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10.7
DARK FIBER NETWORK AGREEMENT
This DARK FIBER NETWORK AGREEMENT (this "Agreement") is entered into
as of the ___ day of August,1999 ("Effective Date") by and between PATHNET,
INC., a Delaware corporation, ("Pathnet" or "Developer"), TRI-STATE GENERATION
AND TRANSMISSION ASSOCIATION, INC., a Colorado cooperative corporation
("Tri-State"); EMPIRE ELECTRIC ASSOCIATION, INC. ("EEA"), LA PLATA ELECTRIC
ASSOCIATION, INC. ("LPEA"), DELTA-MONTROSE ELECTRIC ASSOCIATION, INC. ("DMEA"),
and SAN MIGUEL POWER ASSOCIATION, INC. ("SMPA"). EEA, LPEA, DMEA and SMPA are
referred to herein individually and collectively as the "Participating Member
Systems". Pathnet, Tri-State, EEA, LPEA, DMEA and SMPA are each referred to
herein individually as a Party and collectively as "Parties".
RECITALS
A. Pathnet desires to design, engineer, construct, install and
operate a carrier quality, long haul, fiber optic telecommunications system
between Albuquerque, New Mexico and Grand Junction, Colorado, with
interconnections in the locations identified herein.
B. The Parties desire to enter into this Dark Fiber Network Agreement
to share the costs and revenues in connection with the construction and
operation of a dark fiber network.
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the receipt and sufficiency of which are hereby acknowledged, the
Parties hereto agree as follows:
1. DEFINITIONS
In this Agreement, unless the subject matter or context otherwise
requires:
1.1 "BUSINESS DAY" means a day other than a Saturday, Sunday or
holiday.
1.2 "CABLE" means the fiber optic cable, the conductor and the Fibers
contained therein, and associated splice connections, splice boxes and vaults,
to be installed as part of the Project. Cable does not include electronics and
optronics necessary to create telecommunications capacity on the Fibers.
1.3 "COMPLETION DATE" means the date on which the Fibers pass all
required testing procedures and the Project is otherwise complete, subject only
to punch list items that do not materially interfere with the operation of the
Project and can be completed within thirty (30) days.
1.4 "CONDUCTOR" means an optical ground wire conductor in which the
Fibers are installed on utility transmission facilities.
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1.5 "CONDUIT" when used herein as a defined term means a conduit to
be installed as part of the Project.
1.6 "DEFAULT RATE" shall mean the lesser of (i) [* * *] or (ii) the
highest amount permitted by applicable law.
1.7 "DEVELOPER" means Pathnet, who shall have responsibility to
design, engineer, construct and install the Project as set forth in this
Agreement.
1.8 "DISPOSITION" shall mean any disposition of Fibers, including a
sale, assignment, transfer, lease, or license of Fibers, or a grant of an
indefeasible right to use Fibers, as dark Fibers, or as "dim" Fibers (i.e. with
the benefit of optical amplification) but shall not include a sale of
telecommunications capacity on Fibers.
1.9 "EQUIPMENT SHELTER" means any regeneration, amplification,
optronic or other equipment shelter constructed as part of the Project to house
equipment used in connection with the creation and operation of
telecommunications capacity on the System or to otherwise support the use of the
System as a telecommunications network. The term "Equipment Shelter shall not
include any equipment shelter constructed at the sole cost and expense of a
Party that is in addition to the equipment shelters constructed as part of the
Project.
1.10 "FIBERS" means the [* * *] individual optical fibers installed
on the System as part of the Project or such other number agreed to by the
Parties as provided herein.
1.11 "FORCE MAJEURE" means in relation to the performance of any
obligations under this Agreement, any cause, condition or event of any nature
whatsoever that is beyond the reasonable control of the Party responsible for
such obligation and that prevents in whole or in part the performance by such
Party of its respective obligations including, without limitation, acts of war,
revolution, riot, sabotage, vandalism, earthquakes, and other acts of God, local
or national emergencies, rail accidents, strikes, lockouts, work slowdowns and
all other labor disputes, whether lawful or unlawful, delays of unrelated third
parties and governmental agencies, and any other event (whether or not of the
kind enumerated in this Section) beyond the reasonable control of a Party.
Notwithstanding anything in the preceding sentences, an event shall be treated
as Force Majeure as set forth above only if the delayed Party uses Reasonable
Efforts to mitigate the situation and thereafter to resolve the delay as
expeditiously as possible.
1.12 "FRANCHISE" means authority required under law by a Franchising
Authority as a precondition to providing telecommunications or other services.
1.13 "FRANCHISING AUTHORITY" means a city, county or other unit of
government authorized by law to grant Franchises.
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1.14 "IRU" OR "INDEFEASIBLE RIGHT TO USE" shall mean a long-term
right to use Fibers and shall include all indicia of ownership in such Fibers,
including unrestricted rights of use, with the exception of legal title to the
physical Fibers. A grant of an IRU does not provide the grantee with any
ownership interest or other rights in assets other than the Fibers and
associated equipment in which the IRU is granted.
1.15 "MINIMUM PRICES" shall mean the minimum prices for Dispositions
of Fibers agreed to by the Parties, as modified as agreed to by the Parties from
time to time as provided herein.
1.16 "MW" OR "MAINTENANCE WINDOW" shall mean a prearranged period of
time reserved for performing certain work on the System that may potentially
affect traffic, as more fully described in Exhibit B.
1.17 "NORTHERN ROUTE" means that portion of the System located on
right of way owned by Tri-State or in which Tri-State has an easement, license,
permit, or other interest.
1.18 "PERFECTION RIGHTS" shall mean those approvals, licenses,
easements, and other rights that permit the installation and operation, on the
rights of way described or created by the Underlying Rights, of fiber optic
cable and associated facilities for the purpose of transmitting voice, data,
video and other telecommunications signals between all types of customer
premises equipment and carrier equipment.
1.19 "PERSON" includes individuals, limited liability companies,
partnerships, associations, trusts, cooperatives, unincorporated organizations
and corporations.
1.20 "PNM AGREEMENT" means the Fiber Optic Cable Construction and Use
Agreement Between Public Service Company of New Mexico, Inc. and Pathnet, dated
June 9, 1999. A copy of the PNM Agreement has been disclosed to Tri-State and
the Participating Member Systems.
1.21 "PNM CABLE" shall mean that portion of the cable installed on
utility poles and other facilities owned by the Public Service Company of New
Mexico, including that portion of the Cable that extends from such facilities to
the splice point where such Cable enters an equipment shelter or is connected to
optronic, amplification, regeneration or other equipment.
1.22 "POOLED FIBERS" shall have the meaning set forth in Section 9.1.
1.23 "POP" shall mean a point of presence of a telecommunications
provider.
1.24 "PRIME RATE" shall mean the prime rate of interest published by
the Wall Street Journal as the base rate on corporate loans posted by a
substantial percentage of the nation's largest
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banks on the date any such payment is due. Unless otherwise provided in this
Agreement, interest shall be compounded annually in determining the amount of
interest due.
1.25 "PROJECT" means a carrier-quality, long-haul dark fiber optic
network with a total of [* * *] Fibers (or such other number agreed to by the
Parties as provided herein) and shall include all of the Cables, Conduits,
equipment shelters, utility connections, splice boxes, and all appurtenances
thereto installed, on the Underlying Rights between the POPs that are part of
the Project as agreed to by the Parties, and identified in the Project Budget.
1.26 "PROJECT BUDGET" means the budget for the Project agreed to by
the Parties, as modified from time to time in accordance with this Agreement.
1.27 "PROJECT COSTS" shall mean all costs which are necessary for the
design, engineering, construction, installation, maintenance, and testing of the
Project and the System, including, the cost of cable, fibers, conductor,
facility attachments, and any wires, interconnection facilities, connection
boxes, ducts and pull boxes, utility access points and equipment, regeneration
sites and buildings, cable installation, Underlying Rights Costs, acquiring the
Perfection Rights, permitting, infrastructure upgrades, any increase in real
estate or property taxes on Tri-State right-of-way attributable to the Project,
any costs of relocating the System as required by the grantor of any
right-of-way or permits (other than a Party). Notwithstanding the foregoing,
Project Costs will not include any costs attributable to obtaining, renewing or
expanding Tri-State's underlying rights in its right of way for utility or other
non-telecommunications purposes. In the event that, as part of its efforts to
obtain Perfection Rights, Tri-State also obtains rights attributable to the use
of the right of way for utility or non-telecommunications purposes, Project
Costs shall include only that portion of the costs and expenses incurred in
connection with such efforts that is attributable to obtaining the Perfection
Rights. The allocation of costs between Perfection Rights and other rights will
be as agreed to by Tri-State and Pathnet. Project Costs will also not include
any costs that are attributable to the negligence or willful misconduct of a
Party.
1.28 "PROJECT SPECIFICATIONS" means the construction plans, schedules
and materials, engineering, design and operational specifications agreed to by
Tri-State and Pathnet and set forth in Exhibit A.
1.29 "REASONABLE EFFORTS" shall mean commercially reasonable efforts,
but shall not obligate a Party to make expenditures that are excessive in
amount, in light of the circumstances to which the requirement to use reasonable
efforts applies.
1.30 "RETAINED FIBERS" shall have the meaning set forth in Section
9.1.
1.31 "SEGMENT" shall mean a portion of the Project between two POP's.
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1.32 "SOUTHERN ROUTE" means the portion of the System located on
right of way owned by the Public Service Company of New Mexico.
1.33 "SYSTEM" shall mean the fiber optic communication system,
consisting of the Conduits, Cables, Fibers, Equipment Shelters, and all splice
boxes, vaults and other appurtenances included in the Project.
1.34 "TRI-STATE FACILITIES" shall mean that portion of the Cable and
all other equipment installed on Tri-State Utility Facilities, including that
portion of the Cable that extends from such Utility Facilities to the splice
point where such Cable enters an equipment shelter or is connected to optronic,
amplification, regeneration or other equipment.
1.35 "UTILITY FACILITIES" shall mean utility towers, wires,
associated equipment, or other property used by Tri-State or a Participating
Member System for the generation or transmission of electrical service, whether
such Utility Facilities are on right of way owned by such Party or on right of
way in which such Party holds less than a fee interest, including but not
limited to an easement, license or permitting interest.
1.36 "UNDERLYING RIGHTS" means all deeds, leases, easements, rights
of way, licenses, franchises, permits, authorizations, consents and approvals
(including without limitation, any necessary local, state, federal or tribal
authorizations and environmental permits) including the PNM Agreement and other
rights, titles or interests as are necessary for the construction, installation,
operation, maintenance or repair of the System.
1.37 "UNDERLYING RIGHTS COSTS" means the total costs expended by
Pathnet or Tri-State or, as for Project tasks requested by Pathnet and
Tri-State, the Participating Member Systems, to obtain and defend the Underlying
Rights and any renewals thereof, including any litigation costs required to
defend and preserve Underlying Rights, and any costs required to perfect Project
rights of ways for telecommunications use, including the right to install and
operate fiber optic cable and associated facilities for the purpose of
transmitting voice, data, video and other telecommunications signals between all
types of customer premises equipment and carrier equipment.
1.38 "UNDERLYING RIGHTS REQUIREMENTS" means the terms, conditions,
requirements, restrictions, and/or limitations upon each Party's right to use or
operate the System imposed under the Underlying Rights and the associated
safety, operational and other rules and regulations imposed in connection
therewith or by applicable law.
