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Securities and Exchange Commission on October 8, 1997.
Registration No. 333-35227
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ELECTRIC LIGHTWAVE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 4825 93-1035711
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification
Number)
8100 N.E. PARKWAY DRIVE, SUITE 150, VANCOUVER, WASHINGTON 98662
(360) 892-1000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
ROBERT J. DESANTIS
ELECTRIC LIGHTWAVE, INC.
8100 N.E. PARKWAY DRIVE, SUITE 150
VANCOUVER, WASHINGTON 98662
(360) 892-1000
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
COPIES TO:
JONATHAN H. CHURCHILL, ESQ. VINCENT PAGANO, ESQ.
WINTHROP, STIMSON, PUTNAM & ROBERTS SIMPSON THACHER & BARTLETT
ONE BATTERY PARK PLAZA 425 LEXINGTON AVENUE
NEW YORK, NY 10004 NEW YORK, NY 10017
(212) 858-1000 (212) 455-2000
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [_]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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<S> <C> <C> <C> <C>
Proposed
Title of each class Proposed maximum
of securities to be maximum offering aggregate offering Amount of
registered Amount to be registered price per unit price registration fee
- -------------------------------------------------------------------------------------------------------
Common Stock, Class A $200,000,000* $60,607**
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</TABLE>
* Estimated solely for the purpose of calculating the registration fee pursuant
to Rule 457.
** Previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below are the expenses (other than underwriting discounts and
commissions) expected to be incurred in connection with the issuance and
distribution of the securities to be registered hereby. With the exceptions of
the Securities and Exchange Commission registration fee and the NASDAQ
registration fee, the amounts set forth below are estimates.
Securities and Exchange Commission registration fee................. $ 60,607
NASDAQ registration fee............................................. 5,000
Transfer agent and registrar fees................................... 10,000
Costs of printing and engraving..................................... 70,000
Legal fees and expenses............................................. 60,000
Accounting fees and expenses........................................ 30,000
Blue Sky fees and expenses.......................................... 10,000
Miscellaneous expenses.............................................. 10,000
---------
TOTAL........................... $ 255,607
=========
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As authorized by Section 145 of the General Corporation Law of Delaware,
each director and officer of Electric Lightwave, Inc. may be indemnified by
Electric Lightwave, Inc. against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with the defense or settlement of any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, in which he is involved by reason of the fact that he is or
was a director or officer of Electric Lightwave, Inc. if he acted in good faith
and in a manner that he reasonably believed to be in or not opposed to the best
interests of Electric Lightwave, Inc., and, with respect to any criminal action
or proceeding, if he had no reasonable cause to believe that his conduct was
unlawful. If, however, any threatened, pending or completed action, suit or
proceeding is by or in the right of Electric Lightwave, Inc., the director or
officer shall not be indemnified in respect of any claim, issue or matter as to
which he is adjudged to be liable to Electric Lightwave, Inc. unless the Court
of Chancery of Delaware, which is vested with exclusive jurisdiction to hear and
determine all actions for advancement of expenses or indemnification brought
under Section 145 of the General Corporation Law of Delaware, determines
otherwise.
Article Seventh of Electric Lightwave, Inc.'s Certificate of
Incorporation provides that no director of Electric Lightwave, Inc. shall be
personally liable to Electric Lightwave, Inc. or any of its stockholders for
monetary damages for any breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to Electric
Lightwave, Inc. or its shareholders, (ii) for acts or omissions not in good
faith or which involve intentional
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misconduct or a knowing violation of the law, (iii) under Section 174 of the
General Corporation Law of Delaware, or (iv) for any transaction from which the
director derived an improper personal benefit. In addition, Article Seventh
provides that if the General Corporation Law of Delaware is amended to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a director of Electric Lightwave, Inc. shall be
eliminated or limited to the fullest extent permitted by the General Corporation
Law of Delaware, as so amended. No modification or repeal of the provisions of
Article Seventh shall adversely affect any right or protection of any director
of Electric Lightwave, Inc. existing at the date of such modification or repeal
or create any liability or adversely affect any such right or protection for any
acts or omissions of such director prior to such modification or repeal.
Electric Lightwave, Inc.'s By-Laws provide that Electric Lightwave, Inc.
shall indemnify its officers and directors to the fullest extent permitted by
the General Corporation Law of Delaware.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In 1994, the Company issued 5,725,527 shares of preferred stock of the
Company to Citizens for $57,255,270 in a private placement. Exemption from
registration is claimed under Section 4.2 of the Securities Act of 1933. No
underwriters were involved in such issuance. In 1996, 76 shares of common stock
were issued upon conversion of such preferred stock to common stock. Exemption
from registration under the Securities Act is claimed under Section 3(a)(9) of
the Securities Act of 1933.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
An Exhibit Index, containing a list of all exhibits to this registration
statement, commences on page II-5.
(B) FINANCIAL STATEMENT SCHEDULES
All schedules are omitted because the information is not required, is
not material or is otherwise included in the financial statements or related
notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements certificates
in such denominations and registered in such names as required by the
underwriter to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the
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Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(i) for purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) hereunder the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(ii) for the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has caused this Amendment No. 1 to the registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Vancouver, State of Washington, on October 8, 1997.
ELECTRIC LIGHTWAVE, INC.
/s/Robert J. DeSantis
-------------------------------------
By: Robert J. DeSantis
Title: Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the registration statement has been signed by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE(S)
--------- --------
President, Chief Executive October 8, 1997
*David B. Sharkey Officer and Director
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David B. Sharkey
Chairman of the Board and October 8, 1997
*Daryl A. Ferguson Director
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Daryl A. Ferguson
Principal Financial Officer October 8, 1997
/s/ Robert J. DeSantis and Director
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Robert J. DeSantis
Principal Accounting Officer October 8, 1997
*Livingston E. Ross
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Livingston E. Ross
*By Robert J. DeSantis
------------------------
Attorney-in-fact
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
1.1* Underwriting agreement
3.1* Amended and Restated Certificate of Incorporation
3.2* By-laws
4.1* (Contained in Exhibit 3.1)
5.1* Opinion regarding legality of the securities being registered
10.1** License Agreement between the Company and the United States of
America Department of Energy acting by and through the
Bonneville Power Administration dated March 29, 1996
10.2** License Agreement between the Company and the United States of
America Department of Energy acting by and through the
Bonneville Power Administration dated November 11, 1996
10.3** License Agreement between the Company and the United
States of America Department of Energy acting by and through the
Bonneville Power Administration dated July 18, 1997
10.4** Optical Fiber License Agreement between the Company and Salt
River Project Agricultural Improvement and Power District dated
as of September 11, 1996
10.5 Participation Agreement between the Company, Shawmut Bank
Connecticut, National Association, the Certificate Purchasers
named therein, the Lenders named therein, BA Leasing & Capital
Corporation and Citizens Utilities Company dated as of April 28,
1995, and the related operating documents
10.6 Agreement For Lease of Dark Fiber between the Company and
Citizens Utilities Company dated as of March 24, 1995
10.7* Form of Administrative Services Agreement between the Company
and Citizens Utilities Company dated as of _______, 1997
10.8 Form of Tax Sharing Agreement between the Company and Citizens
Utilities Company dated as of _______, 1997
10.9 Form of Indemnification Agreement between the Company and
Citizens Utilities Company dated as of _______, 1997
10.10* Form of Registration Rights Agreement between the Company and
Citizens Utilities Company dated as of _______, 1997
10.11* Form of Customers and Service Agreement between the Company and
Citizens Utilities Company dated as of _______, 1997
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EXHIBIT NO. DESCRIPTION
10.12* Promissory Note of the Company dated _________, 1997
10.13* Equity Incentive Plan of the Company
10.14* Form of Option Agreement for the Company's Equity Incentive Plan
10.15*** Citizens Utilities Company 1996 Equity Incentive Plan, as
amended
10.16* Form of Guaranty Agreement dated as of ___________, 1997 between
the Company and Citizens Utilities Company
11.1* Statement regarding computation of per share earnings
23.1**** Consent of KPMG Peat Marwick LLP
23.2* Consent of Winthrop, Stimson, Putnam & Roberts (to be contained
in Exhibit No 5.1)
24.1**** Powers of attorney
27.1**** Financial Data Schedule
__________
* To be filed by Amendment.
** Filed herewith. Portions of such exhibit are omitted pursuant to a request
for confidential treatment.
*** The 1996 Equity Incentive Plan is incorporated by reference to Citizens'
Proxy Statement dated March 29, 1996, File No. 001-11001. Amendment No. 1
to the 1996 Equity Incentive Plan is incorporated by reference to
Citizens' Current Report on Form 8-K dated August 7, 1997, File No. 001-
11001.
**** Previously filed.
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<PAGE>
EXHIBIT 10.1
Contract No. 96MS-95240
03/29/96
LICENSE AGREEMENT
executed by the
UNITED STATES OF AMERICA
DEPARTMENT OF ENERGY
acting by and through the
BONNEVILLE POWER ADMINISTRATION
and
ELECTRIC LIGHTWAVE, INC.
[Asterisks herein denote confidential material which has been omitted pursuant
to a request for confidential treatment. Such material has been filed
separately with the Securities and Exchange Commission.]
<PAGE>
TABLE OF CONTENTS
INDEX TO SECTIONS
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SECTION PAGE
1. DEFINITIONS........................................ 2
2. TERM............................................... 6
3. EXHIBITS........................................... 7
4. AMENDMENTS......................................... 7
5. MILESTONE SCHEDULE................................. 7
6. OWNERSHIP.......................................... 7
7. LICENSE............................................ 8
8. PERFORMANCE CRITERIA............................... 9
9. BUSINESS PLAN...................................... 11
10. MARKET PRICE ASSESSMENT............................ 11
11. PAYMENT............................................ 12
12. MAINTENANCE, REPAIR, AND RESTORATION OF THE CABLE.. 13
13. REGENERATOR BUILDING(S)............................ 18
14. RIGHTS AND OBLIGATIONS CONCERNING THE CABLE........ 19
15. RELOCATION OF THE CABLE............................ 21
16. REPRESENTATIONS AND WARRANTIES..................... 22
17. AUDIT PROCEDURES................................... 24
18. INSURANCE.......................................... 26
19. DEFAULT............................................ 29
20. TERMINATION........................................ 31
21. INDEMNIFICATION; WAIVER OF DAMAGES................. 32
22. DISPUTE RESOLUTION................................. 34
23. GENERAL............................................ 36
Exhibit A (Route)
Exhibit B (Payment Specifications)
Exhibit C (Milestone Schedule)
Exhibit D (Fiber Specifications)
<PAGE>
This LICENSE AGREEMENT (Agreement), executed March 29, 1996, by the UNITED
STATES OF AMERICA (Government), Department of Energy, acting by and through the
BONNEVILLE POWER ADMINISTRATION (Bonneville), and Electric Lightwave,
Incorporated (ELI), a corporation organized and existing under the laws of the
State of Delaware. Both Bonneville and ELI may be referred to herein
individually as a "Party" and collectively as the "Parties."
W I T N E S S E T H :
WHEREAS Bonneville owns the Cable and Cable accessories; and
WHEREAS Bonneville shall retain 12 of the 72 fibers in the Cable for its
own use, which will give Bonneville fiber optic cable capacity in excess of that
which is needed to operate its transmission communications along the Route; and
WHEREAS Bonneville is the licensor and ELI is the licensee for 56 of the 72
fibers in the Cable; and
WHEREAS Bonneville constructs and installs the Cable; and
WHEREAS Bonneville shall direct and oversee the design and installation of
the Cable upon the Route; and
WHEREAS Bonneville desires to grant a license for a period of time to ELI
(as hereinafter defined) respecting the ELI Fiber as defined below, along the
Route under the terms and conditions contained herein, including payment by ELI
of the Guaranteed Fee Value (hereafter defined), which payment is an essential
part of this Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
obligations and agreements herein contained, the Parties hereby agree as
follows:
<PAGE>
1. DEFINITIONS
The following terms, when used in this Agreement, shall have the meanings
set forth in this section:
(a) "Bonneville Facilities" means all Bonneville-owned and/or leased
structures, buildings, land, access roads, and equipment along the
Route.
(b) "Bonneville Fiber" means 12 dark optical fibers within the Cable
designated for Bonneville's use as defined in section 7(b) of this
Agreement.
(c) "Cable" means a Bonneville-owned cable, containing 72 optical fibers,
single-mode, nondispersion shifted, to be installed along the Route.
(d) "Cable Accessories" means the equipment necessary for the attachment
of the Cable to the Bonneville Facilities.
(e) "Cable Specifications" means the drawings and specifications regarding
the Cable hardware and materials incorporated into the construction
project.
(f) "Commercial Fiber" means the 56 dark optical fibers within the Cable
designated for commercial purposes.
(g) "Dark Fiber Lease Value" means the sum of all dark fiber lease
payments received by ELI for Commercial Fiber.
(h) "Diverse Fibers" means 4 dark optical fibers within the Cable reserved
for diverse switching paths for a SONET ring in order to achieve
optimum network robustness and reliability.
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(i) "ELI Transport Service(s)" means Transport Service(s) used by ELI in
the delivery of End-User Service(s).
(j) "ELI Transport Service Value(s)" means the sum of the values for all
the ELI Transport Service(s) within the Commercial Fiber as described
in Exhibit B.
(k) "End-User" means the customers of ELI.
(l) "End-User Service(s)" means services provided to the End-User, other
than Transport Service(s) and Other Service(s).
(m) "End-User Transport Service Value(s)" means the sum of all payments
received by ELI from End-User(s) for Transport Service sales.
(n) "Energization" means the time when the Cable is fully installed and
the fiber meets testing criteria agreed to by the Parties.
(o) "Fiber Specifications" means the performance attributes of the fiber
within the Cable as described in Exhibit B.
(p) "Guaranteed Fee Value" means the dollar value of 75 percent of all of
ELI's monthly leased traffic between the Originating and Terminating
Markets measured at Energization or [*], whichever is greater, as
specified in Exhibit B.
(q) "Gross Revenue Value(s) (GRV)" means the sum of ELI's Transport
Service Value(s) plus End-User Transport Service Value(s) plus Dark
Fiber Lease Value(s) plus Other Service Value(s).
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* Confidential material has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with
the Securities and Exchange Commission.
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(r) "Interest Rate" means .05 per day (18.25 percent per annum) to be
compounded daily to the unpaid balance.
(s) "License" means the License granted to ELI in section 7(a).
(t) "Originating and Terminating Markets" means the areas in and around
the cities of Portland, Oregon; Seattle, Washington; Tacoma,
Washington; Olympia, Washington; as well as other cities adjacent to
the Route.
(u) "Other Transport Service(s)" means services sold over the Commercial
Fiber at the Optical Carrier level (e.g. OC1, OC3, OC12, OC48).
(v) "Other Transport Service Value(s)" means the sum of all payments
received by ELI for Other Transport Services.
(w) "Regenerator Building(s)" means the building(s) along the Route, owned
and operated by ELI, that house the terminal and regenerator equipment
including any optronics or electronics required by ELI to make use of
the ELI Fibers. For the purpose of this Agreement, the Regenerator
Building(s) include conduit and fiber optic cable, from the
Regenerator Building(s) up to the nearest fiber optic splice box or
the nearest substation fence, at Bonneville's discretion.
(x) "Route" means the Cable path as described in Exhibit A.
(y) "Transport Services" means individual DS-0, DS-1, and DS-3 circuits
used or sold as bulk transport by ELI for long haul traffic on the
Commercial Fiber as described below:
(1) "Digital Signal Zero (DSO)" means: one (1) 64 Kilobits per
second (Kbps) or 56 Kbps digital, pulse coded modulated voice
channel;
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(2) "Digital Signal One (DS 1)" means: (i) in the U.S. Digital
hierarchy, digital signal level 1 indicates a 1.544 megabytes per
second (Mbps) data signal. Also referred to as a T-1; (ii) in
the U.S. time-division multiplexing hierarchy, digital signal
level 1 (DS-1) indicates the first level of multiplexing. It is
defined as 24 DS-0 (64Kbps) circuits multiplexed into a 1.544
Mbps data signal; and
(3) "Digital Signal Level Three (DS3)" means: (i) in the U.S.
Digital hierarchy, digital signal level 3 indicates a 44.736 Mbps
data signal, often delivered to customers via optical fiber
systems, also referred to as T-3; (ii) in the U.S. time-division
multiplexing hierarchy, digital signal level 3 (DS-3) indicates
the third level of multiplexing. It is defined as 28 DS 1 (1.544
Mbps) signals, with added overhead bits, multiplexed onto a
44.736 Mpbs data signal; (iii) high capacity access service that
provides capacity equivalent to 28 DS-1 circuits, 7 DS2 channels,
or 672 voice grade special access circuits; also used generically
to describe digital data transmission services operating over
fiber optic lines at transmission speed of 44.6 Mbps.
2. TERM
(a) This Agreement shall be effective at 2400 hours on the date of
execution by both Parties (Effective Date) and shall continue in
effect for a period of 15 years after Energization, unless sooner
terminated or extended in accordance with the terms of this Agreement.
(b) The term of this Agreement shall be extended only by mutual agreement
of the Parties. The Agreement may be extended for two separate 5-year
renewal periods. Either Party, shall notify the other Party at least
90 days prior to the expiration date of this Agreement if the
notifying Party decides to exercise its renewal option in its
discretion. The other Party shall have 45 calendar days to
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accept or reject the renewal option. The terms and conditions of this
Agreement applicable to the initial 15-year period may be modified or
renegotiated during the Renewal Period(s) upon mutual agreement by the
Parties.
(c) All obligations incurred and outstanding including Indemnification,
under section 21 shall survive the expiration or termination of this
Agreement; provided that sections 22 and 23(h) shall survive
expiration or termination for 3 years.
3. EXHIBITS
Exhibit A (Route); Exhibit B (Payment Specifications); Exhibit C (Milestone
Schedule); and Exhibit D (Fiber Specifications); are incorporated into and
made a part of this Agreement.
4. AMENDMENTS
This Agreement may be amended upon the written agreement of both Parties.
5. MILESTONE SCHEDULE
Energization of the Cable is currently scheduled for February 15, 1997. On
or before July 15, 1996, Bonneville and ELI agree to complete an evaluation
of the milestones, described in Exhibit C, required to complete
construction and Energization of the Cable. The evaluation shall determine
if Exhibit C can be revised to reflect an earlier Energization date.
6. OWNERSHIP
(a) The Cable shall be owned by Bonneville. Simultaneous with completion
of installation of the Cable on the Route, and Energization Bonneville
shall grant ELI an exclusive license pursuant to section 7 of this
Agreement. Bonneville shall retain sole control of the Bonneville
Fiber.
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(b) Subject to section 6(a), each Party shall own its own electronic and
optronic devices necessary to transmit signals over the fibers each
Party controls as specified in this Agreement.
(c) Bonneville shall own all Bonneville electric transmission facilities,
rights-of-way, structures, improvements, and components obtained for
or installed on Bonneville Facilities and the Route in accordance with
this Agreement.
(d) Title and ownership of the Cable Accessories, Regenerator Building(s)
and related equipment within the Regenerator Building(s) furnished by
ELI shall be and remain the property of ELI, except that Bonneville
shall gain title to and ownership of such equipment which cannot be
removed without damage to Bonneville Facilities.
7. LICENSE (a) Exclusivity
Bonneville hereby grants to ELI an exclusive License to use the
Commercial Fiber and to manage the Diverse Fibers. This right shall
remain exclusive as long as ELI meets or exceeds the Performance
Criteria described in section 8.
(b) Access to the Route
ELI shall have access to the Route for the purposes of performing its
rights and obligations under this Agreement. Bonneville shall have
the right to use the Route, Bonneville Fiber, or any portion thereof,
together with the right to enter upon the Route, or any portion
thereof, at all times, for any and all purposes. Bonneville shall
retain the right to use the Bonneville Fiber for its own internal
electric system network and utility business purposes.
(c) No Property Interest
This Agreement shall not confer upon ELI any ownership or possessory
interest in the Route or other property owned by Bonneville except as
provided herein, and
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ELI agrees that it shall never make any claim of such interest based
upon this Agreement.
8. PERFORMANCE CRITERIA
(a) Pursuant to section 7(a), ELI's Annual Performance must be equal to or
greater than the Performance Criteria associated with the subject year
listed in Table A below.
ANNUAL PERFORMANCE equals the sum of the monthly payments made to
Bonneville by ELI for the given 12-month period. Unless otherwise
agreed to by the Parties, Year 1 shall commence 30 calendar days
following Energization.
TABLE A
YEAR[*] PERFORMANCE CRITERIA[*]
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* Confidential material has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with the
Securities and Exchange Commission.
8
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(b) Bonneville Rights
(1) If at any time following an audit of performance within 60 days
of the conclusion of each annual period, ELI fails to meet the
Performance Criteria, Bonneville, at its discretion, may
determine the License to be nonexclusive and Bonneville shall
have the right to use any unused portion of the Commercial Fiber
for any purpose.
(2) In the event ELI's rights to use the Commercial Fiber
becomes nonexclusive, ELI shall cooperate with Bonneville
to allow co-location of other users of the Commercial Fiber
in ELI's Regenerator Buildings, based on available space.
The Parties shall agree to reasonable compensation.
9. BUSINESS PLAN
ELI shall develop a Business Plan that describes ELI's proposal for
marketing, managing, and utilizing the Cable along the Route. The Business
Plan shall include but is not limited to, ELI's marketing strategy for
telecommunications service(s) along the Route, customer service, sales
strategy for all Transport Services, accounting, billing and collections
standards, strategy for maintaining ELI fibers, and plan for maintaining
compliance with all regulatory requirements or relevant State regulatory
authorities and the Federal Communications Commission. Unless otherwise
agreed to by the Parties, ELI shall complete the Business Plan 6 months
from the date of execution of this Agreement. Prior to finalization of the
Business Plan, Bonneville shall have the right to review ELI's Business
Plan for consistency with this Agreement, however, Bonneville shall not be
involved in ELI's decisions regarding the marketing, pricing, managing, and
use of the Commercial Fiber. ELI shall use its best efforts, consistent
with reasonable commercial practices, to maximize the Gross Revenue Value
generated pursuant to the License.
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10. MARKET PRICE ASSESSMENT
(a) Bonneville shall procure under separate agreement, the services of a
market assessment consultant to assess market prices of bulk transport
services and provide reports to Bonneville.
(b) Bonneville and ELI agree to equally share in the costs of procuring
the services described above.
(c) The market assessment consultant shall be responsible for acquiring
quotes, calculating an average, and delivering the market assessment
report to Bonneville using the methodology agreed to by Bonneville and
ELI. Bonneville and ELI shall within one hundred twenty (120)
calendar days from execution of this Agreement, make their best effort
to agree to the methodology.
(d) Bonneville agrees to allow ELI to participate in the development of
the methodology for assessing market price(s) to be used under this
Agreement.
(e) ELI agrees to use the current data provided to Bonneville by the
market assessment consultant as a basis for setting ELI Transport
Service Value(s) for each ELI Transport Service depending on when the
ELI Transport Service is placed in service by ELI. The ELI Transport
Service for any specific ELI Transport Service will remain in effect
for a period of 36 months, after which the ELI Transport Service must
be re-valued based on the current market assessment data.
(f) The agreed-to methodology may be changed by mutual agreement of
Bonneville and ELI.
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11. PAYMENT
(a) ELI agrees to pay Bonneville under the terms of this Agreement,
according to the Payment Specifications described in Exhibit B. In
addition to ELI's monthly payment to Bonneville, ELI shall include a
monthly report of all transactions. The report will allow Bonneville
to account for the Gross Revenue Value (GRV) generated each month.
Both Parties shall agree on a reporting format to be used, prior to
ELI's first payment to Bonneville.
(b) Unless otherwise agreed to by the Parties, accounting of the GRV shall
begin 30 calendar days following Energization. Payment shall be
received by Bonneville from ELI by the 20th of each month for GRV
calculated on the previous calendar months' transactions. Payments
shall be sent to the address identified in (c) below.
(c) Payment shall be sent to:
Bonneville Power Administration
Client Support - FCC
P.O. Box 3621
Portland, OR 97228-3621
(d) Payments not received by Bonneville when due shall bear interest at
the Interest Rate from the date payment was due until the date payment
is made to Bonneville. Late payments shall be collected pursuant to
the Debt Collection Act, 1982, 5 U.S.C. 5514, with the exception of
section 23(a)(2) of this Agreement.
12. MAINTENANCE, REPAIR, AND RESTORATION OF THE CABLE
(a) Maintenance of the Cable
(1) During the term of this Agreement, Bonneville shall be
responsible for the physical routine maintenance of the Cable and
the Cable Accessories.
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Bonneville shall maintain the Cable and the Route at all times in
good working order and in a safe condition, in conformity with
the Cable Specifications and all applicable laws and regulations.
(2) Bonneville shall pay all costs associated with the routine
maintenance of the Cable.
(3) ELI shall be responsible for maintenance of its property,
including the Regenerator Building(s) along the Route.
(b) Detailed Restoration Plan
(1) Restoration activities will be integral to ensuring successful
implementation of this Agreement. Timely restoration is
dependent upon the timely coordination and cooperation between
Bonneville and ELI. The Parties agree to jointly develop a
Detailed Restoration Plan which shall, upon its completion,
become part of this Agreement.
(2) The Parties agree to, within one hundred-twenty (120) days of the
execution of this Agreement by both Parties, develop a Detailed
Restoration Plan, the specifics of which will be based upon the
provisions of this section 12.
(3) The following provisions described in sections (c) and (d) below
shall form the principles and basis for the development of such a
plan.
(c) Restoration Priorities and General Requirements
(1) Bonneville's obligation to maintain and repair the Cable and any
activities incidental thereto shall be subordinate to, and shall
not conflict with, Bonneville's rightful use and operation of its
transmission facilities. In the
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event both Bonneville's transmission facilities and the Cable
require maintenance or repair, the restoration of the Cable shall
be at all times subordinate to the restoration of Bonneville's
transmission facilities, unless otherwise agreed to by Bonneville
in advance. The restoration of Bonneville's telecommunications
system shall take priority over restoration activities related
with the Commercial Fiber. In the event that ELI's License
becomes nonexclusive pursuant to section 8, the Commercial Fiber
used by ELI shall take priority over restoration activities
related to any fibers used by any other users of the Commercial
Fiber.
(2) Any and all Bonneville, ELI representatives, or other users of
the Commercial Fiber that construct, install, repair, replace, or
otherwise handle the Cable, Cable Accessories, Commercial Fiber,
Bonneville Fiber, or any related materials and equipment shall be
properly trained and equipped to meet all current industry
standards.
(3) A Bonneville representative must be on-site during all repair and
restoration work to perform functions such as safety watch,
protection of Bonneville's transmission facilities, obtain line
clearances. Bonneville shall make its best efforts to have a
representative arrive at the site requiring an emergency
maintenance activity pursuant to 12(d)(1) of this section.
(4) The Party performing the repair and restoration shall use prudent
business methods to acquire the most cost-effective restoration
procedures and materials available given the Cable
Specifications, Fiber Specifications, and current industry
standard.
(5) Bonneville shall require all employees or agents of ELI or any
other users of the Commercial Fiber who work near Bonneville's
transmission
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facilities to demonstrate that they have been properly trained
and equipped to perform the work. The Parties shall agree in
advance what constitutes proper training and reasonable costs.
The costs of agreed-upon training of ELI employees, agents of
ELI, or other users of the Commercial Fiber shall be borne by
ELI.
(6) A Bonneville representative shall have the authority to stop any
work activities or equipment functions for reasons that he or she
determines in good faith to involve potential health hazards,
safety concerns, and potential disruption to Bonneville's
operating system. Bonneville will make reasonable efforts to
coordinate with ELI in case of such events.
(d) Restoration of the Cable
(1) Bonneville shall immediately, upon notification from ELI of
interruption in service, failure, disrepair, impairment, or other
need for repair or restoration of the Commercial Fiber, begin to
mobilize Bonneville crews and make its continuous best effort to
achieve such necessary repair or restoration, including making
its best effort to have maintenance personnel at the affected
site within 4 hours after receipt of such notice, PROVIDED,
HOWEVER, subject to section 12(c)(1), that in the event any of
ELI's rights are interrupted pursuant to section 23(a), repairs
and restoration shall be made as expeditiously as possible. ELI
recognizes that the 4-hour response time represents optimal
conditions, and may be impossible to achieve when responding to
certain remote locations. Actual response times will be
influenced by factors such as the terrain, weather conditions
present at the time the request is made, and the actual mileage
from Bonneville's dispatch station to the fault site.
(2) For purposes of this section, best efforts means activities and
performance consistent with prudent utility practice, existing
contract provisions for
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Bonneville's hourly employees ("Collective Agreement between
Bonneville and Columbia Power Trades Council"), and response
times that do not jeopardize the health and safety of Bonneville
employees, agents of Bonneville, ELI employees, or agents of ELI.
(3) The Detailed Restoration Plan shall set forth the roles and
responsibilities of the respective Parties, and shall address
issues regarding logistical considerations, response interval
factors, communication between the Parties, sequential activity
requirements, and other related items which would impact response
time and restoration intervals. The aforementioned issues will
be taken into consideration in the determination of whether
Bonneville has used its best efforts in such restoration or
repair activities. The Detailed Restoration Plan will also set
forth financial penalties, if any, to be paid to ELI by
Bonneville for failure to use its best efforts on any repair or
restoration, including the mobilization effort as set forth
above.
13. REGENERATOR BUILDING(S)
(a) ELI shall have sole responsibility for the expense and acquisition of
any property necessary for its equipment along the Route. If space is
available at Bonneville substations, such space shall be provided to
ELI at Bonneville's "bare land" lease rate under a separate agreement.
(b) ELI shall provide and own, except as provided in section 6(d), Cable
Accessories splice boxes, and other components necessary for the
operation of the Commercial Fiber.
(c) ELI shall have sole responsibility for obtaining electric power and
any land rights for Regenerator Building(s).
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(d) ELI shall have sole responsibility for the physical maintenance and
environmental compliance associated with the Regenerator Building(s)
and the grounds around the Regenerator Building(s).
14. RIGHTS AND OBLIGATIONS CONCERNING THE CABLE
(a) General
-------
In the event that ELI requires capacity (other than Transport
Service(s)) along the Route, Bonneville and ELI shall agree in writing
on how those transactions shall be valued.
ELI shall not use dark fiber from the Cable for commercial activities
not accounted for in this Agreement.
ELI agrees to utilize the Cable for all ELI capacity needs, existing
or arising along the Route and between the Originating and Terminating
Markets, except for diversity needs.
(b) Permits
-------
Bonneville shall acquire all necessary regulatory or governmental
permits and approvals required for construction of the Cable along the
Route, and ELI shall, at its cost, cooperate and provide Bonneville
with such information as Bonneville may reasonably request from ELI in
connection with such permits and approvals. ELI shall acquire all
necessary regulatory or governmental permits and approvals necessary
for ELI's use of the Commercial Fiber for telecommunications services,
including Transport Service(s) and Dark Fiber Leases, and any permits
and/or approvals that may be required for the Regenerator Building(s).
ELI shall not rely upon Bonneville to acquire from any other Federal
agency any necessary regulatory or governmental permits and approvals.
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When feasible, Bonneville shall, at its cost, cooperate and provide
ELI with such information as ELI may reasonably request form
Bonneville in connection with acquiring permits, easements, or
additional rights-of-way for the Regenerator Building(s); provided
that ELI indemnifies and hold harmless Bonneville from any future
liability resulting from such actions.
(c) Taxes, Mechanic's Liens, and Encumbrances
ELI shall pay its own income taxes as well as all franchise fees and
other fees and taxes resulting from ELI's License or use of the
Commercial Fiber. ELI shall keep the Route free and clear from all
liens and encumbrances resulting from ELI's use of the Commercial
Fiber. If ELI does not pay the foregoing taxes and fees when such
become due, and such nonpayment results in the imposition of a lien
on, or encumbrance of, the Route, then Bonneville shall have the
right, but not the obligation, to pay all amounts due and discharge
such lien or encumbrance, upon 30 calendar days prior written notice
to ELI. In the event Bonneville causes such liens or encumbrances to
be discharged, ELI shall reimburse Bonneville upon demand together
with interest thereon at the Interest Rate, accruing from the date
that Bonneville makes payment discharging such liens or encumbrances
until the date Bonneville receives full reimbursement from ELI. ELI
shall have the absolute right to dispute or challenge any tax or fee
assessed on its use of the Commercial Fiber.
(d) Access Roads
ELI may use Bonneville's access roads to access the Regenerator
Building(s), provided that heavy vehicles or other equipment being
used on the access road will not at any time impair the use of the
access road by Bonneville. Access to the roads shall be limited to
the times and frequency required for maintenance and operation of the
Regenerator Building(s) and equipment, and any repair and restoration
of the Cable pursuant to section 12. ELI shall at ELI's expense
repair any damage to the access roads caused as a result of ELI's use
of the access roads.
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ELI shall acquire access easements to the Regenerator Building(s)
where Bonneville access roads are not available.
(e) Environmental Compliance Activities
Bonneville shall be responsible for compliance with the National
Environmental Policy Act (NEPA) and shall acquire all necessary
permits associated with the project operations, maintenance, and
construction of the Cable. ELI shall at its expense, cooperate and
provide Bonneville with such information as it may reasonably request
in connection with such compliance and permits. The project
activities will be limited to construction and operation of cable,
hardware, Regenerator Building(s), access roads and distribution lines
if needed for Regenerator Building(s). If any mitigation measures are
required along the Route as part of the NEPA compliance activities,
these measures will be performed by Bonneville at the sole cost of
Bonneville. Contacts with the local landowners will be performed by
Bonneville-appointed representatives. Any landowner compensation
required as part of the NEPA and project activities will be made by
Bonneville. All of the compliance and permitting activities
undertaken by Bonneville pursuant to this subparagraph (e) shall be at
the cost and expense of Bonneville.
15. RELOCATION OF THE CABLE
In the event that the Cable may require relocation or replacement during
the term of this Agreement. The cost of such relocation or replacement
shall be allocated as follows:
(a) If requested by ELI, ELI shall pay all such costs;
(b) If requested by Bonneville due to requirements necessary to provide
economical and reliable electric power, Bonneville shall pay all such
costs;
(c) If the Cable must be relocated due to the order of any court,
governmental agency, or in conjunction with the operational needs of
Bonneville, Bonneville shall, in
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consultation with ELI, designate a new route for the Cable. The costs
associated with such required relocation that are not paid by a third
party, shall be paid by Bonneville. ELI shall be responsible for any
relocation costs associated with ELI's Regenerator Building(s), ELI-
owned cable, and ELI-owned terminal equipment.
16. REPRESENTATIONS AND WARRANTIES
(a) ELI
ELI represents and warrants to Bonneville as follows:
(1) ELI is a corporation duly organized and validly existing and in
good standing under the laws of the State of Delaware. ELI is
duly qualified to do business and is in good standing in the
States of Oregon and Washington. ELI covenants that it will
maintain any necessary Federal, State, or local compliances
needed to continue to do business in the States of Oregon and
Washington. ELI has full power and authority to execute,
deliver, and perform its obligations under this Agreement. The
execution of this Agreement by ELI has been duly and validly
authorized by all necessary action on the part of ELI. This
Agreement is a legal, valid, and binding obligation of ELI,
enforceable against ELI in accordance with its terms. The
execution and delivery of this Agreement by ELI and the
performance of the terms, covenants, and conditions contained
herein will not violate the articles of the corporation, or
bylaws of ELI, or any applicable law or regulation or any order
of court or arbitrator, and will not conflict with and will not
constitute a material breach of, or default under, the provisions
of any contract by which ELI is bound. Except as otherwise
stated herein, no approval, authorization, or other action by any
governmental authority or filing with any such authority which
has not been obtained or accomplished is required in connection
with the execution, delivery, and performance by ELI of this
Agreement.
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(2) ELI or any assignee of the License or this Agreement shall remain
a majority controlled subsidiary of Citizens Utilities
(Citizens). Any assignment of the License of this Agreement to
parties not owned by Citizens shall be with the written consent
of Bonneville, such consent shall not be unreasonably withheld.
(3) There are no known actions, suits, or proceedings pending or
overtly threatened against ELI before any court or administrative
agency that would materially impair ELI's performance of its
obligations under this Agreement.
(b) Bonneville
Bonneville represents and warrants to ELI as follows:
(1) Bonneville is duly authorized to execute this Agreement. This
Agreement constitutes a legal and valid obligation of Bonneville
enforceable in accordance with its terms to the full extent
provided by law. The enforceability of this Agreement is
qualified as to:
Limitations imposed by bankruptcy laws of the United States,
insolvency, reorganization, arrangement, moratorium, or other
laws relating to or affecting the enforcement of creditors'
rights generally.
(2) Upon execution of this Agreement, Bonneville warrants that there
are no known conflicts with this Agreement and that this
Agreement does not constitute a material breach of or a default
under any constitutional provision, law, or administrative
regulation, or violate any judgment, decree, or other instrument,
or any other contract related to the Route to which Bonneville is
a Party or to which Bonneville or any of its property or assets
is subject.
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(3) Bonneville has made no other representations or warranties
outside of this Agreement and ELI acknowledges and agrees that it
is not relying on any other representations or warranties.
(c) No Bonneville Warranty Concerning Route
Bonneville makes no representation or warranty whatsoever concerning
the physical characteristics of the Route. ELI acknowledges that
neither Bonneville nor any of Bonneville's officers, employees,
representatives, contractors, or subcontractors or agents have made
any such representation, nor is Bonneville or ELI entering into this
Agreement in reliance upon any such representation or warranty.
17. AUDIT PROCEDURES
(a) Records
The Parties shall maintain true and correct sets of records in
connection with the performance of this Agreement. ELI shall retain
records of all transactions with supporting documentation related
thereto for a period of not less than 3 years after the term of a
specific transaction has expired and receipt of final payment by ELI
to Bonneville. The records in connection with each financial
transaction shall include an accounting of gross revenues, revenue
shares, and billing and collection.
(b) Audit Rights
Notwithstanding anything in this Agreement to the contrary, Bonneville
or Bonneville's agent may at Bonneville's expense request and perform
a complete audit of ELI's financial records to verify the accur
acy of the Gross Revenue Value, and Bonneville revenue share, as
determined and accounted for by ELI in connection with the terms of
this Agreement. In the event that the Parties agree that Bonneville's
audit is determined to be correct,
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ELI shall reimburse Bonneville the agreed upon amount, including
interest owed. In the event that ELI disagrees with the results of
Bonneville's audit and resolution is not reached between the Parties,
the Parties agree to resolve the dispute pursuant to section 22 of
this Agreement.
(c) Bonneville reserves the right to conduct technical audits, including
physical inspection of the number, type and use of circuits, including
Transport Service(s) sold, used, and administered by ELI using the
Commercial Fiber.
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18. INSURANCE
(a) General
At all times during the term of this Agreement and the License term,
ELI, at its own cost and expense, shall provide the insurance
specified by this section.
(b) Evidence Required
On the Effective Date of this Agreement, ELI shall provide Bonneville
with a certificate of insurance (Certificate of Insurance) executed by
an authorized representative of the insurer(s) evidencing that ELI
insurance complies with this section. A copy of all required
endorsements shall be attached to and form a part of the Certificate
of Insurance.
(c) Notice of Cancellation, Reduction, or Material Change in Coverage
Policies shall be endorsed to provide Bonneville with 30 calendar
days' prior written notice of any cancellation, reduction, or material
change in coverage. If insurance coverage is due to be canceled,
reduced, or materially changed, ELI shall, within 30 calendar days
before the effective date of such cancellation, reduction, or material
change, obtain the coverage required under this section 18 and provide
to Bonneville documentation evidencing such coverage. ELI shall be
responsible for the costs of any damage, liability, or injury
occurring during any period of cancellation, reduction, or material
change in insurance coverage to the extent such costs are not
otherwise covered by insurance; provided that ELI shall not be
responsible for the costs of any damage, liability, or injury
occurring during any such period if such damage, liability, or injury
was caused by Bonneville's gross negligence or willful misconduct.
(d) Qualifying Insurers
Policies shall be issued by companies which hold a current
policyholders alphabetic and financial size category rating of not
less than A:X according to Best's Insurance Reports.
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(e) Insurance Required
(1) Liability
Commercial general liability insurance for bodily injury
(including death) and property damage shall provide limits of not
less than $ 10 million per occurrence.
(A) Coverages included shall be:
(i) premises and operations;
(ii) broad form property damage;
(iii) products and completed operations;
(iv) blanket contractual liability;
(v) personal injury liability;
(vi) cross-liability and severability of interests; and
(vii) independent contractors liability.
(B) Coverage shall be endorsed to include the following:
(i) inclusion of Bonneville, its officers, representatives,
agents, and employees as an additional insured as respects
services or operations in connection with this Agreement;
and
(ii) stipulation that the insurance is primary insurance and
that no insurance or self-insurance of Bonneville will be
called upon to contribute to a loss.
(2) BUSINESS AUTOMOBILE LIABILITY INSURANCE
Business Automobile Liability Insurance for bodily injury
(including death) and property damage shall provide total limits
of not less than $2
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million combined single limit per occurrence to all owned,
nonowned, and hired vehicles.
(3) WORKERS' COMPENSATION/EMPLOYEES LIABILITY INSURANCE
Statutory Workers' Compensation and Employer's Liability
Insurance for not less than $1 million per occurrence shall apply
to employer's liability coverage for all employees engaged in
services or operations under this Agreement. The policy shall
include broad form all-States/other States coverage.
(f) Special Provisions
(1) The foregoing requirements as to the types and limits of
insurance coverage to be maintained by ELI, and any approval of
said insurance by Bonneville or ELI, are not intended to and
shall not in any manner limit or qualify the liabilities and
obligations otherwise assumed by ELI pursuant to this Agreement,
including, but not limited to, the provisions concerning
indemnification.
(2) Bonneville acknowledges that some insurance requirements
contained in this section 18 may be fulfilled by a funded self-
insurance program of ELI or it's parent company, Citizens
Utilities. However, this shall not in any way limit liabilities
assumed by ELI under this Agreement. Any self-insurance program
must be first approved in writing by Bonneville.
19. DEFAULT
(a) Events of Default
If either Party is in material breach or default (Defaulting Party),
under this Agreement, the other Party (Non-Defaulting Party) may
notify in writing the Defaulting Party that it is in material breach
or default, such notice to be effective
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upon its receipt by the Defaulting Party. Material breach or default
under this Agreement shall include, but is not limited to the
following:
(1) failure to make any payment when due hereunder; with the
exception of payments that become payable during periods of Force
Majeure as provided in section 23(a)(2).
(2) failure to perform any obligations required to be observed or
performed hereunder;
(3) any representation or warranty made by one Party to the other
herein proving incorrect in any material respect as of the date
of the making thereof;
(4) ELI files a voluntary petition in bankruptcy, or a petition in
bankruptcy is filed against ELI and not dismissed within 60 days,
or ELI is adjudicated as bankrupt or insolvent, or files any
petition or answer seeking or acquiescing in any reorganization,
arrangement, composition, readjustment, liquidation, dissolution,
or similar relief under any present or future Federal, State, or
other statute, law, or regulation relating to bankruptcy,
insolvency, or other relief for debtors, or seeks or consents to
or acquiesces in the appointment of any trustee, receiver,
custodian, liquidator, or similar official of ELI, or makes any
general assignment for the benefit of creditors;
(5) material interference by a Party to the other Party's operations;
or
(6) failure to make restitution for any damage to a Party's real
property or equipment caused as a result of the negligent or
willful acts or omissions of the other Party when such damage
causes material interference to a Party's operations.
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(b) Remedies
(1) DEFAULTING PARTY'S RIGHT TO CURE
The Defaulting Party shall have the right to cure any material
breach or default under this Agreement within 30 calendar days
after the receipt by the Defaulting Party of notification of such
material breach or default. In the case of any material breach
or default which may not reasonably be cured within 30 calendar
days, other than in the case of a breach of section 19(a)(1),
with such 30 calendar day period, the Defaulting Party shall have
the right to provide the Non-Defaulting Party with a plan for the
appropriate actions to cure such material breach or default,
which plan shall be subject to the approval of the Non-Defaulting
Party, which approval shall not be unreasonably withheld. Within
30 calendar days of submission of the plan, the Defaulting Party
must commence diligently pursuing appropriate action under the
plan to cure the material breach or default, and unless otherwise
agreed to by the Parties, such material breach or default shall
be cured within 90 calendar days of submission of the plan,
failing which the Non-Defaulting Party may forthwith and without
further notice terminate this Agreement.
(2) RIGHTS AND REMEDIES UPON TERMINATION
Any Party terminating this Agreement under section 20 shall have
the additional right to cure any material breach or default of
the Defaulting Party to preserve the Non-Defaulting Party's
rights that may be prejudiced as a result of such material breach
or default and exercise and pursue all other rights and remedies
available to it under applicable law.
(3) RIGHTS AND REMEDIES CUMULATIVE
Except as otherwise provided in this Agreement, any right or
remedy afforded to either ELI or Bonneville under any provision
of this
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Agreement is in addition to, and not in lieu of, all rights or
remedies afforded either ELI or Bonneville under any other
provision of this Agreement, by law or otherwise.
20. TERMINATION
(a) Termination of this Agreement may occur in the following instances:
(1) By the Non-Defaulting Party, after the time period for the
Defaulting Party to cure a material breach or default has
expired;
(2) By either Party, if the Party claiming Force Majeure has not
satisfactorily performed any obligations delayed due to the Force
Majeure within 1 year of the notice of the Force Majeure event;
or
(3) Pursuant to Partial Invalidity terms, section 23(d) of this
Agreement.
(b) Subject to section 19(b) the Terminating Party shall give the other
Party 30 calendar days advance written notice of Termination, which
Termination shall become effective 30 calendar days after the receipt
of such notice by the other Party.
21. INDEMNIFICATION; WAIVER OF DAMAGES
(a) Indemnification By ELI
(1) To the extent allowed by law, ELI shall release and indemnify,
defend, and hold harmless Bonneville and each of its directors,
officers, agents, representatives, subcontractors, and employees
(the "Bonneville Indemnitees") from and against any and all
Claims, (i) for injury to or death of a person, including an
employee of Bonneville or an ELI Indemnity, or (ii) for loss of
or damage to property resulting directly or
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indirectly from ELI's performance or nonperformance of this
Agreement, or (iii) for any Claims against Bonneville by
customers of ELI or others doing business with ELI, except in the
cases of clauses (i) and (ii) only, to the extent that such Claim
is the result of the gross negligence or willful misconduct of a
Bonneville Indemnity.
(2) If gross negligence or willful misconduct of a Bonneville
Indemnity has contributed to a Claim, ELI shall not be obligated
to indemnify the Bonneville Indemnitees for the proportionate
share of such Claims caused by such negligence or willful
misconduct. Bonneville shall have the right, at its own cost, to
retain counsel, to monitor, or participate in the defense of any
Claim that is covered by ELI's indemnity hereunder.
(b) Indemnification By Bonneville
(1) To the extent allowed under the Federal Tort Claims Act,
Bonneville shall release and indemnify, defend, and hold harmless
ELI and each of its directors, officers, agents, representatives,
subcontractors, and employees (the "ELI Indemnitees") from and
against any and an Claims for injury to or death of a person,
including an employee of Bonneville or an ELI Indemnity, or for
loss of or damage to property resulting directly or indirectly
from Bonneville's performance or nonperformance of this
Agreement, except to the extent that such Claim is the result of
the gross negligence or willful misconduct of an ELI Indemnity.
In no event shall Bonneville be required to indemnify ELI
Indemnities against Claims against ELI by customers of ELI or
others doing business with ELI.
(2) If gross negligence or willful misconduct of an ELI Indemnity has
contributed to a Claim, Bonneville shall not be obligated to
indemnify the ELI Indemnitees for the proportionate share of such
Claims caused by such negligence or willful misconduct. ELI
shall have the right, at its own
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cost, to retain counsel, to monitor, or participate in the
defense of any Claim that is covered by Bonneville's indemnity
hereunder.
(c) Waiver of Certain Damages
Each Party hereby waives any right to consequential, incidental,
special or indirect damages, or damages for lost profits or exemplary
damages with respect to any claim arising out of or related to this
Agreement. The Parties acknowledge that the foregoing waiver shall
not prejudice the right of indemnity respecting any Claim under this
section 21.
22. DISPUTE RESOLUTION
(a) Pending resolution of a disputed matter, the Parties shall continue
performance of their respective obligations hereunder, provided that
neither Party shall be required to take any action pending such
resolution which it has been advised by counsel, or which it
reasonably believes, is unlawful or not permitted pursuant to
applicable regulations or permit requirements. Any controversy
between the Parties rising out of this Agreement or breach thereof, or
out of performance under this Agreement, is subject to the mediation
process described below. If not resolved by mediation, then the
matter must be submitted to the American Arbitration Association
("AAA") for arbitration before a sole arbitrator.
(b) A meeting will be held promptly between the Parties to attempt in good
faith to negotiate a resolution of the dispute. The meeting will be
attended by individuals with decision making authority regarding the
dispute. If within 30 calendar days after such meeting the Parties
have not succeeded in resolving the dispute, within 30 calendar days
thereafter, upon the written notice from either Party to the other
Party, submit the dispute to a mutually acceptable third-party
mediator who is acquainted with dispute resolution methods. The
mediation shall be nonbinding. If the dispute is not resolved by
mediation either Party may initiate an arbitration
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with the AAA, upon the written notice from either Party to the other
Party. The dispute shall be resolved by arbitration under the rules
and administration of the AAA, and judgment upon the award rendered by
the arbitrator(s) may be entered in any court having jurisdiction
thereof. Neither Party is entitled to seek or recover punitive damages
in considering or fixing any award under these proceedings.
(c) The costs of mediation and arbitration, including any mediator's fees,
AAA administration fee, the arbitrators fee, and costs for the use of
facilities during the hearings, shall be borne equally by the Parties.
Reasonable attorneys' fees may be awarded to the prevailing Party
(provided such a Party can clearly be determined from the proceedings)
at the discretion of the arbitrator. Each Party's other costs and
expenses will be borne by the Party incurring them.
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23. GENERAL
(a) Force Majeure
(1) As used in this Agreement, the term "Force Majeure" means acts of
God (including, but not limited to, earthquakes, fires, floods,
windstorms, landslides, and ice storms); strikes, lockouts, or
other labor disputes; acts of public enemy; wars, riots, and
insurrection; epidemics; civil disturbances; explosions; train
derailments; breakdown or failure of machinery or facilities
(excluding the Cable and Cable Accessories); accidents to
machinery or equipment (excluding the Cable and Cable
Accessories), and delay in delivery of equipment to the extent
such occurrences are beyond the reasonable control of the
Parties; electrical disturbance originating in or transmitted
through such Party's electrical system or equipment or any
electrical system with which such Party's system or equipment is
interconnected; and any other event, cause, or condition beyond
the Party's reasonable control, which, by the exercise of
reasonable diligence, prevents the operation of the Cable and
prevents the Party claiming Force Majeure from performing its
obligations under this Agreement;
(2) If either Party is unable to carry out its obligations under this
Agreement as a result of an event, cause, or condition of Force
Majeure, the Party claiming Force Majeure shall give notice and
full particulars of such Force Majeure in writing to the other
Party within 5 calendar days after the occurrence of the Force
Majeure event, cause, or condition. Any obligations that such
Party claims it is unable to perform due to an event, cause, or
condition of Force Majeure shall be suspended during the
continuance of such event of Force Majeure. The Party claiming
Force Majeure shall use reasonable efforts to remedy and minimize
the effects of
32
<PAGE>
such event of Force Majeure with all reasonable dispatch. For
purposes of this Agreement, the Parties are obligated to make
payments during periods of Force Majeure; PROVIDED, HOWEVER, ELI
shall not be obligated to make payments during periods of Force
Majeure when ELI is unable to provide service under the terms of
the agreement with ELI's customers. Interest shall not accrue on
payments that become payable to either Party during the period of
any Force Majeure.
(3) Neither Party shall be liable under this Agreement for, or
considered to be in material breach or default under, this
Agreement on account of any delay in or failure of performance
due to Force Majeure unless specifically stated in this
Agreement. For the avoidance of doubt, events, causes and
conditions affecting the customers of ELI shall not excuse ELI
from performing its payment obligations under this Agreement. In
the event that ELI continues to receive revenue from End-Users
under this Agreement during a Force Majeure event, ELI will not
be excused from performing its payment under this Agreement.
(b) Notices
All notices and other communications under this Agreement shall be
properly given only if made in writing; and
(1) mailed by certified mail, return receipt requested, postage
prepaid; or
(2) delivered by facsimile transmission followed by certified mail to
the Party's at the address or facsimile number set forth in this
section 23(b) or such other address or facsimile number as such
Party may designate by notice to the other Party. Such notices
and other communications shall be effective on the date of
receipt. If any such notice or communication is not received or
cannot be delivered due to a change in the address of the
33
<PAGE>
receiving Party of which notice was not previously given to the
sending Party or due to a refusal to accept by the receiving
Party, such notice or other communication shall be effective on
the date delivery is attempted.
If to Bonneville: The Bonneville Power Administration
P.O. Box 3621
Portland, OR 97208-3621
Attn: To be identified under separate letter
with a copy to: The Bonneville Power Administration
P.O. Box 3621
Portland, OR 97208-3621
Attn: To be identified under separate letter
If to ELI: Electric Lightwave, Inc.
8100 NE. Parkway Drive, Suite 150
Vancouver, WA
Attn: Legal Affairs
Phone: (360) 892-1000
FAX: (360) 253-4425
(c) Assignment
ELI shall not sell, assign, lease, sublease, sublicense or otherwise
allow use of ELI's License under this Agreement to any person or
entity without Bonneville's written approval; which approval shall not
be unreasonably withheld. Notwithstanding the foregoing, ELI may
assign in writing its rights and responsibilities under this Agreement
to a corporate parent, subsidiary or commonly owned affiliate, upon
written notification to Bonneville, and a guarantee by its parent
company, Citizens Utilities to perform the obligation of ELI under
this Agreement. Any permitted assignment or other transfer of rights
hereunder shall be in writing and shall specify that the assignee or
other transferee is bound by the terms and conditions of this
Agreement to the same extent as if it were the original named party
instead of ELI hereunder. In the event that ELI sells, assigns,
leases, subleases, or otherwise allows use of ELI's License under this
Agreement, ELI or its assigned entity, shall designate a single point-
of-
34
<PAGE>
contact to Bonneville for all activities relating to this Agreement. A
sale, transfer or distribution (by way of a dividend or otherwise) in
one or a series of transactions of 50 percent or more of the capital
stock of the entity that holds the License shall be deemed to be an
assignment of the License.
