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Communication Telesystems - Indefeasible Right of Use Agreement
INDEFEASIBLE RIGHT OF USE AGREEMENT AND FINANCING AGREEMENT
BETWEEN
TELEGLOBE USA INC.
WORLDXCHANGE COMMUNICATIONS
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THIS AGREEMENT, made and entered into as of October 5, 1998 (the "EFFECTIVE DATE").
BY AND BETWEEN: TELEGLOBE USA INC. a Delaware corporation
having its principal office at 1751 Pinnacle Drive,
Suite 1600, McLean, Virginia 22102 hereinafter
referred to as "TELEGLOBE";
AND: WORLDXCHANGE COMMUNICATIONS, a corporation
incorporated under the laws of California, having
its principal office at 4350 La Jolla Village
Drive, Suite 100, San Diego, California 92122,
hereinafter referred to as "WORLDXCHANGE".
WHEREAS, Teleglobe has acquired certain rights to trans-atlantic fiber optic capacity on the AC-1 Submarine Cable System and to associated backhaul capacity which will connect such trans-atlantic capacity to inland termination points as described in the Atlantic Crossing/AC-1 Submarine Cable System Capacity Purchase Agreement dated January 21, 1998 (the "Teleglobe Cable System"); and
WHEREAS, WorldxChange desires to take and pay for the right to use certain capacity in the Teleglobe Cable System as more fully set forth herein.
NOW, THEREFORE, the Parties agree as follows:
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS. This Section 1.1 lists defined terms used in this Agreement. Capitalized terms used in any provision of this Agreement and not otherwise defined therein shall have the following meanings, respectively, unless the context otherwise requires.
(A) "AGREEMENT" shall mean this Agreement and the schedule attached
hereto, as amended from time to time;
(B) "DOLLAR" and "DOLLARS" and the symbol "$" shall mean lawful money of
the United States of America;
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(C) "EFFECTIVE DATE" shall mean the date that the obligations arising
under this Agreement shall be deemed to be in full force and effect
notwithstanding the formal date of its execution by the Parties;
(D) "MIU" shall mean a unit designated as the minimum unit of
investment in the Teleglobe Cable System and shall consist of a
Virtual Container 12 (VC-12), allowing the use of 2,048,000 bits
per second (nominal 2 Mbit/s) digital stream. A MIU may be
expressed in terms of whole or half-MIUs.
(E) "OPERATION AND MAINTENANCE" or "O&M" shall mean the operation and
maintenance of the submarine trans-atlantic cable capacity
contained in the Teleglobe Cable System between the United States
and the United Kingdom. Such operation and maintenance activities
may include testing, adjustment, and storage of plant and
equipment, repairs, maintenance, and reburial and replacement of
plant;
(F) "PARTIES" shall mean all of the parties hereto collectively; and
"PARTY" shall mean any one of them;
(G) "PERSON" shall mean an individual, corporation, company,
cooperative, partnership, trust or unincorporated association and
pronouns have a similarly extended meaning;
(H) "RELEVANT C&MA" shall refer collectively the following agreements
which are attached hereto and are incorporated herein by reference
as the same may be amended from time to time:
(1) That certain Capacity Purchase Agreement ("Capacity
Purchase Agreement") (including attachments and annexes)
dated January 21, 1998 between Global Telesystems, Ltd.
and Teleglobe.
(2) That certain Indefeasible Right of Use Agreement in Inland
Capacity dated March 6, 1998 between GT Landing Corp. and
Teleglobe.
(3) That certain Broadbend Services Agreement dated March 20,
1998 between Racal Telecommunications Limited and Teleglobe.
(I) "SERVICE DATE" shall mean the date of completion of installation,
acceptance testing, and implementation of the Capacity and the
Backhaul Capacity to provide a full circuit from 60 Hudson Street,
New York, New York to Telehouse, London, England, the completion of
which shall be confirmed in writing by Teleglobe to the
WorldxChange. Subject to the compliance of both Parties of their
respective obligations hereunder, it is anticipated that the
Service Date will occur on or about July 31, 1998. Should the
Service Date not occur prior to October 30, 1998, WorldxChange
shall have the right, upon written notice to Teleglobe, to cancel
this Agreement without any liability and Teleglobe shall promptly
return any payments made by WorldxChange pursuant to this Agreement.
