Exhibit 10.13


 


DSC MARKETING SERVICES, INC.


 


SUPPLY AGREEMENT


 


COMMUNICATIONS EQUIPMENT


 

















 


INDEX


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE 1.

  	
  SCOPE

  	
   

  	
  1

  
	
  ARTICLE 2.

  	
  ORDERING PROCEDURES

  	
   

  	
  1

  
	
  ARTICLE 3.

  	
  CONTRACT PRICE

  	
   

  	
  2

  
	
  ARTICLE 4.

  	
  PAYMENT TERMS

  	
   

  	
  2

  
	
  ARTICLE 5.

  	
  DELIVERY, TITLE AND RISK OF LOSS

  	
   

  	
  3

  
	
  ARTICLE 6.

  	
  TERMINATION

  	
   

  	
  3

  
	
  ARTICLE 7.

  	
  SUBCONTRACTING

  	
   

  	
  3

  
	
  ARTICLE 8.

  	
  WARRANTY

  	
   

  	
  3

  
	
  ARTICLE 9.

  	
  WARRANTY ON REPAIRED MATERIALS

  	
   

  	
  4

  
	
  ARTICLE 10.

  	
  LIMITATION OF LIABILITY

  	
   

  	
  4

  
	
  ARTICLE 11.

  	
  TECHNICAL SUPPORT

  	
   

  	
  4

  
	
  ARTICLE 12.

  	
  SOFTWARE LICENSE

  	
   

  	
  5

  
	
  ARTICLE 13.

  	
  TRAINING

  	
   

  	
  5

  
	
  ARTICLE 14.

  	
  DOCUMENTATION

  	
   

  	
  5

  
	
  ARTICLE 15.

  	
  PROPRIETARY RIGHTS/NON-DIVULGENCE

  	
   

  	
  6

  
	
  ARTICLE 16.

  	
  EXCUSABLE DELAY

  	
   

  	
  6

  
	
  ARTICLE 17.

  	
  GENERAL INDEMNITY

  	
   

  	
  6

  
	
  ARTICLE 18.

  	
  REMEDIES

  	
   

  	
  7

  
	
  ARTICLE 19.

  	
  PURCHASER’S RESPONSIBILITIES

  	
   

  	
  8

  
	
  ARTICLE 20.

  	
  HARDWARE AND SOFTWARE VERIFICATION

  	
   

  	
  8

  
	
  ARTICLE 21.

  	
  NOTICES

  	
   

  	
  8

  
	
  ARTICLE 21.

  	
  ENTIRETY OF AGREEMENT

  	
   

  	
  8

  



 


ATTACHMENT A


 


      PRICE LIST


 


i

















 


SUPPLY AGREEMENT


 


This supply agreement (the “Agreement” is made and entered into on
February 26, 1990, by and between DSC Marketing Services, Inc. (“DSC”), a
Delaware corporation, with its principal place of business at 1000 Colt Road,
Plano, Texas, and Consolidated Network Corp. (“Purchaser”), a              
corporation, with its principal place of business at 11701 Bormon Drive, St.
Louis, MO 63146.


 


ARTICLE 1.    SCOPE


 


1.1           The term of the
Agreement shall run from the date first mentioned above through March 30, 1990.


 


1.2                                 During the term of
this Agreement in accordance with each purchase order issued by Purchaser and
accepted by DSC, DSC shall:


 


a.                                       Engineer, sell
and deliver that equipment so specified in the order (“Equipment” being defined
as the hardware component of each product being offered under the terms and
conditions of the Agreement);


 


b.                                      Grant to
Purchaser a nonexclusive, paid-up license to use the software (“Software” is
defined as set forth in Article 12) during the useful life of the associated
Equipment on the terms and conditions set forth in the Software License,
Article 12; and


 


c.                                       Test and install
the Equipment and/or Software (hereinafter “Installation Services”), if
Purchaser elects to purchase such services or such services are included in the
price of the Equipment or Software.


 


ARTICLE 2.    ORDERING PROCEDURES


 


2.1                                 The following
procedures shall be followed with respect to each purchase order issued by
Purchaser and accepted by DSC:


 


a.                                       During the term
of this Agreement, Purchaser will inform DSC of its intent to purchase or
license Equipment, Software, Installation Services, or Systems (“System” or “Systems”
being defined as those products composed of a combination of both hardware and
software) by sending to DSC a written order. This written order, hereinafter referred
to as the “Purchase Order”, will state the type of Equipment, Software, System,
or Installation Services that Purchaser wants to purchase or license, the price
of the ordered items (hereinafter referred to as the “Contract Price”), as set
forth in Attachment A, “Price List”, which is hereby incorporated by reference,
and the proposed delivery dates and installation dates, if applicable.


 


b.                                      Each Purchase
Order shall specifically incorporate by reference the terms and conditions of
this Agreement. In the event of a conflict between the terms and conditions of
this Agreement and of any Purchase Order issued hereunder or if the Purchase
Order does not reference the terms and conditions of this Agreement, the terms
and conditions of the Purchase Order shall control.


 

















 


ARTICLE 3.    CONTRACT PRICE


 


3.1                                 The Contract Price for
each item of Equipment, Software, Installation Services, or Systems is as
specified in Attachment A and shall be paid to DSC in United States dollars. The
Contract Price includes:


 


a.                                       The price of the
Equipment;


 


b.                                      The fee for the
licensing of the Software;


 


c.                                       If Installation
Services are ordered, the charges for installing and testing each unit of
Equipment, Software or System;


 


d.                                      The charges for
the warranty of the Equipment and Software in accordance with Article 8;


 


3.2           The Price, as listed
in Attachment A, shall not include:


 


a.                                       Taxes assessed
against or payable by DSC in connection with the installation or the sale of
the Equipment and the licensing of the Software. Unless prohibited by law,
Purchaser shall pay to DSC the amount of any Federal, State, City or other tax
which DSC may be required to pay on account of (a) the installation of the
Equipment and Software; (b) the transportation, sale or use of the Equipment; (c)
the transportation, licensing or use of the Software; and (d) any other aspect
of DSC’s performance under this Agreement except for any tax assessed upon DSC’s
net income;


 


b.                                      Charges for the
shipment of the Equipment or any part thereof from its point of manufacture,
DSC agrees to prepay for the Purchaser the cost of any such shipment from the
point of manufacture to the destination designated by Purchaser, and Purchaser
shall promptly pay the amount of said shipping costs to DSC upon receipt of the
Invoice therefor, which payment shall be in addition to the Contract Price; and


 


c.                                       All utility
charges including, but not limited to, charges for Central Office Trunks, Tie
Lines, and supporting interconnecting devices, if required, from the utility.


 


ARTICLE 4.    PAYMENT TERMS


 


4.1                                 DSC will issue an
invoice (“Invoice”) to Purchaser upon shipment. The Invoice shall state the
Equipment, Software, or Systems so ordered and the Contract Price of such items.
Installation Services shall be invoiced separately upon completion of the such
Installation Services. The Invoice shall also state the total due to DSC from
Purchaser (“Invoice Total”) which shall include the Contract Price, and any
applicable taxes and/or delivery fees.


 


4.2                                 Payment of the Invoice
Total shall be rendered within thirty (30) days after the date of the Invoice.
All invoices not paid within thirty (30) days as stated herein shall be subject
to a late payment charge of one percent (1%) per month on the unpaid balance.


 


4.3                                 Unless otherwise
agreed to in writing by DSC, until the Invoice Total is paid in full, DSC shall
retain a security interest in the Equipment. Purchaser agrees to execute and
furnish to DSC any and all documentation necessary for the perfection of such
security interest. Purchaser shall not sell or lease the Equipment, allow any liens
or encumbrances to attach to the Equipment (other than DSC’s security
interest), or remove the Equipment from the installation site without DSC’s
written consent prior to payment in full of the Invoice Total.


 


2

















 


ARTICLE 5.    DELIVERY, TITLE AND RISK OF LOSS


 


5.1                                 Shipment of the
Equipment and Software shall be F.O.B. DSC’s manufacturing site.


 


5.2                                 Risk of loss or damage
to the Equipment shall pass to Purchaser upon delivery to the Purchaser.


 


5.3                                 Title to the Equipment
shall pass to Purchaser upon Purchaser’s payment of the Invoice Total.


