Document:

Exhibit 10.12

 

Portions
hereof have been omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment in accordance with
Rule 406 of the Securities Act of 1933, as amended.

 

 

CAPACITY PURCHASE AGREEMENT

 

Between

 

WILLIAMS COMMUNICATIONS, LLC

 

and

 

TELEGLOBE USA INC.

 

 

March 31, 2001

 

 

 

CONFIDENTIAL AND PROPRIETARY

 

 

 

CAPACITY PURCHASE AGREEMENT

 

This CAPACITY PURCHASE AGREEMENT
(this “Agreement”) is made this 31st day of March, 2001 (“Effective Date”), by
and between Williams Communications, LLC,
a Delaware limited liability company (“Seller”), with its principal place of
business at One Williams Center, 26th Floor, Tulsa, Oklahoma 74172, and Teleglobe USA Inc., a Delaware corporation
(together with its Affiliates, “Purchaser”), with its principal place of
business at 11480 Commerce Park Drive, Reston, Virginia 20191.

 

WITNESSETH:

 

WHEREAS, Seller has
constructed, acquired or obtained rights of use in or will construct, acquire,
or obtain rights of use in a fiber optic communication network in North
America;

 

WHEREAS, Seller
agrees to sell, and Purchaser agrees to purchase, certain IRUs (as hereinafter
defined) in the Williams’ Network, as more fully set forth herein;

 

WHEREAS, on even
date herewith, the parties have entered into the O&M Agreement providing
for the operations and maintenance services to be provided by Seller with
respect to the IRUs; and

 

WHEREAS, Seller and
Purchaser desire to define the terms and conditions under which the IRUs will
be acquired by Purchaser.

 

NOW THEREFORE, in
consideration of the foregoing and for other valuable consideration, the
parties hereby agree as follows:

 

1.             DEFINITIONS

 

1.1           “Acceptance Date” shall have the meaning
set forth in Section 4.2.6.

 

1.2           “Acceptance Testing” shall have the meaning
set forth in Section 4.2.1.

 

1.3           “Acknowledgement Letter” shall mean a
signed letter from a financing party contemplated in Section 11.3, that
contains the following elements: (a) an acknowledgement of Purchaser’s rights
under this Agreement, and (b) a statement that the financing party will not
seek to assert against Purchaser any greater rights than expressly exist in
favor of Seller under this Agreement.

 

1.4           “Affiliate” shall mean any person or entity
who directly or indirectly controls, is controlled by or is under common
control with another person or entity.

 

1.5           “Agreement” shall have the meaning set
forth in the recitals.

 

2

 

1.6           “Backhaul” shall mean the 48 STM-1s from
the AT&T Cable Hut at 9401 Los Oso Valley Road, in San Luis Obispo,
California to the Purchaser POP at Los Angeles, California as described in Exhibit
B.

 

1.7           “Backhaul Closing Date” shall mean a date
within five (5) Business Days of the Acceptance Date of the Backhaul.

 

1.8           “Backhaul IRU” shall have the meaning set
forth in Section 2.1.

 

1.9           “Backhaul IRU Purchase Price” shall have
the meaning set forth in Section 3.1.

 

1.10         “Bandon Circuit(s)” shall have the meaning
set forth in Section 4.3.1.

 

1.11         “Bandon Credit” shall have the meaning set
forth in Section 3.3.1.

 

1.12         “Bandon IRU” shall have the meaning set
forth in Section 4.3.1.

 

1.13         “Business Day” shall mean a day other than
Saturday, Sunday or other day on which commercial banks in New York City are
authorized or required to close.

 

1.14         “Capacity” shall mean the Wavelength IRUs
and the Backhaul IRU, collectively.

 

1.15         “Capacity Lease” shall have the meaning set
forth in Section 2.3.3.

 

1.16         “Closing Date” shall mean, collectively,
the Backhaul Closing Date and the Wavelength Closing Date.

 

1.17         “Compliancy” shall have the meaning set
forth in Section 4.2.5.

 

1.18         “Confidential Information” shall have the
meaning set forth in Section 12.1.

 

1.19         “Decommission” shall mean Seller
decommissioning, removal or abandonment of the cable on a segment of the
Williams’ Network that includes the cable underlying the Wavelength or the
Backhaul, respectively.

 

1.20         “Default Rate” shall mean the annual rate
that is two (2) percentage points greater than the one month London Interbank
Offered Rate for U.S. Dollars as quoted in The Wall Street Journal on
the first Business Day following the date a payment is due.

 

1.21         “Demarcation Point” shall mean the point on
the optical distribution frame where the capacity-specific optical interface
terminates and where the Purchaser assumes responsibility for interconnection
of the Capacity to its network as identified on Exhibits B and C.

 

1.22         “Disclosing Party” shall have the meaning
set forth in Section 12.1.

 

1.23         “Effective Date” shall have the meaning set
forth in the recitals.

 

1.24         “Election Notice” shall have the meaning
set forth in Section 3.3.2.

 

3

 

1.25         “Exercise Date” shall have the meaning set
forth in Section 21.1.

 

1.26         “First Three Wavelengths” shall have the
meaning set forth in Section 4.1.2(a).

 

1.27         “Force Majeure Event” shall have the
meaning set forth in Section 18.

 

1.28         “Fourth Wavelength” shall have the meaning
set forth in Section 4.1.2(c).

 

1.29         “Indemnifying Party” or “Indemnified Party” shall have the meanings
set forth in Section 10.1.

 

1.30         “IRU” shall mean an indefeasible and
exclusive right of use.

 

1.31         “IRU Term” shall have the meaning set forth
in Section 8.2.

 

1.32         “Notice Date” shall have the meaning set
forth in Section 8.1.

 

1.33         “O&M Agreement” shall mean the
Operations and Maintenance Agreement between the parties of even date herewith.

 

1.34         “Option” shall have the meaning set forth
in Section 21.1.

 

1.35         “Option Price” shall have the meaning set
forth in Section 21.1.

 

1.36         “Ownership Interest” shall have the meaning
set forth in Section 21.1.

 

1.37         “POP” shall mean point of presence.

 

1.38         “Property Taxes” shall mean any property,
ad valorem, use or other similar taxes, fees or assessments that are determined
based on the ownership of property or any rights thereto.

 

1.39         “Receiving Party” shall have the meaning
set forth in Section 12.1.

 

1.40         “Representatives” shall have the meaning
set forth in Section 12.3.2.

 

1.41         “Required Rights” shall have the meaning
set forth in Section 4.6.

 

1.42         “STM-1” shall mean 155 Mbit/second full
duplex digital line passing between the two Williams’ Network Interface Points
set forth on Exhibit B and compliant with ITU-T standards, together with
the interconnection interfaces pertaining thereto.  Each STM-1 shall have a particular circuit ID on the Williams’
Network.

 

4

 

1.43         “Taxes” shall mean any and all sales, use,
income, gross receipts, excise, transfer, franchise fees or other similar taxes
or fees.

 

1.44         “Taxing Authority” shall mean a federal,
state or local governmental authority or subdivision thereof.

 

1.45         “Technical Specifications” with respect to
the Backhaul shall mean the technical specifications set forth in Exhibit B
and with respect to the Wavelengths shall mean the technical specifications set
forth in Exhibit C.

 

1.46         “Telecommunications Facilities Agreement”
shall mean the Telecommunications Facilities and Services Agreement between the
parties of even date herewith.

 

1.47         “Term” shall have the meaning set forth in Section
8.1.

 

1.48         “Testing Period” shall have the meaning set
forth in Section 4.2.3.

 

1.49         “Testing Specifications” shall have the
meaning set forth in Exhibit D.

 

1.50         “Tributary Cards” means the Purchaser
capacity-specific interface cards, which are dedicated solely for the purpose
of creating the Backhaul IRU or the Wavelength IRU, located at the origination
and termination points set forth in Exhibits B and C.

 

1.51         “Wavelength(s)” shall mean each of the four
(4) individual dedicated point to point full duplex optical channels, each with
derivable capacity of 2.5 gigabits per second (“Gbps”) synchronous serial data,
which shall be provided on a specific frequency within specific fibers. The
Wavelengths will originate and terminate at the locations specified in Exhibit
C.

 

1.52         “Wavelength Closing Dates” shall mean each
date within five (5) Business Days of the Acceptance Date of the Wavelength(s)
on which Seller receives payment in full of the applicable portion of the
Wavelength IRU Purchase Price.

 

1.53         “Wavelength IRU(s)” shall have the meaning
set forth in Section 2.2.

 

1.54         “Wavelength IRU Purchase Price” shall have
the meaning set forth in Section 3.2.

 

1.55         “Williams Network” shall mean the
telecommunications facilities owned and operated by Williams and used to
provide telecommunications services between two locations both end points of
which originate and terminate at a Williams point of presence.

 

5

 

2.             PURCHASE OF IRU AND GRANT OF INTEREST.

 

2.1           Backhaul IRU.  Subject to the terms and conditions contained herein, Purchaser
agrees to purchase and pay for the Backhaul IRU on the Backhaul Closing
Date.  Upon Purchaser’s payment of the
Backhaul IRU Purchase Price, Seller shall grant to Purchaser and Purchaser shall
acquire from Seller an IRU in the Backhaul for the IRU Term (collectively, the
“Backhaul IRU”), with effect from
the Backhaul Closing Date until the last day of the IRU Term.

 

2.2           Wavelength IRUs.  Subject to the terms
and conditions contained herein, Purchaser agrees to purchase and pay for the
Wavelength IRU(s) on the applicable Wavelength Closing Date.  Upon Purchaser’s payment of the Wavelength
IRU Purchase Price for the applicable Wavelength, Seller shall grant to
Purchaser and Purchaser shall acquire from Seller an IRU in the Wavelength(s)
for the IRU Term (collectively, the “Wavelength
IRUs”), with effect from the applicable Wavelength Closing Date
until the last day of the applicable IRU Term.

 

2.3           Property Interest.

 

2.3.1           Purchaser shall have no legal title or
ownership in the physical assets of the Williams Network itself, including any
proceeds from the disposition of the Williams Network.  Notwithstanding the preceding sentence, it
is understood and agreed that the grant of the Backhaul IRU and the Wavelength
IRUs is intended by the parties hereto to be treated for accounting and all
applicable tax purposes, as the sale and purchase of the Backhaul IRU and
Wavelength IRUs, and that on and after the Backhaul Closing Date and the
Wavelength Closing Date, as applicable, Purchaser or its Affiliates shall be
treated as the owner of the Backhaul IRU and the Wavelength IRUs for such
purposes.  Except as a party may
otherwise reasonably deem required by or appropriate under law or accounting
standards, the parties agree to make financial accounting filings and tax
returns consistently with such treatment.

 

2.3.2           The parties intend that the transactions
contemplated by this Agreement shall constitute a sale to Purchaser of the
rights that constitute an IRU and not a lease or other contract for provision
of capacity by Seller to Purchaser.

 

2.3.3           In the event that (i) Seller does not have
the underlying rights to grant an IRU on portions of the Backhaul IRU or the
Wavelength IRUs or (ii) any jurisdiction in which the Williams’ Network is
located does not currently recognize, or does not recognize in the future, the
conveyance of telecommunications facilities on an IRU basis, then as to such
portions of the Backhaul IRU or Wavelength IRUs or such jurisdiction(s) only,
this Agreement shall be considered an agreement for a lease of such capacity (a
“Capacity Lease”).  The term of the Capacity Lease shall be

 

6

 

for the IRU Term of the Backhaul IRU or Wavelength IRUs, as the case
may be.  All amounts owed under this
Agreement shall be paid as provided in this Agreement and Purchaser shall not
be required to make any additional payments as a result of the above-described
change in status of the rights granted under this Agreement.  Notwithstanding the foregoing, the Capacity
Lease shall provide Purchaser with all of the same rights and privileges
contained in this Agreement for the Backhaul IRU or Wavelength IRUs, except for
the nature of such interest.

 

2.3.4           In the event that this Agreement is deemed a
Capacity Lease in one or more jurisdictions, then as to such jurisdictions
only, the terms “purchase,” “purchaser,” and any variations thereon shall mean
“lease,” “lessee,” or the appropriate variation thereof, and the terms
“indefeasible and exclusive right of use” and “IRU” shall mean “Lease.” Any
other terms and conditions of the Agreement also shall be deemed modified only
to the extent necessary to be consistent with the grant of a lease to
Purchaser.  All other terms and
conditions of the Agreement shall remain unchanged and fully valid and
enforceable.

 

2.3.5           Notwithstanding the provisions of Sections
2.3.3 and 2.3.4, it is the intent of the parties that Purchaser be granted
an IRU, or, if less than an IRU, the next highest rights that are less than an
IRU with regard to use of the Backhaul IRU or Wavelength IRUs.  To the extent that (i) Seller obtains the
ability to transfer an IRU on a portion of the Wavelength or Backhaul
previously conveyed as a Capacity Lease or (ii) any jurisdiction(s) recognizes
the conveyance of telecommunications facilities on an IRU basis at any time
during the term of the Agreement, then for such portion of the Williams’
Network, the rights and interest granted in connection with such portion shall
be an IRU, and the terms of this Agreement relating to the lease of capacity
shall be of no force or effect as to such portion of the Wavelength IRUs or
Backhaul IRU.

 

3.             CONSIDERATION

 

3.1           Backhaul IRU Purchase Price.  Subject to performance by Seller of its
obligations hereunder, Purchaser shall pay to Seller, in consideration for the
Backhaul IRU, the sum of *** (the “Backhaul IRU Purchase Price”), which shall
be paid on the Effective Date or the Backhaul Closing Date, as applicable, and
as set forth in Exhibit A, without demand, reduction or set-off except
the reduction for the dark fiber credits and repurchase credit allocated on Exhibit
A.

 

3.2           Wavelength IRU Purchase Price.  Subject to performance by Seller of its
obligations hereunder, Purchaser, shall pay to Seller, in consideration for the
Wavelength IRUs, the sum of *** (the “Wavelength IRU Purchase Price”), which

 

***
Portions hereof have been omitted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidential treatment in
accordance with Rule 406.

 

7

 

shall be paid as set forth in Exhibit A
on the applicable Closing Date, without demand, reduction or set-off except the
reduction for the dark fiber credits and repurchase credit allocated on Exhibit
A.

 

3.3           Reduction of Backhaul IRU Purchase Price.

 

3.3.1           If the China-US cable is operational and the
Acceptance Date for the Backhaul IRU occurs prior to September 30, 2001,
Purchaser shall receive a credit of *** per day, per STM-1 (the “Bandon
Credit”) for the Bandon Circuits which credit shall be calculated in accordance
with Section 3.3.2 below and applied to the Backhaul IRU Purchase
Price.  The Bandon Credit shall only
apply to eighteen (18) of the twenty-two (22) Bandon Circuit(s) that Seller is
currently providing to Purchaser.

 

3.3.2           Once Seller determines that  China-US is operational and that the
Backhaul IRU is ready for testing, Seller shall notify Purchaser in
writing.  Within fifteen (15) days after
Purchaser’s receipt of such notice, Purchaser must notify Seller of the number
of Bandon Circuit(s) that Purchaser desires to keep operational and the date on
which Purchaser elects to have such operational Bandon Circuit(s) terminate
(the “Election Notice”).  Subject to Section
4.3.1, in no event shall the termination date for any Bandon Circuit(s) be
later than September 30, 2001.  For any
Bandon Circuit(s) not listed on the Election Notice, Seller shall have the
right to terminate such Bandon Circuit(s) as of the Backhaul Acceptance Date,
as defined in Section 4.1.1.

 

3.3.3           The amount of the Bandon Credit shall be
determined by taking the number of days remaining from the termination date set
forth in Purchaser’s Election Notice through September 30, 2001 for each Bandon
Circuit multiplied by ***.  By way of
example only, if the Backhaul Acceptance Date occurs on June 1 and China-US is
operational, and Purchaser notifies Seller in the Election Notice that 10 of
the Bandon Circuits need to remain operational through July 1 and the remaining
8 Bandon Circuits may be terminated as of June 1, the Bandon Credit would be
determined by multiplying in 10 circuits by 92 days by *** plus 8 circuits by
122 days by ***.

 

3.4           Operations and Maintenance.  The Backhaul IRU Purchase Price and the
Wavelength IRU Purchase Price include only the price for the purchase of the
Capacity and specifically exclude the price for operations and maintenance,
which is provided for under the O&M Agreement.

 

3.5           Late Payment.  Late payments shall
accrue interest at the Default Rate until paid in full.

 

4.             DELIVERY AND ACCEPTANCE TESTING

 

4.1           Delivery Dates.

 

4.1.1           Backhaul.  Seller shall use commercially reasonable
efforts to cause the Acceptance Date for the Backhaul IRU to occur on the
earlier of:  (a) September 30, 2001; or
(b) the date on which the China-US cable is operational and the Backhaul has
been accepted in accordance with Section 4.2.1 (the “Backhaul Acceptance Date”).

 

4.1.2           Wavelengths.  a) Seller shall use commercially reasonable
efforts to cause the Acceptance Date for the first set of three (3) Wavelengths
(the “First Three Wavelengths”) to
occur by May 15, 2001.  The First Three
Wavelengths will be delivered on a non-diverse path in PAIX.  Nothwithstanding the foregoing, should Seller
deliver the “TUA” as defined in Section

 

***
Portions hereof have been omitted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidential treatment in
accordance with Rule 406.

