Exhibit 10.36
SUMMARY OF OPERATING AGREEMENT
This Summary of Operating Agreement ("Summary") is entered into this 4th day of
February, 2000, by and between SBC Telecom, Inc. ("SBCT "), a wholly owned
subsidiary of SBC Communications Inc. ("SBC"), Telefonos de Mexico S.A. de C.V.
("Telmex") and Network Access Solutions Corporation ("NAS") (collectively the
"Parties") and sets forth the agreement concerning operational, resale and
marketing interaction between SBCT and NAS and Telmex and NAS in connection with
Telmex and SBC's proposed initial loan and purchase of convertible preferred
shares issued by NAS (the "Equity Investment"). The terms and conditions set
forth herein are binding upon the Parties for a period of one (1) year or until
part or all of this Summary is superceded by one or more of the definitive
agreements contemplated by this Summary. The Parties shall use their best
efforts to negotiate definitive agreements within sixty (60) days.
1. RECITALS
WHEREAS, NAS is a provider of local telecommunications/DSL services with
operations in Delaware, Maryland, Massachusetts, New York, Pennsylvania,
Virginia and the District of Columbia;
WHEREAS, NAS has announced plans to expand aggressively in those states and
in other states;
WHEREAS, Telmex, through a wholly owned subsidiary, is making an investment
in NAS and will have access to NAS services and participation in operating
and network decisions outlined herein;
WHEREAS, SBCT has announced plans to offer local telecommunications
services in geographical areas in at least 30 major metropolitan areas;
WHEREAS, SBCT intends to provide xDSL service ("xDSL" includes, but is not
limited to, DSL, ADSL, IDSL and SDSL services) to its customers on a
nationwide basis, through its own facilities and through arrangements with
other providers of such services;
WHEREAS, NAS desires to make modifications to its network and business
operations in order to more closely align its network and business
operations with
the future network and business operations of SBCT and Telmex; and
WHEREAS, a major form of consideration that SBCT and Telmex is receiving
for making the Equity Investment is the execution of this Summary and a
definitive agreement covering marketing, systems integration, collocation,
cooperative network development, joint product development and such other
matters as the Parties may agree (the "Operating Agreements") and a
definitive resale agreement.
NOW THEREFORE, in consideration of the mutual covenants contained herein,
and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Parties agree as follows:
2. SALES AND MARKETING
a. NAS and SBCT, and NAS and Telmex, shall each enter into negotiations
for the purpose of reaching an agreement for SBCT's and / or Telmex's
resale of NAS's telecommunications services including, but not limited
to, xDSL services (the "Resale Agreement"). NAS's wholesale prices to
SBCT and Telmex shall be the lowest of: 1) the lowest wholesale price
extended by NAS to any other customer; 2) the wholesale price at which
such services are available from other telecommunications carriers in
the primary metropolitan statistical area ("PMSA"), provided, however,
that under this subparagraph (2) NAS's wholesale prices shall include
a reasonable profit margin; or 3) NAS's direct cost attributable to
the service, plus a reasonable rate of return, subject to mutually
agreed upon costing methodologies.
b. For services provided by NAS and resold by SBCT and / or Telmex, SBCT
and NAS, and Telmex and NAS, will jointly establish benchmark service
level agreements, service intervals and service guarantees due from
NAS. The Parties will agree on incentives to assure attainment of
agreed upon service levels.
c. SBCT, Telmex and each of their affiliates (including, without
limitation, Prodigy) shall have the ability to purchase wholesale
services from NAS; provided, however, that such ability to purchase
wholesale services shall not apply to Section 3 (Collocation), herein.
d. SBCT, Telmex and each of their affiliates (including, without
limitation, Prodigy) shall have the right to resell NAS
telecommunications services, each under their own brand, and to
establish their own marketing programs, sales collateral and other
promotional material.
e. NAS and SBCT, and NAS and Telmex, shall enter into discussions for the
negotiation of an agreement with NAS to allow NAS to sell certain SBCT
and / or Telmex services.
