre, Southfield, Michigan 48034, ADVAL DATA CORPORATION,
an Oregon corporation ("AdVal Data"), with its chief executive office located at
200 Galeria Officentre, Southfield, Michigan 48034, ADVANCED NETWORK DESIGN, a
California corporation ("A.N.D."), with its chief executive office located at
14849 Firestone Boulevard, La Mirada, California 90638, CEL-TECH INTERNATIONAL
CORP., a Washington corporation ("Cel-Tech"), with its chief executive office
located at 12826 SE 40th Lane, Factoria, Washington 98004, and PACNET INC., a
Washington corporation ("PacNet"), with its chief executive office located at
1111 Third Avenue, Suite 1600, Seattle, Washington 98101.
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. As used in this Agreement, the following
terms shall have the following definitions:
"Acceptable Clearinghouses" means (a) Zero Plus Dialing, Inc.
d/b/a U.S. Billing, and (b) such other Clearinghouses as Foothill, in its
reasonable discretion, may approve in writing as such.
"Account Debtor" means any Person who is or who may become
obligated under, with respect to, or on account of, an Account.
"Accounts" means all currently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to Midcom or
any other Borrower arising out of the sale or lease of goods, the sale or lease
of General Intangibles, or the rendition of services by any Borrower,
irrespective of whether earned by performance, and any and all credit insurance,
guaranties, or security therefor.
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"Adjusted Net Worth", with respect to Midcom, means the sum of
(a) Midcom's net worth, plus (b) the aggregate principal amount of Midcom's
Indebtedness in respect of the Subordinated Notes.
"AdVal" has the meaning ascribed to such term in the
introductory paragraph of this Agreement.
"AdVal Data" has the meaning ascribed to such term in the
introductory paragraph of this Agreement.
"Advances" has the meaning ascribed thereto in Section 2.1(a)
hereof.
"Affiliate" means, as applied to any Person, any other Person
who directly or indirectly controls, is controlled by, is under common control
with or is a director or executive officer of such Person.
"Agreement" has the meaning set forth in the introductory
paragraph of this Agreement.
"A.N.D." has the meaning ascribed to such term in the
introductory paragraph of this Agreement.
"Approved Billing Services Agreement" means a Billing Services
Agreement a true and complete copy of which previously has been provided to
Foothill and Foothill's counsel for review, that is in form and substance
satisfactory to Foothill, with respect to which the LEC party thereto has
delivered a LEC Non-Offset and Consent to Assignment Agreement, and with respect
to which the rights of the Borrower party thereto may be the subject of an
attached, enforceable, and perfected Lien in favor of Foothill.
"Authorized Officer" means any officer or other employee of
any Borrower.
"Average Unused Portion of Facility" means, as of the first
day of any month, the non-negative amount equal to (a) the then Maximum Amount
(giving effect to any increases thereof, if any, that have become effective
before, or that become effective on, such day), minus (b) the average Daily
Balance of Advances that were outstanding during the immediately preceding
month.
"Bankruptcy Code" means the United States Bankruptcy Code (11
U.S.C. Section 101 et seq.), as amended, and any successor statute.
"Benefit Plan" means (a) a "defined benefit plan" (as defined
in Section 3(35) of ERISA) for which any Borrower or any ERISA Affiliate thereof
has been an "employer"
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(as defined in Section 3(5) of ERISA) within the past six years, and (b) any
pension plan subject to Section 412 of the IRC.
"Billing Services Agreement" means a billing services
agreement or similar agreement that has been entered into and is in full force
and effect between any Borrower and a LEC.
"Books and Records" means all of the books and records of each
Borrower, including: ledgers; records indicating, summarizing, or evidencing the
properties or assets of Midcom or any other Borrower (including the Collateral)
or liabilities; all information relating to any Borrower's business operations
or financial condition; and all computer programs, disk or tape files,
printouts, runs, or other computer prepared information.
"Borrowers" means Midcom, AdVal, AdVal Data, A.N.D., Cel-Tech,
and PacNet, collectively, and jointly and severally, and "Borrower" means any
one of them.
"Borrowers' Designated Account" means account number
470581002735 of the Borrowers maintained with Borrowers' Designated Account
Bank, or such other deposit account (located within the United States) of the
Borrowers designated, in writing and from time to time, by all of the Borrowers
to Foothill prior to the date of the establishment of such other deposit
account.
"Borrowers' Designated Account Bank" means Key Bank of Alaska,
whose office is located at 700 Fifth Avenue, 48th Floor, Seattle, Washington
98111-0090, and whose ABA number is 125-000-574.
"Borrowing Base" has the meaning set forth in Section 2.1(a)
hereof.
"Borrowing Base Certificate" means a borrowing base
certificate in form and substance satisfactory to Foothill.
"Business Day" means any day that is not a Saturday, Sunday,
or other day on which national banks are authorized or required to close.
"Carrier" means any provider of long distance
telecommunications access with whom any Borrower from time to time does
business, such as (without limitation) Sprint Communications Company L.P.,
Worldcom Network Services, Inc. d/b/a WilTel, and AT&T Corp.
"Carrier Agreement" means each contract or agreement in effect
between a Borrower and any Carrier.
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"Carrier Non-Offset and Consent to Assignment Agreement"
means, with respect to any Carrier Agreement, an agreement, in form and
substance satisfactory to Foothill, among the Borrower party to such Carrier
Agreement, the Carrier party to such Carrier Agreement, and Foothill.
"Cel-Tech" has the meaning ascribed to such term in the
introductory paragraph of this Agreement.
"Change of Control" shall be deemed to have occurred at such
time as (a) with respect to Midcom, a "person" or "group" (within the meaning of
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, but not
including a Pfleger Related Person) becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Securities Exchange Act of 1934), directly or
indirectly, of more than 20% of the total voting power of all classes of stock
then outstanding of Midcom normally entitled to vote in the election of
directors, or (b) with respect to any Borrower other than Midcom, less than one
hundred percent (100.0%) of the outstanding voting stock of such Borrower by
vote (assuming that all convertible instruments, warrants, bonds, debentures, or
options then outstanding held by Persons other than Midcom or any other Borrower
have been exercised) shall be owned, free and clear of any Liens of any Person
(other than Foothill) and control (without being subject to any voting trust,
voting agreement, shareholders agreement, or any other agreement or arrangement
limiting or affecting the voting of such stock) by Midcom or any other Borrower,
as the case may be.
"Cherry Accounts" means Accounts in respect of customer bases
acquired by Midcom from Cherry Communications Incorporated.
"Clearinghouse" means a LEC call transaction
billing-and-collection clearinghouse, such as (without limitation) Zero Plus
Dialing, Inc. d/b/a U.S. Billing.
"Clearinghouse Account" means, as of any date of
determination, any Account of Midcom or any other Borrower submitted for billing
and collection to or through a Clearinghouse.
"Clearinghouse Notification" means a notice, in form and
substance satisfactory to Foothill, to each Clearinghouse used by any Borrower
from Foothill and such Borrower.
"Closing Date" means the earlier to occur of the date of the
making of the initial Advance hereunder or the first date when each of the
conditions set forth in Section 3.1 shall have been fulfilled or waived.
"Code" means the California Uniform Commercial Code.
"Collateral" means each of the following:
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(a) the Accounts,
(b) the Books and Records,
(c) the Equipment,
(d) the General Intangibles,
(e) the Inventory,
(f) the Negotiable Collateral,
(g) the Real Property, if any,
(h) any money, or other assets of any Borrower that now
or hereafter come into the possession, custody, or
control of Foothill, and
(i) the proceeds and products, whether tangible or
intangible, of any of the foregoing, including
proceeds of insurance covering any or all of the
Collateral, and any and all Accounts, Books and
Records, Equipment, General Intangibles, Inventory,
Negotiable Collateral, Real Property, money, deposit
accounts, or other tangible or intangible property
resulting from the sale, exchange, collection, or
other disposition of any of the foregoing, or any
portion thereof or interest therein, and the proceeds
thereof.
"Collateral Access Agreement" means a landlord waiver or
consent, mortgagee waiver or consent, Equipment lessor or Equipment secured
financer waiver or consent, bailee letter, or a similar acknowledgement
agreement of any warehouseman, processor, or other Person in possession of,
having a Lien upon, or having rights or interests in Collateral consisting of
goods, or of lessors or secured financers of Equipment, in each case, if and as
requested by Foothill, in form and substance satisfactory to Foothill.
"Collections" means all cash, checks, notes, instruments, and
other items of payment (including, insurance proceeds, proceeds of cash sales,
rental proceeds, and tax refunds).
"Comdisco" means Comdisco, Inc.
"Compliance Certificate" means a certificate, in form and
substance satisfactory to Foothill, and delivered by the Chief Financial Officer
of Midcom to Foothill.
"Control Agreement" means a control agreement, in form and
substance satisfactory to Foothill, among one or more Borrowers, Foothill, and
the applicable securities intermediary, that provides (among other things) that,
from and after the giving of notice by Foothill to such securities intermediary
(a "Notice of Exclusive Control"), such securities intermediary shall take
instructions solely from Foothill with respect to the applicable Securities
Account and related Investment Property.
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"Daily Balance" means the amount of the outstanding Advances
owed at the end of a given day.
"deems itself insecure" means, with respect to a particular
circumstance, that the Person in good faith believes that the prospect of
payment or performance with respect to any Obligation is materially impaired.
For purposes of this definition, the burden of proof of establishing lack of
good faith shall be on the party against whom a right, power, or remedy has been
exercised as a result of the Person's deeming itself insecure.
"Default" means an event, condition, or default that, with the
giving of notice, the passage of time, or both, would be an Event of Default.
"Dilution Reserve" means, as of the date of any determination,
an amount sufficient to reduce Foothill's advance rate against Eligible Accounts
by one (1) percentage point for each percentage point by which the amount
(expressed as a percentage and based upon the experience of the immediately
prior six (6) months) of billed Accounts that are subject to bad debt
write-downs, discounts, contras, credits, or other dilutive items is in excess
of: (a) prior to January 1, 1998, seven and one-half percent (7.50%) of all
Eligible Accounts; and (b) from and after January 1, 1998, six percent (6.00%)
of all Eligible Accounts.
"Disbursement Letter" means an instructional letter executed
and delivered by an Authorized Officer to Foothill authorizing the extension of
credit to be made on the Closing Date, in form and substance satisfactory to
Foothill.
"Direct Account" means, as of any date of determination, any
Account that is not a LEC Account or a Clearinghouse Account.
"Dollars or $" means United States dollars.
"DTI" means Dal Telecom International, an entity organized
under the laws of Russia.
"Early Termination Premium" has the meaning set forth in
Section 3.6.
"Effective Date" means the date on which this Agreement is
executed and delivered by each of the Borrowers and Foothill.
"Eligible Accounts" means those Accounts (net of reserves for
accounts receivable variance against the applicable Borrower's general ledger)
created by any Borrower in the ordinary course of business, that arise out of
such Borrower's sale of goods, sale of General Intangibles relating to the
provision of telecommunication services, or rendition of services, and that
strictly comply with each and all of the representations and warranties
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respecting Accounts made by such Borrower to Foothill in the Loan Documents;
provided, however, that standards of eligibility may be fixed and revised from
time to time by Foothill in Foothill's reasonable credit judgment; provided
further that to the extent Foothill revises such standards of eligibility,
Foothill will endeavour in good faith to provide notice to the Borrowers of such
revision, but any failure of Foothill to do so shall not result in any liability
to Foothill whatsoever unless and to the extent such failure arose from the
gross negligence or willful misconduct of Foothill. Eligible Accounts shall not
include the following:
(a) Accounts with selling terms of more than 30 days
or Accounts that the Account Debtor has failed to pay (i) in the case of LEC
Accounts, within 90 days of invoice date (which, for purposes of this Agreement,
with respect to any LEC Account, means the date of receipt by the applicable
Borrower from the applicable LEC of a LEC Confirmation Statement with respect to
such LEC Account), or (ii) in the case of Direct Accounts, within 90 days of
invoice date;
(b) Accounts owed by an Account Debtor or its
Affiliate where fifty percent (50%) or more of all Accounts owed to the
applicable Borrower from that Account Debtor (or its Affiliates) have not been
paid within 90 days of invoice date;
(c) Accounts with respect to which the Account Debtor
is an employee, Affiliate, or agent of any Borrower; unless such Accounts arise
out of an arm's- length transaction on terms no less favorable to such Borrower
than the terms of such Borrower's transactions with its other customers that are
not employees, Affiliates, or agents of any Borrower;
(d) Accounts with respect to which goods are placed
on consignment, guaranteed sale, sale or return, sale on approval, bill and
hold, or other terms by reason of which the payment by the Account Debtor may be
conditional;
(e) Accounts that are not payable in Dollars or with
respect to which the Account Debtor: (i) does not maintain its chief executive
office in the United States, or (ii) is not organized under the laws of the
United States or any State thereof, or (iii) is the government of any foreign
country or sovereign state, or of any state, province, municipality, or other
political subdivision thereof, or of any department, agency, public corporation,
or other instrumentality thereof, unless (y) the Account is supported by an
irrevocable letter of credit satisfactory to Foothill (as to form, substance,
and issuer) and assigned and delivered to and directly drawable by Foothill, or
(z) the Account is covered by credit insurance in form and amount, and by an
insurer, satisfactory to Foothill;
(f) Accounts with respect to which the Account Debtor
is either (i) the United States or any department, agency, or instrumentality of
the United States (exclusive, however, of Accounts with respect to which the
applicable Borrower has complied,
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to the satisfaction of Foothill, with the Assignment of Claims Act, 31 U.S.C.
Section 3727), or (ii) any State of the United States (exclusive, however, of
Accounts owed by any State that does not have a statutory counterpart to the
Assignment of Claims Act);
(g) Accounts with respect to which the Account Debtor
is a creditor of the applicable Borrower, has or has asserted a right of setoff,
or has disputed its liability or made any claim with respect to the Accounts
owing to the applicable Borrower that has not been resolved, to the extent of
the amount (in Foothill's reasonable business credit judgment) of such credit,
set-off right, or dispute or claim;
(h) Accounts with respect to an Account Debtor whose
total obligations owing to one or more of the Borrowers exceed 5% of all
Eligible Accounts, to the extent of the obligations owing by such Account Debtor
in excess of such percentage;
(i) Accounts with respect to which the applicable
Borrower received from the Account Debtor, and is accountable for, a customer
deposit, to the extent of such customer deposit;
(j) Accounts with respect to which the Account Debtor
is subject to any Insolvency Proceeding, or becomes insolvent, or goes out of
business, except to the extent, if any, that Foothill, in its sole and absolute
discretion, deems eligible any such Accounts that also (1) arise after the
commencement of such Account Debtor's Insolvency Proceeding and (2) are
adequately secured by a deposit;
(k) Accounts the timely collection of which Foothill,
in its reasonable credit judgment, believes to be substantially doubtful by
reason of the Account Debtor's financial condition or otherwise;
(l) Accounts with respect to which any goods giving
rise to such Account have not been shipped and delivered to and accepted by the
Account Debtor, any General Intangibles relating to the provision of
telecommunications services giving rise to such Account have not been provided
to and accepted, consumed, or utilized by the Account Debtor, any services
giving rise to such Account have not been performed and accepted, consumed, or
utilized by the Account Debtor, or the Account otherwise does not represent a
final sale;
(m) Accounts with respect to which the Account Debtor
is located in the states of New Jersey, Minnesota, Indiana, or West Virginia (or
any other state that requires a creditor to file a Business Activity Report or
similar document in order to bring suit or otherwise enforce its remedies
against such Account Debtor in the courts or through any judicial process of
such state), unless the applicable Borrower has qualified to do business in New
Jersey, Minnesota, Indiana, West Virginia, or such other states, or has filed a
Notice of
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Business Activities Report with the applicable division of taxation, the
department of revenue, or with such other state offices, as appropriate, for the
then-current year, or is exempt from such filing requirement;
(n) LEC Accounts submitted for billing and collection
to a LEC with respect to which there does not exist an Approved Billing Service
Agreement;
(o) LEC Accounts (i) that are not covered by a LEC
Confirmation Statement received by the applicable Borrower from the applicable
LEC, or (ii) that are covered by a LEC Confirmation Statement received by the
applicable Borrower from the applicable LEC to the extent of (without
duplication) reductions of or offsets against amounts otherwise payable with
respect thereto by reason of up-front LEC rejects or credits deducted from net
confirmed revenues on such LEC Confirmation Statement;
(p) Direct Accounts that have not yet been billed to
the Account Debtor (provided that such Accounts may qualify as Eligible Unbilled
Direct Accounts if they otherwise meet the criteria applicable thereto);
(q) Clearinghouse Accounts, except to the extent of
the Net Due From Acceptable Clearinghouses;
(r) Accounts to the extent that they represent
obligations with respect to advance billings that are due prior to the
completion of performance by the applicable Borrower with respect to the subject
contract or transaction that gives rise to such Accounts; unless Foothill, in
its sole and absolute discretion, otherwise deems such Accounts to constitute
Eligible Accounts;
(s) Cherry Accounts, unless and until such time, if
ever, that both (i) the billing of the underlying Account Debtors in respect of
the Cherry Accounts customer bases is accomplished through a billing network
owned or controlled by a Borrower, and (ii) Midcom's litigation with Cherry
Communications Incorporated has been settled to the satisfaction of Foothill;
(t) Accounts with respect to which any commissions
are owed to any Persons other than a Borrower, to the extent of such
commissions; and
(u) Accounts that have been transferred to a
Borrower's legal or collection department.
"Eligible Direct Account" means, as of any date of
determination, an Eligible Account that is a Direct Account.
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"Eligible LEC Account" means, as of any date of determination,
an Eligible Account that is a LEC Account. The amount of any Eligible LEC
Account shall be presumed to be the amount thereof projected to be received by
the applicable Borrower on the related LEC Confirmation Statement unless
Foothill in its sole discretion determines the amount thereof to be a different
amount.
"Eligible Unbilled Direct Account" means, as of any date of
determination, a Direct Account of any Borrower that (a) resulted from a
transaction that occurred prior to the date of determination and with respect to
which such Borrower has an existing call transaction record in a format that is
capable of being billed by such Borrower to its customer in accordance with such
Borrower's usual billing methods for Direct Accounts but that has not yet been
billed and invoiced to such customer, (b) does not relate to a transaction that
occurred more than 30 days prior to the date of determination, and (c) in all
other respects would qualify as an Eligible Direct Account but for the fact that
it has not yet been billed and invoiced to such Borrower's customer. Eligible
Unbilled Direct Accounts shall be net of contra accounts. If an Account that,
immediately prior to being billed and invoiced, was an Eligible Unbilled Direct
Account, then is billed and invoiced, it thereupon shall cease to be an Eligible
Unbilled Direct Account, and it shall become an Eligible Direct Account if it
then meets the criteria applicable thereto.
"Environmental Law" means (i) the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C.
Section 9601 et seq.; (ii) the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. Section 6901 et seq.; (iii) the Toxic Substances Control Act,
as amended, 15 U.S.C. Section 2601 et seq.; and (iv) any other federal or state
law or regulation relating to the protection of the environment.
"Equipment" means all present and hereafter acquired
machinery, machine tools, motors, equipment, furniture, furnishings, fixtures,
vehicles (including motor vehicles and trailers), tools, parts, goods (other
than consumer goods, farm products, or Inventory), wherever located, of Midcom
or any other Borrower, including (a) any interest of such Borrower in any of the
foregoing, and (b) all attachments, accessories, accessions, replacements,
substitutions, additions, and improvements to any of the foregoing.
"ERISA" the Employee Retirement Income Security Act of 1974,
29 U.S.C. Section 1000 et seq., amendments thereto, successor statutes,
and regulations or guidance promulgated thereunder.
"ERISA Affiliate" means, with respect to any Borrower, (a) any
corporation subject to ERISA whose employees are treated as employed by the same
employer as the employees of such Borrower under IRC Section 414(b), (b) any
trade or business subject to ERISA whose employees are treated as employed by
the same employer as the employees of such Borrower under IRC Section 414(c),
(c) solely for purposes of Section 302 of ERISA and Section 412 of the IRC, any
organization subject to ERISA that is a member of an affiliated service group of
which such Borrower is a member under IRC Section 414(m), or (d) solely for
purposes of Section 302 of ERISA and
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Section 412 of the IRC, any party subject to ERISA that is a party to an
arrangement with such Borrower and whose employees are aggregated with the
employees of such Borrower under IRC Section 414(o).
"ERISA Event" means, with respect to any Borrower, (a) a
Reportable Event with respect to any Benefit Plan or Multiemployer Plan, (b) the
withdrawal of such Borrower or any ERISA Affiliate thereof from a Benefit Plan
during a plan year in which it was a "substantial employer" (as defined in
Section 4001(a)(2) of ERISA), (c) the providing of notice of intent to terminate
a Benefit Plan in a distress termination (as described in Section 4041(c) of
ERISA), (d) the institution by the PBGC of proceedings to terminate a Benefit
Plan or Multiemployer Plan, (e) any event or condition (i) that provides a basis
under Section 4042(a)(1), (2), or (3) of ERISA for the termination of, or the
appointment of a trustee to administer, any Benefit Plan or Multiemployer Plan,
or (ii) that may result in termination of a Multiemployer Plan pursuant to
Section 4041A of ERISA, (f) the partial or complete withdrawal within the
meaning of Sections 4203 and 4205 of ERISA, of such Borrower or any ERISA
Affiliate thereof from a Multiemployer Plan, or (g) providing any security to
any Plan under Section 401(a)(29) of the IRC by such Borrower or any ERISA
Affiliate thereof.
"Event of Default" has the meaning set forth in Section 8.
"Existing Lender Group" means Transamerica Business Credit
Corporation and the other lenders (if any) party to that certain Credit
Agreement, dated as of November 8, 1995 (as amended, restated, supplemented, or
otherwise modified), with Midcom or any other Borrower.
"Existing Lender Group Agent" means Transamerica Business
Credit Corporation, as agent for the Existing Lender Group.
"Fee Date" means the earlier to occur of (a) March 15, 1997,
and (b) the Closing Date.
"FEIN" means Federal Employer Identification Number.
"Foothill" has the meaning set forth in the introductory
paragraph of this Agreement.
"Foothill Account" means an account maintained by Foothill at
a depositary selected by Foothill.
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"Foothill Expenses" means all: costs or expenses (including
taxes, and insurance premiums) required to be paid by any Borrower under any of
the Loan Documents that are paid or incurred by Foothill; fees or charges paid
or incurred by Foothill in connection with Foothill's transactions with any
Borrower, including, fees or charges for photocopying, notarization, couriers
and messengers, telecommunication, public record searches (including tax Lien,
litigation, and UCC searches and including searches with the patent and
trademark office, the copyright office, or the department of motor vehicles),
filing, recording, publication, appraisal (including periodic Personal Property
Collateral or Real Property appraisals), real estate surveys, real estate title
policies and endorsements, and environmental audits; costs and expenses incurred
by Foothill in the disbursement of funds to any one or more of the Borrowers (by
wire transfer or otherwise); charges paid or incurred by Foothill resulting from
the dishonor of checks written by any Borrower or any Account Debtor; costs and
expenses paid or incurred by Foothill to correct any default or enforce any
provision of the Loan Documents, or in gaining possession of, maintaining,
handling, preserving, storing, shipping, selling, preparing for sale, or
advertising to sell the Personal Property Collateral or any Real Property, or
any portion thereof, irrespective of whether a sale is consummated; costs and
expenses paid or incurred by Foothill in examining any Books and Records; costs
and expenses of third party claims or any other suit paid or incurred by
Foothill in enforcing or defending the Loan Documents or in connection with the
transactions contemplated by the Loan Documents or Foothill's relationship with
any Borrower or any guarantor; and Foothill's reasonable attorneys fees and
expenses incurred in advising, structuring, drafting, reviewing, administering,
amending, terminating, enforcing (including attorneys fees and expenses incurred
in connection with a "workout," a "restructuring," or an Insolvency Proceeding
concerning any one or more of the Borrowers or any guarantor of the
Obligations), defending, or concerning the Loan Documents, irrespective of
whether suit is brought.
"Fundamental Change Transaction" has the meaning set forth in
Section 7.3.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, consistently applied.
"General Intangibles" means all of each Borrower's present and
future general intangibles and other personal property (including contract
rights, rights arising under common law, statutes, or regulations, choses or
things in action, goodwill, patents, trade names, trademarks, servicemarks,
copyrights, blueprints, drawings, purchase orders, customer lists, monies due or
recoverable from pension funds, route lists, rights to payment and other rights
under any royalty or licensing agreements, infringement claims, computer
programs, information contained on computer disks or tapes, literature, reports,
catalogs, deposit accounts, insurance premium rebates, tax refunds, and tax
refund claims, in each case, of Midcom or any other Borrower), other than goods,
Accounts, and Negotiable Collateral.
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"Governing Documents" means the certificates or articles of
incorporation, by-laws, or other organizational or governing documents of any
Person.
"Hazardous Materials" means any substances that are defined or
listed in, or otherwise classified pursuant to, any Environmental Laws as
"hazardous substances," "hazardous wastes," "toxic substances," "toxic
pollutants," "hazardous pollutants," or any similar term under any Environmental
Law. The term "Hazardous Materials" specifically includes any petroleum product
and any flammable substances or explosives or any radioactive materials, but
specifically excludes a substance present only in de minimis quantities that
does not present a material risk of harm to public health or the environment or
that would not be the subject of a reporting requirement or an enforcement
action if brought to the attention of appropriate governmental authorities.
"Indebtedness" means: (a) all obligations of Midcom or any
other Borrower for borrowed money, (b) all obligations of Midcom or any other
Borrower evidenced by bonds, debentures, notes, or other similar instruments and
all reimbursement or other obligations of any Borrower in respect of letters of
credit, bankers acceptances, interest rate swaps, or other financial products,
(c) all obligations of Midcom or any other Borrower under capital leases, (d)
all obligations or liabilities of others secured by a Lien on any property or
asset of Midcom or any other Borrower, irrespective of whether such obligation
or liability is assumed, and (e) any obligation of Midcom or any other Borrower
guaranteeing or intended to guarantee (whether guaranteed, endorsed, co-made,
discounted, or sold with recourse to Midcom or any other Borrower) any
indebtedness, lease, dividend, letter of credit, or other obligation of any
other Person.
"Insolvency Proceeding" means any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code or under any other
bankruptcy or insolvency law, assignments for the benefit of creditors, formal
or informal moratoria, compositions, extensions generally with creditors, or
proceedings seeking reorganization, arrangement, or other similar relief.
"Intercreditor Agreements" means, collectively: (a) an
intercreditor agreement between Foothill and Key Bank, with respect to Midcom,
specifying the relative rights, duties, and priorities of Foothill and Key Bank
with respect to the Collateral provided by Midcom to Foothill or Key Bank, in
form and substance satisfactory to Foothill in its sole discretion, acknowledged
and consented to by Midcom; and (b) an intercreditor agreement between Foothill
and Comdisco, with respect to Midcom, specifying the relative rights, duties,
and priorities of Foothill and Comdisco with respect to the Collateral provided
by Midcom to Foothill or Comdisco, in form and substance satisfactory to
Foothill in its sole discretion, acknowledged and consented to by Midcom.
