EXHIBIT 2.1
IRU AND STOCK PURCHASE AGREEMENT
BETWEEN
IXC INTERNET SERVICES, INC.
AND
PSINET INC.
Dated as of July 22, 1997
IRU AND STOCK PURCHASE AGREEMENT
between
IXC Internet Services, Inc.
and
PSINet Inc.
Dated as of July 22, 1997
TABLE OF CONTENTS
Page
SECTION 1. RIGHTS GRANTED TO PSINET . . . . . . . . . . . . 1
1.1 Fiber IRU. . . . . . . . . . . . . . . . . . 1
1.2 IRU Capacity . . . . . . . . . . . . . . . . 2
1.3 Security Interest. . . . . . . . . . . . . . 2
1.4 Additional Rights After the Closing. . . . . 2
1.5 Quiet Enjoyment. . . . . . . . . . . . . . . 3
SECTION 2. USE OF BANDWIDTH. . . . . . . . . . . . . . . . . 3
2.1 Permitted Doubling . . . . . . . . . . . . . 3
2.2 Additional Mileage . . . . . . . . . . . . . 4
2.3 Additional Routes. . . . . . . . . . . . . . 4
2.4 Term of IRU. . . . . . . . . . . . . . . . . 4
SECTION 3. CONSIDERATION . . . . . . . . . . . . . . . . . . 5
3.1 Reincorporation. . . . . . . . . . . . . . . 5
3.2 Issuance of Shares . . . . . . . . . . . . . 5
3.3 Adjustments Relating to Stock Splits and Other
Events . . . . . . . . . . . . . . . . . . . 5
3.4 Certificates . . . . . . . . . . . . . . . . 5
3.5 Issuance of Additional Shares. . . . . . . . 6
3.6 Tax Reporting. . . . . . . . . . . . . . . . 6
SECTION 4. ORDERING BANDWIDTH. . . . . . . . . . . . . . . . 7
4.1 Type of Bandwidth. . . . . . . . . . . . . . 7
4.2 Ordering Bandwidth . . . . . . . . . . . . . 7
4.3 Bandwidth Delivery . . . . . . . . . . . . . 8
4.4 Existing Arrangements. . . . . . . . . . . . 8
4.5 Bandwidth Forecasts. . . . . . . . . . . . . 9
SECTION 5. OTHER SERVICES. . . . . . . . . . . . . . . . . . 9
5.1 Multiplexing . . . . . . . . . . . . . . . . 9
5.2 Reconfiguration. . . . . . . . . . . . . . . 9
SECTION 6. TERM OF AGREEMENT . . . . . . . . . . . . . . . . 9
6.1 Term of the Agreement. . . . . . . . . . . . 9
SECTION 7. PAYMENT, CPI AND DEFAULT. . . . . . . . . . . . . 9
7.1 Payment. . . . . . . . . . . . . . . . . . . 9
7.2 Late Payment . . . . . . . . . . . . . . . . 10
7.3 CPI . . . . . . . . . . . . . . . . . . . . 10
7.4 Default/Termination . . . . . . . . . . . . 10
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Page
SECTION 8. SYSTEM MAINTENANCE AND POPs . . . . . . . . . . . 12
8.1 Maintenance . . . . . . . . . . . . . . . . 12
8.2 Repair or Replacement . . . . . . . . . . . 12
8.3 Consideration . . . . . . . . . . . . . . . 12
8.4 POPs . . . . . . . . . . . . . . . . . . . . 12
8.5 Other Party's Equipment . . . . . . . . . . 13
SECTION 9. INDEMNIFICATION . . . . . . . . . . . . . . . . . 13
9.1 Indemnification Obligations . . . . . . . . 13
9.2 Notice of Indemnification . . . . . . . . . 14
9.3 Defense Obligations . . . . . . . . . . . . 14
SECTION 10. ADMINISTRATION OF AGREEMENT . . . . . . . . . . . 15
10.1 Representatives . . . . . . . . . . . . . . 15
10.2 Responsibilities . . . . . . . . . . . . . . 15
10.3 Form of Actions . . . . . . . . . . . . . . 15
10.4 Fees and Expenses . . . . . . . . . . . . . 15
SECTION 11. FORCE MAJEURE . . . . . . . . . . . . . . . . . . 15
SECTION 12. LIMITATION OF LIABILITY; INDEMNIFICATION . . . . 16
12.1 Limitation of Liability . . . . . . . . . . 16
12.2 Release; Indemnification . . . . . . . . . . 16
SECTION 13. REPRESENTATIONS AND WARRANTIES OF PSINET . . . . 16
13.1 Organization . . . . . . . . . . . . . . . . 16
13.2 Authorization . . . . . . . . . . . . . . . 17
13.3 Shares . . . . . . . . . . . . . . . . . . . 17
13.4 Capitalization . . . . . . . . . . . . . . . 17
13.5 PSINet Filings; No Material Adverse Change . 18
13.6 Effect of Transactions . . . . . . . . . . . 18
13.7 Litigation . . . . . . . . . . . . . . . . . 18
13.8 Brokers . . . . . . . . . . . . . . . . . . 18
13.9 No Other Agreements To Sell . . . . . . . . 18
13.10 Full Disclosure . . . . . . . . . . . . . . 19
SECTION 14. REPRESENTATIONS AND WARRANTIES OF IXC . . . . . . 19
14.1 Organization . . . . . . . . . . . . . . . . 19
14.2 Authorization . . . . . . . . . . . . . . . 19
14.3 Effect of Transactions . . . . . . . . . . . 20
14.4 Litigation . . . . . . . . . . . . . . . . . 20
14.5 Brokers . . . . . . . . . . . . . . . . . . 20
14.6 Investment Representations . . . . . . . . . 20
14.7 Disclosure; No Material Adverse Change . . . 22
14.8 IRUs . . . . . . . . . . . . . . . . . . . . 22
14.9 Available System . . . . . . . . . . . . . . 22
14.10 Stock Ownership . . . . . . . . . . . . . . 22
SECTION 15. COVENANTS . . . . . . . . . . . . . . . . . . . . 23
15.1 Xxxx-Xxxxx-Xxxxxx . . . . . . . . . . . . . 23
15.2 Consents . . . . . . . . . . . . . . . . . . 23
15.3 Other Actions . . . . . . . . . . . . . . . 23
15.4 Board Seat . . . . . . . . . . . . . . . . . 23
15.5 Restriction on Resale . . . . . . . . . . . 23
15.6 No Solicitation . . . . . . . . . . . . . . 24
15.7 Transfer Matters . . . . . . . . . . . . . . 25
15.8 Standstill Agreement . . . . . . . . . . . . 26
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Page
SECTION 16. CONDITIONS PRECEDENT TO CLOSING . . . . . . . . . 28
16.1 Approvals . . . . . . . . . . . . . . . . . 28
16.2 Reincorporation . . . . . . . . . . . . . . 28
16.3 Shareholder Approval . . . . . . . . . . . . 28
16.4 Appraisal Rights . . . . . . . . . . . . . . 28
16.5 Fairness Opinions . . . . . . . . . . . . . 28
16.6 Consent of Bondholders . . . . . . . . . . . 29
16.7 Contribution Agreement . . . . . . . . . . . 29
16.8 Material Adverse Effect . . . . . . . . . . 29
16.10 Preferred Stock Purchase Plan Amendment . . 29
SECTION 17. THE CLOSING . . . . . . . . . . . . . . . . . . . 30
17.1 Deliveries by PSINet . . . . . . . . . . . . 30
17.2 Deliveries by IXC. . . . . . . . . . . . . . 30
17.3 Survival of Representations and Warranties . 31
SECTION 18. TERMINATION . . . . . . . . . . . . . . . . . . . 31
18.1 Termination . . . . . . . . . . . . . . . . 31
18.2 Effect of Termination . . . . . . . . . . . 31
SECTION 19. GENERAL PROVISIONS . . . . . . . . . . . . . . . 31
19.1 Definitions . . . . . . . . . . . . . . . . 31
19.2 Amendments, Waivers and Consents . . . . . . 38
19.3 Section Headings . . . . . . . . . . . . . . 38
19.4 Counterparts . . . . . . . . . . . . . . . . 38
19.5 Notices . . . . . . . . . . . . . . . . . . 38
19.6 Binding Effect; Assignment . . . . . . . . . 39
19.7 Severability; Specific Performance . . . . . 40
19.8 Expenses . . . . . . . . . . . . . . . . . . 40
19.9 Integration . . . . . . . . . . . . . . . . 41
19.10 Schedules . . . . . . . . . . . . . . . . . 41
19.11 Public Announcements . . . . . . . . . . . . 41
19.12 Interpretation . . . . . . . . . . . . . . . 41
19.13 Governing Law . . . . . . . . . . . . . . . 41
19.14 Dispute Resolution . . . . . . . . . . . . . 42
19.15 Relationship of the Parties . . . . . . . . 42
19.16 Laws and Licenses . . . . . . . . . . . . . 42
19.17 Facsimile Delivery . . . . . . . . . . . . . 43
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IRU AND STOCK PURCHASE AGREEMENT
IRU AND STOCK PURCHASE AGREEMENT made as of this 22nd day of July, 1997 by
and between PSINet Inc., a New York corporation ("PSINet"), and IXC Internet
Services, Inc., a Delaware corporation ("IXC").
WHEREAS, IXC and its Affiliates have constructed or are planning to
construct a fiber optic telecommunications system. Pursuant to a Contribution
Agreement to be dated prior to the Closing Date between IXC Carrier, Inc.
("Carrier") and IXC, IXC will acquire a non-cancellable, indefeasible right of
use ("IRU") in two fibers and in certain capacity in that system (such IRU, the
"Base IRU") from Carrier (the "Contribution Agreement").
WHEREAS, IXC and PSINet have entered into a Joint Marketing and Services
Agreement dated as of the date hereof (the "Internet Services Agreement"),
pursuant to which IXC will acquire from PSINet, and PSINet will deliver to IXC,
Internet services.
WHEREAS, IXC is willing to grant PSINet a noncancellable indefeasible right
of use in two fibers on the IXC fiber optic telecommunications system to the
extent necessary to secure certain capacity thereon, and a noncancellable
indefeasible right of use in such capacity on such fibers, and PSINet is willing
to exchange therefor shares of its common stock on the terms and subject to the
conditions set forth below.
WHEREAS, as a condition to the effectiveness of this Agreement, among other
things, PSINet will use reasonable efforts to reincorporate in the State of
Delaware, subject to obtaining all required shareholder consents, by merging
into a Delaware corporation to be formed as a wholly-owned subsidiary of PSINet
which will be named the same name as PSINet upon consummation of such merger
("Newco"; prior to the Closing Date, references in this Agreement to "PSINet"
shall be deemed to refer to PSINet, a New York corporation, and on and after the
Closing Date, references herein to PSINet shall be deemed to refer to Newco).
NOW, THEREFORE, in consideration of the mutual promises set forth below,
and other good and valuable considerations, the receipt and sufficiency of which
are hereby acknowledged, the parties, intending to be legally bound, hereby
agree as follows:
SECTION 1. RIGHTS GRANTED TO PSINet
1.1 Fiber IRU. At the Closing, IXC, as the owner of the Base IRU, shall
grant to PSINet a noncancellable IRU in two fibers in the portion of the
Available System completed at the Closing (the "IXC Fibers") to the extent
necessary to carry one OC-48 (the "PSINet Fiber IRU"). At or prior to the
Closing, IXC shall specify the fibers in the applicable routes in which such IRU
is granted. Except as set forth in the Collocation Agreement and Section 7.4(b)
below, at no time shall PSINet be entitled to have physical access to the IXC
Fibers. IXC agrees that it has no right to use the portion of the IXC Fibers
comprising the PSINet Fiber IRU during the Term (as defined).
1.2 IRU Capacity. At the Closing, IXC shall grant to PSINet a
noncancellable IRU in the IRU Capacity. As used herein, the "IRU Capacity" shall
mean the use of capacity as permitted by this Agreement on that portion of the
IXC fiber optic telecommunications system as described in Exhibit A hereto (such
portion of such system, together with additional portions made Available by IXC
to PSINet after the date hereof, is referred to as the "Available System"). The
total amount of the IRU Capacity will be 10,000 OC-48 Equivalent Miles.
Notwithstanding anything in this Agreement to the contrary, IXC will have no
obligation under this Agreement or otherwise to extend the Available System
except as set forth in Exhibit A, into new geographic areas or to complete a
total 10,000 Route Miles on the Available System. IXC agrees that it has no
right to use the IRU Capacity during the Term.
1.3 Security Interest. At the Closing, IXC shall grant, assign and
transfer to PSINet a continuing, first priority, perfected and exclusive
security interest in and to all of IXC' right, title and interest in and to the
following, whether now existing or hereafter coming into existence
(collectively, the "Collateral"): (a) a portion of the Base IRU in the IXC
Fibers granted to IXC by Carrier, such portion (the "Long-Term Indivisible IRU")
being an IRU in the IXC Fibers for the purpose of the transmission of OC-48
capacity pursuant to IXC' grant of the PSINet Fiber IRU to
PSINet, which security interest shall secure IXC' obligation to provide the
PSINet Fiber IRU pursuant to Section 1.1; (b) a portion (separate from the
Long-Term Indivisible IRU) of the Base IRU in the IXC Fibers granted to IXC
by Carrier, such portion (the "Short-Term Indivisible IRU") being an IRU in
the IXC Fibers which supports OC-48 capacity and (c) the Access Right (as
defined). The Short-Term Indivisible IRU shall be a right of use of fiber
only and shall not include any rights in electronics or optronics. The
security interest in the Short-Term Indivisible IRU shall secure IXC'
obligations to provide the PSINet Fiber IRU over 10,000 OC-48 Equivalent
Miles. At the Closing, IXC and PSINet shall enter into a security agreement
in substantially the form attached hereto as Exhibit B (the "Security
Agreement") and such UCC statements and other instruments reasonably
necessary to grant, perfect and maintain the security interests contemplated
by this Agreement.
1.4 Additional Rights After the Closing. After the Closing, in the event
IXC completes additional portions of the Available System, (a) IXC hereby
grants, without further action on its part, rights to PSINet so that each of the
PSINet Fiber IRU and the Base IRU in the IXC Fibers is extended to cover such
completed portions of the Available System (but only up to a total of 10,000
Route Miles) effective immediately upon completion of each portion, and (b) IXC
hereby grants, without further action on its part, and will execute the
necessary documents to evidence such grant of, additional security interests so
that PSINet has a continuing, first priority, perfected and exclusive security
interest in (i) the Long- Term Indivisible IRU (with such defined phrase being
extended to cover such completed portions of the Available System) and the
products and proceeds thereof, and (ii) the Short-Term Indivisible IRU (with
such defined phrase being extended to cover such completed portion of the
Available System) and the products and proceeds thereof, and the Long-Term
Indivisible IRU and the Short-Term Indivisible IRU, as so extended, will
thereupon become part of the Collateral. Notwithstanding the foregoing, however,
commencing in respect of any completed portion of the Available System, after
the date on which such completed portion of the Available System shall have been
completed, the length of the Short-Term Indivisible IRU shall not exceed the
excess, if any, of 10,000 Route Miles over the number of completed Route Miles
on the Available System Accepted by PSINet. To the extent completion of
additional portions of the Available System requires shortening the length of
the Short-Term Indivisible IRU (which is subject to the security interest
pursuant to the preceding sentence) by a certain number of Route Miles (the
"Reduction Miles"), the Short-Term Indivisible IRU shall be deemed to be
shortened 30 days after the date on which such completed portion of the
Available System shall have been completed, by changing its definition to
exclude a number of Route Miles equal to the number of Reduction Miles. The
specific Route Miles excluded shall be determined by excluding that number of
Route Miles of the Available System most recently completed beginning with the
eastern most portion along the applicable route, all as set forth in a written
notice from IXC to PSINet pursuant to the Security Agreement. The security
interest in the Short-Term Indefeasible IRU shall terminate upon the first to
occur of the following: (i) IXC's making Available and PSINet's Acceptance of
all of the IRU Capacity, and granting an IRU therein, to PSINet on the terms and
subject to the conditions of this Agreement, and (ii) the written consent of the
parties.
1.5 Quiet Enjoyment. IXC covenants that, at the Closing, it will have the
full right and authority to grant to PSINet the PSINet Fiber IRU and capacity
IRUs hereunder. IXC shall assure that Carrier has obtained or will obtain all
Rights-of-Way necessary for the installation and use of the IXC Fibers
comprising the PSINet Fiber IRU and the fibers underlying the capacity IRUs
granted hereunder, and cause such Rights-of-Way to remain in effect or be
adequately replaced during the Term. IXC shall be responsible for, and timely
pay, any and all (i) taxes and franchises, license and permit fees
(collectively, "Taxes") imposed because of the physical location of the IXC
Fibers and the fibers underlying the IRU Capacity and (ii) Rights-of-Way
payments on the IXC Fibers and the fibers underlying the IRU Capacity. Failure
to pay such taxes or payments shall authorize, but not obligate, PSINet to make
such payments, and IXC will immediately reimburse PSINet for any amounts paid.
PSINet will reimburse IXC for (or at IXC's option, pay directly to the proper
authority) any Taxes based on the revenues or capacity usage of PSINet. IXC and
PSINet will each notify the other party of the assertion of any Taxes which
could reasonably be the responsibility of the other party and, as reasonably
requested by the other party, will cooperate with each other to contest any such
Taxes with the proper authorities.
SECTION 2. USE OF BANDWIDTH
2
2.1 Permitted Doubling. IXC shall make Available, but not be obligated to
make Available more than, a single OC-48 Equivalent on any part of the Available
System, provided, however, that to the extent the length of the Available System
is less than 10,000 Route Miles, IXC will make Available to PSINet, at PSINet's
option, up to two OC-48 Equivalents on a portion of the Available System
selected by PSINet that is equal in length to the Shortfall Mileage. For
example, if the length of the Available System is 8,000 route miles, PSINet
would be allowed to have up to two OC-48 Equivalents on up to 2,000 miles and no
more than one OC-48 Equivalent on the then remaining 6,000 miles. In the event
IXC completes portions of the Available System and, as a consequence the
Shortfall Mileage is reduced, IXC, upon six months' notice to PSINet, shall have
the right to require PSINet to reconfigure Bandwidth so that the length of the
portion of the Available System where PSINet has capacity in excess of one OC-48
does not exceed the then current Shortfall Mileage. After IXC' completion of
10,000 miles of the Available System, PSINet will be limited to a maximum of one
OC-48 Equivalent on any particular portion of the Available System.
2.2 Additional Mileage. Subject to the overall IRU Capacity limitation set
forth herein, PSINet, at its option, may order Bandwidth on portions of the
Available System in excess of 10,000 Route Miles (the "Excess Miles") provided
that: (a) the aggregate Route Mileage covered by Bandwidth Units, regardless of
the level or type of Bandwidth which is then being provided by IXC to PSINet
thereon, does not exceed 15,000 Route Miles; (b) pursuant to the Collocation
Agreement in the form attached hereto as Exhibit C, PSINet will pay the market
rate for cabinet space used in connection with the Excess Miles; and (c) PSINet
will pay IXC' fees for add/drop, multiplexing and reconfiguration on the Excess
Miles, as set forth herein. To the extent PSINet orders Bandwidth on Excess
Miles, the parties will in good faith attempt to negotiate and effect
adjustments in PSINet's rights in the PSINet Fiber IRU and in the security
interest in the Long-Term Indefeasible IRU, with such rights to be expanded to
cover such Bandwidth in the Excess Miles and to be reduced so as not to cover
PSINet's usage of Bandwidth to the extent less than an OC-48 on any portion of
the original 10,000 Route Miles of the Available System.
2.3 Additional Routes. Notwithstanding anything herein to the contrary, in
the event IXC or any of its Affiliates adds or acquires an additional route to
its system in the United States during the Reconfiguration Period, (a) the route
will be deemed to be a part of the Available System if: (i) IXC or any of its
Affiliates has at least 18 fibers in such route, net of the number of fibers in
which IXC or any of its Affiliates shall have granted IRU's to nonaffiliated
third parties pursuant to cost-saving or joint build arrangements in connection
with the construction of such route (the "Net Fiber Number"), or (ii) IXC gives
notice to PSINet that IXC has elected to include such route as a part of the
Available System even though the Net Fiber Number in the route is less than 18;
and (b)(i) if the Net Fiber Number in the route is less than 18 but more than
11, IXC shall not be obligated to provide more than two OC-12's to PSINet on the
route; (ii) if the Net Fiber Number in the route is less than 12 but greater
than 3, IXC will not be obligated to provide PSINet with more than one OC-3 (or
at IXC's option, three DS-3's) to PSINet on the route, which OC-3 or DS-3s are
subject to availability (that is, IXC may, at its option, not deliver such OC-3
or DS-3s if needed for IXC's business or if the applicable fibers have not been
lit); and (iii) if the Net Fiber Number in the route is 3 or less, then IXC will
not be obligated to provide PSINet with any capacity on the route. In the event
IXC provides PSINet with an OC-3 pursuant to subsection b(ii) of the preceding
sentence, no multiplexing charge will apply to such OC-3.
2.4 Term of IRU. The term of each Bandwidth Unit of the IRU Capacity will
end on the earlier of: (a) 20 years from the Original Service Activation Date of
the Bandwidth Unit, or (b) 24 years from the Closing Date; provided, however,
that the term of each Bandwidth Unit will be extended by (i) the length of time,
if any, that such Bandwidth Unit commences after the fourth anniversary of the
Closing Date, but only to the extent such delay is attributable to the
completion of the applicable portion of the Available System occurring after
such date, and (ii) the length of time performance by IXC is excused pursuant to
Section 11, below, in the event such performance shall have been so excused for
any period of at least 12 consecutive months.
SECTION 3. CONSIDERATION
3.1 Reincorporation. Prior to the Closing Date, PSINet will use reasonable
efforts to reincorporate in the State of Delaware by merging into Newco, subject
to PSINet obtaining all required shareholder and third-party approvals and
consents therefor.
3
3.2 Issuance of Shares. In consideration of the execution and delivery of
this Agreement, the grant of the IRUs hereunder by IXC to PSINet and IXC's other
obligations to PSINet hereunder, subject to Section 3.3 below, PSINet (as merged
into Newco) agrees to issue and deliver to IXC at the Closing, 10,155,536 shares
of Common Stock of Newco, par value $.0001 per share (such shares, as adjusted
for post-issuance stock splits, stock dividends, recapitalization or similar
events, the "IXC Initial Common Shares"), and at the Additional Shares
Determination Date (as defined) or no later than 30 days after the Additional
Shares Acceleration Date (as defined), certain additional shares of Newco Common
Stock (such shares, as adjusted for post-issuance stock splits, stock dividends,
recapitalization or similar events, the "Additional Shares" and, collectively
with the IXC Initial Common Shares, the "IXC Shares") and/or cash, other
securities or property, if any, as may be issued and delivered as set forth in
Section 3.5. The IXC Shares shall be issued and delivered by PSINet to IXC,
together with corresponding rights under PSINet's preferred stock purchase
rights plan, as amended, modified or supplemented (the "preferred stock purchase
rights plan") as those held by other holders of Common Stock (subject to the
terms of such plan), free and clear of any and all claims, liens, pledges,
options, charges, security interests, restrictions, encumbrances or other rights
of third parties other than (a) the rights created in favor of PSINet pursuant
to this Agreement, and (b) restrictions on transferability generally imposed on
securities under federal or state securities laws.
3.3 Adjustments Relating to Stock Splits and Other Events. It is the
intent of the parties that the number of the IXC Initial Common Shares to be
issued by Newco to IXC hereunder shall, at the Closing Date, be equal to
19.99999% of the outstanding shares of Common Stock of Newco, as determined in
the manner set forth on Exhibit D hereto. If after the date hereof and before
the Closing Date, the number of outstanding shares of Newco Common Stock (as
determined in the same manner set forth on Exhibit D hereto) shall have changed
or if such shares shall have been changed into or exchanged for a different
number or kind of shares or other securities through any issuance,
reorganization, recapitalization, reclassification, merger, consolidation, share
exchange or similar transaction, then a proportionate adjustment in the number
and an appropriate adjustment in the kind of securities issuable hereunder shall
be made.
3.4 Certificates. At the Closing, PSINet agrees to deliver to IXC
certificates issued in IXC's name for all of the IXC Initial Common Shares.
3.5 Issuance of Additional Shares.
(a) Subject to Section 15.7(c) and the last sentence of this Section
3.5(a), on the earlier of (i) the first anniversary of the date on which the
Total Bandwidth has been Accepted and/or Deemed Accepted by PSINet or (ii) the
fourth anniversary of the Closing, (such earlier date, the "Additional Shares
Determination Date"), IXC shall be entitled to receive such number of Additional
Shares, based on the Common Stock Price determined as of the Additional Shares
Determination Date, or, at the sole discretion of PSINet, such amount of cash,
or any combination of Additional Shares and cash, as shall have an Aggregate
Fair Market Value equal to the Additional Shares Value as of the Additional
Shares Determination Date; provided, however, that PSINet shall be entitled, at
its sole option, to accelerate IXC's right to receive Additional Shares and/or
cash pursuant to this Section 3.5(a) at any time after the Closing Date to a
date prior to the Additional Shares Determination Date pursuant to a notice to
such effect given by PSINet to IXC in accordance with the terms of Section 19.5
of this Agreement (the "Additional Shares Acceleration Date") by delivering to
IXC not later than 30 days after the Additional Shares Acceleration Date, such
number of Additional Shares, based on the Common Stock Price determined as of
the Additional Shares Acceleration Date, or, at the sole discretion of PSINet,
such amount of cash, or any combination of Additional Shares and cash, as shall
have an Aggregate Fair Market Value equal to the Additional Shares Value as of
the Additional Shares Acceleration Date. Notwithstanding the foregoing, (i) the
right of IXC to receive any Additional Shares and/or cash pursuant to this
Section 3.5 shall terminate and be of no further force or effect on such date as
the calculation of the IXC Common Shares Value would result in a value equal to
or greater than $240,000,000 and (ii) the obligations of IXC under this
Agreement shall not be altered, diminished, modified or impaired by any delivery
or payment of Additional Shares and/or cash pursuant to this Section 3.5.
(b) If at any time or from time to time prior to the Additional Shares
Determination Date, there shall occur a Merger or Other Reorganization Event,
then, as a part of and as a condition to the effectiveness of such Merger or
Other Reorganization Event, lawful and adequate provision shall be made so that
IXC shall thereafter be entitled to receive pursuant to Section 3.5(a) in lieu
of any
4
Additional Shares IXC may be entitled to receive under Section 3.5(a),
the number of shares of Successor Stock or other securities or property, if any,
of PSINet or of the successor Person resulting from such Merger or Other
Reorganization Event to which a holder of such number of shares of Common Stock
as is equal to the number of Additional Shares that would otherwise be
deliverable pursuant to Section 3.5(a) would have been entitled to receive in
connection with such Merger or Other Reorganization Event. In any such case,
appropriate provisions shall be made with respect to the rights of IXC under
this Section 3.5 in connection with the Merger or Other Reorganization Event to
the end that the provisions of this Section 3.5 shall thereafter be applicable,
as nearly as may be, with respect to any shares of Successor Stock, securities
or property that may be deliverable thereafter upon the Additional Shares
Determination Date or the Additional Shares Acceleration Date, as applicable.
3.6 Tax Reporting. The parties acknowledge that PSINet's issuance of IXC
Shares under this Agreement will be a taxable payment for income tax purposes
and not part of a tax-free acquisition for income tax purposes and not part of a
tax-free reorganization, tax-free incorporation or other tax-free transaction
for income tax purposes, and that PSINet's tax acquisition cost and IXC's gross
receipts for federal income tax purposes with respect to PSINet's payments under
this Agreement will be equal to the value of the IXC Shares upon issuance,
together with the cash or other payments, if any, under Section 3.5. The parties
shall report such issuance of IXC Shares and such cash or other payments, if
any, consistent with the prior sentence in connection with the determination of
their income, franchise or other taxes measured by net income.
SECTION 4. ORDERING BANDWIDTH
4.1 Type of Bandwidth. Subject to the terms and conditions of this
Agreement, PSINet may order Bandwidth in increments from OC-12 to OC-48 along
any portion of the Available System. PSINet may order DS-3's or OC-3's on the
Available System or DS-3's on Barter Capacity (in either case, subject to the
capacity limitations set forth herein), but shall be obligated to pay the
multiplexing fees set forth herein (except on the Barter Capacity). IXC will use
good faith efforts to provision DS-3's on the Barter Capacity subject to
availability and subject to IXC's use for its own network requirements.
Furthermore, IXC will cause IXC Carrier to provide off-net capacity such as
DS-1's and greater, pursuant to the Digital Service Agreement dated as of
December 23, 1994, as amended, between IXC Carrier and PSINet, as the exhibits
thereto shall be revised by IXC Carrier from time to time, on the same payment
terms and subject to the same material conditions by which IXC acquires such
capacity (including the cost thereof, including, without limitation, third party
cross-connect fees, if any) plus an administrative fee (payable once per
circuit) in the amount of * per circuit. PSINet, at its option and subject to
availability, may order other associated services as and at such rates as set
forth on Exhibit E hereto. The rates for such associated services are subject to
change by IXC upon 30 days' notice.