(d) Partial Invalidity
If any provision of this Agreement is determined by a proper court to
be invalid, illegal or unenforceable, such invalidity, illegality, or
unenforceability shall not affect the performance of other provisions
of this Agreement and this Agreement shall remain in full force and
effect without such invalid, illegal or unenforceable provision;
provided that if any such invalid, illegal, or unenforceable provision
results in frustration of this Agreement, such that ELI cannot perform
under section 12, Bonneville shall have the right to terminate in
accordance with section 20.
(e) Governing Law
This Agreement shall be governed by and construed in accordance with
Federal law.
(f) Terms Generally
The defined terms in this Agreement shall apply equally to both the
singular and the plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding
masculine, feminine, and neuter forms. The term "person" includes
individuals, corporations, partnerships, trusts, other legal entities,
organizations, and associations, and any Government or governmental
agency or authority. The words "include," "includes" and "including"
shall be deemed to be followed by the phrase "without limitation."
The words "approval," "consent" and "notice" shall be deemed to be
preceded by the word "written."
35
<PAGE>
(g) Relationship of the Parties
Nothing in this Agreement is intended or shall be deemed to constitute
a partnership, agency or joint venture relationship between or among
the Parties hereto. The performance by the Parties of all duties and
obligations hereunder shall be as independent contractors and not as
agents of the other Party, and no persons employed or utilized by a
performing Party shall be considered employees or agents or the other.
(h) Waivers
No waiver of any provision or breach of this Agreement shall be
effective unless such waiver is in writing and signed by the waiving
Party and any such waiver shall not be deemed a waiver of any other
provision of this Agreement or any other breach of this Agreement.
(i) Confidentiality
If and to the extent any information or documents furnished by one
Party to the other under this Agreement is confidential or proprietary
to the furnishing Party, the receiving Party shall treat such
information or documents as confidential and proprietary and shall
take reasonable steps to protect against the unauthorized use or
disclosure of such information or documents; provided, that such
information and documents are conspicuously marked or otherwise
clearly identified as confidential or proprietary when furnished; and
provided, further, that this section 23(i) shall not apply to
information or documents in the public domain or to information or
documents required to be disclosed by any law, rule, regulation,
order, or other requirement of any governmental authority having
jurisdiction. If a Freedom of Information Act request is received by
Bonneville for such written information or documents, Bonneville must
promptly notify ELI of such request and will, further, notify ELI if
Bonneville is required to disclose such written information or
documents.
36
<PAGE>
(j) No Third-Party Beneficiaries
This Agreement creates rights and obligations only between the Parties
hereto. The Parties hereto expressly do not intend to create any
obligations or promise of performance to any other third person or
entity nor have the Parties conferred any rights or remedy upon any
third person or entity other than the Parties hereto, their respective
successors or assigns to enforce this Agreement.
(k) Miscellaneous
Neither Party shall make public announcement of this Agreement or the
transactions contemplated by this Agreement without the prior consent
of the other Party, unless such public announcement is necessary to
comply with applicable law. This Agreement shall benefit and bind ELI
and Bonneville and their respective permitted successors and assigns.
Time is of the essence of this Agreement. This Agreement may be
executed in counterparts, each of which shall be an original, but all
of which shall constitute one and the same Agreement.
37
<PAGE>
This Agreement may not be amended or modified except by a written
instrument signed by ELI and Bonneville.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement in two
counterparts.
UNITED STATES OF AMERICA
Department of Energy
Bonneville Power Administration
By /s/ Walter E. Pollock
--------------------------------
Group Vice President, Marketing,
Conservation and Production
Name Walter E. Pollock
-------------------------------
(Print/Type)
Date 3/29/96
-------------------------------
ELECTRIC LIGHTWAVE, INC.
By /s/ David B. Sharkey
---------------------------
Name David B. Sharkey
-------------------------
(Print/Type)
Title President
------------------------
Date 3/29/96
-----------------------
<PAGE>
Exhibit A, Page 1 of 1
Contract No. 96MS-95240
ELI Telecommunications Corporation
Effective on the Effective Date
Exhibit A
ROUTE DESCRIPTION
The following Route description is a best estimate of how the Route will be laid
out. Difficulties may arise along the Route that will require Bonneville to
make adjustments that could alter the final Route.
The southern terminus of the route begins at Bonneville's Keeler Substation
located 8 miles west of Portland. The cable is attached to the St. Johns-Keeler
No. 2 wood pole line and deadends at St. Johns Substation located 10 miles
northwest of Portland. The cable is then attached to the Ross-St. Johns No. 1
steel tower line, crosses the Columbia river and deadends at Ross Substation
located 12 miles north of Portland. Going north out of Ross Substation the
cable is attached to the Ross-Lexington No. 1 steel tower line and deadends at
Lexington substation located a few miles north of Longview. The cable is then
attached to the Lexington-Longview No. 1 wood pole line that deadends at
Longview substation located in the west part of Longview. The cable then is
attached from a point 2 miles north of Lexington out of Longview on the
Longview-Chehalis No. 1 steel tower line and deadends at Chehalis substation
located 4 miles south of Chehalis. The cable then goes north out of Chehalis
for 11 miles on the Chehalis-Covington steel tower line and then is attached to
the Paul-Allston No. 2 for the last 3 miles going into Paul substation located 3
miles northeast of Chehalis. The cable goes north out of Paul on the Paul-
Satsop No. 1 steel tower line and deadends on the wood pole lines south of
Olympia substation located in the southwest part of Olympia. The cable then
goes west and north on the Olympia-Grand Coulee No. 1, the Olympia-White River
No. 1 and the Chehalis-Covington No. 1 steel tower lines until it terminates at
Covington substation. The total length of the route is approximately 192 miles
and will require 5 regeneration stations located near Bonneville facilities
along the way. For the majority of the length we plan to use ADSS single-mode
cable but where necessary will switch to an OPGW cable.
<PAGE>
Exhibit B, Page 1 of 4
Contract No. 96MS-95240
ELI Telecommunications Corporation
Effective on the Effective Date
Exhibit B
PAYMENT SPECIFICATIONS
ELI's monthly payment to Bonneville is equal to the MONTHLY PAYMENT
---------------
corresponding to the
GROSS REVENUE VALUE found in the left column of TABLE 1 or the GFV, whichever is
- -------------------
greater.
TABLE 1[*]
The GROSS REVENUE VALUE (GRV) will be determined using the following formula:
GRV = ELITSV + EUTRSV + DFLV + OSV
Where:
GRV = GROSS REVENUE VALUE
GFV = GUARANTEED FEE VALUE
ELITSV = ELI TRANSPORT SERVICE VALUE(S)
EUTSV = END-USER TRANSPORT SERVICE VALUE(S)
DFLV = DARK FIBER LEASE VALUE(S)
OSV = OTHER SERVICE VALUE(S)
- --------------------------
* Confidential material has been omitted pursuant to a request for confidential
treatment. Such material has been filed separately with the Securities and
Exchange Commission.
<PAGE>
Exhibit B, Page 2 of 4
Contract No. 96MS-95240
ELI Telecommunications Corporation
Effective on the Effective Date
SAMPLES OF REPORTING SUMMARY
AND PAYMENT CALCULATION
The samples below are not based on actual data generated but are to be used for
sample purposes only. The Payment Calculation demonstrates how the payment
calculation is to be applied and the Summary Report specifies the information
and format ELI shall use for reporting information to Bonneville.
<TABLE>
<CAPTION>
Month Month Month Month Month Month Month Month Month Month Month Month
1 2 3 4 5 6 7 8 9 10 11 12
GRV GRV GRV GRV GRV GRV GRV GRV GRV GRV GRV GRV
If monthly %
GRV is multiply of
between result by GRV Plus Adder [*] [*] [*] [*] [*] [*] [*] [*] [*] [*] [*] [*]
------- ------ -- --- ---- ----- --- --- --- --- --- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
[*] [*] x [*] + [*] [*]
[*] [*] x [*] + [*] [*]
[*] [*] x [*] + [*] [*]
[*] [*] x [*] + [*] [*]
[*] [*] x [*] + [*] [*]
[*] [*] x [*] + [*] [*] [*]
[*] [*] x [*] + [*] [*] [*] [*] [*] [*]
</TABLE>
*Calculated Value: [*]
Monthly Payment to BPA by ELI: [*]
------------------------------
(the greater of GFV or Calculated Value)
*GFV (Guaranteed Fee Value):[*]
[*] Confidential material has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with the
Securities and Exchange Commission.
<PAGE>
Exhibit B, Page 3 of 4
Contract No. 96MS-95240
ELI Telecommunications Corporation
Effective on the Effective Date
TABLE X
MONTH 6
ACCOUNT SUMMARY
VALUE FOR
ACCOUNT NAME SERVICE TYPE UNIT PRICE # OF UNITS THE MONTH
ELI DS3 $ 3,000 8 $ 24,000
ELI DS3 $ 3,000 1 $ 3,500
ELI DS3 $ 3,700 1 $ 3,500
ELI DS3 $ 3,300 6 $ 19,800
ELI DS3 $ 3,200 1 $ 3,200
A DS1 $ 1,020 2 $ 2,040
A DS3 $ 3,100 1 $ 3,100
B dark fiber $ 50 6* $ 60,000
C dark fiber $ 43 4* $ 34,400
D OC3 $100,000 1 $ 100,000
D DS1 $ 1,020 1 $ 1,020
D DS3 $ 3,200 1 $ 3,200
E dark fiber $ 51 4* $ 41,000
F DS1 $ 940 5 $ 4,700
MONTHLY GROSS REVENUE VALUE (GRV): $ 303,660
*@ 200 miles per fiber
<PAGE>
Exhibit B, Page 4 of 4
Contract No. 96MS-95240
ELI Telecommunications Corporation
Effective on the Effective Date
GUARANTEED FEE VALUE
ELI shall transfer to the Cable all of ELI's Transport Services traffic and
transport traffic associated with ELI's provisioning of Value-Added Services
between the Originating and Terminating Markets on the date of energization of
the Cable, or as soon thereafter as is practicable.
[*]
- -----------------------
* Confidential material has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with the
Securities and Exchange Commission.
<PAGE>
Exhibit C, Page 1 of 1
Contract No. 96MS-95240
ELI Telecommunications Corporation
Effective on the Effective Date
EXHIBIT C
MILESTONE SCHEDULE
See attached Exhibit C.
<PAGE>
EXHIBIT C
Install Fiber between Keeler and Covington Substations
72 Single Mode Fiber Count
Preliminary Schedule
<TABLE>
<CAPTION>
1996 1997
ID TASK NAME DURATION START J F M A M J J A S O N D J F M A M J J A S O N D J F
<S> <C> <C> <C> <C> <C>
1 Project Design 131d 1/15/96 X X X X X X
2 Environmental Study 45d 1/15/96 X X X
3 Establish Substation and Slice configurations 30d 1/15/96 X X
4 Establish Order of construction and outage 19d 1/15/96 X X
5 Cable and Slice Locations Designed 32d 2/1/96 X X
6 Stringing and Sagging Charts Complete 0d 7/15/96 *7/15
7 Prepare Construction Solicitation 32d 3/1/96 X X
8 Check Land rights 47d 2/1/96 X X X
9 Obtain Missing Permits 66d 3/1/96 X X X
10 Surveys 23d 4/1/96 X
11 Materials 65d 4/1/96 X X X
12 Construction 155d 7/1/96 X X X X X X X
13 Test and Energize 11d 1/31/97 X
</TABLE>
- ----------------------------------------------------
Task Summary Rolled Up
Progress
Progress Rolled Up Task
Milestone Rolled Up
Milestone
- ----------------------------------------------------
Keeler-Covington Fiber 1/8/96
<PAGE>
Exhibit D, Page 1 of 4
Contract No. 96MS-95240
ELI Telecommunications Corporation
Effective on the Effective Date
EXHIBIT D
COMMERCIAL FIBER SPECIFICATIONS
Bonneville shall meet or exceed these specifications. In the event that
Bonneville's performance requirements for its communication system requires
Bonneville to exceed the standards and requirements specified in this Exhibit E,
Bonneville shall apply the higher standard.
ELI Network Span and Final Acceptance Requirements:
1.0 Design Criteria:
---------------
The number of cable splices at the time of original construction must be
designed to an average of 4 km between splices. Due to cable cuts, and cable
relocation, additional splices are allowed. The number of splices must be
closely monitored to insure attenuation and reflection tolerances are
maintained.
Construction:
- ------------
Cable must be constructed in accordance with sound commercial practices. The
National Electrical Code shall be followed in every case except where local
regulations are more stringent, in which case local regulations shall govern.
2.0 Typical Fiber Cable Information:
-------------------------------
Single mode fiber specifications may vary, depending on the fiber manufacturer.
Typical concatenated levels of 0.35 dB per km @ 1310nm and 0.25 per km @ 1550nm
are expected.
3.0 Span Requirements:
-----------------
Span documentation must be performed using the two following methods: OTDR
(optical time domain reflectometer) and insertion loss (stabilized light source
and power meter) measurement in each direction at 1550nm wavelength.
o Maximum total span loss must not exceed 35.0 dB at 1550nm.
----------
o Maximum dB/Km loss must not exceed 0.35 dB/Km at 1550nm.
-----
<PAGE>
Exhibit D, Page 2 of 4
Contract No. 96MS-95240
ELI Telecommunications Corporation
Effective on the Effective Date
o In no case shall a fiber show a point discontinuity greater than 0.1dB.
Discontinuities (know as steps, splices or attenuation non uniformities)
shall be measured with an optical time domain reflectometer (OTDR) to
determine the loss of the localized attenuation. The lease squares fit
method of measurement must be used to determine the magnitude of the loss
of a point discontinuity.
o Typical span scenario 30.0 dB = 120 Km X .25 dB/Km.
o Maximum fiber loss scenario 35.0 dB = 100 Km X .85 dB/Km. (depends on
regeneration huts)
o Maximum span dispersion = 2250 ps/mn/Km.
o Performance levels must be maintained as accepted during the entire
duration of the agreement.
o Test data including OTDR hard copies or electronic data must be submitted
to Common System Engineering before Final Acceptance. ELI, at its
discretion, may choose to physically monitor any or all testing associated
with Final Acceptance of the ELI Fibers.
In the event the measured span measured values exceeds the calculated values,
Bonneville will perform corrective maintenance as required to restore the ELI
Fibers to the calculated values.
4.0 Splice Loss:
-----------
the splice loss will average 0.10dB. All splicing will be performed by
proprietor pursuant to fibers leased agreement. Further, no individual splice
will exceed 0.50dB. Splices shall be measured using bi-directional methods to
average absolute splice loss. All fiber splicing must be fusion type:
--------------------------------------
<PAGE>
Exhibit D, Page 3 of 4
Contract No. 96MS-95240
ELI Telecommunications Corporation
Effective on the Effective Date
6.0 Compliance:
----------
Customer, at its discretion, may choose to physically monitor any or all testing
associated with acceptance of Fibers. Test data including OTDR hard copies or
electronic data must be submitted to the customer for review. Customer has the
option to vainer any specifications and/or requirements listed in the technical
specification criteria. (Limited to ELI receiving a hard copy of their fiber
only.)
8.1 Waivers:
-------
The proprietor must provide Fibers with attenuation of not greater than 0.35
loss per. km@ 1550nm and will not be required to perform corrective maintenance
under .25 dB to reduce span attenuation.
9.0 Key optical performance Characteristics Required For Single-Mode Optical
------------------------------------------------------------------------
Cables:
------
9.1 Attenuation Single Mode Non-Shifted:
-----------------------------------
o The attenuation must not exceed 0.30 dB/Km when measured at a wavelength of
1.55 microns (1550nm) using the two point measurement.
o The attenuation must not exceed 0.40 dB/Km when measured at a wavelength of
1.30 microns (1310nm) using the two point measurement.
9.2 Attenuation Single Mode Dispersion Shifted:
------------------------------------------
o The attenuation must not exceed 0.25 dB/Km when measured at a wavelength of
1.55 microns (1550nm) using the two joint measurement.
9.3 Attenuation Versus Wavelength Single-Mode and Dispersion Shifted:
-----------------------------------------------------------------
o The attenuation for the wavelength region form 1525 nm to 1575 nm must not
exceed the attenuation at 1550 nm by more than 0.05 dB/Km.
9.4 Chromatic Dimension Non-Dispersion Shifted (ps/nm-km):
------------------------------------------------------
o For conventional single mode fibers, the zero dispersion wavelength must be
1301.5 to 1321.5nm. The maximum dispersion slope (SoMAX) must be no
greater than 0.092 ps/(km-nm2). The nominal zero dispersion wavelength
must be near 1310nm.
<PAGE>
Exhibit D, Page 4 of 4
Contract No. 96MS-95240
ELI Telecommunications Corporation
Effective on the Effective Date
o zero dispersion range. The dispersion between 1530 and 1570 nm must be
less than or equal to 18 ps/(nm-km).
9.6 Cutoff Wavelength:
-----------------
o The cutoff wavelength of cabled fiber must be less than 1260 nm.
9.7 Core Diameter:
--------------
o The core diameter must be typically 8.3+0.13.
-
9.8 Temperature:
------------
o Operating Temperature Range -60 C to +85 C.
Bonneville will insure that the Cable and related appurtenances meet all of the
above optical performance characteristics operating systems power level.
<PAGE>
EXHIBIT 10.2
Contract No. 97TX-10014
11/27/96
LICENSE AGREEMENT
EXECUTED BY THE
UNITED STATES OF AMERICA
DEPARTMENT OF ENERGY
ACTING BY AND THROUGH THE
BONNEVILLE POWER ADMINISTRATION
AND
ELECTRIC LIGHTWAVE, INC.
[Asterisks herein denote confidential material which has been omitted pursuant
to a request for confidential treatment. Such material has been filed
separately with the Securities and Exchange Commission.]
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION
1. DEFINITIONS........................................ 2
2. TERM............................................... 9
3. EXHIBITS........................................... 11
4. AMENDMENTS......................................... 11
5. MILESTONE SCHEDULE................................. 11
6. OWNERSHIP.......................................... 11
7. LICENSE............................................ 13
8. PERFORMANCE CRITERIA............................... 14
9. ELI CAPITAL SPENDING............................... 16
10. BUSINESS PLAN...................................... 16
11. MARKET PRICE ASSESSMENT............................ 17
12. PAYMENT............................................ 18
13. MAINTENANCE, REPAIR, AND RESTORATION OF THE CABLE.. 21
14. REGENERATOR BUILDING(S)............................ 28
15. RIGHTS AND OBLIGATIONS CONCERNING THE CABLE........ 28
16. RELOCATION OF THE CABLE............................ 36
17. REPRESENTATIONS AND WARRANTIES..................... 38
18. AUDIT PROCEDURES................................... 41
19. INSURANCE.......................................... 42
20. DEFAULT............................................ 47
21. TERMINATION........................................ 51
22. INDEMNIFICATION; WAIVER OF DAMAGES................. 53
23. DISPUTE RESOLUTION................................. 55
24. GENERAL............................................ 56
Exhibit A (Route)
Exhibit B (Payment Specifications)
Exhibit C (Milestone Schedule)
Exhibit D (Fiber Specifications)
<PAGE>
This LICENSE AGREEMENT (Agreement), by the UNITED STATES OF AMERICA
(Government), Department of Energy, acting by and through the BPA POWER
ADMINISTRATION (BPA), and Electric Lightwave, Incorporated (ELI), a corporation
organized and existing under the laws of the State of Delaware. Both BPA and
ELI may be referred to herein individually as "Party" and collectively as
"Parties."
W I T N E S S E T H :
WHEREAS BPA owns the Cable and Cable accessories; and
WHEREAS BPA shall retain 12 of the 36 fibers in the Cable for its own use,
which will give BPA fiber optic cable capacity in excess of that which is needed
to operate its transmission communications along the Route; and
WHEREAS BPA is the licensor and ELI is the licensee for 24 of the 36 fibers
in the Cable; and
WHEREAS BPA constructs and installs the Cable; and
WHEREAS BPA shall direct and oversee the design and installation of the
Cable upon the Route; and
WHEREAS BPA desires to grant a license for a period of time to ELI (as
hereinafter defined) respecting the Commercial Fiber as defined below, along the
Route under the terms and conditions contained herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
obligations and agreements herein contained, the Parties hereby agree as
follows:
1. DEFINITIONS
The following terms, when used in this Agreement, shall have the meanings
set forth in this section:
2
<PAGE>
(a) "BPA Capital Cost" means the direct and indirect costs BPA incurs,
using prudent electric utility practices, to develop and construct the
Cable along the Route. Direct costs include, but not limited to,
Environment, Surveying and Mapping, Design, Land, Material,
Construction, and Labor. Such costs incurred up to 12 months after
Energization shall be included. Indirect costs (overheads) shall be
included as part of BPA Capital Cost and applied at a fixed rate of 40
percent to all direct costs. Interest costs, implicit or otherwise,
will be excluded. BPA shall use its best efforts to manage to the
cost of development and construction of the Cable to, or below, [*].
(b) "BPA Facilities" means all BPA-owned and/or leased structures,
buildings, land, access roads, and equipment along the Route.
(c) "BPA Fiber" means 12 dark optical fibers within the Cable designated
for BPA's exclusive use and control.
(d) "Cable" means a BPA-owned cable, containing 36 optical fibers, single-
mode, nondispersion shifted and/or dispersion shifted, to be installed
along the Route.
(e) "Cable Accessories' means the equipment necessary for the attachment
of the Cable to the BPA Facilities, including splice boxes.
(f) "Cable Specifications" means the drawings and specifications regarding
the Cable hardware and materials incorporated into the construction
project.
(g) "Commercial Fiber" means the 24 dark optical fibers within the Cable
licensed to ELI under this License Agreement.
(h) "Dark Fiber Lease Value" means the sum of all dark fiber lease
payments received by ELI for Commercial Fiber.
- ----------
* Confidential material has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with the
Securities and Exchange Commission.
3
<PAGE>
(i) "Diverse Fibers" means 4 dark optical fibers within the Cable reserved
for diverse switching paths for a SONET ring in order to achieve
optimum network robustness and reliability.
(j) "ELI Transport Service(s)" means Transport Service(s) used by ELI in
the delivery of End-User Service(s).
(k) "ELI Transport Service Value(s)" means the sum of the values for all
the ELI Transport Service(s) within the Commercial Fiber as described
in Exhibit B.
(l) "End-User" means the customer(s) of ELI.
(m) "End-User Service(s) means services provided to the End-User, other
than Transport Service(s) and Other Service(s).
(n) "End-User Transport Service Value(s)" means the sum of all payments
received by ELI from End-User(s) for Transport Service sales.
(o) "Energization" means the time when the Cable is fully installed and
the fiber meets testing criteria agreed to by the Parties.
(p) "Fiber Specifications" means the performance attributes of the fiber
within the Cable as described in Exhibit B.
(q) "Gross Revenue Value(s) (GRV)" means the sum of ELI's Transport
Service Value(s) plus End-User Transport Service Value(s) plus Dark
Fiber Lease Value(s) plus Other Service Value(s).
(r) "Interest Rate" means .05 percent per day (18.25 percent per annum) to
be compounded daily to the unpaid balance.
4
<PAGE>
(s) "License" means the License granted to ELI in section 7(a).
(t) "Originating and Terminating Markets" means the areas in and around
the cities along the Route. The cities in Oregon include Portland and
The Dalles. The cities in Washington include: Yakima, Spokane,
Wenatchee, Ellensburg, Pasco, Richland, and Kennewick; as well as
other cities adjacent to the Route.
(u) "Other Transport Service(s)" means services sold over the Commercial
Fiber at the Optical Carrier level (e.g. OC1, OC3, OC12, OC48).
(v) "Other Transport Service Value(s)" means the sum of all payments
received by ELI for Other Transport Services.
(w) "Regenerator Building(s)" means the building(s) along the Route, owned
and operated by ELI, that house the terminal and regenerator equipment
including any optronics or electronics required by ELI to make use of
the ELI Fibers. For the purpose of this Agreement, the Regenerator
Building(s) include conduit and fiber optic cable from the Regenerator
Building(s) up to the nearest fiber optic splice box on the Route or
the nearest substation fence, at BPA's discretion.
(x) "Route" means the Cable path as described in Exhibit A.
(y) "Transport Services" means individual DSO, DS 1, and DS3 circuits used
or sold as bulk transport by ELI for long-haul traffic on the
Commercial Fiber as described below:
(1) "Digital Signal Zero (DS0)" means: one (1) 64 Kilobits per second
(Kbps) or 56 Kbps digital, pulse coded modulated voice channel;
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(2) "Digital Signal One (DS1)" means: (A) in the U.S. Digital
hierarchy, digital signal level 1 indicates a 1.544 megabytes per
second (Mbps) data signal; and (B) also referred to as a T I in
the U.S. time-division multiplexing hierarchy, digital signal
level 1 (DS1) indicates the first level of multiplexing. It is
defined as 24 DS0 (64 Kbps) circuits multiplexed into a 1.544
Mbps data signal; and
(3) "Digital Signal Level Three (DS3)" means: (A) In the U.S. Digital
hierarchy, digital signal level 3 indicates a 44.736 Mbps data
signal, often delivered to customers via optical fiber systems,
also referred to as T; (B) in the U.S. time-division multiplexing
hierarchy, digital signal level 3 (DS3) indicates the third level
of multiplexing. It is defined as 28 DS1 (1.544 Mbps) signals,
with added overhead bits, multiplexed onto a 44.736 Mpbs data
signal; and (C) high capacity access service that provides
capacity equivalent to 28 DS1 circuits, 7 DS2 channels, or 672
voice grade special access circuits; also used generically to
describe digital data transmission services operating over fiber
optic lines at transmission speed of 44.6 Mbps.
2. TERM
(a) This Agreement shall be effective at 2400 hours on the date of
execution by both Parties (Effective Date) and shall continue in
effect for a period of 15 years after Energization, unless sooner
terminated or extended in accordance with the terms of this Agreement.
(b) The term of this Agreement shall be extended only by mutual agreement
of the Parties. The Agreement may be extended for two separate 5-year
renewal periods. Either Party shall notify the other Party at least
90 days prior to the expiration date of this Agreement if the
notifying Party decides to exercise its renewal option. The other
Party shall have 45 calendar days to accept or reject the renewal
option. The terms and conditions of this
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Agreement applicable to the initial 15-year period may be modified or
renegotiated before each Renewal Period(s) upon mutual agreement by
the Parties.
(c) All obligations incurred and outstanding including Indemnification,
under section 22 shall survive the expiration or termination of this
Agreement; provided that sections 23 and 24(h) shall survive
expiration or termination for 3 years.
3. EXHIBITS
Exhibit A (Route); Exhibit B (Payment Specifications); Exhibit C (Milestone
Schedule); Exhibit D (Fiber Specifications); and Exhibit E (Detailed
Restoration Plan) are incorporated into and made a part of this Agreement.
4. AMENDMENTS
This Agreement may be amended upon the written agreement of both Parties.
5. MILESTONE SCHEDULE
Energization of the Cable is currently scheduled for December 1, 1997. On
or before July 15, 1997, BPA and ELI agree to complete an evaluation of the
milestones, described in Exhibit C, required to complete construction and
Energization of the Cable. The evaluation shall determine if Exhibit C
will be revised to reflect an earlier, or later, Energization date.
6. OWNERSHIP
(a) Each Party shall own its own electronic and optronic devices necessary
to transmit signals over the fibers each Party controls as specified
in this Agreement.
(b) BPA shall own all structures, improvements, and components obtained
for or installed on BPA Facilities and the Route in accordance with
this Agreement.
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(c) Title and ownership of the Cable Accessories, Regenerator Building(s),
and related equipment within the Regenerator Building(s) furnished by
ELI shall be and remain the property of ELI, except that BPA shall
gain title to and ownership of such equipment which cannot be removed
without damage to BPA Facilities at termination of this Agreement.
7. LICENSE
(a) EXCLUSIVITY
BPA hereby grants to ELI an exclusive License to use the Commercial
Fiber and to manage the Diverse Fibers. This right shall remain
exclusive as long as ELI meets or exceeds the Performance Criteria
described in section 8.
(b) ACCESS TO THE ROUTE
ELI shall have escorted access to the Route for the purposes of
performing its rights and obligations under this Agreement. BPA shall
have the right to use the Route, BPA Fiber, or any portion thereof,
together with the right to enter upon the Route, or any portion
thereof, at all times, for any and all purposes. BPA shall retain the
right to use the BPA Fiber for its own internal electric system
network and utility business purposes.
(c) NO PROPERTY INTEREST
This Agreement shall not confer upon ELI any ownership or possessory
interest in the Route or other property owned by BPA except as
provided herein, and ELI agrees that it shall never make any claim of
such interest based upon this Agreement.
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8. PERFORMANCE CRITERIA
(a) Pursuant to section 7(a), the cumulative GRV must be equal to or
greater than the cumulative Performance Criteria (calculated from
previous and current years).
ELI's PERFORMANCE CRITERIA shall be calculated as a percentage of the
Revenue Forecast listed in Table A.
The PERCENTAGE applied to the Revenue Forecast shall be [*], in year
one, and [*] for the following years, except that, following the year
that the cumulative annual GRV for all years is equal to or greater
than BPA Capitol Cost, the percentage used thereafter for calculating
Performance Criteria will be [*].
ANNUAL GRV equals the sum of the monthly GRVs over a given 12-month
period. Unless otherwise agreed to by the Parties, the first 12-month
period (Year 1) shall commence 30 calendar days following
Energization.
TABLE A
YEAR[*] REVENUE FORECAST[*]
- ----------
* Confidential material has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with the
Securities and Exchange Commission.
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SAMPLE PERFORMANCE CRITERIA CALCULATION[*]
A B C D E F G
(b) BPA RIGHTS
(1) If at any time following an audit of performance within 60 days
of the conclusion of each annual period, ELI fails to meet, on a
cumulative basis, the Performance Criteria, BPA, at its
discretion, may determine the License to be nonexclusive and BPA
shall have the right to use any unused portion of the Commercial
Fiber for any purpose.
(2) In the event ELI's rights to use the Commercial Fiber becomes
nonexclusive, ELI shall cooperate with BPA to allow co-location
of other users of the Commercial Fiber in ELI's Regenerator
Buildings, based on available space. The Parties shall agree to
the amount of reasonable compensation to be charged to the co-
locating users.
- ----------
* Confidential material has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with the
Securities and Exchange Commission.
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9. ELI CAPITAL SPENDING
ELI shall make capital investments to provision the Commercial Fiber with
electronics, optronics, buildings, other infrastructure, and fiber
connectivity with Local Exchange Carrier networks and Inter-Exchange
Carrier networks, at a sufficient level to meet the Revenue Forecast listed
in Table A of section 8(a).
10. BUSINESS PLAN
ELI shall develop a Business Plan that describes ELI's proposal for
marketing, managing, and utilizing the Cable along the Route. The Business
Plan shall include, but is not limited to, ELI's marketing strategy for
telecommunications service(s) along the Route, customer service, sales
strategy for all Transport Services, accounting, billing and collections
standards, strategy for maintaining ELI fibers, and plan for maintaining
compliance with all regulatory requirements or relevant State regulatory
authorities and the Federal Communications Commission. Unless otherwise
agreed to by the Parties, ELI shall complete the Business Plan 6 months
from the date of execution of this Agreement. Prior to finalization of the
Business Plan, BPA shall have the right to review ELI's Business Plan for
consistency with this Agreement, however, BPA shall not be involved in
ELI's decisions regarding the marketing, pricing, managing, and use of the
Commercial Fiber. ELI shall use its best efforts, consistent with
reasonable commercial practices, to maximize the GRV generated pursuant to
the License.
11. MARKET PRICE ASSESSMENT
(a) BPA shall procure, under separate agreement, the services of a market
assessment consultant(s) to assess market prices of bulk transport
services and provide reports to BPA.
(b) BPA and ELI agree to equally share in the costs of procuring the
services described above.
(c) The market assessment consultant shall be responsible for acquiring
quotes, calculating an average, and delivering market assessment
reports to BPA at some planned interval, using the methodology agreed
to by BPA and ELI. BPA and
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ELI shall within 120 calendar days from execution of this Agreement,
make their best effort to agree to the methodology.
(d) BPA agrees to allow ELI to participate in the development of the
methodology for assessing market price(s) to be used under this
Agreement.
(e) ELI agrees to use the current data provided to BPA by the market
assessment consultant as a basis for setting ELI Transport Service
Value(s) for each ELI Transport Service, depending on when the ELI
Transport Service is placed in service by ELI. The ELI Transport
Service Value for any specific ELI Transport Service will remain in
effect for a period of 36 months, after which the ELI Transport
Service must be re-valued based on the current market assessment data.
(f) The agreed to methodology may be changed by mutual agreement of BPA
and ELI.
12. PAYMENT
(a) ELI agrees to pay BPA monthly, according to the Payment Specifications
described in Exhibit B. In addition to ELI's monthly payment to BPA,
ELI shall include a monthly report of all transactions. The report
will allow BPA to account for the GRV generated each month. Both
Parties shall agree on a reporting format to be used, prior to ELI's
first payment to BPA.
(b) For the purposes of determining the monthly payment required under
this Agreement, any Transport Services originating in the Originating
and Terminating Markets, or any Transport Services originating in
western Washington (west of Cascade Mountain Range), and terminating
in
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Originating and Terminating Markets, excluding Portland, Oregon, will
be included in the accounting to determine GRV.
(c) Unless otherwise agreed to by the Parties, accounting of the GRV shall
begin 30 calendar days following Energization. Payment shall be
received by BPA from ELI by the last day of each month for GRV
calculated on the previous calendar months' transactions. Payments
shall be sent to the address identified in (f) below.
(d) Payments to BPA for revenue generated by ELI from use of the
Commercial fiber (or portion thereof) before Energization shall be
based on the GRV of such services and calculated using the 46 percent
Payment Factor, as described in Exhibit B. All payments, including
payments based on Early Service Revenues, shall be credited toward
ELI's accumulative monthly payments to BPA to determine Payment
Factor.
(e) EARLY SERVICE REVENUES
Revenues generated by ELI, using the Commercial Fibers, before
Energization (as described in section 8), shall be accumulated as a
credit against the Performance Criteria in Year 1.
(f) Payment shall be made by wire transfer. ELI shall pay by wire
transfer using procedures established by BPA's Financial Services
Group. Wire transfer amounts are due and payable on the Due Date.
The Customer may pay its bill by mail provided the following
conditions are met:
(1) ELI gives BPA 30 days' notice of its intent to pay by mail; and
(2) ELI ensures that BPA receives full payment by the Due Date.
Payments shall be mailed to:
BPA Accounting Operation - FRO
P.O. Box 6040
Portland, OR 97228-3621
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(g) Payments not received by BPA when due shall bear interest at the
Interest Rate from the date payment was due until the date payment is
made to BPA. Late payments shall be collected pursuant to the Debt
Collection Act, 1982, Pub. L. No. 97-365.
(h) BPA may purchase from ELI any commercial telecommunications service
ELI offers business customers generally. The price charged by ELI for
any such service shall be the lowest price then charged by ELI to
similarly situated commercial customers for a similar service or group
of services.
13. MAINTENANCE, REPAIR, AND RESTORATION OF THE CABLE
(a) MAINTENANCE OF THE CABLE
(1) During the term of this Agreement, BPA shall be responsible for
the physical routine maintenance of the Cable and the Cable
Accessories. BPA shall maintain the Cable and the Route at all
times in good working order and in a safe condition, in
conformity with the Cable Specifications and all applicable laws
and regulations.
(2) BPA shall pay all costs associated with the routine maintenance
of the Cable.
(3) ELI shall be responsible for maintenance of its property,
including the Regenerator Building(s) along the Route.
(b) DETAILED RESTORATION PLAN
(1) Restoration activities will be integral to ensuring successful
implementation of this Agreement. Timely restoration is
dependent upon the timely coordination and cooperation between
BPA and ELI.
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(2) The Parties agree to jointly, within 120 days of the execution of
this Agreement by both Parties, develop a Detailed Restoration
Plan (Exhibit E), which shall upon its completion, become part of
this Agreement.
(3) The following provisions described in sections (c) and (d) below
shall form the principles and basis for the development of a
Detailed Restoration Plan.
(c) RESTORATION PRIORITIES AND GENERAL REQUIREMENTS
(1) BPA's obligation to maintain and repair the Cable and any
activities incidental thereto shall be subordinate to, and shall
not conflict with, BPA's rightful use and operation of its
transmission facilities. In the event both BPA's transmission
facilities and the Cable require maintenance or repair, the
restoration of the Cable shall be at all times subordinate to the
restoration of BPA's transmission facilities, unless otherwise
agreed to by BPA in advance. The restoration of BPA's
telecommunications system shall take priority over restoration
activities related with the Commercial Fiber. In the event that
ELI's License becomes nonexclusive pursuant to section 8, the
Commercial Fiber used by ELI shall take priority over restoration
activities related to any fibers used by any other users of the
Commercial Fiber.
(2) Any and all BPA, ELI representatives, or other users of the
Commercial Fiber that construct, install, repair, replace, or
otherwise handle the Cable, Cable Accessories, Commercial Fiber,
BPA Fiber, or any related materials and equipment shall be
properly trained and equipped to meet all current industry
standards.
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(3) A BPA representative must be onsite during all repair and
restoration work to perform functions such as safety watch,
protection of BPA's transmission facilities, and obtain line
clearances.
(4) The Party performing the repair and restoration shall use prudent
business methods to acquire the most cost-effective restoration
procedures and materials available given the Cable
Specifications, Fiber Specifications, and current industry
standards.
(5) BPA shall require all employees or agents of ELI or any other
users of the Commercial Fiber who work near BPA's transmission
facilities to demonstrate that they have been properly trained
and equipped to perform the work. The Parties shall agree in
advance what constitutes proper training and reasonable costs.
The costs of agreed upon training of ELI employees, agents of
ELI, or other users of the Commercial Fiber shall be borne by
ELI.
(6) A BPA representative shall have the authority to stop any work
activities or equipment functions for reasons that he or she
determines in good faith to involve potential health hazards,
safety concerns, and potential disruption to BPA's operating
system. BPA will make reasonable efforts to coordinate with ELI
in case of such events.
(d) RESTORATION OF THE CABLE
(1) BPA shall immediately, upon notification from ELI of interruption
in service, failure, disrepair, impairment, or other need for
repair or restoration of the Commercial Fiber, begin to mobilize
BPA crews and make its continuous best effort to achieve such
necessary repair or restoration, including making its best effort
to have maintenance personnel at the affected site within 4 hours
after receipt of such notice,
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PROVIDED, HOWEVER, subject to Section 13(c)(1), that in the event
any of ELI's rights are interrupted pursuant to Section 23(a),
repairs and restoration shall be made as expeditiously as
possible. ELI recognizes that the 4 hour response time
represents optimal conditions, and may be impossible to achieve
when responding to certain remote locations. Actual response
times will be influenced by factors such as the terrain, weather
conditions present at the time the request is made, and the
actual mileage from BPA's dispatch station to the fault site.
(2) For purposes of this section, best efforts means activities and
performance consistent with prudent utility practice, existing
contract provisions for BPA's hourly employees ("Collective
Agreement between BPA and Columbia Power Trades Council"), and
response times that do not jeopardize the health and safety of
BPA employees, agents of BPA, ELI employees, or agents of ELI.
(3) The Detailed Restoration Plan shall set forth the roles and
responsibilities of the respective Parties, and shall address
issues regarding logistical considerations, response interval
factors, communication between the Parties, sequential activity
requirements, and other related items which would impact response
time and restoration intervals. The aforementioned issues will
be taken into consideration in the determination of whether BPA
has used its best efforts in such restoration or repair
activities. The Detailed Restoration Plan will also set forth
financial penalties, if any, to be paid to ELI by BPA for failure
to use its best efforts on any repair or restoration, including
the mobilization effort as set forth above.
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14. REGENERATOR BUILDING(S)
(a) ELI shall have sole responsibility for the expense and acquisition of
any property necessary for its equipment along the Route. If space is
available at BPA substations, such space shall be provided to ELI at
BPA's "bare land" lease rate under a separate agreement.
(b) ELI shall provide and own, except as provided in section 6(d), Cable
Accessories, splice boxes, and other components necessary for the
operation of the Commercial Fiber.
(c) ELI shall have sole responsibility for obtaining electric power and
any land rights for Regenerator Building(s).
(d) ELI shall have sole responsibility for the physical maintenance and
environmental compliance associated with the Regenerator Building(s)
and the grounds around the Regenerator Building(s).
15. RIGHTS AND OBLIGATIONS CONCERNING THE CABLE
(a) GENERAL
In the event that ELI requires capacity (other than Transport
Service(s)) along the Route, BPA and ELI shall agree in writing on how
those transactions shall be valued.
ELI shall not use Commercial Fiber for commercial activities not
accounted for in this Agreement.
ELI agrees to utilize the Commercial Fiber for all ELI capacity needs,
existing or arising along the Route and between the Originating and
Terminating Markets, except for diversity needs, and subject to ELI's
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existing contractual obligations. ELI shall use its best efforts to
transition as quickly as possible from existing contractual
obligations in satisfying the requirements of the preceding sentence.
(b) PERMITS
BPA shall acquire all necessary regulatory or governmental permits and
approvals required for construction of the Cable along the Route, and
ELI shall, at its cost, cooperate and provide BPA with such
information as BPA may reasonably request from ELI in connection with
such permits and approvals. ELI shall acquire all necessary
regulatory or governmental permits and approvals necessary for ELI's
use of the Commercial Fiber for telecommunications services, including
Transport Service(s) and Dark Fiber Leases, and any permits and/or
approvals that may be required for the Regenerator Building(s). ELI
shall not rely upon BPA to acquire from any other Federal agency any
necessary regulatory or governmental permits and approvals.
When feasible, BPA shall, at its cost, cooperate and provide ELI with
such information as ELI may reasonably request from BPA in connection
with acquiring permits, easements, or additional rights-of-way for the
Regenerator Building(s); provided that ELI indemnifies and holds
harmless BPA from any future liability resulting from such actions.
(c) TAXES, MECHANIC'S LIENS, AND ENCUMBRANCES
ELI shall pay its own income taxes, as well as all franchise fees and
other fees and taxes resulting from ELI's License or use of the
Commercial Fiber. ELI shall keep the Route free and clear from all
liens and encumbrances resulting from ELI's use of the Commercial
Fiber. If ELI does not pay the foregoing taxes and fees when such
become due, and such nonpayment results in the imposition of a lien
on, or encumbrance of, the Route, then BPA shall have the right, but
not the obligation, to pay all amounts due and discharge such lien or
encumbrance, upon 30 calendar days' prior written
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notice to ELI. In the event BPA causes such liens or encumbrances to
be discharged, ELI shall reimburse BPA upon demand together with
interest thereon at the Interest Rate, accruing from the date that BPA
makes payment discharging such liens or encumbrances until the date
BPA receives full reimbursement from ELI. ELI shall have the absolute
right to dispute or challenge any tax or fee assessed on its use of
the Commercial Fiber.
(d) ACCESS ROADS
ELI may use BPA's access roads to access the Regenerator Building(s),
provided that heavy vehicles or other equipment being used on the
access road will not at any time impair the use of the access road by
BPA. Access to the roads shall be limited to the times and frequency
required for maintenance and operation of the Regenerator Building(s)
and equipment, and any repair and restoration of the Cable pursuant to
section 13. ELI shall, at ELI's expense, repair any damage to the
access roads caused as a result of ELI use of the access roads. ELI's
shall acquire access easements to the Regenerator Building(s) where
BPA access roads are not available.
(e) ENVIRONMENTAL COMPLIANCE ACTIVITIES
(1) BPA shall be responsible for compliance with the National
Environmental Policy Act (NEPA) and shall acquire all necessary
permits associated with the project operations, maintenance, and
construction of the Cable. ELI shall, at its expense, cooperate
and provide BPA with such information as it may reasonably
request in connection with such compliance and permits. The
project activities will be limited to construction and operation
of cable, hardware, Regenerator Building(s), access roads and
distribution lines if needed for Regenerator Building(s). If any
mitigation measures are required along the Route as part of the
NEPA compliance activities, these measures will be performed by
BPA at the sole cost of BPA. Contacts with the local landowners
will be performed by BPA-appointed
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representatives. Any landowner compensation required as part of
the NEPA and project activities will be made by BPA. All of the
compliance and permitting activities undertaken by BPA pursuant
to this paragraph (e) shall be at the cost and expense of BPA.
(2) BPA and ELI agree neither they nor anyone acting on their behalf
will bring, keep, or use Hazardous Materials at or on the Route
(including regenerators) except for those necessary for use in
their respective businesses, in which case they are to be
handled, stored, used, and disposed of in compliance with
applicable laws, regulations, and ordinances.
(3) BPA agrees to indemnify and hold ELI harmless from any and all
claims, damages, fines, judgments, penalties, costs, liabilities,
or losses arising from or due to the presence of Hazardous
Materials at or on the Route (including regenerators) if BPA or
its agent, contractor, employees, or invitees is responsible for
the introduction of the Hazardous Materials. This indemnity
shall specifically include, without limitation, any and all costs
due to Hazardous Materials which flow, diffuse, migrate, or
percolate into, onto or under the property, or from the property
to neighboring property or groundwater after the Agreement
commences; however, it shall not include the cost of repairing
ELI's equipment.
(4) ELI agrees to indemnify and hold BPA harmless from any and all
claims, damages, fines, judgments, penalties, costs, liabilities,
or losses arising from or due to the presence of Hazardous
Materials at or on the Route (including regenerators) if ELI or
its agent, contractor, employee, or invitees is responsible for
the introduction of the Hazardous Materials. This indemnity
shall specifically include, without limitation, any and all costs
due to Hazardous Materials which flow, diffuse, migrate, or
percolate into, onto or under the
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property, or from the property to neighboring property or
groundwater after the Agreement commences; however, it shall not
include the cost of repairing BPA's equipment.
(5) Hazardous Materials, as used herein, shall mean all materials
which have been determined to be hazardous to health or the
environment by virtue of being: (A) a hazardous waste as defined
by the Resource Conservation and Recovery Act; (B) a hazardous
substance as defined in the Comprehensive Environment,
Compensation, and Liability Act; (C) a substance regulated by the
Toxic Substances Control Act; and (D) substances regulated by the
Federal Insecticide, Fungicide, Rodenticide Act in accordance
with the applicability provisions of such Act. Reference to
specific statutes include amendments as they are made from time-
to-time, as well as the regulations promulgated thereunder.
16. RELOCATION OF THE CABLE
In the event that the Cable may require relocation or replacement during
the term of this Agreement, the cost of such relocation or replacement
shall be allocated as follows:
(a) If requested by ELI, ELI shall pay all such costs;
(b) If requested by BPA due to requirements necessary to provide
economical and reliable electric power, BPA shall pay all such costs;
(c) If the Cable must be relocated due to the order of any court,
governmental agency, or in conjunction with the operational needs of
BPA, BPA shall, in consultation with ELI, designate a new route for
the Cable. The costs associated with such required relocation that
are not paid by a third party, shall be paid by BPA. ELI shall be
responsible for any relocation
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costs associated with ELI's Regenerator Building(s), ELI-owned cable,
and ELI-owned terminal equipment.
17. REPRESENTATIONS AND WARRANTIES
(a) ELI
ELI represents and warrants to BPA as follows:
(1) ELI is a corporation duly organized and validly existing and in
good standing under the laws of the State of Delaware. ELI is
duly qualified to do business and is in good standing in the
States of Oregon and Washington. ELI covenants that it will
maintain any necessary Federal, State, or local compliance needed
to continue to do business in the States of Oregon and
Washington. ELI has full power and authority to execute,
deliver, and perform its obligations under this Agreement. The
execution of this Agreement by ELI has been duly and validly
authorized by all necessary action on the part of ELI. This
Agreement is a legal, valid, and binding obligation of ELI,
enforceable against ELI in accordance with its terms. The
execution and delivery of this Agreement by ELI and the
performance of the terms, covenants, and conditions contained
herein will not violate the articles of the corporation, or
bylaws of ELI, or any applicable law or regulation or any order
of court or arbitrator, and will not conflict with and will not
constitute a material breach of, or default under, the provisions
of any contract by which ELI is bound. Except as otherwise
stated herein, no approval, authorization, or other action by any
governmental authority or filing with any such authority which
has not been obtained or accomplished is required in connection
with the execution, delivery, and performance by ELI of this
Agreement.
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(2) Any assignment of the License of this Agreement to parties not
owned by Citizens Utilities shall be with the written consent of
BPA, such consent shall not be unreasonably withheld.
(3) There are no known actions, suits, or proceedings pending or
overtly threatened against ELI before any court or administrative
agency that would materially impair ELI's performance of its
obligations under this Agreement.
(4) ELI has made no other representations or warranties outside of
this Agreement and BPA acknowledges and agrees that it is not
relying on any other representations or warranties.
(b) BPA
BPA represents and warrants to ELI as follows:
(1) BPA is duly authorized to execute this Agreement. This Agreement
constitutes a legal and valid obligation of BPA enforceable in
accordance with its terms to the full extent provided by law.
The enforceability of this Agreement is qualified as to:
Limitations imposed by bankruptcy laws of the United States,
insolvency, reorganization, arrangement, moratorium, or other
laws relating to or affecting the enforcement of creditor's
rights generally.
(2) Upon execution of this Agreement, BPA warrants that there are no
known conflicts with this Agreement and that this Agreement does
not constitute a material breach of or a default under any
constitutional provision, law, or administrative regulation, or
violate any judgment, decree, or other instrument, or any other
contract related to the Route to which BPA is a Party or to which
BPA or any of its property or assets is subject.
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(3) BPA has made no other representations or warranties outside of
this Agreement and ELI acknowledges and agrees that it is not
relying on any other representations or warranties.
(c) NO BPA WARRANTY CONCERNING ROUTE
BPA makes no representation or warranty whatsoever concerning the
physical characteristics of the Route. ELI acknowledges that neither
BPA nor any of BPA's officers, employees, representatives,
contractors, or subcontractors or agents have made any such
representation, nor is BPA or ELI entering into this Agreement in
reliance upon any such representation or warranty.
18. AUDIT PROCEDURES
(a) RECORDS
The Parties shall maintain true and correct sets of records in
connection with the performance of this Agreement. ELI shall retain
records of all transactions with supporting documentation related
thereto for a period of not less than 3 years after the term of a
specific transaction has expired and receipt of final payment by ELI
to BPA. The records in connection with each financial transaction
shall include an accounting of gross revenues, revenue shares, and
billing and collection.
(b) AUDIT RIGHTS
Either Party shall have the right to perform an audit of each other's
books, records, and documents used in or relating to the costs to
construct, repair, and maintain the site and improvements under this
Agreement. Such audit may be performed within 36 months after the
date that either Party renders a bill or refund voucher. Each Party
shall be responsible for all expenses incurred by such Party in the
performance of an audit pursuant to this section. In the event that
the Parties agree that the Auditing Party's audit is
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determined to be correct, the Non-Auditing Party shall reimburse the
Auditing Party the agreed upon amount. In the event that the Non-
Auditing Party disagrees with the results of the other Party's audit,
and resolution is not reached between the Parties, the Parties agree
to resolve the dispute pursuant to Section 23 of this Agreement.
(c) BPA reserves the right to conduct technical audits, including physical
inspection of the number, type, and use of circuits, including
Transport Service(s) sold, used, and administered by ELI using the
Commercial Fiber.
19. INSURANCE
(a) GENERAL
At all times during the term of this Agreement and the License term,
ELI, at its own cost and expense, shall provide the insurance
specified by this section.
(b) EVIDENCE REQUIRED
On the Effective Date of this Agreement, ELI shall provide BPA with a
certificate of insurance (Certificate of Insurance) executed by an
authorized representative of the insurer(s) evidencing that ELI
insurance complies with this section. A copy of all required
endorsements shall be attached to and form a part of the Certificate
of Insurance.
(c) NOTICE OF CANCELLATION, REDUCTION, OR MATERIAL CHANGE IN COVERAGE
Policies shall be endorsed to provide BPA with 30 calendar days' prior
written notice of any cancellation, reduction, or material change in
coverage. If insurance coverage is due to be canceled, reduced, or
materially changed, ELI shall, within 30 calendar days before the
effective date of such cancellation, reduction, or material change,
obtain the coverage required under this Section 19 and provide to BPA
documentation evidencing such coverage. ELI shall be responsible for
the costs of any damage, liability, or
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injury occurring during any period of cancellation, reduction, or
material change in insurance coverage to the extent such costs are not
otherwise covered by insurance; provided that ELI shall not be
responsible for the costs of any damage, liability, or injury
occurring during any such period if such damage, liability, or injury
was caused by BPA's gross negligence or willful misconduct.
(d) QUALIFYING INSURERS
Policies shall be issued by companies which hold a current
policyholders alphabetic and financial size category rating of not
less than A:X according to Best's Insurance Reports.
(e) INSURANCE REQUIRED
(1) LIABILITY
Commercial general liability insurance for bodily injury
(including death) and property damage shall provide limits of not
less than $10 million per occurrence.
(A) Coverage included shall be:
(i) premises and operations;
(ii) broad form property damage;
(iii) products and completed operations;
(iv) blanket contractual liability;
(v) personal injury liability;
(vi) cross-liability and severability of interests;
and
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(vii) independent contractors liability.
(B) Coverage shall be endorsed to include the following:
(i) inclusion of BPA, its officers, representatives,
agents, and employees as an additional insured as
respects services or operations in connection
with this Agreement; and
(ii) stipulation that the insurance is primary
insurance and that no insurance or self-insurance
of BPA will be called upon to contribute to a
loss.
(2) BUSINESS AUTOMOBILE LIABILITY INSURANCE
Business Automobile Liability Insurance for bodily injury
(including death) and property damage shall provide total limits
of not less than $2 million combined single limit per occurrence
to all owned, non-owned, and hired vehicles.
(3) WORKERS' COMPENSATION/EMPLOYER'S LIABILITY INSURANCE
Statutory Workers' Compensation and Employer's Liability
Insurance for not less than $1 million per occurrence shall apply
to employer's liability coverage for all employees engaged in
services or operations under this Agreement. The policy shall
include broad form all-States/other States coverage.
