Development Agreement

Exhibit 10.15



DEVELOPMENT AGREEMENT



BY AND AMONG



VICAME INFRASTRUCTURE

DEVELOPMENT GMBH



VIATEL GERMAN ASSET GMBH



CARRIER 1 FIBER NETWORK GMBH & CO. OHG



METROMEDIA FIBER NETWORK GMBH



VIATEL, INC.





METROMEDIA FIBER NETWORK, INC.



DATED AS OF FEBRUARY 19, 1999





TABLE OF CONTENTS



1. Retention of Developer: Certain Definitions ............................ 2



2. Authority of Developer ................................................. 7



3. Obligations of Developer ...............................................11



4. Obligations of Owners ..................................................16



5. Representations and Warranties; Exculpation; Indemnity .................22



6. Funding; Reimbursable Expenses .........................................26



7 Termination ............................................................29



8. Publicity and Public Relations .........................................31



9. Independent Contractor/No Partnership ..................................32



10. Assignment .............................................................32



11. Notices ................................................................32



12. Intentionally Omitted ..................................................36



13. Confidentiality ........................................................36



14. Guaranty ...............................................................38





15. Applicable Law .........................................................39



16. Severability ...........................................................39



17. Counterparts ...........................................................39



18. Benefits and Obligations ...............................................39



19. Integration; Amendment and Waiver ......................................40



20. Further Assurances .....................................................40



21. Force Majeure ..........................................................40



22. Audit Rights ...........................................................40



23. Headings ...............................................................41



24. No Immunity ............................................................41



25. Use of English Language ................................................41



26. Additional Capacity ....................................................41



27. Arbitration ............................................................42



28. Currency ...............................................................43







Exhibit A Binding Letter of Intent Deposit and Balance Exhibit B Major Decisions Exhibit C Information to be Provided to Committee Exhibit D Approved Cities Exhibit E Development Plan and Budget



Schedule 1 Interests Schedule 2 Funding of Project





DEVELOPMENT AGREEMENT



DEVELOPMENT AGREEMENT, dated as of February 19, 1999, by and among Viatel German Asset GmbH, a Gesellschaft mit beschrankter Haftung organized under the laws of Germany, ("Viatel"), Carrier 1 Fiber Network GmbH & Co. oHG, an offene Handelsgesellschaft organized under the laws of Germany ("Carrier 1"), Metromedia Fiber Network GmbH, a Gesellschaft mit beschrankter Haftung organized under the laws of Germany ("MFN" and together with Viatel and Carrier 1, the "Owners"), Metromedia Fiber Network, Inc., a Delaware corporation ("Metromedia"), Viatel, Inc., a Delaware corporation ("Viatel Parent") and ViCaMe Infrastructure Development GmbH, a Gesellschaft mit beschrankter Haftung organized under the laws of Germany ("Developer").



WHEREAS, the Owners (except that Carrier1 Holdings Ltd., has assigned its rights and obligations to Carrier 1 and Metromedia has assigned its rights to MFN) and Guarantors (as defined below) have entered into a Binding Letter of Intent (as defined below), pursuant to which Owners have agreed to jointly arrange for the development and construction of the Outside Plant (as defined below); and



WHEREAS, upon RFS Acceptance of the Outside Plant (as such terms are defined below) each of Carrier 1 and MFN will each own * (filled with fiber optic cable to the extent separately purchased by each Owner in accordance with the terms of this Agreement) along the route of the entire Outside Plant with separate access thereto, and Viatel will own * along the same route (one of which * will be filled with fiber optic cable to the extent separately purchased by Viatel in accordance with the terms of this Agreement and the other of which may be vacant); and



WHEREAS, the Owners believe it is in their mutual best interest to work together on the Network; and



WHEREAS, Owners desire to retain Developer to perform or arrange for certain pre-development, development, design, procurement, construction, supervisory and/or other services with respect to the Outside Plant, and Developer wishes to perform such services, all on the terms and conditions hereinafter set forth.



NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Owners and Developer hereby agree as follows:



* The confidential portion has been omitted pursuant to a request for confidential treatment and omitted material has been filed separately with the Commission.