4.2 Ordering Bandwidth. If ordered by PSINet, IXC will make Available to
PSINet at least 10,000 OC-12 Equivalent Miles in each Six-Month Period. To order
Bandwidth on the Available System, PSINet shall submit a completed, dated and
signed Bandwidth Order to IXC. IXC will then accept or reject the Bandwidth
Order within 45 days following the date of the Bandwidth Order by returning the
countersigned Bandwidth Order to PSINet or setting forth the reason for the
rejection on the returned Bandwidth Order. In accepting a Bandwidth Order, IXC
may change the Requested Delivery Date as reasonably necessary to ensure timely
delivery. PSINet shall specify a Requested Delivery Date in each Bandwidth
Order. The sole reasons for rejection of a Bandwidth Order (other than for
Barter Capacity, which is subject to the conditions set forth above) are (i) the
Bandwidth Order pertains to a portion of the Available System that has not yet
been completed, (ii) IXC shall have provided PSINet with 10,000 OC-12 Equivalent
Miles during the applicable Six-Month Period, (iii) IXC shall have provided
PSINet with 10,000 OC-48 Equivalent Miles in the aggregate, or (iv) PSINet shall
have been determined to be in default of a Material Provision pursuant to
arbitration proceedings conducted under Section 19.14(b) and such default
remains uncured. In the event PSINet orders less than 10,000 OC-12 Equivalent
Miles over the Available System during any Six-Month Period, IXC, at its option,
can require that PSINet order Primary Additional Bandwidth (as defined), as
Available, so that up to a total of 10,000 OC-12 Equivalent Miles are ordered
during the Six-Month Period.
* Confidential material has been omitted and filed separately with the
Securities and Exchange Commission
5
"Primary Additional Bandwidth" shall mean the Bandwidth, if any, Available to
PSINet on a Major Route (as defined), which, together with the Bandwidth, if
any, already being used on the route by PSINet, adds up to one OC-48 Equivalent.
* shall mean any route between two metropolitan statistical areas with
populations of at least * . On or before the date 41 months after the Closing,
IXC shall give notice to PSINet of which portions of the Available System will
be Available by the date four years after the Closing and PSINet shall order, on
or before the date 42 months after the Closing, and IXC shall make Available,
Bandwidth so that, at the fourth anniversary of the Closing, PSINet's total
capacity (as measured in OC-48 Equivalent Miles) in use hereunder will be at
least equal to the smaller of: (i) twice the total length of the Available
System at that date or (ii) 10,000.
4.3 Bandwidth Delivery. IXC will use commercially reasonable efforts to
make the requested Bandwidth Available to PSINet by the Requested Delivery Date.
Within five business days of the date on which Bandwidth is made Available to
PSINet, PSINet shall test it in accordance with the standards set forth in
Exhibit F hereto. * IXC will notify PSINet as quickly as reasonably practicable
upon learning of any circumstances that will cause a delay in delivery of
capacity beyond the Requested Delivery Date. In the event of a late delivery,
IXC will use commercially reasonable efforts to assist PSINet in obtaining
temporary replacement capacity.
4.4 Existing Arrangements. As soon as practicable after the Closing Date,
but in no event later than 30 days thereafter, IXC shall, and shall cause its
Affiliates to, deliver any On-net or Barter Capacity bandwidth leased by PSINet
from IXC or any Affiliate immediately prior to Closing, collocation in the POP's
and related cross-connects (but only those cross-connects within the Available
System) and interconnect facilities with IXC existing at the Closing, to be
transferred to and covered by this Agreement. Bandwidth on order at the Closing
Date will also be covered by this Agreement, including, without limitation this
Section 4.4. Furthermore, with respect to off-net bandwidth leased or on order
prior to the Closing, IXC will use commercially reasonable best efforts to
provide such bandwidth On-net if and when the Available System covers the
applicable routes of such off-net bandwidth. This transfer will be without
penalty and without credit for prior payments, so that all payments for such
bandwidth and facilities for the period commencing on the Closing Date will
cease as of such transfer, provided, however, that maintenance fees as set forth
in Section 8.3 will apply to such bandwidth. Multiplexing charges as set forth
herein will not apply to any bandwidth so transferred unless and until PSINet
reconfigures such bandwidth concurrently with such transfer or, with respect to
a particular route, PSINet orders OC-12 capacity on such route.
4.5 Bandwidth Forecasts. Attached as Exhibit G hereto is PSINet's good
faith, non-binding three-year forecast of the anticipated amount of Bandwidth
that will be required by PSINet under this Agreement, which good faith, non-
binding forecast shall be updated by PSINet quarterly and delivered to IXC by no
later than the 20th day following the end of each calendar quarter.
4.6 Initial Order. Effective upon the Closing, IXC accepts the Bandwidth
Orders attached hereto as Exhibit G-1 as PSINet's initial Bandwidth Orders for
the Requested Delivery dates specified therein.
* Confidential material has been omitted and filed separately with the
Securities and Exchange Commission
6
SECTION 5. OTHER SERVICES
5.1 Multiplexing. In the event PSINet requires capacity in units other
than OC-48 or OC-12 (for example, an OC-3 or DS-3) it will pay IXC's fees for
multiplexing as set forth in Exhibit H hereto (except as set forth in the last
sentence of Section 2.3). PSINet will also pay IXC's fees for multiplexing for
Barter Capacity DS-3's. IXC may change its fees for multiplexing at any time in
its sole and absolute discretion; provided, however, that such changed fees will
only be effective against PSINet on the tenth business day after PSINet's
receipt of written notice from IXC of such changed fees.
5.2 Reconfiguration. During the first four years of this Agreement (or
until one year after the Delivery Completion Date, whichever comes first),
PSINet can Reconfigure Bandwidth. PSINet will pay IXC's fee for reconfiguration
as set forth on Exhibit I hereto, which shall include a fee for reconfiguring
from OC-12 to OC-48 or for moving an OC-48. IXC may change its fees for
reconfiguration at any time in its sole and absolute discretion; provided,
however, that such changed fees will only be effective against PSINet on the
tenth business day after PSINet's receipt of written notice from IXC of such
changed fees. In the event of a reconfiguration that leaves OC-12 equipment (for
which PSINet has previously paid a multiplexing or reconfiguration charge) which
is not being utilized, IXC will either (i) utilize the equipment elsewhere for
PSINet's capacity (without charging a multiplexing fee for such OC-12), (ii)
deliver the OC-12 equipment to PSINet, or (iii) purchase the equipment from
PSINet at a mutually agreeable price.
SECTION 6. TERM OF AGREEMENT
6.1 Term of the Agreement. This Agreement shall commence on the Closing
Date and shall automatically terminate upon the termination of the
last-to-expire term of the Bandwidth delivered hereunder (the "Term").
SECTION 7. PAYMENT, CPI AND DEFAULT
7.1 Payment. PSINet agrees to pay IXC in advance, as billed by IXC, each
month during the Term, all fees and other charges payable hereunder for such
month, for maintenance, off-net capacity, multiplexing and add/drops. PSINet
agrees to pay IXC in arrears, as billed by IXC, each month all fees and other
charges payable hereunder for such months for other services, including for
reconfiguration.
7.2 Late Payment. IXC invoices for amounts payable hereunder shall be due
within 30 days of the date of invoice. If a dispute arises as to any portion of
an invoice, PSINet shall pay the undisputed amount of such invoice when due and
shall notify IXC in writing of the disputed amount no later than 30 days from
the date of invoice. The IXC Authorized Representative and the PSINet Authorized
Representative will first attempt in good faith to promptly resolve the dispute.
If the matter has not been resolved by the IXC Authorized Representative and the
PSINet Authorized Representative within 14 days after PSINet' notice, or if
either party will not agree to meet within such 14-day period, the matter will
be referred to the Chief Executive Officer of IXC and the Chief Executive
Officer of PSINet, who will attempt in good faith to promptly resolve the
dispute. If the dispute has not been resolved by the Chief Executive Officer of
IXC and the Chief Executive Officer of PSINet within an additional 14-day
period, or if either party will not agree to meet within such 14-day period,
then the dispute shall be submitted to arbitration pursuant to Section 19.14. In
any such arbitration, the prevailing party shall be awarded such party's costs
and expenses incurred in bringing such action.
In the event that any payment remains unpaid after its due date, such
payment shall be subject to an interest charge equal to the lesser of one and
one-half percent of the unpaid balance per month or the maximum rate allowed
under applicable state law and, if a payment shall not have been paid in full
within five business days of the applicable due date when no bona fide dispute
exists, IXC may, without any liability to PSINet, at its option, suspend the
provision of maintenance and other services hereunder until such payment is made
in full. Notwithstanding anything herein to the contrary, in no event shall IXC
have the right to terminate, modify or otherwise affect its grant to PSINet of,
or PSINet's right, title and interest in, the IRU Capacity and the PSINet Fiber
IRU.
7
7.3 CPI. In addition to any other adjustment permitted or contemplated
herein, IXC has the right to make adjustments to the fees and charges hereunder
on each anniversary of the expiration of the Closing Date (the "Adjustment
Date") by multiplying the applicable fee or charge for the immediately preceding
twelve (12) month period (the "Prior Period") by a factor equal to one (1) plus
or minus the decimal equivalent of the total percentage change, if any, in the
U.S. Department of Labor Price Index for Urban Consumers, All Items, 1982-84 =
100 for the period from three (3) months prior to the commencement of such Prior
Period to three (3) months prior to the Adjustment Date. IXC shall deliver to
PSINet prior to each Adjustment Date notice of the adjustment in the applicable
fee or charge, setting forth the calculation of such adjustment.
7.4 Default/Termination.
(a) A party may deliver to the other party a written "Notice of
Default" for: (i) failing to make any payment owed hereunder, when no bona fide
dispute exists (a "Monetary Default"); or (ii) the breaching by either party or
its agents, assigns or affiliates of any Material Provision; or (iii) the filing
or initiating of proceedings by or against a party seeking liquidation,
reorganization or other such relief under any federal or state bankruptcy or
insolvency law (a "Bankruptcy Proceeding"). Such Notice of Default must
prominently contain the following sentences in capital letters: "THIS IS A
FORMAL NOTICE OF A BREACH OF CONTRACT. FAILURE TO CURE SUCH BREACH WILL HAVE
SIGNIFICANT LEGAL CONSEQUENCES." A party that has received a Notice of Default
shall have five (5) business days to cure a Monetary Default, thirty (30) days
to cure the alleged breach of any other Material Provision (other than Section
15.8(a) or the Standstill Agreement, which shall be required to be cured upon
demand by PSINet, provided, however, that IXC Communications, Inc. and/or IXC
shall have five (5) business days to cure a nonintentional breach of clause (vi)
of Section 15.8(a) or clause (vi) of Section 2 of the Standstill Agreement) and,
if the defaulting party shall have commenced actions in good faith to cure such
defaults which are not susceptible of being cured during such 30-day period,
such period shall be extended (but not in excess of 90 additional days) while
such party continues such actions to cure, and shall be given ninety (90) days
to remove, have dismissed or stay any involuntary Bankruptcy Proceeding (each
such cure period, a "Cure Period"). If such party fails to cure the breach
within the applicable Cure Period or, in the case of Section 15.8(a) (other than
clause (vi) thereof) or the Standstill Agreement (other than clause (vi) of
Section 2 thereof), upon demand by PSINet, as long as such default shall be
continuing, the non-defaulting party shall have the right to either (a) suspend
its performance or payment obligations under this Agreement and/or any of the
Transaction Documents (other than obligations under Section 15.8(a) and the
Standstill Agreement), (b) seek an order of specific performance or, in the case
of a breach of Section 15.8(a) or the Standstill Agreement, specific
performance, injunctive relief or other equitable remedy, and/or (c) seek the
award of compensatory damages. Notwithstanding anything herein to the contrary,
in no event, shall IXC have the right to terminate, modify or otherwise affect
its grant to PSINet of, or PSINet's right, title and interest in, the IRU
Capacity and the PSINet Fiber IRU, provided, however, that, during the
continuance of any breach (as determined by an arbitration pursuant to Section
19.14) by PSINet of a Material Provision, IXC shall have the rights set forth in
the preceding sentence with respect to matters other than those affecting
PSINet's right, title or interest in the IRU capacity or the PSINet Fiber IRU;
such IXC rights to include, without limitation, the right to disconnect PSINet's
access, and to suspend performance of its obligations hereunder to allow PSINet
access, to IXC's POPs, the IXC Fibers, electronics, and optronics (whether by
way of direct connection, interconnection, or other means), and the right to
suspend maintenance. In the event IXC does not allow PSINet access to IXC's POPs
as set forth in the preceding sentence, IXC will allow PSINet, upon reasonable
notice, to remove PSINet's equipment and any equipment leased to PSINet or
provided by a third party to PSINet from the POPs.
(b) In the event of, and during the continuance of, a breach by IXC of
any Material Provision (subject to the last sentence of this section), so long
as PSINet shall not have been determined pursuant to arbitration proceedings
conducted under Section 19.14(b) to be in breach of a Material Provision
hereunder which remains continuing, PSINet shall be entitled to engage an
Approved Subcontractor to access the Maintainable Equipment (as defined) in
IXC's POPs as reasonably necessary to assure its continued uninterrupted use of
the PSINet Fiber IRU and the IRU in the IRU Capacity granted to PSINet
hereunder. Such access shall be subject to applicable rights-of-way and lessor
rights; provided, however, that in the event PSINet exercises its rights
pursuant to this Section 7.4(b), IXC shall use reasonable efforts to obtain any
necessary third party consents to such access. Such access is referred to as
the "Access Right." PSINet shall use its best efforts to assure that no damage
is caused to IXC's equipment, fibers or systems in connection with such
8
maintenance and access. IXC shall use its commercially reasonable best efforts
to assure that the applicable rights-of-way and lessors' rights are maintained
and exercised at all times in a manner consistent with PSINet's ability pursuant
to this Section 7.4(b) to access all relevant premises to install and/or
maintain equipment associated with or to be associated with the PSINet Fiber IRU
or the IRU in the IRU Capacity granted to PSINet hereunder. Notwithstanding the
foregoing, however, PSINet shall have no rights under this Section 7.4(b) by
reason of an IXC Bankruptcy Proceeding if IXC is not also at such time in breach
of a Material Provision.
SECTION 8. SYSTEM MAINTENANCE AND POPs
8.1 Maintenance. IXC shall provide all maintenance and repair functions on
the Available System as well as on the optical and electronic equipment owned or
leased by IXC used to provide the Bandwidth. IXC agrees it will provide all
maintenance and repair functions in the same manner and with at least the same
degree of care and timeliness utilized by IXC or IXC Communications with respect
to other portions of their telecommunications systems, but at no time shall such
maintenance and repair functions be conducted in a manner which does not equal
or exceed that which is normal and customary in the telecommunications industry.
8.2 Repair or Replacement. In the event that all or any part of the
Available System or optical or electronic equipment owned by IXC requires
replacement during the term of this Agreement, such replacement shall be on a
timely basis, and at the expense of IXC. This replacement will be scheduled at
IXC's reasonable discretion upon adequate notice to PSINet or at PSINet's
reasonable request.
8.3 Consideration. In consideration of IXC's maintenance obligations
hereunder, PSINet shall pay IXC a monthly fee of * per OC-12 Equivalent Mile
per month (on lower capacity, * per DS-3 Mile per month) for each OC-12 (or
its equivalent) provided by IXC to PSINet hereunder.
8.4 POPs. PSINet may only interconnect to IXC Fibers to utilize the IRU
Capacity at IXC's POPs. IXC shall provide PSINet with the applicable Bandwidth
only between IXC's POPs and IXC shall provide POP space to PSINet (including,
without limitation, cabinet space for equipment), all as set forth in the
Collocation Agreement. PSINet's right to occupy any POP will expire upon the
earlier of: (i) 20 years after the first date of occupancy in such POP or (ii)
the termination of the last Bandwidth Unit which terminates in such POP. PSINet
shall pay for all costs associated with connecting its system and POPs to IXC's
POPs. IXC will allow PSINet light-to-light and copper-to-copper connections
within IXC's POPs so that PSINet, at its own expense, can make interconnections
to its own POPs. Notwithstanding the foregoing, if necessary, and where
applicable, IXC shall use commercially reasonable efforts to provide PSINet, at
PSINet's expense, access to existing building entrance facilities, if available,
to access and exit IXC POPs. PSINet will pay IXC time and material agreed upon
on a case by case basis for: (a) equipment installation and tech-assists and (b)
for build-outs for power, cabling and HVAC for PSINet's needs in excess of *
cabinet spaces in the applicable POP. Interconnect facilities to interconnect to
other parties within IXC's POPs shall be installed and maintained under the
terms and conditions that are specified in the Collocation Agreement.
8.5 Other Party's Equipment. IXC shall be required to exercise reasonable
care with respect to any equipment located in any of IXC's POPs or any portion
or component thereof. IXC shall promptly notify PSINet of any matters pertaining
to damage or impending damage, or loss of any portion of the Available System
that are known to it, which may adversely affect PSINet's use of the PSINet IRU
or the IRU Capacity.
SECTION 9. INDEMNIFICATION.
9.1 Indemnification Obligations. IXC and PSINet (hereinafter where either
has undertaken the action or inaction to be indemnified against shall be known
as the "Indemnifying Party") agree
* Confidential material has been omitted and filed separately with the
Securities and Exchange Commission
9
to assume all liability for and indemnify, defend and hold harmless the other
party or any third party claiming through the other party, from and against
all liability, loss, cost, damage, expense or cause of action, of whatsoever
character, or injury or death of any person and damage to or destruction of
any property, including, without limitation, third parties and all related
expenses, including, but not limited to, reasonable attorneys' fees,
investigators' fees and litigation expenses and costs of enforcing this
Section 9 arising out of or relating to, in whole or in part, any of the
following:
(i) claims for libel, slander, infringement of copyright or unauthorized
use of a trade secret, trade name or service xxxx that results from
the transmission of material over the Available System by the
Indemnifying Party, authorized representatives of the Indemnifying
Party or other persons not associated with, or related to, either IXC
or PSINet; or
(ii) claims of any person not a party to this Agreement arising out of the
negligent or willful act or omission of the Indemnifying Party or its
agents, servants, employees, contractors or representatives (other
than IXC, if PSINet is the Indemnifying Party, or PSINet, if IXC is
the Indemnifying Party); or
10
(iii) claims for patent infringement arising out of the use of the
Available System by the Indemnifying Party or any person
authorized by the Indemnifying Party or resulting from the acts
of the Indemnifying Party or the Indemnifying Party's
representatives in combining the Available System with the
facilities of the Indemnifying Party or others, or using the
Available System either alone or in connection with that of the
Indemnifying Party or others; or
(iv) claims, except as otherwise set forth herein, for the material breach
of or failure to comply, in any material respect, with any term or
condition of this Agreement by the Indemnifying Party or its officers,
employees or invitees; or
(v) claims resulting from patent or trade secret infringement or
infringement or unauthorized use of trade secrets or trade name by the
Indemnifying Party in connection with this Agreement;
PROVIDED, HOWEVER, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER
(OR TO ANY THIRD PARTY CLAIMING THROUGH SUCH OTHER PARTY) FOR CONSEQUENTIAL,
INCIDENTAL, EXEMPLARY OR PUNITIVE DAMAGES, AND THE FOREGOING INDEMNITIES SHALL
NOT APPLY WITH RESPECT TO SUCH DAMAGES.
9.2 Notice of Indemnification. Upon receipt by the Indemnifying Party of a
notice from the other party with respect to any claim of a third party against
the other party, the Indemnifying Party shall, within 30 days of the mailing of
the other party's notice setting forth such request for indemnification, either
(i) agree in writing to assume the defense of such third party claim, or (ii)
provide the other party with written notice setting forth the basis for such
objection in reasonable detail. In the event the Indemnifying Party fails to
respond to the other party's written request within such 30 day period, the
other party's right to indemnification, as set forth in the other party's
notice, shall be deemed agreed to by the Indemnifying Party. In the event the
Indemnifying Party timely objects to the other party's request for
indemnification, the dispute shall be settled in accordance with the procedures
set forth in Section 7.2, above.
9.3 Defense Obligations. In the event it is determined that the
Indemnifying Party is required to indemnify the other party, the Indemnifying
Party shall assume the defense of such claim with counsel reasonably
satisfactory to the other party, and the other party shall cooperate to the
extent reasonably requested by the Indemnifying Party in defense or prosecution
thereof. If the Indemnifying Party has agreed to indemnify the other party and
has assumed the defense of any such third party claim, the other party shall
have the right to employ its own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of the other party, and the
Indemnifying Party shall have the right to settle any claim for which
indemnification has been sought and is available hereunder; provided, however,
that, to the extent that such settlement requires the other party to take, or
prohibits the other party from taking, any action or purports to obligate the
other party, then the Indemnifying Party shall not settle such claim without the
prior written consent of the other party, which shall not be unreasonably
withheld, delayed or conditioned.
11
If the Indemnifying Party does not assume the defense of any third party claim
for which it is obligated to provide indemnification hereunder, the other party
may assume control of the defense of such claim through counsel of its choice at
the Indemnifying Party's expense and shall have control over the litigation and
authority to resolve such claim. If action is required to be taken with respect
to any third party claim prior to the determination of the Indemnifying Party's
obligations hereunder, the other party may assume control of the defense of such
claim through counsel of its choice until such time as the Indemnifying Party's
obligations hereunder are determined; provided, however, that the Indemnifying
Party shall not be liable hereunder for any settlement of such claim without the
Indemnifying Party's prior written consent unless and until it is determined
that the Indemnifying Party is obligated hereunder to provide indemnification
with respect thereto and refuses or fails to assume the defense of such claim.
SECTION 10. ADMINISTRATION OF AGREEMENT
10.1 Representatives. Within 30 days after the Closing Date, IXC and PSINet
shall each designate, by written notice to the other party, a representative
(each, an "Authorized Representative") who is authorized to act on the
respective party's behalf with respect to those matters delegated to the
Authorized Representative. Each party may designate an alternate representative
with full authority to act in the absence of the Authorized Representative. Each
party shall have the right to change its Authorized Representative or
alternative by written notice to the other party.
10.2 Responsibilities. The Authorized Representatives shall provide liaison
between the parties in order to provide effective cooperation, exchange of
information and consultation on a prompt and orderly manner concerning the
various matters which may arise, from time to time, in connection with this
Agreement. In addition, the Authorized Representatives shall have the following
responsibilities, among others:
1. Perform those functions and duties assigned to them in this
Agreement;
2. Review and attempt to resolve any disputes between the
parties arising under this Agreement. Should the Authorized Representatives be
unable to resolve a dispute, the matter shall be resolved in accordance with the
provisions of Section 19.14, below; and
3. Arrange for the development and completion of procedures to
implement the provisions of this Agreement.
10.3 Form of Actions. All actions, agreements, resolutions, determinations
or reports made by the Authorized Representatives shall be in writing and shall
become effective when signed by both Authorized Representatives.
10.4 Fees and Expenses. Any and all fees and expenses incurred by an
Authorized Representative in connection with his or her duties shall be paid by
the party he or she represents.
SECTION 11. FORCE MAJEURE
Notwithstanding any provision in this Agreement to the contrary, neither
party shall be liable to the other for any failure of performance under this
Agreement (except with respect to payment or other monetary obligations or as
otherwise specifically set forth herein) due to causes beyond the reasonable
control of a party, including, by way of illustration and not limitation, acts
of God, flood, fire, explosion, storm, acts of public enemies, insurrection,
war, national emergency, riots, strikes, labor disputes, disturbances, lockouts,
labor or material shortages (not resulting from the responsible party's failure
to place reasonable orders therefor), breakdown of or damage to plants or
equipment or facilities (other than arising out of the neglect or mishandling by
such party), failure of a supplier to supply necessary materials or equipment or
labor in a timely manner (including warranty replacements), destruction of
property, embargoes, boycotts, governmental legislation or regulations, orders
or acts of civil or military authorities, governmental acts, or orders of courts
or administrative agencies. Any party excused from performance pursuant to this
Section 11 shall use commercially reasonable efforts to minimize the time during
which such performance is excused pursuant to this Section 11.
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SECTION 12. LIMITATION OF LIABILITY; INDEMNIFICATION
12.1 Limitation of Liability. Except for direct damages otherwise
specifically provided for in this Agreement, in no event shall IXC or PSINet be
liable for any special, incidental, direct, indirect, punitive, reliance or
consequential damages, whether foreseeable or not, arising under this Agreement
or from any breach or partial breach of the provisions of this Agreement or
occasioned by any defect in the Bandwidth or other service provided hereunder,
delay in availability of the Bandwidth or any service provided hereunder,
failure of the Bandwidth or other service provided hereunder, interruptions or
outages of the Available System or any other cause whatsoever or arising out of
any act or omission by IXC or PSINet, as applicable, its employees, servants
and/or agents, including but not limited to, damage or loss of property or
equipment, loss of profits or revenue, cost of capital, cost of replacement
services, or claims of customers for service interruptions or transmission
problems.
12.2 Release; Indemnification. Each party (each party in such capacity
being referred to as the "Releasing Party") releases, assumes and agrees to
indemnify, defend, protect and save the other party harmless from and against
any claim, damage, loss, liability, cost and expense (including reasonable
attorneys' fees) in connection with any loss or damage to any physical property
or facilities of the Releasing Party or any injury to or death of any person
arising out of or resulting in any way from the negligence or misconduct of the
Releasing Party or its employees, servants, contractors and/or agents.
SECTION 13. REPRESENTATIONS AND WARRANTIES OF PSINet
PSINet represents and warrants to IXC that, except as set forth in the
PSINet Disclosure Schedule set forth as Exhibit L hereto, as of the date hereof
and as of the Closing Date, except where a representation and warranty is made
as of a specified date, in which case it is made as of such date:
13.1 Organization. On the date hereof PSINet is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York. On the Closing Date, PSINet, as merged into Newco, will be a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. PSINet is qualified to do business as a foreign
corporation in each jurisdiction in which such qualification is required except
in those jurisdictions where the failure to be so qualified would not have a
Material Adverse Effect on PSINet and its subsidiaries taken as a whole. PSINet
has delivered to IXC true and correct copies of its Certificate of Incorporation
and Bylaws and, prior to the Closing, will deliver true and correct copies of
Newco's Certificate of Incorporation (which does not include the documents
required to effect the Reincorporation) and Bylaws in substantially the form as
set forth as Exhibit J hereto (with such changes thereto as may be required in
order for such Certificate of Incorporation and Bylaws to comply with Delaware
General Corporation Law while providing the parties with substantially
equivalent economic benefits as provided therein).
13.2 Authorization. The execution, delivery and performance of this
Agreement and the Transaction Documents to which PSINet is or will be a party
has been or, on the Closing Date, will be, duly authorized by all necessary
corporate action on the part of PSINet. This Agreement and the Transaction
Documents to which PSINet is or will be a party are or, when executed and
delivered, will be valid and binding obligations of PSINet, enforceable against
PSINet in accordance with their terms, except as such enforceability may be
limited by bankruptcy, insolvency or other laws relating to or affecting
creditors' rights generally and the exercise of judicial discretion in
accordance with general equitable principles. Except as set forth in Section
13.2 of the PSINet Disclosure Schedule, no material consent, approval or
authorization of, or designation, declaration or filing with, any governmental
authority is required of PSINet in connection with the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby.
13.3 Shares. Upon the issuance of the IXC Initial Common Shares on the
Closing Date in accordance with this Agreement, the IXC Initial Common Shares
will be duly authorized, validly issued, fully paid and nonassessable. Upon the
issuance, if any, of the Additional Shares, the Additional Shares will be duly
authorized, validly issued, fully paid and nonassessable.
13
13.4 Capitalization. As of the date of this Agreement, the authorized
capital stock of PSINet consists of 100,000,000 shares of Common Stock, $.01 par
value per share, 29,000,000 shares of undesignated Preferred Stock, $.01 par
value per share, and 1,000,000 shares of Series A Junior Participating Preferred
Stock, $.01 par value per share, of which approximately 40,397,876 shares of
Common Stock are issued and outstanding, 99,556 shares of Common Stock are held
as treasury shares and no shares of Preferred Stock are issued or outstanding.
Upon the Closing Date, after giving effect to the Reincorporation, the
authorized capital stock of Newco will be as set forth in Section 13.4 of the
PSINet Disclosure Schedule and each share of Common Stock of PSINet issued and
outstanding on the date hereof will have been exchanged for one share of Common
Stock of Newco. Except as set forth on the PSINet Disclosure Schedule, as of the
date of this Agreement, there is not outstanding any subscription, option,
warrant, call, right or other agreement or commitment obligating PSINet to
issue, sell, deliver or transfer (including any right of conversion or exchange
under any outstanding security or other instrument) any shares of Common Stock
or any other shares of capital stock of PSINet. PSINet does not have outstanding
any bonds, debentures, notes or other obligations, under the terms of which the
holders of which have the rights to vote with the shareholders of PSINet.
