Exhibit 10.3
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. SUCH PORTIONS ARE DESIGNATED "[***]".
THIS FIXED POINT MICROWAVE SERVICES AGREEMENT is made and entered into as
of the 1st day of December, 1997 (the "EFFECTIVE DATE"), by and between PathNet,
Inc. ("PATHNET"), a Delaware corporation and Northeast Missouri Electric Power
Cooperative ("INCUMBENT"), a Missouri corporation (collectively, the "PARTIES"
and each, a "PARTY".
W I T N E S S E T H:
WHEREAS, PathNet is engaged in the business of creating high capacity,
digital, microwave communications systems for purposes of marketing and selling
the excess long distance telecommunications capacity created by such systems;
WHEREAS, Incumbent is the owner and operator of an existing microwave
telecommunications system that is used for critical communications in
Incumbent's business;
WHEREAS, Incumbent desires to engage PathNet as, and PathNet desires to act
as, Incumbent's sole representative for the purpose of (i) installing, managing
and operating a high capacity digital microwave system along Incumbent's current
microwave paths, and (ii) marketing and selling any Excess Capacity (as defined
below) created by such high capacity digital microwave system;
WHEREAS, following the installation of the high-capacity, digital
communications system described herein, Incumbent will be allocated capacity on
channels from the Initial System (as defined below) for the necessary expansion
and enhancement of Incumbent's internal communications and operational needs;
WHEREAS, given the critical nature of the operational communications
contemplated to be conducted by Incumbent through the high capacity digital
microwave system to be installed by PathNet, the parties recognize that any
interruption in Incumbent's communications service, other than as may be
provided by the terms hereof, would be materially adverse to the public interest
and could involve adverse public safety consequences;
WHEREAS, the intentions of the parties hereto are to provide Incumbent with
a reliable long-term communications capability;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the Parties agree as follows:
SECTION 1. DEFINITIONS.
1.1 DEFINITIONS As used in this Agreement, the following terms shall have
the meanings indicated:
1.1.1 1/0 MULTIPLEXER: Any device that multiplexes capacity
between the DS-1 and the DS-0 levels.
1.1.2 1 X 1: A microwave radio configuration consisting of a
primary and a protect radio.
1.1.3 AFFILIATE: With respect to any Person, any other Person
that directly or indirectly controls, is controlled by, or is under common
control with such Person. For the purposes of this definition, "control"
(including the terms "controlled by" and "under common control with"), as
used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting
securities, by contract, or otherwise.
1.1.4 AGREEMENT: This Fixed Point Microwave Services Agreement,
including the Schedules and Exhibits attached hereto, as the same may be
amended, supplemented or modified in accordance with the terms hereof.
1.1.5 ALARM AND EVENT REPORT: As defined in SECTION 7.7 of
SCHEDULE A.
1.1.6 AMENDED SCHEDULE B: As defined in SECTION 19.15.
1.1.7 AS-BUILT DRAWING: As defined in SECTION 4.1.4 of
SCHEDULE A.
1.1.8 AVAILABLE EXCESS CAPACITY: The total PathNet Excess
Capacity available for use or sale on the System at any given time from
Commissioning through the Expiration Date.
1.1.9 AVERAGE SOLD EXCESS CAPACITY: The cumulative average of
[(PathNet Excess Capacity - Available Excess Capacity)/PathNet Excess
Capacity] taken as a percentage.
1.1.10 BIT ERROR RATE: The number of received bits in error
compared to the total number of bits received.
1.1.11 BREACHING PARTY: As defined in SECTION 18.2.3.
1.1.12 BUSINESS DAY: Any day other than a Saturday, a Sunday, or a
day on which the banking institutions in either New York, New York, or the
city and state in which the principal executive offices of PathNet within
the United States are located, are not open for business.
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1.1.13 CAPACITY EXPANSION: An increase in telecommunication
channels a System is able to transmit, receive and transport above those
created by the installation of the Initial System, achieved by an addition
to or change in equipment.
1.1.14 CAPACITY EXPANSION SCHEDULE: As defined in SECTION 7.1 of
SCHEDULE A.
1.1.15 CERCLA: Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. Section 6901 ET SEQ., as amended.
1.1.16 CHANNEL PLAN: As defined in SECTION 1.1 of SCHEDULE A.
1.1.17 COMMISSIONING: With respect to each path or Segment, the
date on which the circuits of such path or Segment are available for
service after completion of all required site acceptance testing on the
Initial System or any Capacity Expansion.
1.1.18 CUSTOMER AGREEMENTS: As defined in SECTION 10.8.1.
1.1.19 CUTOVER PLAN: As defined in SECTION 4.1.1 of SCHEDULE A.
1.1.20 DEFICIENCY LIST: As defined in SECTION 5.7 of SCHEDULE A.
1.1.21 DISPUTE: As defined in SECTION 18.2.1.
1.1.22 DROP AND INSERT: That process wherein a part of the
information carried in a transmission system is demodulated (dropped) at an
intermediate point and different information is entered (inserted) for
subsequent transmission.
1.1.23 DS-0: 64,000 bits per second; The world-wide standard speed
for digitizing one voice conversation using pulse code modulation, which is
approximately equivalent to a single voice or data channel.
1.1.24 DS-1: 24 DS-0's.
1.1.25 DS-3: 672 DS-0's or 28 DS-1's.
1.1.26 EFFECTIVE DATE: As defined in the introductory paragraph of
this Agreement or the date of any AMENDED SCHEDULE B, as the context
indicates.
1.1.27 ERROR FREE SECOND: Any one-second interval that does not
contain a measurable bit error.
1.1.28 ENCUMBRANCES: Any security interests, mortgages, liens,
pledges, charges, claims, easements, reservations, restrictions, clouds,
equities, rights of way, options, rights of first refusal and other
encumbrances whether or not relating to the
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extension of credit or the borrowing of money. To "Encumber" shall mean to
effect any Encumbrance.
1.1.29 EQUIPMENT: Any and all digital microwave radios, radio
components, cards, antennas, waveguides, multiplexers, software and other
equipment or parts required for the operation of the System provided and
installed by PathNet as set forth on EXHIBIT A-1 to SCHEDULE A.
1.1.30 ERRORED SECONDS: Any one-second interval during which one
or more bit errors occur.
1.1.31 ESCROW AGREEMENT: As defined in SECTION 5 .
1.1.32 EXCESS CAPACITY: The PathNet Excess Capacity and the
Incumbent Excess Capacity.
1.1.33 EXISTING SYSTEM INVENTORY: As defined in SECTION 1.1 of
SCHEDULE A.
1.1.34 EXPIRATION DATE: The date on which this Agreement and the
rights and obligations hereunder are terminated or expire in accordance
with SECTION 3.
1.1.35 FAA: The Federal Aviation Administration, or any other
Federal agency at the time administering tower registration requirements
and regulations.
1.1.36 FACILITIES: Incumbent's towers, shelters, sites and all
equipment owned by Incumbent relating to and used in association with such
towers, shelters and sites for the purpose of operating the System.
1.1.37 FAILED SECOND: Any one-second interval that has 1,544 bit
errors at a DS-1 rate.
1.1.38 FCC: The Federal Communications Commission, or any other
Federal agency at the time administering the Communications Act of 1934, as
amended, the Telecommunications Act of 1996, as amended and the rules and
regulations promulgated thereunder.
1.1.39 FCC CODE: The Communications Act of 1934, as amended, the
Telecommunications Act of 1996, as amended and the rules, regulations and
policies promulgated thereunder and related thereto.
1.1.40 FIRST EXTENSION PERIOD: As defined in SECTION 3.1.3.
1.1.41 FORCE MAJEURE EVENT: As defined in SECTION 17.3.
1.1.42 FORM 415: As defined in SECTION 11.1.1.
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1.1.43 FREQUENCY AVAILABILITY MODEL: As defined in SECTION 1.1 of
SCHEDULE A.
1.1.44 FREQUENCY DIVERSITY: A method of protecting a radio signal
by providing a second radio signal on a different frequency, which will
assume the radio signal load when the regular channel fails.
1.1.45 GOVERNMENTAL AUTHORITY: Any nation or government, any state
or other political subdivision thereof and any court, panel, judge, board,
bureau, commission, agency or other entity, body or other person exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government.
1.1.46 INCUMBENT: As defined in the introductory paragraph.
1.1.47 INCUMBENT DESIRED PATH: As defined in SECTION 10.3.
1.1.48 INCUMBENT ESTIMATED COSTS: As defined in SECTION 4.1.2.
1.1.49 INCUMBENT EXCESS CAPACITY: As defined in SECTION 10.1.2.
1.1.50 INCUMBENT ITEMS: As defined in SECTION 4.1.1.
1.1.51 INCUMBENT PAYMENT CAP: As defined in SECTION 4.1.3.
1.1.52 INCUMBENT REPRESENTATIVE: As defined in SECTION 19.12.
1.1.53 INITIAL PERIOD: As defined in SECTION 3.1.2.
1.1.54 INITIAL SYSTEM: The initial system with a 1 x 1
configuration which is comprised of the first 84 DS-1's (which is
equivalent to 2,040 DS-0's) of the System and the System's 84 DS-1 protect
channels.
1.1.55 INTERCONNECTION: The point at which a private network is
connected to (i) the PSTN, which can include IXC POPs, tandem access
points, the central office, internet service providers, or major industrial
customer points of presence or (ii) another private network.
1.1.56 INTERFERENCE: Any measurable impairment in the performance
of the System or the quality of the signals received or transmitted on the
System.
1.1.57 IXC: An inter-exchange carrier; a telephone company that
provides long-distance telephone service between LATA's but not within any
one LATA.
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1.1.58 JUDGMENT: Any order, judgment, writ, decree, award or other
determination, decision or ruling of any court, judge, justice or
magistrate, any other Governmental Authority or any arbitrator.
1.1.59 LATA: Local Access and Transport Area; one of 161 local
geographic areas in the United States within which a local telephone
company may offer telecommunications services.
1.1.60 LEASED PREMISES: As defined in SECTION 6.1.
1.1.61 LEASED PREMISES ENCUMBRANCE: As defined in SECTION 6.10.
1.1.62 LOSSES: Any and all losses, claims, shortages, damages,
liabilities, expenses (including reasonable attorneys' and accountants'
fees), assessments, tax deficiencies and taxes (including interest and
penalties thereon) sustained, suffered or incurred by any third party
arising from any matter which is the subject of indemnification under
SECTION 15.
1.1.63 MAINTENANCE SERVICES AGREEMENT: The Maintenance Services
Agreement, by and between PathNet and Incumbent, as the same may be amended
from time to time in accordance with its terms.
1.1.64 MATERIAL ADVERSE EFFECT: Any event, fact, circumstance or
occurrence, which results or would result in a material adverse change in
or a material adverse effect on any of: (i) the condition (financial or
otherwise), business, performance, operations, properties, or prospects of
such Person; (ii) the legality, validity or enforceability of this
Agreement; or (iii) the ability of such Person to perform its material
obligations under this Agreement.
1.1.65 MODIFICATIONS SOW: As defined in SECTION 2.1 of SCHEDULE A.
1.1.66 NETWORK MANAGEMENT SYSTEM: As defined in SECTION 7.6 of
SCHEDULE A.
1.1.67 NETWORK MONITORING CENTER: As defined in SECTION 7.5 of
SCHEDULE A.
1.1.68 NON-BREACHING PARTY: As defined in SECTION 18.1.2.
1.1.69 NOTICE OF ELECTION: As defined in SECTION 16.3.
1.1.70 OC-3 MULTIPLEXER: Any device that multiplexes capacity
between the OC-3 and the DS-1 levels.
1.1.71 ORDER WIRE: A service channel consisting of a 64,000 bit
per second circuit between sites.
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1.1.72 OSHA: The Occupational Safety and Health Act, as amended.