 


ARTICLE 6.    TERMINATION


 


Purchaser may at any time prior to shipment terminate any Purchase
Order(s) placed by it hereunder. Purchaser shall notify DSC as soon as
Purchaser knows of the need to terminate any Purchase Order. In such event,
Purchaser’s liability to DSC with respect to such terminated Purchase Order(s)
shall be as follows:


 


	
  Number of Days Written

  	
   

  	
  Termination Charge

  	
   

  
	
  Notice Given Prior to

  	
   

  	
  (As a Percentage (%)

  	
   

  
	
  Scheduled Shipment Date

  	
   

  	
  of the Invoice Total)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Over 60 days

  	
   

  	
  0

  	
   

  
	
  45 to 60
  days

  	
   

  	
  15

  	
   

  
	
  30 to 45
  days

  	
   

  	
  30

  	
   

  
	
  15 to 30
  days

  	
   

  	
  45

  	
   

  



 


ARTICLE 7.    SUBCONTRACTING


 


7.1                                 DSC reserves the right
to subcontract such portions of the (a) Equipment manufacture and/or Software,
and/or (b) Installation to subcontractors of DSC’s choice as DSC deems
appropriate.


 


ARTICLE 8.    WARRANTY


 


8.1                                 THE WARRANTIES SET
FORTH IN ARTICLE 8 AND ARTICLE 9 ARE IN LIEU OF ALL OTHER WARRANTIES WHETHER
EXPRESSED OR IMPLIED, INCLUDING THE WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR INTENDED OR PARTICULAR PURPOSE.


 


8.2                                 DSC warrants that the
Equipment sold to Purchaser or the Software licensed to Purchaser under this
Agreement shall, under normal use and service, be free from defects in
materials and faulty workmanship. If Installation Services are ordered, the
warranty period shall be twelve (12) months from the earlier of the following
dates:  (1) Completion of Installation
(as defined in Article 20); or (2) thirty (30) days after shipment to Purchaser’s
site. If Installation Services are not ordered, the warranty period shall be
(12) months from shipment to Purchaser. (Hereinafter these periods of time
shall be collectively referred to as the “Initial Warranty Period”).


 


8.3                                 DSC’s obligation and
Purchaser’s sole remedy under this article are limited to the repair or
replacement, at DSC’s option, of the defective Equipment or Software. DSC shall
have no obligation to remedy any such defect if it can be shown:  (a) that the Equipment or Software was
altered, repaired, or reworked by any party other than DSC without DSC’s
written consent; (b) that such defects were the result of Purchaser’s improper
storage, mishandling, abuse, or misuse of the Equipment or Software; (c) that
such defects were the result of


 


3

















 


Purchaser’s use of the Equipment or Software in conjunction with
equipment electronically or mechanically incompatible or of an inferior
quality; or (d) that the defect was the result of damage by fire, explosion,
power failure, or any act of nature.


 


8.4                                 In no event shall DSC
be obligated to provide on-site maintenance. Subject to the provisions of this
Warranty clause, defective parts or components will be returned by Purchaser to
DSC’s point of manufacture facility, freight prepaid, and said defective parts
will be repaired or replaced by DSC at no charge to Purchaser.


 


8.5                                 Some of the parts,
components and subassemblies that make up the Equipment are not manufactured by
DSC. In the event that such part, component or subassembly is noted as “Vendor
Equipment” in Attachment A, DSC agrees in lieu of its warranty obligation
described above, to pass through to Purchaser, to the maximum extent possible,
the warranty provided by the manufacturer of the part, component or
subassembly.


 


ARTICLE 9.    WARRANTY ON REPAIRED MATERIALS


 


DSC warrants that the Equipment or Software returned to DSC for repair
shall be warranted from defective materials and workmanship for ninety (90)
days from date of shipment from DSC to Purchaser or until the end of the
Initial Warranty period, whichever is longer. Risk of loss or damage to
Equipment or Software returned to DSC for repair or replacement shall be borne
by Purchaser until delivery to DSC. Upon delivery of such Equipment or
Software, DSC shall assume the risk of loss or damage until that time that the
Equipment or Software being repaired or replaced is returned and delivered to
Purchaser. Purchaser will pay all transportation costs for Equipment or
Software shipped to DSC for repair or replacement. DSC shall pay all
transportation costs associated with returning repaired or replaced Equipment
or Software to Purchaser.


 


ARTICLE 10.         LIMITATION OF
LIABILITY


 


IN NO EVENT SHALL DSC HAVE ANY LIABILITY TO PURCHASER FOR INCIDENTAL, CONSEQUENTIAL,
OR INDIRECT DAMAGES, OR FOR LOSS, DAMAGE OR EXPENSE DIRECTLY OR INDIRECTLY
ARISING FROM THE USE OF THE EQUIPMENT OR THE SOFTWARE, OR THE INABILITY TO USE
THEM EITHER SEPARATELY OR IN COMBINATION WITH OTHER EQUIPMENT OR SOFTWARE, OR
FROM ANY OTHER CAUSE.


 


ARTICLE 11.         TECHNICAL
SUPPORT


 


11.1                           DSC shall provide the
following remote technical support at no charge during the Initial Warranty
Period. This service includes the following:


 


a.                                       Consultation and
telephone assistance, 24 hours, seven days per week, for problem isolation and
correction for hardware purchased and software licensed under this Agreement;


 


b.                                      Modem access
support assistance when applicable;


 


11.2                           On-site call-out maintenance
service is available at rates in effect at the time of request.


 


4

















 


ARTICLE 12.         SOFTWARE
LICENSE


 


12.1                           Purchaser is hereby granted
a nonexclusive, nontransferable, paid-up license to use the Software only in
connection with Purchaser’s use of the Equipment purchased under this
Agreement.


 


12.2                           Software licensed under this
Agreement is defined as computer programs contained on a magnetic tape, disc,
semiconductor device or other memory device or system memory consisting
of:  (a) hardwired logic instructions which
manipulate data in the central processor and which control input- output
operations, error diagnostics and recovery routines; and (b) instruction
sequences in machine-readable code that control call processing, peripheral
equipment, administration and maintenance functions as well as associated
documentation used to describe, maintain and use the programs.


 


12.3                           Purchaser agrees that the
Software to be provided by DSC under the Agreement or any enhancement,
modification, extension or expansion thereof, or an implementation of any of
the foregoing shall, as between the parties hereto, be treated as the exclusive
property of DSC and as proprietary to and a trade secret of DSC. All rights,
title and interest in the Software are and shall remain with DSC subject,
however, to a license to Purchaser to use the software solely in conjunction
with the Equipment during the useful life of the Equipment. Purchaser
shall:  (a) not modify the Software
without the prior written consent of DSC; (b) not reproduce or copy the
software in whole or in part; (c) not provide, disclose or make the Software or
any portions or aspects thereof available to any person except to its employees
on a “need-to-know” basis without prior written consent of DSC; (d) hold the
Software and any portions or aspects thereof including related documentation in
confidence for the benefit of DSC; (e) forthwith return to DSC any and all
magnetic tape, disc, semiconductor device or other memory device or system
and/or documentation of other material which has been replaced, modified, or
updated; (f) utilize the Software or any portions or aspects thereof (including
any methods or concepts utilized therein) solely in conjunction with the
Equipment; (g) issue adequate instructions to all appropriate persons, and take
all actions reasonably necessary to satisfy Purchaser’s obligations under this license.


 


12.4                           The obligations of the
Purchaser hereunder shall not extend to any information or data relating to the
Software which is now available to the general public or becomes available by
reason of acts or failures to act not attributable to Purchaser.


 


12.5                           The obligations of Purchaser
under this Article 12 shall survive the termination of this Agreement for any
reason and shall continued even if the Software is no longer utilized with the
Equipment.


 


ARTICLE 13.         TRAINING


 


DSC shall provide, at no additional charge during the Initial Warranty
Period, the training specified in Attachment A. The training will take place at
DSC’s facility, unless otherwise agreed to by the parties, and will consist of materials
developed and controlled by DSC. All travel and living expenses for the
training sessions shall be borne by Purchaser. Training after the Initial Warranty
Period shall be at the then current DSC rates.


 


ARTICLE 14.         DOCUMENTATION


 


DSC shall furnish that documentation specified in Attachment A to
Purchaser to be used for the operation and ongoing maintenance of the Equipment
and Software. All such documentation is to be


 


5

















 


treated in accordance with the terms of Article 15.  Updates to documentation shall be at no
charge during the Initial Warranty Period.