13.5 PSINet Filings; No Material Adverse Change. Neither PSINet's Annual
Report on Form 10-K for the year ended December 31, 1996 nor any other of
PSINet's periodic reports filed with the U.S. Securities and Exchange Commission
(the "Commission") pursuant to the 1934 Act on or after March 31, 1997 (each, a
"PSINet Filing"), taken as a whole, as of the date of filing thereof, contained
any untrue statement of material facts or omitted to state any material fact
necessary in order to make the statements contained therein not misleading in
light of the circumstances under which such statements were made. PSINet used
reasonable efforts, in good faith, to comply in all material respects with the
requirements of the Commission as to the contents of such filings. Such PSINet
Filings, when they were filed with the Commission, conformed as to form in all
material respects to the requirements of the 1934 Act and the rules and
regulations of the Commission thereunder. Except as disclosed by PSINet in
public announcements or otherwise set forth in the PSINet Disclosure Schedule,
there has been no material and adverse change to the business, financial
condition or results of operation of PSINet and its subsidiaries taken as a
whole since the date of the most recent PSINet Filing.
13.6 Effect of Transactions. Except as set forth in Section 13.6 of the
PSINet Disclosure Schedule, the execution, delivery and performance by PSINet of
this Agreement and the Transaction Documents to which PSINet is a party and the
consummation of the transactions contemplated hereby and thereby will not
conflict with or result in any default or require the consent of any person or
entity under the Articles or Certificate of Incorporation, By-laws or any
material agreement of PSINet, or result in the creation of any lien, charge or
encumbrance of any nature upon any of the properties or assets of PSINet except
pursuant to this Agreement. The execution, delivery and performance of this
Agreement by PSINet will not violate, in any material respect, any judgment,
decree, order, statute, rule or regulation of any federal, state or local
government or agency applicable to PSINet or to which PSINet is a party.
13.7 Litigation. Except as disclosed in Section 13.7 of the PSINet
Disclosure Schedule, there is no litigation or governmental proceeding or
investigation pending or, to the knowledge of PSINet, threatened against PSINet
which (i) may call into question the validity or hinder the enforceability or
the performance of this Agreement, the Transaction Documents to which PSINet is
a party or the transactions contemplated hereby and thereby, or (ii) could
reasonably be expected to give rise to a Material Adverse Effect on PSINet and
its subsidiaries taken as a whole.
13.8 Brokers. Except for the fees of Xxxxxxx Xxxxx & Co. in connection with
any fairness or valuation opinions to be provided by it to PSINet as
contemplated by this Agreement, no broker, finder, agent or similar intermediary
has acted on behalf of PSINet in connection with this Agreement or the
transactions contemplated hereby, and there are no brokerage commissions,
finder's fees or similar fees or commissions payable by PSINet in connection
with this Agreement or the transactions contemplated hereby.
13.9 No Other Agreements To Sell. Except as set forth in this Agreement or
as disclosed in Section 13.9 of the PSINet Disclosure Schedule, neither PSINet
nor any of its subsidiaries has any commitment to (i) sell, assign or transfer a
material portion of the assets or capital stock of PSINet or an Affiliate, (ii)
to effect any merger, consolidation or other reorganization of PSINet
14
or an Affiliate that could affect the transactions contemplated by this
Agreement, or (iii) to enter into any agreement with respect to any of the
foregoing.
13.10 Full Disclosure. No representation, warranty or other statement
of PSINet contained in this Agreement, or any other document or certificate
delivered at Closing or, to PSINet's knowledge, other written statement
furnished to IXC in connection with the transactions contemplated by this
Agreement (other than any interim financial statements of PSINet not filed with
the Securities and Exchange Commission) contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein relating to this Agreement and the
transactions contemplated hereby or to the business or financial condition of
PSINet not materially misleading when taken as a whole in the light of the
circumstances under which they were made. There is no fact known to PSINet which
could reasonably be expected to have, in light of the circumstances in which it
is made, a Material Adverse Effect on PSINet and its subsidiaries, taken as a
whole, that has not been disclosed herein or in such other documents,
certificates and statements furnished to IXC for use in connection with the
transactions contemplated hereby. All interim financial statements furnished by
PSINet to IXC in connection with this Agreement were prepared in good faith.
EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SPECIFICALLY SET FORTH IN
THIS SECTION 13, PSINET MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND
WHATSOEVER, WHETHER EXPRESS, IMPLIED OR STATUTORY, AND PSINET EXPRESSLY
DISCLAIMS AND EXCLUDES ALL OTHER REPRESENTATIONS AND WARRANTIES OF ANY KIND.
15
SECTION 14. REPRESENTATIONS AND WARRANTIES OF IXC
IXC hereby represents and warrants to PSINet that, except as set forth in
the IXC Disclosure Schedule set forth as Exhibit M hereto, as of the date hereof
and as of the Closing Date, except where a representation and warranty is made
as of a specified date, in which case it is made as of such date:
14.1 Organization. IXC is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and is qualified
to do business as a foreign corporation in each jurisdiction in which such
qualification is required except in those jurisdictions where the failure to be
so qualified would not have a Material Adverse Effect on IXC and its
subsidiaries taken as a whole.
14.2 Authorization. The execution, delivery and performance of this
Agreement, the Transaction Documents to which IXC is or will be a party and the
Contribution Agreement have been duly authorized by all necessary corporate
action on the part of IXC and IXC Carrier, as applicable. This Agreement, the
Transaction Documents to which IXC is or will be a party, and the Contribution
Agreement are or, when executed and delivered, will be valid and binding
obligations of IXC and IXC Carrier, as applicable, enforceable against IXC or
IXC Carrier, as applicable, in accordance with their terms, except as such
enforceability may be limited by bankruptcy, insolvency or other laws relating
to or affecting creditors' rights generally and the exercise of judicial
discretion in accordance with general equitable principles. Except as set forth
in Section 14.2 of the IXC Disclosure Schedule, no consent, approval or
authorization of, or designation, declaration or filing with, any governmental
authority is required of IXC or IXC Carrier, as applicable, in connection with
the execution, delivery and performance of this Agreement, the Transaction
Documents to which IXC is or will be a party, and the Contribution Agreement by
IXC or IXC Carrier, as applicable, or the performance or consummation of any
other transaction contemplated hereby or thereby.
14.3 Effect of Transactions. Except as set forth in Section 14.3 of the IXC
Disclosure Schedule, the execution and delivery of this Agreement, the
Transaction Documents to which IXC is or will be a party, and the Contribution
Agreement by IXC and IXC Carrier, as applicable, and the performance by IXC and
IXC Carrier, as applicable, of the transactions contemplated hereby and thereby
will not conflict with or result in any default or require the consent of any
person or entity under the Certificate of Incorporation, By-laws or any material
agreement of IXC or IXC Carrier, as applicable, or result in the creation of any
lien, charge or encumbrance of any nature upon any of the properties or assets
of IXC except pursuant to this Agreement. The execution and delivery of this
Agreement, the Transaction Documents to which IXC is or will be a party, and the
Contribution Agreement by IXC or IXC Carrier, as applicable, and the performance
by IXC and IXC Carrier, as applicable, of the transactions contemplated hereby
and thereby will not violate, in any material respect, any judgment, decree,
order, statute, rule or regulation of any federal, state or local government or
agency applicable to IXC or IXC Carrier, as applicable, is a party.
14.4 Litigation. Except as set forth in Section 14.4 of the IXC Disclosure
Schedule, there is no litigation or governmental proceeding or investigation
pending or, to the knowledge of IXC, threatened against IXC or IXC Carrier which
(i) may call into question the validity or hinder the enforceability or
performance of this Agreement, the Transaction Documents to which IXC or IXC
Carrier is a party or the transactions contemplated hereby or thereby or (ii)
could reasonably be expected to give rise to a Material Adverse Effect on IXC
and its subsidiaries taken as a whole or IXC Carrier.
14.5 Brokers. No broker, finder, agent or similar intermediary has acted on
behalf of IXC or any of its Affiliates in connection with this Agreement or the
transactions contemplated hereby and, there are no brokerage commissions,
finder's fees or similar fees or commissions payable by IXC or any of its
Affiliates in connection with this Agreement or the transactions contemplated
hereby.
14.6 Investment Representations.
(a) IXC (i) has received and reviewed this Agreement, including all
schedules and exhibits hereto and the PSINet Disclosure Schedule, and has had
the opportunity to review the PSINet Filings, the Certificate of Incorporation,
as amended, and By-laws of PSINet, PSINet's preferred stock purchase rights plan
and the proposed Certificate of Incorporation and By-laws of Newco which
16
are proposed to be in effect on the Closing Date and (ii) has had the
opportunity to ask questions of, and has received answers from, PSINet
concerning the transactions contemplated hereby and to obtain additional
information which PSINet possesses or could acquire without unreasonable
effort or expense.
(b) IXC is acquiring or will acquire, as the case may be, the IXC
Shares (collectively the "Acquired Shares") for its own account, for investment,
and not with a view to any resale or "distribution" thereof within the meaning
of the Securities Act. IXC was not formed or organized for the purpose of
acquiring the Acquired Shares.
(c) IXC understands that because the Acquired Shares have not been
and will not be at the time of issuance registered under the Securities Act, it
cannot dispose of any or all of the Acquired Shares unless the Acquired Shares
are subsequently registered under the Securities Act or exemptions from such
registration are available. IXC understands that each certificate representing
the Acquired Shares will bear the following legend or one substantially similar
thereto:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE
STATE OR FOREIGN SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE
SOLD, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE ACT OR THE
AVAILABILITY OF AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN IRU AND
STOCK PURCHASE AGREEMENT, DATED AS OF JULY 22, 1997, A COPY OF WHICH IS
AVAILABLE FOR INSPECTION, IN RELEVANT PART, AT THE PRINCIPAL OFFICES OF THE
ISSUER.
(d) IXC is sufficiently knowledgeable and experienced in financial
and business matters and in the making of investments so as to be able to
evaluate the risks and merits of its investment in PSINet and the Acquired
Shares and is able to bear the economic risk of loss of its entire investment in
the Acquired Shares. IXC is an "accredited investor" as such term is defined in
Rule 501 promulgated under the Securities Act.
(e) IXC has been advised that the Acquired Shares have not been, will
not be at the time of issuance and are not being registered under the Securities
Act or under the "blue sky" laws of any jurisdiction and that PSINet in issuing
the Acquired Shares is and will be relying upon, among other things, the
representations and warranties of IXC contained in this Section 14.6.
14.7 Disclosure; No Material Adverse Change. Neither IXC's parent's Annual
Report on Form 10-K for the year ended December 31, 1996 nor any of IXC's
parent's periodic reports filed with the Commission pursuant to the 1934 Act on
or after March 31, 1997 (each, a "IXC Filing"), taken as a whole, as of the date
of filing thereof, contained any untrue statement of a material fact or omitted
to state any material fact necessary in order to make the statements contained
therein not misleading in light of the circumstances under which such statements
were made. IXC's parent used reasonable efforts, in good faith, to comply in all
material respects with the requirements of the Commission as to the contents of
such filings. Such filings, when they were filed with the Commission, conformed
as to form in all material respects to the requirements of the 1934 Act and the
rules and regulations of the Commission thereunder. IXC and IXC Carrier have
sufficient net worth and capital resources and expect to have sufficient cash
flow from their businesses in order for IXC to be able to perform its
obligations under this Agreement, the other Transaction Documents and the
Contribution Agreement and for IXC Carrier to be able to perform its obligations
under the Contribution Agreement. Except as disclosed by IXC in public
announcements or otherwise set forth in the IXC Disclosure Schedule, there has
been no material and adverse change to the business, financial condition or
results of operation of IXC and its subsidiaries taken as a whole since the date
of the most recent IXC Filing.
14.8 IRUs: At the Closing and throughout the Term, IXC will have good and
valid title to the Base IRU free and clear of all liens and encumbrances, and
rights of third parties, except as created hereunder and those created after the
date hereof and to an indefeasible right to use related facilities and
equipment. In the case of the Long-Term Indivisible IRU and Short-Term
Indivisible IRU, IXC, at the Closing and throughout the Term, will have, good
and valid title free and clear of all liens and encumbrances, and rights of
third parties, except as created hereunder. Pursuant to
17
the Security Agreement, at Closing, IXC shall grant to PSINet a continuing,
first priority perfected and exclusive security interest in the Collateral.
14.9 Available System. IXC Carrier has completed the fiber construction of,
and has installed electronics (which may not include the electronics to be used
to furnish the IRU Capacity) on, the portions of the Available System insofar as
indicated on Exhibit A hereto. The Available System will have sufficient fiber
capacity to satisfy IXC's obligations hereunder.
14.10 Stock Ownership. From the date hereof through and including the
Closing Date and simultaneously with the Closing, neither IXC Communications,
Inc. nor any of its controlled Affiliates nor any "group" (within the meaning of
Section 13(d)(3) of the 0000 Xxx) of which IXC Communications, Inc. or any of
its controlled Affiliates is a member nor, to IXC's knowledge, any of its
Associates, is or will directly or indirectly be the "beneficial owner" (within
the meaning of Rule 13d-3 under the 0000 Xxx) of any Voting Securities of PSINet
or the "Beneficial Owner" of any PSINet securities within the meaning of
PSINet's preferred stock purchase rights plan.
EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SPECIFICALLY SET FORTH IN
THIS SECTION 14, IXC MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND
WHATSOEVER, WHETHER EXPRESS, IMPLIED OR STATUTORY, AND IXC EXPRESSLY DISCLAIMS
AND EXCLUDES ALL OTHER REPRESENTATIONS AND WARRANTIES OF ANY KIND. WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, IXC MAKES NO WARRANTY TO PSINET OR ANY
OTHER PERSON OR ENTITY, WHETHER EXPRESS, IMPLIED OR STATUTORY, AS TO THE
DESCRIPTION, QUALITY, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY
PARTICULAR PURPOSE OF ANY CABLE OR FIBERS OR ANY SERVICE OR BANDWIDTH PROVIDED
HEREUNDER OR DESCRIBED HEREIN, OR AS TO ANY OTHER MATTER, ALL OF WHICH
WARRANTIES ARE HEREBY EXCLUDED AND DISCLAIMED.
SECTION 15. COVENANTS
15.1 Xxxx-Xxxxx-Xxxxxx. As soon as possible after the date hereof, each of
PSINet and IXC shall cause its ultimate parent to prepare and file all documents
with the Federal Trade Commission and the United States Department of Justice as
is required to comply with the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976 ("Xxxx-Xxxxx-Xxxxxx Act") and thereafter shall cause its ultimate parent to
promptly furnish all materials thereafter requested by any of the regulatory
agencies having jurisdiction over such filings.
15.2 Consents. Each of PSINet and IXC shall use its reasonable best efforts
to obtain at the earliest practicable date all consents and approvals required
to consummate the transactions contemplated by this Agreement, including,
without limitation, the consents and approvals referred to in Sections 13.2,
13.6, 14.2 and 14.3 hereof; provided, however, that, except for filing fees
required in connection with the parties' obligations under Section 15.1, above,
neither PSINet nor IXC shall be obligated to pay any consideration therefor to
any third party from whom consent or approval is requested.
15.3 Other Actions. Each of PSINet and IXC shall use its reasonable best
efforts to (i) take all actions necessary or appropriate to consummate the
transactions contemplated by this Agreement and (ii) cause the fulfillment at
the earliest practicable date of all of the conditions to their respective
obligations to consummate the transactions contemplated by this Agreement.
15.4 Board Seat. So long as IXC owns 95% of all IXC Common Shares issued to
IXC hereunder, on the Closing Date, PSINet's Chairman shall recommend that (i)
PSINet's Board of Directors elect Xxxxx X. Xxxxx to PSINet's Board of Directors
effective as of the Closing Date, for a term expiring in 1998 or later and (ii)
subject to the next sentence, such person be nominated to stand for election
with the other nominated Board members at the 1998 Annual Meeting of PSINet (or,
later annual meeting associated with the expiration of his term) for a term
expiring no earlier than 2000 and for reelection thereafter at the applicable
Annual Meetings of PSINet. At such time as IXC shall cease to own the requisite
amount of IXC Common Shares, a resignation letter will be executed by Xxxxx X.
Xxxxx immediately and he shall immediately cease to serve as a member of
PSINet's Board of Directors.
15.5 Restriction on Resale. PSINet shall not sell, swap, lease or otherwise
transfer (including, without limitation, by way of a pledge, hypothecation or
security interest) any Bandwidth obtained from IXC to any third party
("Transferee") except (i) to an Affiliate, or (ii) in connection
18
with the offering of Internet connectivity services, as such services shall
evolve and mature, or (iii) in connection with a bona fide financing
arrangement with an unaffiliated third party and any foreclosure or similar
sale in connection therewith; provided that in any such case, the Transferee
shall agree to be subject to the terms of this Section 15.5. PSINet and each
Transferee shall not use the Bandwidth acquired from IXC pursuant to this
Agreement to provide any party (other than PSINet and its controlled U.S.
affiliates for purpose of the aggregation of the customer traffic of PSINet
and its controlled U.S. affiliates) any form of non-Internet
telecommunications transport at a rate greater than DS-3 (45mbps) without the
specific written approval of IXC. PSINet is specifically restricted from
using the Bandwidth to deliver any analog or digitized long- distance
switched telephone service or any substantially similar service, based on
non-Internet telephone switching technologies, and only on such technologies,
or private line service (such as XX-0, XX-0, XX-0, T-1, T-3, E-1, E-3, OC-3,
OC- 12, OC-48, or any OC-N private line service), to any third party. Any
pledge, hypothecation or security interest of or in the Bandwidth will be
subject to the terms and conditions of this Agreement, including, without
limitation, this section. PSINet will not compete during 1997 against IXC for *
business, or for such other business opportunities introduced to PSINet by
IXC as may be reduced to writing and acknowledged by PSINet, for services to
be rendered in 1997 or thereafter, provided, however, that this sentence will
not restrict PSINet from providing services contracted for prior to the date
hereof.
Notwithstanding the foregoing, the restrictions set forth in this Section
15.5 will not apply to any Transferee which acquires any Bandwidth in connection
with a Bankruptcy Proceeding filed or initiated by or against PSINet.
15.6 No Solicitation.
(a) From the date hereof until three years after the Closing Date,
neither IXC nor any of its Affiliates will, directly or indirectly, either alone
or in association with others in any part of the world induce, request,
encourage or assist any employee of PSINet or its Affiliates to terminate his or
her employment with PSINet, or to join with or become employed by, render
services to or otherwise be engaged by IXC or any of its Affiliates in any
direct or indirect capacity.
(b) From the date hereof until three years after the Closing Date,
neither PSINet nor any of its Affiliates will, directly or indirectly, either
alone or in association with others in any part of the world induce, request,
encourage or assist any employee of IXC or its Affiliates to terminate his or
her employment with IXC, or to join with or become employed by, render services
to or otherwise be engaged by PSINet or any of its Affiliates in any direct or
indirect capacity.
(c) If, at the time of enforcement of Section 15.6, a court shall hold
that the duration, scope, geographic area or other restrictions stated herein
are unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope, geographic area or other restrictions deemed reasonable
under such circumstances by such court shall be substituted for the stated
duration, scope, geographic area or other restrictions.
15.7 Transfer Matters. (a) If IXC or any controlled Affiliate of IXC that
beneficially owns IXC Shares (collectively, the "Selling Shareholder") shall
desire to sell or otherwise dispose of any or all of the IXC Shares beneficially
owned by it (the "Offered Shares"), other than to IXC Carrier, after IXC Carrier
has agreed in writing to be bound by the terms of this Section 15.7 and by
Section 15.8, or pursuant to a pledge to an unaffiliated third-party lender
("Lender") in connection with a bona fide lending transaction or a foreclosure
or similar sale in connection therewith (each, a "Pledge Transaction"), such
Selling Shareholder shall first give written notice (the "Notice of Sale") to
PSINet.
Upon the giving of any Notice of Sale, PSINet shall have a non-assignable,
one-time, first option to purchase all (but not less than all) of the Offered
Shares for cash at the Current Market Price at the date the Notice of Sale is
given, which option must be exercised by giving notice of such exercise to the
Selling Shareholder within 48 hours (excluding hours on Saturdays, Sundays or
* Confidential material has been omitted and filed separately with the
Securities and Exchange Commission
19
national holidays) after the receipt by PSINet of the Notice of Sale (the "Offer
Acceptance Date"). Such notice of exercise shall constitute PSINet's binding,
non-cancelable agreement to purchase the Offered Shares.
20
The closing of the purchase by PSINet of the Offered Shares shall take
place within 30 days after the Offer Acceptance Date. PSINet shall designate the
time and date of the closing which shall be held at the principal office of
PSINet or such other place as may be mutually agreed upon between PSINet and the
Selling Shareholder. At the closing, the Selling Shareholder shall duly assign
and deliver to PSINet certificates representing the Offered Shares, with
required transfer stamps attached, and PSINet shall pay the Selling Shareholder
the purchase price (plus one-half the cost of all transfer stamps required) by
wire transfer of same-day funds to an account designated by the Selling
Shareholder.
If the right given to PSINet in this section shall not have been exercised
as to the Offered Shares as set forth above, the Selling Shareholder shall have
the right, at any time within three months after the expiration of such 48-hour
period, to dispose of all of the Offered Shares. If by the end of such
three-month period, the Selling Shareholder has not sold or otherwise disposed
of all of the Offered Shares, the remaining Offered Shares shall not be sold by
the Selling Shareholder except after compliance again with the provisions of
this Section 15.7.
(b) Notwithstanding any provision of this Agreement to the contrary,
during the six month period preceding or following the Additional Shares
Determination Date and during the six month period following the Additional
Shares Acceleration Date, neither IXC, IXC Communications, Inc. nor any
controlled Affiliate of IXC Communications, Inc. shall sell, transfer, convey or
otherwise dispose of any Common Stock of PSINet or any securities convertible
into or exchangeable or exercisable for any shares of Common Stock of PSINet
(each, an "Untimely Transfer"). PSINet's sole remedy with respect to an Untimely
Transfer occurring during the six-month period prior to the Additional Shares
Determination Date, shall be to delay payment to IXC and suspend PSINet's
obligations to IXC under Section 3.5 as set forth in Section 15.7(c). This
Section 15.7(b) shall not apply to a Pledge Transaction, so long as neither IXC
nor any of its Affiliates do not intentionally breach the terms of the
applicable pledge or any related financing agreement with the purpose of
avoiding this Section 15.7(b).
(c) Notwithstanding any provision of this Agreement to the contrary,
PSINet's obligations to pay or deliver any Additional Shares and/or cash, other
securities or property pursuant to Section 3.5 to IXC shall be suspended in the
event of, and for so long as there shall be continuing (i) a breach by IXC of a
Material Provision, or a breach of Section 15.8(a) or the Standstill Agreement
claimed by PSINet to be material and which PSINet actively seeks to resolve
through the dispute resolution procedures set forth in this Agreement or the
Standstill Agreement, as applicable, or (ii) a breach by IXC or any of its
Affiliates of the provisions of Section 15.7(a) or 15.7(b), until such breach
has been cured (in the case of a breach of Section 15.7(b), until such breach
has been cured for a period of at least fifty (50) consecutive trading days
without an Untimely Transfer after the transaction giving rise to such breach).
15.8 Standstill Agreement.
(a) IXC covenants and agrees that each of it and IXC Communications,
Inc. shall not and shall not permit any controlled Affiliate of IXC
Communications, Inc. and/or IXC to, without the prior approval of the Board of
Directors of PSINet or as otherwise provided in this Agreement, (i) in any
manner acquire, agree to acquire or make any proposal to acquire, directly or
indirectly, any securities or property of PSINet or any of its subsidiaries
(except pursuant to Section 3 of this Agreement or by way of stock dividends,
stock splits or other distributions by PSINet made available to holders of
Voting Securities generally, including without limitation pursuant to a PSINet
preferred stock purchase rights plan or pursuant to any similar plan or
distribution, or as permitted pursuant to clause (ii)(C) of this Section 15.8),
(ii) propose (by itself or by or through any of its directors, executive
officers, attorneys, investment bankers or other Person duly authorized to make
such a proposal) or induce any other Person to propose, directly or indirectly,
(A) any merger or business combination involving PSINet or any of its
subsidiaries, (B) the purchase or sale of any assets of PSINet or any of its
subsidiaries or (C) the purchase of any Voting Securities, by tender offer or
otherwise (except pursuant to the exercise of rights, warrants, options or
similar securities distributed by PSINet to holders of Voting Securities
generally, including without limitation pursuant to the exercise of rights
pursuant to PSINet's preferred stock purchase rights plan), (iii) directly or
indirectly solicit "proxies" or "consents" or become a "participant" in a
"solicitation" (as such terms are defined in Regulation 14A under the 1934 Act),
or seek to advise or influence any Person with respect to the voting of any
Voting Securities of PSINet or any of its subsidiaries, (iv) form, join or in
any way participate in a "group" (within the meaning of Xxxxxxx
00
00(x)(0) xx xxx 0000 Xxx) with respect to any Voting Securities of PSINet or
any of its subsidiaries, (v) deposit any Voting Securities in a voting trust
or subject any Voting Securities to any arrangement or agreement with respect
to the voting of Voting Securities, (vi) otherwise act, alone or in concert
with others, to seek to control or influence (except as a customer or
supplier in the ordinary course of business) the management, Board of
Directors or policies of PSINet (provided, however, that so long as he is a
director of PSINet, this clause (vi) shall not prohibit Xxxxx X. Xxxxx from
taking action and serving in his capacity as a director of PSINet in a manner
consistent with the proper exercise of his fiduciary and other duties as a
director of PSINet), (vii) disclose any intention, plan or arrangement
inconsistent with the foregoing or (viii) advise, assist or encourage any
other Person in connection with any of the foregoing. Notwithstanding
anything in this Section 15.8 to the contrary, so long as there shall not
have occurred an IXC Change of Control, IXC shall be permitted to approach
the Board of Directors of PSINet, directly or indirectly through its
executive officers or its investment bankers for purposes of obtaining a
waiver of its liabilities, obligations and commitments under clause (ii) of
this Section 15.8(a). IXC agrees that the provisions of this Section 15.8
shall be binding upon its successors and assigns (other than resulting from a
Pledge Transaction) and any permitted transferees of the IXC Shares who are
controlled Affiliates of IXC Communications, Inc.
(b) IXC shall be entitled to acquire such number of shares of Common
Stock of PSINet which, when added to the number of shares of Common Stock
beneficially owned (excluding any rights IXC has hereunder to receive Additional
Shares) by IXC, its Affiliates and their respective successors and assigns,
would not exceed one share less than 20% of the then issued and outstanding
shares of Common Stock of PSINet and such acquisition of Common Stock of PSINet
under this Section 15.8(b) shall not, in and of itself, constitute a violation
of Section 15.8(a).
(c) Upon the request of IXC at any time, or from time to time, PSINet
shall issue and sell to IXC up to 100 shares of Common Stock at the then Current
Market Price so long as such purchase does not cause IXC's beneficial stock
ownership to exceed 20% of the then issued and outstanding shares of Common
Stock of PSINet (it being understood that this Agreement and any action taken in
connection herewith shall not constitute a waiver under any provision of
PSINet's preferred stock purchase rights plan). Such issuance and sale of Common
Stock under this Section 15.8(c) shall not, in and of itself, constitute a
violation of Section 15.8(a).
15.9 Registration Rights Agreement. PSINet and IXC shall each execute and
deliver to the other the Registration Rights Agreement attached hereto as
Exhibit N at the Closing.
15.10 Non-Interference. IXC shall respect and not disturb PSINet's
right to its use and quiet enjoyment of the Bandwidth and shall take all
reasonable precautions against (and shall not knowingly use its Available System
in a manner which could reasonably be expected to result in) any interference by
IXC with respect to such use and quiet enjoyment. IXC shall have no right to use
any of the Bandwidth during the Term. Neither IXC nor PSINet shall knowingly use
any electronics or technologies which could reasonably be expected to subject
risk of damage to the other party's fibers, electronics or optronics. IXC shall
use such care in performing its obligations under this Agreement that equal or
exceed that which is normal and customary in the telecommunications industry.
15.11 Use of Marks. Except as provided herein or by advance written
consent of the other Party, each of IXC and PSINet agrees not to (i) display or
use, in advertising or otherwise, any of the other's Marks, (ii) permit any
Affiliate to display or use any of the other's Marks, or (iii) give permission
to display or use any of the other's Marks to any Third Party. Any use by one
Party of any of the other's Marks shall be subject to such other Party's advance
approval in writing, in its discretion, subject to compliance with guidelines
provided by it. Neither Party shall claim ownership or any other rights in any
of the other's Marks. Upon termination or expiration of this Agreement, any and
all rights or privileges granted by IXC or PSINet to use any Marks shall
immediately expire and each Party shall immediately discontinue the use of such
Marks. Nothing herein shall preclude either Party from making factual references
to the other in government filings, disclosure documents and other public
statements, except as otherwise set forth in the IRU Agreement.