1. Retention of Developer: Certain Definitions



1.1 Owners hereby retain Developer to provide the services hereinafter set forth for the Outside Plant all on behalf of, and at the sole cost and expense of, Owners unless specifically provided to the contrary in this Agreement.



1.2 Developer hereby accepts the relationship of trust and confidence established among Developer and Owners by this Agreement. Developer covenants with Owners to act in good faith with reasonable efforts and diligence in the performance of Developer's responsibilities under this Agreement.



1.3 Each of the Owners and Developer understand that the other parties and their respective Affiliates may be interested, directly or indirectly, in certain other development and other activities and undertakings not related to the Network. Subject to the provisions of Section 26, this Agreement and the assumption by Owners and Developer of their respective duties hereunder shall be without prejudice to the rights of any party to have such other activities and undertakings (whether or not competitive with the Network) and to receive and enjoy profits or compensation therefrom.



1.4 As used in this Agreement, the following terms shall have the following respective meanings:



"Additional Fiber Costs" shall mean all costs associated with an Owner installing greater than a * cable in its subduct. The costs referred to in the preceeding sentence are the costs associated with splicing and blowing more than * cable (and terminating more than * cable at each "POP" and repeater location). Additional Fiber Costs shall also include all additional costs incurred as a result of any delay in the completion of the Outside Plant resulting from the separate ordering of the fiber optic cable by each Owner unrelated to the actions of the Construction Contractor.



"Affiliates" shall mean any Person that (a) owns or controls the first Person, (b) is owned or controlled by the first Person or (c) is under common ownership or control with the first Person, where "own" means direct or indirect ownership of more than * of the equity or voting interests or rights to distributions on account of equity of the Person, and "control" means the direct or indirect power to direct the management or policies of the Person, whether through the ownership of voting securities, by contract or otherwise.



* The confidential portion has been omitted pursuant to a request for confidential treatment and omitted material has been filed separately with the Commission.







"Agreement" shall mean this Agreement including the Exhibits and Schedules hereto, as it may be modified or amended from time to time.



"Approved Cities" shall mean the cities listed on Exhibit D to this Agreement, as same may be amended from time-to-time with the unanimous consent of the Owners.



"Binding Letter of Intent" shall mean that certain Binding Letter of Intent dated August 20, 1998, among the Owners and certain of their affiliates, as amended.



"Cash Flow Forecast" means the forecasted monthly expenditures for Construction Costs for the Outside Plant (breaking out costs for rights of way, engineering support, procurement, repeaters, points of presence and cable and duct installation), which forecast is included as part of the Development Plan and Budget.



"Co-Location Facilities" shall have the meaning set forth in the definition of Required Configuration.



"Committee" shall mean the Committee of the Advisory Board of Developer as set forth in the Shareholders' Agreement.



"Confidential Information" shall have the meaning set forth in Section 13.



"Construction Contract" means the contract for the engineering, procurement and construction of the Outside Plant to be entered into between the Construction Contractor, Developer and the Owners. Developer shall enter into the Construction Contract solely in its capacity as agent for and in the name of the Owners, with the Owners (and not Developer) being severally liable for all obligations and liabilities under the Construction Contract.



"Construction Contractor" means the contractor under the Construction Contract.



"Construction Costs" means all costs (exclusive of recoverable value added tax) (whether hard or soft) associated with the construction, procurement and







development (including obtaining all necessary licenses for construction, permits, Necessary Rights, rights of way and other rights) of the Required Configuration for the Outside Plant through RFS Acceptance, including, without limitation, all Outside Plant Costs listed in Section 6.1(d) below, but excluding actual commencement of commercial service of the Network and the procurement and implementation of transmission and related equipment and fiber optic cable, but including costs associated with splicing, blowing and pushing up to * cable in one duct for each Owner (but only terminating * cable at each POP and repeater location).