1.1.73 OTHER AGREEMENTS. As defined in SECTION 19.4.
1.1.74 OUTAGE: When the Bit Error Rate in each second is worse
than 10-3 for a period of ten (10) consecutive seconds.
1.1.75 PART 101: Part 101 of Title 47 of the Code of Federal
Regulations, as amended.
1.1.76 PARTY: As defined in the introductory paragraph.
1.1.77 PATH STUDIES: As defined in SECTION 1.1 of SCHEDULE A.
1.1.78 PATHNET: As defined in the introductory paragraph.
1.1.79 PATHNET ESTIMATED COSTS: As defined in SECTION 4.3.2.
1.1.80 PATHNET EXCESS CAPACITY: At any given time, the
telecommunications channels or DS-0's that the System creates, transports
and receives, less the capacity allocated to Incumbent and to the protect
channels pursuant to the Channel Plan, as amended from time to time.
1.1.81 PATHNET ITEMS: As defined in SECTION 4.3.1.
1.1.82 PATHNET SOFTWARE: The software (including applications
software and systems software) owned or licensed from a third party by
PathNet or owned or developed by PathNet used to provide the services
covered in this Agreement.
1.1.83 PCN: A Prior Coordination Notice sent pursuant to Part 101.
1.1.84 PERMITS: Any and all authorizations, approvals, consents,
licenses, permits, easements, certificates and other rights and permissions
necessary to conduct such Person's business and to own, lease and operate
such Person's properties as currently or as anticipated to be conducted,
owned, leased or operated.
1.1.85 PERSON: An individual or a corporation, partnership,
limited liability company, trust, incorporated or unincorporated
association, joint venture, joint stock company, or other entity of any
kind or any Governmental Authority.
1.1.86 POP: Point Of Presence; The interconnection between any two
facilities based networks.
1.1.87 PROGRESS REPORT: As defined in SECTION 4.1.2 of SCHEDULE A.
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1.1.88 PRE-COMMISSIONING TEST EQUIPMENT: All equipment required
for the testing required to be performed on the System pursuant to SECTION
5 of SCHEDULE A, including, but not limited to, all required digital volt
meters, optical power meters, oscilloscopes, RF signal generators, noise
figure meters, noise figure test sets, RF variable attenuators, DADE adjust
cables, receiver card extenders and extension cords.
1.1.89 PRELIMINARY CONSTRUCTION SCHEDULE: As defined in SECTION
1.1 of SCHEDULE A.
1.1.90 PROJECT DRAWINGS: As defined in SECTION 1.3 of SCHEDULE A.
1.1.91 PROJECT MANAGEMENT PLAN: As defined in SECTION 4.1.1 of
SCHEDULE A.
1.1.92 PROJECT SCHEDULE: As defined in SECTION 4.1.1 of
SCHEDULE A.
1.1.93 PROTECTION CONFIGURATION: An engineering plan under which
channel capacity is protected either on a fully redundant basis or on a 1 x
n protection basis.
1.1.94 PSTN: Public Switched Telephone Network.
1.1.95 QUARTERLY REVENUE REPORT: As defined in SECTION 10.10.
1.1.96 RCRA: Resource Conservation and Recovery Act, 42 U.S.C.
Section 9601 ET SEQ., as amended.
1.1.97 REQUIREMENT OF LAW: With respect to any Person, all
Federal, state and local laws, rules, regulations, Judgments, injunctions,
standards, codes, limitations, restrictions, conditions, prohibitions,
notices, demands or other requirements or determinations of a court or
other Governmental Authority or an arbitrator, applicable to or binding
upon such Person, any of its property or any business conducted by it or to
which such Person, any of its assets or any business conducted by it is
subject.
1.1.98 REVENUE: As defined in SECTION 10.11.4 .
1.1.99 SECOND EXTENSION PERIOD: As defined in SECTION 3.1.4.
1.1.100 SEGMENT: The portion of a microwave communications network
existing between two geographic points. For purposes of this Agreement,
Segment A is the portion of Incumbent's microwave communications network
between Xxxxxx and Xxxxxx Xxxx, Missouri, as set forth in SCHEDULE B and
any additional Segments added to the System pursuant to an AMENDED SCHEDULE
B are identified as Segment B, Segment C, and Segment D, etc.
1.1.101 SERVICES: As defined in SECTION 8.1 .
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1.1.102 SEVERELY ERRORED SECONDS: Any one second interval where the
Bit Error Rate is greater than or equal to 1 x 10-3 at a DS-1 rate
regardless of the cause of degradation affecting the channel error
performance including, but not limited to, unprotected equipment failures
and any other factors that contribute to poor performance.
1.1.103 SONET: Synchronous Optical Network; a family of fiber-optic
transmission rates from 51.84 Mbps to 13.22 Gbps, created to provide the
flexibility needed to transport many digital signals with different
capacities and to provide a standard to which manufacturers may design.
1.1.104 SPACE DIVERSITY: Protection of a radio signal by providing
a separate antenna on the same tower to assume the radio signal load when
the regular transmission path on the primary antenna fades, thereby
ensuring continuous transmission.
1.1.105 SPARE PARTS: The equipment and parts provided by PathNet to
Incumbent pursuant to the performance of Incumbent's obligations under the
Maintenance Services Agreement.
1.1.106 SPECIFICATIONS: As defined in SECTION 8.2.
1.1.107 STATION LOG BOOK: As defined in SECTION 6.2 of SCHEDULE A.
1.1.108 SUBCONTRACTORS: Any firm, corporation, or person working
directly or indirectly for a company that furnishes or performs a portion
of the work, labor or material.
1.1.109 SWITCHED MOD SECTION: A section of network between two
adjacent back-to-back terminals.
1.1.110 SYSTEM: The high capacity digital SONET microwave radio
equipment, antenna, waveguide, Facilities, Network Management System, all
other equipment and materials related thereto, and FCC licenses and other
licenses and Permits related thereof, operated for the purpose of
transmitting, receiving and transporting telecommunications signals over
Incumbent's Segments set forth on SCHEDULE B.
1.1.111 SYSTEM BUDGET: As defined in SECTION 1.1 of SCHEDULE A.
1.1.112 SYSTEM DESIGN: As defined in SECTION 1.1 of SCHEDULE A.
1.1.113 TECHNOLOGY: Inventions, ideas, processes, formulas, and
know-how.
1.1.114 TOWER ANALYSIS: As defined in SECTION 1.1 of SCHEDULE A.
1.1.115 VENDOR CREDIT ASSURANCES: As defined in SECTION 4.5.1.
9
1.1.116 WAYSIDE CHANNELS: The additional DS-1 of telecommunications
capacity within each radio beyond the base OC-3 capacity.
1.2 TERMS GENERALLY The definitions in SECTION 1.1 and elsewhere in this
Agreement shall apply equally to both the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "herein,"
"hereof," "hereto" and "hereunder" and words of similar import refer to this
Agreement (including the Schedules and Exhibits) in its entirety and not to any
part hereto unless the context shall otherwise require. All references herein
to Sections, Exhibits and Schedules shall be deemed references to Sections of,
and Exhibits and Schedules to, this Agreement unless the context shall otherwise
require. Unless otherwise expressly provided herein or unless the context shall
otherwise require, any references as of any time to the "certificate of
incorporation," "articles of incorporation," "charter," "organizational or
constituent documents", "operating agreement" or "bylaws" of any Entity, to any
agreement (including this Agreement) or other contract, instrument or document
or to any agreement statute or regulation are to it as amended and supplemented
from time to time (and, in the case of a statute or regulation to any
corresponding provisions of successor statutes or regulations). Any reference
in this Agreement to a "day" or number and "days" (without the explicit
qualification of "Business") shall be interpreted as a reference to a calendar
day or number of calendar days. If any action or notice is to be taken or given
on or by a particular calendar day, and such calendar day is not a Business Day,
then such action or notice shall be deferred until, or may be taken or given on,
the next Business Day.
SECTION 2. RELATIONSHIP OF THE PARTIES.
2.1 LESSEE, INDEPENDENT CONTRACTOR, REPRESENTATIVE AND NETWORK MANAGER
Incumbent shall appoint PathNet and PathNet shall serve in the following
capacities during the term of this Agreement:
(i) In the role of lessee, PathNet will lease from Incumbent an
interest in Incumbent's sites and Facilities on which to build and operate
the System. As consideration for such leasehold interest and the other
rights and obligations set forth in this Agreement, PathNet will pay the
consideration to Incumbent as set forth in SECTION 5.
(ii) As an independent contractor, PathNet will serve as Incumbent's
sole and exclusive representative in performing analytical pre-design and
design services and installing, testing and ensuring the performance of the
System, as well as any upgrades to such System in accordance with the terms
and conditions set forth in SECTION 7 and in SCHEDULE A.
(iii) As the exclusive representative for the marketing and sale of
Excess Capacity for Incumbent, PathNet will market and sell the Excess
Capacity created by System, as described in SECTION 10.
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(iv) In the role of a network manager, PathNet will serve as the
point of contact for any Outage or trouble on the System and shall operate
the Network Management System and the Network Monitoring Center as
described in SECTION 8.6 and SECTION 7.7 of SCHEDULE A.
2.2 NO JOINT VENTURE, ETC The Parties expressly disclaim any intention to
create, and nothing herein shall be construed as creating, a partnership, joint
venture, agency or employment relationship between PathNet and Incumbent.
2.3 RESTRICTIONS ON ACTIONS OF INCUMBENT
2.3.1 NO PARALLEL SYSTEM For the term of this Agreement, neither
Incumbent, nor any Affiliate of Incumbent, shall operate parallel microwave
telecommunications facilities or systems to those set forth in SCHEDULE B
for the purpose of selling or otherwise providing any capacity on such
parallel facilities or systems.
2.3.2 NOTIFICATION AND RIGHT OF FIRST REFUSAL In the event any
time after the Effective Date, Incumbent elects to construct or build a
fiber path or paths anywhere along Incumbent's then existing system,
Incumbent shall notify PathNet in writing of such intention to construct or
build such fiber path or paths and PathNet shall have a right of first
refusal to construct or build such fiber path or paths on behalf of
Incumbent and to act as Incumbent's exclusive representative for the sale
of excess capacity from such fiber path or paths, exercisable by PathNet by
written notice to Incumbent to such effect within ninety (90) days of
receipt of such notice by Incumbent. In the event Incumbent does not
receive such notice from PathNet stating PathNet's intention to exercise
such right of first refusal or any part thereof during such ninety (90) day
period, Incumbent may engage any person to construct or build such fiber
path or paths and to market and sell the excess capacity from such fiber
path or paths; PROVIDED, HOWEVER, if Incumbent elects to construct or build
any other fiber path or paths not described in the original notification to
PathNet, Incumbent may not so construct or build such additional path or
paths without first complying with the provisions of this SECTION 2.3.2.
SECTION 3. TERM AND EXPIRATION.
3.1 TERM, EXTENSION PERIODS, AND RENEWAL.
3.1.1 TERM This Agreement shall commence on the Effective Date
and shall be in full force and effect for the term as set forth in this
SECTION 3.
3.1.2 INITIAL PERIOD The initial period (the "INITIAL PERIOD")
shall commence upon Commissioning and shall expire on the fifth (5th)
anniversary of the Commissioning.
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3.1.3 FIRST EXTENSION PERIOD In the event the Average Sold Excess
Capacity is at least ten percent (10%) during the Initial Period, the term
of the Agreement shall be automatically extended for an extension period
(the "FIRST EXTENSION PERIOD") commencing on the day after the expiration
of the Initial Period and expiring on the tenth (10th) anniversary
thereafter.
3.1.4 SECOND EXTENSION PERIOD In the event the Average Sold
Excess Capacity is at least ten percent (10%) during the Initial Period and
the First Extension Period, the term of the Agreement shall be
automatically extended for a second extension period (the "SECOND EXTENSION
PERIOD") commencing on the day after the expiration of the First Extension
Period and expiring on the tenth (10th) anniversary thereafter.
