PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED
& FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. SUCH PORTIONS ARE
DESIGNATED "[***]"
Exhibit 10.1
THIS FIXED POINT MICROWAVE SERVICES AGREEMENT is made and entered into
as of the 17th day of October, 1997 (the "EFFECTIVE DATE"), by and between
PathNet, Inc. ("PATHNET"), a Delaware corporation and Northern Border
Pipeline Company ("INCUMBENT"), a Texas partnership (collectively, the
"PARTIES" and each, a "PARTY").
W I T N E S S E T H:
WHEREAS, PathNet is engaged in the business of creating high capacity,
digital, microwave communications systems for purposes of marketing and selling
the excess long distance telecommunications capacity created by such systems;
WHEREAS, Incumbent is the owner and operator of an existing microwave
telecommunications system; and
WHEREAS, Incumbent desires to engage PathNet as, and PathNet desires to act
as, Incumbent's sole representative for the purpose of (i) installing, managing,
and operating a high capacity digital microwave system along Incumbent's
microwave paths and (ii) marketing and selling any Excess Capacity created by
such high capacity digital microwave system.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the Parties agree as follows:
SECTION 1. DEFINITIONS
1.1 DEFINITIONS: As used in this Agreement, the following terms
shall have the meanings indicated:
1.1.1 1/0 MULTIPLEXER: Any device that multiplexes capacity
between the DS-1 and the DS-0 levels.
1.1.2 1 X 1: A microwave radio configuration consisting of a
primary and a protect radio.
1.1.3 AFFILIATE: With respect to any Person, any other Person
that directly or indirectly controls, is controlled by, or is under common
control with such Person. For the purposes of this definition, "control"
(including the terms "controlled by" and "under common control with"), as
used with respect to any Person, shall mean the possession, directly or
indirectly, the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting
securities, by contract, or otherwise.
1.1.4 AGREEMENT: This Fixed Point Microwave Services Agreement,
including the Schedules and Exhibits attached hereto, as the same may be
amended, supplemented or modified in accordance with the terms hereof.
1.1.5 ALARM AND EVENT REPORT: As defined in SECTION 7.7 of
SCHEDULE A.
1.1.6 ARBITRATION RULES: As defined in SECTION 16.2.3.
1.1.7 AS-BUILT DRAWING: As defined in SECTION 4.1.4 of SCHEDULE
A.
1.1.8 AVAILABLE EXCESS CAPACITY: The total PathNet Excess
Capacity available (and not allocated) for use or sale on the System at any
given time from Commissioning through the Expiration Date.
1.1.9 AVERAGE SOLD EXCESS CAPACITY: The cumulative daily average
of [(PathNet Excess Capacity -- Available Excess Capacity)/PathNet Excess
Capacity], taken as a percentage.
1.1.10 BIT ERROR RATE: The number of received bits in error
compared to the total number of bits received.
1.1.11 BREACHING PARTY: As defined in SECTION 16.1.2.
1.1.12 BUSINESS DAY: Any day other than a Saturday, a Sunday, or a
day on which the banking institutions in either New York, New York, or the
city and state in which the principal executive offices of PathNet within
the United States are located, are not open for business.
1.1.13 CAPACITY EXPANSION: An increase in telecommunication
channels a System is able to transmit, receive and transport above those
created by the installation of the Initial System, achieved by an addition
to or change in equipment.
1.1.14 CAPACITY EXPANSION SCHEDULE: As defined in SECTION 7.1 of
SCHEDULE A.
1.1.15 CENTER: As defined in SECTION 16.2.3.
1.1.16 CERCLA: Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. SECTION 6901 ET SEQ., as amended.
1.1.17 CHANNEL PLAN: As defined in SECTION 1.1 of SCHEDULE A.
1.1.18 COMMISSIONING: With respect to each path or Segment, the
date on which the circuits of such path or Segment are available for
service after completion of all required site acceptance testing.
1.1.19 CONFIDENTIAL INFORMATION: Any and all technical, business
and financial information, in whatever form, furnished or disclosed by one
Party to the other Party, including but not limited to information on the
System, cost estimates, technical data, information, pricing, and the terms
and conditions of this Agreement.
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1.1.20 CUSTOMER AGREEMENTS: As defined in SECTION 9.8.1.
1.1.21 CUTOVER PLAN: As defined in SECTION 4.1.1 of SCHEDULE A.
1.1.22 DEFICIENCY LIST: As defined in SECTION 5.7 of SCHEDULE A.
1.1.23 DISPUTE: As defined in SECTION 16.2.1.
1.1.24 DROP AND INSERT: That process wherein a part of the
information carried in a transmission system is demodulated (dropped) at an
intermediate point and different information is entered (inserted) for
subsequent transmission.
1.1.25 DS-0: 64,000 bits per second; The world-wide standard speed
for digitizing one voice conversation using pulse code modulation, which is
approximately equivalent to a single voice or data channel.
1.1.26 DS-1: 24 DS-0's.
1.1.27 DS-3: 672 DS-0's or 28 DS-1's.
1.1.28 EFFECTIVE DATE: As defined in the introductory paragraph of
this Agreement.
1.1.29 ELECTION PAYMENT: As defined in SECTION 4.3.1 for Segment
A.
1.1.30 ELECTION PERIOD: The eighty-four (84) month period
following Commissioning of the Initial System on Segment A during which
Incumbent shall fund the Initial System up to the Incumbent Payment cap.
1.1.31 ENCUMBRANCES: Any security interests, mortgages, liens,
pledges, charges, claims, easements, reservations, restrictions, clouds,
equities, rights of way, options, rights of first refusal and other
encumbrances whether or not relating to the extension of credit or the
borrowing of money. To "Encumber" shall mean to effect any Encumbrance.
1.1.32 EQUIPMENT: Any and all digital microwave radios, radio
components, cards, antennas, waveguides, multiplexers, software and other
equipment or parts required for the operation of the System provided and
installed by PathNet and its subcontractors, as set forth on EXHIBIT A-1 to
SCHEDULE A.
1.1.33 ERROR FREE SECOND: Any one-second interval that does not
contain a measurable bit error.
1.1.34 ERRORED SECONDS: Any one-second interval during which one
or more bit errors occur.
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1.1.35 EXCESS CAPACITY: The PathNet Excess Capacity and the
Incumbent Excess Capacity.
1.1.36 EXISTING SYSTEM INVENTORY: As defined in SECTION 1.1 of
SCHEDULE A.
1.1.37 EXPIRATION DATE: The date on which this Agreement and the
rights and obligations hereunder are terminated or expire in accordance
with SECTION 3.
1.1.38 FAA: The Federal Aviation Administration, or any other
Federal agency at the time administering tower registration requirements
and regulations.
1.1.39 FACILITIES: Incumbent's towers, shelters, sites and all
equipment owned by Incumbent relating to and used in association with such
towers, shelters and sites for the purpose of operating the System.
1.1.40 FAILED SECOND: Any one-second interval that has 1,544 bit
errors at a DS-1 rate.
1.1.41 FCC: The Federal Communications Commission, or any other
Federal agency at the time administering the Communications Act of 1934, as
amended, the Telecommunications Act of 1996, as amended and the rules and
regulations promulgated thereunder.
1.1.42 FCC CODE: The Communications Act of 1934, as amended, the
Telecommunications Act of 1996, as amended and the rules and regulations
promulgated thereunder and related thereto.
1.1.43 FIRST EXTENSION PERIOD: As defined in SECTION 3.2.2.
1.1.44 FORCE MAJEURE EVENT: As defined in SECTION 15.3.
1.1.45 FORM 415: As defined in SECTION 10.1.1.
1.1.46 FREQUENCY AVAILABILITY MODEL: As defined in SECTION 1.1 of
SCHEDULE A.
1.1.47 FREQUENCY DIVERSITY: A method of protecting a radio signal
by providing a second radio signal on a different frequency, which will
assume the radio signal load when the regular channel fails.
1.1.48 GOVERNMENTAL AUTHORITY: Any nation or government, any state
or other political subdivision thereof and any court, panel, judge, board,
bureau, commission, agency or other entity, body or other person exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government.
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1.1.49 HAZARDOUS MATERIAL: Any material amount of any substance,
matter or waste which is or becomes regulated by any Federal, state or
local law, ordinance, order, rule, regulation, code or any government
restrictions or requirement including, but not limited to, asbestos,
petroleum products and "Hazardous Substances" and "Hazardous Wastes" (as
such terms are defined in CERCLA and RCRA.)
1.1.50 INCUMBENT: As defined in the introductory paragraph.
1.1.51 INCUMBENT DESIRED PATH: As defined in SECTION 9.3.
1.1.52 INCUMBENT EXCESS CAPACITY: As defined in SECTION 9.1.2.
1.1.53 INCUMBENT INITIAL ALLOCATION OF CAPACITY: [***]
1.1.54 INCUMBENT ITEMS: As defined in SECTION 4.1.1(A).
1.1.55 INCUMBENT OUT-OF-POCKET PATH FUNDING: [Path Replacement
Costs -- ((i) Path PCS Recovery + (ii) any and all PathNet Funding for a
given Path + (iii) AFUDC + (iv) Overhead)].
1.1.56 INCUMBENT PAYMENT CAP: As defined in SECTION 4.1.1(B).
1.1.57 INCUMBENT REPRESENTATIVE: As defined in SECTION 17.11.
1.1.58 INITIAL PERIOD: As defined in SECTION 3.2.1.
1.1.59 INITIAL SYSTEM: The initial system with a 1 x 1
configuration which is comprised of the first 85 DS-1's (which is
equivalent to 2,040 DS-0's) of the System and the System's 85 DS-1 protect
channels.
1.1.60 INTERCONNECTION: The point at which a private network is
connected to (i) the PSTN, which can include IXC POPs, tandem access
points, the central office, internet service providers, or major industrial
customer points of presence or (ii) another private network.
1.1.61 INTERFERENCE: Any measurable impairment in the performance
of the System or the quality of the signals received or transmitted on the
System.
1.1.62 IXC: An inter-exchange carrier; a telephone company that
provides long-distance telephone service between LATA's but not within any
one LATA.
1.1.63 JUDGMENT: Any order, judgment, writ, decree, award or other
determination, decision or ruling of any court, judge, justice or
magistrate, any other Governmental Authority or any arbitrator.
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1.1.64 LATA: Local Access and Transport Area; one of 161 local
geographic areas in the United States within which a local telephone
company may offer telecommunications services.
1.1.65 LOSSES: Any and all losses, claims, shortages, damages,
liabilities, expenses (including reasonable attorneys' and accountants'
fees), assessments, tax deficiencies and taxes (including interest and
penalties thereon) sustained, suffered or incurred by any Person, including
the Parties hereto, arising from any matter which is the subject of
indemnification under SECTION 14.
1.1.66 MAINTENANCE SERVICES AGREEMENT: The Maintenance Services
Agreement, by and between PathNet and Incumbent, as the same may be amended
from time to time in accordance with its terms.
1.1.67 MATERIAL ADVERSE EFFECT: Any event, fact, circumstance or
occurrence, which results or would result in a material adverse change in
or a material adverse effect on any of: (i) the condition (financial or
otherwise), business, performance, operations, properties, or prospects of
such Person; (ii) the legality, validity or enforceability of this
Agreement; or (iii) the ability of such Person to perform its material
obligations under this Agreement.
1.1.68 MODIFICATIONS SOW: As defined in SECTION 2.1 of SCHEDULE A.
1.1.69 NETWORK MANAGEMENT SYSTEM: As defined in SECTION 7.6 of
SCHEDULE A.
1.1.70 NETWORK MONITORING CENTER: As defined in SECTION 7.5 of
SCHEDULE A.