(f) SPECIAL PROVISIONS
(1) The foregoing requirements as to the types and limits of
insurance coverage to be maintained by ELI, and any approval of
said insurance by BPA or ELI, are not intended to and shall not
in any manner limit
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or qualify the liabilities and obligations otherwise assumed by
ELI pursuant to this Agreement, including, but not limited to,
the provisions concerning indemnification.
(2) BPA acknowledges that some insurance requirements contained in
this Section 19 may be fulfilled by a funded self-insurance
program of ELI or its parent company, Citizens Utilities.
However, this shall not in any way limit liabilities assumed by
ELI under this Agreement. Any self-insurance program must be
first approved in writing by BPA.
20. DEFAULT
(a) EVENTS OF DEFAULT
If either Party is in material breach or default (Defaulting Party),
under this Agreement, the other Party (Non-Defaulting Party) may
notify in writing the Defaulting Party that it is in material breach
or default, such notice to be effective upon its receipt by the
Defaulting Party. Material breach or default under this Agreement
shall include, but is not limited to the following:
(1) failure to make any payment when due hereunder; with the
exception of payments that become payable during periods of Force
Majeure as provided in Section 24(a)(2).
(2) failure to perform any obligations required to be observed or
performed hereunder;
(3) any representation or warranty made by one Party to the other
herein proving incorrect in any material respect as of the date
of the making thereof;
(4) ELI files a voluntary petition in bankruptcy, or a petition in
bankruptcy is filed against ELI and not dismissed within 60 days,
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or ELI is adjudicated as bankrupt or insolvent, or files any
petition or answer seeking or acquiescing in any reorganization,
arrangement, composition, readjustment, liquidation, dissolution,
or similar relief under any present or future Federal, State, or
other statute, law, or regulation relating to bankruptcy,
insolvency, or other relief for debtors, or seeks or consents to
or acquiesces in the appointment of any trustee, receiver,
custodian, liquidator, or similar official of ELI, or makes any
general assignment for the benefit of creditors;
(5) material interference by a Party to the other Party's operations;
or
(6) failure to make restitution for any damage to a Party's real
property or equipment caused as a result of the negligent or
willful acts or omissions of the other Party when such damage
causes material interference to a Party's operations.
(b) REMEDIES
(1) DEFAULTING PARTY'S RIGHT TO CURE
The Defaulting Party shall have the right to cure any material
breach or default under this Agreement within 30 calendar days
after the receipt by the Defaulting Party of notification of such
material breach or default. In the case of any material breach
or default which may not reasonably be cured within 30 calendar
days, other than in the case of a breach of Section 20(a)(1), the
Defaulting Party shall have the right to provide the Non-
Defaulting Party with a plan for the appropriate actions to cure
such material breach or default, which plan shall be subject to
the approval of the Non-Defaulting Party, which approval shall
not be unreasonably withheld. Within 30 calendar days of
submission of the plan, the Defaulting Party must commence
diligently pursuing appropriate action under the plan to cure the
material breach or default, and unless otherwise agreed to by
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the Parties, such material breach or default shall be cured
within 90 calendar days of submission of the plan, failing which
the Non-Defaulting Party may forthwith and without further notice
terminate this Agreement.
(2) RIGHTS AND REMEDIES UPON TERMINATION
Any Party terminating this Agreement under Section 21 shall have
the additional right to cure any material breach or default of
the Defaulting Party to preserve the Non-Defaulting Party's
rights that may be prejudiced as a result of such material breach
or default and exercise and pursue all other rights and remedies
available to it under applicable law.
(3) RIGHTS AND REMEDIES CUMULATIVE
Except as otherwise provided in this Agreement, any right or
remedy afforded to either ELI or BPA under any provision of this
Agreement is in addition to, and not in lieu of, all rights or
remedies afforded either ELI or BPA under any other provision of
this Agreement, by law or otherwise.
21. TERMINATION
(a) Termination of this Agreement may occur in the following instances:
(1) By the Non-Defaulting Party, after the time period for the
Defaulting Party to cure a material breach or default has
expired;
(2) By either Party, if the Party claiming Force Majeure has not
satisfactorily performed any obligations delayed due to the Force
Majeure within 1 year of the notice of the Force Majeure event;
or
(3) Pursuant to Partial Invalidity terms, Section 24(d) of this
Agreement.
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(b) Subject to Section 20(b), the Terminating Party shall give the other
Party 30 calendar days advance written notice of Termination, which
Termination shall become effective 30 calendar days after the receipt
of such notice by the other Party.
22. INDEMNIFICATION; WAIVER OF DAMAGES
(a) INDEMNIFICATION BY ELI
(1) To the extent allowed by law, ELI shall release and indemnify,
defend, and hold harmless BPA and each of its directors,
officers, agents, representatives, subcontractors, and employees
(the "BPA Indemnitees") from and against any and all claims: (A)
for injury to or death of a person, including an employee of BPA
or an ELI Indemnity; (B) for loss of or damage to property
resulting directly or indirectly from ELI's performance or
nonperformance of this Agreement; or (C) for any Claims against
BPA by customers of ELI or others doing business with ELI, except
in the cases of clauses (A) and (B) only, to the extent that such
Claim is the result of the gross negligence or willful misconduct
of a BPA Indemnity.
(2) If gross negligence or willful misconduct of a BPA Indemnity has
contributed to a Claim, ELI shall not be obligated to indemnify
the BPA Indemnitees for the proportionate share of such Claims
caused by such negligence or willful misconduct. BPA shall have
the right, at its own cost, to retain counsel, and to monitor, or
participate in the defense of any Claim that is covered by ELI's
indemnity hereunder.
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(b) INDEMNIFICATION BY BPA
(1) To the extent allowed under the Federal Tort Claims Act, BPA
shall release and indemnify, defend, and hold harmless ELI and
each of its directors, officers, agents, representatives,
subcontractors, and employees (the "ELI Indemnitees") from and
against any and all claims for injury to or death of a person,
including an employee of BPA or an ELI Indemnity, or for loss of
or damage to property resulting directly or indirectly from BPA's
performance or nonperformance of this Agreement, except to the
extent that such claim is the result of the gross negligence or
willful misconduct of a, ELI Indemnity. In no event shall BPA be
required to indemnify ELI Indemnities against claims against ELI
by customers of ELI or others doing business with ELI.
(2) If gross negligence or willful misconduct of an ELI Indemnity has
contributed to a claim, BPA shall not be obligated to indemnify
the ELI Indemnitees for the proportionate share of such claims
caused by such negligence or willful misconduct. ELI shall have
the right, at its own cost, to retain counsel, to monitor, or
participate in the defense of any claim that is covered by BPA's
indemnity hereunder.
(c) WAIVER OF CERTAIN DAMAGES
Each Party hereby waives any right to consequential, incidental,
special or indirect damages, or damages for lost profits or exemplary
damages with respect to any claim arising out of or related to this
Agreement. The Parties acknowledge that the foregoing waiver shall
not prejudice the right of indemnity respecting any claim under this
Section 22.
23. DISPUTE RESOLUTION
(a) Pending resolution of a disputed matter, the Parties shall continue
performance of their respective obligations hereunder, provided that
neither Party shall be required to take any action pending such
resolution which it has been advised by
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counsel, or which it reasonably believes, is unlawful or not permitted
pursuant to applicable regulations or permit requirements. Any
controversy between the Parties rising out of this Agreement or breach
thereof, or out of performance under this Agreement, is subject to the
mediation process described below. If not resolved by mediation, then
the matter must be submitted to the American Arbitration Association
("AAA") for arbitration before a sole arbitrator.
(b) A meeting will be held promptly between the Parties to attempt in good
faith to negotiate a resolution of the dispute. The meeting will be
attended by individuals with decision-making authority regarding the
dispute. If within 30 calendar days after such meeting the Parties
have not succeeded in resolving the dispute, within 30 calendar days
thereafter, upon the written notice from either Party to the other
Party, submit the dispute to a mutually acceptable third-party
mediator who is acquainted with dispute resolution methods. The
mediation shall be non-binding. If the dispute is not resolved by
mediation, either Party may initiate an arbitration with the AAA, upon
the written notice from either Party to the other Party. The dispute
shall be resolved by arbitration under the rules and administration of
the AAA (except that service of process, pleadings, motions and orders
on BPA shall be as prescribed by the Federal Rules of Civil
Procedures), and judgment upon the award rendered by the arbitrator(s)
may be entered in any court having jurisdiction thereof. Neither
Party is entitled to seek or recover punitive damages in considering
or fixing any award under these proceedings.
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(c) The costs of mediation and arbitration, including any mediator's fees,
AAA administration fee, the arbitrators fee, and costs for the use of
facilities during the hearings, shall be borne equally by the Parties.
Reasonable attorneys' fees may be awarded to the prevailing Party
(provided such a Party can clearly be determined from the proceedings)
at the discretion of the arbitrator. Each Party's other costs and
expenses will be borne by the Party incurring them.
24. GENERAL
(a) FORCE MAJEURE
(1) As used in this Agreement, the term "Force Majeure" means acts of
God (including but not limited to, earthquakes, fires, floods,
windstorms, landslides, and ice storms); strikes, lockouts, or
other labor disputes; acts of public enemy; wars, riots, and
insurrection; epidemics; civil disturbances; explosions; train
derailments; breakdown or failure of machinery or facilities
(excluding the Cable and Cable Accessories); accidents to
machinery or equipment (excluding the Cable and Cable
Accessories), and delay in delivery of equipment to the extent
such occurrences are beyond the reasonable control of the
Parties; electrical disturbance originating in or transmitted
through such Party's electrical system or equipment or any
electrical system with which such Party's system or equipment is
interconnected; and any other event, cause, or condition beyond
the Party's reasonable control, which, by the exercise of
reasonable diligence, prevents the operation of the Cable and
prevents the Party claiming Force Majeure from performing its
obligations under this Agreement;
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(2) If either Party is unable to carry out its obligations under this
Agreement as a result of an event, cause, or condition of Force
Majeure, the Party claiming Force Majeure shall give notice and
full particulars of such Force Majeure in writing to the other
Party within 5 calendar days after the occurrence of the Force
Majeure event, cause, or condition. Any obligations that such
Party claims it is unable to perform due to an event, cause, or
condition of Force Majeure shall be suspended during the
continuance of such event of Force Majeure. The Party claiming
Force Majeure shall use reasonable efforts to remedy and minimize
the effects of such event of Force Majeure with all reasonable
dispatch. For purposes of this Agreement, the Parties are
obligated to make payments during periods of Force Majeure;
PROVIDED, HOWEVER, ELI shall not be obligated to make payments
during periods of Force Majeure when ELI is unable to provide
service under the terms of the agreement with ELI's customers.
Interest shall not accrue on payments that become payable to
either Party during the period of any Force Majeure.
(3) Neither Party shall be liable under this Agreement, or considered
to be in material breach or default under this Agreement, on
account of any delay in or failure of performance due to Force
Majeure unless specifically stated in this Agreement. In the
event that ELI continues to receive revenue from End-Users under
this Agreement during a Force Majeure event, ELI will not be
excused from performing its payment under this Agreement.
(b) NOTICES
All notices and other communications under this Agreement shall be
properly given only if made in writing; and
(1) mailed by certified mail, return receipt requested, postage
prepaid; or
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<PAGE>
(2) delivered by facsimile transmission followed by certified mail to
the Party's at the address or facsimile number set forth in this
Section 24(b) or such other address or facsimile number as such
Party may designate by notice to the other Party. Such notices
and other communications shall be effective on the date of
receipt. If any such notice or communication is not received or
cannot be delivered due to a change in the address of the
receiving Party of which notice was not previously given to the
sending Party or due to a refusal to accept by the receiving
Party, such notice or other communication shall be effective on
the date delivery is attempted.
If to BPA: The BPA Power Administration
P.O. Box 3621
Portland, OR 97208-3621
Attn: To be identified under separate letter
with a copy to: The BPA Power Administration
P.O. Box 3621
Portland, OR 97208-3621
Attn: To be identified under separate letter
If to ELI: Electric Lightwave, Inc.
8100 NE. Parkway Drive, Suite 150
Vancouver, WA
Attn: Legal Affairs
Phone: (360) 892- 1000
FAX: (360) 253-4425
(c) ASSIGNMENT
ELI shall not sell, assign, lease, sublease, sub-license or otherwise
allow use of ELI's License under this Agreement to any person or
entity without BPA's written approval; which approval shall not be
unreasonably withheld. Notwithstanding the foregoing, ELI may assign
in writing its rights and responsibilities under this Agreement to a
corporate parent, subsidiary, or commonly owned affiliate, upon
written notification to BPA, and a guarantee by its parent company,
Citizens Utilities, to perform the obligation of ELI
37
<PAGE>
under this Agreement. Any permitted assignment or other transfer of
rights hereunder shall be in writing and shall specify that the
assignee or other transferee is bound by the terms and conditions of
this Agreement to the same extent as if it were the original named
party instead of ELI hereunder. In the event that ELI sells, assigns,
leases, subleases, or otherwise allows use of ELI's License under this
Agreement, ELI or its assigned entity shall designate a single point-
of-contact to BPA for all activities relating to this Agreement. A
sale, transfer, or distribution (by way of a dividend or otherwise) in
one or a series of transactions of 50 percent or more of the capital
stock of the entity that holds the License shall be deemed to be an
assignment of the License.
(d) PARTIAL INVALIDITY
If any provision of this Agreement is determined by a proper court to
be invalid, illegal, or unenforceable, such invalidity, illegality, or
unenforceability shall not affect the performance of other provisions
of this Agreement, and this Agreement shall remain in full force and
effect without such invalid, illegal, or unenforceable provision;
provided that if any such invalid, illegal, or unenforceable provision
results in frustration of this Agreement, such that ELI cannot perform
under Section 13, BPA shall have the right to terminate in accordance
with Section 2 1.
(e) GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
Federal law.
(f) TERMS GENERALLY
The defined terms in this Agreement shall apply equally to both the
singular and the plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding
masculine, feminine, and neuter forms. The term "person" includes
individuals, corporations, partnerships, trusts, other legal entities,
organizations and associations, and
38
<PAGE>
any Government or governmental agency or authority. The words
"include," "includes," and "including," shall be deemed to be followed
by the phrase "without limitation." The words "approval," "consent,"
and "notice," shall be deemed to be preceded by the word "written."
(g) RELATIONSHIP OF THE PARTIES
Nothing in this Agreement is intended or shall be deemed to constitute
a partnership, agency, or joint venture relationship between or among
the Parties hereto. The performance by the Parties of all duties and
obligations hereunder shall be as independent contractors and not as
agents of the other Party, and no persons employed or utilized by a
performing Party shall be considered employees or agents of the other.
(h) WAIVERS
No waiver of any provision or breach of this Agreement shall be
effective unless such waiver is in writing and signed by the waiving
Party and any such waiver shall not be deemed a waiver of any other
provision of this Agreement or any other breach of this Agreement.
(i) CONFIDENTIALITY
If and to the extent any information or documents furnished by one
Party to the other under this Agreement is confidential or proprietary
to the furnishing Party, the receiving Party shall treat such
information or documents as confidential and proprietary and shall
take reasonable steps to protect against the unauthorized use or
disclosure of such information or documents; PROVIDED, HOWEVER, that
such information and documents are conspicuously marked or otherwise
clearly identified as confidential or proprietary when furnished; and
PROVIDED, FURTHER, that this Section 24(g) shall not apply to
information or documents in the public domain or to information or
documents required to be disclosed by any law, rule, regulation,
order, or other requirement of any governmental authority having
jurisdiction. If a Freedom of Information Act, or Congressional
request is received by BPA for such written information or documents,
BPA must promptly
39
<PAGE>
notify ELI of such request and will, further, notify ELI if BPA is
required to disclose such written information or documents.
(j) NO THIRD-PARTY BENEFICIARIES
This Agreement creates rights and obligations only between the Parties
hereto. The Parties hereto expressly do not intend to create any
obligations or promise of performance to any other third person or
entity nor have the Parties conferred any rights or remedy upon any
third person or entity, other
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<PAGE>
than the Parties hereto, their respective successor or assigns to
enforce this Agreement.
(k) MISCELLANEOUS
Neither Party shall make public announcement of this Agreement or the
transactions contemplated by this Agreement without the prior consent
of the other Party, unless such public announcement is necessary to
comply with applicable law. This Agreement shall benefit and bind ELI
and BPA and their respective permitted successors and assigns. Time
is of the essence of this Agreement. This Agreement may be executed
in counterparts, each of which shall be an original, but all of which
shall constitute one and the same Agreement. This Agreement may not
be amended or modified except by a written instrument signed by ELI
and BPA.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement in two
counterparts.
UNITED STATES OF AMERICA
Department of Energy
BPA Power Administration
Name: /s/ George E. Bell
----------------------------------
Acting Senior Vice President,
Transmission Business Line
Date: November 27, 1996
---------------------
ACCEPTED:
ELECTRIC LIGHTWAVE, INC.
By: /s/ Michael Miller
--------------------------
Name: Michael Miller
------------------------
(Print/Type): VP Finance
----------------
Title: VP Finance
------------------------
Date: 11/27/96
-------------------------
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Exhibit A, Page 1 of 6
Contract No. 97TX-10014
ELI Telecommunications Corporation
Effective on the Effective Date
ROUTE DESCRIPTION
The following Route description is a best estimate of how the Route will be laid
out. Difficulties may arise along the Route that will require BPA to make
adjustments that could alter the final Route.
ROSS - FRANKLIN FIBER ROUTE SEGMENT
ROSS SUBSTATION TO NORTH BONNEVILLE SUBSTATION - 36.0 MILES
Dittmer Control Center
North Bonneville - Ross No. 2
AFV 187 (37/2) To AFX.1 (1/1)
Hanford Ostrander No. 1
FY 703 (151/5)
Fiber Optic Wood Pole
AMV 4 (1/1A)
Substation Dead End Structure
Bay 11, 230 kV Switchyard
North Bonneville Substation
NORTH BONNEVILLE SUBSTATION TO BIG EDDY SUBSTATION - 50.2 MILES
Substation Dead End Structure
Bay 13, 230 kV Switchyard
North Bonneville Substation
North Bonneville - Midway No. 1
AS 1 (1/1) To HB 152 (29/2)
Fiber Optic Wood Pole Parallel To McNary - Ross No. 1
AMV 5 (116/3) To AMV 88 (97/4A)
Spearfish Tap To Chenoweth - Goldendale No. 1
4/3 To 1/1
Fiber Optic Wood Pole
AMV 89 (2/4A) To AMV 90 (2/4B)
Big Eddy Midway No. 1
AN 5 (2/3) To AN 2 (1/2)
The Dalles Powerhouse - Big Eddy Switchyard Line No. 1
EN 3 (1/3) To EN 4 (1/4)
Substation Dead End Structure
Bay 10, 115 kV Switchyard
Big Eddy Substation
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Exhibit A, Page 2 of 6
Contract No. 97TX-10014
ELI Telecommunications Corporation
Effective on the Effective Date
BIG EDDY SUBSTATION TO JOHN DAY SUBSTATION - 18.9 MILES
Substation Dead End Structure
Bay 35. 230 kV Switchyard
Big Eddy Substation
Fiber Optic Wood Pole
AMV 130 (1/1) To AMV 131 (1/2)
Substation Dead End Structure
Bay 9E, 500 kV Switchyard
Big Eddy Substation
John Day Big Eddy No. 2
BG 79 (19/4) To BG 1 (1/1)
Substation Dead End Structure
Bay 11W, 500 kV Switchyard
John Day Substation
JOHN DAY SUBSTATION TO SLATT SUBSTATION - 30.3 MILES
Substation Dead End Structure
Bay 6E, 500 kV Switchyard
John Day Substation
Slatt John Day No. 1
CD 658 (31/1) To CD 521A (1/1)
Fiber Optic Wood Pole
AMV 92 (46/1A)
Slatt Substation
SLATT SUBSTATION TO MCNARY SUBSTATION - 45.5 MILES
Fiber Optic Wood Pole
AMV 92 (46/1A)
Slatt Substation
McNary Slatt No. 1
CD 520A (46/1) To CD 394 (19/5)
Fiber Optic Wood Pole
AAM 94 (19/4A) To AMV 96 (19/4C)
McNary Slatt No. 1
CD 393 (19/3) To CD 312 (2/2)
Fiber Optic Wood Pole
AMV 98 (2/1A)
McNary Roundup No. 1
TL 9 (2/8) To TL 1 (1/1)
Substation Dead End Structure
Bay 10, 230 kV Switchyard
McNary Substation
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Exhibit A, Page 3 of 6
Contract No. 97TX-10014
ELI Telecommunications Corporation
Effective on the Effective Date
MCNARY SUBSTATION TO FRANKLIN SUBSTATION - 26.5 MILES
Substation Dead End Structure
Bay 2, 69 kV Switchyard
McNary Substation
Fiber Optic Wood Pole
AMV 99 (1/7A) To AMV 100 (1/7B)
McNary Franklin No. 2
SN 7 (1/7) To SN 149R (20/8)
Fiber Optic Wood Pole Parallel To McNary - Franklin No. 2
AMV 101 (21/1) To AMV 119 (24/5)
McNary Franklin No. 2
Sh 4 (24/6) To ABH 1 (27/7)
Substation Dead End Structure
Bay 5, 230 kV Switchyard
Franklin Substation
FRANKLIN - BELL FIBER ROUTE SEGMENT
FRANKLIN SUBSTATION TO BENTON SUBSTATION - 21.0 MILES
Substation Dead End Structure
Bay 9, 115 kV Switchyard
Franklin Substation
Benton Franklin No. 1
UH 150 (21/13) To UH 1 (1/1)
Substation Dead End Structure
Bay 5, 115 kV Switchyard
Benton Substation
BENTON SUBSTATION TO ASHE SUBSTATION - 3.9 MILES
Substation Dead End Structure
Bay 19, 230 kV Switchyard
Benton Substation
Midway Benton No. 2
AFA 143 (29/6) To AFA 130 (27/4)
Lower Monumental - Ashe No. 1
ACF 183 (39/2) To ACF 191 (40/5)
Substation Dead End Structure
Bay 8, 500 kV Switchyard
Ashe Substation
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Exhibit A, Page 4 of 6
Contract No. 97TX-10014
ELI Telecommunications Corporation
Effective on the Effective Date
ASHE SUBSTATION TO HANFORD SUBSTATION - 19.6 MILES
Midway Benton No. 2
AFA 130 (27/4) To AFA 74 (15/3)
Ashe Hanford No. 1
AAV 54 (11/3) To CA 261 (18/4)
Substation Dead End Structure
Bay 4, 500 kV Switchyard
Hanford Substation
HANFORD SUBSTATION TO MIDWAY SUBSTATION - 14.3 MILES
Midway Benton No. 2
AFA 74 (15/3) To AFA 10 (2/3)
Midway Benton No. 1
TV 11 (2/3) To TV 1 (1/1)
Substation Dead End Structure
Bay 7, 115 kV Switchyard
Midway Substation
MIDWAY SUBSTATION TO MOXEE SUBSTATION - 34.0 MILES
Substation Dead End Structure
Bay 4, 115 kV Switchyard
Midway Substation
Midway Moxee No. 1
YC 1A (1/1) To YC 222 (34/8)
Substation Dead End Structure
Bay 4, 115 kV Switchyard
Moxee Substation
MOXEE SUBSTATION TO SCHULTZ SUBSTATION - 40.0 MILES
Substation Dead End Structure
Bay 9, 115 kV Switchyard
Moxee Substation
Columbia Moxee No. 1
YD 1 (66/10) To FF 388A (26/5)
Substation Dead End Structure
Bay 5W (26/4), 500 kV Switchyard
Schultz Substation
45
<PAGE>
Exhibit A, Page 5 of 6
Contract No. 97TX-10014
ELI Telecommunications Corporation
Effective on the Effective Date
SCHULTZ SUBSTATION TO COLUMBIA SUBSTATION - 26.0 MILES
Substation Dead End Structure
Bay 5E (26/3), 500 kV Switchyard
Schultz Substation
Columbia Moxee No. 1
FF 389A (26/2) To FF 442 (19/1)
Olympia Grand Coulee No. 1
AF 664 (137/5) To AF 736 (155/3)
Substation Dead End Structure
Bay 17, 230 kV Switchyard
Columbia Substation
COLUMBIA SUBSTATION TO VALHALLA SUBSTATION - 5.4 MILES
Substation Dead End Structure
Bay 5, 230 kV Switchyard
Columbia Substation
Rocky Reach - Columbia No. 1
AC 98 (21/3) To AC 79 (17/3)
Columbia Valhalla No. 1
NJ 34 (4/9) To NJ 47 (5/12)
Substation Dead End Structure
Bay 5, 115 kV Switchyard
Valhalla Substation
VALHALLA SUBSTATION TO SICKLER SUBSTATION - 16.7 MILES
Rocky Reach - Columbia No. 1
AC 79 (17/3) To AC 7 (2/2)
Sickler Schultz No. 1
DL 14 (2/1) To DL, 10 (1/1)
Substation Dead End Structure
Bay 3, 500 kV Switchyard
Sickler Substation
46
<PAGE>
Exhibit A, Page 6 of 6
Contract No. 97TX-10014
ELI Telecommunications Corporation
Effective on the Effective Date
SICKLER SUBSTATION TO CHIEF JOSEPH SUBSTATION - 44.6 MILES
Substation Dead End Structure
Bay 4, 500 kV Switchyard
Sickler Substation
Chief Joseph - Sickler No. 1
GU 221 (45/6) To GU 10 (2/3)
Grand Coulee - Chief Joseph No. 1
FB 257 (33/1) To FB 261 (33/5)
Substation Dead End Structure
Bay 10, 230 kV Switchyard
Chief Joseph Substation
CHIEF JOSEPH SUBSTATION TO GRAND COULEE SUBSTATION - 31.7 MILES
Grand Coulee - Chief Joseph No. 1
FB 257 (33/1) To FB 1R (1/1)
Substation Dead End Structure
Bay Y25, 230 kV Switchyard
Grand Coulee Substation
GRAND COULEE SUBSTATION TO MONROE CONTROL CENTER - 82.9 MILES
Substation Dead End Structure
Bay Y19, 230 kV Switchyard
Grand Coulee Substation
Grand Coulee - Bell No. 5
AH 14R (1/1) To AH 413 (82/4)
Grand Coulee Bell
ZC 717 (82/8) To ZC 729 (84/2)
Monroe Control Center
47
<PAGE>
Exhibit B, Page 1 of 4
Contract No. 97TX-10014
ELI Telecommunications Corporation
Effective on the Effective Date
PAYMENT SPECIFICATIONS
ELI's MONTHLY PAYMENT to BPA will equal GRV multiplied by the Payment Factor.
The PAYMENT FACTOR equals [*] until ELI's accumulative monthly payments to BPA
exceed BPA Capital Costs, after which the Payment Factor will equal [*] for the
remainder of the contract.
The GRV will be determined using the following formula:
GRV = ELITSV + EUTRSV + DFLV + OSV
Where:
GRV = GROSS REVENUE VALUE
ELITSV = ELI TRANSPORT SERVICE VALUE(S)
EUTSV = END-USER TRANSPORT SERVICE VALUE(S)
DFLV = DARK FIBER LEASE VALUE(S)
OSV = OTHER SERVICE VALUE(S)
- ----------
* Confidential material has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with the
Securities and Exchange Commission.
48
<PAGE>
Exhibit B, Page 2 of 4
Contract No. 97TX-10014
ELI Telecommunications Corporation
Effective on the Effective Date
SAMPLES OF REPORTING SUMMARY
AND ANNUAL REVENUE SPLIT
The samples below are not based on actual data generated, but to be used for
sample purposes only. The Annual Revenue Split, shown on page two of this
Exhibit, demonstrates how the payment calculation is to be applied to a given
GRV, and the Summary Report specifies the information and format ELI shall use
for reporting information to BPA.
49
<PAGE>
Exhibit B, Page 3 of 4
Contract No. 97TX-10014
ELI Telecommunications Corporation
Effective on the Effective Date
51
ELECTRIC LIGHTWAVE, INC.
BPA PORTLAND . SPOKANE
ECONOMIC ANALYSIS [*]
<TABLE>
<CAPTION>
WHOLESALE LONGHAUL REVENUE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Total
</TABLE>
Revenue Growth yrs 11-15 [*]
Revenue:
Portland to Tri Cities[*]
Portland to Spokane[*]
Portland to Yakima[*]
Spokane to Yakima[*]
Spokane to Tri Cities[*]
Yakima to Tri Cities[*]
Seattle to Spokane[*]
Seattle to Yakima[*]
Seattle to Tri-Cities[*]
Dark Fiber Lease[*]
Total Revenue[*]
BPA Share of Revenue[*]
- --------------------
BPA CAPITAL INVESTMENT[*]
- ----------------------
Backbone:
Number of Miles[*]
Outside Plant[*]
Joint Venture Share[*]
CASH FLOWS
- ----------
BPA
- ---
Capital Expenses[*]
BPA Revenue Sharing[*]
Total[*]
Internal Rate of Return[*]
NPV[*]
- ----------
* Confidential Material has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with the
Securities and Exchange Commission.
50
<PAGE>
Exhibit B, Page 4 of 4
Contract No. 97TX-10014
ELI Telecommunications Corporation
Effective on the Effective Date
TABLE X
MONTH 6
ACCOUNT SUMMARY
ACCOUNT VALUES FOR
NAME START DATE SERVICE TYPE UNIT PRICE # OF UNITS THE MONTH
ELI 12-97 DS3 $3,000 8 $24,000
ELI 1-98 DS3 $3,000 1 $3,500
ELI 2-98 DS3 $3,700 1 $3,500
ELI 3-98 DS3 $3,300 6 $19,800
ELI 6-98 DS3 $3,200 1 $3,200
A 1-98 DS1 $1,020 2 $2,040
A 12-97 DS3 $3,100 1 $3,100
B dark fiber $50 6* $60,000
C dark fiber $43 4* $34,400
D 4-98 OC3 $100,000 1 $100,000
D 1-98 DS1 $1,020 1 $1,020
D 2-98 DS3 $3,200 1 $3,200
E dark fiber $51 4* $41,000
F 4-98 DS1 $940 5 $4,700
MONTHLY GRV: $303,660
* @ 200 miles per fiber
51
<PAGE>
Exhibit C, Page 1 of 1
Contract No. 97TX-10014
ELI Telecommunications Corporation
Effective on the Effective Date
MILESTONE SCHEDULE
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
4, 1996 Qtr 1, 1997 Qtr 2, 1997 Qtr 3, 1997 Qtr 4, 1997 Qtr 1, 1
ID Task Name Durat Start Finish Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb
1 Franklin- 272 11/15/9 12/1/9 XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Bell
2
3 Design 163 11/15/9 7/1/9 XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
4
5 Order cable 87 12/16/9 4/15/9 XXXXXXXXXXXXXXXXXXXXXXXX
& hardware
6
7 Cable 120 8/1/9 8/1/9 XXXXXXXXXXXXXXXXXXXXXXXXXXX
delivery
8
9 Schedule Od 7/15/9 7/15/9
review
10
11 Instal- 196 3/3/9 12/1/9 XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
lation
contract
</TABLE>
52
<PAGE>
Exhibit D, Page 1 of 1 Contract No. 97TX-
10014 ELI Telecommunications Corporation
Effective on the Effective Date
COMMERCIAL FIBER SPECIFICATIONS
BPA shall provide specifications for the Commercial Fiber no later than 30 days
following the execution of this Agreement.
The specifications provided shall meet or exceed current Corning optical fiber
specifications.
53
<PAGE>
================================================================================
EXHIBIT 10.3
CONTRACT NO. 97TX-10072
LICENSE AGREEMENT
EXECUTED BY THE
UNITED STATES OF AMERICA
DEPARTMENT OF ENERGY
ACTING BY AND THROUGH THE
BONNEVILLE POWER ADMINISTRATION
AND
ELECTRIC LIGHTWAVE, INC.
[Asterisks herein denote confidential material which has been omitted pursuant
to a request for confidential treatment. Such material has been filed
separately with the Securities and Exchange Commission.]
================================================================================
Contract No. 97TX-10072
<PAGE>
Index to Sections
- --------------------------------------------------------------------------------
Section Page
1. DEFINITIONS........................................ 2
2. TERM............................................... 6
3. EXHIBITS........................................... 7
4. AMENDMENTS......................................... 7
5. MILESTONE SCHEDULE................................. 7
6. OWNERSHIP.......................................... 7
7. LICENSE............................................ 7
8. PERFORMANCE CRITERIA............................... 8
9. ELI CAPITAL SPENDING............................... 10
10. BUSINESS PLAN...................................... 10
11. MARKET PRICE ASSESSMENT............................ 11
12. PAYMENT............................................ 12
13. MAINTENANCE, REPAIR, AND RESTORATION OF THE CABLE.. 13
14. REGENERATOR BUILDING(S)............................ 16
15. RIGHTS AND OBLIGATIONS CONCERNING THE CABLE........ 17
16. RELOCATION OF THE CABLE............................ 20
17. REPRESENTATIONS AND WARRANTIES..................... 21
18. AUDIT PROCEDURES................................... 23
19. INSURANCE.......................................... 24
20. DEFAULT............................................ 27
21. TERMINATION........................................ 29
22. INDEMNIFICATION; WAIVER OF DAMAGES................. 29
23. DISPUTE RESOLUTION................................. 31
24. GENERAL............................................ 32
Exhibit A (Route)
Exhibit B (Payment Specifications)
Exhibit C (Milestone Schedule)
Exhibit D (Fiber Specifications)
Exhibit E (Detailed Restoration Plan)
<PAGE>
This LICENSE AGREEMENT (Agreement), by the UNITED STATES OF AMERICA
(Government), Department of Energy, acting by and through the BPA POWER
ADMINISTRATION (BPA), and Electric Lightwave, Incorporated (ELI), a corporation
organized and existing under the laws of the State of Delaware. Both BPA and
ELI may be referred to herein individually as "Party" and collectively as
"Parties."
W I T N E S S E T H:
WHEREAS BPA owns the Cable and Cable accessories; and
WHEREAS BPA currently needs only 12 of the 72 fibers in the Cable for its
own operational use, which will give BPA fiber optic cable capacity in excess of
that which is needed to operate its transmission communications along the Route;
and
WHEREAS BPA desires to grant a license for a period of time to ELI
respecting the Commercial Fiber along the Route under the terms and conditions
contained herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
obligations and agreements herein contained, the Parties hereby agree as
follows:
1. DEFINITIONS
The following terms, when used in this Agreement, shall have the meanings
set forth in this section:
(a) "BPA Capital Cost" means the direct and indirect costs BPA incurs,
using prudent electric utility practices, to develop and construct the
Cable. Direct costs include, but not limited to, Environment,
Surveying and Mapping, Design, Land, Material, Construction, and
Labor. Such costs incurred up to 12 months after Energization shall
be included. Indirect costs (overheads) shall be included as part of
BPA Capital Cost and applied at a fixed rate of 45 percent to all
direct costs. Interest costs, implicit or otherwise, will be
excluded. BPA shall use its best efforts to manage to the cost of
development and construction of the Cable to, or below, [*].
- ----------------------------
* Confidential material has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with
the Securities and Exchange Commission.
Contract No. 97TX-10072
<PAGE>
(b) "BPA Facilities" means all BPA-owned and/or leased structures,
buildings, land, access roads, and equipment along the Route.
(c) "BPA Fiber" means 12 dark optical fibers within the Cable designated
for BPA's exclusive use and control.
(d) "Cable" means a BPA-owned cable, containing 72 optical fibers, single-
mode, nondispersion shifted to be installed along the Route.
(e) "Cable Accessories" means the equipment necessary for the attachment
of the Cable to the BPA Facilities, including splice boxes.
(f) "Cable Specifications" means the drawings and specifications regarding
the Cable hardware and materials incorporated into the construction
project.
(g) "Commercial Fiber" means the 60 dark optical fibers within the Cable
licensed to ELI under this License Agreement.
(h) "Dark Fiber Lease Value" means the sum of all dark fiber lease
payments received by ELI for Commercial Fiber.
(i) "Diverse Fibers" means 4 dark optical fibers within the Cable and
constituting a portion of the Commercial Fiber reserved for diverse
switching paths for a SONET ring in order to achieve optimum network
robustness and reliability.
(j) "Due Date" means the date payments shall be sent to BPA in accordance
with section 12.
(k) "ELI Transport Service(s)" means Transport Service(s) used by ELI in
the delivery of End-User Service(s).
(l) "ELI Transport Service Value(s)" means the sum of the values for all
the ELI Transport Service(s) within the Commercial fiber as described
in Exhibit B.
(m) "End-User" means the customer(s) of ELI.
Contract No. 97TX-10072
3
<PAGE>
(n) "End-User Service(s)" means services provided to the End-User, other
than Transport Service(s) and Other Transport Service(s).
(o) "End-User Transport Service Value(s)" means the sum of all payments
received by ELI from End-User(s) for Transport Service sales.
(p) "Energization" means the time when the Cable is fully installed and
the optical fiber meets testing criteria agreed to in writing by the
Parties.
(q) "Fiber Specifications" means the performance attributes of the fiber
within the Cable as described in Exhibit D.
(r) "Gross Revenue Value(s) (GRV)" means the sum of ELI's Transport
Service Value(s) plus End-User Transport Service Value(s) plus Dark
Fiber Lease Value(s) plus Other Transport Service Value(s).
(s) "Interest Rate" means .05 percent per day (18.25 percent per annum) to
be compounded daily on the unpaid balance.
(t) "License" means the License granted to ELI in section 7(a).
(u) "Originating and Terminating Markets" means the areas in and around
the cities along the Route. The cities include Portland, Salem,
Albany, Corvallis and Eugene; as well as other cities adjacent to the
Route.
(v) "Other Transport Service(s)" means services sold over the Commercial
Fiber at the Optical Carrier level (e.g. OC1, OC3, OC12, OC48).
(w) "Other Transport Service Value(s)" means the sum of all payments
received by ELI for Other Transport Services.
(x) "Regenerator Building(s)" means the commercial building(s) along the
Route, owned and operated by ELI, that house the terminal and
regenerator equipment including any optronics or electronics required
by ELI to make use of the ELI Fibers. For the purpose of this
Agreement, the Regenerator Building(s) include
Contract No. 97TX-10072
4
<PAGE>
conduit and fiber optic cable from the Regenerator Building(s) up to
the nearest fiber optic splice box on the Route or the nearest
substation fence, at BPA's discretion.
(y) "Route" means the Cable path as described in Exhibit A.
(z) "Transport Services" means individual DS0, DS1, and DS3 circuits used
or sold as bulk transport by ELI for long-haul traffic on the
Commercial Fiber as described below:
(1) "Digital Signal Zero (DS0)" means: one (1) 64 Kilobits per
second (Kbps) or 56 Kbps digital, pulse coded modulated voice
channel;
(2) "Digital Signal One (DS1)" means: (A) in the U. S. Digital
hierarchy, digital signal level 1 indicates a 1.544 megabytes per
second (Mbps) data signal; and (B) also referred to as a T1 in
the U.S. time-division multiplexing hierarchy, digital signal
level 1 (DS1) indicates the first level of multiplexing. It is
defined as 24 DS0 (64 Kbps) circuits multiplexed into a 1.544
Mbps data signal; and
(3) "Digital Signal Level Three (DS3)" means: (A) In theU.S.
Digital hierarchy, digital signal level 3 indicates a 44.736 Mbps
data signal, often delivered to customers via optical fiber
systems, also referred to as T3; (B) in the U.S. time-division
multiplexing hierarchy, digital signal level 3 (DS3) indicates
the third level of multiplexing. It is defined as 28 DS1 (1.544
Mbps) signals, with added overhead bits, multiplexed onto a
44.736 Mpbs data signal; and (C) high capacity access service
that provides capacity equivalent to 28 DS1 circuits, 7 DS2
channels, or 672 voice grade special access circuits; also used
generically to describe digital data transmission services
operating over fiber optic lines at transmission speed of 44.6
Mbps.
Contract No. 97TX-10072
5
<PAGE>
2. TERM
(a) This Agreement shall be effective at 2400 hours on the date of
execution by both Parties (Effective Date) and shall continue in
effect for a period of 15 years after Energization, unless sooner
terminated or extended in accordance with the terms of this Agreement.
(b) The term of this Agreement shall be extended only by written mutual
agreement of the Parties. The Agreement may be extended for two
separate 5-year renewal periods. Either Party shall notify the other
Party at least 90 days prior to the expiration date of this Agreement
if the notifying Party seeks to renew the Agreement. The Parties
shall have 45 calendar days from the notifying Party's notice in which
to reach written agreement on renewal. The terms and conditions of
this Agreement applicable to the initial 15-year period may be
modified or renegotiated before each renewal period(s) upon written
mutual agreement of the Parties.
Contract No. 97TX-10072
6
<PAGE>
3. EXHIBITS
Exhibit A (Route); Exhibit B (Payment Specifications); Exhibit C (Milestone
Schedule); Exhibit D (Fiber Specifications); and Exhibit E (Detailed
Restoration Plan) are incorporated into and made a part of this Agreement.
4. AMENDMENTS
This Agreement may be amended upon the written agreement of both Parties.
5. MILESTONE SCHEDULE
Energization of the Cable is currently scheduled for April 1, 1998. On or
before October 1, 1997, BPA and ELI agree to complete an evaluation of the
milestones, described in Exhibit C, required to complete construction and
Energization of the Cable. The evaluation shall be used by the Parties to
determine if Exhibit C will be revised to reflect an earlier, or later,
Energization date.
6. OWNERSHIP
(a) Each Party shall own its own electronic and optronic devices necessary
to transmit signals over the fibers each Party controls as specified
in this Agreement.
(b) Except as otherwise set forth in Paragraph 6(c) below, BPA shall own
all structures, improvements, and components obtained for or installed
on EPA Facilities along the Route in accordance with this Agreement.
(c) Title and ownership of the Cable Accessories, Regenerator Building(s),
and related equipment within the Regenerator Building(s) furnished by
ELI shall be and remain the property of ELI, except that BPA shall
gain title to and ownership of such equipment which cannot be removed
without damage to BPA Facilities at termination of this Agreement.
7. LICENSE
(a) Exclusivity
Contract No. 97TX-10072
7
<PAGE>
BPA hereby grants to ELI an exclusive License to use the Commercial
Fiber and to manage the Diverse Fibers. This right shall remain
exclusive as long as ELI meets or exceeds the Performance Criteria
described in section 8.
(b) Access to the Route
ELI shall have escorted access to the Route for the purposes of
performing its rights and obligations under this Agreement. EPA shall
have the right to use the Route, BPA Fiber, or any portion thereof,
together with the right to enter upon the Route, or any portion
thereof, at all times, for any and all purposes. BPA shall retain the
right to use the BPA Fiber for its own internal electric system
network and utility business purposes.
(c) No Property Interest
This Agreement shall not confer upon ELI any ownership or possessory
interest in the Route or other property owned by BPA except as
provided herein, and ELI agrees that it shall never make any claim of
such interest based upon this Agreement.
8. PERFORMANCE CRITERIA
(a) Pursuant to section 7(a), the cumulative GRV must meet or exceed the
cumulative Performance Criteria (calculated from previous and current
years).
(b) Minimum Annual Gross Revenue Performance Requirements: ELI shall
maintain sales at a level that generates gross revenues equal to or
greater than 50 percent of the revenues described in ELI's revenue
forecast, Table A.
In the event that the GRV revenues drop below the minimum required
level, BPA shall have the option of removing any remaining fibers that
are not yet in service from ELI's control, and shall have the right to
market those fibers outside the License Agreement
Contract No. 97TX-10072
8
<PAGE>
(c) Annual GRV equals the sum of the monthly GRVs over a given 12-month
period. Unless otherwise agreed to by the Parties, the first 12-month
period (Year 1) shall commence 30 calendar days following
Energization.
TABLE A[*]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(d)
BPA Rights
(1) BPA shall have the right to make a performance audit within 60
days of the conclusion of each annual period. If BPA determines
that ELI has failed to meet, on a cumulative basis, the
Performance Criteria, BPA shall give written notice of such
failure to ELI. ELI shall have 10 working days after receipt of
written notice from BPA in which to review the results of BPA's
audit and provide any new information or data which might alter
EPA's audit conclusions. If at the end of such 10-day period,
BPA and ELI determine that the Performance Criteria have not been
met, BPA, at its discretion, may determine the License to be
nonexclusive and BPA shall have the right to use any unused
portion of the Commercial Fiber for
- ---------------------
* Confidential material has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with the
Securities and Exchange Commission.
Contract No. 97TX-10072
9
<PAGE>
any purpose. Nothing contained in this paragraph shall prevent
either Party from seeking a resolution of any dispute hereunder
pursuant to the provisions of Section 23 of this Agreement.
(2) In the event ELI's License becomes nonexclusive, ELI shall
cooperate with BPA to allow co-location of other users of the
Commercial Fiber in ELI's Regenerator Buildings, based on
available space. The Parties shall agree to the amount of
reasonable compensation to be charged to the co-locating users.
(e) ELI Rights
In the event ELI's License is determined to be nonexclusive under the
provisions of this Section 8, ELI shall have the right, subject to the
terms of Agreement, including, without limitation, the payments
described in Section 12, to continue its use of the Commercial Fibers
then being used by ELI to provide End-User Services, Other Transport
Services and Transport Services. In addition, to the extent BPA has
unused dark fiber capacity along the Route, ELI shall have the right
to lease such additional dark fiber capacity on the same terms offered
by BPA to other carriers.
9. ELI CAPITAL SPENDING.
ELI shall make capital investments to provision the Commercial Fiber with
electronics, optronics, buildings, other infrastructure, and fiber
connectivity with Local Exchange Carrier networks and Inter-Exchange
Carrier networks, at a sufficient level to meet the Revenue Forecast listed
in Table A of section 8(a).
10. BUSINESS PLAN
ELI shall develop a Business Plan that describes ELI's proposal for
marketing, managing, and utilizing the Cable along the Route. The Business
Plan shall include, but is not limited to, ELI's marketing strategy for
telecommunications service(s) along the Route, customer service, sales
strategy for all Transport Services, accounting, billing and collections
standards, strategy for maintaining ELI fibers, and plan for maintaining
Contract No. 97TX-10072
10
<PAGE>
compliance with all regulatory requirements or relevant State regulatory
authorities and the Federal Communications Commission. Unless otherwise
agreed to by the Parties, ELI shall complete the Business Plan 6 months
from the date of execution of this Agreement. Prior to finalization of the
Business Plan, BPA shall have the right to review ELI's Business Plan for
consistency with this Agreement; however, BPA shall not be involved in
ELI's decisions regarding the marketing, pricing, managing, and use of the
Commercial Fiber. ELI shall use its best efforts, consistent with
reasonable commercial practices, to maximize the GRV generated pursuant to
the License.
11. MARKET PRICE ASSESSMENT
(a) BPA shall procure, under separate agreement, the services of a market
assessment consultant(s) to assess market prices of bulk transport
services and provide reports to BPA.
(b) BPA and ELI agree to equally share in the costs of procuring the
services described above.
(c) The market assessment consultant shall be responsible for acquiring
quotes, calculating an average, and delivering market assessment
reports to BPA at some planned interval, using the methodology agreed
to by BPA and ELI. BPA and ELI shall within 120 calendar days from
execution of this Agreement, make their best effort to agree to the
methodology.
(d) BPA agrees to allow ELI to participate in the development of the
methodology for assessing market price(s) to be used under this
Agreement.
(e) ELI agrees to use the current data provided to BPA by the market
assessment consultant as a basis for setting ELI Transport Service
Value(s) for each ELI Transport Service, depending on when the ELI
Transport Service is placed in service by ELI. The ELI Transport
Service Value for any specific ELI Transport Service will remain in
effect for a period of 36 months, after which the ELI Transport
Service must be re-valued based on the current market assessment data.
Contract No. 97TX-10072
11
<PAGE>
(f) The agreed to methodology may be changed by mutual agreement of BPA
and ELI.
12. PAYMENT
(a) ELI agrees to pay BPA monthly, according to the Payment Specifications
described in Exhibit B. In addition to ELI's monthly payment to BPA,
ELI shall include a monthly report of all transactions. The report
will allow BPA to account for the GRV generated each month. Both
Parties shall agree on a reporting format to be used, prior to ELI's
first payment to BPA.
(b) For the purposes of determining the monthly payment required under
this Agreement, any Transport Services originating in the Originating
and Terminating Markets will be included in the accounting to
determine GRV.
(c) Unless otherwise agreed to by the Parties, accounting of the GRV shall
begin 30 calendar days following Energization. Payment shall be
received by BPA from ELI by the Due Date which is the last day of each
month for GRV calculated on the previous calendar month's
transactions, the Due Date. Payments shall be sent to the address
identified in (f) below.
(d) Payments to BPA for revenue generated by ELI from use of the
Commercial Fiber (or portion thereof) before Energization shall be
based on the GRV of such services and calculated using the 37 percent
and the 32 percent Payment Factors, as described in Exhibit B. All
payments, including payments based on Early Service Revenues, shall be
credited toward ELI's accumulative monthly payments to BPA to
determine Payment Factor.
(e) Early Service Revenues
Revenues generated by ELI, using the Commercial Fibers, before
Energization (as described in section 8), shall be accumulated as a
credit against the Performance Criteria in Year 1.
Contract No. 97TX-10072
12
<PAGE>
(f) ELI shall pay by wire or ACH transfer using procedures established by
BPA's Financial Services Group. Payment amounts are due and payable
on the Due Date. ELI may pay its bill by mail provided the following
condition is met: ELI ensures that BPA receives full payment by the
Due Date.
ELI shall include the following information in the description field
of each transfer (BPA Contract Number; Revenue PL6; and End Item
Code).
If ELI is paying by mail, payments shall be mailed to:
BPA Accounting Operation - CRO
P.O. Box 6040
Portland, OR 97228-6040
ELI shall include the following information in the documentation sent
with each check, BPA Contract Number; Revenue PL6; and End Item Code.)
(g) Payments not received by the Due Date shall bear interest at the
Interest Rate from the Due Date until the date payment is received by
BPA.
(h) BPA may purchase from ELI any commercial telecommunications service
ELI generally offers business customers. The price charged by ELI for
any such service shall be the lowest price then charged by ELI to
similarly situated commercial customers for a similar service or group
of services, taking into account similar terms and volumes.
13. MAINTENANCE, REPAIR, AND RESTORATION OF THE CABLE
(a) Maintenance of the Cable
(1) During the term of this Agreement, BPA shall be responsible for
the physical routine maintenance of the Cable and the Cable
Accessories. BPA shall maintain the Cable and the Route at all
times in good working order and in a safe condition, in
conformity with the Cable Specifications and all applicable laws
and regulations.
(2) BPA shall pay all costs associated with the routine maintenance
of the Cable.
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(3) ELI shall be responsible for maintenance of its property,
including the Regenerator Building(s) along the Route.
(b) Detailed Restoration Plan
(1) The Parties agree to jointly, within 120 days of the execution of
this Agreement by both Parties, develop a Detailed Restoration
Plan (Exhibit E), which shall upon its completion become part of
this Agreement.
(2) The following provisions described in sections (c) and (d) below
shall form the principles and basis for the development of a
Detailed Restoration Plan.
(c) Restoration Priorities and General Requirements
(1) BPA's obligation to maintain and repair the Cable and any
activities incidental thereto shall be subordinate to, and shall
not conflict with, BPA's rightful use and operation of its
transmission facilities. In the event both BPA's transmission
facilities and the Cable require maintenance or repair, the
restoration of the Cable shall be at all times subordinate to the
restoration of BPA's transmission facilities, unless otherwise
agreed to in writing by BPA in advance. The restoration of BPA's
telecommunications system shall take priority over restoration
activities related to the Commercial Fiber. In the event that
ELI's License becomes nonexclusive pursuant to section 8, the
Commercial Fiber used by ELI shall take priority over restoration
activities related to any fibers used by any other users of the
Commercial Fiber.
(2) A BPA representative must be on-site during all repair and
restoration work to perform functions such as safety watch,
protection of BPA's transmission facilities, and obtain line
clearances.
(3) The Party performing the repair and restoration shall use prudent
business methods to acquire the most cost-effective restoration
procedures and
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materials available given the Cable Specifications, Fiber
Specifications, and current industry standards.
(4) Any and all BPA, ELI representatives, or other users of the
Commercial Fiber that construct, install, repair, replace, or
otherwise handle the Cable, Cable Accessories, Commercial Fiber,
BPA Fiber, or any related materials and equipment shall be
properly trained and equipped to meet all current industry
standards. BPA shall require all employees or agents of ELI or
any other users of the Commercial Fiber who work near BPA's
transmission facilities to demonstrate that they have been
properly trained and equipped to perform the work. The Parties
shall agree in advance what constitutes proper training and
reasonable costs. The costs of agreed upon training of ELI
employees, agents of ELI, or other users of the Commercial Fiber
shall be borne by ELI.
(5) A BPA representative shall have the authority to stop any work
activities or equipment functions for reasons that he or she
determines in good faith to involve potential health hazards,
safety concerns, and potential disruption to BPA's operating
system. BPA will make reasonable efforts to coordinate with ELI
in case of such events.
(d) Restoration of the Cable
(1) Except as provided in section 13(c)(1), BPA shall immediately,
upon notification from ELI of interruption in service, failure,
disrepair, impairment, or other need for repair or restoration of
the Commercial Fiber, begin to mobilize BPA crews and make its
best effort to achieve such necessary repair or restoration,
including making its best effort to have maintenance personnel at
the affected site within 4 hours after receipt of such notice,
provided, however, that in the event any of ELI's rights are
interrupted pursuant to section 23(a), repairs and restoration
shall be made as expeditiously as possible. ELI recognizes that
the 4 hour response time represents optimal conditions, and may
be impossible to achieve when
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responding to certain remote locations. Actual response times
will be influenced by factors such as the terrain, weather
conditions present at the time the request is made, and the
actual mileage from BPA's dispatch station to the fault site.
(2) For purposes of this section, best efforts means activities and
performance consistent with prudent utility practice, existing
contract provisions for BPA's hourly employees ("Collective
Agreement between BPA and Columbia Power Trades Council"), and
response times that do not jeopardize the health and safety of
BPA employees or agents or ELI employees or agents.