2. TERM.
2.1 The term of this Agreement (the "Term") shall expire on the
[* * *] anniversary of the Effective Date. At least one hundred eighty (180)
days prior to the expiration of the Original Term, any Party may request, but no
Party shall have an obligation, to renew the Agreement, in
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which event the terms of any such renewal will be as agreed to by the Parties.
In the event that any customer's obligation to pay for Fiber, telecommunications
capacity or other rights or service provided pursuant to this Agreement extends
beyond expiration of this Agreement, then each Party shall have the continued
right to perform its rights hereunder and to receive its share of revenues from
such customer until the customer's obligation is terminated, but only as to the
extent necessary to fulfill such Party's obligations to the customer.
2.2 Notwithstanding the foregoing, nothing herein shall require any
Party to incur any additional costs for the renewal of the PNM Agreement should
such Party elect to have the rights to IRUs for the Southern Route for only the
Original Term of the PNM Agreement, provided that if a Party declines to
contribute its share of renewal costs for the PNM Agreement, then such
non-contributing Party shall not be entitled to any revenues from use of the
Southern Route to the extent attributable to any renewal period.
3. PATHNET TO ENGINEER, DESIGN, INSTALL AND CONSTRUCT
3.1 Pathnet will be the Project Manager for the Project and shall
have sole responsibility to engineer, design, install, construct and test the
Project and shall do so using its best efforts and consistent with industry
standards and in compliance with the Project Specifications set forth in the
Exhibits as they may be revised as agreed by Pathnet and Tri-State in writing
from time to time, and in compliance with applicable laws and governmental and
regulatory requirements. Pathnet shall coordinate with governmental and
regulatory agencies the construction of the Project, obtain all requisite
permits, licenses and authorizations required to engineer, design, install,
construct and test the Project, and prepare monthly summary reports on the
status and scheduling of the Project. Pathnet shall keep the Project free of
debris following installation and shall comply at all times with all applicable
environmental and health and safety laws and all Underlying Rights Requirements.
Pathnet shall use Reasonable Efforts to prevent any lien(s) from being attached
to any Underlying Rights or Tri-State Facilities and ensure that any and all
construction or suppliers' liens on the Project are promptly vacated. Pathnet
shall supply all vehicles, tools, equipment, labor and similar items and
services necessary for Pathnet to perform and complete the Project, and Pathnet
shall be solely responsible for maintaining the security thereof. The Project
shall include equipment and regeneration shelters but shall not include
optronics or other equipment attributable to the creation of telecommunications
capacity on the System, except and only to the extent necessary or appropriate
to the proper functioning of the Project as a dark fiber network.
3.2 Pathnet will provide project management services ("Project
Management") to the Project [* * *]. Project Management shall mean the overall
home office administration, coordination and supervision of the Project, and
shall include Project Cost tracking, preparation of cash flow projections and
other financial reports, preparation of construction schedules and status
reports, coordination of design, procurement and material deliveries, and
non-field supervision and coordination of contractors, subcontractors, suppliers
and escrows. Nothing herein shall prohibit
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Pathnet from contracting out portions of Project Management, provided that the
cost of such contractors shall not be included in Project Costs and shall be
entirely the responsibility of Pathnet.
3.3 Pathnet may contract out such other Project tasks as it deems
appropriate. Each contractor and subcontractor utilized by Pathnet in connection
with the Project shall have the requisite skills and resources to fulfill, in a
timely and good, workmanlike fashion, the obligations for which such entity is
hired. Pathnet may use Pathnet personnel for Project tasks and services, and the
cost of such activities (other than Project Management) shall be a Project Cost,
provided that such costs do not exceed the costs that Pathnet could obtain for
such activities in a third-party arms length transaction.
3.4 Prior to the commencement of any construction, Pathnet and
Tri-State shall agree upon a construction schedule that shall be substantially
adhered to unless modified in writing by Pathnet and Tri-State. Pathnet shall
submit design and materials specifications and construction drawings to
Tri-State for its review and approval. Pathnet shall make all reasonable
revisions to the design and materials specifications and construction drawings
requested by Tri-State. The costs associated with making all reasonable
revisions requested by Tri-State in connection with Tri-State's initial review
of the plans and specifications, and any revisions requested by Tri-State after
the commencement of construction due to field conditions, shall be treated as
Project Costs. Tri-State will solely bear only those costs and expenses
associated with making a revision requested by Tri-State after its initial
approval or if after the commencement of construction the revision that is
requested is not due to field conditions (and Pathnet will use commercially
reasonable efforts to minimize any such costs to Tri-State). Tri-State's
approvals pursuant to this Section 3.4 shall not be unreasonably withheld,
provided that Tri-State may withhold its approval where such drawings or plans
propose activities that may, in Tri-State's sole judgment, adversely affect
Tri-State's utility operations.
3.5 All permits, deeds, leases, licenses, franchises, and other
consents and approvals affecting a Party's Underlying Rights shall be in the
name of such Party. The Parties shall cooperate and, where necessary, jointly
take such action as may be necessary to ensure that such permits are applied for
and granted in a timely fashion and that the Project remains in compliance with
such permits at all times.
3.6 Each Party shall have the right, at its option, to approve any
attachment to its Utility Facilities or to property associated with that Party's
Underlying Rights, including attachment of the Tri-State Cable, as to loading,
location and any other matter that may adversely affect utility operations. In
addition to the approvals from Tri-State described in Section 3.4, all Project
Specifications that may adversely affect the utility operations of a
Participating Member System require the prior approval of that Participating
Member System. Each Party acknowledges that time is of the essence in approving
the drawings and plans, and agrees to respond to submitted plans as promptly as
feasible.
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3.7 Pathnet shall convene periodic meetings of the representatives of
Pathnet and Tri-State to review the progress of the work relating to the
Project, such meetings to be held at the principal office of the Project, or in
Denver, Colorado, or at such other place as may be mutually agreed upon between
Pathnet and Tri-State. Both Parties agree that such meetings may be convened by
means of a telephone conference or any other communication facility whereby all
representatives participating in the meeting can hear each other and make
themselves heard.
3.8 Prior to the commencement of any construction, Tri-State and
Pathnet shall agree upon a Project Budget and a cash flow projection for the
first month and first quarter. Pathnet shall make all reasonable changes to the
Project Budget and cash flow projections requested by Tri-State. Either
Tri-State or Pathnet may request a change to the System, the Project
Specifications set forth in the Exhibits, the Project Budget or the cash flow
projections in writing. If either Tri-State or Pathnet makes such request,
Pathnet shall prepare a detailed statement of the additional costs and savings,
if any, within fifteen (15) Business Days. If such change is required due to
circumstances discovered during the course of construction, is agreed to by
Tri-State and Pathnet, or is prior to Tri-State's initial approval of the
Project Specifications or Budget, then the cost of such change shall be a
Project Cost. Pathnet shall use Reasonable Efforts to comply with the Project
Budget. The Parties acknowledge that the Project Budget is by necessity a
preliminary estimation of Project Costs, and that actual Project Costs may vary
based upon field conditions, actual supplier and contractor contracts and other
issues. Neither Tri-State nor Pathnet will unreasonably withhold their consent
to a change requested by the other.
3.9 Tri-State shall at all times have the right to observe and
inspect Pathnet's performance in connection with the Project.
3.10 All construction activities on the Project shall be conducted so
as to avoid interference with the utility operations of the Parties. Any
construction activities that may adversely affect the utility operations of a
Party shall be approved in advance by such Party. Such approval shall not be
unreasonably withheld, but may be conditioned on Pathnet taking appropriate
measures to minimize the risk of interference. The Parties will cooperate with
Pathnet to enable Pathnet to construct the Project as expeditiously and
cost-effectively as possible, which cooperation will include the scheduling of
utility outages where doing so will not materially and adversely affect utility
operations.
3.11 The parties currently contemplate that the number of Fibers on
the Project will be [* * *], with minor modifications on certain segments of the
Project. In the event that Pathnet or Tri-State agree to modify the foregoing
number of Fibers in the Project, Pathnet will provide written notice of such
fact to the Participating Member Systems. Within five (5) business days
thereafter, any Participating Member System may object to the modification of
the number of additional Fibers. Any Participating Member System that does not
respond within such five (5) day period will be deemed to have consented to the
modification. If a Participating Member System objects to
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modification of the number of Fibers, then Pathnet and Tri-State may agree to
make such modification over the objection.
4. UNDERLYING RIGHTS
4.1 The Underlying Rights for the Southern Route will be provided pursuant to
the PNM Agreement. Tri-State will provide the Underlying Rights for the Northern
Route pursuant to this Agreement and to the extent permitted by the Underlying
Rights that have been provided to Pathnet for its review prior to [* * *],
hereby grants to each Party an easement for the term of this Agreement to use
and access the Tri-State right of way to the extent necessary or appropriate to
permit such Party to exercise its rights and perform its obligations hereunder.
Pathnet will be responsible for obtaining any and all other Underlying Rights
required to install, maintain and operate the System, provided that the Parties
will use reasonable efforts to cooperate with Pathnet in obtaining any
additional underlying rights. Prior to [* * *], Tri-State will disclose to
Pathnet any Underlying Rights Requirements of which it is aware that would
materially interfere with the construction and operation of the System on the
Northern Route. Tri-State will use its best efforts to obtain Perfection Rights
for at least the term of the Agreement, and will not agree to any Perfection
Rights for less than the term of the Agreement without the prior written consent
of Pathnet. If Tri-State is unable to obtain Perfection Rights for the full term
of the Agreement on any portion of the right of way, then Tri-State and Pathnet
will convene to discuss the best way to proceed. Provided that Tri-State follows
the procedures set forth in this Section 4.1, Tri-State will not be in breach of
this Agreement for any failure to obtain Perfection Rights for the full term of
this Agreement.
4.2 In order to prevent a situation where Tri-State incurs Project
Costs in obtaining the Perfection Rights, but is subsequently unable to obtain
sufficient Perfection Rights to develop the System, Tri-State may obtain
Perfection Rights by making deposit or option payments, with full payment for
the Perfection Rights contingent on acquiring sufficient Perfection Rights to
develop the System. Pathnet shall be responsible for its share of the costs in
obtaining the Perfection Rights, including both the amount of any payments to
landowners and the cost of contractors and Tri-State personnel (not in excess of
costs that would have been charged by non-affiliated entities) in obtaining the
Perfection Rights, provided that if Pathnet elects to withdraw from the Project
as provided in Section 5.2, Pathnet's share of the costs of acquiring the
Perfection Rights shall be capped at [* * *].
5. COMPLETION
5.1 Prior to commencement of construction, Tri-State and Pathnet will
agree on a construction schedule for the construction of the Project. Pathnet
will use best efforts to adhere to the construction schedule, which will be
extended to the extent of delays due to Force Majeure events, any extension of
time expressly provided for in this Agreement or the agreement of Pathnet and
Tri-State.
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5.2 After discussing alternatives to termination with the other
Parties, each of the Parties shall be permitted to withdraw from participation
in this Agreement upon the occurrence of the termination conditions provided in
Section 2.6 of the PNM Agreement as to the Southern Route, or if perfection of
the Northern Route exceeds [* * *] or is not substantially complete by [* * *].