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3. COLLOCATION
a. SBCT, at its option, may lease space from NAS inside any collocation
space NAS currently has or has ordered from another party where there
is excess capacity or inside any other space used by NAS to provision
service. SBCT may deploy equipment of its choosing in the collocation
space, except that, to the extent that NAS has DSL equipment in place
or current plans to deploy DSL equipment in that collocation space
that will deliver xDSL-based services in the timeframe required by
SBCT and in accordance with SBCT's existing requirements, SBCT shall
not provide xDSL services using its own equipment located in NAS's
collocation space, except that SBCT may provide DSL service if no
valid resale agreement is in place with NAS. If SBCT changes its
existing requirements, the deployment of SBCT's DSL equipment in NAS's
collocation space shall be subject to the Network Committee review
process for network architecture under the network development
provisions of this Agreement. If NAS deploys DSL equipment in the
future in the shared collocation space that is capable of serving
SBCT's DSL requirements, SBCT shall provision no additional DSL
customers using SBCT's equipment in NAS's collocation space. The
Parties further agree that they will expeditiously work out
collocation issues with respect to Boston, Miami, Seattle and other
cities where SBCT is having difficulty meeting its deployment targets.
If SBCT and NAS have not entered into a resale agreement by June 1,
2000, then (a) SBCT may not request additional collocation space after
December 31, 2000, and (b) SBCT may not request additional collocation
space after June 1, 2000 in any given PMSA if SBCT is already
collocated or has ordered collocation at 10 or more central offices in
that PMSA where NAS has collocation space; provided that the
restrictions set forth in clauses (a) and (b) shall be of no further
effect if SBCT and NAS enter into a resale agreement after June 1,
2000.
b. The space shall be provided by NAS at the lowest of: 1) the lowest
price extended by NAS to any other carrier; 2) the price at which such
space is available from other carriers in the PMSA, provided, however,
that under this subparagraph (2) NAS's prices shall include a
reasonable profit margin; or 3) NAS's direct cost attributable to
providing the space plus a reasonable rate of return, subject to
mutually agreed upon costing methodologies. To provide SBCT with time
to assess its collocation space needs, until June 1, 2000, NAS will
not lease to any third party any collocation space that NAS now
occupies or has ordered without SBCT's prior consent, nor will NAS
lease to any third party prior to December 1, 2000 any collocation
space for which SBCT has advised NAS by June 1, 2000 that SBCT intends
to lease.
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c. At SBCT's option, NAS shall jointly plan with SBCT where and when to
acquire new collocation spaces and the physical requirements of NAS's
new collocation spaces in order to allow SBCT to share collocation
space with NAS, except that in operating territories where an SBC
affiliate is an ILEC, NAS shall make the final determination on any
new collocation space. Each Party will be responsible for its pro rata
share of the direct costs and mutually acceptable indirect costs of
the jointly planned collocation space based on each Party's allocated
space.
d. NAS represents that it has or will acquire the contractual ability to
share collocation space with SBCT under the terms of its
interconnection agreements or collocation tariffs with the owners of
the space and that nothing contained in this section shall cause NAS
to be in breach of any contractual or tariff obligation.
e. Telmex and NAS will negotiate in good faith the terms and conditions
of the collocation and other agreements, consistent with the terms and
conditions provided to SBCT. NAS will apply the necessary flexibility
and devote the necessary resources to develop a long term, mutually
beneficial relationship with Telmex in these matters.
4. NETWORK COMMITTEE
a. SBCT, Telmex and NAS shall establish a Network Committee comprised of
an equal number of representatives from each Party. The Network
Committee will operate under rules agreed to by the Parties. Except
within operating territories where an SBC affiliate is the ILEC, the
Committee shall be responsible for network architecture, network
buildout, collocation planning and such other functions as the Parties
may agree upon. In operating territories where an affiliate of SBC is
an ILEC, NAS shall be solely responsible for its own network
architecture, network buildout and collocation planning function.
b. Committee Management
1) The Network Committee will meet monthly (or as otherwise agreed by
the Parties) at a time and place agreed upon by the members.
Meetings may also be called by any Party on 14 days written
notice to the other Parties, except in cases of emergency, where
as much notice will be given as practicable.
2) Unless agreed by the other Parties, no matter can be finally
resolved unless it was disclosed in an agenda with sufficient
particularity to reasonably disclose the nature of the matter.
3) A quorum shall consist of at least one member from each Party.
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4) Members may participate in a meeting by teleconference and may
designate an alternate member to participate in a meeting on
their behalf.
5) NAS, Telmex and SBCT shall jointly establish, with the assistance
of counsel, rules and procedures governing the conduct of
Committee meetings.
6) Each Party will designate a Project Manager to serve as the
principal contact for matters related to the subject matter of
this Summary.
7) SBCT, Telmex and NAS shall each have as many votes as they have
representatives on the Network Committee, regardless of whether
each representative participates in a meeting.