 


ARTICLE 15.         PROPRIETARY
RIGHTS/NON DIVULGENCE


 


15.1                           All technical information, documentation,
and Software supplied by DSC to Purchaser under this Agreement, except for that
which may be in the public domain, shall, as between the parties hereto, be
treated as the confidential and proprietary information of DSC. Purchaser,
except as specifically authorized in writing by DSC, shall:  (a) treat and protect all technical
information, documentation, and Software received from DSC or its suppliers as
confidential or proprietary information; (b) not reproduce any technical
information, documentation, or Software received from DSC or its suppliers, in
whole or in part; (c) use any technical information, documentation, or Software
received by DSC or its suppliers only for study, operation, or maintenance
purposes in connection with the Equipment; (d) indemnify DSC for any loss or
damages resulting from a breach of this Article 15; and (e) not disclose any
technical information, documentation, or Software received from DSC to any
third parties.


 


15.2                           If this Agreement is
terminated or cancelled, or if Purchaser is found to have breached any of the
provisions of Article 12 or 15, Purchaser agrees to immediately return all
technical information, documentation, and Software to DSC. In any event, the
obligations of Article 12 and 15 will survive termination of this Agreement.


 


ARTICLE 16.         EXCUSABLE
DELAY


 


Neither DSC nor Purchaser shall suffer any liability for
nonperformance, defective performance or late performance of the work due to
causes beyond its control and without its fault or negligence such as, but not
limited to, acts of God, war (including civil war), civil unrest, acts of
government, fire, floods, explosions, the elements, epidemics, quarantine,
restrictions, strikes, lock- outs, plant shutdown, material shortages, or
delays in transportation or delays of its suppliers or subcontractors for like
cause. In the event of an excusable delay as defined in the preceding sentence,
then the party affected, upon giving prompt written notice to the other party,
shall be excused from such performance on a day-to-day basis to the extent of
such prevention, restriction, or interference (and the other party shall
likewise be excused from performance of its obligations on a day-to-day basis
to the extent such party’s obligations relate to the performance so prevented,
restricted or interfered with), provided that the party so affected shall use
its best efforts to avoid or remove such causes of nonperformance and both
parties shall proceed to perform with dispatch whenever such causes are removed
or cease to exist. DSC reserves the right to cancel or otherwise terminate this
Agreement if Purchaser’s performance is delayed for a period of more than
thirty (30) days.


 


ARTICLE 17.         GENERAL
INDEMNITY


 


17.1                           DSC agrees to indemnify and
hold Purchaser harmless with respect to any suit, claim or proceeding brought
against Purchaser by a third party alleging that Purchaser’s use of the
Equipment or the Software, separately or in combination, as a whole or in part,
constitutes an infringement of any United States patent or copyright or misuse
of proprietary or trade secret information. DSC agrees to defend Purchaser
against any such claim and to pay all litigation costs, reasonable attorney’s
fees, settlement payments and any damages awarded or resulting from any such claim.


 


17.2                           Purchaser shall promptly
advise DSC of any such suit, claim, or proceeding and shall cooperate with DSC
in the defense or settlement thereof. DSC shall have sole control of the
defense of any action involving such a claim and of all negotiations for its
settlement or compromise.


 


6

















 


17.3                           In the event that an
injunction is obtained against Purchaser’s use of the Equipment and/or the
Software, in whole or in part, as a result of any such claim, DSC shall use its
best efforts to either:  (a) procure for
Purchaser the right to continue using the portions of the Equipment or the
Software enjoined from use; or (b) replace or modify the same with functionally
equivalent or better Equipment and/or Software so that Purchaser’s use is not
subject to any such injunction. In the event that DSC cannot perform the
remedies set forth in 17.3(a) or 17.3(b), then the Purchaser shall have the
right to return such Equipment and the Software to DSC. In the event of such
return, DSC shall refund the depreciated value of the Equipment and the license
to use the Software within thirty (30) days of the receipt by DSC of the
Equipment and the Software.


 


17.4                           This indemnity shall not
apply to claims arising in respect to the use of the Equipment or Software
supplied by DSC or manufactured by its suppliers in accordance with any design
or any special instruction furnished by the Purchaser, or which is used by the
Purchaser in a manner or for a purpose not contemplated by this Agreement.


 


17.5                           The provisions of this
Article 17 set forth the entire obligation of DSC with respect to any claim of
patent infringement, copyright infringement or misuse of proprietary or trade
secret information.


 


ARTICLE 18.         REMEDIES


 


18.1                           DSC shall have the right,
prior to full payment of the Invoice Total, to suspend its performance under
this Agreement by written notice to the Purchaser and forthwith remove and take
possession of any Equipment and Software that have been delivered if the
Purchaser shall:  (a) file a voluntary
petition under any bankruptcy or insolvency law, or file a voluntary petition
under the reorganization or arrangement provisions of any law of any
jurisdiction, or have proceedings under any such laws instituted against it
which are not terminated within thirty (30) days of such commencement; (b)
become insolvent, bankrupt, or admit in writing of its inability to pay all
debts as they mature or make a general assignment for the benefit of or enter
into any composition or arrangement with creditors; (c) authorize, apply for,
or consent to the appointment of a receiver, trustee, or liquidator of all or a
substantial part of its assets, or have proceedings seeking such appointment
commenced against it which are not terminated within thirty (30) days of such
commencement; or (d) if Purchaser attempts to resell the Equipment or System
without the consent of DSC.


 


18.2                           In the event of any material
breach of this Agreement by either party which shall continue for thirty (30)
or more days after written notice of such breach (including a reasonably
detailed statement of the nature of such breach) shall have been given to the
breaching party by the aggrieved party, the aggrieved party shall be entitled
at its option:  (a) if the aggrieved party
is the Purchaser, to suspend its performance under Article 4 of the Agreement
for as long as the breach continues uncorrected; or (b) if the aggrieved party
is DSC, to suspend performance of all of its obligations under the Agreement
for as long as the breach continues uncorrected; or (c) to avail itself of any
and all remedies available at law or equity whether or not it elects to suspend
its performance under Article 18.2a or 18.2b as applicable.


 


18.3                           In the event (a) either
party fails to timely discharge its obligations under this Agreement and (b)
the aggrieved party employs an attorney in order to collect any amount due and
unpaid, or to enforce any right or remedy hereunder, then the defaulting party
agrees that, in addition to all amounts due hereunder, it shall pay all costs
of collection or enforcement, including court costs and reasonable attorney’s
fees.


 


7

















 


ARTICLE 19.         PURCHASER’S
RESPONSIBILITIES


 


19.1                           The Purchaser shall insure
all DSC-designated personnel access to the Purchaser’s premises and the
Equipment during the times necessary to install, maintain and service the
Equipment. DSC’s personnel shall comply with site and security regulations as
specified by Purchaser.


 


19.2                           The Purchaser shall provide
reasonable working space and facilities including heat, light, ventilation,
electric current and outlets for use by DSC’s designated personnel. Adequate
storage space for equipment and materials shall be made available by the
Purchaser as required. All such facilities shall be provided at no charge to
DSC.


 


19.3                           Any information DSC
reasonably requests from the Purchaser and which is required for DSC to
properly install or maintain the Equipment shall be provided by the Purchaser
in a timely fashion and form reasonably specified by DSC.


 


19.4                           The Purchaser shall not
perform, or attempt to perform, or cause to be performed any maintenance or
repair to the Equipment during the term of this Agreement, other than pursuant
to this Agreement, without prior written consent of DSC.


 


ARTICLE 20.         HARDWARE AND
SOFTWARE VERIFICATION


 


20.1                           If installation services are
ordered, DSC shall, upon completion of the installation, test the Equipment. Purchaser
may witness the installation and test performance.


 


20.2                           When the Equipment and
Software have satisfactorily completed all of DSC’s tests, DSC shall provide
Purchaser with a “Hardware and Software Verification” certificate. Provision of
the Hardware and Software Verification certificate to the Purchaser will be deemed,
for purposes of this Agreement, as “Completion of Installation.”


 


ARTICLE 21.         NOTICES


 


Any notice hereunder by one party to the other party shall be given in
writing by cable, telex, facsimile transmission, personal delivery or posted by
certified air mail with proper postage, return receipt requested, and such notice
shall be effective upon receipt to the parties at the following addresses:


 


	
  If to DSC:

  	
   

  	
  If to Purchaser:

  
	
   

  	
   

  	
   

  
	
  DSC Marketing Services, Inc.

