SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM 10-Q
(Mark One)
___ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
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: 000-21261
VIATEL, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3787366
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
685 Third Avenue
New York, New York
(Address of principal executive offices)
10022
(Zip Code)
(212) 350-9200
(Registrant's telephone number, including area code)
--------------------------------------------------
(Former name,former address and former fiscal year,if changed since last report)
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 No
As of May 13, 1999, 23,227,013 shares of the registrant's Common Stock,
$.01 par value, were outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
VIATEL, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
( in thousands, except share data)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
ASSETS (Unaudited)
---------------- ----------------
---------------- ----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $442,042 $ 329,511
Restricted cash equivalents 23,530 10,310
Restricted marketable securities, current 90,430 50,870
Marketable securities, current 56,713 171,771
Trade accounts receivable, net of allowance for doubtful accounts of
$2,966 and $3,093, respectively 47,107 28,517
Other receivables 14,463 13,404
Prepaid expenses 8,512 2,417
---------------- ----------------
Total current assets 682,797 606,800
---------------- ----------------
---------------- ----------------
Restricted marketable securities, non-current 115,836 83,343
Property and equipment, net 409,909 266,256
Cash securing letters of credit for network construction 121,239 -
Intangible assets, net 70,579 49,968
Other assets 11,630 5,744
---------------- ----------------
================ ================
$1,411,990 $1,009,111
================ ================
================ ================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accrued telecommunications costs $ 41,913 $26,518
Accounts payable and other accrued expenses 25,379 23,656
Property and equipment purchases payable 141,361 97,288
Accrued interest 27,288 12,240
Liability under joint construction agreement 9,631 9,523
Current installments of notes payable and obligations under capital 10,008 8,918
leases ---------------- ----------------
---------------- ----------------
Total current liabilities 255,580 178,143
---------------- ----------------
---------------- ----------------
Long-term liabilities:
Long term debt 1,256,196 896,503
Notes payable and obligations under capital leases, excluding
current installments 36,286 24,636
---------------- ----------------
Total long-term liabilities 1,292,482 921,139
Series A Redeemable Convertible Preferred Stock, $.01 par value; Authorized
718,042 Shares; issued and outstanding 472,791 and 461,258 shares, respectively 48,298 47,121
---------------- ----------------
Commitments and contingencies
Stockholders' deficiency:
Preferred Stock, $.01 par value. Authorized 1,281,958 shares, no shares
issued and outstanding - -
Common Stock, $.01 par value. Authorized 50,000,000 shares, issued and
outstanding 23,193,265 and 23,184,465 shares, respectively 232 232
Additional paid-in capital 128,403 128,357
Accumulated other comprehensive loss (15,082) (6,246)
Accumulated deficit (297,923) (259,635)
---------------- ----------------
---------------- ----------------
Total stockholders' deficiency (184,370) (137,292)
---------------- ----------------
================ ================
$1,411,990 $1,009,111
================ ================
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
VIATEL, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
(in thousands, except per share data)
For the Three Months Ended
March 31,
--------------------------------
1999 1998
----------------- --------------
Revenue:
Communication service revenue $ 48,395 $ 21,239
Capacity sales 13,246 -
----------------- --------------
Total revenue 61,641 21,239
----------------- --------------
Operating expenses:
Cost of service and sales 51,048 19,105
Selling, general and administrative 18,763 8,955
Depreciation and amortization 9,603 2,911
----------------- --------------
Total operating expenses 79,414 30,971
----------------- --------------
Other income (expense):
Interest income 6,828 510
Interest expense (26,166) (3,781)
----------------- --------------
Net loss (37,111) (13,003)
Dividend on redeemable convertible
preferred stock (1,177) -
----------------- --------------
Net loss attributable to common stockholders $ (38,288) $ (13,003)
================= ==============
Net loss per common share attributable to
common stockholders $ (1.65) $ (0.57)
================= ==============
Weighted average common shares outstanding 23,186 22,783
See accompanying notes to consolidated financial statements.
3
<PAGE>
VIATEL, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
For the Three Months Ended
<TABLE>
<CAPTION>
March 31,
-----------------------------------
1999 1998
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(37,111) $ (13,003)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 9,603 2,911
Accreted interest expense on long term debt 10,330 3,447
Provision for losses on accounts receivable 1,600 754
Earned compensation - 16
Changes in assets and liabilities:
Increase in accounts receivable (18,936) (2,732)
Increase in accrued interest expense on senior notes 15,049 -
Increase in prepaid expenses and other receivables (8,855) (1,248)
(Increase)decrease in other assets and intangible assets (947) 555
Increase(decrease) in accrued telecommunication costs, accounts
payable and other accrued expenses 7,689 (1,471)
---------------- ----------------
Net cash used in operating activities (21,578) (10,771)
---------------- ----------------
Cash flows from investing activities:
Purchase of property, equipment and software (101,691) (2,716)
Payment for business acquired, net of cash acquired - (5,000)
Purchase of marketable securities (194,058) (3,510)
Cash securing letters of credit (121,239) -
Issuance of notes receivable (4,390) -
Proceeds from maturity of marketable securities 220,954 27,681
---------------- ----------------
Net cash (used in) provided by investing activities (200,424) 16,455
---------------- ----------------
Cash flows from financing activities:
Proceeds from issuance of senior notes 365,471 -
Deferred financing costs (12,880) -
Proceeds from issuance of common stock 46 421
Repayment of notes payable and bank credit line (682) (577)
Payments under capital leases (300) (53)
---------------- ----------------
Net cash provided by (used in) financing activities 351,655 (209)
---------------- ----------------
Effects of exchange rate changes on cash (3,902) (109)
---------------- ----------------
Net increase in cash and cash equivalents 125,751 5,366
Cash and cash equivalents at beginning of period 339,821 21,096
================ ================
Cash and cash equivalents at end of period $ 465,572 $ 26,462
================ ================
Supplemental disclosures of cash flow information:
Interest paid $ 231 $ 334
================ ================
Assets acquired under capital lease obligations $ 13,550 -
================ ================
See accompanying notes to consolidated financial statements.
</TABLE>
4
<PAGE>
VIATEL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Information as of March 31, 1999 and for the periods
ended March 31, 1999 and 1998 is unaudited)
(1) DESCRIPTION OF BUSINESS
Viatel Inc. and subsidiaries (collectively, the "Company") is a global
integrated services provider of high quality, competitively priced, long
distance communication and data services to end users, carriers and
resellers. The Company operates one of Europe's largest pan-European
networks with points of presence in 45 cities, direct sales forces in
twelve Western European cities and an indirect sales force in more than 180
locations in Western Europe. The Company is currently constructing a series
of state-of-the-art, high quality, high capacity, self-healing fiber optic
rings utilizing the synchronous digital hierarchy standard for digital
transmission which will connect major cities in six European countries (the
"Circe Network").
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION The consolidated financial statements as of March 31,
1999 and for the three month periods ended March 31, 1999 and 1998,
respectively, have been prepared by the Company without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission. In the
opinion of management, all adjustments (consisting of only normal recurring
adjustments) necessary for a fair presentation of the consolidated
financial position, results of operations and cash flows for each period
presented have been made on a consistent basis. Certain information and
footnote disclosures normally included in consolidated financial statements
prepared in accordance with generally accepted accounting principles have
been condensed or omitted pursuant to such rules and regulations although
management believes that the disclosures herein are adequate to make the
information presented not misleading. It is suggested that these financial
statements be read in conjunction with the Company's annual consolidated
financial statements. Certain reclassifications have been made to the prior
year's financial statements to conform to the current year's presentation.
Operating results for the three months ended March 31, 1999 may not be
indicative of the results that may be expected for the full year.
CAPACITY SALES Customers of the company can purchase capacity on the
the Company's Network. Revenues from the sale of network capacity are
recognized in the period that the rights and obligations of ownership
transfer to the purchaser.
Cost of IRU sales in any period is determined based upon the ratio of total
capacity sold and total anticipated capacity to be utilized multiplied by
the related total costs of the relevant portion of the Network.
NEW PRONOUNCEMENTS The Company adopted Statement of Position 98-5 (SOP
98-5), "Reporting on the Costs of Start-Up Activities," issued by the
American Institute of Certified Public Accountants, during the three months
ended March 31, 1999. SOP 98-5 requires that certain start-up expenditures
and organization costs previously capitalized must now be expensed. The
adoption of this statement did not have material effect on our consolidated
financial statements.
(3) INVESTMENTS IN DEBT SECURITIES
Management determines the appropriate classification of its investments in
debt securities at the time of purchase and classifies them as held to
maturity or available for sale. These investments are diversified among
high credit quality securities in accordance with the Company's investment
policy. Debt securities that the Company has both the intent and ability to
hold to maturity are carried at amortized cost. Debt securities for which
the Company does not have the intent or ability to hold to maturity are
classified as available for sale. Securities available for sale are carried
at fair value, with the unrealized gains and losses, net of tax, reported
in a separate component of stockholders' equity. The Company does not
invest in securities for the purpose of trading and therefore does not
classify any securities as trading.
5
<PAGE>
Debt securities classified as held to maturity are adjusted for
amortization of premiums and accretion of discounts to maturity over the
estimated life of the security. Such amortization and interest are included
in interest income. There were no securities classified as available for
sale as of March 31, 1999.
The following is a summary of the amortized cost, which approximates fair
value, of marketable securities held to maturity at March 31, 1999 (in
thousands) :
U.S. corporate debt securities $34,043
German corporate debt securities 22,670
-----------------
Total $56,713
=================
The following is a summary of the amortized cost, which approximates fair
value, of restricted securities held to maturity at March 31, 1999 (in
thousands) :
U.S. Treasury obligations $148,859
German government obligations 57,407
----------------
Total $206,266
================
The amortized cost, which approximates fair value, of restricted securities
held to maturity at March 31, 1999 are shown below (in thousands) :
Due within one year $ 90,430
Due after one through two years 115,836
-----------------
Total $ 206,266
=================
There were no changes in the classification of any securities held to
maturity or securities available for sale from the time of purchase to the
time of maturity or sale.
(4) PROPERTY AND EQUIPMENT
Property and equipment consists of the following as of (in thousands) :
March 31, December 31,
1999 1998
----------------- ------------------
Communication system $326,511 $ 96,193
Construction in progress 89,067 172,630
Furniture, equipment and other 17,742 16,450
Leasehold improvements 6,695 6,651
----------------- ------------------
440,015 291,924
Less accumulated depreciation and 30,106 25,668
amortization ================= ==================
$409,909 $266,256
================= ==================
At March 31, 1999, construction in progress primarily represents
construction of the Circe Network. For the three month period ended March
31, 1999 and the twelve month period ended December 31, 1998, $2.3 million
and $3.3 million of interest was capitalized, respectively.
In connection with the Company's joint construction of the civil works
associated with national communications networks being constructed in
Germany, the Company was required to obtain a letter of credit of
approximately $121.2 million (DM219.1 million) in support of its
obligations.
6
<PAGE>
(5) INTANGIBLE ASSETS
Intangible assets consist of the following as of (in thousands) :
March 31, December 31,
1999 1998
---------------- ----------------
Deferred financing and registration fees $44,427 $31,547
Licenses, trademarks, and servicemarks 9,464 10,031
Goodwill 20,270 8,744
Purchased software 3,096 1,859
Other 140 206
----------------- ---------------
77,397 52,387
Less accumulated amortization 6,818 5,419
================= ===============
$70,579 $46,968
================= ===============
The Company recognized its obligation to pay contingent consideration for
its 1998 acquisition based upon certain key operating performance targets
which were met during the period ended March 31, 1999.
(6) LONG TERM DEBT
On April 8, 1998, the Company completed an offering of units (the "Units
Offering") consisting of senior notes or senior discount notes due 2008 and
shares of 10% Series A Redeemable Convertible Preferred Stock due 2010
("Series A Preferred"), $.01 par value per share, of the Company and units
consisting of senior notes or senior discount notes due 2008 and
subordinated convertible debentures due 2011 (the "Subordinated
Debentures") through which it raised approximately $889.6 million of gross
proceeds ($856.6 million of net proceeds). The Company utilized $118.9
million of the proceeds from the Units Offering to retire its 15% Senior
Discount Notes due 2005 resulting in an extraordinary loss of $28.3
million. Additionally, a portion of the proceeds from the Units Offering
were used to purchase approximately $122.8 million of U.S. government
securities which were pledged as security for the first six interest
payments on the U.S. dollar denominated senior notes and approximately
$30.6 million of German government obligations which were pledged as
security for the first six interest payments on the Deutsche Mark
denominated senior notes issued in the Units Offering. The senior discount
notes accrete through April 15, 2003 and interest becomes payable in cash
in semi-annual installments thereafter. The interest on the senior notes is
payable in semi-annual installments. The Series A Preferred and the
Subordinated Debentures require quarterly payments which are paid in
additional securities, cash or any combination thereof through April 15,
2003 and payable in cash thereafter. The Series A Preferred and the
Subordinated Debentures are mandatorily convertible in the event the
closing price of the Company's common stock exceeds certain predetermined
annual price targets. On May 14, 1999, the conditions for mandatory
conversion were met for both the Series A Preferred and the Subordinated
Debentures (see "Subsequent Event - Conversion"). The Series A Preferred
and Subordinated Debentures conversion rates are $13.20 and $13.46
(approximately DM24.473), respectively.
On September 30, 1998, the Company consummated an offer to exchange senior
notes and senior discount notes due 2008 which have been registered under
the Securities Act of 1933, as amended, for outstanding notes of each such
series which were not registered under the Securities Act of 1933, as
amended.
On March 19, 1999 the Company completed a high yield offering (the "High
Yield Offering") through which it raised approximately $365.5 million of
gross proceeds. A portion of the proceeds from this offering were used to
purchase securities which were pledged as security for the first four
interest payments on the notes issued.
The indentures pursuant to which the senior notes and the senior discount
notes were issued contain certain covenants that, among other things, limit
the ability of the Company to incur additional indebtedness, pay dividends
or make certain other distributions, enter into transactions with
stockholders and affiliates and create liens on its assets. In addition,
upon a change of control, the Company is required to make an offer to
purchase the senior notes and the senior discount notes at a purchase price
equal to 101% of the principal amount, in the case of the senior notes, and
101% of the accreted value of the notes, in the case of the senior discount
notes. The indenture pursuant to which the Subordinated Debentures were
7
<PAGE>
issued also required that the Company offer to repurchase the debentures at
101% of the principal amount in the event of a change of control.
Long term debt consists of the following as of (in thousands) :
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------------- -----------------
<S> <C> <C>
11.25% Senior Notes $400,000 $400,000
11.15% Senior Notes (E91,010) 98,389 106,015
11.50% Senior Notes 200,000 -
11.50% Senior Notes (E150,000) 162,162 -
12.50% Senior Discount Notes, less discount of $193,664 306,336 297,284
12.40% Senior Discount Notes (E115,552), less discount of 76,828 80,355
$48,093 (E44,486)
10% Subordinated convertible debentures (E11,545) 12,481 12,849
================= =================
$1,256,196 $896,503
================= =================
</TABLE>
During 1997, the Company entered into Loan and Security Agreements pursuant
to which the Company borrowed an aggregate of $11.1 million. Under the
terms of these agreements, the Company is required to satisfy certain
covenants and restrictions. As of March 31, 1999, the Company was either in
compliance with, or had received waivers to, these covenants. Obligations
under these Loan and Security Agreements are secured by the grant of a
security interest in certain telecommunications equipment as well as a
portion of the payment obligations also being secured by letters of credit.
(7) STOCK INCENTIVE PLAN
The Amended Stock Incentive Plan (the "Stock Incentive Plan") provides for
the issuance of up to a maximum of 4,166,666 shares of the Company's common
stock.
Stock option activity for the three months ended March 31, 1999 under the
Stock Incentive Plan is shown below (share numbers in thousands) :
WEIGHTED AVERAGE NUMBER OF
EXERCISE PRICES SHARES
Outstanding at December 31, 1998 $ 7.41 2,594
Granted 22.88 573
Exercised 5.27 (9)
------ ---
Outstanding at March 31, 1999 $ 10.22 3,158
======= =======
As of March 31, 1999, 950,471 options were exercisable under the Stock
Incentive Plan
(8) COMPREHENSIVE LOSS
The Company's comprehensive loss is as follows (in thousands) :
For the Three Months Ended
March 31,
--------------------------------
1999 1998
--------------- ---------------
Net loss $(37,111) $(13,003)
Foreign currency translation adjustment (8,836) (517)
=============== ===============
Comprehensive loss $(45,947) $(13,520)
=============== ===============
8
<PAGE>
(9) ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 133 ("SFAS 133"),
"Accounting for Derivative Instruments and Hedging Activities," was issued
in June 1998. SFAS 133 standardizes the accounting for derivative
instruments, including certain derivative instruments embedded in other
contracts, by requiring recognition of those instruments as assets and
liabilities and to measure them at fair value. SFAS 133 will be effective
for the Company in the year 2000. The Company has not completed its
analysis of the impact of this statement on its financial statements but
does not currently believe it will be material.
(10) SEGMENT AND GEOGRAPHIC DATA
While the Company's chief decision maker monitors revenue streams of the
various products and geographic locations, operations are managed and
financial performance is evaluated based on the delivery of multiple,
integrated services to customers over a single network. As a result, there
are many shared expenses generated by the various revenue streams and
management believes that any allocation of the expenses incurred to
multiple revenue streams or geographic locations would be impractical and
arbitrary. Management does not currently make such allocations internally.
The Company groups its products and services by wholesale, retail, and
capacity. The information below summarizes revenue by customer type for the
three months ended March 31, 1999 and 1998, respectively (in thousands):
March 31,
---------- -----------
1999 1998
---------- -----------
Wholesale....................................... $21,061 $9,477
Retail.......................................... 27,334 11,762
Capacity........................................ 13,246 -
------- -------
Consolidated.................................... $61,641 $21,239
======= =======
The information below summarizes revenue by geographic area for the three
months ended March 31, 1999 and 1998, respectively (in thousands):
March 31,
---------- -----------
1999 1998
---------- -----------
Western Europe.................................. $41,449 $11,228
North America................................... 17,252 5,707
Latin America................................... 2,897 3,694
Asia/Pacific Rim and other...................... 43 610
------- -------
Consolidated.................................... $61,641 $21,239
======= =======
The information below summarizes long lived assets by geographic area as of
March 31, 1999 and December 31, 1998, respectively (in thousands):
March 31, December 31,
1999 1998
--------------- ---------------
Western Europe........................ $371,629 $237,443
North America......................... 108,641 75,492
Latin America......................... 218 289
-------- --------
Consolidated.......................... $480,488 $313,224
=============== ================
9
<PAGE>
(11) SUBSEQUENT EVENT - CONVERSION
On May 13, 1999, the Company's Series A Preferred Stock and its
Subordinated Debentures converted into shares of the Company's common
stock. The conversion will be based upon maintenance of the Company's stock
price above a certain per share price for a specified time period. The
Preferred Stock and the Subordinated Debentures converted at a conversion
price equal to $13.20 and approximately $13.40 (DM24.473) per share.
Accordingly, the Company will issue approximately 4.6 million shares of
common stock and will pay cash for any fractional shares due upon
conversion, which is deemed to be immaterial.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
We are a rapidly growing international communications company providing
high quality, competitively priced, long distance communication and data
services to end users, carriers and resellers. We maintain direct sales forces
in twelve Western European cities and an indirect sales force in more than 180
locations throughout Western Europe.
To capitalize on the opportunities presented by deregulation of the
telecommunication industry in Western Europe, we established an early presence
and acquired licenses, interconnection, and infrastructure. Today, we hold
licenses in Belgium, France, Germany, The Netherlands, Italy and the United
Kingdom and interconnection agreements with each incumbent telecommunications
operator in these countries. We also have licenses in Spain, and Switzerland and
expect to obtain interconnection in these countries.
We currently operate one of Europe's largest pan-European networks, with
points of presence in over 45 cities. We believe that control of network
infrastructure is critical to becoming a high quality, low cost provider of
communications services. We also believe that network ownership will enable us
to better manage service offerings. Accordingly, we are in the process of
migrating from a network comprised of international and domestic leased
infrastructure to a network primarily of owned infrastructure.
As part of our strategy to own or control key elements of our network, we
completed an offering of senior notes in March 1999 (the "High Yield Offering")
through which we raised approximately $365.5 million of gross proceeds. The
proceeds of the High Yield Offering along with proceeds from a previous
offering, which raised approximately $889.6 million of gross proceeds, are being
used to complete and construct our five interconnected state-of-the-art fiber
optic rings which, when completed, will link over 40 cities and six countries
which include the United Kingdom, France, Belgium, The Netherlands, Switzerland,
and Germany (the "Circe Network"). The Circe Network, when completed, will be
one of the largest cross-border fiber optic networks in the largest
telecommunications market in Western Europe. This five-ring system is expected
to encompass approximately 8,700 route kilometers
THE CIRCE NETWORK
The Circe Network is a series of state-of-the-art, high quality, high
capacity, self-healing rings, utilizing advanced synchronous digital hierarchy,
the current international standard for digital transmission, and dense wave
division multiplexing technology.
As planned, the Circe Network will be comprised of interlocking,
bi-directional rings, encompassing approximately 8,700 route kilometers of fiber
optic cable. The first phase of the Circe Network, consisting of approximately
1,800 route kilometers was completed in March 1999 and connects, among other
cities, London, Paris, Amiens, Brussels, Antwerp, Rotterdam, and Amsterdam.
Construction activity has also commenced on a second ring which is expected to
be placed into service during the third quarter of 1999 and will connect Paris,
Nancy, Strasbourg, Frankfurt, Dusseldorf, and Amsterdam. Construction on a third
ring which will connect Essen, Hamburg, Berlin, Dresden, Bremen, Leipzig,
Nurnberg, Munich, Stuttgart, Frankfurt and Koln has also begun and is expected
to be available during the first quarter of 2000. We anticipate that the fourth
and fifth phases of the Circe Network will extend into southern France and
Switzerland and will be completed during the second quarter of 2000.
We sell capacity on the Circe Network. Revenue from capacity sales that
qualify under generally accepted accounting principles to be treated as sales
are recognized under a line item titled "Capacity sales". Capacity sales are
recognized as revenue when the purchaser obtains the right to use the capacity.
The related cost of capacity is reported in the same period. With respect to
each sale of capacity, the related cost of capacity sales is equal to a
proportionate amount of the total capitalized cost of the network. Revenue from
operating leases of private line circuits, which are being included in
communication services revenue, are being recognized on a straight line basis
over the life of the lease. The portion of the total capitalized cost of the
Circe Network used to provide communication services circuits is being included
11
<PAGE>
in property and equipment and charged to depreciation and amortization over its
useful life. The sale of capacity on the Circe Network will vary substantially
from period to period and may result in fluctuations in our operating results.
During the first quarter of 1999 we began selling capacity on the Circe Network.
These sales substantially increase our gross profits (i.e., total revenue minus
cost of services and sale) and our gross margin (i.e., gross profits divided by
total revenues). As a result, our gross profits and gross margins will also
fluctuate substantially, in ways that will not necessarily reflect the trends in
our communications services business.
In addition, we expect to trade capacity on the Circe Network for capacity
on other cable systems. These trades of capacity are expected to be non-monetary
exchanges and are not expected to have a material effect on our statement of
operations. We will continue to incur selling, general and administrative
expenses with respect to the Circe Network, which will not be capitalized and
will affect our results of our operations, particularly while the Network is
being designed, built and placed into service, and will continue to incur
additional operating and maintenance expense until the Circe phases become
operational. As a result of financing the Circe Network with debt, we are
capitalizing a portion of the interest incurred that relates to the construction
of the Circe Network until it is placed in service and will incur increases in
interest expense thereafter.
The Circe Network will have a beneficial effect on our cost of services and
sales as well as net income (loss). This will occur as we bring traffic
"on-net," to facilities we own, as opposed to facilities that we lease from
other carriers. The expense associated with facilities we own is accounted for
in depreciation and amortization, while leased capacity is accounted for as a
cost of services and sales. As a result, one gross margins and profit will be
improved as we bring traffic "on-net". However, our net income (loss) are not
improved to the same extent. The effect of bringing traffic "on-net" will be
somewhat delayed, because our leased line agreements do not allow us to
terminate our obligations prior to fixed dates.
RESULTS OF OPERATIONS
The following table summarizes the breakdown of our results of operations
as a percentage of total revenue. Our total revenue, and therefore these
percentages, could fluctuate substantially from period to period due to capacity
sales, which have a substantially different impact on margins than
communications services.
For the Three Months Ended
March 31,
----------------------------
1999 1998
----------- -------------
Total revenue 100.0% 100.0%
Cost of services and sales 82.8% 90.0%
Selling, general and administrative expenses 30.4% 42.2%
Depreciation and amortization 15.6% 13.7%
EBITDA loss (1) (13.3%) (32.1%)
- --------------
(1) As used herein "EBITDA" consists of earnings before interest, income taxes,
extraordinary loss, dividends on convertible preferred stock and depreciation
and amortization. EBITDA is a measure commonly used in the telecommunications
industry to analyze companies on the basis of operating performance. EBITDA is
not a measure of financial performance under generally accepted accounting
principles, is not necessarily comparable to similarly titled measures of other
companies and should not be considered as an alternative to net income as a
measure of performance nor as an alternative to cash flow as a measure of
liquidity.
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THE THREE MONTHS ENDED MARCH
31, 1998
TOTAL REVENUE. Revenue is derived from communication service and capacity
sales. Total revenue increased by 190.2% to $61.6 million for the three months
ended March 31, 1999 from $21.2 million for the three months ended March 31,
1998. Within this growth was a 127.9% increase in communication services revenue
to $48.4 million on 270.8 million billable minutes for first quarter of 1999
from $21.2 million on 52.4 million billable minutes for first quarter of 1998.
Capacity sales were $13.2 million for the first quarter of 1999. We had no
12
<PAGE>
capacity sales during the first quarter of 1998, because the Circe Network did
not exist. Revenue growth for the first quarter of 1999 was generated primarily
by growth from European end user revenues and capacity sales.
A substantial increase in billable minutes from the first quarter of 1998
to the first quarter of 1999 was partially offset by a very substantial decline
in revenue per billable minute, primarily because of (i)a higher percentage of
lower-priced intra-European and national long distance traffic on the Company's
network and (ii) reductions in prices in response to price reductions by
incumbent telecommunications operators and other competitors in many of our
markets.
Communication services revenue per billable minute from the sale of
services to retail customers, which represented 44.3% of total revenue for the
three months ended March 31, 1999, compared to 55.2% for the three months ended
March 31, 1998, decreased 72.5% to $.14 in the first quarter of 1999 from $.51
in the first quarter of 1998. Communication services revenue per billable minute
from the sale of services to carriers and other resellers remained constant at
$.29 in the first quarter of 1999 and in the first quarter of 1998.
During the first quarter of 1999 as compared to the first quarter of 1998,
the Company increased its carrier business (through which we sell switched
minutes, private lines and ports to carriers, Internet Service Providers
("ISPs") and other resellers). Although this business has declined as a
percentage of communications service revenue, because our retail services grew
at a faster rate. The carrier business represented approximately 34.2% of total
revenue and approximately 27.1% of billable minutes for the three months ended
March 31, 1999 as compared to approximately 44.6% of total revenue and
approximately 56.2% of billable minutes for the three months ended March 31,
1998.
During the first quarter of 1999, approximately 67.2% of our total revenue
was generated in Western Europe as compared to approximately 52.9% of our total
revenue during the first quarter of 1998. Communications revenue derived from
North America represented approximately 28.0% of the Company's total revenue
during the three months ended March 31, 1999 compared to approximately 26.8% of
the Company's total revenue during the three months ended March 31, 1998. Total
revenues derived from Latin America represented approximately 4.7% of the
Company's total revenue during the three months ended March 31, 1999 compared to
approximately 17.3% of our total revenue during the three months ended March 31,
1998. Revenue from the Pacific Rim represented approximately 0.1% of our total
revenue during the three months ended March 31, 1999 compared to approximately
2.9% of the Company's total revenue during the three months ended March 31,
1998.
COST OF SERVICES AND SALES. Cost of services and sales increased to $51.0
million in the first quarter of 1999 from $19.1 million in the first quarter of
1998 and, as a percentage of total revenue, decreased to approximately 82.8%
from approximately 90.0% for the three months ended March 31, 1999 and 1998,
respectively. The $51.0 million includes costs associated with the sale of
capacity on the network. These costs did not occur in the first quarter of 1998.
The cost of the sold capacity represented non-cash charges of the pro rata cost
of the network asset and is determined based upon the ratio of total capacity
sold to total estimated capacity multiplied by the total capitalized costs of
the network. Our gross margin increased, as a result of capacity sales, as a
percentage of revenue, to 17.2% for the three months ended March 31, 1999 as
compared to 10.0% for the three months ended March 31, 1998.
Cost of services and sales continued to increase in the three months ended
March 31, 1999 in part because of the relatively high cost of leased
infrastructure. These costs are expected to decrease as a percentage of revenue
as the Company migrates from leased infrastructure to the Circe Network and
other owned capacity. The effect of bringing traffic "on-net" will be somewhat
delayed, because our leased line agreements do not allow early terminations of
our obligations
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased to $18.8 million in the three months ended
March 31, 1999 from $9.0 million in the three months ended March 31, 1998 and,
as a percentage of total revenue, decreased to approximately 30.4% in the three
13
<PAGE>
months ended March 31, 1999 from approximately 42.2% in the corresponding period
in 1998. Much of these expenses are attributable to overhead costs associated
with our headquarters, back office and operations as well as maintaining a
physical presence in seventeen different jurisdictions. We expect to incur
additional expenses as we continue to invest in operating infrastructure and
actively market our products and services. Salaries and commissions, as a
percentage of total selling, general and administrative expenses, were
approximately 47.5% and 52.3% for the three months ended March 31, 1999 and
1998, respectively. Advertising and promotion expenses, as a percentage of total
selling, general and administrative expenses, were approximately 5.1% and 1.1%
for the three months ended March 31, 1999 and 1998, respectively.
EBITDA LOSS. EBITDA loss increased to $8.2 million for the three months
ended March 31, 1999 from $6.8 million for the three months ended March 31,
1998. As a percentage of total revenue, EBITDA loss decreased to approximately
13.3% in the first quarter of 1999 from approximately 32.1% in the first quarter
of 1998.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense, which
includes depreciation of the Network, increased to approximately $9.6 million in
the three months ended March 31, 1999 from approximately $2.9 million in the
three months ended March 31, 1998. The increase was due primarily to the $367.8
million increase in gross property and equipment from $72.2 million at March 31,
1998 to $440.0 at March 31, 1999.
INTEREST. Interest expense increased from approximately $3.8 million in the
three months ended March 31, 1998 to approximately $28.4 million in the three
months ended March 31, 1999, primarily as a result of our aggregate debt, which
includes notes and capital leases payable, increasing from $203.2 million at
March 31, 1998 to $1.3 billion at March 31, 1999. During the three months ended
March 31, 1999, we capitalized $2.3 million of interest costs.
LIQUIDITY AND CAPITAL RESOURCES
We have incurred losses from operating activities in each year of
operations since our inception and expect to continue to incur operating and net
losses for the next several years. Since inception, we have utilized cash
provided by financing activities to fund operating losses and capital
expenditures. The sources of this cash have primarily been through private and
public equity and debt financings and, to a lesser extent, equipment-based
financing. As of March 31, 1999, we had $620.0 million of cash, cash
equivalents, cash securing letters of credit for network construction and other
liquid investments and $229.8 million of restricted cash equivalents, other
restricted investments which secure interest payments on our notes through April
2001 and cash securing letters of credit.
On March 19, 1999, we completed a High Yield Offering through which we
raised approximately $365 million of gross proceeds in a combination of Senior
Dollar Notes and Senior Euro Notes. A portion of the proceeds from the 1999 High
Yield Offering were used to purchase securities which were pledged as security
for the first four interest payments on both the Dollar Notes and the Euro
Notes.
On April 8, 1998, we completed the Units Offering through which we raised
approximately $889.6 million of gross proceeds ($856.6 million of net proceeds).
A portion of the proceeds from the 1998 high yield offering were utilized by the
Company to retire the 15% Senior Discount Notes due 2005 pursuant to a tender
offer. Additionally, a portion of the proceeds from the 1998 high yield offering
were used to purchase securities which were pledged as security for the first
six interest payments on the senior notes.
<PAGE>
We believe that the net proceeds from the High Yield Offering and the Units
Offering, together with cash and marketable securities on hand and the sale of
the capacity on the Circe Network, will provide sufficient funds for us to
expand our business as planned and to fund operating losses for at least the
next 12 to 18 months. However, the amount of future capital requirements will
depend on a number of factors, including the success of our business, the
start-up dates of each ring of the Circe Network, the dates at which we further
expand our network, the types of services we offer, staffing levels,
acquisitions and customer growth, as well as other factors that are not within
our control, including competitive conditions, government regulatory
developments and capital costs. In the event our plan or assumptions change or
prove to be inaccurate, we are unable to convert from leased to owned
infrastructure in accordance with our current plans or the net proceeds of our
offerings, cash and investments on hand, equity offerings and the proceeds from
the sale of capacity on the Circe Network prove to be insufficient to fund our
growth in the manner and at the rate currently anticipated, we may be required
to delay or abandon some or all of our development and expansion plans or we may
14
<PAGE>
be required to seek additional sources of financing earlier than currently
anticipated. In the event we are required to seek additional financing, there
can be no assurance that such financing will be available on acceptable terms at
all.