In addition, (i) for ten (10) business days after the date hereof, Pathnet and
Tri-State may conduct due diligence on each other, and each of Pathnet and/or
Tri-State may withdraw upon written notice within such ten (10) day period if
such due diligence reveals issues that would materially interfere with the other
Party's ability to fulfill its obligations hereunder; and (ii) Tri-State may
withdraw within forty five (45) days after the Effective Date if it fails to
obtain any required approvals from the Rural Utility Service. The Parties
acknowledge that, in order to enable construction of the Project during the
September maintenance window on the Northern Route, Pathnet will have to incur
engineering, network design and other Project Costs prior to [* * *]. In
consideration for Pathnet's agreement to incur such Costs prior to [* * *], if
Pathnet desires to withdraw from participation in the Agreement as provided in
this Section, because perfection of the Northern Route exceeds [* * *] or is not
substantially complete by [* * *], then Tri-State will reimburse Pathnet for
actual and reasonable Project Costs incurred by Pathnet attributable to the
Northern Route prior to termination, other than Pathnet's share of costs
attributable to acquisition of the Perfection Rights as set forth in Section 4.2
hereof. Pathnet will keep Tri-State informed as to Project Costs incurred, and
will use commercially reasonable efforts to minimize such Project Costs. If
Pathnet elects to withdraw from participation in the Southern Route and the
Northern Route, then at Tri-State's request, and subject to the prior approval
of Public Service of New Mexico and the release of Pathnet from all obligations
thereunder, Pathnet will assign the agreement for development of the Southern
Route to Tri-State so that it may complete the Project. If any Party withdraws,
then any non-withdrawing Party may contribute the withdrawing Parties' capital
to the Project and continue the Project, in which event the withdrawing Party(s)
will have no further rights or obligation under the Agreement, and the remaining
Parties' share of revenue from the Project shall be adjusted to reflect its
additional contribution. No Party will be obligated to continue participation
after withdrawal of another Party. Each Party will remain fully liable for
Project Costs incurred prior to the date of withdrawal or termination, as
appropriate. Notwithstanding the foregoing, if Tri-State elects to withdraw from
participation, then upon completion of the Project, the Project will provide
Tri-State with [* * *].
6. TITLE TO SYSTEM.
6.1. Title to the Tri-State Facilities shall be retained by
Tri-State. Public Service of New Mexico shall retain title to the PNM Cable.
Pathnet shall retain title to all other portions of the System, including
regeneration and equipment shelters, and Cable not on a Party's Utility
Facilities except that notwithstanding the foregoing, legal ownership shall not
vest in Pathnet for more than [* * *] of the aggregate initial value of the
Project's fibers, equipment and other property. Nothing herein shall be deemed
to grant Pathnet title to any Utility Facilities or other property in which a
Party has a fee, easement, lease, license, permitting or other ownership
interest. Each Party shall retain full ownership to (and shall be responsible
for all costs in connection with) all optronics and
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other equipment such Party adds to the System for the purpose of creating,
operating or selling telecommunications capacity or services, provided that any
of such equipment that is attached to a Party's Utility Facilities will be owned
by that Party.
6.2 Each Party grants to the other Parties rights in and to all
property owned by the granting Party sufficient to allow the grantee to exercise
its rights, privileges and obligations hereunder, all to the extent of the
granting Parties rights in such property and subject to all Underlying Rights
Requirements, including the PNM Agreement. The foregoing grant includes the
grant of an IRU for the Term of this Agreement in any Fibers, Cable and other
equipment or property owned by the granting Party sufficient to enable the
grantee to utilize its Retained Fibers as provided herein, and to enable Pathnet
to Dispose of the Pooled Fibers as provided herein.
7. CAPITAL CONTRIBUTIONS
7.1 Each Party shall be responsible for timely payment of its
pro-rata share of Project Costs to a third-party escrow agent acceptable to all
Parties (the "Project Escrow") as follows: Tri-State shall pay [* * *], Pathnet
shall pay [* * *], and each Participating Member System shall pay [* * *].
Payments to the third party escrow agent shall be held in an interest bearing
account. All payments of Project Costs shall be made into a Project Escrow as
provided in this Article 7.
7.2 During construction of the Project, Pathnet shall provide each
month to Tri-State for its review and approval an up-to-date budget, an
up-to-date costs report of the Project on a percentage of completion basis, and
a cash flow projection of the costs of the Project to be incurred during the
following month of the development and construction of the Project. These
reports shall be updated monthly and quarterly. After submission of the first
cash flow projection, the Parties shall thereafter establish a Project escrow
account (the "Project Escrow") from which Project Costs will be paid. The
Project Escrow will initially be funded on or before the date that is thirty
(30) days after Pathnet provides the initial budget and cash flow projections
and thereafter, by periodic payments on a schedule to be agreed to by the
Parties. Each Party's payment to the Project Escrow shall be that Party's share
of 100% of the Project Costs projected to become due and payable in the
succeeding quarter plus a buffer of fifteen percent (15%) of such payment. All
payments into the Project Escrow will be made by wire transfer, and will be made
within fifteen (15) days after such Party's receipt of the cash flow projection
reviewed and approved by Tri-State. The Parties shall also make unscheduled
payments as agreed upon by the Parties into the Project Escrow as necessary to
account for unforeseen circumstances.
7.3 The Project Escrow agreement shall provide that the escrow agent
shall disburse Project Costs from the Project Escrow upon its receipt from
Pathnet of (i) a draw request accompanied by reasonable supporting documents
describing Project Costs incurred; and (ii) a certification that such request
and documentation has been provided to Tri-State. The escrow agent shall wait
for ten (10) days after the date of the draw request before honoring the draw
request. In the event that Tri-State disputes the draw request, then within such
ten (10) days period, Tri-State may
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deliver written notice to the escrow agent describing, in reasonable detail,
such dispute. Upon receipt of Tri-State's objection, the escrow agent shall
honor such portion of the draw request that is undisputed, if any, but shall not
disburse any disputed amounts until receipt of written notice from Tri-State and
Pathnet resolving such dispute. If Tri-State has not disputed the draw request,
the escrow agent shall disburse the draw request from the Project Escrow. The
Project Escrow shall terminate upon mutual agreement of the Parties. Tri-State
shall have the right to submit requests for disbursement from the Project Escrow
for (1) the reasonable and actual costs Tri-State incurs to acquire and obtain
easements and rights-of-way to the extent attributable to the Project, (2) all
reasonable and actual costs and expenses relating to obtaining the grant of the
express right to install and operate, on Tri-State Utility Facilities, or
right-of-way or other property owned by Tri-State, used by Tri-State for its
utility operations, or for which Tri-State has been granted a permit for utility
operations, fiber optic cable and other facilities for the purpose of
transmitting voice, data, video and any other signals between all types of
customer premises equipment or carrier equipment, (3) any increase in real
estate or property taxes on Tri-State right-of-way attributable to the Project,
(4) the costs of obtaining the Perfection Rights, (5) and any costs, including
litigation costs, incurred to defend Underlying Rights, Perfection Rights, or
other approvals necessary for the construction, installation, operation,
testing, maintenance or repair of the System, provided that all such defense
activities shall be conducted as provided in Section 16.1.3 hereof., in which
event Pathnet and Tri-State shall follow the same procedures set forth in this
paragraph as to such draw requests, including Pathnet's right to dispute
Tri-State's requested draws from the Project Escrow.
7.4 Prior to the Completion Date, Pathnet shall provide to Tri-State
each month an up-to-date costs report of the Project on a percentage of
completion basis and forecast reports prepared in accordance with generally
accepted accounting principles. A complete set of books of account and records
of the Project, truly and accurately documenting the Project Costs of the
Project shall be maintained at Pathnet's office. Tri-State or its designated
representatives shall have access to and right to inspect, copy and audit such
books and records during business hours upon reasonable prior notice. In the
event that Tri-State disputes any amount, Tri-State shall provide written notice
describing in detail the basis for any such dispute and promptly forward such
notice to Pathnet. To the extent Pathnet and Tri-State are otherwise unable to
resolve such dispute through their respective operating and administrative
personnel within thirty (30) days after notice thereof from Tri-State, the
matter shall be submitted for dispute resolution as provided in this Agreement.
8. GENERAL PROVISIONS RE: CAPITAL CONTRIBUTIONS
8.1 In the event that a Party fails to make any payment under this
Agreement when due, such amounts shall accrue interest from the date five (5)
days after such payment is due until paid, compounded monthly, at an annual rate
equal to the Default Rate.
8.2 Tri-State shall be responsible for and pay all sales and/or
purchase taxes levied or assessed by any governmental agency in connection with
any transfer or deemed transfer of title to
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the Tri-State Cable to Tri-State. Each Party will be responsible for payment of
any and all sales and/or purchase taxes levied on any assets or IRU conveyed to
such Party. The Parties will cooperate to minimize any such taxes. Neither
Tri-State nor the Participating Member Systems will have any liability for any
taxes attributable to any transfer of assets to PNM.
8.3 In addition to the Project Escrow, within thirty (30) days after
funding of the Project Escrow, the Parties shall create and fund a security
escrow account (the "Security Escrow") with a third-party financial institution
reasonably acceptable to all of the Parties. Payments to the third party escrow
agent shall be held in an interest bearing account. Each party shall fund the
Security Escrow with [* * *] of such Party's total estimated contribution to
Project Costs. Once the Project is [* * *] complete, funds from the Security
Escrow will be available to the Project Escrow to pay Project Costs. The
Security Escrow will provide that upon a Default by a Party, all of such Party's
funds in the Security Escrow shall be available to the Project Escrow to pay
Project Costs as they become due, and such disbursements will be credited
towards the defaulting Party's capital contribution to the Project. All interest
earned on a Party's contribution to the Security Escrow will be capitalized on
such Party's escrowed funds.
8.4 Each Party will provide all documents reasonably requested by and financial
assurances reasonably acceptable to the other Parties on or before sixty (60)
days following the Effective Date, including but not limited to, any Pathnet
agreements (or pertinent parts thereof) with Lucent or other equipment
manufacturers, any Pathnet agreements (or pertinent parts thereof) or
correspondence with Native American tribes, and any agreement with or permits
granted by the U.S. Forest Service or other governmental or municipal
organization.
9. REVENUE SHARING.
9.1 The Parties will create a pool consisting of indefeasible rights
to use [* * *] of the Project's Fibers, and such IRUs shall be termed "Pooled
Fibers." Each Party shall be granted IRUs in the following number of Fibers for
the term of this Agreement, which Fibers shall be termed "Retained Fibers":
Pathnet - [* * *]; Tri-State - [* * *]; Participating Member System - [* * *],
to be allocated among the Participating Member Systems in proportion to their
capital contributions. Each Party may sell Retained Fibers to another Party,
provided that such Fibers shall remain Retained Fibers and shall be subject to
all restrictions thereon.
9.2 Pathnet shall be the exclusive sales and marketing agent for
Dispositions of the Pooled Fibers, and for sales, leases or other grants of
other rights on the System, including use of Equipment Shelters, other than
sales of Retained Fibers between Parties. Pathnet will have sole responsibility
for setting the terms and conditions of any such transactions above the Minimum
Price agreed upon by the Parties, subject to the conditions imposed by this
Agreement, and shall have the right, in its sole discretion, to accept or reject
any such orders. Pathnet will dedicate commercially reasonable efforts to the
marketing and sale of the Pooled Fibers and to getting, in Pathnet's
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reasonable judgment, the highest price the market will bear. In consideration
for its sales and marketing efforts, Pathnet will be entitled to a sales
commission on the revenues received from the Disposition of Pooled Fibers or of
other rights on the System, including Equipment Shelter rights, as provided
below (the "Sales Commission"). Nothing herein shall be deemed to grant Pathnet
the right to lease, license or otherwise convey rights to use a Party's Utility
Facilities, Tri-State Facilities, or Underlying Rights owned by Tri-State, used
by Tri-State for its utility operations, or for which Tri-State has been granted
a permit for use in connection with its utility operations or other property
used by a Party for its utility operations. Notwithstanding the foregoing,
Pathnet shall have the right to grant access and other similar rights incidental
and appropriate to the Disposition of Fibers or rights on the System.