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"Inventory" means all present and future inventory in which
Midcom or any other Borrower has any interest, including goods held for sale or
lease or to be furnished under a contract of service and all present and future
raw materials, work in process, finished goods, and packing and shipping
materials, wherever located, of any Borrower.
"Investment" means any transaction within the scope of Section
7.14 (whether permitted or prohibited thereby), and includes capital
contributions, equity contributions, loans, and advances.
"Investment Property" shall have the meaning ascribed to such
term in Division 9 of the Code.
"IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
"Key Bank" means Key Bank of Washington.
"LEC" means a local exchange carrier or telephone company that
provides basic telecommunications services to its customers and from whom any
Borrower receives payments with respect to Accounts, such as (without
limitation) Pacific Bell, U.S. West, Southwestern Bell, GTE, and Ameritech.
"LEC Account" means, as of any date of determination, any
Account of any Borrower submitted by or on behalf of such Borrower to a LEC for
billing and payment pursuant to a Billing Services Agreement.
"LEC Confirmation Statement" means a written confirmation
statement sent to the applicable Borrower by a LEC to confirm the receipt by the
LEC from such Borrower of call transaction records relating to Accounts that the
LEC is to bill on behalf of such Borrower to customers of the LEC.
"LEC Non-Offset and Consent to Assignment Agreement" means an
agreement by a LEC in favor of the applicable Borrower, that is in form and
substance satisfactory to Foothill, that runs to the benefit of Foothill, or
that may be assigned to Foothill and is in fact so assigned, and that is in full
force and effect.
"Lien" means any interest in property securing an obligation
owed to, or a claim by, any Person other than the owner of the property, whether
such interest shall be based on the common law, statute, or contract, whether
such interest shall be recorded or perfected, and whether such interest shall be
contingent upon the occurrence of some future event or events or the existence
of some future circumstance or circumstances, including the lien or security
interest arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation,
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assignment, deposit arrangement, security agreement, adverse claim or charge,
conditional sale or trust receipt, or from a lease, consignment, or bailment for
security purposes and also including reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases, and other
title exceptions and encumbrances affecting Real Property.
"Loan Account" has the meaning set forth in Section 2.7.
"Loan Documents" means this Agreement, the Disbursement
Letter, the Lockbox Agreements, the Pledge Agreement, the Trademark Security
Agreement, any Mortgages hereafter delivered by any one or more of the Borrowers
to Foothill, the Suretyship Agreement, the Intercreditor Agreements, the Control
Agreements, any note or notes executed by any one or more of the Borrowers and
payable to Foothill, and any other agreement entered into, now or in the future,
in connection with this Agreement.
"Lockbox Account" means a depositary account established
pursuant to one of the Lockbox Agreements.
"Lockbox Agreements" means those certain Lockbox Operating
Procedural Agreements and those certain Depository Account Agreements, in form
and substance satisfactory to Foothill, each of which is among a Borrower,
Foothill, and one of the Lockbox Banks.
"Lockbox Bank" means a bank identified as such by the
Borrowers in writing to, and approved by, Foothill.
"Lockboxes" has the meaning set forth in Section 2.4.
"Material Adverse Change" means (a) a material adverse change
in the business, prospects, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of the Borrowers, (b) the
material impairment of the ability of the Borrowers to perform their obligations
under the Loan Documents or of Foothill to enforce the Obligations or realize
upon the Collateral, (c) a material adverse effect on the value of the
Collateral or the amount that Foothill would be likely to receive (after giving
consideration to delays in payment and costs of enforcement) in the liquidation
of such Collateral, or (d) a material impairment of the priority of Foothill's
Liens on the Collateral.
"Material Carriers" means the Carriers identified on Schedule
M-1.
"Maximum Amount" means, subject to increase as set forth
below, Thirty Million Dollars ($30,000,000). From time to time after the
Effective Date, Borrower may request an increase in the Maximum Amount, on one
or more occasions, in increments of
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$5,000,000 or an integral multiple thereof, to an amount not to exceed
$50,000,000, such increases to become effective, in each instance,
prospectively, subject to the prior or concurrent satisfaction of the Maximum
Amount Increase Conditions.
"Maximum Amount Increase Conditions" means: (a) Foothill shall
have received written notice from the Borrowers specifying the requested amount
and requested effective date (not earlier than 60 days following Foothill's
receipt of such notice and all information, reports, and other items to be
delivered under clause (d) below) of an increase in the Maximum Amount; (b)
Foothill shall have received payment of any applicable fee provided for in
Section 2.8(b); (c) Foothill shall have obtained one or more Participants
satisfactory to Foothill to provide the amount of the incremental increase in
the Maximum Amount and on terms and conditions satisfactory to Foothill; (d)
each Borrower shall have delivered to Foothill all information, reports, and
other items reasonably and timely requested by Foothill, and the results of
Foothill's review thereof shall be satisfactory to Foothill in its sole
discretion; and (e) no Default or Event of Default shall have occurred and be
continuing or would result therefrom at the time of the written notice and at
the time of the actual increase in the Maximum Amount.
"Maximum Foothill Amount" means that portion of the Maximum
Amount for which Foothill shall be responsible, exclusive of any participations
with Participants. As of the Effective Date, the Maximum Foothill Amount is
$30,000,000. Thereafter, in connection with Foothill's obtaining one or more
Participants satisfactory to Foothill to provide commitments in respect hereof
on terms and conditions satisfactory to Foothill, the Maximum Foothill Amount
shall be reduced Dollar-for-Dollar by the amount of commitments so provided by
such Participants; provided, however, that in no event shall the Maximum
Foothill Amount be less than the lower of $15,000,000 and 50% of the Maximum
Amount.
"Midcom" has the meaning ascribed to such term in the
introductory paragraph of this Agreement.
"Microwave Assets" means certain microwave transmission/relay
Equipment located at the locations identified as "Microwave Sites" on Schedule
6.13.
"Mortgages" means any one or more mortgages, deeds of trust,
or deeds to secure debt, that hereafter may be from time to time executed by
Midcom or any other Borrower in favor of Foothill, the form and substance of
which shall be satisfactory to Foothill, that encumber any Real Property and the
related improvements thereto.
"Multiemployer Plan" means a "multiemployer plan" (as defined
in Section 4001(a)(3) of ERISA) to which any Borrower or any ERISA Affiliate
thereof has contributed, or was obligated to contribute, within the past six
years.
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"Negotiable Collateral" means all of each Borrower's present
and future letters of credit, notes, drafts, instruments, certificated
securities (including the shares of stock of Subsidiaries of any Borrower),
Investment Property, documents, personal property leases (wherein any Borrower
is the lessor), chattel paper, and any Books and Records relating to any of the
foregoing.
"Net Due From Acceptable Clearinghouses" means the result of
(a) any monies or rights to payment due from Acceptable Clearinghouses pursuant
to the applicable billing/collection agreement between an Acceptable
Clearinghouse and the applicable Borrower, minus (b) the sum of all fees,
charges, credits, adjustments, discounts, reserves, charge-backs, or other
monies withheld by Acceptable Clearinghouses pursuant to such billing/collection
agreements.
"Non-Material Subsidiary" means any Subsidiary identified on
Schedule N-1 attached hereto.
"Notice of Exclusive Control" has the meaning set forth in the
definition of "Control Agreement."
"Obligations" means all loans, Advances, debts, principal,
interest (including any interest that, but for the provisions of the Bankruptcy
Code, would have accrued), contingent reimbursement obligations owing to
Foothill, premiums (including Early Termination Premiums), liabilities
(including all amounts charged to the Loan Account pursuant hereto),
obligations, fees or Foothill Expenses (including any fees or expenses that, but
for the provisions of the Bankruptcy Code, would have accrued) lease payments,
guaranties, covenants, and duties owing by Midcom or any other Borrower to
Foothill of any kind and description (whether pursuant to or evidenced by the
Loan Documents or pursuant to any other agreement between Foothill and any
Borrower, and irrespective of whether for the payment of money), whether direct
or indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, and including any debt, liability, or obligation owing from
any Borrower to others that Foothill may have obtained by assignment or
otherwise, and further including all interest not paid when due and all Foothill
Expenses that any Borrower is required to pay or reimburse by the Loan
Documents, by law, or otherwise.
"Overadvance" has the meaning set forth in Section 2.2.
"PacNet" has the meaning ascribed to such term in the
introductory paragraph of this Agreement.
"Paid-Off Letter" means one or more letters, each in form and
substance reasonably satisfactory to Foothill, from the Existing Lender Group
Agent acknowledging that all of the obligations of Borrower owing to the
Existing Lender Group have been repaid in full
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and that all of the commitments of the Existing Lender Group have been
irrevocably terminated and agreeing to terminate or release all of the Liens
existing in favor of the Existing Lender Group on the properties or assets of
any Borrower.
"Participant" means any Person to which Foothill has sold a
participation interest in its rights under the Loan Documents.
"PBGC" means the Pension Benefit Guaranty Corporation as
defined in Title IV of ERISA, or any successor thereto.
"Permitted Dispositions" means: (a) the sale of Inventory to
buyers in the ordinary course of business; (b) the sale or other disposition of
obsolete Equipment in the ordinary course of business; and (c) the sale or other
disposition of the Microwave Assets.
"Permitted Fundamental Changes" means: (a) the conversion of
the Subordinated Notes into equity securities of Midcom, so long as no Change of
Control would result therefrom; (b) the merger of any Non-Material Subsidiary
with and into any Borrower, so long as that Borrower is the surviving
corporation; (c) so long as no Event of Default has occurred and is continuing
or would result therefrom, the merger of any Borrower with and into any other
Borrower; provided, however, that (i) the proposed surviving Borrower shall
provide Foothill at least 30 days prior written notice of such merger and shall
deliver to Foothill such documents as Foothill may reasonably request for the
purpose of perfecting or maintaining the perfection or priority of any Liens
Foothill may have on any Collateral affected by any such transaction (including
financing statements, fixture filings, and Collateral Access Agreements), and
(ii) in any such merger involving Midcom, the surviving corporation of such
merger shall be Midcom; and (d) so long as no Event of Default has occurred and
is continuing or would result therefrom, the sale, transfer, or other
disposition by any Borrower other than Midcom of all or substantially all of its
assets to any other Borrower; provided, however, that the proposed transferee
Borrower shall provide Foothill at least 30 days prior written notice of such
sale, transfer, or other disposition and shall deliver to Foothill such
documents as Foothill may reasonably request for the purpose of perfecting or
maintaining the perfection or priority of any Liens Foothill may have on any
Collateral affected by any such sale, transfer, or other disposition (including
financing statements, fixture filings, and Collateral Access Agreements).
"Permitted Liens" means (a) Liens held by Foothill, (b) Liens
for unpaid taxes that are not yet due and payable, (c) Liens set forth on
Schedule P-1 attached hereto, (d) the interests of lessors under operating
leases and purchase money Liens of lessors under capital leases to the extent
that the acquisition or lease of the underlying asset is permitted under Section
7.10, and so long as the Lien only secures the purchase price of the asset and
any expenses incurred in connection with such purchase money financing
transaction, (e) easements, rights of way, reservations, covenants, conditions,
restrictions, zoning variances,
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and other similar encumbrances that do not materially interfere with the use or
value of the property subject thereto, (f) mechanics', materialmen's,
warehousemen's, or similar Liens that arise by operation of law, (g) exceptions
listed in any title insurance or commitment therefor delivered by a Borrower
hereunder in respect of any Real Property and as are approved in the sole
discretion of Foothill, (h) Liens of Key Bank that are permitted by, and subject
to, the terms of the Intercreditor Agreement with Key Bank, (i) Liens of
Comdisco that are permitted by, and subject to, the terms of the Intercreditor
Agreement with Comdisco, and (j) a Lien in favor of either Star Bank or Key Bank
on cash collateral for a letter of credit, in an original face amount not to
exceed $120,000, issued by either Star Bank or Key Bank for the benefit of
Comdisco.
"Permitted Protest" means the right of Midcom or any other
Borrower to protest any Lien, tax, rental payment, or other charge, other than
any such Lien that secures the Obligations, provided that (a) a reserve with
respect to such obligation is established on the books of such Borrower in an
amount that is reasonably satisfactory to Foothill, (b) any such protest is
instituted and diligently prosecuted by such Borrower in good faith, and (c)
Foothill is satisfied that, while any such protest is pending, there will be no
impairment of the enforceability, validity, or priority of any of the Liens of
Foothill on the Collateral.
"Permitted Stock Redemption" means, so long as no Event of
Default has occurred and is continuing or would result therefrom, the redemption
by Midcom of approximately 885,360 shares of its common stock held by Ashok Rao
or certain Affiliates thereof for a price to be determined by arbitration and to
be payable ratably over 36 months (all as more particularly described in that
certain Amendment No. 1 to Form S-1 filed by Midcom with the Securities and
Exchange Commission on January 16, 1997 and bearing Registration No. 333-14427).
"Person" means and includes natural persons, corporations,
limited liability companies, limited partnerships, general partnerships, limited
liability partnerships, joint ventures, trusts, land trusts, business trusts, or
other organizations, irrespective of whether they are legal entities, and
governments and agencies and political subdivisions thereof.
"Personal Property Collateral" means all Collateral other than
Real Property.
"Pfleger Related Person" means Paul Pfleger or any Affiliate
thereof.
"Plan" means any employee benefit plan, program, or
arrangement maintained or contributed to by any Borrower or with respect to
which any Borrower may incur liability.
"Pledge Agreement" means an agreement, in form and substance
satisfactory to Foothill, dated as of even date with this Agreement, and entered
into by Midcom and each
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other Borrower for the benefit of Foothill, whereby each such Borrower pledges
to Foothill all of the capital stock of each of its Subsidiaries.
"Pledged Shares" means the original certificates evidencing
the shares of capital stock of Subsidiaries of each Borrower pledged to Foothill
pursuant to the Pledge Agreement.
"Qualified Participant" means (a) a commercial bank organized
under the laws of the United States, or any state thereof, and having total
assets in excess of $100,000,000; (b) a commercial bank organized under the laws
of any other country which is a member of the Organization for Economic
Cooperation and Development or a political subdivision of any such country, and
having total assets in excess of $100,000,000; provided that such bank is acting
through a branch or agency located in the United States; (c) a finance company,
insurance or other financial institution or fund that is engaged in making,
purchasing or otherwise investing in commercial loans in the ordinary course of
its business and having total assets in excess of $50,000,000; (d) any Affiliate
(other than individuals) of Foothill; or (e) any other Person approved by
Foothill and Borrower; provided, however, in no event shall any Qualified
Participant have total assets less than the product of (i) 10 times (ii) the
amount of such Qualified Participant's financing commitment in respect hereof.
"Qualified Transaction" has the meaning set forth in Section
3.6.
"Real Property" means the parcel or parcels of real property
and the related improvements thereto, if any, identified on Schedule R-1, and
any estates or interests in real property hereafter acquired by Midcom or any
other Borrower.
"Reference Rate" means the highest of the variable rates of
interest, per annum, most recently announced by Norwest Bank Minnesota, National
Association, or any successor thereto, as its "prime rate" or "reference rate,"
irrespective of whether such announced rate is the best rate available from such
financial institution.
"Renewal Date" has the meaning set forth in Section 3.4.
"Reportable Event" means any of the events described in
Section 4043(c) of ERISA or the regulations thereunder other than a Reportable
Event as to which the provision of 30 days notice to the PBGC is waived under
applicable regulations.
"Retiree Health Plan" means an "employee welfare benefit plan"
within the meaning of Section 3(1) of ERISA that provides benefits to
individuals after termination of their employment, other than as required by
Section 601 of ERISA.
"Securities Account" means a "securities account" as that term
is defined in Section 8-501 of the Code.
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"Solvent" means, with respect to any Person on a particular
date, that on such date (a) at fair valuations, all of the properties and assets
of such Person are greater than the sum of the debts, including contingent
liabilities, of such Person, (b) the present fair salable value of the
properties and assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person is able to realize upon its
properties and assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course of
business, (d) such Person does not intend to, and does not believe that it will,
incur debts beyond such Person's ability to pay as such debts mature, and (e)
such Person is not engaged in business or a transaction, and is not about to
engage in business or a transaction, for which such Person's properties and
assets would constitute unreasonably small capital after giving due
consideration to the prevailing practices in the industry in which such Person
is engaged. In computing the amount of contingent liabilities at any time, it is
intended that such liabilities will be computed at the amount that, in light of
all the facts and circumstances existing at such time, represents the amount
that reasonably can be expected to become an actual or matured liability.
"Subordinated Notes" means the 8.25% convertible subordinated
notes due 2003 issued by Midcom pursuant to the Subordinated Notes Indenture in
the aggregate principal amount of $97,743,000 outstanding as of the Effective
Date.
"Subordinated Notes Indenture" means that certain Indenture,
dated as of August 22, 1996, by and between Midcom as issuer, and IBJ Schroder
Bank & Trust Company as trustee relative to the Subordinated Notes, as amended
through the Effective Date, and as the same thereafter may be amended, restated,
supplemented, or otherwise modified from time to time in accordance with the
terms of the Loan Documents.
"Subsidiary" of a Person means a corporation, partnership,
limited liability company, or other entity in which that Person directly or
indirectly owns or controls the shares of stock or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
appoint other managers of such corporation, partnership, limited liability
company, or other entity; provided, however, that, for purposes of this
Agreement, DTI shall not be deemed a Subsidiary of Midcom.
"Suretyship Agreement" means an agreement, in form and
substance satisfactory to Foothill, dated as of even date with this Agreement,
and entered into by Midcom and each other Borrower for the benefit of Foothill.
"Syndicated Amount" means that portion of the Maximum Amount
equal to the aggregate financing commitments (to the extent not breached or
terminated) of all Participants.
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"Trademark Security Agreement" means a Trademark Security
Agreement, in form and substance satisfactory to Foothill, dated as of even date
herewith, by and among Midcom, each other Borrower, and Foothill.
"Voidable Transfer" has the meaning set forth in Section
15.8.
"ZPDI Billing Agreement" means the billing/collection
agreement between Midcom and Zero Plus Dialing, Inc. d/b/a U.S. Billing.
"ZPDI Notification and Acknowledgment" means a notice, in form
and substance satisfactory to Foothill, from Midcom and Foothill to (and
acknowledged by) Zero Plus Dialing, Inc. d/b/a U.S. Billing.
1.2 ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP. When used herein, the
term "financial statements" shall include the notes and schedules thereto.
Whenever the term "Borrower" is used in respect of a financial covenant or a
related definition, it shall be understood to mean Borrower on a consolidated
basis unless the context clearly requires otherwise.
1.3 CODE. Any terms used in this Agreement that are defined in
the Code shall be construed and defined as set forth in the Code unless
otherwise defined herein.
1.4 CONSTRUCTION. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, references to
the singular include the plural, the term "including" is not limiting, and the
term "or" has, except where otherwise indicated, the inclusive meaning
represented by the phrase "and/or." The words "hereof," "herein," "hereby,"
"hereunder," and similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. An Event of Default
shall "continue" or be "continuing" until such Event of Default has been waived
in writing by Foothill. Section, subsection, clause, schedule, and exhibit
references are to this Agreement unless otherwise specified. Any reference in
this Agreement or in the Loan Documents to this Agreement or any of the Loan
Documents shall include all alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, and supplements, thereto
and thereof, as applicable.
1.5 SCHEDULES AND EXHIBITS. All of the schedules delivered by
the Borrowers hereunder, as may be modified from time to time by the Borrowers
to the extent permitted hereby, and all of the exhibits attached to this
Agreement shall be deemed incorporated herein by reference. The Borrowers shall
have the right to submit for acceptance by Foothill from time to time proposed
modifications to existing schedules to this Agreement
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or any other Loan Document. Foothill shall have the right, but not the
obligation, to accept any such proposed modification to such existing schedule
within 20 days of its submission. If any such proposed modification is expressly
accepted in writing by Foothill, in its sole and absolute discretion, within
such period, then the relevant existing schedule automatically shall be deemed
thereafter to be modified by the accepted proposed modification thereof. Any
such proposed modification that is not expressly accepted in writing by Foothill
within such period shall be deemed to have been rejected by Foothill.
2. LOAN AND TERMS OF PAYMENT.
2.1 REVOLVING ADVANCES. (a) Subject to the terms and
conditions of this Agreement, Foothill agrees to make advances ("Advances") to
Borrower in an aggregate amount at any one time outstanding not to exceed the
least of (i) the Maximum Amount, (ii) the Maximum Foothill Amount plus the
Syndicated Amount, and (iii) the Borrowing Base. For purposes of this Agreement,
"Borrowing Base", as of any date of determination, shall mean the result of:
(y) the least of:
(i) the sum of:
(A) eighty five percent (85%)
of Eligible Accounts, less
the amount, if any, of the
Dilution Reserve; plus
(B) the lower of (1) seventy
five percent (75%) of
Eligible Unbilled Direct
Accounts, and (2) the
amount of credit
availability created by
clause (y)(i)(A) above; and
(ii) an amount equal to the product of
(A) 2 times (B) the aggregate amount
of the Borrowers' Collections with
respect to Accounts for the
immediately preceding 30 day period
(or, upon the written request
therefor by the Borrowers based upon
a sustained increase in aggregate
revenues of the Borrowers as
demonstrated to the satisfaction of
Foothill, such longer period, if
any, as Foothill, in its reasonable
discretion, may from time to time
approve in writing); and
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(iii) an amount equal to the Borrowers'
revenues (on a consolidated basis)
for the immediately preceding 90 day
period;
minus
(z) the aggregate amount of reserves, if any,
established by Foothill under Section
2.1(b).
(b) Anything to the contrary in Section 2.1(a) above
notwithstanding, Foothill may create reserves against or reduce its advance
rates based upon Eligible Accounts or categories thereof: (i) if Foothill
determines that there has occurred a Material Adverse Change; (ii) in respect of
due and payable excise tax obligations that are unpaid by any one or more of the
Borrowers to the extent that Foothill has not received satisfactory legal advice
that Liens arising in respect of such unpaid tax obligations are subordinated to
the Liens of Foothill; and (iii) in respect of set-offs by Carriers, LECS, or
Clearinghouses that have not executed and delivered, in favor of Foothill, a
non-offset agreement, in form and substance satisfactory to Foothill.
(c) Foothill shall have no obligation to make
Advances hereunder to the extent they would cause the outstanding Obligations to
exceed the Maximum Amount. In addition, Foothill shall have no obligation to
make Advances hereunder to the extent they would cause the outstanding
Obligations to exceed the Maximum Foothill Amount plus the Syndicated Amount.
(d) Amounts borrowed pursuant to this Section 2.1 may
be repaid and, subject to the terms and conditions of this Agreement, reborrowed
at any time during the term of this Agreement.
2.2 OVERADVANCES. If, at any time or for any reason, the
aggregate amount of Obligations owed by Borrower to Foothill pursuant to Section
2.1 is greater than either the dollar or percentage limitations set forth in
Section 2.1 (an "Overadvance"), Borrower immediately shall pay to Foothill, in
cash, the amount of such excess to be used by Foothill to repay Advances
outstanding under Section 2.1.
2.3 INTEREST: RATES, PAYMENTS, AND CALCULATIONS.
(a) Interest Rate. Except as provided in Section
2.3(b), all Obligations shall bear interest at a per annum rate from time to
time equal to the Reference Rate plus 1.00 percentage points.
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(b) Default Rate. All Obligations shall bear
interest, from and after the occurrence and during the continuance of an Event
of Default, at a per annum rate from time to time equal to the Reference Rate
plus 4.00 percentage points.
(c) Minimum Interest. In no event shall the rate of
interest chargeable hereunder be less than seven percent (7.00%) per annum. To
the extent that interest accrued hereunder at the rate set forth herein would be
less than the foregoing minimum rate, the interest rate chargeable hereunder for
the period in question automatically shall be deemed increased to the minimum
rate.
(d) Payments. Interest hereunder shall be due and
payable, in arrears, on the first day of each month during the term hereof. Each
Borrower hereby authorizes Foothill to charge, and (unless Foothill receives
instructions from an Authorized Officer regarding alternative means of payment
acceptable to Foothill in respect thereof) Foothill shall charge, without prior
notice to any Borrower, such interest, all Foothill Expenses (as and when
incurred), and all payments due under any Loan Document to the Loan Account,
which amounts thereafter shall accrue interest at the rate then applicable
hereunder. Any interest not paid when due shall be compounded and shall
thereafter accrue interest at the rate then applicable hereunder.
(e) Computation. The Reference Rate as of the
Effective Date is eight and one quarter percent (8.25%) per annum. In the event
the Reference Rate is changed from time to time hereafter, the applicable rate
of interest hereunder automatically and immediately shall be increased or
decreased by an amount equal to such change in the Reference Rate. All interest
and fees chargeable under the Loan Documents shall be computed on the basis of a
360 day year for the actual number of days elapsed.
(f) Intent to Limit Charges to Maximum Lawful Rate.
In no event shall the interest rate or rates payable under this Agreement, plus
any other amounts paid in connection herewith, exceed the highest rate
permissible under any law that a court of competent jurisdiction shall, in a
final determination, deem applicable. Each Borrower and Foothill, in executing
and delivering this Agreement, intend legally to agree upon the rate or rates of
interest and manner of payment stated within it; provided, however, that,
anything contained herein to the contrary notwithstanding, if said rate or rates
of interest or manner of payment exceeds the maximum allowable under applicable
law, then, ipso facto as of the date of this Agreement, each Borrower is and
shall be liable only for the payment of such maximum as allowed by law, and
payment received from any Borrower in excess of such legal maximum, whenever
received, shall be applied to reduce the principal balance of the Obligations to
the extent of such excess.
2.4 REPORTING AND COLLECTION OF ACCOUNTS.
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(a) At all times from and after the Fee Date and
until the Closing Date, on the first Business Day of each week, the Borrowers
shall report to Foothill, in writing, the aggregate amount of all Collections
during the immediately preceding week in sufficient detail to permit Foothill to
calculate the amount of 'float' payable in respect thereof pursuant to Section
2.5.
(b) At all times from and after the Closing Date,
each Borrower shall maintain lockboxes (the "Lockboxes") and, immediately after
the Closing Date, each Borrower shall instruct all Account Debtors with respect
to the Accounts, General Intangibles, and Negotiable Collateral of such Borrower
to remit all Collections in respect thereof to such Lockboxes. Each Borrower,
Foothill, and the Lockbox Banks shall enter into the Lockbox Agreements, which
among other things shall provide for the opening of a Lockbox Account for the
deposit of Collections at a Lockbox Bank. Each Borrower agrees that all
Collections and other amounts received by such Borrower with respect to
Collateral immediately upon receipt shall be deposited into a Lockbox Account.