The Company recognized its obligation to pay contingent consideration for
its 1998 acquisition. Based upon certain key operating performance targets which
were met during the period ended March 31, 1999.
On May 13, 1999, the Company's Series A Preferred Stock and its
subordinated Debentures converted into shares of the Company's common stock. The
conversion was based upon maintenance of the Company's common stock above a
certain per share price for a specified time period. The Preferred Stock and the
subordinated Debentures converted at a conversion price equal to $13.20 and
approximately $13.42 (DM24.473) per share. Accordingly, the Company will issue
approximately 4.6 million shares of common stock and will pay cash for any
fractional share due upon conversion, which is deemed ot be immaterial.
CAPITAL EXPENDITURES AND COMMITMENTS. The development of our business has
required substantial capital expenditures. During the three months ended March
31, 1999, we had capital additions of approximately $171.4 million, which
included $13.60 million of assets acquired under capital leases, $44.1 million
of property and equipment and a $12 million contingent consideration for our
1998 acquisition. We have entered into certain agreements associated with the
Circe Network, purchased commitments for network expansion and other items
aggregating in excess of $225.0 million at March 31, 1999 Additionally, we have
minimum volume commitments to purchase transmission capacity from various
domestic and foreign carriers aggregating approximately $13.8 million for all of
1999.
FOREIGN CURRENCY. We have exposure to fluctuations in foreign currencies
relative to the U.S. Dollar as a result of billing portions of our
communications services revenue in the local European currency in countries
where the local currency is relatively stable while many of our obligations,
including a substantial portion of its transmission costs, are denominated in
U.S. Dollars. In countries with less stable currencies, such as Brazil, we bill
in U.S. Dollars. Debt service on certain of the notes issued by us are payable
in Euros. A substantial portion of capital expenditures are and will continue to
be denominated in various European currencies, including the Euro. Most of the
European currencies in which we do business converged effective January 1, 1999,
with the exception of the British Pound Sterling.
With the continued expansion of our Network, a substantial portion of the
costs associated with the network, like local access and termination charges and
a portion of the leased line costs, as well as a majority of local selling
expenses and debt service related to the Euro denominated notes, will be charged
to us in the same currencies as revenue is billed. These developments create a
natural hedge against a portion of our foreign exchange exposure. To date, much
of the funding necessary to establish the local direct sales organizations has
been derived from communications services revenue that was billed in local
currencies. Consequently, our financial position as of March 31, 1999 and our
results of operations for the three months ended March 31, 1999 were not
significantly impacted by fluctuations in the U.S. Dollar in relationship to
foreign currencies.
YEAR 2000
The Year 2000 ("Y2K") issue is the result of computer programs,
microprocessors and embedded date reliant systems using two digits rather than
four to define the applicable year. If such programs are not corrected, such
date sensitive computer programs, microprocessors and embedded systems may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculation causing disruptions in
operations.
In an effort to assess its Y2K state of readiness, during 1997 we began
performing a complete inventory assessment of all of our internal systems, which
we have divided into two categories, business essential, or mission critical,
and support systems, or non-mission critical. As part of our Y2K program and as
part of our overall procurement plan, we have sought to ensure that fixed assets
acquired were Y2K compliant. At December 31, 1997 gross property and equipment
was $67.0 million compared to $440.0 million at March 31, 1999, an increase of
556.7 percent in gross property and equipment. As part of this process, we have
inventoried, tested, and ensured Y2K compliance of our mission critical systems.
The inventory and testing of our business essential systems is complete.. The
backbone of our communications network is primarily composed of Nortel switches
which are Y2K compliant. Our message processing and billing systems, which are
used to record and process millions of call detail records, and our
transimission equipment are also Y2K compliant. The majority of our non-mission
critical systems are Y2K compliant. We anticipate being Y2K compliant during the
third quarter of 1999. The total estimated cost of ensuring our preparation for
Year 2000 is approximately $200,000, a portion of which has already been
incurred and expensed.
We have initiated formal communications with the key carriers and other
vendors on which our operations and infrastructure are dependent to determine
the extent to which the Company is susceptible to a failure resulting from such
third parties' inability to remediate their own Y2K problems. Accordingly,
during the procurement process, we have taken steps to ensure that our vendors,
carriers, and products purchased are Y2K compliant or are adequately addressing
the Year 2000 issues. There can be no assurance that the carriers and other
vendors on which our operations and infrastructure rely are or will be Y2K
compliant in a timely manner. Interruptions in the services
15
<PAGE>
provided to the Company by these third parties could result in disruptions in
our services. Depending upon the extent and duration of any such disruptions and
the specific services affected, such disruptions could have a material adverse
affect on our business, financial condition and results of operations. As a
contingency against any possible disruptions in services provided by vendors, we
have sought to diversify our vendor base. We believe that the diversity of our
vendor base is sufficient to mitigate Y2K related disruptions in service to the
Company's customers. In addition, our management believes that the fact we
conduct business in, and derive revenue from, multiple Western European
countries helps to mitigate the potential impact of Y2K related disruptions
In addition, disruptions in the economy generally resulting from the Y2K
issue could also have a material adverse affect on us. We could be subject to
litigation resulting from any disruption in its services. The amount of
potential liability or lost revenue cannot be reasonably estimated at this time.
EURO
On January 1, 1999, eleven of the fifteen member countries of the European
Union ("EU") established irrevocable fixed conversion rates between their
existing sovereign currencies and a single currency called the Euro. The
sovereign currencies are scheduled to remain legal tender as denominations of
the Euro during a transition period from January 1, 1999 to January 1, 2002.
We have completed an internal analysis regarding business and systems
issues related to the Euro conversion and, as a result, made necessary
modifications to its business processes and software applications. We are now
able to conduct business in both Euro and sovereign currencies on a parallel
basis, as required by the EU.
We believe that the Euro conversion has not and will not have a significant
impact on its business strategy in Europe. The costs to convert all systems to
be Euro compliant did not have a significant impact on our results of
operations.
INFLATION
We do not believe that inflation has had a significant effect upon
operations to date.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are subject to foreign currency exchange rate risk relating to receipts
from customers, payments to suppliers and interest and principal payments on the
outstanding Euro denominated senior notes, senior discount notes and
subordinated convertible debentures in foreign currencies. We do not consider
the market risk exposure relating to foreign currency exchange to be material.
See "Liquidity and Capital Resources-Foreign Currency."
We have financial instruments which are subject to interest rate risk,
principally short-term investments and debt obligations issued at a fixed rate.
Historically, we have not experienced material gains or losses due to interest
rate changes when selling short-term investments and typically holds these
securities until maturity. Based on current holdings of short-term investments,
our exposure to interest rate risk is not material. Fixed-rate debt obligations
issued by us are generally not callable until maturity.
16
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS.
*10.22 Project Services Agreement between Viatel, Inc. and
Bechtel Limited dated as of January 11, 1999.
*10.23 Development Agreement by and among Vicaine Infrastructure
Development GMBH, Viatel German Asset GMBH, Carrier 1
Fiber Network GMBH & Co. OH, Metromedia Fiber Network
GMBH, viatel, Inc. and Metromedia Fiber Network, Inc.
dated as of February 19, 1999.
27 Financial Data Schedule.
- ------------------------
* Confifential treatment is requested as to certain
portions
(B) REPORTS ON FORM 8-K.
A report on Form 8-K was filed by the Company on March 12,
1999 pursuant to Item 5 announcing that the Company has
priced a $365 million offering of debt securities consisting
of $200 million of U.S. denominated 11.50% Senior Notes Due
2009 and $165 million of Euro denominated 11.50% Senior Notes
Due 2009.
A report on Form 8-K was filed by the Company on March 18,
1999 pursuant to Item 5 to release its most current financial
information by filing it with the Securities and Exchange
Commission.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VIATEL, INC.
By: /s/ Michael J. Mahoney
-----------------------------------------
Michael J. Mahoney
President and Chief Executive Officer
By: /s/ Allan L. Shaw
-----------------------------------------
Allan L. Shaw
Senior Vice President, Finance and
Chief Financial Officer
Date: May 14, 1999
18
<PAGE>
EXHIBIT INDEX
Sequentially
NO. DESCRIPTION NUMBERED PAGE
*10.22 Project Services Agreement between Viatel, Inc. and
Bechtel Limited dated as of January 11, 1999.
*10.23 Development Agreement by and among Vicaine Infrastructure
Development GMBH, Viatel German Asset GMBH, Carrier 1
Fiber Network GMBH & Co. OH, Metromedia Fiber Network
GMBH, Viatel, Inc. and Metromedia Fiber Network, Inc.
dated as of February 19, 1999.
27 Financial Data Schedule.
- ------------------------
* Confidential treatment is requested as to certain
portions
- ---
EXHIBIT 10.22
- --------------------------------------------------------------------------------
PROJECT SERVICES AGREEMENT
DATED AS OF JANUARY 11, 1999
BETWEEN
VIATEL, INC.
AND
BECHTEL LIMITED
CIRCE CABLE PROJECT
CIRCE 2 SYSTEM
- --------------------------------------------------------------------------------
<PAGE>
- ii -
TABLE OF CONTENTS
PAGE NO.
SECTION 1. DEFINITIONS; INTERPRETATION..............................1
1.1 Defined Terms............................................1
1.2 Rules Of Construction....................................1
SECTION 2. RESPONSIBILITIES OF THE PARTIES..........................2
2.1 Program Manager's Responsibilities.......................2
2.2 Owner's Responsibilities.................................3
SECTION 3. COMPLIANCE WITH LAWS; PERMITS............................6
3.1 Compliance With Laws.....................................6
3.2 No Liability Of Owner Persons............................6
3.3 Variations Required By Law...............................6
3.4 Permits 6
SECTION 4. SUPPLIER CONTRACTS.......................................7
4.1 Generally................................................7
4.2 Terms And Conditions Of Supplier Contracts...............7
4.3 Approval7
4.4 Extension Of Time........................................7
4.5 Agency 7
SECTION 5. WAYLEAVES................................................8
5.1 Generally................................................8
5.2 Approval By The Owner....................................8
SECTION 6. INTELLECTUAL PROPERTY RIGHTS.............................9
6.1 Supplies.................................................9
6.2 Owner Contracts And Overall System Design................9
6.3 New Developments By the Program Manager..................9
6.4 The Program Manager's Existing Intellectual Property.....9
SECTION 7. REIMBURSABLE COSTS, FEES AND PAYMENTS TO THE
PROGRAM MANAGER.........................................10
7.1. Reimbursable Costs......................................10
7.2 Service Fees............................................10
7.3 Payments Generally......................................11
SECTION 8. MAINTENANCE OF BOOKS AND RECORDS........................14
8.1 System Records..........................................14
8.2 The Program Manager's Records...........................15
8.3 Access To Records.......................................15
SECTION 9. TAXES...................................................15
9.1 Responsibility For Taxes................................15
9.2 Exemption From Taxes....................................15
SECTION 10. CHANGE ORDERS...........................................15
10.1 Equitable Relief........................................15
10.2 Reduction in Scope of Services..........................17
10.3 Effect of Changes.......................................17
<PAGE>
- iii -
10.4 Procedure For Implementing Change Order Amendments......18
SECTION 11. GUARANTEED RFS DATE, DELAY DAMAGES, PERFORMANCE BONUS...18
11.1 Guaranteed RFS Date.....................................18
11.2 Effect of Schedule Incentive Fee........................18
11.3 Minimising Delay........................................19
SECTION 12. FORCE MAJEURE...........................................19
12.1 Definition..............................................19
12.2 Notice 20
12.3 Effect Of Force Majeure.................................20
SECTION 13. REPRESENTATIVES OF THE PARTIES..........................20
SECTION 14. INSPECTION RIGHTS.......................................21
14.1 Generally...............................................21
14.2 No Relief...............................................22
SECTION 15. SUSPENSION BY OWNER OR PROGRAM MANAGER..................22
15.1 Suspension By the Owner.................................22
15.2 Suspension By Program Manager...........................23
15.3 Extension Of Time And Stand-by Costs....................23
15.4 The Program Manager's Duties Upon Suspension............23
15.5 The Program Manager's Duties After Suspension...........24
SECTION 16. OPTIONAL TERMINATION....................................24
16.1 Termination.............................................24
16.2 Termination Date........................................24
16.3 Payment.................................................24
SECTION 17. EVENTS OF DEFAULT AND REMEDIES..........................24
17.1 Events Of Default By Program Manager....................24
17.2 No Prejudice............................................26
SECTION 18. DUTIES UPON TERMINATION BY OWNER........................26
18.1 Generally...............................................26
SECTION 19. LIMITATION OF LIABILITY.................................27
19.1 Supplies, Services, Work, Etc. Provided By Others.......27
19.2 Aggregate Cap On Liability..............................28
19.3 Loss Or Damage To The System............................28
19.4 Consequential Loss, Etc.................................29
19.5 Scope Of Limitations....................................29
19.6 Hazardous Waste Or Materials............................29
SECTION 20. WARRANTIES..............................................29
20.1 General Warranty of Services............................29
20.2 Liability In Respect Of The Services....................29
20.3 Alternative Remedy......................................29
20.4 Defects And Deficiencies................................30
SECTION 21. PERFORMANCE TESTS AND RFS CERTIFICATES..................30
21.1 Performance Testing Generally...........................30
21.2 Issuance Of RFS Certificates............................30
<PAGE>
- iv -
21.3 Punch List..............................................31
21.4 Effect of System RFS Certificate........................31
21.5 Final Acceptance........................................31
SECTION 22. REPRESENTATIONS AND WARRANTIES..........................31
22.1 The Program Manager's Representations And Warranties....31
22.2 The Owner's Representations And Warranties..............32
SECTION 23. INSURANCE...............................................33
23.1 Insurance Generally.....................................33
SECTION 24. CONFIDENTIALITY AND PROPRIETARY INFORMATION.............34
24.1 Confidentiality.........................................34
24.2 Publicity...............................................35
SECTION 25. CORRUPT GIFTS AND THE PAYMENT OF COMMISSIONS............35
25.1 Gifts, Etc..............................................35
25.2 Payments................................................35
25.3 Foreign Corrupt Practices Act...........................36
25.4 Permitted Activities....................................36
25.5 Materiality.............................................36
SECTION 26. RELATIONSHIP OF THE PARTIES.............................36
26.1 Generally...............................................36
26.2 Capacity Of Suppliers...................................36
SECTION 27. NOTICES.................................................36
27.1 Methods And Effectiveness...............................36
27.2 Addresses...............................................37
27.3 English Language........................................37
SECTION 28. DISPUTE RESOLUTION; CONSENT TO JURISDICTION.............38
28.1 Mutual Discussions......................................38
28.2 Resolution By Independent Senior Management.............38
28.3 Mediation...............................................38
28.4 Consent To Jurisdiction.................................38
SECTION 29. MISCELLANEOUS...........................................39
29.1 Headings................................................39
29.2 Governing Law...........................................39
29.3 Severability............................................39
29.4 Integration.............................................39
29.5 Amendments And Waivers..................................39
29.6 Further Assurances......................................39
29.7 Counterparts............................................39
29.8 Successors And Assigns..................................39
EXHIBITS
EXHIBIT A Defined Terms
EXHIBIT B Scope of Services
EXHIBIT C Technical Specification
EXHIBIT D Fee Schedule
<PAGE>
- v -
EXHIBIT E Recoverable Costs
EXHIBIT F Insurance Schedule
EXHIBIT G Supplier Contracts
EXHIBIT G-1 MATERIAL TERMS AND CONDITIONS OF SUPPLIER CONTRACTS
EXHIBIT G-2 FORM OF SUPPLIER CONTRACT
EXHIBIT H Form of Certificate of Payment and Final Release
EXHIBIT I Form of Lien Release
EXHIBIT J Schedule of Key Program Manager Personnel
EXHIBIT K Target Cost Assumptions
EXHIBIT L Wayleave Criteria
EXHIBIT M Owner Security
<PAGE>
PROJECT SERVICES AGREEMENT
--------------------------
THIS PROJECT SERVICES AGREEMENT is made this 11th day of January, 1999
BETWEEN:
(1) VIATEL, INC., a Delaware corporation (the "Owner"); and
(2) BECHTEL LIMITED, a United Kingdom limited liability company (the
"Program Manager").
WHEREAS:
(A) The Owner is developing the System (as hereinafter defined); and
(B) The Owner seeks to obtain, and the Program Manager desires to provide,
certain services for the program management and administration of
design, engineering, procurement, permitting, construction,
installation and testing of the System, with a view toward the delivery
to the Owner of an operable System incorporating network equipment and
other System components, as identified in the Technical Specification,
to be provided by contractors and suppliers engaged by the Owner.
NOW, THEREFORE, the Parties, in consideration of the mutual covenants herein
expressed, covenant and agree with each other as follows:
SECTION 1. DEFINITIONS; INTERPRETATION
---------------------------
1.1 DEFINED TERMS. As used in this Contract, capitalised terms shall have the
meanings ascribed thereto in Exhibit A hereto.
1.2 RULES OF CONSTRUCTION. In the interpretation of this Contract, unless the
context otherwise requires:
(a) The singular includes the plural and vice versa and, in particular
(but without limiting the generality of the foregoing), any word or expression
defined in the singular has the corresponding meaning used in the plural and
vice versa.
(b) The term "or" is not exclusive;
(c) The term "including" shall mean "including, without limitation."
(d) Any reference to any gender includes the other gender.
(e) Any reference to any agreement, instrument, contract or other
document shall:
(i) include all appendices, exhibits, annexes and schedules
thereto; and
<PAGE>
2
(ii) be a reference to such agreement, instrument, contract or
other document as amended, supplemented, modified, suspended, restated or
novated from time to time.
(f) Any reference to any Law or Codes and Standards shall include all
statutory and administrative provisions consolidating, amending or replacing
such Law or Codes and Standards, and shall include all rules and regulations
promulgated thereunder.
(g) Any reference to "hereof , "hereto", "herein", "hereunder" or any
other similar term is a reference to this Contract as a whole, and not to any
particular provision or part of this Contract.
(h) Any reference to any Person includes its permitted successors and
assigns.
(i) Unless otherwise specified, a reference to a Section or Exhibit is
to the Section or Exhibit of this Contract.
(j) Unless otherwise specified, any right may be exercised at any time
and from time to time.
(k) If an index or similar reference referred to in this Contract is
changed or no longer published or reported by the Person (or such Person's
successor) who, on the date hereof, publishes or reports such index or
reference, then the Parties shall use their best efforts to replace such index
with the best substitute for the changed or no-longer published index or
reference.
SECTION 2. RESPONSIBILITIES OF THE PARTIES
-------------------------------
2.1 PROGRAM MANAGER'S RESPONSIBILITIES.
(a) THE SERVICES. The Program Manager shall provide certain services of
the types identified in Exhibit B hereto (the "Services") for the program
management and administration of design, engineering, procurement, permitting
(including obtaining of Wayleaves and Permits), construction, installation and
testing of the System with a view toward the delivery to the Owner of an
operable System incorporating the Services, the Supplies, the Procured Services
and the Owner-Procured Equipment, in each case, to the extent specified in the
Technical Specification.
(i) SCOPE OF SERVICES. The scope of the Services is more fully
described in Exhibit B to this Contract and the Target Cost Assumptions set
forth in Exhibit K hereto.
(b) THE PROGRAM MANAGER'S PERSONNEL. The Program Manager shall employ
in connection with performance of this Contract only such Program Manager
Personnel who are safety-conscious, suitably skilled and experienced, and shall
agree to provide to the Owner, subject to the Owner's assumption of appropriate
confidentiality undertakings in respect thereof, all such resumes and other
relevant biographical and employment data as of such date on file with the
<PAGE>
3
Program Manager for the Program Manager Personnel as the Owner may reasonably
request. The Owner or the Owner's Project Representative may, but not
unreasonably or vexatiously, object to and direct the Program Manager to remove
within [REDACTED] any Program Manager Personnel from the Sites or the
performance of the Services; PROVIDED, that the Owner shall be entitled to
review to its satisfaction and pre-approve all Key Program Manager Personnel
proposals or appointments, and may, in its sole discretion upon reasonable
notice to the Program Manager, reject or remove any such Persons so proposed or
appointed. Any Person subject to removal or rejection by the Owner in accordance
with this Section 2.1 shall not be employed again for any portion of the
Services hereunder without the prior approval of the Owner's Project
Representative.
(c) LIMITATIONS ON PERSONNEL NUMBERS. Within the first [REDACTED] Days
after commencement of the Services, the Program Manager shall submit for the
approval of the Owner's Project Representative a staffing plan with respect to
the Full-Time Equivalent Personnel to be utilized by the Program Manager for the
duration of the Services. At the time of submission, on or before the [REDACTED]
calendar month, of each of the Program Manager's monthly progress reports, the
Program Manager may request an adjustment to the number of Full-Time Equivalent
Personnel as set forth in such staffing plan, and if the Owner's Project
Representative concurs with such adjustment, an appropriate revision will be
made thereto. In addition, the Program Manager may request an interim adjustment
to the staffing plan, as follows:
(i) if at any time the Program Manager reasonably believes that
the limitation on Full-Time Equivalent Personnel set forth in any staffing plan
is likely to cause a failure to meet the Guaranteed RFS Date, the Program
Manager shall so notify the Owner, and such notification shall set out the
Program Manager's proposal (containing work-around plans demonstrating with
reasonable specificity the nature, cause and likelihood of anticipated delays)
for an increase in the number of Full-Time Equivalent Personnel authorized by
the relevant staffing plan; and
(ii) to the extent that the Owner consents to any such proposed
increase in personnel numbers it shall do so in writing; PROVIDED, that any
increase so authorized shall relate exclusively to the calendar month covered by
the relevant staffing plan and shall, upon development of each successive
staffing plan, be subject to full review and adjustment by the Parties, which
adjustment may include a reduction in the quantity of Full-Time Equivalent
Personnel down to such level as was in effect prior to any approved increase.
2.2 OWNER'S RESPONSIBILITIES.
(a) INFORMATION AND ITEMS TO BE FURNISHED BY OWNER. The Owner shall
furnish to the Program Manager in writing data and design criteria and other
information necessary to provide the basis upon which the Program Manager shall
perform the Services. The Program Manager shall be entitled to rely upon such
data, criteria and information in its performance of the Services. The Owner
shall grant or obtain permission for the Program Manager Personnel, Owner
Contractors and Suppliers to enter the Sites and such of the Owner's facilities
as to which any such Person may render System-related services.
<PAGE>
4
The Owner shall furnish to the Program Manager or secure the items
required to be furnished or secured by it, including, but not limited to, the
Owner-Procured Equipment, at such times and in such manner as may be required to
enable the Program Manager to perform the Services within the Target Cost and by
the Guaranteed RFS Date. In any case where the Owner is to review work or
respond to requests from the Program Manager, it shall do so promptly,
reasonably and in good faith so as not to delay performance of the Services.
(b) OWNER CONTRACTORS. The Owner will enter into contracts with (each
of the following, an "OWNER CONTRACTOR"):
(i) [REDACTED] for the procurement of the Fiber Optic Cable;
(ii) [REDACTED] or other vendor with respect to the engineering,
acquisition, installation, commissioning and testing of electronics and
equipment for the POPs and the Repeater Facilities; and
(iii) Colliers or other commercial realtor for POP acquisition.
The Owner shall procure that each of the Owner Contractors will
cooperate with the Program Manager and will not interfere with or impede the
Program Manager in carrying out the Services.
(c) TELECOMS LICENCES. The Owner shall obtain any and all Telecoms
Licences required by applicable Law for it to act as a telecommunications
operator or to install telecommunications facilities in [REDACTED].
(d) WAYLEAVES. In relation to any application for, or the granting of,
any Wayleave required for the installation of the Duct, the Fiber Optic Cable or
the Repeater Facilities in accordance with the Technical Specification, the
Owner shall, to the extent that each of the Program Manager's submissions and
proposals complies in all respects with the applicable Wayleave Criteria and the
other requirements of this Contract,
(i) sign and deliver all Wayleave-related documentation submitted
to it by the Program Manager for signature (unless the Program Manager is duly
authorized to sign on the Owner's behalf) within:
(A) [REDACTED], in the case of Public Forms; or
(B) [REDACTED], in the case of Public Contracts; or
(C) [REDACTED], in the case of Alternative Wayleaves;
and
(ii) take such other steps as may be necessary (including payment
of any fees, premiums or rents), within such time periods as specified in the
relevant Wayleave documents or as otherwise necessary for the expeditious
granting thereof.
<PAGE>
5
(e) POINTS OF PRESENCE. The Owner shall be fully responsible for
finding buildings for the POPs and acquiring a legal interest in such buildings,
and in relation to each such building the Owner shall:
(i) promptly notify the Program Manager of its location;
(ii) obtain the Program Manager's approval of its general
suitability (such approval not to be unreasonably withheld by the Program
Manager) (but, for the avoidance of doubt, the Program Manager shall not carry
out a detailed survey of the building);
(iii) obtain any landlord's consent or authorization of any
Governmental Authority that may be required for the required refurbishment
works, change of use or operation of the Owner's telecommunications facilities;
and
(iv) give the Program Manager access to the building to allow
commencement of the refurbishment work in accordance with the current project
schedule.
(f) SYSTEM DESIGN AND TECHNOLOGY. The Owner shall be responsible for
overall system design and for the technology used.
2.3 OWNER-CAUSED DELAY. Any of the following events or circumstances, to the
extent having an actual and adverse effect upon the Program Manager's ability,
despite the exercise of Prudent Practices in its performance of the Services
hereunder, to meet the Guaranteed RFS Date and/or the Target Cost, shall
constitute Owner-Caused Delay (each such event or circumstance, an "Owner-Caused
Delay") subject to the equitable relief provisions of Section 10 hereof:
(i) acts or omissions of Owner Persons or Owner Contractors (A) causing
any casualty or damage to the System or any Owner-Procured Equipment, Services,
Procured Services or Supplies, or (B) wrongfully interfering with the provision
of the Services, Procured Services or Supplies; or
(ii) except to the extent that any relevant obligation of the Owner is
governed by another express provision (including, without limitation, clause
(iii) of this Section 2.3) of this Contract, the Owner's or any Owner Person's
failure to furnish any item of Owner-Procured Equipment (including the Owner's
or any Owner Person's failure to furnish items of Owner-Procured Equipment that
are free from defects and deficiencies) or any information (including the
Owner's failure to provide accurate and complete information) that it is
required to provide hereunder, which failure, in each case (A) relates to an
item that is necessary to the Program Manager in order to complete the Services
by the Guaranteed RFS Date and for the Target Cost and (B) continues (without
the Owner's furnishing thereof or accommodation therefor) for a period in excess
of [REDACTED] after the Program Manager's notice to the Owner thereof; or
(iii) the Owner's unreasonable refusal to review or approve, or any
unreasonable delay in its review, approval, signature or delivery of, any item
of Services (including, without limitation, the Wayleave-related documentation
specified in Sections 2.2 and 5 hereof) complying with this Contract, in each
<PAGE>
6
case, within the time periods specified in this Contract for such review or
approval; or
(iv) the failure by the Owner to make available to the Program Manager
and the Suppliers the Sites (including any such failure with respect to the POPs
to be delivered to the Program Manager in accordance with Section 2.2(e)) on a
timely basis, or any interruption (except for purposes of reasonable inspection
as envisioned by this Contract) in the availability to the Program Manager or
any Supplier of any such Site caused by any Owner Person (including by virtue of
the Owner's commercial use or operation of the System or any portion thereof);
or
(v) the Owner's exercise of suspension rights pursuant to Section 15.1
hereof.
SECTION 3. COMPLIANCE WITH LAWS; PERMITS
-----------------------------
3.1 COMPLIANCE WITH LAWS. The Program Manager shall comply with all Laws and
Codes and Standards of the countries, provinces and territories in which any
part of the Services are to be performed and with all international treaties in
any way affecting this Contract or applicable to any of the Services. For the
purpose of performing the Services, the Program Manager shall, as agent for the
Owner:
(a) give all notices required by Law to be given to any Governmental
Authority;
(b) perform or permit the performance by authorised Persons of any
inspection required by Law; and
(c) pay all fees, charges, impositions or any other moneys payable to
any Governmental Authority or any public officer in respect of the Services (and
all such fees, charges, impositions and other moneys shall constitute
Recoverable Costs);
in each case, except to the extent that the Owner is responsible hereunder for
doing so (pursuant to Section 2.2), or as the Owner may otherwise instruct.
3.2 NO LIABILITY OF OWNER PERSONS. No Owner Person shall be responsible for any
act or omission of the Program Manager that violates any Law. The Program
Manager shall indemnify and hold harmless each Owner Person from and against any
and all liabilities to third parties arising as a result of any such violation
by the Program Manager.
3.3 VARIATIONS REQUIRED BY LAW. The Program Manager shall, before making any
variation from any design, drawing, plan, procedure or other matter that may be
necessitated by complying with any Change in Law, give to the Owner written
notice, specifying the variations proposed to be made, and the reasons for
making them, and make proposals for a Change Order in accordance with Section
10.
<PAGE>
7
3.4 PERMITS. The Program Manager shall procure, as agent for the Owner, all
Permits necessary for System completion in accordance with this Contract, and
shall deliver such Permits and all related documentation to the Owner on or
before the System RFS Date. The Program Manager shall, in performing its
obligations under this Section 3.4, identify and present to the Owner for its
approval a detailed list of all Permits potentially required hereunder, and the
Owner shall promptly advise the Program Manager in writing of the Owner's
requirements and recommendations with respect to the procurement of the Permits
so identified by the Program Manager.
SECTION 4. SUPPLIER CONTRACTS
------------------
4.1 GENERALLY. The Program Manager shall, as agent for the Owner, negotiate and
prepare the Supplier Contracts, and in the case of any [REDACTED], the Program
Manager shall present the same to the Owner for approval. Where any [REDACTED],
the Program Manager shall be free to enter into the Supplier Contract, as agent
for the Owner, without obtaining the prior approval of the Owner.
4.2 TERMS AND CONDITIONS OF SUPPLIER CONTRACTS. Each Supplier Contract prepared
and negotiated by the Owner shall utilize the format, to the extent applicable,
of the form of Supplier Contract annexed as Exhibit G-2 to this Contract. The
Program Manager shall, subject to this Section 4.2, ensure that each Supplier
Contract presented to the Owner for approval incorporates all terms and
conditions (or terms and conditions offering protections that are equivalent to
or in excess of those) specified in Exhibit G-1 hereto as are applicable to such
Supplier Contract. If, despite the Program Manager's use of Prudent Practices,
it is not practicable (taking account of the cost implications and all other
relevant considerations) to incorporate into any Supplier Contract the terms and
conditions (or equivalent terms and conditions) specified in Exhibit G-1 hereto,
the Program Manager shall present to the Owner for its approval a Supplier
Contract incorporating the most favourable alternate terms (including the most
favourable alternate warranties in favour of the Owner) the Program Manager was
able to procure in its exercise of Prudent Practices.
4.3 APPROVAL. The Owner shall, within [REDACTED] of receiving a Supplier
Contract for approval, by written notice to the Program Manager either:
(a) approve the Supplier Contract; or
(b) specify in what respect it does not approve the Supplier Contract
and the steps that it requires the Program Manager to take in relation thereto;
and in the latter case the Program Manager shall employ Prudent Practices to
take all steps required by the Owner and, having done so, shall re-submit the
Supplier Contract to the Owner for approval, and the provisions of this Section
4.3 shall apply in respect thereof. The Owner's failure to provide any written
notice within the time period specified in this Section 4.3 shall result in the
relevant Supplier Contract being deemed for purposes of this Contract approved
in all respects by the Owner.
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8
4.4 EXTENSION OF TIME. If (i) the Owner requires the Program Manager to take
measures pursuant to Section 4.3(b), and (ii) the taking of such steps is likely
to cause the Program Manager delay in meeting the Guaranteed RFS Date, then,
unless the necessity for such measures or delay results from the Program
Manager's failure to [REDACTED] or comply with applicable Technical Requirements
in performing its obligations under this Section 4, the Program Manager shall be
entitled to an extension of time by means of a Change Order executed and
delivered in accordance with Section 10.
4.5 AGENCY. The Parties acknowledge and agree that:
(a) the Program Manager shall, unless otherwise directed by the Owner,
act as the Owner's agent in entering into and administering each Supplier
Contract, and shall, in such connection, perform the obligations (including
making payments on the Owner's behalf to Suppliers, subject to the Owner's
compliance with its payment obligations to the Program Manager under Section 7
hereof) and exercise the rights of the Owner thereunder; and
(b) notwithstanding the Program Manager's entry into Supplier Contracts
as agent for the Owner, the Program Manager shall not have any liability to the
relevant Suppliers under such Supplier Contracts, and all obligations owed to
the Supplier under the Supplier Contract shall be owed by the Owner.
SECTION 5. WAYLEAVES
---------
5.1 GENERALLY. As soon as practicable, the Program Manager shall, as agent for
the Owner, identify, conduct preliminary negotiations concerning, and present to
the Owner proposed terms and conditions for all such Public Wayleaves as are
necessary for the installation and operation of the Fiber Optic Cable, the Duct
and the Repeater Facilities. Each Public Wayleave so presented by the Program
Manager to the Owner shall satisfy all Wayleave Criteria applicable thereto, or,
if any such Public Wayleave is not available to the Owner due to a Change in
Law, Wayleave or Permit Failure, Owner-Caused Delay or Force Majeure Event, the
Program Manager shall prepare and present to the Owner a work-around plan
identifying alternative wayleaves or other System access rights ("Alternative
Wayleaves") complying with the Wayleave Criteria applicable thereto and the
other requirements of this Contract. All costs incurred by the Program Manager
in the preparation and submission to the Owner of Alternative Wayleave and
work-around proposals shall, to the extent that each relevant proposal has been
prepared and submitted in accordance with Prudent Practices, the Wayleave
Criteria and the requirements of this Contract, be reimbursed to the Program
Manager as Recoverable Costs.
