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EXHIBIT 10.86
CHANGE ORDER NUMBER 3
CONSTRUCTION SERVICES AGREEMENT
THIS CHANGE ORDER NO. 3 to the Construction Services Agreement ("CSA") dated
June 30, 1995, is entered into by and between MWR Telecom, Inc., a wholly owned
subsidiary of McLeod, Inc. ("McLeod") and MFS Network Technologies, Inc.
("MFSNT"). The parties agree as follows:
1. PENDING INVOICES. McLeod shall promptly remit payment of all
current and past due invoices listed in the attached Exhibit "A"
for work completed or material delivered under the CSA, and the
retainage for completed sites. Any expenses, claims or amounts
attributable to mobilization costs, increased construction
costs, and all amounts related to the work performed by MFS or
its agents for the benefit of McLeod pursuant to the CSA, are
considered to have been paid in full upon MFS' receipt of
McLeod's payment of the invoices identified on Exhibit "A" to
this Change Order No. 3 and payment of the Price Adjustment
described in paragraph 2 of this Change Order. MFS and McLeod
have no knowledge of any other expenses, claims or amounts
incurred for or due or owing by the other party with respect to
the fiscal year 1996 and 1997 builds; however, if within thirty
(30) days of the effective date of this change order, either
party determines that a legitimate expense, claim or amount has
not been invoiced, that party may invoice such amount within
such thirty (30) day period. The invoiced party will pay such
invoice(s) within thirty (30) days of receipt of such invoice(s)
for invoiced amounts that represent legitimate expenses, claims
or amounts relating to the fiscal year 1996 or 1997 builds. It
is the intent of the parties to finalize and resolve all
expenses, claims and amounts attributable to the fiscal year
1996 and 1997 builds or the Phase I Commitment, and after the
aforedescribed thirty (30) day period MFS and McLeod shall not
make any further claim, demand or invoice any amounts
attributable to the fiscal year 1996 and 1997 builds or the
Phase I Commitments.
2. PRICE ADJUSTMENT. McLeod shall pay MFSNT One Million Dollars
($1,000,000) in cash ("Price Adjustment" or "Adjustment") as
compensation for the following:
- Acceleration/mobilization charges previously
authorized, invoices and subsequently disputed by
McLeod (invoice numbers E01280009 and E01280048).
- Interest due on late payments as identified in
invoices R01280105 and R01280141.
- Any other claims for the sharing of construction
costs for ICN Part II FY 1996 routes, excluding the
incremental fiber, splicing and route adjustments
previously approved and invoiced. FY 1996 routes
built by
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MFSNT are: Denison HS, Lakeland AEA, Emmetsburg HS,
Western Hills AEA, Treynor, Boyer Valley and Harris Park.
FY 1996 routes built by McLeod are: Sheldon Armory,
Sheldon HS, Algona Armory, LeMars Armory, Shenandoah
Armory, Clinton, Mapleton Armory, Estherville HS, Storm
Lake Armory and Fairfield Armory.
- Any other claims for the sharing of construction
costs for ICN Part III FY 1997 routes, excluding the
incremental fiber, splicing and route adjustments
previously approved and invoiced. FY 1997 routes built
by MFSNT are: Laurens Marathon HS, Orange City Floyd, HS,
Orange City Unity Christian HS, Okoboji HS, Charter Oak
Ute HS, Akron Westfield HS, Fremont HS and George Little
Rock HS.
3. PAYMENT TERMS. Payment of the Price Adjustment shall be made
as follows:
(a) Five Hundred Thousand Dollars ($500,000) upon execution
of this Change Order Number 3 by both parties; and
(b) Five Hundred Thousand Dollars ($500,000) on or before
December 31, 1996.
4. PHASE I COMMITMENT. Upon MFSNT's receipt of payment
described in items 1, 2 and 3 above, MFSNT and McLeod agree
that McLeod's obligations for the Phase I Commitment (Article
4.8) under the CSA has been satisfied in full.
5. SHARED ROUTES. McLeod and MFSNT will work together to provide
each other access to routes constructed in the FY 1998 and 1999.
McLeod and MFSNT agree to share construction costs for all
Shared Routes. A "Shared Route" means any fiber optic route
which includes both McLeod and MFSNT fibers. The "Constructing
Party" means the party under obligation to construct the fiber
optic route under its contract with the State of Iowa. The
"Requesting Party" means the party who may designate a route as
a Shared Route. The Constructing Party shall provide the
Requesting Party with the engineered routes for the FY 1998-1999
build. Within two (2) weeks of receipt of the plan documents,
which shall include preliminary route engineering and completion
schedules, the Requesting Party will confirm which routes, or
portions thereof, are to be designated as "Shared Routes." The
Requesting Party shall pay to the Constructing Party an amount
calculated by multiplying the cumulative feet of all Shared
Routes constructed by the Constructing Party for FY 1998-1999
builds by the cost per foot as follows:
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Shared Route Cost
(in feet) (per foot)
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1 - 792,000 $1.25
792,001 - 1,848,000 $1.00
1,848,001 and over $0.90
The Requesting Party shall also pay to the Constructing Party
one hundred percent (100%) of the incremental costs of the
Requesting Party's fibers. The cost-plus alternative will not
apply to the Shared Routes. However, all incremental
construction costs/fees for extension or variation of the FY
1998-1999 build (e.g. fiber, splicing and route adjustments)
("Additional Expenses") will be paid for by the Requesting
Party. Upon the Requesting Party's request, and at its expense,
the Constructing Party shall provide an independent auditor's
certification for any Additional Expenses.
6. TERM. The Construction Services Agreement shall terminate upon
completion of the FY 1998-1999 Shared Routes by both MFSNT and
McLeod and the completion of all obligations respecting Shared
Routes.
7. OTHER AGREEMENTS. McLeod and MFSNT desire to reaffirm their
commitment to other agreements executed by the parties:
(a) The Maintenance Agreement dated June 30, 1995 remains
in full force and effect; and
(b) The parties agree that upon MFSNT's receipt of payment
described in items 1, 2 and 3 above, condition 2(b) of
the Option Agreement dated July 28, 1995 has been
satisfied in full, and that as of the date hereof,
neither party is in breach of the CSA, and that the
Option Agreement remains in full force and effect.
8. RATIFICATION. All provisions of the CSA remain in full force
and effect except as specifically modified by this Change Order
Number 3.
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Agreed to this 31st day of October, 1996.
MFS Network Technologies, Inc. MWR Telecom, Inc.
By: /s/ KEVIN P. MOERSCH BY: /s/ STEPHEN C. GRAY
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Kevin P. Moersch Stephen C. Gray, President
President and Chief Operating Officer