3.1.5 RENEWAL Upon expiration of the Initial Period or any
Extension Period thereof, this Agreement shall be automatically renewed for
a one-year term, and at the end of such one-year term for additional
one-year terms for each year thereafter, unless terminated by either Party
upon written notice to the other Party delivered within the ninety (90) day
period immediately before the end of the Second Extension Period or any
such one-year term.
3.2 NO UNILATERAL RIGHT TO TERMINATE Neither Party shall have the right
to terminate this Agreement or any rights or obligations of either Party
pursuant to this Agreement.
SECTION 4. COSTS.
4.1 INCUMBENT COSTS.
4.1.1 INCUMBENT ITEMS Incumbent shall pay for the services,
functions, materials and other items listed in SECTION 1 of SCHEDULE C
(collectively, the "INCUMBENT ITEMS") in the manner set forth in SECTION
4.1.5.
4.1.2 ESTIMATED COST OF INCUMBENT ITEMS On the Effective Date,
the total estimated cost of the Incumbent Items is [***]
(the "INCUMBENT
ESTIMATED COSTS"). Subject to the Incumbent Payment Cap, the costs of such
Incumbent Items and such Incumbent Estimated Costs are estimates and may be
subject to increases or decreases.
4.1.3 INCUMBENT PAYMENT CAP Incumbent shall pay an amount not to
exceed [***]
(the "INCUMBENT PAYMENT CAP") in the aggregate for the
performance and completion of the Incumbent Items. The cost of Incumbent
Items shall be accrued in accordance with generally accepted accounting
principles. PathNet shall pay for all amounts incurred over the Incumbent
Payment Cap in the completion and performance of the Incumbent Items. As
soon as Incumbent is aware that Incumbent will pay an amount in excess of
the Incumbent Payment Cap, Incumbent shall notify PathNet to that effect.
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4.1.4 EXPANSION OF SYSTEM. To allow for the expansion of the
System beyond a 1x1 configuration, in addition to the Incumbent Items and
the Incumbent Estimated Costs, Incumbent shall pay for any additional new
shelters to be installed to replace existing shelters, even if such
payments exceed the Incumbent Payment Cap. Incumbent also shall be
responsible for payment of all costs relating directly or indirectly to the
replacement of such shelters, in the event that PathNet expands the System
beyond a 1x1 configuration and Incumbent shelters are insufficient to
accommodate the expansion equipment.
4.1.5 PAYMENT OF INCUMBENT ITEMS. Pursuant to the Escrow Agreement
by and between PathNet and Incumbent substantially in form attached hereto
as SCHEDULE D (the "Escrow Agreement"), on the Effective Date, Incumbent
shall deposit in an escrow account, an amount equal to the Incumbent
Estimated Costs which funds shall be disbursed to equipment vendors or
service providers by PathNet, with Incumbent's approval, upon completion
and performance of the Incumbents Items and PathNet receiving an invoice
for such Incumbent Items. In the event at any time prior to completion of
the Incumbent Items, the escrowed funds are depleted below ten percent
(10%) of the Incumbent Estimated Costs, upon PathNet's request Incumbent
shall place in escrow an additional amount equal to twenty percent (20%) of
the Incumbent Estimated Costs which additional funds shall be disbursed to
PathNet as of the cost of the completed of the Incumbent Items are actually
incurred. In the event that any funds remain in escrow upon Commissioning
of the Initial System such funds shall be returned to Incumbent.
4.2 INCUMBENT OPERATING AND ADMINISTRATION COSTS Incumbent shall pay the
operating and administration costs set forth in SECTION 2 of SCHEDULE C as such
costs are actually incurred and become due and payable in the course of the
Incumbent's performance of its obligations under this Agreement.
4.3 PATHNET COSTS.
4.3.1 PATHNET ITEMS PathNet shall pay for services, functions,
materials and other items listed in SECTION 3 of SCHEDULE C (the "PATHNET
ITEMS").
4.3.2 ESTIMATED COST OF PATHNET ITEMS On the Effective Date, the
total estimated cost of the PathNet Items is [***]
(the "PATHNET ESTIMATED COSTS").
4.3.3 NO CAP ON PATHNET ITEMS PathNet shall pay for all amounts
incurred in completing the PathNet Items whether or not the cost of
completing such items is less than, equal to or exceeds the PathNet
Estimated Costs.
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4.3.4 PAYMENT OF PATHNET ITEMS To ensure payment of the PathNet
Estimated Costs PathNet shall:
(a) deliver to Incumbent vendor credit assurances (the "VENDOR
CREDIT ASSURANCES"), which Vendor Credit Assurances shall establish
and confirm, among other things, that PathNet has an adequate credit
facility to acquire the Equipment and Services provided by such
vendor; and
(b) deliver to Incumbent the Escrow Agreement pursuant to which,
among other things, (i) PathNet shall place in escrow funds in an
amount equal to fifty percent (50%) the PathNet Estimated Costs less
the cost of any equipment provided by the vendors referred to in the
Vendor Credit Assurances, (ii) the escrow agent named in such Escrow
Agreement shall disburse to PathNet the funds necessary to pay for the
cost of the PathNet Items as such PathNet Items are completed and as
PathNet receives invoices relating to such PathNet Items, (iii) in the
event that PathNet fails to timely meet its payment responsibilities
with respect to the PathNet Items, the escrow agent named in such
Escrow Agreement shall disburse to Incumbent the funds necessary to
cure such failure to pay by PathNet and (iv) such Escrow Agreement
shall terminate upon Commissioning of the System and upon such
termination any funds remaining in escrow, including any interest
accrued on such funds shall be disbursed to PathNet.
4.4 PATHNET OPERATING AND ADMINISTRATION COSTS PathNet shall pay for the
operating and administration costs set forth in SECTION 4 of SCHEDULE C as such
costs are actually incurred and become due and payable in the course of
PathNet's performance of its obligations under this Agreement.
4.5 CHANGE ORDERS This Agreement anticipates (i) future issuance of
change orders for equipment and services beyond the scope of the Services and
the items set forth on SCHEDULE C, and (ii) PathNet's provision of additional
equipment and services in accordance with such orders. To the extent mutually
agreed upon by the Parties, all such orders shall be deemed to be supplements to
and governed by the terms of this Agreement; provided PathNet and Incumbent's
Estimated Costs may be modified to reflect any agreed upon change orders.
SECTION 5. CONSIDERATION
5.1 CONSIDERATION PAID BY PATHNET. PathNet shall pay to Incumbent, as
consideration for all the rights and Incumbent obligations set forth in this
Agreement (including use of the Leased Premises):
(i) commencing on Commissioning, an allocation of up to [***]
of digital capacity, as set forth by the Parties in the Channel
Plan; PROVIDED, that Incumbent and Incumbent's Affiliates use such
allocation of DS-1's only for their own respective internal communications
needs;
14
(ii) commencing on the [***]
;
and
(iii) commencing on the [***]
.
SECTION 6. LEASEHOLD INTEREST.
6.1 LEASE Incumbent shall lease to PathNet and PathNet shall lease from
Incumbent an interest in each of Incumbent's sites and in the Facilities at such
sites set forth on SCHEDULE B as is necessary for the performance of PathNet's
rights and obligations under this Agreement (the "LEASED PREMISES").
6.2 TERM OF LEASE The term of PathNet's interest in the Leased Premises
and the Parties obligations under this SECTION 6, shall commence on the
Effective Date and shall end on the Expiration Date.
6.3 USE OF LEASED PREMISES.
6.3.1 PEACEFUL ENJOYMENT, USE AND ACCESS Incumbent shall grant to
PathNet the right to the peaceful use, enjoyment and possession of the
Leased Premises during the term of this Agreement as required for the
performance of PathNet's rights and obligations under this Agreement, which
rights shall include, but not be limited to (i) the right to use
Incumbent's Facilities and (ii) upon the reasonable request by PathNet, the
right to full and free access to Incumbent's sites, Facilities and related
equipment; PROVIDED, HOWEVER, any such access granted by Incumbent to
PathNet shall be subject to the security, health and safety and other
regulatory, procedural and policy requirements of Incumbent, as set forth
in SECTION 6.5.
6.3.2 INTERFERENCE During the term of this Agreement, Incumbent
shall not license or otherwise permit any Person to use its Facilities if
the use of such Facilities by such Person would cause any Interference on
the System. As of the Effective Date, Incumbent shall not permit any
Person to use its Facilities which use would in any way cause any
Interference on the System. Notwithstanding the foregoing in the event any
Person causes any Interference on the System, Incumbent shall use all best
efforts to compel such Person to immediately take any and all steps
necessary to correct and eliminate such Interference, including, without
limitation, enforcing provisions in any license or other agreement between
Incumbent and such Person and compelling such Person to cease operation of
such Person's system, to remove such Person's equipment or materials or to
modify such Person's equipment or materials. Incumbent acknowledges that
any Interference shall cause irreparable harm to PathNet and the prompt
cessation of
15
Interference is material to PathNet's interest in the Leased Premises and
PathNet's performance under this Agreement and, as such, PathNet shall be
entitled to injunctive relief in the enforcement of this SECTION 6.3.2.
6.4 VISITING AND EXITING FACILITIES Upon exiting any Facility at the
Leased Premises, PathNet, on behalf of itself and its employees, agents and
Subcontractors, shall ensure that such Facility is returned to the condition
which existed immediately prior to such visit except for such maintenance and
improvements performed during such visit.
6.5 SECURITY, DRUG TESTING, SUBSTANCE ABUSE AND HEALTH AND SAFETY.
6.5.1 SECURITY At the request of Incumbent, PathNet shall require
its employees, agents and Subcontractors upon any site visit to comply with
Incumbent's reasonable security procedures in effect as of the Effective
Date, which procedures are attached hereto as SCHEDULE E. If and to the
extent Incumbent requires PathNet employees, agents or Subcontractors to be
escorted to Incumbent facilities, such requirements shall be explicitly set
forth in SCHEDULE E. Notwithstanding the foregoing, Incumbent shall allow
PathNet employees, agents or Subcontractors to bring any testing equipment,
photographic equipment or both video and audio recording equipment
necessary for the performance of PathNet's obligations under this
Agreement.
6.5.2 DRUG TESTING At the request of Incumbent, PathNet shall
require its employees, agents and Subcontractors to submit to reasonable
drug testing in accordance with Incumbent's drug testing policies and
procedures in effect as of the Effective Date, which policies and
procedures are attached hereto as SCHEDULE F.
6.5.3 SUBSTANCE ABUSE POLICY At the request of Incumbent, PathNet
shall require its employees, agents or Subcontractors to comply with
Incumbent's reasonable substance abuse policies and procedures in effect as
of the Effective Date, which policies and procedures are attached hereto as
SCHEDULE G.
6.5.4 HEALTH AND SAFETY At the request of Incumbent, PathNet
shall require its employees, agents and Subcontractors to comply with
Incumbent's reasonable rules and regulations governing the health and
safety of its employees in effect on the Effective Date, which rules and
regulations are attached hereto as SCHEDULE H.
6.5.5 CLEARANCES AND OTHER REQUIREMENTS At the request of
Incumbent, PathNet shall require its employees, agents or Subcontractors to
(i) apply to Incumbent for any necessary reasonable clearances and (ii)
comply with all other reasonable and applicable requirements, rules,
regulations or ordinances regarding any Person's ability to have access to
Incumbent's sites and Facilities, including, but not limited to, the Leased
Premises, which requirements are set forth as SCHEDULE I.
6.6. SUBLETTING PathNet shall not sublet its interest in the Leased
Premises, in whole or in part, without the prior written consent of Incumbent;
PROVIDED, HOWEVER, PathNet shall have
16
the right to transfer and assign its rights or obligations under this Agreement
to any successor or assign in accordance with SECTION 19.7.