 

8

 

4.2.2 below for the First Three Wavelengths
prior to May 15, 2001, Purchaser agrees to begin the Acceptance Testing
procedure set forth below.  Purchaser
agrees that it will not delay payment of the applicable Wavelength IRU Purchase
Price for the First Three Wavelengths if the Acceptance Date is prior to May
15, 2001.

 

b)  Seller shall use commercially reasonable efforts to cause the
First Three Wavelengths to become physically diverse as set forth in Section
4.5 (by achieving physical diversity between the northern and southern routes
converging at PAIX as described in Exhibit C-1 (diverse circuit path
chart)) by August 15, 2001. 
Notwithstanding the foregoing, should Seller deliver the physical
diversity into PAIX prior to August 15, 2001, Purchaser agrees to begin the
Acceptance Testing procedure set forth below, upon Seller’s delivery of the
“TUA” as defined in Section 4.2.2 below with respect to the new segments
enabling the First Three Wavelengths to become physically diverse.

 

c)  Seller shall use commercially reasonable efforts to cause the
Acceptance Date for the fourth of the four Wavelengths (the “Fourth Wavelength”) to occur by August 15,
2001.  Notwithstanding the foregoing,
should Seller deliver the “TUA” as defined in Section 4.2.2 below for
the Fourth Wavelength prior to August 15, 2001, Purchaser agrees to begin the
Acceptance Testing procedure set forth below. 
Purchaser agrees that it will not delay payment of the applicable
Wavelength IRU Purchase Price for the Fourth Wavelength if the Acceptance Date
is prior to August 15, 2001.

 

4.2           Acceptance Testing.

 

4.2.1           Seller shall test the Backhaul and
Wavelength(s) using procedures in accordance with industry standards (“Acceptance Testing”) to verify that such
Backhaul is operating in accordance with the Technical Specifications set forth
in Exhibit B and that such Wavelength(s) are operating in accordance
with the Technical Specifications set forth in Exhibit C.  Seller shall provide Purchaser with five (5)
Business Days’ prior written notice (which notice may be sent by facsimile or
e-mail in this case only) of the date and time of each applicable test.

 

4.2.2           After the successful conclusion of the
Acceptance Testing conducted by Seller with respect to the Backhaul or Wavelength(s),
Seller shall provide Purchaser with an electronic notice that the Backhaul or
the applicable Wavelength(s), as applicable, is available for use (“Turn Up Acknowledgement” or “TUA”).

 

4.2.3           After receipt by Purchaser from Seller of
the TUA, Purchaser shall have five (5) Business Days to conduct its own
Acceptance Testing to verify that it is operating in accordance with the
applicable Testing Specifications (“Testing
Period”).  If Purchaser
determines that such test results show that the Backhaul or Wavelength(s) or
any portion thereof do not meet the applicable Testing Specifications,
Purchaser

 

9

 

shall, within the Testing Period, notify Seller’ Service Delivery
Department in writing that the Capacity does not comply with the Testing
Specifications, and, if, upon investigation, such non-compliance is due solely
to Seller’ fault, then Seller shall correct the non-compliance as set forth in Section
3.1.3 below.

 

4.2.4           In the event Purchaser notifies Seller
within the time periods set forth in Section 4.2.2 that the Backhaul or
Wavelength(s), or any portion thereof is not operating within the parameters of
the applicable Testing Specifications, Seller shall expeditiously take such
action as shall be necessary with respect to such portion of the Backhaul or
Wavelength(s) to bring the operating standards of such portion of the Backhaul
or Wavelength(s) into compliance, after which such portion of the Backhaul or
Wavelength(s) shall be re-tested in accordance with the provisions of this Section
4.  After taking such actions and
re-testing, Seller shall provide Purchaser with a re-tested TUA and Purchaser
shall again have all rights provided in this Section 4.

 

4.2.5           The cycle described above of testing, taking
corrective action and re-testing shall take place a maximum of two (2) times as
necessary to ensure that such portion of the Backhaul or Wavelength(s) operates
within the parameters of the applicable Testing Specifications.  Following the second such attempt by the
parties to agree on the Acceptance Testing results, if Purchaser asserts that
the test results demonstrate the Backhaul or Wavelength(s), or any portion
thereof, does not meet the applicable Testing Specifications (“Compliancy”), both parties shall choose an
independent engineer to establish whether the test results establish Compliancy
or not.  If the independent engineer
confirms Compliancy, Purchaser shall be deemed to have accepted the Backhaul or
Wavelength(s) and reimburse Seller for the actual cost of the independent
engineer and the actual internal and out-of-pocket costs of extra testing.  If the independent engineer confirms
Purchaser’s test results, Seller will complete expeditiously the corrective
action necessary to achieve Compliancy and pay for the actual cost of the
independent engineer and for the actual internal and out-of-pocket costs
incurred by Purchaser for such extra testing.

 

4.2.6           In the event Purchaser does not object to
the results of any of Seller’ Acceptance Testing or its own Acceptance Testing
within the time periods specified in Section 4.2.3, Purchaser shall be
deemed to have accepted the Backhaul or Wavelength(s) as of the first day
following the end of such period.  The
date on which Purchaser issues its notice accepting the Backhaul or
Wavelength(s), or on which it is deemed to accept the Backhaul or
Wavelength(s), as the case may be, under this

 

***
Portions hereof have been omitted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidential treatment in
accordance with Rule 406.

 

10

 

Section 4.2.5, shall constitute the date of
Purchaser’s acceptance (the “Acceptance Date”).

 

4.2.7           The parties agree that, subject to
Teleglobe’s right to terminate pursuant to Section 4.3.1, acceptance of
the Backhaul will not depend on, and shall occur regardless of, whether the
China-US cable has been
delivered or is operational.

 

4.3           Termination of Purchase Obligation.

 

4.3.1           In the event the Acceptance Date for the
Backhaul has not occurred by October 31, 2001, Purchaser may elect to terminate
its obligation to acquire the Backhaul IRU by providing written notice to
Seller by November 15, 2001, unless the reason for the Acceptance Date not
occurring results from an Event of Default by Purchaser or improper acts or
omissions.  The parties agree that the
Acceptance Date of the Backhaul will not depend on, and shall occur regardless
of, whether the China-US cable has been delivered or is operational.  If the Acceptance Date has not occurred by
October 31, 2001 and Purchaser has not terminated its obligation to acquire the
Backhaul IRU (by the November 15, 2001 deadline), Seller shall continue to
provide to Purchaser the STM-1 circuits into Bandon set forth on Exhibit A to
the Telecommunications Facilities Agreement (the “Bandon Circuit(s)”) at no cost to Purchaser after September
30, 2001.  Seller shall reserve 26
additional STM-1’s from Bandon to Williams’ POP in Los Angeles, California by
October 1, 2001.  Williams shall
continue to provide the Bandon Circuits until the earlier of:  (i) thirty (30) days after the Acceptance
Date of the Backhaul IRU or (ii) six (6) months after September 30, 2001.  On March 31, 2002, if the Acceptance Date
for the Backhaul IRU has still not occurred, Purchaser, at its option, may (1)
terminate the Backhaul IRU (and Williams’ provision of the Bandon circuits
shall end as of March 31, 2002), or (2) convert the Backhaul IRU to an
equivalent IRU on the same terms and conditions as set forth herein between the
Bandon cable landing station and Seller’s POP in Los Angeles, California (the “Bandon IRU”).  In the event Purchaser elects to convert the Backhaul IRU to a
Bandon IRU and Seller is unable to deliver 48 STM-1s from Bandon to Los
Angeles, Purchaser shall have the right to purchase an IRU in 22 STM-1s for a
purchase price of *** less the allocated amount of down payment set forth in
Schedule A.  In addition, the parties
agree to reduce the payment for operations and maintenance associated with
original Backhaul IRU under the O&M Agreement appropriately.

 

4.3.2           (a) In the event the Acceptance Date for the
applicable Wavelength(s) has not occurred by the deadline set forth in Section
4.1, Purchaser may elect to terminate its obligation to acquire the
particular Wavelength IRU for which the Acceptance Date has not occurred by
providing written notice to Seller, unless the reason for the Acceptance Date
not occurring results from Purchaser’s Default or improper acts or
omissions.  The notice and cure periods
set forth in Section 15 shall not apply with respect to the deadlines
set forth in Section 4.1.

 

***
Portions hereof have been omitted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidential treatment in
accordance with Rule 406.

 

11

 

b)  In the event the Acceptance Date has not occurred by the date set
forth in Section 4.1.2(b), Purchaser may elect to (i) drop the Wavelengths at
another point along the Williams Network subject to availability and
commercially reasonable installation intervals or (ii) terminate its obligation
to accept the Fourth Wavelength and return one of the previously delivered and
accepted First Three Wavelengths and receive a refund of *** for the return of
such Wavelength.  In the event Teleglobe
elects to drop the Wavelengths at another point on the Williams Network,
Purchaser shall deliver written notice of its election to change the drop point
within fifteen (15) days of date it may make such election.

 

4.3.3           In the event Purchaser terminates its
obligation to pay for the Backhaul IRU or any Wavelength IRU in accordance with
Sections 4.3.1 or 4.3.2 above, Purchaser agrees to pay to Seller the
value of the services provided by Williams associated therewith, which amount
shall be off-set by a credit of the applicable portion of the amounts Purchaser
previously paid to Seller under the Dark Fiber Agreement between the parties
dated December 22, 1999, which Dark Fiber Agreement has been terminated in
accordance with the Telecommunications Facilities and Services Agreement
between the parties entered into simultaneously herewith.

 

4.3.4           For the avoidance of doubt, in no event
shall a Force Majeure Event be deemed to delay or otherwise modify the
committed delivery and Acceptance Dates unless the Force Majeure Event arises
from an Act of God, fire, flood, war or civil disorder that does not exceed one
hundred and eighty (180) calendar days.

 

4.3.5           The remedies set forth in this Section 4.3
shall be Purchaser’s sole and exclusive remedies with respect to Seller’s late
delivery of the Backhaul IRU or any Wavelength IRU and with respect to any
failure by Seller to provide diversity.

 

4.4           Delivery of IRUs.  The IRUs shall be
delivered to Purchaser at the specified origination and termination points set
forth on Exhibit B or Exhibit C, as applicable.

 

4.5           Physical Diversity.

 

4.5.1           The Backhaul IRU shall be delivered and
maintained on diverse paths throughout the IRU Term.  For purposes of this Section, diverse paths shall mean separate
physical paths delivered between the cable landing station and Seller’s
POP.  One path is provisioned as “work”
and the other path is provisioned as “protect”.

 

***
Portions hereof have been omitted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidential treatment in
accordance with Rule 406.

 

12

 

4.5.2           Two of the Wavelength IRUs shall be
delivered and maintained throughout the entire IRU Term on a fully physically
diverse path from the remaining two Wavelength IRUs subject to Section 4.1.2.

 

4.6           Required Rights.  Commencing as of the
Acceptance Date with respect to each IRU and continuing until the end of the
respective IRU Terms, Seller shall obtain all conduits, leases, fee interests,
licenses, authorizations, permits (including permits for highway, railroad and
waterway crossings and any necessary permits or authorizations such as
environmental permits) and/or other agreements or rights necessary for and
requisite to (i) the granting of the IRUs to Purchaser and (ii) the maintenance
of the Williams’ Network (collectively, the “Required
Rights”).  Seller shall cause
the Required Rights to remain effective through the respective IRU Terms.

 

5.             USE OF CAPACITY

 

5.1           Purchaser
shall be responsible for all costs to connect its facilities to the identified
Demarcation Point at the origination and termination points for the Wavelength
or the Backhaul, as the case may be, as identified in Exhibits B and C.

 

5.2           Purchaser
acknowledges that Seller may require the use of the Capacity from time to time
for the purposes of carrying out tests, adjustments and maintenance.  Purchaser shall make the Capacity available
to Seller upon reasonable notice being given to Purchaser as set forth in the
O&M Agreement, to permit Seller to conduct such tests, adjustments and
maintenance as may be necessary for the Williams’ Network to be maintained in
efficient working order in accordance with the O&M Agreement.

 

5.3           Purchaser
acknowledges that this Agreement grants no right to use any element of the
Williams’ Network other than the Capacity purchased herein.  Purchaser shall keep any and all of the
Williams’ Network free from any liens, rights or claims of any third party
attributable to Purchaser.

 

5.4           Purchaser
shall conduct all operations and use of the IRUs in a manner that does not
interfere with the operations of the Williams’ Network or the use thereof by
any other customer of Seller.

 

5.5           Seller
shall conduct all operations and use of the Williams’ Network in a manner that
does not interfere with the operations of the IRUs granted hereunder or the use
thereof by Purchaser.

 

5.6           Seller
agrees and acknowledges that it has no right to use the Backhaul IRU or
Wavelength IRUs during the IRU Term, except under the conditions specified in Section
5.2 above.

 

5.7           Seller
and Purchaser each agree to cooperate with and support the other in complying
with any requirements directly applicable to the Williams’ Network by any
governmental or regulatory agency or authority.

 

13

 

6.             TAXES

 

6.1           Purchaser
shall bear responsibility for and shall timely pay any Taxes assessed directly
against Purchaser by a Taxing Authority with respect to the Backhaul IRU or
Wavelength IRUs, or Purchaser’s use of facilities connected to the Backhaul IRU
or Wavelength IRUs; provided, however, that such Taxes shall not
include any tax that is (i) imposed upon or measured by Seller’ income or (ii)
imposed with respect to the Williams’ Network or any portion thereof beyond
Purchaser’s pro rata share for such liability, provided, further, that
Purchaser nonetheless agrees to reimburse Seller for fees in support of the
Universal Service Fund contemplated by the Telecommunications Act of 1996 or
any state equivalent, together with a one percent (1%) administrative fee to
the extent Seller’ recovery of the administrative fees is not precluded by law.

 

6.2           Seller
shall bear responsibility for and timely pay any and all Taxes and Property
Taxes asserted against it, the Williams’ Network or any portion thereof by a
federal, state or local governmental authority or subdivision thereof with
respect to the Williams’ Network (whether in connection with Seller’
construction, ownership, maintenance or use of the Williams’ Network, or
otherwise); provided that such Taxes shall not include any tax that is
(i) imposed upon, or measured by, Purchaser’s income or (ii) attributable to
Purchaser as described in Section 6.1 hereof.

 

6.3           With
respect to any and all Property Tax obligations arising in connection with the
Williams’ Network, any portion thereof or any interest therein, as between
Seller and Purchaser, Seller shall bear sole responsibility for payment and
submission of reports and filings in connection therewith.  Seller shall retain responsibility with
respect to any and all Taxing Authorities and their respective jurisdictions, for
timely reporting, filing and remitting payments in connecting with such
Property Taxes.

 

6.4           The
parties agree that they will cooperate with each other and coordinate their
mutual efforts concerning audits, or other such inquiries, filings, reports, etc.,
as may relate solely to the Taxes arising from or under this Agreement, which
may be required or initiated from or by any Taxing Authority.

 

6.5           In
the event that Seller is assessed for any Taxes or fees related to Purchaser’s
ownership of the Backhaul IRU or Wavelength IRUs, Seller shall, within thirty
(30) days after receipt of an invoice therefor, provide information and
documentation to Purchaser sufficient to demonstrate the basis for the tax or
fee and the amount and due date for payment of the tax or fee.  Within such thirty (30) day period, Seller
may pay such tax or fee and invoice Purchaser for reimbursement.  Purchaser shall reimburse Seller for such
payment within thirty (30) days after receipt of Seller’ invoice.  In the event Seller elects to not pay such
tax or fee, it shall so notify Purchaser. 
Purchaser, at its option, may pay the tax or fee, or contest the same.

 

14

 

7.             DECOMMISSIONING

 

7.1           Notwithstanding
anything contained herein to the contrary, Seller may, in its sole discretion,
(i) Decommission the Backhaul or any portion thereof that affects the Backhaul
IRU at any time after the twentieth anniversary of the Backhaul Closing Date
(ii) Decommission the Wavelengths or any portion thereof that affects the
Wavelength IRUs at any time after the twentieth anniversary of the applicable
Wavelength Closing Date.

 

7.2           Seller
shall provide Purchaser ninety (90) days prior written notice of its decision
to Decommission the Backhaul or the Wavelengths, as the case may be.

 

8.             TERM

 

8.1           The
Term of this Agreement (the “Term”)
shall begin on the Effective Date and shall continue until the earlier of: (i)
the expiration or termination of the last IRU Term hereunder; or (ii) the date
on which Purchaser notifies Seller in writing (the “Notice Date”) that the last remaining IRU subject to this
Agreement has, in Purchaser’s determination, reached the end of its
economically useful life and that Purchaser desires not to retain such
IRU.  Purchaser may deliver such notice
to Seller at any time with respect to any or all of the IRUs granted hereunder
and with respect to any IRU covered by such notice, the IRU Term shall be
deemed terminated as of the Notice Date.

 

8.2           The
term of the applicable IRU (“IRU Term”)
shall commence on the applicable Closing Date for the IRU granted hereunder and
shall continue until the twentieth anniversary of such Closing Date, unless
earlier terminated by Purchaser pursuant to Section 7.1.

 

8.3           Upon
expiration of an IRU Term or the earlier termination of an IRU Term by
Purchaser in accordance with Section 8.1, Purchaser shall transfer
all rights and interest in the IRU(s) to Seller and all of Purchaser’s rights
to the IRU(s) shall revert to Seller without reimbursement by Seller of any
fees or other payments previously made with respect thereto, and from and after
such time Purchaser shall have no further rights or obligations (excepting such
obligations as shall have arisen prior to the date of expiration of the IRU
Term or such obligations which are intended to survive as set forth in Section
20) with respect to the applicable IRUs.