1.1.71 NON-BREACHING PARTY: As defined in SECTION 16.1.2.
1.1.72 NOTICE OF ELECTION: As defined in SECTION 14.3.
1.1.73 OC-3 MULTIPLEXER: Any device that multiplexes capacity
between the OC-3 and the DS-1 levels.
1.1.74 OPERATOR: Northern Plains Natural Gas Company, Operator of
Incumbent.
1.1.75 ORDER WIRE: A service channel consisting of a 64,000 bit
per second circuit between sites.
1.1.76 OSHA: The Occupational Safety and Health Act, as amended.
1.1.77 OUTAGE: When the Bit Error Rate in each second is worse
than 10-3 for a period of ten (10) consecutive seconds.
6
1.1.78 PART 101: Part 101 of Title 47 of the Code of Federal
Regulations, as amended.
1.1.79 PARTNER: Shall mean partners of Incumbent and the partners
of any Partner.
1.1.80 PARTY: As defined in the introductory paragraph.
1.1.81 PATH: The spatial separation between two microwave tower
facilities in the System.
1.1.82 PATH PCS RECOVERY: The total amounts actually recovered
from PCS bid winners on every Path comprising Segment A, as such amount may
change from time to time.
1.1.83 PATH REPLACEMENT COSTS: Total costs of the Incumbent Items
as defined in SECTION 4.1.1(a)(i) herein for Segment A, as reasonably
documented by PathNet and Incumbent, including Incumbent's Allowance for
Funds Used During Construction ("AFUDC") + Incumbent's Overhead
("Overhead") deferred in accordance with generally accepted accounting
principles per Path, PROVIDED, HOWEVER, that (i) the incremental costs of
providing back-to-back terminals at every site over the cost of a repeater
terminal for those sites planned by PathNet as repeater sites and (ii) any
costs associated with multiplexing from the DS-1 to DS-0 levels are
excluded from the definition of Path Replacement Costs. (Costs for any
tower, shelter, right-of-way and infrastructure currently existing and
owned by Incumbent are also excluded.)
1.1.84 PATH STUDIES: As defined in SECTION 1.1 of SCHEDULE A.
1.1.85 PATHNET: As defined in the introductory paragraph.
1.1.86 PATHNET ALLOCABLE REVENUE PERCENTAGE: [***]
1.1.87 PATHNET EXCESS CAPACITY: At any given time, the
telecommunications channels or DS-0's on a per mile basis that the System
creates, transports and receives, less the capacity allocated to Incumbent
and the protect channels, pursuant to the Channel Plan, as amended from
time to time.
1.1.88 PATHNET FUNDING: Any payment made by PathNet to Incumbent
for (i) Path Replacement Costs, (ii) any payment made by PathNet pursuant
to SECTION 4.1.1(B), and (iii) or the value of any services provided by
PathNet and included in Incumbent Items for Segment A and not paid for by
Incumbent, provided PathNet Funding shall equal [Path Replacement Costs -
(Incumbent Out-of-Pocket Path Funding + Path PCS Recovery + AFUDC +
Overhead)].
7
1.1.89 PATHNET SOFTWARE: The software (including applications
software and systems software) owned or licensed from a third party by
PathNet used to provide the services covered in this Agreement.
1.1.90 PCN: A Prior Coordination Notice sent pursuant to Part 101.
1.1.91 PERMITS: Any and all authorizations, approvals, consents,
licenses, permits, easements, certificates and other rights and permissions
necessary to conduct such Person's business and to own, lease and operate
such Person's properties as currently conducted, owned, leased or operated.
1.1.92 PERSON: An individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock
company, or other entity of any kind or any Governmental Authority.
1.193 POP: Point Of Presence - the interconnection between any
two facilities based networks.
1.1.94 PRE-COMMISSIONING TEST EQUIPMENT: All equipment required
for the testing required to be performed on the System pursuant to SECTION
5 of SCHEDULE A, including, but not limited to, all required digital volt
meters, optical power meters, oscilloscopes, RF signal generators, noise
figure meters, noise figure test sets, RF variable attenuators, DADE adjust
cables, receiver card extenders and extension cords.
1.1.95 PRELIMINARY CONSTRUCTION SCHEDULE: As defined in SECTION
1.1 of SCHEDULE A.
1.1.96 PROGRESS REPORT: As defined in SECTION 4.1.2 of SCHEDULE A.
1.1.97 PROJECT DRAWINGS: As defined in SECTION 1.3 of SCHEDULE A.
1.1.98 PROJECT MANAGEMENT PLAN: As defined in SECTION 4.1.1 of
SCHEDULE A.
1.1.99 PROJECT SCHEDULE: As defined in SECTION 4.1.1 of SCHEDULE
A.
1.1.100 PROTECTION CONFIGURATION: An engineering plan under which
channel capacity is protected either on a fully redundant basis or on a 1 x
n protection basis.
1.1.101 PSTN: Publicly Switched Telephone Network.
1.1.102 QUARTERLY REVENUE REPORT: As defined in SECTION 9.10.
1.1.103 RCRA: Resource Conservation and Recovery Act, 42 U.S.C.
SECTION 9601 ET SEQ., as amended.
8
1.1.104 REQUIREMENT OF LAW: With respect to any Person, all
Federal, state and local laws, rules, regulations, Judgments, injunctions,
standards, codes, limitations, restrictions, conditions, prohibitions,
notices, demands or other requirements or determinations of a court or
other Governmental Authority or an arbitrator, applicable to or binding
upon such Person, any of its property or any business conducted by it or to
which such Person, any of its assets or any business conducted by it is
subject.
1.1.105 REVENUE: As defined in SECTION 9.12.3.
1.1.106 SECOND EXTENSION PERIOD: As defined in SECTION 3.2.3.
1.1.107 SEGMENT: The portion of a microwave communications network
existing between two geographic points. For purposes of this Agreement,
SEGMENT A is the portion of Incumbent's microwave communications network
between Port of Morgan, Montana and Ventura, Iowa. For purposes of this
Agreement, SEGMENT B is the portion of Incumbent's microwave communications
network between Ventura, Iowa and the terminus of Incumbent's System in
Illinois.
1.1.108 SERVICES: As defined in SECTION 7.1.
1.1.109 SEVERELY ERRORED SECONDS: Any one second interval where the
Bit Error Rate is greater than or equal to 1 x 10-3 at a DS-1 rate
regardless of the cause of degradation affecting the channel error
performance including, but not limited to, unprotected equipment failures
and any other factors that contribute to poor performance.
1.1.110 SONET: Synchronous Optical Network; a family of fiber-optic
transmission rates from 51.84 Mbps to 13.22 Gbps, created to provide the
flexibility needed to transport many digital signals with different
capacities and to provide a standard to which manufacturers may design.
1.1.111 SPACE DIVERSITY: Protection of a radio signal by providing
a separate antenna on the same tower to assume the radio signal load when
the regular transmission path on the primary antenna fades, thereby
ensuring continuous transmission.
1.1.112 SPARE PARTS: The equipment and parts provided by PathNet to
Incumbent pursuant to the performance of Incumbent's obligations under the
Maintenance Services Agreement.
1.1.113 SPECIFICATIONS: As defined in SECTION 7.2.
1.1.114 STATION LOG BOOK: As defined in SECTION 6.2 of SCHEDULE A.
1.1.115 SUBCONTRACTORS: Any firm, corporation, or person working
directly or indirectly for a company that furnishes or performs a portion
of the work, labor or material.
9
1.1.116 SWITCHED MOD SECTION: A section of network between two
adjacent back-to-back terminals.
1.1.117 SYSTEM: The high-capacity digital SONET microwave radio
equipment, antenna, waveguide, Facilities, Network Management System, all
other equipment and materials related thereto, and FCC licenses and other
licenses and Permits related thereof, operated for the purpose of
transmitting, receiving and transporting telecommunications signals over
Incumbent's Segments set forth on SCHEDULE B.
1.1.118 SYSTEM BUDGET: As defined in SECTION 1.1 of SCHEDULE A.
1.1.119 SYSTEM DESIGN: As defined in SECTION 1.1 of SCHEDULE A.
1.1.120 SYSTEM PAYMENT: As defined in SECTION 4.3.2(A) for Segment
B.
1.1.121 TECHNOLOGY: Inventions, ideas, processes, formulas, and
know-how.
1.1.122 TOWER ANALYSIS: As defined in SECTION 1.1 of SCHEDULE A.
1.1.123 WAYSIDE CHANNELS: The additional DS-1 of telecommunications
capacity within each radio beyond the base OC-3 capacity.
1.2 TERMS GENERALLY. The definitions in SECTION 1.1 and elsewhere in this
Agreement shall apply equally to both the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "herein",
"hereof", "hereto" and "hereunder" and words of similar import refer to this
Agreement (including the Schedules and Exhibits) in its entirety and not to any
part hereto unless the context shall otherwise require. All references herein
to Sections, Exhibits and Schedules shall be deemed references to Sections of,
and Exhibits and Schedules to, this Agreement unless the context shall otherwise
require. Unless otherwise expressly provided herein or unless the context shall
otherwise require, any references as of any time to the "Certificate of
Incorporation," "Articles of Incorporation," "charter," "organizational or
constituent documents" or "Bylaws" of any Entity, to any agreement (including
this Agreement) or other contract, instrument or document or to any agreement
statute or regulation are to it as amended and supplemented from time to time
(and, in the case of a statute or regulation to any corresponding provisions of
successor statutes or regulations) up to and including the Effective Date. Any
reference in this Agreement to a "day" or number and "days" (without the
explicit qualification of "Business") shall be interpreted as a reference to a
calendar day or number of calendar days. If any action or notice is to be taken
or given on or by a particular calendar day, and such calendar day is not a
Business Day, then such action or notice shall be deferred until, or may be
taken or given on, the next Business Day.
SECTION 2. RELATIONSHIP OF THE PARTIES
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2.1 INDEPENDENT CONTRACTOR, REPRESENTATIVE AND NETWORK MANAGER. Incumbent
shall appoint PathNet and PathNet shall serve in the following capacities during
the term of this Agreement:
2.1.1 INDEPENDENT CONTRACTOR. As an independent contractor,
PathNet will serve as Incumbent's representative in performing analytical
pre-design and design services and installing, testing and ensuring the
performance of the System, except that for any Capacity Expansion, PathNet
shall serve as Incumbent's sole and exclusive representative in accordance
with the terms and conditions set forth in SECTION 6 and in SCHEDULE A.
2.1.2 EXCLUSIVE MARKETING REPRESENTATIVE. As the exclusive
representative for the marketing and sale of Excess Capacity for Incumbent,
PathNet will market and sell the Excess Capacity created by System, as
described in SECTION 9.
2.1.3 NETWORK MANAGER. In the role of a network manager, PathNet
will serve as the point of contact for any Outage or trouble on the System
and shall operate the Network Management System and the Network Monitoring
Center as described in SECTION 7.5 and SECTION 7.6 of SCHEDULE A.
2.2 NO JOINT VENTURE, ETC. The Parties expressly disclaim any intention
to create, and nothing herein shall be construed as creating, a partnership,
joint venture, agency or employment relationship between PathNet and Incumbent.
2.3 RESTRICTIONS ON ACTIONS OF INCUMBENT. For the term of this Agreement,
Incumbent shall not operate parallel microwave telecommunications facilities or
systems to those set forth in SCHEDULE B for the purpose of selling or otherwise
providing any capacity on such parallel facilities or systems.
SECTION 3. TERM AND EXPIRATION
3.1 TERM, EXTENSION PERIODS AND RENEWAL.
3.1.1 TERM. This Agreement shall commence on the Effective Date
and shall be in full force and effect until the later of the expiration of
the Initial Period or any Extension Period of either Segment A or B, as set
forth in this SECTION 3, or until terminated by Incumbent as provided in
SECTION 3.3.