9.3 If Tri-State has obtained all Perfection Rights necessary to
permit the construction and operation of the System on the Northern Route by [*
* *], or if the Project Costs associated with obtaining the Perfection Rights
are equal to or less than [* * *], then the Sales Commission shall be [* * *] of
the revenues from transactions on the System. Otherwise, the Sales Commission
shall be [* * *] of such revenues. Notwithstanding the foregoing, in any event,
the Sales Commission on transactions to customers referred to Pathnet by
Tri-State or one of the Participating Member Systems shall be [* * *]. Pathnet
will not receive a Sales Commission on sales of Retained Fibers between the
Parties or on a disposition of the Pooled Fibers to Pathnet, Tri-State or a
Participating Member System.
9.4. The Pooled Fibers shall be Disposed of as dark fibers, or with
the benefit of optical regeneration and/or amplification only if agreed to by
the Parties. Any other sale, lease, assignment, transfer or other disposition in
connection with the Pooled Fibers, including the creation and sale of
telecommunications capacity, a swap or exchange of the Pooled Fibers, or the
Disposition of Pooled Fibers for less than the Minimum Prices shall require the
prior consent of the Parties. If all Participating Member Systems have not
agreed to a requested modification of the Minimum Prices within five (5)
business days after receipt of such request, Pathnet and Tri-State, after
reaching an agreement, may elect to modify such Minimum Prices without their
consent. All Pooled Fibers will be Disposed of with a restriction prohibiting
resale as dark fibers, or with the benefit of optical amplification or
regeneration, for at least [* * *] years from the date of sale.
9.5. All Dispositions shall be made pursuant to an agreement in form
and content to be mutually agreed to between Tri-State and Pathnet prior to any
Disposition. Provided that the proposed Disposition complies with the Minimum
Prices and does not materially diverge from the approved form of agreement, then
the Disposition of the Pooled Fibers may be consummated without further consent.
The agreement for the Disposition of the Pooled Fibers shall require the
customer to pay all fees, franchise charges, universal service fund
contributions, taxes, assessments or other governmental impositions.
9.6 Upon expiration or termination of any Disposition, all Pooled
Fibers that were part of that Disposition shall revert to the Pool and shall
continue to be Pooled Fibers.
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9.7 Either party shall have the right to use, create and sell
telecommunications capacity on, swap or otherwise deal with its Retained Fibers
without restriction, except that no Party may, directly or indirectly, effect a
Disposition of Retained Fibers as dark fibers, or with the benefit of optical
amplification or regeneration, until all Pooled Fibers have been Disposed of,
except as to another Party as provided herein.
9.8. The Pooled Fibers shall be disposed of as dark fibers at no less
than the Minimum Price agreed upon by all of the Parties. If the Parties fail to
agree on a mutually acceptable price for a Disposition that is below the Minimum
Prices, then Pathnet may consummate such Disposition with its Retained Fibers,
or with Fibers purchased from Pooled Fibers at the Minimum Prices.
9.9 Revenues received by Pathnet from Dispositions of the Pooled
Fibers or rights on the System, including licenses for use of any Equipment
Shelters, after deduction of the Sales Commission discussed above and any taxes,
assessments, impositions and other charges imposed by governmental agencies not
passed through to the customer, shall be allocated among the parties in
accordance with their respective contributions to Project Costs. After deducting
the Sales Commission, Pathnet will disburse revenues from each transaction in
proportion to each Party's capital contribution within thirty (30) days after
receipt, and will attempt to expedite all such disbursements. If Pathnet fails
to disburse such sums within thirty (30) days, then such sums will bear interest
at the Default Rate until disbursed.
9.10. Each Party may purchase indefeasible rights to use Pooled
Fibers, at the agreed upon Minimum Prices for the term of this Agreement, but
the number of Pooled Fibers that a Party may purchase shall be equivalent to
such Party's capital contribution to the Project (i.e. if a Party has
contributed 25% of the capital to the Project, such Party may purchase up to 25%
of the Pooled Fibers, or [* * *] Pooled Fibers). The purchasing Party may use,
create and sell telecommunications capacity on, swap or otherwise deal with such
Fibers without restriction, except that the purchasing Party may not Dispose of
the purchased Fibers as dark Fibers or Fibers with the benefit of optical
amplification or regeneration, for a period of [* * *] after the date of
purchase. The purchasing party shall be entitled to its share of the revenue
from the initial purchase of the Pooled Fibers as if the purchasing party were
an unrelated third party, but shall thereafter retain all revenue resulting from
the purchased Pooled Fibers. Pathnet shall not be entitled to any Sales
Commission on a Disposition of the Pooled Fibers to Pathnet, Tri-State or a
Participating Member System.
10. ADDITIONAL BENEFIT RE: TELECOMMUNICATIONS CAPACITY
10.1 Subject to availability, each of the Parties has the right to
purchase telecommunications capacity on lit fiber from Pathnet on the System at
the most favorable rate that is being offered by Pathnet on the open market (not
including reasonable costs of interconnection, collocation and other
non-recurring charges based on the open market prices that third parties assess
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Pathnet). Nothing in this provision shall be deemed to require Pathnet to create
or offer services or telecommunications capacity on fiber that lacks the benefit
of optical amplification or regeneration or optronics for the creation of
telecommunications capacity.
11. DEFAULT
11.1 The following events shall be deemed to be events of default
(each, a "Default") under this Agreement:
11.1.1 A Party's violation of any applicable laws,
statutes, ordinances, codes, Underlying Rights Requirements, or other
legal requirements which substantially affects the progress,
maintenance or operation of the Project, if such violation(s) is not
remedied within fifteen (15) Business Days after receipt of notice
thereof from a non-defaulting Party, or, if such default cannot with
reasonable diligence be remedied within such period, a Party's
failure to remedy such default within an additional period reasonably
required to remedy such default if a longer period is permitted at
law (provided that the defaulting Party promptly commences the remedy
within such fifteen (15) day period and diligently pursues
appropriate efforts to remedy such default until completion);
11.1.2 Subject to a Party's right to dispute payment of
sums due hereunder as provided in Article 7, such Party's failure to
make any payment of money required under this Agreement within
fifteen (15) Business Days after receipt of written notice of the
requirement of such payment;
11.1.3 A Party becomes insolvent, liquidates, is
adjudicated as bankrupt, makes an assignment for the benefit of
creditors, invokes any provision of law for the relief of debtors or
initiates any proceeding seeking protection from its creditors;
11.1.4 A material breach of this Agreement by a Party which
is not cured within thirty (30) days after receipt of written notice
from a non-breaching Party, or, if the default cannot be remedied
within such period, the breaching Party's failure to commence the
remedy within such thirty (30) day period and diligently pursue
appropriate efforts to remedy such default until completion.
12. REMEDIES UPON DEFAULT
12.1 Tri-State's Default. In the event of a Default by Tri-State,
Pathnet shall, in addition to any other right or remedy available at law or in
equity, have the right to elect any or all of the remedies set forth below:
12.1.1 Pathnet may temporarily suspend construction of the
Project for the duration of such Default, which suspension shall
delay the scheduled Completion Date for the
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suspension period; in the event Pathnet suspends its performance, the
Participating Member Systems shall have the right to cure Tri-State's
Default, and upon such cure, Pathnet shall recommence performance;
12.1.2 Pathnet may require additional security to ensure
that Tri-State retains the financial and other ability to timely
fulfill its obligations under this Agreement. Such security shall be
no greater than necessary, and may include, without limitation,
additional financial guarantees by Tri-State or other third party;
escrowed funds; letters of credit; or a payment bond;
12.1.3 Intentionally Omitted;
12.1.4 Pathnet and the Participating Member Systems may
complete the Project as provided herein so long as such does not
violate any permit, right-of-way agreement or other Underlying Rights
provided to Pathnet for its review prior to [* * *]. In the event
that the Default is a monetary default, (i) Pathnet and the
Participating Member Systems may contribute Tri-State's remaining
share of the Project Costs and the revenue from the Project shall be
reallocated to reflect the additional capital contributions by
Pathnet or the Participating Member Systems, and (ii) Tri-State's
right to share in revenue shall be adjusted to reflect Tri-State's
actual capital contributions to Project Costs (including any amounts
contributed from escrowed funds). Notwithstanding the foregoing, in
connection with any loss, cost, damage or expense they incur in
connection with such Default by Tri-State, Pathnet and the
Participating Member Systems may (a) retain such amounts, plus
interest at the Default Rate, from all disbursements of revenue due
to Tri-State; and/or (b) recover such amounts in a proceeding under
Article 32 hereof;
12.1.5 In the event such Default materially affects another
Party's ability to perform its rights and obligations hereunder, that
Party may seek appropriate injunctive relief in a court of competent
jurisdiction.
12.2 Pathnet's Default. In the event of a Default by
Pathnet, Tri-State and the Participating Member Systems shall, in
addition to any other right or remedy available at law or equity,
have the right to elect any of the remedies set forth below.
12.2.1 The other Parties may temporarily suspend payment
of any sums owing hereunder until such Default is cured;
12.2.2 One or more of the other Parties may require
additional security to ensure that Pathnet retains the financial and
other ability to timely fulfill its obligations under this Agreement.
Such security shall be shall be no greater than necessary, and may
include, without limitation, additional financial guarantees by
Pathnet or other third party; escrowed funds; letters of credit; or a
performance bond;
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12.2.3 Intentionally Omitted;
12.2.4 Tri-State or the Participating Member Systems may
complete the Project as provided herein by themselves or by using a
vendor of Pooled Fibers other than Pathnet. In the event that the
Default is a monetary default, (i) Tri-State and the Participating
Member Systems may contribute Pathnet's remaining share of the
Project Costs and Tri-State's and the Participating Member System's
respective shares of revenue shall be reallocated to reflect their
additional capital contribution, and (ii) Pathnet's right to share in
revenue shall be adjusted to reflect Pathnet's actual capital
contributions to Project Costs (including any amounts contributed
from escrowed funds). Notwithstanding the foregoing, in connection
with any loss, cost, damage or expense they incur in connection with
such Default by Pathnet, Tri-State or the Participating Member
Systems may (a) retain such amounts, plus interest at the Default
Rate, from all disbursements of revenue due to Pathnet; and/or (b)
recover such amounts in a proceeding under Article 32 hereof;
12.2.5 In the event such Default materially affects a
Party's ability to perform its rights and obligations hereunder, that
Party may seek appropriate injunctive relief in a court of competent
jurisdiction.