  	
   

  	
  CNI

  
	
  1000 Coit Road

  	
   

  	
  11701 Borman Drive

  
	
  Plano, Texas 75075

  	
   

  	
  St. Louis, MO 63146

  
	
  Attn: 
  Contract Manager

  	
   

  	
  Attn:  James K. Ratchford

  



 


ARTICLE 21.         ENTIRETY OF
AGREEMENT


 


21.1                           Purchaser may not assign or
transfer this Agreement or any rights hereunder without the prior written
consent of DSC. Such consent shall not be unreasonably withheld.


 


21.2                           This Agreement together with
all attachments constitutes the entire agreement between DSC and the Purchaser
with respect to the subject matter hereof and supersedes all previous
negotiations, proposals, commitments, representations, writings,
advertisements, publications and understandings of any nature whatsoever. In
the event of any conflict


 


8

















 


between this Agreement and any Attachment, the provisions of this Agreement
shall prevail provided, however, that to the extent possible this Agreement and
the Attachments shall be construed so as to minimize conflict.


 


22.3                           Any changes to this
Agreement requested either by the Purchaser or DSC may only be effected if
mutually agreed upon in writing by duly authorized representatives of the
parties hereto. This Agreement shall not be modified, supplemented, or any
rights of a party to it waived except by such a writing.


 


22.4                           Failure by either party at
any time to require performance by the other party or to claim a breach of any
provision of this Agreement shall not be construed as affecting any subsequent
breach of the right to require performance with respect thereto, or to claim a
breach with respect thereto.


 


22.5                           The rights and obligations
of the parties and all interpretations and performance of this Agreement shall
be governed in all respects by the laws of the State of Texas.


 


21.6                           If any one or more of the
provisions contained in this Agreement shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provision hereof, and this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.


 


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written, such parties acting by their officers,
being thereunto duly authorized.


 


	
  DSC MARKETING SERVICES, INC.

  	
  PURCHASER:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ David M. Holland

  	
   

  	
  By:

  	
  /s/ Wendell C. Moore

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  Senior Vice President

  	
   

  	
  Title:

  	
  Vice President, Finance

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
  March 23, 1990

  	
   

  	
  Date:

  	
  March 2, 1990

  	
   

  



 


9

















 


ATTACHMENT “A”


 


PRICE LIST


 


 


To be agreed upon at the time of the order.


 

















 


AMENDMENT NUMBER 4


 


This Amendment Number 4 (“Amendment”), effective the date of last
signature below, is made to that certain Supply Agreement entered into and
effective as of February 26, 1990 (the “Agreement”) by and between Alcatel USA
Marketing, Inc. (formerly DSC Marketing Services, Inc.), a Delaware
corporation, with its principal place of business located at 1000 Coit Road,
Plano, Texas 75075 (“ALCATEL”) and McLeodUSA Incorporated, a Delaware
corporation, with principal offices at 6400 C Street SW, Post Office Box 3177,
Cedar Rapids, Iowa 52406-3177 (“McLeodUSA”).


 


WHEREAS, the parties agree that this Amendment shall supercede the need
to negotiate a new Supply Agreement as contemplated in Amendment Number 2; and


 


WHEREAS, ALCATEL and McLeodUSA desire to modify certain terms and
conditions of the Agreement and establish the special terms and conditions in
Addendum A which will apply solely to McLeodUSA’s acquisition of ALCATEL’s Litespan(R)/Starspan(R)
products.


 


NOW THEREFORE, the Agreement is hereby amended as follows:


 


THE FOLLOWING PROVISIONS ARE APPLICABLE TO ALL PURCHASES UNDER THE
AGREEMENT. THE SPECIAL TERMS AND CONDITIONS WHICH APPLY SOLELY TO THE
PROCUREMENT OF LITESPAN(R)/STARSPAN(R) PRODUCTS ARE ATTACHED HERETO AS ADDENDUM
A, LITESPAN(R)/STARSPAN(R) PRODUCTS ACQUISITION PROVISIONS.


 


PREAMBLE


 


Effective on or about September 11, 1998 DSC Marketing Services, Inc.
changed its name to Alcatel USA Marketing, Inc.


 


ARTICLE 1.    SCOPE


 


Sub-article 1.2 is hereby replaced in its entirety with the following:


 


1.2   This Agreement provides for
the acquisition of: (a) equipment, components, assemblies, accessories, line
cards, boards, and similar items provided by ALCATEL (“Equipment”); (b) machine
readable computer programs, instruction sequences, procedures, data, logic,
and/or rules that are provided by ALCATEL, exclusive of source code, in or by
any form or media (“Software”); and (c) installation and testing of the
Equipment and/or Software (“Installation Services”) all as offered and
authorized for use by ALCATEL or its affiliated companies. Equipment and/or
Software may hereinafter be referred to as “Product(s)”. The term “System” as
used herein describes an arrangement of Equipment which, when interfaced with
Software, is operable to perform predetermined functions.


 


PROPRIETARY AND CONFIDENTIAL


to McLeodUSA Incorporated and Alcatel USA
Marketing, Inc.


 


1

















 


ARTICLE 2.    ORDERING PROCEDURE


 


This article is hereby replaced in its entirety with the following:


 


2.1   Purchaser may purchase or
license Equipment, Software, Systems, or Installation Services by sending a
written order (“Purchase Order”) to ALCATEL. The Purchase Order will constitute
a firm offer and will identify, by quantity, part number and description, the
Equipment, Software, System, or Installation Services that Purchaser desires to
purchase or license, the price (“Contract Price” as defined in Article 3) of
the ordered items, and the requested delivery dates and installation dates, as
applicable. The terms and conditions of this Agreement shall control over any
conflicting terms and conditions stated on any Purchase Order. All Purchase
Orders are subject to review and acceptance by ALCATEL.


 


2.2   Upon acceptance of a
Purchase Order, ALCATEL shall furnish the requested Products to Purchaser for
delivery on a mutually agreed upon date.


 


2.3   Purchaser may, subject to
mutual written agreement on the impact on the Contract Price and time of
performance, make modifications to a Purchase Order any time prior to the
scheduled shipment date.


 


2.4   ALCATEL will provide
Purchaser with a reasonable opportunity, upon at least three (3) days prior
written request by Purchaser, to inspect all Equipment purchased and the
operation of any Software licensed pursuant to this Agreement for conformance
with ALCATEL’s specifications therefor provided such inspection occurs not less
than five (5) working days prior to shipment. Neither such opportunity to
inspect, nor any inspection made by Purchaser prior to shipment, nor any
statement or indication by Purchaser prior to Purchaser’s receipt of such
Equipment or Software shall in any way be deemed to constitute acceptance of
such Equipment or Software by Purchaser. Unless otherwise mutually agreed, in
writing, payment for Equipment or Software before inspection shall not
constitute acceptance thereof and is without prejudice to claims Purchaser may
have against ALCATEL with respect thereto. Equipment and Software shipped to
Purchaser may be inspected by Purchaser for conformance to ALCATEL’s
specifications therefor within fifteen (15) days after the date of shipment and
shall be deemed accepted on the fifteenth (15) day unless Purchaser advises
ALCATEL, in writing, of the reason for rejection within twenty (20) days after
the date of shipment. Any Product rejected by Purchaser shall be repaired or
replaced in accordance with the WARRANTY provisions of this Agreement.


 


2

















 


ARTICLE 3.    CONTRACT PRICE


 


Sub-article 3.1 is hereby modified by replacing the first sentence with
the following:


 


The Contract Price for each item of Equipment, Software, Installation Services,
or System shall, as applicable, be specified in (i) Attachment A to this
Agreement, (ii) the product pricing attachment of an amendment to this Agreement,
or (iii) a valid written quotation presented to Purchaser by ALCATEL for a
specific sales transaction, and shall be paid to ALCATEL in United States Dollars.