No Lockbox Agreement or arrangement contemplated thereby shall be modified by
any Borrower without the prior written consent of Foothill. Upon the terms and
subject to the conditions set forth in the Lockbox Agreements, all amounts
received in each Lockbox Account shall be wired each Business Day into the
Foothill Account.
2.5 CREDITING PAYMENTS; APPLICATION OF COLLECTIONS. The
receipt of any Collections by Foothill (whether from transfers to Foothill by
the Lockbox Banks pursuant to the Lockbox Agreements or otherwise) immediately
shall be applied provisionally to reduce the Obligations outstanding under
Section 2.1, but shall not be considered a payment on account unless such
Collection item is a wire transfer of immediately available federal funds and is
made to the Foothill Account or unless and until such Collection item is honored
when presented for payment. From and after the Fee Date, Foothill shall be
entitled to charge the Borrowers for 2 Business Days of `clearance' or `float'
at the rate set forth in Section 2.3(a) or Section 2.3(b), as applicable, on all
Collections that (a) from and after the Fee Date and until the Closing Date, are
reported pursuant to Section 2.4(a), and (b) from and after the Closing Date,
are received by Foothill (regardless of whether forwarded by the Lockbox Banks
to Foothill, whether provisionally applied to reduce the Obligations under
Section 2.1, or otherwise). This across-the-board 2 Business Day clearance or
float charge on all Collections is acknowledged by the parties to constitute an
integral aspect of the pricing of Foothill's financing of the Borrowers, and
shall apply irrespective of the characterization of whether receipts are owned
by any Borrower or Foothill, and whether or not there are any outstanding
Advances, the effect of such clearance or float charge being the equivalent of
charging 2 Business Days of interest on such Collections. Should any Collection
item not be honored when presented for payment, then the Borrowers shall be
deemed not to have made such payment, and interest shall be recalculated
accordingly. Anything to the contrary contained herein notwithstanding, any
Collection item shall be deemed received by Foothill only if it is received into
the Foothill Account on or before 11:00 a.m. Los Angeles time. If
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any Collection item is received into the Foothill Account after 11:00 a.m. Los
Angeles time it shall be deemed to have been received by Foothill as of the
opening of business on the immediately following Business Day.
2.6 BORROWERS' DESIGNATED ACCOUNT. Foothill is authorized to
make the Advances under this Agreement based upon telephonic or other
instructions received from anyone purporting to be an Authorized Officer, or
without instructions if pursuant to Section 2.3(d). The Borrowers agree to
establish and maintain Borrowers' Designated Account with Borrowers' Designated
Account Bank for the purpose of receiving the proceeds of the Advances requested
by any Borrower and made by Foothill hereunder. Unless otherwise agreed by
Foothill and the Borrowers, any Advance requested by Borrower and made by
Foothill hereunder shall be made to Borrowers' Designated Account.
2.7 MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF OBLIGATIONS.
Foothill shall maintain an account on its books in the name of the Borrowers
(the "Loan Account") on which the Borrowers will be charged with all Advances
made by Foothill to the Borrowers or for the Borrowers' account, including,
accrued interest, Foothill Expenses, and any other payment Obligations of the
Borrowers, in accordance with Section 2.5 and on which the Borrowers will be
credited with all payments received by Foothill from any Borrower or for the
Borrowers' account, including all amounts received in the Foothill Account from
any Lockbox Bank. Foothill shall render statements regarding the Loan Account to
the Borrowers, including principal, interest, fees, and including an itemization
of all charges and expenses constituting Foothill Expenses owing, and such
statements shall be conclusively presumed to be correct and accurate and
constitute an account stated between the Borrowers and Foothill unless, within
30 days after receipt thereof by the Borrowers, the Borrowers shall deliver to
Foothill, by registered or certified mail at its address specified in Section
12, written objection thereto describing the error or errors contained in any
such statements.
2.8 FEES. The Borrowers shall pay to Foothill the following
fees:
(a) Signing Fee. A one time signing fee of Three
Hundred Seventy Five Thousand Dollars ($375,000), which is earned, in full, on
the Effective Date and is due and payable to Foothill as follows: (i) Two
Hundred Twenty Five Thousand Dollars ($225,000) shall be due and payable on the
Effective Date; and (ii) Seventy Five Thousand Dollars ($75,000) shall be due
and payable on each of the first anniversary of the Effective Date and the
second anniversary of the Effective Date; provided, however, that, in any event,
all unpaid amounts in respect of such fee shall be due and payable upon the
termination of this Agreement, whether by its terms, by prepayment, by
acceleration, or otherwise.
(b) Line Increase Fee. On the effective date of any
increase in the Maximum Amount, a fee equal to the product of (i) the amount by
which the Maximum Amount is increased on such effective date, times (ii) 1.25%.
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(c) Unused Line Fee. On the first day of each month,
payable in arrears and commencing July 1, 1997 (with respect to June 1997), a
fee in an amount equal to one-quarter of one percent (0.25%) per annum times the
Average Unused Portion of Facility with respect to the month then ended;
(d) Financial Examination, Documentation, and
Appraisal Fees. Foothill's customary fee of Six Hundred Fifty Dollars ($650) per
day per examiner, plus out-of-pocket expenses for each financial analysis and
examination (i.e., audits) of any Borrower performed by personnel employed by
Foothill; Foothill's customary appraisal fee of One Thousand Five Hundred
Dollars ($1,500) per day per appraiser, plus out-of-pocket expenses for each
appraisal of the Collateral performed by personnel employed by Foothill; and,
the actual charges paid or incurred by Foothill if it elects to employ the
services of one or more third Persons to perform such financial analyses and
examinations (i.e., audits) of any Borrower or to appraise the Collateral; and,
on each anniversary of the Effective Date, Foothill's customary fee of Two
Thousand Five Hundred Dollars ($2,500) per year for its loan documentation
review. The foregoing notwithstanding, so long as no Event of Default has
occurred and is continuing and Foothill does not deem itself insecure, Foothill
agrees that Borrower only shall be obligated to reimburse Foothill for the
foregoing fees, expenses, and charges with respect to 4 financial examinations
of each Borrower per year and 4 appraisals of the Collateral per year (each of
which appraisals may be conducted in different stages); and
(e) Servicing Fee. Payable, in arrears, on the first
day of each March, June, September, and December after the Fee Date and during
the term of this Agreement, a servicing fee in an amount equal to Sixteen
Thousand Dollars ($16,000) for each three-month period. If this Agreement
terminates on a date other than the first day of any March, June, September, or
December, the Borrowers also shall pay Foothill on such date of termination a
servicing fee in an amount equal to the ratable portion of Sixteen Thousand
Dollars ($16,000) in respect of the period between the immediately preceding
first day of March, June, September, or December, as the case may be, and such
date of termination.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 CONDITIONS PRECEDENT TO THE INITIAL ADVANCE. The
obligation of Foothill to make the initial Advance is subject to the
fulfillment, to the satisfaction of Foothill and its counsel, of each of the
following conditions on or before the Closing Date:
(a) the Effective Date shall occur on or before March
15, 1997;
(b) Foothill shall have received, on or before the
Effective Date, the $225,000 installment of the signing fee due and payable on
the Effective Date in accordance with Section 2.8(a);
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(c) Foothill shall have received, on or before the
Fee Date, the Suretyship Agreement, duly executed, and such document shall be in
full force and effect;
(d) the Closing Date shall occur on or before April
15, 1997;
(e) the Existing Lender Group Agent shall have
executed and delivered the Paid-Off Letter, together with UCC termination
statements and other documentation evidencing the termination of all Liens in
favor of the Existing Lender Group or the Existing Lender Group Agent in respect
of the properties and assets of any Borrower;
(f) Foothill shall have received searches reflecting
the filing of its financing statements with respect to the Collateral;
(g) Foothill shall have received each of the
following documents, duly executed, on or before the Closing Date, and each such
document shall be in full force and effect:
i) the Pledge Agreement;
ii) the Trademark Security Agreement;
iii) the Disbursement Letter;
iv) the ZPDI Notification and
Acknowledgment;
v) the Clearinghouse Notifications for
each Clearinghouse (other Zero Plus
Dialing, Inc. d/b/a U.S. Billing),
if any, used by a Borrower as of the
Closing Date;
vi) the Carrier Non-Offset and Consent
to Assignment Agreements in respect
of each of the Material Carriers;
vii) the Lockbox Agreements; and
viii) the Intercreditor Agreements;
(h) Foothill shall have received possession of the
Pledged Shares together with duly executed blank stock powers with respect
thereto.
(i) Foothill shall have received, dated within 10
days before the Closing Date, a certificate from the Secretary of each Borrower
attesting to the resolutions of such Borrower's Board of Directors authorizing
its execution, delivery, and performance of
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this Agreement and the other Loan Documents to which such Borrower is a party
and authorizing specific officers of such Borrower to execute same;
(j) Foothill shall have received, within 10 days
before the Closing Date, copies of each Borrower's Governing Documents, as
amended, modified, or supplemented to the Closing Date, certified by the
Secretary of such Borrower;
(k) Foothill shall have received, within 10 days
before the Closing Date, a certificate of status with respect to each Borrower,
dated within 10 days of the Closing Date, by the appropriate officer of the
jurisdiction of organization of such Borrower, which certificate shall indicate
that such Borrower is in good standing in such jurisdiction;
(l) Foothill shall have received, within 15 days
before the Closing Date, certificates of status with respect to each Borrower,
each dated within 15 days of the Closing Date, such certificates to be issued by
the appropriate officer of the jurisdictions in which its failure to be duly
qualified or licensed would have a Material Adverse Change, which certificates
shall indicate that such Borrower is in good standing in such jurisdictions;
(m) Foothill shall have received, within 5 days
before the Closing Date, an opinion of each Borrower's counsel in form and
substance satisfactory to Foothill;
(n) Foothill shall have received, on or before the
Closing Date, a memorandum in form and substance satisfactory to Foothill, from
local counsel acceptable to Foothill and licensed in the below-referenced States
that shall satisfactorily address the priority of Foothill's prior perfected
Liens on the Collateral as against municipal or state tax Liens arising, or that
may in the future arise, under the respective laws of the States of California,
Florida, Illinois, New York, Ohio, Texas, and Washington, with respect to taxes
(such as, without limitation, excise taxes) that in any way relate to the
provision of telecommunications services;
(o) Foothill shall have received, within 10 days
before the Closing Date, copies of the Subordinated Notes Indenture and the ZPDI
Billing Agreement, together with a certificate of the Secretary of Midcom
certifying each of the same to be a true and correct and complete copy thereof;
(p) Foothill shall have received and reviewed, and
shall have expressed no objection to, a written business plan for the Borrowers
with respect to the Borrowers' fiscal years 1997, 1998, 1999, and 2000;
(q) Foothill shall have completed a field survey by
its examiners, and the results shall be acceptable to Foothill;
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(r) Foothill shall have completed an updated audit,
and the results shall be acceptable to Foothill;
(s) Foothill shall have received written notice from
the Borrowers specifying the requested date of such initial Advance, which
requested date shall not be less than 3 weeks after the date Foothill receives
such notice;
(t) Foothill shall have received a certificate of
insurance, together with the endorsements thereto, as are required by Section
6.10 hereof, the form and substance of which shall be satisfactory to Foothill
and its counsel;
(u) Foothill shall have received Collateral Access
Agreements in respect of each of the locations set forth on Schedule 3.1(u);
(v) Foothill shall have received a Certificate of the
Chief Financial Officer of Midcom certifying that all tax returns required to be
filed by each Borrower have been timely filed and all taxes upon each Borrower
or its properties, assets, income, and franchises (including payroll taxes) have
been paid prior to delinquency, except such taxes that are the subject of a
Permitted Protest;
(w) Foothill and Foothill's counsel shall have been
provided with a true and complete copy of each Billing Services Agreement in
effect on the Closing Date and shall have had a reasonable opportunity to review
each such Billing Services Agreement, and Foothill shall have advised the
Borrowers as to whether or not each such Billing Services Agreement is an
Approved Billing Services Agreement;
(x) Foothill and Foothill's counsel shall have been
provided with a true and complete copy of each Carrier Agreement in respect of a
Material Carrier and shall have had a reasonable opportunity to review each such
Carrier Agreement, and Foothill shall have expressed no objection to the terms
of each such Carrier Agreement;
(y) Foothill and its counsel shall have had an
opportunity to review the status of (i) the Frontier litigation filed in the
United States District Court for the Eastern District of Michigan (Southern
Division) as Case No. 96-CV-73856-DT, and (ii) that certain securities class
action lawsuit filed in the United States District Court for the Western
District of Washington as Case No. C96-614D, and the results of such review
shall have been satisfactory to Foothill;
(z) Foothill shall have received a certificate, in
form and substance satisfactory to Foothill and duly executed by each of the
Chief Financial Officer and the General Counsel of Midcom, stating, to the best
of such officers' information and good faith belief, the maximum amount of
liability of the Borrowers that the Frontier litigation filed in
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the United States District Court for the Eastern District of Michigan (Southern
Division) as Case No. 96-CV-73856-DT would reasonably be expected to result in,
and such amount shall be acceptable to Foothill in its sole and absolute
discretion;
(aa) Foothill and Foothill's counsel shall have been
provided with a true and complete copy of each of the material contractual
obligations of each Borrower in respect of Indebtedness (including the
Subordinated Notes Indenture and the respective financing documents with Key
Bank and Comdisco) and shall have had a reasonable opportunity to review each
such material contractual obligation, and Foothill shall have expressed no
objection to the terms of each such material contractual obligation;
(ab) Foothill shall have received evidence,
satisfactory to Foothill, of the ability of each Borrower to age accounts
payable in a manner satisfactory to Foothill; and
(ac) all other documents and legal matters in
connection with the transactions contemplated by this Agreement shall have been
delivered or executed or recorded and shall be in form and substance
satisfactory to Foothill and its counsel.
3.2 CONDITIONS PRECEDENT TO ALL ADVANCES. The following shall
be conditions precedent to all Advances hereunder:
(a) the representations and warranties of each
Borrower contained in this Agreement and the other Loan Documents shall be true
and correct in all material respects on and as of the date of such extension of
credit, as though made on and as of such date (except to the extent that such
representations and warranties relate solely to an earlier date);
(b) no Default or Event of Default shall have
occurred and be continuing on the date of such extension of credit, nor shall
either result from the making thereof; and
(c) no injunction, writ, restraining order, or other
order of any nature prohibiting, directly or indirectly, the extending of such
credit shall have been issued and remain in force by any governmental authority
against any Borrower, Foothill, or any of their Affiliates.
3.3 CONDITION SUBSEQUENT. As a condition subsequent to the
making of the initial Advance, the Borrowers shall perform or cause to be
performed the following (the failure by the Borrowers to so perform or cause to
be performed constituting an Event of Default hereunder):
(a) within thirty 30 days of the Closing Date, deliver to
Foothill the certified copies of the policies of insurance, together with the
endorsements thereto, as are required by
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Section 6.10 hereof, the form and substance of which shall be satisfactory to
Foothill and its counsel.
3.4 TERM AND TERMINATION. This Agreement shall become
effective on the Effective Date and this Agreement shall continue in full force
and effect for a term ending on the date (the "Renewal Date") that is three (3)
years from the Effective Date and automatically shall be renewed for successive
1 year periods thereafter, unless sooner terminated pursuant to the terms
hereof. Either all of the Borrowers, on the one hand, or Foothill, on the other
hand, may terminate this Agreement effective on the Renewal Date or on any 1
year anniversary of the Renewal Date by giving the other party at least 90 days
prior written notice. The foregoing notwithstanding, Foothill shall have the
right to terminate its obligations under this Agreement immediately and without
notice upon the occurrence and during the continuation of an Event of Default.
3.5 EFFECT OF TERMINATION. On the date of termination of this
Agreement, all Obligations (including any contingent reimbursement obligations
of any Borrower) immediately shall become due and payable without notice or
demand. No termination of this Agreement, however, shall relieve or discharge
any Borrower of such Borrower's duties, Obligations, or covenants hereunder, and
Foothill's continuing Liens on the Collateral shall remain in effect until all
Obligations have been fully and finally discharged and Foothill's obligation to
provide additional credit hereunder is terminated. If Borrower has sent a notice
of termination pursuant to the provisions of Section 3.4, but fails to pay the
Obligations in full on the date set forth in said notice, then Foothill may, but
shall not be required to, renew this Agreement for an additional term of 1 year.
3.6 EARLY TERMINATION BY THE BORROWERS. (a) The provisions of
Section 3.4 that allow termination of this Agreement by the Borrowers only on
the Renewal Date and certain anniversaries thereof notwithstanding, the
Borrowers have the option, at any time upon 90 days prior written notice to
Foothill, to terminate this Agreement by paying to Foothill, in cash, the
Obligations, in full, together with a premium (the "Early Termination Premium")
equal to the product of (i) the then existing Maximum Amount (giving effect to
any increases that have become effective before, or that become effective on,
the date of such termination) times (ii) a percentage equal to (x) from and
after the Effective Date and through and including the first anniversary of the
Closing Date, 3%, (y) from and after the day immediately following the first
anniversary of the Closing Date and through and including the second anniversary
of the Closing Date, 2%, and (z) thereafter, 1%.
(b) Section 3.6(a) notwithstanding, in the event that
the Borrowers timely exercise the Borrowers' option to terminate this Agreement
pursuant to Section 3.6(a) and the Obligations are repaid in full in cash in
connection with the consummation of a Qualified Transaction, the Early
Termination Premium payable shall be one-half (1/2) of the applicable amount
otherwise payable.
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As used herein, "Qualified Transaction" means the sale of all or
substantially all of the assets or stock of Midcom to any Person other
than any Borrower (including a sale effected by one or more mergers,
consolidations, reorganizations, or other transactions providing for
the conversion or exchange of more than 50% of the outstanding shares
of common stock of Midcom into securities of any Person other than any
Borrower, or cash, or property, or any combination of any of the
foregoing forms of consideration), which transaction shall not be
financed in whole or in part by Foothill or any Participant.
3.7 TERMINATION UPON EVENT OF DEFAULT. If Foothill terminates
this Agreement upon the occurrence of an Event of Default, in view of the
impracticability and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Foothill's
lost profits as a result thereof, the Borrowers shall pay to Foothill upon the
effective date of such termination, a premium in an amount equal to the Early
Termination Premium. The Early Termination Premium shall be presumed to be the
amount of damages sustained by Foothill as the result of the early termination
and the Borrowers agree that it is reasonable under the circumstances currently
existing. The Early Termination Premium provided for in this Section 3.7 shall
be deemed included in the Obligations.
4. CREATION OF LIENS.
4.1 GRANT OF LIENS. Each Borrower hereby grants to Foothill a
continuing Lien on all right, title, and interest of such Borrower in and to all
currently existing and hereafter acquired or arising Personal Property
Collateral in order to secure prompt repayment of any and all Obligations and in
order to secure prompt performance by the Borrowers of each of the Borrowers'
covenants and duties under the Loan Documents. Foothill's Liens on the Personal
Property Collateral shall attach to all Personal Property Collateral without
further act on the part of Foothill or any Borrower. Anything contained in this
Agreement or any other Loan Document to the contrary notwithstanding, except for
Permitted Dispositions, no Borrower has any authority, express or implied, to
dispose of any item or portion of the Personal Property Collateral or any Real
Property.
4.2 NEGOTIABLE COLLATERAL. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral, the
appropriate Borrower, immediately upon the request of Foothill, shall endorse
and deliver physical possession of such Negotiable Collateral to Foothill to the
extent necessary for Foothill to perfect, and maintain the priority of, its Lien
thereon.
4.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, AND
NEGOTIABLE COLLATERAL. At any time upon the occurrence and during the
continuance of an Event of Default, Foothill or Foothill's designee may (a)
notify customers or Account Debtors of any
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Borrower that the Accounts, General Intangibles, or Negotiable Collateral have
been assigned to Foothill or that Foothill has a Lien thereon, and (b) collect
the Accounts, General Intangibles, and Negotiable Collateral directly and charge
the collection costs and expenses to the Loan Account. Each Borrower agrees that
it will hold in trust for Foothill, as Foothill's trustee, any Collections that
it receives and immediately will deliver said Collections to Foothill in their
original form as received by such Borrower.
4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. At any time
upon the request of Foothill, each Borrower shall execute and deliver to
Foothill all financing statements, continuation financing statements, fixture
filings, security agreements, chattel mortgages, Mortgages, pledges,
assignments, endorsements of certificates of title, applications for title,
affidavits, reports, notices, schedules of accounts, letters of authority,
Clearinghouse Notifications, Collateral Access Agreements, and all other
documents that Foothill reasonably may request, in form satisfactory to
Foothill, to perfect and continue perfected Foothill's Liens on the Collateral,
and in order to fully consummate all of the transactions contemplated hereby and
under the other the Loan Documents. Without limiting the generality of the
foregoing, from and after such time as any Borrower becomes a switch-based
operator, such Borrower shall execute and deliver to Foothill all financing
statements that Foothill reasonably may request and shall cause to be executed
and delivered such Collateral Access Agreements from the lessors, warehousemen,
bailees, and mortgagees of the locations where the switching Equipment is
located, and such Collateral Access Agreements and intercreditor agreements from
lessors or secured financers of such switching Equipment, if and as required by
Foothill. Without limiting the foregoing, each Borrower agrees to execute and
deliver any supplementary Control Agreements, security agreements, financing
statements, or other documents reasonably required by Foothill to create,
perfect, or maintain the perfection or priority of, its Liens on such Borrower's
Investment Property (subject to the remedial restrictions contained herein).
4.5 POWER OF ATTORNEY. Each Borrower hereby irrevocably makes,
constitutes, and appoints Foothill (and any of Foothill's officers, employees,
or agents designated by Foothill) as such Borrower's true and lawful attorney,
with power to (a) if such Borrower refuses to, or fails timely to execute and
deliver any of the documents described in Section 4.4, sign the name of such
Borrower on any of the documents described in Section 4.4, (b) at any time that
an Event of Default has occurred and is continuing or Foothill deems itself
insecure, sign such Borrower's name on any invoice or bill of lading relating to
any Account, drafts against Account Debtors, schedules and assignments of
Accounts, verifications of Accounts, and notices to Account Debtors, (c) send
requests for verification of Accounts (in a form reasonably acceptable to such
Borrower), (d) endorse such Borrower's name on any Collection item of such
Borrower that may come into Foothill's possession, (e) at any time that an Event
of Default has occurred and is continuing or Foothill deems itself insecure,
notify the post office authorities to change the address for delivery of such
Borrower's mail to an address designated by Foothill, to receive and open all
mail addressed to such Borrower,
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and to retain all mail relating to the Collateral and forward all other mail to
such Borrower, (f) at any time that an Event of Default has occurred and is
continuing or Foothill deems itself insecure, make, settle, and adjust all
claims under such Borrower's policies of insurance and make all determinations
and decisions with respect to such policies of insurance, and (g) at any time
that an Event of Default has occurred and is continuing or Foothill deems itself
insecure, settle and adjust disputes and claims respecting the Accounts directly
with Account Debtors, for amounts and upon terms that Foothill determines to be
reasonable, and Foothill may cause to be executed and delivered any documents
and releases that Foothill determines to be necessary. The appointment of
Foothill as each Borrower's attorney pursuant to this Section 4.5, and each and
every one of Foothill's rights and powers, being coupled with an interest, is
irrevocable until all of the Obligations have been fully and finally repaid and
performed and Foothill's obligation to extend credit hereunder is terminated. To
the extent Foothill takes any action under any of clauses (a), (b), (e), (f), or
(g) of this Section 4.5, Foothill will endeavour in good faith to provide notice
to the relevant Borrower of such action, but any failure of Foothill to do so
shall not result in any liability to Foothill whatsoever unless and to the
extent such failure arose from the willful misconduct, gross negligence, or bad
faith of Foothill.
4.6 RIGHT TO INSPECT. Prior to the time that an Event of
Default has occurred and is continuing or Foothill deems itself insecure,
Foothill (through any of its officers, employees, or agents) shall have the
right, from time to time (subject to Section 2.8(d)) during normal business
hours and without substantially disrupting the applicable Borrower's normal
business operations, to inspect any Books and Records and to check, test, and
appraise the Collateral in order to verify any one or more of the Borrowers'
financial condition or the amount, quality, value, condition of, or any other
matter relating to, the Collateral. After the time that an Event of Default has
occurred and is continuing or at any time that Foothill deems itself insecure,
Foothill (through any of its officers, employees, or agents) shall have the
right, from time to time thereafter and at any time or times determined by
Foothill in its sole and absolute discretion, to inspect any Books and Records
and to check, test, and (subject to Section 2.8(d)) appraise the Collateral in
order to verify Borrower's financial condition or the amount, quality, value,
condition of, or any other matter relating to, the Collateral, irrespective of
whether any such action disrupts Borrower's normal business operations.
4.7 CONTROL AGREEMENTS. Foothill agrees that it will not give
any Notice of Exclusive Control unless an Event of Default has occurred and is
continuing or Foothill deems itself insecure. Each Borrower agrees that it will
not transfer assets out of any Securities Accounts other than in the ordinary
course of business or as otherwise permitted hereunder and, if to another
securities intermediary, unless each of such Borrower, Foothill, and the
substitute securities intermediary have entered into a Control Agreement. No
arrangement contemplated hereby or by any Control Agreement in respect of any
Securities Accounts or other Investment Property shall be modified by any
Borrower without the prior written consent of Foothill. Upon the occurrence and
during the continuance of an Event of Default or if Foothill deems itself
insecure, Foothill may elect to notify any securities
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intermediary to liquidate or transfer any Investment Property held thereby and
remit the proceeds thereof to the Foothill Account.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce Foothill to enter into this Agreement, each
Borrower makes the following representations and warranties with respect to such
Borrower or its assets, which shall be true, correct, and complete in all
respects as of the date hereof, and shall be true, correct, and complete in all
respects as of the Effective Date, and at and as of the date of the making of
each Advance, as though made on and as of the date of such Advance (except to
the extent that such representations and warranties relate solely to an earlier
date) and such representations and warranties shall survive the execution and
delivery of this Agreement:
5.1 NO LIENS. Such Borrower has good and indefeasible title to
the Collateral owned by such Borrower, free and clear of Liens, except for
Permitted Liens.
5.2 ELIGIBLE ACCOUNTS. The Eligible Accounts of such Borrower
are bona fide existing obligations created by the sale and delivery of Inventory
or General Intangibles or the rendition of services to Account Debtors in the
ordinary course of such Borrower's business, unconditionally owed to such
Borrower without defenses, disputes, offsets, counterclaims, or rights of return
or cancellation except to the extent that the effect of such defenses, disputes,
offsets, counterclaims, rights of return or cancellation have been excluded on
the applicable Borrowing Base Certificate. The property giving rise to such
Eligible Accounts has been delivered or provided to the Account Debtor, or to
the Account Debtor's agent for immediate shipment or delivery to and
unconditional acceptance by the Account Debtor. Such Borrower has not received
notice of actual or imminent bankruptcy, insolvency, or material impairment of
the financial condition of any Account Debtor regarding any Eligible Account.