8) The Parties shall attempt in good faith to promptly resolve any
dispute arising out of this Summary or out of the definitive
agreements contemplated herein ("Dispute") by negotiation between
the designated Project Manager for each Party. Any Party may
provide written notice of a Dispute, which will set forth the
nature of the dispute and the identity of representatives in
addition to the Project Manager who will attend settlement
meetings. After the receipt of a written notice of a Dispute, the
representatives of the Parties shall meet as soon as practicable
at mutually acceptable times and places. If a Dispute has not
been resolved within 30 days of the receipt of written notice,
the Dispute shall be referred to the CEO of NAS, the President of
SBCT, and the Senior Officer of Telmex for resolution.
5. NETWORK ARCHITECTURE
a. The Network Committee will jointly test, evaluate and approve proposed
network platforms, network equipment and network architecture to be
used in NAS's network.
b. NAS will deploy the network platforms and establish network
architecture, and will use the equipment vendors, approved by SBCT and
Telmex, provided however, that SBCT or Telmex shall not require NAS to
use network platforms or establish network architecture which would
have a material adverse effect on NAS's ability to provide service to
its customers nor shall anything preclude NAS from using any network
platforms or network architecture it wishes-- provided that such
network platforms and network architecture do not adversely affect the
services SBCT and / or Telmex obtains or has requested from NAS.
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6. NETWORK BUILDOUT
a. The Network Committee will jointly evaluate and approve proposals to
build out new NAS network facilities, which may include, but is not
limited to, transport, central offices, collocation and equipment
("Network Facilities"). NAS will build out new Network Facilities as
directed by the unanimous vote of the Network Committee.
b. In the event that NAS wants to build out new Network Facilities and
cannot obtain the agreement of the SBCT and Telmex members(s), nothing
in this section shall prevent NAS from building out such Network
Facilities.
c. In the event that SBCT or Telmex wants NAS to build out new Network
Facilities and cannot obtain the agreement of the NAS members(s), NAS
shall build out the Network Facilities as a Mandatory Project as set
forth in subparagraph (e) below.
d. Notwithstanding any other provision of this Section 6 (Network
Buildout) NAS shall establish new Network Facilities to support the
provision of xDSL services in the PMSAs listed in Attachment A. SBCT
shall have the right to amend the list upon reasonable notice. The
xDSL service shall meet SBCT's specifications and shall be deployed in
accordance with SBCT's reasonable timeline.
e. Mandatory Project
1) Should a Network Facilities build out proposal fail to receive
the necessary approval of the Network Committee due to the
failure of NAS to support it, either SBCT or Telmex may require
NAS to initiate the proposal as a Mandatory Project. NAS shall
commence efforts on the Mandatory Project within one (1) month of
receiving notice from SBCT or Telmex to proceed with the
Mandatory Project.
2) Notwithstanding the immediately preceding subparagraph 1), SBCT
or Telmex may, instead of pursuing the proposal as a Mandatory
Project, undertake the project on its own or with a third party.
In such case, NAS will cooperate with SBCT or Telmex and will use
its best efforts to integrate a Mandatory Project into the
existing infrastructure of NAS's network.
3) If NAS is required to complete a Mandatory Project, SBCT and / or
Telmex shall pay NAS: (i) all reasonable, identifiable fully
loaded direct expenses associated with the Mandatory Project,
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plus (ii) the reasonable cost of capital investments directly
required by the Mandatory Project, less (iii) any cost savings,
tax benefits or other benefits attributable to the Mandatory
Project. Cost savings shall be estimated, and then adjusted when
actual data becomes available. Mandatory Projects shall be
subject to mutually agreed upon costing methodologies.
4) At Telmex's or SBCT's option, SBCT or Telmex will either: (i) own
all aspects of the Mandatory Project, including facilities,
intellectual property and rights to use; or (ii) lease from NAS
the exclusive rights to use all aspects of the Mandatory Project
for the life of the equipment for $1 per year plus operating
costs.
5) SBCT and Telmex shall have reasonable audit rights.
7. SYSTEMS INTEGRATION
a. The Parties use certain systems to process, analyze, store and
retrieve data. These systems include, but are not limited to, revenue
systems (which include, among others, systems for pre-ordering,
ordering, service activation, service assurance and billing) and
administrative systems (which include, among others, payroll,
personnel and accounting systems) (collectively, the "Data Systems").
b. NAS and SBCT, and NAS and Telmex, shall, as soon as reasonably
practicable following the execution of Resale Agreements, develop
electronic methods of exchanging information related to pre-ordering,
ordering, service activation, service assurance and billing for NAS
services under their separate resale relationships. NAS and SBCT, and
NAS and Telmex, will establish manual processes for use until
electronic processes are in place.
c. NAS, Telmex and SBCT shall each bear its own cost of developing and/or
otherwise providing the manual and electronic methods of information
exchange. Costs for all shared facilities or capabilities shall be
borne equally by the Parties on a pro-rata basis.