 


Sub-article 3.2 is hereby modified by replacing the introductory phrase
of the first sentence with the following:


 


The Price, as listed in the applicable document described in 3.1 above,
shall not include:


 


ARTICLE 7.    SUBCONTRACTING is hereby modified
in its entirety to read as follows:


 


ALCATEL reserves the right to subcontract such portions of the (a)
Equipment manufacture and/or Software development, and/or Installation Services
to subcontractors of ALCATEL’s choice as ALCATEL deems appropriate. In the event
Purchaser deems the conduct of any on-site subcontractor to be objectionable
Purchaser shall so advise ALCATEL and if, after a reasonable time, the conduct
of the subcontractor has not become acceptable, Purchaser may request ALCATEL
remove such subcontractor, provided, however, Purchaser shall be liable to
ALCATEL for any increase in the Contract Price due to an increase in the cost
or time to perform the work, by a substitute subcontractor, which is or would
be performed by the subcontractor in question.


 


ARTICLE 8.    WARRANTY and ARTICLE 9.    WARRANTY
ON REPAIRED MATERIALS


 


Both of the aforementioned articles are replaced in their entirety by
the following:


 


ARTICLE 8.    WARRANTY


 


8.1   ALCATEL warrants, for the
applicable period stated below, that the Equipment and Software media shall,
under normal use and service, be free from defects in material and faulty
workmanship. ALCATEL further warrants that the Equipment and Software shall
materially conform to ALCATEL’s specifications therefor in effect on the date
of shipment. However, ALCATEL does not warrant that Software will operate
uninterrupted or error free. The initial warranty period (“Initial Warranty
Period”) for any Product shall be: (a) thirteen (13) months from the date of
shipment for Product installed by ALCATEL or a ALCATEL subcontractor; or (b)
twelve (12) months from the date of shipment of Product not installed by
ALCATEL or a ALCATEL subcontractor. Notwithstanding the above described Initial
Warranty Period, the Initial Warranty Period for ALCATEL’s
Litespan(R)/Starspan(R) Products


 


3

















 


shall be five (5) years under both options (a) and (b) above in lieu of
the thirteen (13) and twelve (12) month periods respectively referenced
therein.


 


8.2   ALCATEL warrants that no
later than December 31, 1998, all Product will have the following
functionality: (a) no value for current date will cause any interruption in
operation; (b) date-based functionality will behave consistently for dates
prior to, during, and after the year 2000; (c) in all interfaces and data
storage, the century in any date will be specified either explicitly or by
unambiguous algorithms or inferencing rules; and (d) the year 2000 will be
recognized as a leap year. The forgoing warranty shall apply only if Purchaser
has implemented ALCATEL’s or applicable third party’s (for whom ALCATEL is the
sublicensor) hardware or software patches, updates, or enhancements containing
modifications to the Product, all provided at no charge, to make it meet this
warranty.


 


8.3   Subject to the provisions of
this article, defective Product will be (a) returned by Purchaser to ALCATEL’s
designated facility, at Purchaser’s expense, (b) repaired or replaced by
ALCATEL at no charge to Purchaser, and (c) returned to Purchaser’s point of
shipment at ALCATEL’s expense. Purchaser shall assume risk of loss or damage to
Product returned to ALCATEL for repair or replacement until delivery to ALCATEL.
Upon receipt, and until its delivery to Purchaser, ALCATEL shall assume the
risk of loss or damage to the Product being repaired or replaced. Corrections
to Software shall be provided electronically or on suitable media chosen by
ALCATEL.


 


8.4   ALCATEL’s sole obligation,
and Purchaser’s sole remedy, under this article is limited to the repair or
replacement, at ALCATEL’s option, of the defective Equipment or correction of
erroneous Software. In the event of a warranty claim regarding Equipment,
Purchaser shall obtain a Material Return Authorization (“MRA”) from ALCATEL
prior to the return of any defective Equipment or part thereof. Upon receipt of
the defective Equipment and the MRA or confirmation of a Software error,
ALCATEL shall repair or replace the returned Equipment or correct the Software
unless:  (a) the Product was altered,
repaired, or reworked by a party other than ALCATEL without ALCATEL’s prior
written consent; or (b) such defects or errors were the result of (i) Purchaser’s
improper storage, mishandling, abuse, or misuse of the Product; (ii) Purchaser’s
use of the Product in conjunction with another product which is electronically
or mechanically incompatible, or of an inferior quality; or (iii) damage by
fire, explosion, power failure, or any act of nature. ALCATEL shall warrant any
Product corrected, repaired, or replaced for ninety (90) days from the date of
correction or shipment, as applicable, or until the end of the Initial Warranty
Period, whichever is longer.


 


8.5   THE FOREGOING WARRANTIES ARE
NON-TRANSFERABLE AND ARE PROVIDED IN LIEU OF, AND ALCATEL AND ITS SUPPLIERS AND
LICENSORS DISCLAIM ALL OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING
THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR INTENDED OR PARTICULAR
PURPOSE.


 


4

















 


ARTICLE 10 LIMITATION OF LIABILITY


 


This article is replaced in its entirety with the following:


 


EXCEPT WITH RESPECT TO A BREACH BY PURCHASER OF THE SOFTWARE LICENSE OR
CONFIDENTIAL INFORMATION PROVISIONS OF THIS AGREEMENT IN NO EVENT SHALL EITHER PARTY
HAVE ANY LIABILITY TO THE OTHER FOR INCIDENTAL, CONSEQUENTIAL, SPECIAL, OR INDIRECT
DAMAGES INCLUDING, BUT NOT LIMITED TO, LOSS OF REVENUE OR PROFITS.


 


ARTICLE 12.         SOFTWARE
LICENSE


 


This Article is hereby amended in its entirety to read as follows:


 


12.1  ALCATEL hereby grants Purchaser, and Purchaser hereby
accepts, a nonexclusive, nontransferable license to use Software, and those
features of the Software for which activation has been authorized by ALCATEL,
solely on a single System, or unit of Equipment, as may be applicable. Use of
the Software on multiple Systems or with any equipment furnished by a party
other than ALCATEL or its authorized resellers is not licensed hereunder in the
absence of a separate written agreement between the parties hereto.


 


12.2  Software is proprietary to ALCATEL, and Purchaser
agrees to treat such Software as “Confidential Information” (as the term is
defined in this Agreement). Purchaser agrees to use such Software or any
portions or aspects thereof (including any methods or concepts utilized
therein) solely on the Equipment. Purchaser agrees, within thirty (30) days
after the occurrence of either of the following events, to return, or certify
to ALCATEL in writing the destruction of, all Software, memory media,
documentation and/or other material (a) that has been modified, updated, or
replaced; and/or (b) upon Purchaser’s discontinued use of the Equipment. Purchaser
agrees that it shall not at any time modify, disassemble, or decompile such
Software, or transfer or reverse engineer any portion of the Software or
functioning of any Equipment, or permit others to do so, without ALCATEL’s
prior written consent. Purchaser agrees it will not attempt to transfer
Confidential Information, including any Software or System, without the prior written
consent of ALCATEL. Purchaser further agrees that it shall not reproduce or copy
such Software in whole or in part except for backup and archival purposes. Certain
network management Software is provided by third parties and may be subject to
additional license restrictions.


 


12.3  In the event of a Purchaser breach regarding
Confidential Information, ALCATEL reserves the right, upon notice to Purchaser,
to (a) require the immediate return of all Confidential Information, including
all applicable Software and copies thereof, wherever


 


5

















 


such Confidential Information and copies thereof shall reside,
including any and all associated documentation for which Purchaser is in breach
of license rights, or has not paid the applicable fee, and (b) terminate the
license for such Software and associated documentation granted to Purchaser.
Upon receipt of such notice, Purchaser agrees to immediately discontinue use
and enjoyment of such Software and associated documentation.


 


12.4  The rights and obligations of Purchaser under Articles
12 and 15 will survive expiration or termination of this Agreement for any
reason, and shall continue even if the Software is no longer used with the
Equipment.


 


ARTICLE 15.         PROPRIETARY
RIGHTS/NON DIVULGENCE


 


This Article, including its title, is hereby amended in its entirety to
read as follows:


 


ARTICLE 15. CONFIDENTIAL
INFORMATION


 


All technical information, documentation, Software, other information
or data that ALCATEL supplies to Purchaser which is marked or otherwise
identified as confidential and proprietary information of ALCATEL shall
hereinafter be collectively referred to as “Confidential Information”. Purchaser
agrees that it shall: (a) not disclose any Confidential Information to any
person, except to its employees having a need to know in connection with the operation
and maintenance of the Products, and where applicable its contractors who also
have agreed to keep it confidential; (b) not copy any Confidential Information,
except as provided herein; (c) not reverse engineer or decompile any Product or
Confidential Information; and (d) compensate ALCATEL for any loss or damages
resulting from a breach of this Article.