5.2 APPROVAL BY THE OWNER. The Program Manager shall consult on an ongoing basis
with (and at all times during which Wayleave procurement is proceeding, report
on a weekly basis to) the Owner as to each Wayleave that it proposes to the
Owner. The Owner may reject any such proposal (or may instruct the Program
Manager to cease any further activity with respect thereto) if it determines
that the proposed Wayleave does not (or in the Owner's reasonable judgment, will
not) meet applicable Wayleave Criteria and, in the case of Alternative
Wayleaves, that the route, price or other commercial terms and conditions on
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9
which such Alternative Wayleave is or may be available will not be desirable in
light of the Technical Specification and the other requirements of the System.
In the case of proposals so rejected, terminated or suspended by the Owner, the
Program Manager shall be entitled to (i) reimbursement, as Recoverable Costs, of
any costs incurred as of the relevant rejection, termination or suspension date
(PROVIDED, in the case of suspension, that the Program Manager shall be entitled
to Reimbursable Costs for its resumption of Services with respect to any such
suspended Wayleave proposal) by the Program Manager in the negotiation,
preparation and presentation to the Owner of such rejected, terminated or
suspended Wayleave and (ii) schedule relief to the extent specified in Section
10 hereof, PROVIDED, that the Program Manager shall not be entited to such
schedule relief if the failure of any Wayleave proposal to meet the Wayleave
Criteria is the result of the Program Manager not having performed its
obligations in accordance with the General Warranty in light of such Wayleave
Criteria.
In the event of the Owner's refusal to grant schedule relief claimed by the
Program Manager in connection with any Wayleave proposal rejected in accordance
with this Section 5.2, the Program Manager may, upon written notice to the Owner
within [REDACTED] after such refusal, require that the matter be referred,
within [REDACTED] thereafter, to an independent expert appointed by the Parties'
respective senior management for resolution within [REDACTED] after such
referral.
SECTION 6. INTELLECTUAL PROPERTY RIGHTS
----------------------------
6.1 SUPPLIES. The Program Manager shall endeavour to procure that each Supplier
Contract, pursuant to which Supplies are provided for the System, contains
provisions whereby:
(a) the Owner is granted a licence in respect of Intellectual Property
Rights in the Supplies to the extent that such a licence is necessary for the
ownership, operation, maintenance and marketing of the System;
(b) the Supplier in question agrees to indemnify, protect, defend and
hold harmless the Owner and Program Manager from and against any liability to
third persons based upon, arising out of or otherwise related to an infringement
or claimed infringement of Intellectual Property Rights in the Supplies by
reason of the Owner's ownership, operation, maintenance or marketing of the
System.
Provided that if any Supplier shall refuse to agree to the
incorporation of such provisions despite the Program Manager's use of Prudent
Practices to secure such agreement, the Program Manager shall consult with the
Owner to agree on an appropriate course of action.
6.2 OWNER CONTRACTS AND OVERALL SYSTEM DESIGN. The Owner shall be responsible
for obtaining any licences which it requires in respect of Intellectual Property
Rights in the Owner-Procured Equipment or the overall network design for the
System and shall indemnify, protect, defend and hold harmless the Program
Manager from and against any liability to third persons based upon, arising out
<PAGE>
10
of or otherwise related to an infringement or claimed infringement of any such
Intellectual Property Rights by reason of the Program Manager's performance of
its obligations in accordance with Prudent Practices and the terms of this
Contract.
6.3 NEW DEVELOPMENTS BY THE PROGRAM MANAGER. If, in performing Services for
which the Program Manager is compensated by way of Recoverable Costs, the
Program Manager develops any new items or processes which are independent of
items or processes developed by the Program Manager otherwise than pursuant to
this Contract, any Intellectual Property Rights therein shall belong to the
Owner, and the Program Manager shall have a non-exclusive royalty-free licence
to use the same for any purposes, including the right to grant sub-licences in
respect thereof.
6.4 THE PROGRAM MANAGER'S EXISTING INTELLECTUAL PROPERTY. All Intellectual
Property Rights in items or processes developed by the Program Manager otherwise
than pursuant to this Contract shall remain the property of the Program Manager,
but to the extent that the Program Manager uses any such items or processes in
performing the Services, the Owner shall have a non-exclusive, royalty-free
license to use the same for any purpose connected with the System, including the
right to grant sub-licences for any such purpose.
SECTION 7. REIMBURSABLE COSTS, FEES AND PAYMENTS TO THE PROGRAM
MANAGER
----------------------------------------------------------
7.1. REIMBURSABLE COSTS. The Owner shall, within [REDACTED] after the Program
Manager's submission to the Owner of its Reimbursement Invoice in respect
thereof, reimburse the Program Manager for the full amount of all Reimbursable
Costs expended or disbursed by the Program Manager in performing the Services,
subject the Program Manager's compliance with the provisions of this Section 7.
The Program Manager shall be entitled to submit no more than 2 Reimbursement
Invoices in any calendar month.
(a) OWNER SECURITY. The Owner shall establish for the benefit of the
Program Manager, a letter of credit or equivalent escrow account (the "Owner
Security") on terms and with a bank reasonably acceptable to the Program Manager
as security for payment of the Reimbursable Costs. The Owner Security shall be
issued and outstanding at all times during performance of the Services in an
amount necessary to meet the monthly cash-flow requirements set forth in Exhibit
M hereto. Prior to exercising any rights against the Owner Security, the Program
Manager shall notify the Owner that the Owner has failed to pay, within the
period specified for such payment, an amount due and payable to the Program
Manager in respect of a Reimbursement Invoice duly submitted by the Program
Manager in accordance with this Section 7. The Owner shall, to the extent that
no Event of Default nor other event entitling the Owner to withhold payments to
the Program Manager has occurred and is continuing, reimburse the requested
amount to the Program Manager by the close of business on the [REDACTED] next
succeeding the Program Manager's notice, whereupon the Owner's failure to do so,
shall entitle the Program Manager to draw upon the Owner Security in the amount
of such outstanding payment.
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11
7.2 SERVICE FEES. The Program Manager shall be entitled to Service Fees as
follows:
(a) [REDACTED]
(b) INCENTIVE FEE. [REDACTED]
(i) SCHEDULE COMPONENT. A portion (the [REDACTED]) of the
Incentive Fee equal to [REDACTED] payable in respect of the Program Manager's
achievement of the System RFS Date by the Guaranteed RFS Date, which Schedule
Incentive Fee shall be subject, as applicable, to:
(A) reduction by an amount [REDACTED] of such Schedule
Incentive Fee, for each Day that shall elapse after the 15th Day following the
Guaranteed RFS Date until the System RFS Date up to a limit of the full amount
of such Schedule Incentive Fee; or
(B) increase by an amount [REDACTED] of such Schedule
Incentive Fee for each Day following the System RFS Date up to and including the
Guaranteed RFS Date, up to a limit of one half of such Schedule Incentive Fee;
and
(ii) COST COMPONENT. A portion (the [REDACTED]) of the Incentive
Fee equal to [REDACTED] payable in respect of the Program Manager's completion
of all Services for a Total Completion Cost equivalent to the Target Cost, which
Cost Incentive Fee shall be subject, as applicable, to:
(A) [REDACTED]
(B) [REDACTED]
7.3 PAYMENTS GENERALLY.
(a) PAYMENTS IN DOLLARS OR OTHER CURRENCY. All payments to the Program
Manager shall be made in Dollars except that, where the Program Manager incurs
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12
Reimbursable Costs in another currency, it may report and be reimbursed in the
original currency of expenditure.
(b) INTEREST. Any overpayment, late payment or disputed amount later
determined to have been due and payable shall, to the extent that such payment
or amount has not been paid or reimbursed within [REDACTED] the due date
therefor, accrue interest at the Interest Rate for each Day occurring after the
relevant due date until payment or reimbursement of such amount, together with
applicable interest, is made in full.
(c) TAXES. All payments to be made to the Program Manager hereunder
shall be made free and clear of any and all Taxes; provided, however, that:
(i) If the Owner:
(A) receives a notice, order or instruction from a competent
Governmental Authority that a Tax is required to be withheld by
Law; or
(B) otherwise has a reasonable belief that any tax is
required to be withheld from any payment due to the Program
Manager
then the Owner shall promptly so inform the Program
Manager as far in advance of any proposed withholdings as
practicable.
(ii) The Program Manager shall use its best efforts to obtain
documentary evidence from the relevant taxing authorities reasonably
satisfactory to the Owner that the Owner is not required to withhold such Tax.
If the Program Manager is unable to obtain such documentary evidence on a timely
basis, then the Owner shall proceed to withhold any such Tax. Thereafter, the
Owner shall, at the Program Manager's expense, provide any documentation or
other co-operation as may be reasonably requested by the Program Manager to
permit the Program Manager to recover any withheld amounts to which the Program
Manager is entitled.
(iii) The Program Manager shall protect, defend, indemnify in full
and hold harmless each Owner Person from and against any Losses based upon,
arising out of or otherwise related to Taxes that are owed by the Program
Manager to any taxing authority.
(c) EFFECT OF PAYMENT. No payment (final or otherwise) made under or in
connection with this Contract shall be conclusive evidence of the performance of
the Services, or of this Contract, in whole or in part, and no such payment
shall be construed:
(i) to constitute the acceptance of any Services that have not
been performed by the Program Manager in accordance with Prudent Practices or
any requirement of this Contract applicable thereto; or
(ii) to release the Program Manager from any of its obligations
under this Contract.
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13
(d) CONDITIONS TO PAYMENTS. The Owner shall have no obligation to pay
for any portion of the Services (including the payment of any Incentive Fee) in
the following circumstances, and may withhold any payment to be made to the
Program Manager hereunder (subject, however, to the Owner's release of the full
amount of such withholdings upon the Program Manager's cure of the relevant
deficiency or breach) the extent that:
(i) such portion (or in the case of the Incentive Fee, any item of
Services) has not been performed in accordance with the requirements of this
Contract (including the General Warranty); PROVIDED that:
(A) the Owner shall have notified the Program Manager in
writing, stating such failure or non-compliance with reasonable
specificity; and
(B) such notification is given as soon as reasonably
practicable after the Owner's discovery thereof;
PROVIDED FURTHER that, except to the extent that the Owner is
not otherwise entitled to do so on account of an Event of Default
pursuant to Section 17.1(a) hereof, nothing contained in this
provision shall entitle the Owner to withhold any sums on the
grounds of delay in performance of the Services; or
(ii) the Program Manager has not delivered (or has not caused to
be delivered) to the Owner the documentation required for payment in respect of
such portion of the Services pursuant to Section 7.3(e) hereof (or in the case
of the Incentive Fee, any of the documentation specified in subparagraph (ii) of
such Section 7.3(e)).
(e) PAYMENT DOCUMENTATION. The Program Manager shall deliver (or cause
to be delivered) to the Owner the following documentation in connection with,
and as a condition to, its receipt of the following payments:
(i) REIMBURSABLE COSTS. On or before [REDACTED] calendar month,
the Program Manager shall prepare and submit to the Project Representative its
projection (identifying, in the form of Exhibit K hereto, anticipated items of
Services, Supplies and Procured Services together with the Reimbursable Costs
payable in respect thereof) of the following month's anticipated Reimbursable
Costs. The Program Manager shall notify the Owner of, and shall be entitled to
submit each Reimbursement Invoice upon, its actual expenditure or disbursement
of Reimbursable Costs subject to any such Reimbursement Invoice, and shall
attach to or include in each Reimbursement Invoice a statement (x) certifying to
the Owner that the full amount of the invoiced Reimbursable Costs have in fact
been expended or disbursed by the Program Manager as of the date of such
Reimbursement Invoice, and (y) allocating the Reimbursable Costs between
Supplier Costs and Recoverable Costs, and shall submit together therewith the
following documents:
(A) As to Supplier Costs,
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14
(1) an itemized statement detailing each payment made to
Suppliers, with specific identification (by reference to the
relevant Supplier Contract) of items of Supply or Procured
Services for which reimbursement is claimed by the Program
Manager;
(2) a Lien Release executed by each Supplier with
respect to all Procured Services or Supplies having a
Supplier Cost (including all prior payments made to the
relevant Supplier in respect thereof) in [REDACTED] for which
the Program Manager has made payment and is seeking
reimbursement; and
(3) the Supplier Cost Verification as to Procured
Services or Supplies having a Supplier Cost (including all
prior payments made to the relevant Supplier in respect
thereof) in excess of $500,000 for which reimbursement of
Supplier Costs is sought; and
(B) As to Recoverable Costs,
(1) an itemized statement detailing each such
Recoverable Cost [REDACTED], identifying all relevant Persons
performing the Services with the dates of performance
thereof; and
(2) a Lien Release executed by the Program Manager,
certifying that each Person engaged by it to perform Services
hereunder has been paid in full and that there are no Liens
asserted with respect to the Services for which reimbursement
is sought.
(ii) INCENTIVE FEES. To the extent that any of the following have
not been delivered to the Owner on or prior to the System RFS Date, the Program
Manager shall deliver to the Owner, together with the relevant Incentive Fee
Invoice, the following documents:
(A) all Permits;
(B) Certificates of Payment and Final Release executed by the
Program Manager and each Supplier;
(C) copies of all technical documentation, drawings and
specifications forming a part of the Technical Requirements or
otherwise relating to the Services, the Procured Services or the
Supplies; and
(D) in respect of the Cost Incentive Fee, a final, itemised
statement of the Total Completion Cost prepared by the Program
Manager (which shall attach or enclose appropriate records and
documentary support, or shall otherwise reference the relevant
books, records and receipts, all of which shall be made available
<PAGE>
15
to the Owner upon request in connection with the Owner's review of
such statement of the Total Completion Cost). If the Owner
believes that there is any error in the Program Manager's
statement of the final Total Completion Cost it shall so notify
the Program Manager within 10 Business Days after the Program
Manager's submission of such statement to the Owner, specifying
the grounds for its belief in sufficient detail to enable the
Program Manager to investigate the same.
SECTION 8. MAINTENANCE OF BOOKS AND RECORDS
--------------------------------
8.1 SYSTEM RECORDS. The Program Manager shall keep, and maintain for a period
ending upon the later of:
(a) [REDACTED]; and
(b) the date on which no claim based upon, arising out of or related to
this Contract is outstanding,
all books, records, vouchers and accounts pertaining to this Contract,
including such books, records, accounts and vouchers related to the Program
Manager's payments to Suppliers and the Reimbursement Invoices. All such books,
records, vouchers and accounts shall be maintained in accordance with generally
accepted accounting principles and practices consistently applied, and shall,
upon the Owner's prior instruction, be organised to allow for segregation of
System investment and related records as the Owner may direct. At the Owner's
request, all records required to be maintained pursuant to this Section 8.1
shall be delivered to the Owner on Final Acceptance, and the Program Manager
shall be entitled to keep copies thereof, subject to its confidentiality
obligations under Section 24 hereof.
8.2 THE PROGRAM MANAGER'S RECORDS. The Program Manager shall maintain its
customary fiscal records and books of account in accordance with generally
accepted accounting principles and practices consistently applied. Records
maintained pursuant to this Section 8.2 shall remain in the custody of the
Program Manager, but the Owner shall have access, upon reasonable notice, during
business hours to such records for the sole purpose of examination or
verification of the direct costs (excluding direct costs compensated by means of
established or standard allowances and rates) relating to performance of the
Services.
8.3 ACCESS TO RECORDS. The Program Manager shall give each Owner Person full
access, upon reasonable notice, during business hours, to all documentation and
records required to be kept, obtained and maintained pursuant to Section 8.1 and
shall not destroy any such documentation or records without affording the Owner
an opportunity to review or copy the same.
SECTION 9. TAXES
-----
9.1 RESPONSIBILITY FOR TAXES. The Owner acknowledges that any and all Taxes
payable in respect of the Services shall constitute Recoverable Costs, and that
<PAGE>
16
any Taxes actually paid in respect of any Procured Services or the Supplies
shall constitute Supplier Costs.
9.2 EXEMPTION FROM TAXES. The Program Manager shall use all reasonable efforts
to have all Services, the Procured Services and the Supplies made exempt from
all Taxes, whether in the manufacture thereof, related to the importation or
location or installation thereof, and shall co-operate fully with the Owner in
this respect. The Program Manager hereby undertakes to make applications for
such revisions and for drawbacks, remissions, reclassifications or the like to
the appropriate Governmental Authorities, in accordance with the relevant Laws
then in force. Notwithstanding the foregoing, should the Owner be made aware of
any area of exemption from taxes or duties, then the Owner shall identify such
area to the Program Manager, which shall investigate the same.
SECTION 10. CHANGE ORDERS
-------------
10.1 EQUITABLE RELIEF. The Program Manager shall be entitled to equitable relief
with respect to the requirements of this Contract in the following circumstances
and in accordance with the following procedures:
(a) INCLUDED EVENTS. In the event that the Program Manager is, despite
the exercise of Prudent Practices and through no fault or omission of any
Program Manager Personnel, delayed or subjected to increased costs in its
performance of the Services, the Program Manager may, to the extent that such
delays or increased costs result directly from any of the following events or
circumstances (each such event or circumstance so affecting the Program
Manager's performance hereunder, a "Change Event") or any combination of Change
Events (excluding, however, the effect of any event or circumstance not
expressly set forth herein as a Change Event), be entitled to an adjustment (to
be reflected in a Change Order executed and delivered by the Parties) to the
Guaranteed RFS Date, the Target Cost or the Service Fees, as applicable:
(i) changes or additions to the general scope of this Contract,
changes to the method or manner of performance of the Services as
instructed by the Owner (including, without limitation, any direction
by the Owner to expand build-out of the System, whether within the
jurisdictions contemplated by this Contract or into neighbouring
countries);
(ii) any Force Majeure Event;
(iii) any Change in Law;
(iv) any Owner-Caused Delay;
(v) any Wayleave or Permit Failure;
(vi) the Program Manager's implementation of Owner-requested
measures in respect of Supplier Contracts in accordance with Sections
4.3 and 4.4 hereof;
<PAGE>
17
(vii) to the extent specified in Section 14.2 hereof, delays
sustained by the Program Manager in connection with the Owner's
exercise of inspection rights hereunder;
(viii) the Program Manager's exercise of suspension rights in
accordance with Section 15.2 hereof;
(ix) the discharge or presence at any Site of any hazardous
materials (except to the extent caused by the negligent act or omission
of any of Program Manager's employees, agents or other personnel) or
the existence of unforeseen subsurface conditions at any Site (except
to the extent that such conditions should have been anticipated as of
the date of this Contract by the Program Manager in the exercise of
Prudent Practices); or
(x) any other grounds specifically referred to in the other
provisions of this Contract that expressly entitle the Program Manager
to equitable relief hereunder.
(b) [REDACTED]
(c) [REDACTED]
(i) INCREASE IN SERVICE FEES. Upon any increase in the Target Cost
implemented pursuant to this Section 10.1(c), the Service Fees shall be
increased by a percentage equal to the percentage increase in the
Target Cost effected by the relevant Change Order. Each such Change
Order shall set forth expressly the adjusted amount of the Service Fees
payable hereunder.
(ii) LIMITATION. Notwithstanding anything to the contrary set
forth herein, the Program Manager shall not be entitled to Target Cost
or Service Fee relief solely on account of delays:
(A) resulting solely from a Change Event of the type
described in subsection (vii) of such Section 10.1(a), except to
the extent that Target Cost or Service Fee relief is expressly
authorized in respect of such Change Event pursuant Section
<PAGE>
18
14.2(a) on account of the Owner's repeated and unwarranted
interruptions in the Services in its exercise of inspection rights
hereunder; or
(B) otherwise arising in connection with performance of the
Services, except to the extent that the cause of any such delay
would otherwise constitute a Change Event hereunder.
10.2 REDUCTION IN SCOPE OF SERVICES. The Owner may from time to time issue
written notices to the Program Manager directing revisions to or deletions from
the scope of Services (as reflected in the Target Cost Assumptions) under this
Contract. The Program Manager shall give immediate effect to each such notice
and shall execute a Change Order in respect thereof; PROVIDED, that such notice
shall in no way limit the Program Manager's entitlement to Reimbursable Costs in
respect of Services performed, or Procured Services or Supplies procured or
committed to, by the Program Manager in its due prosecution of the Services
prior to the Owner's notice of deletion or reduction of the relevant item(s) of
Services.
(i) REDUCTION TO TARGET COST AND SERVICE FEES. In the case of any
limitations in the Services imposed by the Owner pursuant to this
Section 10.2 that have caused, or are likely to cause, a reduction in
the Total Completion Cost by an amount equal to or greater than
[REDACTED], the relevant Change Order entered into by the Parties shall
set forth the reduced amount, to be computed by reference to the Target
Cost Assumptions, of the Target Cost reflecting the deletion or
reduction of the Services hereunder. The aggregate Service Fees payable
shall be reduced by a percentage equal to the percentage reduction in
the Target Cost effected by the relevant Change Order. Each such Change
Order shall set forth expressly the adjusted amount of the Service Fees
payable hereunder.
10.3 EFFECT OF CHANGES. Any adjustment to the Contract necessitated by any
Change Event shall be recorded by means of a formal written amendment (a "Change
Order") agreed and executed by the Parties in accordance with the procedure set
forth in Section 10.4. No claim for adjustment to the Target Cost, the Service
Fees and/or the Guaranteed RFS Date shall be made, recognised or acceded to
unless such claim has been adopted and implemented in accordance with the
procedure set forth in Section 10.4 and recorded by means of a formal written
Change Order amendment as provided in this Section 10.3.
10.4 PROCEDURE FOR IMPLEMENTING CHANGE ORDER AMENDMENTS. In the event that the
Program Manager may be entitled to claim any equitable relief hereunder on
account of any Change Event, the Program Manager shall give Owner written notice
of its intent to submit a claim for a Change Order (which notice shall state the
basis of such claim and the general nature of the relief requested) within
[REDACTED] after it becomes aware of such Change Event. The Program Manager
shall submit to Owner its documented and substantiated claim for such
adjustment(s) as soon as practicable after giving such notice, but not later
than [REDACTED] after giving such notice, unless extended in writing by the
Owner. Such claim shall include an estimate of the impact of such proposed
relief on the Target Cost or the Guaranteed RFS Date, as applicable, as
supported by sufficient costing and description detail to allow the Owner to
<PAGE>
19
make a reasonable determination as to such impact and the desirability of such
relief in light of available alternatives.
The Owner shall respond to the Program Manager's claim for a Change
Order amendment within [REDACTED] after receipt. If Owner agrees that the
Program Manager's claim should be implemented, Owner shall issue the formal
written Change Order amendment provided for in Section 10.3 incorporating such
claim.
If the Owner disagrees in any way with the Program Manager's claim for
the Change Order amendment, the Owner shall return the Program Manager's claim
marked-up to show Owner's modifications thereto. The Program Manager shall
within [REDACTED] of receipt of Owner's mark-up, either advise Owner of its
agreement to Owner's modifications or request a meeting with the Owner to
resolve any and all disagreements with the modifications made by Owner. If the
latter option is taken, the Parties shall meet as soon as practicable to resolve
in good faith discussions any disagreements. In the event that the Parties are
unable to resolve any such dispute within [REDACTED] after commencement of
mutual discussions in respect thereof, either Party may, by written notice to
the other Party, require that the matter be referred immediately to an
independent expert appointed by the Parties' respective senior management for
resolution within [REDACTED] after such referral. The resolutions of all
disagreements shall be reflected in the formal written Change Order amendment to
be developed pursuant to Section 10.3.
SECTION 11. GUARANTEED RFS DATE, DELAY DAMAGES, PERFORMANCE BONUS
-----------------------------------------------------
11.1 [REDACTED]
11.2 [REDACTED]
<PAGE>
20
11.3 MINIMISING DELAY. Because the Owner wishes the System to be available for
use as soon as possible, if the Program Manager becomes aware of circumstances
that will cause the System RFS Date to be delayed (if alternative strategies are
not adopted) the following provisions shall apply:
(a) the Program Manager shall inform the Owner of such circumstances;
(b) the Program Manager shall (unless otherwise agreed by the Owner)
develop all reasonable work-around plans, alternate sources or any other means
available with a view to avoiding or minimising the anticipated delay, and shall
present the same to the Owner for approval;
(c) the Program Manager's proposals presented to the Owner pursuant to
paragraph (b) above shall specify:
(i) any increase in the Full-Time Equivalent Personnel (in excess
of the limitation thereon set forth in Section 2.1 hereof) that would be
required to implement such proposals;
(ii) the Program Manager's estimate of the additional Reimbursable
Costs that would likely be incurred as a result of implementing the proposals;
and
(iii) the Program Manager's estimate of the impact on the
Guaranteed RFS Date:
(A) if its proposals are implemented; and
(B) if its proposals are not implemented.
(c) the Program Manager shall not implement the proposals without prior
written approval from the Owner.
SECTION 12. FORCE MAJEURE
-------------
12.1 DEFINITION.
(a) INCLUDED EVENTS. An event shall be a "Force Majeure Event" if such
event:
(i) is beyond the Program Manager's reasonable control despite the
exercise of Prudent Practices;
(ii) is not the result of any breach by the Program Manager of any
provision of this Contract;
(iii) was not caused by the negligent or careless act or omission
of the Program Manager, the Program Manager Personnel or any other
Person engaged by the Program Manager in connection with the
performance of any Services hereunder; and
<PAGE>
21
(iv) is likely to result, despite the exercise of Prudent
Practices and commercially reasonable efforts in mitigation thereof, in
a failure by the Program Manager to comply with any of its obligations
under this Contract.
(b) EXCLUDED EVENTS
The following events are explicitly excluded from the term Force
Majeure Event and are solely the responsibility of the Program Manager:
(i) strikes, labour disputes and lockouts of any kind solely
involving employees of the Program Manager, any Supplier or any other Person
engaged by the Program Manager in connection with the performance of any
Services hereunder;
(ii) [REDACTED] ;
(iii) Defects or Deficiencies in, or the late delivery or late
performance of, Supplies or Procured Services by any Supplier (except to the
extent caused by a Force Majeure Event); and
(iv) [REDACTED] (except to the extent caused
by a Force Majeure Event).
12.2 NOTICE. The Program Manager shall advise the Owner's Project Representative
in reasonable detail of any Force Majeure Event within [REDACTED] after the
date on which the Program Manager first became aware (or, in the exercise of
Prudent Practices, should have been aware) of such Force Majeure Event.
12.3 EFFECT OF FORCE MAJEURE. The Program Manager shall not be considered in
default in the performance of its obligations under this Contract, except
obligations to make payment, to the extent that the performance of any such
obligation is prevented or delayed by a Force Majeure Event.
SECTION 13. REPRESENTATIVES OF THE PARTIES
------------------------------
Each Party shall designate in writing a project manager (a "Project
Representative") to be responsible for co-ordination and monitoring of the
Services on such Party's behalf. Each Party's Project Representative shall
provide the interface with the other Party on all technical and contractual
matters pertaining hereto, and shall have authority to act and make decisions on
behalf of, and be authorised to bind by contract or otherwise, the Party by
which it has been appointed. Either Project Representative may from time to time
authorise Persons to carry out specific tasks on the relevant Party's behalf,
and shall confirm any such authority by written notice to the other Party.
SECTION 14. INSPECTION RIGHTS
-----------------
14.1 GENERALLY. Each of the Owner Persons shall, upon reasonable prior notice to
the Program Manager, have access, within normal business hours, to the Sites,
<PAGE>
22
the Services and all Procured Services and Supplies. The Program Manager shall
provide such facilities as the Project Representatives of the Parties shall
agree are appropriate for such access and for the purpose of inspection and
testing in accordance with the provisions of the Technical Requirements. Each
Owner Person shall upon reasonable prior notice to the Program Manager be
allowed full access, within normal business hours and in accordance with such
other rules and procedures as the Project Representatives may develop by mutual
agreement, to all project offices and Sites of the Program Manager and the
Suppliers to enable it to inspect the Services, Procured Services and Supplies
and to monitor progress. The Owner or Owner's Inspector shall have the right to
establish resident representative(s) at all Sites, and the Program Manager and
the Suppliers shall, at the request of the Owner's Project Representative, make
suitable office space and facilities available for such representative(s) and
any costs incurred in so doing shall constitute Reimbursable Costs. The Program
Manager shall endeavour to include in all of the Supplier Contracts such
provisions as may be necessary to secure such rights on behalf of the Owner
Persons and if any Supplier shall refuse to agree to their inclusion the Program
Manager shall consult with the Owner to agree on an appropriate course of
action. The Owner Persons' inspection activities may include:
(a) an audit of the Program Manager's and the Suppliers' quality
control system and practices and their application to the Services, the Procured
Services and the Supplies, including to the design, manufacture, transportation,
installation and testing thereof; and
(b) inspection of all parts of the Procured Services, Supplies and the
Services to ensure compliance with the Technical Requirements.
14.2 NO RELIEF. Except as provided by subsection (a) of this Section 14.2, no
inspection, audit or approval by or on behalf of the Owner or any other Owner
Person in respect of any aspect of the Services, Procured Services or Supplies
shall relieve the Program Manager of any of its responsibilities under this
Contract.
(a) EXCEPTION - LIMITED RELIEF. To the extent that the Program Manager
is required to interrupt performance of any portion of the Services on account
of the Owner's inspection of any Services, Procured Services or Supplies found
in such inspection to be in compliance with all requirements of this Contract,
the Program Manager shall be entitled to:
(i) in the first such instance, an extension of time equal to the
duration of such interruption to the extent specified in Section
10.1(b) hereof; and
(ii) upon each such unwarranted Owner inspection thereafter,
Target Cost and Service Fee relief to the extent specified in Section
10.1(c) hereof, which relief shall be in addition to any extension of
time to which the Program Manager may be entitled under the preceding
clause (i) of this Section 14.2(a).
<PAGE>
23
SECTION 15. SUSPENSION BY OWNER OR PROGRAM MANAGER
--------------------------------------
15.1 SUSPENSION BY THE OWNER. Should the Owner desire, in its sole discretion,
to suspend the whole or any part of the Services or suspend for a further period
Services already suspended pursuant to this Section 15, the Owner shall notify
the Program Manager, indicating the period of the proposed suspension or further
suspension. The Program Manager shall, within 10 Business Days after such
notice, furnish an itemised statement to the Owner's Project Representative
setting out:
(a) the extension of time to which the Program Manager believes it
would be entitled if the suspension were implemented; and
(b) the Program Manager's estimate of the additional Reimbursable Costs
which would result from the proposed suspension.
Upon receipt of such itemised statement (or if no such statement is received
within the stipulated 10-working-day period), the Owner's Project Representative
shall either confirm or cancel the proposal to suspend or further suspend the
Services or further question the Program Manager on the basis of such itemized
statement. Promptly after the Parties agree on any extension of time, they shall
execute a Change Order in respect thereof in accordance with Section 10 hereof.
15.2 SUSPENSION BY PROGRAM MANAGER. Notwithstanding any provision to the
contrary, if the Owner fails to make any undisputed payment within 7 Business
Days after the due date therefor (an "Owner Default"), the Program Manager shall
have the right, upon notice to the Owner, to suspend its performance of the
Services. In the event that any Owner Default continues for 20 consecutive Days
after the Program Manager's notice thereof, the Program Manager shall have the
right to terminate its Services hereunder and such termination shall be treated
as an Optional Termination for purposes of the Owner's obligation to make
payment to the Program Manager in the manner set forth in Section 16.3 hereof.
15.3 EXTENSION OF TIME AND STAND-BY COSTS. In the event of any suspension of the
Services in whole or in part pursuant to either Section 15.1 or 15.2 hereof:
(a) the Program Manager shall be entitled to Reimbursable Costs for
each of the Program Manager Personnel who would, but for such suspension, be
performing Services during the pendency thereof, together with any other costs
incurred by the Program Manager as a direct and necessary result of such
suspension (including, but not limited to, any payments that it is required to
make to any of the Suppliers); PROVIDED, that the Program Manager shall
endeavour to minimise such Reimbursable Costs to the extent that this is
reasonably practicable in the context of the period of suspension, and for this
purpose shall consult with the Owner;
(b) the Program Manager shall be entitled to an extension of the
Guaranteed RFS Date by means of a Change Order to the extent specified in
Section 10.1(b) hereof, and
(i) in the case of suspension of the Services in their entirety,
such extension shall equal the actual period of suspension, PLUS any period
actually required for remobilisation and resumption of performance following the
suspension;
<PAGE>
24
(ii) in the case of a partial suspension, such extension shall be
of a duration equal to the period by which the Program Manager can demonstrate
that the System RFS Date will be delayed by reason of the suspension; and
(c) in the case of a Program Manager suspension pursuant to Section
15.2, the Program Manager shall be entitled to Target Cost or Schedule Fee
relief to the extent specified in Section 10.1(c) hereof.
15.4 THE PROGRAM MANAGER'S DUTIES UPON SUSPENSION. During any such suspension,
the Program Manager shall:
(a) cease performance of the Services and place no further orders or
Supplier Contracts relating to the suspended Services;
(b) protect and care for all Services, Procured Services and Supplies
and materials, in transit to or from the Site or at storage areas for which it
is responsible; and
(c) give the Owner copies of all outstanding orders and Supplier
Contracts and take any action with respect to such orders and contracts as the
Owner may direct.