(3) The Detailed Restoration Plan shall set forth the roles and
responsibilities of the respective Parties, and shall address
issues regarding logistical considerations, response interval
factors, communication between the Parties, sequential activity
requirements, and other related items which would impact response
time and restoration intervals. The aforementioned issues will
be taken into consideration in the determination of whether BPA
has used its best efforts in such restoration or repair
activities. The Detailed Restoration Plan will also set forth
financial penalties, if any, to be paid to ELI by BPA for failure
to use its best efforts on any repair or restoration, including
the mobilization effort as set forth above.
14. REGENERATOR BUILDING(S)
(a) ELI shall have sole responsibility for the expense and acquisition of
any electric power an/or property necessary for its equipment along
the Route. If space is available at BPA substations, such space shall
be provided to ELI at BPA's "bare land" lease rate under a separate
agreement.
(b) ELI shall provide and own, except as provided in section 6(d), Cable
Accessories, splice boxes, and other components necessary for the
operation of the Commercial Fiber.
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(c) ELI shall have sole responsibility for the physical maintenance and
environmental compliance associated with the Regenerator Building(s)
and the grounds underneath and around the Regenerator Building(s).
15. RIGHTS AND OBLIGATIONS CONCERNING THE CABLE
(a) General
In the event that ELI requires services (other than Transport
Service(s)) along the Route, BPA and ELI shall agree in writing on how
those transactions shall be valued.
ELI shall not use Commercial Fiber for commercial activities not
accounted for in this Agreement.
ELI agrees to utilize the Commercial Fiber for all ELI capacity needs,
existing or arising along the Route and between the Originating and
Terminating Markets, except for diversity needs, and subject to ELI's
existing contractual obligations. ELI shall use its best efforts to
transition as quickly as possible from existing contractual
obligations in satisfying the requirements of the preceding sentence.
(b) Permits
BPA shall acquire all necessary regulatory or governmental permits and
approvals required for construction of the Cable, and ELI shall, at
its cost, cooperate and provide BPA with such information as BPA may
reasonably request from ELI in connection with such permits and
approvals. ELI shall acquire all necessary regulatory or governmental
permits and approvals necessary for ELI's use of the Commercial Fiber
for telecommunications services, including Transport Service(s) and
Dark Fiber Leases, and any permits and/or approvals that may be
required for the Regenerator Building(s). ELI shall not rely upon BPA
to acquire from any other Federal agency any necessary regulatory or
governmental permits and approvals required by ELI.
When feasible, BPA shall, at its cost, cooperate and provide ELI with
such information as ELI may reasonably request from BPA in connection
with
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acquiring permits, easements, or additional rights-of-way for the
Regenerator Building(s); provided that ELI indemnifies and holds
harmless BPA from any future liability resulting from such actions.
(c) Taxes, Mechanic's Liens, and Encumbrances
ELI shall pay its own income taxes, as well as all franchise fees and
other fees and taxes resulting from ELI's License or use of the
Commercial Fiber. ELI shall keep the Route free and clear from all
liens and encumbrances resulting from ELI's use of the Commercial
Fiber. If ELI does not pay the foregoing taxes and fees when such
become due, and such nonpayment results in the imposition of a lien
on, or encumbrance of, the Route, then BPA shall have the right, but
not the obligation, to pay all amounts due and discharge such lien or
encumbrance, upon 30 calendar days' prior written notice to ELI. In
the event BPA causes such liens or encumbrances to be discharged, ELI
shall reimburse BPA upon demand together with interest thereon at the
Interest Rate, accruing from the date that BPA makes payment
discharging such liens or encumbrances until the date BPA receives
full reimbursement from ELI. ELI shall have the absolute right to
dispute or challenge any tax or fee assessed on its use of the
Commercial Fiber.
(d) Access Roads
ELI may use BPA's access roads to access the Regenerator Building(s),
provided that heavy vehicles or other equipment being used on the
access road will not at any time impair the use of the access road by
BPA. Access to the roads shall be limited to the times and frequency
required for maintenance and operation of the Regenerator Building(s)
and equipment, and any repair and restoration of the Cable pursuant to
section 13. ELI shall, at ELI's expense, repair any damage to the
access roads caused as a result of ELI use of the access roads. ELI
shall acquire access easements to the Regenerator Building(s) where
BPA access roads are not available.
(e) Environmental Compliance Activities
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(1) BPA shall be responsible for compliance with the National
Environmental Policy Act (NEPA) and shall acquire all necessary
permits associated with the project operations, maintenance, and
construction of the Cable. ELI shall, at its expense, cooperate
and provide BPA with such information as it may reasonably
request in connection with such compliance and permits. The
project activities will be limited to construction and operation
of cable, hardware, Regenerator Building(s), access roads and
distribution lines if needed for Regenerator Building(s). If any
mitigation measures are required along the Route as part of the
NEPA compliance activities, these measures will be performed by
BPA at the sole cost of BPA. Contacts with the local landowners
will be performed by BPA-appointed representatives. Any
landowner compensation required as part of the NEPA and project
activities will be made by BPA. All of the compliance and
permitting activities undertaken by BPA pursuant to this
paragraph (e) shall be at the cost and expense of BPA.
(2) BPA and ELI agree neither they nor anyone acting on their behalf
will bring, keep, or use Hazardous Materials at or on the Route
(including regenerators) except for those necessary for use in
their respective businesses, in which case they are to be
handled, stored, used, and disposed of in compliance with
applicable laws, regulations, and ordinances.
(3) BPA agrees to indemnify and hold ELI harmless from any and all
claims, damages, fines, judgments, penalties, costs, liabilities,
or losses arising from or due to the presence of Hazardous
Materials at or on the Route (including regenerators) if BPA or
its agent, contractor, employees, or invitees is responsible for
the introduction of the Hazardous Materials. This indemnity
shall specifically include, without limitation, any and all costs
due to Hazardous Materials which flow, diffuse, migrate, or
percolate into, onto or under the property, or from the property
to
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neighboring property or groundwater after the Agreement
commences; however, it shall not include the cost of repairing
ELI's equipment.
(4) ELI agrees to indemnify and hold BPA harmless from any and all
claims, damages, fines, judgments, penalties, costs, liabilities,
or losses arising from or due to the presence of Hazardous
Materials at or on the Route (including regenerators) if ELI or
its agent, contractor, employee, or invitees is responsible for
the introduction of the Hazardous Materials. This indemnity
shall specifically include, without limitation, any and all costs
due to Hazardous Materials which flow, diffuse, migrate, or
percolate into, onto or under the property, or from the property
to neighboring property or groundwater after the Agreement
commences; however, it shall not include the cost of repairing
BPA's equipment.
(5) `Hazardous Materials', as used herein, shall mean all materials
which have been determined to be hazardous to health or the
environment by virtue of being: A) a hazardous waste as defined
by the Resource Conservation and Recovery Act; (B) a hazardous
substance as defined in the Comprehensive Environment,
Compensation, and Liability Act; (C) a substance regulated by the
Toxic Substances Control Act; and (D) substances regulated by the
Federal Insecticide, Fungicide, Rodenticide Act in accordance
with the applicability provisions of such Act. Reference to
specific statutes include amendments as they are made from time-
to-time, as well as the regulations promulgated thereunder.
16. RELOCATION OF THE CABLE
In the event the Cable requires relocation or replacement during the term
of this Agreement, the cost of such relocation or replacement shall be
allocated as follows:
(a) If requested by ELI, ELI shall pay all such costs;
(b) If requested by BPA due to requirements necessary to provide
economical and reliable electric power, BPA shall pay all such costs;
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(c) If the Cable must be relocated due to the order of any court,
governmental agency, or in conjunction with the operational needs of
BPA, BPA shall, in consultation with ELI, designate a new route for
the Cable. The costs associated with such required relocation that
are not paid by a third party, shall be paid by BPA. ELI shall be
responsible for any relocation costs associated with ELI's Regenerator
Building(s), ELI-owned cable, and ELI-owned terminal equipment.
17. REPRESENTATIONS AND WARRANTIES
(a) ELI
ELI represents and warrants to BPA as follows:
(1) ELI is a corporation duly organized and validly existing and in
good standing under the laws of the State of Delaware. ELI is
duly qualified to do business and is in good standing in the
States of Oregon and Washington. ELI covenants that it will
maintain any necessary Federal, State, or local compliance needed
to continue to do business in the States of Oregon and
Washington. ELI has full power and authority to execute,
deliver, and perform its obligations under this Agreement. The
execution of this Agreement by ELI has been duly and validly
authorized by all necessary action on the part of ELI. This
Agreement is a legal, valid, and binding obligation of ELI,
enforceable against ELI in accordance with its terms subject,
however, to limitations imposed by bankruptcy laws of the United
States, insolvency, reorganization, arrangement, moratorium, or
other laws relating to or affecting the enforceability of
creditors' rights generally. The execution and delivery of this
Agreement by ELI and the performance of the terms, covenants, and
conditions contained herein will not violate the articles of the
corporation, or bylaws of ELI, or any applicable law or
regulation or any order of court or arbitrator, and will not
conflict with and will not constitute a material breach of, or
default under, the provisions of any contract by which ELI is
bound. Except for approvals and authorizations required to
perform services on the cable
Contract No. 97TX-10072
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(such as franchise and building permit applications and
approvals), or as otherwise stated herein, no approval,
authorization, or other action by any governmental authority or
filing with any such authority which has not been obtained or
accomplished is required in connection with the execution,
delivery, and performance by ELI of this Agreement.
(2) Any assignment of the license of this Agreement to parties not
owned by Citizens Utilities shall be with the written consent of
BPA, such consent shall not be unreasonably withheld.
(3) There are no known actions, suits, or proceedings pending or
overtly threatened against ELI before any court or administrative
agency that would materially impair ELI's performance of its
obligations under this Agreement.
(4) ELI has made no other representations or warranties outside of
this Agreement and BPA acknowledges and agrees that it is not
relying on any other representations or warranties.
(b) BPA
BPA represents and warrants to ELI as follows:
(1) BPA is duly authorized to execute this Agreement. This Agreement
constitutes a legal and valid obligation of BPA enforceable in
accordance with its terms to the full extent provided by law.
The enforceability of this Agreement is qualified as to:
Limitations imposed by bankruptcy laws of the United States,
insolvency, reorganization, arrangement, moratorium, or other
laws relating to or affecting the enforcement of creditors'
rights generally.
(2) Upon execution of this Agreement, BPA warrants that there are no
known conflicts with this Agreement and that this Agreement does
not constitute a material breach of or a default under any
constitutional provision, law, or
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administrative regulation, or violate any judgment, decree, or
other instrument, or any other contract related to the Route to
which BPA is a Party or to which BPA or any of its property or
assets is subject.
(3) BPA has made no other representations or warranties outside of
this Agreement and ELI acknowledges and agrees that it is not
relying on any other representations or warranties.
(c) No BPA Warranty Concerning Route
BPA makes no representation or warranty whatsoever concerning the
physical characteristics of the Route. ELI acknowledges that neither
BPA nor any of BPA's officers, employees, representatives,
contractors, or subcontractors or agents have made any such
representation, nor is BPA or ELI entering into this Agreement in
reliance upon any such representation or warranty.
18. AUDIT PROCEDURES
(a) Records
The Parties shall maintain true and correct sets of records in
connection with the performance of this Agreement. ELI shall retain
records of all transactions with supporting documentation related
thereto for a period of not less than 3 years after the term of a
specific transaction has expired and receipt of final payment by ELI
to BPA. The records in connection with each financial transaction
shall include an accounting of gross revenues, revenue shares, and
billing and collection. BPA shall retain all documents relative to
BPA Capital Cost for a period of at least three years after BPA incurs
the Capital Cost.
(b) Audit Rights
Either Party shall have the right to perform an audit of each other's
books, records, and documents used in or relating to the costs to
construct, repair, and maintain the site and improvements under this
Agreement. Such audit may be performed within 36 months after the
date that either Party renders a bill or refund voucher. Each Party
shall be responsible for all expenses incurred by such Party
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in the performance of an audit pursuant to this section. In the event
that the Parties agree that the Auditing Party's audit is determined
to be correct, the Non-Auditing Party shall reimburse the Auditing
Party the agreed upon amount. In the event that the Non-Auditing Party
disagrees with the results of the other Party's audit, and resolution
is not reached between the Parties, the Parties agree to resolve the
dispute pursuant to section 23 of this Agreement.
(c) BPA reserves the right to conduct technical audits, including physical
inspection of the number, type, and use of circuits, including
Transport Service(s) sold, used, and administered by ELI using the
Commercial Fiber.
19. INSURANCE
(a) General
At all times during the term of this Agreement and the License term,
ELI, at its own cost and expense, shall provide the insurance
specified by this section.
(b) Evidence Required
On the Effective Date of this Agreement, ELI shall provide BPA with a
certificate of insurance ("Certificate of Insurance") executed by an
authorized representative of the insurer(s) evidencing that ELI
insurance complies with this section. A copy of all required
endorsements shall be attached to and form a part of the Certificate
of Insurance.
(c) Notice of Cancellation, Reduction, or Material Change in Coverage
Policies shall be endorsed to provide BPA with 30 calendar days' prior
written notice of any cancellation, reduction, or material change in
coverage. If insurance coverage is due to be canceled, reduced, or
materially changed, ELI shall, within 30 calendar days before the
effective date of such cancellation, reduction, or material change,
obtain the coverage required under this section 19 and provide to BPA
documentation evidencing such coverage. ELI shall be responsible for
the costs of any damage, liability, or injury occurring during any
period of cancellation reduction, or material change in insurance
coverage to the extent
Contract No. 97TX-10072
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such costs are not otherwise covered by insurance; provided that ELI
shall not be responsible for the costs of any damage, liability, or
injury occurring during any such period if such damage, liability, or
injury was caused by BPA's gross negligence or willful misconduct.
(d) Qualifying Insurers
Policies shall be issued by companies which hold a current
policyholders alphabetic and financial size category rating of not
less than A:X according to Best's Insurance Reports.
(e) Insurance Required
(1) Liability
Commercial general liability insurance for bodily injury
(including death) and property damage shall provide limits of not
less than $10 million per occurrence.
(A) Coverage included shall be:
(i) premises and operations;
(ii) broad form property damage;
(iii) products and completed operations;
(iv) blanket contractual liability;
(v) personal injury liability;
(vi) cross-liability and severability of interests;
and
(vii) independent contractors liability.
(B) Coverage shall be endorsed to include the following:
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(i) inclusion of BPA, its officers, representatives,
agents, and employees as an additional insured as respects
services or operations in connection with this Agreement; and
(ii) stipulation that the insurance is primary
insurance and that no insurance or self-insurance of BPA will be
called upon to contribute to a loss.
(2) Business Automobile Liability Insurance
Business Automobile Liability Insurance for bodily injury
(including death) and property damage shall provide total limits
of not less than $2 million combined single limit per occurrence
to all owned, non-owned, and hired vehicles.
(3) Workers' Compensation/Employer's Liability Insurance
Statutory Workers' Compensation and Employer's Liability
Insurance for not less than $1 million per occurrence shall apply
to employer's liability coverage for all employees engaged in
services or operations under this Agreement. The policy shall
include broad form all-States/other States coverage.
(f) Special Provisions
(1) The foregoing requirements as to the types and limits of
insurance coverage to be maintained by ELI, and any approval of
said insurance by BPA or ELI, are not intended to and shall not
in any manner limit or qualify the liabilities and obligations
otherwise assumed by ELI pursuant to this Agreement, including,
but not limited to, the provisions concerning indemnification.
(2) BPA acknowledges that some insurance requirements contained in
this section 19 may be fulfilled by a funded self-insurance
program of ELI or its parent company, Citizens Utilities.
However, this shall not in any way
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limit liabilities assumed by ELI under this Agreement. Any self-
insurance program must be first approved in writing by BPA.
20. DEFAULT
(a) Events of Default
If either Party is in material breach or default (Defaulting Party),
under this Agreement, the other Party (Non-Defaulting Party) may
notify in writing the Defaulting Party that it is in material breach
or default, such notice to be effective upon its receipt by the
Defaulting Party. Material breach or default under this Agreement
shall include, but is not limited to the following;
(1) failure to make any payment when due hereunder; with the
exception of payments that become payable during periods of Force
Majeure as provided in section 24(a)(2);
(2) failure to perform any obligations required to be observed or
performed hereunder;
(3) any representation or warranty made by one Party to the other
herein proving incorrect in any material respect as of the date
of the making thereof;
(4) ELI files a voluntary petition in bankruptcy, or a petition in
bankruptcy is filed against ELI and not dismissed within 60 days,
or ELI is adjudicated as bankrupt or insolvent, or files any
petition or answer seeking or acquiescing in any reorganization,
arrangement, composition, readjustment, liquidation, dissolution,
or similar relief under any present or future Federal, State, or
other statute, law, or regulation relating to bankruptcy,
insolvency, or other relief for debtors, or seeks or consents to
or acquiesces in the appointment of any trustee, receiver,
custodian, liquidator, or similar official of ELI, or makes any
general assignment for the benefit of creditors;
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(5) material interference by a Party to the other Party's operations;
or
(6) failure to make restitution for any damage to a Party's real
property or equipment caused as a result of the negligent or
willful acts or omissions of the other Party when such damage
causes material interference to a Party's operations.
(b) Remedies
(1) Defaulting Party's Right to Cure
The Defaulting Party shall have the right to cure any material
breach or default under this Agreement within 30 calendar days
after the receipt by the Defaulting Party of notification of such
material breach or default. In the case of any material breach
or default which may not reasonably be cured within 30 calendar
days, other than in the case of a breach of section 20(a)(1), the
Defaulting Party shall have the right to provide the Non-
Defaulting Party with a plan for the appropriate actions to cure
such material breach or default, which plan shall be subject to
the approval of the Non-Defaulting Party, which approval shall
not be unreasonably withheld. Within 30 calendar days of
submission of the plan, the Defaulting Party must commence
diligently pursuing appropriate action under the plan to cure the
material breach or default, and unless otherwise agreed to by the
Parties, such material breach or default shall be cured within 90
calendar days of submission of the plan, failing which the Non-
Defaulting Party may forthwith and without further notice
terminate this Agreement.
(2) Rights and Remedies Upon Termination
Any Party terminating this Agreement under section 21 shall have
the additional right to cure any material breach or default of
the Defaulting Party to preserve the Non-Defaulting Party's
rights that may be prejudiced
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as a result of such material breach or default and exercise and
pursue all other rights and remedies available to it under
applicable law.
(3) Rights and Remedies Cumulative
Except as otherwise provided in this Agreement, any right or
remedy afforded to either ELI or BPA under any provision of this
Agreement is in addition to, and not in lieu of, all rights or
remedies afforded either ELI or BPA under any other provision of
this Agreement, by law or otherwise.
21. TERMINATION
(a) Termination of this Agreement may occur in the following instances:
(1) By the Non-Defaulting Party, after the time period for the
Defaulting Party to cure a material breach or default has
expired;
(2) By either Party, if the Party claiming Force Majeure has not
satisfactorily performed any obligations delayed due to the Force
Majeure within 1 year of the notice of the Force Majeure event;
or
(3) Pursuant to Partial Invalidity terms, section 24(d) of this
Agreement.
(b) Subject to section 20(b), the Terminating Party shall give the other
Party 30 calendar days advance written notice of Termination, which
Termination shall become effective 30 calendar days after the receipt
of such notice by the other Party.
22. INDEMNIFICATION; WAIVER OF DAMAGES
(a) Indemnification By ELI
(1) To the extent allowed by law, ELI shall release and indemnify,
defend, and hold harmless BPA and each of its directors,
officers, agents, representatives, subcontractors, and employees
(the "BPA Indemnitees") from and against any and all claims: (A)
for injury to or death of a person, including an employee of BPA
or an ELI Indemnity; or (B) for loss of or
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damage to property resulting directly or indirectly from ELI's
performance or nonperformance of this Agreement; or (C) for any
Claims against BPA by customers of ELI or others doing business
with ELI, except in the cases of clauses (A) and (B) only, to the
extent that such Claim is the result of the gross negligence or
willful misconduct of a BPA Indemnity.
(2) If gross negligence or willful misconduct of a BPA Indemnity has
contributed to a Claim, ELI shall not be obligated to indemnify
the BPA Indemnitees for the proportionate share of such Claims
caused by such negligence or willful misconduct. BPA shall have
the right, at its own cost, to retain counsel, and to monitor, or
participate in the defense of any Claim that is covered by ELI's
indemnity hereunder.
(b) Indemnification By BPA
(1) To the extent allowed under the Federal Tort Claims Act, BPA
shall release and indemnify, defend, and hold harmless ELI and
each of its directors, officers, agents, representatives,
subcontractors, and employees (the "ELI Indemnitees") from and
against any and all claims for injury to or death of a person,
including an employee of BPA or an ELI Indemnity, or for loss of
or damage to property resulting directly or indirectly from BPA's
performance or nonperformance of this Agreement, except to the
extent that such claim is the result of the gross negligence or
willful misconduct of a ELI Indemnity. In no event shall BPA be
required to indemnify ELI Indemnities against claims against ELI
by customers of ELI or others doing business with ELI.
(2) If gross negligence or willful misconduct of an ELI Indemnity has
contributed to a claim, BPA shall not be obligated to indemnify
the ELI Indemnitees for the proportionate share of such claims
caused by such negligence or willful misconduct. ELI shall have
the right, at its own cost,
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to retain counsel, to monitor, or participate in the defense of
any claim that is covered by BPA's indemnity hereunder.
(c) Waiver of Certain Damages
Each Party hereby waives any right to consequential, incidental
special or indirect damages, or damages for lost profits or exemplary
damages with respect to any claim arising out of or related to this
Agreement. The Parties acknowledge that the foregoing waiver shall
not prejudice the right of indemnity respecting any claim under this
section 22.
23. DISPUTE RESOLUTION
(a) Pending resolution of a disputed matter, the Parties Shall continue
performance of their respective obligations hereunder, provided that
neither Party shall be required to take any action pending such
resolution which it has been advised by counsel, or which it
reasonably believes, is unlawful or not permitted pursuant to
applicable regulations or permit requirements. Any controversy
between the Parties rising out of this Agreement or breach thereof, or
out of performance under this Agreement, is subject to the mediation
process described below. If not resolved by mediation, then the
matter must be submitted to the American Arbitration Association
("AAA") for arbitration before a sole arbitrators.
(b) A meeting will be held promptly between the Parties to attempt in good
faith to negotiate a resolution of the dispute. The meeting will be
attended by individuals with decision-making authority regarding the
dispute. If within 30 calendar days after such meeting the Parties
have not succeeded in resolving the dispute, within 30 calendar days
thereafter, upon the written notice from either Party to the other
Party, submit the dispute to a mutually acceptable third-party
mediator who is acquainted with dispute resolution methods. The
mediation shall be nonbinding. If the dispute is not resolved by
mediation, either Party may initiate an arbitration with the AAA, upon
the written notice from either Party to the other Party. The dispute
shall be resolved by arbitration under the rules and administration of
the AAA (except that service of process, pleadings, motions and orders
on BPA shall
Contract No. 97TX-10072
31
<PAGE>
be as prescribed by the Federal Rules of Civil Procedures), and
judgment upon the award rendered by the arbitrator(s) may be entered
in any court having jurisdiction thereof. Neither Party is entitled to
seek or recover punitive damages in considering or fixing any award
under these proceedings.
(c) The costs of mediation and arbitration, including any mediator's fees,
AAA administration fee, the arbitrators fee, and costs for the use of
facilities during the hearings, shall be borne equally by the Parties.
Reasonable attorneys' fees may be awarded to the prevailing Party
(provided such a Party can clearly be determined from the proceedings)
at the discretion of the arbitrator. Each Party's other costs and
expenses will be borne by the Party incurring them.
24. GENERAL
(a) Force Majeure
(1) As used in this Agreement, the term "Force Majeure" means acts of
God (including but not limited to, earthquakes, fires, floods,
windstorms, landslides, and ice storms); strikes, lockouts, or
other labor disputes; acts of public enemy; wars, riots, and
insurrection; epidemics; civil disturbances; explosions; train
derailments; breakdown or failure of machinery or facilities
(excluding the Cable and Cable Accessories); accidents to
machinery or equipment (excluding the Cable and Cable
Accessories), and delay in delivery of equipment to the extent
such occurrences are beyond the reasonable control of the
Parties; electrical disturbance originating in or transmitted
through such Party's electrical system or equipment or any
electrical system with which such Party's system or equipment is
interconnected; and any other event, cause, or condition beyond
the Party's reasonable control, which, by the exercise of
reasonable diligence, prevents the operation of the Cable and
prevents the Party claiming Force Majeure from performing its
obligations under this Agreement;
Contract No. 97TX-10072
32
<PAGE>
(2) If either Party is unable to carry out its obligations under this
Agreement as a result of an event, cause, or condition of Force
Majeure, the Party claiming Force Majeure shall give notice and
full particulars of such Force Majeure in writing to the other
Party within 5 calendar days after the occurrence of the Force
Majeure event, cause, or condition. Any obligations that such
Party claims it is unable to perform due to an event, cause, or
condition of Force Majeure shall be suspended during the
continuance of such event of Force Majeure. The Party claiming
Force Majeure shall use reasonable efforts to remedy and minimize
the effects of such event of Force Majeure with all reasonable
dispatch. For purposes of this Agreement, the Parties are
obligated to make payments during periods of Force Majeure;
provided, however, ELI shall not be obligated to make payments
during periods of Force Majeure when ELI is unable to provide
service under the terms of the agreement with ELI's customers.
Interest shall not accrue on payments that become payable to
either Party during the period of any Force Majeure.
(3) Neither Party shall be liable under this Agreement for, or
considered to be in material breach or default under, this
Agreement on account of any delay in or failure of performance
due to Force Majeure unless specifically stated in this
Agreement. In the event that ELI continues to receive revenue
from End-Users under this Agreement during a Force Majeure event,
ELI will not be excused from performing its payment under this
Agreement.
(b) Notices
All notices and other communications under this Agreement shall be
properly given only if made in writing; and
(1) mailed by certified mail, return receipt requested, postage
prepaid; or
(2) delivered by facsimile transmission followed by certified mail to
the Party's at the address or facsimile number set forth in this
section 24(b) or
Contract No. 97TX-10072
33
<PAGE>
such other address or facsimile number as such Party may
designate by notice to the other Party. Such notices and other
communications shall be effective on the date of receipt. If any
such notice or communication is not received or cannot be
delivered due to a change in the address of the receiving Party
of which notice was not previously given to the sending Party or
due to a refusal to accept by the receiving Party, such notice or
other communication shall be effective on the date delivery is
attempted.
If to BPA: The BPA Power Administration
P.O. Box 3621
Portland, OR 97208-3621
Attn: To be identified under separate letter
with a copy to: The BPA Power Administration
P.O. Box 3621
Portland, OR 97208-3621
Attn: To be identified under separate letter
If to ELI: Electric Lightwave, Inc.
8100 N.E. Parkway Drive, Suite 150
Vancouver, WA
Attn: Legal Affairs
Phone: (360) 892-1000
FAX: (360) 253-4425
(c) Assignment.
----------
ELI shall not sell, assign, lease, sublease, sublicense or otherwise
allow use of ELI's License under this Agreement to any person or
entity without BPA's written approval; which approval shall not be
unreasonably withheld. Notwithstanding the foregoing, ELI may assign
in writing its rights and responsibilities under this Agreement to a
corporate parent, subsidiary, or commonly owned affiliate, upon
written notification to BPA, and a guarantee by its parent company,
Citizens Utilities, to perform the obligation of ELI under this
Agreement. Any permitted assignment or other transfer of rights
hereunder shall be in writing and shall specify that the assignee or
other transferee is bound by the terms and conditions of this
Agreement to the same extent as if it were the original named party
instead of ELI hereunder. In the event that ELI sells,
Contract No. 97TX-10072
34
<PAGE>
assigns, leases, subleases, or otherwise allows use of ELI's License
under this Agreement, ELI or its assigned entity shall designate a
single point-of-contact to BPA for all activities relating to this
Agreement. A sale, transfer, or distribution (by way of a dividend or
otherwise) in one or a series of transactions of 50 percent or more of
the capital stock of the entity that holds the License shall be deemed
to be an assignment of the License.
(d) Partial Invalidity
If any provision of this Agreement is determined by a proper court to
be invalid, illegal, or unenforceable, such invalidity, illegality, or
unenforceability shall not affect the performance of other provisions
of this Agreement, and this Agreement shall remain in full force and
effect without such invalid, illegal, or unenforceable provision,
provided that if any such invalid, illegal, or unenforceable provision
results in frustration of this Agreement, such that ELI cannot perform
under section 13, BPA shall have the right to terminate in accordance
with section 21.
(e) Governing Law
This Agreement shall be governed by and construed in accordance with
Federal law.
(f) Terms Generally
The defined terms in this Agreement shall apply equally to both the
singular and the plural forms of the terms defined. Whenever the
content may require, any pronoun shall include the corresponding
masculine, feminine, and neuter forms. The term "person" includes
individuals, corporations, partnerships, trusts, other legal entities,
organizations and associations, and any Government or governmental
agency or authority. The words "include," "includes," and"
"including," shall be deemed to be followed by the phrase "without
limitation." The words "approval," "consent," and "notice," shall be
deemed to be preceded by the word "written."
(g) Relationship of the Parties
Contract No. 97TX-10072
35
<PAGE>
Nothing in this Agreement is intended or shall be deemed to constitute
a partnership, agency, or joint venture relationship between or among
the Parties hereto. The performance by the Parties of all duties and
obligations hereunder shall be as independent contractors and not as
agents of the other Party, and no persons employed or utilized by a
performing Party shall be considered employees or agents of the other.
(h) Waivers
No waiver of any provision or breach of this Agreement shall be
effective unless such waiver is in writing and signed by the waiving
Party and any such waiver shall not be deemed a waiver of any other
provision of this Agreement or any other breach of this Agreement.
(i) Confidentiality
If and to the extent any information or documents furnished by one
Party to the other under this Agreement is confidential or proprietary
to the furnishing Party, the receiving Party shall treat such
information or documents as confidential and proprietary and shall
take reasonable steps to protect against the unauthorized use or
disclosure of such information or documents; provided, however, that
such information and documents are conspicuously marked or otherwise
clearly identified as confidential or proprietary when furnished; and
provided, further, that this section 24(g) shall not apply to
information or documents in the public domain or to information or
documents required to be disclosed by any law, rule, regulation,
order, or other requirement of any governmental authority having
jurisdiction. If a Freedom of Information Act, or Congressional,
request is received by BPA for such written information or documents,
BPA must promptly notify ELI of such request and will, further, notify
ELI if BPA is required to disclose such written information or
documents.
(j) No Third-Party Beneficiaries
This Agreement creates rights and obligations only between the Parties
hereto. The Parties hereto expressly do not intend to create any
obligations or promise of
Contract No. 97TX-10072
36
<PAGE>
performance to any other third person or entity nor have the Parties
conferred any rights or remedy upon any third person or entity other
than the Parties hereto, their respective successor or assigns to
enforce this Agreement.
(k) Miscellaneous
Neither Party shall public announcement of this Agreement or the
transactions contemplated by this Agreement without the prior consent
of the other Party, unless such public announcement is necessary to
comply with applicable law. This Agreement shall benefit and bind ELI
and BPA and their respective permitted successors and assigns. Time
is of the essence of this Agreement. This Agreement may be executed
in counterparts, each of which shall be an original, but all of which
shall constitute one and the same Agreement. This Agreement may not
be amended or modified except by a written instrument signed by ELI
and BPA.
Contract No. 97TX-10072
37
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement in two
counterparts.
UNITED STATES OF AMERICA
Department of Energy
BPA Power Administration
Name Kevin A. Ward /s/ Kevin A. Ward
-----------------
Account Executive
Transmission Marketing & Sales
Date July 18, 1997
----------------------------
ACCEPTED:
ELECTRIC LIGHTWAVE, INC.
By: /s/ D.B. Sharkey
-------------------------
Name: D.B. Sharkey
-----------------------
(Print/Type)
Title: President
-----------------------
Date: July 18, 1997
------------------------
Contract No. 97TX-10072
38
<PAGE>
Exhibit A, Page 1 of 1
Contract No. 97TX-10072
ELI Telecommunications Corporation
Effective on the Effective Date
ROUTE DESCRIPTION
The following Route description is a best estimate of how the Route will be
laid out. Difficulties may arise along the Route that will require BPA to make
adjustments that could alter the final Route.
The northern origination point of the Route begins at Bonneville's Keeler
Substation, located 8 miles west of Portland, Oregon. The Cable will be
attached to the Keeler-Oregon City No. 2, 115-kv H-frame wood pole line running
for a distance of approximately 21.4 miles to the Oregon City Substation. The
Cable will then run from the Oregon City Substation a distance of approximately
0.7 miles on the Oregon City to Chemawa No. 2, 115-kv H-frame wood pole line to
the 1/10 structure location. From the 1/1 0 structure, the Cable will traverse
a distance of approximately 24.7 miles on the Big Eddy-Chemawa No. 1, 230-kv
lattice steel tower line to the Chemawa Substation. The Cable will then run on
the Chemawa-to-Salem No. 1, 230-kv double circuit steel tube line for
approximately 10.7 miles until it reaches the Salem Substation. From the Salem
Substation, the Cable will then traverse a distance of approximately 23.9 miles
to the Albany Substation on the Salem-to-Albany No. 1, 115-kv H-frame wood pole
line, encountering two river crossings on steel towers. From Albany Substation,
the Cable will span a distance of approximately 39.8 miles to the Eugene
Substation, traveling along the Albany-to-Eugene No. 1, I I 5-kv H-frame wood
pole line, with one river crossing on steel towers. From a point near Eugene
Substation, the Cable will run a distance of approximately 5.0 miles on the
Marion-Lane 500-kV lattice steel tower line to Lane Substation. From Lane
Substation, the Cable will run a distance of approximately 13.4 miles on the
Alvey-Lane 230-kV lattice steel tower line to the southern terminus of the Cable
to be located at the Alvey Substation.
Contract No. 97TX-10072
<PAGE>
Exhibit B, Page 1 of 4
Contract No. 97TX-10072
ELI Telecommunications Corporation
Effective on the Effective Date
PAYMENT SPECIFICATIONS
ELI's Monthly Payment to BPA will equal GRV multiplied by the Payment Factor.
The Payment Factor equals [*] until ELI's accumulative monthly payments to BPA
exceed BPA Capital Costs, after which the Payment Factor will equal [*] for the
remainder of the contract.
The GRV will be determined using the following formula:
GRV = ELITSV + EUTRSV + DFLV + OSV
Where:
GRV = Gross Revenue Value
ELITSV = ELI Transport Service Value(s)
EUTSV = End-User Transport Service Value(s)
DFLV = Dark Fiber Lease Value(s)
OSV = Other Service Value(s)
- ----------------------------
* Confidential material has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with the
Securities and Exchange Commission.
Contract No. 97TX-10072
<PAGE>
Exhibit B, Page 2 of 4
Contract No. 97TX-10072
ELI Telecommunications Corporation
Effective on the Effective Date
SAMPLES OF REPORTING SUMMARY
AND ANNUAL REVENUE SPLIT
The samples below are not based on actual data generated, but to be used for
sample purposes only. The Annual Revenue Split, shown on page two of this
Exhibit, demonstrates how the payment calculation is to be applied to a given
GRV, and the Summary Report specifies the information and format ELI shall use
for reporting information to BPA.
Contract No. 97TX-10072
<PAGE>
Exhibit B, Page 3 of 4
Contract No. 97TX-10072
ELI Telecommunications Corporation
Effective on the Effective Date
3
<PAGE>
Exhibit B, Page 4 of 4
Contract No. 97TX-10072
ELI Telecommunications Corporation
Effective on the Effective Date
TABLE X
ACCOUNT SUMMARY
VALUES FOR
ACCOUNT NAME START DATE SERVICE TYPE UNIT PRICE # OF THE MONTH
---------- UNITS
Monthly GRV:
* @ 140 miles per fiber
Contract No. 97TX-10072
4
<PAGE>
Exhibit C Page 1 of 1
Contract No. 97TX-10072
ELI Telecommunications Corporation
Effective on the Effective Date
MILESTONE SCHEDULE
<TABLE>
ID TASK DURATION START FINISH NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1
2
3
4
5
6
7
8
9
10
1
</TABLE>
Contract No. 97TX-10072
<PAGE>
Exhibit D Page 1 of 8
Contract No. 97TX-10072
ELI Telecommunications Corporation
Effective on the Effective Date
COMMERCIAL FIBER SPECIFICATIONS
CORNING(R) SMF-28(TM) CPC6
SINGLE-MODE OPTICAL FIBER
GENERAL
Corning(R) SMF-28(TM) single mode fiber is considered the "standard" optical
fiber for telephony, cable television, submarine, and private network
applications in the transmission of data, voice, and/or video services. Corning
SMF-28 fiber is manufactured to the most demanding specifications in the
industry.
SMF-28 fiber is optimized for use in the 1310 nm. wavelength region. The
information carrying capacity of the fiber is at its highest in this
transmission window, and it is al so where dispersion is the lowest. SMF-28
fiber can also be effectively used in the 1550 nm wavelength region.
Corning's enhanced, dual layer acrylate CPC6 coating provides excellent fiber
protection and is easy to work with. CPC6 can be mechanically stripped and has
an outside diameter of 245 um. CPC6 is optimized for use in many single and
multi-fiber cable designs including loose tube, ribbon, slotted core, and tight
buffer cables.
SMF-28 fiber is manufactured using the Outside Vapor Deposition (OVD) process,
which produces a totally synthetic, ultra-pure fiber. As a result, Corning SMF-
28 has consistent geometric properties, high strength, and low attenuation.
Corning SMF-28 fiber can be counted on to deliver excellent performance and high
reliability, reel after reel.
FEATURES AND BENEFITS
o Versatility in 1310 nm and 1550 nm applications.
o Outstanding geometrical properties for low splice loss and high splice yields.
o OVD manufacturing reliability and product consistency.
o Optimized for use in ribbon, loose tube, and other common cable designs.
Contract No. 97TX-10072
<PAGE>
Exhibit D Page 2of 8
Contract No. 97TX-10072
ELI Telecommunications Corporation
Effective on the Effective Date
OPTICAL SPECIFICATIONS
ATTENUATION
- ------------------------------------------
UNCABLED FIBER ATTENUATION CELLS
- ------------------------------------------
Attenuation Cells
(dB/km)
- ------------------------------------------
Wavelength (nm) Standard
- ------------------------------------------
1310 less than or = to 0.40
- ------------------------------------------
1550 less than or = to 0.30
- ------------------------------------------
*Lower attenuation available in limited quantities.
POINT DISCONTINUITY.
No point of discontinuity greater than 0.10 dB at either 1310 nm or 1550 nm.
ATTENUATION AT THE WATER PEAK
The attenuation at 1383+ 3 nm shall not exceed 2.1 dB/km.
-
- ----------------------------------------------------
ATTENUATION VS. WAVELENGTH
- ----------------------------------------------------
Range Ref. # Max Increase
(nm) (nm) a (dB/km)
- ----------------------------------------------------
1285-1330 1310 Standard
- ----------------------------------------------------
1525-1575 1550 less than or = to 0.40
- ----------------------------------------------------
The attenuation in a given wavelength range does not exceed the attenuation of
the reference wavelenght (#) by more than the value a.
- ----------------------------------------------------------------------
ATTENUATION WITH BENDING
- ----------------------------------------------------------------------
Mandrel Number of Wavelength Induced
Diameter Turns (nm) Attenuation
(mm) (dB)
- ----------------------------------------------------------------------
32 1 1550 less than or = to 0.50
- ----------------------------------------------------------------------
75 100 1810 less than or = to 0.05
- ----------------------------------------------------------------------
75 100 1550 less than or = to 0.10
- ----------------------------------------------------------------------
The induced attenuation due to fiber wrapped around a mandrel of a specified
diameter.
o CABLE CUTOFF WAVELENGTH (#ccf) o MODE FIELD DIAMETER
#ccf less than 1260 nm 9.30 + 0.50 m at 1310 nm
-
10.50 + 1.00 m at 1550 nm
-
o DISPERSION
Zero Dispersion Wavelength (#-): 1301.5 nm less than #- less than or = to
1321.5 nm
Zero Dispersion Slope (S\o\): less than or = to 0.092 ps/(nm to the second
power . km)
Fiber Polarization Mode Dispersion Coefficient (PMD): less than or = to 0.5
psec/ km
- --------------------------------------------------------------------------------
DISPERSION CALCULATION
- --------------------------------------------------------------------------------
S\o\
Dispersion=D(#):S\o\[# - # _ to the fourth power]ps/(nm . km), for 1200 nm
---- ------------------------
4 # to the third power
less than or = to # less than or = to 1600 nm # = Operating Wavelength
Contract No. 97TX-10072
<PAGE>
Exhibit D Page 3of 8
Contract No. 97TX-10072
ELI Telecommunications Corporation
Effective on the Effective Date
ENVIRONMENTAL SPECIFICATIONS
- --------------------------------------------------------------------------------
ENVIRONMENTAL TEST INDUCED Operating
CONDITION ATTENUATION Temperature Range
(dB/km) -60 degree C +
85 degree C
- --------------------------------------------------------------------------------
1310 nm 1550 nm
- --------------------------------------------------------------------------------
Temperature Dependence less than or = to 0.05 less than or = to 0.05
- -60 degree C to 85 degree C
- --------------------------------------------------------------------------------
Temperature-Humidity less than or = to 0.05 less than or = to 0.05
Cycling
- -10 degree C to + 85 degree
C, up 98%
RH
- --------------------------------------------------------------------------------
Water Immersion, 23 degree C less than or = to 0.05 less than or = to 0.05
- --------------------------------------------------------------------------------
Heat Aging, 85 degree C less than or = to 0.05 less than or = to 0.05
- --------------------------------------------------------------------------------
DIMENSIONAL SPECIFICATIONS
STANDARD LENGTH (km/reel): 2.2 - 25.0
*Longer spliced lengths available at a premium.
GLASS GEOMETRY
Fiber Curl: greater than or = to 2.0m radius of curvature
Cladding Diameter: 125.0 + 1.0 m
-
Core-Clad Concentricity: less than or = to 0.8 m
Cladding Non-Circularity: less than 1.0%
COATING GEOMETRY
Coating Diameter: 245 + 10 m
-
Coating-Cladding Concentricity: less than 12 m
Defined as: [ 1- Min. Cladding Diameter] ]
----------------------- x 100
[ Min. Cladding Diameter] ]
MECHANICAL SPECIFICATIONS
PROOF TEST:
The entire length of fiber is subjected to a tensile proof stress greater than
or = to 100 kpsi (0.7 GN/m to the second power)*
*Higher proof test available at a premium.
Contract No. 97TX-10072
<PAGE>
Exhibit D Page 4of 8
Contract No. 97TX-10072
ELI Telecommunications Corporation
Effective on the Effective Date
PERFORMANCE CHARACTERIZATIONS
Characterized parameters are typical values.
CORE DIAMETER:
8.3 m
NUMERICAL APERTURE:
0.13
NA was measured at the one percent angle of a one-dimensional
far-field scan at 1310 nm.
ZERO DISPERSION WAVELENGTH (#-):
1312 nm
ZERO DISPERSION SLOPE (S\o\):
0.090 ps/(nm to the second power . km)
REFRACTIVE INDEX DIFFERENCE:
0.36%
EFFECTIVE GROUP INDEX OF REFRACTION (N\eff\):
1.4675 at 1310 nm
1.4681 at 1440 nm
FATIGUE RESISTANCE PARAMETER (n\d\):
greater than or = to 20
COATING STRIP FORCE:
Dry: 0.7 lbs. (3.2N)
Wet: 14 days room temperature: 0.7 lbs. (3.2N)
COATINGS
Corning SMF-28 optical fiber also is available with CSB4 500 m coating.
Contract No. 97TX-10072
<PAGE>
Exhibit D Page 5of 8
Contract No. 97TX-10072
ELI Telecommunications Corporation
Effective on the Effective Date
CORNING(R) SMF/DS(TM) CPC6 SINGLE-MODE
DISPERSION-SHIFTED OPTICAL FIBER
GENERAL
Corning(R) SMF/DS(TM) single mode fiber is designed for use in long-haul and
high capacity applications where 1550 n= systems offer reduced regeneration
frequency, and use of Erbium-doped Fiber Amplifiers. Applications for this
product include telephony, cable television, private network, and submarine
systems where long-link spans and high data rates are required.
SMF/DS is optimized for use in the 1550 nm wavelength region. With low
dispersion in this operating window, fiber information-carrying capacity is at
its highest. The Patented segmented core design has achieved low dispersion,
attenuation, and bend loss at the 1550 operating wavelength.
Corning's enhanced, dual layer acrylate CPC6 coating provides excellent fiber
protection and is easy to work with. CPC6 can be mechanically stripped and has
an outside diameter of 245 m. CPC6 is optimized for use in many single and
multi-fiber cable designs including loose tube, ribbon, slotted core, and tight
buffer cables.
SMF/DS fiber is manufactured using the Outside Vapor Deposition (OVD) process,
which produces a totally synthetic, ultra-pure fiber. As a result, Corning
SMF/DS has consistent geometric properties, high strength, and low attenuation.
Corning SMF/DS fiber can be counted on to deliver excellent performance and high
reliability, reel after reel.
FEATURES & BENEFITS
o Patented segmented core design provides low attenuation, dispersion, and bend
loss at 1550 nm.
o Outstanding geometrical properties for low splice loss and high splice
yields.
o OVD manufacturing reliability and product consistency.
o Optimized for use in loose tube, ribbon, and other common cable designs.
Contract No. 97TX-10072
<PAGE>
Exhibit D Page 6of 8
Contract No. 97TX-10072
ELI Telecommunications Corporation
Effective on the Effective Date
OPTICAL SPECIFICATIONS
ATTENUATION
ATTENUATION CELL: POINT DISCONTINUITY:
less than or = to 0.25 dB/km at 1550 nm No point discontinuity great than 0.10
dB at 1550 nm.
- -----------------------------------------
ATTENUATION VS. WAVELENGTH
- -----------------------------------------
Range Ref. # Max Increase The attenuation in a given wavelength
(nm) (nm) a (dB/km) range does not exceed attenuation of
the reference wavelength (#) by more
than the value a.
- ------------------------------------------
1525-1575 1550 0.05
- ------------------------------------------
- --------------------------------------------------------
ATTENUATION WITH BENDING
- --------------------------------------------------------
Mandrel Number of Wavelength Induced The induced attenuation
Diameter Turns (nm) Attenuation (dB) due to fiber wrapped
(mm) around a mandrel of a
- -------------------------------------------------------- specified diameter.
32 1 1550 less than or = to 0.50
- --------------------------------------------------------
40 100 1550 less than or = to 0.05
- --------------------------------------------------------
o CABLE CUTOFF WAVELENGTH (#ccf) o MODE FIELD DIAMETER
#ccf less than 1260 nm 8.10 + 0.65 nm at 1550 nm
-
o DISPERSION
Zero Dispersion Wavelength (#-): 1535 nm less than or = to #- less than or =
to 1565 nm
Zero Dispersion Slope (S\o\): less than or = to 0.085 ps/(nm to the second
power . km)
Total Dispersion: less than or = to 2.7 ps/(nm . km) over the range 1525 to
1575
- --------------------------------------------------------------------------------
DISPERSION CALCULATION
- --------------------------------------------------------------------------------
Dispersion = D(#)=S\o\(# - #--) [ps/(nm . km), for 1500 nm less than or = to #
less than or = to 1600 nm # = Operating Wavelength
- --------------------------------------------------------------------------------
Contract No. 97TX-10072
<PAGE>
Exhibit D Page 7of 8
Contract No. 97TX-10072
ELI Telecommunications Corporation
Effective on the Effective Date
ENVIRONMENTAL SPECIFICATIONS
- --------------------------------------------------------
ENVIRONMENTAL TEST INDUCED Operating Temperature Range
CONDITION ATTENUATION -60 degree C + 85 degree C
(dB/Km)
- --------------------------------------------------------
1550 nm
- --------------------------------------------------------
Temperature Dependence less than or = to 0.03
- -60 degree C to 85 degree C
- --------------------------------------------------------
Temperature-Humidity less than or = to 0.05
Cycling
- -10 degree C to + 85 degree
C, up 98% RH
- --------------------------------------------------------
Water Immersion, 23 degree C less than or = to 0.05
- --------------------------------------------------------
Heat Aging, 85 degree C less than or = to 0.05
- --------------------------------------------------------
DIMENSIONAL SPECIFICATIONS
Standard Length (km/reel): 4.4 - 25.0
*Longer spliced lengths available at a premium
GLASS GEOMETRY
Fiber Curl: greater than or = to 2.0m radius of curvature
Cladding Diameter: 125.0 + 1.0 m
-
Core-Clad Concentricity: less than or = to 1.0 m
Cladding Non-Circularity:less than 2.0%
COATING GEOMETRY
Coating Diameter: 245 + 10 m
-
Coating-Cladding Concentricity: less than 12 m
[ Min. Cladding Diameter ]
Defined as: 1 - ---------------------- X 100
[ Max. Cladding Diameter ]
MECHANICAL SPECIFICATIONS
PROOF TEST:
The entire length of fiber is subjected to a tensile proof stress greater than
or = to 100 kpsi (0.7 GN/m to the second power)*
*Higher proof test available at a premium.
CONTRACT No. 97TX-10072
<PAGE>
Exhibit D, Page 8 of 8
Contract No. 97TX-10072
ELI Telecommunications Corporation
Effective on the Effective Date
PERFORMANCE CHARACTERIZATIONS
Characterized parameters are typical values.
ATTENUATION AT 1310 nm: REFRACTIVE INDEX DIFFERENCE:
0.38dB/km The refractive index difference between the peak
of the core and the cladding is 0.9%, and the
difference between the peak of the ring and
cladding is 0.3%
NUMBERICAL APERTURE: EFFECTIVE GROUP INDEX OF REFRACTION (N\eff\):
0.17 1.4718 at 1310 nm
NA was measured at the one 1.4711 at 1550 nm
perecent power angle of a
one-dimensional far-field
scan at 1550 nm.
ZERO DISPERSION WAVELENGTH FATIGUE RESISTANCE PARAMETER (n\d\):
(#\O\):
1550 nm greater than or = to 20
ZERO DISPERSION SLOPE (S\o\): COATING STRIP FORCE:
0.075 ps/(nm to the second Dry: 0.7 lbs. (3.2N)
power . km) Wet: 14 days room temperature: 0.7 lbs. (3.2N)
8 Contract No. 97TX-10072
<PAGE>
Exhibit E, Page 1 of 1
Contract No. 97TX-10072
ELI Telecommunications Corporation
Effective on the Effective Date
DETAILED RESTORATION PLAN
(To be included upon the Energization Date)
1 Contract No. 97TX-10072
<PAGE>
EXHIBIT 10.4
------------------------------------------
OPTICAL FIBER LEASE AGREEMENT
DATED EFFECTIVE AS OF SEPTEMBER 11, 1996
BETWEEN
ELECTRIC LIGHTWAVE, INC.