8. PRODUCT DEVELOPMENT
a. SBCT and NAS, and Telmex and NAS, shall actively participate in joint
product development processes, including but not limited to,
identification and evaluation of new products and product
functionalities, and decisions on whether to develop or acquire the
desired product functionality.
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b. SBCT and NAS, and Telmex and NAS, will agree as to both the
functionality of jointly deployed products and the timing of the
marketing and delivery of such products.
c. To the extent joint product development results in characteristics not
otherwise available in the market, the Parties (either SBCT and NAS or
Telmex and NAS) will agree on the terms and conditions upon which
these products are to be made available to customers and other
telecommunications carriers.
d. SBCT and NAS, and Telmex and NAS, will share intellectual property
rights in jointly developed products.
9. TERM
The term of the definitive Operating Agreements and Resale Agreements shall
be five (5) years from the date such agreements are executed.
10. CONFIDENTIALITY
Except to the extent required to be disclosed by law or pursuant to an
order of a court or agency with jurisdiction, each Party shall hold in
confidence the provisions of this Summary and any proprietary or
confidential information received pursuant to the negotiations surrounding
this Summary and shall use such proprietary or confidential information
only to fulfill its obligations or enforce its rights under this Summary or
to consummate a definitive agreement between the Parties covering the
subject matter of this Summary. Each Party shall use the same efforts to
safeguard any proprietary or confidential information received pursuant to
this Summary as it uses to protect its own proprietary or confidential
information. Each Party shall have the right to enforce this
confidentiality obligation by injunctive relief, including specific
performance. This confidentiality obligation shall remain in effect for a
period of twelve (12) months after the expiration of this Summary.
11. COMPLIANCE WITH LAWS
Nothing in this Summary shall obligate a Party to take any action that
violates any applicable governmental law, regulation, order, or policy of
the FCC or any other governmental entity, including, but not limited to,
any provisions of the Federal Communications Act of 1934, as amended
("Act") and the antitrust laws of the United States and the respective
States. In no event shall a Party be obligated to perform any acts or to
abstain from performing any act if, in the Party's reasonable judgment,
after consulting with the other Parties, performance or non-performance
will violate the Act or any applicable law regulation, order, policy of the
FCC, any antitrust laws, or any other law or regulation.
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12. OTHER TERMS AND CONDITIONS
The definitive Operating Agreement between the Parties shall, at a minimum,
contain terms and conditions covering intellectual property rights,
prohibition on solicitation of employees, transition upon termination,
representations and warranties, indemnification, limitation of liability
and coordination on publicity.
13. CHANGE IN CONTROL
In the event of an NAS Change in Control Event, as defined in the Stock
Purchase Agreement by and between SBC and NAS, and Telmex and NAS, SBCT and
Telmex shall have the right to terminate the Operating Agreements and the
Resale Agreements for 180 days after the NAS Change in Control Event by
providing notice to NAS, and such termination shall occur 60 days after
giving such notice.
14. MISCELLANEOUS
Nothing in this Summary permits NAS to influence or control any aspect of
network deployment or operation of Telmex, SBC, or an SBC affiliate, within
SBC's ILEC operating territory.
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IN WITNESS WHEREOF, the Parties hereto have signed this Summary, or have caused
this Summary to be signed in their respective names by an officer, hereto duly
authorized, on the date first written above.
SBC Telecom, Inc.
By: ______________________________
Name: __________________________
Title: ___________________________
Telefonos de Mexico S.A. de C.V.
By: ____________________________
Name: __________________________
Title: ___________________________
Network Access Solutions Corporation
By: _____________________________
Name: __________________________
Title: ___________________________
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ATTACHMENT A
PMSA's For NAS Deployment of Network Facilities
Boston Nashville
Miami Raleigh
Seattle Norfolk
Ft. Lauderdale Louisville
New York City New Orleans
Washington, DC Tucson
Baltimore
Atlanta
Philadelphia
Phoenix
Minneapolis
Denver
Nassau, NY
Bergen-Passaic, NJ
Newark, NJ
Middlesex, NJ
Orlando
Tampa
Salt Xxxx Xxxx
Xxxx Xxxx Xxxxx
Xxxxxxxx
Xxxxxxxxx
Buffalo
Memphis
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