6.7 SURRENDER Upon the expiration of the Agreement in accordance with
SECTION 3, PathNet shall peacefully and quietly surrender occupation of the
Leased Premises to Incumbent, or Incumbent's successors and assigns, without
delivery by Incumbent to PathNet of any notice to quit or demand for possession.
6.8 COLOCATION Incumbent shall allow PathNet, at no additional charge, to
colocate at Incumbent's sites all equipment necessary to support the
Interconnections set forth on EXHIBIT A-6 to SCHEDULE A and any additional
interconnections equipment that may be added by PathNet from time to time and at
any time during the term of this Agreement, subject to the limitations set forth
in SECTION 3 of SCHEDULE A.
6.9 SUBORDINATION PathNet shall subordinate its interest in the Leased
Premises to (i) all deeds of trust, deeds to secure debts, mortgages and other
security instruments now or hereafter Encumbering all or any portion of the real
property described on SCHEDULE B (each, a "LEASED PREMISES ENCUMBRANCE") and
(ii) any increases, renewals, modifications, consolidations, replacements and
extensions of any such Leased Premises Encumbrance. In connection with such
subordination of PathNet's interest in the Leased Premises to all Leased
Premises Encumbrances, PathNet shall, as requested by Incumbent, within sixty
(60) days after the Effective Date, execute and deliver a commercially
reasonable subordination, non-disturbance and attornment agreement with all
Persons secured by such Leased Premises Encumbrances. PathNet shall, as
requested by Incumbent, execute and deliver similar subordination,
non-disturbance and attornment agreements with each future Person secured by a
Leased Premises Encumbrance.
6.10 REMOVAL OF EQUIPMENT PathNet shall, at Incumbent's request, remove
any or all Equipment from Incumbent's Facilities within sixty (60) days after
the Expiration Date. In the event PathNet fails to perform such requested
removal within such sixty (60) day period, as determined by Incumbent in its
sole discretion, Incumbent may restore each site to its condition as of
Commissioning, (reasonable wear and tear and damage from the elements excepted),
and PathNet shall promptly pay Incumbent all costs reasonably incurred by
Incumbent for such removal and restoration.
6.11 REMOVAL OF HAZARDOUS MATERIALS Within ninety (90) days after the
Expiration Date, PathNet shall remove from Incumbent's sites any and all
Hazardous Materials, which were brought to Incumbent's sites by PathNet during
the term of this Agreement.
6.12 SALE OF INITIAL SYSTEM Within ten (10) days after the expiration of
the Second Extension Period, if any, PathNet shall, upon request by Incumbent,
sell to Incumbent the radios and radio software relating to the Initial System
for a purchase price of one dollar ($1.00).
SECTION 7. PROGRAM MANAGEMENT AND PROJECT MANAGEMENT.
17
7.1 PROGRAM MANAGER In connection with the Services and other services
performed by PathNet under this Agreement, PathNet shall provide a Program
Manager whose duties shall include (i) supervising the project through design,
installation and operation, (ii) supervising the Project Manager, (iii)
overseeing the Field Manager and the other PathNet personnel, (iv) coordinating
the business operations of the System including the sale of Excess Capacity as
set forth in SECTION 10, (v) ensuring the performance of PathNet's rights and
obligations under this Agreement and (vi) coordinating with Incumbent to ensure
the integrity of Incumbent's existing system through cutover.
7.2 PROJECT MANAGEMENT FOR MODIFICATIONS In connection with the
modifications of the Facilities set forth in SECTION 2 of SCHEDULE A, PathNet
shall provide a Project Manager, a Field Manager, an Applications Engineer and a
Project Engineer, each of whom shall have the duties as set forth in SECTION 7.4
with respect to such modifications of the Facilities.
7.3 PROJECT MANAGEMENT FOR INSTALLATION In connection with the
installation of the System set forth in SECTION 4 of SCHEDULE A, PathNet shall
provide a Project Manager, a Field Manager, an Applications Engineer and a
Project Engineer, each of whom shall have the duties as set forth in SECTION 7.4
with respect to such installation of the System.
7.4 PATHNET PROJECT MANAGEMENT PERSONNEL The Project Managers, Field
Managers, Applications Engineers and Project Engineers shall each have the
duties as set forth below:
(a) PROJECT MANAGER. Duties shall include ensuring the overall
functional integrity of the delivered System, the preparation, amendment
and adherence to a construction schedule, and compliance with PathNet's
other obligations under SCHEDULE A.
(b) FIELD MANAGER. Duties shall include the oversight and direction
of all on-site activities, the coordination of all Subcontractors and all
required communication with the Project Manager.
(c) APPLICATIONS ENGINEER. Duties shall include the review and
translation of the System configuration into specific hardware
requirements, precise interface levels, intra and inter-rack cabling and
all other necessary peripheral equipment, rack profiles and required
Interconnection data.
(d) PROJECT ENGINEER. Duties shall include the performance of all
planning and support activities and a detailed site survey to gather data
for development of the installation plan and testing plan.
SECTION 8. SERVICES AND SYSTEMS SPECIFICATIONS.
8.1 SERVICES.
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8.1.1 SYSTEM DESIGN, MODIFICATION, INSTALLATION, OPERATION AND
PERFORMANCE PathNet and Incumbent shall perform their respective functions
with respect to the design, modification, installation, operation and
performance of the System as set forth on SCHEDULE A and in this SECTION 8
(the "SERVICES").
8.1.2 UPGRADE OF SYSTEM In accordance with its performance of the
Services, PathNet shall have the right to, at its own expense, upgrade the
System and Equipment, and the System and Equipment operation policies and
procedures, including, but not limited to, (i) replacing Equipment, (ii)
adding newly available improved Equipment and (iii) modifying policies,
procedures and specifications relating to the System, to conform such
policies, procedures and specifications with new Technology or industry
standards.
8.1.3 INCUMBENT TRAINING PathNet shall provide to Incumbent the
training as set forth on SCHEDULE J.
8.1.4 PERFORMANCE OF THE SERVICES PathNet shall have the right to
engage Subcontractors to perform any of the Services.
8.2 SPECIFICATIONS.
8.2.1 GENERAL PathNet and Incumbent shall perform the Services in
accordance with any and all technical and operational specifications set
forth in SCHEDULE A (the "SPECIFICATIONS").
8.2.2 CHANNEL PLAN.
(a) ORIGINAL CHANNEL PLAN. On the Effective Date, Incumbent
shall deliver to PathNet a proposed T-1 channelization plan setting
forth its proposed capacity needs at each site listed on SCHEDULE B.
Such capacity shall in no event exceed the capacity granted to
Incumbent by PathNet as consideration as set forth in SECTION 5 and
shall be subject to Drop and Insert capacity at each Switched Mod
Section. PathNet shall incorporate Incumbent's proposed
channelization plan into the Channel Plan subject to the limitations
set forth in this SECTION 8.2.2.
(b) AMENDED CHANNEL PLAN. Incumbent shall have the right to
modify its allocated capacity (as described in the Channel Plan) along
the network any time after Commissioning, provided that sufficient
Drop and Insert capacity exists between each Switched Mod Section
using available Wayside Channels to effect such modification, by
providing written notice to PathNet to such effect. Within ninety
(90) days after receipt of any such written notice from Incumbent,
PathNet shall make such modification to the configuration of the
Channel Plan at no charge to Incumbent. Incumbent shall not
reconfigure the Channel Plan in any manner other than as set forth in
this SECTION 8.2.2..
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8.2.3 SPECIFICATIONS, STANDARDS AND INSPECTIONS In connection
with the Services set forth in SECTION 2 and SECTION 4 of SCHEDULE A,
PathNet shall comply with the following requirements:
(a) REASONABLE EFFORTS. PathNet shall use commercially
reasonable efforts to ensure that the modification of the System set
forth in SECTION 2 of SCHEDULE A and the installation of the System
set forth in SECTION 4 of SCHEDULE A occur as expeditiously as
possible.
(b) INDUSTRY STANDARDS. All Services and materials supplied
pursuant to SCHEDULE A must meet or exceed all applicable
Specifications. Where Specifications are not stated, such work
performed and materials supplied will meet all applicable provisions
of the following standards: (i) EIA RS-195 (latest edition), (ii)
EIA/TIA-222 (latest edition), (iii) American Society of Testing
Materials A 325 and A 572, (iv) the applicable sections of the
National Electric Code, (v) the American National Standards Institute,
(vi) XXX 000-00, (xxx) XXX-000, (xxxx) XXX-000, (xx) OSHA 29 CFR 1910
and (x) all other applicable Federal, state and local regulations of
all Governmental Authorities with jurisdiction; PROVIDED, HOWEVER, in
the case of a conflicting requirement of standards, the more stringent
standard shall apply.
(c) SITE INSPECTIONS. During the performance of the Services,
Incumbent shall allow PathNet to perform site inspections at any hour,
on any day subject to the access limitations set forth in SECTION
6.5.1.
8.3 MAINTENANCE OF THE SYSTEM. Within sixty (60) days after the Effective
Date, Incumbent and PathNet shall execute and deliver the Maintenance Services
Agreement. PathNet shall have the right to supplement at its own expense at any
time, and from time to time, any maintenance performed on the System as
determined by PathNet.
SECTION 9. OWNERSHIP, DEPRECIATION AND ENCUMBRANCE OF SYSTEM.
9.1 OWNERSHIP OF EQUIPMENT AND ASSETS.
9.1.1 EQUIPMENT AND ASSETS OWNED BY INCUMBENT Incumbent shall own
the equipment and assets relating to the System as set forth in SCHEDULE K.
9.1.2 EQUIPMENT AND ASSETS OWNED BY PATHNET PathNet shall own the
equipment and assets relating to the System as set forth in SCHEDULE K.
9.2 DEPRECIATION OF EQUIPMENT.
20
9.2.1 DEPRECIATION BY INCUMBENT Incumbent shall have the right to
fully depreciate the equipment and assets currently owned or to be owned by
Incumbent as listed in SCHEDULE K.
9.2.2 DEPRECIATION BY PATHNET PathNet shall have the right to
fully depreciate the equipment and assets currently owned or to be owned by
PathNet as listed in SCHEDULE K.
9.3 ENCUMBRANCE.
9.3.1 INITIAL SYSTEM PathNet shall not Encumber the radios, radio
software, antenna, waveguide multiplexers or any other equipment required
to operate the Initial System in accordance with the Specifications.
9.3.2 OTHER EQUIPMENT, MATERIALS, AGREEMENTS AND ASSETS PathNet
shall have the right to Encumber (i) the Equipment used in any Capacity
Expansion, (ii) the Revenue generated from the sale of Excess Capacity in
accordance with SECTION 9, (iii) any Customer Agreement relating to the
System, (iv) this Agreement and any related documents, instruments and
agreements executed and delivered in connection with this Agreement and any
rights or obligations hereunder or thereunder and (v) its leasehold
interest in the Leased Premises.
9.3.3 VENDOR REMEDIES Incumbent hereby acknowledges that pursuant
to the Encumbrances granted by PathNet to certain equipment vendors or
service providers or other lenders in accordance with SECTION 9.3.2, such
vendors or providers shall have the right to assume and perform PathNet's
rights and obligations under this Agreement and the other documents,
instruments and agreements executed in connection hereto.
9.4 TAXES The Parties' respective responsibilities for taxes arising
under or in connection with this Agreement shall be as follows: (i) each Party
shall be responsible for any personal or real property taxes on property it owns
or leases, for franchise and privilege taxes on its business and for taxes based
on its net income or gross revenue and (ii) PathNet shall be responsible for any
sales, use, excise, value-added services, consumption and other taxes and duties
payable by Incumbent on any goods and services used or consumed in providing the
services to be performed by PathNet under this Agreement, where the tax is
imposed on Incumbent's acquisition or use of such goods or services and the
amount of the tax is measured by Incumbent's costs in acquiring such goods or
services; PROVIDED, HOWEVER, that PathNet shall not be responsible for any
Federal, state or local income taxes of Incumbent or any franchise taxes of
Incumbent.