3.2 INITIAL AND EXTENSION PERIODS
3.2.1 INITIAL PERIOD. The initial term (the "INITIAL PERIOD")
shall commence upon the receipt of the FCC common carrier license for
Segment A and shall expire on the fourth (4th) anniversary of the
Commissioning of Segment B.
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3.2.2 FIRST EXTENSION PERIOD. In the event the Average Sold
Excess Capacity is at least ten percent (10%) during the Initial Period,
the term of the Agreement shall be automatically extended for an extension
period (the "FIRST EXTENSION PERIOD") commencing on the day after the
expiration of the Initial Period and expiring on the tenth (10th)
anniversary thereafter; provided PathNet shall notify Incumbent of its
intent to exercise its option to extend the term of the Agreement at least
one hundred and eighty (180) days prior to the end of the preceding term.
3.2.3 SECOND EXTENSION PERIOD. In the event the Average Sold
Excess Capacity is at least twenty percent (20%) during the Initial Period
and the First Extension Period, the term of the Agreement shall be
automatically extended for a second extension period (the "SECOND EXTENSION
PERIOD") commencing on the day after the expiration of the First Extension
Period and expiring on the tenth (10th) anniversary thereafter; provided
PathNet shall notify Incumbent of its intent to exercise its option to
extend the term of the Agreement at least one hundred and eighty (180) days
prior to the end of the preceding term.
3.2.4 SUBSEQUENT EXTENSIONS. Upon expiration of the Second
Extension Period thereof this Agreement shall be automatically renewed for
a one-year term, and at the end of such one-year term for additional
one-year terms for each year thereafter, unless terminated by either Party
upon written notice to the other Party to that effect delivered at least
ninety (90) days before the end of the second extension period or any such
one-year term.
3.3 TERMINATION. To the extent PathNet (a) fails to make payment on the
undisputed portion of any of the following payments: (i) Election Payment
pursuant to the terms of SECTION 4.3.1(A), (ii) Any payment exceeding the amount
of the Incumbent Payment Cap pursuant to SECTION 4.1.1(B), (iii) System Payment
pursuant to SECTION 4.3.2(A), (iv) Payment of Revenue pursuant to SECTION
9.12.4; or (b) fails to meet the Average Sold Excess Capacity threshold as set
forth in SECTION 3.2.2 and SECTION 3.2.3, Incumbent shall have the right to
terminate this Agreement upon written notice to PathNet; provided that PathNet
shall have the right to cure its default caused by the failure to make any
payment pursuant to this SECTION 3.3(A), for a period of fifteen (15) days
following receipt of the written notice of default from Incumbent.
SECTION 4. COSTS
4.1 INCUMBENT COSTS.
4.1.1 INCUMBENT ITEMS AND INCUMBENT PAYMENT CAP
(a) INCUMBENT ITEMS. Incumbent shall pay for the services,
functions, materials and other items listed in (i)
SECTION 1.A and (ii) SECTION 1.B of SCHEDULE C
(collectively, the "INCUMBENT ITEMS") in the manner set
forth in SECTION 4.1.2.
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(b) INCUMBENT PAYMENT CAP. Incumbent shall pay an amount
not to exceed [***]
(the "INCUMBENT PAYMENT CAP") in
the aggregate for the performance and completion of the
Incumbent Items for Segment A. PathNet shall pay for
all amounts incurred over the Incumbent Payment Cap in
the completion and performance of the Incumbent Items
for Segment A provided that such costs will be included
as part of the PathNet Funding. As soon as Incumbent
is aware that the actual costs of Incumbent Items for
Segment A will exceed the Incumbent Payment Cap,
Incumbent shall notify PathNet to that effect.
4.1.2 PAYMENT FOR INCUMBENT ITEMS. Incumbent shall within thirty
(30) days pay for any Incumbent Items upon receipt of an invoice or other
bill from PathNet or from an equipment vendor or service provider (pursuant
to any PathNet requested retention), provided PathNet has approved such
purchase order, invoice or bill before any payment is made by Incumbent.
4.2 INCUMBENT OPERATING AND ADMINISTRATION COSTS. Incumbent shall pay the
operating and administration costs for Segments A and B, as set forth in SECTION
2 of SCHEDULE C as such costs are actually incurred and become due and payable
in the course of the Incumbent's performance of its obligations under this
Agreement.
4.3 PATHNET COSTS.
4.3.1 SEGMENT A.
(a) ELECTION PAYMENT. At any time during the Election
Period and from time to time, PathNet, in its sole
discretion, shall have the right to pay Incumbent any
amount of the Incumbent Out-of-Pocket Path Funding for
the right to additional future Revenue from the sale of
Excess Capacity on the System, provided any such
payment shall be included as part of PathNet Funding
(and the Incumbent Out-of-Pocket Funding shall be
recalculated) and the percentage Revenue paid to
Incumbent shall be adjusted pursuant to SECTION 5.1.1
to reflect an increase in PathNet Allocable Revenue
Percentage. As of the date of completion of the
Election Period or at any time during the Election
Period, PathNet, in its sole discretion, shall pay
Incumbent an amount equal to the current Incumbent
Out-of-Pocket Path Funding for the applicable paths (as
such Funding may be adjusted pursuant to any and all
additional PathNet Funding) on at least ninety (90%)
percent of Incumbent's Paths comprising Segment A of
the System ("Election Payment"), provided the
percentage Revenue paid to Incumbent shall be adjusted
pursuant to SECTION 5.1.1. If PathNet fails to pay the
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Election Payment upon completion of the Election
Period, Incumbent shall have the right to terminate
this Agreement.
4.3.2 SEGMENT B.
(a) SYSTEM PAYMENT. Upon Commissioning of the Initial
System on Segment B, PathNet shall pay Incumbent the
quarterly payments as set forth in EXHIBIT C-2 to
SCHEDULE C ("System Payment").
4.4 PATHNET OPERATING AND ADMINISTRATION COSTS. PathNet shall pay for the
operating and administration costs on Segments A and B, as set forth in SECTION
3 of SCHEDULE C as such costs are actually incurred and become due and payable
in the course of PathNet's performance of its obligations under this Agreement.
4.5 CHANGE ORDERS. This Agreement anticipates (i) future issuance of
change orders for equipment and services beyond the scope of this SECTION 4, and
(ii) PathNet's provision of related equipment and services in accordance with
such orders. To the extent mutually agreed upon by the Parties, all such orders
shall be deemed to be supplements to and governed by the terms of this
Agreement; provided PathNet and Incumbent's Estimated Costs may be modified to
reflect any agreed upon change orders.
SECTION 5. REVENUE SHARING
5.1 SEGMENTS A AND B.
5.1.1 ALLOCATION OF CAPACITY AND REVENUE SHARING - SEGMENT A.
PathNet shall provide Incumbent Initial Allocation of Capacity and pay to
the Incumbent Revenue pursuant to the formulas set forth below: (i) upon
Commissioning of the Initial System, a percentage of Revenue, if any, from
the sale of PathNet Excess Capacity on Segment A of the Initial System
equal to [***]
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5.1.2 REVENUE SHARING - SEGMENT B. PathNet shall pay to Incumbent
the following Revenue pursuant to the formulas set forth below: [***]
5.2 USE OF FACILITIES.
5.2.1 RIGHT TO OPERATE. Incumbent shall provide to PathNet the
exclusive right and PathNet shall have the right to install and operate the
System (including, without limitation, full access to such System) at each
of Incumbent's sites and Facilities, as set forth in SCHEDULE B, as is
required and necessary for the performance of PathNet's rights and
obligations under this Agreement.
5.2.2 PEACEFUL ENJOYMENT, USE AND ACCESS. Incumbent shall grant
to PathNet the right to the peaceful use, enjoyment and possession of the
Facilities during the term of this Agreement as required for the
performance of PathNet's rights and obligations under this Agreement, which
rights shall include, but not be limited to (i) the right to use
Incumbent's Facilities and (ii) upon the reasonable request by PathNet, the
right to full and free access to Incumbent's Facilities and related
equipment; PROVIDED, HOWEVER, any such access granted by Incumbent to
PathNet shall be subject to the security, health and safety and other
regulatory, procedural and policy requirements of Incumbent, as set forth
in SECTION 5.4. PathNet's continuous and uninterrupted non-use of the
Facilities for purposes described in this Agreement for one (1) year shall
be sufficient to demonstrate abandonment unless PathNet shall have notified
Incumbent in writing of its reasons for non-use.
5.2.3 INTERFERENCE. During the term of this Agreement, Incumbent
shall not license or otherwise permit any Person to use its Facilities
(including the transfer of any rights to the Facilities) if the use of such
Facilities by such Person would cause any Interference on the System. In
the event another tenant of Incumbent causes any Interference on the
System, Incumbent shall compel such tenant to immediately take all steps
necessary to correct and eliminate such Interference, including, without
limitation, enforcing provisions in any license or other agreement between
Incumbent and such tenant and compelling such tenant to cease operation of
such tenant's system, to remove such tenant's equipment or materials or to
modify such tenant's equipment or materials. Incumbent acknowledges that
any Interference shall cause irreparable harm to PathNet and the prompt
cessation of Interference is material to PathNet's interest in the
Facilities and PathNet's performance under this Agreement and, as such,
PathNet shall be entitled to injunctive relief in the enforcement of this
section.
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5.3 VISITING AND EXITING FACILITIES. Upon exiting any Facility, PathNet,
on behalf of itself and its employees, agents and Subcontractors, shall ensure
that such Facility is returned to a condition, which existed immediately prior
to such visit.
5.4 INCUMBENT SECURITY PROCEDURES, POLICY ON DRUGS AND ALCOHOL AND SAFETY
REQUIREMENTS.
5.4.1 INCUMBENT SECURITY PROCEDURES. At the request of Incumbent,
PathNet shall require its employees, agents and Subcontractors upon any
site visit to comply with Incumbent's reasonable security procedures in
effect as of the Effective Date, which procedures are attached hereto as
SCHEDULE E. If and to the extent Incumbent requires PathNet employees,
agents or Subcontractors to be escorted to Incumbent facilities, such
requirements shall be explicitly set forth in SCHEDULE E. Notwithstanding
the foregoing, Incumbent shall allow PathNet employees, agents or
Subcontractors to bring any testing equipment, photographic equipment or
both video and audio recording equipment necessary for the performance of
PathNet's obligations under this Agreement.
5.4.2 INCUMBENT POLICY ON DRUGS AND ALCOHOL IN THE WORKPLACE. At
the request of Incumbent, PathNet shall require its employees, agents or
Subcontractors to comply with Incumbent's reasonable substance abuse
policies and procedures in effect as of the Effective Date, which policies
and procedures are attached hereto as SCHEDULE G.
5.4.3 INCUMBENT SAFETY PROCEDURES. At the request of Incumbent,
PathNet shall require its employees, agents and Subcontractors to comply
with Incumbent's reasonable rules and regulations governing the health and
safety of its employees in effect on the Effective Date, which rules and
regulations are attached hereto as SCHEDULE H.
5.4.4 CLEARANCES AND OTHER REQUIREMENTS. At the request of
Incumbent, PathNet shall require its employees, agents or Subcontractors to
(i) apply to Incumbent for any necessary reasonable clearances and (ii)
comply with all other reasonable and applicable requirements, rules,
regulations or ordinances regarding any Person's ability to have access to
Incumbent's sites and Facilities.
5.5 CO-LOCATION. Incumbent shall allow PathNet, at no additional charge,
to co-locate at Incumbent's Facilities all equipment necessary to support the
Interconnections set forth on EXHIBIT A-7 to SCHEDULE A and any additional
interconnections equipment that may be added by PathNet from time to time and at
any time during the term of this Agreement, subject to the limitations set forth
in SECTION 3 of SCHEDULE A.