 

9.             LIMITATION OF LIABILITY

 

9.1           NOTWITHSTANDING
ANY OTHER PROVISION HEREIN TO THE CONTRARY, NEITHER PARTY SHALL BE RESPONSIBLE
OR LIABLE TO THE OTHER FOR SPECIAL, CONSEQUENTIAL, INCIDENTAL, INDIRECT,
PUNITIVE OR EXEMPLARY LOSSES OR DAMAGES ARISING AS A RESULT OF OR IN THE
PERFORMANCE OR NONPERFORMANCE OF ITS OBLIGATIONS UNDER THIS AGREEMENT, OR ITS
ACTS OR OMISSIONS RELATED TO THIS AGREEMENT OR ITS USE OF THE WILLIAMS’ NETWORK
OR ANY CAUSE WHATSOEVER, WHETHER OR NOT ARISING FROM SOLE, JOINT OR CONCURRENT
NEGLIGENCE, STRICT LIABILITY OR VIOLATION OF LAW.

 

15

 

9.2           Nothing
contained herein shall operate as a limitation on the right of either Seller or
Purchaser to bring an action for damages against any third party, including
indirect, special, or consequential damages, based on any acts or omissions of
such third party as such acts or omissions may affect the operation or use of
the Capacity.  Each of Seller and
Purchaser shall assign such rights of claims, execute such documents and do
whatever else may be reasonably necessary to enable the other to pursue any
such action against such third party, provided however, that the provisions of
this Section 9.2 shall not permit, and the parties agree that Section
9.1 shall apply to prevent, the filing of an action by Seller or Purchaser
for damages against a third party for indirect, special, or consequential
damages arising out of or in connection with this Agreement if such third
party, directly or through one or more intermediate parties, has a right of
indemnification, impleader, cross-claim, contribution, or other right of
recovery against Seller or Purchaser, respectively.

 

9.3           EXCEPT
AS SPECIFICALLY SET FORTH IN THIS AGREEMENT, SELLER MAKES NO WARRANTY OR
REPRESENTATION TO PURCHASER OR ANY OTHER PERSON OR ENTITY, WHETHER EXPRESS,
IMPLIED OR STATUTORY, AS TO THE INSTALLATION, DESCRIPTION, QUALITY,
MERCHANTABILITY, COMPLETENESS OR FITNESS FOR ANY PARTICULAR PURPOSE OF THE
WILLIAMS NETWORK, OR AS TO ANY OTHER MATTER, ALL OF WHICH WARRANTIES ARE HEREBY
EXPRESSLY EXCLUDED AND DISCLAIMED.

 

9.4           With
respect to rights provided under this Agreement, the parties shall make a
similar disclaimer in each of their customer contracts, and shall require their
customers, permitted assignees or other users of the Capacity to agree, assume,
and be subject to the terms of this Section 9.

 

10.          INDEMNIFICATION

 

10.1         Each
party (the “Indemnifying Party”)
hereby releases and agrees to indemnify, defend, protect and hold harmless the
other party, its employees, officers, shareholders, directors, agents,
contractors and Affiliates (the “Indemnified
Parties”), from and against, and assumes liability for any and all
claims, demands, actions, losses, damages, assessments, charges, liabilities,
costs and expenses (including without limitation, interest, penalties and
attorneys fees and disbursements (including an allocated share of in-house
counsel fees)) which may from time to time be suffered or incurred by, or
asserted against, the Indemnified Parties directly or indirectly, on account of
or in connection with:

 

10.1.1      Any injury, death, loss or damage to any person,
tangible property or facilities of any person or entity to the extent arising
out of or resulting from the negligence or willful misconduct of the
Indemnifying Party, its officers, employees, servants, Affiliates, agents or
contractors or from any other person or entity for whom it is in law
responsible; and

 

16

 

10.1.2      Any violation by the Indemnifying Party of
regulations, rules, statutes or court orders of any local, state or federal
governmental agency, court or body in connection with its performance under
this Agreement, or its use of the Williams Network.

 

10.2         In
the event an Indemnified Party is notified of any action as to which it may
seek to be indemnified under this Section, it will promptly notify the
Indemnifying Party and seek to consult with such Indemnifying Party prior to
taking any material action with respect thereto, unless required to do so in
order to protect any rights or remedies which may be available.

 

10.3         The
Indemnifying Party hereby expressly recognizes and agrees that its obligation
to indemnify, defend, protect and save the Indemnified Parties harmless is a
material obligation to the continuing performance of the Indemnifying Party’s
other obligations hereunder.  The obligations
of this Section 10 shall survive the expiration or earlier termination
of this Agreement.  Recovery under or in
respect of this Section 10 shall not be limited to the proceeds of any
insurance to be carried hereunder or otherwise carried by the Indemnifying
Party.

 

11.          ASSIGNMENT

 

11.1         This
Agreement shall be binding on each party and its respective successors and
assigns.  Neither party may assign this
Agreement or any of its rights or obligations hereunder without the prior
written consent of the other party, which consent shall not be unreasonably
withheld or delayed.  If Seller does not
consent to the credit of the proposed assignee, Purchaser may still assign this
Agreement without consent of Seller, but Purchaser shall remain primarily liable
for all of the obligations hereunder. 
Any attempted assignment in violation of this Section 11 shall be
of no force or effect and shall be null and void.

 

11.2         Notwithstanding
the foregoing, Purchaser may assign this Agreement without prior written
consent to (i) any Affiliate, successor through merger, or acquirer of
substantially all of its assets which has the capacity to fulfill the
requirements set forth in this Agreement, or (ii) if necessary to be in
compliance with the rules and/or regulations of any regulatory agency,
governmental agency, legislative body or court of competent jurisdiction.  Notwithstanding, in all cases the assignee
must acknowledge in writing its assumption of the obligations of the assignor
hereunder and notify the other party to this Agreement of such assignment as
soon as practicable.

 

11.3         Notwithstanding
the foregoing, Seller may assign this Agreement without prior written consent
to (i) any Affiliate, successor through merger, acquirer of substantially all
of its assets which has the capacity to fulfill the requirements set forth in
this Agreement or as part of a financing transaction where Seller remains the
operator of the Williams’ Network, subject to the financing party executing an
Acknowledgement Letter, or (ii) if necessary to be in compliance with the rules
and/or regulations of any regulatory agency, governmental agency, legislative

 

17

 

body or court of competent jurisdiction.  Notwithstanding, in all cases the assignee
shall acknowledge in writing its assumption of the obligations of the assignor
hereunder and notify the other party to this Agreement of such assignment as
soon as practicable.

 

11.4         Notwithstanding
anything to the contrary in this Agreement, Purchaser may resell to its
customers (including on an IRU basis), lease, provision, swap, transfer or
exchange the IRUs or any telecommunications capacity derived from the IRUs in
smaller increments.

 

12.          CONFIDENTIAL AND PROPRIETARY INFORMATION

 

12.1         In
connection with this Agreement, either party may furnish to the other certain
information that is marked or otherwise identified as proprietary or
confidential (“Confidential Information”).  This Confidential Information may include,
among other things, documentation, data, drawings, specifications, plans, and
other technical or business information, including, without limitation,
confidential information of a party’s customer.  For purposes of this Section 12, the party that discloses
Confidential Information is referred to as the “Disclosing Party”, and the
party that receives Confidential Information is referred to as the “Receiving
Party”.

 

12.2         When
Confidential Information is furnished in tangible form, the Disclosing Party
shall mark or otherwise identify it as proprietary or confidential.  When Confidential Information is provided
orally, the Disclosing Party shall, at the time of disclosure or promptly
thereafter, identify the Confidential Information as being proprietary or
confidential.

 

12.3         With
respect to Confidential Information disclosed under this Agreement, the
Receiving Party shall:

 

12.3.1      hold the Confidential Information in confidence,
exercising a degree of care not less than the care used by the Receiving Party
to protect its own proprietary or confidential information that it does not
wish to disclose, but in no event less than a reasonable degree of care;

 

12.3.2      restrict disclosure of the Confidential
Information solely to those of its Affiliates, officers, directors, employees,
its lenders or other parties providing financing arrangements, agents or
representatives, including legal counsel and independent auditors
(collectively, “Representatives”),
who need to know such Confidential Information for the purpose of negotiating,
executing and implementing this Agreement. 
The Receiving Party agrees to inform each of its Representatives of the
non-public nature of the Confidential Information and to direct such persons to
treat such Confidential Information in accordance with the terms of this Section
12 and with respect to permitted third parties, execute a non-disclosure 

 

18

 

agreement substantially reflecting the terms and conditions of this Section
12; and

 

12.3.3      use the Confidential Information only in
connection with the performance of this Agreement except as the Disclosing
Party may otherwise agree in writing.

 

12.4         Confidential
Information shall be deemed the property of the Disclosing Party.  Upon request of the Disclosing Party, the
Receiving Party shall return all Confidential Information received in tangible
form, or shall destroy it and provide written certification of destruction to
the Disclosing Party.  If the Receiving
Party loses or makes an unauthorized disclosure of Confidential Information, it
shall notify the Disclosing Party and use reasonable efforts to retrieve the
Confidential Information.

 

12.5         The
Receiving Party shall have no obligation to preserve the proprietary nature of
Confidential Information which:

 

12.5.1      was previously known to the Receiving Party free
of any obligation to keep it confidential;

 

12.5.2      is or becomes publicly available by means other
than unauthorized disclosure by the Receiving Party;

 

12.5.3      is developed by or on behalf of the Receiving
Party independently of any Confidential Information furnished under this
Agreement; or

 

12.5.4      is received from a third party whose disclosure
does not violate any confidentiality obligation.

 

12.6         The
contents and existence of this Agreement is Confidential Information of both
parties, and all information that may be disclosed to Receiving Party
pertaining to the identities, locations, and requirements of the Disclosing
Party’s customers, is Confidential Information of Disclosing Party.

 

12.7         If
the Receiving Party is required to disclose the Disclosing Party’s Confidential
Information by an order or a lawful process of a court or governmental body,
the Receiving Party shall promptly notify the Disclosing Party, and shall
cooperate with the Disclosing Party in seeking reasonable protective
arrangements before the Confidential Information is produced; provided,
however, that after notice to and consultation with the Disclosing Party and
seeking reasonable protective arrangements, the Receiving Party may release
Confidential Information to governmental bodies which is required to comply
with federal or state securities laws.

 

12.8         Each
party agrees that the Disclosing Party would be irreparably injured by a breach
of this Section 12 by the Receiving Party or its representatives and that the
Disclosing Party may be entitled to equitable relief, including injunctive
relief and

 

19

 

specific performance, in the event of any
breach of the provisions of this Section 12.  Such remedies shall not be deemed to be the exclusive remedies
for a breach of this Section 12, but shall be in addition to all other
remedies available at law or in equity.

 

13.          PUBLICITY AND ADVERTISING

 

13.1         Neither
party shall publish or use any advertising, sales promotions, or other
publicity materials that use the other party’s logo, trademarks, or service
marks without the prior written approval of the other party.

 

13.2         No
publicity regarding the existence and/or terms of this Agreement may occur
without the mutual written agreement of both parties.  The content and timing of any press releases and all other
publicity regarding the subject matter of the Agreement or Purchaser’s relationship
with Seller shall be mutually agreed upon in writing by the parties.

 

13.3         Nothing
in this Agreement establishes a lease, license or right for either party to use
any of the other party’s brands, marks, or logos without prior written approval
of the other party.

 

14.          REPRESENTATIONS, WARRANTIES AND COVENANTS

 

14.1         Each
party represents, warrants and covenants that as of the Effective Date and on
each Acceptance Date:

 

14.1.1         It has taken all requisite action to approve
the execution, delivery and performance of this Agreement;

 

14.1.2         This Agreement constitutes a legal, valid and
binding obligation enforceable against such party in accordance with its terms,
subject to bankruptcy, insolvency, creditors’ rights and general equitable
principles;

 

14.1.3         Its execution and performance under this
Agreement shall not violate any applicable existing regulations, rules,
statutes or court orders of any local, state or federal government agency,
court or body of any country or any contract or other agreement the party is
subject to;

 

14.1.4         It is a corporation or other legal entity duly
organized, validly existing and in good standing under the laws of its state of
incorporation or formation;

 

14.1.5         It has the full right and authority to enter
into, execute, deliver and perform its obligations under this Agreement;

 

14.1.6         To the best of its knowledge and belief, there
exists no breach of any agreement it may have with third parties which
reasonably could be

 

20

 

expected to have a material adverse effect on its ability to perform
its obligations under this Agreement;

 

14.1.7         Its execution and performance of this
Agreement will not result in a breach of any agreement it may have with third
parties or any applicable law which reasonably could be expected to have a
material adverse effect on its ability to perform its obligations under this
Agreement;

 

14.1.8         There are no pending or, to best of its
knowledge and belief, threatened claims, actions, suits, audits, investigations
or proceedings by or against it which reasonably could be expected to have a
material adverse effect on its ability to perform its obligations under this
Agreement;

 

14.1.9         It is qualified to do business in all
jurisdictions where such qualification is required by applicable law, except
where the failure to be so qualified could not reasonably be expected to have a
material adverse effect on its ability to perform its obligations under this
Agreement;

 

14.1.10       It shall perform its obligations under this
Agreement and use the Williams Network in a manner consistent with applicable
law, and shall not use, or knowingly permit the Williams Network to be used,
for any illegal purpose or in any other unlawful manner; and

 

14.1.11       It now holds or will obtain prior to the
applicable Acceptance Date all necessary consents, authorizations, licenses,
permits and other approvals, both governmental and private, as are necessary to
perform its obligations under this Agreement, including, with respect to Seller
only, as necessary for the operation and maintenance of the Williams Network.

 

14.2         In
addition to Section 13.1, Seller hereby represents, warrants and
covenants to Purchaser as of the Effective Date and each Acceptance Date that:

 

14.2.1         the Wavelength IRUs and Backhaul IRU will be
designed and operated as integral parts of the Williams Network;

 

14.2.2         Seller shall not amend any material agreement
or grant a waiver thereunder without the prior written consent of Purchaser, if
such amendment or waiver will have a direct material adverse effect on the IRUs
granted hereunder; and, Seller shall not seek to transfer any asset used in the
performance of this Agreement to an Affiliate without causing the Affiliate be
bound by this representation.

 

15.          DEFAULT

 

15.1         Generally.

 

15.1.1         A party shall be in default under this
Agreement thirty (30) days after the non-defaulting party shall have given
written notice of such default

 

21

 

unless the defaulting party shall have cured such default within such
thirty (30) days; provided, however, that where any such default other than the
payment of money cannot reasonably be cured
within such 30-day period, if the defaulting party shall proceed
promptly to cure the same and prosecute such cure with due diligence, the time
for curing such default shall be extended for such period of time not to exceed
ninety (90) days as may be necessary to complete such cure, and further
provided that the period for cure set forth in Section 15.2.7 shall be
one hundred eighty (180) days.

 

15.1.2         The notice and default provisions set forth in
this Section 15 shall not apply to delivery deadlines set forth in Section
4.1.

 

15.2         “Events
of Default” shall include, but not be limited to, the following:

 

15.2.1         failure to make any payment when due hereunder
not cured within the applicable cure period following written notice by the
non-defaulting party;

 

15.2.2         breach of any material provision hereof not
cured within the applicable cure period following written notice by the non-defaulting
party;

 

15.2.3         the making by either party of a general
assignment for the benefit of its creditors;

 

15.2.4         the filing of a voluntary petition in
bankruptcy or the filing of a petition in bankruptcy or other insolvency
protection against either party which is not dismissed within ninety (90) days
thereafter, or the filing by either party of any petition or answer seeking,
consenting to, or acquiescing in reorganization, arrangement, adjustment,
composition, liquidation, dissolution or similar relief; or

 

15.2.5         the failure of the Backhaul IRU or any
Wavelength IRU or any portion thereof to meet the Technical Specifications
applicable thereto the result of which causes such Backhaul IRU, Wavelength IRU
or portion thereof to be unusable by Purchaser for a continuous period of sixty
(60) consecutive days.  For purposes of
this Section, “unusable” shall mean either the inability to transmit any
traffic over the Wavelength or Backhaul or portion thereof, as applicable, due
to failure of facilities supplied by Seller, or degradation of service below
the Technical Specifications due to facilities provided by Seller.  In no event shall “unusable” mean
Purchaser’s inability to transmit traffic or use the Wavelength or Backhaul due
to the unavailability of the China-US cable, Purchaser’s inability to connect
to the Wavelength or Backhaul, failure of any facilities or equipment provided
by or supplied by Purchaser or for reasons of a similar nature.

 

22

 

15.2.6                            the failure of Purchaser to
fulfill its obligation to purchase any Wavelength IRU or the Backhaul IRU.

15.2.7                            the failure of Williams to
fulfill its obligations to maintain Required Rights as set forth in Section
4.6 (except as modified by Section 21, Bargain Purchase Option).

15.3                       In the event of a default
described in Section 15.2.5 or Section 15.2.7 above, Purchaser
shall have the right to terminate the affected Backhaul IRU or Wavelength IRU
(or any portion thereof) and Seller shall pay to Purchaser a pro rata refund of
the Backhaul IRU Purchase Price or the applicable portion of the Wavelength IRU
Purchase Price previously paid to Seller for the applicable terminated IRU,
based on a term of twenty (20) years, calculated from the applicable Acceptance
Date.  Upon receipt of such refund,
which shall be payable to Purchaser within ten (10) Business Days of the
request therefore, Purchaser shall return all rights and interest in the
terminated IRU to Seller.  The parties
hereby agree that in the event of a default in accordance with Section
15.2.5 above, the rights and remedies set forth in this paragraph shall be
Purchaser’s sole and exclusive rights and remedies with respect to such
default.