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(J) "TELEGLOBE CABLE SYSTEM" shall mean the Teleglobe's interest in that
certain Atlantic Crossing/AC-1 Submarine Cable System trans-atlantic
capacity between Brookhaven, New York and White Sands, United
Kingdom, plus backhaul capacity between Brookhaven, New York and
60 Hudson Street, New York, New York, and between White Sands, UK and
Telehouse, London, England, as more fully described in the relevant
C&MA.
1.2 GENDER. Any reference in this Agreement to any gender shall include all genders and words used herein importing the singular number only shall include the plural and vice versa.
1.3 HEADINGS. The division of this Agreement into Articles, Sections, Subsections and other Subdivisions and the insertion of headings are for convenience of reference only and shall not affect or be utilized in the construction or interpretation hereof.
1.4 SEVERABILITY. Any Article, Section, Subsection or other Subdivision of this Agreement or any other provision of this Agreement which is proven to be illegal, invalid or unenforceable shall be severed herefrom and shall be ineffective to the extent of such illegality, invalidity or unenforceability and shall not affect or impair the remaining provisions hereof, which provisions shall be severed from any illegal, invalid or unenforceable Article, Section, Subsection or other subdivision of this Agreement or any other provision of this Agreement and shall otherwise remain in full force and effect.
1.5 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement by and between the Parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the Parties. Except as provided for herein, this Agreement may be amended only by an instrument in writing signed by both Parties.
1.6 GOVERNING LAW. This Agreement shall be interpreted and construed in accordance with the laws of Virginia, without giving effect to the laws of such state governing conflicts of laws.
1.7 OWNERSHIP. EXCEPT FOR THE RIGHTS SPECIFICALLY GRANTED TO WORLDXCHANGE UNDER THIS AGREEMENT, nothing in this Agreement shall vary the existing rights of ownership in those segments of the Teleglobe Cable System in which IRUs have been granted to WorldxChange. Ownership of all segments of the Teleglobe Cable System shall remain with Teleglobe and the other signatories to the Relevant C&MA as applicable.
ARTICLE 2
GRANTING OF IRU AND BACKHAUL CAPACITY
2.1 GRANTING. Subject to WorldxChange making all payments to Teleglobe when due hereunder, as of and from the Service Date, Teleglobe grants to WorldxChange, on an IRU basis, an interest in one (1) STM-1 (155.52 Mbps) of capacity (the "Capacity") on the Teleglobe Cable System, with termination points at the beachhead cable station of the Teleglobe Cable System in
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Brookhaven, New York on the west end, and at the beachhead cable station of the Teleglobe Cable System in White Sands, United Kingdom on the east end.
2.2 BACKHAUL CAPACITY. In addition to the grant of Capacity hereunder, subject to WorldxChange making all payments to Teleglobe when due hereunder, Teleglobe shall provide WorldxChange as of and from the Service Date with access to and use of one (1) STM-1 (15552 Mbps) of backhaul capacity (the "Backhaul Capacity") between the beachhead cable station of the Teleglobe Cable System in the United States and Teleglobe's point of presence at 60 Hudson Street, New York, NY, and between the beachhead cable station of the Teleglobe Cable Station in the United Kingdom and Teleglobe's point of presence at Telehouse, 5th Floor, Corriander Avenue, East India Docks, London, England, all of which shall be provided per the terms of this Agreement and for a term consistent with the IRU in the Capacity granted hereunder. The Backhaul Capacity is provided by Teleglobe as a service, and not on an IRU basis and is provided upon the same terms and conditions upon which Teleglobe has acquired it under its Atlantic Crossing/AC-1 Submarine Cable System Indefeasible Right of Use Agreement in Inland Capacity (United States) and Racal Telecommunications Limited Broadband Services Agreement (UK), which are attached hereto.