5.6 REMOVAL OF EQUIPMENT. PathNet shall, at Incumbent's request,
remove any or all Equipment from any Capacity Expansion from Incumbent's
Facilities within sixty (60) days after the Expiration Date. In the event
PathNet fails to perform such requested removal within such sixty (60) day
period, as determined by Incumbent in its sole discretion, Incumbent may restore
each site to its condition as of Commissioning, (reasonable wear and tear and
damage
16
from the elements excepted), and PathNet shall promptly pay Incumbent all costs
reasonably incurred by Incumbent for such removal and restoration.
5.7 REMOVAL OF HAZARDOUS MATERIALS. Within ninety (90) days after
the Expiration Date, PathNet shall remove from Incumbent's sites any and all
Hazardous Materials, which were brought to Incumbent's sites by PathNet during
the term of this Agreement.
SECTION 6. PROGRAM MANAGEMENT; PROJECT MANAGEMENT; PROJECT SCHEDULE
6.1 PROGRAM MANAGER. In connection with the Services and other services
performed by PathNet under this Agreement, PathNet shall provide a program
manager whose duties shall include (i) supervising the project through design,
installation and operation, (ii) supervising the project manager, (iii)
overseeing the field manager and the other PathNet personnel, (iv) coordinating
the business operations of the System including the sale of Excess Capacity as
set forth in SECTION 9 and (v) ensuring the performance of PathNet's rights and
obligations under this Agreement.
6.2 PROJECT MANAGEMENT. In connection with the modifications and
installation of the Facilities set forth in SECTION 2 and SECTION 4 of SCHEDULE
A, PathNet shall provide a project manager, a field manager, an applications
engineer and a project engineer, each of whom shall have the duties as set forth
below:
6.2.1 PROJECT MANAGER. PathNet shall provide a project manager
whose duties shall include ensuring the overall functional integrity of the
delivered System, the preparation, amendment and adherence to a
construction schedule, and compliance with PathNet's other obligations
under SCHEDULE A.
6.2.2 FIELD MANAGER. PathNet shall provide a field manager whose
duties shall include the oversight and direction of all on-site activities,
the coordination of all Subcontractors and all required communication with
the project manager.
6.2.3 APPLICATIONS ENGINEER. PathNet shall provide an
applications engineer, whose duties shall include the review and
translation of the System configuration into specific hardware
requirements, precise interface levels, intra and inter-rack cabling and
all other necessary peripheral equipment, rack profiles and required
Interconnection data.
6.2.4 PROJECT ENGINEER. PathNet shall provide a project engineer
whose duties shall include the performance of all planning and support
activities and a detailed site survey to gather data for development of the
installation plan and testing plan.
6.3 PROJECT SCHEDULE. PathNet shall provide all reasonable efforts to
construct Segments A and B within seven (7) months from the time all permits and
approvals have been received; PROVIDED, HOWEVER, PathNet shall complete the
installation and construction of
17
Segment A by no later than December 31, 1997 and Segment B by no later than the
date of commencement of pipeline commercial operations.
SECTION 7. SERVICES AND SYSTEMS SPECIFICATIONS
7.1 SERVICES.
7.1.1 SYSTEM DESIGN, MODIFICATION, INSTALLATION, OPERATION AND
PERFORMANCE. PathNet and Incumbent shall perform their respective
functions with respect to the design, modification, installation, operation
and performance of the System as set forth on SCHEDULE A and in this
SECTION 7 (the "SERVICES").
7.1.2 UPGRADE OF SYSTEM. In the event PathNet sells at least
fifty (50%) percent of the Average Sold Excess Capacity of the System
configured at any time or can demonstrate commitments for the sale of such
Average Sold Excess Capacity, PathNet may, at its own expense, upgrade the
System and Equipment, and the System and Equipment operation policies and
procedures, including, but not limited to, (i) replacing Equipment, (ii)
adding newly available improved Equipment, and (iii) modifying policies,
procedures and specifications relating to the System, to conform such
policies, procedures and specifications with new Technology or industry
standards.
7.1.3 INCUMBENT TRAINING. PathNet shall provide to Incumbent the
training as set forth on SCHEDULE J.
7.1.4 PERFORMANCE OF THE SERVICES. PathNet shall have the right,
subject to Incumbent's approval, such approval shall not be unreasonably
withheld, to engage Subcontractors to perform any of the Services.
7.2 SPECIFICATIONS.
7.2.1 GENERAL. PathNet and Incumbent shall perform the Services
in accordance with any and all technical and operational specifications set
forth in SCHEDULE A (the "SPECIFICATIONS").
7.2.2 CHANNEL PLAN.
(a) ORIGINAL CHANNEL PLAN. On the Effective Date, Incumbent shall
deliver to PathNet a proposed T-1 channelization plan, as
detailed in EXHIBIT A-4, setting forth its proposed capacity
needs at each site listed on SCHEDULE B. Such capacity shall in
no event exceed Incumbent Initial Allocation of Capacity and
shall be subject to Drop and Insert capacity at each Switched Mod
Section. PathNet shall incorporate Incumbent's proposed
channelization plan into the Channel Plan subject to the
limitations set forth above.
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(b) AMENDED CHANNEL PLAN. Incumbent shall have the right to modify,
its allocated capacity (as described in the Channel Plan) along
the network any time after Commissioning, provided that
sufficient Drop and Insert capacity exists between each Switched
Mod Section using available Wayside Channels to effect such
modification, by providing written notice to PathNet to such
effect. Within ninety (90) days after receipt of any such
written notice from Incumbent, PathNet shall make such
modification to the configuration of the Channel Plan at no
charge to Incumbent. Incumbent shall not reconfigure the Channel
Plan in any manner other than as set forth in this section.
7.2.3 SPECIFICATIONS, STANDARDS AND INSPECTIONS. In connection with
the Services set forth in SECTION 2 and SECTION 4 of SCHEDULE A, PathNet
shall comply with the following requirements:
(a) REASONABLE EFFORTS. PathNet shall use commercially reasonable
efforts to ensure that the modification of the System set forth
in SECTION 2 of SCHEDULE A and the installation of the System set
forth in SECTION 4 of SCHEDULE A occur as expeditiously as
possible.
(b) INDUSTRY STANDARDS. All Services and materials supplied pursuant
to SCHEDULE A must meet or exceed all applicable Specifications.
Where Specifications are not stated, such work performed and
materials supplied will meet all applicable provisions of the
following standards: (i) EIA RS-195 (latest edition), (ii)
EIA/TIA-222 (latest edition), (iii) American Society of Testing
Materials A 325 and A 572, (iv) the applicable sections of the
National Electric Code, (v) the American National Standards
Institute, (vi) ACI 318-83, (vii) ACI-305, (viii) ACI-306, (ix)
OSHA 29 CFR 1910 and (x) all other applicable Federal, state and
local regulations of all Governmental Authorities with
jurisdiction; PROVIDED, HOWEVER, in the case of a conflicting
requirement of standards, the more stringent standard shall
apply.
(c) SITE INSPECTIONS. During the performance of the Services,
Incumbent shall allow PathNet to perform site inspections at any
hour, on any day subject to the access limitations set forth in
SECTION 5.4.1.
SECTION 8. OWNERSHIP, DEPRECIATION AND ENCUMBRANCE OF SYSTEM
8.1 OWNERSHIP OF EQUIPMENT AND ASSETS.
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8.1.1 EQUIPMENT AND ASSETS OWNED BY INCUMBENT. Incumbent shall
own the equipment and assets relating to Segments A and B of the System as
set forth in SCHEDULE K.
8.1.2 EQUIPMENT AND ASSETS OWNED BY PATHNET. PathNet shall own
the equipment and assets relating to Segments A and B of the System as set
forth in SCHEDULE K.
8.2 DEPRECIATION OF EQUIPMENT.
8.2.1 DEPRECIATION BY INCUMBENT. Incumbent shall have the right
to fully depreciate for federal and state income tax purposes the equipment
and assets currently owned or to be owned by Incumbent as listed in
SCHEDULE K.
8.2.2 DEPRECIATION BY PATHNET. PathNet shall have the right to
fully depreciate for federal and state income tax purposes the equipment
and assets currently owned or to be owned by PathNet as listed in SCHEDULE
K.
8.3 ENCUMBRANCE.
8.3.1 INITIAL SYSTEM. PathNet shall not Encumber the radios,
radio software, antenna or waveguide used in the Initial System on Segments
A and B or any equipment or assets owned by Incumbent pursuant to SCHEDULE
K, or otherwise owned or leased by Incumbent, or any real estate or
infrastructure owned by Incumbent.
8.3.2 OTHER EQUIPMENT, MATERIALS, AGREEMENTS AND ASSETS. PathNet
shall have the right to Encumber (i) the Equipment used in any Capacity
Expansion on Segment A and B or any other equipment owned by PathNet
pursuant to SCHEDULE K, (ii) PathNet's share of Revenue as determined
under SECTION 5 of this Agreement, (iii) any Customer Agreement relating to
the System provided, however, that PathNet shall not encumber any of
Incumbent's rights under said Customer Agreements, (iv) PathNet's rights in
this Agreement and PathNet's rights in any related documents, instruments
and agreements executed and delivered in connection with this Agreement and
any rights and obligations hereunder or thereunder.
8.4 TAXES. The Parties' respective responsibilities for taxes arising
under or in connection with this Agreement shall be as follows: (i) each Party
shall be responsible for any personal or real property taxes on property it owns
or leases, for franchise and privilege taxes on its business and for taxes based
on its net income or gross revenue and (ii) PathNet shall be responsible for any
sales, use, excise, value-added services, consumption and other taxes and duties
payable by Incumbent on any goods and services used or consumed in providing the
services to be performed by PathNet under this Agreement, where the tax is
imposed on Incumbent's acquisition or use of such goods or services and the
amount of the tax is measured by Incumbent's costs in acquiring such goods or
services; PROVIDED, HOWEVER, that PathNet shall not be responsible for any
Federal, state or local income taxes of Incumbent or any franchise taxes of
Incumbent.
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8.5 MAINTENANCE FOR SYSTEMS. Incumbent shall be responsible for the
maintenance of the System pursuant to the terms of a separate written agreement
to be entered into by the parties. The separate maintenance agreement shall
provide for ongoing maintenance of PathNet's microwave facilities.
SECTION 9. EXCESS CAPACITY MARKETING AND SALES
9.1 EXCLUSIVE REPRESENTATIVE.
9.1.1 PATHNET EXCESS CAPACITY. PathNet shall have the exclusive
right to market and sell any and all PathNet Excess Capacity.
9.1.2 INCUMBENT EXCESS CAPACITY. At any time and from time to
time, Incumbent shall have the right to request in writing that PathNet
serve as Incumbent's exclusive representative for the marketing and sale of
all or any portion of the capacity allocated to Incumbent in accordance
with the Channel Plan (the "INCUMBENT EXCESS CAPACITY"). In the event
PathNet sells any Incumbent Excess Capacity, PathNet shall receive a
marketing fee [***] of the revenue generated from the sale
of such Incumbent Excess Capacity actually collected, less any applicable
deduction set forth in SECTION 9.12.1 and SECTION 9.12.2 [***]
Incumbent
Excess Capacity shall be marketed on a pro rata basis with PathNet Excess
Capacity.
9.1.3 MARKETING AND SALE BY INCUMBENT. Incumbent or any
Affiliates of Incumbent shall not market or sell any Incumbent Excess
Capacity or any capacity purchased by Incumbent pursuant to SECTION 9.3 to
any third party without the prior written consent of PathNet; PROVIDED,
HOWEVER, Incumbent may market and sell all or any portion of the Incumbent
Excess Capacity or any capacity purchased by Incumbent pursuant to SECTION
9.3, to Affiliates of Incumbent for and only for such Affiliates' internal
communications needs and not for resale to third parties.
