IRU Capacity Agreement - AT&T Corp. and Tel-Save Inc.
IRU CAPACITY AGREEMENT
This IRU Capacity Agreement (the "Agreement") is entered into as of
December 31, 1998 (the "Effective Date") between AT&T Corp. ("AT&T"), a New York
corporation with offices at 295 North Maple Avenue, Basking Ridge, New Jersey
07920, and Tel-Save, Inc. ("Tel-Save"), a Pennsylvania corporation with offices
at 8805 Route 202, New Hope, Pennsylvania 18938.
BACKGROUND
This Agreement is made with reference to the following facts:
A. AT&T operates a fiber optic communications system (as such system
exists now, and as it is modified from time to time, the "AT&T Network").
B. AT&T desires to provide, and Tel-Save desires to obtain, an
indefeasible right to use optical fibers and dedicated circuit capacity derived
with network electronics and circuit electronics on the AT&T Network.
TERMS OF AGREEMENT
1. Definitions
1.1 "Tel-Save Backbone Network" shall mean, at any date, the Tel-Save
Routes as of that date.
1.2 "Capacity" shall mean the DS-3 Capacity on the Tel-Save Backbone
Network including both (a) the circuit capacity, as measured in terms of
transmission and (b) a portion of the relevant fiber strands necessary to
transport such capacity.
1.3 "DS-3 Capacity" shall mean DS-3 transmission capacity between AT&T
Central Offices, meeting the specifications set forth in AT&T's Technical
Reference 54014 and its addenda, as revised from time to time.
1.4 "DS-3 Electronics" shall mean the technology and components that
enable DS-3 testing, multiplexing, and transmission, meeting the specifications
set forth in AT&T's Technical Reference 54014 and its addenda, as revised from
time to time.
1.5 "Indefeasible Right to Use" or "IRU" shall mean the exclusive,
unrestricted, and indefeasible right to use the relevant Capacity for any legal
purpose. The granting of such IRU does not convey title or legal ownership of
any fibers or equipment on the AT&T Network. Notwithstanding the occurrence of a
breach by the receiving party of any legal duty or obligation imposed by any
contract, by the law of torts (including simple or gross negligence, strict
liability or willful misconduct), or by federal or state laws, rules,
regulations, orders, standards or ordinances, during the Term, the granting
party shall have no right to revoke or restrict in any manner or to any degree
whatsoever, through injunctive relief or otherwise, the use of the IRU granted
to the receiving party. The parties mutually understand and agree that any such
breach shall be compensable, if at all, by a remedy at law and not at equity.
<PAGE>
Page 2
1.6 "Specifications" shall mean, the service specifications set forth in
AT&T Technical Reference 54014, as revised from time to time.
1.7 "Tel-Save Routes" shall mean the routes between AT&T Central Offices
over which Tel-Save obtains rights to use capacity under this Agreement,
including the routes listed in Attachment A.
1.8 "Total interruption" means any situation in which Tel-Save suffers a
total loss of connectivity in one or more Tel-Save Routes, lasting two or more
hours, which loss is not caused by Tel-Save, and that does not occur within or
as a result of equipment connections that Tel-Save provides.
2. Indefeasible Right to Use. AT&T hereby grants to Tel-Save for the Term
of this Agreement an IRU in the Capacity, contingent upon timely receipt of
payment as specified in Section 5 of this Agreement.
3. Term. This Agreement is binding on the parties as of the Effective Date
and, subject to the termination provisions of this Agreement, shall remain in
effect until December 31, 2023 (such period is referred to as the "Term").
4. Implementation. AT&T and Tel-Save shall work together, in good faith,
to develop a mutually agreeable implementation schedule for furnishing the
Capacity and associated DS-3 Electronics, and the parties agree to work
together, in good faith, in the future to develop necessary implementation
schedules, as appropriate.
5. Payment. In consideration for the IRU granted hereunder in the
Capacity, Tel-Save shall pay an IRU Fee to AT&T of $1,500,000.00, to be paid on
or before March 1, 1999.
6. Testing. Prior to making any Capacity available to Tel-Save under this
Agreement, AT&T shall test the Capacity on a route-specific basis to ensure
that the Capacity is in conformity with the Specifications. If any testing
establishes that the Capacity does not conform to the Specifications, AT&T
promptly shall correct such nonconformity and conduct additional testing prior
to making the Capacity available to Tel-Save.