2.3 O&M. Subject to WorldxChange making the required payments set forth in Articles 3 and 4 hereof, Teleglobe shall use reasonable efforts to ensure that the trans-atlantic submarine fiber optic cable capacity contained in the Teleglobe Cable System and the Backhaul Capacity is maintained in accordance with the Relevant C&MA between Teleglobe or its affiliate(s) and the owners of such capacity. Any charges incurred by Teleglobe relating to the operation and maintenance of the Backhaul Capacity, if any, shall be fully reimbursed by WorldxChange upon demand by Teleglobe, provided however, such charges shall not exceed the pro-rata amount of the total charges incurred by Teleglobe with respect to all equivalent capacity controlled by Teleglobe (including the Backhaul Capacity); and provided further that WorldxChange shall be permitted to take advantage of any periodic payment terms that Teleglobe receives.
2.4 SUBMARINE CABLE RESTORATION. Restoration will not be available on the trans-atlantic capacity contained in the Teleglobe Cable System until a complete loop is constructed between the US and UK beachhead cable stations, which is estimated to be complete by March 31, 1999. When such restoration becomes available to Teleglobe, Teleglobe agrees to provide such restoration to WorldxChange on a non-discriminatory basis with the capacity in the Atlantic Crossing/AC-1 Submarine Cable System retained by Teleglobe for its own use. Additionally, until such time as restoration on the trans-Atlantic capacity becomes available, Teleglobe agrees to permit WorldxChange to participate in any interim restoration arrangements available to Teleglobe pursuant to paragraph 2(j) of the Atlantic Crossing/AC-1 Submarine Cable System Capacity Purchase Agreement, at the same price and on the same terms as such interim restoration arrangements are obtained by Teleglobe.
ARTICLE 3
IRU GRANTING PRICE AND PRICE FOR BACKHAUL CAPACITY
3.1 IRU FEE AND BACKHAUL FEE. In consideration of the grant of the Capacity by Teleglobe to WorldxChange, WorldxChange agrees to pay to Teleglobe an IRU fee of Eight Million Two Hundred Fifty Thousand
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Dollars (US$8,250,000) (the "IRU and Backhaul Fee") which Teleglobe shall finance over five (5) years at 12% per annum on a declining balance basis.
3.2 PAYMENT OF IRU FEE AND BACKHAUL FEE. WorldxChange hereby agrees and covenants to pay the IRU and Backhaul Fee over a five (5) year term on a monthly basis by pay the sum of One Hundred Eighty Three Thousand Five Hundred Seventeen Dollars ($183,517) by wire transfer, certified cheque, commencing on the first day of the month immediately after the Effective Date of this Agreement and continuing on the first day of each successive month until fully paid.
3.3 TAXES. All prices and charges due hereunder are exclusive of all applicable taxes, including value added tax, sales taxes, and duties or levies imposed by any authority, government or government agency (except income tax or other corporate taxes attributable to Teleglobe), all of which shall be paid promptly when due by WorldxChange.
ARTICLE 4
PAYMENT OF CHARGES AND EXPENSES
4.1 ANNUAL O&M CHARGE. In consideration of Teleglobe's provision of O&M in connection with the IRU granted for the Capacity and Backhaul Capacity, WorldxChange shall pay to Teleglobe annually in advance the sum of Two Hundred Eighty Five Thousand ($285,000) (the "Annual O&M Charge"), which Annual O&M Charge shall increase by three percent (3%) each year, compounded annually but shall not exceed Three Hundred Thirty Thousand ($330,000) during the term of this Agreement.
4.2 INVOICING AND PAYMENTS. On the Service Date and on each anniversary thereof, Teleglobe shall submit to WorldxChange an invoice for the O&M Charge provided for in this Article 4 and for any applicable non-recurring cost. WorldxChange shall make full payment on all such invoices within thirty (30) days of such invoice. Invoices shall be paid in US Dollars in the manner set forth in Article 3.3.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF WORLDXCHANGE
REPRESENTATIONS AND WARRANTIES. WorldxChange represents and warrants to Teleglobe that WorldxChange has obtained, or will obtain prior to the Service Date, all relevant telecommunications licenses necessary for the acquisition of the Capacity, the execution and delivery of, and the performance of, its obligations under this Agreement and shall use all reasonable efforts to have continued in effect such exemptions, approvals, consents, authorizations, licenses and permits as long as it shall have obligations under this Agreement.