SECTION 16. CONDITIONS PRECEDENT TO CLOSING
Each party shall not be obligated to proceed with the Closing, unless and
until the following conditions shall have been fulfilled or waived by the
applicable party:
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16.1 Approvals. Unless waived by each party, each of PSINet and IXC shall
have obtained all consents and approvals by (a) governmental authorities that
are necessary for the consummation of the transactions contemplated hereby
(including, without limitation, expiration or termination of all applicable
waiting periods (and any extensions thereof) under the Xxxx-Xxxxx-Xxxxxx Act,
and the effectiveness of any registration statement under the Securities Act of
1933 required prior to the Closing in connection with the reincorporation of
PSINet in the State of Delaware; and (b) any other Person necessary for the
consummation of the transactions contemplated by this Agreement. Each party
shall work with the other to acquire any permits or licenses required to be
obtained by the other party; provided, however, except as may be required
pursuant to Section 15.1, above, neither party shall be required to make any
payment or assume any liability in connection therewith.
16.2 Reincorporation. PSINet shall have reincorporated in the State of
Delaware by merging into Newco pursuant to documents satisfactory to IXC and
PSINet.
16.3 Shareholder Approval. Unless waived by each party, PSINet shall have
obtained all approvals of its shareholders which are required in connection with
the execution, delivery and performance of this Agreement, including, without
limitation, approval of the reincorporation of PSINet in the State of Delaware
and the issuance of the IXC Shares to IXC as provided in this Agreement.
16.4 Appraisal Rights. Unless waived by PSINet, the reincorporation of
PSINet in the State of Delaware shall not give rise to the exercise of statutory
appraisal rights involving an aggregate amount greater than $2,000,000.
16.5 Fairness Opinions.
(a) Unless waived by PSINet, there shall have been delivered to PSINet
an opinion of independent investment bankers selected by PSINet, in form and
substance satisfactory to PSINet, (i) as to the fairness to PSINet and its
stockholders from a financial point of view of the issuance of the IXC Shares
and the consummation of the transactions contemplated by, and in connection
with, this Agreement and (ii) as to the value of the IRUs being granted by IXC
to PSINet and the securities being issued or issuable by PSINet to IXC pursuant
to this Agreement.
(b) Unless waived by IXC, there shall have been delivered to IXC an
opinion of independent investment bankers selected by IXC, in form and substance
satisfactory to IXC, as to the fairness to IXC from a financial point of view of
the transactions contemplated by, and in connection with, this Agreement.
16.6 Consent of Bondholders. Unless waived by IXC, IXC shall have obtained,
upon terms acceptable to IXC, all approvals of its bondholders which are
required in connection with the execution, delivery and performance of this
Agreement and the transactions contemplated by, and in connection with, this
Agreement.
16.7 Contribution Agreement. The Contribution Agreement, in form and
substance satisfactory to PSINet and IXC, shall have been executed and delivered
by each of Carrier and IXC.
16.8 Material Adverse Effect. Unless waived by each party, no Material
Adverse Effect shall have occurred with respect to either party, Carrier or IXC
Communications Inc. from the date hereof through the Closing.
16.9 Acquisition of PSINet. Unless waived by IXC, prior to the Closing, no
Person shall have acquired or agreed to acquire more than 50% of the outstanding
common stock of PSINet.
16.10 Preferred Stock Purchase Plan Amendment. Unless waived by each
party, PSINet shall have entered into an amendment to its preferred stock
purchase rights plan on or before August 1, 1997, satisfactory to IXC and
PSINet, providing, among other things, for purposes: (i) of the definitions of
"Acquiring Person", "Beneficial Owner" and "Beneficial Ownership"; and (ii) of
the definitions of "Associate" and Affiliate" of an Acquiring Person:
(i) no Person shall be deemed to be an "Affiliate" or "Associate" (as
such terms are used in the preferred stock purchase rights plan) of IXC, IXC
Communications, Inc. or any controlled Affiliate of IXC or IXC Communications,
Inc. (collectively, the "IXC Parties") except for
23
other IXC Parties and no IXC Party will be deemed to be an "Affiliate" or
"Associate" of any Person except for other IXC Parties; and
(ii) no Person (except for other IXC Parties) shall be deemed to be
the Beneficial Owner (as such term is used in the preferred stock purchase
rights plan) of shares of Common Stock owned by any IXC Party and no IXC Party
shall be deemed to be the Beneficial Owner of shares of Common Stock owned by
any Person (other than other IXC Parties);
unless, in any such case, any IXC Party and such Person: (A) are members of a
"group" within the meaning of Rule 13d-5 under the 1934 Act for or in
furtherance of the purpose of (x) acquiring, holding, voting or disposing of
securities of PSINet, (y) seeking to control the management, Board of Directors
or policies of PSINet, or (z) effecting or seeking to effect any action,
transaction, change or matter referred to in any one or more of clauses (a)
through (j) of Item 4 of Securities and Exchange Commission Schedule 13D as in
effect on May 8, 1996, or (B) otherwise are, or shall be deemed to be, acting in
concert for or in furtherance of any such purpose.
Furthermore, such amendment shall provide that such amended provisions
of the preferred stock purchase rights plan cannot be further amended without
the written consent of IXC, in a way that materially adversely affects any IXC
Party (it being agreed that PSINet and its Board of Directors generally have the
right to amend, modify or waive provisions of the preferred stock purchase
rights plan insofar as they may relate to the approval of transactions with and
other matters involving parties other than IXC regardless of whether such
transaction or matter could result in a change of ownership or control of PSINet
or its businesses or operations or any of its controlled Affiliates, the
composition of the Board of Directors of PSINet or similar fundamental corporate
change or change of relative ownership of Common Stock).
As promptly as practicable upon fulfillment or waiver of the
conditions set forth in this Section 16, PSINet and IXC agree to execute a
certificate certifying that such conditions have been satisfied or waived and
that the Closing Date has occurred.
SECTION 17. THE CLOSING. On the terms and subject to the satisfaction of the
conditions contained in this Agreement, the closing of the grant of the PSINet
Fiber IRU and the IRU in the IRU Capacity and the sale and purchase of the IXC
Shares hereunder (the "Closing") shall take place at the offices of PSINet or
such other place, time and date as may be mutually agreed to by the parties as
soon as possible after the conditions of Section 16 have been fulfilled.
17.1 Deliveries by PSINet. At the Closing, PSINet shall deliver the
following:
(a) The certificates representing the IXC Initial Common Shares;
(b) A legal opinion of Nixon, Hargrave, Devans & Xxxxx LLP, counsel to
PSINet, as may be reasonably requested by IXC and mutually agreed to by the
parties;
(c) An Officer's Certificate as may be reasonably requested by IXC and
mutually agreed to by the parties; and
(d) The executed Registration Rights Agreement contemplated by Section
15.9, above.
17.2 Deliveries by IXC. At the Closing, IXC shall deliver the following:
(a) An Officer's Certificate as may be reasonably requested by PSINet
and mutually agreed to by the parties;
(b) The executed Registration Rights Agreement contemplated by Section
15.9, above;
(c) A legal opinion of Xxxxxxx & XxXxxxxx, counsel to IXC, as may
reasonably requested by PSINet and mutually agreed to by the parties;
(d) The Security Agreement and such UCC statements and other
instruments as may be deemed reasonably necessary by PSINet to effect the grant
of security interests pursuant to Section 1; and
24
(e) Such other instruments, documents and certificates as are
reasonably requested by PSINet to effect the grant of the indefeasible rights of
use hereunder.
17.3 Survival of Representations and Warranties. Regardless of any
investigation at any time made by or on behalf of any party, or of any
information any party may have in respect thereof, all representations and
warranties made hereunder or pursuant hereto or in connection with the
transactions contemplated hereby shall survive the Closing for a period of two
years from the Closing; provided, however, that each party hereby represents and
warrants to the other party that it has no actual knowledge as of the date
hereof or as of the Closing of any breach of any representation or warranty by
such other party (as contrasted with knowledge solely of a fact which may give
rise to any such breach).
SECTION 18. TERMINATION
18.1 Termination. This Agreement may be terminated at any time prior to the
Closing Date:
(a) by the written agreement of PSINet and IXC; or
(b) by PSINet or IXC if the conditions set forth in Section 16 of this
Agreement, through no fault of the terminating party, have not been satisfied on
or prior to November 25, 1997 (as such date may be extended by mutual agreement
of the parties); or
(c) by PSINet or IXC if any decree, permanent injunction, judgment,
order or other action by any court of competent jurisdiction or any governmental
authority preventing or prohibiting consummation of the transactions
contemplated by this Agreement shall have become final and nonappealable.
18.2 Effect of Termination. Upon termination of this Agreement pursuant to
Section 18.1, above, this Agreement shall thereafter become void and have no
effect, and neither party hereto shall have any liability to the other party in
respect thereof, except that nothing herein shall relieve either party from
liability for any material breach of this Agreement, including a breach covering
the failure to use reasonable efforts to satisfy the conditions set forth in
Section 16; provided, however, neither party shall have any liability arising
out of any termination by reason of the failure of the conditions set forth in
Section 16 to have been satisfied.
SECTION 19. GENERAL PROVISIONS
19.1 Definitions. As used in this Agreement, the following terms shall have
the following meanings:
"Accepted": means that PSINet has tested Bandwidth and found it to satisfy
the specifications contained in Exhibit F hereto and thereafter, accepted it in
accordance with Exhibit F hereto.
"Access Right": as defined in Section 7.4(b).
"Additional Shares Value": means, as of the applicable date of calculation,
an amount equal to the difference, if greater than zero, between (A)
$240,000,000 and (B) the IXC Common Shares Value determined as of the applicable
date of calculation.
"Affiliate": of a Person means any Person which directly or indirectly
controls, is under common control with, or is controlled by, such Person, where
"control" means the power and ability to direct the management and policies of
the controlled Person through the ownership of voting shares of the controlled
Person or by contract or otherwise. Notwithstanding the foregoing, Trustees of
General Electric Pension Trust and Grumman Hill Investments, L.P. and Grumman
Hill Associates, Inc. shall not be deemed to "control" or be "under common
control" with, or to be Affiliates of IXC and PSINet shall not be deemed to be
"controlled by" or "under common control with" IXC.
"Aggregate Fair Market Value": with respect to a combination of cash and
Additional Shares as of a date of determination, means the sum of (i) such cash
and (ii) the product of the Common Stock Price as of such date and the number of
such Additional Shares.
25
"Approved Subcontractor": shall mean (i) any person so approved by IXC
(which approval shall not be unreasonably withheld, conditioned or delayed),
(ii) the relevant equipment manufacturer or (iii) any authorized service agent
of the relevant equipment manufacturer.
"Associates" shall have the meaning set forth in Rule 12b-2 promulgated
under the Securities Exchange Act of 1934, as amended, but shall exclude
Trustees of General Electric Pension Trust, Grumman Hill Investments, L.P. and
Grumman Hill Associates, Inc.
"Authorized Representative": as defined in Section 10.1 of this Agreement.
"Available": of a Bandwidth Unit, means that IXC has tested the Bandwidth
Unit in accordance with Exhibit F hereto, the Bandwidth Unit performed in
accordance with the specifications set forth thereon, and the Bandwidth Unit is
thereafter made available for use by PSINet in accordance with such
specifications.
"Available System": as defined in Section 1.2 of this Agreement.
"Bandwidth": one or more Bandwidth Units.
"Bandwidth Unit": a particular DS-3, OC-3, OC-12 or OC-48.
"Bankruptcy Proceeding": as defined in Section 7.4(a) of this Agreement.
"Barter Capacity": DS-3 capacity IXC has received from other carriers
through barter or swap arrangements.
"Carrier": as defined in the recitals to this Agreement.
"Closing": as defined in Section 17 of this Agreement.
"Closing Date": the date of the Closing.
"Collateral": as defined in Section 1.3 of this Agreement.
"Collocation Agreement": the agreement in the form attached hereto as
Exhibit C which is to be executed and delivered by IXC and PSINet at the
Closing.
"Commission": as defined in Section 13.5 of this Agreement.
"Common Stock": Common Stock, par value $.01 per share, of PSINet or par
value $.0001 per share of Newco, as applicable.
"Common Stock Price": means (i) the average closing market price per share
of the Common Stock or, if applicable, the Successor Stock, as reported by The
Nasdaq Stock Market or the principal securities exchange on which the Common
Stock or, if applicable, the Successor Stock, shall then be listed over the 20
trading day period immediately preceding the applicable date of calculation,
weighted by the average trading volume of the Common Stock or, if applicable,
the Successor Stock, as reported by The Nasdaq Stock Market or the principal
securities exchange on which the Common Stock or, if applicable, the Successor
Stock, shall then be listed on each day of such 20 trading day period, or (ii)
if the Common Stock, or, if applicable, the Successor Stock, is not as of the
applicable date of calculation listed on The Nasdaq Stock Market or any
securities exchange, the price per share of the Common Stock or, if applicable,
the Successor Stock, on the applicable date of calculation as determined by
mutual agreement of PSINet and IXC or, in the case of the Successor Stock, by
mutual agreement of the issuer of such Successor Stock and IXC.
"complete": with respect to a fiber route, means the fiber, optronics and
electronics in the route have been installed and tested and are ready for
commercial use ("completed" and "completion" have correlative meanings.)
"Cure Period": as defined in Section 7.4(a) of this Agreement.
26
"Current Market Price": as of a date means the closing price as publicly
reported on the Nasdaq Stock Market (or, if not available on such market, on the
principal trading market) of the Common Shares of PSINet as of 4:00 p.m. Eastern
Time on such date.
"Deemed Accepted": means Bandwidth on the Available System made Available
to PSINet which meets the specifications for acceptance thereof by PSINet set
forth in Exhibit F to this Agreement and which has not been Accepted by PSINet
after the receipt by PSINet of a notice, given by IXC to PSINet in accordance
with the terms of Section 19.5 of this Agreement, that IXC has made such
Bandwidth so Available.
"Delivery Completion Date": the date by which IXC has delivered to PSINet
and PSINet has Accepted 10,000 OC- 48 Equivalent Miles of Bandwidth.
"DS-3": means a circuit meeting the specifications set forth in AT&T
Technical Reference Pub. 54014 Addendum 1, November 1992 and Bellcore
TB-NWT-608499, Issue 5, December 1993.
"DS-3 Equivalent Mile": means one-forty eighth of an OC-48 Equivalent Mile.
"Excess Miles": as defined in Section 2.2 of this Agreement.
"Xxxx-Xxxxx-Xxxxxx Act": as defined in Section 15.1 of this Agreement.
"Indemnifying Party": as defined in Section 9 of this Agreement.
"Internet": The global network of interconnected commercial, educational
and governmental computer networks that utilize a protocol that allow computers
with different architectures and operating system software to communicate
thereon, as the same may evolve and mature.
"Internet Services Agreement": as defined in the recitals to this
Agreement.
"IRU Capacity": as defined in Section 1.2 of this Agreement.
"IXC Bankruptcy Proceeding": a Bankruptcy Proceeding filed or initiated by
or against IXC.
"IXC Change of Control": (i) the shareholders of IXC approve an agreement
for the sale of all or substantially all of the assets of IXC; or (ii) the
shareholders of IXC approve a merger or consolidation of IXC with any other
corporation, other than (A) a merger for consideration which would result in the
voting securities of IXC outstanding immediately prior thereto continuing to
represent more than 80% of the combined voting power of the voting securities of
IXC, or such surviving entity, outstanding immediately after such merger or
consolidation, or (B) a merger or consolidation effected to implement a
recapitalization of IXC (or similar transaction) in which no "person" (as
defined below) acquires more than 20% of the combined voting power of IXC's
then-outstanding securities; or (iii) any "person," as such term is used in
Sections 13(d) and 14(d) of the 1934 Act (other than (A) IXC or (B) the
shareholders of IXC, or any corporation owned by the shareholders of IXC, in
substantially the same proportions as their ownership of stock of IXC) is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the 1934 Act),
directly or indirectly, of securities of IXC representing more of than 50% of
the combined voting power of IXC's then outstanding securities.
"IXC Common Shares": means such number of shares of Common Stock (as
adjusted for any stock splits, stock dividends, recapitalizations or similar
events after the Closing Date) issued and sold by PSINet to IXC on the Closing
Date pursuant to this Agreement.
"IXC Common Shares Value": means the aggregate fair market value of the IXC
Common Shares determined as of the applicable date of calculation, based on the
Common Stock Price as of such date, including, if applicable, for purposes of
such calculation, in the event a Merger or Other Reorganization Event shall have
occurred on or prior to such date in connection with which there shall have been
issued or delivered to the holders of the Common Stock, in addition to or in
lieu of any Successor Stock, other securities or property, the fair market value
as of the applicable date of calculation of such other securities or property
received by IXC and/or any of its Affiliates and Associates in consideration for
the IXC Common Shares then owned by them (such fair market value to be initially
determined by the board of directors, general partners or board members, as
applicable
28
of the successor Person resulting from such Merger or Other Reorganization
Event). In the event IXC disagrees with such determination of fair market
value, such fair market value shall be determined by arbitration pursuant to
Section 19.14.
"IXC Initial Common Shares": as defined in Section 3.2 of this Agreement.
"IXC Fibers": as defined in Section 1.1 of this Agreement.
"IXC Filing": as defined in Section 14.7 of this Agreement.
"Long-Term Indefeasible IRU": as defined in Section 1.3 of this Agreement.
"Maintainable Equipment" shall mean the electrical, electronic and optronic
equipment which is utilized in delivering the PSINet Fiber IRU and the IRU in
the IRU Capacity to PSINet (a) including regeneration, op/amp, and fiber
terminating equipment, and multiplexing equipment but (b) excluding fiber in any
fiber optic cable.
"Material Adverse Effect": a material adverse effect on the condition,
financial or otherwise, or operating results of a Person and its subsidiaries
taken as whole.
"Material Provision": any provision of this Agreement or of any of the
Transaction Documents (including, without limitation, payment provisions but
excluding, in and of itself, any Bankruptcy Proceeding) the breach of which by
one party is determined by an arbitration pursuant to Section 19.14 to
constitute a material adverse effect on the use and enjoyment by the other party
of the benefits of such agreement.
"Marks": shall mean trade names, logos, trademarks, trade devices, trade
dress, service marks, symbols, abbreviations or registered marks, or
contractions or simulations thereof, or any other indicia or origin.
"Merger or Other Reorganization Event": means a capital reorganization of
the Common Stock (other than a subdivision, combination, reclassification or
exchange of shares) or a merger or consolidation of PSINet with or into another
Person or the sale of all or substantially all of PSINet's properties and assets
to any other Person.
"Monetary Default": as defined in Section 7.4 (a) of this Agreement.
"Newco": as defined in the recitals to this Agreement.
"1934 Act": means the U.S. Securities Exchange of 1934, as amended, and the
rules and regulations thereunder.
"Notice of Default": as defined in Section 7.4(a) of this Agreement.
"Notice of Sale": as defined in Section 15.7 of this Agreement.
"OC-3": means OC-3 SONET optical transmission capacity meeting the
applicable specifications set forth in Exhibit F hereto.
"OC-12": means OC-12 SONET optical transmission capacity meeting the
applicable specifications set forth in Exhibit F hereto.
"OC-12 Equivalent Mile": one-quarter of an OC-48 Equivalent Mile.
"OC-48": means OC-48 SONET optical transmission capacity meeting the
applicable specifications set forth in Exhibit F.
"OC-48 Equivalent": 1 OC-48, 4 OC-12s, 16 OC-3s or 48 DS-3s.
"OC-48 Equivalent Mile": 0 Xxxxx Xxxx of OC-48 capacity, 4 Route Miles of
OC-12 capacity, 16 Route Miles of OC-3 capacity or 00 Xxxxx Xxxxx xx XX-0
capacity.
28
"Offer Acceptance Date": as defined in Section 15.7 of this Agreement.
"Offered Shares": as defined in Section 15.7 of this Agreement.
"On-net": refers to any circuit which IXC is able to deliver on the
Available System as then completed.
"Original Services Activation Date": the Service Activation Date of a
Bandwidth Unit, or, in the event the Bandwidth Unit is the result of the
Reconfiguring of one or more other Bandwidth Units, the earliest Service
Activation Date of any such Bandwidth Units.
"Person": any individual, corporation, partnership, firm, joint venture,
association, limited liability company, trust, unincorporated organization or
other entity.
"POPs": those IXC locations listed in Exhibit K hereto (as expanded by IXC
from time to time.)
"PSINet Fiber IRU": as defined in Section 1.1 of this Agreement.
"PSINet Filing": as defined in Section 13.5 of this Agreement.
"Reconfigure": to swap Bandwidth between two points for lesser, equal or
greater amount of Bandwidth between such points or elsewhere.
"Reduction Mile": as defined in Section 1.4 of this Agreement.
"Requested Delivery Date": as to Bandwidth, the date requested by PSINet
that IXC make such Bandwidth Available, as set forth in the applicable Bandwidth
Order and as applicable as modified by IXC pursuant to Section 4.2.
"Rights-of-Way": all rights, licenses, authorizations (including, without
limitation, any sate, local, tribal or federal authorizations or permits
(including, without limitation, environmental permits)), rights-of-way,
easements, landlord consents and other agreements now existing or hereafter
arising which are necessary for (i) the use of poles, conduit, cable, wire or
other physical plant facilities relating to or used in connection with the
PSINet Fiber IRU and the capacity IRU granted to PSINet hereunder and (ii) the
installation, use and quiet enjoyment of the PSINet Fiber IRU and the capacity
IRU granted to PSINet hereunder.
"Route Mile": one mile of the actual geographic length of the fiber route.
"Securities Act": the Securities Act of 1933, as amended, and the rules and
regulations thereunder.
"Selling Shareholder": as defined in Section 15.7 of this Agreement.
"Service Activation Date": with respect to a Bandwidth Unit, the date the
Bandwidth Unit is first Accepted by PSINet.
"Shortfall Mileage": the amount of Route Miles by which the length of the
Available System is less than 10,000 miles.
"Short-Term Indefeasible IRU": as defined in Section 2.3 of this Agreement.
"Six-Month Period": any six-month period starting October 1 or April 1 of
any year.
"Standstill Agreement": the Standstill Agreement of even date hereof from
IXC Communications, Inc. to PSINet.
"Successor Stock": means the capital stock or other equity securities of
any Person issuable to the holders of the Common Stock in connection with any
Merger or Other Reorganization Event.
"Term": as defined in Section 6.1 of this Agreement.
29
"Total Bandwidth": means 10,000 OC-48 Equivalent Miles of Bandwidth on the
Available System to be made Available to PSINet pursuant to the terms of this
Agreement.
"Transaction Documents": this Agreement, the Registration Rights Agreement,
the Security Agreement, the Standstill Agreement, the Internet Services
Agreement and each of the agreements, instruments and documents executed and
delivered by PSINet or IXC pursuant to this Agreement, but not including the
Newco Certificate of Incorporation and By-laws, the amendment to PSINet's
preferred stock purchase rights plan or the Contribution Agreement.
"Voting Securities" the Common Shares and any other securities of PSINet as
may from time to time be entitled to vote for the election of directors of
PSINet without regard to any event or occurrence.
19.2 Amendments, Waivers and Consents. For purposes of this Agreement and
the Transaction Documents, except as otherwise specifically set forth herein or
therein, no course of dealing between PSINet and IXC and no delay on the part of
either party hereto in exercising any rights hereunder or thereunder shall
operate as a waiver of the rights hereof and thereof. No covenant or other
provision hereof or thereof may be waived or amended other than by a written
instrument signed by the party so waiving or amending such covenant or other
provision.
19.3 Section Headings. The table of contents and section headings in this
Agreement have been inserted for reference purposes only and shall not be deemed
to limit or otherwise affect the construction of any provision thereof or
hereof.
19.4 Counterparts. This Agreement may be executed simultaneously in any
number of counterparts, each of which when so executed and delivered shall be
taken to be an original, but such counterparts shall together constitute but one
and the same document.
19.5 Notices. All notices, claims, demands and other communications under
this Agreement shall be in writing and shall be deemed given when delivered
personally, the next business day after delivered to a nationally recognized
overnight courier for next business day delivery, when transmitted by facsimile
or five (5) days after sent by registered or certified mail, return receipt
requested, to the parties (and to the Persons receiving copies thereof) at the
following addresses or facsimile numbers (or to such other address or facsimile
number as a party may have specified by notice given to the other party pursuant
to this provision):
If to IXC to:
IXC Internet Services, Inc.
0000 Xxxxx xx xxx Xxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Chairman
Facsimile: (000) 000-0000
With copies to:
IXC Communications, Inc.
0000 Xxxxx xx xxx Xxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: General Counsel
Facsimile: (000) 000-0000
Xxxxxxx & XxXxxxxx
000 Xxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
If to PSINet to:
PSINet Inc.
000 Xxxxxxx Xxxx Xxxxx
00
Xxxxxxx, Xxxxxxxx 00000
Attention: Chairman
Facsimile: (000) 000-0000
With a copy to:
PSINet Inc.
000 Xxxxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: General Counsel
Facsimile: (000) 000-0000
and to:
Nixon, Hargrave, Devans & Xxxxx LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Xx.
Facsimile: (000) 000-0000
19.6 Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns. Nothing in this Agreement shall create or be deemed to create
any third party beneficiary rights in any person or entity not a party to this
Agreement except as provided below. No assignment of this Agreement or of any
rights or obligations hereunder may be made by either party without the prior
written consent of the other party hereto and any attempted assignment without
the required consent shall be void; provided, however, that notwithstanding the
foregoing, (i) as permitted by, and subject to the provisions of, Section 15.5
hereof, PSINet shall have the right to sell, swap, lease, assign or otherwise
transfer all or a portion of its rights in any of the IRU's to any person who
agrees in writing with IXC to be bound by Section 15.5 and this Section 19.6,
(ii) each party shall have the right to pledge, assign or otherwise transfer
this Agreement and its rights hereunder, in whole or in part, as collateral
security to any lender, and (iii) each party shall have the right to assign or
transfer this Agreement and its rights hereunder, in whole or in part, to its
parent or to any direct or indirect wholly-owned subsidiary of that party or to
any Person into which that party may be merged or consolidated or which
purchases all or substantially all of the assets of that party; provided,
however, that (a) such parent, subsidiary or Person agrees to be bound by the
terms of this Agreement (including, without limitation, all provisions binding
upon the assigning or transferring party) and (b) any such assignment or
transfer shall not relieve that party from any liability or obligation under
this Agreement.
19.7 Severability; Specific Performance.
(a) Whenever possible, each provision of this Agreement shall be
interpreted in such a manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be deemed prohibited or invalid
under such applicable law, such provision shall be ineffective to the extent of
such prohibition or invalidity, and such prohibition or invalidity shall not
invalidate the remainder of such provision or the other provisions of this
Agreement.
(b) Each of PSINet and IXC recognizes and affirms that in the event of
breach by it or any controlled Affiliate of any of the provisions of Section
15.6, 15.7, or 15.8 money damages would be inadequate and the other party would
have no adequate remedy at law. Accordingly, each party shall have the right, in
addition to any other rights and remedies existing in its favor, to enforce its
rights and the other parties' obligations under Section 15.6, 15.7 or 15.8 not
only by an action or actions for damages, but also by an action or actions for
specific performance, injunction and/or other equitable relief in order to
enforce or prevent any violations (whether anticipatory, continuing or future)
of the provisions thereof (including, in the case of Section 15.6, the extension
of the 3-year period by a period equal to (i) the length of the violation of
Section 15.6 plus (ii) the length of any court proceedings necessary to stop
such violation). In the event of a breach or violation by a party of any of the
provisions of Section 15.6, the running of the 3-year period (but not of the
party's obligations under Section 15.6) shall be tolled during the continuance
of any actual breach or violation.
31
19.8 Expenses. Except as otherwise provided in this Agreement, each party
shall bear its own costs and expenses (including attorney's fees), and all taxes
imposed upon it under applicable law, in connection with the negotiation,
execution and performance of this Agreement and each other agreement, document
and instrument contemplated by this Agreement and in connection with the
consummation of the transactions contemplated hereby and thereby and all
obligations required to be performed by each of them hereunder and thereunder.
PSINet shall pay all sales, use and excise taxes related to the Bandwidth
and services provided by IXC under this Agreement and any other taxes related to
the Bandwidth and services under this Agreement which are by the terms of the
relevant statute or ordinance imposed upon PSINet; provided that, where
permitted, PSINet may provide sale or resale exemption certificates to IXC. In
no event shall PSINet be obligated to pay income taxes levied upon IXC's income
or any real or personal property taxes assessed against IXC or IXC's property,
including any gross receipts taxes assessed in lieu of income or property taxes,
provided that, if the terms of the relevant statute or ordinance imposes such
gross receipts tax upon PSINet, then PSINet shall be liable for such tax. PSINet
shall pay IXC said gross receipts taxes when they become due provided that the
taxes are invoiced and included as a separate line item on the same invoice that
is subject to such tax. IXC shall pay any such tax not invoiced to PSINet at the
time such tax is incurred.
19.9 Integration. This Agreement, including the exhibits, documents and
instruments referred to herein constitutes the entire agreement, and supersedes
all other prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof, other than the
Confidentiality Agreement between the parties dated as of May 14, 1997.