7. Outage Credits. In the event of a Total interruption in a specific
Tel-Save Route that is due to circumstances within AT&T's reasonable control
(fiber cuts shall not be deemed to be within AT&T's reasonable control),
Tel-Save shall be entitled to an outage credit. For each two hour period of
such Total Interruption. Tel-Save shall receive an outage credit at a rate of
$20.00 for each such period of a Total Interruption for each Tel-Save Route
where the Total Interruption occurs. The duration of such a Total Interruption
will be measured from the time of notice to AT&T's network control center that
a Total Interruption has occurred to the time of restoration of the Service. No
credit will be provided for any scheduled Interruption. An outage credit will
be applied against other amounts due to AT&T from Tel-Save, or, to the extent
such sums are not due to AT&T, provided as a refund.
8. Chronic Failure. If there shall occur, within any period of 12
consecutive months, more than four Total Interruptions caused by factors within
AT&T's reasonable control, AT&T will demonstrate to Tel-Save actions taken by
AT&T to reduce such Interruptions. If there shall occur more than two
additional Total Interruptions due to factors within AT&T's
<PAGE>
Page 3
reasonable control within the subsequent three month period. This shall be
deemed a Chronic Failure for purposes of this Agreement.
9. Interference. In the event that AT&T believes in good faith that
Tel-Save's use of the Tel-Save Backbone Network is interfering unreasonably with
the use of AT&T service by others or the operation of the AT&T Network, AT&T may
immediately restrict or suspend the Capacity, without liability on the part of
AT&T, and then notify Tel-Save of the action that AT&T has taken and the reason
for such action. For purposes of the foregoing sentence, the normal usage by
Tel-Save of all or any part of the Capacity shall be deemed to be reasonable. To
the extent doing so does not interfere with its ability to prevent such
interference. AT&T will attempt to limit any restriction or suspension under
this Section to the Capacity that are causing such interference.
10. Relocation. Unless the circumstances make such notice impracticable,
AT&T shall give Tel-Save at least 90 days prior written notice of any scheduled
relocation of any portion of the Tel-Save Backbone Network and as much advance
notice as possible of any unscheduled relocation. AT&T shall have the right to
direct any relocation of any portion of the Tel-Save Backbone Network, including
but not limited to the right to determine the extent and timing of, and the
methods to be used for such relocation; provided, however, that unless otherwise
agreed, any such relocation, (i) shall be constructed and tested in accordance
with the Specifications, and (ii) shall not result in any interruption in excess
of two hours or degradation of the Capacity. In the event an AT&T Central Office
is relocated or replaced by a new site, AT&T shall relocate the applicable
Tel-Save Capacity. Any such relocation shall be undertaken at no cost to
Tel-Save, except in cases where relocation is accompanied by additions or other
work to benefit Tel-Save and for which Tel-Save agrees in writing to pay.
11. Use of the Capacity and Restriction on Resale. Tel-Save may use the
Capacity for any lawful purpose and Tel-Save represents and warrants that its
use of the Capacity and its offering of services using the Tel-Save Backbone
Network will comply with all applicable government codes, ordinances, laws,
rules, regulations and/or restrictions. Tel-Save may sell, trade, exchange or
otherwise make available to any person or entity any service provided over the
Tel-Save Backbone Network.