15.4                       Except as set forth in Section
4.3.5 and Section 15.3, in addition to the specific remedies provided
hereunder, upon any default by a party, after notice thereof the non-defaulting
party may pursue any legal remedies that it may have under applicable law or
principles of equity relating to such default that are consistent with this
Agreement, provided that appropriate notice has been given under this Section.

15.5                       The parties agree that in
the event of a default hereunder or due to the termination by Purchaser under Section
18 hereof (“Force Majeure”) whereby
Seller is required to refund to Purchaser a portion of the Wavelength IRU
Purchase Price or the Backhaul IRU Purchase Price, for purposes of such
calculation, the Backhaul IRU Purchase Price shall be *** or proportionately
less if Purchaser elects to take 22 of the 48 STM-1s as provided in Section 4.3.1
and each Wavelength IRU Purchase Price shall be ***.

16.          RULES OF
CONSTRUCTION

16.1                       The captions or headings in
this Agreement are strictly for convenience and shall not be considered in
interpreting this Agreement or as amplifying or limiting any of its
content.  Words in this Agreement that
import the singular connotation shall be interpreted as plural, and words that
import the plural connotation shall be interpreted as singular, as the identity
of the parties or objects referred to may require.

16.2                       Unless expressly defined
herein, words having well-known technical or trade meanings in the
telecommunications industry shall be so construed.

16.3                       Except as set forth to the
contrary herein, any right or remedy of Seller or Purchaser shall be cumulative
and without prejudice to any other right or remedy, whether contained herein or
not.

***
Portions hereof have been omitted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidential treatment in
accordance with Rule 406.

 

23

 

16.4                       This Agreement does not
provide, and is not intended to provide third parties with any remedy, claim,
liability, reimbursement, cause of action, or any other right.

16.5                       This Agreement has been
fully negotiated between and jointly drafted by Seller and Purchaser.

16.6                       In the event of a conflict
between the provisions of this Agreement and those of any Exhibit, the provisions
of this Agreement shall prevail and such Exhibits shall be corrected
accordingly.

16.7                       Except as specifically set
forth herein, the normal standards of performance within the telecommunications
industry in the relevant market shall be the measure of whether a party’s
performance is reasonable and timely.

17.          MISCELLANEOUS
PROVISIONS

17.1                       Arbitration.

17.1.1                          Any dispute or disagreement
relating to this Agreement that is not settled to their mutual satisfaction
within the applicable notice or cure periods provided in this Agreement, shall,
upon the demand for arbitration by either party, be settled by arbitration in
New York, New York, in accordance with the Commercial Arbitration Rules of the
American Arbitration Association in effect on the date that a party gives
notice of its demand for arbitration under this Section 17.1.  If Seller and Purchaser cannot agree on a
single arbitrator within fifteen (15) days after the notice demanding
arbitration is received by the receiving party, Seller and Purchaser shall each
select an arbitrator within the subsequent fifteen (15) day period and the two
(2) arbitrators shall select a third arbitrator within ten (10) days.  If the parties fail to appoint arbitrators
or the arbitrators cannot agree on a third arbitrator, then either party may
request that the American Arbitration Association shall select and appoint a
neutral arbitrator who shall act as the sole arbitrator.  The parties shall be entitled to submit
expert testimony and/or written documentation on such arbitration
proceeding.  The decision of the
arbitrator or arbitrators shall be final and binding upon Seller and Purchaser
and shall include written findings of law and fact, and judgment may be
obtained thereon by either Seller or Purchaser in a court of competent
jurisdiction.  Seller and Purchaser
shall each bear the cost of preparing and presenting its own case.  The cost of the arbitration, including the
fees and expenses of the arbitrator or arbitrators, shall be shared equally by
Seller and Purchaser unless the award otherwise provides.  The arbitrator or arbitrators shall be
instructed to establish procedures such that a decision can be rendered within
ninety (90) days after the appointment of the arbitrator or arbitrators.  In no event shall the arbitrator or
arbitrators have the power to award any damages described in and limited by Section
9 which 

 

24

 

 

section shall be binding on the arbitrator(s).  This Section 17 shall not be
construed to limit either party’s ability to recover under Section 10
with respect to claims of third parties brought against such party.

17.1.2                          The obligation to arbitrate
shall not be binding upon either party with respect to requests for preliminary
injunctions, temporary restraining orders, specific performance or other
procedures in a court of competent jurisdiction to obtain interim relief when
deemed necessary by such court to preserve the status quo or prevent
irreparable injury pending resolution by arbitration of the actual dispute.

17.1.3                          Any arbitrator appointed to
act under this Section 17.1 must agree to be bound to the provisions of
this Agreement, including Sections 9 and 12 with respect to the terms of
this Agreement and any information obtained during the course of the
arbitration proceedings.

17.2                       Notices.

17.2.1                          Unless otherwise provided in
this Agreement, all notices and communications concerning this Agreement
(except invoices) shall be in writing and addressed to the other party as
follows:

If to Purchaser:                                                   Teleglobe USA
Inc.

Attn:       Executive Vice President
                  and General Counsel

11480 Commerce Park Drive

Reston, Virginia 20191

Phone No.: (703) 755-2000

Facsimile No.: (703) 755-2694

with a copy to:                                                     Teleglobe USA
Inc.

Attn:       Chief Network Officer

11480 Commerce Park Drive

Reston, Virginia 20191

Phone No.: (703) 755-2000

Facsimile No.: (703) 755-2622

If to Seller:                                                                           Williams
Communications, LLC

Attn:       Contract Administration

One Williams Center, 27th Floor

Tulsa, OK 74172

Phone No.: (918) 573-3983

Facsimile No.: (918) 574-6042

with a copy to:                                                     Williams
Communications, LLC

Attn:       General Counsel

One Williams Center, Suite 4100

 

25

 

Tulsa,
OK 74172

Phone No.: (918) 573-2000

Facsimile No.: (918) 573-3005

or at such other address as
may be designated in writing to the other party.

17.2.2                          Unless otherwise provided
herein, notices shall be hand delivered, sent by registered or certified U.S.
Mail, postage prepaid, or by commercial overnight delivery service, and shall
be deemed served or delivered to the addressee or its office when received at
the address for notice specified above when hand delivered, on the day after
being sent when sent by overnight delivery service, or three (3) days after
deposit in the mail when sent by registered or certified U.S. mail.  Notice may be sent via facsimile, effective
on the date of sending the facsimile when the sender receives electronic
confirmation denoted “send successful” (or similar message), provided that the
party sending facsimile notice simultaneously sends a copy of the notice via a
nationally recognized overnight courier with the package marked for next-day
delivery.

17.3                       Waiver.  The waiver by any party, in whole or in
part, of a breach of or a default under any of the provisions of this
Agreement, or the failure, in whole or in part, of any party, upon one or more
occasions, to enforce any of the provisions of this Agreement or to exercise
any right or privilege hereunder shall not thereafter be construed as a waiver
of any subsequent breach or default or as a waiver of any other provision,
right or privilege hereunder.

17.4                       Governing
Law. 
This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of New York without reference to
its choice of law principles.

17.5                       Entire
Agreement; Amendment.  This Agreement constitutes the
entire and final agreement and understanding between Seller and Purchaser with
respect to the subject matter hereof and supersedes all prior agreements
relating to the subject matter hereof, which are of no further force or
effect.  The Exhibits referred to herein
are integral parts hereof and are made a part of this Agreement by reference.  This Agreement may only be modified or
supplemented by an instrument in writing executed by duly authorized
representatives of Seller and Purchaser.

17.6                       Counterparts.  This Agreement may be executed in one or
more counterparts, all of which taken together shall constitute one and the
same instrument.

18.          FORCE
MAJEURE

Except for an obligation to pay money
hereunder, neither party shall be in default under this Agreement with respect
to any delay in its performance caused by any of the 

 

26

 

following conditions (each a “Force Majeure Event”): act of God, fire,
flood, government codes, ordinances, laws, rules, regulations or restrictions;
war or civil disorder; or any other cause beyond the reasonable control of such
party.  The party claiming relief under
this Section shall promptly notify the other in writing of the existence of the
Force Majeure Event relied on, the expected duration of the Force Majeure
Event, and the cessation or termination of the Force Majeure Event and shall
exercise commercially reasonable efforts to minimize the time for any such
delay.  If a Force Majeure Event
persists beyond ninety (90) days, the parties agree to meet and discuss an
equitable solution taking into account the nature of the obligation involved,
the likelihood of a workaround solution, and the extent to which the affected
party is or will be adversely affected. 
If a Force Majeure Event persists beyond one hundred eighty (180) days,
Purchaser shall have the right to terminate such IRUs as are affected by the
Force Majeure Event and to receive a pro rata refund of the Backhaul IRU
Purchase Price or Wavelength IRU Purchase Price, as applicable, previously paid
to Seller for the applicable terminated IRU, based on a term of twenty (20)
years, calculated from the applicable Acceptance Date.  Upon receipt of such refund, which shall be
payable to Purchaser within ten (10) Business Days of the request therefore,
Purchaser shall return all rights and interest in the terminated IRU to Seller.  In no event shall either party be deemed in
default on account of a Force Majeure Event or termination pursuant to this
Section and termination and receipt of the refund described above shall be
Purchaser’s sole and exclusive rights and remedies with respect to any Force
Majeure Event.

19.          SEVERABILITY

If any term, covenant or condition contained
herein shall, to any extent, be invalid or unenforceable in any respect under
the laws governing this Agreement, the remainder of this Agreement shall not be
affected thereby, and each term, covenant or condition of this Agreement shall
be valid and enforceable to the fullest extent permitted by law.

20.          TERMINATION;
SURVIVAL

In the event all purchase obligations under
this Agreement have been terminated pursuant to Section 4.4, this
Agreement shall automatically terminate. 
Notwithstanding anything to the contrary contained herein, expiration or
termination of this Agreement shall not affect the rights or obligations of any
party hereto prior to the date of termination or pursuant to the Sections of this
Agreement entitled Indemnification, Limitation of Liability, Confidentiality
and Proprietary Information, and Arbitration, respectively.

21.          BARGAIN
PURCHASE OPTION

21.1                       Purchaser shall have the
option to purchase from Seller all of Seller’s right, title and interest in and
to the derivable capacity constituting the Backhaul and the Wavelengths, as
well as the Tributary Cards without warranty or recourse (the “Ownership Interest”) to the extent
Purchaser has then not already acquired such rights (an “Option”) for a
purchase price of Ten Dollars ($10.00) (the “Option
Price”), on the last

 

***
Portions hereof have been omitted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidential treatment in
accordance with Rule 406.

 

27

 

day of the applicable IRU Term (the “Exercise
Date”) so long as Purchaser shall have complied fully with all of
its obligations hereunder.  Purchaser
may exercise the Option by giving Seller an irrevocable written notice, at
least thirty (30) days before the Exercise Date, electing to purchase all (but
not less than all) of the Ownership Interest and by paying the Option Price to
Seller on the Exercise Date.  If no such
notice is delivered by Purchaser to Seller within such period, Purchaser shall
be deemed to have waived any right to purchase the Ownership Interest.  If such notice is delivered to Seller by the
Exercise Date and the Option Price paid to Seller as provided herein, Seller
shall on the Exercise Date transfer to Purchaser all of the Ownership Interest.

21.2                       In the event any Required
Rights documents are ambiguous with respect to the provisions of Section 20(a),
such ambiguity, solely for purposes of this Agreement, shall be construed as
not permitting transfer of an Ownership Interest.  This Section is intended solely to prevent unintentional
violation of the rights of third parties and shall not be construed as
estopping either party from applying a different interpretation of Required
Rights documents with respect to other parties.

21.3                       To the extent Purchaser
obtains an Ownership Interest, Purchaser must secure, at its own expense, all
rights, licenses, authorizations, easements, leases, fee interests, or
agreements to the extent necessary from third parties to provide fort the
continued occupancy of real property or fixtures (such as conduits, bridges,
river crossings, or transmission towers) by the Ownership Interest.  Upon Seller’s written request with respect
to specific tracts, Purchaser shall promptly certify that it has complied with
the condition set forth in the preceding sentence.

21.4                       In the event Purchaser
exercises the Option, Purchaser shall (i) reimburse Seller for any direct
out-of-pocket costs incurred by Seller in connection with the exercise of the
Option and the transfer of right, title and interest in the applicable
Ownership Interest, and (ii) release, indemnify, defend, protect and hold
harmless Seller, its employees, officers, shareholders, directors, agents,
contractors and Affiliates, from and against, and assumes liability for any and
all claims, demands, actions, losses, damages, assessments, charges,
liabilities, taxes, costs and expenses (including without limitation, interest,
penalties, and attorney’s fees and disbursements) which may from time to time
be suffered or incurred by, or asserted against Seller directly or indirectly,
on account of or in connection with the grant of the Option or the transfer of
the Ownership Interest to Purchaser pursuant to exercise of the Option,
including without limitation, those arising from (1) any claims by a landowner
that Seller or Purchaser are violating such landowner’s rights because of a
transfer of the Ownership Interest, (2) any claims by any party to or successor
to a right-of-way agreement that Seller violated or exceeded the terms of such
right-of-way agreement because of a transfer of the Ownership Interest, (3) any
additional fees, payments, charges, taxes, or any other form of monetary claims
by any party to or successor to a right-of-way agreement that the transfer of
the Ownership Interest entitles that party to any additional payments under
such right-of-way agreement.  The
provisions of this Section 

 

28

 

shall apply regardless of the merits of any claim and regardless of
whether Seller actually transferred an Ownership Interest with respect to the
segment in question.

 

29

 

 

IN
WITNESS WHEREOF and in confirmation of their consent to the terms and
conditions contained in this Agreement and intending to be legally bound
hereby, Seller and Purchaser have executed this Agreement as of the dates set
forth opposite the signatures of their respective authorized officers below.

 

 

	
  TELEGLOBE USA INC.

  	
   

  	
  WILLIAMS COMMUNICATIONS, LLC

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/  Stewart Verge

  	
   

  	
  By:

  	
  /s/ William
  L. Cornoy

  
	
  Name:

  	
  Stewart
  Verge

  	
   

  	
  Name:

  	
  William  L. Cornoy

  
	
  Title:

  	
  Executive
  Vice President

  	
   

  	
  Title:

  	
  SVP &GM
  Network Services

  
	
  Date:

  	
  March 31,
  2001

  	
   

  	
  Date:

  	
  March 31,
  2001

  

 

 

30

EXHIBIT A

 

PAYMENT SCHEDULE

 

A.            Wavelength IRU Purchase Price:

 

The Wavelength IRU Purchase
Price is $***, which shall be due and payable as follows:

 

Within five (5) Business
Days of the following Milestones, Purchaser shall make the payment indicated.

 

	
  Milestone

  	
   

  	
  Date

  	
   

  	
  Payment

  	
   

  	
  Credit

  	
   

  	
  Amount —

  Payable

  	
   

  
	
  First Progress Payment

  	
   

  	
  March 31,
  2001

  	
   

  	
  $

  	
  ***

  	
   

  	
  $

  	
  (***

  	
  )**

  	
  $

  	
  ***

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Second Progress Payment

  	
   

  	
  Acceptance Date
  of First Three Wavelengths

  	
   

  	
  $

  	
  ***

  	
   

  	
  $

  	
  ***

  	
   

  	
  $

  	
  ***

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Third Progress Payment

  	
   

  	
  Acceptance
  Date for the Fourth Wavelength

  	
   

  	
  $

  	
  ***

  	
   

  	
  $

  	
  (***

  	
  )**

  	
  $

  	
  ***

  	
   

  

 

B.            Backhaul IRU Purchase Price:

 

The Backhaul IRU Purchase
Price is $***, which shall be due and payable as follows:

 

Within five (5) Business
Days after the following Milestones, Purchaser shall make the payment
indicated.

 

	
  Milestone

  	
   

  	
  Date

  	
   

  	
  Payment

  	
   

  	
  Credit

  	
   

  	
  Amount

  Payable

  	
   

  
	
  First Progress Payment

  	
   

  	
  March 31,
  2001

  	
   

  	
  $

  	
  ***

  	
   

  	
  $

  	
  (***

  	
  )**

  	
  $

  	
  ***

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Second Progress Payment

  	
   

  	
  Acceptance
  Date for Backhaul

  	
   

  	
  $

  	
  ***

  	
   

  	
  ***

  	
   

  	
  $

  	
  ***

  	
   

  
													

 

The Backhaul IRU Purchase
Price is subject to reduction as set forth in Section 3.3.

 

* Each such payment date, a
“Closing Date.”

 

** The total of these credit
amounts represent the $***down payment paid by Purchaser for 1999 Dark Fiber
Agreement and $***for Seller’s repurchase of dark fiber on Atl-Jax and Atl-DC
routes.

 

*** Portions hereof have been omitted and
filed separately with the Securities and Exchange Commission pursuant to a
request for confidential treatment in accordance with Rule 406.