15.5 THE PROGRAM MANAGER'S DUTIES AFTER SUSPENSION. Upon the cessation of such
suspension, the Program Manager shall immediately take steps to resume
performance of the Services upon being directed to do so by the Owner.
SECTION 16. OPTIONAL TERMINATION
--------------------
16.1 TERMINATION. The Owner may at any time, upon [REDACTED] (a "Notice of
Optional Termination") to the Program Manager, terminate the Program Manager's
employment hereunder (an "Optional Termination"). An Optional Termination shall
not nullify this Contract but shall operate to terminate the Program Manager's
right to proceed with the Services. An Optional Termination shall not relieve
the Program Manager or the Owner from liability under applicable Law for damages
for any failure or omission to perform any portion of this Contract prior to
such termination or prejudice any legal rights of the Owner or the Program
Manager, whether those rights arise under this Contract or otherwise.
16.2 TERMINATION DATE. An Optional Termination shall be effective, and the
Program Manager's employment under this Contract shall be terminated [REDACTED]
after the Notice of Optional Termination is delivered to the Program Manager.
16.3 PAYMENT. Upon any Optional Termination, the Owner shall pay to the Program
Manager an amount equal to the sum of (i) all Reimbursable Costs incurred by the
Program Manager as of the effective date of the Optional Termination, (ii) those
Fixed Fees which have accrued as of the effective date of the Optional
Termination, [REDACTED] and Fixed Fees payable as of such termination,
(representing a liquidated and pro-rated payment in lieu of the Incentive Fee to
which the Program Manager would otherwise have been entitled but for such
termination); and (iii) the Program Manager's
<PAGE>
25
reasonable and necessary costs incurred in connection with the termination of
the Supplier Contracts (and, to the extent that the Program Manager's
performance thereunder would otherwise have entitled it to the payment of
Reimbursable Costs, any other contracts entered into by the Program Manager in
connection with the Services), demobilisation from the Sites and the performance
of its duties upon termination as specified hereunder.
SECTION 17. EVENTS OF DEFAULT AND REMEDIES
------------------------------
17.1 EVENTS OF DEFAULT BY PROGRAM MANAGER. If at any time (any of the following,
an "Event of Default"):
(a) the Program Manager fails to carry out the Services at the rate of
progress required by and in accordance with this Contract that is likely to
result in a material breach of this Contract; or
(b) the Program Manager fails to make any undisputed payment hereunder
when due; or
(c) the Program Manager commits any material breach of, or fails in any
material respect to comply with and observe, any provision of this Contract; or
(d) the Program Manager abandons the Services for a period in excess of
10 Days, or intimates without lawful cause or justification that the Services
will not or cannot be completed; or
(e) the Program Manager shall make a general assignment for the benefit
of creditors, or any proceeding shall be instituted by the Program Manager
seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding up, reorganisation, arrangement, adjustment, protection, relief or
composition of the Program Manager or its debts under Law relating to
bankruptcy, insolvency or reorganisation or relief or the appointment of a
receiver, trustee or other similar official for the Program Manager or for any
substantial part of its property or the Program Manager shall take any corporate
action to authorise any of the actions set forth above in this Section 17.1(e);
or
(f) an involuntary petition shall be filed or an action or proceeding
otherwise commenced against the Program Manager seeking reorganisation,
arrangement or readjustment of the Program Manager's debts or for any other
relief under any bankruptcy or insolvency act or Law, now or hereafter existing
and remain undismissed or unvacated for a period of 30 Days; or
(g) a receiver, assignee, liquidator, trustee or similar officer for
the Program Manager or for all or any part of its property shall be appointed
involuntarily; or
(h) the Program Manager shall file a certificate of dissolution under
applicable Law or shall be liquidated, dissolved or wound up or shall commence
or have commenced against it any action or proceeding for dissolution, winding
up or liquidation, or shall take any corporate action in furtherance thereof; or
<PAGE>
26
(i) the Program Manager either:
(A) intentionally fails to make prompt payment of an undisputed
invoice due to any Supplier for materials or labour; or
(B) repudiates or is in material default with respect to any of
its obligations to any Supplier; or
(j) any representation or warranty made by the Program Manager herein
or in any certificate, financial statement or other document furnished to the
Owner by or on behalf of the Program Manager shall prove to be false or
misleading in any material respect to the knowledge of the Program Manager as of
the time made, confirmed or furnished;
then, upon the occurrence of any Event of Default referred to in this Section
17.1, the Owner may, by notice in writing, advise the Program Manager of such
Event of Default and the Program Manager shall have [REDACTED] to correct such
Event of Default to the reasonable satisfaction of the Owner or, if it cannot
reasonably be corrected in such period, to demonstrate to the reasonable
satisfaction of the Owner that it has taken and has diligently pursued all
appropriate steps to correct the relevant Event of Default and to procure that
it will not be repeated. If the Program Manager fails to correct any such Event
of Default or to take such action to the reasonable satisfaction of the Owner
within such [REDACTED] period, or, fails to complete in any event the cure or
correction of any Event of Default within [REDACTED] after the occurrence
thereof, or, upon the occurrence of any other Event of Default, then the Owner
may, upon written notice (a "Notice of Exercise of Remedies") to the Program
Manager, exercise any or all of the following rights and remedies:
(a) suspend payment under this Contract in whole or in part;
(b) terminate the Program Manager's employment under this
Contract upon written notice to the Program Manager (such event,
a "Termination for Default"; such Notice of Exercise of Remedies,
a "Notice of Termination for Default"), which Termination for
Default shall be effective immediately upon the Program Manager's
receipt of the Notice of Termination for Default;
(c) apply any amount owing to the Program Manager hereunder
to the payment and performance of the obligations of the Program
Manager hereunder; or
(d) exercise any and all rights and remedies it may have
under law or equity, including seeking specific performance and
the recovery of damages, subject, in any event, to the provisions
of Section 19.
The foregoing remedies are cumulative, and the Owner may elect
one or more thereof without prejudice to any other right or
remedy the Owner may have.
<PAGE>
27
17.2 NO PREJUDICE. No action taken by the Owner under this Section 17 shall
prejudice any right of the Owner hereunder, and all sums of money that may
remain in the hands of the Owner with respect to this Contract may, at the
election of the Owner, may be withheld pending the final determination of the
rights and obligations of the Parties under this Contract.
SECTION 18. DUTIES UPON TERMINATION BY OWNER
--------------------------------
18.1 GENERALLY. Upon receipt of a Notice of Optional Termination or a Notice of
Termination for Default (each, a "Notice of Termination"), unless otherwise
directed by the Owner in such notice, the Program Manager shall:
(a) stop work under this Contract on the effective date of the Optional
Termination or, as the case may be, Termination for Default;
(b) place no further orders or contracts for materials, services or
facilities;
(c) unless otherwise directed by the Owner, use reasonable efforts to
terminate all orders and contracts and Supplier Contracts;
(d) assign to the Owner in the manner, at the time and to the extent
directed by the Owner, all of the Program Manager's right, title and interest,
if any, under all Permits and Wayleaves and under such orders, contracts and
Supplier Contracts, whether or not terminated;
(e) use reasonable efforts to settle all outstanding liabilities and
all claims arising out of such termination of orders and Supplier Contracts,
with the Owner's approval or ratification to the extent the Owner so requires;
(f) relinquish title, to the extent vested in the Program Manager, and
deliver, to the extent that the Program Manager has possession thereof, the
following to the Owner in the manner, at the time, at the place and to the
extent (if any) directed by the Owner:
(i) the fabricated or unfabricated parts, Services in process,
completed Services, Procured Services and Supplies and all other items
commenced, partly executed, produced or completed as part of, or acquired in
connection with, the performance of the Services terminated by the Notice of
Termination;
(ii) all materials, plant, tools, dies, jigs, fixtures and
implements purchased, used or to be used exclusively in connection with the
performance of the Services terminated by the Notice of Termination: and
(iii) to the extent that title is not already vested in the Owner,
the completed or partially completed plans, drawings, information, Permits,
Wayleaves and other property that, if this Contract had not been terminated,
would have been required to be furnished to the Owner;
<PAGE>
28
(g) take such action as may be necessary, or which the Owner may
direct, for the protection and preservation of the property related to this
Contract that is under the Program Manager's control and in which the Owner has
or may acquire an interest;
(h) at the Owner's request, assist the Owner in preparing an inventory
of all equipment in use or in storage; and
(i) take such other actions in relation to termination of this Contract
that the Owner may reasonably request.
All costs associated with such actions shall constitute Reimbursable
Costs unless the termination is consequent upon an Event of Default as to which
the Program Manager has failed to timely effect and diligently pursue a cure.
SECTION 19. LIMITATION OF LIABILITY
-----------------------
19.1 SUPPLIES, SERVICES, WORK, ETC. PROVIDED BY OTHERS. Except to the extent of
any liability arising out of any breach by the Program Manager of the General
Warranty in its selection of Suppliers or the procurement, testing and
supervision of the Procured Services and Supplies, the Program Manager shall
have no liability for Defects and Deficiencies in the services, materials or
equipment furnished by others (including, but not limited to, Suppliers and
Owner Contractors). To the extent practicable, the Owner shall procure that all
indemnity, all release and all hold-harmless agreements contained in Owner
Contracts, whereby Owner Contractors agree to indemnify, release or hold the
Owner harmless shall extend like protection to the Program Manager.
19.2 AGGREGATE CAP ON LIABILITY. The total aggregate liability of the Program
Manager to all Owner Persons under or arising out of or in connection with this
Contract or otherwise with respect to the Services shall not in any
circumstances exceed [REDACTED], and for this purpose:
(a) the following shall be subject to (and shall accordingly be taken
into account in establishing the Program Manager's aggregate liability that is
subject to) the Aggregate Liability Cap:
(i) the cost of re-performing Services pursuant to Section 20.2
(or, as the case may be, the Program Manager's liability to make
reimbursement to the Owner pursuant to Section 20.3), and, for this
purpose, the cost of re-performing Services pursuant to Section 20.2
shall be calculated as the Recoverable Costs attributable thereto; and
(ii) any liability which the Program Manager may have to any Owner
Person arising out of or in connection with this Contract or the
Services, and, in such connection (because the Program Manager does not
have a contractual relationship with Owner Persons other than the
Owner), the Owner shall indemnify the Program Manager against any
Losses that the Program Manager may thereby suffer or incur in excess
of the Aggregate Liability Cap; and
<PAGE>
29
(b) any proceeds of insurance (and, accordingly, any liability of the
Program Manager in respect of risks for which the Program Manager's liability is
limited to payments made by insurers in accordance with Section 19.4) shall not
be subject to, and accordingly shall not be taken into account in establishing
the Program Manager's aggregate liability that is subject to, the Aggregate
Liability Cap.
19.3 LOSS, INJURY OR DAMAGE TO PERSONS OR THE SYSTEM. The Program Manager's
liability for Loss of or damage to any elements of the System, or for any injury
to, or death or disease of, any Person, shall be limited to those payments made
on the Program Manager's behalf by the insurers affording the insurance
described in Section 23, and the Owner shall release the Program Manager from
any Loss, damage or expense in excess of those payments as a result of Loss of
or damage to other property of the Owner or in the custody of the Owner (or as a
result of any injury to, or death or disease of, any Person), except to the
extent that such Loss, injury or damage is not, in whole or in part, insurable
hereunder arising:
(a) on account of any injury to, or death or disease of, any Person, or
any damage to, or loss of use of, any property or asset based upon, arising
under or otherwise related to the willful, wanton or negligent act or omission
of the Program Manager, its employees and agents in connection with the
performance of this Contract; or
(b) in connection with any infringement by Program Manager, its
employees and agents or any claimed infringement by such Persons of Intellectual
Property Rights as described in Section 6 hereof; or
(c) from any act or omission of the Program Manager or its employees
and agents that violates any Law.
19.4 CONSEQUENTIAL LOSS, ETC. Except to the extent resulting from gross
negligence or willful misconduct, under no circumstances shall the Program
Manager be liable to the Owner for, nor shall the Owner make claim for,
consequential, special or indirect Loss or damage, or for any Loss or damage
resulting from loss of use, loss of profits or revenues, costs of capital, loss
of goodwill, claims of the Owner's customers or like items of Loss or damage,
and the Owner shall release the Program Manager therefrom.
19.5 SCOPE OF LIMITATIONS. Except to the extent otherwise specifically provided
herein, the waiver and disclaimers of liability, releases from liability,
limitations and allocations of liability and exclusive remedy provisions
expressed in this Contract shall apply even in the event of the fault,
negligence (in whole or in part), strict liability, breach of contract, or
otherwise of the Party released or whose liability is waived, disclaimed,
limited, apportioned or fixed by such exclusive remedy provision, and shall
extend to such Party's Affiliates and the directors, officers, employees and
agents of such Party or its Affiliates.
19.6 HAZARDOUS WASTE OR MATERIALS.
The Program Manager shall have no liability for or in respect of
hazardous waste or materials that may be encountered in carrying out the
Services, and the Owner shall indemnify the Program Manager against any
additional costs and any liabilities to third parties that the Program Manager
may incur as a consequence of such waste or materials being encountered.
SECTION 20. WARRANTIES
----------
20.1 GENERAL WARRANTY OF SERVICES. The Program Manager hereby warrants (the
"General Warranty") to the Owner that the Services will in all respects be
performed in accordance with Prudent Practices upon diligent examination of, and
in compliance with, all requirements of this Contract applicable to such
Services.
20.2 LIABILITY IN RESPECT OF THE SERVICES. If any aspect of the Services is not
performed in accordance with the General Warranty, the Program Manager shall,
subject to Section 20.3, re-perform, at its expense, that aspect of the
Services, provided that:
<PAGE>
30
(a) the Owner has notified the Program Manager in writing, stating with
reasonable specificity the reasons why the Owner believes that the Services were
not performed in accordance with the General Warranty; and
(b) such notification is given within a reasonable time after the
discovery of the facts or circumstances giving rise to the Owner's belief and
within the General Warranty Period.
20.3 ALTERNATIVE REMEDY. If for any reason the Program Manager does not, within
a reasonable time after the Owner's notice given in accordance with Section 20.2
above, re-perform the relevant Services in accordance with Section 20.2 to the
reasonable satisfaction of the Owner, the Owner may, at its election within 4
Business Days after notice to the Program Manager of such failure, assess,
demand or withhold the amount of Reimbursable Costs that the Owner has
calculated as attributable to the aspect of the Services which has not been
performed in accordance with the General Warranty.
20.4 DEFECTS AND DEFICIENCIES. Prior to the System RFS Date, the Program Manager
shall as part of the Services administer and enforce against the Suppliers, as
agent for the Owner, the Supplier Contracts (including the Supplier Warranty
provisions thereof). If, on or after the System RFS Date, any Defects and
Deficiencies shall be identified in any of the Procured Services or the
Supplies:
(a) the Owner shall pursue its rights against the relevant Supplier
(pursuant to the warranties in favour of the Owner under the relevant Supplier
Contract) and the Program Manager shall, accordingly, not have any liability in
respect of any such Defects or Deficiencies;
(b) if the Owner shall so request, the Program Manager shall assist the
Owner in pursuing its rights against any of the Suppliers under the applicable
Supplier Warranties; PROVIDED that:
(i) any costs incurred by the Program Manager in so doing shall be
Reimbursable Costs;
(ii) the Program Manager's obligations under this Section 20.4
shall cease at the expiry of the General Warranty Period.
20.5 SCOPE OF LIABILITY FOR DEFECTS AND DEFICIENCIES. Except to the extent that
the Owner may have a remedy pursuant to Section 19.3 hereof, the remedies
specified in this Section 20 are the Owner's sole and exclusive remedies for
Defects and Deficiencies arising out of or in connection with the Program
Manager's performance under this Contract. There are no standards of
performance, guarantees or warranties with respect to Defects and Deficiencies
other than those expressed in this Section 20.
SECTION 21. PERFORMANCE TESTS AND RFS CERTIFICATES
--------------------------------------
21.1 PERFORMANCE TESTING GENERALLY. The Program Manager shall administer and
coordinate the required Performance Tests in connection with the achievement of
<PAGE>
31
the System RFS Date, in accordance with the Technical Specification and such
performance testing standards that the Program Manager shall develop and the
Owner shall approve.
21.2 ISSUANCE OF RFS CERTIFICATES. Within 10 Days of the Program Manager's
notice to the Owner that the System has been completed and tested in accordance
with the Technical Requirements, the Owner shall issue an RFS Certificate to the
Program Manager in respect of the System, provided that the Owner is reasonably
satisfied that:
(a) all Performance Test results furnished by the Program Manager in
connection with its application for the RFS Certificate indicate that each
Performance Guarantee set forth the Technical Requirements has been met or
exceeded;
(b) the System has been tested on an integrated basis throughout the
entire route thereof and has, on the basis of the Performance Test results
delivered to the Owner, met or exceeded the Performance Guarantees; and
(c) all Permits, Wayleaves and other items required to be delivered to
the Owner hereunder have so been delivered.
21.3 PUNCH LIST. The existence of minor Defects and Deficiencies that do not
materially affect the use of the System shall not delay the issuance of the
System RFS Certificate; PROVIDED that such minor Defects and Deficiencies are
specified in a Punch List prepared by the Program Manager and agreed to in
writing by the Owner. The Program Manager shall administer the remedying of any
such Defects and Deficiencies by the relevant Suppliers or, as the case may be,
Owner Contractors as soon as reasonably practicable after the System RFS Date.
21.4 EFFECT OF SYSTEM RFS CERTIFICATE. Upon the issue of the System RFS
Certificate all of the Program Manager's obligations in relation to the
performance of the Services shall cease save for those under Sections 6, 8, 19,
20, 21.3 and 24 hereof.
21.5 FINAL ACCEPTANCE. Final Acceptance shall occur as soon as the General
Warranty Period shall have expired and there are no outstanding claims by the
Owner in respect of the Services. The Owner shall issue a Certificate of Final
Acceptance confirming that, and as soon as practicable after, Final Acceptance
has occurred. The Program Manager's liability for all purposes under this
Contract shall end at Final Acceptance.
SECTION 22. REPRESENTATIONS AND WARRANTIES
------------------------------
22.1 THE PROGRAM MANAGER'S REPRESENTATIONS AND WARRANTIES. The Program Manager
hereby represents and warrants that:
(a) ORGANISATION, POWER AND AUTHORITY. It is a limited liability
company duly organised, validly existing and in good standing under the Laws of
the United Kingdom and is qualified (whether directly or by acting through
Affiliate(s) in any relevant jurisdiction) to do business in each applicable
<PAGE>
32
jurisdiction, including the Netherlands, Germany and France, in which the nature
of the business conducted by it makes such qualification necessary, and has all
requisite legal power and authority to execute this Contract and to perform the
terms, conditions and provisions thereof.
(b) AUTHORISATION. The execution and delivery by the Program Manager of
this Contract has been duly authorised by all requisite corporate action.
(c) ENFORCEABILITY. This Contract constitutes the legal, valid and
binding obligation of the Program Manager, enforceable in accordance with the
terms thereof except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganisation, moratorium or other similar Laws affecting
creditors' rights generally and to the extent that the remedies of specific
performance, injunctive relief and other forms of equitable relief are subject
to equitable defences, the discretion of the court before which any proceeding
therefor may be brought, and the principles of equity in general.
(d) NO CONFLICT. Neither the execution, delivery or performance by the
Program Manager of this Contract, nor the consummation of the transactions
contemplated thereby, will result in:
(i) a violation of, or a conflict with, any provision of the
organisational documents of the Program Manager;
(ii) a contravention or breach of, or a default under, any term or
provision of any material contract, agreement or instrument to which the Program
Manager is a party or by which it or its property may be bound, which
contravention, breach or default could be reasonably expected to have a material
adverse effect on the ability of the Program Manager to perform its obligations
under this Contract to consummate the transactions contemplated by this
Contract; or
(iii) a violation by the Program Manager of any Law.
(e) NO VIOLATION OF LAW. It is not in violation of any Law promulgated,
or judgment entered, by any Governmental Authority, which violations,
individually or in the aggregate, would adversely affect it or its performance
of any obligations hereunder.
(f) LITIGATION. There are no actions, suits or proceedings, now pending
or (to its best knowledge) threatened against it before any court or
administrative body or arbitral tribunal that might materially adversely affect
the ability of the Program Manager or any Supplier to perform its obligations
hereunder.
(g) LICENCES. It will hold (whether directly or through Affiliate(s) in
any relevant jurisdiction) all national, provincial, local and other Permits
required to allow it to operate or conduct its business now and as contemplated
by this Contract.
(h) QUALIFICATIONS. It has:
<PAGE>
33
(i) examined this Contract thoroughly and has become familiar with
its terms;
(ii) full experience and proper qualifications to perform the
Services and to administer construction of the System; and
(iii) taken reasonable steps to ascertain the nature and location
of the Services, the general character and accessibility of the System
build-out, the existence of above-ground major obstacles to construction and
other general and local conditions (including labour, safety and environmental)
that might affect its performance of the Services or the Service Fees but, for
the avoidance of doubt, the Program Manager has not carried out a detailed
survey of the proposed route and has not established whether unconditional
Wayleaves will be available for the whole of the proposed route; accordingly,
the Program Manager does not warrant that the whole of the proposed route will
be suitable or feasible and does not warrant the precise nature or scope of the
work which will be required.
22.2 THE OWNER'S REPRESENTATIONS AND WARRANTIES. The Owner hereby represents and
warrants that:
(a) ORGANISATION, POWER AND AUTHORITY. It is a corporation duly
organised, validly existing and in good standing under the Laws of Delaware and
is qualified (whether directly or by acting through Affiliate(s) in any relevant
jurisdiction) to do business in all jurisdictions in which the nature of the
business conducted by it makes such qualification necessary, and has all
requisite legal power and authority to execute this Contract and to perform the
terms, conditions and provisions thereof.
(b) AUTHORISATION. The execution and delivery by the Owner of this
Contract has been duly authorised by all requisite corporate action.
(c) ENFORCEABILITY. This Contract constitutes the legal, valid and
binding obligation of the Owner, enforceable in accordance with the terms
thereof except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganisation, moratorium or other similar Laws affecting
creditors' rights generally and to the extent that the remedies of specific
performance, injunctive relief and other forms of equitable relief are subject
to equitable defences, the discretion of the court before which any proceeding
therefor may be brought, and the principles of equity in general.
(d) OWNERSHIP OF SYSTEM. It is the sole and exclusive owner (whether
directly or through its Affiliates) of (i) the physical assets and properties
constituting (or, upon System completion, to constitute) the System, and (ii)
all of the Owner's rights pursuant to or accruing under this Contract.
SECTION 23. INSURANCE
---------
23.1 INSURANCE GENERALLY. The Program Manager shall procure and maintain in
effect insurance coverage with respect to its performance of the Services in the
amounts and coverage types identified in the Insurance Schedule annexed as
Exhibit F hereto and the costs of doing so shall be Reimbursable Costs.
<PAGE>
34
(a) GENERALLY. Unless otherwise stipulated in writing between the
Parties, the Program Manager shall in respect of the System maintain all
insurance in full force and effect until the System RFS Date. The Program
Manager shall, immediately upon the Owner's request, name the Owner as an
additional insured under any policy required to be maintained hereunder.
(b) CANCELLATION, NON-RENEWAL OR REDUCTION IN COVERAGE. Each insurance
policy shall provide that no cancellation, non-renewal, reduction in coverage or
other material change shall be effective in the absence of [REDACTED] written
notice to the Owner.
(c) COPIES. At the Owner's request, the Program Manager shall furnish
the Owner with certified copies of insurance policies or certificates of
insurance that provide sufficient information to verify that the Program Manager
has complied with its insurance obligations hereunder.
(d) FAILURE TO MAINTAIN INSURANCE. If the Program Manager fails to
effect or keep in force any of the insurance required under this Contract, the
Owner may, without prejudice to any other rights it may have hereunder, effect
and keep in force any such insurance or take out new insurance satisfactory to
the Owner.
23.2 OWNER'S ELECTION. The Owner may by notice in writing to the Program Manager
given [REDACTED] in advance of insurance placement by the Program Manager
elect to procure and maintain any of the insurance coverage referred to Exhibit
F hereto, in which case, the Owner shall, immediately upon the Program Manager's
request, name the Program Manager as an additional insured (and shall provide
the Program Manager with the documentation and non-cancellation rights otherwise
available to the Owner hereunder in the case of Program Manager-procured
insurance) under any policy and the Program Manager shall not be entitled to
payment of Reimbursable Costs or Service Fees in respect of any insurance so
procured directly by the Owner.
SECTION 24. CONFIDENTIALITY AND PROPRIETARY INFORMATION
-------------------------------------------
24.1 CONFIDENTIALITY.
(a) GENERALLY. All drawings, diagrams, specifications or other
information supplied in connection with this Contract by or on behalf of either
Party (such disclosing Party or person acting or its behalf, the "Disclosing
Party") to the other Party (such recipient Party, together with its directors,
officers, employees, agents or subcontractors or any of their respective
directors, officers, employees, agents or subcontractors, the "Recipients")
shall be used solely in assisting the Recipients in performance of this
Contract. Until the expiry of three years after the System RFS Date all
information which has been designated in writing by the Disclosing Party as
being confidential and proprietary shall not be disclosed by the Recipients to
any third party without the prior written consent of the Disclosing Party,
except as expressly permitted under clause (b) of this Section 24.1. Each Party
hereto shall ensure that each potential Recipient under its control or acting on
its behalf in connection with this Contract is subject to appropriate
confidentiality undertakings with respect to all information disclosed
hereunder.
<PAGE>
35
(b) LIMITATION. Notwithstanding the absence of the Disclosing Party's
prior written consent, any Recipient may disclose information furnished
hereunder:
(i) as necessary for the performance of this Contract (and then
only under conditions of confidentiality as set forth herein);
(ii) as required by Law or pursuant to court order;
(iii) if it is or becomes generally available to the public by
publication or otherwise, other than by disclosure in violation of this Section
24;
(iv) if it was within any Recipient's possession prior to being
furnished to a Recipient by or on behalf of the Disclosing Party;
(v) if it becomes available to the Recipient on a non-confidential
basis; or
(vi) if it was independently developed by the Recipient without
reference to the information provided by or on behalf of the Disclosing Party.
To the extent practicable, any Recipient shall give reasonable
advance notice to the Disclosing Party prior to any disclosure pursuant to
Section 24.1 (b)(ii) hereof.
24.2 PUBLICITY. No publicity relating to this Contract or the Services shall be
published in any newspaper, magazine, journal or any other written, oral or
visual medium without the prior written approval of the Owner's Project
Representative.
SECTION 25. CORRUPT GIFTS AND THE PAYMENT OF COMMISSIONS
--------------------------------------------
25.1 GIFTS, ETC. The Program Manager:
(a) represents and warrants that none of its employees, agents or
affiliates has undertaken to; and
(b) covenants that none of its employees, agents or affiliates shall,
offer or give or agree to give to any Owner Person any gift,
commission, rebate or consideration of any kind as an inducement or reward for
doing, influencing or carrying out any act in relation to the obtaining or
execution of this Contract or for showing any favour or disfavour to any Person
in relation to this Contract.
25.2 PAYMENTS. The Program Manager covenants that neither it, nor any of its
agents or affiliates, shall, directly or indirectly:
(a) offer, pay, promise to pay or authorise the payment of any money,
or offer, give, promise to give or authorise the giving of anything of value to
<PAGE>
36
any foreign (non-US) government official or any foreign political party,
official thereof or candidate for political office for purposes of influencing
any act or decision of such government official or political party, official or
candidate, or inducing such government official or political party, official or
candidate to use its or its intelligence with the government or instrumentality
thereof to influence any act or decision of such government or instrumentality;
(b) offer, pay, promise to pay or authorise the payment of any money, or
offer, give, promise to give or authorise the giving of anything of value to any
Person while knowing or having a reason to know that all or a portion of such
money or thing of value will be offered or given to any such government official
or any such political party, official thereof or candidate for political office
for purpose of influencing any act or decision of such government official or
political party, official or candidate, or inducing such government official or
political party, official or candidate to use its influence with respect to any
act or decision of such government or instrumentality;
(c) use fictitious, inflated, duplicate, anonymous, inadequate,
unrecorded or otherwise false accounts, transfers, records, reports, documents
or bookkeeping entries for the purpose of (i) concealing, mislabelling,
misstating, omitting or otherwise falsifying the existence, source or
application of funds for the uses proscribed by Section 25.2(a) or 25.2(b)
hereof; (ii) excluding them from the Owner's usual system of financial
accountability or (iii) obtaining approval by the Owner of any activities
proscribed by Section 25.2(a) or 25.2(b) hereof.
25.3 FOREIGN CORRUPT PRACTICES ACT. The Program Manager acknowledges that the
prohibitions set forth in Section 25.2 hereof conform to the requirements of the
US Foreign Corrupt Practices Act of 1977, as amended, and shall apply to all
activities of the Program Manager, its agents and affiliates notwithstanding the
fact that such activities may be permitted by the standards or customs of
countries other than the United States.
25.4 PERMITTED ACTIVITIES. Section 25.2 hereof does not prohibit:
(a) the normal extension of those common courtesies and social
amenities (including meals, holiday gifts and tips of nominal amounts)
consistent with ethical business practices that are offered and received on a
basis of friendship or hospitality, and without the expectation of anything in
return, and are of too little value, duration or frequency to give even the
appearance of impropriety; provided that the cost thereof is properly identified
and disclosed on the books of the Owner;
(b) the payment of commissions or fees to responsible and qualified
consultants, agents. marketing representatives, attorneys and others for
necessary and legitimate services actually performed; provided that the amount
paid is reasonably related to the value of such services or the benefits
resulting therefrom;
(c) payments to Persons whose duties are essentially ministerial or
clerical, which are not intended to influence the misuse of official position,
but rather are intended to encourage the lawful use of official position to
expedite a matter or to act with respect to matters not involving any
discretion; or
<PAGE>
37
(d) any payment to a government official, employee or agency that is
specifically required by Law, regulation or decree equally applicable to all
similarly situated companies.
25.5 MATERIALITY. Breach of this Section 25 may render the Program Manager, the
Suppliers and agents liable to punishment by Law, and any such breach shall
constitute an Event of Default.
SECTION 26. RELATIONSHIP OF THE PARTIES
---------------------------
26.1 GENERALLY. The relationship between the Parties shall not be that of
partners or joint venturers and nothing herein contained shall be deemed to
constitute a partnership or joint venture among them. Neither Party shall have
authority or power to act unilaterally as agent for the other.
26.2 CAPACITY OF SUPPLIERS. No Supplier or any of its employees, representatives
or agents shall be deemed or construed to be employees, representatives or
agents of the Owner.
SECTION 27. NOTICES
-------
27.1 METHODS AND EFFECTIVENESS. All notices, requests, consents and other
communications hereunder (each, a "Notice") shall be in writing and shall be
delivered by one or more of the following methods:
METHOD DATE OF EFFECTIVENESS
- ------ ---------------------
Personal delivery Date delivered
Facsimile with return confirmation of Date sent; provided that
transmission original received by mail
or courier service
within 5 days thereafter
Nationally recognised overnight courier service Business Day after the
date sent
First-class certified mail, postage prepaid and Fifth (5th) day after the
return receipt requested date sent
27.2 ADDRESSES. Unless otherwise notified in writing, for the purposes of this
Section 27, the addresses and facsimile numbers of the Parties are:
(a) THE PROGRAM MANAGER. If to the Program Manager, at the following
addresses:
Bechtel Limited
245 Hammersmith Road
London W6 8DP
England
Attention: William W. West
Telephone: 44 181 846 4483
Facsimile: 44 181 846 4938
Copy to George B. Baber - same details as above.
<PAGE>
38
(b) THE OWNER. If to the Owner, at the following address:
Viatel, Inc.
800 Third Avenue
New York, New York 10022
United States of America
Attention: General Counsel
Telephone: 212-350-9261
Facsimile: 212-350-9250
or to such other place and with such other copies as either Party may designate
as to itself by written notice to the other Party.
27.3 ENGLISH LANGUAGE. Except where otherwise provided, all documents relating
to this Contract and all communications between the Parties shall be in the
English language.
SECTION 28. DISPUTE RESOLUTION; CONSENT TO JURISDICTION
-------------------------------------------
28.1 MUTUAL DISCUSSIONS. If a dispute or difference of any kind whatsoever shall
arise between the Parties in connection with, relating to or arising out of this
Contract, including the interpretation, performance, non-performance or
termination of this Contract, the Parties shall attempt, for a period of
[REDACTED], to settle such dispute by mutual good-faith discussions between the
Project Representatives of the Parties.
28.2 RESOLUTION BY INDEPENDENT SENIOR MANAGEMENT. If a dispute or difference is
not resolved within a period of [REDACTED] in accordance with Section 28.1, or
such longer time as is mutually agreed, the dispute or difference shall be
submitted for resolution to responsible senior management of each Party who are
not directly involved with this Contract or the System, who shall endeavour to
resolve the same within [REDACTED] of the matter being referred to them.
28.3 MEDIATION. In the event that any dispute or difference is not resolved
pursuant to Section 28.1 or Section 28.2 within the relevant periods specified
in those sections, or such longer periods as the Parties may agree, the Parties
shall endeavour to settle the same by non-binding mediation under the
Construction Industry Mediation Rules of the American Arbitration Association
prior to any litigation in respect thereof. Notwithstanding any other provision
of this Contract to the contrary, the Parties may, but shall not be required to,
agree in writing to any other form of final and binding dispute resolution in
connection with any particular dispute arising hereunder.