5.3 EQUIPMENT. Except as set forth on Schedule 5.3, all of the
Equipment owned by such Borrower is used or held for use in such Borrower's
business and is fit for such purposes and is personal property.
5.4 LOCATION OF INVENTORY AND EQUIPMENT. Except as set forth
on Schedule 5.4, the Inventory and Equipment are not stored with a bailee,
warehouseman, or similar party (without Foothill's prior written consent).
Except as set forth on Schedule 5.4, the Inventory and Equipment are located
only at the locations identified on Schedule 6.13.
5.5 INVENTORY RECORDS. Such Borrower now keeps, and hereafter
at all times shall keep, correct and accurate records itemizing and describing
the kind, type, quality, and quantity of any Inventory of such Borrower, and
such Borrower's cost therefor.
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5.6 LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN. The chief
executive office of such Borrower is located at the addresses indicated in the
introductory paragraph of this Agreement. The FEIN of Midcom is 91-1438806. The
FEIN of AdVal is 52- 1841828. The FEIN of AdVal Data is 91-1687823. The FEIN of
A.N.D. is 95-3856847. The FEIN of Cel-Tech is 91-1419803. The FEIN of PacNet is
91-1642635.
5.7 DUE ORGANIZATION AND QUALIFICATION; NO SUBSIDIARIES EXCEPT
AS DISCLOSED.
(a) Such Borrower is duly organized and existing and
in good standing under the laws of the jurisdiction of its incorporation and
qualified and licensed to do business in, and in good standing in, any state
where the failure to be so licensed or qualified reasonably could be expected to
have a Material Adverse Change.
(b) Set forth on Schedule 5.7 is a complete and
accurate list of each of the direct and indirect Subsidiaries of such Borrower,
showing: (i) the jurisdiction of their incorporation; (ii) the number of shares
of each class of common and preferred stock authorized for each such Subsidiary;
and (iii) the number and the percentage of the outstanding shares of each such
class owned directly or indirectly by such Borrower. All of the outstanding
capital stock of each such Subsidiary has been validly issued and is fully paid
and non-assessable.
(c) Except as set forth on Schedule 5.7, no capital
stock (or any securities, instruments, warrants, options, purchase rights,
conversion or exchange rights, calls, commitments or claims of any character
convertible into or exercisable for capital stock) of any direct or indirect
Subsidiary of such Borrower is subject to the issuance of any security,
instrument, warrant, option, purchase right, conversion or exchange right, call,
commitment or claim of any right, title, or interest therein or thereto.
(d) Each Non-Material Subsidiary (i) does not own any
property or assets with a book value in excess of $50,000, (ii) does not
currently engage in any material business activity, and (iii) does not intend in
the future to engage in any material business activity.
5.8 DUE AUTHORIZATION; NO CONFLICT.
(a) The execution, delivery, and performance by such
Borrower of this Agreement and the Loan Documents to which it is a party have
been duly authorized by all necessary corporate action.
(b) The execution, delivery, and performance by such
Borrower of this Agreement and the Loan Documents to which it is a party do not
and will not (i) violate any provision of federal, state, or local law or
regulation (including Regulations G, T, U, and
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X of the Federal Reserve Board) applicable to such Borrower, the Governing
Documents of such Borrower, or any order, judgment, or decree of any court or
other Governmental Authority binding on such Borrower, (ii) conflict with,
result in a breach of, or constitute (with due notice or lapse of time or both)
a default under any material contractual obligation (including the Subordinated
Notes Indenture) or material lease of such Borrower, (iii) result in or require
the creation or imposition of any Lien of any nature whatsoever upon any
properties or assets of such Borrower, other than Permitted Liens, or (iv)
require any approval of stockholders or any approval or consent of any Person
under any material contractual obligation of such Borrower.
(c) Other than the filing of appropriate financing
statements, fixture filings, similar security filings, and mortgages, the
execution, delivery, and performance by such Borrower of this Agreement and the
Loan Documents to which such Borrower is a party do not and will not require any
registration with, consent, or approval of, or (except for Midcom's filings with
the Securities Exchange Commission in the ordinary course of Midcom's business)
notice to, or other action with or by, any federal, state, foreign, or other
Governmental Authority or other Person.
(d) This Agreement and the other Loan Documents to
which such Borrower is a party, and all other documents contemplated hereby and
thereby, when executed and delivered by such Borrower will be the legally valid
and binding obligations of such Borrower, enforceable against such Borrower in
accordance with their respective terms, except as enforcement may be limited by
equitable principles or by bankruptcy, insolvency, reorganization, moratorium,
or similar laws relating to or limiting creditors' rights generally.
(e) The Liens granted by such Borrower to Foothill in
and to its properties and assets pursuant to this Agreement and the other Loan
Documents are validly created, perfected, and first priority Liens, subject only
to Permitted Liens.
5.9 LITIGATION. There are no actions or proceedings pending by
or against such Borrower before any court or administrative agency and no
Borrower has any knowledge or belief of any pending, threatened, or imminent
litigation, governmental investigations, or claims, complaints, actions, or
prosecutions involving any Borrower or any guarantor of the Obligations, except
for: (a) ongoing collection matters in which Borrower is the plaintiff; (b)
matters disclosed on Schedule 5.9; and (c) matters arising after the date hereof
that, if decided adversely to any one or more of the Borrowers, would not have a
Material Adverse Change.
5.10 NO MATERIAL ADVERSE CHANGE. All financial statements
relating to such Borrower or any guarantor of the Obligations that have been
delivered by such Borrower to Foothill have been prepared in accordance with
GAAP (except, in the case of unaudited financial statements, for the lack of
footnotes and being subject to year-end audit adjustments) and fairly present
such Borrower's (or such guarantor's, as applicable) financial condition as
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of the date thereof and such Borrower's results of operations for the period
then ended. There has not been a Material Adverse Change with respect to any
Borrower (or such guarantor, as applicable) since the date of the latest
financial statements submitted to Foothill on or before the Effective Date.
5.11 SOLVENCY. Such Borrower is Solvent. No transfer of
property is being made by such Borrower and no obligation is being incurred by
such Borrower in connection with the transactions contemplated by this Agreement
or the other Loan Documents with the intent to hinder, delay, or defraud either
present or future creditors of any Borrower.
5.12 EMPLOYEE BENEFITS. No Borrower or any ERISA Affiliate
thereof maintains or contributes to any Benefit Plan, other than those listed on
Schedule 5.12. Each Borrower and each ERISA Affiliate thereof have satisfied the
minimum funding standards of ERISA and the IRC with respect to each Benefit Plan
to which it is obligated to contribute. No ERISA Event has occurred nor has any
other event occurred that may result in an ERISA Event that reasonably could be
expected to result in a Material Adverse Change. Except for the Borrowers'
obligations with respect to "401(k) Plan" contributions, no Borrower or any
ERISA Affiliate thereof, or any fiduciary of any Plan is subject to any direct
or indirect liability with respect to any Benefit Plan under any applicable law,
treaty, rule, regulation, or agreement. No Borrower or any ERISA Affiliate
thereof is required to provide security to any Benefit Plan under Section
401(a)(29) of the IRC.
5.13 ENVIRONMENTAL CONDITION. Such Borrower has not used and,
to the best of such Borrower's knowledge, no other previous owners or operators
have used or permitted the use of such Borrower's properties or assets to treat,
store for more than 90 days, produce, transport, release, or dispose of any
Hazardous Materials except in compliance with all Environmental Laws in all
material respects. Such Borrower has not received any notice designating or
identifying any of such Borrower's properties or assets as a Hazardous Materials
disposal site or candidate for closure pursuant to any Environmental Law. No
Lien arising under any Environmental Law has attached to any revenues or to any
real or personal property owned or operated by such Borrower. Such Borrower has
not received a summons, citation, notice, or directive from the Environmental
Protection Agency or any other federal or state governmental agency concerning
any action or omission by such Borrower resulting in the releasing or disposing
of Hazardous Materials into the environment.
5.14 MATERIAL CARRIERS. The Material Carriers collectively
account for not less than 95% of the aggregate amount of the Borrowers' volume
of telecommunications traffic through Carriers. Each Carrier Agreement in
respect of a Material Carrier is in full force and effect and no Borrower is in
material default thereunder.
5.15 RELIANCE BY FOOTHILL; CUMULATIVE. Each warranty and
representation contained in this Agreement automatically shall be deemed
repeated with each extension of
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credit hereunder and shall be conclusively presumed to have been relied on by
Foothill regardless of any investigation made or information possessed by
Foothill. The warranties and representations set forth herein shall be
cumulative and in addition to any and all other warranties and representations
that any Borrower now or hereafter shall give, or cause to be given, to
Foothill.
6. AFFIRMATIVE COVENANTS.
Each Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, and unless Foothill shall otherwise consent in writing, such
Borrower shall do all of the following:
6.1 ACCOUNTING SYSTEM. Maintain a standard and modern system
of accounting in accordance with GAAP with ledger and account cards or computer
tapes, disks, printouts, and records pertaining to the Collateral which contain
information as from time to time may be reasonably requested by Foothill.
6.2 COLLATERAL REPORTING. Provide Foothill with the following
documents at the following times in form satisfactory to Foothill: (a) on each
Business Day (or on such less frequent basis satisfactory to Foothill), (i) a
sales journal, collection journal, and collection register containing all
entries since the last such journals and register delivered hereunder, (ii) a
Borrowing Base Certificate, (iii) a report summarizing all written disputes or
claims with respect to Accounts received by such Borrower and not previously
reported to Foothill, (iv) a report with respect to unbilled Direct Accounts of
such Borrower, and (v) a report detailing contra Accounts with respect to each
of Eligible Direct Accounts, Eligible LEC Accounts, and Eligible Unbilled Direct
Accounts, (b) on a monthly basis and, in any event, by no later than the 10th
day of each month during the term of this Agreement, (i) a Borrowing Base
Certificate containing a detailed calculation of the Borrowing Base, (ii) a
detailed aging, by total, of the Accounts, together with a reconciliation to the
detailed calculation of the Borrowing Base previously provided to Foothill,
(iii) a summary aging, by vendor, of such Borrower's accounts payable and any
book overdraft, and (iv) a summary aging, by state and by municipality, of such
Borrower's tax obligations in respect of state or municipal taxes (such as,
without limitation, excise taxes) that in any way relate to the provision of
telecommunications services, (c) upon request, copies of invoices in connection
with the Accounts, customer statements, credit memos, remittance advices and
reports, deposit slips, and purchase orders and invoices, and (d) such other
reports as to the Collateral or the financial condition of such Borrower as
Foothill may request from time to time. Such Borrower shall bill Account Debtors
with respect to Direct Accounts within 45 days after the close of any monthly
billing period.
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Deliver to
Foothill: (a) as soon as available, but in any event within 30 days after the
end of each month during the
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term of this Agreement, a company prepared balance sheet, income statement, and
cash flow statement covering such Borrower's operations during such month; and
(b) as soon as available, but in any event within 90 days after the end of each
of such Borrower's fiscal years ending either immediately prior to the beginning
of, or during, the term of this Agreement, financial statements of such Borrower
for each such fiscal year, audited by independent certified public accountants
reasonably acceptable to Foothill and certified, without any qualifications, by
such accountants to have been prepared in accordance with GAAP, together with a
certificate of such accountants addressed to Foothill stating that such
accountants do not have knowledge of the existence of any Default or Event of
Default. Such audited financial statements shall include a balance sheet, profit
and loss statement, and cash flow statement, and, if prepared, such accountants'
letter to management. With respect to any Borrower that is a parent company of
one or more Subsidiaries, or is a Subsidiary or Affiliate of another company,
then, in addition to the financial statements referred to above, such Borrower
agrees to deliver financial statements prepared on a consolidating basis so as
to present such Borrower and each such related entity separately, and on a
consolidated basis.
Together with the above, Midcom also shall deliver to Foothill
Midcom's Form 10-Q Quarterly Reports, Form 10-K Annual Reports, and Form 8-K
Current Reports, and any other filings made by Midcom with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder or in respect thereof, within 3
Business Days of the date that the same are filed, or any other information that
is provided by any Borrower to its shareholders generally, and any other report
reasonably requested by Foothill relating to the financial condition of any one
or more of the Borrowers.
Within 10 Business Days of the end of each month, together
with the financial statements provided in accordance with Section 6.3(a), such
Borrower shall deliver to Foothill (i) a certificate signed by its chief
financial officer to the effect that: (w) all reports, statements, or computer
prepared information of any kind or nature delivered or caused to be delivered
to Foothill hereunder have been prepared in accordance with GAAP (except, in the
case of unaudited financial statements, for the lack of footnotes and being
subject to year-end audit adjustments) and fairly present the financial
condition of such Borrower, (x) the representations and warranties of such
Borrower contained in this Agreement and the other Loan Documents are true and
correct in all material respects on and as of the date of such certificate, as
though made on and as of such date (except to the extent that such
representations and warranties relate solely to an earlier date), (y) such
Borrower is not in default with respect to any of its obligations to any
Material Carrier under any Carrier Agreement, or, if such Borrower is in such
default, specifying the details of each such default, and (z) on the date of
delivery of such certificate to Foothill there does not exist any condition or
event that constitutes a Default or Event of Default (or, in each case, to the
extent of any non-compliance, describing such non-compliance as to which he or
she may have knowledge and what action such Borrower has taken, is taking, or
proposes to take with respect thereto), and
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(ii) for each month that also is the date on which a financial covenant in
Section 7.22 is to be tested, a Compliance Certificate demonstrating in
reasonable detail the Borrowers' compliance at the end of such period with the
applicable financial covenants contained in Section 7.22.
Each Borrower shall have issued written instructions to its
independent certified public accountants authorizing them to communicate with
Foothill and to release to Foothill whatever financial information concerning
any Borrower that Foothill may request. Each Borrower hereby irrevocably
authorizes and directs all auditors, accountants, or other third parties to
deliver to Foothill, at the Borrowers' expense, copies of each Borrower's
financial statements, papers related thereto, and other accounting records of
any nature in their possession, and to disclose to Foothill any information they
may have regarding any Borrower's business affairs and financial conditions.
6.4 TAX RETURNS. Deliver to Foothill copies of each of such
Borrower's future federal income tax returns, and any amendments thereto, within
30 days of the filing thereof with the Internal Revenue Service.
6.5 GUARANTOR REPORTS. Cause any guarantor of any of the
Obligations (other than any Borrower) to deliver its annual financial statements
at the time when Midcom provides its audited financial statements to Foothill
and copies of all federal income tax returns as soon as the same are available
and in any event no later than 30 days after the same are required to be filed
by law.
6.6 RETURNS. Returns and allowances, if any, as between such
Borrower and its Account Debtors shall be on the same basis and in accordance
with the usual customary practices of such Borrower, as they exist at the time
of the execution and delivery of this Agreement.
6.7 TITLE TO EQUIPMENT. Upon Foothill's request, immediately
deliver to Foothill, properly endorsed, any and all evidences of ownership of,
certificates of title, or applications for certificates of title, to any items
of Equipment of such Borrower.
6.8 MAINTENANCE OF EQUIPMENT. Maintain the Equipment of such
Borrower in good operating condition and repair (ordinary wear and tear
excepted), and make all necessary replacements thereto so that the value and
operating efficiency thereof shall at all times be maintained and preserved.
Such Borrower shall not permit any item of Equipment (other than applicable
items of Microwave Assets) of such Borrower to become a fixture to real estate
or an accession to other property, and the Equipment (other than applicable
items of Microwave Assets) of such Borrower shall at all times remain personal
property.
6.9 TAXES. All assessments and taxes, whether real, personal,
or otherwise, due or payable by, or imposed, levied, or assessed against any
Borrower or any of its property
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shall be paid in full, before delinquency or before the expiration of any
extension period. Such Borrower shall make due and timely payment or deposit of
all federal, state, and local taxes, assessments, or contributions required of
it by law, and will execute and deliver to Foothill, on demand, appropriate
certificates attesting to the payment thereof or deposit with respect thereto.
Such Borrower will make timely payment or deposit of all tax payments and
withholding taxes required of it by applicable laws, including those laws
concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal
income taxes, and will, upon request, furnish Foothill with proof satisfactory
to Foothill indicating that such Borrower has made such payments or deposits.
The foregoing to the contrary notwithstanding, no Borrower shall be required to
pay or discharge any such assessment or tax (other than: (x) payroll taxes, (y)
any taxes that are the subject of a federal tax Lien, and (z) any state or
municipal taxes (such as, without limitation, excise taxes) that in any way
relate to the provision of telecommunications services and give rise to Liens,
if any, that have priority over the prior perfected Liens of Foothill under the
laws of the States of California, Florida, Illinois, New York, Ohio, Texas, and
Washington) to the extent and so long as the validity thereof shall be the
subject of a Permitted Protest.
6.10 INSURANCE.
(a) At its expense, keep its Personal Property
Collateral insured against loss or damage by fire, theft, explosion, sprinklers,
and all other hazards and risks, and in such amounts, as are ordinarily insured
against by other owners in similar businesses. Such Borrower also shall maintain
business interruption, public liability, product liability, and property damage
insurance relating to such Borrower's ownership and use of its Personal Property
Collateral, as well as insurance against larceny, embezzlement, and criminal
misappropriation.
(b) At its expense, obtain and maintain (i) insurance
of the type necessary to insure the Improvements and Chattels (as such terms are
defined in the Mortgages), for the full replacement cost thereof, against any
loss by fire, lightning, windstorm, hail, explosion, aircraft, smoke damage,
vehicle damage, earthquakes, elevator collision, and other risks from time to
time included under "extended coverage" policies, in such amounts as Foothill
may require, but in any event in amounts sufficient to prevent such Borrower
from becoming a co-insurer under such policies, (ii) combined single limit
bodily injury and property damages insurance against any loss, liability, or
damages on, about, or relating to each parcel of Real Property Collateral, in an
amount of not less than $1,000,000; (iii) business rental insurance covering
annual receipts for a 12 month period for each parcel of Real Property
Collateral; and (iv) insurance for such other risks as Foothill may require.
Replacement costs, at Foothill's option, may be redetermined by an insurance
appraiser, satisfactory to Foothill, not more frequently than once every 12
months at such Borrower's cost.
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(c) [intentionally omitted]
(d) All such policies of insurance shall be in such
form, with such companies, and in such amounts as may be reasonably satisfactory
to Foothill. All insurance required herein shall be written by companies which
are authorized to do insurance business in the State of California. All hazard
insurance and such other insurance as Foothill shall specify, shall contain a
California Form 438BFU (NS) mortgagee endorsement, or an equivalent endorsement
satisfactory to Foothill, showing Foothill as sole loss payee thereof, and shall
contain a waiver of warranties. Every policy of insurance referred to in this
Section 6.10 shall contain an agreement by the insurer that it will not cancel
such policy except after 30 days prior written notice to Foothill and that any
loss payable thereunder shall be payable notwithstanding any act or negligence
of any Borrower or Foothill which might, absent such agreement, result in a
forfeiture of all or a part of such insurance payment and notwithstanding (i)
occupancy or use of the Real Property Collateral for purposes more hazardous
than permitted by the terms of such policy, (ii) any foreclosure or other action
or proceeding taken by Foothill pursuant to the Mortgages upon the happening of
an Event of Default, or (iii) any change in title or ownership of the Real
Property Collateral. The Borrowers shall deliver to Foothill certified copies of
such policies of insurance and evidence of the payment of all premiums therefor.
(e) Original policies or certificates thereof
satisfactory to Foothill evidencing such insurance shall be delivered to
Foothill at least 30 days prior to the expiration of the existing or preceding
policies. The Borrowers shall give Foothill prompt notice of any loss covered by
such insurance, and Foothill shall have the right to adjust any loss. Foothill
shall have the exclusive right to adjust all losses payable under any such
insurance policies without any liability to any Borrower whatsoever in respect
of such adjustments. Any monies received as payment for any loss under any
insurance policy including the insurance policies mentioned above, shall be paid
over to Foothill to be applied at the option of Foothill either to the
prepayment of the Obligations without premium, in such order or manner as
Foothill may elect, or shall be disbursed to the applicable Borrower under stage
payment terms satisfactory to Foothill for application to the cost of repairs,
replacements, or restorations. All repairs, replacements, or restorations shall
be effected with reasonable promptness and shall be of a value at least equal to
the value of the items or property destroyed prior to such damage or
destruction. Upon the occurrence of an Event of Default, Foothill shall have the
right to apply all prepaid premiums to the payment of the Obligations in such
order or form as Foothill shall determine.
(f) Each Borrower shall not take out separate
insurance concurrent in form or contributing in the event of loss with that
required to be maintained under this Section 6.10, unless Foothill is included
thereon as named insured with the loss payable to Foothill under a standard
California 438BFU (NS) Mortgagee endorsement, or its local equivalent. Such
Borrower immediately shall notify Foothill whenever such separate
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insurance is taken out, specifying the insurer thereunder and full particulars
as to the policies evidencing the same, and originals of such policies
immediately shall be provided to Foothill.
6.11 NO SETOFFS OR COUNTERCLAIMS. All payments hereunder and
under the other Loan Documents made by or on behalf of any Borrower shall be
made without setoff or counterclaim and free and clear of, and without deduction
or withholding for or on account of, any federal, state, or local taxes.
6.12 [INTENTIONALLY OMITTED].
6.13 LOCATION OF INVENTORY AND EQUIPMENT. Except as set forth
on schedule 5.4, keep the Inventory and Equipment of such Borrower only at the
locations identified on Schedule 6.13; provided, however, that the Borrowers may
amend Schedule 6.13 so long as such amendment occurs by written notice to
Foothill not less than 30 days prior to the date on which any such Inventory or
Equipment is moved to such new location, so long as such new location is within
the continental United States, and so long as, at the time of such written
notification, the applicable Borrower provides any financing statements or
fixture filings necessary to perfect and continue perfected Foothill's Liens on
such assets and also provides to Foothill a Collateral Access Agreement.
6.14 COMPLIANCE WITH LAWS. Comply with the requirements of all
applicable laws, rules, regulations, and orders of any governmental authority,
including the Fair Labor Standards Act and the Americans With Disabilities Act,
other than laws, rules, regulations, and orders the non-compliance with which,
individually or in the aggregate, would not have and could not reasonably be
expected to have a Material Adverse Change.
6.15 EMPLOYEE BENEFITS.
(a) Cause to be delivered to Foothill each of the following:
(i) promptly, and in any event within 10 Business Days after such Borrower or
any of its Subsidiaries knows or has reason to know that an ERISA Event has
occurred that reasonably could be expected to result in a Material Adverse
Change, a written statement of the chief financial officer of such Borrower
describing such ERISA Event and any action that is being taken with respect
thereto by such Borrower or any Subsidiary or ERISA Affiliate thereof, and any
action taken or threatened by the IRS, Department of Labor, or PBGC. Such
Borrower or such Subsidiary, as applicable, shall be deemed to know all facts
known by the administrator of any Benefit Plan of which it is the plan sponsor;
(ii) promptly, and in any event within 3 Business Days after the filing thereof
with the IRS, a copy of each funding waiver request filed with respect to any
Benefit Plan and all communications received by Borrower, any of its
Subsidiaries or, to the knowledge of Borrower, any ERISA Affiliate with respect
to such request; and (iii) promptly, and in any event within 3 Business Days
after receipt by such Borrower, any of its Subsidiaries or, to the knowledge of
such Borrower, any ERISA Affiliate thereof, of the
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PBGC's intention to terminate a Benefit Plan or to have a trustee appointed to
administer a Benefit Plan, copies of each such notice.
(b) Cause to be delivered to Foothill, upon Foothill's
request, each of the following: (i) a copy of each Benefit Plan of such Borrower
or any Subsidiary or ERISA Affiliate thereof (or, where any such plan is not in
writing, complete description thereof) (and if applicable, related trust
agreements or other funding instruments) and all amendments thereto, all written
interpretations thereof and written descriptions thereof that have been
distributed to employees or former employees of such Borrower or its
Subsidiaries; (ii) the most recent determination letter issued by the IRS with
respect to each Benefit Plan; (iii) for the three most recent plan years, annual
reports on Form 5500 Series required to be filed with any governmental agency
for each Benefit Plan; (iv) all actuarial reports prepared for the last three
plan years for each Benefit Plan; (v) a listing of all Multiemployer Plans, with
the aggregate amount of the most recent annual contributions required to be made
by such Borrower or any ERISA Affiliate thereof to each such plan and copies of
the collective bargaining agreements requiring such contributions; (vi) any
information that has been provided to such Borrower or any ERISA Affiliate
thereof regarding withdrawal liability under any Multiemployer Plan; and (vii)
the aggregate amount of the most recent annual payments made to former employees
of such Borrower or its Subsidiaries under any Retiree Health Plan.
6.16 LEASES. Pay when due all rents and other amounts payable
under any leases to which such Borrower is a party or by which such Borrower's
properties and assets are bound, unless such payments are the subject of a
Permitted Protest. To the extent that such Borrower fails timely to make payment
of such rents and other amounts payable when due under its leases, Foothill
shall be entitled, in its sole discretion, and without the necessity of
declaring an Event of Default, to reserve an amount equal to such unpaid amounts
against the Borrowing Base.
6.17 PERFORMANCE OF OBLIGATIONS TO CARRIERS. Make all payments
due from it to Carriers within 90 days of their due date except to the extent
the same are the subject of a Permitted Protest, and otherwise comply in all
material respects with such Borrower's non-monetary contractual obligations to
Carriers; provided that such Borrower shall not be in breach of this section by
virtue of claiming permitted credits and deductions, or by virtue of immaterial
breaches that would not permit Carriers to enforce default remedies. Should any
Borrower acquire knowledge that such Borrower is in breach of this section, or
should such Borrower receive a default notice from any Carrier, in each such
instance such Borrower immediately shall notify Foothill of same and all
relevant details pertaining thereto. If Foothill determines in good faith that
any Borrower is delinquent with respect to amounts owed to a Carrier, and that
such delinquency may have a material adverse effect upon the value or
collectibility of the Accounts (such as, by way of illustration but not by way
of limitation, where a Carrier threatens to contact customers of such Borrower
and give notices or assert demands that could confuse such customers or
interfere with collection of the affected
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<PAGE> 48
Accounts by such Borrower or Foothill), then Foothill in its sole discretion may
elect to pay to such Carrier amounts claimed by such Carrier to be due from such
Borrower, whereupon such amounts so paid by Foothill shall become Foothill
Expenses immediately due and payable from Borrower to Foothill. To the extent
Foothill takes any action under the immediately preceding sentence, Foothill
will endeavour in good faith to provide notice to the relevant Borrower of such
action, but any failure of Foothill to do so shall not result in any liability
to Foothill whatsoever unless and to the extent such failure arose from the
willful misconduct, gross negligence, or bad faith of Foothill.