AND
SALT RIVER PROJECT AGRICULTURAL
IMPROVEMENT AND POWER DISTRICT
------------------------------------------
[Asteriks herein denote confidential material which has been omitted pursuant to
a request for confidential treatment. Such material has been filed separately
with the Securities and Exchange Commission]
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
<TABLE>
<S> <C> <C>
ARTICLE I: DEFINITIONS......................................... 1
-----------
ARTICLE II: SYSTEM.............................................. 13
------
2.1 Existing SRP Operations and Network................. 13
-----------------------------------
2.2 Existing ELI Operations and Network................. 14
-----------------------------------
2.3 SRP Build-Out....................................... 14
-------------
2.4 ELI Build-Out....................................... 14
-------------
ARTICLE III: LEASE OF FIBER...................................... 15
--------------
3.1 Lease of Fiber to ELI............................... 15
---------------------
3.2 Use of Leased Fiber................................. 15
-------------------
3.3 Term of Lease....................................... 16
-------------
3.4 Operating Lease Payments............................ 16
------------------------
ARTICLE IV: RESERVED FIBER...................................... 16
--------------
4.1 Reserved Fiber...................................... 16
--------------
4.2 Dark Fiber Reservation.............................. 17
----------------------
4.3 Amount of Reserved Fiber............................ 17
------------------------
4.4 Sale of Network Services and Elements............... 17
-------------------------------------
ARTICLE V: FINANCIAL TERMS..................................... 17
---------------
5.1 Operating Revenues.................................. 17
------------------
5.2 Base Case Financial Model........................... 18
-------------------------
5.3 Annual Budgeting Process............................ 19
------------------------
5.4 Operating Lease Percentage.......................... 19
--------------------------
5.5 Operating Lease Payment............................. 20
-----------------------
5.6 Annual Adjustment for Past Operating Lease Payments. 24
---------------------------------------------------
5.7 SRP Direct Operating Services....................... 25
-----------------------------
5.8 Minimum Performance Standards....................... 26
-----------------------------
5.9 Books, Records and Audit Rights..................... 27
-------------------------------
</TABLE>
- i -
<PAGE>
<TABLE>
<C> <S> <C>
ARTICLE VI: UTILICOM SERVICES............................................27
-----------------
6.1 Right of SRP to Provide Utilicom Services Over the System....27
---------------------------------------------------------
6.2 System Costs and Charges for Utilicom Services...............27
----------------------------------------------
6.3 Tracking of Utilicom Services................................29
-----------------------------
6.4 Quarterly Review of Utilicom Services........................29
-------------------------------------
ARTICLE VII: SYSTEM DESIGN................................................29
-------------
7.1 Integrated Design............................................29
-----------------
7.2 Design Responsibilities......................................30
-----------------------
7.3 Information Requests.........................................31
--------------------
ARTICLE VIII: CONSTRUCTION OF SEGMENTS.....................................33
------------------------
8.1 Construction of Segments.....................................33
------------------------
8.2 Future Segments..............................................34
---------------
8.3 Work Standards...............................................36
--------------
8.4 Supply of System Materials...................................36
--------------------------
8.5 Changes......................................................37
-------
8.6 Use of Contractors...........................................38
------------------
8.7 Inspection of Work and Acceptance of Construction............39
-------------------------------------------------
8.8 As-Built Drawings............................................40
-----------------
8.9 Correction of Work...........................................42
------------------
8.10 Title and Risk of Loss.......................................43
----------------------
8.11 Customer Installations.......................................43
----------------------
ARTICLE IX: MAINTENANCE..................................................44
-----------
9.1 General Responsibilities.....................................44
------------------------
9.2 Maintenance Procedures.......................................45
----------------------
9.3 Maintenance Supplies.........................................45
--------------------
9.4 Repair Timing................................................45
-------------
9.5 Staff Training...............................................46
--------------
ARTICLE X: PROPERTY RIGHTS AND OBLIGATIONS..............................46
-------------------------------
10.1 Rights of Way and Building Entrances.........................46
------------------------------------
10.2 Cross Licenses...............................................47
--------------
10.3 Route Designations...........................................48
------------------
10.4 Right of Entry...............................................48
--------------
10.5 Entry Conditions.............................................49
----------------
</TABLE>
- ii -
<PAGE>
<TABLE>
<C> <S> <C>
10.6 Property Right Obligations...................................50
--------------------------
10.7 Property Interest Documentation..............................52
-------------------------------
10.8 Memorandum of Agreement......................................52
-----------------------
10.9 Incremental Property Rights Costs............................52
---------------------------------
10.10 Franchise Rights and Licensing Costs.........................53
------------------------------------
10.11 Liens........................................................54
-----
10.12 Discontinuance and Relocation................................57
-----------------------------
ARTICLE XI: SYSTEM OPERATIONS AND COORDINATION...........................57
----------------------------------
11.1 Operations...................................................57
----------
11.2 Coordinating Committee.......................................59
----------------------
11.3 Network Deployment Committee.................................62
----------------------------
11.4 Staffing.....................................................64
--------
ARTICLE XII: REPRESENTATIONS, WARRANTIES AND COVENANTS....................64
-----------------------------------------
12.1 Representations, Warranties and Covenants of ELI.............64
------------------------------------------------
12.2 Representations, Warranties and Covenants of SRP.............67
------------------------------------------------
12.3 Confidentiality..............................................69
---------------
12.4 Cooperation..................................................72
-----------
12.5 Regulatory Compliance........................................73
---------------------
12.6 Certificates.................................................73
------------
12.7 Independent Contractor Status................................74
-----------------------------
12.8 Transactions with Affiliates.................................74
----------------------------
12.9 Further Assurances...........................................74
------------------
12.10 Nonexclusive Agreement.......................................75
----------------------
12.11 Damage and Destruction.......................................75
----------------------
ARTICLE XIII: INSURANCE....................................................76
---------
13.1 Required Insurance Coverage..................................76
---------------------------
13.2 General Conditions...........................................76
------------------
ARTICLE XIV: ASSIGNMENT, SUBLETTING AND OTHER TRANSFERS...................77
------------------------------------------
14.1 Transfers....................................................77
---------
14.2 ELI or SRP Financing.........................................78
--------------------
14.3 SRP and ELI Recognition of Transferees.......................78
--------------------------------------
14.4 No Assumption or Release.....................................79
------------------------
14.5 Mergers and Acquisitions.....................................79
------------------------
14.6 No Third Party Beneficiaries.................................79
----------------------------
</TABLE>
- iii -
<PAGE>
<TABLE>
<C> <S> <C>
ARTICLE XV: CONDEMNATION.................................................79
------------
15.1 Taking.......................................................79
------
15.2 Taking Awards................................................80
-------------
15.3 Notice of Taking.............................................80
----------------
ARTICLE XVI: ENVIRONMENTAL HAZARD LIABILITY...............................81
------------------------------
16.1 Representations..............................................81
---------------
16.2 Responsibilities of Parties..................................81
---------------------------
16.3 Alternate Locations..........................................82
-------------------
ARTICLE XVII: LIABILITY AND INDEMNITY......................................82
-----------------------
17.1 ELI Indemnity................................................82
-------------
17.2 SRP Indemnity................................................83
-------------
17.3 No Consequential Damages.....................................83
------------------------
17.4 Waiver of Subrogation........................................84
---------------------
17.5 Defense of Claims............................................84
-----------------
17.6 Third Party Claims...........................................84
------------------
17.7 Survival.....................................................84
--------
17.8 Limitation of ELI Liability..................................85
---------------------------
17.9 Limitation of SRP Liability..................................85
---------------------------
17.10 Applicability of Liability Limitations.......................85
--------------------------------------
ARTICLE XVIII: FORCE MAJEURE................................................86
-------------
18.1 Excuse of Performance........................................86
---------------------
18.2 Definition...................................................86
----------
18.3 Continuance after Force Majeure Event........................87
-------------------------------------
ARTICLE XIX: BREACH AND TERMINATION.......................................88
----------------------
19.1 Termination Events...........................................88
------------------
19.2 Actions Following Occurrence of Termination Event............90
-------------------------------------------------
19.3 Rights of ELI and SRP Upon Termination.......................91
--------------------------------------
ARTICLE XX: MISCELLANEOUS................................................93
-------------
20.1 Amendments...................................................93
----------
20.2 Binding Effect...............................................93
--------------
</TABLE>
- iv -
<PAGE>
<TABLE>
<C> <S> <C>
20.3 Waivers......................................................93
-------
20.4 Notices......................................................93
-------
20.5 Severability.................................................94
------------
20.6 Interpretation...............................................95
--------------
20.7 Governing Law and Choice of Forum............................95
---------------------------------
20.8 Commissions..................................................95
-----------
20.9 Counterparts.................................................95
------------
20.10 Attorney Fees................................................96
-------------
20.11 Costs........................................................96
-----
</TABLE>
EXHIBITS
- --------
Exhibit "A" ELI Construction Plan
Exhibit "B" Network Maps
Exhibit "C" Initial Base Case Financial Model
Exhibit "D" SRP Construction Plan
Exhibit "E" Existing SRP Network Contracts
Exhibit "F" Reserved Fiber Allocation for Existing Segments
Exhibit "G" Operating Lease Payment Calculation Examples
Exhibit "H" Coordinating Committee
Exhibit "I" Network Deployment Committee
Exhibit "J" Staffing
- v -
<PAGE>
OPTICAL FIBER LEASE AGREEMENT
-----------------------------
THIS OPTICAL FIBER LEASE AGREEMENT ("Agreement") is made and entered
into effective as of September 11, 1996, by and between ELECTRIC LIGHTWAVE,
INC., a Delaware corporation ("ELI"), and SALT RIVER PROJECT AGRICULTURAL
IMPROVEMENT AND POWER DISTRICT, an Agricultural Improvement District organized
and existing under the laws of the State of Arizona ("SRP").
R E C I T A L S
- - - - - - - -
A. ELI is a supplier of telecommunications services in the Phoenix,
Arizona metropolitan area.
B. SRP is a supplier of electric power and communications-enabled power
related products and services in portions of Maricopa County, Gila County and
Pinal County, Arizona.
C. ELI and SRP are each in the process of deploying fiber optic cable in
the Phoenix, Arizona metropolitan area to expand their existing communications
networks.
D. ELI desires to lease optical fibers from SRP, and SRP, upon the terms,
covenants and conditions set forth in this Agreement, is willing to lease
optical fiber to ELI.
NOW, THEREFORE, in consideration of the mutual promises contained in
this Agreement and for good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged, ELI and SRP agree as follows:
ARTICLE I
DEFINITIONS
-----------
As used in this Agreement, the following terms shall have the meanings
specified below:
<PAGE>
"Acceptance of Construction" shall mean the written notification from
ELI to SRP, or from SRP to ELI, pursuant to Section 8.7, that specified work has
been inspected by such party and found to have been performed substantially in
accordance with the requirements of this Agreement.
"Additional Segment" shall mean those Segments identified on the ELI
Construction Plan and the SRP Construction Plan for construction after the date
of this Agreement by ELI or by SRP.
"Ad Valorem Taxes" shall mean ad valorem property taxes, special
assessments, local improvement district levies and other levies assessed against
the Facilities, the System or any Right of Way.
"Affected Portion" shall mean the portion of any Segment that is or
may: (1) be affected by a Taking; (2) become the subject of a lien or transfer;
or (3) be damaged or destroyed as the result of the occurrence of an event of
casualty.
"Affiliate" shall mean, with respect to either ELI or SRP, any
corporation that controls such party, is controlled by such party, or is with
such party under common control of another entity.
"Agent" shall mean the agent of any permitted Transferee who, pursuant
to Section 14.2, is entitled to receive any notices required to be given under
the terms of this Agreement.
"Agreement" shall mean this Optical Fiber Lease Agreement.
"Approvals" shall mean all permits, approvals and licenses from all
government authorities or other parties having jurisdiction or approval rights
respecting: (1) the use and
- 2 -
<PAGE>
occupation of any Right of Way where Facilities are located or to be
constructed; and (2) the use of Facilities.
"Base Case Financial Model" shall mean the economic analysis of the
revenues, expenses, capital outlays, income and cash flows projected over a
period beginning on the effective date of this Agreement and ending December 31,
2011. The Base Case Financial Model determines the present value of existing
and projected future capital investment (less Residual Value at the end of the
Term), then applies a formula to determine an Operating Lease Payment to
equalize the return of ELI and SRP on the present value of their respective
capital investments over the Term. The Base Case Financial Model will be
reevaluated from time to time as provided in Article V.
"Building Entrance" shall mean that portion of the System which runs
from a connection point on the System to the point-of-presence inside a
customer's building, including all Rights of Way, conduit, Fiber, fiber optic
patch panel and other Facilities necessary to establish the connection from a
connection point on the System to the customer's building.
"Changes" shall mean changes, additions to, deletions from or other
modifications to the construction plans for a Segment.
"Construction Plans" shall mean, collectively, the ELI Construction
Plan and the SRP Construction Plan.
"Coordinating Committee" shall mean the committee comprised of
representatives of ELI and SRP, as described in Section 11.2.
"Cost of Goods Sold" shall mean the actual cost of services purchased
for resale and the cost of leased Facilities.
- 3 -
<PAGE>
"Dark Fiber" shall mean Fiber through which no light is transmitted.
"Deferred Operating Lease Payment" shall mean the difference between
the hypothetical Operating Lease Payment, calculated as described in Section
5.5(a)(4), and the actual Operating Lease Payment paid by ELI to SRP in any of
the 15 consecutive calendar quarters beginning with year 1 of the Base Case
Financial Model. In no event will the Deferred Operating Lease Payment be less
than zero.
"Direct Operating Costs" shall include ELI Phoenix Direct Operating
Expenses and SRP Phoenix Direct Operating Expenses.
"Electric Services" shall mean those electric power generation,
transmission services, distribution services and other services relating to the
use of electric power, other than Utilicom Services, that SRP supplies to
customers.
"ELI Capital" shall include: (1) all capital expenditures ELI has
already incurred or, pursuant to the terms of this Agreement, will incur to
complete the ELI Construction Plan, including, without limitation, expenditures
to: (a) connect the existing ELI Network with the existing SRP Network; (b)
install a switch to provide Telecommunications Services; and (c) provide System
Electronics needed to deliver Telecommunications Services; (2) all ELI
expenditures to construct Future Segments, including the reasonable market value
of all Rights of Way and Building Entrances acquired to construct a Future
Segment; (3) any other capital expenditures approved by the Coordinating
Committee; and (4) ELI's Unreimbursed Direct Operating Expenses.
"ELI Construction Plan" shall mean the build-out plan for the
deployment by ELI of Additional Segments, including preliminary route
designations, construction schedule and Fiber
- 4 -
<PAGE>
capacity. A copy of the ELI Construction Plan is attached to and incorporated by
reference in this Agreement as Exhibit "A."
"ELI Facilities" shall mean those components of the System, other than
the SRP Facilities, whether located on or off a Right of Way, now owned or
hereafter (pursuant to the terms of this Agreement) acquired by ELI, including,
without limitation, Fiber, System Electronics, Building Entrances, Main Hubs,
Minihubs, junctions, terminals, regenerators, power sources, fault alarm
systems, structures and shelters, any conduit, poles or pole line attachments
associated with any of the foregoing, and all articles of personal property
owned or used by ELI connected with, necessary for, or useful to the
construction, installation, operation, maintenance, repair, reinstallation,
replacement, relocation and removal of any of the foregoing.
"ELI Network" shall mean the Fiber described on Exhibit "B" and ELI-
owned Future Segments deployed by ELI, including Fiber, System Electronics and
other ELI Facilities.
"ELI Operating Division" shall mean a regional office or service
center of ELI that, for internal accounting or regulatory purposes, has been
identified and designated as a separate division. An ELI Operating Division
shall be a geographic area reasonably consistent in size and population with
ELI's current operating divisions.
"ELI Phoenix Direct Operating Expenses" shall include the following
cost categories of the ELI Operating Division in Phoenix, Arizona that are
incurred consistent with the terms and provisions of this Agreement: (1)
corporate sales, carrier sales, marketing, technicians, maintenance,
engineering, real estate (including land rights acquisition), legal, insurance
(including all expenses incurred for loss, damage or liability not covered by
insurance), regulatory, facilities and property
- 5 -
<PAGE>
taxes; (2) SRP Direct Operating Services; and (3) a cost factor equal to the ELI
Vancouver Operating Expenses for the relevant accounting period divided by the
total number of ELI Operating Divisions existing at the end of such accounting
period, but in no event less than the number of ELI Operating Divisions shown on
the Initial Base Case Financial Model. If applicable, a reasonable component for
ELI overhead (other than a duplication for ELI Vancouver Operating Expenses) may
be included in the foregoing cost categories.
"ELI Vancouver Operating Expenses" shall mean the following services
and activities provided by ELI's home office in Vancouver, Washington for all
ELI Operating Divisions, wherever located: network control center, network
support, provisioning, customer service, system engineering and support,
telemarketing, sales support, carrier sales, marketing, accounting, finance,
billing, facilities, purchasing, legal, regulatory, and information systems, and
may include expenses of ELI's parent corporation or any ELI Affiliate directly
related to the System, but shall not include an allocation of overhead of ELI's
parent corporation or any ELI Affiliate.
"ELI's Preferred Rates" shall mean, from time to time during the Term,
the lowest prices then charged by ELI to similarly situated commercial
Telecommunications Services customers for a similar service or group of
services.
"Existing Segment" shall mean Segments owned by SRP or ELI existing as
of the date of this Agreement and identified on the ELI Construction Plan and
the SRP Construction Plan.
"Facilities" shall mean, collectively, the ELI Facilities and the SRP
Facilities.
- 6 -
<PAGE>
"Fiber" shall mean the fiber optic strands that, pursuant to the terms
of this Agreement, are designed, deployed, interconnected and used to create the
System for the transmission of Telecommunications Services and Utilicom Services
by ELI and SRP.
"Force Majeure" shall have the meaning given in Section 18.2.
"Future Segments" shall mean any Segments other than Additional
Segments that, after the date of this Agreement, may be proposed by either ELI
or SRP for addition to their respective networks and approved as described in
Section 8.2.
"Gross Margin" shall mean, for any accounting period, the difference
between the Gross Revenues generated from the sale of Telecommunications
Services for such period, and the Cost of Goods Sold for the corresponding
period.
"Gross Revenues" means all revenues billed by ELI for
Telecommunications Services provided by means of the System, less actual
uncollectibles (as determined consistent with ELI's business practices).
"Hazardous Substances" shall mean any waste, pollutant (as that term
is defined in 42 U.S.C. (S) 9601(33) or in 33 U.S.C. (S) 1362(13) or any
successor statutes thereto), hazardous substance (as that term is defined in 42
U.S.C. (S) 9601(14) or any successor statute thereto), hazardous chemical (as
that term is defined by 29 CFR Part 1910.1200(c) or any successor regulation
thereto), toxic substance, hazardous waste (as that term is defined in 42 U.S.C.
(S) 6901 or any successor statute thereto), radioactive material, special waste,
petroleum, including crude oil or any other hydrocarbon based substance, waste,
or breakdown or decomposition product thereof, or any
- 7 -
<PAGE>
constituent of any such substance or waste, including, but not limited to
polychlorinated biphenyls, and asbestos.
"Hub Site" shall mean the location of any Main Hub or Minihub.
"Initial Base Case Financial Model" shall mean the Base Case Financial
Model attached to and incorporated by reference in this Agreement as Exhibit
"C".
"Key Accounts" shall mean the customer accounts of SRP which are high
volume users of SRP's Electric Services which have been identified and
classified by SRP for special billing, accounting, customer service, marketing
or other purposes pursuant to the established Key Account program offered by SRP
to its customers, as now constituted or as it may hereafter be amended.
"Leased Fiber" shall mean all of the Fiber now or hereafter deployed
in the SRP Network.
"License" shall mean a license to exercise the rights granted to ELI
and SRP in Section 10.2 and elsewhere in this Agreement.
"Main Hub" shall mean any Hub Site, other than a Minihub, where
Facilities have been or are proposed to be constructed or installed to provide
the central point within the System to cross-connect traffic between end-users.
"Maps" shall mean: (1) the maps or drawings attached to and
incorporated by reference in this Agreement as Exhibit "B" which depict ELI's
and SRP's Existing Segments and Additional Segments; (2) any updates to the
foregoing; and (3) any other drawings or maps that either ELI or SRP is required
to prepare, update or submit to the Network Deployment Committee pursuant
- 8 -
<PAGE>
to the terms of this Agreement, or to any state or federal regulatory agency as
required by applicable statute, rule or regulation.
"Minihub" shall mean any Hub Site, other than a Main Hub site, where
Facilities have been or are proposed to be constructed or installed to provide a
network traffic concentration point for distribution to a Main Hub.
"Minimum Performance Standards" shall mean the performance criteria
and targets for the sale of Telecommunications Services over the System during
the Term identified in Section 5.8.
"Net Operating Income" shall mean, generally, Gross Margin less Direct
Operating Costs. However, as described in Section 5.5, the calculation of Net
Operating Income may also include a reduction for Unreimbursed Direct Operating
Expenses and for Deferred Operating Lease Payments for purposes of calculating
the Operating Lease Payment in certain years of the Term.
"Network Deployment Committee" shall mean the committee comprised of
representatives of ELI and SRP, as described in Section 11.3, whose primary
function shall be the coordination of efforts between ELI and SRP relating to
the design, construction and maintenance of the System.
"Operating Lease Payment" shall mean the quarterly lease payment of
ELI to SRP for use of the Leased Fiber.
"Operating Lease Percentage" shall mean the percentage factor
generated under the terms and assumptions of the Base Case Financial Model as
part of the annual budgeting process
- 9 -
<PAGE>
described in Section 5.4 that, when multiplied against the Net Operating Income
for any quarter, establishes the Operating Lease Payment (if any) for such
quarter.
"Reserved Fiber" shall mean that portion of the Fiber in the SRP
Network, now or hereafter deployed, which is allocated to the exclusive use of
SRP.
"Residual Value" shall mean the value of SRP Capital and ELI Capital
(not including Unreimbursed Direct Operating Expenses and Unreimbursed Deferred
Operating Lease Payments) remaining at the end of the Term, determined on a ten-
year straight-line depreciation schedule, using a mid-year convention.
"Right of Way" shall mean the real property and rights related thereto
used by ELI for its Telecommunications Services transmission system or by SRP
for its Electric Services and Utilicom Services transmission systems that are
used, owned, operated, leased or controlled by ELI or SRP, as applicable,
pursuant to either: (1) an historical use that is not based on a direct grant
of authority from the applicable property owner; or (2) a subsisting grant,
easement, lease, franchise, license or other agreement.
"Segment" shall mean a portion of the System with defined beginning
and end points.
"SONET" shall mean a synchronous optical network that is capable of
high speed transmission of digital signals.
"SRP Capital" shall include: (1) all capital expenditures SRP has
already incurred as shown on Exhibit "C" or, pursuant to the terms of this
Agreement, will incur to complete the SRP Construction Plan, including, without
limitation, all reasonable capital expenditures for the deployment of Fiber,
including the Reserved Fiber; (2) all SRP expenditures to construct Future
- 10 -
<PAGE>
Segments, including the reasonable market value of all Rights of Way and
Building Entrances contributed by SRP to construct a Future Segment; (3) any
other capital expenditures approved by the Coordinating Committee; and (4) SRP's
Unreimbursed Direct Operating Expenses.
"SRP Construction Plan" shall mean the build-out plan for the
deployment by SRP of Additional Segments, including preliminary route
designations, construction schedule and Fiber capacity. A copy of the SRP
Construction Plan is attached to and incorporated by reference in this Agreement
as Exhibit "D."
"SRP Direct Operating Services" shall mean those services provided by
SRP to ELI as described in Section 5.7.
"SRP Facilities" shall mean those components of the SRP Network, other
than the ELI Facilities now owned or hereafter (pursuant to the terms of this
Agreement) acquired by SRP, including, without limitation, Fiber, Building
Entrances, junctions, terminals, regenerators, power services, fault alarm
systems, structures and shelters, any conduit, poles or pole line attachments
associated with any of the foregoing, and all articles of personal property
owned or used by SRP connected with, necessary for, or useful to the
construction, installation, operation, maintenance, repair, reinstallation,
replacement, relocation and removal of any of the foregoing.
"SRP Network" shall mean the Fiber described in Exhibit "B" and SRP-
owned Future Segments, including Fiber and the other SRP Facilities.
"SRP Phoenix Direct Operating Expenses" shall include the following
cost categories of SRP associated with Telecommunications Services offered or
provided by ELI, or jointly by SRP and ELI, by means of the System, and that are
incurred consistent with the terms and provisions of
- 11 -
<PAGE>
this Agreement: business development, marketing, sales and sales support,
technicians, maintenance, engineering, real estate (including land rights
acquisition), legal, insurance (including all expenses incurred for loss, damage
or liability not covered by insurance) and property taxes. If applicable, a
reasonable component for SRP overhead may be included in the foregoing cost
categories.
"System" shall mean the combination of the ELI Network and the SRP
Network currently installed or to be deployed by ELI and SRP pursuant to the
terms of this Agreement, including all Segments, all improvements, Facilities,
Building Entrances and other equipment which creates the Fiber communications
system contemplated by this Agreement. The System shall not include the
Reserved Fiber or any equipment currently owned or hereafter purchased by or for
SRP solely for use in connection with the Reserved Fiber or SRP's Electric
Services transmission system.
"System Electronics" shall mean all items of equipment, hardware,
software, electronics, optronics and any components thereof owned by ELI that
are used to transmit or monitor Telecommunications Services or Utilicom Services
over the Leased Fiber or the System, including, without limitation, routers,
access nodes, MSDTs, channel banks, digital system cross connect equipment,
fiber optic terminals, fiber optic patch panels, multiplexers and switches.
"System Materials" shall mean all Fiber, System Electronics, equipment
and other materials obtained by ELI or SRP under the terms of this Agreement to
construct any Segment.
"Taking" shall mean the exercise of the power of eminent domain by any
public or quasi-public authority, other than an exercise by ELI or SRP in
accordance with statutory authority.
"Telecommunications Services" shall mean all services delivered by
means of the System (other than Utilicom Services), including, without
limitation, the two-way transmission of
- 12 -
<PAGE>
signals, messages, images, sounds, data and other information of any nature
transmitted to customers by means of the System.
"Term" shall mean the period of time beginning on the effective date
of this Agreement and terminating on December 31, 2011.
"Transferee" shall mean any individual or entity to which either ELI
or SRP, pursuant to Article XIV, transfers or assigns any interest in this
Agreement or, as applicable, in the ELI Facilities or the SRP Facilities.
"Unreimbursed Direct Operating Expenses" shall mean all ELI Phoenix
Direct Operating Expenses and SRP Phoenix Direct Operating Expenses that are not
recovered by the parties under the terms of the Base Case Financial Model in the
quarter in which they are incurred.
"Utilicom Services" shall mean all services delivered by means of the
System including, without limitation, the two-way transmission of signals,
messages, images, sounds, data and other information of any nature transmitted
to customers by means of the System (other than Telecommunications Services),
that are incidental to Electric Services and water services provided by SRP and
its Affiliates, to their customers.
ARTICLE II
SYSTEM
------
2.1 Existing SRP Operations and Network. SRP maintains an extensive
-----------------------------------
water delivery system and is a provider of electric power and water. As part of
its electrical power delivery system, SRP has installed a communications network
consisting of approximately 165.6 miles of 20-strand, 24-strand and 48-strand
Fiber cable.
- 13 -
<PAGE>
2.2 Existing ELI Operations and Network. ELI provides
-----------------------------------
Telecommunications Services in the States of Washington, Oregon, California,
Arizona and Utah. ELI's Arizona operations are centered in the Phoenix
metropolitan area and consist of: (a) special access service types such as:
DS-0, DS-1, and DS-3; and (b) frame relay, FDDI, and other data related
services. ELI has applied for operating authority from the Arizona Corporation
Commission to provide intrastate Telecommunications Services, including local
exchange services, in Arizona. ELI has installed a metropolitan area network in
downtown Phoenix, Arizona consisting of approximately 8 miles of 96-strand Fiber
cable.
2.3 SRP Build-Out. Over the next four (4) fiscal years of SRP (May 1
-------------
to April 30), starting with SRP's 1996/1997 fiscal year, SRP, at its own
expense, shall construct the Additional Segments described in the SRP
Construction Plan, approximately along the routes identified on the Map attached
to this Agreement as Exhibit "B". SRP's total Fiber cable deployment commitment
consists of an additional approximately 324 miles of Fiber cable. It is
anticipated that SRP will expend approximately [*] to complete the SRP
Construction Plan. The Additional Segments to the SRP Network shall be
designed, constructed and maintained in accordance with the terms, covenants and
conditions of this Agreement.
2.4 ELI Build-Out. Over the next three (3) calendar years (including
-------------
1996), ELI, at its own expense, shall construct and install:
(a) Additional Segments. The Additional Segments described in
-------------------
the ELI Construction Plan, approximately along the routes identified on the
Map attached to this Agreement as Exhibit "B." ELI's total Fiber cable
deployment commitment consists of an
- 14 -
* Confidential material has been omitted pursuant to a request for confidential
treatment. Such material has been filed separately with the Securities and
Exchange Commission.
<PAGE>
additional approximately 54.74 miles of Fiber cable. It is estimated that
ELI will expend approximately $3,350,000.00 to complete the Additional
Segments.
(b) System Electronics. The System Electronics and related
------------------
Facilities (other than Fiber in the SRP Network) as described in Section
8.1. It is anticipated that ELI will expend approximately $27,008,700 to
install the System Electronics and related Facilities.
The Additional Segments to the ELI Network and the ELI System Electronics shall
be designed, constructed and maintained in accordance with the terms, covenants
and conditions of this Agreement.
ARTICLE III
LEASE OF FIBER
--------------
3.1 Lease of Fiber to ELI. SRP hereby leases to ELI, and ELI leases
---------------------
from SRP, all of the Leased Fiber during the Term in accordance with and subject
to the provisions of this Agreement. The Leased Fiber will be for the exclusive
use of ELI, with the exception of the Reserved Fiber as set forth in Article IV.
The Leased Fiber subject to this Agreement shall be Dark Fiber. ELI, at its
expense, shall supply all System Electronics and related Facilities (other than
Fiber in the SRP Network) needed to supply Telecommunications Services over the
System. All such System Electronics, and related Facilities shall be designed,
purchased, installed and maintained in accordance with the terms, covenants and
conditions of this Agreement.
3.2 Use of Leased Fiber. ELI may use the Leased Fiber solely for the
-------------------
purpose of providing Telecommunications Services. ELI shall use the Leased
Fiber in accordance with applicable laws, rules, regulations, orders and other
regulatory requirements, now or hereafter in effect, of any governmental
authority having jurisdiction over ELI, the Leased Fiber or the use
- 15 -
<PAGE>
thereof. ELI shall not use the Leased Fiber in connection with the marketing of
electric power, other than electric power supplied by SRP.
3.3 Term of Lease. The lease of the Leased Fiber to ELI shall
-------------
commence on the effective date of this Agreement and shall continue for the
Term, unless sooner terminated pursuant to the express provisions of this
Agreement
3.4 Operating Lease Payments. To the extent payable under the terms
------------------------
of the Base Case Financial Model, ELI shall make Operating Lease Payments to SRP
consistent with the following: (a) Operating Lease Payments shall be due and
payable thirty (30) days after the end of each calendar quarter; (b) an
Operating Lease Payment shall not be considered late if paid within fifteen (15)
days after it is due; and (c) each late payment will bear interest at the rate
of 12% per annum until paid. The Operating Lease Payment amount, if any, shall
be recalculated each year throughout the Term as part of the annual budgeting
process described in Section 5.3.
ARTICLE IV
RESERVED FIBER
--------------
4.1 Reserved Fiber. SRP reserves for its own use the Reserved Fiber.
--------------
SRP may use the Reserved Fiber solely for the following purposes: (a) to
provide electric and water system communications services; (b) to provide SRP
corporate telecommunications services; (c) to provide Utilicom Services; and (d)
to provide for other uses as identified in Exhibit "E" attached to and
incorporated in this Agreement by reference. Notwithstanding the foregoing, SRP
may use the Reserved Fiber for any purpose, to the extent that the Reserved
Fiber is no longer needed for the purposes set forth in subparts (a) through (d)
above. SRP shall use the Reserved Fiber in accordance with applicable laws,
rules, regulations, orders and other regulatory requirements, now or hereafter
- 16 -
<PAGE>
in effect, of any governmental authority having jurisdiction over SRP, the
Reserved Fiber or the use thereof.
4.2 Dark Fiber Reservation. SRP's Reserved Fiber shall be Dark
----------------------
Fiber. SRP shall not have the right to use System Electronics installed by ELI
for use in connection with the System for SRP's Reserved Fiber. However, ELI,
at SRP's request, may sell System services to SRP as provided in Section 4.4 and
in other sections of this Agreement.
4.3 Amount of Reserved Fiber. The amount of Reserved Fiber to which
------------------------
SRP shall be entitled for all Existing Segments and Additional Segments in the
SRP Network is identified on Exhibit "F" attached to and incorporated by
reference in this Agreement. The Coordinating Committee shall specify the
number of Reserved Fibers for Future Segments. Reserved Fiber shall be fixed
for the Term.
4.4 Sale of Network Services and Elements. To the extent it is
-------------------------------------
economically and technically feasible, SRP and its Affiliates may purchase
unbundled network elements, facilities or functions from ELI. In addition, SRP
and its Affiliates may resell all finished services sold or offered by or
through ELI. The price charged to SRP or any SRP Affiliate for all such services
and network elements shall be based on ELI's Preferred Rates.
ARTICLE V
FINANCIAL TERMS
---------------
5.1 Operating Revenues. Within the general parameters of this
------------------
Agreement, ELI and SRP shall cooperate with each other, in good faith, and shall
use their best efforts to maximize the revenues generated by the System to
provide Telecommunications Services. In addition, throughout the Term:
- 17 -
<PAGE>
(a) SRP Revenues. SRP shall be entitled to collect and retain
------------
all revenues generated by use of the System or the Reserved Fiber to
deliver services, including, without limitation, Utilicom Services, to SRP
customers.
(b) ELI Revenues. Except for SRP resale of Telecommunications
------------
Services, ELI shall collect all revenues generated by use of the System to
deliver Telecommunications Services. However, as consideration for ELI's
use of the SRP Network, ELI shall pay to SRP an Operating Lease Payment in
accordance with the terms and assumptions set forth in the Base Case
Financial Model.
5.2 Base Case Financial Model. The Base Case Financial Model
-------------------------
provides a method to calculate the Operating Lease Payment in an amount that
[*]. The Base Case Financial Model:
(a) Is based on a calendar year cycle, and starts with a year "0"
to reflect capital investments of ELI and SRP which predate the effective
date of this Agreement, and capital investments and Direct Operating Costs
of ELI and SRP after the effective date of this Agreement through December
31, 1996, and has a year "1" beginning January 1, 1997 and ending December
31, 1997;
(b) Projects expected capital expenditures by ELI and SRP over
the Term;
(c) Determines the Residual Value of capital investment at the
end of the Term;
- 18 -
* Confidential material has been omitted pursuant to a request for confidential
treatment. Such material has been filed separately with the Securities and
Exchange Commission.
<PAGE>
(d) Determines a present value in year "0" of total capital
investment of each party, less Residual Value, using an adjustable annual
discount rate which is ten percent (10%) in year "1"; and
(e) Determines a ratio of the present value of SRP Capital and
the present value of the sum of SRP Capital and ELI Capital.
The Initial Base Case Financial Model is attached to this Agreement as Exhibit
"C." Each party certifies that the Initial Base Case Financial Model represents
the party's good faith best estimate of existing and future conditions.
5.3 Annual Budgeting Process. Each year during the Term, ELI, using
------------------------
the Base Case Financial Model, will develop a Telecommunication Services
capital, operating and maintenance budget for the coming calendar year. The
budgeting process shall occur during the fourth quarter of the calendar year.
The Base Case Financial Model shall be updated with cost and revenue results for
any prior year, and the current year actual results for the first three calendar
quarters. In addition, ELI shall incorporate projections for the fourth quarter
of the current calendar year and for all remaining years of the Term. The
discount rate to be applied to the current year will be readjusted to 300 basis
points over the ten year Treasury Bond Rate established at the most recent
August Treasury auction. The results of the budgeting process and Base Case
Financial Model update shall be the basis for calculating the Operating Lease
Payment for the coming year.
5.4 Operating Lease Percentage. The Operating Lease Payment is
--------------------------
calculated by multiplying the Net Operating Income by the Operating Lease
Percentage. The Operating Lease Percentage is calculated according to this
formula:
- 19 -
<PAGE>
[*]
-------------------------------------
[*]
Initially, the Operating Lease Percentage shall be [*] as shown on the
Initial Base Case Financial Model attached to this Agreement as Exhibit "C."
However, subject to the terms and assumptions of the Base Case Financial Model,
the Operating Lease Percentage may be adjusted each year as part of the annual
budgeting and Base Case Financial Model update.
5.5 Operating Lease Payment. For any given quarter during the Term,
-----------------------
including the period between the effective date of this Agreement and December
31, 1996, the amount of the Operating Lease Payment, if any, shall be the
Operating Lease Percentage multiplied by Net Operating Income for the quarter,
plus or minus any adjustments required by Section 5.6(b).
(a) Variation of Calculation of Net Operating Income During First
-------------------------------------------------------------
15 Quarters of the Base Case Financial Model. The following formula shall
--------------------------------------------
be used at the end of Year 0 and at the end of each of the first 15
calendar quarters of the Base Case Financial Model to compute Net Operating
Income for the purpose of calculating the Operating Lease Payment:
Gross Margin
Less: Current Direct Operating Costs
Less: Accumulated Unreimbursed Direct Operating Expenses
--------------------------------------------------
Equals: Net Operating Income or (Unreimbursed Direct Operating Expenses)
Based on the foregoing calculation of Net Operating Income, the following
payment priorities and principles shall apply:
(1) The Gross Margin will first be used to pay current
Direct Operating Costs. If the Gross Margin is insufficient to pay
all current Direct
- 20 -
* Confidential material has been omitted pursuant to a request for confidential
treatment. Such material has been filed separately with the Securities and
Exchange Commission.
<PAGE>
Operating Costs, the Gross Margin will be used to pay each party's
current Direct Operating Costs on a prorated basis. Any resulting
Unreimbursed Direct Operating Expenses will be added to ELI Capital or
to SRP Capital, as applicable.
(2) If there is Gross Margin remaining after paying all
current Direct Operating Costs, the remaining Gross Margin will next
be used to repay any then accumulated Unreimbursed Direct Operating
Expenses, on a prorated basis, until all such Unreimbursed Direct
Operating Expenses have been fully repaid to ELI and SRP. The
proration will be based on the percentage that each party's
Unreimbursed Direct Operating Expenses bears to the total of
Unreimbursed Direct Operating Expenses.
(3) Any Net Operating Income remaining after paying all
current Direct Operating Costs and repaying all then accumulated
Unreimbursed Direct Operating Expenses, will be used to pay an
Operating Lease Payment to SRP.
(4) At the end of each quarter during the first 15 calendar
quarters of the Base Case Financial Model, an Operating Lease Payment
shall be hypothetically calculated as though all Unreimbursed Direct
Operating Expenses were added to capital at the end of each quarter.
In the event the hypothetical calculation produces an Operating Lease
Payment greater in amount than that actually paid, the difference is a
Deferred Operating Lease Payment and will be added to SRP Capital.
- 21 -
<PAGE>
(5) At the end of the 15th calendar quarter of the Base Case
Financial Model, any then Unreimbursed Direct Operating Expenses will
become a permanent addition to ELI Capital or SRP Capital, as
applicable.
(b) Variation of Calculation of Net Operating Income During the
-----------------------------------------------------------
16th through the 35th Quarters. The following formula shall be used at the
------------------------------
end of each of the 16th through the 35th calendar quarters of the Base Case
Financial Model to compute Net Operating Income for the purpose of
calculating the Operating Lease Payment:
Gross Margin
Less: Current Direct Operating Costs
------------------------------
Equals: Subtotal Net Operating Income, if positive
or (Unreimbursed Direct Operating Expenses), if negative.
If Subtotal Net Operating Income is positive, then:
If Subtotal Net Operating Income is greater than Prorated Portion of
Accumulated Deferred Operating Lease Payments, then:
Subtotal Net Operating Income
Less: Prorated Portion of Accumulated Deferred Operating Lease
--------------------------------------------------------
Payments
--------
Equals: Net Operating Income.
If Subtotal Net Operating Income is less than Prorated Portion of
Accumulated Deferred Operating Lease Payments, then:
Subtotal Net Operating Income
-----------------------------
Equals: Partial Payment of Prorated Portion of Accumulated Deferred
Operating Lease Payments; and
Net Operating Income is Zero.
Based on the foregoing calculation of Net Operating Income, the following
payment priorities and principles shall apply:
- 22 -
<PAGE>
(1) The Gross Margin will first be used to pay current
Direct Operating Costs. If the Gross Margin is insufficient to pay
all current Direct Operating Costs, the Gross Margin will be used to
pay each party's current Direct Operating Costs on a prorated basis.
The proration will be based on the percentage that each party's
current Direct Operating costs bears to the total of current Direct
Operating Costs. Any resulting Unreimbursed Direct Operating Expenses
will become a permanent addition to ELI Capital or to SRP Capital, as
applicable.
(2) If there is Gross Margin remaining after paying all
current Direct Operating Costs, the remaining Gross Margin will next
be used to pay a prorated portion of SRP's accumulated Deferred
Operating Lease Payments (on a quarterly basis), based on the
following table:
Percent of Total Remaining Accumulated Deferred
Quarters Operating Lease Payments Paid in Period
-------- ---------------------------------------
16 through 19 20%
20 through 23 25%
24 through 27 33%
28 through 31 50%
32 through 35 100%
(3) After paying all current Direct Operating Costs and the
prorated portion of SRP's accumulated Deferred Operating Lease
Payments, any remaining Net Operating Income will be used to pay an
Operating Lease Payment.
(4) At the end of the 35th calendar quarter of the Base Case
Financial Model, any then accumulated Deferred Operating Lease
Payments will become a permanent part of SRP Capital.
- 23 -
<PAGE>
(c) Calculation of Net Operating Lease Payment in Subsequent
--------------------------------------------------------
Quarters. Throughout the balance of the Term, Net Operating Income, for
--------
purposes of calculating the Operating Lease Payment, will be computed as
follows:
Gross Margin
Less: Current Direct Operating Costs
------------------------------
Equals: Net Operating Income or (Unreimbursed Direct Operating Expenses)
Based on the foregoing calculation of Net Operating Income, the following
payment priorities and principles shall apply:
(1) The Gross Margin will first be used to pay current
Direct Operating Costs. If the Gross Margin is insufficient to pay
all current Direct Operating Costs, the Gross Margin will be used to
pay each party's current Direct Operating Costs on a prorated basis.
The proration will be based on the percentage that each party's
current Direct Operating Costs bears to the total of current Direct
Operating Costs. Any resulting Unreimbursed Direct Operating Expenses
will become a permanent addition to ELI Capital or to SRP Capital, as
applicable.
(2) After paying all current Direct Operating Costs, any
remaining Net Operating Income will be used to pay an Operating Lease
Payment.
(d) Operating Lease Payment Examples. Examples of the
--------------------------------
calculation of the Operating Lease Payment under the principles described
in this Article V are attached to and incorporated by reference in this
Agreement as Exhibit "G."
5.6 Annual Adjustment for Past Operating Lease Payments. In the
---------------------------------------------------
event that the annual redetermination of the Base Case Financial Model changes
the Operating Lease Percentage:
- 24 -
<PAGE>
(a) The parties shall recalculate the Operating Lease Payment for
all prior years;
(b) An adjustment figure shall be calculated which in current
dollar terms (using the annual discount rate of 300 basis points above the
ten year Treasury Bond Rate as determined in Section 5.3) adjusts the prior
year payments to reflect the new Operating Lease Percentage;
(c) The Operating Lease Payments for the next four quarters shall
be proportionately increased or decreased to make the adjustment determined
in part (b); and
(d) At the end of the Term or earlier termination of this
Agreement, the parties shall determine a final, actual Operating Lease
Percentage, and ELI or SRP, as the case may be, shall make a final payment
to the other so that actual Operating Lease Payments match the final
Operating Lease Percentage.
It is the goal of this section to produce at the expiration of the Term or the
earlier termination of this Agreement equal returns on the invested capital of
ELI and SRP.
5.7 SRP Direct Operating Services. ELI may purchase from SRP certain
-----------------------------
SRP Direct Operating Services to satisfy ELI's maintenance and operating
obligations with respect to the System. A list of services SRP is willing to
provide and a projection of the annual cost of providing such services shall be
developed by SRP and submitted to ELI and the Coordinating Committee no later
than July 31 of each year. ELI may purchase all or any portion of such services
from SRP, but ELI shall approve the purchase of all such services to the extent
they are offered at market prices and at market quality. To facilitate payment
to SRP for the services selected by ELI, ELI shall include
- 25 -
<PAGE>
such services in the annual budget update. Services shall be paid on a monthly
basis and shall be in addition to any quarterly Operating Lease Payment payable
by ELI to SRP. SRP shall provide ELI with a monthly invoice describing the
services actually provided by SRP. The services that may be offered by SRP
include:
(a) Field technicians required to perform installation and
servicing duties as included in the annual budget;
(b) Services related to the procurement of Rights of Way,
Building Entrances and permits; and
(c) Network and customer project design and engineering.
5.8 Minimum Performance Standards. During the Term, ELI shall comply
-----------------------------
with the Minimum Performance Standards described in this Section 5.8. The
Minimum Performance Standards shall be calculated for each year of the Term
based on the Initial Base Case Financial Model. The Minimum Performance
Standards shall be measured on an annual basis consistent with the following:
Years of Term Performance Criteria
------------- --------------------
1 through 2 50% of projected Gross Revenues from the sale of
Telecommunications Services for such year
3 through 4 75% of projected Gross Revenues from the sale of
Telecommunications Services for such year
5 through 6 50% of the Operating Lease Payment amount in
effect for such year
7 through 15 75% of the Operating Lease Payment amount in
effect for such year
- 26 -
<PAGE>
5.9 Books, Records and Audit Rights. Each of ELI and SRP shall keep
-------------------------------
and maintain adequate books and records relating to services provided by,
revenues generated from, and costs expended with respect to the System. Each
party shall have the right, upon reasonable notice and during normal business
hours to: (a) audit the other's books and records pertaining to the operation
and performance of the System; (b) compare the System's operation to applicable
Minimum Performance Standards, budgets and the Base Case Financial Model; and
(c) monitor compliance with the terms, covenants and conditions of this
Agreement. The Coordinating Committee shall develop and approve accounting and
auditing procedures relating to the System, which procedures shall be consistent
with Generally Accepted Accounting Principles. The Coordinating Committee shall
develop standards for capitalization which will reasonably standardize the
capitalization procedures (with respect to the capitalization determinations
under this Agreement) of ELI and SRP.
ARTICLE VI
UTILICOM SERVICES
-----------------
6.1 Right of SRP to Provide Utilicom Services Over the System. SRP
---------------------------------------------------------
and its Affiliates shall have System-wide access to provide Utilicom Services to
its customers. Revenues generated from the sale of Utilicom Services shall be
excluded from the calculations of the Base Case Financial Model. Use of the
System by SRP and its Affiliates for Utilicom Services, however, is subject to
the limitations described in this Article VI.
6.2 System Costs and Charges for Utilicom Services.
----------------------------------------------
(a) Budgeting Process. During the annual budgeting process, ELI
-----------------
shall project billings for the sale of Telecommunications Services over the
System for the coming year, as described in Section 5.3. In addition, SRP
and its Affiliates shall project the type and
- 27 -
<PAGE>
quantity of Utilicom Services that will be provided over the System in the
coming year. ELI shall calculate the total charges that SRP and its
Affiliates, or their Utilicom Services customers, would be billed for the
projected Utilicom Services if such services were treated as
Telecommunications Services sold by ELI to its Telecommunications Services
customers. The charges shall be calculated using ELI's Preferred Rates to
be in effect for the coming year. The charges shall be calculated as
additional marginal costs to a customer. For example, the use of an
existing customer line for Utilicom Services shall not be considered in the
calculation, because this use would not create additional charges to the
customer. If the calculation of total Utilicom Services charges based on
the SRP budget (at ELI's Preferred Rates) exceeds five percent (5%) of the
total projected billings for the sale of Telecommunications Services for
such year, SRP and its Affiliates, shall reduce their projected Utilicom
Services to a level that does not exceed such five percent (5%) limit.
Alternatively, upon request by SRP and its Affiliates, ELI shall sell at
ELI's Preferred Rates in effect for such coming year the excess volume of
services desired by them for their Utilicom Services customers to the
extent that ELI reasonably has available capacity.
(b) Provisioning and Installations for Utilicom Services. SRP
----------------------------------------------------
shall notify ELI in writing of all orders obtained by SRP and its
Affiliates, for Utilicom Services. In the normal course of business
following receipt of notification from SRP, ELI shall provision all
Utilicom Services to be delivered over the System. ELI shall use existing
System Electronics, Fiber, circuits and customer premises equipment to
complete the provisioning requirements for the customer. If the Utilicom
Services cannot be provisioned using existing System
- 28 -
<PAGE>
Electronics, Fiber, circuits and customer premises equipment, SRP or ELI at
SRP's request, shall provision and install the necessary System
Electronics, Fiber, circuits and customer premises equipment. SRP and its
Affiliates shall pay for any additional System Electronics, Fiber, circuits
and customer premises equipment needed to supply the Utilicom Services. If
no additional provisioning is required, SRP and its Affiliates shall not be
charged for the addition of new Utilicom Services customers to the System.
6.3 Tracking of Utilicom Services. ELI shall track use of the System
-----------------------------
to provide Utilicom Services through billing or another mechanism. The
mechanism shall calculate the charges that SRP, and its Affiliates, or their
Utilicom Services customers, would be required to pay for the use of the System,
at ELI's Preferred Rates. SRP shall cooperate reasonably with ELI to measure
Utilicom Services traffic on the System. ELI shall not bill SRP or its
Affiliates for Utilicom Services provided over the System except as described in
Section 6.4.
6.4 Quarterly Review of Utilicom Services. On a calendar quarter
-------------------------------------
basis, ELI shall compare actual use of the System by SRP and its Affiliates for
Utilicom Services with the projected use of the System set forth in the budget
described in Section 6.2(a). If charges for Utilicom Services actually provided
during such quarter (based on ELI's Preferred Rates then in effect) would exceed
five percent (5%) of the total billings for all Telecommunications Services
delivered over the System for the same quarter, ELI may bill SRP and its
Affiliates the amount of the excess charges.
ARTICLE VII
SYSTEM DESIGN
-------------
7.1 Integrated Design. The System shall be integrated and designed
-----------------
to provide a seamless interconnection to customers. The System shall also be
integrated to the ELI regional
- 29 -
<PAGE>
network and physically interconnected with local exchange and interexchange
networks. The design of the System shall be consistent with the standards and
policies adopted by the Network Deployment Committee pursuant to the provisions
of Section 11.3(a).
7.2 Design Responsibilities.
-----------------------
(a) ELI Design Responsibilities. ELI shall design the
---------------------------
telecommunications transport network and shall design, engineer and specify
all System Electronics. ELI design specifications shall be shared with SRP
personnel to ensure consistency with System operational parameters. ELI
shall also design all Hub Sites.
(b) SRP Design Responsibilities. SRP shall design the SRP
---------------------------
Segments and shall do so in a manner that allows capacity to be readily
deployed for telecommunications purposes.
(c) Design Coordination Efforts. Throughout the Term, ELI and
---------------------------
SRP, through the Network Deployment Committee, shall:
(1) Coordinate the design of the telecommunications
transport and electric communications networks to ensure consistency
with each other's design specifications;
(2) Wherever possible, design the System to provide for
diverse routing, including, without limitation, use of a ring/sub-ring
architecture and use of SONET equipment, and for consistency with
ELI's telecommunications network practices and procedures;
- 30 -
<PAGE>
(3) Jointly design the integrated aspects of the System,
including, without limitation, Facilities, and all System Electronics
and Fiber;
(4) Jointly develop an overall System architecture and Fiber
backbone design that is consistent with ELI's network architecture and
design standards;
(5) Jointly design service laterals, Building Entrances, and
other Facilities for the System as required; and
(6) Wherever possible, use common design standards for all
System assets and Facilities.
(d) Joint Responsibilities. ELI and SRP shall follow the
----------------------
prioritization schedules for the construction of Segments as outlined in
their respective Construction Plans. Before beginning construction of any
Additional Segment, ELI and SRP shall present the Segment to the Network
Deployment Committee. The Network Deployment Committee may direct the
construction of additional Fiber or choose, within reason, a different
construction schedule, route or alignment. Changes in the timing of the
construction of a Segment may be based on market conditions, such as the
demand for Telecommunications Services in the general vicinity to be served
by the Segment. To the extent any change in a proposed route or alignment
forces ELI or SRP to incur additional Right of Way expense, the amount of
the additional Right of Way expense shall be added to capital.
7.3 Information Requests. To facilitate planning and design of the
--------------------
System, ELI and SRP shall furnish or make available to each other and to the
Coordinating Committee or Network
- 31 -
<PAGE>
Deployment Committee, as applicable, with reasonable promptness after request,
and at the reasonable cost of the requesting party:
(a) Engineering Data. Copies of all available Maps, charts and
----------------
other engineering data and documentation pertaining to specified sections
and the physical condition of any Right of Way needed for any Segment,
including, without limitation, the nature and location of all improvements
and Facilities thereon, and all relevant engineering data and plans related
thereto;
(b) Right of Way Documents. Right of Way documents shall
----------------------
include:
(1) Copies of all available documentation pertaining to
ownership or right to use any specified Right of Way (including
existing easements, rights of use or other use or occupancy rights, if
any, previously granted to others), and other existing agreements
respecting the Right of Way (including, without limitation, utility
crossings) and restrictions on the right to use or to occupy the Right
of Way for the purposes intended by this Agreement;
(2) Copies of maps and other available documentation
sufficient to describe the identity and location of any other users of
the specified portions of any Right of Way, as well as identification
of areas within the specified Right of Way which might involve title
or possession problems due to the nature of the ownership or any
third-party right of way ownership (including, without limitation,
reversionary or re-entry rights of underlying fee owners); and
- 32 -
<PAGE>
(3) Any available information on pending relocation projects
by ELI or SRP, as applicable, or others along the specified Right of
Way, and information regarding material scheduling constraints
resulting from temporarily taking out-of-service any particular
segment of the Right of Way;
(c) Building Entrances Documents. Copies of all available
----------------------------
documentation pertaining to ownership or right to use any specified
Building Entrance, and other existing agreements respecting the Building
Entrance and restrictions on the right to use or to occupy Building
Entrances for the purposes intended by this Agreement; and
(d) Maps. A copy of each Map each year throughout the Term, when
----
prepared for or filed with any governmental agency, and copies of any
amendments or supplements to each Map which may be prepared and so filed
from time to time.
ARTICLE VIII
CONSTRUCTION OF SEGMENTS
------------------------
8.1 Construction of Segments. Additional Segments and Future
------------------------
Segments shall be constructed consistent with the design standards described in
Article VII. ELI shall install all System Electronics, wherever located, at
ELI's sole cost and expense. With respect to Future Segments, SRP shall have
the option of installing all Fiber, wherever located, at SRP's sole cost and
expense. However, with respect to a Future Segment proposed by SRP, ELI shall
have the option to direct that SRP install System Electronics and Fiber at SRP's
sole cost and expense. The party responsible for the construction of a Segment
shall obtain necessary Approvals to undertake and complete the construction.
ELI and SRP shall cooperate with each other in obtaining necessary Approvals.
- 33 -
<PAGE>
8.2 Future Segments. From time to time throughout the Term, either
---------------
ELI or SRP may make proposals to the Coordinating Committee for the construction
of one or more Future Segments. Review of any such proposal shall be made in
accordance with the following:
(a) Review. The Coordinating Committee or the Network Deployment
------
Committee, if delegated such responsibility by the Coordinating Committee,
shall review preliminary route designations and the construction schedule
for a proposed Future Segment, and shall make such physical inspections of
the Right of Way associated with such Future Segment as it deems necessary
or appropriate for the purpose of: (1) identifying problem areas; (2)
arriving at suitable and economically viable alternatives; (3) establishing
a schedule for the commencement and completion of the work; and (4)
defining the final routes and any specialized construction or operational
considerations, including, without limitation, points of interconnection
and new Facilities required to make the Future Segment operational.
(b) Review Factors. The Coordinating Committee shall be
--------------
responsible for approving the construction of any proposed Future Segment.
In addition to the design standards described in Article VII, the following
factors shall be considered in making a decision to approve a proposed
Future Segment:
(1) The effect of the proposed construction on the Base Case
Financial Model;
(2) The difficulty of integrating the proposed Future
Segment into the then existing System;
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(3) The estimated cost to construct and equip the proposed
Future Segment;
(4) The timing of the proposed construction in relation to
the phases identified in the parties' Construction Plans;
(5) The compatibility of the proposed Future Segment with
the then existing construction and marketing plans of ELI, SRP and the
System;
(6) The amount of Reserved Fiber to be allocated to SRP, for
the proposed Future Segment;
(7) Existing or anticipated customer demand for Telecommuni
cations Services and Utilicom Services in the area to be served by the
proposed Future Segment; and
(8) Such other factors as may be developed by the
Coordinating Committee relative to the approval of Future Segments.
(c) Decision by Coordinating Committee. Within ten (10) days
----------------------------------
after receipt of a proposal to approve the construction of a Future
Segment, the Coordinating Committee shall approve the same in whole or in
part, or raise any objections thereto, which objections shall be stated in
writing and in reasonable detail and shall include a statement of the
necessary modifications required to obtain approval. If the Coordinating
Committee does not respond in such ten (10) day period to a proposal to
construct a Future Segment, the Coordinating Committee shall be deemed to
have approved the same.