"Defaulting Owner" shall have the meaning set forth in Section 7.1(c) of this Agreement



"Developer's Trust Account" shall have the meaning given such terms in the Shareholders' Agreement



"Development Plan and Budget" means the detailed statement of the tasks and responsibilities, Construction Costs, Cash Flow Forecast and time required to design, procure, construct and develop the Outside Plant which has been approved by all the Owners and is attached to this Agreement as Exhibit E. The Development Plan and Budget may only be amended in accordance with the terms of this Agreement.



"Event of Default" shall have the meaning given such term in Section 7.1(c) of this Agreement.



"Funding Default" shall have the meaning given such term in Schedule 2 of this Agreement.



"Funding Notice" shall have the meaning given such term in Schedule 2 of this Agreement.



"Funding Obligation" shall have the meaning given such term in Schedule 2 of this Agreement.



"Guarantor(s)" shall have the meaning given such term in Section 14 of this Agreement.



* The confidential portion has been omitted pursuant to a request for confidential treatment and omitted material has been filed separately with the Commission.







"Interest" shall mean, as of the date hereof until an Owner's percentage Interest is changed in accordance with this Agreement, the percentage for each Owner set forth on Schedule 1 and their ownership interest in all assets created in connection with the Network pursuant to this Agreement or any related agreement.



"IRU" shall mean an indefeasible right of use.



"Letter(s) of Credit" shall have the meaning given such term in Schedule 2.



"Major Decisions" shall mean the approval of any one or more of the actions or matters set forth on Exhibit B and any material changes to or amendments of any previously approved Major Decision.



"Majority-in-Interest" shall mean an Owner or Owners owning more than 50% of the Interests.



"Managing Directors" shall have the meaning given such term in the Shareholders' Agreement.



"Necessary Rights" shall mean, to the extent possible under applicable German law, substantially equivalent but separately divisible and transferable rights in and to easements, rights of way, licenses, permits and other rights necessary for the construction and ownership of the Network (not including licenses or permits related to the operation of a telecommunications network in Germany [eg., Class 3 and Class 4 licenses under the German Telecommunications Act], which are the individual responsibility of the Owners).



"Network" shall mean when used in respect of each individual Owner, a fully-operational fiber optic telecommunications link completed and ready for commercial use in accordance with the Required Configuration which Network shall consist of (i) the whole of the Outside Plant to which the relevant Owner is entitled hereunder or under the Construction Contract, (ii) fiber optic cable procured by each Owner separately and installed pursuant to the Construction Contract and (iii) any and all transmission electronics and related equipment procured for, installed upon or integrated with (in each case, at each Owner's sole cost and risk) such Outside Plant.







"Outside Completion Date" shall have the meaning given such term in Section 3.5 of this Agreement.



"Outside Plant" shall mean the entirety of the fiber optic telecommunications infrastructure underlying, as the context may require, each individual Owner's Network or all of such Networks collectively, which Outside Plant shall (i) be completed by the Construction Contractor in accordance with the Required Configuration and the Construction Contract, (ii) link the Approved Cities and (iii) include any and all equipment, facilities, materials, services and supplies necessary or incidental to achievement of RFS Acceptance in respect thereof; provided, in any event that reference to such "Outside Plant" shall not be deemed hereunder to include the procurement of fiber optic cable nor the procurement or installation of any transmission electronics or related equipment to be procured by the individual Owners for use in their respective Networks.



"Outside Plant Costs" shall have the meaning given such term in Section 6.1(d).



"Parent's Trust Account" shall have the meaning given such term in the Binding Letter of Intent.



"Person" means any domestic or foreign individual, corporation, limited liability company, partnership, joint venture, estate, trust, unincorporated association, any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing.



"Required Configuration" shall mean, in respect of the Network (and each of its components), a fiber optic telecommunications network containing four identical subducts generally buried in the ground into which necessary access along the route of the Network for each Owner will be obtained through separate manholes for each of the separate subducts. The Required Configuration specifically excludes transmission and related equipment and fiber optic cable but will include separate facilities of approximately * (to be shared by each of the Owners pro-rata in accordance with their Interests except in Frankfurt, Dusseldorf and Berlin in which locations MFN and Carrier 1 will each have units within such facilities of approximately *) each to house such equipment, with one such facility located in each of the Approved Cities (the "Co-Location Facilities"). The Co-Location Facilities shall be owned or leased by an entity reasonably acceptable to all Owners, including Affiliates of Viatel, so long as all Owners shall have equivalent rights of access and use thereto.