 


ARTICLE 21.         NOTICES


 


This Article is hereby replaced in its entirety with the following:


 


Any notice to be given by one party to the other shall be in writing
and transmitted by overnight courier, facsimile, cable, telex, personal
delivery or posted by certified mail with proper postage, return receipt
requested, and such notice shall be effective the date of transmittal if sent
by facsimile, cable, or telex, or upon receipt if transmitted by personal delivery,
overnight courier, or certified mail. The notice addresses of the respective
parties shall be as follows:


 


6

















 


	
  Notice to ALCATEL

  	
   

  	
  Notice to Purchaser

  
	
   

  	
   

  	
   

  
	
  Alcatel USA Marketing, Inc.

  	
   

  	
  McLeodUSA Incorporated

  
	
  1000 Coit Road

  	
   

  	
  6400 C Street SW

  
	
  Plano, Texas 75075

  	
   

  	
  Post Office Box 3177

  
	
  Attn: Corporate Contracts

  	
   

  	
  Cedar Rapids, Iowa 52406-3177

  
	
   

  	
   

  	
  Attn: General Counsel

  



 


The original ARTICLE 22.  ENTIRETY
OF AGREEMENT is hereby renumbered as ARTICLE 23.


 


Add the following as a new ARTICLE 22:


 


ARTICLE 22. EXPORT CONTROLS AND
LEGAL COMPLIANCE


 


22.1  Each party shall comply with all laws and regulations
applicable to it and/or its officers, directors, and employees in connection
with this Agreement and any Equipment, Software or services, including, without
limitation, the export control laws and regulations of the United States of America.
Each party shall indemnify, defend, and hold the other harmless from and
against any claims, suits, actions, damages, expenses, liability, and costs
arising from its failure to comply with any such law or regulation, provided
that the other party promptly advises it of the claim, suit or action. The
indemnifying party shall have sole control over the defense and settlement of
the claim, suit, or action.


 


22.2  Purchaser specifically acknowledges that goods,
software, or technology supplied by ALCATEL or its affiliates and subsidiaries
under this Agreement are considered high-technology products subject to U.S.
trade sanctions and export control laws and regulations including, but not
limited to, the various Foreign Assets Control Regulations, the Export
Administration Regulations, and the International Traffic in Arms Regulations. Purchaser
specifically acknowledges that such goods, software, or technology obtained from
ALCATEL or its affiliates and subsidiaries pursuant to this Agreement shall not
be exported, reexported, transshipped, disclosed, diverted, or transferred,
directly or indirectly, contrary to U.S. laws, orders, or regulations. The
provisions of this Article shall survive any termination of this Agreement.


 


ARTICLE 23.         ENTIRETY OF
AGREEMENT


 


Sub-article 23.1 is hereby revised in its entirety to read as follows:


 


Purchaser may not assign or transfer this Agreement or any rights
hereunder without the prior written consent of ALCATEL, which consent shall not
be unreasonably withheld. Notwithstanding the foregoing, Purchaser shall have the
right, upon reasonable prior written notice to ALCATEL, to assign, convey or
otherwise transfer its rights and obligations under


 


7

















 


this Agreement to any entity controlled by, controlling, or under
common control with Purchaser, or any entity into which Purchaser may be merged
or consolidated or which purchases all or substantially all of the assets of Purchaser.


 


Sub-article 23.7 is hereby added to read as follows:


 


23.7  Neither party shall disclose the existence of this
Agreement (other than as may be required for regulatory filings), nor its terms
and conditions, nor use the name of the other party in any news release, public
announcement, advertisement, or other form of publicity without the prior written
consent of the other party. Notwithstanding the above, in the event Purchaser
receives a request, from a government entity, to disclose any terms and
conditions of this Agreement Purchaser shall first advise ALCATEL, in writing,
of the extent of such proposed disclosure, within reasonable time before the
date such disclosure is required, to allow ALCATEL the opportunity to protest
or challenge such disclosure.


 


Sub-article 23.8 is hereby added to read as follows:


 


23.8  It is agreed between the parties that the means for
resolution of any dispute, controversy or claim between the parties arising out
of, or in connection with, this Agreement, or the breach, termination or
validity thereof, except with regard to the ownership of intellectual property,
will be resolved by mutual agreement of the parties. If such dispute, controversy,
or claim cannot be settled by mutual agreement of the parties such dispute,
controversy, or claim will be settled by arbitration in accordance with the
Rules of Arbitration of the American Arbitration Association as in force on the
date one party notifies the other, in writing, of its right to seek such
arbitration. The arbitration shall be conducted by a single arbitrator selected
in accordance with the aforementioned rules. The arbitration shall be conducted
at a mutually agreed upon site. The parties agree that the arbitration award
shall not be in excess of any limitations set forth in this Agreement, shall
not include punitive or exemplary damages, shall be in writing, and shall be
final and binding upon the parties and not subject to appeal. The costs of
preparation and presentation of the arbitration case will be borne by the
parties in such proportion and manner as may be provided in the arbitration
award. Notwithstanding anything to the contrary contained in this Agreement,
either party may have recourse to the laws and administrative, regular, or extraordinary
courts or tribunals in the jurisdiction of its choice in order to apply for
emergency, special or pre-judgment relief with regard to its intellectual
property rights or rights to receive or make payment hereunder, and the parties
agree not to contest such jurisdiction. Judgement upon the award rendered by
the arbitrator may be entered in any court having jurisdiction thereof.


 


/ / /


 


Except as herein amended all other terms and conditions of the
Agreement remain in full force and effect.


 


8

















 


IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to be executed by their duly authorized representatives, effective
the date of last signature below.


 


	
  ALCATEL USA MARKETING, INC.

  	
  McLEODUSA INCORPORATED

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Signature:

  	
   

  	
  /s/ Doug Jacobs

  	
   

  	
   

  	
  Signature:

  	
   

  	
  Stephen C. Gray

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
  Doug Jacobs

  	
   

  	
   

  	
  Name:

  	
   

  	
  Stephen C. Gray

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
  Senior Vice President

  	
   

  	
   

  	
  Title:

  	
   

  	
  President & COO

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
  1/4/99

  	
   

  	
   

  	
  Date:

  	
   

  	
  10/30/98

  	
   

  



 


9

















 


AMENDMENT NUMBER 4


 


ADDENDUM A


 


LITESPAN(R)/STARSPAN(R) PRODUCT ACQUISITION
PROVISIONS


 


The following additional terms and conditions are applicable solely to
the procurement of Litespan(R)/Starspan(R) products.


 


VOLUME


 


McLeodUSA commits to the purchase/license and acceptance of delivery of
ALCATEL Litespan(R)/Starspan(R) Equipment, Software and the option for services
(for installation) totaling a minimum of Two Hundred Million Dollars ($200,000,000.00)
over a six year period commencing as of March 31, 1998, based on the product
deployment plan described in Attachment 1 of this Addendum A. In Attachment 2
of this Addendum A, ALCATEL has provided McLeodUSA with part numbers and
pricing for all Litespan(R)/Starspan(R) components, predicated on the volume of
purchases shown in Attachment 1. Each Litespan(R)/Starspan(R) configuration
includes an agreed upon set of assumptions and ALCATEL furnished Equipment and
Software. Three Litespan(R) configurations, exclusive of AMS applicable
hardware and software, have been identified and listed below and additional
configuration models can be added.


 


Collocation Model (DS-1 FED) for the furnishing of ALCATEL Litespan(R) Equipment
with a required fill ratio of 70% (1,352 lines) as shown in the Package
Breakouts of Attachment 2 and further identified as ALCATEL part numbers
798.1012.610 through 798.1012.614.


 


Collocation Model (Optical FED) for the furnishing of ALCATEL
Litespan(R) Equipment with a required fill ratio of 70% (1,408 lines) as shown
in the Package Breakouts of Attachment 2 and further identified as ALCATEL part
number 798.1012.605 through 798.1012.609.


 


Network Build Model (COT/RT/ONU) for the furnishing of ALCATEL Litespan(R)/Starspan(R)
Equipment with a fill ratio of 100% as shown in Attachment 2.