19.10 Schedules. The disclosure of information in the PSINet Disclosure
Schedule, the IXC Disclosure Schedule, in any other Schedule or any Exhibit
hereto shall be deemed to be disclosure in each other Schedule hereto. The
inclusion of any information in the PSINet Disclosure Schedule, the IXC
Disclosure Schedule, or any Schedule hereto shall not be deemed to be an
admission by PSINet or IXC that such information is material or outside the
ordinary course of business.
19.11 Public Announcements. Neither party shall publish or use any
advertising, sales, promotions, or other publicity materials that use the other
party's name, logo, trademarks or service marks without the prior written
approval of the other party. Each party shall have the right to review, comment
upon and approve any publicity materials, press releases or other public
statements by the other that refer to, or that describe any aspect of, this
Agreement made prior to, or within 90 days after, the Closing; provided,
however, that with respect to IXC's consent solicitation and to disclosure
documents required under the 1934 Act, subject to the last sentence of this
Section 19.11, each party shall only have the right to prior review and to
comment upon the other party's documents. Each party agrees that it will not
issue any such publicity materials, press releases or public statements without
the prior written approval of the other party. Nothing in this Agreement
establishes a license for either party to use any of the other party's brands,
marks, or logos without the prior written approval of the other party. The
provisions of this section shall survive termination of this Agreement for a
period of two years, except for the last sentence hereof which shall survive for
the Term. IXC and PSINet shall cooperate to request confidential treatment as
may be mutually agreed by them with respect to certain terms of this Agreement,
the Transaction Documents and transactions contemplated hereby and thereby in
any filing with the Commission, any other governmental authority or any
securities exchange or stock market.
19.12 Interpretation. The parties acknowledge and agree that: (i) each
party and its counsel reviewed and negotiated the terms and provisions of this
Agreement and have contributed to its revision; (ii) the rule of construction to
the effect that any ambiguities are resolved against the drafting party shall
not be employed in the interpretation of this Agreement; and (iii) the terms and
provisions of this Agreement shall be construed fairly as to both parties
hereto, regardless of which party was generally responsible for the preparation
of this Agreement or any provision hereof.
19.13 Governing Law. This Agreement shall be deemed to be a contract
made under, and shall be construed in accordance with, the laws of the State of
Delaware without reference to its principles of conflicts of law.
19.14 Dispute Resolution.
32
(a) If any controversy or claim arises out of or relates to this
Agreement or with respect to an alleged breach of the terms hereof, subject to
Section 19.7, above, PSINet and IXC shall seek to resolve the matter amicably
through discussions between themselves. The parties shall attempt to resolve all
controversies, claims or breaches at the operational level, and in the event a
resolution cannot be reached, such controversy, claim or breach will be referred
progressively to higher levels within each party, to their respective
chairpersons. If the parties fail to resolve such controversy, claim or breach
within thirty (30) days by amicable arrangement and compromise, either party may
seek arbitration as set forth below but only within four years of the occurrence
of the events giving rise to, or the accrual of, such controversy, claim or
breach.
(b) Except as provided in Section 19.7, above, any controversy or
claim arising out of or in relating to this Agreement, or a breach of this
Agreement, shall be finally settled by binding arbitration in Chicago, Illinois
in accordance with the J.A.M.S./ENDISPUTE Arbitration Rules and Procedures
("Endispute Rules"), as amended by this Agreement. If possible, the parties
shall appoint by mutual agreement, as the arbitrator, an attorney experienced in
telecommunications, securities law and transactional matters. If such agreement
cannot be reached, the arbitrator shall be such type of attorney and shall be
chosen under the Endispute Rules. The costs of arbitration, including the fees
and expenses of the arbitrator, shall be shared equally by the parties unless
the arbitration award provides otherwise or except as provided in Section 7.2.
Each party shall bear the cost of preparing and presenting its case. The parties
agree that this provision and the arbitrator's authority to grant relief shall
be subject to the United States Arbitration Act, 9 U.S.C. 1-16 et seq. ("USAA"),
the provisions of this Agreement, and the ABA-AAA Code of Ethics for Arbitrators
in Commercial Disputes. The parties agree that the arbitrator shall have no
power or authority to make awards or issue orders of any kind except as
expressly permitted by this Agreement, and in no event shall the arbitrator have
the authority to make any award that provides for punitive or exemplary damages.
The arbitrator's decision shall follow the plain meaning of relevant documents,
and shall be final and binding. The award may be confirmed and enforced in any
court of competent jurisdiction. All post-award proceedings shall be governed by
the USAA.
19.15 Relationship of the Parties. This Agreement and the Transaction
Documents shall not be deemed to cause either party hereto to be deemed the
agent or partner of the other party and neither party shall have the right to
bind the other. This Agreement shall not be interpreted to impose any limitation
or restriction on IXC's ability to enter the Internet business or to acquire
Internet-related companies or to enter into agreements with other Internet
companies.
19.16 Laws and Licenses. This Agreement is subject to all applicable
federal, state and local laws, regulations, rulings and orders of governmental
agencies, including, but not limited to, the Communications Act of 1934 as
amended by the Telecommunications Act of 1996, and the rules and regulations of
the FCC.
19.17 Facsimile Delivery. This Agreement may be delivered by facsimile
transmission of an executed counterpart signature page hereof, and after
attachment of such transmitted signature page to a copy of this Agreement, such
copy shall have the same effect and evidentiary value as copies delivered with
original signatures. Any party delivering this Agreement by facsimile
transmission shall deliver to the other party, as soon as practicable after such
delivery, an original executed counterpart signature page of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
IXC Internet Services, Inc.
By: /s/ XXXXX X. XXXXX
Name: Xxxxx X. Xxxxx
Title: Chairman, President and CEO
PSINet Inc.
By: /s/ XXXXXXX X. XXXXXXXX
Name: Xxxxxxx X. Xxxxxxxx
Title: Chairman, President and CEO
33
PSINet
Exhibit List
Exhibit A Available System
Exhibit B Security Agreement
Exhibit C Collocation and Interconnection Agreement
Exhibit D Newco Common Stock Percentage Determination
Exhibit E Associated Services
Exhibit F OC-N Specifications and Testing Standards
Exhibit G PSINet's Bandwidth Forecast
Exhibit G-1 Initial Order
Exhibit H Multiplexing Fees
Exhibit I Reconfiguration Fees
Exhibit J Newco Certificate of Incorporation
Exhibit K POP Space
Exhibit L PSINet Disclosure Schedule
Exhibit M IXC Disclosure Schedule
Exhibit N Registration Rights Agreement
EXHIBIT A
Available System
[MAP]
EXHIBIT B
EXHIBIT B
TO
IRU AND STOCK PURCHASE AGREEMENT
SECURITY AGREEMENT AND ASSIGNMENT
THIS SECURITY AGREEMENT AND ASSIGNMENT, dated as of __________, 1997, is
made by and between IXC Internet Services, Inc. a Delaware corporation
(hereinafter, together with its successors and assigns, "IXC"), and PSINet Inc.,
a New York corporation (hereinafter, together with its successors and assigns,
"PSINet" or the "Secured Party"). All capitalized terms used but not otherwise
defined herein shall have the meanings set forth in that certain IRU and Stock
Purchase Agreement entered into as of July 22, 1997 (as amended, supplemented or
modified, the "Purchase Agreement").
PRELIMINARY STATEMENTS:
A. IXC and PSINet are parties to the Purchase Agreement pursuant to
which, among other things, PSINet has acquired the PSINet Fiber IRU and the IRU
Capacity from IXC and IXC has acquired from PSINet 19.99999% of the total
outstanding shares of Common Stock of PSINet.
B. Pursuant to the Purchase Agreement, IXC has agreed to execute and
deliver this Security Agreement and to grant to PSINet a security interest in
the Collateral (as hereinafter defined) as security for IXC's obligation to
provide the PSINet Fiber IRU and IRU in the IRU Capacity.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and for other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto agree as follows:
A G R E E M E N T
1. Defined Terms. As used in this Security Agreement the following terms
have the following meanings, unless the context otherwise requires:
"Collateral" has the meaning assigned to it in Section 2 of this
Security Agreement.
"Default" means a default under the Purchase Agreement that remains
uncured following the expiration of any applicable cure period and that
materially and adversely affects the use and enjoyment of the PSINet Fiber
IRU or the IRU in the IRU Capacity by PSINet.
"GAAP" means generally accepted accounting principles in the United
States of America from time to time in effect as set forth in the opinions
and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and
pronouncements of the Financial Accounting Standards Board, or in such
other statements by any successor entity as may be in general use by
significant segments of the accounting profession that are applicable to
the circumstances as of the date of determination.
"hereby," "herein," "hereof," "hereunder" and words of similar import
refer to this Security Agreement as a whole and not merely to the specific
section, paragraph or clause in which the respective word appears.
"Lien" means any mortgage, pledge, charge, security interest or other
encumbrance.
"Permitted Liens" means (i) any Liens for taxes not yet delinquent or
Liens for taxes being contested in good faith and by appropriate
proceedings promptly instituted and diligently concluded, and (ii)
materialmen's and mechanic's Liens and other similar Liens arising in the
ordinary course of business, which are being contested in good faith by
appropriate proceedings or are paid within 60 days from the creation
thereof, and which do not impair the use and enjoyment by PSINet of the
PSINet Fiber IRU and/or the IRU in the IRU Capacity.
"Proceeds" means "proceeds," as such term is defined in section
9-306(1) of the UCC and, in any event, shall include, without limitation,
(i) any and all payments (in any form whatsoever) made or due and payable
to IXC from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the Collateral by
any governmental body, authority, bureau or agency (or any person acting
under color of governmental authority), and (ii) any and all other amounts
from time to time paid or payable to IXC under or in connection with any of
the Collateral, excluding from such other amounts, amounts paid to IXC by
PSINet.
"Secured Obligations" means IXC's obligation to provide the PSINet
Fiber IRU and the IRU in the IRU Capacity pursuant to the Purchase
Agreement.
"Security Agreement" means this Security Agreement and Assignment, as
the same may from time to time be amended or supplemented.
"UCC" means the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of Delaware; provided, however, in the
event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection, priority or exercise of remedies of either Secured
Party's security interest in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than the State of
Delaware, the term "UCC" means the Uniform Commercial Code, as in effect in
such other jurisdiction for purposes of the provisions hereof relating to
such attachment, perfection, priority or exercise of remedies and for
purposes of definitions related to such provisions.
2. Grant of Security Interest; Collateral Assignment.
2.1 Collateral. (a) As collateral security for the prompt and complete
performance when due of the Secured Obligations, IXC hereby grants to the
Secured Party a continuing security interest in, all IXC' right, title and
interest in, to and under the following, whether now owned or hereafter acquired
and wherever located (all of which, together with the Collateral as further
defined in this Section 2.1(a) and in Section 2.1(b), being hereinafter
collectively called the "Collateral"):
(i) the Long-Term Indivisible IRU;
(ii) the Short-Term Indivisible IRU;
(iii) the Access Right; and
(iv) to the extent not otherwise included, all Proceeds of the
foregoing.
As set forth in Section 1.4 of the Purchase Agreement, the PSINet Fiber IRU
and the Base IRU in the IXC Fibers shall be extended to cover additional
completed portions of the Available System effective immediately upon completion
without any further action on the part of IXC and the Long-Term Indivisible IRU
and the Short-Term Indivisible IRU shall include such completed portions of the
Available System. IXC hereby grants, without further action on its part, and
will execute the necessary documents to evidence such grant of a continuing
security interest in (i) the Long-Term Indivisible IRU (with such defined phrase
being extended to cover such completed portions of the Available System) and the
products and proceeds thereof, (ii) the Short- Term Indivisible IRU, and (iii)
the Access Right (with each such defined phrase being extended to cover such
completed portion of the Available System) and the products and proceeds
thereof, and the Long-Term Indivisible IRU, the Short-Term Indivisible IRU, and
the Access Right, as so extended, will thereupon become part of the Collateral.
Notwithstanding the foregoing, however, commencing in respect of any completed
portion of the Available System, after the date on which such completed portion
of the Available System shall have been completed, the length of the Short-Term
Indivisible IRU shall not exceed the excess, if any, of 10,000 Route Miles over
the number of completed Route Miles on the Available System Accepted by the
Secured Party. To the extent completion of additional portions of the Available
System requires shortening the length of the Short-Term Indivisible IRU (which
is subject to the security interest pursuant to the preceding sentence) by a
certain number of Route Miles (the "Reduction Miles"), the Short-Term
Indivisible IRU shall be deemed to be shortened 30 days after the date on which
such completed portion of the Available System shall have been completed by
changing its definition to exclude a number of Route Miles equal to the number
of Reduction Miles. The specific Route Miles excluded shall be determined by
excluding that number of Route Miles of the
-2-
Available System most recently completed beginning with the eastern most
portion along the applicable route, all as set forth in a written notice from
IXC to the Secured Party.
(b) IXC does hereby assign, transfer and set over unto Secured Party, as
collateral security for the prompt and complete performance of the Secured
Obligations, all of IXC's rights and interests in and to the Contribution
Agreement to the extent necessary to deliver and provide PSINet with the IRU in
the IRU Capacity and the PSINet Fiber IRU (such necessary rights and interests
in and to the Contribution Agreement being referred to as the "PSINet Rights"),
including without limitation: (i) the right to receive, use and accept the
PSINet Rights, (ii) all claims for damages in respect of the PSINet Rights
arising as a result of any default under the Contribution Agreement, (iii) any
and all rights of IXC to compel performance of the terms of the Contribution
Agreement relating to the PSINet Rights, and (iv) all rights, benefits and
claims under all warranty and indemnity provisions, if any, contained in the
Contribution Agreement relating to the PSINet Rights. Notwithstanding the
foregoing, so long as no Default shall have occurred and be continuing, Secured
Party authorizes IXC, without affecting the terms of this Agreement, to exercise
in its own name the PSINet Rights under the Contribution Agreement. The defined
term "Collateral" under this Agreement shall include the PSINet Rights.
2.2 Non-Disturbance and Restrictions. The Secured Party and each
transferee of any Collateral pursuant to this Agreement shall not disturb the
exercise of the rights of any third party or IXC to use fibers, appurtenances or
equipment in the Available System so long as the exercise of such rights does
not interfere with the exercise by PSINet of its rights to use the PSINet Fiber
IRU, the IRU in the IRU Capacity or to enjoy the benefits thereof. The rights of
PSINet and each such transferee hereunder are subject to the obligation to
comply with Section 8, Section 15.5 and the other obligations of PSINet under
the Purchase Agreement.
3. Representations and Warranties. IXC hereby represents and warrants
that:
3.1 Ownership, Liens. Except for the security interest granted to the
Secured Party pursuant to this Security Agreement, IXC is the owner of each item
of the Collateral, having good title thereto, free and clear of any and all
Liens other than Permitted Liens.
3.2 Business Locations. IXC' principal place of business and the place
where its records concerning the Collateral are kept are at the locations listed
in Schedule I hereto, and IXC will not change such principal place of business
or remove such records without at least thirty (30) days prior written notice to
each Secured Party and providing to Secured Party such documents and taking such
action as is necessary to ensure PSINet has a first priority perfected security
interest in the Collateral.
3.3 Trade Names. Neither IXC nor any of its predecessors in interest has,
at any time within the five-year period ending on the date hereof, conducted any
business under any name other than "IXC Internet Services, Inc." except as set
forth on Schedule IV hereto.
3.4 Identification Number. The Federal Employer Identification Number of
IXC is _________.
4. Covenants. IXC covenants and agrees with the Secured Party that from
and after the date of this Security Agreement and until the Secured Obligations
are fully satisfied:
4.1 Compliance with Laws. IXC will comply, in all material respects, with
all acts, rules, regulations, orders, decrees and directions of any governmental
authority, applicable to the Collateral or any part thereof; provided, however,
that IXC may contest any act, regulation, order, decree or direction in any
reasonable manner which shall not in the sole opinion of the Secured Party
adversely affect the Secured Party's right or the priority of its security
interest in the Collateral; and provided further, that nothing contained herein
shall be deemed to prohibit IXC from contesting any Lien arising by operation of
law where IXC is contesting in good faith and by appropriate proceedings the
obligations which gave rise to such Lien, provided that such contest does not
involve the material danger of the sale, forfeiture or loss, or material
restriction of, use or enjoyment of any of the Collateral.
4.2 Payment of Obligations. IXC will pay promptly when due, all taxes,
assessments, franchises, fees and governmental charges or levies imposed upon or
payable in respect of the Collateral or in respect of its income or profits
therefrom, as well as all claims and demands of
-3-
any kind (including claims for labor, materials and supplies), except that no
such charge need be paid if (i) the validity thereof is being contested in
good faith in an appropriate manner, and (ii) such contest does not involve
any material danger of the sale, forfeiture or loss, or material restriction
of, use or enjoyment of any of the Collateral or any interest therein.
4.3 Limitations on Liens on Collateral; Lien Waivers. IXC will not create,
permit or suffer to exist, and will defend the Collateral against and take such
other action as is necessary to remove, any Lien, claim or right, in or to the
Collateral, other than Permitted Liens, and will defend the right, title and
interest of the Secured Party in and to any of IXC's rights to the Collateral
and in and to the Proceeds and products thereof against the claims and demands
of all persons whomsoever.
4.4 Continuous Perfection. IXC will not change its name, identity or
corporate structure in any manner which might make any financing or continuation
statement filed in connection herewith seriously misleading within the meaning
of section 9-402(7) of the UCC (or any other then applicable provision of the
UCC) unless IXC shall have given each Secured Party at least thirty (30) days'
prior written notice thereof and shall have taken all action (or made
arrangements to take such action substantially simultaneously with such change
if it is impossible to take such action in advance) necessary or reasonably
requested by each Secured Party to amend such financing statement or
continuation statement so that it is not seriously misleading.
4.5 Further Identification of Collateral. IXC will furnish to the Secured
Party from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Secured Party may reasonably request, all in reasonable
detail.
4.6 Notices. IXC will advise each Secured Party promptly, in reasonable
detail, (i) within 30 days of IXC gaining knowledge of any lien, security
interest, encumbrance or claim, other than Permitted Liens for taxes not yet due
and payable, made or asserted against any of the Collateral, (ii) of any
material change in the composition of the Collateral, and (iii) of the
occurrence of any other event which would have a material effect on the security
interests created hereunder.
4.7 Contribution Agreement. (a) IXC agrees that, so long as this Agreement
is in effect, it will not, without the prior written consent of Secured Party,
do any of the following if such act would have a material adverse effect on the
Collateral; (i) amend, modify or permit to be amended or modified the
Contribution Agreement, (ii) waive or permit to be waived any material
provisions of the Contribution Agreement, or (iii) exercise any right to
terminate or cancel any material provision of the Contribution Agreement or
consent or agree to, or suffer or permit, the termination thereof whether or not
on account of any default therein specified.
(b) It is expressly agreed that anything herein to the contrary
notwithstanding, IXC shall remain liable under the Contribution Agreement to
perform all of its obligations thereunder and Secured Party shall have no
obligation or liability under the Contribution Agreement by reason of, or
arising out of, this Security Agreement nor shall the Secured Party be required
or obligated in any manner to perform or fulfill any obligations of IXC under or
pursuant to any of the Contribution Agreement, or to make any payment or to make
any inquiry, as to the nature or sufficiency of any payment received by it, or
to present or file any claim or to take any other action to collect or enforce
the payment of any amounts which may have been assigned to it or to which it may
be entitled hereunder at any time or times.
5. Remedies, Rights Upon Default. If any Default shall occur and be
continuing, the Secured Party may exercise (in addition to all other rights
and remedies granted to it in this Security Agreement) after thirty (30) days
notice to IXC (and the notice specified below of time and place of public or
private sale), may forthwith collect, receive, appropriate and realize upon
the Collateral or any part thereof, and/or may forthwith sell, lease, assign,
give option or options to purchase, or sell and deliver said Collateral (or
contract to do so), as the case may be, or any part thereof, in one or more
parcels at public sale or sales, at any exchange broker's board or at the
Secured Party's offices or elsewhere at such prices as it may deem best
(subject to Section 2.2 and the last sentence of this Section 5), for cash or
on credit or for future delivery without assumption of any credit risk. The
Secured Party shall have the right upon any such public sale or sales to
purchase the whole or any part of said Collateral so sold. The Secured Party
shall pay over the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after
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deducting all reasonable costs and expenses incurred therein or incidental
to the care, safekeeping or otherwise of any or all of the Collateral or in any
way relating to the rights of the Secured Party hereunder, for application on an
equal basis to the payment in whole or in part of the Secured Obligations, and
only after such net proceeds need the Secured Party account for the surplus, if
any, to IXC. IXC agrees that neither Secured Party needs to give more than
thirty (30) days' notice (which notification shall be deemed given when mailed,
postage prepaid, addressed to IXC at its address provided pursuant to this
Security Agreement) of the time and place of any public sale may take place and
that such notice is reasonable notification of such matters. The Secured Party's
exercise of the foregoing rights and remedies is subject to the provisions of
Section 2.2 and any transferee (including the Secured Party) of any of the
Collateral must agree to be bound by such provisions.
6. Reinstatement. This Security Agreement shall remain in full force and
effect and continue to be effective should any petition be filed by or against
IXC for liquidation or reorganization, should IXC become insolvent or make an
assignment for the benefit of creditors or should a receiver or trustee be
appointed for all or any significant part of IXC's assets, and shall continue to
be effective or be reinstated, as the case may be, if at any time payment and
performance of the Secured Obligations, or any part thereof, is, pursuant to
applicable law, rescinded or reduced in amount, or must otherwise be restored or
returned by any obligee of the Secured Obligations, whether as a "voidable
preference," "fraudulent conveyance," or otherwise, all as though such payment
or performance had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Secured Obligations
shall be reinstated and deemed reduced only by such amount paid and not so
rescinded, reduced, restored or returned.
7. Notices. Unless otherwise provided herein, all notices and
communications concerning this Security Agreement shall be addressed to the
other party as follows:
If to IXC: IXC Internet Services, Inc.
Attn: Chief Financial Officer
0000 Xxxxx xx xxx Xxxx
Xxxxx 000
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
with copies to: IXC Communications, Inc.
Attention: General Counsel
0000 Xxxxx xx xxx Xxxx
Xxxxx 000
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Xxxxxxx X. Xxxxxx, Esq.
Xxxxxxx & XxXxxxxx
000 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
If to PSINet: PSINet Inc.
000 Xxxxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Chairman
Facsimile: (000) 000-0000
With a copy to:
PSINet Inc.
000 Xxxxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: General Counsel
Facsimile: (000) 000-0000
and to: Nixon, Hargrave, Devans & Xxxxx LLP
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000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Xx.
Facsimile: (000) 000-0000
Unless otherwise provided herein, notices shall be sent by registered or
certified U.S. Mail, postage prepaid, or by commercial overnight deliver
service, or by facsimile, and shall be deemed served or delivered to the address
or its office on the date of receipt acknowledgement or, if postal claim notices
are given, on the date of this return marked "unclaimed," provided, however,
that upon receipt of a returned notice marked "unclaimed," the sending party
shall make a reasonable effort to contact and notify the other party by
facsimile.
8. Severability. Any provision of this Security Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render enforceable
such provision in any other jurisdiction.
9. No Waiver; Cumulative Remedies. The Secured Party shall by any act,
delay, omission or otherwise be deemed to have waived any of its or their rights
or remedies hereunder and no waiver shall be valid unless in writing, signed by
the Secured Party, and then only to the extent therein set forth. A waiver by
the Secured Party of any right or remedy hereunder on any one occasion shall not
be construed as a bar to any right or remedy which the Secured Party would
otherwise have had on any future occasion. No failure to exercise nor any delay
in exercising on the part of the Secured Party any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or future
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies hereunder provided are cumulative and may be exercised
singly or concurrently, and are not exclusive of any rights and remedies
provided by law. None of the terms or provisions of this Security Agreement may
be waived, altered, modified or amended except by an instrument in writing, duly
executed by the party against which enforcement of such waiver, alteration,
modification or amendment is sought.
10. Successors and Assigns; Governing Law. This Security Agreement and all
obligations of IXC hereunder shall be binding upon the successors and assigns of
IXC, and shall, together with the rights, obligations and remedies of the
Secured Party hereunder inure to the benefit of and be binding upon the
successors and assigns of the Secured Party. This Security Agreement shall be
governed by, and be construed and interpreted in accordance with, the laws of
the State of Delaware.
11. Termination.
11.1 Short Term Indivisible IRU. Subject to Section 6 hereof, the
Secured Party's security interest in the Short Term Indivisible IRU shall
terminate upon the Secured Party's Acceptance of 10,000 Route Miles along the
Available System.
11.2 Agreement. Subject to Section 6 hereof, upon expiration of the
Purchase Agreement and the payment or performance of the Secured Obligations,
this Security Agreement shall terminate and PSINet will, at the request and
expense of IXC, execute and deliver to IXC a proper instrument or instruments
evidencing such termination.
12. Dispute Resolution. Any controversy or claim between or among the
Secured Party, IXC or IXC Carrier, Inc. arising out of or relating to this
Agreement or with respect to an alleged breach of the terms hereof shall be
resolved in accordance with the provisions of Section 19.14 of the Purchase
Agreement; provided that the foregoing shall not be applicable with respect to
any matters which arise in connection with any Bankruptcy Proceeding involving
IXC or IXC Carrier, Inc., as debtor.
13. Counterparts. This Security Agreement may be executed in any number of
counterparts, which shall, collectively and separately, constitute one
agreement.
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14. No Conflict. Nothing contained in this Security Agreement shall be
deemed to alter, modify, affect or limit any of Secured Party's rights under the
Purchase Agreement.
IN WITNESS WHEREOF, IXC and PSINet have each caused this Security Agreement
to be executed by a duly authorized officer as of the date first set forth
above.
IXC Internet Services, Inc.
By:
Name:
Title:
PSINet Inc.
By:
Name:
Title:
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ACKNOWLEDGEMENT AND CONSENT
The undersigned, IXC Carrier, Inc. ("Carrier"), hereby acknowledges and
consents to the foregoing Security Agreement and Assignment and agrees not to
interfere with the rights or quiet enjoyment of the Secured Party under the
Purchase Agreement in accordance with its terms, except that IXC will have the
rights under Section 7.4(a) of the Purchase Agreement with respect to a
continuing breach (as determined by an arbitration) by Secured Party of a
Material Provision and in such event Carrier shall not be obligated to perform
any obligation which IXC is allowed pursuant to Section 7.4(a) to withhold or
suspend. Carrier hereby consents to the collateral assignment by IXC to the
Secured Party of the PSINet Rights under the Contribution Agreement as provided
in the Security Agreement and Assignment and recognizes the Secured Party as the
permitted assignee with respect to the PSINet Rights and agrees to allow the
Secured Party to exercise and obtain the benefit of such PSINet Rights. Carrier
hereby agrees to be bound by the provisions of Section 4.7 of the Security
Agreement and Assignment to the same extent as IXC and as if Carrier were a
party thereto. If Carrier gives any notices of the occurrence of a default or
event of default under the Contribution Agreement to IXC, Carrier shall
simultaneously give such notice to the Secured Party. Secured Party shall be
entitled to exercise the rights granted to IXC with respect to the PSINet Rights
and to obtain the benefits of the PSINet Rights under the Contribution Agreement
without being required or obligated to cure any default or event of default on
the part of IXC or to perform or fulfill any obligations of or make any payments
which were required to be made by IXC [except that at such time as Secured Party
exercises the PSINet Rights under the Contribution Agreement, Secured Party
shall be bound by the provisions of Sections _____ thereof].* Notwithstanding
the foregoing, upon and after the exercise by Secured Party of the PSINet Rights
under the Contribution Agreement, the Secured Party will have the same rights
and opportunity to cure the default or event of default as are given to IXC
under the Contribution Agreement. In no event shall Secured Party's obligations
with respect to the PSINet Rights under the Contribution Agreement exceed,
duplicate or be in addition to any obligation of Secured Party under the
Purchase Agreement. Carrier agrees that, with respect to the PSINet Rights, upon
a default or event of default on the part of IXC under the Contribution
Agreement, the Contribution Agreement will continue in full force and effect
between Carrier and the Secured Party in respect of the PSINet Rights to the
same extent as if Secured Party were a party thereto, subject to the fifth and
seventh sentences of this paragraph.
In the event of a Default under the foregoing Security Agreement and
Assignment, notwithstanding Section 5 thereof, Secured Party shall not be
entitled to foreclose, collect, receive, appropriate, sell, lease, assign, give
option or options to purchase, or sell or deliver, or contract to do any of the
foregoing or otherwise realize upon the PSINet Rights under the Contribution
Agreement (except that Secured Party may deal with its IRU capacity and shall
have the rights to the PSINet Rights and use thereof as provided and permitted
under the Purchase Agreement with respect to the PSINet Fiber IRU and/or the IRU
in the IRU Capacity, including without limitation Section 15.5 of the Purchase
Agreement). Nothing contained herein shall (i) be deemed to modify, affect or
limit any of Secured Party's rights under the Purchase Agreement or (ii) prevent
Secured Party from taking any action necessary to preserve, protect, perfect or
continue its security interest in the PSINet Rights or (iii) prevent Secured
Party from using or obtaining the benefits of the PSINet Rights.