28.4 CONSENT TO JURISDICTION. The Parties agree that, without limiting the
ability of either Party to appeal an order of any such court, the United States
District Court for the Southern District of New York and state courts located in
the State of New York shall have exclusive jurisdiction to enforce the terms of
this Contract and to decide any claims or disputes that may arise or result
from, or be connected with, this Contract and any superseding agreement, any
breach or default hereunder or thereunder, or the transactions contemplated
herein or therein. Any and all claims, actions, causes of action, suits or
<PAGE>
39
proceedings relating to the foregoing shall be filed and maintained only in such
courts, and the Parties hereto hereby irrevocably consent and submit to the
jurisdiction of such courts. If an action, suit or proceeding is instituted in
the United States District Court for the Southern District of New York or a
state court located in the State of New York, each Party agrees not to assert,
by way of motion, as a defense or otherwise, in any such action, suit or
proceeding, any claim that:
(a) it is not subject personally to the jurisdiction of such court;
(b) such action, suit or proceeding is brought in an inconvenient
forum;
(c) the venue of such action, suit or proceeding is improper; or
(d) this Contract and any superseding agreement or the subject matter
hereof or thereof may not be enforced in or by such court.
Any and all service of process, and any other notice in any such
action, shall be given personally or by registered or certified mail, return
receipt requested, or by any other means of mail that requires a signed receipt,
postage prepaid, mailed to such a Party as herein provided. The Parties agree to
and submit to enforcement of interim judgments issued in any such court.
SECTION 29. MISCELLANEOUS
-------------
29.1 HEADINGS. For the purposes of interpretation, the headings of the Sections
hereof shall not be deemed to form part of this Contract.
29.2 GOVERNING LAW. This Contract shall be construed and governed in accordance
with the Laws in force in the State of New York, United States, applicable to
agreements made and to be performed wholly within such State.
29.3 SEVERABILITY. If any provision of this Contract shall be invalid or
unenforceable, such invalidity or unenforceability shall not invalidate or
render unenforceable the entire Contract, but rather the entire Contract shall
be construed as if not containing the particular invalid or unenforceable
provision or provisions, and rights and obligations of the Owner and the Program
Manager shall be construed and enforced accordingly.
29.4 INTEGRATION. This Contract supersedes all prior oral or written
understandings between the Parties and constitutes the entire agreement with
respect to the subject matter of this Contract.
29.5 AMENDMENTS AND WAIVERS.
(a) AMENDMENTS. This Contract and any of its provisions may be amended,
supplemented or otherwise modified by another agreement in writing signed by a
duly authorised person on behalf of each Party.
<PAGE>
40
(b) WAIVERS. Any provision of this Contract may be waived if, and only
if, such waiver is in writing and signed by the Party against whom the waiver is
to be enforced. No failure or delay by any Party in exercising any right, power
or privilege hereunder shall operate as waiver thereof, nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any right, power or privilege.
29.6 FURTHER ASSURANCES. The Program Manager shall provide any and all such
co-operation and assistance as the Owner may reasonably request in connection
with the implementation of this Contract and the engineering, procurement and
construction of the System. Specifically, the Program Manager shall promptly
provide any technical, engineering, financial or other information that the
Owner is entitled to under this Contract, whenever requested by the Owner,
including in connection with any requests by, filings to, or regulatory
requirements of Governmental Authorities.
29.7 COUNTERPARTS. This Contract may be executed in one or more counterparts,
each of which when so executed shall be deemed to be an original. Such
counterparts together shall constitute but one Contract.
29.8 SUCCESSORS AND ASSIGNS. This Contract shall be binding upon each Party, its
successors and permitted assignees. Neither Party may assign or transfer any or
all of its rights under this Contract without the prior express written consent
of the other Party; PROVIDED that either Party may effect such assignment or
transfer to an Affiliate of such Party without any such requirement of prior
consent.
IN WITNESS WHEREOF, the Parties have duly executed this Contract as of the date
first set forth above.
BECHTEL LIMITED
- ---------------
By _______________________
Name:
Title:
VIATEL, INC.
- ------------
By _______________________
Name:
Title:
<PAGE>
EXHIBIT A
DEFINED TERMS
-------------
"Affiliate" of any Person means any other Person that, directly or
indirectly through one or more intermediaries, controls the first Person, or any
other Person that is controlled by or under common control with the first
Person. For the purposes of this definition, the term "CONTROL" shall be defined
as direct or beneficial ownership of greater than fifty percent (50%) of the
equity interests or greater than fifty percent (50%) of the voting control of an
entity.
"Aggregate Liability Cap" has the meaning ascribed thereto in Section
19.2 of the Contract.
"Alternative Wayleave" has the meaning ascribed thereto in Section 5.1
of the Contract.
"Business Day" means any Day, other than a Saturday, Sunday or national
or statutory holiday in any of the United Kingdom, France, Germany, the
Netherlands or the United States.
"Certificate of Payment and Final Release" means the certificate
delivered by the Program Manager or, as applicable, each Supplier to the Owner
in the form of Exhibit H to the Contract.
"Change in Law" means (a) the adoption, enactment or application to
either Party or the System of any Law or any Codes and Standards of the United
Kingdom, the Netherlands, Germany, France or the United States not existing or
applicable to such Party or System as of the date of the Contract; or (b) any
change in any Law or any Codes and Standards of the United Kingdom, the
Netherlands, Germany, France or the United States or in the application thereof
by a Governmental Authority after the date of the Contract, but not including
any Law or any Codes and Standards or application thereof in existence as of the
date of the Contract that, by its terms, becomes or will become effective and
applicable to either Party or the System after the date of the Contract.
"Change Event" has the meaning ascribed thereto in Section 10.1 of the
Contract.
"Change Order" has the meaning ascribed thereto in Section 10.3 of the
Contract.
"Codes and Standards" means Governmental Authority requirements
pertaining to or relating to the System and the Services including rules,
regulations, codes, standards and Permits emanating from a Governmental
Authority.
"Contract" means the Project Services Agreement, dated January 11,
1999, between the Program Manager and the Owner, including all Exhibits thereto.
"Cost Incentive Fee" has the meaning ascribed thereto in Section 7.2(b)
of the Contract.
"Day" means the 24-hour period beginning and ending at 00.00 hours
Greenwich Mean Time.
<PAGE>
A-2
"Defects and Deficiencies" means:
(a) when used with respect to Supplies, such items that are not:
(i) of good quality or free from improper workmanship and
deficiencies;
(ii) fit for the particular purpose for which they are provided
under the applicable Supplier Contract; or
(iii) free from errors or omissions in design or manufacture in
light of the Technical Requirements; and
(b) when used with respect to the Procured Services or any portion
thereof:
(i) such is not in accordance with the Technical Requirements;
(ii) such is not provided in a workmanlike manner; or
(iii) any materials, equipment, tools or supplies, or any design,
engineering, start-up, installation or quality-control activity that,
in the Owner's reasonable judgment:
(A) does not conform to the Technical Requirements or is of
improper or inferior workmanship; or
(B) would adversely affect the ability of the System to meet
any Performance Guarantee or warranty requirement referenced
hereunder;
(c) when used with respect to the Services or any portion thereof, any
respects in which they have not been performed in accordance with the
General Warranty.
"Disclosing Party" has the meaning ascribed thereto in Section 24.1 of
the Contract.
"Dollars" or "$" means the lawful currency of the United States.
"Duct" means, as described in the Technical Requirements, the duct to
be installed as part of the System to carry the Fiber Optic Cable.
"Event of Default" has the meaning ascribed thereto in Section 17.1 of
the Contract.
"Fiber Optic Cable" means, as described in the Technical Requirements,
the fiber optic cable to be supplied for the System pursuant to an Owner
Contract.
<PAGE>
A-3
"Fixed Fee" has the meaning ascribed thereto in Section 7.2(a) of the
Contract.
"Force Majeure Event" has the meaning ascribed thereto in Section 12.1
of the Contract.
"Full-Time Equivalent Personnel" means the quotient of:
(x) total number of Hours Worked charged to the Owner during any
calendar month, DIVIDED BY
(y) [REDACTED],
where [REDACTED] is the anticipated monthly per-person expenditure of Hours
Worked for Program Manager Personnel performing the Services, assuming a
commitment of 48 hours per week, multiplied by [REDACTED] per month.
"General Warranty Period" means a period of two (2) years commencing
from the System RFS Date.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, regulatory or administrative functions of or pertaining to
government.
"Guaranteed RFS Date" means [REDACTED], as such date may be extended in
accordance with Section 10 of the Contract.
"Hours Worked" has the meaning ascribed thereto in Exhibit E to the
Contract.
"Incentive Fee" has the meaning ascribed thereto in Section 7.2(b) of
the Contract.
"Incentive Fee Invoice" has the meaning ascribed thereto in Section
7.2(b) of the Contract.
"Interest Rate" means the lesser of (i) the LIBOR Rate plus four per
cent and (ii) the maximum interest rate permitted by applicable Law.
"Intellectual Property Rights" means all patent, trade mark, copyright
and other industrial and intellectual property rights.
"Invoice" means the System RFS Invoice and each Incentive Fee Invoice.
"Key Program Manager Personnel" means any Person named in, or at any
time occupying any position or serving any function identified in, Exhibit J
hereto.
"Law" means any federal, state, provincial or local constitution,
charter, act, statute, law, ordinance, code, rule, regulation, order or other
legislative action of any Governmental Authority to the extent having the force
of law.
<PAGE>
A-4
"LIBOR Rate" means, for any Day, the one-month London Interbank Offered
Rate (LIBOR) published in London edition of The Financial Times.
"Lien" means any mortgage, pledge, lien, deed of trust, claim, charge,
security interest, attachment or encumbrance of any kind, or any other similar
type of preferential arrangement including materialmen's, labourers',
mechanics', Suppliers' and vendors' liens, and including any agreement to give
any of the foregoing, any conditional sale or other title retention agreement,
any lease in the nature thereof.
"Lien Release" means the lien release executed and delivered by the
Program Manager or any Supplier in the form of Exhibit I to the Contract.
"Losses" means all damages, obligations, debts, deficiencies, demands,
judgments, causes of action, costs, charges, fines, penalties, claims, actions,
proceedings, liabilities, losses, demands, suits, prosecutions or expenses
(including reasonable attorney's fees, disbursements, costs, expenses and other
charges).
"Nortel" has the meaning ascribed thereto in Section 2.2(b) of the
Contract.
"Notice" has the meaning ascribed thereto in Section 27.1 of the
Contract.
"Notice of Exercise of Remedies" has the meaning ascribed thereto in
Section 17.1 of the Contract.
"Notice of Optional Termination" has the meaning ascribed thereto in
Section 16.1 of the Contract.
"Notice of Termination" has the meaning ascribed thereto in Section
18.1 of the Contract.
"Notice of Termination for Default" has the meaning ascribed thereto in
Section 17.1 of the Contract.
"Optional Termination" has the meaning ascribed thereto in Section 16.1
of the Contract.
"Owner" has the meaning ascribed thereto in the preamble to the
Contract.
"Owner-Caused Delay" has the meaning ascribed thereto in Section 2.3 of
the Contract.
"Owner Contract" means a contract entered into between the Owner and an
Owner Contractor.
"Owner Contractor" has the meaning ascribed thereto in Section 2.2(b)
of the Contract.
<PAGE>
A-5
"Owner Default" has the meaning ascribed thereto in Section 15.2(b) of
the Contract.
"Owner Person" means:
(a) the Owner, the Owner's Project Representative and the Owner's
Inspector;
(b) anyone else acting on behalf of the Owner (other than the
Program Manager) in connection with this Contract; and
(c) the successors (including any Person acquiring any ownership
interest in System assets or properties, or in the Owner's rights under
the Contract), assigns, employees, agents, officers, directors and
affiliates of any of the foregoing.
"Owner-Procured Equipment" means any and all materials, plant,
machinery, equipment, hardware and other items provided by any Owner Contractor
pursuant to an Owner Contract.
"Owner Security" means has the meaning ascribed thereto in Section 7.1
of the Contract.
"Owner's Inspector" means a qualified Person designated as the
authorised representative of the Owner to:
(a) make all necessary inspections of the Services, the Procured
Services and the Supplies furnished or being furnished under this
Contract;
(b) to report on progress in the performance of the Services; and
(c) to review the Performance Tests, the Reimbursement Invoices,
the Invoices, the issuance of RFS Certificates and other matters
relating to the Contract.
"Parties" means the Owner and the Program Manager.
"Performance Guarantees" means the performance parameters for the
System, as set forth in the Technical Specification, and as may be developed by
the Program Manager and approved by the Owner.
"Performance Tests" means the tests to be conducted in accordance with
the Technical Specification and the terms and conditions of the Contract.
"Permits" means all:
(a) permits, "no objections", permissions-in-principle,
authorisations, consents, registrations, certificates, licenses,
orders, work authorisations/visas, permissions for the operation of
field equipment (including vehicles, machinery and communications
equipment and facilities) and similar authorisations; and
<PAGE>
A-6
(b) consents, licenses, waivers, privileges, acknowledgements,
agreements, concessions, approvals from and all other filings with and
applications submitted to, any Governmental Authority or any other
Person,
but not including Wayleaves, Telecoms Licences or any of the foregoing which
relate to the POPs.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, trust, unincorporated organisation or Governmental
Authority.
"POP" or "Point of Presence" means each facility designed to house
termination and switching equipment for the System, as more particularly
described in the Technical Specification.
"Procured Services" means any and all services to be provided by any
Supplier pursuant to a Supplier Contract.
"Program Manager" has the meaning ascribed thereto in the preamble to
the Contract.
"Program Manager Personnel" means any Person at any time directly
performing Services under this Contract and:
(a) meeting the description of Key Program Manager Personnel; or
(b) engaged by the Program Manager (or by a parent or subsidiary
company of the Program Manager) as a full-time employee subject to the
Program Manager's (of the relevant parent's or subsidiary's) standard
conditions of employment for the relevant position or locality.
"Project Representative" has the meaning ascribed thereto in Section 13
of the Contract.
"Prudent Practices" means:
(a) in respect of any Services constituting engineering or
construction-management services, those practices, methods, specifications and
standards of safety and performance, as the same may change from time to time,
as are commonly used by professional firms regularly performing engineering and
construction-management services in Europe for facilities of the type and size
similar to the System, and
(b) in respect of any Services constituting procurement or
contract-administration services, those practices, methods, equipment,
specifications and standards of safety and performance, as the same may change
from time to time, as are commonly used by professional firms regularly
performing engineering and construction services in Europe for facilities of the
type and size similar to the System,
<PAGE>
A-7
which, in each case, in the exercise of reasonable judgment and in the light of
the facts known at the time the decision was made, are considered professional,
safe and prudent practice in connection with the supervision of design,
construction, installation and use of equipment, facilities and improvements,
with commensurate standards of safety, performance, dependability, efficiency
and economy.
"Public Contract" means any instrument or document relating to any
Public Wayleave setting forth negotiated terms and conditions differing from, or
supplemental to, the statutory terms and conditions applicable to Public Forms.
"Public Form" means any standard-form application, instrument or other
document issued or utilized by, or required for submission to, any Governmental
Authority that does not contain or require any negotiated provision or other
special term or condition to any Public Wayleave not otherwise set forth in
applicable Laws and Codes and Standards.
"Public Wayleave" means any Wayleave that is (i) subject to official
grant by any appropriate Governmental Authority, and (ii) available to the
general public upon uniform terms and conditions (or, in the case of Public
Contracts, upon substantially uniform terms and conditions, subject to limited
negotiation of certain provisions) as expressly set forth in applicable Laws and
Codes and Standards.
"Recipients" has the meaning ascribed thereto in Section 24.1 of the
Contract.
"Recoverable Costs" means all items listed in Exhibit E to the
Contract.
"Reimbursable Costs" means the Supplier Costs and the Recoverable
Costs.
"Repeater Facilities" means all equipment, materials, facilities and
locations described in, and meeting the requirements of, Section 8 of the
Technical Specification.
"RFS Certificate" means the certificate to be issued by the Owner in
respect of the System in accordance with Section 21 of the Contract.
"Schedule Incentive Fee" has the meaning ascribed thereto in Section
7.2(b) of the Contract.
"Service Fees" means, collectively, the Fixed Fee and the Incentive
Fees.
"Services" has the meaning ascribed thereto in Section 2.1 of the
Contract.
"Site" means any location or locations at which the Program Manager or
any Supplier (or any employee or agent of either) is at any time performing
services or providing supplies in connection with this Contract.
<PAGE>
A-8
"Supplier" means any contractor, vendor or supplier entering into a
Supplier Contract to perform services or provide equipment, supplies or material
for the System.
"Supplier Contract" means any contract that the Program Manager enters
into as agent for the Owner with any contractor, vendor or supplier.
"Supplier Cost" means any payment actually disbursed pursuant to any
Supplier Contract by the Program Manager to Suppliers in respect of Supplies or
Procured Services.
"Supplier Cost Verification" means the certification executed by the
Program Manager representing and confirming to the Owner that (i) the Program
Manager has, in fact, paid to the relevant Supplier(s) the full amount of
Supplier Costs as to which such Supplier Cost Verification relates and, (ii) to
the best of the Program Manager's knowledge and based on its full inspection as
required hereunder, the relevant Procured Services and Supplies are in
accordance with the Technical Requirements and have been completed and delivered
to the extent required under the Technical Requirements and the relevant
Supplier Contract for payment in respect thereof.
"Supplies" means any and all materials, plant, machinery, equipment,
hardware and other items provided by any Supplier pursuant to a Supplier
Contract.
"System" means the whole of each fiber optic telecommunications link
(including all equipment, Supplies, Permits, Wayleaves and other items, as more
precisely described in the Technical Specification, requisite for the
transmission of communications thereon) extending between and including all POPs
at the locations identified in the Technical Specification.
"System RFS Date" means the date on which a RFS Certificate is issued
in respect of the System in accordance with Section 21.2 of the Contract.
"Target Cost" [REDACTED]
"Target Cost Assumptions" means the schedule annexed as Exhibit K to
the Contract setting forth (i) categorical descriptions of the types and
quantities of Services anticipated by the Parties as necessary to achieve the
System RFS Date within the Target Cost and by the Guaranteed RFS Date and (ii)
the assumptions upon which such descriptions are based.
"Taxes" means all taxes and duties of any type, including
sales-of-goods taxes, value added taxes, customs duties or other levies and
duties applicable to the performance or delivery of the Services, the Procured
Services and the Supplies, but excluding any tax, duty or other charge levied on
or attributable to property owned, income earned or personnel engaged by the
Program Manager or any Supplier.
"Technical Requirements" means the following documents:
<PAGE>
A-9
(a) the Technical Specification;
(b) the manufacturers' specifications and warranties relating to
any Procured Services and Supplies.
"Technical Specification" means Exhibit C to the Contract.
"Telecoms Licence" means any licence or similar authorization of any
Governmental Authority that a Person must hold in order to act as the owner or
operator of telecommunications facilities in a relevant jurisdiction.
"Termination for Default" has the meaning ascribed thereto in Section
17.1 of the Contract.
"Total Completion Cost" means the total amount of the Reimbursable
Costs paid or payable to the Program Manager prior to the System RFS Date.
"United States" means the United States of America.
"Wayleave" means any right-of-way, easement, license, franchise,
crossing, joint-use arrangement or other access right (but excluding leases of
existing transmission capacity or fiber optic cable from other
telecommunications service providers) that may be identified to the Owner by the
Program Manager, and entered into by or on behalf of the Owner, in connection
with the installation, maintenance, operation and ownership of the Fiber Optic
Cable, the Duct and the Repeater Facilities.
"Wayleave Criteria" means the technical criteria and applicable terms
and conditions set forth in Exhibit L to the Contract for Public Wayleaves and
Alternative Wayleaves.
"Wayleave or Permit Failure" means any refusal, delay or conditional
mandate by any Governmental Authority with respect to any application by the
Program Manager, duly submitted in full compliance with all applicable Laws,
Codes and Standards and the Wayleave Criteria, for any Public Wayleave or
Permit, which refusal, delay or mandate (i) is contrary to, or inconsistent
with, applicable Law or Codes and Standards, (ii) imposes conditions
supplemental to, or more onerous than, the express terms of such Laws or Codes
and Standards, or (iii) represents an arbitrary or capricious act or omission by
any relevant Governmental Authority in the conduct of its official duties.
<PAGE>
EXHIBIT B
DESCRIPTION OF SERVICES
-----------------------
DESIGN REVIEW AND PLANNING
- --------------------------
- - Ongoing review of plans and specifications throughout conceptual
development, implementation and testing.
- - Make recommendations for potential Suppliers of equipment and materials and
design, engineering and construction services for the System, including
preparation of proposals as to the allocation of System completion
activities among the various Supplier Contracts and the coordination of
such activities among Suppliers.
- - Analyze proposed System components in terms of their technical suitability
(excepting network design, which is the responsibility of the Owner
Contractor supplying the network electronic equipment), initial cost and
life-cycle investment, and provide recommendations to the Owner with
respect to the foregoing.
- - Evaluate new or innovative developments and advise the Owner as to
potential time- or cost-savings that are consistent with, or would improve
upon, quality standards.
- - Review System design for adaptability to staged construction, develop bar
chart and milestone schedules that highlight critical decisions for the
Owner, and arrange early commitments for the purchase and fabrication of
long-lead and early-start items.
- - Evaluate System design in terms of construction feasibility and cost, and
analyze and advise on the use of available labor-saving techniques, such as
off-Site fabrication and pre-assembly of System components.
- - Review all specifications for conformity with current trade practices and
appropriate allocation of equipment purchases and work assignments.
- - Prepare comprehensive, categorized project budgets and schedules at various
stages of design, engineering and construction.
- - Develop a project implementation plan to analyze special requirements and
conditions.
- - Identify opportunities for fast-tracking the overall System completion
schedule and evaluate costs and benefits of such strategies.
- - Identify requirements for overtime work programs and shutdowns, and prepare
recommendations for the Owner on appropriate work-around plans.
PROCUREMENT SUPPORT
- -------------------
- - Advise the Owner of current pricing and availability of labor and materials
at the relevant Sites.
- - Confirm potential Suppliers' availability, reputation and capacity for
reliable performance, bondability and other information as to their
suitability to provide the Procured Services and the Procured Supplies.
<PAGE>
B-2
- - Advise on jurisdictional assignments, labor agreement obligations, trade
restrictions and local work practices.
- - Prepare and review bid packages to facilitate that alternate systems,
components, materials and techniques are clearly specified so as to obtain
proper bidder response.
- - Where appropriate, develop bidding alternatives on materials, construction
techniques, fabrication and installation methods in order to take advantage
of current conditions in the construction marketplace.
- - Review the bid packages and the scope of services and supplies therein to
confirm that every detail of work is properly and fully assigned.
- - Review and tailor the bidding format and instructions for each type of
Procured Services and Procured Supply to help facilitate proper response to
base bids, specific alternate bids and unit price requests.
- - Review early purchase bid packages. In major installation packages, confirm
inclusion of all requirements for special receipt, handling and
installation of materials and equipment to be furnished by others.
- - Interview qualified potential Suppliers to confirm their interest in the
bidding process to help in the determination that there exists effective
competition among bidders.
- - Establish the recommended bidders list for major elements of the Procured
Services and Supplies.
- - Participate in prebid conferences and assist in responding to questions
raised during the bidding period.
- - Evaluate base bids, alternate proposals, unit prices and all other
pertinent data.
- - Review all cost proposals in relation to known local and current markets
for similar services and supplies, using extensive in-house cost data and
recent buy-out information.
- - Organize and conduct meetings with bidders to discuss their bids and
proposed approach regarding project logistics, manpower and sequence of
operations in order to ascertain that they conform to the completion
schedules.
- - Make a complete and independent evaluation of the bids and post-bid
discussions, subcontractor selection, alternates to be accepted and unit
prices to be included. Prepare detailed recommendations for award.
- - On behalf of the Owner, negotiate contracts with potential Suppliers, with
a view toward reduction of the overall costs and delivery lead time for the
Procured Services and the Supplies.
<PAGE>
B-3
CONTRACT MANAGEMENT
- -------------------
- - Update and confirm project budgets by developing a detailed independent
cost review using current market experience, current Supplier costs and
labor availability data.
- - Develop and maintain a master project schedule. Solicit schedule updates
from all Suppliers as work progresses and integrate them into the master
schedule. Coordinate with the Owner as to matters affecting milestone
dates. Provide all other administrative, management and related services to
coordinate scheduled activities and responsibilities of the Suppliers, both
among themselves and in relation to the activities of the Program Manager
and the Owner Persons to secure System completion in accordance with the
latest cost estimates and completion schedules.
- - Develop and implement procedures satisfactory to the Owner for the review
and processing of Suppliers' applications for payment.
- - Prepare, produce and maintain a cost reporting and forecasting system to
track project costs and keep the Owner apprised of changes and revisions
that impact project costs. Provide monthly reports, with complete back-up,
on the Total Completion Cost.
- - Control costs by anticipating potential problem areas and resolving them
such that additional costs are minimized. This process shall include
initiating input from the Suppliers and the Owner's Project Representative
for low-cost, yet high quality, responses to field changes.
- - Use commercially reasonable efforts to obtain satisfactory performance from
each Supplier and recommend courses of action to the Owner when the
requirements of any Supplier Contract are not being fulfilled.
- - Compile and review all required documentation and make recommendations to
the Owner regarding payments to Suppliers, and perform all accounting and
maintain all records required under the Contract.
- - Monitor and evaluate any Supplier claims and advise the Owner with respect
to same.
PERMITTING AND WAYLEAVE SUPPORT
- -------------------------------
- - Review the Owner's Wayleave and Permit documentation and comment on
compatibility with System objectives.
- - Recommend and agree with the Owner on supplemental criteria for Wayleave
selection.
- - Identify routing options, assess and select preferred route, also
alternative routes, where appropriate, based upon agreed criteria
consistent with the Contract.
- - Collect routing information and coordinate with relevant statutory
authorities, landowners and other relevant entities to produce
documentation necessary for Wayleave and Permits applications.
<PAGE>
B-4
- - Plan and negotiate Wayleaves and Permits of occupation of the route
including preparation of necessary plans, drawings and documents.
- - Submit applications for Wayleaves and Permits on behalf of the Owner and
expedite their approval.
- - Liase with the Owner's Contractors and make recommendations to the Owner to
achieve a coordinated approach to Wayleave and Permits.
TESTING, FIELD MANAGEMENT AND REPORTING
- ---------------------------------------
- - Maintain project documentation systems at all appropriate Sites and in one
centralized location; organize and administer document updates and keep
Suppliers informed of the latest design conditions.
- - Expedite and assist in the administration of Supplier Contracts. Provide
additional information as required to facilitate Supplier decisions in the
field.
- - Review all work-in-progress at the Sites to confirm that it is in
accordance with the Technical Requirements.
- - Perform or require, upon the Owner's written authorization, additional
testing or inspection of incomplete or unsatisfactory Procured Services and
Supplies, whether or not the same are fabricated, installed or completed.
Reject and require, at no additional cost, re-performance or redelivery of
any item of services or supplies that is incomplete or contains Defects and
Deficiencies.
- - When any Procured Services or Supplies (or portions thereof) are, in the
Program Manager's judgment, substantially complete, coordinate with the
relevant Supplier(s) to inspect such services or supplies and prepare for
the Owner a list of incomplete or unsatisfactory items and a schedule for
their completion. Coordinate completion of any such items and any Punch
List items, and notify and assist the Owner at such time as such items are
ready for final inspection.
- - Compile, verify and deliver to the Owner's Project Representative weekly
progress reports for the System.
- - Recommend and retain on behalf of the Owner (with the Owner's approval)
special consultants or inspectors as needed.
- - Arrange for the delivery, storage, protection and security of
Owner-purchased materials, systems and equipment to be integrated into the
System.
- - Develop integrated testing standards and procedures for the Owner's
approval and administer the testing and delivery to the Owner of the
System.
- - Develop and implement a Site-specific safety program or programs designed
to enhance the safety of workers, the public and property, and perform the
following safety-related functions:
<PAGE>
B-5
- - Maintenance of a fire/emergency evacuation plan;
- - Maintenance of appropriate records at Site field offices;
- - Providing all on-site Suppliers with a "road map" for movement of personnel
and materials;
- - Establishment of a chain of command between the Program Manager and the
Suppliers in the pursuit of a safe and healthy work environment;
- - Reinforcement of safety awareness and procedures at all Supplier meetings;
- - Mandatory monthly Site safety meetings for project personnel; and
- - Weekly walk-throughs to check the quality control and safety level of work
being performed.
<PAGE>
EXHIBIT C
TECHNICAL SPECIFICATION
-----------------------
[REDACTED]
<PAGE>
EXHIBIT D
FEE SCHEDULE
------------
[REDACTED]
<PAGE>
EXHIBIT E
RECOVERABLE COSTS
-----------------
[REDACTED]
<PAGE>
EXHIBIT F
INSURANCE REQUIREMENTS
----------------------
[REDACTED]
<PAGE>
EXHIBIT G-1
MATERIAL TERMS AND CONDITIONS OF SUPPLIER CONTRACTS
---------------------------------------------------
A. WARRANTIES
----------
1.) GENERAL WARRANTIES. Each Supplier shall warrant for the benefit of the
Owner that (together with such other warranties as may be set forth in
any Supplier Contract, the "SUPPLIER WARRANTIES"):
(a) All items included in the Procured Services or Supplies, as
applicable, shall:
(i) meet or exceed the Performance Guarantees;
(ii) be performed or furnished in accordance with:
(A) Prudent Practices (as applicable to each Supplier
Contract);
(B) Applicable Laws and Codes and Standards;
(C) Specifications and instructions of manufacturers,
vendors and subcontractors applicable to any item of
such Supplies; and
(D) All other requirements of this Contract and such
Supplier Contract; and
(b) All items of Supply shall:
(i) be new;
(ii) be fit for the particular purpose of this Contract (as
described in the Technical Specification);
(iii)be fully capable of (and be installed and maintained to be
capable of) integration into the System, such that, assuming
that the Procured Services and Supplies provided by other
Suppliers conforms to the Technical Requirements, the System,
on an integrated basis, shall meet the Performance
Guarantees.
2.) SUBCONTRACTOR WARRANTIES. Any and all warranties furnished to any
Supplier by subcontractors or vendors shall be consistent with the
relevant Supplier Warranties, and shall, as requested by the Owner, be
subject to conditional assignment to the Owner on or after the System
RFS Date.
3.) WARRANTY PERIODS. [REDACTED]
<PAGE>
G1-2
B. PAYMENTS
--------
1.) PROGRESS PAYMENTS AND RETAINAGE.
(a) Each Supplier Contract shall, to the maximum extent practicable,
provide that payments shall be deferred until testing and
acceptance of the relevant items of Procured Services or Supplies
has occurred. Each Supplier shall, as a condition to final payment
for the Procured Services or Supplies, execute and deliver a
Certificate of Payment and Final Release in favor of the Owner. In
the case of Supplier Contracts providing for payment on a
percentage-of-completion basis, each Supplier shall execute and
deliver Lien Releases in favor of the Owner with respect to
Procured Services or Supplies having an aggregate Supplier Cost in
excess of [REDACTED].
(b) All payments made to Suppliers prior to testing and acceptance of
the relevant Procured Services or Supplies shall be subject to
retainage in amounts usual and customary in respect of such
services and supplies. To the extent that retainage security is
unavailable, inadequate or undesirable in the context of any
particular Supplier Contract, such Supplier Contract shall provide
for an alternative form of security such as a performance bond or
bank guarantee in favor of, and in form and substance satisfactory
to, the Owner.
2.) WITHHOLDING AND OFFSET OF PAYMENTS. The Supplier Contracts shall
entitle the Owner to withhold payment on account of:
(a) the Supplier's failure to remedy Defects and Deficiencies;
(b) the existence of Liens, claims or other charges in favor of third
parties against the System, the Owner or the Supplier;
(c) the Supplier's failure to:
(i) maintain all required insurance;
(ii) provide all required documentation;
(iii)pay, when due, any liquidated damages, other damages or any
payments owed to the Supplier; or
(iv) make all payments to subcontractors, vendors and suppliers in
accordance with their respective contracts with the Supplier;
or
<PAGE>
G1-3
(d) a finding by the Owner that the amount of any prior progress
payment made to a Supplier exceeded the amount that should have
been payable in respect of the Procured Services or Supplies
actually delivered by such Supplier.
Supplier Contracts shall provide that the Owner may, upon notice to the
relevant Supplier of its intention to do so, apply any payments
withheld or moneys to become due to such Supplier to satisfy, discharge
or secure the release of such claims that the Supplier has failed to
settle within 30 Days after notice thereof from the Owner. Any such
application shall be deemed payment to the Supplier.
3.) PUNCH LISTS. Supplier Contracts shall require, in connection with
applications for any RFS Certificate, that the Supplier deliver to the
Owner for its approval a written punch list (the "PUNCH LIST") of items
of Supply or Procured Services to be completed or supplied, which shall
specify estimated cost to complete or supply each such item. Upon the
Owner's approval of any Punch List, the Owner may withhold from the
retainage or any other amount paid to the Supplier upon the issuance of
the applicable RFS Certificate, an amount (the "PUNCH LIST RESERVE")
equal to [REDACTED]of the cost of completing or correcting all items
identified on the relevant Punch List.
