Exhibit 10.2

 

FIRST AMENDMENT TO CAPACITY AGREEMENT

 

THIS FIRST AMENDMENT TO CAPACITY AGREEMENT (“First Amendment”) is entered into
as of this 19th day of May, 2003, by and between INTERSTATE FIBERNET, INC., a
Delaware corporation (as successor to Interstate FiberNet, a Georgia general
partnership), (“IFN”), and ENTERGY TECHNOLOGY COMPANY, a Delaware corporation
(“ETC”), (hereinafter each referred to in the singular as “Party” or
collectively as “Parties”). Capitalized terms used in this First Amendment and
not otherwise defined herein shall have the meanings set forth in the Capacity
Agreement.

 

W I T N E S S E T H:

 

WHEREAS, IFN and ETC entered into that certain Capacity Agreement dated February
1, 1997, (the “Capacity Agreement”); and

 

WHEREAS, IFN and ETC desire to amend and modify certain terms and conditions of
the Capacity Agreement to, inter alia, extend the term of the Capacity
Agreement, ratify the actions of the Parties, redefine the terms Available
Capacity, Delinquent Amounts, Gross Revenue and House Accounts, amend the
applicable rates and charges, confirm the use of House Accounts and to otherwise
provide for and clarify the obligations of the parties under the Agreement.

 

NOW, THEREFORE, in consideration of the mutual promises and covenants contained
herein and in the Capacity Agreement, the receipt and sufficiency of which are
hereby acknowledged, IFN and ETC agree as follows:

 

ARTICLE 1

RENEWAL TERM AND RATIFICATION

 

1.1    Renewal Term. The parties hereby agree that the Capacity Agreement is
renewed for a term of three (3) years (the “Renewal Term”), effective as of
12:01 a.m. on February 1, 2002 (the “Effective Date”), and continuing until
12:01 a.m. on January 31, 2005 (the “Expiration Date”), unless earlier
terminated in accordance with Section 6.2 (Termination of Agreement) or Section
12.3 (Force Majeure) of the Capacity Agreement. The Renewal Term of the Capacity
Agreement shall be automatically extended thereafter unless terminated by IFN or
ETC by delivering to the other Party written notice of termination of the
Capacity Agreement not less than six (6) months prior to the Expiration Date. In
the event the term of the Capacity Agreement is automatically extended as
provided herein, then the Capacity Agreement may thereafter be terminated by IFN
or ETC by delivering to the other Party written notice of termination, said
termination to be effective no sooner than six (6) months from the actual
receipt of the notice of termination by the non-terminating Party.

 

1.2    Ratification. The Parties hereby agree that the Capacity Agreement,
unless otherwise specifically amended herein, shall remain in full force and
effect, and each Party

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hereby ratifies all actions taken in connection therewith from the Effective
Date to the date of this First Amendment.

 

ARTICLE 2

AMENDED DEFINITIONS

 

2.1    Available Capacity. The term “Available Capacity” as defined in Section
1.1 of the Capacity Agreement is hereby amended to mean the amount of bandwidths
in increments of equivalent DS-3 channels specifically designated on an ongoing
monthly basis by ETC, in its sole discretion, as available for use by IFN under
the terms of the Capacity Agreement.

 

The Parties understand that the telecommunications facilities or capacity made
available to ETC by the Entergy Operating Companies (Entergy Arkansas, Inc.,
Entergy Gulf States, Inc., Entergy Louisiana, Inc., Entergy Mississippi, Inc.
and Entergy New Orleans, Inc.) and/or their affiliate service company (Entergy
Services, Inc.) (together, the Entergy Operating Companies and their service
company, shall be referred to as “Entergy”), but not specifically designated by
ETC as available for use by IFN, does not constitute “Available Capacity,” and
IFN has no right or obligation to demand additional capacity from ETC under this
Agreement. Exhibit “E” of the Capacity Agreement is hereby deleted in its
entirety.