---------------
* Such sections are subject to approval by Secured Party and shall not
include any payment obligations.
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Capitalized terms used herein but not otherwise defined herein shall have
the respective meanings ascribed thereto in the foregoing Security Agreement and
Assignment.
IXC Carrier, Inc.
By:
Name:
Title:
The foregoing Acknowledgment and Consent is acknowledged and agreed to by
the undersigned.
PSINet Inc.
By:
Name:
Title:
IXC Internet Services, Inc. hereby acknowledges receipt of notice of,
consents to and agrees to be bound by the terms and provisions of the foregoing
Acknowledgment and Consent as they relate to the relative rights of PSINet Inc.
and IXC Carrier, Inc.
IXC Internet Services, Inc.
By:
Name:
Title:
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EXHIBIT C
[COLLOCATION AND INTERCONNECTION AGREEMENT]
EXHIBIT C
TO
IRU AND STOCK PURCHASE AGREEMENT
COLLOCATION AND INTERCONNECTION AGREEMENT
This Collocation and Interconnection Agreement (this "Agreement") is
entered into as of the _________ day of _______________, 199_, by and between
IXC Internet Services, Inc., a Delaware corporation ("IXC"), and PSINet Inc., a
New York corporation ("PSINet"). All capitalized terms used but not otherwise
defined herein shall have the meanings set forth in that certain IRU and Stock
Purchase Agreement entered into as of July 22, 1997 by and between IXC and
PSINet (as amended, supplemented or modified, the "Purchase Agreement"). In the
event of any conflict between the terms of this Agreement and those of the
Purchase Agreement, the terms of the Purchase Agreement shall control.
BACKGROUND AND PURPOSE
This Agreement is made with reference to the following facts:
A. IXC and PSINet have entered into the Purchase Agreement pursuant to
which, among other things, PSINet has acquired from IXC the PSINet Fiber IRU,
the IRU Capacity and the option to order Bandwidth on the Available System and
IXC has acquired from PSINet shares of PSINet's common stock.
B. In connection with the Purchase Agreement, PSINet may wish to
collocate its telecommunications equipment ("Equipment") at IXC's premises or
points-of-presence ("POPs") and, or may wish to interconnect its Equipment to
IXC's or third party's equipment. This Agreement sets forth the terms and
conditions on which PSINet may collocate and, or interconnect its Equipment on
IXC's premises.
TERMS OF AGREEMENT
Accordingly, in consideration of the foregoing and of the mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereto agree as follows:
1. IXC Premises. IXC's premises available for the collocation of PSINet's
Equipment or interconnection of PSINet's facilities are listed on Exhibit K to
the Purchase Agreement as it may be expanded from time to time (the "IXC
Premises" or "IXC POPs").
2. Collocation Rights.
2.1 Collocation. IXC hereby grants to PSINet the right to locate,
install, maintain and operate Equipment at the IXC Premises for the duration of
the term of the Purchase Agreement. No use of the IXC Premises required or
permitted under this Agreement shall create or vest in PSINet any easements or
other ownership or property rights of any nature in IXC's real or personal
property or the IXC Premises.
2.2 Basic Services. In consideration of the maintenance fee that
PSINet is required to pay IXC under the section entitled System Maintenance and
POPs - Consideration set forth in the Purchase Agreement, IXC shall supply HVAC
(Heating, Ventilation and Air Conditioning) for standard components, non-UPS AC
power and space for PSINet Equipment at the IXC POPs as follows:
Sites # of Spaces* Power Per Space
----- ------------ ---------------
As listed on Exhibit K * *
* A space adequate to contain a cabinet (measuring 2 feet (width) x 3 feet
(depth) x 70 inches (height)). PSINet shall supply its own cabinets. If PSINet
has more, or desires more, than six Spaces in the IXC POPs, PSINet shall be
required to pay for those Spaces at IXC's standard rates.
2.3 Interface. Interface points for PSINet's IRU Capacity provided by
IXC under the Purchase Agreement shall be at fiber patch panels ("Connect
Panels") located in the IXC Premises. The Connect Panel located in the IXC
Premises shall be the demarcation to establish PSINet's operational and
maintenance responsibilities. Subject to the space limitations set forth in this
Agreement, PSINet shall provide, install and maintain at its expense the
electronic equipment at the IXC Premises it desires. PSINet will pay IXC time
and materials agreed upon on a case by case basis for equipment installation,
tech-assists and build-outs for power, cabling and HVAC.
2.4 Additional Services. In the event PSINet desires installation
services (including, but not limited to cross connect facilities needed to
access local exchange carriers' or competitive access providers' entrance
facilities), DC power, or additional space, AC power or HVAC (collectively
referred to as the "Services") at any of the IXC Premises, it shall make a
written request for such Services to IXC. Within fifteen (15) business days
after receiving such written request, IXC shall provide PSINet with the
availability of the Services and IXC's standard rates for the Services. In the
event upgrades or expansions to the IXC Premises or its facilities are necessary
to accommodate PSINet's request, IXC may include the entire cost of such
upgrades or expansions in the cost to PSINet. In the event IXC provides the
Services to PSINet by replacing its existing equipment at PSINet's expense, IXC
shall give the old, replaced equipment to PSINet. In the event PSINet chooses to
receive additional Services at the IXC Premises, PSINet shall pay any and all
(initial and continuing) costs reasonably determined by IXC to be necessary to
provide Services to PSINet. If IXC makes available and PSINet utilizes more than
20 amps of AC power per Space during any particular month during the term of
this Agreement, PSINet shall pay IXC its standard rate for each additional amp.
IXC shall provide PSINet with an invoice setting forth the costs for additional
Services within sixty (60) days of the later of: (a) IXC receiving its invoices
for such Services from subcontractors and vendors or (b) delivering the Services
to PSINet. PSINet shall pay IXC the amounts due within thirty (30) days of
receipt of an invoice from IXC.
2.5 Back-up Power. In the event that PSINet desires back-up power at
the IXC POPs, PSINet shall submit its back-up power requirements to IXC. IXC
shall within thirty days of receipt of PSINet's request provide PSINet with a
quote as to IXC's costs for providing such back-up power; provided however, that
IXC shall only be obligated to provide such quote and the back-up power if IXC,
in its sole discretion, determines that providing such back-up power is feasible
considering available space, environmental factors, required consents from third
parties and other relevant factors.
* Confidential material has been omitted and filed separately with the
Securities and Exchange Commission
-2-
In the event IXC does provide back-up power to PSINet: (a) IXC shall provide
PSINet with invoices setting forth the costs for such back-up power within sixty
(60) days of the later of: (i) IXC receiving its invoices from subcontractors
and vendors for installing and providing such back-up power or (ii) delivering
the back-up power to PSINet; and (b) IXC will have no liability whatsoever to
PSINet with regard to any delay, failure or defect in such back-up power and
Section 18 shall apply to such power. IXC's initial and ongoing costs for
providing such back-up power to PSINet may be included in IXC's invoices to
PSINet. PSINet shall pay IXC the amounts due within thirty (30) days of receipt
of an invoice from IXC.
2.6 Delivery and Installation. PSINet shall, at its own expense,
deliver, install and maintain its collocated Equipment in a safe condition and
meeting or exceeding the standards set forth in Section 7.2. At no additional
charge, IXC shall provide to PSINet Spaces that are reasonably proximate to each
other in light of the type of Equipment that PSINet is installing; provided,
however, that if PSINet or its Equipment requires a specific geometric
arrangement, and IXC determines that in order to accommodate PSINet or its
Equipment, rearrangement of the existing facilities at the IXC Premises is
required, PSINet agrees to reimburse IXC for any such make-ready costs. IXC will
advise PSINet in writing of any estimated make-ready charges (including
investigation, design and engineering fees) for such rearrangement work and
PSINet shall make payment to IXC within thirty (30) days from its receipt of
IXC's invoice therefor.
3. Interconnection with PSINet POPs.
3.1 Construction and Installation. In the event PSINet desires to
connect any of its POPs to any IXC POP, PSINet may construct, install, operate
and maintain a connection facility (the "POP-to-POP Interconnect Facility")
between the PSINet premises and the IXC Premises so long as PSINet meets or
exceeds the standards set forth in Section 7.2. PSINet shall provide at its
expense all necessary rights-of-way, permits, equipment and IXC-approved
materials to construct and install each POP-to-POP Interconnect Facility,
including, but not limited to, cables and conduit and any labor charges
associated therewith. If necessary, and where applicable, IXC shall use
commercially reasonable efforts to provide PSINet, at PSINet's expense, access
to existing building entrance facilities, if available, to access and exit IXC
POPs. The demarcation point for PSINet shall be in the IXC POPs at the Connect
Panel or the DSX panel, as appropriate.
3.2 Ownership. PSINet shall retain ownership of any portion of the
POP-to-POP Interconnect Facility that is located on the IXC Premises during the
term of this Agreement; provided, however, that title to any part of the
POP-to-POP Interconnect Facility within the IXC Premises shall be transferred to
IXC upon expiration or termination of this Agreement.
3.3 Maintenance and Changes. PSINet shall be responsible for
maintenance and repair of the POP-to-POP Interconnect Facility on PSINet's side
of the point of demarcation. Any improvement, modification, addition to,
relocation, or removal of, the POP-to-POP Interconnect Facility by PSINet at the
IXC Premises is subject to prior review and written approval by IXC Transmission
Engineering Department and the cost of such improvement, modification, addition
to, relocation, or removal of, the POP-to-POP Interconnect Facility will be the
sole responsibility of PSINet. IXC's approval will not be unreasonably withheld
and in the event IXC fails to respond to PSINet's written request within thirty
(30) days of receiving PSINet's request for such changes, IXC's shall be deemed
to have approved PSINet's request.
4. Interconnection to Third Parties. Interconnect facilities to
interconnect PSINet's equipment to other parties within IXC's POPs shall be
installed and maintained subject to available space at the IXC POPs and under
the following terms and conditions:
(a) *
Should subsequent interconnections become necessary after initial
installation, up to the aggregate bandwidth capacity of the circuits
PSINet has ordered at the POP, realignment of the interconnections
shall be subject to the preceding and to the
* Confidential material has been omitted and filed separately with the
Securities and Exchange Commission
-3-
reconfiguration charges as indicated in Exhibit E. All such
interconnections shall be subject to the provisions of Section 15.5
of the Purchase Agreement.
(b) PSINet shall reimburse IXC for the capital cost to establish a point
of demarcation for Additional Interconnects that PSINet requests IXC
to provide. This demarcation shall be in the IXC equipment room and
shall be either the IXC standard DSX termination or fiber distribution
frame as is applicable for the interconnects required.
(c) IXC shall charge PSINet a one time charge and a monthly recurring
charge for each Additional Interconnect in the IXC POP. These charges
shall be an amount equal to the then standard ancillary pricing for
such service set forth on Exhibit E to the Purchase Agreement. Nothing
in this Agreement shall prevent or in any way limit IXC's ability to
charge third parties for interconnection.
(d) In the event IXC chooses to cross-connect with an Additional
Interconnect party for which PSINet has paid a charge to IXC under
Section 4(b), IXC shall at IXC's option: (i) refund to PSINet such
charge or (ii) shall pay PSINet a monthly cross-connect fee negotiated
by the parties at such time.
(e) IXC's maintenance responsibility shall be limited to the demarcation
point and the associated cross connect at that point.
(f) PSINet shall not use any interconnect facility to allow third parties
collocated in any POP to interconnect with each other at that POP.
5. Notice to Interconnect or Collocate. No later than forty-five (45)
days prior to PSINet's planned installation of its Equipment or POP-to-POP
Interconnect Facilities at any IXC Premises, PSINet shall provide to IXC notice
of its desire to interconnect/locate in a particular IXC Premise, a copy of
PSINet's construction design drawings and installation schedule for IXC's review
and approval (collectively referred to hereon as the "Interconnect/Collocation
Notice"). The Interconnect/Collocation Notice shall (at a minimum) include: (a)
PSINet's installation date(s); (b) any excess cable storage requirements; (c)
identification of all POP-to- POP Interconnect Facilities and Equipment to be
installed; (d) a diagram of the desired location of the POP-to-POP Interconnect
Facilities and Equipment; (e) the space, power, environmental and other
requirements for the POP-to-POP Interconnect Facilities and Equipment; (f) the
estimated commencement and termination dates for the
interconnection/collocation; (g) all other information reasonably required by
IXC. PSINet's Equipment shall be placed and maintained in accordance with IXC's
requirements and specifications. Within two weeks of receiving the
Interconnection/Collocation Notice, IXC shall respond to PSINet's
Interconnection/Collocation Notice with its acceptance or objections.
-4-
6. Required Authorizations. PSINet shall obtain, at its sole cost and
expense, from any appropriate public and/or private authority, any required
permission, authorization, permit, license or easement (collectively, the
"Authorizations") to bring fiber to the IXC Premises and, or needed to
construct, install, operate and maintain the POP-to-POP Interconnect Facility
and to use the property over which the POP-to-POP Interconnect Facility will be
operated and maintained. PSINet represents and warrants that such Authorizations
shall be in effect for the entire Term of this Agreement. IXC shall cooperate
with PSINet in its efforts to obtain such authorizations.
7. Use of Equipment and POP-to-POP Interconnect Facilities.
7.1 No Interference. PSINet shall not use its fibers, Equipment or
POP-to- POP Interconnect Facilities, and IXC shall not use its fiber, equipment
or interconnect facilities in any way which interferes with the other party's
use of its fibers or equipment or in any manner which violates any of the terms
or conditions of this Agreement or the Purchase Agreement. PSINet shall not
install any electrical or other equipment that overloads any electrical
paneling, circuitry or wiring.
7.2 Standards. PSINet shall ensure that its equipment and any
POP-to-POP Interconnect Facilities (as defined) are installed to meet or exceed
any reasonable requirements of IXC, any requirements of IXC's building
management, and any applicable local, state and federal codes and public health
and safety laws and regulations (including fire regulations and the National
Electric Code). In the event IXC's building management or any local, state or
federal body determines the POP-to-POP Interconnect Facility is not in
compliance with the applicable laws and regulations, PSINet shall immediately
make any changes necessary such that the POP-to-POP Interconnect Facility no
longer conflicts with such law or regulations. PSINet further agrees to comply
with the requirements of IXC's or IXC's building management's insurance
underwriter(s).
7.3 Intervention. If any part of PSINet's fiber, POP-to-POP
Interconnect Facilities or Equipment is not placed and maintained in accordance
with the terms and conditions of this Agreement and PSINet fails to correct the
violation within thirty days from receipt of written notice thereof from IXC,
then IXC may, at its option, without further notice to PSINet, correct the
deficiency at PSINet's expense without liability for damages to the fiber,
POP-to-POP Interconnect Facilities or Equipment or for any interruption of
PSINet's services. As soon as practicable thereafter, IXC shall advise PSINet in
writing of the work performed or the action taken. PSINet shall reimburse IXC
for all expenses incurred by IXC associated with any work or action performed by
IXC pursuant hereto. PSINet shall remit payment to IXC within thirty days from
its receipt of IXC's invoice therefor.
7.4 Threat to Persons or Property. In the event, and in IXC's sole
determination, if PSINet's fiber, POP-to-POP Interconnect Facilities or
Equipment poses an immediate threat to the safety of IXC employees or the
public, interferes with the performance of IXC's service obligations, or poses
and immediate threat to the physical integrity of IXC's facilities, IXC may
perform such work and/or take such action that it deems necessary without notice
to PSINet and without subjecting itself to any liability for damage to the
fiber, POP-to- POP Interconnect Facilities or the Equipment or for any
interruption of PSINet's services. As soon as practicable thereafter, IXC shall
advise PSINet in writing of the work performed or the action taken. PSINet shall
reimburse IXC for all expenses incurred by IXC associated with any work or
action performed by IXC pursuant hereto. PSINet shall remit payment to IXC
within thirty days from its receipt of IXC's invoice therefor.
-5-
8. Access to IXC Premises.
8.1 Notice. Except as specifically set forth in the Purchase
Agreement, the terms in this Section 8 shall govern PSINet's access to the IXC
Premises. In the event PSINet's Equipment or POP-to-POP Interconnect Facilities
are located in the IXC Premises Customer Interface Facility ("CIF"), PSINet may
perform routine preventative maintenance or emergency maintenance and repairs on
its Equipment or POP-to-POP Interconnect Facilities during normal business hours
(7 am - 6 pm local time) without advance notice to IXC. In the event PSINet
desires to: (a) perform routine preventative maintenance or emergency
maintenance and repairs during non-business hours; (b) perform any procedures
other than routine preventative maintenance (such as installation, removal or
relocation of its Equipment or POP-to-POP Interconnect Facilities); (c) perform
any function outside of the CIF or (d) access (on PSINet's side of the
demarcation point) the fibers leading from the IXC electronics which provide the
IRU Capacity, PSINet may do so if: (x) it provides reasonable advance notice to
IXC; and (y) a IXC employee or representative is present on the IXC Premises at
the time. Notice provided as follows shall be deemed "reasonable advance notice"
for the purposes of this section: (i) twenty-four (24) hours for routine
preventative maintenance during non-business hours or outside the CIF; (ii) two
(2) hours for repairs of network malfunction causing loss of service or degraded
conditions (during non-business hours or outside the CIF), provided that such
period shall be reasonably tolled to permit IXC to dispatch personnel to an
un-manned IXC Premise upon receipt of a request for access thereto; (iii) two
(2) weeks notice for removing POP-to-POP Interconnect Facilities and, or
Equipment (regardless of location or time) and (iv) forty-five (45) days (as set
forth in Section 5) for installing Equipment or POP-to-POP Interconnect
Facilities (regardless or location or time). The presence of a IXC employee or
representative shall not relieve PSINet of its responsibility to conduct all of
its work operations in the IXC Premises in a safe and workmanlike manner. Under
no circumstances shall PSINet have access to any fibers on the IXC side of the
demarcation point.
8.2 Security. PSINet shall abide by IXC's reasonable security
requirements. When deemed appropriate by IXC, PSINet employees or
representatives shall be issued passes or visitor identification cards which
must be presented upon request before entry to the IXC Premises and surrendered
upon demand or upon termination of this Agreement. Such passes or other
identification shall be issued only to persons meeting any reasonable security
criteria applicable at the IXC Premise for such purpose. Notwithstanding any
other provision of this Agreement, IXC shall, without threat of liability, have
the right to immediately terminate the right of access of any PSINet personnel
or representative should it determine in its sole discretion for any lawful
reason that such termination is in its best interest. IXC shall promptly notify
PSINet of any such termination, and PSINet shall have a reasonable opportunity
to demonstrate that the terminated rights of access should be reinstated. Any
termination of access shall remain in effect pending such demonstration and
IXC's final determination as to the advisability of such reinstatement.
9. Relocation. PSINet shall, at its own expense, relocate its fiber,
POP-to-POP Interconnect Facilities and Equipment upon IXC's written request and
in the reasonable (under the circumstances) time frame required by IXC. Such
relocations could be within the IXC POP or in the event the entire IXC POP is
relocated. In any such event, IXC shall provide the following services at no
cost to PSINet: (i) site make-ready; (ii) the intra-site cabling functionally
equivalent to that which existed in the prior IXC POP; (iii) relocation of IXC's
IRU circuits and equipment used by PSINet; and (iv) re-establishing competitive
access provider and local exchange carrier interconnects common to both IXC and
PSINet.
10. No Restrictions. Except as specifically set forth in the Purchase
Agreement, nothing contained in this Agreement shall be construed as a
limitation, restriction or prohibition against IXC with respect to any agreement
or arrangement which IXC has heretofore entered into, or may in the future enter
into, with others not parties to this Agreement regarding the IXC Premises.
IXC's right to maintain and operate its facilities in such a manner as will best
enable it to fulfill its own service requirements is in no manner limited by
this Agreement.
11. Inspections. IXC reserves the right to make periodic inspections of
any part of the fiber, POP-to-POP Interconnect Facilities and Equipment located
within or physically attached to the IXC Premises; provided that PSINet shall
have the right to have one or more of its employees or representatives present
during the time of any such inspection. IXC shall give PSINet advance notice of
such inspections, except in those instances where, in the sole judgement of IXC,
safety
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considerations justify the need for such an inspection without the delay of
providing notice. The making of periodic inspections or the failure to do so
shall not operate to impose upon IXC any liability of any kind whatsoever nor
relieve PSINet of any responsibility, obligation, or liability assumed under
this Agreement.
12. Emergencies. In the event of an emergency:
(a) IXC's work shall take precedence over any and all operations of
PSINet in the IXC Premises and IXC may rearrange PSINet's Equipment or
POP-to-POP Interconnect Facilities.
(b) IXC shall use reasonable efforts to provide PSINet with advance
notice of any such work.
(c) IXC shall use reasonable care given the circumstances when
handling PSINet Equipment.
13. Liens and Encumbrances. PSINet shall not have the power, authority or
right to create and shall not permit any lien or encumbrance, including, without
limitation, tax liens, mechanics' liens, or other liens or encumbrances with
respect to work performed, in connection with the installation, repair,
maintenance or operation of its Equipment, POP-to-POP Interconnect Facilities or
other property installed within the IXC Premises.
14. Term. This Agreement shall become effective as of its execution by
both parties and shall continue in effect until such time as it is terminated on
the earlier of (a) the expiration or termination of the Purchase Agreement or
(b) such time as it is terminated as provided herein or by operation of law.
15. Subordination. PSINet agrees that its rights under this Agreement
shall be totally subordinate to any mortgages, loans, deeds of trust or any
other borrowing upon the real or personal property which may be incurred by IXC.
PSINet shall sign any such reasonable documents as are necessary to satisfy any
lender, private or institutional, to reflect said subordination.
16. Release; Indemnification. Each party (each party in such capacity
being referred to as the "Releasing Party") releases, assumes and agrees to
indemnify, defend, protect and save the other party harmless from and against
any claim, damage, loss, liability, cost and expense (including reasonable
attorneys' fees) in connection with any loss or damage to any physical property
or facilities of the Releasing Party or any injury to or death of any person
arising out of or resulting in any way from the negligence or misconduct of the
Releasing Party or its employees, servants, contractors and/or agents.
17. Limitation of Liability.
17.1 Equipment and Facilities. IXC, its employees or subcontractors
shall not be liable for any damages to PSINet's fiber, POP-to-POP Interconnect
Facilities and Equipment collocated on the IXC Premises, except to the extent
that such damages are caused by the gross negligence or intentional acts of IXC,
its agents or employees; provided that the maximum liability of IXC for any
damage to PSINet's fiber, POP-to-POP Interconnect Facilities and Equipment shall
not exceed the replacement value of the fiber, POP-to-POP Interconnect
Facilities and Equipment, or in the event that the fiber, POP-to-POP
Interconnect Facilities and the Equipment is repairable, the costs to restore
the fiber, POP-to-POP Interconnect Facilities and the Equipment to its original
condition. IXC shall not be liable for any damages of whatever nature,
including, but not limited to actual or consequential damages, arising from any
interruption or failure in the supply of utilities to the IXC Premises.
17.2 No Consequential Damages. Except as specifically provided for in
the Purchase Agreement, in no event shall IXC or PSINet be liable for any
special, incidental, direct, indirect, punitive, reliance or consequential
damages, whether foreseeable or not, arising under this Agreement or from any
breach or partial breach of the provisions of this Agreement or occasioned by
any defect in the Bandwidth or other service provided hereunder, delay in
availability of the Bandwidth or any service provided hereunder, failure of the
Bandwidth or other service provided hereunder, interruptions or outages of the
Available System or any other cause whatsoever or arising out of any act or
omission by IXC or PSINet, as applicable, its employees, servants and/or agents,
including
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but not limited to, damage or loss of property or equipment, loss of profits
or revenue, cost of capital, cost of replacement services, or claims of
customers for service interruptions or transmission problems.
18. Disclaimer of Warranty. IXC MAKES NO WARRANTY TO PSINet OR ANY OTHER
PERSON OR ENTITY, WHETHER EXPRESS, IMPLIED, OR STATUTORY, AS TO THE DESCRIPTION,
QUALITY, MERCHANTABILITY, COMPLETENESS OR FITNESS FOR ANY PARTICULAR PURPOSE OF
ANY PREMISES, FACILITIES, SERVICES, EQUIPMENT, POWER, CABLE OR FIBERS PROVIDED
HEREUNDER OR DESCRIBED HEREIN, OR AS TO ANY OTHER MATTER, ALL OF WHICH
WARRANTIES ARE HEREBY EXCLUDED AND DISCLAIMED. NO OTHER WARRANTIES ARE EXPRESSED
OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.
19. Default/Termination.
19.1 Default. A party may deliver to the other party a written "Notice
of Default" for: (i) failing to make any payment owed hereunder, when no bona
fide dispute exists (a "Monetary Default"); or (ii) the breaching by either
party or its agents, assigns or affiliates of any Material Provision; or (iii)
the filing or initiating of proceedings by or against a party seeking
liquidation, reorganization or other such relief under any federal or state
bankruptcy or insolvency law (a "Bankruptcy Proceeding"). Such Notice of Default
must prominently contain the following sentences in capital letters: "THIS IS A
FORMAL NOTICE OF A BREACH OF CONTRACT. FAILURE TO CURE SUCH BREACH WILL HAVE
SIGNIFICANT LEGAL CONSEQUENCES." A party that has received a Notice of Default
shall have five (5) business days to cure a Monetary Default, thirty (30) days
to cure the alleged breach of any Material Provision (and, if the defaulting
party shall have commenced actions in good faith to cure such defaults which are
not susceptible of being cured during such 30-day period, such period shall be
extended (but not in excess of 90 additional days) while such party continues
such actions to cure), and shall be given ninety (90) days to remove, have
dismissed or stay any involuntary Bankruptcy Proceeding (each such period, a
"Cure Period"). If such party fails to cure the breach within the Cure Period,
as long as such default shall be continuing, the non-defaulting party shall have
the right to either (a) suspend its performance or payment obligations under
this Agreement, (b) seek an order of specific performance, and/or (c) seek the
award of compensatory damages.
19.2 Removal Upon Termination. Upon termination of this Agreement for
any reason other than a material default by IXC, PSINet shall remove, at its
sole expense, its fiber, POP-to-POP Interconnect Facilities and Equipment within
ten (10) days following such termination. In the event PSINet fails to remove
its fiber, POP-to-POP Interconnect Facilities and Equipment within such ten (10)
day period, the fiber, POP-to-POP Interconnect Facilities and Equipment shall be
deemed abandoned and IXC, at its sole discretion and without liability, may
remove the fiber, POP-to-POP Interconnect Facilities and Equipment and be
reimbursed by PSINet for all costs associated with such removal. PSINet shall
make payment to IXC for any such costs within thirty days of its receipt of an
invoice containing such costs. In the event this Agreement terminates due to a
material default by IXC, either PSINet or IXC may remove the PSINet Equipment or
POP-to-POP Interconnect Facilities at its own expense upon fifteen (15) working
days written notice to the other party.
20. Insurance. PSINet shall, at its expense, obtain and keep in full force
and effect at all times for the duration of this Agreement, with a carrier or
carriers satisfactory to IXC, insurance policies of the following kinds and in
the following amounts:
(a) Worker's Compensation Insurance in accordance with all applicable
laws;
(b) Employer's liability insurance with limits for employer's
liability of $500,000 per accident;
(c) Comprehensive bodily injury and property damage liability
insurance, including automobile insurance and contractual liability insurance,
in at least the following amounts:
Bodily injury to any one person $1,000,000
Bodily injury aggregate per occurrence $1,000,000
Property damage in any one accident $ 500,000
Property damage aggregate per occurrence $1,000,000
Upon request of IXC, PSINet shall furnish IXC certificates of such insurance
and/or copies of the applicable policies, and each policy shall provide that no
change or cancellation shall become
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effective except upon twenty (20) days prior written notice to IXC of such
change or cancellation. In the event of any change or cancellation not
acceptable to IXC, IXC may demand that PSINet obtain replacement coverage. If
PSINet fails to obtain replacement coverage within twenty (20) days after
such demand by IXC, IXC may obtain replacement coverage and invoice all
premiums therefore to PSINet. PSINet shall make payment to IXC for any amount
of such invoices within thirty days of its receipt thereof.
21. Assignment. Except as provided below, this Agreement may not be
assigned in whole or in part without the prior written consent of IXC. PSINet
may assign this Agreement in whole, but not in part and only in connection with
a permitted assignment of all of PSINet's rights and obligations under the
Purchase Agreement to an entity that is both a permitted assignee under the
section entitled Binding Effect; Assignment in the Purchase Agreement and a
permitted transferee under the section entitled Restrictions on Resale in the
Purchase Agreement; provided, however, that any such assignment or transfer
shall be subject to IXC's rights under this Agreement and an assignee or
transferee shall continue to perform PSINet's obligations to IXC under the terms
and conditions of this Agreement. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns.