6.18 LEC AGREEMENTS, CARRIER AGREEMENTS, AND OTHER AGREEMENTS.
From time to time, if and as requested by Foothill, each Borrower shall deliver
to Foothill copies of all Billing Service Agreements, Carrier Agreements, and/or
other material agreements in effect between such Borrower, on the one hand, and
a LEC, Clearinghouse, or Carrier, on the other hand; provided that if any such
agreement contains confidentiality restrictions, Foothill will agree to
reasonable restrictions upon the use or dissemination of such agreement by
Foothill.
6.19 BROKERAGE INDEMNITY. Pay any and all brokerage
commissions or finder's fees incurred in connection with or as a result of the
Borrowers' obtaining financing from Foothill under this Agreement, and indemnify
and hold Foothill harmless from and against any claim of a broker or finder for
the payment of any brokerage commission or finder's fee arising out of the
Borrowers' obtaining financing from Foothill under this Agreement.
6.20 CONTINGENCY PLAN. Prior to the 60th day following the
Effective Date, the Borrowers shall have prepared and shall provide to Foothill
a formalized written contingency plan for backup computer operations, in
reasonable detail and including cost estimates and feasibility analysis, which
plan shall be reasonably satisfactory to Foothill.
6.21 NEW CARRIER NON-OFFSET AND CONSENT TO ASSIGNMENT
AGREEMENTS. With respect to any Carrier Agreement entered into after the Closing
Date, cause the relevant Carrier to duly execute and deliver to Foothill a
Carrier Non-Offset and Consent to Assignment Agreement in respect thereof.
7. NEGATIVE COVENANTS.
Each Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, such Borrower will not do any of the following without Foothill's
prior written consent:
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7.1 INDEBTEDNESS. Create, incur, assume, permit, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, except (without duplication):
(a) Indebtedness evidenced by this Agreement;
(b) Indebtedness set forth in the latest financial
statements of Borrower submitted to Foothill on or prior to the Effective Date;
(c) Indebtedness evidenced by the Subordinated Notes;
(d) Indebtedness secured by Permitted Liens;
(e) any other unsecured Indebtedness in the aggregate
amount not to exceed $1,500,000 at any one time outstanding; and
(f) refinancings, renewals, or extensions of
Indebtedness permitted under clauses (b), (c), (d), and (e) of this Section 7.1
(and continuance or renewal of any Permitted Liens associated therewith) so long
as: (i) the terms and conditions of such refinancings, renewals, or extensions
do not materially impair the prospects of repayment of the Obligations by the
Borrowers, (ii) the net cash proceeds of such refinancings, renewals, or
extensions do not result in an increase in the aggregate principal amount of the
Indebtedness so refinanced, renewed, or extended, (iii) such refinancings,
renewals, refundings, or extensions do not result in a shortening of the average
weighted maturity of the Indebtedness so refinanced, renewed, or extended, and
(iv) to the extent that Indebtedness that is refinanced was subordinated in
right of payment to the Obligations, then the subordination terms and conditions
of the refinancing Indebtedness must be at least as favorable to Foothill as
those applicable to the refinanced Indebtedness.
7.2 LIENS. Create, incur, assume, or permit to exist, directly
or indirectly, any Lien on or with respect to any of the Collateral, except for
Permitted Liens (including Liens that are replacements of Permitted Liens to the
extent that the original Indebtedness is refinanced under Section 7.1(f) and so
long as the replacement Liens only encumber those assets or property that
secured the original Indebtedness).
7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES. Except for Permitted
Fundamental Changes, enter into any acquisition, merger, consolidation,
reorganization, or recapitalization, or reclassify its capital stock, or
liquidate, wind up, or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, assign, lease, transfer, or otherwise dispose of,
in one transaction or a series of transactions, all or any substantial part of
its business, property, or assets, whether now owned or hereafter acquired, or
acquire by purchase or otherwise all or substantially all of the properties,
assets, stock, or other evidence
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<PAGE> 50
of beneficial ownership of any Person (collectively, a "Fundamental Change
Transaction"). Without limiting the generality of the foregoing, no Borrower
shall cause, suffer, or permit any Non-Material Subsidiary to have any property
or assets with an aggregate book value in excess of $50,000 or to engage in any
material business activity. For the avoidance of doubt, the foregoing shall not
prevent any Borrower from solely executing and delivering a non-binding letter
of intent in respect of any Fundamental Change Transaction; provided, however,
that such Borrower shall not consummate any Fundamental Change Transaction
contemplated in any such letter of intent unless (i) such Borrower shall have
provided to Foothill all information, reports, and other items reasonably
requested by Foothill in respect of the contemplated Fundamental Change
Transaction, and (ii) Foothill, in its sole and absolute discretion, shall have
consented to such contemplated Fundamental Change Transaction(s) within 30 days
after the later of the date of Foothill's receipt of Borrower's written request
for such consent and the date of Foothill's receipt of all such information,
reports, and other items; provided further that any such contemplated
Fundamental Change Transaction that is not expressly consented to in writing by
Foothill within such period shall be deemed to have been rejected by Foothill.
7.4 EXTRAORDINARY TRANSACTIONS AND DISPOSAL OF ASSETS. Except
for Permitted Dispositions and except as may be permitted by Section 7.3, enter
into any transaction not in the ordinary and usual course of such Borrower's
business, including the sale, lease, or other disposition of, moving,
relocation, or transfer, whether by sale or otherwise, of any of such Borrower's
properties or assets.
7.5 CHANGE NAME. Change such Borrower's name, FEIN, corporate
structure (within the meaning of Section 9402(7) of the Code), or identity, or
add any new fictitious name, unless such Borrower shall have provided Foothill
not less than 30 days prior written notice of any such proposed change and
executed and delivered to Foothill such documents (including financing
statements, fixture filings, and Collateral Access Agreements) as Foothill may
reasonably request.
7.6 GUARANTEE. Guarantee or otherwise become in any way liable
with respect to the obligations of any third Person except by endorsement of
instruments or items of payment for deposit to the account of such Borrower or
which are transmitted or turned over to Foothill.
7.7 RESTRUCTURE. Make any change in such Borrower's corporate
structure, the principal nature of such Borrower's business operations, or the
date of its fiscal year.
7.8 PREPAYMENTS; AMENDMENTS TO DOCUMENTS. (a) Except in
connection with a refinancing permitted by Section 7.1(f), prepay, redeem,
retire, defease, purchase, or otherwise acquire any Indebtedness owing to any
third Person, other than the Obligations in accordance with this Agreement, and
(b) directly or indirectly, amend, modify,
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alter, increase, or change any of the terms or conditions of any agreement,
instrument, document, indenture, or other writing evidencing or concerning
Indebtedness permitted under Sections 7.1(b), (c), (d), (e), or (f).
7.9 CHANGE OF CONTROL. Cause, permit, or suffer, directly or
indirectly, any Change of Control.
7.10 CAPITAL EXPENDITURES. (a) The Borrowers shall not make
any capital expenditures in respect of switching Equipment and related
improvements in excess of $19,000,000 in the aggregate during the term of this
Agreement.
(b) The Borrowers shall not make any other capital
expenditures during any fiscal year in excess of: (i) with respect to fiscal
year 1997 of Midcom, $6,000,000, and (ii) with respect to any fiscal year of
Midcom after fiscal year 1997, 120% of the amount of capital expenditures
permitted under this Section 7.10 for the immediately preceding fiscal year of
Midcom.
7.11 CONSIGNMENTS. Consign any Inventory or sell any Inventory
on bill and hold, sale or return, sale on approval, or other conditional terms
of sale.
7.12 DISTRIBUTIONS. Except for the Permitted Stock Redemption,
make any distribution or declare or pay any dividends (in cash or other
property, other than capital stock) on, or purchase, acquire, redeem, or retire
any of such Borrower's capital stock, of any class, whether now or hereafter
outstanding.
7.13 ACCOUNTING METHODS. Modify or change its method of
accounting or enter into, modify, or terminate any agreement currently existing,
or at any time hereafter entered into with any third party accounting firm or
service bureau for the preparation or storage of such Borrower's accounting
records without said accounting firm or service bureau agreeing to provide
Foothill information regarding the Collateral or such Borrower's financial
condition. Each Borrower waives the right to assert a confidential relationship,
if any, it may have with any accounting firm or service bureau in connection
with any information requested by Foothill pursuant to or in accordance with
this Agreement, and agrees that Foothill may contact directly any such
accounting firm or service bureau in order to obtain such information.
7.14 INVESTMENTS. Directly or indirectly make, acquire, or
incur any liabilities (including contingent obligations) for or in connection
with (a) the acquisition of the securities of (whether debt or equity), or other
interests in, a Person, (b) loans, advances, capital contributions, equity
contributions, or transfers of property to a Person, or (c) the acquisition of
all or substantially all of the properties or assets of a Person. The foregoing
notwithstanding, after the Effective Date, any Borrower may make investments in
DTI,
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including equity investments and intercompany loans, advances, or accounts,
that do not exceed $500,000 in the aggregate for all Borrowers at any one time
outstanding.
7.15 TRANSACTIONS WITH AFFILIATES. Directly or indirectly
enter into or permit to exist any material transaction with any Affiliate of any
Borrower except for (a) Permitted Fundamental Changes, (b) the transactions
described on Schedule 7.15, and (c) transactions that are (i) in the ordinary
course of such Borrower's business, (ii) upon fair and reasonable terms, (iii)
are fully disclosed to Foothill, and (iv) are no less favorable to such Borrower
than would be obtained in an arm's length transaction with a non-Affiliate.
7.16 SUSPENSION. Suspend or go out of a substantial portion of
its business.
7.17 [INTENTIONALLY OMITTED].
7.18 USE OF PROCEEDS. Use the proceeds of the Advances made
hereunder for any purpose other than: (a) to pay transactional costs and
expenses incurred in connection with this Agreement; and (b) consistent with the
terms and conditions hereof, for its lawful and permitted corporate purposes.
7.19 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE; INVENTORY
AND EQUIPMENT WITH BAILEES. Without 30 days prior written notification to
Foothill, relocate its chief executive office to a new location, unless, at the
time of such written notification, such Borrower provides any financing
statements or fixture filings necessary to perfect and continue perfected
Foothill's Liens and also provides to Foothill a Collateral Access Agreement.
Except as set forth on Schedule 5.4, the Inventory and Equipment shall not at
any time now or hereafter be stored with a bailee, warehouseman, or similar
party without Foothill's prior written consent.
7.20 NO PROHIBITED TRANSACTIONS UNDER ERISA OR IRC. Directly
or indirectly:
(a) Engage, or permit any Subsidiary of such Borrower to
engage, in any prohibited transaction which is reasonably likely to result in a
civil penalty or excise tax described in Sections 406 of ERISA or 4975 of the
IRC for which a statutory or class exemption is not available or a private
exemption has not been previously obtained from the Department of Labor;
(b) permit to exist with respect to any Benefit Plan any
accumulated funding deficiency (as defined in Sections 302 of ERISA and 412 of
the IRC), whether or not waived;
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(c) fail, or permit any Subsidiary of such Borrower to fail,
to pay timely required contributions or annual installments due with respect to
any waived funding deficiency to any Benefit Plan;
(d) terminate, or permit any Subsidiary of such Borrower to
terminate, any Benefit Plan where such event would result in any liability of
such Borrower, any of its Subsidiaries or any ERISA Affiliate thereof under
Title IV of ERISA;
(e) fail, or permit any Subsidiary of such Borrower to fail,
to make any required contribution or payment to any Multiemployer Plan;
(f) fail, or permit any Subsidiary of such Borrower to fail,
to pay any required installment or any other payment required under Section 412
of the IRC on or before the due date for such installment or other payment;
(g) amend, or permit any Subsidiary of such Borrower to amend,
a Plan resulting in an increase in current liability for the plan year such that
either of such Borrower, any Subsidiary of Borrower or any ERISA Affiliate
thereof is required to provide security to such Plan under Section 401(a)(29) of
the IRC; or
(h) withdraw, or permit any Subsidiary of such Borrower to
withdraw, from any Multiemployer Plan where such withdrawal is reasonably likely
to result in any liability of any such entity under Title IV of ERISA;
which, individually or in the aggregate for all Borrowers, results in or
reasonably would be expected to result in a claim against or liability of any
one or more of the Borrowers, their Subsidiaries, or their ERISA Affiliate in
excess of $100,000.
7.21 CONTRACTS WITH CARRIERS, LECS, OR CLEARINGHOUSES. Enter
into any new contractual arrangements with Carriers, LECs, or Clearinghouses, or
materially amend, modify, or extend existing contractual arrangements with
Carriers, LECs, or Clearinghouses, if the effect would be to prohibit Foothill
from having a Lien on the rights of such Borrower thereunder, to prohibit
disclosure of the terms thereof to Foothill, to grant a Lien to the Carrier,
LEC, or Clearinghouse on any of the Collateral, to authorize any Carrier to
withhold delivery of call transaction record tapes other than after the
occurrence of a default under the relevant Carrier Agreement, or to authorize
any Carrier to contact or directly bill customers of such Borrower with respect
to services provided by such Carrier to such Borrower for resale to such
Borrower's customers.
7.22 FINANCIAL COVENANT. Maintain a consolidated Adjusted Net
Worth determined in accordance with GAAP of Midcom and its Subsidiaries of less
than the relevant amount set forth in the following table, measured on a fiscal
quarter-end basis:
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<PAGE> 54
<TABLE>
<CAPTION>
==========================================================================================
Period Ending Minimum Consolidated Adjusted Net Worth
- ------------------------------------------------------------------------------------------
<S> <C>
6/30/97 ($15,852,000)
- ------------------------------------------------------------------------------------------
9/30/97 ($32,712,000)
- ------------------------------------------------------------------------------------------
12/31/97 ($45,686,000)
- ------------------------------------------------------------------------------------------
03/31/98 ($52,023,000)
- ------------------------------------------------------------------------------------------
06/30/98 ($55,557,000)
- ------------------------------------------------------------------------------------------
09/30/98 ($56,111,000)
- ------------------------------------------------------------------------------------------
12/31/98 ($54,804,000)
- ------------------------------------------------------------------------------------------
03/31/99 ($51,474,000)
- ------------------------------------------------------------------------------------------
06/30/99 ($45,960,000)
- ------------------------------------------------------------------------------------------
09/30/99 ($38,406,0000
- ------------------------------------------------------------------------------------------
12/31/99 ($29,000,0000
==========================================================================================
</TABLE>
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an
event of default (each, an "Event of Default") under this Agreement:
8.1 If any one or more of the Borrowers fail to pay when due
and payable or when declared due and payable, any portion of the Obligations
(whether of principal, interest (including any interest which, but for the
provisions of the Bankruptcy Code, would have accrued on such amounts), fees and
charges due Foothill, reimbursement of Foothill Expenses, or other amounts
constituting Obligations);
8.2 If any one or more of the Borrowers fail or neglect to
perform, keep, or observe any term, provision, condition, covenant, or agreement
contained in this Agreement, in any of the Loan Documents, or in any other
present or future agreement between any one or more of the Borrowers and
Foothill;
8.3 If there is a Material Adverse Change;
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8.4 If any material portion of any Borrower's properties or
assets is attached, seized, subjected to a writ or distress warrant, or is
levied upon, or comes into the possession of any third Person;
8.5 If an Insolvency Proceeding is commenced by any Borrower;
8.6 If an Insolvency Proceeding is commenced against any
Borrower and any of the following events occur: (a) such Borrower consents to
the institution of the Insolvency Proceeding against it; (b) the petition
commencing the Insolvency Proceeding is not timely controverted; (c) the
petition commencing the Insolvency Proceeding is not dismissed within 60 days of
the date of the filing thereof; provided, however, that, during the pendency of
such period, Foothill shall be relieved of its obligation to extend credit
hereunder; (d) an interim trustee is appointed to take possession of all or a
substantial portion of the properties or assets of, or to operate all or any
substantial portion of the business of, such Borrower; or (e) an order for
relief shall have been issued or entered therein;
8.7 If any Borrower is enjoined, restrained, or in any way
prevented by court order from continuing to conduct all or any material part of
its business affairs;
8.8 If a notice of Lien, levy, or assessment is filed of
record with respect to any of any Borrower's properties or assets by the United
States Government, or any department, agency, or instrumentality thereof, or by
any state, county, municipal, or governmental agency, or if any taxes or debts
owing at any time hereafter to any one or more of such entities becomes a Lien,
whether choate or otherwise, upon any of any Borrower's properties or assets and
the same is not paid on the payment date thereof;
8.9 If a judgment or other claim becomes a Lien upon any
material portion of any Borrower's properties or assets;
8.10 (a) If there is a default in any material agreement with
Key Bank, any material agreement with Comdisco, or the Subordinated Notes
Indenture or any Subordinated Note, and such default (i) occurs at the final
maturity of the obligations thereunder, or (ii) results in a right by the third
Person party thereto or beneficiary thereof, irrespective of whether exercised,
to accelerate the maturity of the applicable Borrower's obligations thereunder;
or
(b) If there is a default in any Carrier Agreement
with a Material Carrier, and such default (i) occurs at the final maturity of
the obligations thereunder, (ii) results in a right by the Carrier party
thereto, irrespective of whether exercised, to accelerate the maturity of the
applicable Borrower's obligations thereunder, or (iii) results in the
termination by the applicable Carrier of such agreement; or
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<PAGE> 56
(c) If there is a default (other than a default that,
individually or in the aggregate with all other defaults, could not reasonably
be expected to result in a Material Adverse Change) in any other material
agreement to which any Borrower is a party with one or more third Persons, and
such default (i) occurs at the final maturity of the obligations thereunder, or
(i) results in a right by such third Persons, irrespective of whether exercised,
to accelerate the maturity of such Borrower's obligations thereunder;
8.11 If any Borrower makes any payment on account of
Indebtedness that has been contractually subordinated in right of payment to the
payment of the Obligations (including Indebtedness evidenced by the Subordinated
Notes), except to the extent such payment is permitted by the terms of the
subordination provisions applicable to such Indebtedness;
8.12 If there occurs a "Change of Control" under the
Subordinated Notes Indenture, as amended or modified from time to time;
8.13 If any material misstatement or misrepresentation exists
now or hereafter in any warranty, representation, statement, or report made to
Foothill by any Borrower or any officer, employee (within the scope of his
employment), agent (within the scope of his agency), or director of any
Borrower, or if any such warranty or representation is withdrawn; or
8.14 If the obligation of any guarantor or other third Person
under any Loan Document is limited or terminated by operation of law or by the
guarantor or other third Person thereunder, or any such guarantor or other third
Person becomes the subject of an Insolvency Proceeding.
9. FOOTHILL'S RIGHTS AND REMEDIES.
9.1 RIGHTS AND REMEDIES. Upon the occurrence, and during the
continuation, of an Event of Default Foothill may, at its election, without
notice of its election and without demand, do any one or more of the following,
all of which are authorized by each Borrower:
(a) Declare all Obligations, whether evidenced by
this Agreement, by any of the other Loan Documents, or otherwise, immediately
due and payable;
(b) Cease advancing money or extending credit to or
for the benefit of any one or more of the Borrowers under this Agreement, under
any of the Loan Documents, or under any other agreement between any Borrower and
Foothill;
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(c) Terminate this Agreement and any of the other
Loan Documents as to any future liability or obligation of Foothill, but without
affecting Foothill's rights and Liens on the Personal Property Collateral or any
Real Property and without affecting the Obligations;
(d) Settle or adjust disputes and claims with respect
to Accounts directly with the relevant Account Debtors for amounts and upon
terms which Foothill considers advisable, and in such cases, Foothill will
credit the Borrowers' Loan Account with only the net amounts received by
Foothill in payment of such disputed Accounts after deducting all Foothill
Expenses incurred or expended in connection therewith;
(e) Cause each Borrower to hold all returned
Inventory in trust for Foothill, segregate all returned Inventory from all other
property of any Borrower or in any Borrower's possession and conspicuously label
said returned Inventory as the property of Foothill;
(f) Without notice to or demand upon any Borrower or
any guarantor, make such payments and do such acts as Foothill considers
necessary or reasonable to protect its Liens on the Collateral. Each Borrower
agrees to assemble the Personal Property Collateral if Foothill so requires, and
to make the Personal Property Collateral available to Foothill as Foothill may
designate. Each Borrower authorizes Foothill to enter the premises where the
Personal Property Collateral is located, to take and maintain possession of the
Personal Property Collateral, or any part of it, and to pay, purchase, contest,
or compromise any Lien that in Foothill's determination appears to conflict with
its Liens and to pay all expenses incurred in connection therewith. With respect
to any of each Borrower's owned or leased premises, such Borrower hereby grants
Foothill a license to enter into possession of such premises and to occupy the
same, without charge, for up to 120 days in order to exercise any of Foothill's
rights or remedies provided herein, at law, in equity, or otherwise;
(g) Without notice to any Borrower (such notice being
expressly waived), and without constituting a retention of any collateral in
satisfaction of an obligation (within the meaning of Section 9505 of the Code),
set off and apply to the Obligations any and all (i) balances and deposits of
any Borrower held by Foothill (including any amounts received in the Lockbox
Accounts), or (ii) indebtedness at any time owing to or for the credit or the
account of any Borrower held by Foothill;
(h) Hold, as cash collateral, any and all balances
and deposits of any Borrower held by Foothill, and any amounts received in the
Lockbox Accounts, to secure the full and final repayment of all of the
Obligations;
(i) Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell (in the manner provided
for herein) the Personal Property
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Collateral. Foothill is hereby granted a license or other right to use, without
charge, any Borrower's labels, patents, copyrights, rights of use of any name,
trade secrets, trade names, trademarks, service marks, and advertising matter,
or any property of a similar nature, as it pertains to the Personal Property
Collateral, in completing production of, advertising for sale, and selling any
Personal Property Collateral and any Borrower's rights under all licenses and
all franchise agreements shall inure to Foothill's benefit;
(j) Require each Borrower to deliver to Foothill a
complete list of all end-user customers of such Borrower, with respect to all
Accounts of such Borrower including LEC Accounts and Direct Accounts, or any
reasonably designated portion thereof, which such Borrower shall deliver to
Foothill promptly upon demand by Foothill;
(k) Sell the Personal Property Collateral at either a
public or private sale, or both, by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such places (including
any premises of any Borrower) as Foothill determines is commercially reasonable.
It is not necessary that the Personal Property Collateral be present at any such
sale;
(l) Foothill shall give notice of the disposition of
the Personal Property Collateral as follows:
(1) Foothill shall give the relevant
Borrower and each holder of a Lien on the Personal Property Collateral who has
filed with Foothill a written request for notice, a notice in writing of the
time and place of public sale, or, if the sale is a private sale or some other
disposition other than a public sale is to be made of the Personal Property
Collateral, then the time on or after which the private sale or other
disposition is to be made;
(2) The notice shall be personally delivered
or mailed, postage prepaid, to the relevant Borrower as provided in Section 12,
at least 5 days before the date fixed for the sale, or at least 5 days before
the date on or after which the private sale or other disposition is to be made;
no notice needs to be given prior to the disposition of any portion of the
Personal Property Collateral that is perishable or threatens to decline speedily
in value or that is of a type customarily sold on a recognized market. Notice to
Persons other than the relevant Borrower claiming an interest in the Personal
Property Collateral shall be sent to such addresses as they have furnished to
Foothill;
(3) If the sale is to be a public sale,
Foothill also shall give notice of the time and place by publishing a notice one
time at least 5 days before the date of the sale in a newspaper of general
circulation in the county in which the sale is to be held;
(m) Foothill may credit bid and purchase at any
public sale; and
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(n) Any deficiency that exists after disposition of
the Personal Property Collateral as provided above will be paid immediately by
the Borrowers. Any excess will be returned, without interest and subject to the
rights of third Persons, by Foothill to the relevant Borrower.
9.2 REMEDIES CUMULATIVE. Foothill's rights and remedies under
this Agreement, the Loan Documents, and all other agreements shall be
cumulative. Foothill shall have all other rights and remedies not inconsistent
herewith as provided under the Code, by law, or in equity. No exercise by
Foothill of one right or remedy shall be deemed an election, and no waiver by
Foothill of any Event of Default shall be deemed a continuing waiver. No delay
by Foothill shall constitute a waiver, election, or acquiescence by it.
10. TAXES AND EXPENSES.
If any Borrower fails to pay any monies (whether taxes, assessments,
insurance premiums, or, in the case of leased properties or assets, rents or
other amounts payable under such leases or related agreements) due to third
Persons (including Comdisco or Key Bank), or fails to make any deposits or
furnish any required proof of payment or deposit, all as required under the
terms of this Agreement, then, to the extent that Foothill determines that such
failure by such Borrower could result in a Material Adverse Change, in its sole
discretion and without prior notice to any Borrower, Foothill may do any or all
of the following: (a) make payment of the same or any part thereof; (b) set up
such reserves in the Loan Account as Foothill deems necessary to protect
Foothill from the exposure created by such failure; or (c) obtain and maintain
insurance policies of the type described in Section 6.10, and take any action
with respect to such policies as Foothill deems prudent. Any such amounts paid
by Foothill, and any other amounts paid by Foothill to Comdisco or Key Bank
under the Intercreditor Agreement, shall constitute Foothill Expenses. Any such
payments made by Foothill shall not constitute an agreement by Foothill to make
similar payments in the future or a waiver by Foothill of any Event of Default
under this Agreement. Foothill need not inquire as to, or contest the validity
of, any such expense, tax, or Lien and the receipt of the usual official notice
for the payment thereof shall be conclusive evidence that the same was validly
due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 DEMAND; PROTEST; ETC. Each Borrower waives demand,
protest, notice of protest, notice of default or dishonor, notice of payment and
nonpayment, notice of any default, nonpayment at maturity, release, compromise,
settlement, extension, or renewal of accounts, documents, instruments, chattel
paper, and guarantees at any time held by Foothill on which any Borrower may in
any way be liable.
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11.2 FOOTHILL'S LIABILITY FOR COLLATERAL. So long as Foothill
complies with its obligations, if any, under Section 9207 of the Code, Foothill
shall not in any way or manner be liable or responsible for: (a) the safekeeping
of the Collateral; (b) any loss or damage thereto occurring or arising in any
manner or fashion from any cause; (c) any diminution in the value thereof; or
(d) any act or default of any carrier, warehouseman, bailee, forwarding agency,
or other Person. All risk of loss, damage, or destruction of the Collateral
shall be borne by the Borrowers.