9.2 REFERRALS OF CUSTOMERS BY INCUMBENT. Incumbent shall refer any
potential third party customer of Excess Capacity to PathNet; PROVIDED that if
Incumbent is successful at referring a new (and previously unsolicited by
PathNet) Customer to PathNet, Incumbent shall receive a marketing fee not to
exceed [***] (in addition to other Revenue to be received
by Incumbent) from the sale of Excess Capacity on the System.
9.3 PURCHASE OF AVAILABLE EXCESS CAPACITY BY INCUMBENT. Incumbent
shall have the right to purchase Available Excess Capacity on any path or
Segment of the System (each such path or Segment being referred to herein as an
"INCUMBENT DESIRED PATH"), at a price equal to either (i) the lowest price paid
to PathNet for like capacity and for a similar term by any purchaser during the
one hundred eighty (180) days immediately preceding the purchase by Incumbent of
capacity on such Incumbent Desired Path less twenty-five (25%) percent or (ii)
if no PathNet Excess Capacity has been purchased on such Incumbent Desired Path
during such one hundred eighty (180) day period, the last price paid for such
Incumbent Desired Path less
21
twenty-five (25%) percent; PROVIDED, HOWEVER, Incumbent shall in no event
purchase more than twenty percent (20%) of the Available Excess Capacity on any
Segment or path within the System at any given time.
9.4 COMMERCIALLY REASONABLE EFFORTS. PathNet shall use commercially
reasonable efforts to obtain the best available price and terms in the marketing
and sale of any Excess Capacity. PathNet shall not, now or in the future,
guarantee any Revenue disbursements nor does PathNet warrant its ability to sell
the Excess Capacity.
9.5 SELLING PRICES FOR EXCESS CAPACITY. Notwithstanding anything set
forth herein to the contrary, PathNet shall have the right to (i) sell Excess
Capacity at prices determined by PathNet to be appropriate on specific routes,
which prices may be below or above current competitive market pricing, (ii)
package the Excess Capacity in sales increments of DS-1's, DS-3's or OC-3's, or
any other increments and (iii) aggregate the paths sold in various combinations,
each as determined by PathNet in its sole discretion.
9.6 BARTER ARRANGEMENTS. Incumbent shall be permitted to barter Incumbent
Excess Capacity, with PathNet's assistance, for telecommunications capacity of
other incumbents engaged by PathNet; PROVIDED, HOWEVER, PathNet shall have the
right to approve any barter arrangement relating to Incumbent Excess Capacity,
which approval shall not be unreasonably withheld. Neither PathNet nor
Incumbent shall derive any fee from facilitating any such barter arrangements.
9.7 ASSUMED NAME; TRADENAMES AND TRADEMARKS. PathNet shall have the right
to market Excess Capacity under its name or any other assumed name, tradename or
trademark which PathNet is authorized to use for such purpose; PROVIDED,
HOWEVER, PathNet shall not use any trademark or tradename of Incumbent or any
Affiliate of Incumbent in written material for purposes of marketing any Excess
Capacity without the prior written consent of Incumbent.
9.8 CUSTOMER AGREEMENTS.
9.8.1 AUTHORIZATION. PathNet shall negotiate, execute and
deliver, on behalf of itself and Incumbent, all agreements and arrangements
("CUSTOMER AGREEMENTS") for customers of Excess Capacity, which Customer
Agreements shall contain, terms and conditions determined by PathNet.
9.8.2 APPROVAL AND CONSENT BY INCUMBENT. If the terms of any
Customer Agreement require the written approval or consent of Incumbent as
a condition to the execution, delivery or performance, Incumbent shall
promptly provide such written approval or consent.
9.8.3 USE OF INCUMBENT'S NAME IN CUSTOMER AGREEMENTS FORBIDDEN.
In any customer agreements, PathNet shall not use Incumbent's name or name
of Incumbent's Operator or any of its Affiliates or imply in any manner
that Incumbent or its Operator or Affiliates are responsible in any manner
for the services provided in any Customer Agreements. Incumbent shall have
the right to review any Customer Agreements
22
executed between PathNet and its customers to verify that the terms
contained herein have not been violated.
9.8.4 MODIFICATIONS TO SYSTEM. In the event that any Customer
Agreement requires that the System be modified in any way, PathNet shall
ensure that any such modifications (i) shall not compromise the integrity
and performance of the System in accordance with the Specifications and
(ii) shall be made at no additional cost to Incumbent.
9.9 MAINTENANCE OF BOOKS AND RECORDS AND AUDIT PROCEDURES.
9.9.1 BOOKS AND RECORDS. PathNet shall maintain and keep detailed
and accurate books and records with regard to sales of Excess Capacity and
the Revenue generated and collected from such sales.
9.9.2 INCUMBENT REVIEW AND AUDIT PROCEDURES. No more than once
during any consecutive twelve (12) month period, Incumbent shall be
entitled to review and audit PathNet's books and records relating to the
sale of Excess Capacity during business hours upon ten (10) days written
notice to PathNet. Incumbent shall not have the right pursuant to this
SECTION 9.9.2, to review or audit PathNet's corporate income statements,
balance sheets or other forms of general corporate reporting. Incumbent
shall not disclose, at any time before or after the Expiration Date, any
information related to PathNet or PathNet's business obtained by Incumbent
pursuant to a review or audit performed under this SECTION 9.9.2 unless
such information has previously come into the public domain (other than
through unauthorized disclosure) or except as required by law.
9.9.3 EXPENSES OF INCUMBENT REVIEWS AND AUDITS. Incumbent shall
pay the cost of any such review or audit performed pursuant to SECTION
9.9.2.
9.9.4. APPROVAL OF AUTHORIZED REPRESENTATIVE. In the event that
Incumbent hires an authorized representative of Incumbent to perform any
such review or audit pursuant to SECTION 9.9.2, PathNet shall have the
right to approve such authorized representative before any access is
granted to such authorized representative to PathNet's books and records,
which approval shall not be unreasonably withheld.
9.10 QUARTERLY REVENUE REPORTS. PathNet shall issue to Incumbent quarterly
Revenue reports substantially in the form of SCHEDULE L (each a "QUARTERLY
REVENUE REPORT") within thirty (30) days after the end of each calendar quarter.
Each such Quarterly Revenue Report shall be an unaudited statement produced by
PathNet.
9.11 ANNUAL CERTIFIED REVENUE REPORTS. PathNet shall provide to Incumbent
on an annual basis an audited annual revenue report from a national accounting
firm.
9.12 COLLECTION AND PAYMENT OF REVENUE.
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9.12.1 COSTS OF COLLECTION. PathNet shall deduct any costs
reasonably incurred by PathNet in connection with the collection of any and
all delinquent Revenue, including, but not limited to, the cost of any
legal actions, collection fees, court proceedings, audits, or other
enforcement actions. PathNet shall deduct such costs from gross revenue
collected prior to the disbursement of such revenue to PathNet and
Incumbent pursuant to SECTION 5.1 and SECTION 9.
9.12.2 TAXES ON GROSS REVENUE. The amount of any taxes on gross
revenue paid by PathNet on behalf of Incumbent shall be deducted from any
revenue to be disbursed to Incumbent prior to disbursement of such revenue
as set forth in this SECTION 9.12.
9.12.3 DEFINITION OF REVENUE. For purposes of this Agreement,
"REVENUE" shall mean the gross revenue generated from the sale of Excess
Capacity actually collected less any deductions set forth in SECTION 9.12.1
and SECTION 9.12.2.
9.12.4 PAYMENTS TO INCUMBENT. PathNet shall pay Incumbent its
allocated portion of Revenue actually received from the sale of Excess
Capacity either monthly or within thirty (30) days after the end of each
calendar quarter in accordance with the payment instructions set forth in
SCHEDULE M. If such payments are to be made quarterly, during the quarter,
until payment, PathNet shall place the Revenue due to Incumbent in an
interest bearing escrow account in the name of the Incumbent.
9.12.5 INTEREST EARNED ON UNDISTRIBUTED REVENUE. Incumbent shall
retain any and all interest earned on any Revenue collected but not yet
distributed to Incumbent in accordance with SECTION 5.1 and SECTION 9.
9.12.6 INCUMBENT'S ASSIGNEES OF REVENUE. Incumbent shall have the
right to designate other entities to receive its disbursements by written
notice to PathNet to such effect; PROVIDED, HOWEVER, any such designation
by Incumbent shall not relieve Incumbent of any tax liability resulting
from its receipt of such disbursements pursuant to SECTION 5.1 and SECTION
9.
SECTION 10. FCC LICENSES AND OTHER REGULATORY APPROVALS AND LICENSES
10.1 FCC RULES AND REGULATIONS.
10.1.1 MICROWAVE RADIO STATION LICENSES.
(a) Segments A and B.
i. PREPARATION AND FILING OF FORMS 415. PathNet shall prepare
and timely file all required Form 415, Applications for
Authorization in the Microwave Services (each a "FORM 415"),
or any successor forms,
24
documents or instruments to such Form 415 as the FCC may
prescribe, including but not limited to, the preparation or
ordering of all frequency coordinations required pursuant to
SCHEDULE B and SCHEDULE C of Form 415, in order to own,
operate and sell the Excess Capacity of Segments A and B of
the System in accordance with the terms and conditions of
this Agreement.
ii. IDENTITY OF LICENSEE. All Microwave Radio Station Licenses
issued by the FCC relating to the Initial System of Segments
A and B shall be licensed in the name of Incumbent or a
wholly-owned subsidiary of Incumbent. All Microwave Radio
Station Licenses issued by the FCC relating to any Capacity
Expansion on Segments A and B shall be licensed in the name
of PathNet or a wholly-owned subsidiary of PathNet.
Incumbent shall be permitted to continue to own and be
licensed as a private microwave operator at the stations
licensed to PathNet relating to Segments A and B of the
System, provided that (i) such private licenses are for
different frequency pairs than those assigned to the System
(including, but not limited to, any Capacity Expansion of
the System) and (ii) such private licenses are permitted
under the FCC Code.
iii. MAINTENANCE OF LICENSE. PathNet shall maintain in good
standing each Microwave Radio Station License relating to
the System, including, but not limited to, preparing and
filing any required amendments to the Forms 415 relating to
the System and submitting and filing any supplementary
information as required by the FCC.
10.1.2 COMMON CARRIER REPORTING OBLIGATIONS. Incumbent and PathNet
shall prepare and file all forms, reports, instruments, documents and
agreements required by the FCC and FCC Code relating to Incumbent's status
as a "common carrier" under the FCC Code.
10.1.3 TARIFF FILINGS. PathNet shall prepare and timely file all
tariff applications pursuant to 47 CFR 61, as amended, or any successor
statute, rule or regulation and shall request and file all necessary
waivers of such tariff requirements, as determined by PathNet in its sole
discretion.
10.1.4 FREQUENCY COORDINATION NOTICES. During the term of this
Agreement, PathNet shall prepare and send all required frequency
coordination notices required under 47 CFR 101.103, as amended, or any
successor statute, rule or regulation and shall respond as appropriate to
all PCNs received by PathNet or Incumbent relating to the System.
10.1.5 DELIVERY OF COPIES. PathNet shall provide to Incumbent a
copy of all filings and submissions with the FCC, relating to the System
within thirty (30) days of such filings and submissions.
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10.1.6 ASSISTANCE IN PREPARATION OF LICENSE APPLICATIONS. Upon
request by PathNet and in a timely manner, Incumbent shall provide to
PathNet all information necessary for the completion of all required
filings and submissions with the FCC including, but not limited to
Incumbent's authorized signature on any filings or other submissions to the
FCC or any documents, instruments or agreements completed in connection
with such filings and submissions.