C. TITLE; NO LIENS
---------------
1.) TITLE. Each Supplier shall represent and warrant to the Owner that:
(a) prior to the transfer of any property to the Owner, such Supplier
has good and marketable title to, and ownership of, all materials,
work and equipment to be incorporated into the System or forming a
part of the Procured Services or the Supplies;
(b) upon the delivery of the Procured Services and the Supplies or the
transfer of any other property to the Owner, the Owner shall have
the absolute and exclusive right, title and interest to all
materials, work and equipment to be incorporated into the System
or otherwise forming a part of the Procured Services or the
Supplies (and, to the extent that the Supplier delivers to the
Owner any Procured Services or the Supplies involving Intellectual
Property Rights, that all requirements of Section 6 of the
Contract applicable to such Intellectual Property Rights have been
complied with); and
(c) such title shall pass to the Owner free and clear of any and all
Liens.
2.) NO LIENS; REMOVAL OF LIENS. Each Supplier shall:
(a) Keep the System, the Site, the Supplies and the Procured Services
free and clear of any and all Liens (including posting a bond)
other than Liens created directly by the Owner; and
(b) Indemnify each Owner Person from and against any and all Losses in
any way arising from such Supplier's breach of the foregoing
covenant.
<PAGE>
G1-4
D. DEFAULT AND REMEDIES
--------------------
1.) EVENTS OF DEFAULT. Each Supplier Contract shall provide that each of
the following shall be an Event of Default ("EVENT OF DEFAULT"):
(a) the Supplier has failed to carry out engineering, fabrication,
supply, delivery, installation or testing the Procured Services or
Supplies at the rate of progress required by and in accordance
with such Supplier Contract that is likely to result in a material
breach thereof; or
(b) the Supplier fails to make any payment under the Supplier Contract
when due; or
(c) the Supplier commits any material breach of, or fails in any
material respect to comply with and observe, any provision of the
Supplier Contract; or
(d) the Supplier abandons performance of the Procured Services or the
Supplies for a period in excess of [REDACTED] , or intimates
without lawful cause or justification that such will not or cannot
be completed; or
(e) the Supplier shall make a general assignment for the benefit of
creditors, or any proceeding shall be instituted by the Supplier
seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of the Supplier or its debts
under Law relating to bankruptcy, insolvency or reorganization or
relief or the appointment of a receiver, trustee or other similar
official for the Supplier or for any substantial part of its
property or the Supplier shall take any corporate action to
authorize any of the actions set forth above in this Section; or
(f) an involuntary petition shall be filed or an action or proceeding
otherwise commenced against the Supplier seeking reorganization,
arrangement or readjustment of the Supplier's debts or for any
other relief under any bankruptcy or insolvency act or Law, now or
hereafter existing and remain undismissed or unvacated for a
period of [REDACTED]; or
(g) a receiver, assignee, liquidator, trustee or similar officer for
the Supplier or for all or any part of its property shall be
appointed involuntarily; or
(h) the Supplier shall file a certificate of dissolution under
applicable Law or shall be liquidated, dissolved or wound up or
shall commence or have commenced against it any action or
proceeding for dissolution, winding up or liquidation, or shall
take any corporate action in furtherance thereof; or
<PAGE>
G1-5
(i) the Supplier either:
(i) fails to make prompt payment of any undisputed invoice due to
any subcontractor, vendor or supplier, or otherwise for
materials or labor; or
(ii) repudiates or is in default with respect to any of its
obligations to any subcontractor, vendor or supplier; or
(j) the Supplier fails, after being notified thereof by the Owner, to
promptly correct any Defects or Deficiencies prior to the System
RFS Date or within the relevant Warranty Period; or
(k) any representation or warranty made by the Supplier in the
Supplier Contract or in any certificate, financial statement or
other document furnished to the Owner by or on behalf of the
Supplier shall prove to be false or misleading in any material
respect as of the time made, confirmed or furnished.
2.) REMEDIES. Each Supplier Contract shall entitle the Owner to take the
following actions upon the occurrence and continuance of any Event of
Default:
(a) suspend payment under the Supplier Contract in whole or in part;
(b) take the performance of the Supplier Contract, including any
Supplies or Procured Services not yet delivered to Owner, wholly
or partly out of the control of the Supplier or any other Person
and cause the same to be completed, whereupon the Supplier shall
reimburse the Owner for any additional costs incurred by the Owner
in connection with such completion;
(c) exercise rights against the retainage, performance bond or bank
guarantee, as applicable, provided by the Supplier;
(d) apply any amount owning to the Supplier to the payment and
performance of its obligations; or
(e) exercise any and all rights and remedies it may have under law or
equity, including seeking specific performance and the recovery of
damages.
The foregoing remedies shall be cumulative, and the Owner shall be
entitled to elect one or more thereof without prejudice to any other
right or remedy it may have.
E. INSURANCE; INDEMNITY
--------------------
1.) INSURANCE.
(a) GENERALLY. Each Supplier Contract shall require that the Supplier
procure, at its own cost and expense, and maintain in effect
adequate insurance coverage against all risks normally insurable
<PAGE>
G1-6
and insured in accordance with industry standards relating to the
Procured Services and the Supplies. Unless otherwise stipulated
between Owner and the Program Manager, such insurance shall be
maintained in effect for the duration of all applicable Warranty
Periods and, if requested by the Owner, shall name the Owner and
the Program Manager as an additional insured. Each Supplier shall,
to the extent applicable, provide the following insurance (in the
maximum coverage amounts, and subject to the deductibles as Owner
and the Program manager shall agree in respect of each Supplier
Contract):
(i) COMPREHENSIVE PERSONAL INJURY AND PROPERTY DAMAGE LIABILITY
INSURANCE. This insurance shall (i) cover all activities of
the Supplier, its employees, agents, subcontractors and
vendors (collectively, the "SUPPLIER PERSONS"), (ii) state
that it is primary coverage and not subject to contribution
from other insurance maintained by the Supplier, and (iii) be
maintained in effect for [REDACTED].
(ii) BUILDER'S RISK AND COURSE OF CONSTRUCTION INSURANCE. This
insurance shall be written on a replacement cost basis for
the full value at risk, and shall include, without
limitation:
(A) physical damage insurance covering the Supplies or
Procured Services at the Supplier's premises; and
(B) transportation and installation all risks covering the
Supplies or Procured Services.
(iii)WORKER'S COMPENSATION INSURANCE. This insurance shall cover
all employees and servants of the Supplier for all
compensation and other benefits required by any applicable
Law or by Governmental Authority in respect of injury, death,
sickness or disease. The territorial restriction shall be
amended so that employees working in the area of operations
are not excluded.
(b) NOTICE OF CANCELLATION. All of the Supplier's insurance coverages
shall provide that, prior to any cancellation or material change
thereto initiated by the insurers, a [REDACTED] notice shall be
forwarded to the Owner.
(c) COPIES. At the Owner's request, the Supplier shall furnish the
Owner with certified copies of insurance policies or certificates
of insurance that provide sufficient information to verify that
the Supplier has complied with the insurance requirements under
the Supplier Contract.
(d) FAILURE TO MAINTAIN INSURANCE. If the Supplier fails to effect or
keep in force any of the insurance required by the Supplier
<PAGE>
G1-7
Contract, the Owner may, without prejudice to any other rights it
may have under the Supplier Contract, effect and keep in force any
such insurance and pay the premium due or take out new insurance
satisfactory to the Owner, in which event any amounts so paid by
the Owner shall become immediately due and payable by the Supplier
to the Owner. Should the Supplier fail to make any payment to the
Owner upon its request therefor, the Owner may deduct the amount
of such payment from any payment that is, or may become, due to
the Supplier.
2.) INDEMNITY. Each Supplier Contract shall provide that the Supplier shall
be liable for, and shall indemnify, protect, defend and hold harmless
each Owner Person from and against, all Losses:
(a) in respect of any injury to, or death or disease of, any person,
or any damage to, or loss of use of, any property or asset based
upon, arising under or otherwise related to the act, omission or
negligence of the Supplier, its employees, agents, subcontractors
and vendors (collectively, the "SUPPLIER PERSONS") in connection
with the performance of this Contract; or
(b) arising in connection with any infringement or claimed
infringement of Intellectual Property Rights forming a part of the
Procured Services or the Supplies; or
(c) arising from any act or omission of any Supplier Person that
violates any Law; or
(d) to the extent not covered by items (a) through (c) above, in
respect of any injury to, or death or disease of, any person, or
any damage to, or loss of use of, any property as a result of the
discharge or presence of any environmentally hazardous substance,
which discharge or presence was caused in any manner by the act,
omission or negligence of any Supplier Person; or
(e) arising from any breach by the Supplier of a Supplier Warranty; or
(f) otherwise stipulated as indemnifiable under any other provision of
the Supplier Contract,
except for such Losses solely due to the willful misconduct or gross negligence
of such Owner Person.
<PAGE>
EXHIBIT G-2
FORM OF SUPPLIER CONTRACT
-------------------------
[REDACTED]
<PAGE>
EXHIBIT H
FORM OF CERTIFICATE OF PAYMENT AND FINAL RELEASE
------------------------------------------------
CERTIFICATE OF PAYMENT AND FINAL RELEASE
----------------------------------------
Dated _____________
CIRCE CABLE PROJECT
Circe 2 System
Reference is made to the [PROJECT SERVICES AGREEMENT / RELEVANT SUPPLIER
CONTRACT] dated as of [_____________ ___, ____] (as amended, supplemented or
otherwise modified from time to time, the "CONTRACT"), between [VIATEL, INC.]
(the "OWNER") and [BECHTEL LIMITED / RELEVANT SUPPLIER] (the ["CONTRACTOR"] /
["SUPPLIER"]). Capitalized terms used but not otherwise defined herein shall
have the meanings ascribed thereto in the Contract.
1. RELEASE AND WAIVER. In consideration of, and subject to, the Owner's
remittance of the final payment owed to the [PROGRAM MANAGER] / [SUPPLIER] in
connection with the Contract, the [PROGRAM MANAGER] / [SUPPLIER] hereby and
forever releases, waives, and discharges:
1.1. any rights, Liens or other claims that the [PROGRAM MANAGER] /
[SUPPLIER] has or may have against any Owner Person arising out of or relating
to the System or any Services, Procured Services or Supplies (including any
materials, equipment or supplies forming a part thereof, or furnished in
connection therewith, the "CONTRACT ITEMS") performed or delivered pursuant to
the Contract or any other agreement or contract relating to the System; and
1.2. any other legal or equitable claim or right that the [PROGRAM
MANAGER] / [SUPPLIER] may have against any Owner Person or the System (or any
portion thereof) in any manner arising out of or relating to the performance of
the Contract and the delivery of any Contract Items.
2. CERTIFICATIONS. The [PROGRAM MANAGER] / [SUPPLIER] certifies that:
2.1. acceptance of the Final Payment by the [PROGRAM MANAGER] /
[SUPPLIER] shall represent the [PROGRAM MANAGER'S] / [SUPPLIER'S] complete
satisfaction with the final compensation for all claims and the Contract Items;
2.2. there are no expected or known Liens arising out of or in
connection with the performance or delivery by the [PROGRAM MANAGER] /
[SUPPLIER] of any Contract Items;
2.3. all Taxes and insurance premiums for which the [PROGRAM MANAGER] /
[SUPPLIER] is responsible under the Contract that have accrued to date in
connection with any Contract Items have been fully paid and discharged.
IN WITNESS WHEREOF, the [PROGRAM MANAGER] / [SUPPLIER] has
executed this Certificate of Payment and Final Release as of _______________,
19___.
[BECHTEL LIMITED / RELEVANT SUPPLIER]
By
----------------------------------
Name:
Title:
<PAGE>
EXHIBIT I
FORM OF LIEN RELEASE
--------------------
LIEN RELEASE
------------
Dated ______________
CIRCE CABLE PROJECT
Circe 2 System
Reference is made to the [PROJECT SERVICES AGREEMENT / RELEVANT
SUPPLIER CONTRACT] dated as of [_____________ ___, ____] (as amended,
supplemented or otherwise modified from time to time, the "CONTRACT"), between
[VIATEL, INC.] (the "OWNER") and [BECHTEL LIMITED / RELEVANT SUPPLIER] (the
["CONTRACTOR"] / ["SUPPLIER"]). Capitalized terms used but not otherwise defined
herein shall have the meanings ascribed thereto in the Contract.
1. RELEASE AND WAIVER. In consideration of, and subject to, the Owner's
payment for the [SERVICES] / [SUPPLIES] described in the [PROGRAM
MANAGER] / [SUPPLIER] Invoice, dated as of the date hereof (the
"CURRENT INVOICE"), the [PROGRAM MANAGER] / [SUPPLIER] hereby and
forever releases, waives, and discharges any rights, Liens or other
claims (other than claims that are subject to the dispute-resolution
provisions of Section [___] of the Contract) that the [PROGRAM MANAGER]
/ [SUPPLIER] has or may have against any Owner Person arising out of or
relating to the System or such Services, Procured Services, Supplies or
other items heretofore performed, delivered or otherwise subject to the
Current Invoice (collectively, the "INVOICED ITEMS"), including any
materials, equipment or supplies forming a part of, or furnished in
connection with, any Invoiced Items.
2. CERTIFICATIONS. The [PROGRAM MANAGER] / [SUPPLIER] certifies that:
2.1. there are no expected or known Liens on the System (or any
portion thereof) or on any Invoiced Items arising out of or in
connection with the performance or delivery by the [PROGRAM
MANAGER] / [SUPPLIER] of the Invoiced Items; and
2.2. all Taxes (excluding any income taxes) and insurance premiums
for which the [PROGRAM MANAGER] / [SUPPLIER] is responsible
under the Contract that have accrued to date in connection
with the Invoiced Items have been fully paid and discharged,
or, to the extent accrued but not yet payable, such Taxes and
premiums will be paid and discharged out of the payment(s)
made by the Owner to the [PROGRAM MANAGER] / [SUPPLIER] in
respect of the Current Invoice.
IN WITNESS WHEREOF, the [PROGRAM MANAGER] / [SUPPLIER] has executed
this Lien Release as of this ____ day of __________________, ______.
[BECHTEL LIMITED / RELEVANT SUPPLIER]
By
----------------------------------
Name:
Title:
<PAGE>
EXHIBIT J
SCHEDULE OF KEY PROGRAM MANAGER PERSONNEL
-----------------------------------------
1.0 INTRODUCTION
------------
1.0 The Program Manager's Project Representative, as approved by the
Owner, being an employee of the Program Manager, shall direct and
control the overall performance of the Services as set forth in the
Contract. Such Project Representative, or any replacement approved by
the Owner, shall be the primary Program Manager contact for the Owner
for official directions, correspondence, and instructions.
2.0 KEY PERSONNEL
-------------
[REDACTED]
3.0 REMOVAL OF KEY PERSONNEL
------------------------
[REDACTED]
4.0 PERSONNEL
---------
4.1 The following positions are identified as Key Program Manager
Personnel positions and will require the Owner's written approval of
individuals who fill these roles;
[REDACTED]
<PAGE>
EXHIBIT K
TARGET COST ASSUMPTIONS
-----------------------
BASIS OF CIRCE 2 COSTING
------------------------
[REDACTED]
<PAGE>
EXHIBIT L
WAYLEAVE CRITERIA
-----------------
[REDACTED]
<PAGE>
EXHIBIT M
OWNER SECURITY
--------------
[REDACTED]
Exhibit 10.23
DEVELOPMENT AGREEMENT
BY AND AMONG
VICAME INFRASTRUCTURE
DEVELOPMENT GMBH
VIATEL GERMAN ASSET GMBH
CARRIER 1 FIBER NETWORK GMBH & CO. OHG
METROMEDIA FIBER NETWORK GMBH
VIATEL, INC.
AND
METROMEDIA FIBER NETWORK, INC.
DATED AS OF FEBRUARY 19, 1999
<PAGE>
TABLE OF CONTENTS
1. Retention of Developer: Certain Definitions ............................ 2
2. Authority of Developer ................................................. 7
3. Obligations of Developer ...............................................11
4. Obligations of Owners ..................................................16
5. Representations and Warranties; Exculpation; Indemnity .................22
6. Funding; Reimbursable Expenses .........................................26
7 Termination ............................................................29
8. Publicity and Public Relations .........................................31
9. Independent Contractor/No Partnership ..................................32
10. Assignment .............................................................32
11. Notices ................................................................32
12. Intentionally Omitted ..................................................36
13. Confidentiality ........................................................36
14. Guaranty ...............................................................38
<PAGE>
15. Applicable Law .........................................................39
16. Severability ...........................................................39
17. Counterparts ...........................................................39
18. Benefits and Obligations ...............................................39
19. Integration; Amendment and Waiver ......................................40
20. Further Assurances .....................................................40
21. Force Majeure ..........................................................40
22. Audit Rights ...........................................................40
23. Headings ...............................................................41
24. No Immunity ............................................................41
25. Use of English Language ................................................41
26. Additional Capacity ....................................................41
27. Arbitration ............................................................42
28. Currency ...............................................................43
EXHIBITS
Exhibit A Binding Letter of Intent Deposit and Balance
Exhibit B Major Decisions
Exhibit C Information to be Provided to Committee
Exhibit D Approved Cities
Exhibit E Development Plan and Budget
Schedule 1 Interests
Schedule 2 Funding of Project
<PAGE>
DEVELOPMENT AGREEMENT
DEVELOPMENT AGREEMENT, dated as of February 19, 1999, by and among Viatel
German Asset GmbH, a Gesellschaft mit beschrankter Haftung organized under the
laws of Germany, ("Viatel"), Carrier 1 Fiber Network GmbH & Co. oHG, an offene
Handelsgesellschaft organized under the laws of Germany ("Carrier 1"),
Metromedia Fiber Network GmbH, a Gesellschaft mit beschrankter Haftung organized
under the laws of Germany ("MFN" and together with Viatel and Carrier 1, the
"Owners"), Metromedia Fiber Network, Inc., a Delaware corporation
("Metromedia"), Viatel, Inc., a Delaware corporation ("Viatel Parent") and
ViCaMe Infrastructure Development GmbH, a Gesellschaft mit beschrankter Haftung
organized under the laws of Germany ("Developer").
WHEREAS, the Owners (except that Carrier1 Holdings Ltd., has assigned its
rights and obligations to Carrier 1 and Metromedia has assigned its rights to
MFN) and Guarantors (as defined below) have entered into a Binding Letter of
Intent (as defined below), pursuant to which Owners have agreed to jointly
arrange for the development and construction of the Outside Plant (as defined
below); and
WHEREAS, upon RFS Acceptance of the Outside Plant (as such terms are
defined below) each of Carrier 1 and MFN will each own [REDACTED] (filled with
fiber optic cable to the extent separately purchased by each Owner in accordance
with the terms of this Agreement) along the route of the entire Outside Plant
with separate access thereto, and Viatel will own [REDACTED] along the same
route (one of which [REDACTED]will be filled with fiber optic cable to the
extent separately purchased by Viatel in accordance with the terms of this
Agreement and the other of which may be vacant); and
WHEREAS, the Owners believe it is in their mutual best interest to work
together on the Network; and
WHEREAS, Owners desire to retain Developer to perform or arrange for
certain pre-development, development, design, procurement, construction,
supervisory and/or other services with respect to the Outside Plant, and
Developer wishes to perform such services, all on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Owners and Developer
hereby agree as follows:
1
<PAGE>
1. Retention of Developer: Certain Definitions
1.1 Owners hereby retain Developer to provide the services
hereinafter set forth for the Outside Plant all on behalf of, and at the sole
cost and expense of, Owners unless specifically provided to the contrary in this
Agreement.
1.2 Developer hereby accepts the relationship of trust and
confidence established among Developer and Owners by this Agreement. Developer
covenants with Owners to act in good faith with reasonable efforts and diligence
in the performance of Developer's responsibilities under this Agreement.
1.3 Each of the Owners and Developer understand that the other
parties and their respective Affiliates may be interested, directly or
indirectly, in certain other development and other activities and undertakings
not related to the Network. Subject to the provisions of Section 26, this
Agreement and the assumption by Owners and Developer of their respective duties
hereunder shall be without prejudice to the rights of any party to have such
other activities and undertakings (whether or not competitive with the Network)
and to receive and enjoy profits or compensation therefrom.
1.4 As used in this Agreement, the following terms shall have the
following respective meanings:
"Additional Fiber Costs" shall mean all costs associated with an
Owner installing greater than a [REDACTED] cable in its subduct. The costs
referred to in the preceeding sentence are the costs associated with splicing
and blowing more than [REDACTED] cable (and terminating more than [REDACTED]
cable at each "POP" and repeater location). Additional Fiber Costs shall also
include all additional costs incurred as a result of any delay in the completion
of the Outside Plant resulting from the separate ordering of the fiber optic
cable by each Owner unrelated to the actions of the Construction Contractor.
"Affiliates" shall mean any Person that (a) owns or controls the
first Person, (b) is owned or controlled by the first Person or (c) is under
common ownership or control with the first Person, where "own" means direct or
indirect ownership of more than [REDACTED] of the equity or voting interests or
rights to distributions on account of equity of the Person, and "control" means
the direct or indirect power to direct the management or policies of the Person,
whether through the ownership of voting securities, by contract or otherwise.
2
<PAGE>
"Agreement" shall mean this Agreement including the Exhibits and
Schedules hereto, as it may be modified or amended from time to time.
"Approved Cities" shall mean the cities listed on Exhibit D to this
Agreement, as same may be amended from time-to-time with the unanimous consent
of the Owners.
"Binding Letter of Intent" shall mean that certain Binding Letter of
Intent dated August 20, 1998, among the Owners and certain of their affiliates,
as amended.
"Cash Flow Forecast" means the forecasted monthly expenditures for
Construction Costs for the Outside Plant (breaking out costs for rights of way,
engineering support, procurement, repeaters, points of presence and cable and
duct installation), which forecast is included as part of the Development Plan
and Budget.
"Co-Location Facilities" shall have the meaning set forth in the
definition of Required Configuration.
"Committee" shall mean the Committee of the Advisory Board of
Developer as set forth in the Shareholders' Agreement.
"Confidential Information" shall have the meaning set forth in
Section 13.
"Construction Contract" means the contract for the engineering,
procurement and construction of the Outside Plant to be entered into between the
Construction Contractor, Developer and the Owners. Developer shall enter into
the Construction Contract solely in its capacity as agent for and in the name of
the Owners, with the Owners (and not Developer) being severally liable for all
obligations and liabilities under the Construction Contract.
"Construction Contractor" means the contractor under the
Construction Contract.
"Construction Costs" means all costs (exclusive of recoverable value
added tax) (whether hard or soft) associated with the construction, procurement
and
3
<PAGE>
development (including obtaining all necessary licenses for construction,
permits, Necessary Rights, rights of way and other rights) of the Required
Configuration for the Outside Plant through RFS Acceptance, including, without
limitation, all Outside Plant Costs listed in Section 6.1(d) below, but
excluding actual commencement of commercial service of the Network and the
procurement and implementation of transmission and related equipment and fiber
optic cable, but including costs associated with splicing, blowing and pushing
up to [REDACTED] cable in one duct for each Owner (but only
terminating [REDACTED] cable at each POP and repeater location).
"Defaulting Owner" shall have the meaning set forth in Section
7.1(c) of this Agreement
"Developer's Trust Account" shall have the meaning given such terms
in the Shareholders' Agreement
"Development Plan and Budget" means the detailed statement of the
tasks and responsibilities, Construction Costs, Cash Flow Forecast and time
required to design, procure, construct and develop the Outside Plant which has
been approved by all the Owners and is attached to this Agreement as Exhibit E.
The Development Plan and Budget may only be amended in accordance with the terms
of this Agreement.
"Event of Default" shall have the meaning given such term in Section
7.1(c) of this Agreement.
"Funding Default" shall have the meaning given such term in Schedule
2 of this Agreement.
"Funding Notice" shall have the meaning given such term in Schedule
2 of this Agreement.
"Funding Obligation" shall have the meaning given such term in
Schedule 2 of this Agreement.
"Guarantor(s)" shall have the meaning given such term in Section 14
of this Agreement.
4
<PAGE>
"Interest" shall mean, as of the date hereof until an Owner's
percentage Interest is changed in accordance with this Agreement, the percentage
for each Owner set forth on Schedule 1 and their ownership interest in all
assets created in connection with the Network pursuant to this Agreement or any
related agreement.
"IRU" shall mean an indefeasible right of use.
"Letter(s) of Credit" shall have the meaning given such term in
Schedule 2.
"Major Decisions" shall mean the approval of any one or more of the
actions or matters set forth on Exhibit B and any material changes to or
amendments of any previously approved Major Decision.
"Majority-in-Interest" shall mean an Owner or Owners owning more
than 50% of the Interests.
"Managing Directors" shall have the meaning given such term in the
Shareholders' Agreement.
"Necessary Rights" shall mean, to the extent possible under
applicable German law, substantially equivalent but separately divisible and
transferable rights in and to easements, rights of way, licenses, permits and
other rights necessary for the construction and ownership of the Network (not
including licenses or permits related to the operation of a telecommunications
network in Germany [eg., Class 3 and Class 4 licenses under the German
Telecommunications Act], which are the individual responsibility of the Owners).
"Network" shall mean when used in respect of each individual Owner,
a fully-operational fiber optic telecommunications link completed and ready for
commercial use in accordance with the Required Configuration which Network shall
consist of (i) the whole of the Outside Plant to which the relevant Owner is
entitled hereunder or under the Construction Contract, (ii) fiber optic cable
procured by each Owner separately and installed pursuant to the Construction
Contract and (iii) any and all transmission electronics and related equipment
procured for, installed upon or integrated with (in each case, at each Owner's
sole cost and risk) such Outside Plant.
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"Outside Completion Date" shall have the meaning given such term in
Section 3.5 of this Agreement.
"Outside Plant" shall mean the entirety of the fiber optic
telecommunications infrastructure underlying, as the context may require, each
individual Owner's Network or all of such Networks collectively, which Outside
Plant shall (i) be completed by the Construction Contractor in accordance with
the Required Configuration and the Construction Contract, (ii) link the Approved
Cities and (iii) include any and all equipment, facilities, materials, services
and supplies necessary or incidental to achievement of RFS Acceptance in respect
thereof; provided, in any event that reference to such "Outside Plant" shall not
be deemed hereunder to include the procurement of fiber optic cable nor the
procurement or installation of any transmission electronics or related equipment
to be procured by the individual Owners for use in their respective Networks.
"Outside Plant Costs" shall have the meaning given such term in
Section 6.1(d).
"Parent's Trust Account" shall have the meaning given such term in
the Binding Letter of Intent.
"Person" means any domestic or foreign individual, corporation,
limited liability company, partnership, joint venture, estate, trust,
unincorporated association, any federal, state, county or municipal government
or any bureau, department or agency thereof and any fiduciary acting in such
capacity on behalf of any of the foregoing.
"Required Configuration" shall mean, in respect of the Network (and
each of its components), a fiber optic telecommunications network containing
four identical subducts generally buried in the ground into which necessary
access along the route of the Network for each Owner will be obtained through
separate manholes for each of the separate subducts. The Required Configuration
specifically excludes transmission and related equipment and fiber optic cable
but will include separate facilities of approximately [REDACTED] (to be shared
by each of the Owners pro-rata in accordance with their Interests except in
Frankfurt, Dusseldorf and Berlin in which locations MFN and Carrier 1 will each
have units within such facilities of approximately [REDACTED] each to house such
equipment, with one such facility located in each of the Approved Cities (the
"Co-Location Facilities"). The Co-Location Facilities shall be owned or leased
by an entity reasonably acceptable to all Owners, including Affiliates of
Viatel, so long as all Owners shall have equivalent rights of access and use
thereto.
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"Required Qualifications" means one or more individuals with ten
(10) or more years experience in civil work construction projects similar to the
construction of the Network.
"RFS Acceptance" shall mean in respect of the Outside Plant, the
date on which the Construction Contractor has satisfied all requirements of the
Construction Contract as to completion and delivery of such Outside Plant
(including without limitation, completion of all splicing, joining and
installation activities with respect to the fiber optic cable to be procured and
furnished by each of the Owners in accordance with this Agreement (to the extent
each Owner complies with its obligations hereunder) and the Construction
Contract).
"ROWCO" shall mean a German partnership or similar entity (to be
treated as a partnership for United States Federal income tax purposes by making
an election in the time and in the manner set forth in United States Treasury
Regulations Section 301.7701-3) to be owned by the Owners in proportion to their
Interests and the sole purpose of which shall be to own Necessary Rights that
are not owned separately by each Owner or Viatel and which shall provide each
Owner the benefits of the Necessary Rights so held by it.
"Shareholders' Agreement" shall mean that certain Shareholders'
Agreement of Developer dated of even date herewith, as the same may be amended
from time to time.
2. Authority of Developer
2.1 Subject to the terms of this Agreement, Owners hereby appoint
Developer as their agent and authorize Developer to take all actions, and to
make all decisions, necessary or appropriate in Developer's reasonable judgment
to coordinate, oversee and supervise the Construction Contract and the
development, design, procurement and construction of the Outside Plant,
substantially in accordance with the Development Plan and Budget. Until the
Outside Completion Date all communications with respect to the Outside Plant
from Owners to the Construction Contractor, any subcontractors, suppliers,
vendors (including the vendors of the fiber optic cable) or service providers
and other persons affiliated or associated with the Outside Plant, including all
approvals, shall be communicated through Developer.
It is expressly understood and agreed that actions taken by Developer in
accordance with this Agreement shall be taken by Developer as agent for and in
the name of Owners, and all obligations, costs or expenses reasonably incurred
by
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Developer in the performance of its obligations hereunder are the liability of
the Owners in proportion to their Interests (except as otherwise provided in
this Agreement) and not the liability of Developer. Any payments made by
Developer in the performance of its responsibilities under this Agreement shall
be made out of funds (a) that Developer from time to time holds in trust for the
Owners or (b) that Owners provide to Developer, including amounts available to
be drawn under the Letters of Credit provided by the Owners to Developer.
Developer shall not be required to make any advances to, or for the account of,
Owners or to pay any amount except out of funds held, provided or obtained as
aforesaid nor shall Developer be required to incur any liability or obligation
for the account of Owners. Developer shall be reimbursed by Owners on a monthly
basis upon submission of appropriate supporting documentation to Owners, for all
costs advanced by Developer.
2.2 In addition to, and not in limitation of, the foregoing,
Developer shall have the authority to take all actions, and to make all
decisions, necessary or appropriate in Developer's reasonable judgment, for the
performance of Developer's obligations set forth herein and to complete the
Outside Plant in accordance with the Construction Contract and Development Plan
and Budget, including without limitation: (a) the right to incur liabilities on
behalf of Owners pursuant to Section 3.2 (r) hereof and reimbursable
out-of-pocket expenses pursuant to Section 6.2 hereof, and (b) the right to
disburse funds to pay when due (i) all the costs, expenses and fees incurred in
connection with the predevelopment and development of the Outside Plant
including, without limitation, the fees and expenses of outside counsel and
consultants retained by Developer as agent for and in the name of the Owners,
(ii) the cost of all services, materials and labor in connection with the
development of the Outside Plant in accordance with the Development Plan and
Budget and this Agreement (including all applicable value added tax payable to
the Construction Contractor), (iii) the fees and disbursements payable to
Developer under this Agreement, and (iv) all other fees and charges incurred by
Developer on account of Owners in accordance with this Agreement, provided,
however, that Developer shall not have authority to disburse funds to pay or
incur liabilities to pay costs or expenses related to the Outside Plant and
associated with Major Decisions which have not been approved by unanimous vote
of the Owners with respect to Major Decisions set forth in paragraphs 1, 2, 4
and 5 of Exhibit B and the vote of at least two of the Owners with respect to
Major Decisions set forth in paragraph 3 of Exhibit B.
2.3 Notwithstanding any other provision of this Agreement, Developer
shall not, without the approval of all Owners, have the authority to:
(a) make expenditures for items not included, or in excess of the
amounts for any items provided for, in the Development Plan and Budget, or incur
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any liability related thereto; provided, however, that Developer may disburse
such funds and/or incur liabilities notwithstanding the lack of Owners' approval
if:
(i) the aggregate of all such expenditures does not exceed the
total amount for the Outside Plant specified in the Development Plan and
Budget (exclusive of all amounts related to value added tax in Germany)
and either (A) the aggregate of all such expenditures in respect of the
applicable line item in the approved budget does not exceed the amount
budgeted for such line item, or (B) Developer reasonably projects that
savings from another line item (the "Projected Savings") will upon
completion of the work relating to such line item be sufficient to pay for
such expenditure and such Projected Savings are concurred to in writing by
Owners holding at least [REDACTED] of the Interests, or
(ii) an emergency exists which, in the reasonable judgment of
Developer, requires the expenditure of unbudgeted funds for the
preservation or safety of the Network, or to avoid the suspension of any
necessary service in or to the Network, or
(iii) such expenditures are necessary, in the reasonable
judgment of Developer, in order to avoid a material increase in cost to
Owners resulting from the delay in such expenditure, provided, that the
expenditure is contemplated in the Development Plan and Budget; or
(b) make or permit to be made any material changes in the
Development Plan and Budget; or
(c) take any action which, at the time such action was taken,
Developer knew or had reason to know, would result in a delay in achieving a
major milestone identified in the Development Plan and Budget or the
Construction Contract by more than a total of [REDACTED] days; or
(d) modify the Network to add or delete cities, towns or other areas
from the list of Approved Cities set forth on Exhibit D which will be included
in the Network.
Developer shall provide each Owner with written notice and an explanation
of all expenditures made under Section 2.3(a)(i) at least [REDACTED] business
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days before such expenditure is made, except in the event of an emergency. In
the case of an emergency, Developer shall provide such notice within [REDACTED]
days thereafter.