* The confidential portion has been omitted pursuant to a request for confidential treatment and omitted material has been filed separately with the Commission.







"Required Qualifications" means one or more individuals with ten (10) or more years experience in civil work construction projects similar to the construction of the Network.



"RFS Acceptance" shall mean in respect of the Outside Plant, the date on which the Construction Contractor has satisfied all requirements of the Construction Contract as to completion and delivery of such Outside Plant (including without limitation, completion of all splicing, joining and installation activities with respect to the fiber optic cable to be procured and furnished by each of the Owners in accordance with this Agreement (to the extent each Owner complies with its obligations hereunder) and the Construction Contract).



"ROWCO" shall mean a German partnership or similar entity (to be treated as a partnership for United States Federal income tax purposes by making an election in the time and in the manner set forth in United States Treasury Regulations Section 301.7701-3) to be owned by the Owners in proportion to their Interests and the sole purpose of which shall be to own Necessary Rights that are not owned separately by each Owner or Viatel and which shall provide each Owner the benefits of the Necessary Rights so held by it.



"Shareholders' Agreement" shall mean that certain Shareholders' Agreement of Developer dated of even date herewith, as the same may be amended from time to time.



2. Authority of Developer



2.1 Subject to the terms of this Agreement, Owners hereby appoint Developer as their agent and authorize Developer to take all actions, and to make all decisions, necessary or appropriate in Developer's reasonable judgment to coordinate, oversee and supervise the Construction Contract and the development, design, procurement and construction of the Outside Plant, substantially in accordance with the Development Plan and Budget. Until the Outside Completion Date all communications with respect to the Outside Plant from Owners to the Construction Contractor, any subcontractors, suppliers, vendors (including the vendors of the fiber optic cable) or service providers and other persons affiliated or associated with the Outside Plant, including all approvals, shall be communicated through Developer.



It is expressly understood and agreed that actions taken by Developer in accordance with this Agreement shall be taken by Developer as agent for and in the name of Owners, and all obligations, costs or expenses reasonably incurred by







Developer in the performance of its obligations hereunder are the liability of the Owners in proportion to their Interests (except as otherwise provided in this Agreement) and not the liability of Developer. Any payments made by Developer in the performance of its responsibilities under this Agreement shall be made out of funds (a) that Developer from time to time holds in trust for the Owners or (b) that Owners provide to Developer, including amounts available to be drawn under the Letters of Credit provided by the Owners to Developer. Developer shall not be required to make any advances to, or for the account of, Owners or to pay any amount except out of funds held, provided or obtained as aforesaid nor shall Developer be required to incur any liability or obligation for the account of Owners. Developer shall be reimbursed by Owners on a monthly basis upon submission of appropriate supporting documentation to Owners, for all costs advanced by Developer.



2.2 In addition to, and not in limitation of, the foregoing, Developer shall have the authority to take all actions, and to make all decisions, necessary or appropriate in Developer's reasonable judgment, for the performance of Developer's obligations set forth herein and to complete the Outside Plant in accordance with the Construction Contract and Development Plan and Budget, including without limitation: (a) the right to incur liabilities on behalf of Owners pursuant to Section 3.2 (r) hereof and reimbursable out-of-pocket expenses pursuant to Section 6.2 hereof, and (b) the right to disburse funds to pay when due (i) all the costs, expenses and fees incurred in connection with the predevelopment and development of the Outside Plant including, without limitation, the fees and expenses of outside counsel and consultants retained by Developer as agent for and in the name of the Owners, (ii) the cost of all services, materials and labor in connection with the development of the Outside Plant in accordance with the Development Plan and Budget and this Agreement (including all applicable value added tax payable to the Construction Contractor), (iii) the fees and disbursements payable to Developer under this Agreement, and (iv) all other fees and charges incurred by Developer on account of Owners in accordance with this Agreement, provided, however, that Developer shall not have authority to disburse funds to pay or incur liabilities to pay costs or expenses related to the Outside Plant and associated with Major Decisions which have not been approved by unanimous vote of the Owners with respect to Major Decisions set forth in paragraphs 1, 2, 4 and 5 of Exhibit B and the vote of at least two of the Owners with respect to Major Decisions set forth in paragraph 3 of Exhibit B.