10.1.7 FUTURE CHANGES IN FCC REQUIREMENTS. If FCC requirements
relating to the Form 415, common carriers, frequency coordination or any
other matters relating to the System change or are modified, PathNet shall
be responsible for compliance with such new requirements including, but not
limited to, the payment of any costs or fees associated therewith and
Incumbent shall cooperate with PathNet with respect to such compliance;
PROVIDED, HOWEVER, if the FCC establishes user fees or other such fees
relating to the frequencies used in and the communications business
conducted over the System, the cost of such additional fees shall be
divided between PathNet and Incumbent, as determined by PathNet and
Incumbent at such time. In the event that fees are required for any FCC
mandated Universal Service Support Mechanism or any universal service fund
obligations are required by any federal or state law or regulation, PathNet
shall be solely responsible for such fees or obligations.
10.1.8 SPECTRAL LOADING REQUIREMENTS. PathNet shall (i) ensure
that the System, as licensed, shall comply with all spectral loading
requirements set forth in 47 CFR 101.141, or any successor statute, rule or
regulation or (ii) obtain a waiver of any or all of such requirements;
PROVIDED, HOWEVER, if the System does not meet such spectral loading
requirements and PathNet is unable to obtain a waiver of such requirements,
PathNet shall have the right to modify the System to a hot-standby
Protection Configuration until such time as the spectral loading
requirements can be met.
10.1.9 DEFAULT IN FCC LICENSE. In the event that the FCC
institutes a penalty against or fine imposed on PathNet, Incumbent, or the
System, due to non-compliance with any FCC requirements, PathNet shall
promptly pay such penalty or fine (in the case such penalty or fine is
instituted as the result of an act or omission on the part of PathNet) or
Incumbent shall promptly pay such penalty or fine (in the event such
penalty or fine is instituted as the result of an act or omission on the
part of Incumbent).
10.2 ZONING REQUIREMENTS. Incumbent shall be responsible for compliance
with all zoning requirements applicable to the System and its Facilities,
including, but not limited to, the Facilities. Incumbent shall advise PathNet
of zoning requirements, which, in the reasonable opinion of Incumbent, differ
from those generally applicable to microwave facilities. PathNet shall provide
to Incumbent all required information and shall cooperate with Incumbent in
connection with Incumbent's compliance with all zoning requirements pursuant to
this SECTION 10.2.
10.3 BUREAU OF LAND MANAGEMENT REQUIREMENTS. Incumbent shall be
responsible for compliance with all United States Department of Interior Bureau
of Land Management
26
requirements applicable to the System and its Facilities, including, but not
limited to, the Facilities. PathNet shall provide Incumbent with all requested
information and shall cooperate with Incumbent in connection with Incumbent's
compliance with such United States Department of Interior Bureau of Land
Management requirements pursuant to this SECTION 10.3.
10.4 TOWER REGISTRATION. Incumbent shall ensure compliance with all FAA
and FCC tower registration requirements including, but not limited to, the
preparation of any filings with or the obtaining of any waivers or extensions
from the FAA or FCC. Incumbent shall promptly notify PathNet of any deficiency
on non-compliance with any such tower registration requirements, filings,
waivers or extensions.
SECTION 11. INSURANCE
11.1 DELIVERY OF CERTIFICATES OF INSURANCE. Upon Incumbent's request and
prior to the commencement of any Services by PathNet, PathNet shall deliver to
Incumbent Certificates of Insurance relating to PathNet's Commercial General
Liability Insurance Policy, Workers Compensation Insurance Policy, Automobile
Liability Insurance and Excess Liability Insurance Policy.
11.2 PATHNET INSURANCE COVERAGE. During the term of this Agreement,
PathNet shall maintain the types of insurance at the coverage limits set forth
below:
11.2.1 WORKERS COMPENSATION AND EMPLOYER'S LIABILITY INSURANCE.
Workers Compensation Insurance with a limit of not less than $500,000;
11.2.2 COMMERCIAL GENERAL LIABILITY INSURANCE. Commercial General
Liability Insurance with a limit of not less than $1,000,000 per occurrence
and $1,000,000 in the aggregate;
11.2.3 AUTOMOBILE LIABILITY INSURANCE. Automobile Liability
Insurance, which includes coverage for non-owned and hired vehicles with a
limit of not less than $1,000,000; and
11.2.4 EXCESS LIABILITY INSURANCE. Excess Liability Insurance with
a limit of not less than $4,000,000.
11.3 INCUMBENT INSURANCE COVERAGE. Incumbent shall maintain insurance
coverage on the System which coverage shall include general liability and other
forms of insurance covering such risks as are usually insured against by prudent
companies engaged in the business and activities in which the Incumbent is
engaged, in amount which are adequate in relation to the business and properties
of Incumbent, and all premiums to date have been paid in full.
11.4 PROOF OF LICENSED SUBCONTRACTORS. Upon reasonable request of
Incumbent, PathNet shall provide to Incumbent proof of licensing and
certification of insurance for coverage
27
in types and amounts as set forth in SECTION 11.2 for any Subcontractors engaged
by PathNet to provide Services, during the term of such engagement.
SECTION 12. SOFTWARE AND PROPRIETARY RIGHTS
12.1 PATHNET SOFTWARE. PathNet retains all right, title and interest in
and to PathNet Software. As of the Effective Date and pursuant to the PathNet
Sublicense Agreement attached hereto as SCHEDULE N, Incumbent is granted a
nonexclusive sublicense to use PathNet Software for the sole purpose of
receiving the services pursuant to this Agreement. PathNet Software will be
made available to Incumbent in such form and on such media as exists on the
Effective Date, together with existing documentation and any other related
materials. Incumbent shall not be permitted to use PathNet Software for the
benefit of any entities other than PathNet without the prior written consent
which may be withheld at PathNet's sole discretion. Except as otherwise
requested or approved by PathNet, Incumbent shall cease all use of PathNet
Software upon expiration of this Agreement.
12.2 PROPRIETARY RIGHTS. Incumbent acknowledges and agrees that all or
portions of the information and materials, including but not limited to the
PathNet Software and related documentation to be supplied by PathNet hereunder
are owned by PathNet and/or others and are proprietary in nature. Incumbent
also acknowledges and agrees that PathNet and/or its suppliers have and will
retain all proprietary rights in such information and materials. Incumbent (i)
shall respect such claim of proprietary right, (ii) shall protect such
information at least to the extent that it protects its own proprietary
information, (iii) shall not use such information except for the purposes for
which its is being made available as set forth in this Agreement and (iv) shall
not reproduce, print, disclose, or otherwise make said information available to
any third party, in whole or in part, in whatever form.
SECTION 13. REPRESENTATIONS AND WARRANTIES
13.1 REPRESENTATIONS AND WARRANTIES OF EACH PARTY. Each Party hereby
represents and warrants the other Party as follows:
13.1.1 DUE INCORPORATION AND FORMATION; AUTHORIZATION OF
AGREEMENTS; BINDING EFFECT. Such Party is a corporation or partnership, as
the case may be, duly formed or organized, and validly existing under the
laws of its state of incorporation or organization, and has the corporate
or partnership authority to own its property and carry on its business as
owned and carried on as of the Effective Date. Such Party is duly licensed
or qualified to do business and is in good standing (if applicable) in each
jurisdiction in which the failure to be so licensed or qualified would have
a Material Adverse Effect on such Party. Such Party has the corporate or
partnership authority to execute and deliver this Agreement, to perform its
obligations hereunder, and to consummate the transactions contemplated
hereby. This Agreement has been duly authorized, executed and delivered by
such Party and this Agreement constitutes a legal, valid and binding
obligation of such Party enforceable in accordance with its terms,
28
subject as to enforceability to limits imposed by bankruptcy, insolvency or
similar laws affecting creditors rights generally and the availability of
equitable remedies.
13.1.2 NO CONFLICT; NO DEFAULT. Neither the execution or delivery
of this Agreement by such Party, nor (except as would not have a Material
Adverse Effect on such Party), the performance of this Agreement by such
Party or the consummation by such Party of the transactions contemplated
hereby in accordance with the terms and conditions hereof: (i) will
conflict with, violate, result in a breach of or constitute a default under
any of the terms, conditions or provisions of the certificate or articles
of incorporation or bylaws (or other governing documents) of such Party or
any material agreement or instrument to which such Party is a party or by
which such Party may be bound, (ii) will conflict with, violate or result
in a breach of, constitute a default under (whether with notice or lapse of
time or both), accelerate or permit the acceleration of the performance
required by, give to others any interests or rights or require any consent,
authorization or approval under any contract to which such Party is a party
or by which such Party is or may be bound or to which any equity interest
held by such Party or any of its material properties or assets is subject
or (iii) will result in the creation or imposition of any Encumbrance upon
any equity interest held by such Party or any of the other material
properties or assets of such Party, other than Permitted Encumbrances.
13.1.3 NO CONSENT. No consent, approval, order or authorization
of, or registration, declaration or filing with any Governmental Authority,
domestic or foreign, is required to be obtained by such Party in connection
with the execution and delivery of this Agreement. If and to the extent
any such consent, approval, order, or communication of registration,
delcaration or filing with any Governmental Authority, domestic or foreign
is required to perform under this Agreement or to consummate the
transaction contemplated hereby, such Party shall use good faith efforts to
obtain such consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Authority, domestic or foreign.
13.1.4 COMPLIANCE WITH LAWS AND REGULATIONS. That such Party is
not and that the performance of its obligations under this Agreement will
not result in a violation in any respect of (i) any applicable Federal,
state, local or foreign laws, ordinances, regulations, rulings and orders
of government agencies applicable to its business in any respect the
violation of which could have a Material Adverse Effect (including
Requirements of Law relating to pollution, protection of the environment,
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic, hazardous or regulated
substances or wastes into the environment or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage disposal,
transport or handling of pollutants or other such hazardous or regulated
substances or wastes) or (ii) any applicable order, Judgment, injunction,
award or decree in any respect which could have a Material Adverse Effect
on such Party.
13.1.5 PERMITS. Such Party has or will obtain all authorizations,
approvals, consents, licenses, Permits and certificates (including, but not
limited to all required approvals from the FCC) necessary to conduct their
respective businesses and to own, lease and operate its properties as
currently or anticipated to be conducted, owned, leased
29
or operated, as the case may be, for which the failure to possess would
result in a Material Adverse Effect. No violations are outstanding or
uncured with respect to any such Permits and no proceeding is pending to
revoke or limit any Permit.
13.1.6 LABOR MATTERS. Such Party has complied in all material
respects with all applicable Federal, state and local laws and ordinances
relating to the employment of labor, including the provisions thereof
relating to wages, hours, employee benefit plans and the payment of social
security taxes, and is not liable for any arrears of wages or any tax
related thereto (except for currently accrued and unpaid wages and except
for currently accrued withholding, payroll, unemployment and social
security taxes payment of which is not overdue) or penalties for failure to
comply with any of the foregoing, and neither has received a notice to the
contrary from any Governmental Authority. Such Party has not suffered any
strike, slowdown, picketing or work stoppage by any union or other group or
employees affecting the business of such Party, and no such event or action
is threatened.
13.1.7 NO DISCRIMINATION. Such Party currently subscribes and
offers and will continue to subscribe and offer to all customers,
employees, licensees, and invitees the opportunity to obtain all the goods,
services, accommodations, advantages, facilities and privileges of such
Party without discrimination because of race, creed, color, sex, age,
national origin or ancestry, in accordance with all applicable Federal,
state, and local laws relating to equal opportunity and discrimination.
13.1.8 DISCLAIMER. EXCEPT AS EXPRESSLY PROVIDED HEREIN, NEITHER
PATHNET NOR INCUMBENT MAKES ANY OTHER EXPRESS WARRANTY AND THERE ARE NO
IMPLIED WARRANTIES WITH RESPECT TO ANY TECHNOLOGY, GOODS, SERVICES, RIGHTS
OR OTHER SUBJECT MATTER OF THIS AGREEMENT. PATHNET AND INCUMBENT HEREBY
DISCLAIM THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE WITH RESPECT TO ANY AND ALL OF THE FOREGOING.
