PETER J. LYONS
President
Broadband Carrier Division
April 7, 1999
Mr. Roger B. Abbott
Chief Executive Officer
WorldxChange Communications
9999 Willow Creek Road
San Diego, CA 92131
Dear Roger:
In an effort to resolve the current situation between Communication
TeleSystems International, d/b/a WorldxChange Communications (WorldxChange)
and Siemens Information and Communication Networks, Inc. (Siemens) relating
to your deployment of the EWSD switching system and the resulting network
problems and, along with your request for further financial assistance,
Siemens is pleased to offer the following in return for WorldxChange's
acceptance of the below listed conditions:
(1) Siemens will immediately provide an additional $6 million in U.S.
lease financing from its Telecommunications Finance Group (TFG), at
its then current lease rate (not to exceed 11 1/2% per annum) and
other lease terms customarily offered to WorldxChange with the
provision that the value of any single item to be leased shall be
no less than $20,000. This financing may also be applied to
reimburse WorldxChange for equipment purchases, the type of which
customarily qualify for TFG leasing, made or paid for during the
past ninety (90) days.
(2) With the exception of Lease #185161/Seattle, WA; #185224/Honolulu,
HI; and #185232/New York, NY; TFG will continue to defer payments
on all other
SIEMENS INFORMATION AND COMMUNICATION NETWORKS, INC.
400 Rinehart Road Tel: (407) 942-5077
Lake Mary, Florida 32746 Fax: (407) 942-5701
existing U.S. leases (including the Dallas and Los Angeles EWSD
leases as well as the additional $6 million referenced in paragraph
1, which have not yet commenced) as follows: a) lease #185161,
#185224 and #185232 will be restructured as of April 10, 1999, by
extending the term of these leases by 9 months, with interest for
these leases beginning to accrue as of April 10, 1999, at the
contract rate and payments on these leases to resume on May 1,
1999; b) payment on all other U.S. leases shall commence on
December 1, 1999, with interest on these leases beginning to accrue
as of April 10, 1999. The interest rate from April 10, 1999,
through December 1, 1999, shall be 6.5% per annum, after which the
interest rate shall revert back to the contract rate specified in
each such lease. Sometime in early November, the prior deferral
period and the interest attributable to the current deferral will
be incorporated into a restructured lease payment amount/term for
each lease; c) It is acknowledged and agreed that no interest will
be owed or payable by WorldxChange on any of the existing U.S.
leases for the period July 1, 1998 through April 9, 1999.
(3) Siemens will provide EWSD line side software for all features
available up through Release 16 for up to 10,000 subscriber lines
for each of the three existing EWSD systems currently located in
New York, NY; Los Angeles, CA; and Dallas, TX. The license for the
use of such software will be granted at no additional charge. The
terms and conditions of the license will be the same as those for
the existing software on those switches. Any hardware required to
2
implement the line side software function will be offered to
WorldxChange at Siemens' most preferred customer discounts based on
equivalent volumes.
(4) Siemens will provide Local Number Portability software at no cost
to WorldxChange for all existing U.S. based DCO and EWSD systems on
a network buyout basis.
(5) Siemens will grant a 10% Third Party Vendor ("TPV") allowance for
each new U.S. switch purchase through September 30, 1999. As the
ratio between Siemens and TPV equipment on lease becomes more in
balance, the TPV allowance will be reviewed for possible
modification.
(6) The total principal balance, on which lease payments will resume on
May 1, 1999, shall be limited to an aggregate amount of $6 million.
In return for the above, WorldxChange agrees to:
(7) drop all claims for damages and liabilities, including without
limitation, those for lost revenue, that it has or may have
asserted against Siemens and agrees to accept and execute the
enclosed Release and Covenant Not to Sue;
(8) WorldxChange unconditionally accepts all EWSD switches through
Release 16 as they are designed and functioning as of the date of
this letter (except that the Dallas and Los Angeles EWSD switches
will be so accepted upon completion of installation). Nothing
herein shall limit the responsibility of Siemens (including
3
but not limited to warranty obligations) with respect to future
releases after Release 16;
(9) WorldxChange agrees that the design and content of any future
releases and their associated features and functions will be under
the sole control of Siemens, however, in this regard, Siemens will,
upon WorldxChange's request, evaluate for potential inclusion in
future releases those features and functions that WorldxChange
deems to be critical to its business;
(10) WorldxChange agrees to treat Siemens as its worldwide preferred
vendor of choice and in this regard agrees to provide Siemens with
a reasonable opportunity to bid on any future purchases by
WorldxChange during the next 24 months of products or services
which WorldxChange is aware that are offered by Siemens or its
affiliates;
(11) WorldxChange agrees to execute and deliver lease restructure
documents for all Canadian leases to incorporate existing payment
arrearages into a revised lease term. Monthly payments for these
leases will resume on May 1, 1999.