11.3 INDEMNIFICATION. The Borrowers shall pay, indemnify,
defend, and hold Foothill, each Participant, and each of their respective
officers, directors, employees, counsel, agents, and attorneys-in-fact (each, an
"Indemnified Person") harmless (to the fullest extent permitted by law) from and
against any and all claims, demands, suits, actions, investigations,
proceedings, and damages, and all reasonable attorneys fees and disbursements
and other costs and expenses actually incurred in connection therewith (as and
when they are incurred and irrespective of whether suit is brought), at any time
asserted against, imposed upon, or incurred by any of them in connection with or
as a result of or related to the execution, delivery, enforcement, performance,
and administration of this Agreement and any other Loan Documents or the
transactions contemplated herein, and with respect to any investigation,
litigation, or proceeding related to this Agreement, any other Loan Document, or
the use of the proceeds of the credit provided hereunder (irrespective of
whether any Indemnified Person is a party thereto), or any act, omission, event
or circumstance in any manner related thereto (all the foregoing, collectively,
the "Indemnified Liabilities"). The Borrowers shall have no obligation to any
Indemnified Person under this Section 11.3 with respect to any Indemnified
Liability that a court of competent jurisdiction finally determines to have
resulted from the gross negligence or willful misconduct of such Indemnified
Person. This provision shall survive the termination of this Agreement and the
repayment of the Obligations.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other Loan Document shall
be in writing and (except for financial statements and other informational
documents which may be sent by first-class mail, postage prepaid) shall be
personally delivered or sent by registered or certified mail, postage prepaid,
return receipt requested, or by prepaid telex, overnight courier, telefacsimile,
or telegram (with messenger delivery specified) to a Borrower or to Foothill, as
the case may be, at its address set forth below:
IF TO ANY BORROWER: C/O MIDCOM COMMUNICATIONS INC.
1111 Third Avenue, Suite 1600
Seattle, Washington 98101
Attn: Chief Financial Officer
Fax No. 206.628.8295
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WITH COPIES TO: MIDCOM COMMUNICATIONS INC.
1111 Third Avenue, Suite 1600
Seattle, Washington 98101
Attn: General Counsel
Fax No. 206.628.8295
AND HELLER EHRMAN WHITE & MCAULIFFE
6100 Columbia Center
701 5th Avenue
Seattle, Washington 98104
Attn: Thomas S. Hodge, Esq.
Fax No. 206.447.0849
IF TO FOOTHILL: FOOTHILL CAPITAL CORPORATION
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attn: Business Finance Division Manager
Fax No. 310.575.3435
WITH COPIES TO: BROBECK, PHLEGER & HARRISON LLP
550 South Hope St., Suite 2100
Los Angeles, California 90071
Attn: John Francis Hilson, Esq.
Fax No. 213.239.1324
The parties hereto may change the address at which they are to
receive notices hereunder, by notice in writing in the foregoing manner given to
the other. All notices or demands sent in accordance with this Section 12, other
than notices by Foothill in connection with Sections 9504 or 9505 of the Code,
shall be deemed received on the earlier of the date of actual receipt or 3 days
after the deposit thereof in the mail. Each Borrower acknowledges and agrees
that notices sent by Foothill in connection with Sections 9504 or 9505 of the
Code shall be deemed sent when personally delivered, deposited in the mail or
transmitted by telefacsimile or other similar method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(UNLESS AND TO THE EXTENT EXPRESSLY PROVIDED TO THE CONTRARY IN AN ANOTHER LOAN
DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF,
AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL
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MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE
DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF CALIFORNIA. THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING
IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED
AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA OR, AT THE SOLE OPTION OF FOOTHILL, IN ANY OTHER
COURT IN WHICH FOOTHILL SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH
HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH PARTY
HERETO WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY
HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE
EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13. EACH
BORROWER AND FOOTHILL HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN
DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. EACH BORROWER AND FOOTHILL REPRESENT THAT EACH HAS REVIEWED
THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF
THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWER'S DOCUMENTS.
All documents, schedules, invoices, agings, or other papers
delivered to Foothill by any Borrower may be destroyed or otherwise disposed of
by Foothill four (4) months after they are delivered to or received by Foothill,
unless such Borrower requests, in writing, the return of said documents,
schedules, or other papers and makes arrangements, at such Borrower's expense,
for their return.
15. GENERAL PROVISIONS.
15.1 EFFECTIVENESS. This Agreement shall be binding and deemed
effective when executed by each of the Borrowers and Foothill.
15.2 SUCCESSORS AND ASSIGNS. This Agreement shall bind and
inure to the benefit of the respective successors and assigns of each of the
parties; provided, however, that no Borrower may assign this Agreement or any
rights or duties hereunder without Foothill's
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prior written consent and any prohibited assignment shall be absolutely void. No
consent to an assignment by Foothill shall release any Borrower from its
Obligations. Foothill may assign this Agreement and its rights and duties
hereunder and no consent or approval by any Borrower is required in connection
with any such assignment. Foothill reserves the right to sell, assign, transfer,
negotiate, or grant participations in all or any part of, or any interest in
Foothill's rights and benefits hereunder and the other Loan Document, in each
case, without the consent of any Borrower; provided, however, that the prior
written consent of Borrower shall be required in connection with any sale of any
such participating interests by Foothill to any Person other than a Qualified
Participant. In connection with any such assignment or participation, Foothill
may disclose all documents and information which Foothill now or hereafter may
have relating to any Borrower or any Borrower's business. To the extent that
Foothill assigns its rights and obligations hereunder to a third Person,
Foothill thereafter shall be released from such assigned obligations to Borrower
and such assignment shall effect a novation between Borrower and such third
Person.
15.3 PARTICIPATION AGREEMENT ACKNOWLEDGMENT. By entering into
a participation agreement with Foothill in respect hereof, each Participant
shall be deemed to have agreed that (a) the Borrowers are third party
beneficiaries of the commitment of such Participant to participate in Advances
by Foothill, and (b) if such Participant fails to fund its portion of a
requested Advance, then, as to the amount participated, the Borrowers will have
the same rights with respect to such Participant as the Borrowers would have had
with respect to Foothill in the absence of such participation. Foothill hereby
further agrees to use reasonable best efforts to cause any such participation
agreement to contain an express acknowledgment of the immediately preceding
sentence.
15.4 SECTION HEADINGS. Headings and numbers have been set
forth herein for convenience only. Unless the contrary is compelled by the
context, everything contained in each section applies equally to this entire
Agreement.
15.5 INTERPRETATION. Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved against Foothill
or any Borrower, whether under any rule of construction or otherwise. On the
contrary, this Agreement has been reviewed by all parties and shall be construed
and interpreted according to the ordinary meaning of the words used so as to
fairly accomplish the purposes and intentions of all parties hereto.
15.6 SEVERABILITY OF PROVISIONS. Each provision of this
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any specific provision.
15.7 AMENDMENTS IN WRITING. This Agreement can only be amended
by a writing signed by both Foothill, on the one hand, and all of the Borrowers,
on the other hand.
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15.8 COUNTERPARTS; TELEFACSIMILE EXECUTION. This Agreement may
be executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one and
the same Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of a manually executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver a manually executed
counterpart of this Agreement but the failure to deliver a manually executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement.
15.9 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the
incurrence or payment of the Obligations by any Borrower or any guarantor of the
Obligations or the transfer by either or both of such parties to Foothill of any
property of either or both of such parties should for any reason subsequently be
declared to be void or voidable under any state or federal law relating to
creditors' rights, including provisions of the Bankruptcy Code relating to
fraudulent conveyances, preferences, and other voidable or recoverable payments
of money or transfers of property (collectively, a "Voidable Transfer"), and if
Foothill is required to repay or restore, in whole or in part, any such Voidable
Transfer, or elects to do so upon the reasonable advice of its counsel, then, as
to any such Voidable Transfer, or the amount thereof that Foothill is required
or elects to repay or restore, and as to all reasonable costs, expenses, and
attorneys fees of Foothill related thereto, the liability of the Borrowers or
such guarantor automatically shall be revived, reinstated, and restored and
shall exist as though such Voidable Transfer had never been made.
15.10 INTEGRATION. This Agreement, together with the other
Loan Documents, reflects the entire understanding of the parties with respect to
the transactions contemplated hereby and shall not be contradicted or qualified
by any other agreement, oral or written, before the date hereof.
15.11 QUALIFICATION UNDER SUBORDINATED NOTES INDENTURE. The
Obligations constitute "Senior Indebtedness" and "Designated Senior
Indebtedness" under the Subordinated Notes Indenture.
15.12 CONFIDENTIALITY. Foothill agrees to treat all material,
non-public information regarding any Borrower and its operations, assets, and
existing and contemplated business plans in a confidential manner; it being
understood and agreed by each Borrower that in any event Foothill may make
disclosures (a) to counsel for and other advisors, accountants, and auditors to
Foothill, (b) reasonably required by any bona fide potential or actual assignee,
transferee, or participant in connection with any contemplated or actual
assignment or transfer by Foothill of an interest herein or any participation
interest in Foothill's rights hereunder, (c) of information that has become
public by disclosures made by Persons other than Foothill, or (d) as required or
requested by any court, governmental or administrative agency, pursuant
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to any subpoena or other legal process, or by any law, statute, regulation, or
court order; provided, however, that, unless prohibited by applicable law,
statute, regulation, or court order, Foothill shall notify the Borrowers of any
request by any court, governmental or administrative agency, or pursuant to any
subpoena or other legal process for disclosure of any such non-public material
information concurrent with, or where practicable, prior to the disclosure
thereof.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in Los Angeles, California.
MIDCOM COMMUNICATIONS INC.,
a Washington corporation
By_________________________
Title:_______________________
ADVAL, INC.,
an Oregon corporation
By_________________________
Title:_______________________
ADVAL DATA CORPORATION,
an Oregon corporation
By_________________________
Title:_______________________
ADVANCED NETWORK DESIGN,
a California corporation
By_________________________
Title:_______________________
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CEL-TECH INTERNATIONAL CORP.,
a Washington corporation
By_________________________
Title:_______________________
PACNET INC.,
a Washington corporation
By_________________________
Title:_______________________
FOOTHILL CAPITAL CORPORATION,
a California corporation
By_________________________
Title:_______________________
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[GRAPHIC OMITTED]
LOAN AND SECURITY AGREEMENT
BY AND AMONG
MIDCOM COMMUNICATIONS INC.,
ADVAL, INC.,
ADVAL DATA CORPORATION,
ADVANCED NETWORK DESIGN,
CEL-TECH INTERNATIONAL CORP.,
AND
PACNET INC.
AND
FOOTHILL CAPITAL CORPORATION
DATED AS OF FEBRUARY 27, 1997
<PAGE> 69
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
1. DEFINITIONS AND CONSTRUCTION.................................................................................. 1
1.1 Definitions.......................................................................................... 1
1.2 Accounting Terms..................................................................................... 22
1.3 Code................................................................................................. 22
1.4 Construction......................................................................................... 22
1.5 Schedules and Exhibits............................................................................... 22
2. LOAN AND TERMS OF PAYMENT..................................................................................... 23
2.1 Revolving Advances................................................................................... 23
2.2 Overadvances......................................................................................... 24
2.3 Interest: Rates, Payments, and Calculations......................................................... 24
2.4 Reporting and Collection of Accounts................................................................. 25
2.5 Crediting Payments; Application of Collections....................................................... 26
2.6 Borrowers' Designated Account........................................................................ 26
2.7 Maintenance of Loan Account; Statements of Obligations............................................... 27
2.8 Fees................................................................................................. 27
3. CONDITIONS; TERM OF AGREEMENT................................................................................. 28
3.1 Conditions Precedent to the Initial Advance.......................................................... 28
3.2 Conditions Precedent to all Advances................................................................. 32
3.3 Condition Subsequent................................................................................. 32
3.4 Term and Termination................................................................................. 32
3.5 Effect of Termination................................................................................ 33
3.6 Early Termination by the Borrowers................................................................... 33
3.7 Termination Upon Event of Default.................................................................... 34
4. CREATION OF LIENS............................................................................................. 34
4.1 Grant of Liens....................................................................................... 34
4.2 Negotiable Collateral................................................................................ 34
4.3 Collection of Accounts, General Intangibles, and Negotiable Collateral............................... 34
4.4 Delivery of Additional Documentation Required........................................................ 35
4.5 Power of Attorney.................................................................................... 35
4.6 Right to Inspect..................................................................................... 36
4.7 Control Agreements................................................................................... 36
5. REPRESENTATIONS AND WARRANTIES................................................................................ 37
5.1 No Liens............................................................................................. 37
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
5.2 Eligible Accounts.................................................................................... 37
5.3 Equipment............................................................................................ 37
5.4 Location of Inventory and Equipment.................................................................. 37
5.5 Inventory Records.................................................................................... 37
5.6 Location of Chief Executive Office; FEIN............................................................. 38
5.7 Due Organization and Qualification; No Subsidiaries Except as
Disclosed............................................................................................ 38
5.8 Due Authorization; No Conflict....................................................................... 38
5.9 Litigation........................................................................................... 39
5.10 No Material Adverse Change. ......................................................................... 39
5.11 Solvency............................................................................................. 40
5.12 Employee Benefits.................................................................................... 40
5.13 Environmental Condition.............................................................................. 40
5.14 Material Carriers.................................................................................... 40
5.15 Reliance by Foothill; Cumulative..................................................................... 41
6. AFFIRMATIVE COVENANTS......................................................................................... 41
6.1 Accounting System.................................................................................... 41
6.2 Collateral Reporting................................................................................. 41
6.3 Financial Statements, Reports, Certificates.......................................................... 42
6.4 Tax Returns.......................................................................................... 43
6.5 Guarantor Reports.................................................................................... 43
6.6 Returns.............................................................................................. 43
6.7 Title to Equipment................................................................................... 43
6.8 Maintenance of Equipment............................................................................. 43
6.9 Taxes................................................................................................ 44
6.10 Insurance............................................................................................ 44
6.11 No Setoffs or Counterclaims.......................................................................... 46
6.12 [intentionally omitted].............................................................................. 46
6.13 Location of Inventory and Equipment.................................................................. 46
6.14 Compliance with Laws................................................................................. 46
6.15 Employee Benefits.................................................................................... 46
6.16 Leases............................................................................................... 47
6.17 Performance of Obligations to Carriers............................................................... 47
6.18 LEC Agreements, Carrier Agreements, and Other Agreements............................................. 48
6.19 Brokerage Indemnity.................................................................................. 48
6.20 Contingency Plan..................................................................................... 48
6.21 New Carrier Non-Offset and Consent to Assignment Agreements.......................................... 48
7. NEGATIVE COVENANTS............................................................................................ 48
7.1 Indebtedness......................................................................................... 49
7.2 Liens................................................................................................ 49
7.3 Restrictions on Fundamental Changes.................................................................. 49
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
7.4 Extraordinary Transactions and Disposal of Assets.................................................... 50
7.5 Change Name.......................................................................................... 50
7.6 Guarantee............................................................................................ 50
7.7 Restructure.......................................................................................... 50
7.8 Prepayments; Amendments to Documents................................................................. 50
7.9 Change of Control.................................................................................... 51
7.10 Capital Expenditures................................................................................. 51
7.11 Consignments......................................................................................... 51
7.12 Distributions........................................................................................ 51
7.13 Accounting Methods................................................................................... 51
7.14 Investments.......................................................................................... 51
7.15 Transactions with Affiliates......................................................................... 52
7.16 Suspension........................................................................................... 52
7.17 [Intentionally Omitted].............................................................................. 52
7.18 Use of Proceeds...................................................................................... 52
7.19 Change in Location of Chief Executive Office; Inventory and Equipment
with Bailees......................................................................................... 52
7.20 No Prohibited Transactions Under ERISA or IRC........................................................ 52
7.21 Contracts with Carriers, LECs, or Clearinghouses..................................................... 53
7.22 Financial Covenant................................................................................... 53
8. EVENTS OF DEFAULT............................................................................................. 54
9. FOOTHILL'S RIGHTS AND REMEDIES................................................................................ 56
9.1 Rights and Remedies.................................................................................. 56
9.2 Remedies Cumulative.................................................................................. 59
10. TAXES AND EXPENSES............................................................................................ 59
11. WAIVERS; INDEMNIFICATION...................................................................................... 59
11.1 Demand; Protest; etc................................................................................. 59
11.2 Foothill's Liability for Collateral.................................................................. 59
11.3 Indemnification...................................................................................... 60
12. NOTICES....................................................................................................... 60
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.................................................................... 61
14. DESTRUCTION OF BORROWER'S DOCUMENTS........................................................................... 62
15. GENERAL PROVISIONS............................................................................................ 62
15.1 Effectiveness........................................................................................ 62
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
15.2 Successors and Assigns............................................................................... 62
15.3 Participation Agreement Acknowledgment............................................................... 63
15.4 Section Headings..................................................................................... 63
15.5 Interpretation....................................................................................... 63
15.6 Severability of Provisions........................................................................... 63
15.7 Amendments in Writing................................................................................ 63
15.8 Counterparts; Telefacsimile Execution................................................................ 64
15.9 Revival and Reinstatement of Obligations............................................................. 64
15.10 Integration.......................................................................................... 64
15.11 Qualification under Subordinated Notes Indenture..................................................... 64
15.12 Confidentiality...................................................................................... 64
</TABLE>
SCHEDULES
Schedule M-1 Material Carriers
Schedule N-1 Non-Material Subsidiaries
Schedule P-1 Permitted Liens
Schedule R-1 Real Property
Schedule 3.1(u) Collateral Access Agreements Required on or before Closing
Date
Schedule 5.3 Certain Equipment
Schedule 5.4 Bailees and Warehousemen
Schedule 5.7 Subsidiaries
Schedule 5.9 Litigation
Schedule 5.12 ERISA Benefit Plans
Schedule 6.13 Location of Inventory and Equipment
Schedule 7.15 Transactions with Affiliates
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PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of February 27, 1997, made by the
Persons listed on the signature pages hereof (each a "Pledgor" and collectively
the "Pledgors"; provided that "Pledgor" shall be deemed to include any other
Person that executes and delivers an amendment in the form of Exhibit A hereto
agreeing to be bound by the terms and provisions hereof), to Foothill Capital
Corporation ("Foothill").
W I T N E S S E T H :
WHEREAS, Midcom Communications Inc., Adval, Inc., Adval Data
Corporation, Advanced Network Design, Cel-Tech International Corp., and Pacnet
Inc. (hereinafter referred to, collectively, as "Borrowers") and Foothill have
entered into that certain Loan and Security Agreement, dated as of even date
herewith (as it may be amended, supplemented or otherwise modified from time to
time, the "Loan Agreement"; capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed thereto in the Loan Agreement);
and
WHEREAS, each Pledgor is the legal and beneficial owner of the
shares of capital stock or other equity securities described in Schedule I
hereto (or any addenda thereto) (collectively, the "Pledged Shares"); and
WHEREAS, the Pledged Shares as of the date hereof represent
all of the capital stock or other equity securities of each direct or indirect
Subsidiary of each Pledgor (each, an "Issuer"); and
WHEREAS, it is a condition precedent under the Loan Agreement
to the making of the Advances that the Pledgors shall have made the pledge
contemplated by this Agreement;
NOW, THEREFORE, in consideration of the premises and to induce
Foothill to make the Advances, each Pledgor hereby agrees with Foothill as
follows:
SECTION l. Pledge. Each Pledgor hereby pledges to Foothill,
and grants to Foothill a security interest in, all of such Pledgor's right,
title, and interest in and to the following (the "Pledged Collateral"):
<PAGE> 2
(i) all of the Pledged Shares;
(ii) all additional shares of stock or other
securities of any Issuer of the Pledged Shares from time to
time acquired by such Pledgor in any manner (any such shares
being "Additional Shares");
(iii) the certificates (if any) representing the
shares referred to in clauses (i) and (ii) above; and
(iv) all dividends, cash, instruments and other
property or proceeds, from time to time received, receivable
or otherwise distributed in respect of or in exchange for any
or all of the Pledged Shares and/or Additional Shares.
SECTION 2. Security for Obligations. This Agreement secures,
and the Pledged Collateral is security for, the full and prompt payment by
Borrowers when due (whether at stated maturity, by acceleration or otherwise)
of, and the performance by Borrowers of, the Obligations, whether now or
hereafter existing and whether for principal, interest, fees, expenses or
otherwise, and the performance by each Pledgor of its obligations hereunder
(collectively, the "Secured Obligations").
SECTION 3. Delivery of Pledged Collateral. (a) All
certificates or instruments representing or evidencing the Pledged Collateral
shall be delivered to and held by or on behalf of Foothill pursuant hereto and
shall be in suitable form for transfer by delivery, or shall be accompanied by
duly executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to Foothill; (b) upon the occurrence and during the
continuance of an Event of Default, Foothill shall have the right to the extent
permitted under any applicable law, at any time in its discretion and without
notice to any Pledgor, to transfer to or to register in its name or in the name
of any of its nominees any or all of the Pledged Collateral; and (c) Foothill
shall have the right at any time to exchange certificates representing or
evidencing any of the Pledged Collateral for certificates of smaller or larger
denominations.
SECTION 4. Representations and Warranties. Each Pledgor makes
the following representations:
(a) As of the date that the applicable Pledged Shares are
pledged hereunder by such Pledgor, those Pledged Shares (i) have been duly
authorized and validly issued; (ii) are fully paid and non-assessable; and (iii)
constitute all of the issued and outstanding capital stock and other equity
securities of the Issuer thereof.
2.
<PAGE> 3
(b) Such Pledgor is the legal and beneficial owner of the
Pledged Collateral free and clear of any Lien, except for Permitted Liens.
(c) Upon compliance with any applicable local law registration
requirements, the pledge of the Pledged Shares creates a valid, perfected and
first priority security interest in such Pledged Collateral, in favor of
Foothill.
(d) No consent, authorization, approval, or other action by,
and no notice to or filing with, any governmental authority is required either
(i) for the pledge by such Pledgor of the Pledged Collateral pursuant to this
Agreement or for the due execution, delivery or performance of this Agreement by
such Pledgor, or (ii) for the exercise by Foothill of the voting or other rights
provided for in this Agreement or of the remedies in respect of the Pledged
Collateral pursuant to this Agreement, except as may be required in connection
with the disposition of the Pledged Collateral by laws affecting the offering
and sale of securities generally or for any filings necessary to comply with
applicable local law registration requirements.
SECTION 5. Further Assurances, Etc. (a) Each Pledgor agrees
that at any time and from time to time, at the cost and expense of such Pledgor,
such Pledgor will promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or desirable, or
that Foothill may reasonably request, in order to perfect and protect the Lien
granted or purported to be granted hereby or to enable Foothill to exercise and
enforce its rights and remedies hereunder with respect to any Pledged
Collateral.
(b) Each Pledgor agrees to defend the title to the Pledged
Collateral and the Lien thereon of Foothill against the claim of any other
Person and to maintain and preserve such Lien until indefeasible payment in full
of all obligations.
SECTION 6. Voting Rights; Dividends; Etc.
(a) As long as no Event of Default shall have occurred and be
continuing (and, in the case of subsection (a) (i) of this Section 6, as long as
no notice thereof shall have been given by Foothill to the Pledgors pursuant to
subsection (b) hereof):
(i) Each Pledgor shall be entitled to exercise any and all
voting and other consensual rights pertaining to the Pledged Collateral or any
part thereof for any purpose not inconsistent with the terms of this Agreement
or any other Loan Document; provided, however, that such Pledgor shall not
exercise or shall refrain from exercising any such right if such action could
reasonably be expected to result in a Material Adverse Change;
3.
<PAGE> 4
(ii) Each Pledgor shall be entitled to receive and retain
(subject to any Lien thereon in favor of Foothill) any and all dividends or
distributions paid in respect of the Pledged Collateral, other than any and all:
(A) dividends paid or payable other than in cash in
respect of, and instruments and other property received,
receivable or otherwise distributed in respect of, or in
exchange for, any Pledged Collateral,
(B) dividends and other distributions paid or payable
in cash in respect of any Pledged Shares or Additional Pledged
Shares in connection with a partial or total liquidation or
dissolution of the Issuer thereof or in connection with a
reduction by the Issuer thereof of such Issuer's capital,
capital surplus or paid-in-surplus, and
(C) cash paid, payable or otherwise distributed in
redemption of, or in exchange for, any Pledged Collateral, all
of which shall be forthwith delivered to Foothill for deposit
in the Lockboxes, in the manner set forth in the Loan
Agreement, and shall, if received by such Pledgor, be received
in trust for the benefit of Foothill, be segregated from the
other property or funds of such Pledgor, and be forthwith
delivered to Foothill for deposit in the Lockboxes, in the
same form as so received (with any necessary endorsement); and
(iii) Foothill shall execute and deliver (or cause to be
executed and delivered) to any Pledgor all such proxies and other instruments as
such Pledgor may reasonably request for the purpose of enabling such Pledgor to
exercise the voting and other rights which it is entitled to exercise pursuant
to paragraph (i) above and to receive the dividends or distributions which it is
authorized to receive and retain pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuance of an Event
of Default:
(i) Upon notice by Foothill to any Pledgor, all
rights of such Pledgor to exercise the voting and other
consensual rights which it would otherwise be entitled to
exercise pursuant to Section 6(a) (i) above shall cease, and
all such rights shall thereupon become vested in Foothill who
shall thereupon have the sole right to exercise such voting
and other consensual rights.
(ii) All rights of any Pledgor to receive the
dividends or distributions which it would otherwise be
authorized to receive and retain pursuant to Section 6(a) (ii)
above shall cease, and all such rights shall thereupon become
vested in
<PAGE> 5
Foothill who shall thereupon have the sole right to receive
and hold as Pledged Collateral such dividends or distributions
for deposit in the Lockboxes.
(iii) All dividends or distributions which are
received by any Pledgor contrary to the provisions of
paragraph (ii) of this Section 6(b) shall be received in trust
for the benefit of Foothill, shall be segregated from other
property or funds of such Pledgor and shall be forthwith
delivered to Foothill for deposit in the Lockboxes, in the
same form as so received (with any necessary endorsement).
(iv) Each Pledgor shall, if necessary to permit
Foothill to exercise the voting and other rights which it may
be entitled to exercise pursuant to Section 6(b)(i) above and
to receive all dividends and distributions which it may be
entitled to receive under Section 6(b)(ii) above, execute and
deliver to Foothill, from time to time and upon written notice
of Foothill, appropriate proxies and other instruments as
Foothill may reasonably request. The foregoing shall not in
any way limit Foothill's power and authority granted pursuant
to Section 8 hereof.
SECTION 7. Transfers and Other Liens; Additional Shares. (a)
Each Pledgor agrees that it will not (i) sell or otherwise dispose of, or grant
any option or warrant with respect to, any of the Pledged Collateral except as
permitted by the Loan Agreement, or (ii) create or permit to exist any Lien upon
or with respect to any of the Pledged Collateral, except for the Lien created
pursuant to this Agreement or Liens permitted pursuant to Section 7.2 of the
Loan Agreement.