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<PAGE>
8.3 Work Standards. All work performed under this Agreement shall be
--------------
performed in a good, workmanlike manner, in accordance with generally accepted
professional standards of sound construction practices and shall comply with all
applicable requirements of federal, state and local laws, regulations, licenses,
permits and applicable engineering and construction codes and standards.
8.4 Supply of System Materials.
--------------------------
(a) Standards. All System Materials used to construct or equip
---------
an Additional Segment or a Future Segment shall meet or exceed the minimum
specifications developed by the Network Deployment Committee for System
Materials, which specifications shall be based on the more stringent of
ELI's specifications or industry specifications. ELI shall be responsible
for inspecting and testing all System Electronics and may reject any System
Electronics component that is defective or does not conform to approved
specifications. Similarly, SRP shall be responsible for inspecting and
testing any equipment relating to Electric Services and Utilicom Services
transmission and may reject any component that is defective or does not
conform to approved specifications. ELI shall have the right to select all
vendors and suppliers for System Electronics, wherever located, and
construction activities over which ELI has primary responsibility. SRP
shall have the right to select all vendors and suppliers for construction
activities over which SRP has primary responsibility.
(b) Manufacturer Warranties. In procuring and obtaining System
-----------------------
Materials under paragraph (a) above, each of ELI and SRP, as applicable,
shall use reasonable
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efforts to obtain from the vendors and suppliers thereof, for the mutual
benefit of ELI and SRP, warranties that such System Materials are: (1) of
the kind and quality described in the purchase order or supply contract;
(2) free of defects in workmanship, material, design and title; (3) of good
and merchantable quality; and (4) where appropriate, fit for their intended
purpose. In addition, ELI and SRP, as applicable, shall attempt to obtain
standard warranty periods for all System Materials (it being understood
that standard materials warranties are in the range of one to two years
from the date of delivery), and shall use reasonable efforts to obtain
longer warranty periods, if such extended warranties do not materially
increase the cost of the System Materials. ELI's and SRP's sole obligation
and liability to each other with respect to the System Materials warranties
shall be to administer such warranties for and on behalf of the System and
to use reasonable efforts in enforcing such warranties. In no event shall
either ELI or SRP be deemed to have warranted to each other or to any third
party user any System Materials, or to have guaranteed any such warranties
provided by vendors or suppliers.
8.5 Changes. After work on a Segment has begun, material Changes to
-------
the design or construction plans for such Segment may be made only in accordance
with the terms of this Section 8.5.
(a) Grounds for a Change. A Change may result from any of the
--------------------
following:
(1) An event of Force Majeure;
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(2) A failure by the constructing party's designated
representatives, contractors or agents to fulfill their obligations
under contracts or subcontracts with the contracting party;
(3) A failure, defect or delay in delivery with respect to
any System Materials which materially and adversely affects the cost
of ELI or SRP, as applicable, to perform its work under the terms of
this Agreement, or to meet its construction schedule or other
performance standards under this Agreement;
(4) A request by either ELI or SRP for a Change; or
(5) In the event of an emergency affecting the safety of
persons or property.
(b) Changes. ELI and SRP shall cooperate reasonably with each
-------
other and shall use the Network Deployment Committee to review and approve
Changes. No prior approval shall be required to make a Change resulting
from an emergency. Except to the extent a Change specifically amends one
or more provisions hereof, all provisions of this Agreement shall apply to
all Changes, and no Change shall be implied as a result of any other
Change.
8.6 Use of Contractors. Each of ELI and SRP shall have the right to
------------------
have any of the construction and installation work it is required to provide
under the terms of this Agreement performed by one or more contractors pursuant
to written agreements with such contractors. No agreement with any contractor
entered into by ELI shall create a contractual relationship between such
contractor and SRP, and ELI shall be solely responsible for the engagement and
management
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<PAGE>
of such contractors, for all work performed by such contractors, and for all
acts and omissions of such contractors in providing service or performing work
as contemplated by the terms of this Agreement. Similarly, no agreement with any
contractor entered into by SRP shall create a contractual relationship between
such contractor and ELI, and SRP shall be solely responsible for the engagement
and management of such contractors, for all work performed by such contractors,
and for all acts and omissions of such contractors in providing service or
performing work as contemplated by the terms of this Agreement.
8.7 Inspection of Work and Acceptance of Construction.
-------------------------------------------------
(a) Inspection. When work on any Segment has been completed, ELI
----------
or SRP, depending on which party had primary responsibility for
constructing the Segment, shall give notice to the other that work has been
completed. Within five (5) working days following receipt of such notice,
the party receiving notice shall make an inspection of such Segment for
conformance with the construction requirements of this Agreement, and may
perform operational readiness tests, as deemed necessary, in accordance
with standard operating procedures approved by the Network Deployment
Committee. Within five (5) working days following such inspection, the
inspecting party shall furnish the other party with either: (1) an
Acceptance of Construction respecting such Segment; or (2) a written
statement setting forth in reasonable detail any objections to or defects
in the construction of such Segment. Failure of the inspecting party to
respond by written notification within the time period specified in the
preceding sentence shall be deemed an Acceptance of Construction for
purposes of this Agreement.
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<PAGE>
(b) Response to Objections. Upon receipt of any such statement
----------------------
of objections, the party that had primary responsibility for constructing
the Segment shall either: (1) promptly correct the objections or defects,
whereupon the other party may re-inspect the same within ten (10) working
days following receipt of notice that the work has been corrected and, if
found corrected, issue an Acceptance of Construction; or (2) dispute such
statement of objections or defects by referring the disputed issues for
determination, without thereby waiving any rights with respect to any
matter in controversy, to the Network Deployment Committee.
(c) Effect of Acceptance of Construction. ELI's issuance of an
------------------------------------
Acceptance of Construction for work performed by or under the direction of
SRP shall signify approval of the construction of ELI's Telecommunications
Services transmission system only and shall in no way be deemed to
represent an opinion or guarantee of ELI concerning the adequacy of such
construction with respect to SRP's Electric Services and Utilicom Services
transmission systems. Similarly, SRP's issuance of an Acceptance of
Construction for work performed by or under the direction of ELI shall
signify approval of the construction of SRP's Electric Services and
Utilicom Services transmission systems only and shall in no way be deemed
to represent an opinion or guarantee of SRP concerning the adequacy of such
construction with respect to ELI's Telecommunications Services transmission
system.
8.8 As-Built Drawings.
-----------------
(a) Review of As-Built Drawings. Within ten (10) working days
---------------------------
following Acceptance of Construction of each Segment (or any alteration or
relocation thereof), the
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<PAGE>
party that had primary responsibility for constructing such Segment, as a
cost of construction to be paid by such party, shall furnish the other
party with "as-built" drawings of such Segment. The "as-built" drawings, as
the same may be amended from time to time, shall establish the locations of
the applicable Right of Way, any applicable Building Entrances and any
Facilities associated therewith. Within five (5) working days following the
delivery of the "as-built" drawings for any Segment, the non-constructing
party shall inspect the Segment for conformance with the "as-built"
drawings and the other construction requirements of this Agreement. Within
five (5) working days following such inspection, the inspecting party shall
furnish the other party with either: (1) an acceptance of the "as-built"
drawings for such Segment; or (2) a statement setting forth in reasonable
detail any reasonable objections to or defects in such "as-built" drawings.
Failure of the inspecting party to respond by written notification within
the time period specified in the preceding sentence shall be deemed an
acceptance of such "as-built" drawings for purposes of this Agreement.
(b) Response to Objections. Upon receipt of any such statement
----------------------
of objections, the party that had primary responsibility for constructing
the Segment shall either: (1) promptly amend the "as-built" drawings; (2)
correct the defects, whereupon the other party may re-inspect the same
within five (5) working days following receipt of notice that the work has
been corrected and, if found corrected, issue an acceptance of the "as-
built" drawings; or (3) dispute such statement of objections or defects by
referring the disputed issues for determination, without thereby waiving
any rights with respect to any matter in controversy, to the Network
Deployment Committee.
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<PAGE>
(c) Effect of Approvals. Notwithstanding the foregoing, ELI's
-------------------
approval of "as-built" drawings or statement of any objections to such "as-
built" drawings shall signify approval of or objections with respect to
ELI's Telecommunications Services transmission system only and shall in no
way be deemed to represent an opinion with respect to the adequacy of SRP's
Electric Services and Utilicom Services transmission systems. Similarly,
SRP's approval of "as-built" drawings or statement of any objections to
such "as-built" drawings shall signify approval of or objections with
respect to SRP's Electric Services and Utilicom Services transmission
systems only and shall in no way be deemed to represent an opinion with
respect to the adequacy of ELI's Telecommunications Services transmission
system.
8.9 Correction of Work. If following the issuance of an Acceptance
------------------
of Construction and an acceptance of the "as-built" drawings for any Segment, a
defect in the work performed to construct the Segment or a defect in the design
of the Segment is discovered which breaches the work standards set forth in
Section 8.3, the sole and exclusive remedy of ELI and SRP shall be as set forth
in this Section 8.9. As soon as reasonably possible following discovery of the
defect, but in no event later than one (1) year following the issuance of the
Acceptance of Construction for such Segment, the party that had primary
responsibility for the construction of the Segment shall be given written notice
of the defect. As soon as reasonably possible following receipt of notice of
the defect, the receiving party, at its sole cost and expense, shall: (a)
reperform any deficient services; and (b) repair, or if necessary, replace or
modify any deficient construction or installation work. THE WARRANTY SET FORTH
IN SECTION 8.3 AND THE WARRANTY
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<PAGE>
REMEDIES SET FORTH IN THIS SECTION 8.9 ARE EXCLUSIVE AND IN LIEU OF ALL OTHER
WARRANTIES AND WARRANTY REMEDIES, EXPRESS OR IMPLIED, WITH RESPECT TO WORK
PERFORMED AND ITEMS PROVIDED BY EITHER ELI OR SRP UNDER THE TERMS OF THIS
AGREEMENT, AND ALL OTHER IMPLIED WARRANTIES OR WARRANTIES IMPOSED BY LAW,
INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE, AND WARRANTIES ARISING FROM COURSE OF DEALING OR USAGE OR TRADE, ARE
HEREBY WAIVED AND DISCLAIMED BY ELI AND SRP.
8.10 Title and Risk of Loss. Legal title to and beneficial
----------------------
ownership of all ELI Facilities shall be and remain with ELI, and ELI shall at
all times have care, custody and control of the ELI Facilities, subject to the
provisions of this Agreement. Similarly, legal title to and beneficial
ownership of all SRP Facilities shall be and remain with SRP, and SRP shall at
all times have care, custody and control of the SRP Facilities, subject to the
provisions of this Agreement. Except as otherwise provided in this Agreement,
each of ELI and SRP shall be responsible for and shall be obligated to replace,
repair or reconstruct at its own expense all or any portion of any Facility
which it owns or controls that is lost, damaged or destroyed regardless of how
such loss or damage occurred. Notwithstanding the foregoing, each party shall
be responsible for any loss, damage or destruction caused by its own acts or
omissions.
8.11 Customer Installations. Notwithstanding any provision of
----------------------
Article VII or this Article VIII to the contrary, when either ELI or SRP
receives an order to make the necessary
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<PAGE>
installations to expand the System, by not more than 500 feet in length,
including a Building Entrance, the following provisions shall apply:
(a) Telecommunications Services Customers. With respect to all
-------------------------------------
Telecommunications Services customers, wherever located, ELI shall design,
provision, purchase, install and own all System Electronics. ELI and SRP
shall each design, provision, purchase, install and own all Fiber and other
Facilities necessary to connect Telecommunications Services customers to
its own network.
(b) Utilicom Services Customers. Utilicom Services shall be
---------------------------
provisioned in accordance with the provisions of Section 6.2(b).
(c) Other Approvals. No approval from the Network Deployment
---------------
Committee, the Coordinating Committee or from each other shall be required
for ELI or SRP to complete a customer installation in accordance with the
terms of this Section 8.11.
(d) Design Plans. Promptly after completing a customer
------------
installation, ELI or SRP, as applicable, shall furnish to the other a
complete set of the design and installation plans used to connect the
customer to the System.
ARTICLE IX
MAINTENANCE
-----------
9.1 General Responsibilities. ELI shall be responsible for
------------------------
maintaining the ELI Network and all System Electronics. SRP shall be
responsible for maintaining the Fiber used in connection with SRP Network.
Maintenance costs shall be included in the calculation of Direct Operating
Expenses. Where the ELI Network and the SRP Network interconnect, the fiber
optic patch panel shall be the point of demarcation between the maintenance
responsibilities of ELI and
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<PAGE>
SRP. SRP shall be responsible for maintenance of all Fiber and the fiber optic
patch panel. ELI shall be responsible for maintenance of all Fiber and System
Electronics on the ELI side of the fiber optic patch panel. Maintenance services
shall be available on an on-call basis twenty-four (24) hours a day.
9.2 Maintenance Procedures. The Network Deployment Committee shall
----------------------
coordinate maintenance procedures and protocols for use by ELI and SRP,
including, without limitation, direct measure of quality tests to be performed
no less frequently than on a quarterly basis. Standards developed for
preventative maintenance by the Network Deployment Committee shall meet or
exceed the more stringent of industry or ELI standards and practices then in
existence. Within one hundred twenty (120) days after the effective date of
this Agreement, the Network Deployment Committee shall adopt standard
maintenance procedures and practices for the System.
9.3 Maintenance Supplies. ELI and SRP shall purchase and maintain
--------------------
adequate inventories of maintenance supplies and spare parts for their own
Facilities.
9.4 Repair Timing. ELI and SRP shall cooperate with each other to
-------------
restore damaged or malfunctioning portions of the System as soon as reasonably
possible. ELI and SRP agree to use their reasonable efforts to do emergency
repair work affecting Telecommunications Services and Utilicom Services
simultaneously so that both networks experience minimal downtime. ELI and SRP
acknowledge the importance of uninterrupted operation of the System and agree to
use good faith efforts to arrive at repair sites with necessary personnel,
equipment and materials promptly after receiving notice of the existence of a
problem. Further, ELI and SRP acknowledge the importance of restoring electric
service, and understand that restoration of electric service may take priority
over the restoration of the System according to customary industry practices.
To the extent
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<PAGE>
repairs are required to the System to fix damage caused by a customer, ELI and
SRP shall recover repair costs from the customer.
9.5 Staff Training. Each of ELI and SRP, at its own expense, shall
--------------
train and obtain industry certifications for all field technicians used to
maintain Facilities. In addition, all field technicians shall be familiar with
System maintenance procedures and standards adopted by the Network Deployment
Committee.
ARTICLE X
PROPERTY RIGHTS AND OBLIGATIONS
-------------------------------
10.1 Rights of Way and Building Entrances.
------------------------------------
(a) Existing SRP Rights of Way and Building Entrances. Subject
-------------------------------------------------
to the provisions of this Section 10.1, SRP's existing Rights of Way and
Building Entrances may be used to deploy Fiber or to install System
Electronics. On a case-by-case basis, ELI and SRP shall jointly review and
determine the availability of SRP Rights of Way and Building Entrances for
use by the System. Any use of SRP's Rights of Way and Building Entrances
shall be based on the mutual determination of ELI and SRP that such use:
(1) is within the scope of the original grant of the Right of Way or
Building Entrance; (2) is legally permissible; and (3) is economically
feasible. SRP does not warrant that any of its Rights of Way or Building
Entrances may be legally used for telecommunications purposes. ELI
expressly acknowledges that it has been or will be given the opportunity to
inspect all documents and information in SRP's possession regarding the
value of SRP's interest in the Right of Ways, and that SRP's Rights of Way
and Building Entrances may not be usable for telecommunications purposes.
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<PAGE>
(b) Additional Rights of Way and Building Entrances. It is
-----------------------------------------------
anticipated that SRP will use existing SRP Rights of Way to complete the
SRP Construction Plan. However, in the event SRP's existing Rights of Way
cannot be used to complete the SRP Construction Plan, and there is no other
reasonable alternative, SRP, at its own cost and expense, shall acquire any
additional Rights of Way needed to complete the SRP Construction Plan.
However, SRP is not obligated to use its power of eminent domain to acquire
additional Rights of Way and Building Entrances. ELI, at its own cost and
expense, shall acquire all additional Rights of Way needed to complete the
ELI Construction Plan. On a case-by-case basis as needed, ELI may request
assistance from SRP to acquire Rights of Way if existing SRP Rights of Way
are not available for telecommunications purposes. ELI shall reimburse SRP
for SRP's costs to obtain such additional Rights of Way. If either ELI or
SRP expends funds to acquire necessary Building Entrances to complete a
customer connection, such acquisition costs shall be added, as applicable,
to ELI Capital or SRP Capital.
10.2 Cross Licenses.
--------------
(a) Grant of License to SRP. ELI hereby grants to SRP a
-----------------------
nonexclusive License to use Rights of Way which are used by the System for
System purposes consistent with the requirements of Section 10.1. System
purposes may include design, engineering, construction, installation,
inspection, maintenance, repair, testing and replacement, relocation,
operation and removal of Segments, Facilities and System Materials on the
terms and subject to the covenants and conditions specified in this
Agreement.
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<PAGE>
(b) Grant of License to ELI. SRP hereby grants to ELI a
-----------------------
nonexclusive License to use Rights of Way which are used by the System for
System purposes consistent with the requirements of Section 10.1. System
purposes may include design, engineering, construction, installation,
inspection, maintenance, repair, testing and replacement, relocation,
operation and removal of Segments, Facilities and System Materials on the
terms and subject to the covenants and conditions specified in this
Agreement.
10.3 Route Designations. ELI and SRP have reviewed the Maps
------------------
attached to this Agreement depicting their respective existing and currently
planned communications networks and have approved such Maps for the purposes set
forth in Section 10.2.
10.4 Right of Entry. The cross Licenses granted in Section 10.2
--------------
shall include the right for each of ELI and SRP to enter the Right of Way or
other real property, as applicable, with its employees, agents and contractors
in order to exercise the rights granted under this Agreement, subject to the
following notice requirements:
(a) Engineering and Design Inspections. ELI and SRP shall give
----------------------------------
each other not less than two (2) hours prior notice by telephone before
entering any Existing Segment in the other's service territory for the
purpose of surveying and inspecting or making such engineering and other
tests as may be necessary or advisable to enable the notifying party to
determine the feasibility of using the Segment in the System or to evaluate
and approve engineering, design and installation plans and cost estimates
to upgrade such Segment.
(b) Inspection of Construction. During the actual performance of
--------------------------
any construction of the System, ELI and SRP shall each have the right to
enter the job site to
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<PAGE>
observe each other's performance of work under this Agreement, provided
that all observers shall adhere to such reasonable work safety rules as may
be promulgated by ELI and SRP for such job sites. After completion of
construction of a particular portion of a job for which ELI or SRP has
given the other notice of completion pursuant to Section 8.7, prior to
entering the relevant Segment to perform the inspection, the inspecting
party shall give the other party not less than two (2) hours prior notice
by telephone.
(c) Segments. ELI and SRP shall give each other not less than
--------
two (2) hours prior notice by telephone before entering any Segment inside
the other's service territory for the purpose of inspection, maintenance,
repair or to exercise of any other right with respect to a Segment
provided under the terms of this Agreement.
(d) Emergencies. In the case of an emergency with respect to a
-----------
Segment, each of ELI and SRP shall have the right to enter such Segment
without the need or requirement to give the other prior notice, provided
that notice of the entry shall be given as soon as practicable thereafter.
10.5 Entry Conditions. Notwithstanding the provisions of Section
----------------
10.4, each of ELI and SRP may from time to time by notice to the other specify
additional entry conditions or requirements arising out of a relationship with a
particular Right of Way or Building Entrance grantor or Hub Site lessor,
including, without limitation: (a) the need to give prior notice to such
grantor or lessor; (b) the requirement that no entry be made unless accompanied
by personnel of the party that has the relationship with such grantor or lessor;
and (c) the requirement that entry be made only through a specified route. In
addition, ELI shall not make any physical contact with the towers,
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<PAGE>
cables or other elements of the SRP power transmission system (except as
required to access the Telecommunications Services transmission system utilizing
procedures approved by SRP). Further, each of ELI and SRP shall indemnify the
other with respect to such entry as provided in Article XVII. Each notice given
as provided in Section 10.4 shall disclose the scope and estimated duration of
the entry. If such scope or duration changes, additional notice shall be given.
Any required telephonic notice shall be given at the telephone numbers specified
in Section 20.4 (or at such other number or relevant local office number that
ELI and SRP may from time to time specify).
10.6 Property Right Obligations. Throughout the Term, ELI and
--------------------------
SRP shall have the following obligations pertaining to the property rights
described in this Agreement:
(a) Avoid Encumbrances. Subject to the provisions of Section
------------------
10.11(c), neither ELI nor SRP shall create or grant any lien or other
property interest against any of the Facilities, Rights of Way or Building
Entrances the foreclosure or enforcement of which could terminate or
prevent the exercise of the rights of the other under this Agreement.
(b) Maintain Property Rights. With respect to any Right of Way
------------------------
or Building Entrance, while designated a part of a Segment, ELI and SRP,
subject to the provisions of Section 10.12, shall timely perform all of
their respective obligations pertaining to the use of such Right of Way or
Building Entrance, in accordance with all applicable terms and conditions
of the grants and property conveyances by which they hold a property
interest therein, and shall take such other actions as may reasonably be
necessary to prevent the lapse, forfeiture or termination of any such
property interests.
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<PAGE>
(c) Payment of Taxes. With respect to any Right of Way or
----------------
Building Entrance, while designated a part of a Segment, each of ELI and
SRP, as applicable, shall timely pay any and all Ad Valorem Taxes assessed
to it, the nonpayment of which could result in a lien upon such property.
Notwithstanding the foregoing, either party may withhold payment of
disputed amounts if such withholding is conducted in accordance with the
provisions of applicable law.
(d) Defense of Property Interest. Should the right of ELI or SRP
----------------------------
to use, in accordance with the terms and conditions of this Agreement, any
Right of Way or Building Entrance then designated a part of a Segment be
challenged by the holder or alleged holder of a property interest in such
Right of Way or Building Entrance, ELI or SRP, depending on which party has
the primary right to use the Right of Way and subject to the provisions of
Sections 10.9 and 10.10 shall defend the right to so use the Right of Way
or Building Entrance. Notwithstanding the foregoing, ELI shall defend its
ability to use the Right of Way, to the extent the challenge relates only
to the use of the Right of Way by ELI. The other party, subject to the
provisions of Sections 10.9 and 10.10, shall take all actions and execute
such additional documents as are deemed reasonably necessary in connection
with the establishment or defense of the challenged rights. All costs and
expenses of such defense shall be considered ELI Phoenix Direct Operating
Expenses or SRP Phoenix Direct Operating Expenses, as the case may be.
Neither ELI or SRP makes any warranty to the other regarding the adequacy
of any Right of Way or Building Entrance.
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<PAGE>
10.7 Property Interest Documentation. From time to time upon
-------------------------------
request, ELI and SRP shall make available to each other for review at the ELI
regional office in Phoenix, Arizona or at SRP's main office, as applicable, all
agreements and other documents in their possession with respect to their
respective rights, titles and interests in and to Rights of Way and Building
Entrances which they own or have the right to use in connection with the System.
In addition, ELI and SRP shall inform each other of any facts relating to such
rights, titles and interests of which they have knowledge and which are material
to the exercise or defense of the rights granted under this Agreement.
10.8 Memorandum of Agreement. Upon request of ELI or SRP and at
-----------------------
the expense of the requesting party, the other party shall execute in form
appropriate for recordation a Memorandum or Short Form of the Licenses granted
by this Agreement (or similar document appropriately styled to permit
recordation) to give notice of the existence of the rights of ELI and SRP under
this Agreement. Such a recordation may be made in any county in which a
Segment, or portion thereof, is located. Such document shall not be styled as a
grant of an easement or a leasehold interest.
10.9 Incremental Property Rights Costs. If at any time during
---------------------------------
the Term, a third party Right of Way or Building Entrance grantor of either ELI
or SRP makes a demand for additional compensation or indicates its intent to
reopen, renegotiate or terminate the easement, license or other agreement
establishing rights in a Right of Way or Building Entrance as a result of the
existence of this Agreement, ELI or SRP, as applicable, shall promptly notify
the other in writing of such demand. After conferring with each other and
allowing the party that owns or has been granted the right to
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<PAGE>
use the Right of Way or Building Entrance in question an opportunity to resolve
the issue, the other party may attempt at its expense to resolve the issue with
such grantor through negotiation or settlement. Any decision to commence
litigation on behalf of or in the name of either ELI or SRP shall be in the sole
discretion of such party, and any subsequent litigation, whether brought by ELI,
at SRP's request, or by SRP, at ELI's request, or by such third party Right of
Way or Building Entrance grantor, shall be conducted at the expense and under
the direction and control of the party named in the action. If the dispute is
resolved either through negotiation, settlement or litigation, and such
resolution requires the payment of additional consideration for such additional
or expanded use: (a) ELI shall be required to pay such additional compensation
and litigation expenses with respect to a Right of Way or Building Entrance the
original grant of which ran to SRP; and (b) SRP shall be required to pay such
additional compensation and litigation expenses with respect to a Right of Way
or Building Entrance the original grant of which ran to ELI. The terms of any
settlement must be approved by both ELI and SRP before it becomes binding. If
either ELI or SRP possesses the power of eminent domain within the relevant
jurisdiction, it shall have the right, in its sole discretion, independently of
the consent of the other to seek resolution of such a dispute by exercising such
power of eminent domain, provided that the condemning party shall pay all costs
of such exercise.
10.10 Franchise Rights and Licensing Costs. ELI and SRP
------------------------------------
shall each be responsible for all franchises and licenses as may be necessary
for their respective operations. If at any time during the Term, a governmental
authority having or asserting franchise or licensing authority over either ELI
or SRP makes a demand, as a result of this Agreement, for a new franchise or
license, for additional compensation under an existing franchise or license, or
indicates its intent to reopen,
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renegotiate or terminate an existing franchise or license or gives notice of a
forfeiture thereof, ELI or SRP, as applicable, shall promptly notify the other
in writing of such demand. After conferring with each other and allowing the
party under the jurisdiction or claimed jurisdiction of such governmental
authority an opportunity to resolve the issue, the other party may attempt at
its expense to resolve the issue with such governmental authority through
negotiation or settlement. Any decision to commence litigation on behalf of or
in the name of either ELI or SRP shall be in the sole discretion of such party,
and any subsequent litigation, whether brought by ELI, at SRP's request, or by
SRP, at ELI's request, or by such governmental authority, shall be conducted at
the expense and under the direction and control of the party names in the
action. If the dispute is resolved either through negotiation, settlement, or
litigation, and such resolution requires the payment of additional consideration
for such additional or expanded use: (a) ELI shall be required to pay such
additional compensation with respect to a franchise or license relating to the
SRP Network; and (b) SRP shall be required to pay such additional compensation
with respect to a franchise or license relating to the ELI Network. The terms of
any settlement must be approved by both ELI and SRP before it becomes binding.
10.11 Liens.
-----
(a) Release of Liens. In the event any of the ELI Facilities or
----------------
the SRP Facilities becomes subject to any mechanics', artisans' or
materialmen's lien the following provisions shall apply:
(1) If such a lien is chargeable to or through ELI, ELI
shall promptly cause the same to be discharged and released of record
(by payment, posting
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of bond, court deposit or other means) without cost to SRP. ELI shall
indemnify SRP against all costs and expenses (including reasonable
attorney fees) reasonably incurred in discharging and releasing such
lien. If any such lien is not so discharged and released within ninety
(90) days after notice thereof by SRP to ELI, then SRP may pay or
secure the release or discharge thereof at the expense of ELI.
(2) If such a lien is chargeable to or through SRP, SRP
shall promptly cause the same to be discharged and released of record
(by payment, posting of bond, court deposit or other means) without
cost to ELI. SRP shall indemnify ELI against all costs and expenses
(including reasonable attorney fees) reasonably incurred in
discharging and releasing such lien. If any such lien is not so
discharged and released within ninety (90) days after notice thereof
by ELI to SRP, then ELI may pay or secure the release or discharge
thereof at the expense of SRP.
(b) Contest of Liens. Nothing in this Agreement shall preclude
----------------
ELI or SRP from contesting any lien described in paragraph (a) above or the
contract or action upon which the same arose after the same shall have been
bonded or otherwise released of record, as provided above.
(c) Facilities as Collateral. ELI hereby recognizes and agrees
------------------------
that the SRP Facilities, the Rights of Way and Building Entrances shall be
and remain at all times the property of SRP, its successors and assigns,
and shall at no time be or become subject to or collateral under any
mortgage, bond, indenture or other financing arrangement of ELI. Similarly,
SRP hereby recognizes and agrees that the ELI Facilities, the Rights of Way
and
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<PAGE>
Building Entrances shall be and remain at all times the property of ELI,
its successors and assigns, and shall at no time be or become subject to or
collateral under any mortgage, bond, indenture or other financing
arrangement of SRP. In addition, if either ELI or SRP pledges any of its
Facilities, Rights of Way or Building Entrances to a creditor under any
mortgage, bond, indenture or other financing arrangement, such pledging
party shall use its reasonable efforts to provide to the non-pledging party
written agreements in favor of the non-pledging party from such creditor to
the effect that: (1) the non-pledging party shall not be named or joined in
any proceeding to enforce any such mortgage, bond, indenture or other
financing arrangement unless such joining is required by law in order to
perfect the proceeding; (2) enforcement of any such mortgage, bond,
indenture or other financing arrangement shall not terminate this Agreement
nor disturb or interfere with the non-pledging party's use of the System
(except in the case where the non-defaulting party is in default beyond the
period, if any, provided in this Agreement to cure such default); (3) any
party succeeding to the interests of the pledging party as a result of the
enforcement of any such mortgage, bond, indenture or other financing
arrangement shall be bound to the non-pledging party, and the non-pledging
party shall be bound to such successor, under all the terms, covenants and
conditions of this Agreement, for the balance of the Term, including any
extensions thereof (if exercised by the non-pledging party), with the same
force and effect as if such successor were an original signatory to this
Agreement; and (4) whenever any provision of such mortgage, bond, indenture
or other financing arrangement is in conflict with or purports to
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limit the rights or increase the obligations of the non-pledging party
under this Agreement, the provisions of this Agreement shall control.
10.12 Discontinuance and Relocation.
-----------------------------
(a) SRP Discontinuance of Electric Services. SRP shall be
---------------------------------------
entitled to discontinue its use of any part of its electrical power system
or any Right of Way for electric power transmission or distribution
purposes. However, SRP shall not take any action to release or relinquish
voluntarily its underlying property interests, which shall be protected as
provided in Section 10.6. In the event of any such discontinuance, SRP
shall give written notice to ELI as soon as reasonably practicable. The
notice of discontinuance shall be accompanied by a plan of any alternative
route, if available.
(b) Relocations. If ELI relocates any ELI Facilities or SRP
-----------
relocates any SRP Facilities, the relocating party shall grant the other
party permission to utilize the alternate location under the terms,
covenants and conditions contained in this Agreement. The relocating party
shall bear the cost of relocating the portion of the System affected by
such relocation. Further ELI and SRP shall have the right to seek
compensation from any third party that may have made such relocation
necessary.
ARTICLE XI
SYSTEM OPERATIONS AND COORDINATION
----------------------------------
11.1 Operations.
----------
(a) System Management and Control. ELI shall provide primary
-----------------------------
network management and control for the System from Vancouver, Washington.
ELI shall be responsible for circuit turn-ups and end-user service
deployment. SRP shall be provided its
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own operations, administration, maintenance and provisioning gateway into
the System so that proper functioning of SRP's System operations may be
monitored independently.
(b) Troubleshooting. System difficulties will be detected, in
---------------
most instances, by ELI at its network control center. SRP and ELI shall
respond according to their respective maintenance responsibilities set
forth in Section 9.1. ELI and SRP, through the Network Deployment
Committee, shall coordinate efforts to establish minimum system service
standards applicable to both ELI and SRP. Such standards shall meet or
exceed the more stringent of ELI's existing service standards or applicable
industry standards, and shall include procedures for notification and
documentation of trouble reports, service priorities and response levels.
(c) Customer Service. ELI and SRP customer service personnel
----------------
will be trained to handle all customer inquiries through the first point of
contact, as viewed by the customer. Therefore, ELI and SRP shall rely on
each other and coordinate efforts as needed to address Telecommunications
Services, Electric Services and Utilicom Services questions effectively.
ELI shall provide primary call center support for Telecommunications
Services customers as follows: (1) full customer service from 7:00 a.m. to
7:00 p.m. P.T. Monday through Friday; (2) on-call service from 7:00 p.m. to
7:00 a.m. P.T. Monday through Friday; and (3) on-call service twenty-four
(24) hours a day Saturday, Sunday and holidays. SRP shall provide primary
call center support for Electric Services and Utilicom Services issues. In
cases where SRP has installed or maintains service or equipment, SRP shall
meet or exceed the more stringent of ELI's standards or industry standards
for response time, restoral and
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other metrics. Key Account customers shall receive relationship management,
provisioning and customer service priority in accordance with Key Account
management and customer service systems developed by ELI and SRP. ELI shall
not market to a Key Account without participation by SRP.
(d) Billing. ELI shall provide billing services for all
-------
Telecommunications Services. Similarly, SRP shall provide billing services
for all Electric Services and Utilicom Services.
(e) Mapping. ELI shall provide and maintain network mapping
-------
systems for the System. ELI and SRP shall share mapping data, and shall
cooperate with each other and coordinate efforts to produce all maps
required for maintenance, provisioning or regulatory purposes.
(f) Information Sharing. Except as provided in this Agreement,
-------------------
there shall be no general requirement for either party to share marketing,
customer or other information. However, ELI and SRP may negotiate with each
other to share information as needed to enhance Telecommunications Services
operations, profitability and service offerings. Whenever information is
shared, ELI and SRP shall take reasonable precautions to protect each
other's confidential information, as provided in Section 12.3 of this
Agreement.
11.2 Coordinating Committee. The Coordinating Committee shall be
----------------------
established by ELI and SRP to coordinate efforts between ELI and SRP relating to
the deployment and operation of the System during the Term.
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<PAGE>
(a) Roles and Responsibilities. The Coordinating Committee shall
--------------------------
perform the functions described in this Agreement and shall have the
following roles and responsibilities:
(1) Provide a forum for exchanging ideas and information
relating to the System, its operation and profitability, and the
marketing of services offered by means of the System;
(2) Review of the annual budgets prepared by ELI and SRP,
and the Base Case Financial Model updates prepared by ELI;
(3) Review and approval of the initial capital deployment
plan for the System and annual updates to the plan;
(4) Defining the amount of Reserved Fiber to be allocated to
SRP;
(5) Review and approval of the project life and annual
capital and maintenance budgets for the System;
(6) Review and approval of performance objectives and
metrics for the System;
(7) Due diligence in accordance with the terms of this
Agreement including: (i) oversight of accounting and operations audit
procedures; and (ii) review of audit results and recommendations for
adjustments to operations and financial mechanisms for allocation of
benefits to each of ELI and SRP;
(8) Definition of the scope of decision making by the
Network Deployment Committee;
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(9) Liaison with the senior managements of ELI and SRP;
(10) Appointment of additional committees as necessary; and
(11) Conduct of periodic Coordinating Committee meetings.
(b) Decision Making. ELI and SRP intend that the members of the
---------------
Coordinating Committee, in good faith and with the mutual benefit of both
parties in mind, shall negotiate and deliberate on all issues that come
before the Coordinating Committee. Actions by the Coordinating Committee
shall be governed by the following:
(1) ELI and SRP shall each be entitled to one vote;
(2) All actions of the Coordinating Committee shall be on
the basis of one vote for ELI and one vote for SRP;
(3) One member from SRP and one member from ELI shall
constitute a quorum;
(4) The Coordinating Committee may meet in person, by
telephone, video conference or other means by which all persons
present can hear and communicate with each other; and
(5) Any action that may be taken at a meeting of the
Coordinating Committee may be taken without a meeting, by a written
consent, setting forth the action so taken, signed by all the members
of the Coordinating Committee.
(c) Composition of Coordinating Committee. Each of ELI and SRP
-------------------------------------
shall have the right to appoint two members of the Coordinating Committee.
Such appointments do not need the consent or approval of the other party,
and unless otherwise agreed, shall not
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be for any particular term or duration. Attached to and incorporated by
reference in this Agreement as Exhibit "H" is the initial list of the
members of the Coordinating Committee appointed by ELI and SRP.
(d) Deadlocks. In the event the Coordinating Committee is
---------
deadlocked with respect to any issue over which it has decision making
authority, the issue shall be presented to the President of ELI and to the
General Manager of SRP for decision. If the President of ELI and the SRP
General Manager cannot resolve the deadlock, they shall select a mutually
acceptable independent third party mediator, and both ELI and SRP shall
work in good faith to resolve the issue through mediation (which mediation
shall be conducted in accordance with the Rules of Commercial Mediation
established by the American Arbitration Association). If a good faith
effort to mediate the issue fails to achieve a mutually satisfactory
result, either party may demand arbitration (which shall be conducted in
accordance with the Rules of Commercial Arbitration established by the
American Arbitration Association).
11.3 Network Deployment Committee. The Network Deployment
----------------------------
Committee shall be established by ELI and SRP to coordinate efforts between ELI
and SRP relating to the design, construction and maintenance of the System.
(a) Roles and Responsibilities. The Network Deployment Committee
--------------------------
shall perform the functions described in this Agreement and shall have the
following roles and responsibilities:
(1) Development and execution of the annual network
construction plan and associated action plans;
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(2) Coordinating the build-out of the System;
(3) Establishment of uniform policies, standards and
procedures for System design criteria, System Materials, customer
service and testing the operational readiness of Segments, performing
validation tests for installed System Electronics, System maintenance,
and management and periodically renewing System capacity;
(4) Budgeting decisions for customer projects;
(5) Technical support for new communications-enabled product
development;
(6) Staff support for the Coordinating Committee; and
(7) Appointment of "Project Management Teams" as necessary.
(b) Meetings. The Network Deployment Committee shall meet at
--------
least quarterly. The Network Deployment Committee shall promptly review
issues and items over which it has review obligations under the terms of
this Agreement. The Network Deployment Committee shall keep and provide
minutes of each meeting. Meeting minutes shall be distributed to members
of the Network Deployment Committee and to the engineering departments of
both ELI and SRP. Each of ELI and SRP shall designate one of its
representatives on the Network Deployment Committee as a prime contact
person with signature authority to take action on its behalf at committee
meetings.
(c) Decision Making. Generally, the Network Deployment Committee
---------------
shall use a consensus decision making approach for all decisions over which
it has
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responsibility, whether under the express terms of this Agreement or by
delegation from the Coordinating Committee. In the event the Network
Deployment Committee cannot reach a consensus on any particular issue, the
issue shall be referred to the Coordinating Committee for resolution.
(d) Composition of Network Deployment Committee. Each of ELI and
-------------------------------------------
SRP shall have the right to appoint an equal number of members to the
Network Deployment Committee. Such appointments do not require the consent
or approval of the other party, and, unless otherwise agreed, shall not be
for any particular term or duration Attached to and incorporated by
reference in this agreement as Exhibit "I" is the initial list of the
members of the Network Deployment Committee appointed by ELI and SRP.
11.4 Staffing. Attached to and incorporated by reference in this
--------
Agreement as Exhibit "J" is a list of the general staffing obligations of ELI
and SRP to support the services and obligations they have each agreed to provide
under the terms of this Agreement. Each of ELI and SRP shall maintain such
staffing support throughout the Term.
ARTICLE XII
REPRESENTATIONS, WARRANTIES AND COVENANTS
-----------------------------------------
12.1 Representations, Warranties and Covenants of ELI. ELI
------------------------------------------------
represents and warrants to SRP, and covenants with SRP, as follows:
(a) Authority. ELI is a corporation duly organized, validly
---------
existing and in good standing under the laws of the State of Delaware, and
has all requisite corporate power and authority to enter into this
Agreement and to perform according to the terms, covenants and conditions
contained in this Agreement.
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<PAGE>
(b) Restrictions. To the best of ELI's knowledge, the execution
------------
of this Agreement, any instrument or document required by this Agreement,
and the consummation of the transactions contemplated by this Agreement
will not violate any article, bylaw or other corporate restriction, or any
statute, ordinance, law, order, ruling, certificate or license, regulation
or demand of any court, regulatory agency or other tribunal to which ELI is
subject.
(c) Binding Obligation. This Agreement, when duly executed by
------------------
ELI, shall constitute a valid, legal and binding obligation of ELI, and
shall be enforceable in accordance with its terms.
(d) Governmental Approvals. ELI has all necessary governmental
----------------------
approvals to enter into and to perform its obligations under this
Agreement, excepting approvals, if any, required: (1) from local
governmental authorities regarding ELI's use of the SRP Network located
within the jurisdiction of any such governmental authority, which approvals
ELI shall use reasonable efforts to obtain; (2) by the Arizona Corporation
Commission for ELI to provide intrastate services in the State of Arizona;
and (3) any local government permits necessary to construct Additional
Segments and Future Segments.
(e) Proceedings. Except for U S West Communications, Inc. v.
-----------
Arizona Corporation Commission, Case No. CV95-14284 (Arizona Superior
Court), U S West Communications, Inc. v. Jennings, Case No. CIV-95-1832-
PHX-SMM (D. Ariz.), and ELI's pending application for intrastate authority
before the Arizona Corporation Commission, no litigation or governmental
proceeding, including, without limitation, any docket before the
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Arizona Corporation Commission, is pending, or to ELI's knowledge,
threatened which might adversely affect this Agreement, the transactions
contemplated by this Agreement, or ELI's rights under, or ability to
perform pursuant to the terms of, this Agreement. ELI shall promptly notify
SRP of any material adverse claims, actual or threatened, affecting any
part of the System or ELI's telecommunication's business in Arizona.
(f) ELI Facilities. The existing ELI Facilities are operational
--------------
and function in accordance with the design specifications thereof provided
by ELI to SRP. The ELI Facilities are and will be operated in a safe
manner and in compliance in all material respects with all applicable laws,
regulations and governmental orders.
(g) Compliance with Governmental Requirements. To its knowledge,
-----------------------------------------
subject to the approvals to be sought by ELI as set forth in Section
12.1(d), ELI has not violated any rule, order or regulation issued by any
governmental authority with respect to any license, permit, franchise or
right of way which may materially and adversely affect SRP's use thereof or
ELI's right to grant a License to SRP, or to execute and perform this
Agreement.
(h) Financing Restrictions. This Agreement does not violate any
----------------------
terms, covenants, conditions or restrictions in any mortgages, bonds and
other indentures of ELI, and the SRP Facilities will not be subject to or
deemed to be collateral under any such agreements of ELI.
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<PAGE>
(i) Resources and Capacity. ELI possesses sufficient financial,
----------------------
managerial, and technical capacity and resources to perform its obligations
under the terms of this Agreement.
12.2 Representations, Warranties and Covenants of SRP. SRP
------------------------------------------------
represents and warrants to ELI, and covenants with ELI, as follows:
(a) Authority. SRP is an Agricultural Improvement District duly
---------
organized, validly existing and in good standing under the laws of the
State of Arizona and believes in good faith that it has all requisite power
and authority to enter into this Agreement or to perform according to the
terms, covenants and conditions contained in this Agreement.
(b) Restrictions. Subject to paragraph 12.2(a), to the best of
------------
SRP's knowledge, the execution of this Agreement, any instrument or
document required by this Agreement, and the consummation of the
transactions contemplated by this Agreement will not violate any article,
bylaw or other organizational restriction, or any statute, ordinance, law,
order, ruling, certificate or license, regulation or demand of any court,
regulatory agency or other tribunal to which SRP is subject.
(c) Binding Obligation. This Agreement, when duly executed by
------------------
SRP, shall constitute a valid, legal and binding obligation of SRP, and
shall be enforceable in accordance with its terms.
(d) Governmental Approvals. SRP has all necessary governmental
----------------------
approvals to enter into and to perform its obligations under this
Agreement, except that SRP
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has not obtained all local government permits necessary to construct
Additional Segments and Future Segments.
(e) Proceedings. No litigation or governmental proceeding,
-----------
including, without limitation, before the Arizona Corporation Commission,
is pending, or to SRP's knowledge, threatened which might adversely affect
this Agreement, the transactions contemplated by this Agreement, or SRP's
rights under, or ability to perform pursuant to the terms of, this
Agreement. SRP shall promptly notify ELI of any material adverse claims,
actual or threatened, affecting any Segment.
(f) SRP Facilities. The existing SRP Facilities are operational
--------------
and function in accordance with the design specifications thereof provided
by SRP to ELI. The SRP Facilities are and will be operated in a safe
manner and in compliance in all material respects with all applicable laws,
regulations and governmental orders.
(g) Compliance with Governmental Requirements. To its knowledge,
-----------------------------------------
SRP has not violated any rule, order or regulation issued by any
governmental authority with respect to any license, permit, franchise or
right of way which may materially and adversely affect ELI's use thereof or
SRP's right to grant a License to ELI, or to execute and perform this
Agreement.
(h) Financing Restrictions. This Agreement does not violate any
----------------------
terms, covenants, conditions or restrictions in any mortgages, bonds and
other indentures of SRP. The ELI Facilities will not be subject to or
deemed to be collateral under any such agreements of SRP.
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(i) Resources and Capacity. SRP possesses sufficient financial,
----------------------
managerial, and technical capacity and resources to perform its obligations
under the terms of this Agreement.
12.3 Confidentiality. All information furnished by ELI and SRP
---------------
to each other, or by or to their respective representatives, whether or not
reduced to writing or specifically identified as non-public, confidential, or
proprietary, and all analyses, compilations, data, studies, or other documents
prepared by ELI or SRP containing, or based in whole or in part on, any such
furnished information, or reflecting review of, or interest in, all or part of
such information are hereinafter collectively referred to as the "Information."
As used in this Agreement, a "representative" of ELI or SRP, as the case may be,
shall mean any and all directors, officers, employees, agents or
representatives, including, without limitation, attorneys, accountants,
consultants and financial advisors of ELI or SRP, as the case may be. In
consideration of being furnished with the Information, ELI and SRP agree that:
(a) Nondisclosure. The Information will be kept confidential and
-------------
will not, without the prior written consent of the party providing the
information, be disclosed by the other party or any of its representative,
in any manner whatsoever, in whole or in part, and will not be used by a
party or any of its representatives directly or indirectly for any purpose
other than activities contemplated by this Agreement. Moreover, ELI and
SRP will transmit the Information only to those representatives who need to
know the Information for the purpose of performing or exercising each
party's obligations and rights under this Agreement,
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who have been informed of the confidential nature of the Information, and
who have agreed to be bound by the terms of this Agreement.
(b) Authorized Disclosure. Without the prior written consent of
---------------------
the other party, neither party or its representatives will disclose to any
other person the fact that the Information has been made available, or any
of the terms, conditions or other facts with respect to this Agreement,
except as required by law and then only with prior written notice given, as
soon as possible, to the other party and in compliance with the provisions
of Section 20.4 of this Agreement. The term "person" as used in this
Agreement shall be interpreted broadly to include, without limitation, any
corporation, company, group, partnership or individual.
(c) Nonconfidential Information. This Section 12.3 shall be
---------------------------
inoperative as to any portion of the Information which: (1) is or becomes
generally available to the public other than as a result of a disclosure by
a party or its representatives; (2) becomes available to a party in good
faith from a third-party no subject to a confidential obligation to the
party; or (3) was known to a party on a nonconfidential basis prior to its
disclosure by the other party or one of its representatives.
(d) Compelled Disclosure. In the event that either party or
--------------------
anyone to whom the party transmits the Information relating to this
Agreement is requested or becomes legally compelled (by oral questions,
interrogatories, requests for information or documents, subpoena, civil
investigative demand, or any similar process) to disclose any of the
Information, the party so compelled will provide prompt written notice of
such event to the
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other party so that the notified party may seek a protective order or other
appropriate remedy, waive compliance with the provisions of this Agreement
or both. In the event that such protective order or other remedy is not
obtained or that the notified party waives compliance with the provisions
of this Agreement, the legally compelled party will furnish only that
portion of the Information which is legally required and will exercise its
best efforts to obtain reliable assurance that confidential treatment will
be accorded the Information.
(e) Public Records Law. It is understood that ELI and SRP are or
------------------
may be subject to in the future, public records disclosure laws, and that
these laws will govern the disclosure responsibilities of ELI and SRP
notwithstanding the terms of this Agreement. ELI and SRP each agree that
to the extent reasonably practical, it will notify the other of any public
records requests of any part of the Information, and will give the other
party a reasonable opportunity to contest the public records request.
(f) Non-Waiver. It is understood and agreed that no failure or
----------
delay by a party in exercising any rights, power or privilege under this
Agreement shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise of any right, power
or privilege hereunder.
(g) Equitable Relief. A party shall be entitled to equitable
----------------
relief, including injunctive relief and specific performance, in the event
of any breach of the provisions of this Agreement. Such remedies shall not
be deemed to be the exclusive remedies for a breach of this Agreement by a
party or its representatives, but shall be in addition to all other
remedies available by law or equity. For purposes of equitable relief, ELI
and SRP agree that breach
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of the provisions of this Agreement may subject that party who has provided
Information to irreparable harm and injury.
(h) Ownership of Information. The Information acquired from the
------------------------
other party or any of its representatives shall be and shall remain the
exclusive property of the disclosing party. Neither the disclosure of
Information, or the execution of this Agreement shall be construed as a
license to the party receiving Information, or to make use of, or sell the
Information or products derived from the Information, or to make use of it
in any way that damages or competitively disadvantages the party disclosing
the Information.
12.4 Cooperation. ELI and SRP shall cooperate with each other,
-----------
in good faith, and shall use their best efforts to:
(a) Committees. Establish and make staffing assignments to the
----------
Coordinating Committee, the Network Deployment Committee and such other
committees as may, from time to time, be established to implement the
understandings, agreements and intents set forth in this Agreement;
(b) Network Design and Deployment. Expeditiously complete the
-----------------------------
design, deployment and construction of the Facilities as provided in this
Agreement;
(c) Conflicts Resolution. Negotiate reasonable and mutually
--------------------
beneficial resolutions to all conflicts that may arise between ELI and SRP
relating to the design, deployment, construction, maintenance, operation
and use of the Facilities or any other duty, right or obligation of either
of them relating to or arising out of this Agreement;
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(d) Operating Plans. Develop budgets, cost estimates, operating
---------------
plans, marketing plans, and maintenance plans for the Facilities consistent
with the terms, covenants and conditions of this Agreement and to give and
receive information pertaining to the efficient design, deployment, use,
maintenance and performance of the System; and
(e) Approvals and Consents. Obtain all regulatory, governmental,
----------------------
third-party and shareholder approvals, consents, permits and franchises as
may be necessary or prudent for the operation of the Facilities and the
implementation of any operating plan for the use of the System as described
in this Agreement.
12.5 Regulatory Compliance. Each of ELI and SRP shall be
---------------------
responsible to comply with the regulatory requirements relating to its own
business practices and operations.
12.6 Certificates. Upon request of either ELI or SRP, at any
------------
time and from time to time hereafter, the other party without charge and within
thirty (30) days following receipt of such request, shall certify and confirm in
writing to the requesting party: (a) that this Agreement is in full force and
effect and has not been supplemented, modified or amended (or if there have been
supplements, modifications or amendments, specifying same); (b) whether, to the
best knowledge of the party issuing such certificate, any other sums then due
and payable by ELI to SRP or by SRP to ELI pursuant to any provisions of this
Agreement are then unpaid (and if such sums remain unpaid, the amount thereof);
(c) whether, to the best knowledge of the party issuing such certificate, the
other party is in default in the performance of any of the covenants or
agreements on its part to be performed under the terms of this Agreement (or, if
defaults exist, specifying each particular in which it is asserted such other
party is in default); (d) if such certificate is issued in connection with any
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financing of any Segment, that, subject to the provisions of Section 14.1, the
requesting party is authorized to enter into such financing transaction and that
the other party will adhere to and perform its obligations under Article XIV
hereof, following its receipt of notice of the Transfer; and (e) as to such
other matters in respect of this Agreement as the party requesting such
certificate may reasonably request.
12.7 Independent Contractor Status. ELI and SRP acknowledge and
-----------------------------
agree that they reserve no control whatsoever over the employment, discharge,
compensation of or services rendered by the employees or contractors of each
other, notwithstanding the ability of ELI and SRP under this Agreement to
exercise certain rights to enforce the various standards and specifications
agreed upon pursuant to the terms of this Agreement. Nothing in this Agreement
shall be construed as inconsistent with the foregoing independent status and
relationship or as creating or implying a partnership or joint venture between
ELI and SRP.
12.8 Transactions with Affiliates. From and after the effective
----------------------------
date of this Agreement, all transactions with an Affiliate involving the System
entered into by either ELI or SRP shall be at arm's-length and shall comply with
applicable regulatory requirements. Services purchased from or sold to an
Affiliate shall be evidenced by a written contract, the terms of which shall be
subject to then existing market rates, terms and conditions.
12.9 Further Assurances. Each of ELI and SRP, with reasonable
------------------
promptness, shall execute and deliver such further instruments, documents,
applications and requests or petitions for authority as may be necessary or
prudent to implement or carry out more effectively the understandings, purposes
and intents of this Agreement.
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12.10 Nonexclusive Agreement. Nothing in this Agreement shall be
----------------------
construed to prohibit SRP from making agreements with other telecommunications
carriers, not involving the SRP Network, or from competing with ELI.
Notwithstanding the generality of the immediately preceding sentence, to the
extent the System is available at competitive prices and terms, SRP shall use
the System in connection with the sale by SRP of telecommunications services.
In addition, SRP shall not compete with ELI in selling to the Key Accounts,
provided that ELI meets SRP's requirements (in SRP's sole but reasonable
discretion) in providing service to the Key Account customers. SRP's
requirements could include branding an ELI-provided service with a SRP brand.
12.11 Damage and Destruction. In the event any Segment is damaged
----------------------
or destroyed, ELI or SRP, as applicable, shall give immediate notice to the
other party of the occurrence of such damage or destruction. ELI and SRP shall
cooperate with each other to reroute or substitute services delivered by means
of the Affected Portion to allow for continued and uninterrupted service to
customers. Unless mutually agreed otherwise, ELI and SRP shall use any
available insurance proceeds to repair or reconstruct the damaged or destroyed
Affected Portion and to restore the Affected Portion to its full and proper use.