 

	
  CAPACITY
  PURCHASE AGREEMENT

  	
   

  	
  CONFIDENTIAL AND PROPRIETARY

  

 

1

 

 

EXHIBIT B

 

TECHNICAL SPECIFICATIONS AND
DESCRIPTION

FOR BACKHAUL SERVICE

 

The Technical Specifications
set forth herein are stated as an objective that the Backhaul will perform in
accordance with prevailing telecommunications industry standards. The Backhaul
provided under this Agreement is measured using two variables: Network
Availability and Mean-time-to-restore. Mean-time-to-restore is addressed in
Section 10 of this Exhibit.

 

1.0           Interconnection specifications

 

a.             Optical Synchronous Digital
Hierarchy (SDH) capacity.  SDH capacity
is provided in accordance with ITU standards. Available Line rates are shown in
Table G.3 below.

 

b.             Network Access and Interfaces.
Backhaul provides network access at standard SDH (ITU) interfaces capable of
interconnecting STM-1 (155 Mbps) single-ended dedicated line circuits.

 

Table G.3 Circuit

Specifications

 

	
  Interface

  	
   

  	
  STM-1

  
	
  Line Rate

  	
   

  	
  155.520 Mbps

  
	
  Tolerance

  	
   

  	
  +/—20 ppm

  
	
  Line Code

  	
   

  	
  CMI

  
	
  Signal Format

  	
   

  	
  9 rows by 270 columns by 1 (bytes)

  
	
  Impedance

  	
   

  	
  75 Ώ

  
	
  Pulse Shape

  	
   

  	
  ITU-T G.703

  
	
  Wavelength

  	
   

  	
  1261-1360 nm

  

 

2.0           Conversion.

 

a.             Telecommunications transmissions in
the United States operate in compliance with SONET standards rather than
international SDH standards.  The
international SDH standard uses the STM-1 as a fundamental building block.  The STM-1 is equivalent to the 3rd
level of the SONET hierarchy called STS-3 (or STS-3c).  In the United States, these electrical
signals then get mapped to an optical signal called an OC-3 (or OC-3c).

 

b.             Backhaul receives SDH hand-offs,
but due to network configuration, the traffic must be transported via a SONET
interface.  To manage this, SDH traffic
arrives in the OC48 terminal at the cable landing POP as an STM1 signal.  The OC-3 card converts the SS bits to SONET
format and then the STM1 is transported

 

2

 

 

untouched to the
corresponding OC-3 card at the Termination POP.  At the Termination POP, the SS bits are then converted back to
SDH format for handoff to Purchaser’s equipment.  This transport will not disturb the traffic payload, the path
overhead or the required timing needs.

 

3.0           Protection.  The network equipment has a protection
capability on a per STM-1 circuit basis. 
If the equipment delivering the STM signal fails, it will switch
automatically to a stand-by unit.  The
automatic switch will be transparent to the voice or data traffic being carried
at the time of the equipment failure. 
Additional protection is made possible by diversity and redundancy.

 

4.0           Diversity.  Backhaul shall provide Route Diversity
between all landing stations (excluding Bandon) and designated termination
points.  Route Diversity is defined as
separate physical paths being delivered via two different conduits between the
cable landing station and the designated Seller’s POP.  One path is provisioned as “work” and the
other path is provisioned as “protect”.

 

5.0           Redundancy.  In locations where physical Route Diversity
is not available, Seller will provide Redundancy.  Redundancy means that Seller will provision service on a path
over one circuit and keep a circuit for protection on the same specified path
and equipment between the cable landing station and the designated Seller’s
POP.

 

6.0           Availability.  Availability on Seller’s Network.  Availability is a measurement of the percent
of total time that service is operative when measured over a 365 consecutive
day (8760 hour) period.  Optical SONET
Service is considered inoperative when there has been a loss of signal or when
two consecutive 15 second loop-back tests confirm the observation of a bit
error rate equal to or worse than 1 x l0-6.  For Services on Seller’s network,
availability shall be 99.95% from the Origination Point (as set forth below) to
Seller’s Termination POP measured over a one year period.  For Services not on Seller’s network, the
Third Party Provider will establish availability.  The Local Access availability standards for Local Access Services
are established by the Local Access Provider. 
See General Provisions for other factors affecting availability.

 

7.0           Performance (% Error Free Seconds,
while Available).  Error Free Seconds on
Seller’s Network.  Performance is noted
in Error Free Seconds which are a measure of the percentage of total seconds
that do not contain bit errors when measured over a consecutive 24 hour
period.  Performance shall be measured
on a one-way basis using a Pseudo Random Bit Sequence test pattern as defined
in CCITT Recommendation 0.151.  For
Services on Seller’s network, Error Free Seconds shall be 99.5% from the
Origination Point (as set forth below) to Seller’s Termination POP measured
over a one year period.  The Error Free
Seconds standards for Local Access Services is established by the Local Access
Provider.  For Services not on Seller’s
network, the Third Party Provider will establish Error Free Seconds.

 

8.0           Quality Standards.  Standards apply on a one-way basis between
the Origination Point (as set forth below) and Seller’s Termination POP
only.  All standards exclude nonperformance
due to force majeure or planned interruptions for necessary maintenance

 

3

 

 

purposes.  All standards exclude nonperformance due to
acts or omissions of Teleglobe or due to any failure of Teleglobe-provided
equipment.

 

9.0           Maintenance.  Seller will undertake repair efforts on
equipment or fiber when Seller first becomes aware of it, or when notified by
Teleglobe and Teleglobe has released all or part of the Service for testing.  The maintenance standards in this Section
III B only apply for Equipment or Fiber on Seller’s owned and operated network
and from the Origination Demarcation Point (as defined in Section 1.1 of this
Agreement) to Seller’s Termination POP.

 

10.0         Mean Time to Restore (“MTTR”).  Mean Time to Restore is be the average time
required to restore service and resume availability and is stated in terms of
equipment and cable outages.  The time
is measured from the moment the outage is reported until the service is
available.  With respect to Backhaul,
Seller has an objective of repairing network equipment within an average of two
(2) hours and an objective to have the first fiber on a cable cut restored
within an average of six (6) hours. 
Seller will undertake repair efforts on equipment or fiber when Seller
first becomes aware of the problem, or when notified by Teleglobe and Teleglobe
has released all or part of the capacity for testing.  The maintenance standards in this Section only apply for equipment
or fiber on Seller’s owned and operated network and from Seller’s POP to
Seller’s POP,

 

11.0         Calculation.  Seller calculates network availability upon
written request from customers. 
Purchase must notify the Williams Service Delivery and initiate an
action request to determine if the standards stated above were met.

 

12.0         Description.  The Backhaul is point-to-point transport
that connects an international cable network to Seller’s domestic U.S.
network.  Purchaser’s Backhaul shall be
provided at STM-l capacity.  Seller will
pickup Purchaser’s traffic which enters the U.S. via a cable Williams’ Network
at a cable landing station.  The cable
landing station where Seller will pick up Purchaser’s traffic is as set forth
below.  The origination demarcation
point for the Backhaul shall be at the Williams’ Network interface of the
AT&T landing station on the China-US cable Williams’ Network (the
“Origination Demarcation Point”).  Once
Seller picks up the traffic at such cable landing station, it will then carry
the traffic to the termination POP set forth below.

 

	
  Origination Point:

  	
   

  	
  The fiber distribution
  panel designated by Seller in the AT&T Cable Hut for China-US Cable at
  9401 Los Oso Valley Road in San Luis Obispo, California.

  
	
   

  	
   

  	
   

  
	
  Termination Point:

  	
   

  	
  The fiber distribution
  panel in the Purchaser POP at 1 Wilshire Boulevard, Los Angeles, California.

  

 

13.0         Portability.  Once Purchaser has accepted and paid for the
Backhaul IRU, Purchaser may elect to port any of the STM-ls constituting the
Backhaul IRU to the Japan-US cable or the Southern Cross cable as accessed
through the Los Osos, California cable landing station, subject to:  (i) Purchaser must provide Seller with sixty
(60) days notice; and (ii) Purchaser must pay a reconfiguration fee to be
determined at the time of Purchaser’s

 

4

 

 

request for such
portability.  Portability shall mean,
for example, that Purchaser shall have the ability to turn down any number of
the 48 STM-1s which originate at San Luis Obispo and turn up the same number of
STM-1s at the Los Osos cable landing station. 
In no event shall the Termination Point set forth in Section 12.0
above be portable and in no event shall the total number of STM-1s exceed
48.  Seller agrees to perform the
transition without an Outage (as defined in the O&M Agreement).  In the event the transition causes an
Outage, Seller will provide Outage Credits (as defined in the O&M
Agreement) to Purchaser.  Such Outage
Credit shall be Purchaser’s sole and exclusive remedy in the event of any
Outage during the transition period.

 

5

 

 

EXHIBIT C

 

TECHNICAL SPECIFICATIONS AND
DESCRIPTION

FOR WAVELENGTHS

 

Seller shall have the
capability to monitor and report performance monitoring functions and
alarm/status monitoring functions listed as required in the Telcordia
GR-253-CORE SONET Transport System Common Generic Criteria (Dec. 1997) for
Optical Waves.  The standards by which
Seller’s Optical Wavelength is measured apply on a one-way basis between
Seller’s POPs only.

 

1.0           Network Availability.  Network Availability is a measurement of the
percent of total time that the Wavelength is operative when measured over a 365
consecutive day (8760 hour) period.  For
Wavelengths on Seller’s network, Network Availability shall be 99.339% measured
over a one thousand (1,000) mile Wavelength for a one-year period.  Performance (% Error Free Seconds (“EFS”),
while available) is noted in EFS, which is a measure of the percentage of total
seconds that do not contain bit errors when measured over a period of thirty
(30) consecutive days.  For Wavelengths
on Seller’s network, EFS shall be 99.076% from POP to POP measured over a
one-year period.  Network Availability
will vary with different circuit lengths.

 

2.0           Maintenance.  The following maintenance procedures and
activities are to be provided by Seller for Wavelengths.  Seller will promptly perform transport
capacity maintenance activities for Wavelengths including isolating troubles
and will provide information concerning those troubles, for each Wavelength, to
Purchaser’s trouble reporting center.

 

a.             Remote Alarm Surveillance.  Throughout the term, Seller will provide
remote alarm surveillance and sectionalization equipment and procedures for the
purpose of detecting any out-of-service conditions or service-affecting
conditions, and for rapidly removing impairments and restoring the Wavelengths.

 

b.             Notification.  In the event of any service-affecting alarm
condition on a Wavelength, Seller will notify the Purchaser’s trouble reporting
center.  Such notice will include (i)
the type and status of alarm-causing condition, (ii) the estimated time to
repair, (iii) and the probable cause of failure.  Seller will report the status of repair work and a revised
estimate of the time to complete the repair.

 

3.0           Mean Time to Restore.  Mean Time to Restore (MTTR) shall be the
average time required to restore service and resume availability and is stated
in terms of cable outages.  The time is
measured from the moment the outage is reported until the service is
available.  With respect to Wavelengths,
Seller has an objective to have the first fiber on a cable cut restored within
an average of six (6) hours.  Seller will
undertake repair efforts on equipment or fiber when Seller first becomes aware
of the problem, or when notified by Purchaser and Purchaser has released all or
part of the Wavelength for testing.  The
maintenance standards in this Section only apply for equipment or fiber on
Seller’ owned and operated network and from Seller’s POP to Seller’s POP.

 

6

 

 

4.0           Description.  Each Wavelength shall be an unprotected,
concatenated OC-48 wavelength.  Seller
uses dense wavelength division multiplexing (“DWDM”) technology to multiplex
OC-48 signals at unique wavelengths, or waves, and then transmits the composite
signal over a single fiber.  At the
receiver, the composite signal is then de-multiplexed and each unique signal is
recovered.  Each Wavelength(s) provided
hereunder will originate at the fiber cross connect in the Seller’s POP set
forth below as the origination point and will terminate at the fiber cross
connect in the Seller’s POP set forth below as the termination point with all
such Wavelengths to be provided on circuits located entirely upon the Seller’s
owned and operated network and both end points of which originate and terminate
at a Seller POP.  The Wavelengths do not
include a timing source.  Purchaser will
be expected to provide a clocking source for its equipment.

 

	
  Wave 1:

  	
   

  	
  Origination Point:

  
	
   

  	
   

  	
  The fiber distribution panel designated by Seller in Seller’s POP at

  165 Halsey Street, Suite 625

  Newark, New Jersey

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Termination Point:

  
	
   

  	
   

  	
  The meet-me-room in the basement at the Palo Alto Internet Exchange

  529 Bryant Street

  Palo Alto, California

  
	
   

  	
   

  	
   

  
	
  Wave 2:

  	
   

  	
  Origination Point:

  
	
   

  	
   

  	
  The fiber distribution panel designated by Seller in Seller’s POP at

  60 Hudson Street, Suite 1203

  New York, New York

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Termination Point:

  
	
   

  	
   

  	
  The meet-me-room in the basement at the Palo Alto Internet Exchange

  529 Bryant Street

  Palo Alto, California

  
	
   

  	
   

  	
   

  
	
  Wave 3:

  	
   

  	
  Origination Point:

  
	
   

  	
   

  	
  The fiber distribution panel designated by Seller in Seller’s POP at

  165 Halsey Street, Suite 625

  Newark, New Jersey

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Termination Point:

  
	
   

  	
   

  	
  The meet-me-room in the basement at the Palo Alto Internet Exchange

  529 Bryant Street

  Palo Alto, California

  

 

7

 

 

	
   

  	
   

  	
   

  
	
  Wave 4:

  	
   

  	
  Origination Point:

  
	
   

  	
   

  	
  The fiber distribution panel designated by Seller in Seller’s POP at

  60 Hudson Street, Suite 1203

  New York, New York

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Termination Point:

  
	
   

  	
   

  	
  The meet-me-room in the basement at the Palo Alto Internet Exchange

  529 Bryant Street

  Palo Alto, California

  

 

8

 

 

EXHIBIT C-1

 

WAVELENGTH ROUTING

 

	
  Associated

  Circuit ID #s

  	
   

  	
  Non Diverse Routing

  	
   

  	
  Diverse Routing

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  South 1

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TWC273070

  	
   

  	
  Newark — DC

  	
   

  	
  Newark — DC

  
	
  TWC411106

  	
   

  	
  DC — Los Angeles

  	
   

  	
  DC — Los Angeles

  
	
  TWC273016

  	
   

  	
  Los Angeles — Modesto — San Francisco —
  PAIX

  	
   

  	
  Los Angeles — Modesto — Santa Clara — PAIX

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  North 1

  	
   

  	
   

  	
   

  	
   

  
	
  TWC411107

  	
   

  	
  New York Sacramento — Modesto — San
  Francisco — PAIX

  	
   

  	
  New York — Sacramento — San Francisco —
  PAIX

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  South 2

  	
   

  	
   

  	
   

  	
   

  
	
  TWC328506

  	
   

  	
  Newark — DC

  	
   

  	
  Newark — DC

  
	
  TWC332451

  	
   

  	
  DC — Los Angeles

  	
   

  	
  DC — Los Angeles

  
	
  TWC328429

  	
   

  	
  Los Angeles — Modesto — San Francisco —
  PAIX

  	
   

  	
  Los Angeles — Modesto — Santa Clara — PAIX

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  North2

  	
   

  	
   

  	
   

  	
   

  
	
  TWC456364

  	
   

  	
  New York — Sacramento — Modesto — San
  Francisco — PAIX

  	
   

  	
  New York — Sacramento — San Francisco —PAIX

  

 

 

South 1, North 1, and South
2 all together constitute First Three Wavelengths.

North 2 is the Fourth Wavelength.

 

Teleglobe agrees that as of
the Effective Date, TWC273071 which constituted the segment from New York, New
York to Newark, New Jersey on the wavelength described as South 1 shall be
cancelled by Williams and Williams shall have no obligation to provide such
segment.  This cancellation shall have
no effect on the Wavelength IRU Purchase Price hereunder.

 

9

 

 

EXHIBIT D

 

TESTING SPECIFICATIONS

 

Seller shall test the Backhaul and Wavelength(s) using procedures in
accordance with industry standards.  A
Wavelength or the Backhaul shall be considered acceptable by both parties when
the Wavelength or Backhaul has been tested for a period of 24 hours and the
results of such tests conclude that the error free seconds are no greater than
a bit error rate of 10-12. 
Purchaser acknowledges that Seller may, at its election, test each
Wavelength in segments or end-to-end, due to the length of the end-to-end
Circuit.

 

 

10

 

 

AMENDMENT
NO. 1

THIS
AMENDMENT (“Amendment”) is made and entered into effective
this 2nd day of May, 2001, by and between WILLIAMS
COMMUNICATIONS, LLC (“Seller”) and TELEGLOBE
USA INC. (“Purchaser”).

WHEREAS, Seller and
Purchaser are parties to that certain Capacity Purchase Agreement which is
dated March 31, 2001 (the “Agreement”); and

WHEREAS, Seller and
Purchaser desire to amend the Agreement; and

NOW,
THEREFORE in consideration of the foregoing premises and
mutual promises and covenants of the parties hereto, the receipt and
sufficiency of which is hereby acknowledged, Seller and Purchaser agree to
amend the Agreement as follows:

1.                                       Section 13.0,
“Portability,” of Exhibit B, “Technical Specifications and Description for
Backhaul Service,” shall be deleted in its entirety and replaced with the
following:

“13.0  Portability.  Notwithstanding anything in this Agreement to the contrary and
subject to availability, Purchaser may accept and pay for individual STM-1s
prior to Seller’s delivery of the China-US STMs, on the Japan-US cable or the
Southern Cross cable as accessed through the Los Osos, California cable landing
station as they become available, instead of on the China-US cable as was
originally contemplated.  Subject to the
particular STM-1 meeting the Testing Specifications, Purchaser agrees to accept
and pay for any STM-l associated with the Japan-US cable requested by Purchaser
and delivered by Seller regardless of whether the Japan-US cable has been
turned up or is operational. Once Purchaser has accepted and paid for an
individual STM-l, it shall become part of the Backhaul IRU.  In no event shall the Backhaul IRU consist of
more or less than 48 STM-ls, except as specifically set forth in this
Agreement.  For example, Purchaser may
elect to accept and pay for 2 STM-ls on the Southern Cross cable when they
become available.  If Purchaser so
elects, Purchaser will then purchase 46 STM-1s on the China-US cable, which
purchases together shall constitute the Backhaul IRU.  The purchase price for individual STM-1s shall be *** and payment
shall be due five (5) business days after acceptance of each STM-1.