9.5 SECURITY INTEREST IN INITIAL SYSTEM On the Effective Date, PathNet
and Incumbent shall execute and deliver the Security Agreement substantially on
the form attached hereto as SCHEDULE O, pursuant to which, among other things,
PathNet shall grant Incumbent a
21
security interest in the radio, radio software, antenna, waveguide, multiplexers
and any other Equipment required to operate the Initial System.
SECTION 10. EXCESS CAPACITY MARKETING AND SALES.
10.1 EXCLUSIVE REPRESENTATIVE.
10.1.1 PATHNET EXCESS CAPACITY PathNet shall have the exclusive
right to market and sell any and all PathNet Excess Capacity.
10.1.2 INCUMBENT EXCESS CAPACITY At any time and from time to
time, Incumbent shall have the right to request in writing that PathNet
serve as Incumbent's exclusive representative for the marketing and sale of
all or any portion of the capacity allocated to Incumbent in accordance
with the Channel Plan (the "INCUMBENT EXCESS CAPACITY"). Such written
notice shall set forth, (i) that portion of the Incumbent Excess Capacity
to be marketed and sold by PathNet, (ii) the length of time that such
portion of the Incumbent Excess Capacity will be available to be marketed
and sold, and (iii) that Incumbent acknowledges that such Incumbent Excess
Capacity shall not be available for Incumbent's use during the time
specified in such written notice. Upon receipt of such written notice
PathNet shall serve as Incumbent's exclusive representative for the
marketing and sale of such Incumbent Excess Capacity; PROVIDED, HOWEVER,
that PathNet shall have the right, as determined by PathNet in its sole
discretion, to sell the PathNet Excess Capacity on any path or Segment
before selling the Incumbent Excess Capacity on such path or Segment.
10.1.3 MARKETING FEE FOR SALE OF INCUMBENT EXCESS CAPACITY In the
event PathNet sells any Incumbent Excess Capacity, PathNet shall receive a
marketing fee in the amount of [***]
of such Revenue).
10.1.4 MARKETING AND SALE BY INCUMBENT Incumbent or any Affiliates
of Incumbent shall not market or sell any Incumbent Excess Capacity or any
capacity purchased by Incumbent pursuant to SECTION 10.3 to any third party
without the prior written consent of PathNet; PROVIDED, HOWEVER, Incumbent
may market and sell all or any portion of the Incumbent Excess Capacity or
any capacity purchased by Incumbent pursuant to SECTION 10.3, to Affiliates
of Incumbent for and only for such Affiliates' internal communications
needs and not for resale to third parties.
10.2 REFERRALS OF CUSTOMERS BY INCUMBENT Incumbent shall refer any
potential third party customer of Excess Capacity to PathNet.
10.3 PURCHASE OF AVAILABLE EXCESS CAPACITY BY INCUMBENT Incumbent shall
have the right to purchase Available Excess Capacity on any path or Segment of
the System (each
22
such path or Segment being referred to herein as an "INCUMBENT DESIRED PATH"),
at a price equal to either (i) the lowest price paid to PathNet for like
capacity and for a similar term by any purchaser during the one hundred eighty
(180) days immediately preceding the purchase by Incumbent of capacity on such
Incumbent Desired Path or (ii) if no PathNet Excess Capacity has been purchased
on such Incumbent Desired Path during such one hundred eighty (180) day period,
the last price paid for such Incumbent Desired Path; PROVIDED, HOWEVER,
Incumbent shall in no event under clause (i) or clause (ii) above purchase more
than twenty percent (20%) of the Available Excess Capacity on any Segment or
path within the System at any given time.
10.4 COMMERCIALLY REASONABLE EFFORTS PathNet shall use commercially
reasonable efforts to obtain the best available price and terms in the marketing
and sale of any Excess Capacity. PathNet shall not, now or in the future,
guarantee any Revenue disbursements nor does PathNet warrant as to its ability
to sell the Excess Capacity.
10.5 SELLING PRICES FOR EXCESS CAPACITY Notwithstanding anything set forth
herein to the contrary, PathNet shall have the right to (i) sell Excess Capacity
at prices determined by PathNet to be appropriate on specific routes, which
prices may be below or above current competitive market pricing, (ii) package
the Excess Capacity in sales increments of DS-1's, DS-3's or OC-3's, or any
other increments and (iii) aggregate the paths sold in various combinations,
each as determined by PathNet in its sole discretion.
10.6 BARTER ARRANGEMENTS Incumbent shall be permitted to barter Incumbent
Excess Capacity for telecommunications capacity of other incumbents engaged by
PathNet; PROVIDED, HOWEVER, PathNet shall have the right to approve any barter
arrangement relating to Incumbent Excess Capacity, which approval shall not be
unreasonably withheld. Neither PathNet nor Incumbent shall derive any fee from
facilitating any such barter arrangements.
10.7 ASSUMED NAME; TRADENAMES AND TRADEMARKS PathNet shall have the right
to market Excess Capacity under its name or any other assumed name, tradename or
trademark which PathNet is authorized to use for such purpose; PROVIDED,
HOWEVER, PathNet shall not use any trademark or tradename of Incumbent or any
Affiliate of Incumbent in written material for purposes of marketing any Excess
Capacity without the prior written consent of Incumbent.
10.8 CUSTOMER AGREEMENTS.
10.8.1 AUTHORIZATION PathNet shall negotiate, execute and deliver,
on behalf of itself and Incumbent, all agreements and arrangements
("CUSTOMER AGREEMENTS") for customers of Excess Capacity, which Customer
Agreements shall contain, terms and conditions determined by PathNet in its
sole discretion.
10.8.2 APPROVAL AND CONSENT BY INCUMBENT If the terms of any
Customer Agreement require the written approval or consent of Incumbent as
a condition to the execution, delivery or performance, Incumbent shall
promptly provide such written approval or consent.
23
10.8.3 MODIFICATIONS TO SYSTEM In the event that any Customer
Agreement requires that the System be modified in any way, PathNet shall
ensure that any such modifications (i) shall not compromise the integrity
and performance of the System in accordance with the Specifications and
(ii) shall be made at no additional cost to Incumbent.
10.9 MAINTENANCE OF BOOKS AND RECORDS AND AUDIT PROCEDURES.
10.9.1 BOOKS AND RECORDS PathNet shall maintain and keep detailed
and accurate books and records with regard to sales of Excess Capacity and
the Revenue from such sales.
10.9.2 INCUMBENT REVIEW AND AUDIT PROCEDURES No more than once
during any consecutive twelve (12) month period, Incumbent shall be
entitled to review and audit PathNet's books and records relating to the
sale of Excess Capacity during business hours upon ten (10) days written
notice to PathNet. Incumbent shall not have the right pursuant to this
SECTION 10.9.2, to review or audit PathNet's corporate income statements,
balance sheets or other forms of general corporate reporting, except that
Incumbent shall receive a copy of an excerpt from PathNet's annual audit
report that relates to the sale of excess capacity from its System.
Incumbent shall not disclose, at any time before or after the Expiration
Date, any information related to PathNet or PathNet's business obtained by
Incumbent pursuant to a review or audit performed under this SECTION 10.9.2
unless such information has previously come into the public domain (other
than through unauthorized disclosure) or except as required by law.
10.9.3 EXPENSES OF INCUMBENT REVIEWS AND AUDITS Incumbent shall
pay the cost of any such review or audit performed pursuant to SECTION
10.9.2.
10.9.4 APPROVAL OF AUTHORIZED REPRESENTATIVE In the event that
Incumbent hires an authorized representative of Incumbent to perform any
such review or audit pursuant to SECTION 9.9.2, PathNet shall have the
right to approve such authorized representative before any access is
granted to such authorized representative to PathNet's books and records,
which approval shall not be unreasonably withheld.
10.10 QUARTERLY REVENUE REPORTS PathNet shall issue to Incumbent
quarterly revenue reports substantially in the form of SCHEDULE L (each a
"QUARTERLY REVENUE REPORT") within thirty (30) days after the end of each
calendar quarter. Each such Quarterly Revenue Report shall be an unaudited
statement produced by PathNet.
10.11 COLLECTION AND PAYMENT OF REVENUE.
10.11.1 COSTS OF COLLECTION PathNet shall deduct any costs
reasonably incurred by PathNet in connection with the collection of any and
all revenue generated from the sale of Excess Capacity, including, but not
limited to, the cost of any legal actions, collection fees, court
proceedings, audits, or other enforcement actions. PathNet
24
shall deduct such costs from gross revenue collected prior to the
disbursement of such revenue to PathNet and Incumbent pursuant to SECTION 5
and SECTION 10.
10.11.2 MAINTENANCE MONTHLY SERVICE CHARGES The amount of any
Maintenance Monthly Service Charges (as such term is defined in the
Maintenance Services Agreement) paid by PathNet to Incumbent pursuant to
the Maintenance Services Agreement, shall be deducted from gross revenue
collected prior to disbursement of such revenue to PathNet and Incumbent
pursuant to SECTION 5 and SECTION 10.
10.11.3 TAXES ON GROSS REVENUES The amount of any taxes on gross
revenue paid by PathNet on behalf of Incumbent shall be deducted from any
revenue to be disbursed to Incumbent prior to disbursement of such revenue
as set forth in this SECTION 10.11.
10.11.4 DEFINITION OF REVENUE For purposes of this Agreement,
"REVENUE" shall mean the gross revenue generated from the sale of Excess
Capacity actually collected less any deductions set forth in SECTION
10.11.1, SECTION 10.9.2 and SECTION 10.11.3.
10.11.5 PAYMENTS TO INCUMBENT PathNet shall pay Incumbent its
allocated portion of Revenue actually received from the sale of Excess
Capacity within thirty (30) days after the end of each calendar quarter in
accordance with the payment instructions set forth in SCHEDULE M.
10.11.6 INTEREST EARNED ON UNDISTRIBUTED REVENUE PathNet shall
retain any and all interest earned by PathNet on any Revenue collected but
not yet distributed to Incumbent in accordance with SECTION 5 and SECTION
10.
10.11.7 INCUMBENT'S ASSIGNEES OF REVENUES Incumbent shall have the
right to designate other entities to receive its disbursements by written
notice to PathNet to such effect; PROVIDED, HOWEVER, any such designation
by Incumbent shall not relieve Incumbent of any tax liability resulting
from its receipt of such disbursements pursuant to SECTION 5 and SECTION
10.
SECTION 11. FCC LICENSES AND OTHER REGULATORY APPROVALS AND LICENSES.
11.1 FCC RULES AND REGULATIONS.
11.1.1 MICROWAVE RADIO STATION LICENSES.
(a) PREPARATION AND FILING OF FORMS 415. PathNet shall
prepare and timely file all required Form 415, Applications for
Authorization in the Microwave Services (each a "FORM 415"), or
any successor forms, documents or instruments to such Form 415 as
the FCC may prescribe, including but not limited
25
to, the preparation or ordering of all frequency coordinations
required pursuant to Schedule B and Schedule C of Form 415, in
order to own, operate and sell the Excess Capacity of the System
in accordance with the terms and conditions of this Agreement.
(b) IDENTITY OF LICENSEE. All Microwave Radio Station
Licenses issued by the FCC relating to the System shall be
licensed in the name of PathNet or a wholly-owned subsidiary of
PathNet. Incumbent shall be permitted to continue to own and be
licensed as a private microwave operator at the stations licensed
to PathNet relating to the System, provided that (i) such private
licenses are for different frequency pairs than those assigned to
the System (including, but not limited to, any Capacity Expansion
of the System) and (ii) such private licenses are permitted under
the FCC Code.
(c) MAINTENANCE OF LICENSE. PathNet shall maintain in good
standing each Microwave Radio Station License relating to the
System, including, but not limited to, preparing and filing any
required amendments to the Forms 415 relating to the System and
submitting and filing any supplementary information as required
by the FCC.