The Network Deployment Committee shall be notified of any temporary re-routings
or arrangements pending repair or reconstruction. The Network Deployment
Committee shall coordinate efforts to minimize any disruption of service that
may result from the occurrence of the damage or destruction. In the event the
damage or destruction renders the Affected Portion entirely unusable, the
decision to reconstruct the Affected Portion shall be treated as a Future
Segment, subject to the review and construction processes and procedures for
Future Segments set forth in Article VIII of this Agreement.
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ARTICLE XIII
INSURANCE
---------
13.1 Required Insurance Coverage. Without limiting any of the
---------------------------
liabilities or other obligations of SRP or ELI, both parties shall procure and
cause their respective contractors to procure and maintain in force at their own
cost and expense the following insurance coverages:
(a) Workers Compensation and Employers Liability Insurance.
------------------------------------------------------
Workers Compensation Insurance to cover obligations imposed by applicable
federal and state statutes and Employers Liability Insurance with a minimum
limit of $1,000,000.00.
(b) Commercial Liability Insurance. Commercial Liability
------------------------------
Insurance with a minimum combined single limit of $1,000,000.00 each
occurrence. The policy shall include coverage for bodily injury liability,
property damage liability, personal injury liability, and contractual
liability for liability assumed under this Agreement. The policy shall
contain a severability of interest provision.
13.2 General Conditions.
------------------
(a) ELI Policies. The policies required to be maintained by ELI
------------
and its contractors pursuant to Section 13.1(b) shall: (1) include SRP as
an additional insured; (2) provide that SRP shall not by reason of its
inclusion as an additional insured, incur liability to the insurer for
payment of premiums for such insurance; and (3) provide that such insurance
is primary and not excess without right of contribution from any other
insurance which might be otherwise available to SRP.
(b) SRP Policies. The policies required to be maintained by SRP
------------
and its contractors pursuant to Section 13.1(b) shall: (1) include ELI as
an additional insured; (2)
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provide that ELI shall not by reason of its inclusion as an additional
insured, incur liability to the insurer for payment of premiums for such
insurance; and (3) provide that such insurance is primary and not excess
without right of contribution from any other insurance which might be
otherwise available to ELI.
(c) Evidence of Insurance. Prior to commencing work at
---------------------
Facilities owned by the other party, SRP, ELI and their respective
contractors shall furnish a certificate of insurance as evidence attesting
that the insurance required under this Article XIII is in effect.
(d) Blanket Policies. Nothing in this Article XIII shall be
----------------
construed to prevent either ELI or SRP from satisfying its insurance
obligations pursuant to this Agreement under a blanket policy or policies
of insurance which meet or exceed the requirements of this Article XIII.
(e) Self-Insurance. Notwithstanding any provision in this
--------------
Article XIII to the contrary, ELI and SRP may self-insure all or any
portion of the insurance required under this Agreement.
ARTICLE XIV
ASSIGNMENT, SUBLETTING AND OTHER TRANSFERS
------------------------------------------
14.1 Transfers. This Agreement and the rights granted under this
---------
Agreement are being granted in reliance on the financial standing and technical
experience of ELI and SRP and are thus granted personally to ELI by SRP and to
SRP by ELI. Neither ELI nor SRP may assign any right under this Agreement,
whether in whole or in part, without the prior written consent of the other,
which consent shall not be unreasonably withheld. Notwithstanding the
generality of the foregoing, either party may assign its rights in this
Agreement in whole or in part without the consent
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of the other party to an Affiliate, provided that such assignment shall not
relieve the assigning party of any of its obligations under this Agreement. Any
assignment which does not comply with the provisions of this Article XIV shall
be null and void.
14.2 ELI or SRP Financing. In the event that ELI or SRP, after
--------------------
obtaining the consent of the other pursuant to Section 14.1, assigns its
interest under this Agreement pursuant to a sale-leaseback or other financing
transaction, the other party agrees that, upon written notice to it specifying:
(a) the name and address of the Transferee; and (b) the name and address of the
Transferee's Agent, the other party will simultaneously give to the Agent any
notices required to be given to the financing party under this Agreement. ELI
and SRP shall accept payment or performance by the Agent of any obligation of
the other party provided such payment or performance shall be made within the
applicable cure periods allowed by this Agreement. The Agent shall have the
right to cure any default by SRP or ELI, as the case may be, within the
applicable cure periods allowed by this Agreement. Subject to the terms of this
Section 14.2, the Transferee may further assign or transfer any rights or
interests it may have under this Agreement from time to time, in whole or in
part, with the consent of ELI or SRP, as the case may be, which consent shall
not be unreasonably withheld or delayed.
14.3 SRP and ELI Recognition of Transferees. If any such
--------------------------------------
Transferee shall obtain use of all or any part of the Affected Portion of the
Facilities, through enforcement of any agreement with ELI or SRP, then, so long
as all of the obligations of the other party under this Agreement are being
performed and such Transferee agrees to be bound by and to observe and perform
the obligations of the financing party under this Agreement with respect to the
Affected Portion, the other
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party shall not disturb the use of the Affected Portion by such Transferee and
shall recognize such Transferee's right to use thereof, subject to the terms of
this Agreement.
14.4 No Assumption or Release. Except as set forth in Section
------------------------
14.3, no assignment under this Article XIV shall be deemed to be an assumption
by the Transferee of the obligations of ELI under this Agreement, and ELI or
SRP, as the case may be, shall not in any event be released, relieved or
discharged of or from any of the obligations assumed under this Agreement unless
specifically agreed to by the other.
14.5 Mergers and Acquisitions. Notwithstanding any provision of
------------------------
this Agreement to the contrary, neither ELI nor SRP shall be restricted or
prohibited by this Agreement from participating in or completing any mergers
with or acquisitions of businesses similar to or comparable in nature with the
business in which they are now engaged, provided that the successor by merger to
either ELI or SRP shall be subject to the terms, covenants and conditions of
this Agreement and shall be deemed to have assumed all obligations of the
merging party hereunder, including, with respect to a successor to ELI, the
obligation to pay to SRP the Operating Lease Payment for all Net Operating
Income its generated by the merged entity from the operation of the System.
14.6 No Third Party Beneficiaries. Except as otherwise expressly
----------------------------
provided in this Agreement, neither this Agreement, nor any of its terms or
provisions, nor any inclusion by reference herein, shall be construed as being
for the benefit of any signatory not a party to this Agreement.
ARTICLE XV
CONDEMNATION
------------
15.1 Taking. Should any Segment be made the subject of a Taking,
------
the rights of ELI and SRP relative to the property and interest in such property
shall be as set out below.
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(a) Taking Affecting ELI Interests. If the Taking affects ELI
------------------------------
Facilities, or Rights of Way or Building Entrances owned or controlled by
ELI, or any other interest belonging to ELI, the License granted to SRP
under the terms of this Agreement, to the extent appropriated by such
Taking, shall terminate.
(b) Taking Affecting SRP Interests. If the Taking affects SRP
------------------------------
Facilities, or Rights of Way or Building Entrances owned or controlled by
SRP, or any other interest belonging to SRP, the License granted to ELI
under the terms of this Agreement, to the extent appropriated by such
Taking, shall terminate.
15.2 Taking Awards. In the proceeding for any such Taking (or an
-------------
involuntary discontinuance of the use of a Segment in anticipation of a Taking),
the interests of ELI and SRP in and to the Affected Portion of the Segment shall
be severed. Any awards resulting from the proceeding shall be allocated between
and payable in accordance with the respective interests of ELI and SRP (both
physical and occupational, including any incremental value of the Right of Way
by virtue of the installation therein of the System). In addition, each of ELI
and SRP shall be entitled to claim and receive the portion of the total award
attributable to its interest in the System and may claim damages payable on
account of relocation or re-routing expenses relating to the System.
15.3 Notice of Taking. Each of ELI and SRP shall notify the
----------------
other immediately of any Taking threatened or filed against any portion of a
Right of Way or Building Entrance which includes (or, based upon preliminary
route designations approved by the Network Deployment Committee, could include)
any part of the System. In addition, each of ELI and SRP agree not to sell or
convey any portion of a Right of Way or Building Entrance containing (or, based
upon
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preliminary route designations approved by the Network Deployment Committee,
could contain) any Facilities to such acquiring authority in lieu of
condemnation without giving prior notice to and the opportunity to the other
party to participate in the negotiations with respect to such conveyance. Upon
giving any such notice of a proposed or pending Taking, ELI and SRP, to the
extent reasonably available, shall procure alternate Rights of Way or Building
Entrances within which or to which the System may be relocated following such
Taking. Each of ELI and SRP shall bear its share of the cost of relocating the
System affected by such relocation.
ARTICLE XVI
ENVIRONMENTAL HAZARD LIABILITY
------------------------------
16.1 Representations. Neither ELI nor SRP has any knowledge of,
---------------
nor has either of them received any notice from any governmental agency
concerning the existence of, any Hazardous Substances on or under any Rights of
Way or Building Entrances controlled or used by either of them (including any
proposed Additional Segment or any Future Segment) or relating to any existing
Facilities which would: (a) materially and adversely affect or interfere with
the deployment or use of the System or the respective rights of ELI and SRP
under the terms of this Agreement; or (b) require any corrective action or any
form of remediation respecting an affected or contaminated area, except that SRP
has knowledge of groundwater contamination and other contamination in certain of
its Rights of Way.
16.2 Responsibilities of Parties. If any Hazardous Substance is
---------------------------
introduced or released by either ELI or SRP which affects a Right of Way,
Building Entrance, Hub Site or other Facility, the responsible party shall
defend, indemnify and hold the other party harmless from and against any and all
expenses, claims, fines and actions arising out of the existence, introduction
or
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release of any such Hazardous Substance. In addition, the responsible party
shall also bear all costs of removing, neutralizing, containing or otherwise
remediating any such Hazardous Substance. In cases where both ELI and SRP have
caused or contributed to the existence, introduction or release of any such
Hazardous Substance, each party shall be liable therefor and shall indemnify and
hold the other harmless to the extent of such party's contribution to the
release or contamination.
16.3 Alternate Locations. Upon learning of the existence,
-------------------
introduction or release of Hazardous Substances on Right of Way areas within
which the System is or is intended to be located, ELI and SRP, to the extent
available, shall use alternate contiguous areas within which the System may be
relocated to avoid the contaminated areas.
ARTICLE XVII
LIABILITY AND INDEMNITY
-----------------------
17.1 ELI Indemnity. ELI shall indemnify, defend and hold
-------------
harmless SRP, its officers, agents and employees of and from any claim, demand,
lawsuit, or action of any kind for injury to or death of persons, including, but
not limited to, employees of ELI or SRP, and damage or destruction of property,
including, but not limited to, property of either ELI or SRP, arising out of:
(a) negligent or willful acts or omissions of ELI, its agents, officers,
directors, employees or contractors; (b) the exercise by ELI of the privileges
or rights given herein; and (c) the performance by ELI of any of its obligations
under this Agreement. Such obligation to indemnify shall extend to and
encompass all costs incurred by SRP in defending such claims, demands, lawsuits
or actions, including, but not limited to, attorney, witness and expert witness
fees, and any other litigation related expenses. ELI's obligations pursuant to
this Section 17.1 shall not extend to claims, demands, lawsuits or actions for
liability attributable to the active negligence or willful action of SRP, its
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directors, officers, employees, contractors, successors or assigns. ELI shall
pay any cost that may be incurred by SRP in enforcing this indemnity, including
reasonable attorney fees.
17.2 SRP Indemnity. SRP shall indemnify, defend and hold
-------------
harmless ELI, its officers, agents and employees of and from any claim, demand,
lawsuit, or action of any kind for injury to or death of persons, including, but
not limited to, employees of SRP or ELI, and damage or destruction of property,
including, but not limited to, property of either SRP or ELI, arising out of:
(a) negligent or willful acts or omissions of SRP, its agents, officers,
directors, employees or contractors; (b) the exercise by SRP of the privileges
or rights given herein; and (c) the performance by SRP of any of its obligations
under this Agreement. Such obligation to indemnify shall extend to and
encompass all costs incurred by ELI in defending such claims, demands, lawsuits
or actions, including, but not limited to, attorney, witness and expert witness
fees, and any other litigation related expenses. SRP's obligations pursuant to
this Section 17.2 shall not extend to claims, demands, lawsuits or actions for
liability attributable to the active negligence or willful action of ELI, its
directors, officers, employees, contractors, successors or assigns. SRP shall
pay any cost that may be incurred by ELI in enforcing this indemnity, including
reasonable attorney fees.
17.3 No Consequential Damages. Notwithstanding any provision in
------------------------
this Agreement to the contrary, neither ELI, SRP nor their respective
contractors or subcontractors shall be liable to the other for incidental,
consequential, special, punitive or indirect damages, including without
limitation, loss of use, loss of profits or revenue, cost of capital or
increased operating costs, arising out of this transaction whether by reason of
contract, indemnity, strict liability, negligence, intentional conduct, breach
of warranty or from breach of this Agreement.
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17.4 Waiver of Subrogation. To the extent that such insurance is
---------------------
in force and collectible and to the extent permitted by law, each of ELI and SRP
hereby releases and waives all right of recovery against the other or anyone
claiming through or under each of them by way of subrogation or otherwise. The
foregoing release and waiver shall be in force and effect only if the releasing
party's insurance policies contain provisions to the effect that such a release
and waiver shall not invalidate the insurance, and each of ELI and SRP shall use
its best efforts to secure such provisions in its policies.
17.5 Defense of Claims. Either ELI or SRP as the indemnifying
-----------------
party hereunder shall have the right to defend the other by counsel of the
indemnifying party's selection reasonably satisfactory to the indemnified party,
with respect to any claims within the indemnification obligations of this
Article XVII. ELI and SRP shall give each other prompt notice of any asserted
claims or actions indemnified against, shall cooperate with each other in the
defense of any such claims or actions, and shall not settle any such claims or
actions without the prior written consent of the other.
17.6 Third Party Claims. Except as set forth in Sections 14.2,
------------------
17.1 and 17.2, nothing in this Agreement shall be construed to create rights in,
or duties or liabilities to, or any standard of care with reference to, or to
grant remedies to, any person or entity not a party to this Agreement. ELI and
SRP by entering into this Agreement do not hold themselves out as furnishing
like or similar services to any other person or entity.
17.7 Survival. The obligations of the respective parties under
--------
this Article XVII shall survive the expiration or earlier termination of this
Agreement.
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17.8 Limitation of ELI Liability. Notwithstanding anything to
---------------------------
the contrary in this Agreement, SRP alone shall have the responsibility for:
(a) the SRP Utilicom Services or Reserved Fiber transmission systems; (b) the
fitness of the SRP Facilities as and when constructed; and (c) the correctness
of the "as-built" drawings of the SRP Facilities. ELI's issuance of an
acceptance or approval of the foregoing shall signify approval of or objections
with respect to ELI's Telecommunications Services transmission system only and
shall in no way be deemed to represent an opinion or guarantee with respect to
the adequacy of SRP's Electric Services, Utilicom Services and Reserved Fiber
transmission systems or the support thereof.
17.9 Limitation of SRP Liability. Notwithstanding anything to
---------------------------
the contrary in this Agreement, ELI alone shall have responsibility for: (a)
the ELI Telecommunications Services transmission system; (b) the fitness of the
ELI Facilities as and when constructed; and (c) the correctness of the "as-
built" drawings of the ELI Facilities. SRP's issuance of an acceptance or
approval of any of the foregoing shall signify an approval of or objections to
SRP's Electric Services, Utilicom Services and Reserved Fiber transmission
systems only and shall in no way be deemed to represent an opinion or guarantee
with respect to the adequacy of ELI's Telecommunications Services transmission
system or the support thereof.
17.10 Applicability of Liability Limitations. ELI and SRP intend
--------------------------------------
that the waivers and disclaimers of liability, releases from liability,
exclusive remedy provisions, and (except as expressly stated to the contrary
therein) indemnity and hold harmless provisions expressed throughout this
Agreement shall apply even in the event of the fault, negligence (in whole or in
part), strict liability, or breach of contract of the party released or whose
liability is waived, disclaimed, limited,
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apportioned or fixed by such exclusive remedy provision, or who is indemnified
or held harmless, and shall extend to their respective Affiliates and its and
their partners, directors, officers, employees and agents. ELI and SRP also
intend and agree that such provisions shall continue in full force and effect
notwithstanding the completion, termination, suspension, cancellation or
rescission of this Agreement, or termination of the rights and privileges
granted by this Agreement. No officer, director, employee, agent or other
individual representative of either ELI or SRP shall be personally responsible
for any liability arising under this Agreement.
ARTICLE XVIII
FORCE MAJEURE
-------------
18.1 Excuse of Performance. Notwithstanding anything in this
---------------------
Agreement to the contrary, neither ELI or SRP shall be liable or responsible for
a delay or failure in performing or carrying out any of its obligations (other
than obligations to make payments) under this Agreement caused by Force Majeure
(as defined below).
18.2 Definition. The term "Force Majeure" as used in this
----------
Agreement shall mean any cause beyond the reasonable control of ELI or SRP, as
applicable, or beyond the reasonable control of any of their respective
contractors, subcontractors, suppliers or vendors, including without limitation:
(a) Acts of God. Acts of God, including, but not necessarily
-----------
limited to, lightning, earthquakes, adverse weather of greater duration or
intensity than normally expected for the job area and time of year, fires,
explosions, floods, other natural catastrophes, sabotage, acts of a public
enemy, acts of government or regulatory agencies, wars, blockades,
embargoes, insurrections, riots or civil disturbances;
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(b) Labor Disputes. Labor disputes, including, but not
--------------
necessarily limited to, strikes, work slowdowns, work stoppages or labor
disruptions, labor or material shortages, or delays or disruptions of
transportation;
(c) Court Orders. Orders and judgments of any federal, state or
------------
local court, administrative agency or governmental body;
(d) Change in Law. The adoption of or change in any federal,
-------------
state or local laws, rules, regulations, ordinances, permits or licenses,
or changes in the interpretation of such laws, rules, regulations,
ordinances, permits or licenses, by a court or public agency having
appropriate jurisdiction after the date of the execution of this Agreement;
or
(e) Government Approvals. Any suspension, termination,
--------------------
interruption, denial or failure to issue or renew by any governmental
authority or other party having approval rights of any Approval required or
necessary hereunder for the construction, installation or operation of the
Facilities or for either party to perform its obligations hereunder, except
when such suspension, termination, interruption, denial or failure to issue
or renew results from the negligence or failure to act of the party
claiming the occurrence of an event of Force Majeure.
18.3 Continuance after Force Majeure Event. Subject to the
-------------------------------------
provisions of Section 8.5, if either ELI or SRP is rendered unable to fulfill
any of its obligations under this Agreement by reason of Force Majeure, such
party shall promptly notify the other and shall exercise due diligence to remove
such inability with all reasonable dispatch; provided, that nothing contained in
this Section 18.3 shall be construed as requiring ELI or SRP to settle any
strike, work stoppage or other labor
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dispute in which it may be involved, or to accept any permit, certificate,
license or other Approval on terms deemed unacceptable to such party, or to
enter into any contract or other undertaking on terms which the party deems to
be unduly burdensome or costly.
ARTICLE XIX
BREACH AND TERMINATION
----------------------
19.1 Termination Events. The occurrence and continuance of the
------------------
following events may result in the termination of this Agreement, subject to the
provisions of this Article XIX:
(a) Change of Conditions. A change of conditions under which
--------------------
ELI, SRP or the System operates which is beyond the control of the parties
such that the System cannot continue to operate as contemplated by the
terms of this Agreement, or meet the Minimum Performance Standards for the
sale of Telecommunications Services, including, without limitation:
(1) Adverse Change in Financial Condition. A change in the
-------------------------------------
financial condition of ELI or SRP that materially and adversely
affects the ability of ELI or SRP to perform in accordance with the
terms, covenants and conditions of this Agreement;
(2) Change in Ownership. An unsolicited change in the
-------------------
controlling ownership of ELI, SRP or Citizens Utilities Company, which
for purposes hereof means a change in the direct or beneficial
ownership of any such entity in excess of 50%; or
(3) Adverse Change in Law. Changes in law or in the
---------------------
regulatory environment materially affecting ELI, SRP or the use of the
System.
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(b) Breach or Default. A material breach or material default
-----------------
under the terms, covenants or conditions of this Agreement by either ELI or
SRP, including, without limitation:
(1) Failure to Pay. The failure of either ELI or SRP to
--------------
make any payment required under the terms of this Agreement when due;
and
(2) Failure to Satisfy Minimum Performance Standards. The
------------------------------------------------
revenues generated from the sale of Telecommunications Services fails
to satisfy the Minimum Performance Standards.
(c) Intentional Termination. An intentional termination of this
-----------------------
Agreement by either ELI or SRP, including, without limitation:
(1) Intentional Termination. Either ELI or SRP announces to
-----------------------
the other its intention to terminate this Agreement for strategic or
other reasons that are unrelated to the parties' performance under
this Agreement;
(2) Willful Failure to Perform. The willful failure by
--------------------------
either ELI or SRP to perform its obligations under the terms of this
Agreement; and
(3) Termination Effected by Willful Acts or Omissions.
-------------------------------------------------
Either ELI or SRP, by willful acts or omissions, places either itself
or the System in a position or condition which breaches the terms,
covenants and conditions of this Agreement or effectively terminates
this Agreement, including, without limitation, a willful failure to
cure a breach or default after having received written notice thereof
from the other party.
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19.2 Actions Following Occurrence of Termination Event. Should
-------------------------------------------------
any termination event described in Section 19.1 occur, ELI and SRP shall have
the following rights and obligations:
(a) Change of Conditions. If the termination event is a change
--------------------
in conditions described in Section 19.1(a), ELI and SRP covenant and agree
to meet expeditiously and to discuss and negotiate in good faith the effect
of the changed condition on this Agreement, their respective performance
obligations hereunder, and their ability to perform under the terms,
covenants and conditions of this Agreement. By mutual consent, ELI and SRP
may terminate this Agreement, or modify this Agreement to address and
account for the changed condition in a mutually acceptable manner. If ELI
and SRP cannot agree on a solution to the effect of the changed condition,
either party, by written notice to the other, may elect to terminate this
Agreement.
(b) Breach or Default. If the termination event is a breach or
-----------------
default described in Sections 19.1(b) and 19.1(c), the non-defaulting party
shall give written notice of such occurrence to the defaulting party. The
defaulting party shall be given a reasonable time to cure any breach or
default as follows:
(1) Monetary Default. In the case of a monetary default,
----------------
the defaulting party shall have thirty (30) days after receipt of the
written notice in which to effectuate a cure.
(2) Nonmonetary Default. In the case of a nonmonetary
-------------------
default, the defaulting party shall have sixty (60) days after receipt
of the written notice in which to effectuate a cure. If the
nonmonetary default cannot be corrected within such sixty (60) day
period, the defaulting party shall have an additional reasonable
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time in which to effectuate a cure, provided the defaulting party
commences corrective action within the original sixty (60) day period
and thereafter diligently prosecutes the corrective action to
completion. If the defaulting party does not timely cure the breach or
default within the time periods specified above, the non-defaulting
party may elect to terminate this Agreement by providing written
notice of such election to the defaulting party.
In the event of an uncured breach or default described in Section 19.1(b)
or 19.1(c), the non-breaching party, in addition to the remedies and
obligations set forth in Section 19.3, shall have available to it all legal
remedies available for breach of contract.
19.3 Rights of ELI and SRP Upon Termination. Upon the
--------------------------------------
termination of this Agreement, for any reason:
(a) Transition Period. At termination, ELI and SRP shall
-----------------
continue to abide by the terms of this Agreement, including the methods
established hereunder and in the Base Case Financial Model for the
accounting and distribution of profits from the sale of Telecommunications
Services. The transition period shall last a maximum of two (2) years
following the effective date of termination. During such transition
period, SRP and ELI may seek alternative suppliers for Fiber and services
needs. ELI's and SRP's rights to use the System shall continue for the
duration of the transition period, however, the exclusivity of ELI's rights
in the Leased Fiber shall terminate. If at the conclusion of the
transition period SRP has not found replacement suppliers of the services
previously provided by ELI, SRP shall have the right to purchase such
services from ELI, for resale or otherwise, to permit continued service to
SRP's customers. SRP's purchase of such services from ELI, for resale
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or otherwise, shall be subject to then existing market rates, terms and
conditions. If at the conclusion of the transition period, ELI has not
found replacement suppliers of the services previously provided by SRP, ELI
shall have the right to lease Dark Fiber from SRP, at then existing market
rates, terms and conditions, including, without limitation, length of term,
and with sufficient capacity to service, without interruption, ELI's
customers, but in no event shall this provision obligate SRP to provide
greater capacity than the capacity being used by ELI at termination. In no
event shall the purchase and lease rights set forth in this section extend
beyond five (5) years following termination.
(b) Valuation of Telecommunications Services Customer Base. As
------------------------------------------------------
of the effective date of the termination of this Agreement, the goodwill
and other intangible value of the Telecommunications Services customer base
shall be appraised, by independent appraisal. If ELI and SRP cannot agree
on an appraiser to perform the appraisal, each party may select its own
appraiser and, except as provided in below, the arithmetic mean of the two
appraisals shall be deemed to be the value of such goodwill and other
intangibles. However, if the value established by the higher of the two
appraisals is more than fifteen percent (15%) higher than the lower of the
two appraisals, the two appraisers shall select a third appraiser. The
value of the goodwill and other intangibles relating to the
Telecommunications Services customer base shall then be established by
calculating the arithmetic mean of the value given by the third appraiser
with the next closest value given by one of the other two appraisers. ELI
shall pay to SRP, as SRP's share of the value of goodwill and other
intangibles associated with the Telecommunications Services customer base
of the System, one-half (50%) of the final appraised value obtained as
provided in this Section 19.3(b).
- 92 -
<PAGE>
ARTICLE XX
MISCELLANEOUS
-------------
20.1 Amendments. Neither this Agreement nor any provisions
----------
hereof may be changed, waived, discharged or terminated orally and may only be
modified or amended by an instrument in writing, singed by both ELI and SRP.
20.2 Binding Effect. This Agreement shall be binding upon and
--------------
shall inure to the benefit of ELI, SRP and their respective successors and
assigns.
20.3 Waivers. The failure by ELI or SRP at any time or times
-------
hereafter to require strict performance by the other of any of the undertakings,
agreements or covenants contained in this Agreement shall not waive, affect or
diminish any right of ELI or SRP hereunder to demand strict compliance and
performance therewith. None of the undertakings, agreements or covenants of ELI
and SRP under this Agreement shall be deemed to have been waived unless such
waiver is evidenced by an instrument in writing signed by the party to be
charged specifying such waiver.
20.4 Notices. Unless otherwise specifically provided in this
-------
Agreement, any notice or other communication herein required or permitted to be
given shall be in writing and may be personally served, telecopied, telexed or
sent by courier or United States certified mail and shall be deemed to have been
given when delivered in person or by courier service, upon receipt of a telecopy
or telex, or five (5) days after deposit in the United States mail, with postage
prepaid and properly addressed, as follows:
If to ELI, to: Electric Lightwave, Inc.
8100 N.E. Parkway Drive, #200
Vancouver, Washington 98662
Attn: Legal Department
Telecopy Number: (360) 253-4425
Telephone Number: (360) 892-1000
- 93 -
<PAGE>
and to: Electric Lightwave, Inc.
2600 North Central Avenue, Suite 300
Phoenix, Arizona 85004
Attn: General Manager
Telecopy Number: (602) 277-8343
Telephone Number: (602) 277-1122
If to SRP, to: Salt River Project Agricultural and
Improvement District
1600 North Priest Drive
Tempe, Arizona 85281
Attn: Corporate Secretary
Telecopy Number: (602) 236-2188
Telephone Number: (602) 236-5005
and to: Salt River Project Agricultural and
Improvement District
1600 North Priest Drive
Tempe, Arizona 85281
Attn: Manager SRP Telecom
Telecopy Number: (602) 236-3407
Telephone Number: (602) 236-6699
and to: Salt River Project Agricultural and
Improvement District
1600 North Priest Drive
Tempe, Arizona 85281
Attn: Legal Department
Telecopy Number: (602) 236-5397
Telephone Number: (602) 236-7249
Such addresses may be changed by notice to the other party given in the same
manner as above provided.
20.5 Severability. If any term or provision of this Agreement
------------
shall, to any extent, be determined by a court of competent jurisdiction to be
void, voidable or unenforceable, such void, voidable or unenforceable term or
provision shall not affect any other term or provision of this Agreement.
- 94 -
<PAGE>
20.6 Interpretation. Whenever the context shall require, the
--------------
plural shall include the singular, the whole shall include any part thereof, and
any gender shall include both other genders. The article, section and paragraph
headings contained in this Agreement are for purposes of reference only and
shall not limit, expand or otherwise affect the construction of any provisions
hereof. All references in this Agreement to articles, sections and paragraphs,
unless expressly noted otherwise, are to articles, sections and paragraphs
contained in this Agreement.
20.7 Governing Law and Choice of Forum. This Agreement and all
---------------------------------
matters relating hereto shall be governed by, construed and interpreted in
accordance with the laws of the State of Arizona. Any arbitration or mediation
under this agreement shall be held in the State of Arizona, County of Maricopa.
Jurisdiction for any disputes arising out of this agreement shall be exclusively
in the courts of the State of Arizona, state or federal, and any litigation
shall be brought in Maricopa County, Arizona.
20.8 Commissions. No brokerage, finder's or other fee,
-----------
commission or compensation shall be paid by ELI or SRP in connection with the
transaction contemplated by this Agreement. ELI and SRP shall indemnify and
hold each other harmless (including attorney fees and costs) from and against
any and all claims for brokerage and finder's fees or commissions which may be
asserted against the other based on the actions or omissions of the indemnifying
party.
20.9 Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which when so executed and delivered, shall be deemed
an original, but all such counterparts taken together shall constitute only one
instrument.
- 95 -
<PAGE>
20.10 Attorney Fees. ELI and SRP agree that should either of them
-------------
default in any of the covenants or agreements contained herein, the defaulting
party shall pay all costs and expenses, including reasonable attorney fees and
costs, incurred by the non-defaulting party to protect its rights hereunder,
regardless of whether an action is commenced or prosecuted to judgment.
20.11 Costs. Except as otherwise set forth in this Agreement, ELI
-----
and SRP shall each be responsible for its own costs, including legal fees,
incurred in negotiating and finalizing this Agreement.
DATED effective as of the date first above written.
ELI:
ELECTRIC LIGHTWAVE, INC., a Delaware
corporation
By: /s/ David B. Sharkey
---------------------------------------
Title: President
-----------------------------------
SRP:
SALT RIVER PROJECT AGRICULTURAL
IMPROVEMENT AND POWER DISTRICT, an Agricultural
Improvement District organized and existing
under the laws of the State of Arizona
By: /s/ William P. Schrader
---------------------------------------
Title: President
-----------------------------------
- 96 -
<PAGE>
Approved as to form:
/s/ Kenneth C. Sundlof, Jr.
- --------------------------------------
Kenneth C. Sundlof, Jr.
Jennings, Strouss & Salmon, P.L.C.
Date: September 9, 1996
---------------------------------
<PAGE>
EXHIBIT A [*]
ELI CONSTRUCTION PLAN
---------------------
- --------------------
[*] Confidential material has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with the
Securities and Exchange Commission.
<PAGE>
EXHIBIT B [*]
NETWORK MAPS
------------
- --------------------
[*] Confidential material (2pgs) has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with the
Securities and Exchange Commission.
2
<PAGE>
EXHIBIT C [*]
ECONOMIC ANALYSIS
-----------------
- --------------------
[*] Confidential material (6pgs) has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with the
Securities and Exchange Commission.
3
<PAGE>
EXHIBIT D: SRP CONSTRUCTION PLAN
Segment Description/Approximate Route Miles[*]
ELI Connections/Upgrades: (FY '96/97 or as needed)
96 fiber [*] 6.25 miles
96 fiber [*] 4.0 miles
48 fiber [*]
5.3 miles
48 fiber [*] 1.8 miles
48 fiber [*] 2.0 miles
96 fiber [*] 4.2 miles
48 fiber [*] 1.9 miles
48 fiber [*] 2.0 miles
48 fiber [*] 2.0 miles
48 fiber [*] 4.4 miles
- -----------------------------------------------------------------
Total 33.85 miles
SRP Substation Buildout
Fiscal Year `96/97
------------------
Ring [*]
72 fiber [*] 2.0 miles
48 fiber [*] 3.0 miles
24 fiber [*] 2.3 miles
96 fiber [*] 0.7 miles
48 fiber [*]
Ring [*]
48 fiber [*] 4.0 miles
48 fiber [*] 2.0 miles
Ring [*]
48 fiber [*] 2.5 miles
48 fiber [*] 2.2 miles
48 fiber [*] 3.0 miles
48 fiber [*] 2.0 miles
48 fiber [*] 2.5 miles
48 fiber [*] 2.5 miles
24 fiber [*] 2.0 miles
Ring [*]
48 fiber [*] 5.0 miles
48 fiber [*] 2.0 miles
48 fiber [*] 1.5 miles
24 fiber [*] 2.0 miles
24 fiber [*] 1.2 miles
Ring [*]
48 fiber [*] 2.0 miles
24 fiber [*] 1.5 miles
24 fiber [*] 1.1 miles
24 fiber [*] 1.3 miles
24 fiber [*] 2.0 miles
24 fiber [*] 0.5 miles
Ring [*]
48 fiber [*] 4.0 miles
24 fiber [*] 1.0 miles
24 fiber [*] 1.3 miles
24 fiber [*] 2.5 miles
48 fiber [*] 1.7 miles
48 fiber [*] 3.0 miles
Ring [*]
48 fiber [*] 1.5 miles
- -----------------------------------------------------------------
Total '96-'97 65.80 miles
- --------------------
* Confidential material has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with the
Securities and Exchange Commission.
<PAGE>
Fiscal Year `97/98[*]
---------------------
Ring [*]
48 fiber [*] 1.3 miles
48 fiber [*] 3.0 miles
48 fiber [*] 2.1 miles
48 fiber [*] 0.2 miles
48 fiber [*] 2.0 miles
48 fiber [*] 2.3 miles
Ring [*]
24 fiber [*] 2.0 miles
24 fiber [*] 1.1 miles
24 fiber [*] 0.6 miles
24 fiber [*] 0.3 miles
24 fiber [*] 2.4 miles
24 fiber [*] 3.5 miles
24 fiber [*] 0.8 miles
24 fiber [*] 0.4 miles
Ring [*]
24 fiber [*] 2.1 miles
24 fiber [*] 2.7 miles
24 fiber [*] 8.5 miles
48 fiber [*] 0.5 miles
Ring [*]
24 fiber [*] 2.1 miles
24 fiber [*] 3.4 miles
48 fiber [*] 1.3 miles
24 fiber [*] 2.5 miles
24 fiber [*] 2.0 miles
24 fiber [*] 1.0 miles
24 fiber [*] 1.6 miles
Ring [*]
24 fiber [*] 3.2 miles
24 fiber [*] 2.0 miles
24 fiber [*] 1.2 miles
24 fiber [*] 2.0 miles
24 fiber [*] 2.5 miles
24 fiber [*] 0.6 miles
24 fiber [*] 5.3 miles
Ring [*]
24 fiber [*] 3.6 miles
24 fiber [*] 2.0 miles
24 fiber [*] 2.8 miles
48 fiber [*] 4.1 miles
24 fiber [*] 0.1 miles
Ring [*]
24 fiber [*] 1.3 miles
24 fiber [*] 2.2 miles
24 fiber [*] 2.0 miles
24 fiber [*] 2.5 miles
24 fiber [*] 2.3 miles
24 fiber [*] 4.1 miles
24 fiber [*] 1.0 miles
Ring [*]
24 fiber [*] 1.2 miles
24 fiber [*] 2.0 miles
24 fiber [*] 2.0 miles
- -----------------------------------------------------------------
Total '97-'98 99.70 miles
- --------------------
* Confidential material has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with the
Securities and Exchange Commission.
<PAGE>
Fiscal Year `98/99[*]
---------------------
Ring [*]
24 fiber [*] 4.0 miles
24 fiber [*] 2.0 miles
24 fiber [*] 1.5 miles
24 fiber [*] 1.0 miles
24 fiber [*] 2.8 miles
24 fiber [*] 2.2 miles
Ring [*]
24 fiber [*] 7.5 miles
24 fiber [*] 3.0 miles
24 fiber [*] 2.0 miles
48 fiber [*] 3.0 miles
48 fiber [*] 9.5 miles
Ring [*]
24 fiber [*] 2.2 miles
24 fiber [*] 3.3 miles
24 fiber [*] 1.8 miles
24 fiber [*] 3.5 miles
24 fiber [*] 2.8 miles
Ring [*]
48 fiber [*] 1.5 miles
24 fiber [*] 1.3 miles
24 fiber [*] 2.3 miles
24 fiber [*] 2.1 miles
24 fiber [*] 3.0 miles
24 fiber [*] 3.0 miles
24 fiber [*] 2.3 miles
24 fiber [*] 4.0 miles
Ring [*]
24 fiber [*] 3.3 miles
24 fiber [*] 2.2 miles
24 fiber [*] 4.0 miles
24 fiber [*] 2.0 miles
Ring [*]
48 fiber [*] 1.0 miles
24 fiber [*] 2.0 miles
24 fiber [*] 1.0 miles
24 fiber [*] 1.5 miles
24 fiber [*] 2.1 miles
- -----------------------------------------------------------------
Total '98-'99 90.70 miles
- --------------------
* Confidential material has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with the
Securities and Exchange Commission.
3
<PAGE>
Fiscal Year `99/00[*]
---------------------
Ring [*]
24 fiber [*] 2.0 miles
24 fiber [*] 5.0 miles
24 fiber [*] 6.0 miles
24 fiber [*] 3.0 miles
24 fiber [*] 5.0 miles
24 fiber [*] 2.3 miles
Ring [*]
48 fiber [*] 3.0 miles
24 fiber [*] 6.0 miles
24 fiber [*] 2.0 miles
- -----------------------------------------------------------------
Total '99 - '00 34.30 miles
- --------------------
* Confidential material has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with the
Securities and Exchange Commission.
4
<PAGE>
EXHIBIT "E"
EXISTING OR PENDING SRP NETWORK CONTRACTS
-----------------------------------------
MESA UNIFIED SCHOOL DISTRICT #4
A pending bid for bandwidth and transmission services for a district wide
communications network. If accepted this bid requires that SRP deploy a private
fiber optic network connecting all Mesa Public School facilities utilizing
reserved fiber on the SRP Network backbone and additional fiber for spurs and
building entrances. In addition, SRP will lease T-1 circuits and resell dial
tone services from US WEST Communications. This bid was submitted in conjunction
with Fujitsu Business Communications Systems, Inc., on May 30, 1996.
MOTOROLA
A month-to-month service agreement with Motorola, Inc. (an Illinois corporation
located at 1299 E. Algonquin Road, Schaumburg, Illinois) for point-to-point
Digital Signal-3 service between Motorola facilities located at 2501 S. Price
Road, Chandler, Arizona, and Motorola operations located at the Orbital Sciences
Center facility located at 3380 S. Price Road, Chandler, Arizona. This service
was initiated July 1, 1996.
TELEPORT COMMUNICATIONS GROUP
A ten-year license for fiber optic telecommunications facilities for use by TCG
Phoenix (a New York general partnership having its principal place of business
at 2730 East Camelback Road, Phoenix, Arizona) to provide telecommunications
services. These fiber optic cable facilities are located along SRP Arizona Canal
right-of-way between 16th Street and 40th Street in Phoenix, Arizona.
US WEST COMMUNICATIONS
A ten-year license for fiber optic telecommunications facilities for use by US
WEST Communications (a Delaware corporation having its principal place of
business at 12999 Deer Creek Canyon Road, Littleton, Colorado) to provide
telecommunications services. These fiber optic cable facilities are located
along SRP Arizona Canal right-of-way between 16th Street and 4Oth Street in
Phoenix, Arizona.
<PAGE>
EXHIBIT F
RESERVED FIBER ALLOCATION FOR SEGMENTS IN SRP SERVICE TERRITORY
<TABLE>
<CAPTION>
EXISTING ADDITIONAL ADD STRANDS STRANDS CABLE STRAND-MILES STRAND-MILES STRAND-MILES
FIBER SEGMENT NAME/*/ COUNT COUNT YR RESERVED AVAILABLE MILES RESERVED AVAILABLE TOTAL
<S> <C> <C> <C> <C> <C> <C> <C> <C>
/*/ 72 1 54 18 2 108 36 144
/*/ 48 1 30 18 3 90 54 144
/*/ 48 1 30 18 0.2 6 3.6 9.6
/*/ 96 1 24 72 0.2 4.8 14.4 19.2
/*/ 24 8 16 3 24 48 72
/*/ 24 6 18 2.3 13.8 41.4 55.2
/*/ 24 8 16 2 16 32 48
/*/ 24 4 20 2 8 40 48
/*/ 24 10 14 1 10 14 24
/*/ 24 1 12 12 2.3 27.6 27.6 55.2
/*/ 24 14 10 3 42 30 72
/*/ 20 16 4 1.3 20.8 5.2 26
/*/ 6 6 0 3 18 0 18
/*/ 18 16 2 5 80 10 90
/*/ 48 1 10 38 4 40 152 192
/*/ 48 1 10 38 2 20 76 96
/*/ 48 1 10 38 5 50 190 240
/*/ 48 1 10 38 2 20 76 96
/*/ 48 1 10 38 1.5 15 57 72
/*/ 24 1 6 18 2 12 36 48
/*/ 24 1 6 18 1.2 7.2 21.6 28.8
/*/ 20 20 0 2 40 0 40
/*/ 20 20 0 3.3 66 0 66
/*/ 20 20 0 5 100 0 100
/*/ 48 1 6 42 2.2 13.2 92.4 105.6
/*/ 48 1 6 42 3 18 126 144
/*/ 48 1 10 38 2 20 76 96
/*/ 48 1 6 42 2.5 15 105 120
/*/ 48 1 6 42 2.5 15 105 120
/*/ 20 10 10 3 30 30 60
/*/ 20 10 10 4 40 40 80
/*/ 48 1 10 38 2 20 76 96
/*/ 24 1 6 18 1.5 9 27 36
/*/ 24 1 6 18 1.1 6.6 19.8 26.4
/*/ 24 1 6 18 1.3 7.8 23.4 31.2
/*/ 24 1 6 18 2 12 36 48
/*/ 24 1 8 16 0.5 4 8 12
/*/ 48 1 8 40 4 32 160 192
/*/ 48 1 8 40 1.5 12 60 72
/*/ 24 1 8 16 1 8 16 24
/*/ 24 1 8 16 1.3 10.4 20.8 31.2
</TABLE>
- ---------------
/*/ Confidential material has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with the
Securities and Exchange Commission.
<PAGE>
EXHIBIT F
RESERVED FIBER ALLOCATION FOR SEGMENTS IN SRP SERVICE TERRITORY
<TABLE>
<CAPTION>
EXISTING ADDITIONAL ADD STRANDS STRANDS CABLE STRAND-MILES STRAND-MILES STRAND-MILE
FIBER SEGMENT NAME/*/ COUNT COUNT YR RESERVED AVAILABLE MILES RESERVED AVAILABLE TOTAL
<S> <C> <C> <C> <C> <C> <C> <C> <C>
/*/ 24 1 8 16 2.5 20 40 60
/*/ 48 1 8 40 1.7 13.6 68 81.6
/*/ 48 1 8 40 3 24 120 144
/*/ 24 8 16 3 24 48 72
/*/ 20 10 10 1.3 13 13 26
/*/ 20 12 8 2 24 16 40
/*/ 20 12 8 2 24 16 40
/*/ 20 12 8 2.3 27.6 18.4 46
/*/ 20 12 8 4.6 55.2 36.8 92
/*/ 24 8 16 6 48 96 144
/*/ 24 8 16 3 24 48 72
/*/ 24 6 18 2.5 15 45 60
/*/ 48 2 6 42 1 3 7.8 54.6 62.4
/*/ 48 2 6 42 3 18 126 144
/*/ 48 2 6 42 2.1 12.6 88.2 100.8
/*/ 48 2 6 42 0.2 1.2 8.4 9.6
/*/ 48 2 6 42 2 12 84 96
/*/ 48 2 8 40 2.3 18.4 92 110.4
/*/ 24 12 12 11 132 132 264
/*/ 24 12 12 2 24 24 48
/*/ 24 12 12 4 48 48 96
/*/ 24 12 12 3 36 36 72
/*/ 24 1 6 18 2 12 36 48
/*/ 48 1 12 36 1.25 15 45 60
/*/ 48 1 12 36 1.25 15 45 60
/*/ 24 2 6 18 2.4 14.4 43.2 57.6
/*/ 24 2 12 12 0.6 7.2 7.2 14.4
/*/ 24 2 12 12 0.3 3.6 3.6 7.2
/*/ 24 2 12 12 0.4 4.8 4.8 9.6
/*/ 24 2 6 18 1.1 6.6 19.8 26.4
/*/ 24 2 6 18 0.8 4.8 14.4 19.2
/*/ 24 2 6 18 2 12 36 48
/*/ 24 2 6 18 3.5 21 63 84
/*/ 24 8 16 1.2 9.8 19.2 28.8
/*/ 48 12 36 2.2 26.4 79.2 105.6
/*/ 24 12 12 3.5 42 42 84
/*/ 24 12 12 2 24 24 48
/*/ 24 2 8 16 2.7 21.6 43.2 64.8
/*/ 24 2 6 18 2.1 12.6 37.8 50.4
/*/ 24 2 10 14 2.1 21 29.4 50.4
/*/ 24 2 14 10 3.4 47.6 34 81.6
/*/ 24 2 12 12 1.6 19.2 19.2 38.4
/*/ 24 2 6 18 1 6 18 24
/*/ 24 12 12 1 12 12 24
</TABLE>
- ---------------
/*/ Confidential material has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with the
Securities and Exchange Commission.
<PAGE>
EXHIBIT F
RESERVED FIBER ALLOCATION FOR SEGMENTS IN SRP SERVICE TERRITORY
<TABLE>
<CAPTION>
EXISTING ADDITIONAL ADD STRANDS STRANDS CABLE STRAND-MILES STRAND-MILES STRAND-MILES
FIBER SEGMENT NAME/*/ COUNT COUNT YR RESERVED AVAILABLE MILES RESERVED AVAILABLE TOTAL
<S> <C> <C> <C> <C> <C> <C> <C> <C>
/*/ 24 2 8 16 2 16 32 48
/*/ 24 2 14 10 2.5 35 25 60
/*/ 48 2 12 36 1.3 15.6 46.8 62.4
/*/ 24 12 12 13 156 156 312
/*/ 48 20 28 2 40 56 96
/*/ 48 18 30 1.7 30.6 51 81.6
/*/ 48 18 30 2 36 60 96
/*/ 48 18 30 3 54 90 144
/*/ 24 2 12 12 3.2 38.4 38.4 76.8
/*/ 24 2 8 16 2 16 32 48
/*/ 24 2 10 14 1.2 12 16.8 28.8
/*/ 24 2 10 14 2 20 28 48
/*/ 24 2 10 14 2.5 25 35 60
/*/ 24 2 10 14 0.6 6 8.4 14.4
/*/ 24 2 12 12 5.3 63.6 63.6 127.2
/*/ 24 2 6 18 3.6 21.6 64.8 86.4
/*/ 24 2 6 18 2 12 36 48
/*/ 24 2 6 18 2.8 16.8 50.4 67.2
/*/ 48 2 12 36 4.1 49.2 147.6 196.8
/*/ 24 2 6 18 0.1 0.6 1.8 2.4
/*/ 24 2 6 18 1.3 7.8 23.4 31.2
/*/ 24 2 6 18 2.2 13.2 39.6 52.8
/*/ 24 2 6 18 2 12 36 48
/*/ 24 2 6 18 2.5 15 45 60
/*/ 24 2 6 18 2.3 13.8 41.4 55.2
/*/ 24 2 6 18 4.1 24.6 73.8 98.4
/*/ 24 2 6 18 1 6 18 24
/*/ 48 12 36 1.5 18 54 72
/*/ 48 12 36 3 36 108 144
/*/ 48 12 36 2 24 72 96
/*/ 48 12 36 1 12 36 48
/*/ 24 2 8 16 1.2 9.6 19.2 28.8
/*/ 24 2 8 16 2 16 32 48
/*/ 24 2 8 16 2 16 32 48
/*/ 48 16 32 1.7 27.2 54.4 81.6
/*/ 48 16 32 4 64 128 192
/*/ 48 16 32 2.2 35.2 70.4 105.6
/*/ 48 16 32 6 96 192 288
/*/ 24 3 6 18 4 24 72 96
/*/ 24 3 6 18 2 8 16.8 50.4 67.2
/*/ 24 3 6 18 2 12 36 48
/*/ 24 3 6 18 1.5 9 27 36
/*/ 24 3 6 18 1 6 18 24
/*/ 24 3 6 18 2.2 13.2 39.6 52.8
</TABLE>
- ---------------
/*/ Confidential material has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with the
Securities and Exchange Commission.
<PAGE>
EXHIBIT F
RESERVED FIBER ALLOCATION FOR SEGMENTS IN SRP SERVICE TERRITORY
<TABLE>
<CAPTION>
EXISTING ADDITIONAL ADD STRANDS STRANDS CABLE STRAND-MILES STRAND-MILES STRAND-MILES
FIBER SEGMENT NAME/*/ COUNT COUNT YR RESERVED AVAILABLE MILES RESERVED AVAILABLE TOTAL
<S> <C> <C> <C> <C> <C> <C> <C> <C>
/*/ 24 3 6 18 2 12 36 48
/*/ 24 3 6 18 3.3 19.8 59.4 79.2
/*/ 24 3 6 18 2.2 13.2 39.6 52.8
/*/ 24 3 6 18 4 24 72 96
/*/ 12 6 6 3.5 21 21 42
/*/ 12 6 6 3.5 21 21 42
/*/ 48 3 6 42 1 6 42 48
/*/ 24 3 8 16 2 16 32 48
/*/ 24 3 8 16 1 8 16 24
/*/ 24 3 8 16 1.5 12 24 36
/*/ 24 3 8 16 2.1 16.8 33.6 50.4
/*/ 48 12 36 6 72 216 288
/*/ 24 3 8 16 7.5 60 120 180
/*/ 24 3 8 16 3 24 48 72
/*/ 24 3 8 16 3 24 48 72
/*/ 24 3 8 16 2 16 32 48
/*/ 24 3 6 18 2.2 13.2 39.8 52.8
/*/ 24 3 6 18 3.3 19.8 59.4 79.2
/*/ 24 3 8 16 1.8 14.4 28.8 43.2
/*/ 24 3 8 16 3.5 28 56 84
/*/ 24 3 8 16 2.8 22.4 44.8 67.2
/*/ 24 24 0 5 120 0 120
/*/ 48 24 24 2 48 48 96
/*/ 48 24 24 4 96 96 192
/*/ 48 3 8 40 1.5 12 60 72
/*/ 24 3 6 18 1.3 7.8 23.4 31.2
/*/ 24 3 6 18 2.3 13.8 41.4 55.2
/*/ 24 3 6 18 2.1 12.6 37.8 50.4
/*/ 24 3 6 18 3 18 54 72
/*/ 24 3 6 18 3 18 54 72
/*/ 24 3 6 18 2.3 13.8 41.4 55.2
/*/ 24 3 6 18 4 24 72 96
/*/ 24 8 16 2 16 32 48
/*/ 24 4 6 18 2 12 36 48
/*/ 24 4 6 18 5 30 90 120
/*/ 24 4 6 18 6 36 108 144
/*/ 24 4 6 18 3 18 54 72
/*/ 24 4 6 18 5 30 90 120
/*/ 24 4 6 18 2.3 13.8 41.4 55.2
/*/ 48 4 6 42 3 18 126 144
/*/ 24 4 6 18 6 36 108 144
/*/ 24 4 12 12 2 24 24 48
/*/ 24 2 6 18 8.5 51 153 204
/*/ 48 4 10 38 9.5 95 361 456
</TABLE>
- ---------------
/*/ Confidential material has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with the
Securities and Exchange Commission.
<PAGE>
EXHIBIT F
RESERVED FIBER ALLOCATION FOR SEGMENTS IN SRP SERVICE TERRITORY
<TABLE>
<CAPTION>
EXISTING ADDITIONAL ADD STRANDS STRANDS CABLE STRAND-MILES STRAND-MILES STRAND-MILES
FIBER SEGMENT NAME/*/ COUNT COUNT YR RESERVED AVAILABLE MILES RESERVED AVAILABLE TOTAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
/*/ 48 2 12 36 0.5 6 18 24
ADDITIONAL BULLDOUT TO SUPPORT ELI/SRP JOINT OPERATIONS
/*/ 72 1 12 60 6.25 75 375 450
/*/ 96 1 12 84 4 48 336 384
/*/ 48 1 12 36 5.3 63.6 190.8 254.4
/*/ 48 1 12 36 2 24 72 96
/*/ 48 1 12 36 2 24 72 96
/*/ 48 1 6 42 4.4 26.4 184.8 211.2
/*/ 48 1 12 36 2 24 72 96
/*/ 96 1 12 84 4.2 50.4 352.8 403.2
/*/ 48 1 12 36 1.9 22.8 68.4 91.2
/*/ 48 2 12 36 2 24 72 96
=============================================================================================================================
TOTALS 489.9 4900.4 10932.8 15833.2
PERCENTAGE 31.0 69.0
NOTES: *
</TABLE>
- ---------------
/*/ Confidential material has been omitted pursuant to a request for
confidential treatment. Such material has been filied separately with the
Securities and Exchange Commission.