Section 2.4. Notwithstanding the provisions of Section 2.3 hereof, in
the event Developer makes a written request (the "Approval Request") to the
Owners for the taking of an action described in paragraph 2 of Exhibit B hereof
(i.e. cost increases greater than the amounts set forth in the Development Plan
and Budget, exclusive of all amounts related to value added tax in Germany) or
for delays in achieving major milestones for greater than [REDACTED] days) if
the approval of all Owners has not been obtained within [REDACTED] days
following the receipt of the Approval Request, unless exigent circumstances
require a shorter time period, in which event such shorter time period (but in
no event less than [REDACTED] days), then the Owners which have provided such
approval (the "Approving Owners") shall have the rights set forth in this
Section 2.4. Within the [REDACTED] day period following the expiration of the
aforesaid [REDACTED] day period, or such shorter time period as exigent
circumstances shall require (but in no event less than 5 days) the Approving
Owners shall have the right, but not the obligation, to elect to purchase (i)
the Interest of the Owner(s) voting against such approval (the "Rejecting
Owner(s)") for an amount equal to the aggregate amount paid, invested, drawn
down under such Rejecting Owner(s) Letter of Credit and/or contributed by the
Rejecting Owner(s) for Outside Plant Costs (whether paid to Developer or at its
direction), including the Additional Fiber Costs, and amounts drawn on the
Letter of Credit provided by the Rejecting Owner(s) and (ii) all fiber optic
cable and electronics and transmission equipment actually installed and made a
part of the Network by the Rejecting Owner at a price equal to the actual
out-of-pocket third party costs incurred by the Rejecting Owner for such items
(the "Purchase Price"). Such election shall be made by giving written notice
thereof to the Rejecting Owner(s). The Interest of the Rejecting Owner(s) shall
be purchased on a date specified by the Approving Owner(s) which date shall not
be more than [REDACTED] days after the expiration of such [REDACTED] day period
(the "Buyout Date"). On the Buyout Date the Rejecting Owners shall be
irrevocably obligated to transfer its or their Interest to the Approving Owners
in exchange for the Purchase Price and the return by Developer of the Rejecting
Owner's Letter of Credit. On the Buyout Date the Rejecting Owner(s) also shall
be paid for all reimbursable expenses due such Rejecting Owner in accordance
with Section 6.2. The Interest of the Rejecting Owner(s) will be purchased by
the Approving Owners (if more than one) in proportion to the Interests of the
Approving Owner(s). Notwithstanding the foregoing, nothing in this Section 2.4
shall grant or be deemed to (i) grant the Approving Owner(s) the right to
purchase the share of stock in Developer owned by such Rejecting Owner or (ii)
obligate the Rejecting Owner to transfer such Rejecting Owner's share in
Developer.
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3. Obligations of Developer
3.1 During the term of this Agreement, Developer shall: (i) use
commercially reasonable efforts and diligence to coordinate, supervise, manage
and facilitate such services as may be necessary to implement the
pre-development, development, design, procurement, construction and completion
of the Outside Plant in accordance with the Development Plan and Budget, and
(ii) provide, upon the request of an Owner or as required under this Agreement,
consultation and assistance to such Owner concerning all matters with respect to
the development of the Network. Developer shall arrange for the personnel and
services necessary to perform its responsibilities under this Agreement. It is
understood that Developer will rely primarily on independent contractors and may
not have employees of its own.
3.2 Developer's obligations under this Agreement for the Outside
Plant shall include, but shall not be limited to, the following areas:
Budget, Planning and Administration.
(a) Developer shall update or modify the Development Plan and Budget
from time to time upon the request of Owners and otherwise when it deems
necessary or appropriate, and all such revisions to the Development Plan and
Budget shall promptly be submitted to Owners for their approval and shall become
effective only after such approval has been given in writing in accordance with
the terms of this Agreement. If the Development Plan and Budget is modified in
accordance with the preceding sentence or Developer otherwise determines, in its
reasonable judgment, that based upon the status of the construction of the
Outside Plant ("Changed Conditions"), the Letter of Credit from each Owner
exceeds the amount reasonably necessary to pay such Owner's share of the Outside
Plant Costs to be incurred to reach RFS Acceptance ("Maximum Amount"), Developer
shall advise each Owner of the allocable reduction in their respective Letter of
Credit based upon the revised Development Plan and Budget or Changed Conditions.
Thereafter each Owner may reduce its respective Letter of Credit accordingly but
in no event to an amount less than such Owner's Maximum Amount.
(b) Negotiate any documents, instruments or agreements or amendments
thereto necessary or appropriate for the implementation of each phase of the
Outside Plant and services related thereto provided such documents, instruments
or agreements, or amendments thereto are consistent with the Development Plan
and Budget.
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(c) Supervise, inspect or cause to be inspected and coordinate the
services and activities of the Construction Contractor, equipment vendors, fiber
optic cable suppliers (for coordination purposes only), architects, construction
managers, subcontractors, engineers, consultants, and others, to insure
cooperative efforts in the implementation of the Development Plan and Budget.
(d) Prepare and submit to Owners for their approval, and upon their
approval obtain, an insurance package for the Outside Plant, including bonding
requirements for the Construction Contractor. Any and all insurance shall name
Owners and Developer as insured and loss payees thereunder, and shall include,
to the extent available, a waiver by the insurer of any rights of subrogation to
claims against Developer or Owners or their direct and indirect members, and
their officers, directors, shareholders, principals, representatives, agents and
employees.
(e) Perform all accounting functions necessary or appropriate for
and in connection with the coordination of the development, design, procurement
and construction or capital improvement activities being conducted pursuant to
and in accordance with the Development Plan and Budget
(f) Retain such consultants and other professionals as Developer in
its reasonable judgment deems necessary or appropriate in connection with
obtaining Necessary Rights, any right of way planning, environmental analysis,
development, design, procurement, construction or capital improvement activities
being conducted. Developer will require any contractors, architects, engineers
and other professionals retained hereunder to be insured in customary amounts
against professional liability for errors and omissions to the extent such
insurance is customarily required in the applicable geographical region.
(g) Review all applications for payment by the Construction
Contractor, engineers, consultants, architect, construction manager, manager and
others ("Payment Applications") as to the completeness and determine the
appropriateness of such applications for payment under the Construction Contract
and other agreements and the Development Plan and Budget, as the case may be,
negotiate and settle any disputes or irregularities in connection with such
Payment Applications and agreements, and pay, from Owners' funds, of all such
Payment Applications deemed appropriate by Developer in its reasonable judgment.
(h) Developer will provide each Owner a copy of all Payment
Applications, together with copies of all documents, certificates and other
information submitted in support of such Payment Applications (the "Supporting
Information"). Payment Applications and related Supporting Information in
respect of payments to
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be made in a given month shall be provided not later than the fifteenth day of
the preceding month.
(i) As soon as Developer is informed by the Construction Contractor
of the proposed location of nodes, points of presence and/or Co-Location
Facilities for the Network, Developer will give notice thereof to the Owners.
Developer will cooperate with each Owner in providing information and applicable
time periods regarding fiber optic cable delivery schedules, fiber optic cable
count related to the cable to be placed in each Owner's subduct and such other
information as each Owner shall reasonably request related to fiber optic cable
as is reasonably available to Developer. Each Owner agrees that either prior to
or simultaneously with the execution of the Construction Contract, they will
each have executed separate purchase orders for the fiber optic cable to be used
in connection with the Network and that it shall be the responsibility of the
Construction Contractor (and not Developer) to request the delivery of fiber
optic cable (from the vendor of such fiber optic cable) on behalf of each Owner
in accordance with the Construction Contract.
(j) Assist the Owners in obtaining, to the extent available under
applicable German law, the recovery of value added tax (VAT) paid in connection
with the construction of the Outside Plant.
Design, Construction and Construction Management; Necessary Rights
(k) Supervise and inspect or cause to be inspected the activities of
the Construction Contractor and any subcontractors, suppliers, vendors,
providers and other Persons connected with the construction of the Outside
Plant.
(l) Authorize, on Owners' behalf, change orders submitted by
contractors or others, or initiated by Developer, subject to Section 2.3 hereof,
which, in Developer's reasonable judgment, are appropriate or necessary,
provided that Owners' authorization must be obtained if such change order
involves a Major Decision listed on Exhibit B.
(m) Intentionally Omitted.
(n) Subject to the provisions of Section 4.8, submit, prosecute and
administer applications and agreements in the name of Owners (or in accordance
with this Agreement, ROWCO or Viatel) for the Necessary Rights and other similar
approvals with respect to the Outside Plant with utility companies, public
agencies,
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private owners and federal, state, county, municipal and other governmental
authorities (collectively "Governmental Authorities").
(o) Negotiate all necessary agreements with Governmental Authorities
and other third parties including, but not limited to, those related to
Necessary Rights, access, and traffic, but excluding any negotiations related to
telecommunications licenses.
(p) Schedule meetings, as often as Developer or any of the Owners
deem appropriate, among Owners, the Construction Contractor and its construction
manager and such other parties as Developer or any Owner may deem necessary or
appropriate concerning the Outside Plant.
(q) Coordinate, to the extent applicable, (i) RFS Acceptance, (ii)
schedule and coordinate inspections and (iii) completion of all punch-list
items, retainage and final acceptance of the Outside Plant by Owners.
Finance
(r) Incur any obligations and expenses and expend Owners' funds in
accordance with the terms of the Development Plan and Budget, subject to Section
2.3 hereof.
(s) Call funds from Owners and draw down the Letters of Credit (in
accordance with Schedule 2 hereto) from time to time as required to pay
Construction Costs, Additional Fiber Costs and expenses (including reimbursable
expenses to Developer pursuant to Section 6.2) or in anticipation of payment to
third parties of costs and expenses incurred in preparation of or pursuant to
the Development Plan and Budget. Drawdowns of the Owners' funding obligations
for the Outside Plant and calls on the Letters of Credit shall be made in
accordance with the provisions of Schedule 2.
Local Requirements
(t) Retain competent consultants, attorneys, accountants, planners
and other professionals as Developer shall deem necessary (collectively
"Advisors") to ensure that the Outside Plant and all aspects of design,
procurement, licensing and construction of the Outside Plant conform to the
applicable laws of the relevant
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locality. The fees and expenses of such Advisors shall be paid by Developer as
agent for and in the name of the Owners from funds budgeted for such purpose in
the Development Plan and Budget.
3.3 Developer shall keep Owners promptly informed of all material
matters which come to Developer's attention relating to or affecting the Network
or any of Owners' obligations under this Agreement. In addition, Developer shall
promptly and in a timely manner answer all inquiries any of the Owners may have
with respect to implementation of the Development Plan and Budget. In addition,
Developer and its officers and agents will keep the Committee fully informed as
to the status of the Outside Plant including providing monthly reports on the
Outside Plant and the Network, monthly expenditures compared to budget, progress
toward meeting the RFS Acceptance, status of obtaining the Necessary Rights or
other material licenses, rights of way and easements, the information specified
on Exhibit C and all other information reasonably requested by the Committee
related to the Outside Plant and the Network. Senior representatives of
Developer and, if requested by an Owner, a representative of the Construction
Contractor shall meet with the Committee at least monthly until the RFS
Acceptance.
3.4. To the extent that calls for funds or drawdowns on the Letters
of Credit are made from Owners by Developer, or otherwise obtained by Developer
from Owners (including all amounts paid to Parent's Trust Account pursuant to
the Binding Letter of Intent), such sums, together with all interest earned
thereon, shall be deposited in, and held in trust in Developer's Trust Account
(except to the extent Developer determines, in its reasonable judgment, to pay
such funds directly to the Construction Contractor), and shall not be commingled
with other funds held by Developer. Developer shall invest such funds as are
temporarily not needed in connection with the Outside Plant in obligations of
the United States Government, the Federal Republic of Germany, Euro denominated
obligations, money market funds, certificates of deposit of banks or other
lending institutions with at least $500,000,000 of capital surplus or other
similar interest-bearing investments of comparable credit quality to be
determined by Developer; provided, however, that Developer shall not be required
to make any such investment if it would interfere with the timely application of
such funds to Construction Costs. All such funds shall be the property of
Owners, subject to the rights of Developer to disburse same as provided herein.
3.5 Owners and Developer acknowledge and agree that any plans and
specifications prepared for the Outside Plant and the Network shall be prepared
by the Construction Contractor, engineers or other professionals and that
Developer shall not be expected or required to render professional
architectural, engineering or other similar services to Owners. No loss that
results from any errors, insufficiencies, omissions, or inconsistencies in such
plans and specifications whatsoever shall be
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borne by Developer; provided, however, from and after March 30, 2000 (the
"Outside Completion Date"), each Owner (singly or with other Owners as they may
elect) shall have the right to pursue all available remedies against the
Construction Contractor, architects, engineers and other parties providing the
property or services that resulted in such loss, provided that RFS Acceptance
has not be achieved by that date. Prior to the Outside Completion Date,
Developer, as agent for and in the name of the Owners, shall have the right to
pursue the remedies against such parties as and when it shall reasonably
determine, however, following the Outside Completion Date each Owner may elect
to take over the enforcement of any claims (to the extent related to such
Owner's rights) commenced and then being pursued by Developer. In addition, it
is understood that Owners are relying on warranties and guarantees to be
received from the Construction Contractor, the subcontractors and other
suppliers with regard to the construction of the Outside Plant and Network, and
that Developer shall not be liable for construction means, methods, techniques,
materials, and procedures employed by such persons in the performance of
contract(s), the failure of the Construction Contractor to carry out its
responsibilities in accordance with the Construction Contract, or any other
defects or failure of the construction. The Owners shall receive any and all
warranties and guarantees directly from the Construction Contractor and any
applicable subcontractor. Notwithstanding the foregoing, Developer shall be
responsible for exercising and administering all claims in connection with such
guarantees and warranties until the first to occur of RFS Acceptance or the
Outside Completion Date.
4. Obligations of Owners
4.1 Owners shall cooperate with Developer in all respects in
connection with the development, design, procurement, construction and capital
improvement of the Outside Plant and the Network and shall promptly and in a
timely manner (a) provide information regarding their requirements for the
Network, (b) promptly answer all inquiries Developer may have with respect to
such information, and (c) approve or disapprove any items submitted by Developer
to Owners pursuant to this Agreement. Additional information or decisions
requested by Developer of Owners shall also be given by Owners to Developer in a
prompt and timely manner. To the extent legally possible under applicable German
law each of the Owners shall own (i) all right, title and interest in their
subduct and fiber (to the extent installed) as such items are constructed and
delivered pursuant to, and subject to compliance with, the terms and conditions
of the Construction Contract and (ii) directly, have an interest in or otherwise
have a right to use the Necessary Rights as and when obtained in accordance with
the terms of this Agreement.
4.2 Each Owner shall provide its Letter of Credit or funds to
Developer as required in accordance with Schedule 2 and Section 3.2(s) hereof.
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4.3 Developer shall, as agent for and in the name of the Owners (not
as a guarantor), enter into agreements with architects, engineers, construction
managers, contractors and other consultants, which agreements shall be in
substantial conformity with the Development Plan and Budget and be typical for
projects of a type and size similar to the Project, and be in substantially
identical form for each Owner. The services, duties and responsibilities of each
such person or entity shall be described in such agreement, and copies of same
will be furnished to Owners and Developer. If necessary, the Owners will, at
Developer's request, enter into agreements in their own name or the name of an
Affiliate selected by such Owner, provided that the agreements entered into by
the Owners shall be substantially identical. All agreements executed by Owners
will provide for copies of all notices thereunder to be sent to Developer, and
vice versa, and if any such agreement does not so provide, Owners and Developer,
as the case may be, shall promptly send copies of all notices delivered
thereunder to Developer. Developer shall be entitled to rely upon the accuracy
and completeness of any information and reports provided by the architect,
manager, sales and marketing manager and any consultants, engineers, contractors
and other professionals retained by Owners or by Developer pursuant to and in
accordance with this Agreement.
4.4 All decisions required by the Owners hereunder will be made by a
Majority-In-Interest of the Owners except for Major Decisions or as otherwise
specifically provided for in this Agreement. Major Decisions shall be approved
by unanimous vote of the Owners with respect to Major Decisions set forth in
paragraphs 1, 2, 4 and 5 Exhibit B and the vote of at least two Owners with
respect to Major Decisions set forth in paragraph 3 of Exhibit B.
4.5 Owners shall pay all costs and expenses reasonably incurred in
connection with Necessary Rights and other appropriate approvals, permits,
variances, easements, assessments, fees and charges required or desirable as
contemplated in the Development Plan and Budget, and Owners hereby appoint
Developer as its agent to make such applications and obtain such approvals.
Owners agree to cooperate with Developer in connection with all applications for
Necessary Rights and other approvals, permits, licenses and all other documents
and agreements necessary or appropriate to be filed or entered into with all
Governmental Authorities, utility companies, public agencies and private owners
and to execute, acknowledge and deliver all documents and agreements reasonably
requested or required to obtain such Governmental Authorities, approvals,
permits and licenses or to create utility and other easements necessary to
furnish utilities.
4.6 Each Owner shall keep Developer and the other Owners promptly
informed of all material matters which come to such Owner's attention relating
to or affecting the development, design, procurement or construction of the
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Outside Plant and the Network or any of Developer's obligations under this
Agreement, including, without limitation, all agreements and discussions between
an Owner and third parties which relate to such matters, and Owners shall
promptly notify Developer of any developments necessitating or warranting a
change in the Development Plan and Budget.
4.7 Owners agree that the Outside Plant is to be constructed so that
each Owner shall own a single subduct (except for Viatel which will own two). As
provided in Section 3.2(i) Developer will provide each Owner timely notice of
the Co-Location Facilities for the Network and the location of nodes and points
of presence. In accordance with Section 3.2, each Owner shall be responsible for
purchasing the fiber optic cable to be placed in its subduct. Subject to the
provisions of Section 3.2(i), Developer shall be under no obligation to delay
the construction of the Outside Plant if one or more Owner(s) fails to either
timely order or cause timely delivery of the fiber optic cable. Viatel agrees to
make available to the Owners the ability to purchase fiber optic cable for the
Network at the same price that it is able to purchase fiber optic cable for the
Network. Developer will add to the funding request for an Owner pursuant to
Schedule 2 the Additional Fiber Costs caused by such Owner and reasonably
expected to be paid in the month following such funding request.
If a portion of the subducts cannot be owned directly by the Owners and is
subject to a long-term lease, license or similar arrangement applicable under
German law ("Lease Arrangements"), the portion of the subducts subject thereto
and the terms and conditions of the Lease Arrangements shall be substantially
equivalent for all Owners (with Owners sharing costs under the Lease
Arrangements in proportion to their Interests) and Owners shall direct Developer
to negotiate any Lease Arrangements in such fashion.
4.8 The Owners agree that, to the maximum extent possible, each Owner
shall be the beneficiary of and have substantially equivalent but separately
divisible and transferable rights in and to the Necessary Rights and shall
direct Developer to apply for and negotiate the terms of the Necessary Rights to
accomplish such objective. [REDACTED] The determination regarding the ownership
of the Necessary Rights will be made by Developer in good faith, based upon
consultations with Owners, each Owner's ability to own the Necessary Rights and
licensing and other applicable legal requirements under German law. [REDACTED]
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Notwithstanding the foregoing, the Owners confirm their understanding that the
telecommunication licenses required for the operation of the portion of the
Network being built for Viatel is held by Viaphone GmbH, an Affiliate of Viatel,
and that pursuant to Applicable Legal Requirements, the Necessary Rights and the
Precluded Rights (as they relate to rights of way in both the public and the
private domain) arise from the licenses held by Viaphone GmbH. Furthermore,
Developer will provide full cooperation to the Owners in connection with
assisting each such Owner in obtaining all Necessary Rights as soon as
practicable and permissible under applicable German law.
[REDACTED]
[REDACTED] Viatel on behalf of itself and its Affiliates and ROWCO
acknowledge that an Owner will be irreparably damaged in the event it does not
have the full benefit of the Necessary Rights held on its behalf, accordingly,
in addition to all other remedies that are available to an Owner at law or in
equity, Viatel on behalf of itself and its Affiliates and ROWCO agree that an
Owner shall be entitled to specific enforcement of its rights under Sections 4.8
and 4.9. [REDACTED]
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From and after the date hereof, Developer agrees that in connection with
the negotiation of any written agreement with third parties documenting the
Necessary Rights, Developer shall use "commercially reasonable efforts" to
include a provision stating that such third party shall have no ownership in all
or any part of the Network. For purposes of the preceding sentence,
"commercially reasonable efforts" shall mean efforts that will not, in
Developer's reasonable judgment, result in (x) an increase in the cost of the
construction of the Outside Plant or the Network, (y) delay in the timing for
completion of the Outside Plant or the Network, or (z) otherwise adversely
affect Developer's ability to fulfill its duties and obligations under this
Agreement.
[REDACTED] In connection with the foregoing, Carrier 1 and MFN (severally
to the extent the Title Defect impacts such party) agree (x) to reimburse Viatel
for all costs incurred with the Corrective Efforts within 10 business days of
the date of written notice and (y) indemnify and hold harmless Developer, Viatel
and its Affiliates from any and all loss, cost, damage or liability (including
income tax) arising as a result of Title Defect and Viatel's Corrective Efforts.
4.9 Prior to RFS Acceptance, except as otherwise provided in this
Agreement, no Owner shall have the right to grant a security interest or
otherwise encumber its rights in and to the Necessary Rights. Following RFS
Acceptance, each Owner (including Viatel) may grant security interests and other
encumbrances in its rights in and to the Necessary Rights so long as such
secured party agrees to the conditions set forth in the next sentence. If Viatel
grants any lien, security interest or other encumbrance on Necessary Rights
being held by Viatel for the benefit of one or more other Owners, the party to
whom such lien, security interest or other encumbrance is granted shall, as a
condition to any such grant, acknowledge in
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writing (in a form and on terms reasonably satisfactory to all Owners) the
rights of the other Owners, agree that its lien, security interest or
encumbrance is subordinate to the rights of the other Owners, to the extent any
exists, and covenant not to take any action that would interfere with the other
Owner's right in and use of the Necessary Rights. The provisions of this Section
4.9 shall not prohibit the sale, transfer, assignment, license or other
disposition of IRUs, dark fiber or other similar interests in the Network by an
Owner (whether before or after RFS Acceptance).
4.10 Owners shall maintain comprehensive liability insurance, in
customary amounts, against claims relating to or arising out of the Network,
except for claims arising in connection with the construction of the Network
which shall be covered through insurance provided by the Construction
Contractor. Such policy shall name Developer as a named insured thereunder and
shall include broad form contractual liability coverage insuring the indemnity
provisions of this Agreement. Any insurance obtained hereunder may be maintained
under a blanket insurance policy.
4.11 (a) The Owners agree that following RFS Acceptance, to the
extent repairs, expansion, modification or other actions are required with
respect to their respective Networks (the "Owner Actions"), the Owner Actions
shall be performed by such Owner (the "Acting Owner") in a manner intended to
result in a minimal level of interference and disruption to the remaining Owners
(the "Non-Acting Owners"). The Acting Owners agree to use reasonable efforts to
coordinate the performance of the Owner Actions and all other activities related
to the Network with the other Owners in the manner set forth in the preceding
sentence. To the extent any losses, costs or damages are incurred by the
Non-Acting Owners as a result of the Owner Actions, the Acting Owner agrees to
indemnify and hold harmless the Non-Acting Owners from any and all such losses,
costs, damages or otherwise.
(b) The Owners agree to take all actions necessary or desirable to
obtain and maintain separate ownership of all component parts of their
respective Networks. However, to the extent that, for any reason, as a matter of
operation of mandatory German law, all three or any two owners (each, a
"Co-Owner" and, collectively the "Co-Owners") obtain joint property in any item
(Sache) which is intended to be a component part of at least one of the Networks
(each, a "Joint Item") at any time before or after RFS Acceptance, the Owners
agree as follows:
(i) If the Joint Item is divisible into legally separate parts
(Teilung in Natur), each Co-Owner may demand such division at any time and
all Owners agree to take all actions necessary or desirable to implement
such division. The cost of such division shall be borne in equal parts by
the Co-
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Owners. Each Co-Owner shall obtain separate ownership in such part(s) of
the Joint Item as was intended to have been transferred separately to such
Owner.
(ii) If the Joint Item, as a matter of mandatory German law,
is not divisible into legally separate parts (the "Indivisible Item"), the
Co-Owners shall agree on the maintenance and administration ( Verwaltung)
of such Joint Item, provided that each Co-Owner shall have the right to
(i) take all actions necessary to preserve the Indivisible Item (the
"Preservation Action") without the prior written consent of the other
Co-Owner(s) and (ii) demand the prior written consent of the other
Co-Owners to such Preservation Action. Any maintenance or administration
expenses shall be borne in equal parts by the Co-Owners. To the extent
permitted as a matter of mandatory German law, the Co-Owners shall not
have the right to demand partition (Auseinandersetzung) of the Indivisible
Item. To the extent that the exclusion of the right to demand partition is
unenforceable as a matter of mandatory law (e.g. pursuant to Section 84
subsection 2 of the German Bankruptcy Code [Insolvenzordnung]), the
Co-Owners agree that the sale to a third party would be improper
(unstatthaft) and that each Co-Owner shall be entitled to demand that the
Indivisible Item be auctioned solely among the Co-Owners in accordance
with Section 753 subsection 1, sentence 2 of the German Civil Code.
(c) The terms of this Section 4.11 shall survive the termination or expiration
of this Agreement.
5. Representations and Warranties; Exculpation; Indemnity
5.1 Representations and Warranties. Each Owner represents and
warrants to the other parties to this Agreement on the date hereof as follows:
(a) Organization; Power and Authority. Such party is duly organized,
validly existing and has all requisite legal power and authority to execute this
Agreement and to perform the terms, conditions and provisions hereof.
(b) Authorization. The execution, delivery and performance by such
party of this Agreement have been duly authorized by all requisite action.
(c) Enforceability. This Agreement constitutes the legal, valid and
binding obligation of such party, enforceable against such party in accordance
with its
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terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and to the extent that the remedies of specific
performance, injunctive relief and other forms of equitable relief are subject
to equitable defenses, the discretion of the arbitration board before which any
proceeding therefor may be brought, and the principles of equity in general.
(d) No Conflict. Neither the execution, delivery or performance by
such party of this Agreement, nor the consummation of the transactions
contemplated thereby, will result in a (i) violation of, or conflict with, any
provision of the organizational documents of such party, (ii) contravention or
breach of, or a default under, any term or provision of any material contract,
agreement or instrument to which such party is a party or by which it or its
property may be bound, which contravention, breach or default could be
reasonably expected to have a material adverse effect on the ability of such
party to perform its obligations under this Agreement or to consummate the
transactions contemplated by this Agreement or (iii) violation by such party of
any applicable law.
(e) No Violation of Law. The party is not in violation of any
applicable law promulgated, or judgment entered, by any governmental authority,
which violations, individually or in the aggregate, would adversely affect it or
its performance of any obligations under this Agreement.
(f) Compliance with Laws. The party currently possesses or intends
to apply for and pursue and is not aware of any reason why it will not be in a
position to obtain all necessary licenses and permits from all applicable
authorities in Germany and the United States.
(g) No Litigation There are no material actions, suits or legal,
equitable, arbitration or administrative proceedings, pending or, to the
knowledge of such party threatened, against such party or any Affiliate of such
party which is set forth on its Organizational Chart.
(h) No Bankruptcy Filing. Neither such party nor any Affiliate of
such party which is set forth on its Organizational Chart is contemplating
either the filing of a petition under any bankruptcy, insolvency or similar laws
(either in the United States, Germany or otherwise) or the liquidation of all or
a major portion of its assets or property. Such party has no knowledge that any
Person has taken any action to file or cause to be filed any such petition
against it.
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5.2 Owners' Indemnity. (a) Each Owner shall be entitled to demand
from each other Owner (each, an "Other Owner") that the Other Owner shall
defend, indemnify, and hold harmless Developer, its Affiliates and their
respective partners, shareholders, directors, managing directors, managers,
officers, members, employees, agents, successors and assigns from and against
all loss, damage, charges, liabilities (direct or indirect), claims, expenses
(including, without limitation, reasonable attorneys' fees and expenses) and
suits or other causes of action of any nature whatsoever (hereinafter
collectively referred to in this Section 5 as "Claims") arising from or in any
way connected with (A) the Network or the performance of Developer's obligations
under and in accordance with the terms of this Agreement, (B) any other acts
performed by Developer at the direction of the Other Owner, (C) the breach of
any material provision of this Agreement by such Other Owner, and (D) such Other
Owner's failure (other than by reason of Developer's default or another Owner's
default under this Agreement) or refusal to comply with or abide by any legal
requirements, unless, following a final adjudication on the merits by a court of
competent jurisdiction, it is determined that the Claim was attributable to one
of the Indemnified Owner Matters described below in Section 5.3.
(b) Each Owner shall defend, indemnify and hold harmless each other
Owner and its Affiliates and their respective partners, shareholders, directors,
managing directors, managers, officers, members, employees, agents, successors
and assigns from and against all Claims arising from or in any way connected
with (A) such Owner's failure (other than by reason of another Owner's default)
or refusal to comply with or to abide by any Applicable Legal Requirements; or
(B) a breach of any material provision of this Agreement by such Owner or (c)
such Owner's gross negligence or willful misconduct.
5.3 Developer's Indemnity. Developer agrees to indemnify, defend and
hold harmless each Owner and its Affiliates and their respective partners,
shareholders, directors, Owners, Owners' managing directors, managers, officers,
members, employees, agents, successors and assigns (collectively, "Owner
Indemnitees") from and against any and all Claims due to Developer's or
Developer's employees and agents (which for purposes of this Agreement shall
under no circumstances include the Construction Contractor or any independent
contractors, consultants or other similar third parties retained by Developer
pursuant to this Agreement) willful and material breach of this Agreement, or
gross negligence ("Indemnified Owner Matters"). Developer agrees to reimburse
Owner Indemnitees for and indemnify Owner Indemnitees against the payment of any
monies which Owner Indemnitees are required to pay out in connection with or as
any expense (including, without limitation, reasonable attorneys' fees) in
defense of any Claim, civil or criminal action, proceeding, charge or
prosecution made, instituted or maintained against Developer, Owner Indemnitees,
or Owner Indemnitees and
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Developer jointly and/or severally, determined by a court of competent
jurisdiction to have been due to, caused by, or arising out of the Indemnified
Owner Matters.
5.4 Waiver of Claims. Developer shall not be liable or accountable,
in damages or otherwise, to Owners for any act or failure to act performed by it
in good faith and which does not constitute fraud, bad faith, willful
misconduct, or gross negligence. Owner shall not be liable or accountable, in
damages or otherwise, to any other Owner or Developer for any act or failure to
act performed by it in good faith and which does not constitute fraud, bad
faith, willful misconduct or gross negligence.
5.5 Exculpation
(a) Except as otherwise provided in Section 14, no direct or
indirect partner, shareholder, officer, director or member in or of any Owner
(and no officer, director, manager, member, employee or agent of such partner or
shareholder) will be personally liable for the performance of such Owner's
obligations under this Agreement. The liability of each Owner for such Owner's
obligations under this Agreement will be limited to such Owner's Interest in the
Network and the proceeds thereof. Nothing in this Section 5.5 (a) will affect
the rights of Developer to seek appropriate relief against any person to the
extent that such person misappropriates funds of Developer or commits fraud
against Developer.
(b) Except as provided in Section 14, no direct or indirect partner,
shareholder or member in or of Developer (and no officer, director, manager,
member, employee or agent of such member, partner or shareholder) will be
personally liable for the performance of Developer's obligations under this
Agreement. The liability of Developer for its obligations under this Agreement
will be limited to its assets. Nothing in this Section 5.5 (b) will affect the
rights of any Owner to seek appropriate relief against any person to the extend
that such person misappropriates funds of such Owner or commits fraud against
such Owner.
5.6 Survival. The provisions of this Section 5 (other than
subsection 5.1) shall survive the termination of this Agreement.
5A. Covenants
5A.1 Affirmative Covenants. Each Owner hereby covenants and agrees
that so long as this Agreement is in effect:
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(a) Such party will do or cause to be done, all things necessary to
preserve and keep in full force and effect its existence, and material
contractual rights, franchises and licenses.
(b) Such party will comply in all material respects with all
applicable legal requirements in respect of the conduct of its business and the
ownership of its property other than where the failure to so comply would not
materially prevent the completion of the Outside Plant in material compliance
with the Development Plan and Budget.
6. Funding: Reimbursable Expenses
6.1 Funding
(a) Binding Letter of Intent Funds. Prior to the execution of this
Agreement, Carrier 1 and MFN each transferred into Parent's Trust Account
[REDACTED] of the amount specified on Exhibit A. This amount represented Carrier
1's and MFN's share of certain costs contemplated by the Binding Letter of
Intent. Viatel confirms that it or Viatel Parent has advanced its pro rata share
of the funds expended pursuant to the Binding Letter of Intent (including
[REDACTED] advanced into the Parent's Trust Account and credit for an additional
[REDACTED] of funds previously expended pursuant to Section 4(b) of the Binding
Letter of Intent). Upon execution of this Agreement, the amount set forth on
Exhibit A as the Total, less all amounts expended by the Viatel Parent pursuant
to the terms of the Binding Letter of Intent shall be deposited by Viatel into
Developer's Trust Account (the "Balance"). In addition, upon the execution of
this Agreement, Viatel from its own funds shall deposit an amount equal to the
Balance (reduced by [REDACTED] previously deposited by or credited for the
account of Viatel) into Developer's Trust Account. Upon execution of this
Agreement, Developer shall provide Carrier 1 and MFN reasonably detailed
documentation reflecting the sums deposited into Developer's Trust Account and
the sums expended therefrom and the sums expended by Viatel's Parent prior to
depositing the Balance into Developer's Trust Account.
