EXHIBIT 10.35
June 19, 1997
Concentric Network Corporation
00000 X. Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Chief Financial Officer
Re: Service Credits - Letter Agreement
In connection with the execution of (i) the Amended & Restated Employee
Services and Staffing Agreement between Critical Technologies, Inc. ("CTI") and
Concentric Network Corporation ("CNC") of even date herewith (the "ESS
Agreement") and (ii) the $1,100,000 Obligation - Letter Agreement among Xxxxxxxx
Communications Group, Inc., CTI and CNC of even date herewith, Xxxxxxxx
Communications Group, Inc. and its affiliates (hereinafter collectively referred
to as "WCG") agree to provide CNC with credits which, under certain
circumstances, can be used to offset the purchase price of "Services" (as
hereinafter defined). The terms and conditions associated with the use of such
Service credits are set forth below.
1. "Services" are defined as inter-exchange multimedia telecommunications
carrier services provided by WCG which have not been previously provided to CNC
as of the date of this Letter Agreement. Services may include the following:
Inter-exchange Telecommunications Carrier Services
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Wide Area ATM
Private Line Services
Frame Relay Services
Collocation Services, existing and new
WCG Agency services
Others to be defined
Planned Services
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CLEC services
xDSL services
Switched 1+, 1-800, 1-900, etc.
IP Voice Services
IP Video Services
However, such multi-media Services shall not include any services to be provided
under the ESS Agreement with CTI. Further, the Services provided by WCG shall
be used strictly for video
transmission or multimedia applications, including, but not limited to Internet
access, web site hosting, web site mirroring, and similar Internet-related
services.
2. CNC's credit for Services will apply on all WCG charges for Services
under the Master Agreement (as hereinafter defined), but shall not apply to
Third Party Costs. Third Party Costs shall include charges reasonably necessary
to render the Services and paid by WCG to an unaffiliated entity or entities
including, but not limited to, local access charges, taxes, installation
charges, off-network charges, one time fees and other similar costs. The
Services credit will be applied to each monthly WCG invoice at a rate of fifty
percent (50%) of the face value of Services (after payment in full by CNC of all
Third Party Costs) until the credit is consumed in its entirety. No Service
credits can be utilized if CNC is past due with respect to any invoice from WCG.
All remaining charges for Services after application of the credits for WCG
Services will be paid entirely in cash by CNC. If the Services credit is not
utilized within five (5) years of the closing of the Financing Event, the
credits shall expire and CNC shall not be entitled to any refund, further credit
or other payment for any of the unused credits.
3. CNC will be entitled to utilize the Service credits on all Service
charges incurred by CNC under the Master Agreement. The Master Agreement shall
be negotiated by CNC and WCG in connection with WCG's participation in the
"Financing Event" described in the Memorandum of Understanding between WCG and
CNC dated as of May 30, 1997. The Master Agreement will set forth CNC's
obligation to purchase in the aggregate a total of at least $21.2 million of
telecommunications equipment and Services from WCG (the $21.2 million shall
include the Services credit amount). CNC will agree in this document to meet
the $21.2 million commitment by purchasing at least $16.2 million in Services
and no more than $5 million in equipment during the five (5) year period
following the closing of the Financing Event. The parties recognize that if the
Financing Event does not occur and/or the terms and conditions of the Master
Agreement can not be negotiated to each party's satisfaction that CNC will have
no purchase obligation with respect to WCG Services and equipment. In such an
event, CNC shall be entitled to utilize the Service credits to purchase Services
from WCG subject to the same terms and conditions as set forth in paragraph 2
above. CNC will not be entitled to any cash refund or other form of
reimbursement from WCG for any unused Service credits granted under this Letter
Agreement or otherwise.
4. Upon execution of this Letter Agreement by both parties, CNC will be
entitled to $1.1 million of Service credits under the Master Agreement.
Further, WCG will provide additional Service credits for the positive dollar
difference between (i) the WCG benefit rate (currently 27.2%) multiplied by the
"Base Salary Rate" of each "Loaned Employee" actually charged to CNC and (ii)
the CNC benefit rate multiplied by the "Base Salary Rate" of each "Loaned
Employee" actually charged to CNC (which CNC benefit rate shall in no event be
lower than 19.6% during the remaining term of the ESS Agreement). The amount of
such credits shall be computed monthly and allocated to CNC's account once CNC
pays CTI pursuant to Section 5.7 of the ESS Agreement for such month. The CNC
and WCG benefit rates will be reviewed and updated on January 1 of each year and
the amount of credits allocated to CNC shall be adjusted accordingly. The terms
"Base Salary Rate" and "Loaned Employees" shall have the meanings set forth in
the ESS Agreement.
Page 3
The parties have executed this Letter Agreement by their duly authorized
representatives as of June 19, 1997.
XXXXXXXX COMMUNICATIONS GROUP. INC.
By:/s/
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Its:
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Agreed and Accepted
CONCENTRIC NETWORK CORPORATION
By: /s/
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Its:
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