<PAGE>
Page 4
12. Limitation of Liability. AT&T'S LIABILITY, IF ANY, FOR ANY CLAIM OR
SUIT BY TEL-SAVE OR ITS AFFILIATES, FOR DAMAGES ASSOCIATED WITH THE
INSTALLATION, PROVISION, TERMINATION, MAINTENANCE, REPAIR OR RESTORATION OF ANY
OF THE CAPACITY SHALL NOT EXCEED AN AMOUNT EQUAL TO THE PRORATED PORTION OF
CHARGES FOR THE AFFECTED CAPACITY FOR THE PERIOD DURING WHICH THAT CAPACITY WAS
AFFECTED. IN NO EVENT SHALL AT&T OR TEL-SAVE BE LIABLE IN CONNECTION WITH THE
PROVISION, USE OR RESALE OF THE CAPACITY FOR INDIRECT, INCIDENTAL,
CONSEQUENTIAL, RELIANCE OR SPECIAL DAMAGES, INCLUDING WITHOUT LIMITATION DAMAGES
FOR LOST PROFITS OR DIMINISHED BUSINESS VALUE, REGARDLESS OF THE FORM OF ACTION
WHETHER IN CONTRACT, INDEMNITY WARRANTY, STRICT LIABILITY OR TORT, INCLUDING
WITHOUT LIMITATION NEGLIGENCE OF ANY KIND WHETHER ACTIVE OR PASSIVE, PROVIDED
THAT (A) NOTHING IN THIS SECTION SHALL LIMIT THE PARTIES' RESPECTIVE RIGHTS AND
OBLIGATIONS UNDER SECTION 7.2 ("INDEMNIFICATION") OF THE MASTER CARRIER
AGREEMENT ENTERED INTO BETWEEN TEL-SAVE AND AT&T ON APRIL 22, 1998 (THE "MCA");
(B) THE LIMITATIONS OF LIABILITY DESCRIBED IN THIS SECTION SHALL NOT RENDER
INAPPLICABLE ANY CHARGES OR OTHER LIABILITIES FOR WHICH A PARTICULAR AMOUNT,
FORMULA OR OTHER METHOD OF CALCULATION IS SPECIFICALLY PROVIDED IN THIS
AGREEMENT; AND (C) NOTHING IN THIS AGREEMENT SHALL LIMIT EITHER PARTY'S
LIABILITY IN TORT FOR (1) THAT PARTY'S WILLFUL OR INTENTIONAL MISCONDUCT OR (2)
DAMAGES TO INDIVIDUALS OR THEIR ESTATES FOR BODILY INJURY OR DEATH PROXIMATELY
CAUSED BY THAT PARTY'S NEGLIGENCE.
13. Termination.
13.1 Upon the expiration of the Term of this Agreement, use of the
Capacity shall terminate and Tel-Save shall owe AT&T no additional
consideration.
13.2 In the event Tel-Save abandons or otherwise relinquishes use of
any of the Capacity subsequent to the start of the term ("Abandonment") and
notifies AT&T of that Abandonment, Tel-Save shall be entitled to a reuse credit
dependent on the time of Notice as follows: (1) Abandonment during years one
through three of the Term, an amount equal to 1/10th of 1% of the pro-rata IRU
fee regarding the abandoned facilities for each remaining month of the Term of
the Commitment; (2) Abandonment during years four through six of the Term, an
amount equal to 1/12th of 1% of the pro-rata IRU fee regarding the abandoned
facilities for each remaining month of the of the Term of the Commitment; (3)
Abandonment during years seven through ten of the Term, an amount equal to
1/15th of 1% of the pro-rata IRU fee regarding the abandoned facilities for each
remaining month of the of the Term Commitment; (4) Abandonment during years
eleven through fifteen of the Term, an amount equal to 1/18th of 1% of the
pro-rata IRU fee regarding the abandoned facilities for each remaining month of
the Term of the Commitment; (5) Abandonment during years sixteen through twenty
of the Term, an amount equal to 1/36th of 1% of the pro-rata IRU fee regarding
the abandoned facilities for each remaining month of the Term of the Commitment;
and (6) Abandonment during years twenty-one through twenty-five of the Term, an
amount equal to 1/72nd of 1% of the pro-rata IRU fee regarding the abandoned
facilities for each remaining month of the Term of the Commitment. Upon notice
of Abandonment, AT&T shall be entitled to reuse the facilities for its own use
or in the provision of capacity or services the others.
14. Default.
<PAGE>
Page 5
14.1 AT&T has the right to terminate this Agreement upon thirty days'
prior written Notice of Default in the event Tel-Save fails to make full and
timely payment of the IRU Fee as specified in Section 5. In the event of such
termination, AT&T shall be entitled not only to revoke the IRU granted, which is
contingent upon timely payment of the IRU Fee, but also to collect the sum of
$500,000 as liquidated damages for the failure to pay the IRU Fee. In the event
that AT&T is required to institute collection procedures, AT&T will also be
entitled to the reasonable attorneys' fees necessary to effect collection of
that amount.