(b) Development Plan and Budget. The Owners hereby authorize
Developer to incur the costs set forth in the Development Plan and Budget and to
expend the funds deposited into Developer's Trust Account to pay for such costs
(but not for any other costs) including any cost reimbursements on the terms
described in Section 6.2 of this Agreement.
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(c) Construction Cost Funding. Owners agree to fund the Construction
Costs (which are all costs related to the Outside Plant, including Outside Plant
Costs, in accordance with Schedule 2).
(d) Outside Plant Costs. "Outside Plant Costs" shall mean and
include all costs of pre-development, development and construction of the
Outside Plant (unless expressly indicated otherwise), including, without
duplication, the following:
(i) the cost of the Necessary Rights and other rights of way,
licenses, permits, easements or other rights (including the
cost of obtaining same together with any fees incurred in
connection therewith), plus any other costs related to the
acquisition thereof, but excluding any costs connected to a
telecommunications license under the German Telecommunications
Act;
(ii) the cost of all labor, materials, utilities, equipment
(acquired or rented) and similar items incorporated into or
consumed in the construction and development of the Outside
Plant including all contract prices, including fees and
bonuses, of contractors or materialmen;
(iii) architectural, topographical and boundary surveying, legal,
consulting, accounting and engineering fees and expenses paid
to outside architects, surveyors, accountants, consultants,
attorneys, notaries and engineers in connection with the
planning, construction and obtaining the Necessary Rights for
the Network; the cost of related site, utility, or landscaping
work, including borings, soil analysis, traffic studies and
market studies;
(iv) all insurance premiums paid or payable by Owners with respect
to the Outside Plant, including any builder's risk, fire and
extended coverage, or general liability coverage carried by
Owners;
(v) all credit support and other performance security related
costs incurred under or in connection with the Construction
Contract;
(vi) all amounts reimbursable to Developer pursuant to Section 6.2;
and
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(vii) all other costs appropriately incurred in connection with the
Outside Plant.
Any of such costs and expenses which have been incurred or paid by Developer or
its Affiliates with respect to the Outside Plant prior to the date hereof shall
be included in Outside Plant Costs for all purposes hereof. Outside Plant Costs
shall not include the costs of transmission and transmission related equipment,
fiber optic cable. Additional Fiber Costs and costs associated with commencement
of commercial service for the Network.
6.2 Reimbursable Expenses; Developer's Remuneration. Owners shall
reimburse Developer in proportion to their Interest for all reasonable
out-of-pocket costs and expenses (exclusive of recoverable value added tax)
incurred by it in accordance with the Development Plan and Budget and
reimbursable to Developer hereunder including, without limitation, reasonable
travel and entertainment expenses advanced by any shareholder(s) of Developer
from its own funds (which advances shall not be obligatory). Developer shall
have the right to reimburse any shareholder(s) of Developer for amounts due
under this Section 6.2 for advances for reimbursement of expenses as set forth
in this Section 6.2. Owners shall also separately reimburse the applicable
shareholder(s) of Developer for (i) all compensation paid to on-site employees
of any shareholder of Developer working full-time on the construction of the
Outside Plant including, but not limited to, base salaries, bonuses, medical
benefits, retirement benefits, other fringe benefits, payroll taxes and any
severance payments (in an amount not to exceed [REDACTED] per annum for one
employee appointed by each of the two Owners that are not responsible for
designating the Managing Directors pursuant to the Shareholders' Agreement),
(ii) the fair and equitable portion of such compensation paid to off-site
employees of the shareholder(s) of Developer responsible for the designation of
the Managing Directors pursuant to the Shareholders' Agreement and responsible
for the day-to-day operations of Developer (other than employees at or above the
level of vice president) working on matters relating to the construction of the
Outside Plant (iii) the fair and equitable portion of any other overhead items
(such as office space, office equipment and support staff) allocable to time or
resources spent in respect of the construction of the Outside Plant by the
shareholder(s) of Developer responsible for the designation of the Managing
Directors under the Shareholders' Agreement and responsible for the day-to-day
operations of Developer and (iv) reasonable legal and accounting expenses
incurred directly by Developer (and not its shareholders) in connection with the
performance of its duties hereunder. A fee equal to [REDACTED] of all
reimbursable expenses to Developer will be paid to Developer plus applicable
value added tax due under German law, if any. Reimbursable expenses shall be
invoiced by Developer and payable per month, within [REDACTED] days following
the end of such month. To the extent all Owners agree, the expenses of each
Owner, including reasonable legal fees and expenses, related to the negotiation
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of the Binding Letter of Intent and this Agreement shall be an Outside Plant
Cost and shall be reimbursed to Owners. Developer shall provide, at an Owner's
request, reasonable supporting documentation of the foregoing expenses. In the
event an Owner (pursuant to subsections (i)-(iii)) above shall provide services
which benefit all Owners related to the Network (which are not duplicative of
services provided by Developer and which are not incurred merely for the
monitoring of construction for such Owner's individual benefit), the allocable
costs or expenses of such employee incurred by such Owner shall be reimbursed.
If Viatel no longer has the right to designate the Managing Director(s) of
Developer in accordance with the Shareholders' Agreement, the Owners (other than
Viatel) are hereby authorized to (x) nominate one of the shareholders of
Developer (other than Viatel) to provide directly or (y) cause the Developer to
subcontract with a third party to provide the services required by Developer;
provided such subcontractor or shareholder has substantial experience in
international construction projects of the scope and size of the Network, has a
net worth of no less than [REDACTED] and such subcontractor or shareholder
assumes all the obligations of Developer under this Agreement (including those
set forth in Section 14) and all related agreements occurring after the date
such shareholder provides the services required by Developer. In such event,
Developer shall be entitled to receive a fee (payable in accordance with each
Owner's Interest), to be passed directly through to the shareholder providing
such services or the applicable subcontractor, in an amount equal to [REDACTED]
of all remaining Construction Costs.
7. Termination
7.1 Termination
(a) This Agreement shall expire by its terms when RFS Acceptance is
achieved and upon completion of all obligations of Developer under this
Agreement and contracts and agreements with third parties; provided the
obligations related to ROWCO and Viatel holding Necessary Rights for the benefit
of the Owners (and other matters specifically designated as surviving the
termination of this Agreement) shall survive the termination of this Agreement.
(b) Intentionally Omitted.
(c) This Agreement may be terminated by Developer as to each
breaching Owner (a "Defaulting Owner) upon the occurrence of the following
specified events (each an "Event of Default"):
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(i) The occurrence of a Funding Default;
(ii) The material breach of any covenant, obligation,
representation, warranty or other agreement under this Agreement by each Owner
(in their capacity as Owner) which breach (A) remains uncured for a period of
[REDACTED] days after receipt by Owner of written notice from Developer
describing such breach and the action required to cure it (or, if such breach is
not susceptible of cure within such [REDACTED] day period, such longer period of
time as is reasonably necessary with diligence to cure such breach, but in no
event more than [REDACTED]) and (B) prevents the Network from being completed in
material compliance with the Development Plan and Budget; or
(iii) Such party shall commence a bankruptcy, insolvency or other
similar proceeding under the Bankruptcy Code in Title 11 of the United States
Code or any similar bankruptcy or creditors rights law in the United States,
Germany or other applicable jurisdiction (as amended, modified, succeeded or
replaced, from time to time, the "Bankruptcy Code"); or an involuntary case is
commenced against any such party under the Bankruptcy Code and the petition is
not dismissed within 60 days after commencement of the case; or a custodian,
trustee or other similar party is appointed for, or takes charge of all or
substantially all of the property of any such party; or any such party commences
any other proceeding under any reorganization, arrangement, adjustment of the
debt, relief of creditors, dissolution, insolvency or similar law of any
jurisdiction whether now or hereafter in effect relating to any such party.
(d) Upon agreement of all Owners and Developer.
7.2 Consequences of Termination. If this Agreement is terminated in
accordance with the provisions of Section 7.1 above, the following provisions
shall apply:
(a) No party shall have any further rights or obligations to one
another under this Agreement if the parties mutually agree to terminate this
Agreement pursuant to Section 7.1(d), except for the obligations set forth in
this Section 7.2(a) and Sections 4.11, 5 and 13. Developer shall provide an
accounting to the Owners for all monies advanced to Developer pursuant to this
Agreement within [REDACTED] days of the termination of this Agreement and within
[REDACTED] days of the termination of this Agreement, refund to the Owners their
proportionate share of those funds which have not yet been spent, incurred or
irrevocably committed to be spent or incurred as of the termination date (unless
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such commitment may be canceled without penalty or Owners agree to pay such
cancellation penalty) and shall return each Owner's Letter of Credit to such
Owner.
(b) Upon the occurrence of an Event of Default related to any Owner,
Developer shall have the right to (i) terminate this Agreement with respect to
the Defaulting Owner (except with respect to any continuing obligations of the
Defaulting Owner set forth in this Agreement to pay money, indemnify the
non-Defaulting Owners or Developer or such other terms and conditions hereof
which survive the termination of this Agreement) such that the Defaulting Owner
will have none of the rights, benefits or privileges of an Owner set forth
herein (including, but not limited to voting rights) and (ii) draw down on the
Letter of Credit posted by the Defaulting Owner and deposit the proceeds of same
in Developer's Trust Account. Developer and the non-Defaulting Owners shall have
the right to complete the construction of the Network and use such funds for the
purpose of paying for (i) the portion of the Outside Plant Costs, Construction
Costs and expenses incurred pursuant to Section 6.2 allocable to the Defaulting
Owner and (ii) all actual out-of-pocket costs and expenses incurred by Developer
in connection with the enforcement of its rights under this Section 7.2(b). In
addition, Developer and the non-Defaulting Owners shall have a claim a against
the Defaulting Owner for any increased costs incurred in connection with the
completion of the Network, if any, arising directly from the default of the
Defaulting Owner. Notwithstanding the foregoing, following an Event of Default
during construction of the Outside Plant, the Defaulting Owner shall have the
right to receive delivery of the assets comprising the Outside Plant from the
Construction Contractor pursuant to the terms of the Construction Contract.
8. Publicity and Public Relations
All publicity and public relations releases with respect to the
Network shall receive the prior written approval of all Owners, except where
immediate disclosure is required by applicable law. In such event the
information shall be provided to the Owners at the same time as it is disclosed.
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9. Independent Contractor/No Partnership
Developer, in accordance with its status as independent contractor,
covenants and agrees that it will conduct itself consistent with such status,
that it will neither hold itself out as nor claim to be an officer or employee
of any of the Owners by reason hereof. No provision of this Agreement shall be
construed as creating a partnership or any other formal business association, or
authorizing one party to act as an agent of another party except to the extent
specifically set forth herein.
10. Assignment
10.1 Except as otherwise provided in this Section 10, this Agreement
may not be assigned by any party without the prior written consent of the other
parties hereto. The provisions of this Section 10 shall not be construed to
prohibit the sale, transfer, assignment, license or other disposition of IRU's,
dark fiber or similar interests in the Network by an Owner (whether before or
after RFS Acceptance).
10.2 Without limiting Developer's right to delegate certain duties
as permitted under Section 2 of the Agreement and the rights of the Owners set
forth in Section 4.9, Developer may not assign or transfer this Agreement or any
rights or benefits under this Agreement to any person or entity without the
prior written approval of all Owners, which consent may be granted or withheld
by Owners in their discretion. This Agreement may not be assigned by any Owner
provided that any Owner may assign its rights and obligations under this
Agreement to an Affiliate of such Owner, subject to the execution of such
documentation as Developer shall reasonably require to effectuate the assignment
in a manner consistent with the terms and purposes of this Agreement.
11. Notices
11.1 Any notice required or permitted to be given hereunder and any
approval by the parties shall be in writing and shall be (as elected by the
party giving such notice or proposing such approval): (i) personally delivered,
(ii) by recognized overnight courier for next business day delivery, or (iii)
transmitted by telefax, telecopy or other similar transmittal device to the
parties as listed below with a hard copy sent by one of the other methods
described in clauses (i) and (ii) of this section.
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11.2 Except as otherwise specified herein, all notices and other
communications shall be deemed to have been duly given on the earlier to occur
of: (i) the date of receipt if delivered personally; (ii) on the next business
day if sent by overnight courier, or (iii) the date of transmission with
confirmed answerback if transmitted by telefax, telecopy or other similar
transmittal device. Any party may change its address for purposes hereof by
notice given to the other parties.
11.3 Notices, requests and approvals hereunder shall be directed as
follows:
TO OWNERS AND GUARANTORS:
If to Viatel or
Viatel Parent: Viatel German Asset GmbH
Hanauer LandstraBe 187-189
60314 Frankfurt am Main
with a copy to: Viatel, Inc.
685 Third Avenue
New York, New York 10017
Telephone: (212) 350-9201
Facsimile: (212) 350-9245
Attention: Michael J. Mahoney, President
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with a copy to: Viatel, Inc.
685 Third Avenue
New York, New York 10017
Telephone: (212) 350-9261
Facsimile: (212) 350-9245
Attention: Sheldon M. Goldman, Senior Vice
President
If to Carrier 1: Carrier 1 Fiber Network GmbH & Co. oHG
Lyoner StraBe 15
60528 Frankfurt am Main
with a copy to: Carrier 1 International S.A.
Militarstrasse 36
CH-8004 Zurich, Switzerland
Telephone: (41) 1-297-2600
Facsimile: (41) 1-297-2601
Attention: Stig Johansson, President
with a copy to: Providence Equity Partners Inc.
901 Fleet Center
50 Kennedy Plaza
Providence, RI 02903
Telephone: (401) 751-1700
Facsimile: (401) 751-1790
Attention: Glenn M. Creamer, Managing Director
34
<PAGE>
with a copy to: Primus Venture Partners
5900 Landerbrook Drive, Suite 200
Cleveland, OH 44124
Telephone: (440) 684-7300
Facsimile: (440) 684-7342
Attention: Jonathan E. Dick, Managing Director
If to MFN or
Metromedia: Metromedia Fiber Network GmbH
Bethman StraBe 50/54
60311 Frankfurt
Germany
with a copy to: Metromedia Fiber Network, Inc.
One North Lexington Ave.
White Plains, NY 10601
Telephone: (914) 421-6700
Facsimile: (914) 421-6777
Attention: Howard M. Finkelstein, President
with a copy to: Metromedia Fiber Network, Inc.
One Meadowlands Plaza
East Rutherford, NJ 07073-2137
Attention: General Counsel
TO DEVELOPER:
ViCaMe Infrastructure Development GmbH
c/o Viatel German Asset GmbH
Hanauer LandstraBe 187-189
60314 Frankfurt am Main
35
<PAGE>
with a copy to: Viatel, Inc.
685 Third Avenue
New York, NY 10017
Telephone: (212) 350-9201
Facsimile: (212) 350-9245
Attention: Michael J. Mahoney, President
with a copy to each Owner at its address listed above.
12. Intentionally Omitted
13. Confidentiality
The Owners and Developer, to the extent of their respective rights
and abilities to do so, shall exchange such information and data as is
reasonably required for each party to perform under this Agreement or any other
information regarding the Network. This Agreement and all documents and
information received from a party under this Agreement, including draft
documents, notes, reports, studies, pricing information, technical descriptions
and diagrams, correspondence, oral discussions, facsimile or electronic
transmissions or data, wire transfers, telephone conversations, or any other
means of transmitting or transferring documents or information shall be deemed
confidential ("Confidential Information") and shall be maintained as
confidential and shall not be disclosed for a period of two (2) years from the
date of termination or expiration of this Agreement unless the disclosing party
shall otherwise have received consent in writing from the other parties.
Information, including but not limited to Confidential Information, disclosed by
a party under this Agreement shall not be used by the receiving party except for
the purposes of this Agreement, and each party shall take such steps as are
reasonably necessary to keep such Confidential Information from being disclosed
to third parties and shall use no less than the same standard of care to avoid
disclosure, publication, misuse, espionage, loss or theft of Confidential
Information as it takes in protecting its own sensitive, confidential and
proprietary information.
Notwithstanding the foregoing, it is understood and agreed that the
Owners and their respective Affiliates may disclose such portion of the
Confidential Information as is reasonable or customary in connection with (i)
seeking and obtaining financing including high yield debt financing in the
public and private markets, (ii) to potential acquirors of an Owner or its
Affiliates, (iii) to an Owner's
36
<PAGE>
potential customers for the Network, including acquirors of IRUs; and (iv)
complying with customary reporting requirements to their investors and lenders
(collectively, "Permitted Disclosures").
(a) Information Not Deemed Confidential. As used herein, the term
Confidential Information shall not include any documents or information which:
(i) was known by the receiving party prior to its receipt
hereunder, as evidenced by written documentation;
(ii) is acquired by the receiving party from a third party
which has the right to disclose such information and
which is not under any obligation to maintain the same
confidential;
(iii) is or comes into the public domain other than by
violation of a confidentiality agreement; or
(iv) is released in response to a subpoena, court order,
governmental authority requirement, or legal process;
provided that the party requested to release such
information shall, if reasonably possible, notify the
party initially disclosing the information of the demand
at least three (3) business days before responding to
such demand.
(b) Use of Confidential Information. The parties shall use
Confidential Information for the sole purpose of assessing or pursuing the
Network under this Agreement and shall restrict access only to those persons
working on the Network who need to know such information or in connection with
Permitted Disclosures. The parties will cause their respective officers,
directors, employees, counsel, representatives, agents, advisors and Affiliates
to abide by the terms of the confidentiality provisions of this Agreement.
Except for Permitted Disclosures, prior to disclosing any information obtained
from the other parties to any third party, including without limitation all
subcontractors, consultants and other advisors to the parties, the party making
such disclosure shall obtain from such third party a signed confidentiality
agreement which contains essentially the same obligations of secrecy as does
this Agreement and an agreement not to compete against the parties in building
the Network.
37
<PAGE>
(c) No License. Nothing in this Agreement shall be interpreted as
granting a license to use, or a transfer of, any intellectual property rights of
any party, including but not limited to, copyrights, trademarks, trade secrets,
and patents, unless specifically stated in a separate writing signed by the
party owning such rights.
14. Guaranty
Viatel Parent hereby unconditionally guarantees the timely performance of
each and every obligation, representation, warranty and covenant of Viatel
hereunder. Metromedia hereby unconditionally guarantees the timely performance
of each and every obligation, representation, warranty and covenant of MFN
(Viatel Parent and Metromedia are collectively known as the "Guarantors"). The
Owners hereby agree that the obligations of the Guarantors hereunder are
several, absolute and unconditioned, shall not be subject to any counter-claim,
set-off, deduction, or defense based upon any claims each of the Guarantors may
have against Developer or each of the Owners and shall remain in full force and
effect in that regard to, and shall not be released, discharged or terminated or
in any other way affected by any circumstance or condition. Each of the
Guarantors unconditionally waive notice of acceptance of this guaranty or any
notice to the Owners or themselves in connection with the enforcement of the
guaranty provisions of this Section 14.
Viatel Parent hereby unconditionally guarantees the obligations of
Developer set forth in this Agreement. Viatel Parent hereby agrees that its
obligations hereunder are absolute and unconditioned, shall not be subject to
any counter-claim, set-off, deduction, or defense based upon any claims it may
have against Developer or each of the Owners and shall remain in full force and
effect in that regard to, and shall not be released, discharged or terminated or
in any other way affected by any circumstance or condition. Viatel Parent
unconditionally waives notice of acceptance of this guaranty or any notice to
the Owners or themselves in connection with the enforcement of the guaranty
provisions of this Section 14. Notwithstanding the foregoing, Viatel Parent's
guaranty of the obligations of Developer set forth in this Section 14 shall not
apply to any liability, costs, expenses or other fact, matter or condition
arising: (i) as a result of the acts, omissions or failure to act of the Owners
(where such Owner had an obligation to act) or the Guarantors (other than Viatel
and Viatel Parent) or (ii) from and after the date, if ever, that Viatel (or
such other Owner as may then be applicable) has no longer appointed the Managing
Director of Developer (the "Managing Director Date"); provided that any
obligations of Viatel Parent (or Metromedia) pursuant to this Section 14 that
existed prior to the Managing Director Date shall remain in full force and
effect. From and after the Managing Director Date, the Owner responsible for
appointing the Managing Director of Developer shall be obligated to execute such
documents as the Owners, including Viatel and Viatel Parent, shall reasonably
require evidencing the obligation of Metromedia (if it is MFN) or Carrier 1
International, S.A.
38
<PAGE>
(if it is Carrier 1) to guaranty the obligations of Developer in form and
substance equivalent to the guaranty of Viatel Parent set forth in this Section
14.
15. Applicable Law
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
16. Severability
If any item or provision of this Agreement or the application
thereof to any person or circumstances shall, to any extent, be invalid or
unenforceable, the remainder of this Agreement, or the application of such term
or provision to persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby, and each term and
provision of this Agreement shall be valid and be enforced to the fullest extent
permitted by law.
17. Counterparts
This Agreement may be executed in one or more counterparts, and each
of such counterparts shall, for all purposes, be deemed to be an original, but
all of such counterparts shall constitute one and the same instrument.
18. Benefits and Obligations
The covenants and agreements herein contained shall (subject to
Section 10 hereof) inure to the benefit of, and be binding upon, the parties
hereto and their respective heirs, administrators, legal representatives and
permitted successors and assigns. Except as otherwise provided herein, no
provisions of this Agreement shall inure to the benefit of, or be enforceable
by, any creditors, contractors or other third parties.
39
<PAGE>
19. Integration; Amendment and Waiver
This Agreement represents the entire and integrated agreement
between the Owners and Developer and supersedes all prior negotiations,
representations or agreements, either written or oral with respect to the
subject matter hereof. This Agreement may be amended or modified only by written
instrument signed by all of the Owners and Developer.
20. Further Assurances
Each Owner agrees to execute and deliver such further instruments as may
be necessary or desirable to effect this Agreement and the covenants and
obligations of the parties hereto. Viatel Parent agrees to enter into good faith
discussions concerning the co-location of transmission equipment for Carrier 1
and/or MFN on Viatel Parent's Affiliate's premises with favorable pricing and
commercial terms and conditions. Viatel Parent and its Affiliates also agree to
undertake to enter good faith discussions relating to the management of the
Network of Carrier 1 and MFN on commercially reasonable terms.
21. Force Majeure
No party hereto shall be liable or deemed in default for failure to
perform or delay in performance due to acts of God, acts of nature, acts of
government, fire, flood, accidents, strikes or other interruptions of labor,
shortages or scarcity of material, electricity, labor or fuel or inability to
obtain transportation provided each party shall give the other parties timely
notice of its inability to so perform or deliver.
22. Audit Rights
Each Owner or its designated agent may at any time during the term of this
Agreement and within three years of RFS Acceptance cause a complete audit to be
made of all or any portion of those books, records or other materials of
Developer and/or any shareholder of Developer or any engineer, contractor or
subcontractor that directly or indirectly relate to any component or phase of
the Network for the purpose of verifying all costs and expense of the Network.
Such books, records and materials shall be preserved for a period of three (3)
years, or for such longer period as may be required by law, after RFS
Acceptance. Developer agrees to use all commercially reasonable efforts to cause
all contracts entered into in connection with the Network to contain a provision
granting the Owner the foregoing audit rights.
40
<PAGE>
23. Headings
The headings in this Agreement are solely for convenience of reference and
shall not affect its interpretation.
24. No Immunity
To the extent any Owner may be or becomes entitled, in any jurisdiction in
which judicial proceedings may at any time be commenced with respect to this
Agreement, to claim for itself or its properties or revenues any immunity from
suit, court jurisdiction, attachment in aid of execution of a judgement,
execution of a judgment or from any other legal process or remedy relating to
its obligations under this Agreement, and to the extent that in any such
jurisdiction there may be attributed such an immunity (whether or not claimed),
such Owner hereby irrevocably agrees not to claim and hereby irrevocably waives
such immunity to the fullest extent permitted by the laws of such jurisdiction.
25. Use of English Language
This Agreement has been negotiated and executed in the English language.
All certificates, reports, notices and other documents and communications given
or delivered pursuant to this Agreement by the parties hereto (including any
modifications or supplements hereto) shall be in the English language.
26. Additional Capacity.
Each Owner agrees upon behalf of itself and its Affiliates that prior to
RFS Acceptance to the extent capacity and/or dark fiber (outside the scope of
the Network) is obtained in Germany, each such party shall offer a portion of
such capacity and/or dark fiber to the other Owners on commercially reasonable
terms and conditions as determined by the offering Owner.
41
<PAGE>
27. Arbitration.
The parties to this Agreement agree that any dispute arising out of, or in
connection with, the execution, interpretation, performance or non-performance
of this Agreement (including the validity, scope and enforceability of this
arbitration provision) (each, a "Dispute") shall be settled by arbitration,
which shall be conducted in New York, New York, pursuant to the then prevailing
rules of the International Chamber of Commerce ("ICC) by a panel of three
arbitrators of the ICC (the "Board of Arbitration.") acceptable to the parties
hereto. If the parties agree within ten (10) days of filing an arbitration
request with the ICC that for the purposes of the dispute to be arbitrated
certain of the parties collectively constitute one side ("Side 1") and the
remaining parties collectively constitute the other side ("Side 2"), then Side
1, on the one hand, and Side 2, on the other hand, shall select one (1)
arbitrator and the third arbitrator shall be selected by mutual agreement of the
other arbitrators. If the other arbitrators fail to reach agreement on a third
arbitrator (the "Third Arbitrator") within ten (10) days after their selection,
then the ICC shall designate, in accordance with ICC rules, a Third Arbitrator.
If the parties fail to agree on the composition of the two sides within the
specified time, the parties shall jointly appoint a panel of three arbitrators
within ten (10) days (the "Joint Appointment"). If the parties fail to reach an
agreement on a panel of three arbitrators within such ten (10) day period, then
any party may request the ICC to designate, in accordance with ICC rules, all
three arbitrators (the "ICC Appointment"). The language of the arbitration
proceedings shall be in English and all arbitrators shall be familiar with the
laws of the state of New York and the Federal Republic of Germany except that
the Third Arbitrator, or, in the case of Joint Appointment or ICC Appointment,
one of the arbitrators is not required to have such familiarity, shall not be a
lawyer and shall have expertise in infrastructure development Networks or other
Networks of similar scope and nature. The parties agree to facilitate the
arbitration by (a) making available to one another and to the Board of
Arbitration for inspection and extraction all documents, books, records, and
personnel under their control or under the control of a person controlling or
controlled by such party if determined by the Board of Arbitration to be
relevant to the dispute, (b) conducting arbitration hearings to the greatest
extent possible on successive business days and (c) using their best efforts to
observe the time periods established by the rules of the ICC by the Board of
Arbitration for the submission of evidence and briefs. The Board of Arbitration
is not authorized to decide any Dispute ex aequo et bono but shall strictly
apply the applicable law. The decision of the Board of Arbitration shall be
final, binding and not subject to further review, and judgment on the award of
the Board of Arbitration may be entered in and enforced by any court having
jurisdiction over the parties or their assets subject to the procedural
requirements in such jurisdiction. The Board of Arbitration shall be authorized
and directed to award reasonable costs and attorney's fees to the prevailing
party.
42
<PAGE>
(b) To the extent that a Dispute pertains to the same or
substantially similar issues that are pending before the Board of Arbitration in
a proceeding filed in accordance with (i) Section 8.7 of the Shareholders'
Agreement by and among Viatel, Carrier 1 and MFN as of the date hereof, and (ii)
Section 12 of the Fee Agreement between Viatel Parent, MFN and Carrier 1 dated
as of the date hereof and the parties shall agree to consolidate all such
proceedings in a single proceeding. Notwithstanding Section 27(a) hereof, to the
extent the Dispute is consolidated pursuant to the terms of this Section 27(b),
the arbitrators appointed pursuant to the Development Agreement shall be deemed
the Board of Arbitration under the other agreements referenced in this Section
27(b). Upon such consolidation, the Board of Arbitration shall decide each of
the disputes in accordance with the law applicable to such dispute.
28. Currency.
This is an international transaction in which the specification of German
DM or their Euro equivalent is of the essence, and the obligations of all
parties under this Agreement to make payment in such currency shall not be
discharged or satisfied by a tender or recovery pursuant to any other currency
and any arbitral award (or judgment to enforce such award) shall also be made in
such currency.
43
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the day and year written above.
OWNERS:
VIATEL GERMAN ASSET GMBH
By: /s/ [ILLEGIBLE]
---------------------------------------
Name: [ILLEGIBLE]
-------------------------------------
Title: [ILLEGIBLE]
------------------------------------
CARRIER 1 FIBER NETWORK GMBH & CO. OHG
By: Carrier 1 Holding GmbH
By: /s/ Edward Gross
---------------------------------------
Name: Edward Gross
-------------------------------------
Title: Managing Director
------------------------------------
METROMEDIA FIBER NETWORK
GMBH
By: /s/ Vincent A. [ILLEGIBLE]
---------------------------------------
Name: Vincent A. [ILLEGIBLE]
-------------------------------------
Title: [ILLEGIBLE]
------------------------------------
44
<PAGE>
DEVELOPER:
VICAME INFRASTRUCTURE
DEVELOPMENT GMBH
By: /s/ [ILLEGIBLE]
---------------------------------------
Name: [ILLEGIBLE]
-------------------------------------
Title: [ILLEGIBLE]
------------------------------------
GUARANTORS:
VIATEL, INC.
By: /s/ Sheldon M. Goldman
---------------------------------------
Name: Sheldon M. Goldman
-------------------------------------
Title: Senior Vice Presidnet
------------------------------------
METROMEDIA FIBER NETWORK, INC.
By: /s/ Howard Finkelstein
---------------------------------------
Name: Howard Finkelstein
-------------------------------------
Title: President
------------------------------------
45
<PAGE>
EXHIBIT A
BINDING LETTER OF INTENT DEPOSIT AND BALANCE
Cost of Subducts: [REDACTED]
Outside Plant Installation: [REDACTED]
Pre-Development Plan and Budget [REDACTED]
Program Costs and Insurance: [REDACTED]
----------
Total [REDACTED]
Amounts
Expended
or Committed [REDACTED]
Balance [REDACTED]
----------
<PAGE>
EXHIBIT B
MAJOR DECISIONS
1. Approval and amendment of the Development Plan and Budget.
2. Approval of any actions which are likely to result in [REDACTED] for the
construction of the Outside Plant greater than the amount set forth in the
Development Plan and Budget (exclusive of all amounts related to value
added tax in Germany) or [REDACTED].
3. Any transaction or agreement between Developer and any Owner or Affiliate
of an Owner except transactions and agreements in the ordinary course of
business which are on arms length terms and conditions comparable to those
which could be expected to be obtained from an independent third party
(the transactions and agreements covered by such exception not being Major
Decisions) or amend any such agreement after it has been approved by the
Owners.
4. Any changes in the Approved Cities included in the Network set forth on
Exhibit D.
5. Approval of the Construction Contract with the Construction Contractor.
<PAGE>
EXHIBIT C
INFORMATION TO BE PROVIDED TO COMMITTEE
1. Monthly reports comparing expenditures made in such month and year to date
against the Development Plan and Budget on a line item basis.
2. Reports on the status of obtaining the Necessary Rights and other rights
of way, including the areas covered, name of party obtaining such
Necessary Rights and other rights of way, term of rights and annual cost.
3. Monthly reports of Construction Contractor for any anticipated delay in
achieving milestones.
4. Status on achieving major milestones and reasons for any anticipated delay
in achieving same (including construction, procurement and management
(CPM)), scheduling, right of way acquisitions, engineering, design,
procurement and construction status).
5. Other information reasonably requested and available.
<PAGE>
EXHIBIT D
APPROVED CITIES
[REDACTED]
<PAGE>
EXHIBIT E
DEVELOPMENT PLAN AND BUDGET
[REDACTED]
<PAGE>
SCHEDULE 1
INTERESTS
[REDACTED]
<PAGE>
SCHEDULE 2
FUNDING OF NETWORK
[REDACTED]
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information in thousands extracted
from the unaudited consolidated financial statements of the company for the
three months ended March 31, 1999 and is qualified in its entirety by reference
to such unaudited consolidated financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-END> Mar-31-1999
<CASH> 465,572
<SECURITIES> 147,143
<RECEIVABLES> 50,200
<ALLOWANCES> 3,093
<INVENTORY> 0
<CURRENT-ASSETS> 682,797
<PP&E> 440,015
<DEPRECIATION> 30,106
<TOTAL-ASSETS> 1,411,990
<CURRENT-LIABILITIES> 255,580
<BONDS> 1,256,196
48,298
0
<COMMON> 232
<OTHER-SE> 128,403
<TOTAL-LIABILITY-AND-EQUITY> 1,411,990
<SALES> 0
<TOTAL-REVENUES> 48,395
<CGS> 0
<TOTAL-COSTS> 51,048
<OTHER-EXPENSES> 26,766
<LOSS-PROVISION> 1,600
<INTEREST-EXPENSE> 19,338
<INCOME-PRETAX> (37,111)
<INCOME-TAX> 0
<INCOME-CONTINUING> (37,111)
<DISCONTINUED> 0
<EXTRAORDINARY> (0)
<CHANGES> 0
<NET-INCOME> (38,288)
<EPS-PRIMARY> (1.65)
<EPS-DILUTED> (1.65)
</TABLE>