 

In addition, once Purchaser
has accepted and paid for 48 STM-1s, Purchaser may elect to port any of the
STM-1s constituting the Backhaul IRU to the Japan-US cable or the Southern
Cross cable as accessed through the Los Osos, California cable landing station,
or to the China-US cable as accessed through the San Luis Obispo, California
cable landing station, subject to availability and: (i) Purchaser must provide
Seller with sixty (60) days notice; and (ii) Purchaser must pay a
reconfiguration fee to be determined at the time of Purchaser’s request for
such portability.  Portability shall
mean, for example, that Purchaser shall have the ability to turn down any
number of the 48 STM-ls which constitute the Backhaul IRU and turn up the same
number of STM-1 s at the Los Osos cable landing station.  In no event shall the Termination Point set
forth in Section 12.0 above be portable and in no event shall the total number
of STM-1 s exceed 48. Seller agrees to perform the transition without an Outage
(as defined in the O&M Agreement).  In
the event the transition causes an Outage, Seller will provide Outage Credits
(as defined in the O&M Agreement) to Purchaser.  Such Outage Credit shall be Purchaser’s sole and exclusive remedy
in the event of any Outage during the transition period.”

2.                                       Except as
specifically amended herein, all terms, conditions and provisions contained in
the Agreement shall remain unchanged and in full force and effect.

SIGNATURE PAGE TO FOLLOW

***
Portions hereof have been omitted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidential treatment in
accordance with Rule 406.

 

31

 

IN WITNESS
WHEREOF, the parties have executed this Amendment on the day and year first
above set forth.

 

	
  TELEGLOBE USA. INC.

  	
   

  	
  WILLIAMS COMMUNICATIONS, LLC  

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /S/ 
  Stewart Verge

  	
   

  	
  /S/ William L. Cornoy

  
	
  (SIGNATURE)

  	
   

  	
  (SIGNATURE)

  
	
   

  	
   

  	
   

  
	
  Stewart Verge

  	
   

  	
  William L. Cornoy 

  
	
  (PRINT)

  	
   

  	
  (PRINT)

  
	
   

  	
   

  	
   

  
	
  EVP-Global Ops

  	
   

  	
  SVP & Gen’l Mgr — Network Services

  
	
  (TITLE)

  	
   

  	
  (TITLE)

  

 

 

AMENDMENT
NO. 2

THIS AMENDMENT (“Amendment”) is made,
entered into, and effective this 25th day of October,
2001, by and between WILLIAMS COMMUNICATIONS,
LLC (“Seller”) and TELEGLOBE USA INC. (“Purchaser”).

WHEREAS, Seller and
Purchaser are parties to that Capacity Purchase Agreement, dated March 31,
2001, as amended by Amendment No. 1 dated May 2, 2001 (together the
“Agreement”); and

WHEREAS, the Seller
agrees to allow Purchaser to order, pursuant to the terms and conditions of the
Agreement, certain Backhaul in addition to the Backhaul provided for in the
original Agreement;

NOW,
THEREFORE, in consideration of the foregoing premises and
mutual promises and covenants of the parties hereto, the receipt and
sufficiency of which is hereby acknowledged, Seller and Purchaser agree to amend
the Agreement as follows:

1.               a.     The Definitions contained in Sections 1.6, 1.7, and
1.8 of the Agreement shall be deleted in their entirety and replaced with the
following:

1.6           “Backhaul” shall mean either a) the original 48 STM-ls, as
described in Section 12.0 of Exhibit B (except as ported in accordance with
Section 13.0 of Exhibit B, as amended by Amendment No. 1); or b) the Added
Backhaul as specified in any applicable Service Order.

1
7           “Backhaul Closing Date” shall mean a date
within five (5) Business Days of the Acceptance Date of the Backhaul or Added
Backhaul, as applicable.

1.8           “Backhaul IRU” shall have the meaning set forth in Section
2.1, as to the original 48 STM-ls, or shall have the meaning set forth in Section
2.1.1, as added by Amendment No.2.

                        b.     The following Definitions shall be added to Section 1
of the Agreement:

1.5.1        “Added Backhaul” shall mean the number of STM-1 s from the
AT&T Cable Hut at 9401 Los Oso Valley Road, San Luis Obispo, California to
the Purchaser POP at Los Angeles, California as specified in an applicable
Service Order, but excluding the original 48 STM-ls.

1.5.2        “Added Backhaul IRU Purchase Price” shall have the meaning set
forth in Section 3.1.1, as added by Amendment No. 2.

2.                       The following
paragraph shall be added to the Agreement as Section 2.1.1:

2.1.1        Ordering
Added Backhaul. Customer may order and Williams shall provide,
subject to availability and the terms and conditions contained 

 

 

herein,
Added Backhaul. All such orders shall be requested on Williams’ service order
form in effect at the time of the request (the “Service Order”). No Service
Order shall be binding upon the Parties unless signed by an authorized
representative of Purchaser and Seller. Purchaser agrees to pay for the Added
Backhaul IRU on the applicable Backhaul Closing Date. Upon Purchaser’s payment
of the Added Backhaul IRU Purchase Price, Seller shall grant to Purchaser and
Purchaser shall acquire from Seller an IRU in the Added Backhaul for the IRU
Term (collectively, the “Backhaul IRU”), with effect from the Backhaul Closing
Date until the last day of the IRU Term.

3.                       The following
paragraph shall be added to the Agreement as Section 3.1.1:

3.1.1        Added
Backhaul IRU Purchase Price. Subject to performance by Seller of its
obligations hereunder, Purchaser shall pay to Seller, in consideration for any
Added Backhaul IRU, the sum of money specified in he applicable Service Order
(the “Added Backhaul IRU Purchase Price”),
which shall be paid on the Backhaul Closing Date.

4.                       Section 3.3 of the
Agreement shall not apply to any Added Backhaul IRU.

5.                       The provisions
of Section 4.3.1 of the Agreement shall not apply to any Added Backhaul.

6.                       Except as
specifically amended herein, all terms, conditions and provisions contained in
the Agreement shall remain unchanged and in full force and effect.

IN WITNESS WHEREOF, the
parties have executed this Amendment as of the dates set forth opposite the
signatures of their respective authorized officers below.

 

	
  TELEGLOBE USA. INC.  

  	
   

  	
  WILLIAMS COMMUNICATIONS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /S/ 
  Stewart Verge

  	
   

  	
  /S/ Dan M. Miller

  
	
  Signature of
  Authorized Representative

  	
   

  	
  Signature of
  Authorized Representative

  
	
   

  	
   

  	
   

  
	
  Stewart Verge

  	
   

  	
  Dan M. Miller

  
	
  Printed Name

  	
   

  	
  Printed Name

  
	
   

  	
   

  	
   

  
	
  Executive Vice President

  	
   

  	
  VP Access Services Network

  
	
  Title

  	
   

  	
  Title

  
	
   

  	
   

  	
   

  
	
  10-25-01

  	
   

  	
  12-17-01

  
	
  Date

  	
   

  	
  DateExhibit 4.3

 

REGISTRATION RIGHTS AGREEMENT

 

AGREEMENT (this “Agreement”), dated as of
August 22, 2003, by and among INTERACTIVE HEALTH, INC., a Delaware
corporation (the “Company”), J. H. WHITNEY MEZZANINE FUND, L.P., a Delaware
limited partnership (“WMF”), WHITNEY PRIVATE
DEBT FUND, L.P., a Delaware limited partnership (“WPDF”),
and GREENLEAF CAPITAL, L.P., a Delaware limited
partnership (“GreenLeaf” and together
with WMF and WPDF,
collectively, the “Warrant
Purchasers”), WHITNEY V, L.P., a Delaware limited
partnership (“Whitney V”
and collectively with the Warrant Purchasers, the “Whitney Funds”), and the
individuals identified as “Management Purchasers” in the signature pages hereto
(the “Management
Purchasers” and collectively with the Warrant Purchasers and
Whitney V, the “Purchasers”).

 

W  I  T  N  E
S  S  E  T  H :

 

WHEREAS, pursuant to the terms of the
Securities Purchase Agreement (the “Purchase Agreement”), dated as of
the date hereof, by and among the Company, Interactive Health LLC, WMF, WPDF,
Whitney V and the Management Purchasers, (i) Whitney V will purchase from the
Company 4,880,000  shares (the “Whitney V Shares”) of
Series A Convertible Preferred
Stock, $.001 par value per
share, of the Company (the “Series A Preferred Stock”), (ii)
each of the Management Purchasers will purchase from the Company the number of
shares (the “Management
Shares”and together with the Whitney V Shares, the “Preferred Shares”)
of Series A Preferred Stock set forth after the signature of each
Management Purchaser thereto, (iii) WMF will purchase
a warrant (the “WMF Warrant”) to purchase an
aggregate of 513,616  shares of common stock, par value $.001 per share, of the Company (the “Common Stock”),
(iv) WPDF will purchase a warrant (the “WPDF Warrant”) to purchase an aggregate of 202,743  shares of Common Stock, and (v) GreenLeaf
will purchase a warrant (the “GreenLeaf
Warrant” and together with the WMF Warrant and
the WPDF Warrant, the “Warrants”) to
purchase an aggregate of 27,032  shares of Common Stock; and

 

WHEREAS, the Company and the other
parties hereto desire to provide for the circumstances under which the Company
will register securities of the Company on behalf of such other parties.

 

NOW, THEREFORE, as an inducement to the
Purchasers to consummate the transactions contemplated by the Purchase
Agreement and in consideration of the premises and of the mutual covenants and
obligations hereinafter set forth, the Company hereby covenants and agrees with
the other parties hereto, and with each subsequent holder of Restricted Securities
(as such term is defined herein), as follows:

 

SECTION
1.         Definitions.  As used herein, the following terms shall
have the following respective meanings:

 

 

“Commission”
shall mean the Securities and Exchange Commission, or
any other Federal agency at the time administering the Securities Act.

 

“Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended, or any
similar Federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.

 

“GreenLeaf Warrant” shall have the meaning ascribed
to such term in the first Whereas clause.

 

“Initial
Public Offering” shall mean the sale by the Company or any other person
or entity of equity securities of the Company pursuant to a registration
statement on Form S-1 or otherwise under the Securities Act.

 

“Institutional
Investors” shall mean WMF, WPDF, GreenLeaf, Whitney V and
their respective successors and assigns.

 

“Management Shares”
shall have the meaning ascribed to such term in the first Whereas
clause, together with all shares of capital stock issued as dividends thereon.

 

“Preferred Shares” shall have
the meaning ascribed to such term in the first Whereas
clause, together with all shares of capital stock issued as dividends thereon.

 

“Registration
Expenses” shall mean the expenses so described in Section 5
hereof.

 

“Restricted
Securities” shall mean the Preferred Shares, the Warrants and the
Restricted Stock.

 

“Restricted
Stock” shall mean the shares of Common Stock underlying the Warrants
and the shares of Common Stock into which the Preferred Shares are convertible,
and any capital stock or other securities issued or issuable
with respect to such Preferred Shares or Common Stock by way of a stock
dividend or stock split or in connection with a combination of shares, recapitalization, merger, conversion, consolidation or
other reorganization.

 

“Securities
Act” shall mean the Securities Act of 1933, as amended, or any similar
Federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.

 

2

 

“Securityholders Agreement” shall have the meaning
assigned to such term in the Purchase Agreement.

 

“Selling
Expenses” shall mean the expenses so described in Section 5
hereof.

 

“Series
A Preferred Stock” shall have the meaning ascribed to such term in the
first Whereas clause.

 

“Threshold
Amount” shall mean that number of Institutional Investors holding at
least 35% of the Restricted Stock then held by all Institutional Investors.

 

“Warrants”
shall have the meaning ascribed to such term in the first Whereas
clause.

 

“Whitney
V Shares” shall have the meaning ascribed to such term in the first Whereas clause, together with all shares of capital stock
issued as dividends thereon.

 

“WMF Warrant” shall have the meaning ascribed to
such term in the first Whereas clause.

 

“WPDF Warrant” shall have the meaning ascribed to
such term in the first Whereas clause.

 

SECTION 2.         Required
Registration.

 

(a)   At any time beginning six months following
the completion of an Initial Public Offering, the Threshold Amount of
Institutional Investors may, by written notice (the “Demand Notice”),
request that the Company register under the Securities Act all or any portion
of the shares of Restricted Stock held by such requesting holders for sale in
the manner speci­fied in such notice; provided, however, that the
Company shall not be obligated to register Restricted Stock pursuant to such
request: (i) unless at the time of such request, all of the holders of
Restricted Stock requesting registration shall demand to include at least the
lesser of (A) $5,000,000 in Restricted Stock or (B) the total amount of
Restricted Securities then held by such holders; (ii) in any particular
jurisdiction in which the Company would be required to qualify to do business
or to execute a general consent to service of process in effecting such
registration when it was not then so qualified and had not filed such a
consent; (iii) subject to Section 3(a) below, during the period beginning
30 days prior to the filing, and ending on a date 90 days following the
effective date, of a registration statement filed by the Company relating to an
underwritten offering only of the Company’s capital stock (other than a
registration statement for the Company’s capital stock which does not give rise
to incidental registration rights pursuant to Section 3(a) below) provided
that the Company is actively employing in good faith its best

 

3

 

efforts to cause such registration
statement to become effective; or (iv) if counsel to the Company opines to the
requesting Institutional Investors that the filing of such a registration
statement would require the disclosure of material non-public information about
the Company that the Company is not otherwise required to disclose, the
disclosure of which could have a material adverse effect on the business or
financial condition of the Company, in which event no such registration
statement need be filed until the earlier of the lapse of 60 days from the
issuance of the opinion of Company counsel or such information is no longer
required to be disclosed, is not material or non-public, or its disclosure
would not have a material adverse effect on the business or financial condition
of the Company; provided, however, that the Company may not exercise its
right under this clause (iv) more than once in any 12-month period.  Notwithstanding anything to the contrary
contained here­in, no request may be made under this Section 2 within 180 days after the effective date of a
registration statement filed by the Company covering a firm commitment
underwritten public offering in which the holders of Restricted Stock shall
have been entitled to join pursuant to this Section 2 or Section 3
hereof and in which there shall have been effectively registered all shares of
Restricted Stock as to which registration shall have been so requested by the
Institutional Investors initiating the registration.

 

(b)   Within 10 days following receipt of any
notice under this Section 2, the Company shall notify all other holders of
Restricted Stock from whom notice has not been received and shall prepare and
file and use its best efforts to have declared effective a registration
statement under the Securities Act for the public sale, in accordance with the
method of disposition specified in such notice from requesting holders, of the
number of shares of Restricted Stock specified in such notice (and in any notices
received from other holders of Restricted Stock within 20 days after the date
of such notice from the Company).  If
such method of disposition shall be an underwritten public offering, the
Company may designate the managing underwriter of such offering, subject to the
approval of the holders of Restricted Stock participating in such registration
who own a majority in interest of the Restricted Stock requested to be included
in such registration by such Institutional Investors, which approval shall not be
unreasonably withheld.  The number of
shares of Restricted Stock to be included in such an underwriting may be
reduced (pro  rata among all hold­ers to be included in such
registration statement, under this Section 2, to participate in such
registration) if and to the extent that the managing underwriter shall be of
the opinion that such inclusion would adversely affect the marketing of the
securities to be sold therein.  With
respect to the preceding sentence, if the Company elects to reduce pro  rata
the amount of Restricted Stock proposed to be offered in the underwriting, for
purposes of making any such reduction, each holder of Restricted Stock which is
a partnership, together with the affiliates, partners, employees, retired
partners and retired employees of such holder, the estates and family members
of any such partners, employees, retired partners and retired employees and of
their spouses, and any trusts for the benefit of any of the foregoing persons
shall be deemed to be a single “person”, and any pro  rata
reduction with respect to such “person” shall be based upon the aggregate
number of shares of Restricted Stock owned by all entities and individuals
included as such “person,” as defined in this sentence (and the aggregate
number so allo­cated to such “person” shall be allocated among the entities and

 

4

 

individuals included in such
“person” in such manner as such holder of Restricted Stock may reasonably
determine).  The Company shall be
obligated to register Restricted Stock pursuant to requests made under this
Section 2 on two occasions only; provided, however, that as
to such occasion such obligation shall be deemed satisfied only when a
registration statement covering all shares of Restricted Stock specified in
notices received as aforesaid (and not withdrawn by the holders thereof), for
sale in accordance with the method of disposition specified by the requesting
holders, shall have become effective and, if such method of disposition is a firm
commitment underwritten public offering, all such shares shall have been sold
pursuant thereto.