14.2 Tel-Save has the right to terminate this Agreement with regard to
a specific Tel-Save Route upon thirty days' prior written Notice of Default in
the event of a Chronic Failure (as defined in Section 8 of this Agreement) on
that route. In the event of such termination, the IRU with respect to such Route
shall be terminated and Tel-Save shall be entitled (in addition to any outage
credits specified in Section 7 above) to liquidated damages in the amount of the
pro-rata share of the IRU that the remaining term of the specific Tel-Save Route
represents. In the event that Tel-Save is required to institute collection
procedures, Tel-Save will also be entitled to the reasonable attorneys' fees
necessary to effect collection of that amount.
15. Incorporation of Terms by Reference. The following provisions of the MCA
are incorporated by reference and made part of this Agreement as if fully set
forth. As used in these provisions as incorporated, the term "Agreement" shall
be read as a reference to this Agreement, the term "Services" shall be read as a
reference to Capacity under this Agreement, and the capitalized terms used shall
have the meanings set forth in the MCA.
Indemnification. ((Section)7.2)
Force Majeure. ((Section)7.3.)
Limitation of Actions. ((Section)7.4.)
Disclaimer of Warranties. ((Section)7.5.)
Exclusive Remedies. ((Section)7.6).
Restrictions Against Use of Name and Brand Identification.
((Section)8.1.)
Inconsistent Use. ((Section)8.2.)
No Patent or Software License. ((Section)8.3.)
Taxes to be Billed by AT&T. ((Section)9.1.)
Taxes Not To be Billed by AT&T. ((Section)9.2.)
Gross Receipts Tax. ((Section)9.3.)
Confidential Information. ((Section)11.1.)
Protection of Confidentiality. ((Section)11.2.)
Disclosure to or by Affiliates or Subcontractors. ((Section)11.3.)
Return or Destruction of Confidential Information. ((Section)11.4.)
Disclosure to Consultants. ((Section)11.5.)
Required Disclosure. ((Section)11.6.)
Injunctive Remedy. ((Section)11.7.)
Assignment. ((Section)13.3.)
Third-Party Beneficiaries; Affiliates. ((Section)13.4.)
Relationship of the Parties. ((Section)13.5.)
Acknowledgment of Right to Compete. ((Section)13.6.)
Network Equipment. ((Section)13.7.)
Removal of Property. ((Section)13.8.)
Notices. ((Section)13.9.)
Compliance with Laws. ((Section)13.11.)
<PAGE>
Page 6
Export Regulation Compliance. ((Section)13.12.)
Choice of Law. ((Section)13.13.)
Severability. ((Section)13.14.)
Construction. ((Section)13.16.)
Descriptive Headings. ((Section)13.17.)
Survival of Terms. ((Section)13.18.)
Modification And Waiver. ((Section)13.19.)
Execution in Counterparts. ((Section)13.21.)
16. Entire Agreement Amendment. This Agreement constitutes the entire and
final agreement and understanding between the parties with respect to the
subject matter hereof, the granting of IRU Capacity, and supersedes all prior
agreements relating to the subject matter hereof, which are of no further force
or effect. The Exhibits referred to herein are integral parts hereof and are
hereby made a part of this Agreement. This Agreement may only be modified or
supplemented by an instrument in writing executed by a duly authorized
representative of each party.
IN WITNESS WHEREOF, in confirmation of their consent to the terms and
conditions contained in this Agreement and intending to be legally bound
thereby, the parties have executed this IRU Capacity Agreement on the dates
shown below but effective for all purposes as of the Effective Date.
<TABLE>
<S> <C>
AT&T Corp. Tel-Save Inc.
By: [SIG] By: /s/ EDWARD DEMAO
--------------------------- -------------------------
Title: President Title: COO
--------------------------- -------------------------
Date: Dec. 11, 1998 Date: 12/31/98
--------------------------- -------------------------
</TABLE>
REVIEWED AND APPROVED AS TO FORM
AT&T LAW DIVISION
BY: [SIG]
---------------------------
<PAGE>
Page 1
EXHIBIT A
DS-3 CAPACITY CIRCUIT IDENTIFICATION
***