13.2 REPRESENTATIONS AND WARRANTIES OF PATHNET.
13.2.1 HAZARDOUS MATERIALS. PathNet represents and warrants that
(i) PathNet is and shall remain in compliance with any and all Federal,
state or local laws, regulations or permits in regard to Hazardous
Materials, (ii) PathNet shall report to Incumbent and to applicable
Governmental Authorities any release of reportable quantities of a
hazardous substance as mandated by SECTION 103 (A) of CERCLA and (iii)
PathNet will, within five (5) Business Days of receipt, send to Incumbent a
copy of any notice, order, inspection report or other document issued by
any government authorities relating to PathNet's status with environmental
or health and safety laws.
13.2.2 SERVICES. PathNet warrants (i) that the Services will be
performed in a workmanlike manner and (ii) that it has or will obtain
agreements or arrangements with
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its employees, agents and Subcontractors sufficient to allow it to provide
Incumbent with the Services;
13.2.3 TITLE TO ASSETS, PROPERTIES AND RIGHTS AND RELATED MATTERS.
Except as set forth herein, PathNet has good and marketable title to all
assets necessary for the conduct of PathNet's business and for the
transactions contemplated by this Agreement free and clear of all
Encumbrances of any kind or character, except (i) liens for current taxes
not yet due and payable, (ii) Encumbrances securing taxes, assessments,
governmental charges or levies or the Encumbrances of material, carriers,
landlords and like persons, all of which are not yet due and payable and
(iii) Encumbrances of a character that do not substantially impair the
ability of PathNet to carry out its obligations under this Agreement.
13.3 REPRESENTATIONS AND WARRANTIES OF INCUMBENT.
13.3.1 INDEPENDENT INVESTIGATION. Incumbent represents and
warrants that it has independently investigated the potential for the
success of PathNet's ability to create, aggregate and sell Excess Capacity
and has not relied upon any inducements or representations of PathNet or
its agents, other than those contained in this Agreement.
13.3.2 TITLE TO ASSETS, PROPERTIES AND RELATED MATTERS. Except as
set forth herein, Incumbent represents and warrants that it has good and
marketable title to all the properties, interests in properties and assets,
real, personal or mixed, (or the right to occupy said property by virtue of
easements, leases, permits, licenses or right-of-way grants) as set forth
on SCHEDULE D for Segment A (including, but not limited to, any
rights-of-way, leasehold interests, easements, and rights necessary to
insure vehicular and pedestrian ingress and egress to and from any such
properties or assets), free and clear of all Encumbrances of any kind or
character, except (i) liens for current taxes not yet due and payable, (ii)
Encumbrances securing taxes, assessments, governmental charges or levies or
the Encumbrances of materialman, landlords and like persons, all of which
are not yet due and payable and (iii) Encumbrances of a character that do
not substantially impair the ability of Incumbent to carry out its
obligations under this Agreement.
Incumbent is in the process of acquiring the property rights necessary
for the transactions contemplated by this Agreement on Segment B, but makes
no representations or warranties as to its ability to acquire such property
rights.
SECTION 14. INDEMNIFICATION
14.1 INDEMNIFICATION BY INCUMBENT. Incumbent agrees to indemnify, defend
and hold harmless PathNet and its Affiliates and their respective officers,
directors, employees, agents, successors and assigns from and against any and
all Losses and threatened Losses arising from, in connection with, or based on
allegations of, any of the following:
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14.1.1 Any claims of infringement of any patent, trade secret,
copyright or other proprietary rights alleged to have occurred because of
systems or other resources provided to PathNet by Incumbent.
14.1.2 Any claims arising out of the untruth, inaccuracy or breach
of any representation or warranty of Incumbent set forth in this Agreement.
14.1.3 (i) Any personal injury, disease or death of any Person,
(ii) damage to or loss of any property, money damages or specific
performance owed to any Person (by contract or operation of law) or (iii)
any fines, penalties, taxes, claims, demands, charges, actions, causes of
action, assessments, environmental response costs, environmental penalties,
injunctive obligations caused by, arising out of, or in any way incidental
to, or in connection with, actions or omissions of Incumbent, its
employees, Subcontractors or agents.
14.2 INDEMNIFICATION BY PATHNET. PathNet agrees to indemnify, defend and
hold harmless Incumbent, its Partners, Operator, and Affiliates and their
respective officers, directors, employees, agents, successors and assigns from
and against any and all Losses and threatened Losses arising from, in connection
with, or based on allegations of, any of the following:
14.2.1 Any claims of infringement of any patent, trade secret,
copyright or other proprietary rights alleged to have occurred because of
systems or other resources provided to Incumbent by PathNet.
14.2.2 Any claims arising out of the untruth, inaccuracy or breach
of any representation or warranty of PathNet set forth in this Agreement.
14.2.3 (i) Any personal injury, disease or death of any person,
(ii) damage to or loss of any property, money damages or specific
performance owed to any Person (by contract or operation of law) or (iii)
any fines, penalties, taxes, assessments, environmental response costs,
environmental penalties or injunctive obligations caused by, arising out
of, or in any way incidental to, or in connection with, actions or
omissions of PathNet, its employees, Subcontractors or agents.
14.2.4 Any Losses, causes of action or suits arising out of
Customer Agreements.
14.3 INDEMNIFICATION PROCEDURES. With respect to any claims, the following
procedures shall apply:
14.3.1 NOTICE. Promptly after receipt by an entity entitled to
indemnification under SECTION 14.1 or SECTION 14.2 of notice of the
commencement or threatened commencement of any civil, criminal,
administrative or investigative action or proceeding involving a claim in
respect of which the indemnitee will seek indemnification pursuant to any
such Section, the indemnitee shall notify the indemnitor of such claim in
writing. No failure to so notify an indemnitor shall relieve it of its
obligations under this Agreement except to the extent that it can
demonstrate damages
32
attributable to such failure. Within fifteen (15) days following receipt
of written notice from the indemnitee relating to any claim, but no later
than ten (10) days before the date on which any response to a complaint or
summons is due, the indemnitor shall notify the indemnitee in writing if
the indemnitor elects to assume control of the defense and settlement of
that claim (a "NOTICE OF ELECTION").
14.3.2 PROCEDURE FOLLOWING NOTICE OF ELECTION. If the indemnitor
delivers a Notice of Election relating to any claim within the required
notice period, the indemnitor shall be entitled to have sole control over
the defense and settlement of such claim; provided that, (i) the indemnitee
shall be entitled to participate in the defense of such claim and to employ
counsel at its own expense to assist in the handling of such claim, and
(ii) the indemnitor shall obtain the prior written approval of the
indemnitee before entering into any settlement of such claim or ceasing to
defend against such claim. After the indemnitor has delivered a Notice of
Election relating to any claim in accordance with the section (a) above,
the indemnitor shall not be liable to the indemnitee for any legal expenses
incurred by the indemnitee in connection with the defense of that claim.
In addition, the indemnitor shall not be required to indemnify the
indemnitee for any amount paid or payable by the indemnitee in the
settlement of any claim for which the indemnitor has delivered a timely
Notice of Election, if such amount was agreed to without the written
consent of the indemnitor.
14.3.3 PROCEDURE WHERE NO NOTICE OF ELECTION IS DELIVERED. If the
indemnitor does not deliver a Notice of Election relating to any claim
within the required notice period, the indemnitee shall have the right to
defend the claim in such manner as it may deem appropriate, at the cost and
expense of the indemnitor. The indemnitor shall promptly reimburse the
indemnitee for all such costs and expenses.
14.4 SUBROGATION. In the event that an indemnitor shall be obligated to
indemnify an indemnitee pursuant to SECTION 14.1 or SECTION 14.2, the indemnitor
shall, upon payment of such indemnity in full, be subrogated to all rights of
the indemnitee with respect to the claims to which such indemnification relates.
SECTION 15. LIABILITY OF THE PARTIES TO EACH OTHER
15.1 LIABILITY GENERALLY. Subject to the specific provisions of this
SECTION 15, it is the intent of the Parties that each Party shall be liable to
the other Party for any actual damages incurred by the non-breaching Party as a
result of the breaching Party's failure to perform its obligations in the manner
required by this Agreement and failure to cure such nonperformance as set forth
in SECTION 16.1.2.
15.2 LIABILITY RESTRICTIONS.
15.2.1 SUBJECT TO SECTION 15.2.2 BELOW, IN NO EVENT, WHETHER IN
CONTRACT OR IN TORT (INCLUDING BREACH OF WARRANTY, NEGLIGENCE AND STRICT
LIABILITY IN TORT), SHALL A PARTY BE LIABLE
33
TO THE OTHER PARTY FOR INDIRECT, CONSEQUENTIAL, EXEMPLARY, PUNITIVE OR
SPECIAL DAMAGES EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES IN ADVANCE.
15.2.2 The limitations set forth in SECTION 15.2.1 shall not apply
with respect to: (i) damages occasioned by the willful misconduct or gross
negligence of a Party, (ii) damages occasioned by improper or wrongful
termination of this Agreement or (iii) damages occasioned by a violation of
SECTION 12 of this Agreement.
15.2.3 Each Party shall have a duty to mitigate damages for which
the other Party is responsible.
15.2.4 Each Party shall be liable to the other Party for any actual
damages as set forth in SECTION 15.1 only if, and to the extent that the
aggregate of all losses arising from or in connection with any such failure
to perform obligations in the manner required by this Agreement exceeds ten
thousand dollars ($10,000.00).
15.2.5 PathNet agrees that all claims arising from and out of the
terms of this Agreement shall be limited to the assets of Incumbent and
that all rights or remedies at law or in equity against Incumbent's
Partners by PathNet, its successors, assigns and representatives are hereby
expressly waived.
15.3 FORCE MAJEURE. No Party shall be liable for any breach, default or
delay in the performance of its obligations under this Agreement (i) if and to
the extent such default or delay is caused, directly or indirectly, by: fire,
flood, earthquake, elements of nature or acts of God, riots, civil disorders,
rebellions or revolutions in any country, Requirements of Law relating to the
System or to the sale of Excess Capacity, or any other cause beyond the
reasonable control of such Party (a "FORCE MAJEURE EVENT"), (ii) provided the
non-performing Party is without fault in causing such breach, default or delay,
and such breach, default or delay could not have been prevented by reasonable
precautions and cannot reasonably be circumvented by the non-performing Party
through the use of alternate sources, work around plans or other means.
SECTION 16. INFORMAL DISPUTE RESOLUTION; ARBITRATION
16.1 INFORMAL DISPUTE RESOLUTION.
16.1.1 ROLE OF PROGRAM MANAGER. In the event Incumbent has a
dispute, controversy or other complaint relating to PathNet's performance
of PathNet's rights and obligations under this Agreement, Incumbent shall
have the right to first contact the Program Manager to resolve such
dispute, controversy or other complaint. If Incumbent is not satisfied
with the resolution provided by the Program Manager, Incumbent may resort
to the arbitration procedures set forth in this SECTION 16.
16.1.2 NOTICE OF BREACH, CURE AND REMEDIES. In the event of a
material breach by either PathNet or Incumbent (the "BREACHING PARTY"), the
other Party (the "NON-
34
BREACHING PARTY") shall send by certified mail a written notice of such
material breach to the Breaching Party setting forth the specific
allegations of such breach. Upon receipt of the notice of breach, the
Breaching Party shall have thirty (30) days to cure such breach. In the
event the Breaching Party fails to cure such breach, as determined by the
Non-Breaching Party in its sole discretion, or the Breaching Party
determines, in its sole discretion, that it has cured such breach, either
the Breaching Party or the Non-Breaching Party may invoke the arbitration
procedures set forth in SECTION 16.2 to resolve whether such breach has
been cured.