22. Notices. All notices, claims, demands and other communications under
this Agreement shall be in writing and shall be deemed given when delivered
personally, the next business day after delivered to a nationally recognized
overnight courier for next business day delivery, when transmitted by facsimile
or five (5) days after sent by registered or certified mail, return receipt
requested, to the parties (and to the Persons receiving copies thereof) at the
following addresses or facsimile numbers (or to such other address or facsimile
number as a party may have specified by notice given to the other party pursuant
to this provision):
If to IXC to:
IXC Internet Services, Inc.
5000 Plaza on the Lake, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Chief Financial Officer
Facsimile: (000) 000-0000
With copies to:
IXC Communications, Inc.
5000 Plaza on the Lake, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: General Counsel
Facsimile: (000) 000-0000
Xxxxxxx & XxXxxxxx
000 Xxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
If to PSINet to:
PSINet Inc.
000 Xxxxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Chairman
Facsimile: (000) 000-0000
With copies to:
PSINet Inc.
000 Xxxxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
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Attention: General Counsel
Facsimile: (000) 000-0000
Nixon, Hargrave, Devans & Xxxxx LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Xx.
Facsimile: (000) 000-0000
23. General Provisions.
23.1 Laws and Licenses. This Agreement is subject to all
applicable federal, state and local laws, regulations, rulings and orders of
governmental agencies, including, but not limited to, the Communications Act of
1934 as amended by the Telecommunications Act of 1996, and the rules and
regulations of the FCC. IXC and PSINet agree that, except as otherwise provided
herein, the statute of limitations set forth in the Communications Act of 1934,
47 U.S.C. section 415, as amended, shall govern all actions arising out of this
Agreement, including arbitrations.
23.2 Confidentiality. This Agreement shall be governed by the terms of
the Confidentiality Agreement entered into between the parties and dated as of
May 14, 1997.
23.3 Amendments, Waivers and Consents. For purposes of this Agreement
and the Transaction Documents, except as otherwise specifically set forth herein
or therein, no course of dealing between PSINet and IXC and no delay on the part
of either party hereto in exercising any rights hereunder or thereunder shall
operate as a waiver of the rights hereof and thereof. No covenant or other
provision hereof or thereof may be waived or amended other than by a written
instrument signed by the party so waiving or amending such covenant or other
provision.
23.4 Section Headings. The table of contents and section headings in
this Agreement have been inserted for reference purposes only and shall not be
deemed to limit or otherwise affect the construction of any provision thereof or
hereof.
23.5 Governing Law. This Agreement shall be deemed to be a contract
made under, and shall be construed in accordance with, the laws of the State of
Delaware without reference to its principles of conflicts of law.
23.6 Dispute Resolution. Any controversies, claims or disputes arising
out of or relating to this Agreement shall be resolved in the manner set forth
in the section entitled Dispute Resolution in the Purchase Agreement.
23.7 Severability. In the event that any one or more of the clauses,
covenants or provisions contained in this Agreement should be held to be
unenforceable under any Federal, State or City law, statute, code,
administrative or regulatory rule, such invalidity or unenforceability shall not
affect the remainder of this Agreement, which shall remain in full force and
effect.
23.8 Interpretation. This Agreement shall be interpreted in a manner
so as to be consistent with the Purchase Agreement and under the same rules of
construction and interpretation set forth in the Purchase Agreement.
23.9 Counterparts. This Agreement may be executed simultaneously in
any number of counterparts, each of which when so executed and delivered shall
be taken to be an original, but such counterparts shall together constitute but
one and the same document.
23.10 Facsimile Delivery. This Agreement may be delivered by
facsimile transmission of an executed counterpart signature page hereof, and
after attachment of such transmitted signature page to a copy of this Agreement,
such copy shall have the same effect and evidentiary value as copies delivered
with original signatures. Any party delivering this Agreement by facsimile
transmission shall deliver to the other party, as soon as practicable after such
delivery, an original executed counterpart signature page of this Agreement.
-10-
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
IXC Internet Services, Inc.
By:
Name:
Title:
PSINet Inc.
By:
Name:
Title:
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XXXXXXX X
XXXXX XXXXXX XXXXX
PERCENTAGE DETERMINATION
Exhibit D to the IRU
and Stock Purchase Agreement
Newco Common Stock Percentage Determination
The exact number of IXC Initial Common Shares to be issued and delivered by
PSINet to IXC at the Closing shall be equal to 19.99999% of the total number of
issued and outstanding shares of Common Stock of PSINet as of the Closing Date
(after giving effect to the issuance of the IXC Initial Common Shares pursuant
to the Agreement), including, for this purpose, shares of Common Stock of PSINet
issuable upon exercise of all warrants issued and outstanding as of the Closing
Date, but without giving effect to any shares of Common Stock issuable (i) upon
exercise of any options issued to current and former employees, officers,
directors and consultants of PSINet and its subsidiaries which are outstanding
as of the Closing Date, and/or (ii) pursuant to such rights, if any, that
Chatterjee (as defined in Section 13.9 of the PSINet Disclosure Schedule) and/or
its designee may have as of the Closing Date under the Joint Venture Agreement
(as defined in Section 13.9 of the PSINet Disclosure Schedule) (see Section 13.9
of the PSINet Disclosure Schedule); *
* Confidential material has been omitted and filed separately with the
Securities and Exchange Commission
EXHIBIT E
ASSOCIATED SERVICES
EXHIBIT E
TO
IRU AND STOCK PURCHASE AGREEMENT
Associated Services
Ancillary Pricing Schedule for On-Net Service
Non-Recurring Charges DS-1 DS-3 OC-3 OC-12
--------------------- ---- ---- ---- -----
New Order
Installation (On-Net) $ * $ * *
New Order
Installation (Off-Net) * * * *
DS-1 Ramp-Up per DS-O $ * * * *
Order Change
(less than
5 business days) $ * $ * $ * $ *
Order Cancellation
(less than
5 business days) $ * $ * $ * $ *
ASR (new or disconnect)
(Special Access Only) $ * $ * $ * $ *
ASR Supplement $ * $ * $ * $ *
Order Expedite $ * $ * $ * $ *
Reconfiguration ---------- Same as Install ----------
Non-Recurring Charges DS-1 DS-3 OC-3 OC-12
--------------------- ---- ---- ---- -----
Minimum circuit
charge (IXC portion) $ * $ *
Cross-connect charge $ * $ * $ * $ *
Other Interexchange
Carrier to Lessor
local access or
bypass facility
(Lessor long haul
not involved)
Local bypass charge $ * $ * $ * $ *
Lessor POP to Lessor
POP in same city,
with no Lessor
long haul attached
at either Lessor POP
* Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
Miscellaneous Recurring Non-Recurring
------------- --------- -------------
M13 1 yr Term * *
2+ yr Term * *
3+ yr Term * *
Echo Canceller (per circuit end) * *
Second End Loop (Ex: for ADPCM) * *
Demand Maintenance *
Rack Space *
Shelf Space * *
DC Power *
CIF AC/DC Power *
All other services *
--------------------
(1) All of the above charges are subject to change with a 30-day notice.
(2) Services not described above will be considered special handling and
charges will be assessed on an individual basis.
* Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
-2-
DSO Ancillary Pricing
DSO Ancillary Pricing
---------------------
New Order Installation $ *
Order Cancellation Prior to Turn up $ *
Order Expedite $ *
Reconfiguration (City pairs the same) $ *
DCS Charge (Switching Only) $ *
DSO DCS Port Charge (Xxxx access at DCS) $ *
DSI DCS Port $ *
Minimum Charge per DS-0 $ *
--------------------
(1) All of the above charges are subject to change with a 30-day notice.
(2) Services not described above will be considered special handling and
charges will be assessed on an individual basis.
* Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
-3-
IXC Policy Overview, Collocation Rack Space Cost
In reference to Rack Space Non Recurring Installation Charges (One time buildout
charges)
The cost for buildout of rack space is $* per rack space. This cost includes the
following:
- Rack 19', 23' or 26' Racks. Cabinets will be addressed on a case by case
basis.
- Termination of DC power to rack mounted fuse panels and AC power to a dual
outlet box. Note: AC power is NOT uninterruptable, generators are available
at most sites but UPS's are not. Check with IXC representative for site
specific power capabilities.
- Termination of up to 6 DS-3 signal cable pairs (coax) or 56 DS-1 circuits
(ABAM) to DSX panels. Additional terminations will be charged at the rate
of $* per DS3, and $* per 28 DS1s or a fraction thereof. Fiber termination
is not included in this price and will be reviewed on a case by case basis.
- Termination of two POTS lines for remote access to hardware will be
allowed, where LEC entrance facilities are available. Customer will be
responsible for ordering and billing of such service and providing
termination in customer racks.
- Only IXC approved materials will be installed, IXC Engineering contact can
provide details.
- IXC will sign off on the install verifying quality and test results.
- Customer installation equipment must meet all applicable National Electric
Code requirements and any other applicable safety/building code
requirements.
For crossconnect and monthly recurring charges, please refer to the Ancillary
Pricing Schedule as part of the customer Digital Service Agreement.
IXC installation standards are available, and any questions, with regards to
installs, should be addressed with the site technician, prior to installation.
Standard CIF time lines will be maintained for rack installations, contact the
IXC CIF Specialist to review these time frames once site CIF space availability
have been confirmed.
* Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
-4-
EXHIBIT F
OC-N SPECIFICATIONS AND TESTING STANDARDS
EXHIBIT F
TO
IRU AND STOCK PURCHASE AGREEMENT
OC-N Specifications and Testing Standards
OC-3: The ANSI SONET (Synchronous Optical Network) transmission standard
for high capacity optical telecommunications whose line rate is 155.52 Mbps. One
OC-3 is comprised of 3 STS-1 Synchronous Transport Signal, Level 1 signals
which, at 51.84 Mbps, is the lowest level SONET signal. The STS-1 is defined at
the electrical level prior to optical conversion. These SONET standards and
elements are further defined in the "Bellcore Synchronous Optical Network
(SONET) Transport Systems: Common Generic Criteria GR-253-CORE, Issue 2,
December, 1995."
OC-12: The ANSI SONET (Synchronous Optical Network) transmission standard
for high capacity optical telecommunications whose line rate is 622.08 Mbps. One
OC-12 is comprised of 12 STS-1 Synchronous Transport Signal, Level 1 signals
which, at 51.84 Mbps, is the lowest level SONET signal. The STS-1 is defined at
the electrical level prior to optical conversion. These SONET standards and
elements are further defined in the "Bellcore Synchronous Optical Network
(SONET) Transport Systems: Common Generic Criteria GR-253-CORE, Issue 2,
December, 1995."
OC-48: The ANSI SONET (Synchronous Optical Network) transmission standard
for high capacity optical telecommunications whose line rate is 2488.32 Mbps.
One OC-48 is comprised of 48 STS-1 Synchronous Transport Signal, Level 1 signals
which, at 51.84 Mbps, is the lowest level SONET signal. The STS-1 is defined at
the electrical level prior to optical conversion. These SONET standards and
elements are further defined in the "Bellcore Synchronous Optical Network
(SONET) Transport Systems: Common Generic Criteria GR-253-CORE, Issue 2,
December, 1995."
The optical interface/demarcation for the SONET OC-3, OC-12, and OC-48
tributary signals will occur at the Texas optical interconnect panel. The
optical connector standardized for use at Texas locations is the Ultra Polished
FC/PC connector with a return loss greater than 45 dB. All optical signals at
this demarcation must equal or exceed the applicable Bellcore specifications,
referenced above.
Testing Standards
Texas will test and turn-up the OC-3, OC-12, and/or OC-48 circuits to the
applicable demarcation point per this Agreement. The tests will be performed per
the applicable manufacturer's test specifications as it applies to the specific
type of traffic hand- off. The system will also be tested for a long-term
stability test running end-to-end for a period of 24 hours; Bit Error Rate (BER)
performance shall be no greater than 10-(1)(1).
Five (5) days prior to testing, Texas will notify Virginia verbally and in
writing of Texas' intent to complete testing of the applicable circuit
activation: Virginia will have the right but not the obligation to witness the
activation testing. Copies of test results will be provided to Virginia upon
completion of the activation tests. If Virginia is not present at time of
testing, a copy of the test results will be forwarded to same.
After Texas delivers circuits to PSINet, PSINet shall test same in
accordance with the following criteria, and accept installation segments of IRU
Capacity only after it meets the following:
- Optical signal strength and other characteristics are within industry
standards at each termination point as measured with appropriate test equipment.
- Backup path verified by testing fault switching hardware applicable to
the circuit being provided (test of 1:1 redundancy on the optronics).
- Packet data passed with payload contents of 4500 bytes of all zeros for
twelve hours registering frame/code violations or other bit errors at a rate not
to exceed 10-(1)(1).
- Packet data passed with payload contents of 4500 bytes of pseudo- random
data patterns for twelve hours registering frame/code violations or other bit
errors at a rate not to exceed 10-(1)(1).
- Live production data passed for twelve hours registering frame/code
violation or other bit errors at a rate not to exceed 10-(1)(1).
- Each segment, regardless of capacity meets the applicable Bellcore
specification, and equipment manufacturer's specification to the applicable
demarcation point per this Agreement.
Virginia shall, within 5 business days of delivery either accept or reject
the IRU Capacity for each segment delivered. As soon as Virginia discovers a
problem in testing, Virginia shall notify Texas. If rejected, Virginia shall
specify, in good faith, the defect or failure in each segment rejected within
the applicable 5-business day period. In the event Virginia rejects, Texas shall
promptly, and at no cost to Virginia, commence to remedy the defect or failure
and, following such remedy, deliver the capacity to Virginia. Virginia, shall
provisionally be deemed to have accepted the IRU Capacity for the applicable
segment at the Final Delivery Date (as defined). The "Final Delivery Date" shall
mean the first date that Texas delivered the relevant segment of the IRU
Capacity to Virginia which was followed by either acceptance by Virginia or a
failure by Virginia to reject the IRU Capacity on such segment within the
required time.
The foregoing procedures shall apply again and successively thereafter
until the defects and/or failures have been remedied, and Virginia accepts the
applicable segment. The date when Virginia accepts the applicable segments shall
be the Acceptance Date.
EXHIBIT G
PSINET'S BANDWIDTH
FORECAST
Non-Binding Three-Year Forecast of Bandwidth Requirements
PSINet will order approximately an OC-12 along a route traversing the Available
continental US every six months during the Term. The actual route will depend
upon availability of Bandwidth on the Available System. Every six months during
the Term, PSINet will attempt to add an OC-12 among all needed routes, perhaps
with breaks in the route at different POPs each time, until each route has four
OC-12's. A likely schedule, again depending upon availability of Bandwidth on
the Available System, is as follows:
Six Month Interval OC-12 miles ordered
1 5,000+
2 6,000
3 8,000
4 10,000
5 10,000
6 10,000
During the first interval, PSINet also anticipates ordering a system-wide DS-3,
which is likely to amount to the equivalent of approximately 700 OC-12 route
miles.
EXHIBIT G-1
TO
IRU AND STOCK PURCHASE AGREEMENT
INITIAL ORDER FOR BANDWIDTH
PSINet's initial order for Bandwidth consists of one OC-12 per segment along
each of the following routes, each such segment requested to be delivered by IXC
as of the respective dates provided below:
Group 1
*
Group 2
*
These orders are for express routes with no intermediate drops. The delivery
date for each route will be as set forth below:
Group 1 The later of January 1, 1998, or six (6) months after Closing or
60 days after completion of the applicable route.
Group 2 The later of June 1, 1998, or 60 days after completion of the
applicable route.
* PSINet acknowledges that IXC does not currently plan to complete this route
by July 1, 1998.
* Confidential material has been omitted and filed separately with the
Securities and Exchange Commission
EXHIBIT H
MULTIPLEXING FEES
EXHIBIT H
TO
IRU AND STOCK PURCHASE AGREEMENT
MULTIPLEXING FEES
Cost Per On-net NEW Circuit Non-recurring Installation/Provisioning Costs
including Channelization equipment*
City A/City Z DS3 OC3 Tier A OC3 Tier B OC12 Tier A OC12 Tier B OC48
DS3 * x x x x x
OC3 Tier A x * * x x x
OC3 Tier B x * * x x x
OC12 Tier A x x x * * x
OC12 Tier B x x x * * x
OC48 x x x x x *
* Time and Materials Rates to be determined and applied for new
interconnection cabling/infrastructure required between PSINet and IXC
demarcation. Rates/Costs do not include any rates/costs of drops.
** Applies to second channel overbuild on a spur or moving an OC-48.
*** OC-12 charges do not apply to initial installs
Tier A Cities: WASHDC, PHLAPA, NYCMNY, HDSNOH, CHCGIL, KSCYMO, JPLNMO, DLLSTX,
HSTNTX, PHNXAZ, LSANCA, ATLNGA, and as modified by IXC in future fiber builds.
Tier B Cities: All On-net cities listed on the Available System other than Tier
A cities.
* Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
EXHIBIT I
TO
IRU AND STOCK PURCHASE AGREEMENT
RECONFIGURATION FEES
(See Exhibits E and H)
EXHIBIT J
NEWCO CERTIFICATE OF INCORPORATION
EXHIBIT K
POPSPACE
EXHIBIT K
TO
IRU AND STOCK PURCHASE AGREEMENT
POP Space
"POP" shall mean any of IXC's junction or terminal locations located on the
fiber route that constitutes the completed portion of the Available System, as
selected by written notice from PSINet to IXC, provided that (i) there shall be
no more than * POP's so selected; (ii) a selection, once made, cannot be
changed, provided that if IXC moves a POP, the new location will be considered
the same as the old one for purposes of this clause (ii); and (iii) in no event
will PSINet have the right to select as POPs both a terminal and a junction in
or near the same metropolitan statistical area. Notwithstanding the foregoing,
PSINet and IXC may agree (separately from the Collocation Agreement) that PSINet
may rent cabinet space in other IXC locations and PSINet shall be permitted to
use its IRU fiber and IRU capacity between IXC terminals and junctions on the
Available System in or near the same metropolitan statistical area.
* Confidential material has been omitted and filed separately with the
Securities and Exchange Commission
EXHIBIT L
PSINET DISCLOSURE
SCHEDULE
Exhibit L to the
IRU and Stock Purchase
Agreement
PSINet Disclosure Schedule
13.2 Material Governmental Authority Consents
13.4 Capitalization
13.5 Material Adverse Change
13.6 Other Consents
13.7 Litigation
13.9 Other Agreements
The following information constitutes the PSINet Disclosure Schedule to
that certain IRU and Stock Purchase Agreement dated as of July 21, 1997 between
PSINet Inc. and IXC Internet Services, Inc. (the "Agreement"). Capitalized terms
used in this PSINet Disclosure Schedule which are not otherwise defined herein
shall have the respective meanings ascribed thereto in the Agreement. All
references herein to Sections are to Sections of the Agreement unless otherwise
noted. The representations and warranties in Section 13 of the Agreement are
made and given subject to the disclosures in this PSINet Disclosure Schedule and
the exceptions set forth herein. This PSINet Disclosure Schedule is incorporated
into the Agreement by reference and made a part thereof. This PSINet Disclosure
Schedule incorporates by reference all applicable information contained in the
PSINet Filings with the Securities and Exchange Commission. Disclosure of
information in any Section of the PSINet Disclosure Schedule, shall be deemed to
be disclosure in each other Section of the PSINet Disclosure Schedule.
Disclosure of any information in the PSINet Disclosure Schedule, whether or not
in response to a requirement contained in the Agreement to schedule material
matters or matters outside the ordinary course of business, shall not be deemed
to be an admission by PSINet that such information is material or outside the
ordinary course of business nor is it or shall it be deemed to be a
representation that such information must be set forth on this PSINet Disclosure
Schedule or otherwise in the Agreement. Nothing in this PSINet Disclosure
schedule shall constitute an admission of any liability or obligation of PSINet
or its affiliates to any third party nor an admission against PSINet or its
Affiliates' interests.
Section 13.2
Material Governmental Authority Consents
1. Filing of a Form D (if elected by PSINet), Form 8-A, Form 8-B, Forms 8-
K, Forms S-8, Proxy Statement, registration statement(s) under the Securities
Act, request for confidential treatment and any related documents with the
Commission.
2. Such filings with the Commission as may be required under the
Registration Rights Agreement contemplated by Section 15.9.
3. Such consents, approvals, authorizations, designations, declarations or
filings as may be required under state securities laws in connection with the
issuance of any Acquired Shares or under federal or state law in connection with
the Registration Rights Agreement contemplated by Section 15.9 of the Agreement
or in connection with any transfer of Acquired Shares.
4. Filing with National Association of Securities Dealers, Inc. of one or
more listing applications and of documents filed with the Commission.
5. Such consents, approvals, authorizations, designations, declarations or
filings as may be required under state corporation and tax laws in connection
with the Reincorporation.
6. Such filings and notifications as may be required under the
Xxxx-Xxxxx-Xxxxxx Act.
7. Such filings as may be required with the U.S. Patent and Trademark
Office and of copyright amendments in connection with the Reincorporation.
8. Such filings of UCC financing statements and other documents and
instruments as may be required in connection with the Reincorporation.
Section 13.4
Capitalization
1. Upon the Closing Date, after giving effect to the Reincorporation and
assuming that PSINet does not designate any other series of Preferred Stock
prior to completion of the Closing, the authorized capital stock of PSINet will
consist of 200,000,000 shares of Common Stock, $.0001 par value per share,
29,000,000 shares of undesignated Preferred Stock, $.01 par value per share, and
1,000,000 shares of Series A Junior Participating Preferred Stock, $.01 par
value per share.
2. As of the date of this Agreement, there are no outstanding
subscriptions, options, warrants, call, rights or other agreements or
commitments to issue, sell, deliver or transfer any shares of Common Stock or
other shares of capital stock of PSINet except options to purchase
[7,557,065.49] shares of Common Stock (subject to adjustment as provided
therein) and warrants to purchase 224,274 shares of Common Stock (subject to
adjustment as provided therein).
3. See item 2 under Section 13.9 of the PSINet Disclosure Schedule.
Section 13.5
Material Adverse Change
1. Such changes as may have resulted from general economic or political
matters affecting the industries and markets in which PSINet's business operates
and/or the U.S. economy.
2. See item 1 under Section 13.9 of the PSINet Disclosure Schedule.
Section 13.6
Other Consents
1. Such consent as may be required by PSINet's bank lender, Fleet Bank of
Massachusetts, N.A. ("Fleet").
2. PSINet has a loan facility with Fleet pursuant to which it has granted
Fleet a lien on substantially all of its assets. Such lien would attach to the
IRUs and other rights and property conveyed to PSINet pursuant to the Agreement.
Section 13.7
Litigation
1. See item 1 under Section 13.9 of the PSINet Disclosure Schedule.
2. After the execution of the Joint Venture Agreement referred to in
Section 13.9 of the Disclosure Schedule, Institutional Trading Corporation
("ITC") commenced an action alleging that PSINet owed it an investment banking
finders fee or similar compensation in the amount of $1.5 million in connection
with the transactions contemplated by the Joint Venture Agreement and other
contractual claims. ITC has since withdrawn such action without prejudice. In
the event PSINet completes a transaction with Chatterjee (as defined in Section
13.9 of the PSINet Disclosure Schedule), PSINet believes it is likely that ITC
will commence a new action alleging similar claims with respect to such
transaction.
Section 13.9
Other Agreements
1. In September 1996, PSINet entered into a Joint Venture Agreement,
dated as of September 19, 1996 (the "Joint Venture Agreement") with Chatterjee
Management Company (doing business as The Chatterjee Group) ("Chatterjee")
pursuant to which PSINet and an investment group led by Chatterjee would
establish a joint venture for the purpose of building an Internet network across
Europe and providing Internet-related services in Europe and such investment
group would invest up to * in the joint venture. A copy of the original Joint
Venture Agreement with Chatterjee has been filed with the Commission (portions
of which are subject to a confidential treatment request and a complete copy
thereof is available for review by IXC). Under certain circumstances, Chatterjee
or its designee would have the right to require PSINet to issue to Chatterjee or
such designee such number of shares of PSINet Common Stock as shall equal (i)
the amount of investments made by Chatterjee or such designee (none has been
made to date) divided by (ii) $11.625, provided, however, that this right is was
not to be exercisable prior to October 1,1997 and under certain other
circumstances. No monies have been invested by Chatterjee or the investment
group pursuant to the Joint Venture Agreement nor were any other actions
undertaken to implement it. For several months, PSINet and Chatterjee have
discussed a substantive change to the structure discussed in the Joint Venture
Agreement which, if entered into, would have resulted in a * direct investment
in PSINet by Chatterjee *
By letter dated July 14, 1997, a copy of which has previously been
furnished to IXC, Chatterjee made certain statements concerning the negotiations
between Chatterjee and PSINet, including, without limitation, (i) Chatterjee's
conclusion that PSINet does not intend to proceed with the Joint Venture
Agreement or the substantive change to the structure discussed in the Joint
Venture Agreement(which Chatterjee claims had been agreed upon by PSINet) and
(ii) Chatterjee's statement that it will proceed based upon that conclusion.
PSINet has not yet responded to that letter. In the event PSINet and Chatterjee
do not complete this transaction (and PSINet presently believes it is likely
that the parties will not reach such an agreement), the Joint Venture Agreement
may be abandoned or Chatterjee may seek to commence arbitration or other
adversarial proceedings against PSINet under the Joint Venture Agreement and
related documents (seeking, among other things, to enforce the Joint Venture
Agreement) or otherwise.
2. PSINet has issued options and warrants as described in Section 13.4 of
the PSINet Disclosure Schedule and has stock option and similar plans, as
described in the PSINet Filings, pursuant to which PSINet may issue additional
options and share underlying such options.
* Confidential material has been omitted and filed separately with the
Securities and Exchange Commission
EXHIBIT M
TO
IRU AND STOCK PURCHASE AGREEMENT
IXC Internet Services, Inc. ("IXC")
Disclosure Schedule
to the
IRU and Stock Purchase Agreement
dated as of July 22, 1997 by and between
PSINet and IXC
(the "Purchase Agreement")
The representations and warranties in Section 14 of the Purchase Agreement
are made and given subject to the disclosures in this Disclosure Schedule and
the exceptions set forth herein. Unless otherwise defined herein, the
capitalized terms used herein shall have the meanings assigned to such terms in
the Purchase Agreement. Section references herein correspond to section
references in the Purchase Agreement. This Disclosure Schedule incorporates by
reference all applicable information contained in the IXC Communications, Inc.
filings with the Securities and Exchange Commission. The inclusion of any
information on this Disclosure Schedule is not, and shall not be deemed to be, a
representation that such information must be set forth on this Disclosure
Schedule or otherwise in the Purchase Agreement. Nothing in this Disclosure
Schedule shall constitute an admission of any liability or obligation of IXC, or
its affiliates to any third party nor an admission against IXC's or its
affiliates interests.
SECTION 14.2
Governmental Authorizations
A filing by IXC's ultimate parent to the Federal Trade Commission and the United
States Department of Justice under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976.
SECTION 14.3
Required Consents
Indenture dated as of October 5, 1995 by and among IXC Communications, Inc., the
Guarantors (as defined therein) and IBJ Xxxxxxxx Bank & Trust Company, as
Trustee with respect to the 12 1/2% Senior Notes due 2005.
SECTION 14.4
Pending Litigation
1. TEL CENTRAL COMMUNICATIONS, INC. VS IXC LONG DISTANCE, INC. U.S.
District Court, Western District of Missouri (Central Division) Civil Action No.
97-4095-CV-C
On April 4, 1997, Tel-Central Communications, Inc. ("Tel-Central")
filed a complaint against IXC-LD, one of IXC Communications, Inc.'s
subsidiaries, in the United States District Court in the Western District of
Missouri after IXC Communications, Inc. terminated service to Tel-Central for
failure to pay for services. Tel-Central's complaint makes various state and
federal law claims and seeks damages of over $100 million and asks for punitive
damages of $100 million. On May 23, 1997, Tel Central filed a voluntary Chapter
11 petition in bankruptcy. On May 30, 1997, IXC-LD filed a motion to dismiss the
complaint. The case is currently stayed as a result of the bankruptcy
proceedings.
2. XXXXXX BREED, ET AL., VS. IXC ADVANTAGE LONG DISTANCE, INC., IXC LONG
DISTANCE, INC., IXC COMMUNICATIONS, INC., ET AL. In the District Court of Xxxxxx
County, IXC, Cause No. 9705729
This action, filed May 27, 1997, was brought by a group of investors
in IXC Advantage Long Distance, Inc. ("IXC Advantage") who allege that IXC
Advantage and/or its Chief Executive Officer diverted funds from IXC Advantage
to form a new company named Free Plus Calling, Inc. A subsidiary of IXC
Communications, Inc. had invested in IXC Advantage, owned a 25% interest in IXC
Advantage, and one of such subsidiary's officers served on the board of
directors of IXC Advantage from its formation in mid-1994 until Mach of 1996.
The plaintiffs allege that as a result of the board seat, the defendants either
knew or should have known of the diversion of funds and hence became liable for
the conduct. The defendants currently have an extension of time to answer the
complaint.
3. XXXXXX XXXXXXXX ET AL., VS. XXXXXX COUNTY COMMISSIONERS, ET AL.,
INCLUDING IXC LONG DISTANCE, INC. State of Indiana, Xxxxxx Superior Court No.