12.3 Default by the Participating Member System's. In the
event of a Default by a Participating Member System, Pathnet and
Tri-State shall, in addition to any other right or remedy available
at law or equity, have the right to elect any of the remedies set
forth below:
12.3.1 Pathnet may temporarily suspend construction of the
Project for the duration of the Default, which suspension shall delay
the scheduled Completion Date for the suspension period; in the event
Pathnet suspends its performance, Tri-State and the remaining
Participating Member Systems shall have the right to cure the
Participating Member System's Default, and upon such cure, Pathnet
shall recommence performance;
12.3.2 Either or both of Pathnet and Tri-State may require
additional security to ensure that the defaulting Participating
Member System retains the financial and other ability to timely
fulfill its obligations under this Agreement. Such security shall be
as determined by the requiring party in its sole discretion, and may
include, without limitation, additional financial guarantees by an
Participating Member System or other third party; escrowed funds;
letters of credit; or a performance bond;
12.3.3 Any or all of the remaining participants may
complete the Project as provided herein. If the Default is a monetary
default, then (i) Pathnet Tri-State or any remaining Participating
Member System may contribute the defaulting Participating Member
System's remaining share of the Project Costs and the Parties'
respective shares of revenue shall be reallocated to reflect their
additional capital contribution, and (ii) the defaulting
Participating
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Member System's right to share in revenue shall be adjusted to
reflect such Participating Member System's actual capital
contributions to Project Costs (including any amounts contributed
from escrowed funds). Notwithstanding the foregoing, the Parties may,
on a pari passu basis, retain the amount of any loss, cost, damage or
expense it has incurred in connection with such Default by such
Participating Member System, plus interest at the Default Rate, from
all disbursements of revenue due to such Participating Member System;
and/or (b) recover such amounts in a proceeding under Article 32
hereof;
12.3.4 In the event such Default materially affects a
Party's ability to perform its rights and obligations hereunder, that
Party may seek appropriate injunctive relief in a court of competent
jurisdiction.
12.3.5 If Parties (not including Pathnet) representing more
than 30% of the capital contributions to the Project Default
hereunder, Pathnet may terminate this Agreement, in which event all
obligations of Pathnet hereunder shall be null and void, and Pathnet
may recover damages from the defaulting Participating Member Systems
in a proceeding under Article 3 hereof.
13. LIMITED WARRANTY
13.1 For a period of twelve (12) months following the Completion
Date, Pathnet warrants that the engineering, design, construction and
installation of the System is in compliance with the Project Specifications and
the terms of this Agreement. Upon termination of the twelve (12) month warranty
period, Tri-State shall have no further recourse whatsoever against Pathnet with
respect to the engineering, design, construction and installation of System
except for claims made during such warranty period, for which Pathnet shall
remain responsible.
13.2 EXCEPT AS SET FORTH IN THIS ARTICLE 13 OR AS MAY BE SET FORTH
SPECIFICALLY AND EXPRESSLY ELSEWHERE IN THIS AGREEMENT, NO PARTY MAKES ANY
WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE SYSTEM OR ANY PERFORMANCE OF
SUCH PARTY HEREUNDER, , INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR
A PARTICULAR PURPOSE OR USE, AND ALL SUCH WARRANTIES ARE HEREBY EXPRESSLY
DISCLAIMED. THE WARRANTIES SET FORTH IN THIS AGREEMENT CONSTITUTE THE ONLY
WARRANTIES MADE BY THE PARTIES TO EACH OTHER WITH RESPECT TO THIS AGREEMENT AND
ARE MADE IN LIEU OF ALL OTHER WARRANTIES, WRITTEN OR ORAL, STATUTORY, EXPRESS OR
IMPLIED.
14. MAINTENANCE
14.1 Pathnet shall be responsible for obtaining maintenance and
monitoring services for the System after the Completion Date. Any maintenance
agreement shall be decided on a
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competitive cost basis reasonably acceptable to all Parties. Any maintenance
contract for lit Fibers shall require that the maintenance provider maintain the
System at least to the standards set forth in Exhibit B hereof, or to such other
standards as may be agreed upon by Tri-State and Pathnet. Each Party may bid to
provide maintenance and monitoring services on all or part of the System.
Notwithstanding the foregoing, any monitoring of dark Pooled Fibers on the
System prior to Disposition of such Fibers will be conducted by Pathnet at no
cost to the Project.
14.2 Pathnet acknowledges and agrees that in the event of damage to
the System that adversely affects a Party's utility operations, that Party's
first priority will be to restore utility operations. Each Party will cooperate
with Pathnet or another maintenance provider to permit restoration and repair of
the System as promptly as possible.
14.3 Each Party will notify Pathnet and Tri-State immediately upon
its becoming aware of a situation that adversely affects, or threatens to
adversely affect, the System or a Party's utility operations.
15. LEGAL REQUIREMENTS
15.1 Except as may appear to the contrary in this Agreement, Pathnet
shall be fully responsible for obtaining and maintaining all required regulatory
permits, franchises, authorizations, licenses, consents or approvals required
for the construction of the Project (the "Permits"), except that Tri-State will
be responsible for obtaining any permits required from the Bureau of Land
Management and such other permits that Tri-State identifies that it desires to
obtain prior to [* * *]. All permits relating to Tri-State Facilities or
Underlying Rights used by Tri-State for its utility operations shall be in the
name of Tri-State. Each Party shall provide such assistance to Pathnet in
fulfilling its obligations hereunder as Pathnet may from time to time reasonably
request.
15.2 Pathnet shall fully comply with all provisions of applicable law
in carrying out its obligations hereunder but shall not be obliged under any
circumstances whatsoever to obtain any of the permits, authorizations, licenses,
consents or approvals to be obtained by Tri-State in the conduct of its
business, or the use and operation by each Party of its rights in the System.
15.3 Each Party shall be solely responsible for compliance with all
legal and regulatory requirements associated with its business or with ownership
or operation of its portion of the System, including without limitation
obtaining, maintaining and paying for any and all required regulatory permits,
franchises, authorizations, licenses, consents or approvals which are required
for its use, ownership and operation of its portion of the System, and the other
Parties shall have no responsibility or liability whatsoever in connection
therewith.
15.4 Each Party shall comply with all terms and conditions of the
Underlying Rights Requirements. At the request of a Party, each of Pathnet and
Tri-State shall provide the requesting
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Party with a copy of all Underlying Rights including those obtained in
connection with the Southern Route.
16. INDEMNIFICATION AND LIABILITY
16.1 Indemnities.
16.1.1 Pathnet hereby releases and agrees to indemnify,
defend, protect and hold harmless the other Parties, their respective
directors, officers, stockholders, members, agents, and employees,
and their respective successors or permitted assigns from and
against, and assumes liability for: (i) any and all causes of action,
demands, claims, suits, losses, judgments or costs, including without
limitation legal costs and reasonable attorney fees (collectively
"Damages") which may be brought by or asserted by any of Pathnet's
affiliates, subscribers, or subscribers' customers, any person or
entity providing labor, services or materials to Pathnet, or any
other action or matter of any nature arising out of, connected to, or
related to Pathnet's design, construction, maintenance, operation or
use of the System, and (ii) each and every breach, or material
default by Pathnet of any of its covenants, agreements, duties or
obligations hereunder, and (iii) any violation by Pathnet of any
regulation, rule, statute or court order of any local, state or
federal governmental agency, court or body in connection with
Pathnet's performance of its obligations under this Agreement, and
(iv) each and every breach or default of any of Pathnet's
representations or warranties contained herein; and (v) any of the
acts, omissions, negligence or willful misconduct of Pathnet or its
directors, officers, stockholders, affiliates, employees, contractors
or agents in connection with the performance of this Agreement,
unless and to the extent that the claim results from the actions or
omissions of Pathnet at the direction or on the request of Tri-State
or an Participating Member System, or from the actions or omissions
of Tri-State or an Participating Member System, or unless liability
is otherwise disclaimed in this Agreement. The provisions of this
Section shall survive termination or expiration of this Agreement.
16.1.2 Tri-State hereby releases and agrees to indemnify,
defend, protect and hold harmless the other Parties, their respective
directors, officers, stockholders, agents, and employees, and their
respective successors or permitted assigns from and against, and
assumes liability for: (i) any and all causes of action, demands,
claims, suits, losses, judgments or costs, including without
limitation legal costs and reasonable attorney fees (collectively
"Damages") which may be brought by or asserted by any of Tri-State's,
affiliates, subscribers, subscribers' customers, any person or entity
providing labor, services or materials to Tri-State, or any other
action or matter of any nature arising out of, connected to, or
related to Tri-State's construction, maintenance, operation or use of
the System, and (ii) each and every breach, or material default by
Tri-State of any of its covenants, agreements, duties or obligations
hereunder, and (iii) any violation by Tri-State of any regulation,
rule, statute or court order of any local, state or federal
governmental agency, court or body in connection with Tri-State's
performance of its obligations under this Agreement, and (iv)
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each and every breach or default of any of Tri-State's
representations or warranties contained herein; and (v) any of the
acts, omissions, negligence or willful misconduct of Tri-State's
directors, officers, stockholders, members, affiliates, employees,
contractors or agents in connection with the performance of this
Agreement, unless and to the extent that the claim results from the
actions or omissions of Tri-State at the direction or on the request
of another Party, or from the actions or omissions of another Party,
or unless liability is otherwise disclaimed in this Agreement. The
provisions of this Section shall survive termination or expiration of
this Agreement.
16.1.3 Each Participating Member System hereby releases and
agrees to indemnify, defend, protect and hold harmless the other
Parties, their respective directors, officers, stockholders, members,
agents, and employees, and their respective successors or permitted
assigns from and against, and assumes liability for: (i) any and all
causes of action, demands, claims, suits, losses, judgments or costs,
including without limitation legal costs and reasonable attorney fees
(collectively "Damages") which may be brought by or asserted by that
Participating Member System's affiliates, subscribers, or
subscribers' customers, any person or entity providing labor,
services or materials to that Participating Member System, or any
other action or matter of any nature arising out of, connected to, or
related to that Participating Member System's design, construction,
maintenance, operation or use of the System, including any Segment,
and (ii) each and every breach, or material default by that
Participating Member System of any of its covenants, agreements,
duties or obligations hereunder, and (iii) any violation by that
Participating Member System of any regulation, rule, statute or court
order of any local, state or federal governmental agency, court or
body in connection with that Participating Member System's
performance of its obligations under this Agreement, and (iv) each
and every breach or default of any of that Participating Member
System's representations or warranties contained herein; and (v) any
of the acts, omissions, negligence or willful misconduct of that
Participating Member System or its directors, officers, stockholders,
affiliates, employees, contractors or agents in connection with the
performance of this Agreement, unless and to the extent that the
claim results from the actions or omissions of that Participating
Member System at the direction or on the request of another Party or
from the actions or omissions of another Party, or unless liability
is otherwise disclaimed in this Agreement. The provisions of this
Section shall survive termination or expiration of this Agreement.