(12) All amounts due Siemens for open account purchases (Account No.
66155) will immediately be paid and WorldxChange will resume making
payments for this account based on Net 30 Day terms.
4
Please indicate your acceptance of the above by signing in the space provided
below one of the two originals of this letter and returning same to the
undersigned along with the executed Release and Covenant Not to Sue.
Sincerely,
/s/ Peter J. Lyons
Peter J. Lyons
President, Broadband Carrier Division
Enclosure
Agreed and Accepted:
WorldxChange Communications
By: /s/ Roger B. Abbott
--------------------------------
Roger B. Abbott
Chief Executive Officer
5
[WORLDXCHANGE COMMUNICATIONS LETTERHEAD]
April 8, 1999
Peter J. Lyons
Siemens
400 Rinehart Rd.
Lake Mary, FL 32746
Dear Pete:
In reviewing the agreement we have been working on, Roger raised the point
that, while the length of the lease extension is specified for the three (3)
leases on which payment will resume on May 1st, we did not specify the length
of the lease extensions on the remaining U.S. leases and the Canada leases.
Our understanding is that on the Canada leases (on which payments will also
resume on May 1st) and the balance of the U.S. leases (which will resume
monthly payments on December 1, 1999), those leases will be restructured so
that whatever term was remaining when the deferral started on July 1, 1998
will still remain when the monthly payments resume.
Please confirm that Siemens agrees with this understanding by countersigning
this letter at the place indicated below and transmitting it back to me by
facsimile. I've enclosed copies of the letter agreement and release which
Roger has already signed, so that this will be a done deal when I receive
your fax.
Thanks again for your help in working this out. Roger and I look forward to
continuing our long standing relationship with you and Siemens.
Sincerely,
/s/ Eric G. Lipoff
Eric G. Lipoff
Senior Vice President
and General Counsel
enclosure
EGL/sm
The above is agreed and accepted to:
By: /s/ Peter J. Lyons
-----------------------
Date: 4/8/99
-----------------------
RELEASE AND COVENANT NOT TO SUE
Communication TeleSystems International d/b/a WorldxChange Communications
(WorldxChange), with offices at 9999 Willow Creek Road, San Diego, CA, 92131,
on behalf of itself, its parent corporations and affiliates and their
respective officers, directors and employees (hereinafter referred to as
"WorldxChange"), for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, does hereby release, remise,
acquit, set aside and forever discharge Siemens Information and Communication
Networks, Inc., also known as Telecommunications Finance Group, its parents,
subsidiaries, affiliates, predecessors, successors, assigns, employees,
agents, officers and directors (hereinafter referred to as "Siemens") of and
from all manner of claims, causes of action, suit, debts, controversies,
agreements, promises, damages, liabilities, costs, expenses, compensation,
judgments, executions and demands whatsoever, in law or in equity, in
contract or tort, whether known or unknown, WorldxChange ever had, now has or
hereafter can, shall or may have against Siemens from the beginning of the
world through the date of this Release and Covenant Not to Sue relating to,
concerning or arising out of or connected with, directly or indirectly,
delivery, installation, turnover and operation of any and all EWSD switching
equipment and EWSD computer software and other associated equipment and
computer software through and including Release 16 provided by or through
Siemens to WorldxChange.
WorldxChange expressly agrees and covenants not to jointly or severally bring
any litigation against Siemens for any claims, disputes or causes of action
whatsoever relating to, concerning or arising out of any of the foregoing
business dealings.
It is expressly understood and agreed that this Release and Covenant Not to
Sue is given to compromise doubtful and disputed allegations and claims made
by WorldxChange and that the provision of the aforementioned consideration by
Siemens to WorldxChange does not constitute any admission of legal liability
or responsibility on the part of any person released and that each of the
persons released denies any such legal liability or responsibility.
This Release and Covenant Not to Sue shall be governed and construed
according to the laws of the State of Florida without regard to the
principles governing conflicts of law.
IN WITNESS WHEREOF, WorldxChange has caused this Release and Covenant Not to
Sue to be executed by its duly authorized representative dated this 7th day
of April, 1999.
WorldxChange Communications
By: /s/ Roger B. Abbott
----------------------------
Roger B. Abbott
Chief Executive Officer
6