 

(c)   The Company
shall be entitled to include in any registration statement referred to in this
Section 2 for which the method of distribution is an underwritten public
offering, for sale in accordance with the method of disposition specified by
the requesting holders, shares of Common Stock to be sold by the Company for
its own account, except as and to the extent that, in the opinion of the
managing underwriter (if such method of disposition shall be an underwritten
public offering), such inclusion would adversely affect the marketing of the
Restricted Stock to be sold.  Except as
set forth in this Section 2, no securities shall be included in any
registration statement referred to in this Section 2 without the prior
written consent of the holders of a majority in interest of the Institutional
Investors’ Restricted Stock requested to be included in such registration.  Except with respect to registration statements
(i) on Form S-8 (or its successor) or that (ii) relate to a transaction for
which the Company exercised its rights under Section 2(a)(iv), the Company
will not file with the Commission any other registration statement with respect
to its Common Stock, whether for its own account or that of other stockholders,
from the date of receipt of a notice from requesting holders pursuant to this
Section 2 until the completion of the period of distribution of the
registration contemplated thereby.

 

SECTION 3.         Incidental
Registration; Form S-3 Registration.

 

(a)   If the
Company at any time (other than pursuant to Section 2 hereof) proposes to
regis­ter any of its securities under the Securities Act for sale to the
public, whether for its own account or for the account of other security
holders or both (except with respect to registration statements on Form S-8 (or
its successor) or another form, which is not available for registering
Restricted Stock for sale to the public (or its successor)), each such time it
will give prompt written notice to all holders of Restricted Stock of its
intention to do so.  Upon the written
request of any such holder, given within 20 days after the date of any such
notice, to register any of its Restricted Stock (which request shall state the
intended method of disposition thereof), the Company will cause the Restricted
Stock as to which registration shall have been so requested to be included in
the securities to be covered by the registration statement proposed to be filed
by the Company, all to the extent requisite to permit the sale or other
disposition by the holder (in accordance with its written request) of such
Restricted Stock so registered.  The
Company may withdraw any such registration statement before it becomes
effective or postpone the offering of securities contemplated by such
registration statement without any obligation to the holders of any Restricted
Stock.  In the event that any
registration pursuant to this Section 3 shall be, in whole or in part, an
underwritten public offering of Common Stock, any request by a

 

5

 

holder pursuant to this Section 3 to register
Restricted Stock shall specify that such Restricted Stock is to be included in
the underwriting on the same terms and conditions as the shares of Common Stock
otherwise being sold through underwriters under such registration.  The number of shares of Common Stock,
including, without limitation Restricted Stock, to be included in such an
underwriting may be reduced (pro rata among the requesting holders to be
included in such registration statement) if and to the extent that the managing
underwriter shall be of the opinion that such inclusion would adversely affect
the marketing of the securities to be sold by the Company therein; provided,
however, that if any shares are to be included in such underwriting for
the account of any person other than the Company, the number of shares to be
included by any such person shall be reduced prior to the reduction in any
shares to be included therein by the Company; and provided, further,
however, that the number of any shares of Common Stock held by any person
other than the holders of Restricted Stock hereunder shall be reduced before
the number of any such shares held by the holders of Restricted Stock hereunder
is reduced.  With respect to the first
proviso of the preceding sentence, if the Company elects to reduce pro rata the
amount of Restricted Stock proposed to be offered in the underwriting for the
accounts of all persons other than the Company, for purposes of making any such
reduction, each holder of Restricted Stock which is a partnership, together
with the affiliates, partners, employees, retired partners and retired
employees of such holder, the estates and family members of any such partners,
employees, retired partners and retired employees and of their spouses, and any
trusts for the benefit of any of the foregoing persons shall be deemed to be a
single “person,” and any pro  rata reduction with respect to such
“person” shall be based upon the aggregate number of shares of Restricted Stock
owned by all entities and individuals included as such “person”, as defined in
this sentence (and the aggregate number so allocated to such “person” shall be
allocated among the entities and individuals included in such “person” in such
manner as such holder of Restricted Stock may reasonably determine).  Notwithstanding anything to the contrary
contained in this Section 3, in the event that there is an underwritten
offering of securities of the Company pursuant to a registration covering
Restricted Stock and a holder of Restricted Stock does not elect to sell his,
her or its Re­stricted Stock to the underwriters of the Company’s securities in
connection with such offering, such holder shall refrain from selling such
Restricted Stock not registered pursuant to this Section 3 during the
period of distribution of the Company’s securities by such underwriters and the
period in which the underwriting syndicate participates in the after market; provided,
however, that such holder shall, in any event, be entitled to sell its
Restricted Stock commencing on the 120th day after the effective date of such
registration statement.

 

(b)   If, at a
time when Form S-3 is available for such registration, the Company shall
receive from any Institutional Investor a written request or requests that the
Company effect a registration on Form S-3 of any of such holder’s Restricted
Stock, within 10 days following receipt of such notice, the Company will give
written notice of the proposed registration to all other holders of Restricted
Stock and, as soon as practicable, effect such registration and all such
related qualifications and compliances as may be requested and as would permit
or facilitate the sale and distribution of all Restricted Stock as are
specified in such request and any written requests of other holders of
Restricted Stock given within 20 days after

 

6

 

receipt of such notice.  The Company shall not be required to file a
registration statement under Form S-3 if it would not be required to file a
registration statement under Section 2 hereof pursuant to
Section 2(a)(ii).  The Company shall
have no obligation to effect a registration under this Section 3(b) unless
either (i) all the outstanding shares of Restricted Stock held by the persons
requesting registration pursuant to this Section 3(b) are requested to be
sold or (ii) the aggregate offering price of the securities requested to be sold
pursuant to such registration is, in the good faith judgment of the Company,
expected to be equal to or greater than $5,000,000.  Any registration under this Section 3(b)
will not be counted as a registration under Section 2 above.

 

SECTION 4.         Registration
Procedures.  If and whenever the Company is required by
the provisions of Section 2 or 3 hereof to effect the registration of any
shares of Restricted Stock under the Securities Act, the Company will, as
expeditiously as possible:

 

(a)   prepare and
file with the Commission a registration statement (which, in the case of an
underwritten public offering pursuant to Section 2 hereof, shall be on
Form S-1 or other form of general applicability satisfactory to the managing
underwriter selected as therein provided) with respect to such securities and
use its best efforts to cause such registration statement to become and remain
effective (provided that before filing a registration statement or any
amendments or supplements thereto, the Company will furnish to the counsel selected
by the holders of a majority of the Restricted Stock covered by such
registration statement copies of all such documents and include any comments of
such counsel in such document) for the period of the distribution contemplated
thereby (determined as hereinafter provided);

 

(b)   prepare and
file with the Commission such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be necessary
to keep such registration statement effective for the period specified in
Section 4(a) above and as to comply with the provisions of the Securities
Act with respect to the disposition of all Restricted Stock covered by such
registration statement in accordance with the sellers’ intended method of
disposition set forth in such registration statement for such period;

 

(c)   furnish to
each seller and to each underwriter such number of copies of the registration
statement and the prospectus included therein (including each preliminary
prospectus and any amendment or supplement thereto) and such other documents as
such persons may reasonably request in order to facilitate the public sale or
other disposition of the Restricted Stock covered by such registration
statement;

 

(d)   use its
best efforts to register or qualify the Restricted Stock covered by such
registration statement under the securities or blue sky laws of such
jurisdictions as the sellers of Restricted Stock or, in the case of an
underwritten public offering, the managing underwriter shall reasonably request
and do any and all other acts and things which are reasonably necessary or
advisable to enable such seller to consummate the disposition in such
jurisdictions of the Restricted Stock owned by such seller (provided that the
Company will not

 

7

 

be required to (i) qualify generally to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this subsection or (ii) consent to general service of process (i.e.,
service of process which is not limited solely to securities law violations) in
any such jurisdiction);

 

(e)   immediately
notify each seller under such regis­tration statement and each underwriter, at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event as a result of which the
prospectus contained in such registra­tion statement, as then in effect,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing and, at the
request of any seller, the Company will promptly prepare a supplement or
amendment to such registration statement so that, as thereafter delivered to
the purchasers of such Restricted Stock, such registration statement will not
contain an untrue statement of a material fact or omit to state any fact
necessary to make the statements therein not misleading;

 

(f)    furnish,
at the request of any seller, on the date that Restricted Stock is delivered to
the underwriters for sale pursuant to such registration: (i) an opinion dated
such date of counsel representing the Company for the purposes of such
registration, addressed to the underwriters and to such seller, (A)
stating  that such registration statement
has become effective under the Securities Act, (B) stating that, to the best
knowledge of such counsel, no stop order suspending the effectiveness thereof
has been issued and no proceedings for that purpose have been instituted or are
pending or contemplated under the Securities Act, (C) stating that the
registration statement and the related prospectus, and each amendment or
supplement there­of, comply as to form in all material respects with the
requirements of the Securities Act and the applicable rules and regulations of
the Commission thereunder (except that such counsel
need not express any opinion as to financial statements contained therein), (D)
containing a 10b-5 opinion in customary form and (E) and to such other effects
as may reasonably be requested by counsel for the underwriters or by such
seller or its counsel, and (ii) a letter dated such date from the independent
public accountants retained by the Company, addressed to the underwriters and
to such seller, (A) stating that they are independent public accountants within
the meaning of the Securities Act and that, in the opinion of such accountants,
the financial statements of the Company included in the registration statement
or the pro­spectus, or any amendment or supplement thereof, comply as to form
in all material respects with the applicable accounting requirements of the
Securities Act, and such letter shall additionally cover such other financial
matters (including information as to the period ending no more than five
business days prior to the date of such letter) with respect to the
registration in respect of which such letter is being given as such
underwriters or such seller may reasonably request; and (B) containing “cold
comfort” language covering such matters of the type customarily covered by
“cold comfort” letters as the holders of a majority in nominal value of the
Restricted Stock being sold reasonably request;

 

(g)   make available for inspection by each seller, any underwriter

 

8

 

participating in any distribution pursuant to such
registration statement, and any attorney, accountant or other agent retained by
such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company’s
officers, directors, employees, public accountants, attorneys and financial
advisors to supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such registration
statement;

 

(h)   use its best efforts to cause all such Restricted Securities to be
listed on a recognized U.S. stock exchange or traded on a U.S. inter-dealer
quotation system and, if similar securities issued by the Company are already
so listed, on each securities exchange or inter-dealer quotation system on
which similar securities issued by the Company are then listed or traded;

 

(i)    provide a transfer agent and registrar for all such Restricted
Securities not later than the printing of any preliminary prospectus;

 

(j)    assist any underwriter or seller participating in such
registration or offering in its marketing efforts with prospective investors by
causing the Company’s officers, directors and employees to participate in
marketing efforts, including “roadshow” presentations
in various major national and international centers, in connection with any
offering;

 

(k)   otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission or any other applicable regulatory authority,
and make available to its security holders, as soon as reasonably practicable,
an earnings statement covering the period of at least twelve months beginning
with the first day of the Company’s first full calendar quarter after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
promulgated thereunder;

 

(l)    permit any holder, which holder, in its sole and exclusive
judgment, might be deemed to be an underwriter or a controlling person of the
Company, to participate in the preparation of such registration statement and
to require the insertion therein of material furnished to the Company in
writing, which in the reasonable judgment of such holder and its counsel should
be included and which material has been approved by the Company, such approval
not to be unreasonably withheld or delayed;

 

(m)   in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related offering document or suspending the
qualification of any Restricted Securities included in such registration
statement or offering document for sale in any jurisdiction, the Company will
use its best efforts promptly to obtain the withdrawal of such order;

 

(n)   use its best efforts to cause such Restricted Stock covered by
such

 

9

 

registration statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable the sellers thereof to consummate the disposition of such Restricted
Stock; and

 

(o)   take all such other actions as the holders of a majority in
nominal value of Restricted Stock being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Restricted Stock (including, without limitation, effecting a stock split or a
combination of shares.

 

For purposes of Sections 4(a) and (b) above and of
Section 2(c) hereof, the period of distribution of Restricted Stock in a
firm commitment underwritten public offering shall be deemed to extend until
each underwriter has completed the distribution of all securities purchased by
it, and the period of distribution of Restricted Stock in any other
registration shall be deemed to extend until the earlier of the sale of all
Restricted Stock covered thereby or nine months after the effective date
thereof.

 

In connection with each registration hereunder, the
selling holders of Restricted Stock will furnish to the Company such
information with respect to themselves and the proposed distribution by them as
shall be necessary in order to assure compliance with Federal and applicable
state securities laws.

 

In connection with each registration pursuant to
Sections 2 and 3 hereof covering an underwritten public offering, the Company
agrees to enter into such customary agreements (including underwriting
agreements) as the managing underwriter selected in the manner herein provided
may request in such form and containing such provisions as are customary in the
securities business for such an arrangement between major underwriters and
companies of the Company’s size and investment stature, provided that such
agreement shall not contain any such provision applicable to the Company which
is inconsistent with the provisions hereof.

 

The Company agrees (i) not to effect any public sale
or distribution of its capital stock or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and during the 180-day period beginning on the effective date of any
registration statement (except as part of such underwritten registration
pursuant to the terms hereof or pursuant to registrations on Forms S-4 or S-8
or any successor forms), unless the underwriters managing such public offering
otherwise agree, and (ii) to use its best efforts to cause each holder of at
least 5% (on a fully diluted basis) of its capital stock, or any securities
convertible into or exchangeable or exercisable for its capital stock (other
than in a public offering pursuant to the terms hereof) to agree not to effect
any public sale or distribution (including sales pursuant to Rule 144 under the
Securities Act) of any such securities during such period (except as part of
such underwritten offering, if otherwise permitted pursuant to the terms
hereof), unless the underwriters managing such public offering otherwise agree.

 

10

 

Any holder of Restricted Stock, and their permitted
transferees, receiving any written notice from the company regarding the
Company’s plans to file a registration statement shall treat such notice
confidentially and shall not disclose such information to any person other than
as necessary to exercise its rights under this Agreement.

 

SECTION 5.         Expenses.  All expenses
incurred by the Company in complying with Sections 2 and 3 hereof, including,
without limitation, all registration and filing fees, fees and expenses of
compliance with securities and blue sky laws, fees and expenses in connection
with any listing of the Common Stock on a securities exchange or inter-dealer quotation
system, printing expenses, fees and disbursements of counsel and independent
public accountants for the Company, and the fees and disbursements of the
underwriters, fees of the National Association of Securities Dealers, Inc.,
transfer taxes, fees of transfer agents and registrars and costs of insurance
and fees and expenses of one counsel for the sellers of Restricted Stock, but
excluding any Selling Expenses (as defined below), are herein called
“Registration Expenses”.  All
underwriting discounts and selling commissions applicable to the sale of
Restricted Stock are herein called “Selling Expenses.”  The Company will pay all Registration
Expenses in connection with each registration statement filed pursuant to
Section 2 or 3 hereof.  All Selling
Expenses incurred in connection with any sale of Restricted Stock by any
participating seller shall be borne by such participating seller, or by such
persons other than the Company (except to the extent the Company shall be a
seller) as they may agree.

 

SECTION 6.         Indemnification.  In the event
of a registration of any of the Restricted Stock under the Securities Act
pursuant to Section 2 or 3 hereof, the Company will indemnify and hold
harmless each seller of such Restricted Stock thereunder
and each underwriter of such Restricted Stock thereunder
and their respective officers, directors and employees and each other person,
if any, who controls such seller or underwriter within the meaning of the
Securities Act, against any and all losses, claims, damages, expenses or
liabilities, joint or several, to which such person may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such Restricted Stock was registered
under the Securities Act pursuant to Section 2 or 3, any preliminary
prospectus or final prospectus contained therein, any amendment or supplement
thereof, any materials or information provided to investors by, or with the
approval of, the Company in connection with the marketing of the offering of
the Restricted Stock, including any roadshow or
investor presentations made to investors by the Company (whether in person or
electronically), or any application, filing or other material filed,
registered, distributed or otherwise furnished by the Company or with the
consent of the Company in connection with the securities laws of any state or
political subdivision thereof, including any blue sky application, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each such person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, expense or action; provided,
however, that the

 

11

 

Company will not be liable in any such case if and to
the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with information furnished by such person in
writing specifically for use in such registration statement or prospectus.

 

In the event of a registration of any of the
Restricted Stock under the Securities Act pursuant to Section 2 or 3
hereof, each seller of such Restricted Stock thereunder,
severally and not jointly, will indemnify and hold harmless the Company and
each person, if any, who controls the Company within the meaning of the
Securities Act, each officer of the Company who signs the registration
statement, each director of the Company, each underwriter and each person who
controls any underwriter within the meaning of the Securities Act, against all
losses, claims, damages, expenses or liabilities, to which the Company or such
officer or director or underwriter or controlling person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages,
expenses or liabilities (or actions in re­spect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in the registration statement under which such Restricted Stock
was registered under the Securities Act pursuant to Section 2 or 3, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereof, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
the Company and each such officer, director, underwriter and controlling person
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or  action; provided, however, that
such seller will be liable hereunder in any such case if and  only to the extent that any such loss, claim,
damage or liability arises out of or is based upon an  untrue statement or alleged untrue statement
or omission or alleged omission made in reliance  upon and in conformity with information
pertaining to such seller, as such, furnished in writing to the Company by such
seller specifically for use in such registration statement or prospectus;  provided, further, however,
that the liability of each seller hereunder shall be limited to the  proportion of any such loss, claim, damage,
liability or expense which is equal to the proportion  that the public offering price of the shares
sold by such seller under such registration statement bears  to the total public offering price of all
securities sold thereunder, but not to exceed the
proceeds  received by such seller from
the sale of Restricted Stock covered by such registration statement.