2.3 Notwithstanding any other provision of this Agreement, Developer shall not, without the approval of all Owners, have the authority to:



(a) make expenditures for items not included, or in excess of the amounts for any items provided for, in the Development Plan and Budget, or incur







any liability related thereto; provided, however, that Developer may disburse such funds and/or incur liabilities notwithstanding the lack of Owners' approval if:



(i) the aggregate of all such expenditures does not exceed the

total amount for the Outside Plant specified in the Development Plan and

Budget (exclusive of all amounts related to value added tax in Germany)

and either (A) the aggregate of all such expenditures in respect of the

applicable line item in the approved budget does not exceed the amount

budgeted for such line item, or (B) Developer reasonably projects that

savings from another line item (the "Projected Savings") will upon

completion of the work relating to such line item be sufficient to pay for

such expenditure and such Projected Savings are concurred to in writing by

Owners holding at least * of the Interests, or



(ii) an emergency exists which, in the reasonable judgment of

Developer, requires the expenditure of unbudgeted funds for the

preservation or safety of the Network, or to avoid the suspension of any

necessary service in or to the Network, or



(iii) such expenditures are necessary, in the reasonable

judgment of Developer, in order to avoid a material increase in cost to

Owners resulting from the delay in such expenditure, provided, that the

expenditure is contemplated in the Development Plan and Budget; or



(b) make or permit to be made any material changes in the Development Plan and Budget; or



(c) take any action which, at the time such action was taken, Developer knew or had reason to know, would result in a delay in achieving a major milestone identified in the Development Plan and Budget or the Construction Contract by more than a total of * days; or



(d) modify the Network to add or delete cities, towns or other areas from the list of Approved Cities set forth on Exhibit D which will be included in the Network.



Developer shall provide each Owner with written notice and an explanation of all expenditures made under Section 2.3(a)(i) at least * business days before



* The confidential portion has been omitted pursuant to a request for confidential treatment and omitted material has been filed separately with the Commission.







such expenditure is made, except in the event of an emergency. In the case of an emergency, Developer shall provide such notice within * days thereafter.



Section 2.4. Notwithstanding the provisions of Section 2.3 hereof, in the event Developer makes a written request (the "Approval Request") to the Owners for the taking of an action described in paragraph 2 of Exhibit B hereof (i.e. cost increases greater than the amounts set forth in the Development Plan and Budget, exclusive of all amounts related to value added tax in Germany) or for delays in achieving major milestones for greater than * days) if the approval of all Owners has not been obtained within * days following the receipt of the Approval Request, unless exigent circumstances require a shorter time period, in which event such shorter time period (but in no event less than * days), then the Owners which have provided such approval (the "Approving Owners") shall have the rights set forth in this Section 2.4. Within the * day period following the expiration of the aforesaid * day period, or such shorter time period as exigent circumstances shall require (but in no event less than * days) the Approving Owners shall have the right, but not the obligation, to elect to purchase (i) the Interest of the Owner(s) voting against such approval (the "Rejecting Owner(s)") for an amount equal to the aggregate amount paid, invested, drawn down under such Rejecting Owner(s) Letter of Credit and/or contributed by the Rejecting Owner(s) for Outside Plant Costs (whether paid to Developer or at its direction), including the Additional Fiber Costs, and amounts drawn on the Letter of Credit provided by the Rejecting Owner(s) and (ii) all fiber optic cable and electronics and transmission equipment actually installed and made a part of the Network by the Rejecting Owner at a price equal to the actual out-of-pocket third party costs incurred by the Rejecting Owner for such items (the "Purchase Price"). Such election shall be made by giving written notice thereof to the Rejecting Owner(s). The Interest of the Rejecting Owner(s) shall be purchased on a date specified by the Approving Owner(s) which date shall not be more than * days aft ...