 

The Parties agree and reaffirm that IFN’s right to use, market and/or manage the
Available Capacity shall not adversely affect the capacity reserved or used by
Entergy, and shall not subject Entergy to regulation by state or local
governments or agencies thereof as a telecommunications utility or common
carrier. Violation of this provision shall be grounds for termination under
Section 6.2 of the Capacity Agreement.

 

2.2    Delinquent Amounts. The term “Delinquent Amounts” as defined in Section
1.2 of the Capacity Agreement is hereby amended to mean any amounts billed by
IFN to customers for the use of ETC’s telecommunications facilities or capacity,
which amounts have not been paid to IFN for at least ninety (90) days after
IFN’s actual Invoice Date, or for which IFN’s customer has commenced legal
proceedings for protection from creditors under the laws relating to bankruptcy
or insolvency.

 

2.3    Gross Revenue. The term “Gross Revenue” as defined in Section 1.3 of the
Capacity Agreement is hereby amended to mean the gross revenues generated during
any calendar month from IFN’s sales of circuits utilizing the Available
Capacity, whether or not IFN has actually collected such revenue, excluding
applicable taxes.

 

2.4    House Accounts. The term “House Account” as defined in Section 1.4 of the
Capacity Agreement is hereby amended to mean an account developed wholly or
partially by ETC and for which ETC provides administrative, billing, provision
and network management services. IFN shall have no obligation to provide any
services with regard to said House Accounts, and ETC shall receive one hundred
(100%) percent of the Gross Revenue from House Accounts.

 

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2.5    Total Revenue Commitment. The term “Total Revenue Commitment” as defined
in Section 1.5 of the Capacity Agreement is hereby deleted as unnecessary.

 

2.6    Sales Target. The term “Sales Target” as defined in Section 1.6 of the
Capacity Agreement is hereby clarified to mean the revenue projections mutually
agreed to by IFN and ETC pursuant to Section 4.3 hereof, and accepted as a basis
to determine ETC’s right to alter the exclusivity of the Capacity Agreement, as
amended.

 

ARTICLE 3

PAYMENT

 

3.1     Consideration. In consideration of the Available Capacity and Special
Seller Facilities provided by ETC to IFN hereunder, IFN shall pay to ETC eighty
(80%) percent of all Gross Revenue generated during each calendar month.

 

3.2    Terms of Payment. By the twentieth (20th) day of each month, IFN shall
pay ETC compensation calculated pursuant to Section 3.1, and using Gross Revenue
from the previous month regardless of whether the Gross Revenue is received from
customers. At such time, IFN shall also provide ETC with a monthly revenue
report and summary of its calculations of all amounts due ETC pursuant to the
Capacity Agreement for the preceding month. Said revenue report shall include a
listing of individual customer distribution and revenue attributable to the ETC
network and facilities.

 

3.3    Deductions for Delinquent Amounts. IFN’s obligation to pay ETC the
compensation set forth above shall be subject to IFN’s right to deduct from any
such compensation Delinquent Amounts, plus all of IFN’s out-of-pocket costs of
collection of such amounts, including but not limited to, attorneys’ fees and
disbursements and collection agency fees; provided, however, that ETC shall not
be responsible for reimbursing IFN for any of IFN’s out-of-pocket costs of
collection from any customers that are in excess of the amount equal to
Delinquent Amounts actually received from such customer as a result of IFN’s
collection activities. IFN will notify ETC within sixty (60) days after an
amount becomes delinquent of any amounts that are at risk of not being
collected. IFN will use reasonable and customary efforts to collect Delinquent
Amounts. If IFN receives any Delinquent Amount from any customer after having
been reimbursed by ETC for such amount, IFN will promptly forward such amount to
ETC. If IFN elects not to pursue collection of any Delinquent Amount, IFN shall,
at ETC’s request, assign said accounts to ETC for collection. ETC may retain
100% of the amounts it collects on the assigned accounts.

 

3.4    Rates and Charges. Section 3.1 (Rates and Charges), Exhibit “B” (Rates
and Charges) and Exhibit “C” (Compensation Schedule) are hereby deleted in their
entirety.