16.1.4 The Parties agree to promptly provide each other
with notice of any lawsuit, judicial, administrative or other dispute
resolution, action, proceeding or claim of which it becomes aware and
which it believes may result in an indemnification obligation
hereunder (each, an "Action"); provided that the failure to provide
any such notice shall not affect the indemnifying Party's
indemnification obligation unless the indemnifying Party is actually
prejudiced by the failure to receive such notice and then only to the
extent of such prejudice. After receipt of any such notice, if the
indemnifying Party shall acknowledge in writing to the indemnified
Party that the indemnifying Party shall be obligated under the terms
of this
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indemnity hereunder in connection with such Action, then the
indemnifying Party shall be entitled, if it so elects (i) to take
control of the defense and investigation of such Action, (ii) to
employ and engage attorneys of its own choice, which are reasonably
acceptable to the indemnified Party, to handle and defend the same,
at the indemnifying Party's cost, risk and expense, unless the named
Parties to such action or proceeding include both the indemnifying
Party and the indemnified Party and the indemnified Party has been
advised in writing by counsel that there may be one or more legal
defenses available to such indemnified Party that are different from
or additional to those available to the indemnifying Party, in which
case the indemnified Party shall also have the right to employ its
own counsel in any such case with the reasonable fees and expenses of
such counsel being borne by the indemnifying Party, and (iii) to
compromise or settle such Action, which compromise or settlement
shall be made only with the written consent of the indemnified Party,
such consent not to be unreasonably withheld or delayed, provided,
however, such consent of the indemnified Party is not required if
such settlement, compromise or consent includes as an unconditional
term thereof given by the claimant or the plaintiff to the
indemnified Party a full release from all liability in respect of
such indemnifiable claim. Notwithstanding anything in this Article 16
to the contrary, (i) if there is a reasonable probability that an
indemnifiable claim may materially adversely affect the indemnified
Party, other than as a result of money damages or other money
payments, the indemnified Party shall have the right to participate
in such defense, compromise or settlement and the indemnifying Party
shall not, without the indemnified Party's written consent (which
consent shall not be unreasonably withheld or delayed), settle or
compromise any indemnifiable claim or consent to entry of any
judgment in respect thereof unless such settlement, compromise or
consent includes as an unconditional term thereof giving by the
claimant or the plaintiff to the indemnified Party a full release
from all liability in respect of such indemnifiable claim. In all
such cases, the indemnified Party shall cooperate in the defense of
the Action.
16.2 In no event shall any Party be liable to the other for any
non-performance or breach of contract, or for any costs, losses or damages,
including without limitation loss of profit or consequential damages of any type
whatsoever under this Agreement, which arise by reason of or under conditions of
Force Majeure.
16.3 Notwithstanding any other provision in this Agreement, no Party
shall be liable for any loss of profit or revenues, or indirect, incidental,
consequential, punitive, special or exemplary damages of any type whatsoever
arising under this Agreement.
16.4 Notwithstanding any other provision of this Agreement, no Party
shall be liable for any breach hereof or for any claim of any nature whatsoever
in the aggregate in excess of [* * *] of the Project Costs as estimated as of
the date hereof, provided that the foregoing limitation on damages shall not
apply to a Party's funds in the Security Escrow to the extent such funds are
allocated to the Project and increase such Party's share of capital costs of the
Project. This Section 16.4 shall not form the basis of any claim against either
party in and of itself, and shall not increase
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Confidential Treatment Requested
or enlarge the liability of either party pursuant to the other terms of this
Agreement or otherwise. This Section 16.4 shall not limit any claim by a party
against an insurer under any insurance policy specified and provided hereunder.
[* * *]
17. TAXES
17.1 Each Party shall bear its share (in proportion to its capital
contribution) of any and all taxes levied by any authority in respect of the
construction of the Project, provided that this shall not apply to any taxes on
the income or capital of another Party or PNM. Without limiting the foregoing,
taxes shall include all sales taxes, use taxes, municipal taxes, levies or
assessments, and goods and services taxes, fees or other charges. The Parties
shall have no liability for any such taxes payable by PNM, whether under the PNM
Agreement or otherwise.
17.2 The Parties agree to negotiate in good faith with a view to
minimizing any taxes that may be due in connection with the Project.
17.3 Notwithstanding any provision to the contrary herein, either
Pathnet or Tri-State shall have the right to protest by appropriate proceedings
the imposition and/or amount of any taxes or franchise, license or permit fees,
interest or penalties imposed or assessed against it due to its use of the
System and/or based on the physical location of the System and/or the
construction thereof ("Additional Taxes"). In such event, the protesting Party
shall protect, indemnify, hold harmless and defend, at the protesting Party's
sole cost and expense, the other from and against any costs, expenses, damages
or losses incurred by the non-protesting Party, or other reasonable charges or
expenses, including reasonable attorney fees, which are incurred by the
non-protesting Party as a result of the protesting Party's protest, including,
without limitation, any Additional Taxes or any deficiency asserted by any
taxing authority. Any benefits obtained in connection with the protest shall be
allocated among the protesting parties based upon their contribution to the cost
of the protest.
18. EQUIPMENT SHELTERS
18.1 Each party shall have the right to use up to [* * *] square feet
in all Equipment Shelters constructed as part of the Project. Each party shall
also have the right to construct, at its sole cost and expense, its own
regeneration or equipment shelters, provided such installations do not adversely
affect the System and Tri-State has given its prior written approval to the
installation of any facilities that will be located on property owned by
Tri-State, used by Tri-State for its utility operations, or for which Tri-State
has been granted a permit for use in connection with its utility operations, and
the constructing party shall retain all right, title and interest in and to such
shelters, including the right to any revenues resulting from grants of licenses
to use such shelter, or otherwise. Each Party shall have the right to approve
any such additional shelters that would interfere with such Party's utility
operations, such approval not to be unreasonably withheld. In connection with
any Equipment Shelters, each party shall have the following rights:
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18.1.1 The unrestricted right of access and entry; and
18.1.2 The right to utilize on an equal basis with the
other party, common amenities such as power and fire suppression.
18.2 Revenue from leases of collocation space in or any other rights
to any Equipment Shelters shall be shared as provided herein.
19. INTERCONNECTIONS AND ADDITIONAL FACILITIES
19.1 Each Party shall have the right, at its sole cost and expense,
to install interconnections and additional facilities to the System, including
additional equipment shelters, provided such installations do not adversely
affect the System. Each Party shall have the right to approve any such
additional equipment that are attached to such Party's utility structures or
that would interfere with such Party's utility operations, such approval not to
be unreasonably withheld. The non-interconnecting Party will cooperate with the
interconnecting Party in facilitating such interconnections. All costs related
thereto, including maintenance of all equipment, shall be the sole
responsibility of the Party making such interconnection and any revenues
resulting therefrom, shall be retained by the Party making such interconnection.
Notwithstanding the foregoing, any installation of more than the
initially-agreed upon number of Fibers requires the procedures provided in
Section 3.11.
20. REPRESENTATIONS AND WARRANTIES
20.1 With the exception of any approvals to be obtained by Tri-State
from the Rural Utility Service, each Party represents and warrants to the others
that:
20.1.1 subject to the approvals described in Article 41
hereof, it has been duly created, is validly existing and has the
power and authority to enter into and perform its obligations under
this Agreement and otherwise to carry on its business as presently
conducted;
20.1.2 the entry into and performance of this Agreement
will not violate or constitute a default or breach under its Articles
of Incorporation and Bylaws, any laws or orders binding upon it or
any agreement to which it is a party;
20.1.3 there is no litigation or administrative proceeding
pending or, to its knowledge, threatened against it which could
reasonably be expected to have a material adverse effect on its
financial condition or business;
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20.1.4 this Agreement has been duly authorized, executed
and delivered and is binding on it and enforceable against it in
accordance with its terms; and
20.1.5 it shall, at all times, use equipment and operate
in a manner which will not damage or cause injury or impairment to
the Project.
20.2 Except as specifically set forth in this Agreement,
no party makes any representations or warranties with respect to the
engineering, design, capacity, construction, installation or functions of the
System.
21. PATHNET TO INSURE PRIOR TO FINAL ACCEPTANCE DATE
21.1 Pathnet agrees to maintain at all times during the construction
of the Project the following insurance coverage as part of the Project Costs
with terms and conditions acceptable to Tri-State:
21.1.1 Professional Liability Insurance in the amount of
[* * *] per claim and in the aggregate;
21.1.2 Commercial General Liability Insurance in the
amount of [* * *] combined single limit per occurrence, subject to
the applicable annual aggregate, or such higher amounts as determined
by Pathnet;
21.1.3 Workers Compensation Insurance and Employer's
Liability Insurance in the amount of [* * *] or as required by law;
21.1.4 Builders Risk Insurance in the amount of [* * *],
or as required by law;
21.1.5 Automobile Liability Insurance in the amount of
[* * *] for all Pathnet owned, hired and non-owned vehicles.
21.1.6 Umbrella Excess Liability with limits of not less
than [* * *] combined single limit in excess of the above-referenced
Commercial General Liability and Automobile Insurance.
Each of the Parties shall be added as an additional insured in the
policies referred to in Section 21, with the exception of the Workers
Compensation Policy, all to the extent of their respective interests in the
Project. Pathnet shall obtain policies with financially reputable insurer(s)
with at least an A.M. Best rating of "A" or better, which are lawfully approved
to do business in all jurisdictions where any work is performed and that are
reasonably acceptable to Tri-State. A certified copy of such policies shall be
provided to the Parties, which will provide for thirty (30) days written notice
to the Parties prior to any cancellation or modification to the policy. In
addition, all
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policies referred to above, except Workers Compensation, shall contain a waiver
of subrogation clause in favor of all insureds, their respective employees,
agents, representatives, directors or officers.
22. PARTIES TO INSURE FOLLOWING COMPLETION DATE
22.1 As of and following the Completion Date, each Party shall obtain
and maintain, at its sole cost and expense, the following insurance coverage:
22.1.1 Insurance coverage as set forth in any maintenance
agreement; and
22.1.2 Any insurance coverage that is required by law; and
22.1.3 Any insurance coverage that either Party reasonably
considers necessary.
23. FURTHER ASSURANCES
Each Party shall, from time to time, execute and deliver all such
further documents and instruments and do all acts and things as the other Party
may reasonably require to effectively carry out or better evidence or perfect
the full intent and meaning of this Agreement.
24. FEES
Each Party hereto will pay their respective legal and accounting
costs and expenses incurred in connection with the preparation, execution and
delivery of this Agreement and all documents and instruments executed pursuant
hereto and any other costs and expenses that are not Project Costs as provided
herein.
25. PUBLIC ANNOUNCEMENTS
No public announcement or press release concerning this Agreement may
be made by a Party without the prior consent and joint approval of Pathnet and
Tri-State, not to be unreasonably withheld or delayed, except as required under
applicable law or in connection with the obligations of a public company.
26. BENEFIT OF THE AGREEMENT
This Agreement will inure to the benefit of and be binding upon the
respective heirs, executors, administrators, successors and permitted assigns of
the Parties hereto.
27. ENTIRE AGREEMENT
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This Agreement constitutes the entire agreement between the Parties
hereto with respect to the subject matter hereof and cancels and supersedes any
prior understandings and agreements between the Parties with respect thereto.
28. AMENDMENTS AND WAIVERS
No amendment to this Agreement will be valid or binding unless set
forth in writing and duly executed by all of the Parties hereto. No waiver of
any breach of any provision of this Agreement will be effective or binding
unless made in writing and signed by the Party purporting to give the same and,
unless otherwise provided, will be limited to the specific breach waived.
29. ASSIGNMENT
29.1 This Agreement may not be assigned by a Party without the prior
written consent of Pathnet and Tri-State, not to be unreasonably withheld.
Notwithstanding the foregoing, however, upon prior notice to Pathnet and
Tri-State but without the necessity of obtaining their consent, a Party may
assign this Agreement to an entity that controls, is controlled by, or is under
common control with, the assignor, or to the successor of a party by merger,
consolidation or purchase of all or substantially all of the assignor's stock or
assets (an "Affiliate"). For purposes hereof, "control" shall mean the
ownership, directly or indirectly, of more than 50% of the outstanding equity
interests in an entity. No assignment, whether permitted or otherwise, shall be
effective unless the assignee has agreed to be bound by the provisions of this
Agreement in all respects and to the same extent as the assignor. In addition,
upon any assignment, the assignor will continue to be bound by all the
obligations hereunder as if such assignment had not occurred and perform such
obligations to the extent that the assignee fails so to do. Nothing in this
Section shall limit a Party's ability to sell or convey its Fibers, Cable,
Underlying Rights, or other rights in and to the System, all to the extent
permitted hereunder.