(b) Each Pledgor agrees that it will (i) except as permitted
by the Loan Agreement, cause each Issuer not to issue any shares of capital
stock or other equity securities in addition to or in substitution for the
Pledged Shares, (ii) pledge hereunder, immediately upon its acquisition
(directly or indirectly) thereof, any and all Additional Shares, and (iii)
promptly (and in any event within three Business Days) deliver to Foothill a
Pledge Amendment, duly executed by such Pledgor, in substantially the form of
Exhibit A hereto (a "Pledge Amendment"), in respect of the Additional Shares,
together with all certificates or other instruments representing or evidencing
the same. Each Pledgor hereby (i) authorizes Foothill to attach each Pledge
Amendment to this Pledge Agreement, (ii) agrees that all capital stock and other
equity securities listed on any Pledge Amendment delivered to Foothill shall for
all purposes hereunder constitute Pledged Shares, and (iii) is deemed to have
made, upon such delivery, the representations and warranties contained in
Section 4 hereof with respect to such Pledged Collateral.
<PAGE> 6
SECTION 8. Foothill Appointed Attorney-in-Fact and Proxy.
Subject to Section 6 hereof, each Pledgor hereby irrevocably constitutes and
appoints Foothill and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact and proxy with full
irrevocable power and authority in the place and stead of such Pledgor and in
the name of such Pledgor or in its own name, from time to time in Foothill's
discretion, for the purpose of carrying out the terms of this Agreement, to take
any and all appropriate action and to execute and deliver any and all documents
and instruments which Foothill may deem necessary or advisable to accomplish the
purposes of this Agreement, and, without limiting the generality of the
foregoing, hereby gives Foothill the power and right, on behalf of such Pledgor,
upon the occurrence and during the continuance of an Event of Default, to
receive, indorse and collect all instruments made payable to such Pledgor
representing any dividend or distribution in respect of the Pledged Collateral
or any part thereof, to give full discharge for the same, and to vote or grant
any consent in respect of the Pledged Shares authorized by Section 6(b) hereof.
Each Pledgor hereby ratifies, to the extent permitted by law, all that any said
attorney shall lawfully do or cause to be done by virtue hereof. This power,
being coupled with an interest, is irrevocable until, and shall automatically
terminate upon, the termination of this Agreement pursuant to Section 17. To the
extent Secured Party takes any action under this Section 8, Secured Party will
endeavor in good faith to provide notice to the relevant Pledgor of such action,
but any failure of Secured Party to do so shall not result in any liability to
Secured Party whatsoever unless and to the extent such failure arose from the
willful misconduct, gross negligence, or bad faith of Secured Party.
SECTION 9. Foothill May Perform. If any Pledgor fails to
perform any agreement contained herein, Foothill may itself perform, or cause
performance of, such agreement, and the expenses of Foothill incurred in
connection therewith shall be payable by such Pledgor under Section 12 hereof
and constitute Obligations secured hereby.
SECTION 10. Reasonable Care. Foothill shall be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if the Pledged Collateral is accorded treatment
substantially equal to that which Foothill accords its own property, it being
understood that Foothill shall not have any responsibility for (i) ascertaining
or taking action with respect to calls, conversions, exchanges, maturities,
tenders or other matters relative to any Pledged Collateral, whether or not
Foothill has or is deemed to have knowledge of any such matter, or (ii) taking
any necessary steps to preserve rights against any Person with respect to any
Pledged Collateral.
SECTION 11. Remedies upon Default. If any Event of Default
shall have occurred and be continuing:
6.
<PAGE> 7
(a) Foothill may exercise in respect of the Pledged
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party after
default under the Code or any other applicable law in effect in the State of
California at that time, and Foothill may also, without notice except as
specified below, sell the Pledged Collateral or any part thereof in one or more
parcels at public or private sale, at any exchange, broker's board or at any
office of Foothill or elsewhere, for cash, on credit or for future delivery, and
upon such other terms as Foothill may deem commercially reasonable. Each Pledgor
agrees that, to the extent notice of sale shall be required by law, at least ten
days' notice to such Pledgor of the time and place of any public sale or the
time after which any private sale is to be made shall constitute reasonable
notification. Foothill shall not be obligated to make any sale of Pledged
Collateral regardless of notice of sale having been given. Foothill may adjourn
any public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned. Each Pledgor hereby waives any
claims against Foothill arising by reason of the fact that the price at which
any Pledged Collateral may have been sold at such a private sale was less than
the price which might have been obtained at a public sale, even if Foothill
accepts the first offer received and does not offer such Pledged Collateral to
more than one offeree. Foothill will comply with applicable federal and state
securities laws in connection with any foreclosure sale.
(b) Each Pledgor recognizes that by reason of certain
prohibitions contained in the Securities Act of 1933, as amended (the
"Securities Act") and applicable state securities laws, Foothill may be
compelled, with respect to any sale of all or any part of the Pledged
Collateral, to limit purchasers to those who will agree, among other things, to
acquire such securities for their own account, for investment, and not with a
view to the distribution or resale thereof. Each Pledgor acknowledges and agrees
that any such sale may result in prices and other terms less favorable to the
seller than if such sale were a public sale without such restrictions and,
notwithstanding such circumstances, agrees that any such sale shall be deemed to
have been made in a commercially reasonable manner. Foothill shall be under no
obligation to delay the sale of any of the Pledged Collateral for the period of
time necessary to permit any Pledgor to register such securities for public sale
under the Securities Act, or under applicable state securities laws, even if
such Pledgor would agree to do so.
(c) If Foothill determines to exercise its right to sell any
or all of the Pledged Collateral, upon written request, each Pledgor shall, from
time to time, furnish to Foothill all such information as Foothill may request
in order to determine the number of shares and other instruments included in the
Pledged Collateral which may be sold by Foothill as exempt transactions under
the Securities Act and rules of the Securities and Exchange Commission
thereunder, as the same are from time to time in effect.
7.
<PAGE> 8
SECTION 12. Expenses. Each Pledgor will, jointly and
severally, upon demand pay to Foothill the amount of any and all reasonable
expenses, including, without limitation, the reasonable fees and expenses of
Foothill's counsel and of any experts and agents, which Foothill may incur in
connection with (i) the administration of this Agreement, (ii) the custody or
preservation of, sale of, collection from, or other realization upon, any of the
Pledged Collateral, (iii) the exercise or enforcement of any of the rights and
remedies hereunder of Foothill, or (iv) the failure by any Pledgor to perform or
observe any of the provisions hereof.
SECTION 13. Security Interest Absolute. All rights of Foothill
and obligations of the Pledgors hereunder, and all security interests created or
granted hereby, shall be absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of any
provision of the Loan Agreement or any other Loan Document or
any other agreement or instrument relating thereto;
(ii) any change in the time, manner or place of
payment of, or in any other term of, or any increase in the
amount of, all or any of the Secured Obligations, or any other
amendment or waiver of any term of, or any consent to any
departure from any requirement of, the Loan Agreement or any
other Loan Document;
(iii) any exchange, release or non-perfection of any
Lien on any other collateral, or any release or amendment or
waiver of any term of any guaranty of, or consent to departure
from any requirement of any guaranty of, all or any of the
Secured Obligations; or
(iv) any other circumstance which might otherwise
constitute a defense available to, or a discharge of,
Borrowers or any Pledgor.
SECTION 14. Amendments, Etc. No amendment or waiver of any
provision of this Agreement nor consent to any departure by any Pledgor herefrom
shall in any event be effective unless the same shall be in writing and signed
by Foothill and each Pledgor affected thereby, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
SECTION 15. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing (including, without
limitation, by
8.
<PAGE> 9
telecopy) and mailed, sent or delivered in accordance with the provisions set
forth in Section 12 of the Loan Agreement.
SECTION 16. Continuing Security Interest; Transfer of
Obligations. This Pledge Agreement shall create a continuing security interest
in the Pledged Collateral and shall (i) remain in full force and effect until
the termination of this Agreement pursuant to Section 17, (ii) be binding upon
each Pledgor, its successors and assigns, and (iii) inure, together with the
rights and remedies of Foothill hereunder, to the benefit of and be enforceable
by Foothill and its successors, transferees and assigns.
SECTION 17. Termination of Security Interest. This Agreement,
and the security interests created or granted hereby, shall automatically
terminate and be released on the date at which (i) the commitments of Foothill
to extend credit to Borrowers under the Loan Agreement have been irrevocably
terminated, and (ii) all Secured Obligations have been fully and finally paid in
cash. Upon any release of the security interest created by this Agreement in any
of the Pledged Collateral pursuant to this Section 17, Foothill (without
recourse upon, or any representation or warranty whatsoever by, Foothill) shall
promptly (i) return, transfer and deliver to the applicable Pledgor all
certificates, instruments and other property held by Foothill pursuant to this
Agreement representing or evidencing such Pledged Collateral as shall not have
been sold or otherwise applied pursuant to the terms hereof, as the case may be,
all without recourse upon, or representation or warranty whatsoever by,
Foothill, except that the same shall be free and clear of any claims, liens or
encumbrances created by or in respect of Foothill, and at the cost and expense
of such Pledgor, and (ii) execute and deliver to each Pledgor (at the cost and
expense of such Pledgor) such instruments as may be reasonably requested by such
Pledgor acknowledging the release of such security interest with respect to such
Pledged Collateral.
SECTION 19. Governing Law; Severability. This Agreement shall
be governed by, and be construed and interpreted in accordance with, the law of
the State of California. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity and without invalidating the remaining
provisions of this Agreement.
SECTION 20. Waiver of Jury Trial. Each Pledgor waives any
right it may have to a trial by jury in respect of any litigation based on, or
arising out of, under or in connection with, this Agreement or any other Loan
Document, or any course of conduct, course of dealing, verbal or written
statement or other action of any loan party or any secured party.
9.
<PAGE> 10
SECTION 21. Section Titles. The Section titles contained in
this Agreement are and shall be without substantive meaning or content of any
kind whatsoever and are not part of this Agreement.
SECTION 22. Counterparts. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute but one and the same agreement.
IN WITNESS WHEREOF, each Pledgor has caused this Agreement to
be duly executed and delivered by its duly authorized officer on the date first
above written.
MIDCOM COMMUNICATIONS INC.,
a Washington corporation
By /s/ PAUL P. SENIO
------------------------
Title: Secretary
--------------------
ADVAL, INC.,
an Oregon corporation
By /s/ PAUL P. SENIO
------------------------
Title: Secretary
--------------------
ADVAL DATA CORPORATION,
an Oregon corporation
By /s/ PAUL P. SENIO
------------------------
Title: Secretary
--------------------
ADVANCED NETWORK DESIGN,
a California corporation
10.
<PAGE> 11
By /s/ PAUL P. SENIO
------------------------
Title: Secretary
--------------------
CEL-TECH INTERNATIONAL CORP.,
a Washington corporation
By /s/ PAUL P. SENIO
------------------------
Title: Secretary
--------------------
PACNET INC.,
a Washington corporation
By /s/ PAUL P. SENIO
------------------------
Title: Secretary
--------------------
Accepted and Acknowledged:
FOOTHILL CAPITAL CORPORATION,
a California corporation
By___________________________
Title:_______________________
11.
<PAGE> 12
EXHIBIT A
PLEDGE AMENDMENT
This Pledge Amendment, dated ____________, 19___, is delivered
pursuant to Section 7 of the Pledge Agreement referred to below. [IF THIS PLEDGE
AMENDMENT IS BEING EXECUTED AND DELIVERED BY A NEW PLEDGOR: THE UNDERSIGNED
HEREBY ACKNOWLEDGES EACH AND ALL OF THE PROVISIONS OF THE PLEDGE AGREEMENT AND
JOINS IN AND AGREES TO BE BOUND THEREBY AS A PLEDGOR, MUTATIS MUTANDIS.] The
undersigned hereby agrees that: (a) this Pledge Amendment may be attached to the
Pledge Agreement, dated as of February 27, 1997, between the Pledgors referred
to therein and Foothill Capital Corporation; and (b) that the capital stock and
other equity securities listed on this Pledge Amendment shall be and become part
of the Pledged Collateral referred to in the Pledge Agreement and Schedule I
thereto and shall secure all Secured Obligations. The terms defined in the
Pledge Agreement or Loan Agreement are used herein as therein defined.
[NAME OF PLEDGOR]
By:_______________________________
Name:
Title:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
Pledgor Issuer Number Class Certificate Former Name, if Pledgor's Jurisdiction of
of Shares Number(s) any, in which Percentage Organization
Certificate Issued Ownership
of Total
Issued and
Outstanding
Capital
Stock
represented
by Pledged
Shares
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
</TABLE>
<PAGE> 13
SCHEDULE I
Pledged Shares
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
Pledgor Issuer Number Class Certificate Former Name, if Pledgor's Jurisdiction of
of Shares Number(s) any, in which Percentage Organization
Certificate Issued Ownership
of Total
Issued and
Outstanding
Capital
Stock
represented
by Pledged
Shares
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
</TABLE>
<PAGE> 1
TRADEMARK SECURITY AGREEMENT
THIS TRADEMARK SECURITY AGREEMENT (this "Agreement"), dated as
of February 27, 1997, is made by each of MIDCOM COMMUNICATIONS INC., a
Washington corporation ("Midcom"), ADVAL, INC., an Oregon corporation ("AdVal"),
ADVAL DATA CORPORATION, an Oregon corporation ("AdVal Data"), ADVANCED NETWORK
DESIGN, a California corporation ("A.N.D."), CEL-TECH INTERNATIONAL CORP., a
Washington corporation ("Cel-Tech"), and PACNET INC., a Washington corporation
("PacNet"; collectively, with Midcom, AdVal, AdVal Data, A.N.D., and Cel-Tech,
the "Debtors"), in favor of FOOTHILL CAPITAL CORPORATION, a California
corporation ("Secured Party").
RECITALS
A. The Debtors and Secured Party have entered into that certain Loan and
Security Agreement, dated as of even date herewith (as amended, restated,
modified, renewed or extended from time to time, the "Loan Agreement"), pursuant
to which Secured Party has agreed to make certain financial accommodations to
the Debtors, and each Debtor has granted to Secured Party a security interest in
(among other things) all of the general intangibles of such Debtor.
B. Pursuant to the Loan Agreement and as one of the conditions
precedent to the obligations of Secured Party under the Loan Agreement, each
Debtor has agreed to execute and deliver this Agreement to Secured Party for
filing with the United States Patent and Trademark Office and with any other
relevant recording systems in any domestic or foreign jurisdiction, and as
further evidence of and to effectuate Secured Party's existing security
interests in the trademarks and other general intangibles described herein.
ASSIGNMENT
NOW, THEREFORE, for valuable consideration, the receipt and
adequacy of which is hereby acknowledged, each Debtor hereby agrees in favor of
Secured Party as follows:
1. Definitions; Interpretation.
(a) Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
-1-
<PAGE> 2
"Proceeds" means whatever is receivable or received from or
upon the sale, lease, license, collection, use, exchange or other disposition,
whether voluntary or involun tary, of any Trademark Collateral, including
"proceeds" as defined at UCC Section 9306, all insurance proceeds and all
proceeds of proceeds. Proceeds shall include (i) any and all accounts, chattel
paper, instruments, general intangibles, cash and other proceeds, payable to or
for the account of any Debtor, from time to time in respect of any of the
Trademark Collateral, (ii) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to or for the account of any Debtor from time to
time with respect to any of the Trademark Collateral, (iii) any and all claims
and payments (in any form whatsoever) made or due and payable to any Debtor from
time to time in connection with any requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the Trademark Collateral by any
Person acting under color of governmental authority, and (iv) any and all other
amounts from time to time paid or payable under or in connection with any of the
Trademark Collateral or for or on account of any damage or injury to or
conversion of any Trademark Collateral by any Person.
"PTO" means the United States Patent and Trademark Office and
any successor thereto.
"Secured Obligations" means all liabilities, obligations, or
undertakings owing by each Debtor to Secured Party of any kind or description
arising out of or outstanding under, advanced or issued pursuant to, or
evidenced by the Loan Agreement, the other Loan Documents, or this Agreement,
irrespective of whether for the payment of money, whether direct or indirect,
absolute or contingent, due or to become due, voluntary or involuntary, whether
now existing or hereafter arising, and including all interest (including
interest that accrues after the filing of a case under the Bankruptcy Code) and
any and all costs, fees (including attorneys fees), and expenses which any one
or more of the Debtors is required to pay pursuant to any of the foregoing, by
law, or otherwise.
"Trademark Collateral" has the meaning set forth in Section 2.
"Trademarks" has the meaning set forth in Section 2.
"UCC" means the Uniform Commercial Code as in effect from time
to time in the State of California.
"United States" and "U.S." each mean the United States of
America.
(b) Terms Defined in UCC. Where applicable and except
as otherwise defined herein, terms used in this Agreement shall have the
meanings ascribed to them in the UCC.
-2-
<PAGE> 3
(c) Interpretation. In this Agreement, except to the
extent the context otherwise requires:
(i) Any reference to a Section or a Schedule
is a reference to a section hereof, or a schedule hereto, respectively,
and to a subsection or a clause is, unless otherwise stated, a
reference to a subsection or a clause of the Section or subsection in
which the reference appears.
(ii) The words "hereof," "herein," "hereto,"
"hereunder" and the like mean and refer to this Agreement as a whole
and not merely to the specific Section, subsection, paragraph or clause
in which the respective word appears.
(iii) The meaning of defined terms shall be
equally applicable to both the singular and plural forms of the terms
defined.
(iv) The words "including," "includes" and
"include" shall be deemed to be followed by the words "without
limitation."
(v) References to agreements and other
contractual instruments shall be deemed to include all subsequent
amendments and other modifications thereto.
(vi) References to statutes or regulations
are to be construed as including all statutory and regulatory
provisions consolidating, amending or replacing the statute or
regulation referred to.
(vii) Any captions and headings are for
convenience of reference only and shall not affect the construction of
this Agreement.
(viii) Capitalized words not otherwise
defined herein shall have the respective meanings ascribed to them in
the Loan Agreement.
(ix) In the event of a direct conflict
between the terms and provisions of this Agreement and the Loan Agreement, it is
the intention of the parties hereto that both such documents shall be read
together and construed, to the fullest extent possible, to be in concert with
each other. In the event of any actual, irreconcilable conflict that cannot be
resolved as aforesaid, the terms and provisions of the Loan Agreement shall
control and govern; provided, however, that the inclusion herein of additional
obligations on the part of any Debtor and supplemental rights and remedies in
favor of Secured Party (whether under California law or applicable federal law),
in each case in respect of the Trademark Collateral, shall not be deemed a
conflict in the Loan Agreement.
-3-
<PAGE> 4
2. Security Interest.
(a) Assignment and Grant of Security Interest. To
secure the payment and performance of the Secured Obligations, each Debtor
hereby assigns, transfers, and conveys to Secured Party, and hereby grants a
security interest to Secured Party in, all of such Debtor's right, title and
interest in, to and under the following property, whether now existing or
hereafter acquired or arising, and whether registered or unregistered
(collectively, the "Trademark Collateral"):
(i) all state (including common law),
federal and foreign trademarks, service marks and trade names,
corporate names, company names, business names, fictitious business
names, trade styles, trade dress, logos, other source or business
identifiers, designs and general intangibles of like nature, now
existing or hereafter adopted or acquired, together with and including
all licenses therefor held by that Debtor (unless otherwise prohibited
by any license or related licensing agreement under circumstances where
the granting of the security interest would have the effect under
applicable law of the termination or permitting termination of the
license for breach and where the licensor is not an affiliate of a
Debtor), and all registrations and recordings thereof, and all
applications filed or to be filed in connection therewith, including
registrations and applications in the PTO, any State of the United
States or any other country or any political subdivision thereof, and
all extensions or renewals thereof, including without limitation any of
the foregoing identified on Schedule A hereto (as the same may be
amended, modified or supplemented from time to time), and the right
(but not the obligation) to register claims under any state or federal
trademark law or regulation or any trademark law or regulation of any
foreign country and to apply for, renew and extend any of the same, to
sue or bring opposition or cancellation proceedings in the name of that
Debtor or in the name of Secured Party for past, present or future
infringement or unconsented use thereof, and all rights arising
therefrom throughout the world (collectively, the "Trademarks");
(ii) all claims, causes of action and rights to sue
for past, present or future infringement or unconsented use of any
Trademarks and all rights arising therefrom and pertaining thereto;
(iii) all general intangibles related to or arising
out of any of the Trademarks and all the goodwill of that Debtor's
business symbolized by the Trademarks or associated therewith; and
(iv) all products and Proceeds of any and all of the
foregoing.
(b) Continuing Security Interest. Each Debtor agrees
that this Agreement shall create a continuing security interest in the Trademark
Collateral which shall remain in effect until terminated in accordance with
Section 17.
-4-
<PAGE> 5
3. Further Assurances; Appointment of Secured Party as
Attorney-in-Fact. Each Debtor at its expense shall execute and deliver, or cause
to be executed and delivered, to Secured Party any and all documents and
instruments, in form and substance satisfactory to Secured Party, and take any
and all action, which Secured Party may reasonably request from time to time, to
perfect and continue perfected, maintain the priority of or provide notice of
Secured Party's security interest in the Trademark Collateral and to accomplish
the purposes of this Agreement. Secured Party shall have the right, in the name
of each Debtor, or in the name of Secured Party or otherwise, without prior
notice to or assent by that Debtor, and each Debtor hereby irrevocably
constitutes and appoints Secured Party (and any of Secured Party's officers or
employees or agents designated by Secured Party) as that Debtor's true and
lawful attorney-in-fact with full power and authority, (i) to sign the name of
Debtor on all or any of such documents or instruments and perform all other acts
that Secured Party deems necessary or advisable in order to perfect or continue
perfected, maintain the priority or enforceability of or provide notice of
Secured Party's security interest in, the Trademark Collateral, and (ii) to
execute any and all other documents and instruments, and to perform any and all
acts and things for and on behalf of Debtor, which Secured Party may deem
necessary or advisable to maintain, preserve and protect the Trademark
Collateral and to accomplish the purposes of this Agreement, including (A) after
the occurrence and during the continuance of any Event of Default, to defend,
settle, adjust or institute any action, suit or proceeding with respect to the
Trademark Collateral, (B) after the occurrence and during the continuance of any
Event of Default, to assert or retain any rights under any license agreement for
any of the Trademark Collateral, and (C) after the occurrence and during the
continuance of any Event of Default, to execute any and all applications,
documents, papers and instruments for Secured Party to use the Trademark
Collateral, to grant or issue any exclusive or non-exclusive license with
respect to any Trademark Collateral (it being understood that so long as no
Event of Default has occurred and is continuing, that Debtor may grant or issue
licenses in the ordinary course of business with respect to the Trademark
Collateral), and to assign, convey or otherwise transfer title in or dispose of
the Trademark Collateral. The power of attorney set forth in this Section 3,
being coupled with an interest, is irrevocable so long as this Agreement shall
not have terminated in accordance with Section 17. To the extent Secured Party
takes any action under this Section 3, Secured Party will endeavor in good faith
to provide notice to the relevant Debtor of such action, but any failure of
Secured Party to do so shall not result in any liability to Secured Party
whatsoever unless and to the extent such failure arose from the willful
misconduct, gross negligence, or bad faith of Secured Party.
4. Representations and Warranties. Each Debtor represents and
warrants to Secured Party as follows:
(a) No Other Trademarks. Schedule A sets forth a true
and correct list of all of the existing Trademarks that currently are
registered, or for which any currently pending application for registration has
been filed with the PTO or any corresponding or similar trademark office of any
other U.S. or foreign jurisdiction, and that are owned or held (whether pursuant
to a license or otherwise) or used by that Debtor.
-5-
<PAGE> 6
(b) Trademarks Subsisting. Each of the Trademarks
listed in Schedule A is subsisting and has not been adjudged invalid or
unenforceable, in whole or in part, and, to the best of that Debtor's knowledge,
each of the Trademarks is valid and enforceable.
(c) Ownership of Trademark Collateral; No Violation.
(i) That Debtor has rights in and good and defensible title to the existing
Trademark Collateral, (ii) with respect to the Trademark Collateral shown on
Schedule A hereto as owned by it, that Debtor is the sole and exclusive owner
thereof, free and clear of any Liens and rights of others (other than the
security interest created hereunder), including licenses, registered user
agreements and covenants by that Debtor not to sue third persons, and (iii) with
respect to any Trademarks for which that Debtor is either a licensor or a
licensee pursuant to a license or licensee agreement regarding such Trademark,
each such license or licensing agreement is in full force and effect, that
Debtor is not in default of any of its obligations thereunder and, other than
the parties to such licenses or licensing agreements, no other Person has any
rights in or to any of the Trademark Collateral. To the best of that Debtor's
knowledge, the past, present and contemplated future use of the Trademark
Collateral by that Debtor has not, does not and will not infringe upon or
violate any right, privilege or license agreement of or with any other Person.
(d) No Infringement. To the best of that Debtor's
knowledge, no material infringement or unauthorized use presently is being made
of any of the Trademark Collateral by any Person.
(e) Powers. That Debtor has the unqualified right,
power and authority to pledge and to grant to Secured Party a security interest
in all of that Debtor's right, title, and interest in and to the Trademark
Collateral pursuant to this Agreement, and to execute, deliver and perform its
obligations in accordance with the terms of this Agreement, without the consent
or approval of any other Person except as already obtained.
5. Covenants. So long as any of the Secured Obligations remain
unsatisfied, each Debtor agrees that it will comply with all of the covenants,
terms and provisions of this Agreement, the Loan Agreement and the other Loan
Documents, and each Debtor will promptly give Secured Party written notice of
the occurrence of any event that could have a material adverse effect on any of
the Trademarks or the Trademark Collateral, including any petition under the
Bankruptcy Code filed by or against any licensor of any of the Trademarks as to
which that Debtor is a licensee.
6. Future Rights. For so long as any of the Secured
Obligations shall remain outstanding, or, if earlier, until Secured Party shall
have released or terminated, in whole but not in part, its interest in the
Trademark Collateral, if and when any Debtor shall obtain rights to any new
Trademarks, or any reissue, renewal or extension of any Trademarks, the
provisions of Section 2 shall automatically apply thereto and that Debtor shall
give to Secured Party prompt notice thereof. Each Debtor shall do all things
deemed necessary or advisable by Secured Party to ensure the validity,
perfection, priority and enforceability of the security interests of Secured
-6-
<PAGE> 7
Party in such future acquired Trademark Collateral. Each Debtor hereby
authorizes Secured Party to modify, amend or supplement the Schedules hereto and
to re-execute this Agreement from time to time on that Debtor's behalf and as
its attorney-in-fact to include any future Trademarks which are or become
Trademark Collateral and to cause such re-executed Agreement or such modified,
amended or supplemented Schedules to be filed with the PTO.
7. Secured Party's Duties. Notwithstanding any provision
contained in this Agreement, Secured Party shall have no duty to exercise any of
the rights, privileges or powers afforded to it and shall not be responsible to
any Debtor or any other Person for any failure to do so or delay in doing so.
Except for the accounting for moneys actually received by Secured Party
hereunder or in connection herewith, Secured Party shall have no duty or
liability to exercise or preserve any rights, privileges or powers pertaining to
the Trademark Collateral.