16.1.3 SCOPE OF ARBITRATION AND DISPUTE RESOLUTION. SECTION 16 and
the arbitration and dispute resolution mechanisms provided herein shall not
apply to Incumbent's right to terminate this Agreement as provided in
SECTION 3.3.
16.2 ARBITRATION.
16.2.1 ARBITRATION; RESOLUTION OF DISPUTES. Except as provided in
SECTION 16.1.3, any and all disputes and controversies between Incumbent
and PathNet concerning the negotiation, interpretation, performance,
determination of amounts due either Party, breach or termination of this
Agreement (each a "DISPUTE") shall be subject to resolution as set forth in
this SECTION 16.
16.2.2 SETTLEMENT DISCUSSIONS. Subject to SECTION 16.1, any
Dispute shall be attempted to be resolved first through amicable settlement
discussions and each Party shall bear its own costs of such settlement
discussions. Each Party hereby agrees to use good faith efforts to reach a
settlement through such amicable settlement discussions.
16.2.3 REFERRAL TO BINDING ARBITRATION. In the event the Parties
fail to reach a settlement of the Dispute pursuant to settlement
discussions in accordance with SECTION 16.2.2, each Party shall have the
right, but not the obligation, to refer such Dispute for final resolution
by binding arbitration in accordance with the Center for Public Resources'
(the "CENTER") Rules for Non-Administered Arbitration of Business Disputes
(the "ARBITRATION RULES").
16.2.4 BINDING EFFECT. The Parties acknowledge and agree that (i)
the award in any arbitration shall be final, conclusive and binding on the
Parties and (ii) any such arbitration award be a final resolution of the
Dispute between the Parties to the same extent as a final judgment of a
court of competent jurisdiction.
16.2.5 USE OF COURTS AND OTHER LEGAL REMEDIES. Each Party
covenants and agrees that it shall not resort to any court for legal
remedies concerning any Dispute other than to enforce a final decision by
the arbitrators or for preliminary, interim or provisional equitable relief
in aid of arbitration.
16.2.6 ARBITRATION PROCESS.
(a) NOTICE. If the Parties cannot resolve a Dispute to their
mutual satisfaction pursuant to SECTION 16.2.2, either Party
may deliver to
35
the other Party a written notice in accordance with the
Arbitration Rules.
(b) SITE AND ARBITRATION TRIBUNAL. Absent agreement to the
contrary by the Parties, the arbitration will be conducted
in Omaha, Nebraska by a panel of three (3) arbitrators with
expertise in the fields of telecommunications engineering
and construction, PROVIDED, HOWEVER, in the case of
particular witnesses not subject to subpoena at the
designated hearing site, hearings may be held at any place
designated by the arbitrators where such witnesses can be
compelled to attend, and, with the consent of the Parties,
before a single member of the arbitration tribunal. Within
thirty (30) days after the filing of the notice of
arbitration, each Party must select one (1) arbitrator and a
third arbitrator will be selected by agreement of the two
(2) arbitrators selected by the Parties. If either Party
fails to select an arbitrator or there is no agreement on
the selection of the third arbitrator, the Center will
select such arbitrators.
(c) TRANSCRIPTS AND EVIDENCE. Both Parties shall cause a
written transcript of all proceedings and testimony shall be
kept and the cost of such transcript shall be borne equally
by the Parties pending the final award. All documents that
either Party proposes to offer in evidence, except for those
objected to by the other Party, shall be deemed to be
self-authenticating.
(d) APPLICABLE LAW. The arbitrator shall determine the claims
of the Parties and render their final award in accordance
with the governing law of this Agreement as set forth in
SECTION 17.5. Notwithstanding anything set forth in the
Arbitration Rules to the contrary, the provisions of this
SECTION 16 shall govern any arbitration proceeding brought
in relation to this Agreement or the transactions
contemplated thereby.
(e) SANCTIONS. The Parties acknowledge that, in addition to any
other remedy allowed or specified in or under the
Arbitration Rules, the failure of a Party to comply with any
interim, partial or interlocutory order, after due notice
and opportunity to cure such non-compliance, may be treated
by the arbitrators as a default and all or some of the
claims or defenses of the defaulting Party may be stricken
and partial or final award entered against such Party, as
determined by the arbitrators in their sole discretion,
sanctions as such arbitrators deem appropriate.
(f) LIMITATION ON AWARDS. Except as provided in SECTION 15.2.2,
arbitrators may not award (i) incidental, special,
consequential or
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punitive damages in the resolutions of any Dispute and the
Parties hereby waive all rights to and claims for monetary
awards other than compensatory damages, (ii) the right to
terminate this Agreement or any of the rights and
obligations hereunder, or (iii) any other right or remedy
that contravenes the terms and conditions of this Agreement.
(g) PERIOD OF LIMITATIONS. In the event the Party claiming a
Dispute does not institute binding arbitration within one
(1) year after the commencement of settlement discussions
pursuant to SUBSECTION 16.2.2, such Party shall forever be
barred from bringing a claim on the specific subject matter
of such Dispute.
(h) ARBITRATION AWARD. Any arbitration award must be in writing
and must contain findings of fact and conclusions of law
upon which the arbitrators relied in making the decision
relating to such award.
(i) ATTORNEYS' FEES. The arbitrator shall award the reasonable
cost, including attorneys' fees, to the prevailing Party.
SECTION 17. MISCELLANEOUS
17.1 NOTICES. All notices pertaining to disputes arising from this
Agreement shall be directed to a corporate entity or employee designated by the
signatories as having full rights and responsibilities to address such issues.
Notices under this Agreement shall be sufficient only if personally delivered by
a commercial prepaid delivery or courier service or mailed by certified or
registered mail, return receipt requested to a Party at its address set forth
below or as amended by notice pursuant to this SECTION 17.1. If not received
sooner, notice by mail shall be deemed received five (5) business days after
deposit in the U.S. mail. All notices shall be delivered as follows:
If to PathNet:
Michael A. Lubin, Esquire
Vice President and General Counsel
PathNet, Inc.
1015-31st Street, NW
Washington, DC 20007
Tel: 202.625.7284
Fax: 202.625.7369
If to Incumbent:
Mr. Al Behrens
Director, Functional Strategies
Northern Border Pipeline Company
1111 South 103rd Street
37
Omaha, NE 68103-0330
Tel: (402) 398-7135
Fax: (402) 398-7874
17.2 BINDING NATURE; ENTIRE AGREEMENT. PathNet and Incumbent acknowledge
that (i) each has read and understands the terms and conditions of this
Agreement and agrees to be bound by such terms and conditions, (ii) this
Agreement shall be binding on each of PathNet and Incumbent and their respective
successors and assigns, (iii) this Agreement is the complete and conclusive
statement of the agreement between the Parties, (iv) this Agreement supersedes
any and all prior agreements and arrangements between the Parties and all
understandings and agreements, oral and written, heretofore made between
Incumbent and PathNet are merged in this Agreement which alone, fully and
completely expresses their agreement on the subject matter of this Agreement and
(v) this Agreement sets forth the entire agreement on the subject matter hereof.
17.3 AMENDMENT. No modifications of, additions to or waiver of this
Agreement shall be binding upon Incumbent or PathNet unless such modification,
addition or waiver is in writing and signed by an authorized representative of
each Party.
17.4 SEVERABILITY. If any term or provision of this Agreement shall to any
extent be held by a court or other tribunal to be invalid, void or
unenforceable, then such term or provision shall be inoperative and void insofar
as it is in conflict with the law, but the remaining terms and provisions of
this Agreement shall nevertheless continue in full force and effect and the
rights and obligations of the Parties shall be deemed to be restated to reflect
as nearly as possible the original intentions of the Parties in accordance with
applicable law.
17.5 GOVERNING LAW. This Agreement, and the rights and obligations of the
Parties hereunder, shall be governed and interpreted in accordance with the laws
of the State of Nebraska (other than the choice of law rules thereof).
17.6 SURVIVAL. Any provision of this Agreement which completes performance
or observance subsequent to any termination or expiration of this Agreement
shall survive such termination of expiration and continue in full force and
effect.
17.7 ASSIGNMENT. At any time and from time to time, PathNet shall have the
right to assign this Agreement or any of PathNet's rights and obligations under
this Agreement; provided, that in no event shall any such assignment relieve
PathNet of its obligations under this Agreement. Incumbent may not or shall not
have the right to assign this Agreement or any of its rights and obligations
hereunder, PROVIDED, HOWEVER, Incumbent may assign its right and obligations, in
whole but not in part, under this Agreement without the approval of PathNet, to
any entity which acquires all or substantially all of the assets of Incumbent or
to any subsidiary, Affiliate or successor in a merger or consolidation of
Incumbent; provided, that in no event shall any such assignment relieve
Incumbent of its obligations under this Agreement.
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17.8 WAIVER. Failure or delay on the part of Incumbent or PathNet to
exercise any right, power or privilege under this Agreement shall not constitute
a waiver of any right power or privilege of this Agreement.
17.9 GOOD FAITH RENEGOTIATION. Notwithstanding anything set forth herein
to the contrary, the Parties hereby agree that in the event a Governmental
Authority issues a decision, order, rule or other rulemaking of any kind, which
necessitates any modification or amendment to this Agreement, the Parties shall
negotiate in good faith to modify or amend this Agreement to comply with such
decision, order, rule or other rulemaking.
17.10 CONFIDENTIALITY. Except as otherwise provided in this section,
the Parties agree that all Confidential Information shall be kept in confidence
and shall not, without the prior written consent of the disclosing Party, be
disclosed by the receiving Party in any manner whatsoever, in whole or in part,
and that they will use the Confidential Information disclosed to them solely for
the purposes of this Agreement unless otherwise specifically authorized in
writing by the disclosing Party, or specifically required by an order of a
regulatory agency or court of competent jurisdiction, in which case the Parties
agree to use their best efforts to limit disclosure through a protective order
or other similar means. Notwithstanding the foregoing,the existence of this
Agreement shall not be Confidential Information and either Party may disclose
Confidential Information to its partners, operator, Affiliates, parent
corporations, investors, investment bankers, creditors, third party contractors,
capacity purchasers and their applicable respective employees, attorneys and
agents, provided that such disclosure is made only to those persons with a
legitimate need to know such Confidential Information for purposes consistent
with this Agreement.
17.11 INCUMBENT'S DESIGNATED REPRESENTATIVE. Incumbent shall on the
Effective Date designate in writing a representative who shall have express
authority to bind Incumbent with respect to all matters requiring Incumbent's
approval or authorization in connection with this Agreement (the "INCUMBENT
REPRESENTATIVE"). Such Incumbent Representative shall have the authority to
make decisions and grant any and all consents required under this Agreement on
behalf of Incumbent and PathNet shall be entitled to rely on any such decision
or consent by the Incumbent Representative.
17.12 OUTSOURCING. In addition to, and not in place of, any rights of
PathNet under this Agreement, PathNet shall have the right to engage third party
Subcontractors to perform any or all of PathNet's rights and obligations under
this Agreement.
17.13 UNION AND LABOR RELATIONS. With respect to any services
performed pursuant to this Agreement, Incumbent shall ensure all such services
comply with all applicable labor or union-related agreements, regulations and
ordinances and shall not require PathNet to join any union or other labor
organization as a condition to performing services contemplated by this
Agreement.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement, as of the
date first written above.
PATHNET, INC.
By: /s/ Dave Schaeffer
---------------------------------
Name: Dave Schaeffer
Title: Chairman
NORTHERN BORDER PIPELINE COMPANY
By: Northern Plains Natural Gas Company, Operator
By: /s/ Larry L. DeRoin
---------------------------------
Name: Larry L. DeRoin
Title: President