29.2 Notwithstanding any other provision of this Agreement, each
Party may assign, encumber or place liens on its interest in this Agreement and
the Project in connection with any financing or investment transactions. Such
Party's lender(s) shall have the additional right to take possession, sell,
assign or otherwise deal with such Party's interest in the Project and System,
subject to the terms of this Agreement. Notwithstanding the foregoing, nothing
herein shall be construed to permit any Party other than Tri-State to place a
lien on or otherwise encumber Tri-State Facilities, Tri-State Utility
Facilities, or any structures, other property, rights-of-way, or other
Underlying Rights used by Tri-State for its utility operations or for which
Tri-State has obtained a permit for its utility operations.
29.3 The Parties acknowledge that other entities in the region of the
Project own right of way and other assets that, if incorporated into the
Project, could increase the value of the System. Either Tri-State or Pathnet
shall have the right to propose the participation of a third-party in the
Agreement. In that event the Parties will discuss incorporating such third-party
into the Agreement,
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which incorporation may involve an extension of the System or a reallocation of
the Parties' respective shares of capital contributions and revenues.
Notwithstanding the foregoing, no Party shall have any obligation to agree to
such an extension or reallocation or to incorporate the proposed third-party
into the Agreement.
30. NOTICES
Any demand, notice or other communication to be given in connection
with this Agreement will be given in writing and will be given by personal
delivery, by certified or registered mail or by facsimile addressed to the
recipient as follows:
To Pathnet: Pathnet
1015 31st Street, N.W.
Washington, D.C. 20007
Attn: General Counsel
Facsimile Number: (202) 625-7369
To Tri-State: Tri-State Generation and Transmission Association
1100 West 116th Avenue
Denver, Colorado 80233
Attn: General Counsel
Facsimile Number: (303) 254-6007
or to such other address, individual or facsimile number as may be
designated by notice given by either Party to the other. Any demand, notice or
other communication given by personal delivery or by certified or registered
mail will conclusively be deemed to have been given on the day of actual
delivery thereof and, if given by facsimile, on the day of transmittal thereof
if given during the normal business hours of the recipient and on the Business
Day during which such normal business hours next occur if not given during such
hours on any day, provided that the sender of the facsimile receives
confirmation of delivery of the facsimile transmission by personal delivery,
certified or registered mail. If the Party giving any demand, notice or other
communication knows or ought reasonably to know of any difficulties with the
postal system that might affect the delivery of mail, any such demand, notice or
other communication may not be mailed but must be given by personal delivery or
by facsimile.
31. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the domestic laws of the State of Colorado, without reference to its choice of
law principles.
32. DISPUTE RESOLUTION
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If the Parties are unable to resolve any disagreement or dispute
arising under or related to this Agreement, including without limitation, the
failure to agree upon any item requiring a mutual agreement of the Parties
hereunder, they shall resolve the disagreement or dispute as follows:
32.1 Attempt to settle such dispute by mutual discussion
between Frank Knutson and Robert Temmer acting on behalf of
Tri-State, and Bill Smedberg and Dick Jalkut, acting on behalf of
Pathnet, or such other persons as may nominated by the Parties.
32.2 If the matter has not been resolved by the mutual
discussion required by Section 29.1 within thirty (30) business days
after the date on which the dispute arose, then, the Parties shall
endeavor to settle the dispute by mediation under the applicable
rules of the American Arbitration Association.
32.3 If such dispute cannot be settled within thirty (30)
business days after submission to mediation pursuant to Section 32.2
hereof, such dispute shall finally be resolved by an arbitral
tribunal consisting of three (3) independent and impartial
arbitrators (the "Tribunal"), under the Rules of the American
Arbitration Association (the "Arbitration Rules"). Each Party shall
appoint one (1) arbitrator within fifteen (15) days after initiation
of arbitration and the two (2) arbitrators so appointed shall select
a third (3rd) arbitrator as the chairman of the Tribunal within
fifteen (15) days of the appointment of the second arbitrator. In the
event that the Parties or the arbitrators fail to select arbitrators
as required above, the AAA shall select such arbitrators. The AAA
shall have the authority to disqualify any arbitrator who it
determines not to be independent and impartial. The arbitrators shall
be entitled to a fee commensurate with their fees for professional
services requiring similar time and effort. Venue for the arbitration
shall be Denver, CO.
32.4 Arbitration discovery shall be conducted in accordance
with the Federal Rules of Civil Procedure, with any disputes over the
scope of discovery to be determined by the arbitrators, it being
intended that the arbitrators shall allow limited, reasonable
discovery prior to any hearing on the merits. The arbitrators shall
conduct a hearing no later than sixty (60) days after initiation of
the matter to arbitration, and a decision shall be rendered by the
arbitrators within thirty (30) days after the hearing. At the
hearing, the Parties shall present such evidence and witnesses as
they may choose, with or without counsel. Adherence to formal rules
of evidence shall not be required but the arbitration panel shall
consider any evidence and testimony that it determines to be
relevant, in accordance with procedures that it determines to be
appropriate. The arbitration determination shall be in writing and
shall specify the factual and legal bases for the determination. The
arbitrators may award legal or equitable relief, including but not
limited to specific performance, and any award of damages shall be
limited as provided in this Agreement. The arbitrators' fees and
other costs of the arbitration shall be borne by the Party against
whom the award is rendered, except as the arbitration panel may
otherwise provide in its written opinion. Notwithstanding anything
herein to the contrary, Pathnet or Tri-State may, prior to the final
decision rendered by a mediator or arbitrator, petition a state or
federal court for a temporary restraining order or a
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preliminary injunction upon a showing of the requisites therefor in
such court. The foregoing provision for court proceedings is intended
to be limited to those cases in which emergency access to the court
is necessary to prevent immediate and irreparable harm in the interim
period until mediation or arbitration can be completed.
32.5 The Parties agree that this submission and agreement
to arbitrate shall be governed by and specifically enforceable in
accordance with the laws of the State of Colorado. The Parties agree
to abide by all decisions and determinations rendered in such
proceedings. Such decisions and determinations shall be final and
binding on all Parties. All decisions and determinations may be filed
with the clerk of one or more courts, state, federal or foreign
having jurisdiction over the Party against whom it is rendered or its
property, as a basis of judgment.
32.6 Pending the resolution or settlement of a dispute
between the Parties as set forth in this Article 32, the Parties
hereby expressly agree that the performance of its obligations under
this Agreement shall not be delayed, suspended, impeded or hindered.
33. CONFIDENTIAL INFORMATION
33.1 As used in this Agreement, 'Confidential Information' means only
information marked as confidential or proprietary (or if disclosed orally,
information that is summarized in a written document marked as confidential or
proprietary). Information marked as confidential or proprietary and of a
technical, business or other nature (including, without limitation, trade
secrets, know-how and information relating to the technology, customers,
business plans, promotional and marketing activities, finances and other
business affairs of such Party) may constitute Confidential Information. The
Parties understand and agree that this Agreement and all materials, maps,
engineering designs and documents, construction techniques, pricing and other
information marked as confidential or proprietary that are exchanged between
them in fulfilling the provisions and intents of this Agreement, are and shall
be Confidential Information. Each Party shall disclose Confidential Information
only to its attorneys, representatives, advisors, bankers, lenders, investors,
the Rural Utility Service, property owners for the purpose of obtaining
Underlying Rights, governmental entities for the purpose of obtaining permits
and other approvals, members, contractors, agents, affiliates, directors,
officers and employees with a need to know, provided such entities agree to be
bound by the confidentiality provisions of this Article 33, and shall keep
secret all Confidential Information of the other Party except as authorized by
the respective owners. This obligation shall continue to bind any Party after it
shall cease to be a Party for whatever reason and shall survive for a period of
two years following the termination of this Agreement but such obligation of
confidentiality shall not apply:
33.1.1 to a disclosure to a person who knew the
confidential information prior to its being disclosed;
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33.1.2 to information which comes into the public domain
without any breach of the provisions of this Article;
33.1.3 to disclosure of information which is disclosed on
a confidential basis to consultants or advisers of a Party who have a
bona fide need to know to assist that Party in the carrying out of
the terms of this Agreement;
33.1.4 to a disclosure of information required by a
governmental or judicial law, order, rule or regulation; If any
Confidential Information is required to be disclosed under this
subsection, disclosure shall be limited only to persons with a need
to know, and the disclosing Party shall provide at least five (5)
days (or such shorter period permitted by law) prior notice of such
disclosure to the other Party to give such other Party an
opportunity, at its own expense, to oppose or seek to limit
disclosure;
33.1.5 to a disclosure of information which is disclosed
in proceedings taken by either Party for the enforcement of any of
its rights and remedies under this Agreement;
33.1.6 in connection with one's obligations as a public
company;
33.1.7 to third parties in connection with financing or
investments on a need to know basis, provided such recipients agree
to be bound by the confidentiality terms hereof;.
33.1.8 such information that is reasonably necessary (and
specifically excluding any Confidential Information concerning
another Party's business plans, goals, strategies or other
proprietary information) in connection with sales and marketing
efforts.
33.2 The provisions of this Article shall survive expiration or
termination of this Agreement by two (2) years.
34. PATENTS AND COPYRIGHTS
Each Party acknowledges the rights of the other Party in certain
patents and copyrighted material the other Party may possess or develop in the
performance of this Agreement or in the operation of the System. Each Party
further acknowledges that any such rights shall remain the exclusive property of
the owning Party, and the non-owning Party shall have no interest in such rights
by virtue of the existence of this Agreement between the Parties. Each Party
agrees to use its reasonable efforts to protect such rights in dealings with
third parties.
35. TIME
Time shall be of the essence of this Agreement.
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36. LANGUAGE
The Parties have expressly requested that this agreement and its
ancillary documents be drafted in English.
37. SEVERABILITY
If any term, covenant or condition contained herein shall, to any
extent, be invalid or unenforceable in any respect under the laws governing this
Agreement, so long as such invalidity does not materially impair the benefit of
this Agreement to either Party, the remainder of this Agreement shall not be
affected thereby, and each term, covenant or condition of this Agreement shall
be valid and enforceable to the fullest extent permitted by law.
38. RELATIONSHIP
The Parties acknowledge and agree that this Agreement does not create
a partnership or joint venture relationship between them. The performance by the
Parties of all duties and obligations hereunder shall be as independent
contractors and not as agents or trustees of the other Party. No Party shall owe
any fiduciary obligations to any other Party. No Party has any authority or
capacity whatsoever to contract for or on behalf of or bind the other in respect
of any matter related to these presents or otherwise. None of the employees of
any Party shall be considered to be servants, employees or agents of any other
Party.
39. JOINT PREPARATION, COUNSEL AND RELEASE OF LIABILITY
Each Party acknowledges and agrees that it has had the advice of
legal and business counsel in connection with this Agreement, has had a full and
fair opportunity to review this Agreement and the terms hereof, and has fully
considered the business, economic and other risks inherent in the Project. The
Parties acknowledge that Pathnet has disclosed to the other Parties certain
business models, revenue projections and other analyses pertinent to the Project
and other information pertinent to the Underlying Rights, the Project or the
System. Pathnet will have no liability to the other Parties or otherwise with
respect to the accuracy of such information, and each of the other Parties
hereby releases and holds Pathnet harmless from any and all loss, cost, damage,
expense or other liability, in the event such models, projections or analyses or
other information prove to be inaccurate in any respect. The Parties also
acknowledge that Tri-State has disclosed or will disclose to the other Parties
certain models, projections, analyses, or other information pertinent to the
Underlying Rights, the Project or the System, and hereby agree that Tri-State
will have no liability to the other Parties or otherwise, and each of the other
Parties hereby releases and holds Tri-State harmless from any and all loss,
cost, damage, expense or other liability, in the event such information
disclosed by Tri-State proves to be inaccurate in any respect.