8. Remedies. Secured Party shall have all rights and remedies
available to it under the Loan Agreement and applicable law (which rights and
remedies are cumulative) with respect to the security interests in any of the
Trademark Collateral or any other Collateral. Each Debtor agrees that such
rights and remedies include the right of Secured Party as a secured party to
sell or otherwise dispose of its Collateral after default, pursuant to UCC
Section 9504. Each Debtor agrees that Secured Party shall at all times have such
royalty-free licenses, to the extent permitted by law, for any Trademark
Collateral that is reasonably necessary to permit the exercise of any of Secured
Party's rights or remedies upon or after the occurrence of (and during the
continuance of) an Event of Default with respect to (among other things) any
tangible asset of any Debtor in which Secured Party has a security interest,
including Secured Party's rights to sell inventory, tooling or packaging which
is acquired by any Debtor (or its successors, permitted assignees, or trustees
in bankruptcy). In addition to and without limiting any of the foregoing, upon
the occurrence and during the continuance of an Event of Default, Secured Party
shall have the right but shall in no way be obligated to bring suit, or to take
such other action as Secured Party deems necessary or advisable, in the name of
any Debtor or Secured Party, to enforce or protect any of the Trademark
Collateral, in which event each Debtor shall, at the request of Secured Party,
do any and all lawful acts and execute any and all documents required by Secured
Party in aid of such enforcement. To the extent that Secured Party shall elect
not to bring suit to enforce such Trademark Collateral, each Debtor agrees to
use all reasonable measures and its diligent efforts, whether by action, suit,
proceeding or otherwise, to prevent the infringement, misappropriation or
violation thereof by others and for that purpose agrees diligently to maintain
any action, suit or proceeding against any Person necessary to prevent such
infringement, misappropriation or violation.
-7-
<PAGE> 8
9. Binding Effect. This Agreement shall be binding upon, inure
to the benefit of and be enforceable by each Debtor and Secured Party and their
respective successors and permitted assigns.
10. Notices. All notices and other communications hereunder to
or from Secured Party or any Debtor shall be in writing and shall be mailed,
sent or delivered in accordance with the Loan Agreement.
11. GOVERNING LAW AND VENUE; JURY TRIAL WAIVER. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE
ASSIGNMENT AND SECURITY INTERESTS HEREUNDER IN RESPECT OF ANY PROPERTY ARE
GOVERNED BY FEDERAL LAW, IN WHICH CASE SUCH CHOICE OF CALIFORNIA LAW SHALL NOT
BE DEEMED TO DEPRIVE SECURED PARTY OF SUCH RIGHTS AND REMEDIES AS MAY BE
AVAILABLE UNDER FEDERAL LAW. THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO SHALL BE
DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF CALIFORNIA. THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING
IN CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE
AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA OR,
AT THE SOLE OPTION OF SECURED PARTY, IN ANY OTHER COURT IN WHICH SECURED PARTY
SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER
JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH DEBTOR AND SECURED PARTY
WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO
ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT
ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 11.
EACH DEBTOR AND SECURED PARTY HEREBY WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED
HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS. EACH DEBTOR AND SECURED PARTY REPRESENT
THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS
JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.
-8-
<PAGE> 9
12. Entire Agreement; Amendment. This Agreement, together with
the Schedules hereto, contains the entire agreement of the parties with respect
to the subject matter hereof and supersedes all prior drafts and communications
relating to such subject matter. Neither this Agreement nor any provision hereof
may be modified, amended or waived except by the written agreement of the
parties as provided in the Loan Agreement. Notwithstanding the foregoing,
Secured Party may re-execute this Agreement or modify, amend or supplement the
Schedules hereto as provided in Section 6 hereof.
13. Severability. If one or more provisions contained in this
Agreement shall be invalid, illegal or unenforceable in any respect in any
jurisdiction or with respect to any party, such invalidity, illegality or
unenforceability in such jurisdiction or with respect to such party shall, to
the fullest extent permitted by applicable law, not invalidate or render illegal
or unenforceable any such provision in any other jurisdiction or with respect to
any other party, or any other provisions of this Agreement.
14. Counterparts. This Agreement may be executed in any number
of coun terparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute but one and the same agreement.
15. Loan Agreement. Each Debtor acknowledges that the rights
and remedies of Secured Party with respect to the security interest in the
Trademark Collateral granted hereby are more fully set forth in the Loan
Agreement and the other Loan Documents and all such rights and remedies are
cumulative.
16. No Inconsistent Requirements. Each Debtor acknowledges
that this Agreement and the other Loan Documents may contain covenants and other
terms and provisions variously stated regarding the same or similar matters, and
each Debtor agrees that, subject to Section 1(c)(ix), all such covenants, terms
and provisions are cumulative and all shall be performed and satisfied in
accordance with their respective terms.
17. Termination. Upon the indefeasible payment in full of the
Secured Obligations, including the cash collateralization, expiration, or
cancellation of all Secured Obligations, if any, consisting of letters of
credit, and the full and final termination of any commitment to extend any
financial accommodations under the Loan Agreement, this Agree ment shall
terminate and Secured Party shall execute and deliver such documents and instru
ments and take such further action reasonably requested by the Debtors, at the
Debtors' expense, as shall be necessary to evidence termination of the security
interest granted by any Debtor to Secured Party hereunder.
-9-
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in Los Angeles, California.
MIDCOM COMMUNICATIONS INC.,
a Washington corporation
By_________________________
Title:_____________________
ADVAL, INC.,
an Oregon corporation
By_________________________
Title:_____________________
ADVAL DATA CORPORATION,
an Oregon corporation
By_________________________
Title:_____________________
-10-
<PAGE> 11
ADVANCED NETWORK DESIGN,
a California corporation
By_________________________
Title:_____________________
CEL-TECH INTERNATIONAL CORP.,
a Washington corporation
By_________________________
Title:_____________________
PACNET INC.,
a Washington corporation
By_________________________
Title:_____________________
FOOTHILL CAPITAL CORPORATION,
a California corporation
By_________________________
Title:_____________________
-11-
<PAGE> 12
STATE OF CALIFORNIA )
) ss
COUNTY OF LOS ANGELES )
On April __, 1997, before me, ______________________________, Notary
Public, personally appeared ______________________________, personally known to
me (or proved to me on the basis of satisfactory evidence) to be the person(s)
whose name(s) is/are subscribed to the within instrument and acknowledged to me
that he/she/they executed the same in his/her/their authorized capacity(ies),
and that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
____________________
Signature
[SEAL]
-12-
<PAGE> 13
STATE OF _________ )
) ss
COUNTY OF __________ )
On April __, 1997, before me, ______________________________, Notary
Public, personally appeared ______________________________, personally known to
me (or proved to me on the basis of satisfactory evidence) to be the person(s)
whose name(s) is/are subscribed to the within instrument and acknowledged to me
that he/she/they executed the same in his/her/their authorized capacity(ies),
and that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
____________________
Signature
[SEAL]
-13-
<PAGE> 14
SCHEDULE A
to the Trademark Security Agreement
U.S. Trademarks of Each Debtor
Registration
Debtor Registration No. Date Owner Registered Mark
- ------ ---------------- ---- ----- ---------------
A-1.
<PAGE> 15
SCHEDULE B
to the Trademark Security Agreement
Foreign Trademarks of Each Debtor
Registration
Debtor Country Registration No. Date Owner Registered Mark
- ------ ------- ---------------- ---- ----- ---------------
- NONE -
A-2.
<PAGE> 1
SURETYSHIP AGREEMENT
THIS SURETYSHIP AGREEMENT (THIS "AGREEMENT"), is entered into as of
March 14, 1997, between FOOTHILL CAPITAL CORPORATION, a California corporation
("Foothill"), on the one hand, and, on the other hand, MIDCOM COMMUNICATIONS
INC., a Washington corporation ("Midcom"), ADVAL, INC., an Oregon corporation
("AdVal"), ADVAL DATA CORPORATION, an Oregon corporation ("AdVal Data"),
ADVANCED NETWORK DESIGN, a California corporation ("A.N.D."), CEL-TECH
INTERNATIONAL CORP., a Washington corporation ("Cel-Tech"), and PACNET INC., a
Washington corporation ("PacNet"; collectively, with Midcom, AdVal, AdVal Data,
A.N.D., and Cel-Tech, the "Debtors") with reference to the following facts:
A. Foothill, as lender, and the Debtors, as borrowers, have
entered into that certain Loan and Security Agreement (the
"Loan Agreement") dated as of February 27, 1997;
B. In order to induce Foothill to enter into the Loan Agreement,
and in consideration thereof, and in consideration of any loan
or other financial accommodations hereinafter extended by
Foothill to the Debtors, whether pursuant to the Loan
Agreement or otherwise, the Debtors have agreed to enter into
this Agreement; and
C. Any and all initially capitalized terms used herein and not
defined herein shall have the meaning ascribed thereto in the
Loan Agreement.
NOW THEREFORE, in consideration of the above recitals and the
mutual promises contained herein, Foothill and the Debtors hereby agree as
follows:
1. SURETYSHIP WAIVERS AND CONSENTS.
1.1 The Debtors each are, and at all times shall be, jointly and
severally liable for each and every one of the Obligations under the Loan
Agreement and the Loan Documents (as defined in the Loan Agreement), regardless
of which Debtor or Debtors requested, received, used, or directly enjoyed the
benefit of, the extensions of credit hereunder. Unless otherwise expressly set
forth to the contrary in any of the Loan Documents, all of the Collateral shall
secure all of the Obligations. Each Debtor's Obligations under the Loan
Agreement are independent Obligations and are absolute and unconditional. Each
Debtor, to the extent permitted by law, hereby waives any defense to
<PAGE> 2
such Obligations that may arise by reason of the disability or other defense or
cessation of liability of any other Debtor for any reason other than payment in
full. Each Debtor also waives any defense to such Obligations that it may have
as a result of Foothill's election of or failure to exercise any right, power,
or remedy, including the failure to proceed first against another Debtor or any
security it holds from such other Debtor. Without limiting the generality of the
foregoing, each Debtor expressly waives all demands and notices whatsoever
(except for any demands or notices, if any, that such Debtor expressly is
entitled to receive pursuant to the terms of any Loan Document), and agrees that
Foothill may, without notice (except for such notice, if any, as such Debtor
expressly is entitled to receive pursuant to the terms of any Loan Document) and
without releasing the liability of such Debtor, extend for the benefit of any
other Debtor the time for making any payment, waive or extend the performance of
any agreement or make any settlement of any agreement for the benefit of any
other Debtor, and may proceed against each Debtor, directly and independently of
any other Debtor, as Foothill may elect in accordance with the Loan Agreement.
1.2 Each Debtor acknowledges that the Obligations undertaken herein or
in the other Loan Documents, and the grants of security interests and liens by
such Debtor to secure Obligations of the other Debtors, could be construed to
consist, at least in part, of the guaranty of Obligations of the other Debtors
and, in full recognition of that fact, each Debtor consents and agrees as
hereinafter set forth in the balance of this Section 1. The consents, waivers,
and agreements of the Debtors that are contained in the balance of this Section
1 are intended to deal with the suretyship aspects of the transactions evidenced
by the Loan Documents (to the extent that a Debtor may be deemed a guarantor or
surety for the Obligations of another Debtor) and thus are intended to be
effective and applicable only to the extent that any Debtor has agreed to answer
for the Obligation of another Debtor or has granted a lien or security interest
in Collateral to secure the Obligation of another Debtor; conversely, the
consents, waivers, and agreements of the Debtors that are contained in the
balance of this Section 1 shall not be applicable to the direct Obligation of a
Debtor with respect to credit extended directly to such Debtor, and shall not be
applicable to security interests or liens on Collateral of a Debtor given to
directly secure direct Obligations of such Debtor where no aspect of guaranty or
suretyship is involved. Each Debtor consents and agrees that Foothill may, at
any time and from time to time, without notice or demand, whether before or
after any actual or purported termination, repudiation or revocation of the Loan
Agreement by any one or more Debtors, and without affecting the enforceability
or continuing effectiveness hereof as to such Debtor, in accordance with the
terms of the Loan Documents:
(a) with respect to any other Debtor, supplement, restate,
modify, amend, increase, decrease, extend, renew, accelerate or otherwise change
the time for payment or the terms of the Obligations of such other Debtor or any
part thereof, including
2.
<PAGE> 3
any increase or decrease of the rate(s) of interest thereon with the agreement
of such other Debtor;
(b) supplement, restate, modify, amend, increase, decrease or
waive, or enter into or give any agreement, approval or consent with respect to,
the Obligations or any part thereof, or any of the Loan Documents or any
security or guarantees granted or entered into by any Person(s) other than such
Debtor, or any condition, covenant, default, remedy, right, representation or
term thereof or thereunder;
(c) accept new or additional instruments, documents or
agreements in exchange for or relative to any of the Loan Documents or the
Obligations or any part thereof;
(d) accept partial payments on the Obligations;
(e) receive and hold additional security or guarantees for the
Obligations or any part thereof;
(f) release, reconvey, terminate, waive, abandon, fail to
perfect, subordinate, exchange, substitute, transfer or enforce any security or
guarantees, and apply any security and direct the order or manner of sale
thereof as Foothill in its sole and absolute discretion may determine;
(g) release any other Person (including, without limitation,
any other Debtor) from any personal liability with respect to the Obligations or
any part thereof;
(h) with respect to any Person other than such Debtor
(including, without limitation, any other Debtor), settle, release on terms
satisfactory to Foothill or by operation of applicable laws or otherwise
liquidate or enforce any Obligations and any security therefor or guaranty
thereof in any manner, consent to the transfer of any security and bid and
purchase at any sale; or
(i) consent to the merger, change or any other restructuring
or termination of the corporate or partnership existence of any other Debtor or
any other Person, and correspondingly agree, in accordance with all applicable
provisions of the Loan Documents, to the restructure of the Obligations, and any
such merger, change, restructuring or termination shall not affect the liability
of any Debtor or the continuing effectiveness hereof, or the enforceability
hereof with respect to all or any part of the Obligations.
1.3 Upon the occurrence and during the continuance of any Event of
Default,
3.
<PAGE> 4
Foothill may enforce the Loan Documents independently as to each Debtor and
independently of any other remedy or security Foothill at any time may have or
hold in connection with the Obligations, and it shall not be necessary for
Foothill to marshal assets in favor of any Debtor or any other Person or to
proceed upon or against or exhaust any security or remedy before proceeding to
enforce the Loan Agreement. Each Debtor expressly waives any right to require
Foothill to marshal assets in favor of any Debtor or any other Person or to
proceed against any other Debtor, any other Person, or any collateral provided
by any Person, and agrees that Foothill may proceed against any Debtor, any
other Person, or any collateral in such order as it shall determine in its sole
and absolute discretion.
1.4 Foothill may file a separate action or actions against any Debtor,
whether such action is brought or prosecuted with respect to any security or
against any other Person, or whether any other Person is joined in any such
action or actions. Each Debtor agrees, for itself, that Foothill and any other
Debtor, or any Affiliate of any other Debtor (other than such Debtor itself),
may deal with each other in connection with the Obligations or otherwise, or
alter any contracts or agreements now or hereafter existing between any of them,
in any manner whatsoever, all without in any way altering or affecting the
continuing efficacy as to such Debtor of the Loan Documents.
1.5 The rights of Foothill created or granted herein with respect to
any Debtor and the enforceability of the Loan Documents as to any Debtor at all
times shall remain effective to cover the full amount of all the Obligations
even though the Obligations, including any part thereof or any other security or
guaranty therefor, may be or hereafter may become invalid or otherwise
unenforceable as against any other Debtor and whether or not any other Debtor
shall have any personal liability with respect thereto.
1.6 To the maximum extent permitted by applicable law, each Debtor, for
itself, expressly waives any and all defenses now or hereafter arising or that
otherwise might be asserted by reason of
(a) any disability or other defense of any other Debtor with
respect to the Obligations, or with respect to the enforceability of Foothill's
security interest in or lien on any collateral securing any of the Obligations
(including, without limitation, the Collateral),
(b) the unenforceability or invalidity of any security or
guaranty for the Obligations or the lack of perfection or continuing perfection
or failure of priority of any security for the Obligations,
(c) the cessation for any cause whatsoever of the liability of
any other
4.
<PAGE> 5
Debtor (other than by reason of the full payment and performance of all
Obligations),
(d) any failure of Foothill to marshal assets in favor of any
Debtor or any other Person,
(e) any failure of Foothill to give notice of sale or other
disposition of collateral to any other Debtor or any other Person other than
such waiving Debtor, or any defect in any notice that may be given to any other
Debtor or any other Person other than such waiving Debtor, in connection with
any sale or disposition of any collateral securing the Obligations or any of
them (including, without limitation, the Collateral),
(f) any failure of Foothill to comply with applicable law in
connection with the sale or other disposition of any collateral or other
security for any Obligation that is owned by another Debtor or by any other
Person other than such waiving Debtor, including any failure of Foothill to
conduct a commercially reasonable sale or other disposition of any such
collateral or other security for any Obligation,
(g) any act or omission of Foothill or others that directly or
indirectly results in or aids the discharge or release of any other Debtor, or
the Obligations of any other Debtor, or any security or guaranty therefor, by
operation of law or otherwise,
(h) any law which provides that the obligation of a surety or
guarantor must neither be larger in amount nor in other respects more burdensome
than that of the principal or which reduces a surety's or guarantor's obligation
in proportion to the principal obligation,
(i) any failure of Foothill to file or enforce a claim in any
bankruptcy or other proceeding with respect to any Person other than such
waiving Debtor,
(j) the election by Foothill of the application or
non-application of Section 1111(b)(2) of the Bankruptcy Code,
(k) any extension of credit or the grant of any lien under
Section 364 of the Bankruptcy Code,
(l) any use of cash collateral under Section 363 of the
Bankruptcy Code,
(m) any agreement or stipulation with respect to the provision
of adequate protection in any bankruptcy proceeding of any Person,
(n) the avoidance of any lien in favor of Foothill for any
reason, or
5.
<PAGE> 6
(o) any action taken by Foothill that is authorized by this
section or any other provision of any Loan Document. Until such time, if any, as
all of the Obligations have been paid and performed in full and no portion of
any commitment of Foothill to any Debtor under any Loan Document remains in
effect, no Debtor shall have any right of subrogation, contribution,
reimbursement or indemnity, and each Debtor expressly waives any right to
enforce any remedy that Foothill now has or hereafter may have against any other
Person and waives the benefit of, or any right to participate in, any collateral
now or hereafter held by Foothill. Except to the extent expressly provided for
in any Loan Document, each Debtor expressly waives, to the maximum extent
permitted by applicable law, all rights or entitlements to presentments, demands
for payment or performance, notices of nonpayment or nonperformance, protests,
notices of protest, notices of dishonor and all other notices or demands of any
kind or nature whatsoever with respect to the Obligations, and all notices of
acceptance of the Loan Documents or of the existence, creation or incurring of
new or additional Obligations.
1.7 In the event that all or any part of the Obligations at any time
should be or become secured by any one or more deeds of trust or mortgages or
other instruments creating or granting liens on any interests in real property,
each Debtor authorizes Foothill, upon the occurrence of and during the
continuance of any Event of Default, at its sole option, without notice or
demand except as is or may be expressly required by the terms of any Loan
Document or by the provisions of any applicable law, to foreclose any or all of
such deeds of trust or mortgages or other instruments by judicial or nonjudicial
sale, without affecting or diminishing, except to the extent of the effect of
the application of the proceeds realized therefrom, and except to the extent
mandated by any non-waivable provision of applicable law, the Obligations of any
Debtor (other than the Obligations of a grantor of a foreclosed deed of trust,
mortgage, or other instrument, to the extent, if any, that applicable law
affects or diminishes the Obligations of such grantor), the enforceability of
the Loan Agreement or any other Loan Document, or the validity or enforceability
of any remaining security interests or liens of, or for the benefit of, Foothill
on any collateral.
1.8 To the fullest extent permitted by applicable law, each Debtor
expressly waives any defenses to the enforcement of the Loan Agreement, or to
the enforcement of any other Loan Document, or to any rights of Foothill created
or granted hereby or thereby, or to the recovery by Foothill against any Debtor
or any other Person liable therefor of any deficiency after a judicial or
nonjudicial foreclosure or sale of any collateral, whether real or personal,
from time to time securing any of the Obligations, even though such a
foreclosure or sale may impair the subrogation rights of one or more of the
Debtors and may preclude one or more of the Debtors from obtaining reimbursement
or contribution from other Debtors. To the fullest extent permitted by
applicable law, each Debtor expressly waives any defenses or benefits that may
be derived from California
6.
<PAGE> 7
Code of Civil Procedure SectionSection 580a, 580b, 580d or 726, or comparable
provisions of the laws of any other jurisdiction, and all other suretyship
defenses it otherwise might or would have under California law or other
applicable law. To the fullest extent permitted by applicable law, each Debtor,
for itself, expressly waives any right to receive notice of any judicial or
nonjudicial foreclosure or sale of any real property or interest therein of
another Debtor that is subject to any such deeds of trust or mortgages or other
instruments, and any Debtor's failure to receive any such notice shall not
impair or affect such Debtor's obligations or the enforceability of the Loan
Documents or any rights of Foothill created or granted hereby or thereby.
1.9 Each Debtor hereby agrees to keep each other Debtor fully apprised
at all times as to the status of its business, affairs, finances, and financial
condition, and its ability to perform its Obligations under the Loan Documents,
and in particular as to any adverse developments with respect thereto. Each
Debtor hereby agrees to undertake to keep itself apprised at all times as to the
status of the business, affairs, finances, and financial condition of each other
Debtor, and of the ability of each other Debtor to perform its Obligations under
the Loan Documents, and in particular as to any adverse developments with
respect to any thereof. Each Debtor hereby agrees, in light of the foregoing
mutual covenants to inform each other, and to keep themselves and each other
informed as to such matters, that Foothill shall have no duty to inform any
Debtor of any information pertaining to the business, affairs, finances, or
financial condition of any other Debtor, or pertaining to the ability of any
other Debtor to perform its Obligations under the Loan Documents, even if such
information is adverse, and even if such information might influence the
decision of one or more of the Debtors to continue to be jointly and severally
liable for, or to provide Collateral for, Obligations of one or more of the
other Debtors. To the fullest extent permitted by applicable law, each Debtor
hereby expressly waives any duty of Foothill to inform any Debtor of any such
information.
1.10 Debtors and each of them warrant and agree that each of the
waivers and consents set forth herein are made after consultation with legal
counsel and with full knowledge of their significance and consequences, with the
understanding that events giving rise to any defense or right waived may
diminish, destroy, or otherwise adversely affect rights that Debtors otherwise
may have against other Debtors, Foothill, or others, or against Collateral, and
that, under the circumstances, the waivers and consents herein given are
reasonable and not contrary to public policy or law. If any of the waivers or
consents herein are determined to be contrary to any applicable law or public
policy, such waivers and consents shall be effective to the maximum extent
permitted by law.
1.11 Anything to the contrary in this Agreement notwithstanding,
nothing in this Agreement shall constitute a waiver or relinquishment by any
Debtor (a) of any right to notice from Foothill expressly provided for in favor
of such Debtor in any Loan
7.
<PAGE> 8
Document, or (b) of any duty or obligation of Foothill expressly provided for in
favor of such Debtor in any Loan Document.
2. MISCELLANEOUS.
2.1 Section headings and numbers have been set forth herein for
convenience only. Unless the contrary is compelled by the context, everything
contained in each section applies equally to this entire agreement.
2.2 This Agreement shall bind and inure to the benefit of the
respective successors and permitted assigns of each of the parties.
2.3 Neither this Agreement nor any uncertainty or ambiguity herein
shall be construed or resolved against Foothill or any Debtor, whether under any
rule of construction or otherwise. On the contrary, this Agreement has been
reviewed by all parties and shall be construed and interpreted according to the
ordinary meaning of the words used so as to fairly accomplish the purposes and
intentions of all parties hereto.
2.4 Each provision of this Agreement shall be severable from every
other provision of this Agreement for the purpose of determining the legal
enforceability of any specific provision.
2.5 This Agreement can only be amended by a writing signed by both
Foothill and the Debtors.
2.6 This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, shall be deemed to be an original, and all of which, when taken
together, shall constitute but one and the same Agreement. Delivery of an
executed counterpart of this Agreement by telefacsimile shall be equally as
effective as delivery of a manually executed counterpart of this Agreement. Any
party delivering an executed counterpart of this Agreement by telefacsimile also
shall deliver a manually executed counterpart of this Agreement but the failure
to deliver a manually executed counterpart shall not affect the validity,
enforceability, and binding effect of this Agreement.
2.7 This Agreement is a Loan Document.
[remainder of page intentionally left blank]
8.
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in Los Angeles, California.
MIDCOM COMMUNICATIONS INC.,
a Washington corporation
By_________________________
Title:_____________________
ADVAL, INC.,
an Oregon corporation
By_________________________
Title:_____________________
ADVAL DATA CORPORATION,
an Oregon corporation
By_________________________
Title:_____________________
ADVANCED NETWORK DESIGN,
a California corporation
By_________________________
Title:_____________________
9.
<PAGE> 10
CEL-TECH INTERNATIONAL CORP.,
a Washington corporation
By___________________________
Title:_______________________
PACNET INC.,
a Washington corporation
By___________________________
Title:_______________________
FOOTHILL CAPITAL CORPORATION,
a California corporation
By___________________________
Title:_______________________
10.
<PAGE> 1
EXHIBIT 11.1
MIDCOM COMMUNICATIONS INC.
EXHIBIT 11.1 STATEMENT RE: COMPUTATION OF NET LOSS PER SHARE
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
(In thousands, except per share data) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Net loss $(19,731) $(14,500)
Weighted average shares outstanding 15,852 15,199
Net loss per share $( 1.24) $( 0.95)
</TABLE>
- --------------------------------------------------------------------------------
20
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 12,247,000
<SECURITIES> 0
<RECEIVABLES> 23,671,000
<ALLOWANCES> 6,004,000
<INVENTORY> 0
<CURRENT-ASSETS> 31,753,000
<PP&E> 33,130,000
<DEPRECIATION> 13,985,000
<TOTAL-ASSETS> 67,126,000
<CURRENT-LIABILITIES> 45,792,000
<BONDS> 0
0
0
<COMMON> 68,974,000
<OTHER-SE> (157,216,000)
<TOTAL-LIABILITY-AND-EQUITY> 67,126,000
<SALES> 24,306,000
<TOTAL-REVENUES> 24,306,000
<CGS> 17,977,000
<TOTAL-COSTS> 24,036,000
<OTHER-EXPENSES> (283,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,307,000
<INCOME-PRETAX> (19,731,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (19,731,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (19,731,000)
<EPS-PRIMARY> (1.24)
<EPS-DILUTED> (1.24)
</TABLE>