11.1.2 COMMON CARRIER REPORTING OBLIGATIONS PathNet shall prepare
and file all forms, reports, instruments, documents and agreements required
by the FCC and FCC Code relating to PathNet's status as a "common carrier"
under the FCC Code.
11.1.3 TARIFF FILINGS PathNet shall prepare and timely file all
tariff applications pursuant to 47 CFR 61.1, as amended, or any successor
statute, rule or regulation and shall request and file all necessary
waivers of such tariff requirements, as determined by PathNet in its sole
discretion.
11.1.4 FREQUENCY COORDINATION NOTICES During the term of this
Agreement, PathNet shall prepare and send all required frequency
coordination notices required under 47 CFR 101.103, as amended, or any
successor statute, rule or regulation and shall respond as appropriate to
all PCNs received by PathNet or Incumbent relating to the System.
11.1.5 DELIVERY OF COPIES Upon Incumbent's request, PathNet shall
provide to Incumbent a copy of all filings and submissions with the FCC,
relating to the System within thirty (30) days of such request by
Incumbent.
11.1.6 ASSISTANCE IN PREPARATION OF LICENSE APPLICATIONS Upon
request by PathNet and in a timely manner, Incumbent shall provide to
PathNet all information necessary for the completion of all required
filings and submissions with the FCC including, but not limited to
Incumbent's authorized signature on any filings or other submissions to the
FCC or any documents, instruments or agreements completed in connection
with such filings and submissions.
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11.1.7 FUTURE CHANGES IN FCC REQUIREMENTS If FCC requirements
relating to the Form 415, common carriers, frequency coordination or any
other matters relating to the System change or are modified, PathNet shall
be responsible for compliance with such new requirements including, but not
limited to, the payment of any costs or fees associated therewith and
Incumbent shall cooperate with PathNet with respect to such compliance;
PROVIDED, HOWEVER, if the FCC establishes user fees regulatory fees,
universal service fees, forfeitures or other such fees relating to the
frequencies used in and the communications business conducted over the
System, the cost of such additional fees shall be divided between PathNet
and Incumbent, as determined by PathNet and Incumbent at such time.
11.1.8 SPECTRAL LOADING REQUIREMENTS PathNet shall (i) ensure that
the System, as licensed, shall comply with all spectral loading
requirements set forth in 47 CFR 101.141, or any successor statute, rule or
regulation or (ii) obtain a waiver of any or all of such requirements;
PROVIDED, HOWEVER, if the System does not meet such spectral loading
requirements and PathNet is unable to obtain a waiver of such requirements,
PathNet shall have the right to modify the System to a hot-standby
Protection Configuration until such time as the spectral loading
requirements can be met.
11.1.9 DEFAULT IN FCC LICENSE In the event that the FCC institutes
a penalty against or fine imposed on PathNet, Incumbent, or the System, by
a final, non-appealable order, due to non-compliance with any FCC
requirements, PathNet shall promptly pay such penalty or fine (in the case
such penalty or fine is instituted as the result of an act or omission on
the part of PathNet) or Incumbent shall promptly pay such penalty or fine
(in the event such penalty or fine is instituted as the result of an act or
omission on the part of Incumbent).
11.2 ZONING REQUIREMENTS Incumbent shall be responsible for compliance
with all zoning requirements applicable to the System and its Facilities,
including, but not limited to, the Leased Premises. Incumbent shall advise
PathNet of zoning requirements, which, in the reasonable opinion of Incumbent,
differ from those generally applicable to microwave facilities. PathNet shall
provide to Incumbent all required information and shall cooperate with Incumbent
in connection with Incumbent's compliance with all zoning requirements pursuant
to this SECTION 11.2.
11.3 BUREAU OF LAND MANAGEMENT REQUIREMENTS Incumbent shall be responsible
for compliance with all United States Department of Interior Bureau of Land
Management requirements applicable to the System and its Facilities, including,
but not limited to, the Leased Premises. PathNet shall provide Incumbent with
all requested information and shall cooperate with Incumbent in connection with
Incumbent's compliance with such United States Department of Interior Bureau of
Land Management requirements pursuant to this SECTION 11.3.
11.4 TOWER REGISTRATION Incumbent shall ensure compliance with all FAA and
FCC tower registration requirements including, but not limited to, the
preparation of any filings with or the obtaining of any waivers or extensions
from the FAA or FCC. Incumbent shall promptly
27
notify PathNet of any deficiency on non-compliance with any such tower
registration requirements, filings, waivers or extensions.
SECTION 12. INSURANCE.
12.1 DELIVERY OF CERTIFICATES OF INSURANCE Prior to the commencement of
any Services by PathNet, PathNet shall deliver to Incumbent Certificates of
Insurance relating to PathNet's Commercial General Liability Insurance Policy,
Workers Compensation Insurance Policy, Automobile Liability Insurance and Excess
Liability Insurance Policy.
12.2 PATHNET INSURANCE COVERAGE During the term of this Agreement, PathNet
shall maintain the types of insurance at the coverage limits set forth below:
(a) WORKER'S COMPENSATION INSURANCE. Workers Compensation Insurance
as required by laws and regulations applicable to and covering Persons
performing the Services;
(b) COMMERCIAL GENERAL LIABILITY INSURANCE. Commercial General
Liability Insurance with a limit of not less than $3,000,000 per occurrence
and $ 5,000,000 in the aggregate;
(c) AUTOMOBILE LIABILITY INSURANCE. Automobile Liability Insurance,
which includes coverage for non-owned and hired vehicles with a limit of
not less than $1,000,000; and
(d) EXCESS LIABILITY INSURANCE. Excess Liability Insurance with a
limit of not less than $4,000,000.
12.3 INCUMBENT INSURANCE COVERAGE Incumbent shall maintain insurance
coverage on properties and operations of Incumbent to the extent necessary to
permit PathNet to operate the System and perform its obligations in event of any
property or operations damages or losses which coverage shall include general
liability and other forms of insurance covering such risks as are usually
insured against by prudent companies engaged in the business and activities in
which the Incumbent is engaged, in amount which are adequate in relation to the
business and properties of Incumbent, and all premiums to date have been paid in
full.
12.4 PROOF OF LICENSED SUBCONTRACTORS PathNet shall provide to Incumbent
proof of licensing and certification of insurance for any Subcontractors engaged
by PathNet to provide Services, during the term of such engagement.
SECTION 13. SOFTWARE AND PROPRIETARY RIGHTS.
13.1 PATHNET SOFTWARE PathNet retains all right, title and interest in and
to PathNet Software. As of the Effective Date and pursuant to the PathNet
Sublicense Agreement attached
28
hereto as SCHEDULE N, Incumbent is granted a nonexclusive sublicense to use
PathNet Software for the sole purpose of receiving the services pursuant to this
Agreement. PathNet Software will be made available to Incumbent in such form
and on such media as exists on the Effective Date, together with existing
documentation and any other related materials. Incumbent shall not be permitted
to use PathNet Software for the benefit of any entities other than PathNet
without the prior written consent which may be withheld at PathNet's sole
discretion. Except as otherwise requested or approved by PathNet, Incumbent
shall cease all use of PathNet Software upon expiration of this Agreement.
13.2 PROPRIETARY RIGHTS Incumbent acknowledges and agrees that all or
portions of the information and materials, including but not limited to the
PathNet Software and related documentation to be supplied by PathNet hereunder
are owned by PathNet and/or others and are proprietary in nature. Incumbent
also acknowledges and agrees that PathNet and/or its suppliers have and will
retain all proprietary rights in such information and materials. Incumbent (i)
shall respect such claim of proprietary right, (ii) shall protect such
information at least to the extent that it protects its own proprietary
information, (iii) shall not use such information except for the purposes for
which its is being made available as set forth in this Agreement and (iv) shall
not reproduce, print, disclose, or otherwise make said information available to
any third party, in whole or in part, in whatever form.
SECTION 14. REPRESENTATIONS AND WARRANTIES.
14.1 REPRESENTATIONS AND WARRANTIES OF EACH PARTY Each Party hereby
represents and warrants as follows:
14.1.1 DUE INCORPORATION AND FORMATION; AUTHORIZATION OF
AGREEMENTS; BINDING EFFECT Such Party is a corporation or partnership, as
the case may be, duly formed or organized, and validly existing under the
laws of its state of incorporation or organization, and has the corporate
or partnership authority to own its property and carry on its business as
owned and carried on as of the Effective Date. Such Party is duly licensed
or qualified to do business and is in good standing (if applicable) in each
jurisdiction in which the failure to be so licensed or qualified would have
a Material Adverse Effect on such Party. Such Party has the corporate or
partnership authority to execute and deliver this Agreement, to perform its
obligations hereunder, and to consummate the transactions contemplated
hereby. This Agreement has been duly authorized, executed and delivered by
such Party and this Agreement constitutes a legal, valid and binding
obligation of such Party enforceable in accordance with its terms, subject
as to enforceability to limits imposed by bankruptcy, insolvency or similar
laws affecting creditors rights generally and the availability of equitable
remedies.
14.1.2 NO CONFLICT; NO DEFAULT Neither the execution or delivery
of this Agreement by such Party, nor the performance of this Agreement by
such Party or the consummation by such Party of the transactions
contemplated hereby in accordance with the terms and conditions hereof:
(i) will conflict with, violate, result in a breach of or constitute a
default under any of the terms, conditions or provisions of the certificate
or
29
articles of incorporation or bylaws (or other governing documents) of such
Party or any material agreement or instrument to which such Party is a
party or by which such Party may be bound, (ii) will conflict with, violate
or result in a breach of, constitute a default under (whether with notice
or lapse of time or both), accelerate or permit the acceleration of the
performance required by, give to others any interests or rights or require
any consent, authorization or approval under any contract to which such
Party is a party or by which such Party is or may be bound or to which any
equity interest held by such Party or any of its material properties or
assets is subject or (iii) will result in the creation or imposition of any
Encumbrance upon any equity interest held by such Party or any of the other
material properties or assets of such Party, other than Permitted
Encumbrances.
14.1.3 NO CONSENT No consent, approval, order or authorization of,
or registration, declaration or filing with any Governmental Authority,
domestic or foreign, is required to be obtained by such Party in connection
with the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby, except those that
have been obtained and are in full force and effect pursuant to Section
14.1.5, except that the approval of Rural Utilities Service, United States
Department of Agriculture, is required on behalf of Incumbent.
14.1.4 COMPLIANCE WITH LAWS AND REGULATIONS That the performance
of such Party's obligations under this Agreement will not result in a
violation in any respect of (i) any applicable Federal, state, local or
foreign laws, ordinances, regulations, rulings and orders of government
agencies applicable to its business in any respect the violation of which
could have a Material Adverse Effect (including Requirements of Law
relating to pollution, protection of the environment, releases or
threatened releases of pollutants, contaminants, hazardous or regulated
substances or wastes into the environment or (ii) any applicable order,
Judgment, injunction, award or decree in any respect which could have a
Material Adverse Effect on such Party.
14.1.5 PERMITS Such Party has or will obtain all authorizations,
approvals, consents, licenses, Permits and certificates (including, but not
limited to all required approvals from the FCC) necessary to conduct their
respective businesses and to own, lease and operate its properties as
currently or anticipated to be conducted, owned, leased or operated, as the
case may be, for which the failure to possess would result in a Material
Adverse Effect. No violations are outstanding or uncured with respect to
any such Permits and no proceeding is pending to revoke or limit any
Permit.