40. SURVIVAL
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Any provision and paragraph of this Agreement which by its nature
extends beyond the term hereof or which is required to ensure that the Party
fully exercise their rights and perform their obligations hereunder, shall
survive the expiration or termination of this Agreement for any cause
whatsoever.
41. APPROVALS
The participation of each of the Participating Member Systems in this
Agreement remains subject to the approval of such Participating Member System's
Board of Directors. If any Participating Member System does not provide written
confirmation within ten (10) days after the date hereof that such approval has
been obtained, this Agreement shall continue to be binding upon Pathnet and
Tri-State, and, absent an agreement between the Parties to the contrary, Pathnet
and Tri-State will each contribute their respective proportionate shares of the
Project Costs that would have been contributed by such Participating Member
System, provided that Tri-State shall have the first option to contribute the
withdrawing Participating Member System's share. All revenues from the Project
will be adjusted proportionally.
42. COUNTERPARTS
This Agreement may be executed in any number of counterparts each of
which shall be deemed an original, but all of which together shall constitute
the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF the Parties have executed this Agreement.
TRI-STATE GENERATION AND TRANSMISSION ASSOCIATION, INC.,
a Colorado cooperative corporation
By: /s/ Frank R. Knutson
---------------------------
Name: Frank R. Knutson
Title:
Date: August , 1999
PATHNET, INC., a Delaware corporation
By: /s/ W.R. Smedberg V
---------------------------
Name: William R. Smedberg V
Title: EVP Corporate Development
Date: August 5, 1999
EMPIRE ELECTRIC ASSOCIATION, INC.
By: /s/ W.C. Bauer
---------------------------
Name: William C. Bauer
Title: President
Date: August , 1999
LA PLATA ELECTRIC ASSOCATION, INC.
By: /s/ David L. Potter
---------------------------
Name: David L. Potter
Title: General Manager
Date: August , 1999
DELTA-MONTROSE ELECTRIC ASSOCATION, INC.
By: /s/ Daniel R. McClendon
---------------------------
Name: Daniel R. McClendon
Title: General Manager
Date: August , 1999
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SAN MIGUEL POWER ASSOCATION, INC.
By: /S/ Gary Norton
---------------------------
Name: Gary N. Norton
Title: General Manager
Date: August , 1999
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EXHIBIT A
PROJECT SPECIFICATIONS
[to be determined]
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EXHIBIT B
MAINTENANCE SPECIFICATIONS AND PROCEDURES
Any Party responsible for providing maintenance of the System
hereunder shall be referred to herein as the "Service Provider". The Party
receiving maintenance services from the Service Provider hereunder shall be
referred to herein as the "Service Recipient". All other capitalized terms not
otherwise defined herein shall have their respective meanings as set forth in
the Agreement of which this Exhibit forms a part.
1. Maintenance.
(a) Routine maintenance and repair of the System
described in this Section ("Scheduled
Maintenance") shall be performed by or under the
direction of Service Provider, at Service
Provider's reasonable discretion or at Service
Recipient's request. Scheduled Maintenance shall
commence upon the Completion Date of the
Agreement. Scheduled Maintenance shall include
the following activities:
(i) Patrol of System route on a regularly
scheduled basis, which will be weekly;
(ii) Maintenance of a "Call-Before-You-Dig"
program and all required and related cable
locates;
(iii) Maintenance of sign posts along the System
right-of-way with the number of the local
"Call-Before-You-Dig" organization; and
(iv) Assignment of fiber maintenance employees
to locations along the System at intervals
dependent upon terrain, accessibility,
locate ticket volume, etc. Service Provider
shall decide the staffing of fiber
maintenance employees for the System.
(b) Non-routine maintenance and repair of the System
which is not included as Scheduled Maintenance
("Unscheduled Maintenance"), shall be performed
by or under the direction of Service Provider.
Unscheduled Maintenance shall commence upon the
Effective Date of the Agreement. Unscheduled
Maintenance shall consist of:
(i) "Emergency Unscheduled Maintenance" in
response to an alarm identification by
Service Provider's Operations Center,
notification by
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Service Recipient or notification by any
third party of any failure, interruption or
impairment in the operation of the System,
or any event imminently likely to cause the
failure, interruption or impairment in the
operation of the System.
(ii) "Non-Emergency Unscheduled Maintenance" in
response to any potential service-affecting
situation to revent any failure,
interruption or impairment in the operation
of the System.
Service Recipient shall immediately report the need for
Unscheduled Maintenance to Service Provider in accordance
with procedures promulgated by Service Provider from time
to time. Service Provider will log the time of Service
Recipient's report, verify the problem and dispatch
personnel immediately to take corrective action.
2. Operations Center.
Service Provider shall operate and maintain an Operations Center
("OC") capable of receiving System alarms twenty-four (24) hours a
day, seven (7) days a week. Service Provider's maintenance employees
shall be available for dispatch twenty-four (24) hours a day, seven
(7) days a week. Service Provider shall have its first maintenance
employee at the site requiring Emergency Unscheduled Maintenance
activity within [* * *] after the time Service Provider becomes aware
of an event requiring Emergency Unscheduled Maintenance, unless
delayed by circumstances beyond the reasonable control of Service
Provider. Service Provider shall maintain a toll-free telephone
number to contact personnel at the OC. Service Provider's OC
personnel shall dispatch maintenance and repair personnel to handle
and repair problems detected in the System.
(i) Through the Service Recipient's remote
surveillance equipment and upon
notification by Service Recipient to
Service Provider; or
(ii) Upon notification by a third party.
3. Cooperation and Coordination.
(a) Service Recipient and Service Provider shall
utilize the Escalation List attached hereto, as
updated from time to time, to report and seek
immediate initial redress of exceptions noted in
the performance of Service Provider in meeting
maintenance service objectives.
(b) Service Provider will, as necessary, arrange for
unescorted access for Service Provider to all
sites of the System, subject to applicable
contractual, underlying real property and other
third party limitations and restrictions.
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Confidential Treatment Requested
(c) In performing its services hereunder, Service
Provider shall take workmanlike care to prevent
impairment to the signal continuity and
performance of the System. The precautions to be
taken by Service Provider shall include
notifications to Service Recipient. In addition,
Service Provider shall reasonably cooperate with
Service Recipient in sharing information and
analyzing the disturbances regarding the cable
and/or fibers. In the event that any Scheduled or
Unscheduled Maintenance hereunder requires a
traffic roll or reconfiguration involving cable,
fiber, electronic equipment, or regeneration or
other facilities of the Service Recipient, then
Service Recipient shall, at Service Provider's
reasonable request, make such personnel of
Service Recipient available as may be necessary
in order to accomplish such maintenance, which
personnel shall coordinate and cooperate with
Service Provider in performing such maintenance
as required of Service Provider hereunder.
(d) Service Provider shall notify Service Recipient
at least five (5) business days prior to the
date in connection with any Maintenance Window
(MW) of any Scheduled Maintenance and as soon
as possible after becoming aware of the need
for Unscheduled Maintenance. Service Recipient
shall have the right to be present during the
performance of any Scheduled Maintenance or
Unscheduled Maintenance so long as this
requirement does not interfere with Service
Provider's ability to perform its obligations
under this Agreement. In the event that
Scheduled Maintenance is canceled or delayed
for whatever reason as previously notified,
Service Provider shall notify Service Recipient
at Service Provider's earliest opportunity, and
will comply with the provisions of this
Section.
4. Facilities.
(a) Service Provider shall maintain the System in a
manner, which will permit Service Recipient's use
in accordance with this Agreement. All common
systems within facilities along the System shall
be maintained in accordance with manufacturer's
specifications, to include battery plants,
generators, and HVAC units.
(b) Except to the extent otherwise expressly provided
in the Agreement, Service Recipient will be
solely responsible for providing and paying for
any and all maintenance of [* * *], none of which
is included in the maintenance services to be
provided hereunder.
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Confidential Treatment Requested
5. Fiber Optic Cable/Fibers.
(a) Service Provider shall perform appropriate
Scheduled Maintenance on the fiber optic cable
contained in the System in accordance with
Service Provider's then current preventative
maintenance procedures as agreed to by Service
Recipient, which shall not substantially deviate
from standard industry practice.
(b) Service Provider shall have qualified
representatives on site any time Service Provider
has reasonable advance knowledge that another
person or entity is engaging in construction
activities or otherwise digging within five (5)
feet of the System.
(c) Service Provider shall maintain sufficient
capability to teleconference with Service
Recipient during an Emergency Unscheduled
Maintenance in order to provide regular
communications during the restoration process.
When correcting or repairing fiber optic cable
discontinuity or damage, including but not
limited to in the event of Emergency
Unscheduled Maintenance, Service Provider shall
use best efforts to repair traffic-affecting
discontinuity within [* * *] after the Service
Provider maintenance employee's arrival at the
problem site. In order to accomplish such
objective, it is acknowledged that the repairs
so effected may be temporary in nature. In such
event, within twenty-four (24) hours after
completion of any such Emergency Unscheduled
Maintenance, Service Provider shall commence
its planning for permanent repair, and
thereafter promptly shall notify Service
Recipient of such plans, and shall implement
such permanent repair within an appropriate
time thereafter. Restoration of open fibers on
fiber strands not immediately required for
service shall be completed on a mutually
agreed-upon schedule. If the fiber is required
for immediate service, the repair shall be
scheduled for the next available Maintenance
Window (MW).
(d) In performing repairs, Service Provider shall
comply with the splicing specifications as set
forth in the Project Specifications. Service
Provider shall provide to Service Recipient any
modifications to these specifications as may be
necessary or appropriate in any particular
instance for Service Recipient's approval, which
approval shall not be unreasonably withheld.
(e) Service Provider's representatives that are
responsible for initial restoration of a cut
fiber optic cable shall carry on their vehicles
the typical appropriate equipment that would
enable a temporary splice, with the objective of
restoring operating capability in as little time
as possible. Service Provider shall maintain and
supply an inventory of spare fiber optic cable in
storage
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facilities supplied and maintained by Service
Provider at strategic locations to facilitate
timely restoration.
6. Maintenance Window (MW).
Scheduled Maintenance, which is reasonably expected to
produce any signal discontinuity, must be coordinated
between the Parties. Generally, this work should be
scheduled after 6:00 p.m. and before 8:00 a.m. local time.
Major system work, such as fiber rolls and hot cuts, will
be scheduled for MW weekends and shall allow work during
daylight hours if on a Saturday or Sunday. Service
Provider and Service Recipient will agree upon a MW
calendar. The intent is to avoid jeopardy work on
high-traffic holidays.
7. Subcontracting.
Service Provider may subcontract any of the maintenance
services hereunder; provided that Service Provider shall
require the subcontractor(s) to perform in accordance with
the requirements and procedures set forth herein. The use
of any such subcontractor shall not relieve Service
Provider of any of its obligations hereunder.
8. Fees and Costs.
Each Party shall pay for total maintenance costs,
including without limitation taxes required under the
Agreement, in proportion to that Party's contribution to
Project Costs.
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