 


In the event McLeodUSA does not meet the committed Litespan(R)
purchases, per Attachment 1, on a cumulative basis (as measured annually,
beginning on the first anniversary date of the effective date of this Amendment
4) ALCATEL retains the right to re-negotiate the applicable prices. In the
event that McLeodUSA exceeds the committed purchases on a cumulative basis (as
measured annually, beginning on the first anniversary date of the effective
date of this Amendment 4) McLeodUSA retains the right to re-negotiate the
applicable prices.


 


McLeodUSA retains the right to verify the industry competitiveness of
the pricing and technology on an annual basis through a Request For Proposal
(RFP) process. ALCATEL will receive a first right of refusal to match
reasonable and legitimate offers for


 


PROPRIETARY AND CONFIDENTIAL


to McLeodUSA Incorporated and Alcatel USA
Marketing, Inc.


 


1

















 


comparable products and services based on the same criteria used for
submittal and evaluation of third party proposals for the then-subject RFP.


 


ALCATEL agrees to make commercially reasonable effort to ship generally
available products included on each McLeodUSA purchase order within eight (8) business
weeks (excluding ALCATEL observed holidays) after ALCATEL’s acceptance of each
order provided McLeodUSA continuously provides ALCATEL with a monthly rolling
forecast, in printed or electronic format commencing on the date this Amendment
Number 4 becomes effective, of anticipated product purchases. The above time
frame shall not be applicable to (product) purchase orders for which ALCATEL
has advised McLeodUSA of a longer shipment or lead time requirement. If, with
respect to fifty percent (50%) or more of all orders to which the above stated
time frame applies, ALCATEL has not shipped such orders within ten (10) weeks
after ALCATEL’s acceptance of such orders McLeodUSA shall have the right to
re-negotiate the total commitment under this Addendum A. ALCATEL further agrees
to provide McLeodUSA with product availability intervals (i.e. lead times order
is required before shipment) on an annual basis.


 


SUPPORT


 


ALCATEL agrees to provide a total of five (5) man-years of Operational
Engineer (OE) support during the term of this Agreement with no more than two
(2) OE’s committed in the first year and a maximum of three (3) OE’s supporting
McLeodUSA simultaneously at any point in time. These OE’s will be located at
McLeodUSA offices and McLeodUSA will provide all necessary office space and
facilities for the OE’s. McLeodUSA may request changes in OE support, by
notifying ALCATEL, in writing, no less than ninety (90) days before any changes
in support are to be effective. ALCATEL will pay all customary employee
expenses associated with initially locating an OE to the office designated by
McLeodUSA however, McLeodUSA will reimburse ALCATEL for any travel,
subsistence, and/or other reasonable expenses incurred by the OE’s when travel
is requested or required by McLeodUSA and any expenses associated with
permanently (for this project assignment) relocating any OE to another
McLeodUSA office (which requires a relocation of the OE’s residence) if so
requested by McLeodUSA.


 


TRAINING


 


ALCATEL agrees to provide on-site training classes at the rate of one
(1) per quarter in years 1 and 2 of the project, and one (1) class
semi-annually in years 3-6. During the first two (2) years of the project a
class may be requested at any time during the year (even in advance of accrual)
provided, however, no more than two (2) classes will be taught consecutively at
any time. Training classes will be taught at times mutually agreed between the
parties.


 


2

















 


SUBCONTRACTORS


 


ALCATEL agrees to provide McLeodUSA with a list of ALCATEL approved
installation subcontractors for Litespan(R) products.


 


PROVISIONING TEMPLATES


 


ALCATEL agrees, once the Litespan(R) product templates are developed
for McLeodUSA, to establish a method of pre-loading, at ALCATEL facilities,
required Litespan(R)/Starspan(R) operating software, software keys, and
pre-provisioning Litespan systems, as applicable, prior to shipment to
McLeodUSA. This will be based on the predefined configuration models, as
applicable.


 


PROBLEM ESCALATION


 


ALCATEL agrees to provide McLeodUSA with implementation/outage notice
and escalation documentation and procedures for all ALCATEL manufactured
systems.


 


INDUSTRY STANDARDS COMPLIANCE


 


ALCATEL certifies that the RPOTS channel unit will meet the Industry
Standard Carrier Serving Area (CSA) guidelines as specified by industry
standards and if, during the period of Litespan(R) product deployment, the
RPOTS channel unit does not meet the published CSA guidelines, ALCATEL will
provide the appropriate channel unit to meet McLeodUSA service requirements.


 


ENHANCED COMMUNICATIONS


 


The parties agree to work together to establish a mutually acceptable
electronic interface for order processing, trouble reporting, management
reporting, forecasting, and any other procedures which can be electronically
linked and automated, if possible.


 


BELLCORE LABS INDICES


 


Bellcore Labs document TR-418, issue 2, describes a quality and
reliability index in terms of “returned and failed modules” over a given volume
of product. ALCATEL agrees that if, anytime after deployment of a reasonable
number of Litespan(R) products, the rate of “returned and failed modules” for
all Litespan(R) products deployed exceeds the Bellcore Labs applicable quality
and reliability index (per TR-418, issue 2, or the then current Bellcore Labs standard)
McLeodUSA has the right to temporarily or permanently cease further placement
of Litespan(R) Products. However, McLeodUSA agrees that prior to taking any
such action it will give ALCATEL a reasonable time to rectify any breach of the
above referenced Bellcore Labs index.


 


Example:  Assume the Bellcore
reliability index states that the “returned and failed module” rate per 1000
units deployed is 20, then McLeodUSA could


 


3

















 


require ALCATEL to take remedial action if ALCATEL’s “returned and
failed module” rate equals or exceeds 20.


 


OVERNIGHT RESPONSE


 


ALCATEL agrees that if McLeodUSA encounters a shortage of certain
Litespan(R) components in its “Rotating Pool”, upon receipt of appropriate
purchase order documentation from McLeodUSA, ALCATEL will use all commercially
reasonable efforts to “overnight” ship such components to McLeodUSA.


 


LITECRAFT(R) LICENSES


 


ALCATEL agrees to provide up to forty (40) licenses, upon McLeodUSA’s
request, of the then current applicable version of LITECRAFT(R) software at no
additional charge, thereafter each license of LITECRAFT(R) software shall cost
$2,222.00.


 


EXTENDING THE WARRANTY


 


ALCATEL will provide a five (5) year warranty on Litespan(R) products. The
charge for extending the warranty to seven (7) years is an additional $2.10 per
line for both copper and fiber based collocation models, payable as Litespan(R)
product is ordered by McLeodUSA. The charge for extending the warranty to seven
(7) years for network build Litespan(R) products will be three percent (3%) of the
purchase price of such products (excluding shipping and taxes). The additional
charge for extending the warranty is to be included on each McLeodUSA purchase
order.


 


CTAC SUPPORT


 


ALCATEL will provide Customer Technical Assistance Center (CTAC)
support, as defined in this Agreement, for either the six (6) year deployment
period or the warranty period, whichever is longer, at no additional charge. Access
to CTAC support by McLeodUSA personnel shall be controlled by authorization
code(s) as mutually agreed by ALCATEL and McLeodUSA.


 


SEED STOCK


 


McLeodUSA agrees, that by December 31, 1998, it will purchase two (2)
fully functional “100% line-card filled” Litespan(R) HDT’s as “seed stock” for deployment
as may be deemed necessary by McLeodUSA, and to establish and maintain a
complete “Rotating Pool” of spare Litespan(R) products.


 


SOFTWARE MAINTENANCE FEE


 


ALCATEL agrees to provide annual updates, releases, and upgrades to
maintain the purchased features of Litespan(R) operating software, LITECRAFT(R)
software, and AMS software for: (i) a prepaid maintenance fee of $3.00 per line
as lines are shipped (1,076,400 X $3.00 for a total of $3,229,200.00 over the
ALCATEL Litespan(R) product deployment


 


4

















 


plans); or (ii) a one-time lump-sum prepaid software maintenance fee of
$2,700,000.00 (based on Attachment 1), to cover such updates, releases and upgrades
through the year 2003, payable in full no later than October 30, 1998. The
above charges are based on McLeodUSA performing all Litespan(R) product software
upgrades and do not include any required hardware. These prepaid software
maintenance fees do not include any future software features beyond the proposed
GR-303, copper fed Litespan(R), Starspan(R), Integrated P-Phone, VT UPSR and
current features of Litespan(R) operating software as of the effective date of
this Amendment. In the event McLeodUSA elects to enhance Litespan(R) operating
characteristics (for example, Broadband features), ALCATEL agrees to negotiate,
in good faith, pricing for the enhanced features offered at that time.