 

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ARTICLE 4

PRICING, BILLING AND PROJECTED SALES

 

4.1    DS-3 Price Floors and OC-N Pricing. The intent of setting price floors
for services is to ensure that ETC will receive compensation for all circuits
incorporated by a reasonable cash flow and by a reasonable return on investment
in the network. Thus, ETC and IFN shall on at least an annual basis mutually
establish a minimum acceptable price for DS-3 and OC-n circuits. IFN shall
obtain pre-approval from ETC for all circuits that require pricing below the
levels of the mutually agreed upon pricing and for service terms that are not
standard. ETC will not unreasonably withhold approval of such system pricing and
service terms. ETC and IFN may agree to revise a price floor at any time.

 

4.2    Billing. IFN shall bill its customers monthly, in advance, on the
twentieth (20th) day of the month for their use of capacity on ETC’s network.
The first month of service will be billed in arrears as a partial month in the
next billing cycle if it is installed after the twentieth (20th) day of the
month and as a partial month in the current billing cycle if it is installed
prior to the twentieth (20th) day of the month.

 

Upon ETC’s written request, IFN will promptly provide ETC a transaction detail
of (i) the current month billing journal and (ii) a detail of all circuits and
the contract rate of those circuits installed after the twentieth (20th) day of
the month and not included in the current month’s billing cycle.

 

4.3    Sales Target. During the term of this Agreement, IFN will meet with ETC
on a semi-annual basis during the months of October and April and provide ETC
with monthly revenue projections for the subsequent six (6) month period,
beginning in January and July of the projection year. Upon agreement between IFN
and ETC, these projections will become IFN’s monthly Sales Target for the
applicable six (6) month periods.

 

4.4    Deleted Sections and Exhibits. Section 3.3 (Billing) and Exhibit “D” of
the Capacity Agreement are hereby deleted in their entirety.

 

ARTICLE 5

EXCLUSIVITY

 

5.1    Exclusive Right to Market Available Capacity. The Parties reaffirm that
IFN has the exclusive right to market Available Capacity, and ETC shall not
grant any other entity the right to market Available Capacity. This right of
exclusivity, however, is as to third parties only, and does to limit ETC’s
rights to market, sell, lease or otherwise use its telecommunications network in
any way. ETC expressly retains the right to sell or otherwise market capacity on
the Entergy network, whether designated as Available Capacity or not, to any
person or entity, and to otherwise hold itself out as a telecommunications
carrier with respect to such capacity. Section 7.1 of the Capacity Agreement is
inconsistent with the intent of the Parties and is hereby deleted in its
entirety. To the extent that any other provisions of the Capacity Agreement
pertaining to exclusivity are inconsistent with this Article 5, those provisions
are hereby deleted or amended to reflect the current understanding of the
Parties.

 

5.2    Termination of Exclusivity. IFN’s exclusive right to market Available
Capacity may be terminated, at ETC’s sole discretion, in the event that IFN
fails to meet a minimum of

 

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75% of its monthly Sales Target for any three consecutive months, subject to
adjustment for any part of the Sales Target that is not realized as a result of
failure by ETC to provide interconnection of Special Seller Facilities to which
it has committed. Should IFN and ETC be unable to agree on a Sales Target for
any subsequent projection year, ETC may, at its sole discretion, terminate IFN’s
rights of exclusivity.

 

Section 6.4 (Termination of Exclusivity) of the Capacity Agreement is hereby
deleted in its entirety.

 

ARTICLE 6

MERGER OR ACQUISITION EVENT

 

6.1    In the event of a merger or acquisition event (“M&A Event”), defined as
(i) the acquisition, by merger, consolidation or otherwise, by either Party of
an unrelated person or entity, resulting in the acquiring Party acquiring
control of a fiber route which makes the then existing Fiber Route(s) redundant
in nature or (ii) either Party being acquired, by merger, consolidation or
otherwise, by an unrelated person or entity resulting in a change of control of
the acquired Party (i.e., acquiring greater than 50% of the controlling interest
in the acquired-Party) which said acquiring unrelated person or entity either
has or intends to create a fiber route redundant to the then existing Fiber
Route(s), then the acquiring or acquired Party shall have the option to provide
written notice to the other Party at any time on or after January 1, 2003,
following an M&A Event (“M&A Event Notice”), notwithstanding the fact that the
M&A Event may occur prior to January 1, 2003, said M&A Event Notice to have the
effect as described below:

 

(a)    Each Party will continue provisioning of new circuits, i.e., processing
of “new” circuit orders of the other Party, on the Fiber Route(s) for a period
of twelve (12) consecutive months from receipt by the other Party of the MBA
Event Notice;

 

(b)    The acquired or acquiring Party shall have the right, but not the
obligation, to commence placing its future “new” circuits on the network fiber
route(s) acquired through the M&A Event immediately following the M&A Event. Any
“new” circuits placed on the network fiber route(s) acquired through the M&A
Event shall not be subject to this Capacity Agreement;

 

(c)    Notwithstanding any term to the contrary contained herein, in the event
IFN provides ETC with a M&A Event Notice, then ETC and IFN shall continue the
current compensation methodology per this Agreement as it relates to circuits as
long as the circuits remain on the Fiber Route(s);

 

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ARTICLE 7

ADDITIONAL MODIFICATIONS

 

7.1    Termination. The following sentence is hereby incorporated as the last
sentence in paragraph 6.2.2 of Section 6.2, entitled “Termination of Agreement,”
of Article 6, entitled “TERM,” of the Agreement:

 

Notwithstanding any term or provision in this paragraph 6.2.2 to the contrary,
neither Party shall be permitted to terminate this Agreement due to a change in
a material rate provided said change in the material rate is a change to a “fair
market” rate.

 

7.2    Notices. The following contact information is hereby incorporated into
Section 12.5, entitled “Notices” of the Capacity Agreement:

 

If to ETC:

 

Entergy Technology Company

639 Loyola Avenue

New Orleans, Louisiana 70113

Attention: Vice President and General Manager

Telecopy: (504) 576-7099

 

If to IFN:

 

Interstate FiberNet, Inc.

1791 O. G. Skinner Drive

West Point, Georgia 31833

Attention: Chief Financial Officer

Telecopy: (706)             -            

 

The remaining provisions of Article 12.5 shall remain in full force and effect.

 

ARTICLE 8

ADDITIONAL TERMS

 

8.1    Effective Date. The terms and conditions of this First Amendment shall be
deemed retroactive and effective on the 1st day of February, 2002. However, with
respect to the new compensation structure (ETC receives 80% of Gross Revenues),
no retroactive adjustments will be made. The new compensation structure as
described in this addendum, will become effective upon the signing of this
addendum.

 

8.2    Governing Law. The Capacity Agreement, as amended, the rights and
obligations of the Parties hereto, and any claims or disputes relating thereto,
shall be governed by and construed in accordance with the laws of the State of
Louisiana (but not including the choice of law rules thereof).

 

8.3    Other Terms and Conditions. Unless otherwise specifically stated in this
First Amendment, all terms and conditions of the Capacity Agreement shall remain
in full force and effect, as if fully stated herein.

 

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If there are any conflicting terms or conditions between the terms and
conditions of this First Amendment and the terms and conditions of the Capacity
Agreement, the terms and conditions of this First Amendment shall control.

 

8.4    Entire Agreement. Any and all prior agreements made between IFN and ETC,
whether written or oral, regarding the subject matter of this First Amendment
shall be superseded by this First Amendment.

 

IN WITNESS WHEREOF, IFN and ETC have executed this First Amendment to Capacity
Agreement, by their duly authorized representatives, as of the day and year
first above written.

 

       

IFN:

         INTERSTATE FIBERNET, INC. /s/       By:   /s/ Douglas A. Shumate

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Witness       Name:  

Douglas A. Shumate

         

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        Title:  

Senior Vice President and Chief Financial Officer

         

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        ETC:        

ENTERGY TECHNOLOGY COMPANY

/s/       By:   /s/ Earl S. Frederick

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Witness       Name:  

Earl S. Frederick

         

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        Title:  

Vice President and General Manager

         

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