55DO2-9701-CP-6
This action, filed on February 5, 1997, alleges the illegal
construction of fiber across plaintiffs' property. This portion of IXC Carrier,
Inc.'s network consists of an indefeasible right to use ("IRU") fibers from
WorldCom ("WorldCom, Inc."). IXC Carrier, Inc. acquired the IRU from WorldCom
pursuant to an IRU Agreement with WorldCom (the "IRU Agreement"). WorldCom has
accepted defendant's tender of defense and indemnity in this action pursuant to
the IRU Agreement.
4. IXC LONG DISTANCE, INC. VS. BUILDING FUTURES IN COMMUNICATIONS, INC.
This arbitration action was filed by IXC-LD on February 10, 1997
seeking $256,393 for past due services, plus additional amounts for accelerated
take-or-pay commitments under the terminated Telecommunications Services
Agreement between the parties dated April 19, 1996. Building Futures in
Communication, Inc. ("BFIC") had been terminated on IXC-LD's network on December
13, 1997 for non-payment. BFIC has counterclaims against IXC-LD for up to $1
million in actual damages plus punitive damages. Discovery is underway and no
arbitration date has yet been set.
5. IXC LONG DISTANCE, INC. VS. PRIME TELECOM, INC.
This arbitration action was filed by IXC-LD on January 14, 1997
seeking $134,187 for past due services, plus additional amounts for accelerated
take-or-pay commitments, under the terminated Telecommunications Services
Agreement between the parties dated May 25, 1995. Prime Telecom, Inc.'s services
had been terminated on IXC-LD's network on December 13, 1997 for non-payment.
Discovery is underway and no arbitration date has been set.
SECTION 14.7
Material Adverse Change
The facts or circumstances set forth in the IXC Communications, Inc.'s News
Release dated July 3, 1997 may cause a Material Adverse Change in IXC.
EXHIBIT N
REGISTRATION RIGHTS AGREEMENT
Exhibit N
EXHIBIT N
TO
IRU AND STOCK PURCHASE AGREEMENT
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made as of the day
of July, 1997 by and between , PSINet Inc., a New York corporation (the
"Company"), and IXC Internet Services, Inc. , a Delaware corporation ("IXC").
WITNESSETH:
WHEREAS, the Company and IXC have entered into an IRU and Stock Purchase
Agreement dated as of July 21, 1997 (the "IRU Agreement"), pursuant to which the
Company, will issue shares of Common Stock.
WHEREAS, it is a condition precedent to the consummation of the
transactions under the IRU Agreement that this Agreement be entered into.
WHEREAS, the Company has previously granted registration rights to certain
other holders of the Company's securities pursuant to the Amended and Restated
Registration Rights Agreement, the 2/8/95 Registration Rights Agreement, the
6/16/95 Registration Rights Agreement, the 7/11/95 Registration Rights Agreement
and the 9/19/96 Registration Rights Agreement.
WHEREAS, it is the intention of the parties to this Agreement that the
registration rights granted hereunder shall rank ratably with the registration
rights under the Amended and Restated Registration Rights Agreement, the 2/8/95
Registration Rights Agreement, the 6/16/95 Registration Rights Agreement, the
7/11/95 Registration Rights Agreement and the 9/19/96 Registration Rights
Agreement and with registration rights to be granted under other agreements as
more fully provided in Section 2.6 hereof.
WHEREAS, certain defined terms are set forth in Article I hereof.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, and in consideration of the mutual
covenants contained herein and for other good and available consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
indicated below:
"Amended and Restated Registration Rights Agreement" shall mean the Amended
and Restated Registration Rights Agreement dated as of January 17, 1995 among
the Company and the other parties thereto, as the same has been and hereafter
may be amended from time to time to add additional parties signatory thereto.
"Closing" shall mean the closing of the transactions contemplated under the
IRU Agreement as more specifically defined therein.
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Common Stock, $.01 par value per share, of
the Company.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Existing Registration Rights" shall have the meaning set forth in Section
2.7 hereof.
"Other Registration Rights" shall have the meaning set forth in Section 2.7
hereof.
"Person" shall mean any individual, corporation, partnership, firm, joint
venture, association, limited liability company, trust, unincorporated
organization, or other entity.
"primary offering" shall have the meaning set forth in Section 2.1 hereof.
"Registrable Securities" shall have the meaning set forth in Section 2.4
hereof.
"secondary offering" shall have the meaning set forth in Section 2.1
hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"2/8/95 Registration Rights Agreement" shall mean the Registration Rights
Agreement dated as of February 8, 1995 among the Company and the other parties
thereto, as the same may be amended from time to time and, to the extent, if
any, the same shall be in effect on the date hereof and remain in effect from
time to time hereafter.
"6/16/95 Registration Rights Agreement" shall mean the Registration Rights
Agreement dated as of June 16, 1995 among the Company and the other parties
-2-
thereto, as the same may be amended from time to time and, to the extent, if
any, the same shall be in effect on the date hereof and remain in effect from
time to time hereafter.
"7/11/95 Registration Rights Agreement" shall mean the Registration Rights
Agreement dated as of July 11, 1995 among the Company and the other parties
thereto, as the same may be amended from time to time and, to the extent, if
any, the same shall be in effect on the date hereof and remain in effect from
time to time hereafter.
"9/19/96 Registration Rights Agreement" shall mean the Registration Rights
Agreement dated as of September 19, 1996 between the Company and The Chatterjee
Management Company, as the same may be amended from time to time and, to the
extent, if any, the same shall be in effect on the date hereof and remain in
effect from time to time hereafter.
-3-
ARTICLE II
REGISTRATION RIGHTS
SECTION 2.1 OPTIONAL REGISTRATIONS
If at any time or times after the date hereof (so long as IXC shall own
Registrable Securities which are not eligible for sale by IXC under Rule 144(k)
of the Securities Act), the Company shall determine to register any shares of
Common Stock or securities convertible into or exchangeable or exercisable for
shares of the Common Stock under the Securities Act (whether in connection with
a public offering of securities by the Company (a "primary offering"), a public
offering of securities by shareholders (a "secondary offering"), or both, but
not in connection with a registration effected solely to implement an employee
benefit plan or a transaction to which Rule 145 or any other similar rule of the
Commission under the Securities Act is applicable), the Company will promptly
give written notice thereof to IXC. In connection with any such registration, if
within 30 days after receipt of such notice IXC requests the inclusion of some
or all of the Registrable Securities in such registration, the Company, subject
to Section 2.7 hereof, will use its reasonable best efforts to effect the
registration under the Securities Act of all such Registrable Securities;
provided, that such registration is in connection with an underwritten public
offering; and provided, further, that, if the underwriter determines that the
registration of securities in excess of any amount to be registered by the
Company would adversely affect such offering then the Company may (subject to
the allocation priority set forth below) exclude from such registration and
underwriting some or all of the Registrable Securities which would otherwise be
underwritten pursuant to the notice described herein. The Company shall advise
IXC promptly after such determination by the underwriter, and the number of
shares of securities that are entitled to be included in the registration and
underwriting shall be allocated in the following manner: the securities to be
sold by the Company shall be included in such registration and underwriting,
and, subject to Section 2.7 hereof, the number of additional shares that may be
included in the registration and underwriting shall be allocated among IXC and
all holders of other securities having registration rights granted by the
Company requesting that such other securities be included in such registration
and underwriting in proportion, as nearly as practicable, to their respective
holdings of Registrable Securities and such other securities. All expenses of
the registration and offering shall be borne by the Company, except that IXC and
all holders of other securities having registration rights granted by the
Company shall bear underwriting and selling discounts and commissions
attributable to their Registrable Securities or such other securities, as the
case may be, being registered, transfer taxes on shares being sold by IXC or the
other holders, as the case may be, and all fees and expenses of counsel for IXC
and such holders, as the case may be. Without in any way limiting the types of
registrations to which this Section 2.1 shall apply, in the event that the
Company shall effect a "shelf registration" under Rule 415 of the Securities Act
or any other similar rule or regulation, the Company shall take all necessary
action, including, without limitation, the filing of post-effective amendments,
to permit IXC to include its shares in such registration in accordance with the
terms of this Section 2.1.
SECTION 2.2 REQUIRED REGISTRATIONS
At any time or times after the date hereof (so long as IXC shall own
Registrable Securities which are not eligible for sale by IXC under Rule
144(k) of the Securities Act), IXC may notify the Company in writing that it
(i) intends to offer or cause to be offered for public sale all or any
portion of its Registrable Securities (such requests shall be in writing and
shall state the number of shares of Registrable Securities to be disposed of
and the intended
-4-
method of disposition of such shares by IXC) and (ii) request that the
Company cause such Registrable Securities to be registered under the Securities
Act; provided, however, that IXC may make only three requests for registration
under this Section 2.2. Upon receipt of such notification, subject to Section
2.7 hereof, the Company will notify all of the Persons who would be entitled to
notice of a proposed registration under Existing Registration Rights or Other
Registration Rights of its receipt of such notification. Upon the written
request of any such Person delivered to the Company within 30 days after receipt
from the Company of such notification, the Company will use its reasonable best
efforts to cause such Registrable Securities as may be requested by IXC or such
securities as may be requested by any such Person to be registered under the
Securities Act within 125 days of the notification by IXC, in accordance with
the terms of this Section 2.2; provided, however, that unless such registration
becomes effective and remains in effect for 60 days, such registration shall not
be counted as one of the three requests for registration that may be made by IXC
under this Section 2.2. IXC shall have the right to select the investment
banker(s) and manager(s) (which shall be of national standing and reputation) to
administer any underwritten public offering under this Section 2.2, subject to
the execution and delivery by such investment banker(s) to the Company of a
confidentiality agreement in form and substance satisfactory to the Company. If
requested in writing by the Company, IXC and the other Persons participating in
a registration under this Section 2.2 shall negotiate in good faith with any
underwriters retained in connection with the underwriting of such registration.
In the case of the registration of Registrable Securities in connection with an
underwritten public offering under this Section 2.2, if the underwriter
determines that the registration of securities in excess of an amount determined
by such underwriter would adversely affect such offering, then the Company may
(subject to the allocation priority set forth below) exclude from such
registration and underwriting some or all of the Registrable Securities and
other securities which would otherwise be underwritten pursuant to this Section
2.2. The Company shall advise IXC and the other Persons who requested to
participate in such registration promptly after such determination by the
underwriter, and the number of securities that are entitled to be included in
the registration and underwriting shall be allocated in the following manner:
subject to Section 2.7 hereof, the number of securities that may be included in
the registration and underwriting shall be allocated among IXC and such other
Persons requesting that Registrable Securities or other securities be included
in such registration and underwriting in proportion, as nearly as practicable,
to their respective holdings of Registrable Securities and other securities;
provided, however, that if the number of Registrable Securities pursuant to such
registration shall be reduced to a number which is less than 80% of the number
of Registrable Securities as to which IXC requested registration pursuant to
this Section 2.2, then such registration shall not be counted as one of the
three requests for registration that may be made by IXC under this Section 2.2.
All expenses of such registration and offering and the reasonable fees and
expenses of one independent counsel for IXC and the other Persons who requested
to participate in such registration shall be borne by the Company; provided,
however, that (i) the Company shall have no liability for such expenses if such
registration does not become effective due solely to the action or failure to
act of IXC and (ii) IXC and other Persons who requested to participate in such
registration shall bear underwriting and selling discounts and commissions
attributable to their Registrable Securities or other securities being
registered and transfer taxes on shares being sold by them. The Company may
postpone the filing of any registration statement required hereunder for a
reasonable period of time, not to exceed 90 days during any 12 month period of
time, if the Company has been advised by legal counsel that such filing would
require the disclosure of a material transaction or other matter and the Company
determines reasonably and in good faith that such disclosure would have a
material adverse effect on the Company. Notwithstanding anything in this Section
2.2 to the contrary, the Company shall not be required to effect a registration
under this Section 2.2 more than 135 days following the end of the Company's
fiscal year, if such registration shall require the preparation of audited
financial statements for
-5-
any interim period not otherwise prepared by the Company. If a demand
registration is requested during such period, subject to the second preceding
sentence, the Company will commence such registration promptly following the
end of the next fiscal year. The Company will enter into customary agreements
(including underwriting agreements) reasonably acceptable to the Company to
facilitate the demand registrations provided for above.
SECTION 2.3 FORM S-3 SHELF REGISTRATION
IXC shall have the right to request and have effected up to one
registration every six months of Registrable Securities on Form S-3 or any
successor form or, if Form S-3 or any successor form is not available, any
appropriate form under the Act (the "Shelf Registration Statement") for an
offering to be made on a continuous basis covering all the Registrable
Securities (the "Shelf Registration") (such request shall be in writing and
shall state the number of shares of Registrable Securities to be disposed of and
the intended method of disposition of such shares by IXC) provided that the
Registrable Securities for which such registration is requested are not eligible
for sale by IXC under Rule 144(k) of the Securities Act. Subject to the
provisions of applicable law, the Company will use its reasonable best efforts
to (i) file the Shelf Registration Statement to effect the registration of all
shares of Registrable Securities within 30 days of such request and (ii) cause
the Shelf Registration Statement to become effective under the Act on or prior
to the date 45days from the date of filing and (iii) keep the Shelf Registration
Statement continuously effective for 60 days from the date the Registration
Statement becomes effective under the Act. All expenses in connection with a
registration requested pursuant to this Section 2.3 shall be borne by the
Company; provided, however, that (i) the Company shall have no liability for
such expenses if such registration does not become effective due solely to the
action or failure to act of IXC and (ii) IXC shall bear underwriting and selling
discounts and commissions, if any, attributable to its Registrable Securities
being registered, transfer taxes on shares being sold by it and all fees and
expenses of its counsel. The Company may postpone the filing of any registration
statement required hereunder for a reasonable period of time, not to exceed 90
days, if the Company has been advised by legal counsel that such filing would
require the disclosure of a material transaction or other factor which would not
otherwise be required to be disclosed at such time and the Company determines
reasonably and in good faith that such disclosure would have a material adverse
effect on the Company with respect to the registration of the Registrable
Securities. The shelf-registration statement may also include securities held or
to be held by other holders of the Company's securities.
SECTION 2.4 REGISTRABLE SECURITIES
For purposes of this Agreement, the term "Registrable Securities" shall
mean the Common Stock issued or issuable under the IRU Agreement and any Common
Stock issued or issuable with respect thereto by way of a stock dividend or
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization.
SECTION 2.5 FURTHER OBLIGATIONS OF THE COMPANY
Whenever the Company is required under this Article II to register any
Registrable Securities, it agrees that it shall also do the following:
(a) Use its reasonable best efforts to diligently prepare and file
with the Commission a registration statement and such amendments and supplements
to said registration statement and the prospectus used in connection therewith
as may be necessary to keep said registration statement effective (but, in the
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case of a registration under this Agreement, for no more than 60 days after the
initial effective date of the registration statement) and to comply with the
provisions of the Securities Act with respect to the sale of securities covered
by said registration statement for the period necessary to complete the proposed
public offering; provided, however, the Company may suspend the effectiveness of
any registration statement filed hereunder for a reasonable period of time, not
to exceed 90 days, if the Company has been advised by legal counsel that
maintaining such effectiveness would require the disclosure of a material
transaction or other matter and the Company determines reasonably and in good
faith that such disclosure would have a material adverse effect on the Company;
provided, further, that in the event of any such suspension of effectiveness,
the 60 day period of effectiveness required above shall be deemed tolled for the
number of days the effectiveness of such registration statement was suspended
and, if any securities covered by such registration statement remain unsold, the
Company shall thereafter take all necessary actions, including, without
limitation, the filing of post-effective amendments, to cause such registration
statement to become effective for the remainder of such 60 day period;
(b) Furnish to IXC such copies of each preliminary and final
prospectus and such other documents as IXC may reasonably request to facilitate
the public offering of its Registrable Securities;
(c) Use its reasonable best efforts to register or qualify the
securities covered by said registration statement at the Company's expense under
the securities or "blue-sky" laws of such jurisdiction as IXC may reasonably
request, provided that the Company shall not be required to register or qualify
the securities in any jurisdictions which require it to qualify to do business
or subject itself to taxation or general service of process therein;
(d) Immediately notify IXC, at any time when a prospectus relating to
its Registrable Securities is required to be delivered under the Securities Act,
of any stop order issued or threatened by the Commission or of the happening of
any event as a result of which such prospectus contains an untrue statement of a
material fact or omits any material fact necessary to make the statements
therein not misleading, and, at the request of IXC, prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of such Registrable Securities, such prospectus will not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein not misleading;
(e) Cause all such Registrable Securities to be listed on NASDAQ or
included in each securities exchange or quotation system on which similar
securities issued by the Company are then listed;
(f) Otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission and make generally available
to its security holders, in each case as soon as practicable, but not later than
30 days after the close of the period covered thereby, an earnings statement of
the Company which will satisfy the provisions of Section 11(a) of the Securities
Act; and
(g) Choose the underwriters (except as otherwise provided in Section
2.2 hereof), auditors, Company legal counsel and financial printer to be engaged
by the Company in any such registration.
SECTION 2.6 NO TRANSFER OF REGISTRATION RIGHTS
The registration rights of IXC under this Agreement may not be transferred
or assigned except to IXC Communications, Inc. or a controlled affiliate of IXC
Communications, Inc.; provided that such transferee shall have entered into an
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agreement substantially the same as that set forth in Section 15.8 of the IRU
Agreement.
SECTION 2.7 PRIOR AND OTHER REGISTRATION RIGHTS AGREEMENTS
Notwithstanding any provision hereof to the contrary, the provisions of
this Article II: (i) shall rank ratably with the registration rights granted
under the Amended and Restated Registration Rights Agreement (the "Amended
Registration Rights") and, to the extent the provisions of this Article II
conflict or are inconsistent with any such Amended Registration Rights, such
conflict or inconsistency shall be resolved in a manner which, to the greatest
extent reasonably feasible, affords IXC and the holders of such Amended
Registration Rights, the ratable benefits of this Article II and such Amended
Registration Rights; (ii) shall rank ratably with the registration rights
granted under the 2/8/95 Registration Rights Agreement (the "2/8/95 Registration
Rights") and, to the extent the provisions of this Article II conflict or are
inconsistent with any such 2/8/95 Registration Rights, such conflict or
inconsistency shall be resolved in a manner which, to the greatest extent
reasonably feasible, affords IXC and the holders of the 2/8/95 Registration
Rights, the ratable benefits of this Article II and such 2/8/95 Registration
Rights; (iii) shall rank ratably with the registration rights granted under the
6/16/95 Registration Rights Agreement (the "6/16/95 Registration Rights") and,
to the extent the provisions of this Article II conflict or are inconsistent
with any such 6/16/95 Registration Rights, such conflict or inconsistency shall
be resolved in a manner which, to the greatest extent reasonably feasible,
affords IXC and the holders of the 6/16/95 Registration Rights, the ratable
benefits of this Article II and such 6/16/95 Registration Rights; (iv) shall
rank ratably with the registration rights granted under the 7/11/95 Registration
Rights Agreement (the "7/11/95 Registration Rights") and, to the extent the
provisions of this Article II conflict or are inconsistent with any such 7/11/95
Registration Rights, such conflict or inconsistency shall be resolved in a
manner which, to the greatest extent reasonably feasible, affords IXC and the
holders of the 7/11/95 Registration Rights, the ratable benefits of this Article
II and such 7/11/95 Registration Rights; (v) shall rank ratably with the
registration rights granted under the 9/19/96 Registration Rights Agreement (the
"9/19/96 Registration Rights") and, to the extent the provisions of this Article
II conflict or are inconsistent with any such 9/19/96 Registration Rights, such
conflict or inconsistency shall be resolved in a manner which, to the greatest
extent reasonably feasible, affords IXC and the holders of the 9/19/96
Registration Rights, the ratable benefits of this Article II and such 9/19/96
Registration Rights; and (vi) shall rank ratably with the registration rights to
be granted under any other agreement in connection with the original issuance of
any other capital stock of the Company (the "Other Registration Rights") and, to
the extent the provisions of this Article II shall conflict with any such Other
Registration Rights, such conflict shall be resolved in a manner which, to the
greatest extent reasonably feasible, affords IXC and the holders of such Other
Registration Rights, the ratable benefits of the provisions of this Article II
and such Other Registration Rights.
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ARTICLE III
INDEMNIFICATION AND CONTRIBUTION
SECTION 3.1 INDEMNIFICATION
Incident to any registration statement referred to in this Agreement, and
subject to applicable law, the Company will indemnify and hold harmless each
underwriter, IXC (including its directors, officers, employees and agents), and
each person who controls any of them within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages, expenses and liabilities, joint or several (including
any investigation, legal and other expenses incurred in connection with, and any
amount paid in settlement of, any action, suit or proceeding or any claim
asserted), to which they, or any of them, may become subject under the
Securities Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities arise out of or are based on (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement
(including any related preliminary or definitive prospectus, or any amendment or
supplement to such registration statement or prospectus), (ii) any omission or
alleged omission to state in such document a material fact required to be stated
in it or necessary to make the statements in it not misleading, or (iii) any
violation by the Company of the Securities Act, any state securities or "blue
sky" laws or any rule or regulation thereunder in connection with such
registration; provided, however, that the Company will not be liable to the
extent that such loss, claim, damage, expense or liability (x) arises from and
is based on an untrue statement or omission or alleged untrue statement or
omission made in reliance on and in conformity with information furnished in
writing to the Company by or on behalf of such underwriter, IXC or controlling
person expressly for use in such registration statement or (y) provided that the
Company has theretofore timely prepared all necessary prospectus supplements or
amendments and provided them to IXC or its representative, arises from the
failure of IXC or any underwriter to comply with such prospectus delivery
requirements as are applicable to it. With respect to losses, claims, damages,
expenses and liabilities arising out of or based upon such untrue statement or
omission or alleged untrue statement or omission in the information furnished in
writing to the Company by or on behalf of IXC expressly for use in such
registration statement or such failure to comply with such prospectus delivery
requirements, IXC will indemnify and hold harmless each underwriter, the Company
(including its directors, officers, employees and agents), and each person who
controls any of them within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages, expenses and liabilities, joint or several, to which they, or any of
them, may become subject under the Securities Act, the Exchange Act or other
federal or state statutory law or regulation, at common law or otherwise to the
same extent provided in the immediately preceding sentence. In no event,
however, shall the liability of IXC for indemnification under this Section 3.1
exceed the proceeds received by it from its sale of Registrable Securities under
such registration statement.
SECTION 3.2 CONTRIBUTION
If the indemnification provided for in Section 3.1 above for any reason is
held by a court of competent jurisdiction to be unavailable to an indemnified
party in respect of any losses, claims, damages, expenses or liabilities
referred to therein, then each indemnifying party under this Article III, in
lieu of indemnifying such indemnified party thereunder, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, expenses or liabilities in such proportion as is appropriate to
reflect the relative benefits received by the Company, IXC and the underwriters
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from the offering of the Registrable Securities as well as the relative fault of
the Company, IXC and the underwriters in connection with the statements or
omissions which resulted in such losses, claims, damages, expenses or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company, IXC and the underwriters shall be
deemed to be in the same respective proportions as the net proceeds from the
offering (before deducting expenses) received by the Company and IXC and the
underwriting discount received by the underwriters, in each case as set forth in
the table on the cover page of the applicable prospectus, bear to the aggregate
public offering price of the Registrable Securities. The relative fault of the
Company, IXC and the underwriters shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company, IXC or the underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and IXC agree that it would not
be just and equitable if contribution pursuant to this Section 3.2 were
determined by pro rata or per capita allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in this paragraph. In no event, however, shall IXC be required to contribute
any amount under this Section 3.2 in excess of the proceeds received by it from
its sale of Registrable Securities under such registration statement. No person
found guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
SECTION 3.3 EXPENSES, ETC.
(a) The amount paid or payable by an indemnified party as a result of
the losses, claims, damages and liabilities referred to in this Article III
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim. The
indemnification and contribution provided for in this Article III will remain in
full force and effect regardless of any investigation made by or on behalf of
the indemnified parties or any officer, director, employee, agent or controlling
person of the indemnified parties.
(b) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in an underwriting agreement
entered into in connection with any registration statement referred to in this
Agreement are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall control.
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ARTICLE IV
RULE 144
SECTION 4.1 RULE 144 REPORTING
With a view to making available the benefits of certain rules and
regulations of the Commission which may permit the sale of the Registrable
Securities to the public without registration, the Company agrees to: (i) at all
times make and keep public information available as those terms are understood
and defined in Rule 144 under the Securities Act (and any successor rule to Rule
144); (ii) file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and (iii) furnish to IXC as promptly as possible upon its request a written
statement by the Company confirming its compliance with the reporting
requirements of Rule 144 and of the Securities Act and the Exchange Act, a copy
of the most recent annual or quarterly report of the Company, and any other
reports and documents so filed as IXC may reasonably request in availing itself
of any rule or regulation of the Commission allowing it to sell any such
securities without registration.
SECTION 4.2 USE OF RULE 144
IXC shall endeavor to sell its Registrable Securities whenever possible in
transactions pursuant to Rule 144 under the Securities Act (and any successor
rule to Rule 144) rather than pursuant to registrations effected under this
Agreement so long as such sales may be effected in compliance with the
requirements of Rule 144 (or any successor rule to Rule 144).
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ARTICLE V
GENERAL
SECTION 5.1 GRANTING OF RIGHTS AGREEMENTS
The Company shall not grant any registration rights in respect of any
shares of capital stock of the Company or other securities of the Company if
such rights would be superior to the registration rights granted to IXC under
this Agreement; provided, however, that IXC hereby consents and agrees that the
Company may grant in other agreements to other holders of securities of the
Company registration rights which rank ratably with the registration rights
granted hereunder to IXC.
SECTION 5.2 AMENDMENTS, WAIVERS AND CONSENTS
For purposes of this Agreement and all agreements, documents and
instruments executed pursuant hereto, except as otherwise specifically set forth
herein or therein, no course of dealing between the Company and IXC and no delay
on the part of any party hereto in exercising any rights hereunder or thereunder
shall operate as a waiver of the rights hereof or thereof. No covenant or other
provision hereof or thereof may be waived or amended other than by a written
instrument signed by the party so waiving or amending such covenant or other
provision. Any waiver or amendment affected in accordance with this Section 5.2
shall be binding upon IXC and the Company at the time such waiver or amendment
is effected.
SECTION 5.3 SURVIVAL OF COVENANTS; ASSIGNABILITY OF RIGHTS
All covenants and agreements of the Company or IXC made herein shall
survive until fully discharged; provided, however, that notwithstanding any
provision of this Agreement to the contrary, in no event shall IXC be entitled
to any registration rights hereunder to the extent that it could sell pursuant
to Rule 144(k) under the Securities Act Registrable Securities which it desires
to register under the Securities Act pursuant to Sections 2.1, 2.2 or 2.3 hereof
or at any time after one year following the date at which the IRU Agreement is
no longer in effect. This Agreement may not be assigned by IXC except as set
forth in Section 2.6. All covenants and agreements of the Company herein shall
bind the Company's successors and assigns, whether so expressed or not, and,
except as otherwise provided in this Agreement, all such covenants and
agreements shall inure to the benefit of IXC's successors and assigns.
SECTION 5.4 GOVERNING LAW
This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York without reference to its
principles of conflicts of law.
SECTION 5.5 HEADINGS
The headings used in this Agreement have been inserted for reference
purposes only and shall not control or affect in any manner the meaning or
interpretation of any provision of this Agreement.
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SECTION 5.6 PRONOUNS
All pronouns and any variation thereof, shall be deemed to refer to the
masculine, feminine or neuter, singular or plural, as the identity of the person
or persons may require.
SECTION 5.7 NOTICES AND DEMANDS
Any notice or demand which, by any provision of this Agreement or any
agreement, document or instrument executed pursuant hereto or thereto, except as
otherwise provided therein, is required or provided to be given shall be deemed
to have been sufficiently given or served and received for all purposes when
delivered or 5 days after being sent by certified or registered mail, postage
and charges prepaid, return receipt requested, or by express delivery providing
receipt of delivery, to the following addresses: if to the Company, at 000
Xxxxxxx Xxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000, or at such other address designated
by the Company to IXC in writing; if to IXC, at its mailing address maintained
on the books and records of the Company, or at such other address designated by
IXC to the Company in writing.
SECTION 5.8 SEVERABILITY
The invalidity or unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of the remaining provisions of this
Agreement, and this Agreement shall be construed in all respects as if such
invalid or unenforceable provision were omitted. All provisions of this
Agreement shall be enforced to the full extent permitted by law.
SECTION 5.9 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement among the parties
pertaining to the subject matter hereof and supersedes and cancels all other
prior agreements, understandings, negotiations and discussions, whether written
or oral, relating to the subject matter hereof.
SECTION 5.10 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original, and all of which together shall be deemed one
and the same instrument.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
PSINET INC.
By:
Name:
Title:
Accepted and Agreed as of the
date first above written.
IXC INTERNET SERVICES, INC.
By:
Name:
Title:
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