 


LUMP SUM OFFER


 


If McLeodUSA purchases the prepaid, lump-sum software maintenance for $2,700,000.00
(see Software Maintenance Fee above), and purchases the extended Litespan(R)
products warranty for two (2) additional years pursuant to the paragraph above
entitled Extending the Warranty, ALCATEL will provide two (2) fully
equipped Litespan(R) systems, configured per the defined Collocation Model configuration,
at no charge for use as “seed stock” to support any immediate demand for
ALCATEL Litespan(R) product. These two (2) “seed stock” systems will be shipped
to a McLeodUSA designated facility upon ALCATEL’s receipt of the software
maintenance fee prepayment, in full, and receipt of written acknowledgment from
McLeodUSA of acceptance of the extended warranty offer.


 


P-PHONE


 


ALCATEL agrees, as a future feature, to provide integrated GR-303
capability for Electronic Business Sets or P-Phone capability for current
Litespan(R) products with trials beginning December 18, 1998. Until the
integrated P-Phone card is available ALCATEL will provide an interim solution,
using other cards, for up to 2000 lines. This interim solution will be priced
at $700.00 per “P-Phone equivalent” card. When the P-Phone capability is
available, ALCATEL agrees to provide applicable Litespan(R) operating software
and any common equipment support modules, required to support integrated
P-Phone, at no additional charge. The integrated P-Phone card will be priced at
$700.00 per card. When the integrated P-Phone card is available, that card can
be substituted for the interim solution. If ALCATEL does not meet the P-Phone
availability by December 31, 1998, McLeodUSA reserves the right to request an
increase in the number of interim solution lines. It is understood that if the
integrated P-Phone card is not available by June 30, 1999, McLeodUSA shall have
the right to negotiate the applicable prices.


 


Product Credit


 


If McLeodUSA acquires Seventeen Million One Hundred Seventy Five
Thousand Eight Hundred Ninety Two Dollars ($17,175,892.00), or more, of the
total Litespan(R)/Starspan(R) product commitment during the first 24 months of
the project plan, ALCATEL will grant McLeodUSA a Litespan(R) product credit of
Three Hundred Sixty-Five Thousand Dollars ($365,000.00) for the FTTC trial
products already delivered to McLeodUSA ATS Division in Cedar Rapids, IA. If
McLeodUSA fails to achieve the Litespan(R) product purchase


 


5

















 


commitment in the first 24 months of the project plan, the amount of
Litespan(R) product credit will be pro-rated to the same level of actual
product purchases (i.e. if 80% of purchase commitment is made, product credit
would equal 80% of the product purchases for the FTTC trial). Any amount
payable to ALCATEL from McLeodUSA would be due on the 25th month after
execution of this Amendment.


 


LAB SYSTEM


 


ALCATEL agrees to provide McLeodUSA a Litespan(R)/Starspan(R) lab
system at no charge consisting of: a COT, 1 RT, and a rack mounted ONU-24,
ONU-48, and ONU- 96/LS 200. As ALCATEL develops new products and enhancements,
McLeodUSA may elect to add these capabilities to the McLeodUSA lab for the
purpose of product evaluation and network integration testing. If any new
ALCATEL Litespan(R)/Starspan(R) enhancement is accepted and deployed in
McLeodUSA’s network, the new enhancement will remain in McLeodUSA’s lab at no
charge, and any item (i.e. enhancement) which is not accepted and deployed
within six (6) months of delivery will be returned to ALCATEL’s designated
facility.


 


REGULATORY CHANGES


 


ALCATEL understands that McLeodUSA’s business plans have been developed
under the Telecommunications Act of 1996 and in the event that said Act’s
intent is modified or repealed by a governmental authority with appropriate
jurisdiction to the extent that it substantially prevents McLeodUSA from
continuing to implement the plans contemplated in this Amendment, ALCATEL
agrees that should such regulatory conditions occur, McLeodUSA shall have the
option to request re- negotiation of unit prices based on revised quantities or
to re-negotiate unit prices based on the quantities purchased to date and cease
any further purchases of Litespan(R)/Starspan(R) product.


 


LINE COST REDUCTION


 


Line cost reduction can be facilitated via a multi-year discounted
prepayment schedule (see table below) against the purchase price of the total
number of ONU protect optics needed for McLeodUSA’s network build plan. ALCATEL’s
calculations, assuming 90% of the anticipated Two Hundred Million Dollar ($200,000,000.00)
of product purchased is for network-build applications, of the total purchase
price for protection for the optical path between the HDT and the remote ONU’s
or BRXs is valued at Thirty-Five Million Four Hundred Thousand Dollars
($35,400,000.00) or approximately Forty-Three Dollars ($43.00) per line. ALCATEL
offers McLeodUSA a discount of Five Million Four Hundred Thousand Dollar ($5,400,000.00)
which would result in a net price of Thirty Million Dollars ($30,000,000.00),
payable as follows:


 


6

















 


Line Cost Reduction Discounted Prepayment Schedule


 


	
  Year 1

  	
   

  	
  Fifteen Million Dollars ($15,000,000.00)

  	
   

  	
  invoice date 10/30/1998

  	
   

  	
  Due

  	
  11/30/98

  
	
  Year 2

  	
   

  	
  Three Million Dollars ($3,000,000.00)

  	
   

  	
  invoice date 10/30/1999

  	
   

  	
  Due

  	
  11/30/99

  
	
  Year 3

  	
   

  	
  Three Million Dollars ($3,000,000.00)

  	
   

  	
  invoice date 10/30/2000

  	
   

  	
  Due 

  	
  11/30/2000

  
	
  *Year 4

  	
   

  	
  Three Million Dollars ($3,000,000.00)

  	
   

  	
  invoice date 10/30/2001

  	
   

  	
  Due

  	
  11/30/2001

  
	
  *Year 5

  	
   

  	
  Three Million Dollars ($3,000,000.00)

  	
   

  	
  invoice date 10/30/2002

  	
   

  	
  Due

  	
  11/30/2002

  
	
  *Year 6

  	
   

  	
  Three Million Dollars ($3,000,000.00)

  	
   

  	
  invoice date 10/30/2003

  	
   

  	
  Due

  	
  11/30/2003

  



 






* If the dollar volume of equipment delivered equals or exceeds Two
Hundred Million Dollars ($200,000,000.00) in this year all remaining payments
against the Thirty Million Dollars ($30,000,000.00) primary protection for the
optical path become due and payable thirty (30) days after the Two Hundred
Million Dollar ($200,000,000.00) volume level of equipment delivered is equaled
or exceeded.


 


RPOTS CHANNEL UNIT PRICE DECREASE


 


An additional discount of Twelve percent (12%) is offered on the RPOTS
channel unit, decreasing the price from $250 to $221 per unit.


 


NOTE: The package pricing for the Collocation systems at 100% fill
remains unchanged.


 


CONTINUOUS RPOTS PRICE DECREASES


 


In addition, as long as McLeodUSA meets or exceeds the cumulative
purchase volume shown in Attachment 1 a continuous improvement discount will be
offered on the RPOTS channel unit. This discount will be cumulative and
applicable at the beginning of each calendar year for new purchases to be made
during that year, as follows:


 


 


	
  Year

  	
   

  	
  Cumulative

  Discount

  	
   

  	
  Discount

  	
   

  
	
  1

  	
   

  	
  0%

  	
   

  	
  0%

  	
   

  	
   

  
	
  2

  	
   

  	
  2%

  	
   

  	
  2%

  	
   

  	
   

  
	
  3

  	
   

  	
  2%

  	
   

  	
  4%

  	
   

  	
   

  
	
  4

  	
   

  	
  3%

  	
   

  	
  7%

  	
   

  	
   

  
	
  5

  	
   

  	
  3%

  	
   

  	
  10%

  	
   

  	
   

  
	
  6

  	
   

  	
  3%

  	
   

  	
  13%

  	
   

  	
   

  



 


The cumulative discounts stated above are applicable to the revised
($221/unit) RPOTS channel unit price only.


 


NOTE: The package pricing for the Collocation systems at 100% fill
remains unchanged.


 


7