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ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF TELEGLOBE
6.1 REPRESENTATIONS AND WARRANTIES. Teleglobe represents and warrants to WorldxChange that:
(A) it is authorized to sell and lease interests in the Capacity as
contemplated hereunder;
(B) the execution of this Agreement by Teleglobe will not constitute a
breach of any other agreement to which Teleglobe is a party or
bound; and,
(C) as of the Service Date, Teleglobe had fully performed all
obligations required on its part to be performed pursuant to the
Relevant CM&A.
6.2 NO REPRESENTATION ON THE CAPACITY. Except as expressly set forth in this Agreement, Teleglobe has not made or shall not be deemed to have made any representations or warranties whatsoever with respect to the Capacity or the Backhaul Capacity. Teleglobe expressly disclaims with respect to WorldxChange and WorldxChange hereby expressly waives, releases and renounces, all warranties, obligations and liabilities of Teleglobe and all rights, claims and remedies against Teleglobe, express or implied, arising by law or otherwise, with respect to any failure, delay in installation, cancellation of, non-conformance, temporary or permanent failure of or defect in the Teleglobe Cable System or the Capacity or the Backhaul Capacity, as the case my be, whatsoever shall have been the cause and however long it shall have lasted (whether or not Teleglobe has been advised of the possibility of such loss or damage arising). Without limiting the generality of the foregoing, WorldxChange acknowledges and agrees that the Capacity and the Backhaul Capacity is being sold and leased on an "as is, where is" basis. Notwithstanding anything to the contrary contained herein, this provision shall not release Teleglobe from any liability for breach of any of the representations or warranties set for in Article 6.1, or the failure of Teleglobe to perform any obligations set forth in Article 7.2 hereof, or willful misconduct on the part of Teleglobe.
ARTICLE 7
COVENANTS OF WORLDXCHANGE AND TELEGLOBE
7.1 During the term of this Agreement, WorldxChange shall:
(A) pay to Teleglobe (or its designee, as may be notified in writing to
WorldxChange, as the case may be) when they become due all amounts
payable under this Agreement and otherwise comply with all other
provisions of this Agreement;
(B) maintain, at its own expense, an appropriate insurance policy with
terms and coverage thresholds equal to or greater than the industry
standard for major global telecommunications carriers for protection
against all risks associated with the Capacity and Backhaul Capacity
as reasonably deemed necessary by WorldxChange acting reasonably;
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(C) until all payment have been paid pursuant to Article 3.1, to
undertake to keep the Capacity and Backhaul Capacity free of
liens, charges and other encumbrances (including any inchoate
liens or floating charges) and shall reimburse Teleglobe (or its
designee, as the case may be), and in the event of accidental
breach, to take all steps required to discharge such liens,
charges and other encumbrances;
(D) not use the Capacity or Backhaul Capacity for any illegal,
unlawful, fraudulent or unauthorized purposes and, without
limiting the generality of the foregoing, use the Capacity and
Backhaul Capacity, at all times, in a manner consistent with the
applicable authorization, licenses and permits for the landing,
construction and operation of the Teleglobe Cable System;
(E) use the Capacity and Backhaul Capacity in such a way as to avoid
degrading the overall performance of the Teleglobe Cable System or
causing interruptions of, or interference with, impairment or
degradation of the use of any other capacity in the Teleglobe Cable
System, or impair privacy of any communications over such facilities.
If, after notification by Teleglobe, WorldxChange does not take
immediate and effective action to comply with its obligations,
Teleglobe may take reasonable action required to protect the other
capacity in the Teleglobe Cable System up to and including the
interruption of the Capacity and Backhaul Capacity responsible for
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