14.1.6 TITLE TO ASSETS, PROPERTIES AND RIGHTS AND RELATED MATTERS
Except as set forth on SCHEDULE K, such Party has, and will continue to
have for the term of this Agreement as set forth in SECTION 3, good and
marketable title to all the properties, interests in properties and assets,
real, personal or mixed, necessary for the conduct of such Party's business
and for the transactions contemplated by this Agreement (including, but not
limited to, any rights of way, leasehold interests, easements, proofs of
dedication and rights necessary for PathNet to perform its obligations
hereunder without any Interference, provided that prevention of such
Interference is within the reasonable control of Incumbent) free and clear
of all Encumbrances of any kind or character, except
30
(i) liens for current taxes not yet due and payable, (ii) Encumbrances
securing taxes, assessments, governmental charges or levies or the
Encumbrances of materialmen, carriers, landlords and like persons, all of
which are not yet due and payable, (iii) minor Encumbrances of a character
that do not substantially impair the assets or properties of such Party or
which will not have a Material Adverse Effect on such Party and (iv) first
mortgage of Rural Utilities Service, United States Department of
Agriculture on all assets of Incumbent.
14.1.7 LABOR MATTERS Such Party has complied in all material
respects with all applicable Federal, state and local laws and ordinances
relating to the employment of labor, including the provisions thereof
relating to wages, hours, employee benefit plans and the payment of social
security taxes, and is not liable for any arrears of wages or any tax
related thereto (except for currently accrued and unpaid wages and except
for currently accrued withholding, payroll, unemployment and social
security taxes payment of which is not overdue) or penalties for failure to
comply with any of the foregoing, and neither has received a notice to the
contrary from any Governmental Authority. Such Party has not suffered any
strike, slowdown, picketing or work stoppage by any union or other group or
employees affecting the business of such Party, and no such event or action
is threatened.
14.1.8 NO DISCRIMINATION Such Party currently subscribes and
offers and will continue to subscribe and offer to all customers,
employees, licensees, and invitees the opportunity to obtain all the goods,
services, accommodations, advantages, facilities and privileges of such
Party without discrimination because of race, creed, color, sex, age,
national origin or ancestry, in accordance with all applicable Federal,
state, and local laws relating to equal opportunity and discrimination.
14.1.9 DISCLAIMER EXCEPT AS EXPRESSLY PROVIDED HEREIN, NEITHER
PATHNET NOR INCUMBENT MAKES ANY OTHER EXPRESS WARRANTY AND THERE ARE NO
IMPLIED WARRANTIES WITH RESPECT TO ANY TECHNOLOGY, GOODS, SERVICES, RIGHTS
OR OTHER SUBJECT MATTER OF THIS AGREEMENT. PATHNET AND INCUMBENT HEREBY
DISCLAIM THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE WITH RESPECT TO ANY AND ALL OF THE FOREGOING.
14.2 REPRESENTATIONS AND WARRANTIES OF PATHNET.
14.2.1 SERVICES PathNet warrants (i) that the Services will be
performed in a workmanlike manner and (ii) that it has or will obtain
agreements or arrangements with its employees, agents and Subcontractors
sufficient to allow it to provide Incumbent with the Services;
SECTION 15. DELIVERIES.
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15.1 DELIVERIES BY INCUMBENT On or before the Effective Date, Incumbent
shall provide to PathNet (i) evidence of ownership by Incumbent of the sites set
forth on SCHEDULE B or, in the event Incumbent leases such sites, evidence of
Incumbent's leasehold interest in such sites and (ii) copies of all
environmental reports, title reports, surveys, specified or legal access, and
zoning Permits and licenses relating to the sites set forth on SCHEDULE B.
SECTION 16. INDEMNIFICATION AS A RESULT OF THIRD PARTY CLAIMS.
16.1 INDEMNIFICATION BY INCUMBENT Incumbent agrees to indemnify, defend
and hold harmless PathNet and its Affiliates and their respective officers,
directors, employees, agents, successors and assigns from and against any and
all Losses and threatened Losses arising from, in connection with, or based on
allegations of, any of the following:
(a) any claims of infringement of any patent, trade secret,
copyright or other proprietary rights alleged to have occurred because of
systems or other resources provided to PathNet by Incumbent.
(b) any claims arising out of the untruth, inaccuracy or breach
of any representation or warranty of Incumbent set forth in this Agreement.
(c) the liability of PathNet for (i) any personal injury,
disease or death of any person, (ii) damage to or loss of any property,
money damages or specific performance owed to any third party (by contract
or operation of law) or (iii) any fines, penalties, taxes, claims, demands,
charges, actions, causes of action, assessments, environmental response
costs, environmental penalties or injunctive obligations caused by, arising
out of, or in any way incidental to, or in connection with, actions or
omissions of Incumbent, its officers, directors, employees, Subcontractors
or agents.
16.2 INDEMNIFICATION BY PATHNET
. PathNet agrees to indemnify, defend and hold harmless Incumbent and its
Affiliates and their respective officers, directors, employees, agents,
successors and assigns from and against any and all Losses and threatened Losses
arising from, in connection with, or based on allegations of, any of the
following:
(a) Any claims of infringement of any patent, trade secret,
copyright or other proprietary rights alleged to have occurred because of
systems or other resources provided by Incumbent to PathNet.
(b) Any claims arising out of the untruth, inaccuracy or breach
of any representation or warranty of PathNet set forth in this Agreement.
(c) The liability of Incumbent for (i) any personal injury,
disease or death of any person, (ii) damage to or loss of any property,
money damages or specific performance owed to any third party (by contract
or operation of law) or (iii) any fines, penalties, taxes, claims, demand
charges, actions, causes of action assessments, environmental response
costs, environmental penalties or injunctive obligations caused
32
by, arising out of, or in any way incidental to, or in connection with,
actions or omissions of PathNet, its officers, directors, employees,
Subcontractors or agents.
(d) The liability of Incumbent arising out of any or all
obligations to or contracts with customers to purchase Excess Capacity.
16.3 INDEMNIFICATION PROCEDURES With respect to any third party claims,
the following procedures shall apply:
(a) NOTICE. Promptly after receipt by an entity entitled to
indemnification under SECTION 16.1 or SECTION 16.2 of notice of the
commencement or threatened commencement of any civil, criminal,
administrative or investigative action or proceeding involving a claim in
respect of which the indemnitee will seek indemnification pursuant to any
such Section, the indemnitee shall notify the indemnitor of such claim in
writing. No failure to so notify an indemnitor shall relieve it of its
obligations under this Agreement except to the extent that it can
demonstrate damages attributable to such failure. Within fifteen (15) days
following receipt of written notice from the indemnitee relating to any
claim, but no later than ten (10) days before the date on which any
response to a complaint or summons is due, the indemnitor shall notify the
indemnitee in writing if the indemnitor elects to assume control of the
defense and settlement of that claim (a "NOTICE OF ELECTION").
(b) PROCEDURE FOLLOWING NOTICE OF ELECTION. If the indemnitor
delivers a Notice of Election relating to any claim within the required
notice period, the indemnitor shall be entitled to have sole control over
the defense and settlement of such claim; provided that, (i) the indemnitee
shall be entitled to participate in the defense of such claim and to employ
counsel at its own expense to assist in the handling of such claim, and
(ii) the indemnitor shall obtain the prior written approval of the
indemnitee before entering into any settlement of such claim or ceasing to
defend against such claim. After the indemnitor has delivered a Notice of
Election relating to any claim in accordance with the subsection (a) above,
the indemnitor shall not be liable to the indemnitee for any legal expenses
incurred by the indemnitee in connection with the defense of that claim.
In addition, the indemnitor shall not be required to indemnify the
indemnitee for any amount paid or payable by the indemnitee in the
settlement of any claim for which the indemnitor has delivered a timely
Notice of Election, if such amount was agreed to without the written
consent of the indemnitor.
(c) PROCEDURE WHERE NO NOTICE OF ELECTION IS DELIVERED. If the
indemnitor does not deliver a Notice of Election relating to any claim
within the required notice period, the indemnitee shall have the right to
defend the claim in such manner as it may deem appropriate, at the cost and
expense of the indemnitor. The indemnitor shall promptly reimburse the
indemnitee for all such costs and expenses.
16.4 SUBROGATION In the event that an indemnitor shall be obligated to
indemnify an indemnitee pursuant to SECTION 16.1 or SECTION 16.2, the indemnitor
shall, upon payment of such
33
indemnity in full, be subrogated to all rights of the indemnitee with respect to
the claims to which such indemnification relates.
SECTION 17. LIABILITY OF THE PARTIES TO EACH OTHER.
17.1 LIABILITY GENERALLY Subject to the specific provisions of this
SECTION 16, it is the intent of the Parties that each Party shall be liable to
the other Party for any actual damages incurred by the Non-Breaching Party as a
result of the Breaching Party's failure to perform its obligations in the manner
required by this Agreement and failure to cure such nonperformance as set forth
in SECTION 18.1.2.
17.2 LIABILITY RESTRICTIONS.
(a) SUBJECT TO SUBSECTION (b) BELOW, IN NO EVENT, WHETHER IN
CONTRACT OR IN TORT (INCLUDING BREACH OF WARRANTY, NEGLIGENCE AND STRICT
LIABILITY IN TORT), SHALL A PARTY BE LIABLE TO THE OTHER PARTY FOR INDIRECT
OR CONSEQUENTIAL, EXEMPLARY, PUNITIVE OR SPECIAL DAMAGES EVEN IF SUCH PARTY
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES IN ADVANCE.
(b) The limitations set forth in subsection (a) shall not apply
with respect to: (i) damages occasioned by the willful misconduct or gross
negligence of a Party, (ii) damages occasioned by a non-compliance with any
Requirements of Law by either Party, (iii) damages occasioned by improper
or wrongful termination of this Agreement or (iv) damages occasioned by a
violation of SECTION 12 of this Agreement.
(c) Each Party shall have a duty to mitigate damages for which
the other Party is responsible.
(d) Each Party shall be liable to the other Party for any actual
damages as set forth in SECTION 16.1 only if, and to the extent that the
aggregate of all losses arising from or in connection with any such failure
to perform obligations in the manner required by this Agreement exceeds ten
thousand dollars ($10,000.00), except with respect to any payment
obligations set forth in SECTION 4.
17.3 FORCE MAJEURE
(a) No Party shall be liable for any breach, default or delay in the
performance of its obligations under this Agreement (i) if and to the
extent such default or delay is caused, directly or indirectly, by: fire,
flood, earthquake, elements of nature or acts of God, riots, civil
disorders, rebellions or revolutions in any country, changes in
Requirements of Law relating to the System or to the sale of Excess
Capacity, or any other cause beyond the reasonable control of such Party (a
"FORCE MAJEURE EVENT"), (ii) provided the non-performing Party is without
fault in causing such breach, default or delay, and such breach, default or
delay could not have been prevented by reasonable
34
precautions and cannot reasonably be circumvented by the non-performing
Party through the use of alternate sources, work around plans or other
means.
(b) In such event the non-performing Party shall be excused from
further performance or observance of the obligation(s) so affected for as
long as such circumstances prevail and such Party continues to use its best
efforts to recommence performance or observance whenever and to whatever
extent possible without delay. Any Party so delayed in its performance
shall immediately notify the Party to whom performance is due by telephone
(to be confirmed in writing within two (2) days of the inception of such
delay) and describe at a reasonable level of detail the circumstances
causing such delay.
SECTION 18. INFORMAL DISPUTE RESOLUTION; ARBITRATION.
18.1 INFORMAL DISPUTE RESOLUTION.
18.1.1 ROLE OF PROGRAM MANAGER. In the event Incumbent has a
dispute, controversy or other complaint relating to PathNet's performance
of PathNet's rights and obligations under this Agreement, Incumbent shall
have the right to first contact the Program Manager to resolve such
dispute, controversy or other complaint. If Incumbent is not satisfied
with the resolution provided by the Program Manager, Incumbent may resort
to the arbitration procedures set forth in this SECTION 18.
18.1.2 NOTICE OF BREACH, CURE AND REMEDIES. In the event of a
breach by either PathNet or Incumbent (the "BREACHING PARTY"), the other
Party (the "NON-BREACHING PARTY") shall send by certified mail a written
notice of such breach to the Breaching Party setting forth the specific
allegations of such breach. Upon receipt of the notice of breach, the
Breaching Party shall have thirty (30) days to cure such breach. In the
event the Breaching Party fails to cure such breach, as determined by the
Non-Breaching Party in its sole discretion, or the Breaching Party
determines, in its sole discretion, that it has cured such breach, either
the Breaching Party or the Non-Breaching Party may invoke the arbitration
procedures set forth in SECTION 18.2 to resolve whether such breach has
been cured.