 

Promptly after receipt by an indemnified party
hereunder of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party hereunder, notify the indemnifying party in writing thereof, but the
omission so to notify the indemnifying party shall not relieve it from any
liability which it may have to any indemnified party under this Section 6,
unless the indemnified party is materially prejudiced by such failure.  In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
in and, to the extent it shall wish, to assume and undertake the defense
thereof with counsel reasonably satisfactory to such indemnified

 

12

 

party, and, after notice from the indemnifying party
to such indemnified party of its election to assume and undertake the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under this Section 6 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected; provided,
however, that, if the indemnified party shall have reasonably concluded
that there may be reasonable defenses available to it which are different from
or additional to those available to the other party or parties thereto or if
the interests of the indemnified party reasonably may be deemed to conflict
with the interests of the other party or parties thereto, the indemnified party
shall have the right to select a separate counsel and to assume such legal
defenses and otherwise to participate in the defense of such action, with the
expenses and fees of such separate counsel and other expenses related to such
participation to be reimbursed by the indemnifying party as incurred.

 

The Company and the sellers shall be entitled to
receive indemnities from underwriters participating in any distribution of
Restricted Stock to the same extent as provided above with respect to
information so furnished in writing by such underwriters expressly for use in
any prospectus or registration statement.

 

Notwithstanding the foregoing, any indemnified party
shall have the right to retain its own counsel in any such action, but the fees
and disbursements of such counsel shall be at the expense of such indemnified
party unless (i) the indemnifying party shall have failed to retain counsel for
the indemnified party as aforesaid, (ii) the indemnified party shall have
reasonably concluded that there may be reasonable defenses available to it
which are different from or additional to those available to the other party or
parties thereto or that the interests of the indemnified party conflict with
the interests of the other party or parties thereto, or (iii) the indemnifying
party and such indemnified party shall have mutually agreed to the retention of
such counsel.  It is understood that the
indemnifying party shall not, in connection with any action or related actions
in the same jurisdiction, be liable for the fees and disbursements of more than
one separate firm qualified in such jurisdiction to act as counsel for the
indemnified party.  The indemnifying
party shall not (i) without the prior written consent of the indemnified
parties (which consent shall not be unreasonably withheld), settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding, or (ii) be liable for any settlement of any proceeding
effected without its written consent, (which consent shall not be unreasonably
withheld), but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or
judgment.  If the indemnification
provided for in the first two paragraphs of this Section 6 is unavailable
to or insufficient to hold harmless an indemnified party under such paragraphs
in respect of any losses, claims, damages or liabilities or actions referred to
therein, then each indemnifying party shall in lieu of indemnifying such
indemnified

 

13

 

party con­tribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages, liabilities
or actions in such proportion as appropriate to reflect the relative fault of
the indemnifying party, on the one hand, and the indemnified party, on the
other, in connection with the statement or omissions which resulted in such
losses, claims, damages, liabilities or actions, as well as any other relevant
equitable considerations including, without limitation, the failure to give any
notice under the second paragraph of this Section 6.  The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the indemnifying party, on the
one hand, or by the indemnified party, on the other hand, and to the parties’
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.

 

The Company and the sellers of Restricted Stock agree
that it would not be just and equitable if contribution pursuant to this
Section 6 were determined by pro  rata allocation (even if
all of the sellers of Restricted Stock were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding
paragraph.  The amount paid or payable by
an indemnified party as a result of the losses, claims, dam­ages, liabilities
or action referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim.  Notwithstanding the provisions of this and
the immediately preceding paragraph, the sellers of such Restricted Stock shall
not be required to contribute any amount in excess of the amount, if any, by
which the total price at which the Common Stock sold by each of them was
offered to the public exceeds the amount of any damages which they would have
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission.  No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who is
not guilty of such fraudulent misrepresentation.  The indemnification of underwriters provided
for in this Section 6 shall be on such other terms and conditions as are
at the time customary and reasonably required by such underwriters and the
indemnification of the sellers of Restricted Stock in such underwriting shall,
at the sellers’ request, be modified to conform to such terms and
conditions.  Upon the reasonable request
of any stockholder selling Restricted Stock pursuant to a registration
statement or any underwriter of such stock, the Company shall obtain, if
reasonably available, an insurance policy covering the risks described above in
this Section 6 in an amount and with a deductible reasonably requested by
such seller or underwriter and naming such seller, any under­writer of such
stock and any person controlling such seller or underwriter as
beneficiaries.  The costs of obtaining
and maintaining any such insurance shall be borne by the Company.

 

The indemnification provided for under this Agreement
will remain in full force and effect regardless of any investigation made by or
on behalf of the indemnified party or any officer, director or controlling
person of such indemnified party and will survive the transfer of securities.

 

14

 

SECTION 7                Changes in Common Stock.  If, and as often as, there are
any changes in the Common Stock by way of stock split, stock dividend,
combination or reclassification, or through merger, consolidation,
reorganization or recapitalization, or by any other
means, appropriate adjustment shall be made in the provisions hereof, as may be
required, so that the rights and privileges granted by this Agreement shall
continue with respect to the Common Stock as so changed.

 

SECTION 8          Other
Registration Rights.  Except
as provided in this Agreement, the Company will not grant to any person the
right to request the Company to register any Common Stock, or any securities
convertible or exchangeable into or exercisable for Common Stock, which are
superior to or pari  passu with
the rights granted to the holders of the Restricted Stock hereunder, without
the prior written consent of each of such holder.  The Company will not enter into any agreement
inconsistent with the terms of this Agreement.

 

SECTION 9                Representations and Warranties of the Company.  The Company
represents and warrants to each of the other parties hereto as follows (which
representations and warranties shall survive the execution and delivery of this
Agreement):

 

(a)   The
execution, delivery and performance of this Agreement by the Company have been
duly authorized by all requisite corporate action and will not violate any
provi­sion of law, any order of any court or other agency of government, the
Certificate of Incorporation or By-laws of the Company, or any provision of any
indenture, agreement or other instrument to which it or any of its properties
or assets is bound, or conflict with, result in a breach of or constitute (with
due notice or lapse of time or both) a default under any such indenture,
agreement or other instrument, or result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever upon any of the properties
or assets of the Company or any of its subsidiaries.

 

(b)   This
Agreement has been duly executed and delivered by the Company and constitutes
the legal, valid and binding obligation of the Company, enforceable in
accordance with its terms.

 

SECTION 10              Rule 144 Reporting.  The Company agrees with each of the other
parties hereto as follows:

 

(a)           The Company shall make and keep
current public information available as those terms are understood and defined
in Rule 144 under the Securities Act, at all times from and after 90 days
following the effective date of the first registration of the Company under the
Securities Act of an offering of its securities to the general public.

 

(b)           The Company shall file with the
Commission in a timely manner all reports and other documents as the Commission
may prescribe under Section 13(a) or 15(d)

 

15

 

of the Exchange Act at any time
after the Company has become subject to such reporting requirements of the
Exchange Act.

 

(c)           The
Company shall furnish to each holder of Re­stricted Securities forthwith upon
request (i) a written state­ment by the Company as to its compliance with the
reporting requirements of Rule 144 (at any time from and after 90 days
following the effective date of the first registration statement of the Company
for an offering of its securities to the general public), and of the Securities
Act and the Exchange Act (at any time after it has become subject to such
reporting requirements), (ii) a copy of the most recent annual or quarterly report
of the Company, and (iii) such other reports and documents so filed as such
holder may reason­ably request to avail itself of any rule or regulation of the
Commission allowing a holder of Restricted Securities to sell any such
securities without registration.

 

SECTION 11              Miscellaneous.

 

(a)   The
obligations and rights under Sections 2, 3 and 8 shall terminate as to a holder
of Restricted Stock when (i) such holder is no longer an “affiliate” as used in
Rule 144 and (ii) such holder is permitted to sell all Restricted Stock then
held by it pursuant to Rule 144(k).

 

(b)   All
covenants and agreements contained in this Agreement by or on behalf of any of
the parties hereto shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto whether so expressed or not.  Without limiting the generality of the
foregoing, the registration rights conferred herein on the holders of
Restricted Securities shall inure to the benefit of any and all subsequent hold­ers
from time to time of the Restricted Securities.

 

(c)   All
notices, demands and other communications provided for or permitted hereunder
shall be made in writing and shall be by registered or certified first-class
mail, return receipt requested, telecopier (with
receipt confirmed), courier service or personal delivery:

 

16

 

(i)            if
to the Company:

 

3030 Walnut Avenue

Long Beach, CA  90807

Telecopier
No.: (562) 426-7127

Attention:              Chief Financial Officer

 

with a copy to:

 

Gibson, Dunn & Crutcher  LLP

2029 Century Park East, 40th Floor

Los Angeles, CA 90067

Telecopier No.: (310) 552-7053

Attention:              Jonathan K. Layne

 

(ii)           if
to any of the Whitney Funds:

 

	
  Whitney Private Debt Fund, L.P.

  	
  J.H. Whitney Mezzanine Fund,
  L.P.

  
	
  177 Broad Street

  	
  177 Broad Street

  
	
  Stamford, Connecticut 06901

  	
  Stamford, Connecticut 06901

  
	
  Telecopier No.:  (203) 973-1422

  	
  Telecopier No.:  (203) 973-1422

  
	
  Attention: 

  	
  Daniel J. O’Brien

  	
  Attention: 

  	
  Daniel J. O’Brien

  
	
   

  	
  Michael C. Salvator

  	
   

  	
  Michael C. Salvator

  
	
   

  	
   

  
	
  Whitney V, L.P.

  	
  GreenLeaf Capital, L.P.

  
	
  177 Broad Street

  	
  177 Broad Street

  
	
  Stamford, Connecticut 06901

  	
  Stamford, Connecticut 06901

  
	
  Telecopier No.:  (203) 973-1422

  	
  Telecopier No.:  (203) 973-1422

  
	
  Attention: 

  	
  Daniel J. O’Brien

  	
  Attention: 

  	
  Daniel J. O’Brien

  
	
   

  	
  Michael C. Salvator

  	
   

  	
  Michael C. Salvator

  
	
   

  	
   

  	
   

  	
   

  
	
  with a copy to:

  
	
   

  
	
  Gibson, Dunn & Crutcher  LLP

  
	
  2029 Century Park East, 40th Floor

  
	
  Los Angeles, CA 90067

  
	
  Telecopier No.: (310) 552-7053

  
	
  Attention:              Jonathan
  K. Layne

  

 

17

 

 

(iii)          if to the Management Purchasers:

 

the
address set forth after the signature of each Management Purchaser

 

or to such other address or addresses as shall have
been furnished in writing to the other parties hereto.  Each party hereto agrees, at all times, to
provide the Company with an address for notices hereunder.

 

All such notices and
communications shall be deemed to have been duly given: when delivered by hand,
if personally delivered; when delivered by courier, if delivered by commercial
overnight courier service; if mailed, five Business Days (as defined in the
Purchase Agreement) after being deposited in the mail, postage prepaid; or if telecopied, when receipt is acknowledged.

 

(d)   THIS AGREEMENT SHALL BE GOVERNED BY,
CONSTRUED IN ACCORDANCE WITH, AND ENFORCED UNDER, THE LAW OF THE STATE OF NEW
YORK APPLICABLE TO AGREEMENTS OR INSTRUMENTS ENTERED INTO AND PERFORMED
ENTIRELY WITHIN SUCH STATE.

 

(e)   (I) EACH PARTY TO THIS AGREEMENT HEREBY
IRREVOCABLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AND HEREBY EXPRESSLY SUBMITS TO
THE PERSONAL JURISDICTION AND VENUE OF SUCH COURTS FOR THE PURPOSES THEREOF AND
EXPRESSLY WAIVES ANY CLAIM OF IMPROPER VENUE AND ANY CLAIM THAT SUCH COURTS ARE
AN INCONVENIENT FORUM.  EACH PARTY HEREBY
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF
BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO ITS ADDRESS SET FORTH IN
SECTION 11(C), SUCH SERVICE TO BECOME EFFECTIVE 10 DAYS AFTER SUCH
MAILING.

 

(II)  THE COMPANY WAIVES ITS RIGHT TO A JURY TRIAL
WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION
WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF
SUCH RIGHTS AND OBLIGATIONS.  EXCEPT AS
PROHIBITED BY LAW, THE COMPANY HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR
RECOVER IN ANY LITIGATION REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES.  THE COMPANY  (X) CERTIFIES THAT NO

 

18

 

REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OF THE
PURCHASERS HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT ANY OF THE PURCHASERS
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS
AND (Y) ACKNOWLEDGES THAT THE PURCHASERS HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED
HEREIN.

 

(f)    This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof and may not
be modified or amended except in writing.

 

(g)   Telefacsimile
transmissions of any executed original document and/or retransmission of any
executed telefacsimile transmission shall be deemed
to be the same as the delivery of an executed original.  At the request of any party hereto, the other
parties hereto shall confirm telefacsimile
transmissions by executing duplicate original documents and delivering the same
to the requesting party or parties.  This
Agreement may be executed in any number of counterparts and by the parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which taken together shall constitute one and the
same agreement.

 

(h)   The Company (on the one hand) and the
Purchasers (on the other hand) agree that any amendment to the Federal
securities laws (and regulations promulgated thereunder
(and related registration forms), and related state securities laws shall not
affect the substantive registration requirements (and other obligations of the
Company) set forth in this Agreement; and, following any such amendment, the
Company shall continue to be required to cause the registration of Restricted
Stock (and pay all Registration Expenses and provide indemnification) under the
Federal securities laws, as amended, in a manner consistent to carry out the
intent and purposes of (and on terms as similar as practicable as the terms set
forth in) this Agreement.

 

(i)    If any one or more of the provisions
contained in this Agreement, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way
impaired, unless the provisions held invalid, illegal or unenforceable shall
substantially impair the benefits of the remaining provisions of this
Agreement.  The parties hereto further
agree to replace such invalid, illegal or unenforceable provision of this
Agreement with a valid, legal and enforceable provision that will achieve, to
the extent possible, the economic, business and other purposes of such invalid,
illegal or unenforceable provision.

 

[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK]

 

19

 

IN WITNESS WHEREOF, the parties hereto have executed
this Agreement on the date first above written.

 

 

	
   

  	
  INTERACTIVE HEALTH, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kevin A. Smith

  	
   

  
	
   

  	
   

  	
  Name: Kevin Smith

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  
	
   

  
	
   

  	
  J.H. WHITNEY MEZZANINE FUND, L.P.

  
	
   

  	
  By:

  	
  Whitney GP, L.L.C.

  
	
   

  	
   

  	
  its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Daniel J. O’Brien

  	
   

  
	
   

  	
   

  	
  Daniel J.
  O’Brien

  
	
   

  	
   

  	
  Managing
  Member

  
							

 

 

[SIGNATURE
PAGE TO REGISTRATION RIGHTS AGREEMENT]

 

 

	
   

  	
  WHITNEY PRIVATE DEBT FUND, L.P.

  
	
   

  	
  By:

  	
  Whitney Private Debt GP, LLC

  
	
   

  	
   

  	
  its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Daniel J. O’Brien

  	
   

  
	
   

  	
   

  	
  Daniel J.
  O’Brien

  
	
   

  	
   

  	
  Managing
  Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  GREENLEAF CAPITAL,
  L.P.

  
	
   

  	
  By:

  	
  GreenLeaf GP, L.L.C.

  
	
   

  	
   

  	
  its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Daniel J. O’Brien

  	
   

  
	
   

  	
   

  	
  Daniel J.
  O’Brien

  
	
   

  	
   

  	
  Attorney-in-Fact

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  WHITNEY V, L.P.

  
	
   

  	
  By:

  	
  Whitney Equity Partners V, L.P.

  
	
   

  	
   

  	
  its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Daniel J. O’Brien

  	
   

  
	
   

  	
   

  	
  Daniel J.
  O’Brien

  
	
   

  	
   

  	
  Managing
  Member

  

 

 

[SIGNATURE
PAGE TO REGISTRATION RIGHTS AGREEMENT]

 

 

	
   

  	
  MANAGEMENT PURCHASERS

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  /s/ Craig Womack

  	
   

  
	
   

  	
   

  	
  Name: Craig Womack

  
	
   

  	
   

  	
  Number of Preferred
  Shares:  50,000

  
	
   

  	
   

  	
  Address:

  
	
   

  	
   

  	
  850 E. Ocean Blvd. #204

  
	
   

  	
   

  	
  Long Beach, CA 90802

  
	
   

  	
   

  	
  Telephone No.: (562) 435-6305

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Andrew B. Cohen

  	
   

  
	
   

  	
   

  	
  Name: Andrew Cohen

  
	
   

  	
   

  	
  Number of Preferred
  Shares:  40,000

  
	
   

  	
   

  	
  Address:

  
	
   

  	
   

  	
  3015 Tiffany Circle

  
	
   

  	
   

  	
  Los Angeles, CA 90077

  
	
   

  	
   

  	
  Telephone No.: (310) 446-1438

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Hans Dehli

  	
   

  
	
   

  	
   

  	
  Name: Hans Dehli

  
	
   

  	
   

  	
  Number of Preferred
  Shares:  30,000

  
	
   

  	
   

  	
  Address:

  
	
   

  	
   

  	
  32826 Leah Drive

  
	
   

  	
   

  	
  Dana Point, CA 92629

  
	
   

  	
   

  	
  Telephone No.: (949)
  661-6386

  

 

 

[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]

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