18.2 ARBITRATION.
18.2.1 ARBITRATION; RESOLUTION OF DISPUTES. Subject to SECTION
18.1, any and all disputes and controversies between Incumbent and PathNet
concerning the negotiation, interpretation, performance, breach or
termination of this Agreement (each a "DISPUTE") shall be subject to
resolution as set forth in this SECTION 18.
18.2.2 SETTLEMENT DISCUSSIONS. Subject to SECTION 18.1, any
Dispute shall be attempted to be resolved first through amicable settlement
discussions and each Party
35
shall bear its own costs of such settlement discussions. Each Party hereby
agrees to use good faith efforts to reach a settlement through such
amicable settlement discussions.
18.2.3 REFERRAL TO BINDING ARBITRATION. In the event the Parties
fail to reach a settlement of the Dispute pursuant to settlement
discussions in accordance with SECTION 18.2.2, each Party shall have the
right, but not the obligation, to refer such Dispute for final resolution
by binding arbitration conducted in St. Louis, MO in accordance with the
rules and procedures of the American Arbitration Association. Either Party
may elect to require that the arbitration be administered by a panel of
three (3) arbitrators and/or that any such arbitrators have expertise in
the fields of telecommunications engineering or construction. Judgement
upon the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof. Cost of the arbitration, including,
reasonable attorney's fees of both Parties, shall be borne by the Party as
determined by such arbitrators.
18.2.4 BINDING EFFECT. The Parties acknowledge and agree that (i)
the award in any arbitration shall be final, conclusive and binding on the
Parties and (ii) any such arbitration award be a final resolution of the
Dispute between the Parties to the same extent as a final judgment of a
court of competent jurisdiction.
18.2.5 USE OF COURTS AND OTHER LEGAL REMEDIES. Each Party
covenants and agrees that it shall not resort to any court for legal
remedies concerning any Dispute other than to enforce a final decision by
the arbitrators or for preliminary, interim or provisional equitable relief
in aid of arbitration.
18.2.6 APPLICABLE LAW. The arbitrator shall determine the claims
of the Parties and render their final award in accordance with the
governing law of this Agreement as set forth in SECTION 19.5.
18.2.7 LIMITATION ON AWARDS. Arbitrators may not award (i)
incidental, consequential or punitive damages in the resolutions of any
Dispute and the Parties hereby waive all rights to and claims for monetary
awards other than compensatory damages, except as provided in Section
16.2(d) of this Agreement, (ii) the right to terminate this Agreement or
any of the rights and obligations hereunder except pursuant to SECTION 3.3,
or (iii) any other right or remedy that contravenes the terms and
conditions of this Agreement.
18.2.8 PERIOD OF LIMITATIONS. In the event the Party claiming a
Dispute does not institute binding arbitration within four (4) years after
the commencement of settlement discussions pursuant to SECTION 18.2.2, such
Party shall forever be barred from bringing a claim on the specific subject
matter of such Dispute.
SECTION 19. MISCELLANEOUS.
19.1 NOTICES All notices pertaining to disputes arising from this
Agreement shall be directed to a corporate entity or employee designated by the
signatories as having full rights and
36
responsibilities to address such issues. Notices under this Agreement shall be
sufficient only if personally delivered by a commercial prepaid delivery or
courier service or mailed by certified or registered mail, return receipt
requested to a Party at its address set forth below or as amended by notice
pursuant to this SECTION 19.1. All notices shall be delivered as follows:
If to PathNet:
Xxxxxxx X. Xxxxx, Esquire
Vice President and General Counsel
PathNet, Inc.
0000-00xx Xxxxxx. XX
Xxxxxxxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
If to Incumbent:
Xxxxx Xxxx, General Manager
Northeast Missouri Electric Power
Cooperative
X.X. Xxx 000
Xxxxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
19.2 BINDING NATURE; ENTIRE AGREEMENT PathNet and Incumbent acknowledge
that (i) each has read and understands the terms and conditions of this
Agreement and agrees to be bound by such terms and conditions, (ii) this
Agreement shall be binding on each of PathNet and Incumbent and their respective
successors and assigns, (iii) this Agreement is the complete and conclusive
statement of the agreement between the Parties, (iv) this Agreement supercedes
any and all prior agreements and arrangements between the Parties and all
understandings and agreements, oral and written, heretofore made between
Incumbent and PathNet are merged in this Agreement which alone, fully and
completely expresses their agreement on the subject matter of this Agreement and
(v) this Agreement sets forth the entire agreement on the subject matter hereof.
19.3 AMENDMENT No modifications of, additions to or waiver of this
Agreement shall be binding upon Incumbent or PathNet unless such modification,
addition or waiver is in writing and signed by an authorized representative of
each Party.
19.4 SEVERABILITY Contemporaneously herewith, the Parties have entered
into this Agreement (collectively, the "Other Agreement"). The Parties
acknowledge and agree that (i) the terms and provisions of this Agreement are
mutually interdependent, (ii) this Agreement and the Other Agreements are
mutually interdependent, (iii) the consideration for entering into each
provision of this Agreement and any or all of the foregoing agreements is
indivisible, (iv) neither of the Parties would have entered into any of the
foregoing agreements unless the other Party agreed to execute and deliver all of
the foregoing agreements, (v) it would be contrary to the intention and bargain
of the parties if, in the event of the bankruptcy of one of the Parties, such
Party sought to assume some but not all of the provisions of this Agreement or
some but not all of the foregoing agreements, (vi) it would be contrary to the
intention and bargain of the Parties if, in the event of the bankruptcy of one
of the Parties, such
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Party sought to reject some but not all of the provisions of the Agreement or
some but no all of the foregoing agreements, (vii) it would be contrary to the
intention and bargain of the Parties if a court for any reason were to enforce
some but not all of the provisions of this Agreement or were to hold some but
not all of the provisions of this Agreement or were to hold some but not all of
the provisions of this Agreement to be unenforceable, and (viii) it would be
contrary to the intention and bargain of the Parties if a court for any reason
were to enforce some but not all of the foregoing agreements or were to hold
some but not all of the foregoing agreements to be unenforceable.
19.5 GOVERNING LAW This Agreement, and the rights and obligations of the
Parties hereunder, shall be governed and interpreted in accordance with the laws
of the State of Missouri (other than the choice of law rules thereof).
19.6 SURVIVAL Any provision of this Agreement which contemplates
performance or observance subsequent to any termination or expiration of this
Agreement shall survive such termination or expiration and continue in full
force and effect.
19.7 ASSIGNMENT At any time and from time to time, PathNet shall have the
right to assign this Agreement or any of PathNet's rights and obligations under
this Agreement; provided, that in no event shall any such assignment relieve
PathNet of its obligations under this Agreement. Incumbent shall not have the
right to assign this Agreement or any of its rights and obligations hereunder
without the prior written consent of PathNet, which consent shall not be
unreasonably withheld; PROVIDED, HOWEVER, Incumbent may assign its rights and
obligations, in whole but not in part, under this Agreement without the approval
of PathNet, to any entity which acquires all or substantially all of the assets
of Incumbent or to any subsidiary, Affiliate or successor in a merger or
consolidation of Incumbent; provided, that in no event shall any such assignment
relieve Incumbent of its obligations under this Agreement.
19.8 WAIVER
. Failure or delay on the part of Incumbent or PathNet to exercise any right,
power or privilege under this Agreement shall not constitute a waiver of any
right power or privilege of this Agreement.
19.9 RECORDATION Each Party hereby acknowledges that this Agreement may be
subject to recordation and the costs, fees or expenses associated with any such
recordation shall be borne by the recording Party.
19.10 GOOD FAITH RENEGOTIATION Notwithstanding anything set forth
herein to the contrary, the Parties hereby agree that in the event a
Governmental Authority issues a decision, order, rule or other rulemaking of any
kind, which necessitates any modification or amendment to this Agreement, the
Parties shall negotiate in good faith to modify or amend this Agreement to
comply with such decision, order, rule or other rulemaking.
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19.11 CONFIDENTIAL TERMS AND CONDITIONS Incumbent shall not disclose,
except as required by law or as set forth in SECTION 19.9, the terms and
conditions of this Agreement to any third party.
19.12 INCUMBENT'S DESIGNATED REPRESENTATIVE Incumbent shall on the
Effective Date designate in writing a representative who shall have express
authority to bind Incumbent with respect to all matters requiring Incumbent's
approval or authorization in connection with this Agreement (the "INCUMBENT
REPRESENTATIVE"). Such Incumbent Representative shall have the authority to
make decisions and grant any and all consents required under this Agreement on
behalf of Incumbent and PathNet shall be entitled to rely on any such decision
or consent by the Incumbent Representative.
19.13 PATHNET'S DESIGNATED REPRESENTATIVE PathNet shall on the Effective
Date designate in writing a representative who shall have express authority to
bind PathNet with respect to all matters requiring PathNet's approval or
authorization in connection with this Agreement (the "PATHNET REPRESENTATIVE").
Such PathNet Representative shall have the authority to make decisions and grant
any and all consents required under this Agreement on behalf of PathNet and
Incumbent shall be entitled to rely on any such decision or consent by the
PathNet Representative.
19.14 OUTSOURCING In addition to, and not in place of, any rights of
PathNet under this Agreement, PathNet shall have the right to engage third party
Subcontractors to perform any or all of PathNet's rights and obligations under
this Agreement, provided that PathNet requires all subcontractors to provide
evidence of the same insurance coverages required herein of PathNet.
19.15 UNION AND LABOR RELATIONS Incumbent is a non-union employer and
with respect to any services performed by PathNet pursuant to this Agreement,
Incumbent will not require PathNet to comply with all applicable labor or
union-related agreements, regulations and ordinances and shall not require
PathNet to join any union or other labor organization as a condition to
performing services contemplated by this Agreement.
19.16 EXECUTION OF AN AMENDED SCHEDULE B In the event that both
Incumbent and PathNet elect to add additional Segments to the System, each of
Incumbent and PathNet shall execute and deliver an "AMENDED SCHEDULE B" setting
forth (i) the additional paths, sites and specific location information of the
additional Segment or Segments, (ii) the consideration PathNet shall pay to
Incumbent for such additional Segment (thereby amending SECTION 5.2 with respect
to such additional Segment; PROVIDED, HOWEVER, SECTION 5 shall remain in full
force and effect with respect to Segment 1 or any other existing Segment) and
(iii) the Incumbent Items, the amount of the Incumbent Estimated Costs and the
method of payment of the cost of the Incumbent Items with respect to such
additional Segment (thereby amending SECTION 4.1 and SECTION 1 of SCHEDULE C
with respect to such additional Segment; PROVIDED, HOWEVER, SECTION 4.1 and
SECTION 1 of SCHEDULE C shall in any event remain in full force and effect with
respect to Segment 1 or any other existing Segment.) PathNet's and Incumbent's
rights and obligations under this Agreement will commence with respect to such
additional Segment or Segments on the date of execution of such AMENDED SCHEDULE
B by both Parties which date shall be deemed
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the "EFFECTIVE DATE" with respect to such Segment for purposes of this Agreement
and each reference to SCHEDULE B in this Agreement shall be deemed to refer to
such AMENDED SCHEDULE B.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement, as of
the date first written above.
PATHNET, INC.
By: /s/ Xxxx Xxxxxxxxx
-------------------------------
Name: Xxxx Xxxxxxxxx
Title: Chairman
NORTHEAST MISSOURI ELECTRIC
POWER COOPERATIVE
By: /s/ Xxxxx X. Xxxx
-------------------------------
Name: Xxxxx X. Xxxx
Title: General Manager
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