<PAGE>
EXHIBIT "G"
Operating Lease Payment Examples
--------------------------------
FIRST 15 QUARTERS:
- ------------------
<TABLE>
<CAPTION>
Example #1 Example #2 Example #3
------------------ ------------------ -----------------
CALCULATION OF OPERATING LEASE PAYMENT:
- ---------------------------------------
<S> <C> <C> <C>
Gross Revenue $ 1,000,000 $ 5,000,000 $10,000,000
Cost of Goods Sold (400,000) (2,000,000) (4,000,000)
Gross Margin 600,000 3,000,000 6,000,000
Current Direct Operating Costs (1,000,000) (1,500,000) (2,000,000)
Accumulated Unreimbursed Direct
Operating Expenses 0 (400,000) 0
Deferred Operating Lease Amortization (2) N/A N/A N/A
Net Operating Income (400,000) 1,100,000 4,000,000
Operating Lease Percentage [*] [*] [*]
Operating Lease Payment $ 0 [*] [*]
==========================================================
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED UNREIMBURSED DIRECT OPERATING EXPENSES (1):
- -------------------------------------------------------
<S> <C> <C> <C>
Beginning of Year $0 ($400,000) $0
Current Year Unreimbursed (400,000) 0 0
Prior Year Deduction 0 400,000 0
End of Year ($400,000) $ 0 $0
==============================
</TABLE>
<TABLE>
<CAPTION>
DEFERRED OPERATING LEASE (2):
- -----------------------------
<S> <C> <C> <C>
Beginning of Year $0 $0 [*]
Current Year Deferred 0 [*] 0
Current Year Amortization N/A N/A N/A
End of Year $0 [*] [*]
=========================
</TABLE>
* Confidential material has been omitted pursuant to a request for confidential
treatment. Such material has been filed separately with the Securities and
Exchange Commission.
<PAGE>
EXHIBIT "G"
Operating Lease Payment Examples
--------------------------------
DURING 16TH THROUGH 35TH QUARTERS:
- ----------------------------------
<TABLE>
<CAPTION>
Example #1 Example #2 Example #3
------------ ------------ ------------
CALCULATION OF OPERATING LEASE PAYMENT:
- ---------------------------------------
<S> <C> <C> <C>
Gross Revenue $ 1,000,000 $ 5,000,000 $10,000,000
Cost of Goods Sold (400,000) (2,000,000) (4,000,000)
Gross Margin 600,000 3,000,000 6,000,000
Current Direct Operating Costs (1,000,000) (1,500,000) (2,000,000)
Accumulated Unreimbursed Direct
Operating Expenses N/A N/A N/A
Deferred Operating Lease Amortization (2) 0 [*] [*]
Net Operating Income (400,000) [*] [*]
Operating Lease Percentage [*] [*] [*]
Current Operating Lease Payment $ 0 [*] [*]
=========================================
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED UNREIMBURSED DIRECT OPERATING EXPENSES (1):
- -------------------------------------------------------
<S> <C> <C> <C>
Beginning of Year $0 $0 $0
Current Year Unreimbursed N/A N/A N/A
Prior Year Deduction N/A N/A N/A
End of Year $0 $0 $0
=========================
</TABLE>
<TABLE>
<CAPTION>
DEFERRED OPERATING LEASE (2):
- -----------------------------
<S> <C> <C> <C>
Quarter (16-19) (20-23) (24-27)
Percent [*] [*] [*]
Beginning of Year [*] [*] [*]
Current Year Deferred N/A N/A N/A
Current Year Amortization 0 [*] [*]
End of Year [*] [*] [*]
================================
</TABLE>
* Confidential material has been omitted pursuant to a request for confidential
treatment. Such material has been filed separately with the Securities and
Exchange Commission.
<PAGE>
EXHIBIT "G"
Operating Lease Payment Examples
--------------------------------
AFTER 35TH QUARTERS:
- --------------------
<TABLE>
<CAPTION>
Example #1 Example #2 Example #3
------------ ------------ ------------
CALCULATION OF OPERATING LEASE PAYMENT:
- ---------------------------------------
<S> <C> <C> <C>
Gross Revenue $ 1,000,000 $ 5,000,000 $10,000,000
Cost of Goods Sold (400,000) (2,000,000) (4,000,000)
Gross Margin 600,000 3,000,000 6,000,000
Current Direct Operating Costs (1,000,000) (1,500,000) (2,000,000)
Accumulated Unreimbursed Direct
Operating Expenses N/A N/A N/A
Deferred Operating Lease Amortization (2) N/A N/A N/A
Net Operating Income (400,000) 1,500,000 4,000,000
Operating Lease Percentage [*] [*] [*]
Operating Lease Payment $ 0 [*] [*]
=========================================
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED UNREIMBURSED DIRECT OPERATING EXPENSES (1):
- -------------------------------------------------------
<S> <C> <C> <C>
Beginning of Year $0 $0 $0
Current Year Unreimbursed N/A N/A N/A
Prior Year Deduction N/A N/A N/A
End of Year $0 $0 $0
=========================
</TABLE>
<TABLE>
<CAPTION>
DEFERRED OPERATING LEASE (2):
- -----------------------------------------------------------
<S> <C> <C> <C>
Beginning of Year $0 $0 $0
Current Year Deferred N/A N/A N/A
Current Year Amortization N/A N/A N/A
End of Year $0 $0 $0
===============
</TABLE>
* Confidential material has been omitted pursuant to a request for confidential
treatment. Such material has been filed separately with the Securities and
Exchange Commission.
<PAGE>
EXHIBIT "H"
COORDINATING COMMITTEE
----------------------
ELECTRIC LIGHTWAVE (1) The Vice President with responsibility for sales; and
(2) The Vice President with responsibility for engineering.
SALT RIVER PROJECT (1) The senior-most manager responsible for commercial
telecommunications services; presently Richard M.
Hayslip, Manager of Environmental, Land and Risk
Management Services.
(2) The senior-most manager responsible for internal
telecommunications services; presently Robert M.
Thomas, Manager of Electric System Operations &
Maintenance.
<PAGE>
EXHIBIT "I"
NETWORK DEPLOYMENT COMMITTEE
----------------------------
ELECTRIC LIGHTWAVE (1) The Vice President with responsibility for engineering;
(2) A Senior Engineering Representative Designated by the
Vice President of Engineering; and
(3) The Phoenix General Manager.
SALT RIVER PROJECT (1) The manager responsible for internal
telecommunications; presently Mark L. Etherton, Manager
of Communications Engineering.
(2) The manager(s) responsible for telecommunications
business management; presently Michael C. Sherman,
Manager of Telecommunications Business Development and
Christopher R. Forsyth, Manager of SRP Telecom.
(3) A senior telecommunications technical advisor;
presently Mr. Ron L. Taylor, Principal Engineer-
Communications Engineering.
<PAGE>
EXHIBIT "J"
STAFFING
--------
ELECTRIC LIGHTWAVE
PHOENIX
General Manager--Phoenix: Responsible for sales operations and overall
direction of the Phoenix office, including budgets and coordination of non-sales
personnel. The General Manager will serve as primary contact to SRP.
Sales Engineer--Phoenix: Assists the Account Executive with the sales process,
technical resource for highly technical and complex customer requirements.
Account Executive: Responsible for producing Telecommunications Services
revenue, as well as account management.
OSP Engineer: Designs OSP and supports the sales process, supports the
implementation of the System, serves as resource to SRP engineering personnel in
design of the System.
Hub Technician: Installs and maintains all services for ELI customer base.
Administrative Assistant: Supports the General Manager in the overall
management of the Phoenix office, supports the sales personnel in their sales
efforts as directed by the General Manager.
Receptionist: Supports the Administrative Assistant, serves as primary contact
for visitors to the office, answers phones.
CORPORATE
ELI corporate headquarters will provide support personnel and other resources
necessary to provide: assistance in design and engineering of communications
outside plant facilities; design and engineering of System electronics and
optronics; System operation and maintenance (including 7x24 monitoring via ELI's
network control center); communications product development and marketing;
service sales and provisioning; customer service; billing and collections; local
area number portability; and compliance with state and federal regulatory
requirements.
SALT RIVER PROJECT
The following describes staff dedicated to the operation of the System as a
telecommunications network ("SRP Telecom"), or having support for SRP Telecom as
a primary objective. This includes those employees, the majority of whose time
will be charged to SRP Telecom direct operating expenses, or to capital projects
within SRP Telecom.
<PAGE>
Manager, SRP Telecom: Strategic development of telecommunications initiative;
integration of backbone network and customer lateral decisions; capital budget
management; business interface with engineering, legal, finance, and accounting
departments; development of enhanced energy services.
Manager, Telecommunications Business Development: Strategic development of
telecommunications initiative; business interface with marketing, real estate
and communications departments; development of enhanced energy services; key
trade ally/vendor relationship management.
Secretary, Telecommunications: Secretarial support for SRP Telecom department.
Analyst, Telecommunications: Financial analysis, process design, secondary
research, market analysis; competitive assessment.
Principal Engineer, Communications Engineering: Backbone network design,
project management, customer lateral/CPE network design.
Senior Engineering, Communications Engineering: Network design, CPE equipment
specification, network hardware integration.
Technician/Designer, Communications Engineering: Design, mapping, fiber
tracking.
Designer, Transmission Line Design: Construction design of physical plant,
project coordination of cable construction jobs.
Right of Way Agent, Land Management: Acquisition of rights-of-way, easements as
required to support network completion, research of existing rights.
Business Account Representative, Business Account Management: Coordination of
training, account management systems and product information dissemination.
J-2
<PAGE>
PARTICIPATION AGREEMENT
(Electric Lightwave, Inc. Trust No. 1995-A)
Dated as of April 28, 1995
Among
ELECTRIC LIGHTWAVE, INC., as Construction Agent and Lessee,
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity except as expressly
stated herein, but solely as Certificate Trustee,
THE PERSONS NAMED ON SCHEDULE I,
as Certificate Purchasers,
THE PERSONS NAMED ON SCHEDULE II,
as Lenders,
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity except as expressly
stated herein, but solely as Administrative Agent,
and
BA LEASING & CAPITAL CORPORATION,
not in its individual capacity except as expressly
stated herein, but solely as Information Agent,
and
CITIZENS UTILITIES COMPANY,
as Guarantor
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS............................................................ 2
ARTICLE II
EFFECTIVENESS; ACQUISITION AND LEASE; GENERAL PROVISIONS................ 3
SECTION 2.1. Effectiveness of Agreement................................ 3
SECTION 2.2. Agreement to Acquire, Lease, Guaranty and Make Advances... 3
SECTION 2.3. Participation by Lenders.................................. 3
SECTION 2.4. Participation by Certificate Purchasers................... 4
SECTION 2.5. Advance Dates; Continuations and Conversions.............. 4
SECTION 2.6. Commitment Fee............................................ 9
SECTION 2.7. Participants' Instructions to Certificate
Trustee and Administrative Agent............ 10
SECTION 2.8. Nature of Transaction..................................... 10
SECTION 2.9. Computations ............................................ 11
SECTION 2.10. Commitment Reduction...................................... 11
SECTION 2.11. Commitment Increase....................................... 12
SECTION 2.12. Event of Taking........................................... 13
ARTICLE III
CONDITIONS TO ADVANCES AND COMPLETION................................... 13
SECTION 3.1. Conditions to All Advances................................ 13
SECTION 3.2. Conditions to Advances for Construction and
Related Costs of Equipment.................. 16
SECTION 3.3. Conditions to Delivery Dates.............................. 17
SECTION 3.4. Conditions to First Advance Date for Construction
and Related Costs of Equipment.............. 18
ARTICLE IV
REPRESENTATIONS AND WARRANTIES.......................................... 19
SECTION 4.1. Representations and Warranties of Lessee.................. 19
SECTION 4.2. Representations and Warranties of each
Certificate Purchaser and each Lender....... 23
SECTION 4.3. Representations and Warranties of Bank.................... 25
SECTION 4.4. Representations and Warranties of Administrative Agent.... 27
SECTION 4.5. Representations and Warranties of Information Agent....... 28
SECTION 4.6. Representations and Warranties of Guarantor............... 30
ARTICLE V
COVENANTS OF LESSEE..................................................... 34
SECTION 5.1. Further Assurances........................................ 34
SECTION 5.2. Consolidation, Merger, Sale, etc.......................... 34
SECTION 5.3. Corporate Existence, etc.................................. 37
SECTION 5.4. Liens..................................................... 37
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
Page
SECTION 5.5. Compliance Certificates.................................. 37
SECTION 5.6. Change of Name or Address................................ 37
SECTION 5.7. Investigation by Authorities............................. 38
SECTION 5.8. Information Regarding Systems; Other Information......... 38
SECTION 5.9. Securities ........................................... 38
SECTION 5.10. Interest Rates........................................... 38
SECTION 5.11. Tax Reporting............................................ 39
SECTION 5.12. Searches ............................................ 39
ARTICLE VI
OTHER COVENANTS AND AGREEMENTS......................................... 39
SECTION 6.1. Cooperation with Lessee.................................. 39
SECTION 6.2. Covenants of Certificate Trustee and the
Certificate Purchasers..................... 39
SECTION 6.3. Restrictions on and Effect of Transfer................... 42
SECTION 6.4. Covenants and Agreements of Participants................. 45
SECTION 6.5. Required Transfers....................................... 46
SECTION 6.6. Affirmative Covenants of Guarantor....................... 46
SECTION 6.7. Negative Covenants of Guarantor.......................... 50
ARTICLE VII
INDEMNIFICATION........................................................ 54
SECTION 7.1. General Indemnification.................................. 54
SECTION 7.2. General Tax Indemnity.................................... 56
SECTION 7.3. Withholding Tax Exemption................................ 60
SECTION 7.4. Excessive Use Indemnity.................................. 60
SECTION 7.5. Gross Up................................................. 61
ARTICLE VIII
THE AGENTS............................................................. 61
SECTION 8.1. Appointment of Administrative Agent and Information
Agent; Powers and Authorization to Take
Certain Actions.................................... 61
SECTION 8.2. Reliance ................................................ 63
SECTION 8.3. Action Upon Instructions Generally....................... 63
SECTION 8.4. Indemnification.......................................... 64
SECTION 8.5. Independent Credit Investigation......................... 65
SECTION 8.6. Refusal to Act........................................... 65
SECTION 8.7. Resignation or Removal of an Agent; Appointment
of Successor............................... 66
SECTION 8.8. Separate Agent........................................... 66
SECTION 8.9. Termination of Agencies.................................. 67
SECTION 8.10. Compensation of Agents................................... 67
SECTION 8.11. Limitations.............................................. 67
-ii-
<PAGE>
TABLE OF CONTENTS
(continued)
Page
ARTICLE IX
MISCELLANEOUS........................................................... 68
SECTION 9.1. Survival of Agreements.................................... 68
SECTION 9.2. No Broker, etc............................................ 69
SECTION 9.3. Notices ............................................ 69
SECTION 9.4. Counterparts ............................................ 69
SECTION 9.5. Amendments ............................................ 69
SECTION 9.6. Headings, etc............................................. 71
SECTION 9.7. Parties in Interest....................................... 71
SECTION 9.8. GOVERNING LAW ............................................ 71
SECTION 9.9. Payment of Transaction Costs and Other Costs.............. 71
SECTION 9.10. Severability ............................................. 72
SECTION 9.11. Unconstructed Systems..................................... 72
SECTION 9.12. Limited Liability of Certificate Trustee.................. 72
SECTION 9.13. Liabilities of the Participants........................... 73
SECTION 9.14. Liabilities of Administrative Agent....................... 73
SECTION 9.15. Limitations of Recourse................................... 73
SECTION 9.16. Reproduction of Documents................................. 74
SECTION 9.17. Consideration for Consents to Waivers and
Amendments.................................. 74
SECTION 9.18. Role of Arranger and its Affiliates....................... 75
SECTION 9.19. Notices to Certificate Trustee under Loan Agreement....... 75
SECTION 9.20. Submission to Jurisdiction; Waivers....................... 75
SECTION 9.21. FINAL AGREEMENT........................................... 76
SECTION 9.22. Consent to Assignment of Documents........................ 76
-iii-
<PAGE>
SCHEDULE I Certificate Purchaser Commitments
SCHEDULE II Lenders Commitments
SCHEDULE III Addresses For Notice; Wire Instructions
SCHEDULE IV Types of Equipment
APPENDIX 1 Definitions
APPENDIX 2 Conditions Precedent to Document Closing Date
EXHIBIT A Form of Guaranty
EXHIBIT B Form of Construction Agency Agreement
EXHIBIT C Form of Lease
Exhibit A - Form of Lease Supplement
EXHIBIT D-1 Form of Advance Request
EXHIBIT D-2 Form of Continuation/Conversion Request
EXHIBIT E Form of Loan Agreement
Exhibit A - Form of Note
EXHIBIT F Form of Trust Agreement
Exhibit A - Form of Trust Certificate
EXHIBIT G Form of Support Agreement
EXHIBIT H-1/ Form of Combined Opinion of Leasee's General
H-2 Counsel and Special Counsel
EXHIBIT H-3 Form of Opinion of Certificate Trustee's Special Counsel
EXHIBIT H-4 Form of Opinion of Guarantor's Special Counsel
EXHIBIT H-5 Form of Opinion of Special [State] Counsel
EXHIBIT I-1 Form of Officer's Certificate of Electric Lightwave, Inc.
EXHIBIT I-2 Form of Officer's Certificate of Citizens Utilities Company
EXHIBIT J Form of Investor's Letter
EXHIBIT K Form of Security Agreement and Assignment of Leases
EXHIBIT L Form of Purchase Order Assignment
EXHIBIT M Form of Certificate of Acceptance
EXHIBIT N-1 Form of Bill of Sale
EXHIBIT N-2 Form of Certificate of Transfer
-iv-
<PAGE>
PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT (Electric Lightwave, Inc. Trust No.
1995-A), dated as of April 28, 1995 (this "Agreement"), is among ELECTRIC
LIGHTWAVE, INC., a Delaware corporation, as Construction Agent and Lessee;
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, a national banking association,
not in its individual capacity except as expressly stated herein, but solely in
its respective capacities as Certificate Trustee and Administrative Agent for
the Certificate Purchasers and Lenders, respectively; the Persons named on
Schedule I hereto (together with their respective permitted successors, assigns
and transferees), as Certificate Purchasers; the Persons listed on Schedule II
hereto (together with their respective permitted successors, assigns and
transferees), as Lenders; BA Leasing & Capital Corporation, a California
corporation, not in its individual capacity except as expressly stated herein,
but solely as Information Agent for the Lenders and Certificate Purchasers
(together with Administrative Agent and any successor of each, the "Agents," and
individually, an "Agent"), and Citizens Utilities Company, a Delaware
corporation, as Guarantor.
W I T N E S S E T H:
WHEREAS, Lessee is engaged in the business, among others, of
constructing and operating (a) metropolitan area telecommunications networks
(each a "MAN" and, collectively, "MANs") that may provide, subject to the
issuance of applicable authorizations where needed, (i) high speed dedicated
private line service on a jurisdictionally interstate basis which is sold to
customers on a circuit basis rather than on a minutes-of-use basis, (ii) high
speed dedicated private line service for an interlata access transport area
(LATA) and (iii) local switched exchange services between and among customers in
a LATA, and (b) fiber optic cable links (each an "FCL" and, collectively,
"FCLs"); and
WHEREAS, the Trust under the Trust Agreement has been created for the
purpose of providing financing for the purchase, construction and installation
of certain new equipment (the "Equipment") of the types identified on Schedule
IV and comprising, as so constructed and installed, one or more Systems subject
to a Lease Supplement that are to be operated for voice, data transmission,
video or other communications purposes as component parts or the whole of, or as
enhancements to, one or more MANs located in the Designated Locations and the
FCL connecting Las Vegas, Nevada and Phoenix, Arizona (the "Southwest FCL"); and
<PAGE>
Participation Agreement
WHEREAS, (a) Lessee, as Construction Agent for Lessor, shall construct
certain Systems using Advances from Lessor, and (b) Lessee shall lease each
System from Lessor for the applicable Lease Supplement Term pursuant to the
Lease; and
WHEREAS, Lessor wishes to obtain, and the Certificate Purchasers are
willing to provide to Lessor, a portion of the funding of the costs for the
purchase, construction and installation of the Equipment for the foregoing
purposes; and
WHEREAS, Lessor wishes to obtain, and the Lenders are willing to
provide, financing (the "Financing") for the remaining portion of the funding of
the costs of the purchase, construction and installation of the Equipment for
the foregoing purposes; and
WHEREAS, to secure the Financing, Administrative Agent, on behalf of
the Participants, will have the benefit of an unperfected Lien from Lessor on
all of Lessor's right, title and interest in and to the Systems and the related
Equipment, and on substantially all of Lessor's rights against Lessee under the
Lease and the Construction Agency Agreement with respect to the Systems and the
related Equipment; and
WHEREAS, to secure further the payment of all sums due from Lessee and
the performance of all obligations of Lessee under the Operative Documents, and
as a material inducement to the Certificate Purchasers and the Lenders to enter
into this Agreement and each of the other Operative Documents, Guarantor is
executing and delivering the Guaranty;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Unless the context shall otherwise require, capitalized terms used and
not defined herein shall have the meanings assigned thereto in Appendix 1 for
all purposes hereof.
2
<PAGE>
Participation Agreement
ARTICLE II
EFFECTIVENESS; ACQUISITION AND LEASE; GENERAL PROVISIONS
SECTION 2.1. Effectiveness of Agreement. This Agreement shall become
effective (as of April 30, 1995) on the date on which all the conditions
precedent thereto set forth in Appendix 2 shall have been satisfied or waived by
the applicable parties as set forth therein (the "Document Closing Date").
SECTION 2.2. Agreement to Acquire, Lease, Guaranty and Make Advances.
On the Document Closing Date, Certificate Trustee and Lessee shall enter into
(i) the Lease pursuant to which Lessee shall agree to lease certain Systems,
from time to time, from Lessor, and (ii) the Construction Agency Agreement
pursuant to which Certificate Trustee shall appoint Lessee as construction agent
to construct such Systems on the terms and conditions herein and therein set
forth. Also on the Document Closing Date, Guarantor shall execute and deliver to
Administrative Agent the Guaranty. On each Advance Date, which may include the
Document Closing Date, Certificate Trustee shall, on the terms and conditions
herein set forth, make an Advance for the purposes of (x) funding all or a
portion of the cost of purchasing the Equipment, (y) funding all or a portion of
the cost of constructing and installing the Equipment so as to comprise a
System, and/or (z) funding all or a portion of the invoiced Transaction Costs
and the Arrangement Fee.
SECTION 2.3. Participation by Lenders. Subject to the terms and
conditions of this Agreement and in reliance on the representations and
warranties of each of the parties hereto contained herein or made pursuant
hereto, on each Advance Date each Lender shall finance a portion of each Advance
that is to be made by Certificate Trustee by making a secured loan to
Certificate Trustee (in accordance with Certificate Trustee's payment
instructions set forth on Schedule III) in an amount in immediately available
funds on such Advance Date equal to such Lender's Commitment Percentage of such
Advance and in the aggregate (including all prior Advances made by such Lender
pursuant to the Operative Documents and all allocable Capitalized Interest) not
more than its Commitment, each as set forth on Schedule II hereto; provided,
however, that, if any Participant's Remaining Commitment shall be insufficient
to fund such Participant's Commitment Percentage of a requested Advance, such
insufficiency shall be funded by any other Participant or Participants that have
a Remaining Commitment sufficient to fund such Participants' respective
Commitment Percentages of such requested Advance as well as such insufficiency.
Such Loans shall be evidenced by a Note (and attached grid or other appropriate
documentation or records)
3
<PAGE>
Participation Agreement
issued to each Lender under and repayable with interest in accordance with the
terms of the Loan Agreement.
SECTION 2.4. Participation by Certificate Purchasers. Subject to the
terms and conditions of this Agreement and in reliance on the representations
and warranties of each of the parties hereto contained herein or made pursuant
hereto, on each Advance Date each Certificate Purchaser shall acquire an
interest in the Overall Transaction by making available to Certificate Trustee
(in accordance with Certificate Trustee's payment instructions set forth on
Schedule III) an amount in immediately available funds on such Advance Date
equal to such Certificate Purchaser's Commitment Percentage of such Advance and
in the aggregate (including all Advances made by such Certificate Purchaser
pursuant to the Operative Documents and all allocable Capitalized Yield) not
more than its Commitment, each as set forth on Schedule I hereto; provided,
however, that, if any Certificate Purchaser's Remaining Commitment shall be
insufficient to fund such Certificate Purchaser's Commitment Percentage of a
requested Advance, such insufficiency shall be funded by any other Participant
or Participants that have a Remaining Commitment sufficient to fund such
Participants' respective Commitment Percentages of such requested Advance as
well as such insufficiency. Such amounts made available shall be evidenced by a
Certificate (and attached grid or other appropriate documentation or records)
issued to the related Certificate Purchaser. Each holder of a Certificate shall
be entitled to receive the Yield on the Certificate Purchaser Amount set forth
in its Certificate, which Yield, other than Capitalized Yield, shall be payable
on each Payment Date, and to the return to it of such Certificate Purchaser
Amount at the Stated Maturity thereof, in accordance with the terms of such
Certificate and the Trust Agreement.
SECTION 2.5. Advance Dates; Continuations and Conversions.
(a) Notices and Closing. At least three (3) Business Days (or one (1)
Business Day, if the first Advance is in connection with the Document Closing
Date and is to bear interest at the Alternate Base Rate) prior to each Advance
Date, Lessee (in its capacity as Construction Agent, in the case of clause (ii)
below) shall deliver to Administrative Agent (with sufficient copies for
Administrative Agent to deliver to Certificate Trustee, Information Agent and
all Participants) an irrevocable written notice substantially in the form of
Exhibit D-1 (an "Advance Request"), setting forth:
(i) the proposed Advance Date;
4
<PAGE>
Participation Agreement
(ii) in the case of an Advance to fund any portion of the cost
of the purchase, construction or installation of any Equipment, the
identification (in a manner reasonably acceptable to Information Agent
and sufficient to enable Lessor to obtain the particulars thereof from
Lessee's books and records on request) of the applicable System and MAN
or FCL to which such purchase, construction or installation relates or
is to relate;
(iii) in the case of an Advance to fund any Transaction Costs
or the Arrangement Fee, a description of such Transaction Costs or the
Arrangement Fee and a statement specifying the System or Systems to
which any such Transaction Costs or Arrangement Fee are allocable;
(iv) whether such Advance is to accrue interest at a rate
equal to the Alternate Base Rate or the LIBO Rate, and the Interest
Period if a LIBO Rate Loan is requested; and
(v) the amount of the requested Advance, which shall be made
in an amount equal to or greater than $5,000,000 and an integral
multiple of $500,000, or in the unused amount of the applicable
Commitments, or in respect of any Advance Date for which Transaction
Costs and/or the Arrangement Fee is to be paid, in the amount of such
costs and fees;
All documents and instruments required to be delivered on the Document Closing
Date pursuant to this Agreement shall be delivered at the offices of Mayer,
Brown & Platt, 1675 Broadway, New York, New York 10019-5820. All documents and
instruments required to be delivered on any other Advance Date pursuant to this
Agreement shall be delivered at the offices of Administrative Agent at 777 Main
Street, MSN 238, Hartford, Connecticut, 06115: Corporate Trust Administration
(Electric Lightwave, Inc. Trust No. 1995-A). On the scheduled Advance Date, and
subject to the terms and conditions of this Agreement, and upon receipt of funds
by Certificate Trustee from the Participants sufficient therefor, Certificate
Trustee shall make the requested Advance.
(b) Commitment Limits. The aggregate amount disbursed, including
Capitalized Interest and Capitalized Yield, by each of the Participants
hereunder shall not exceed the respective amounts of their Commitments.
(c) Frequency and Timing of Advance Dates. There may not be more than
one Advance Date in any calendar month.
5
<PAGE>
Participation Agreement
(d) Obligations Several. The obligations of the parties hereto or
elsewhere in the Operative Documents shall be several and not joint, and no
party shall be liable or responsible for the acts or defaults of any other party
hereunder or under any other Operative Document.
(e) Termination of Commitment. Notwithstanding anything in this
Agreement or any other Operative Document to the contrary, no party hereto shall
be obligated to make any fundings pursuant to this Agreement after 1:00 p.m.,
Hartford, Connecticut time, on the Commitment Termination Date, and no Advance
Date may occur following such date.
(f) Failure of a Participant to Fund. If Administrative Agent
determines that any Participant (a "Defaulting Participant") will not make
available the amount (the "Defaulted Amount") which would constitute its portion
of the Advance specified in an Advance Request, Administrative Agent shall
promptly notify each other Participant (each, a "Non-Defaulting Participant")
and specify the additional amounts required to be funded by each Non-Defaulting
Participant. Each Non-Defaulting Participant, as soon as practical after receipt
of notice but not before the Advance Date, shall transfer to Administrative
Agent, in immediately available funds, its pro rata share of the Defaulted
Amount, determined in the same proportion that such Non-Defaulting Participant's
Commitment bears to the aggregate Commitments of all Non-Defaulting
Participants; provided, that such amount, together with all amounts previously
funded by each Non-Defaulting Participant (including allocable Capitalized
Interest and allocable Capitalized Yield, as appropriate), shall not exceed the
Non-Defaulting Participant's Commitment. If the Defaulted Amount cannot be fully
funded by the Non-Defaulting Participants, Administrative Agent shall so notify
the Non-Defaulting Participants and give to all Non-Defaulting Participants the
opportunity to increase their respective Commitments by notice in writing to
Administrative Agent; provided, that should the aggregate proposed increased
Commitments by one or more Non-Defaulting Participants exceed the Defaulted
Amount, Administrative Agent shall increase the Commitments of the participating
Non-Defaulting Participants on a pro rata basis in accordance with the
respective amounts by which such Non-Defaulting Participants have offered to
participate, it being understood that in no event shall the aggregate amount
funded by any Participant (including allocable Capitalized Interest and
allocable Capitalized Yield, as appropriate), exceed the amount of such
Participant's Commitment, after giving effect to any increase in such Commitment
pursuant to this sentence.
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Participation Agreement
In the event of any funding of all or a portion of the Defaulted Amount
by the Non-Defaulting Participants, the following rules shall apply,
notwithstanding any other provision in any Operative Agreement:
(i) The Commitment of the Defaulting Participant shall
be decreased in an amount equal to the total
aggregate increase, if any, in the Commitments of
the Non-Defaulting Participants pursuant to this
Section 2.5(f), and the Commitment Percentages of
the Participants shall be revised accordingly;
(ii) A Defaulting Participant shall be obligated to fund
any Advances occurring after its default, which
funding shall be based upon its revised Commitment
Percentage, if the Commitment Percentages are
revised in accordance with the immediately
preceding clause (i); and to the extent that the
----------
Commitment Percentage of any Defaulting Participant
shall not be so revised, Administrative Agent may
thereafter call upon such Defaulting Participant to
fund a share of one or more future Advances in an
amount greater than such Defaulting Participant's
Commitment Percentage so that the aggregate amount
disbursed by such Defaulting Participant shall
equal (after giving effect to such Advance or
Advances) its Commitment Percentage of the
aggregate amount of all Advances (including
Capitalized Interest and Capitalized Yield) then
and theretofore made by all Participants;
(iii) A Defaulting Participant shall not have the right
to fund its Defaulted Amount without the written
consent of Administrative Agent and Lessee, and
then only to the extent such Defaulted Amount has
not been funded by the Non-Defaulting Participants
in a manner that resulted in a decrease in the
Defaulting Participant's Commitment Percentage;
(iv) If and to the extent that the Defaulted Amount is
not funded by the Non-Defaulting Participants,
Administrative Agent may reduce the stated amount
of the Advance Request so that the total Advance
specified in the Advance Request as so restated
equals the aggregate revised fundings to be made
by the Non-Defaulting Participants for the Advance
Date;
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Participation Agreement
(v) None of Lessor, either Agent or any Participant,
including the Defaulting Participant shall be
responsible for any incidental or consequential
damages suffered by any Lessee or any of Lessee's
Affiliates as a result of its failure to so fund;
and
(vi) To the extent of the Defaulted Amount, (A) the
right of the Defaulting Participant to receive any
payments made under the Notes or the Certificates
or otherwise in accordance with the Operative
Documents shall be subordinate in all respects to
the right of the Non-Defaulting Participants to
receive such payments, and (B) no such payments
described in clause (A) shall be made to the
----------
Defaulting Participant until each Non-Defaulting
Participant shall have received all sums due to it.
(g) Postponement of Advance Date. In the event that any Participant
shall make the funding requested pursuant to any Advance Request and the
relevant Advance Date shall not have occurred on the date specified in such
Advance Request, Lessee (in its capacity as Construction Agent to the extent
such Advance Request was made by Lessee in such capacity) shall pay Lessor
damages equal to interest on the amount funded by each Participant at the
Assumed Interest Rate for the period from the date of each such Participant's
Advance to the date such Advance is returned to such Participant or such Advance
Date shall have occurred, less any interest earned by Lessor (or Administrative
Agent) on behalf of the Participants by investing such funded amounts (which
damages Lessor (or Administrative Agent) will remit to the appropriate
Participant(s)); provided, that this provision shall not be construed to require
Lessor (or Administrative Agent) to invest such funds in interest-bearing
accounts unless the Required Entities shall have instructed Administrative Agent
in writing (including telecopy) to do so prior to 3:00 p.m., Hartford,
Connecticut time, on the applicable proposed Advance Date; and provided,
further, that Administrative Agent shall not be required to invest such funds in
any investment in which it does not typically invest overnight funds, and then
only to the extent that appropriate overnight investments are reasonably
available to it in accordance with its standard cut-off requirements. Such
damages shall be due and payable by Lessee upon the occurrence of such postponed
Advance Date, and such payment shall be an additional condition precedent to
such Advance Date; provided, however, that if such Advance Date shall not have
occurred by the third (3rd) Business Day following the funding by the
Participants in respect
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Participation Agreement
thereof, then all such damages shall be due and payable on such date, and Lessor
(or Administrative Agent on its behalf, as the case may be) shall refund to each
Participant all amounts funded by such Participant and all accrued interest
allocable to such Participant. No additional Advance Request shall be required
to be given if an Advance Date is postponed and thereafter timely consummated on
the date to which it has been postponed.
(h) Construction Advances. Certificate Trustee shall establish and
maintain at Shawmut Bank Connecticut, National Association, in Hartford,
Connecticut, or at such other place as Certificate Trustee shall designate by
written notice to Lessee and the Participants, a deposit account in the name of
Certificate Trustee into which any Advances made in order to fund any portion of
the cost of constructing Equipment shall be directly paid. All such funds placed
in such deposit account shall at all times be for the account of Construction
Agent. Certificate Trustee hereby grants Construction Agent a power of attorney,
which shall be effective so long as no Lease Event of Default exists, to
withdraw funds from such account for the performance of its agency duties under
the Lease. Neither Certificate Trustee nor either Agent shall account for or
inquire into Construction Agent's use of funds so withdrawn from the deposit
account.
(i) Continuation and Conversion Election. By delivering a
Continuation/Conversion Request to Administrative Agent on or before 12:00 noon,
Hartford, Connecticut time, on a Business Day, Lessee, in its capacity as Lessee
or as Construction Agent, may from time to time irrevocably elect, on not less
than three (3) nor more than five (5) Business Days' notice, that all or any
portion in an aggregate minimum amount of $5,000,000 and an integral multiple of
$500,000 of any Loans be, in the case of Alternate Base Rate Loans, converted
into LIBO Rate Loans or, in the case of LIBO Rate Loans, be converted into an
Alternate Base Rate Loan or continued as a LIBO Rate Loan; provided, however,
that no portion of the outstanding principal amount of any Loans may be
continued as, or be converted into, LIBO Rate Loans when any Lease Default has
occurred and is continuing. In the absence of delivery of a
Continuation/Conversion Request with respect to any LIBO Rate Loan at least
three (3) Business Days before the last day of the then current Interest Period
with respect thereto, such LIBO Rate Loan shall, on such last day, automatically
convert to an Alternate Base Rate Loan.
SECTION 2.6. Commitment Fee. On the last Business Day of
each calendar quarter and the Commitment Termination Date for the
period commencing on the Document Closing Date and continuing
through the Commitment Termination Date, Lessee shall pay to Lessor
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Participation Agreement
a fully-earned, non-refundable Commitment Fee (the "Commitment Fee") equal to
the number of basis points per annum set forth in a letter, dated the date
hereof, from Lessee to the Participants (with a copy to Lessor) multiplied by
the average daily unused portion of the aggregate Commitments for the applicable
period of computation. From time to time upon receipt, Lessor will promptly
deliver to the Participants (other than any Defaulting Participant) their pro
rata portions of such Commitment Fee in accordance with such Participants'
proportionate share of the aggregate Remaining Commitments.
SECTION 2.7. Participants' Instructions to Certificate Trustee and
Administrative Agent. (a) By making its monies available pursuant to Section
2.4, each Certificate Purchaser agrees that such act shall constitute, without
further act, (i) evidence that the conditions set forth in Article III have been
satisfied or waived; provided, that any Certificate Purchaser's failure to raise
the issue of noncompliance with respect to any such condition shall not be
deemed to be a waiver of such condition unless such Certificate Purchaser shall
have acknowledged such waiver in writing, and (ii) authorization and direction
by such Certificate Purchaser to Certificate Trustee to take the actions
specified in Section 1.1 of the Trust Agreement.
(b) By making its monies available pursuant to Section 2.3, each Lender
agrees that such act shall constitute, without further act, (i) evidence that
the conditions set forth in Article III have been satisfied or waived; provided,
that any Lender's failure to raise the issue of noncompliance with respect to
any such condition shall not be deemed to be a waiver of such condition unless
such Lender shall have acknowledged such waiver in writing, and (ii)
authorization and direction by such Lender to Administrative Agent to make a
Loan pursuant to Section 2.3 of the Loan Agreement.
SECTION 2.8. Nature of Transaction. It is the intent of the parties
hereto that: (i) the Overall Transaction constitutes an operating lease from
Certificate Trustee to Lessee for purposes of Lessee's financial reporting, (ii)
the transaction contemplated hereby preserves ownership of the Equipment in
Lessee for Federal and state income tax and bankruptcy purposes, including the
substantive law upon which bankruptcy decisions are based, (iii) the Lease
grants a Lien on the Equipment and the other Collateral in favor of Certificate
Trustee, (iv) Lessee's payment of Base Rent shall be treated as payment of
interest for Federal and state income tax purposes, and (v) the Security
Agreement creates a Lien on the Trust Estate (provided, that the Lien on the
Equipment thereby created shall be unperfected), subject to certain limited
exceptions. Nevertheless, Lessee acknowledges and agrees
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Participation Agreement
that none of Lessor, Arranger, any Agent or any Participant has provided or will
provide tax, accounting or legal advice to Lessee regarding the Overall
Transaction or made any representations or warranties concerning the tax,
accounting or legal characteristics of the Operative Documents upon which the
Lessee may rely and that Lessee has obtained and relied upon such tax,
accounting and legal advice concerning the Operative Documents as it deems
appropriate.
SECTION 2.9. Computations. For all purposes under the Operative
Documents, all computations of interest, Yield, Commitment Fees and other
accrued amounts (including the Overdue Rate) shall be made on the basis of
actual number of days elapsed in a 360-day year, or, in the case of interest in
an Alternate Base Rate Loan, 365 days, or if appropriate, 366 days.
SECTION 2.10. Commitment Reduction. At the option of Lessee,
exercisable from time to time by written notice to Certificate Trustee and
Administrative Agent, Lessee may request Administrative Agent to reduce the
aggregate unused portion of the Participants' respective Commitments, whereupon
Administrative Agent shall notify the Participants of such request, and the
Commitment of each Participant shall thereby be so reduced, subject to the
following provisions:
(i) Such notice from Lessee shall specify the aggregate amount of
such reduction for all Participants, which amount shall be
$1,000,000 or an integral multiple thereof;
(ii) Such notice shall specify the effective date of such
reduction, such effective date to be a date not earlier than
three (3) Business Days after the date of such notice;
(iii) The remaining unused portions of the Commitments, after
giving effect to such reduction, shall be sufficient to
fund fully the remaining acquisition and construction
costs, including Capitalized Interest and Capitalized
Yield, to be funded under this Agreement and the other
Operative Documents in respect of Systems as to which
Advances for construction have theretofore been made, and
Lessee shall so certify in such notice;
(iv) Any reduction of the unused portions of Commitments shall be
made pro rata among the Participants based upon each
Participant's Commitment Percentage; and
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Participation Agreement
(v) No such reduction of the Commitments shall be undertaken that
would reduce the aggregate amount of the Commitments, after
giving effect to such requested reduction, below the
outstanding aggregate amount of the Advances, including all
Capitalized Interest and
Capitalized Yield.
SECTION 2.11. Commitment Increase.
(a) From time to time on any Business Day after the initial Delivery
Date and not less than 360 days prior to the Final Maturity Date, Lessee may
notify Certificate Trustee, Administrative Agent and the Participants of its
desire to purchase or construct additional Systems in the Designated Locations
and the amount of additional financing requested in order to purchase or
construct such additional Systems. Within twenty (20) Business Days following
receipt of such notice, each Participant shall, in its sole discretion, commit
or decline to commit to make additional Loans or investments (relative to such
Participant, its "Supplemental Funding") to finance such acquisition or
construction. At the time of such acceptance and/or rejection, Lessee may, in
its sole discretion, request that any Participant declining to commit to make
such Supplemental Funding sell its Notes and Certificates to another Participant
or financial institution (a "Replacement Participant"); provided, that no
declining Participant shall be obligated to sell its Notes and/or Certificates
to any Replacement Participant. Any Participant selling its Notes and/or
Certificates shall receive the amount of principal (or Certificate Purchaser
Amount, as the case may be) and accrued but unpaid interest (or Yield, as the
case may be) then outstanding on the Notes and Certificates held by such
Participant, plus any breakage fees. Nothing in this Section 2.11 shall diminish
any selling Participant's right to indemnification under Article VII. At no time
shall any Participant be permitted or required to make any Supplemental Funding
unless all Participants (including any Replacement Participant) consent to make
a Supplemental Funding.
(b) The obligation of each Participant (including any Replacement
Participant) to make a Supplemental Funding (and Advances thereunder) shall be
subject to the fulfillment to the satisfaction of (including, with respect to
writings, such writings being in form and substance reasonably satisfactory to
the addressee or beneficiary thereof), or the waiver in writing by, such
Participant of the applicable conditions precedent set forth in Sections 3.1 and
3.2 on or prior to the date of such Supplemental Funding (except that the
obligation of any party
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Participation Agreement
hereto shall not be subject to such party's own performance or compliance).
SECTION 2.12. Event of Taking. Upon the occurrence of an Event of
Taking with respect to a Qualified MAN or FCL, neither Lessor nor any
Participant shall thereafter have any obligation under the Operative Documents
to provide any financing with respect to any Systems comprising such Qualified
MAN or FCL.
ARTICLE III
CONDITIONS TO ADVANCES AND COMPLETION
SECTION 3.1. Conditions to All Advances. The obligation of each
Participant to perform its obligations on any Advance Date shall be subject to
the fulfillment to the satisfaction of (including, with respect to writings,
such writings being in form and substance reasonably satisfactory to Information
Agent, or the waiver in writing by, Information Agent (at the direction of the
Required Entities)) of the conditions precedent set forth in this Section 3.1
(in addition to the conditions precedent set forth in Section 3.2 and, if
applicable, Section 3.4) on or prior to such Advance Date (except that the
obligation of any party hereto shall not be subject to such party's own
performance or compliance):
(a) Advance Request. Lessee (as Lessee and as Construction Agent) shall
have delivered an Advance Request conforming with the requirements of Section
2.5(a) in respect of the proposed Advance Date.
(b) Performance. Each party to any Operative Document shall have
performed and complied with all agreements and conditions contained herein and
in any other Operative Document to which it is a party that are required to be
performed or complied with by it on or prior to such Advance Date. Without
limiting the foregoing, each Participant shall have funded the full amount to be
funded by such Participant on such Advance Date as described in Article II, or
the full amount of the required funding shall have been obtained through the
alternative arrangements provided for in Section 2.5(f).
(c) Consents and Approvals. All Governmental Approvals and other
approvals and consents required to be taken, given or obtained, as the case may
be, by or from any Governmental Authority or any other Person, or by or from any
trustee or holder of any indebtedness or obligation of Lessee or Guarantor, that
are necessary or, in the reasonable opinion of Information Agent or counsel to
Information Agent, advisable in connection with the
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<PAGE>
Participation Agreement
execution, delivery and performance of the Operative Documents by all other
parties hereto, shall have been taken, given or obtained, as the case may be,
shall be in full force and effect and (if the same shall have been contested)
the time for appeal with respect to any thereof shall have expired (or, if an
appeal shall have been taken, the same shall have been dismissed) and shall not
be subject to any pending proceedings or appeals (administrative, judicial or
otherwise); it being understood that in respect of the portion of any Advance to
finance the construction or acquisition of a System to be located in the State
of Oregon, Lessee shall be classified as a "competitive telecommunications
provider" in the State of Oregon, or under Applicable Law shall otherwise be
exempt from any requirement for prior approval or authorization by applicable
Governmental Authority of such financing, or shall have received all then
necessary final authorizations, approvals or exemptions for entering into the
Operative Documents from applicable Governmental Authority or for such
financing.
(d) Representations and Warranties True; Absence of Defaults and
Material Adverse Effect. Each representation and warranty of Lessee and
Guarantor contained herein or in any other Operative Document shall be true and
correct in all material respects as though made on and as of such Advance Date,
except that any such representation or warranty which is expressly made only as
of a specified date need be true and correct only as of such date. No Lease
Default, Lease Event of Default, or Construction Agency Event of Default shall
have occurred and be continuing. Since the Document Closing Date, no Material
Adverse Effect shall have occurred.
(e) Officer's Certificate of Lessee. Administrative Agent shall have
received, with sufficient copies for Administrative Agent to distribute to
Certificate Trustee, Information Agent and all Participants, an Officer's
Certificate of Lessee stating that (i) each and every representation and
warranty of Lessee contained in the Operative Documents is true and correct in
all material respects on and as of such Advance Date as though made on and as of
such Advance Date, except to the extent such representations or warranties
relate solely to an earlier date, in which case such representations and
warranties shall have been true and correct in all material respects on and as
of such earlier date; (ii) no Lease Default, Lease Event of Default or
Construction Agency Event of Default has occurred or would occur as a result of
such Advance and be continuing; (iii) each Operative Document to which Lessee is
a party is in full force and effect with respect to it; and (iv) Lessee has duly
performed and complied with all covenants, agreements and conditions contained
herein or in any other
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Participation Agreement
Operative Document required to be performed or complied with by it on or prior
to such Advance Date.
(f) Officer's Certificate of Guarantor. Administrative Agent shall have
received, with sufficient copies for Administrative Agent to distribute to
Certificate Trustee, Information Agent and all Participants, an Officer's
Certificate of Guarantor stating that (i) each and every representation and
warranty of Guarantor contained in the Operative Documents is true and correct
in all material respects on and as of such Advance Date as though made on and as
of such Advance Date, except to the extent such representations or warranties
relate solely to an earlier date, in which case such representations and
warranties shall have been true and correct in all material respects on and as
of such earlier date; (ii) each Operative Document to which Guarantor is a party
is in full force and effect with respect to it; and (iii) Guarantor has duly
performed and complied with all covenants, agreements and conditions contained
herein or in any other Operative Document required to be performed or complied
with by it on or prior to such Advance Date.
(g) Officer's Certificate of Certificate Trustee. On each Advance Date,
Administrative Agent shall have received, with sufficient copies for
Administrative Agent to distribute to Information Agent and each Participant, an
Officer's Certificate of Certificate Trustee, dated such Advance Date, stating
that (i) each and every representation and warranty of Certificate Trustee
contained in the Operative Documents to which it is a party is true and correct
in all material respects on and as of such Advance Date as though made on and as
of such Advance Date, except to the extent such representations and warranties
relate solely to an earlier date, in which case such representations and
warranties shall have been true and correct in all material respects as of such
earlier date, (ii) it has duly performed and complied with all agreements and
conditions herein and in any other Operative Document required to be performed
or complied with by it on or prior to such Advance Date, and (iii) each
Operative Document to which it is a party is in full force and effect with
respect to it.
(h) Arrangement Fee and Transaction Costs. Lessee shall have paid the
Arrangement Fee and all Transaction Costs invoiced three (3) Business Days prior
to such Advance Date to the parties to whom such Transaction Costs are payable
(or shall have requested payment thereof or reimbursement therefor pursuant to
an Advance Request). Such payment shall be made by wire transfer of immediately
available funds.
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Participation Agreement
(i) Proceedings Satisfactory, Etc. All proceedings taken in connection
with such Advance Date and all documents relating thereto (the form of which was
not previously approved pursuant to the terms of this Agreement) shall be
reasonably satisfactory to Administrative Agent and its counsel, and Information
Agent and its counsel shall have received copies of such documents as
Information Agent, its counsel and each Participant or its counsel may
reasonably request in connection therewith (with sufficient copies for
Administrative Agent to distribute to Certificate Trustee, Information Agent and
each Participant).
(j) Taxes. All taxes (other than taxes based on net income or that are
the subject of Permitted Contest), charges, fees and costs, if any, due and
payable in connection with the execution, delivery, recording and filing of the
Operative Documents and the transactions contemplated to be consummated on each
Advance Date shall have been paid in full, or arrangements for such payment
shall have been made to the satisfaction of the Required Entities.
SECTION 3.2. Conditions to Advances for Construction and Related Costs
of Equipment. The obligation of each Participant to perform its obligations on
any Advance Date for the payment of costs for the purchase, construction or
installation of or relating to Equipment that is to comprise a System shall be
subject to the fulfillment to the satisfaction of (including, with respect to
writings, such writings being in form and substance reasonably satisfactory to,
or the waiver in writing by, Information Agent (at the direction of the Required
Entities)) of the conditions precedent set forth in this Section 3.2 (in
addition to the conditions precedent set forth in Section 3.1 and, if
applicable, Section 3.4) on or prior to such Advance Date (except that the
obligation of any party hereto shall not be subject to such party's own
performance or compliance).
(a) Assurance of Completion. Lessee, as Construction Agent, shall
deliver its certification to Administrative Agent (in form and substance
satisfactory to Information Agent and the Participants) that the available
Commitments are sufficient to complete the construction of the Systems being
constructed in accordance with the Design Objectives by the Commitment
Termination Date.
(b) Construction Progress Information. In the event that mechanics,
materialmen's or other statutory liens with an aggregate amount claimed which
equals or is greater than $5,000,000 are filed with respect to any System,
Lessee, as Construction Agent, shall promptly (and in any event not later than
the delivery of the next following Advance Request) furnish to Administrative
Agent and
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Participation Agreement
Information Agent, and shall thereafter continue to furnish to Administrative
Agent and Information Agent as a condition to each Advance with respect to such
Systems, as applicable, notice of the amount and nature of each such lien claim,
together with such additional details concerning the construction of such
Equipment as Information Agent shall require.
SECTION 3.3. Conditions to Delivery Dates. The occurrence of any
Delivery Date and of the obligation of Lessor to lease any System to Lessee
(except with respect to any System which becomes subject to the Lease, at the
election of Lessor, as a result of a Construction Agency Event of Default) shall
be subject to the fulfillment to the satisfaction of (including, with respect to
writings, such writings being in form and substance reasonably satisfactory to,
or the waiver in writing by, Information Agent (at the direction of the Required
Entities)) of the conditions precedent set forth in this Section 3.3 on or prior
to such Delivery Date (except that the obligation of any party hereto shall not
be subject to such party's own performance or compliance).
(a) Construction Completion. The construction of the Systems proposed
to be leased upon such Delivery Date shall have been completed substantially in
accordance with all Applicable Laws, free and clear of all Liens other than
Permitted Liens, and such Systems shall be in compliance with the applicable
Design Objectives and be ready for operation and use as intended, as certified
in an Officer's Certificate executed by an officer of Lessee knowledgeable about
such Systems.
(b) Lessee Certification. Lessee, as Construction Agent, shall have
furnished Certificate Trustee and Administrative Agent with a certification of
Lessee, as Construction Agent, to the effect that:
(i) The representations and warranties of Lessee set forth in
Sections 4.1(e), (g), (j), (n) and (q) are true and correct as of the
Delivery Date for the Systems, including the Equipment comprising such
Systems, to be delivered on such date;
(ii) All amounts owing to third parties for the Systems to be
delivered on the Delivery Date and for the purchase, construction and
installation of the Equipment relating thereto have been paid in full
(other than obligations that are the subject of a Permitted Contest by
Lessee, as Construction Agent); and
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Participation Agreement
(iii) The Systems to be delivered on the Delivery Date would
be treated, if owned by Lessee as of such date, as placed in service
for financial reporting purposes in the fiscal quarter in which the
delivery is to be made.
(c) Bill of Sale. Construction Agent shall have executed and delivered
or caused to be executed and delivered a Bill of Sale or other document,
acceptable in form and substance to Information Agent, confirming title to the
Systems proposed to be leased to and in Lessor.
(d) Third Party Approvals. All third party approvals necessary in the
reasonable opinion of Information Agent for the operation and use of the Systems
and for Lessee to perform its obligations with respect to the applicable Lease
Supplement shall have been obtained.
(e) Insurance. Insurance complying with the provisions of Section 9.1
of the Lease shall be in full force and effect.
(f) Certificates of Acceptance. Lessee shall have executed and
delivered a Certificate of Acceptance with regard to each System to be delivered
as of such date under the Lease.
SECTION 3.4. Conditions to First Advance Date for Construction and
Related Costs of Equipment. The obligation of each Participant to perform its
obligations on the first Advance Date for construction and related costs for
Equipment shall be subject to the delivery by Lessee to Administrative Agent of
the following opinions of local counsel, which opinions must be to the
satisfaction of, or receive a waiver in writing by, Information Agent (at the
direction of all of the Participants) on or prior to such first Advance Date:
(a) Opinion of Brown & Bain, Arizona counsel to Lessee;
(b) Opinion of Thelen, Marrin, Johnson & Bridges, California
counsel to Lessee;
(c) Opinion of Campbell & Campbell, Nevada counsel to Lessee;
(d) Opinions of Ater Wynne Hewitt Dodson & Skerritt, Oregon
and Washington counsel to Lessee; and
(e) Opinion of Suitter, Axland & Hanson, Utah counsel to
Lessee.
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Participation Agreement
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. Representations and Warranties of Lessee. As of the date
hereof and each Advance Date (except as otherwise expressly provided), Lessee
makes the representations and warranties set forth in this Section 4.1 to each
of the other parties hereto.
(a) Due Organization, etc. Lessee is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has full corporate power and authority to conduct its business as presently
conducted and proposed to be conducted, to own or hold under lease its
properties, to execute, deliver and perform its obligations under each of the
Operative Documents to which it is or is to be a party and each other agreement,
instrument and document to be executed and delivered by it on or before the
Document Closing Date and each Advance Date in connection with or as
contemplated by each such Operative Document, and it is duly qualified as a
foreign corporation authorized to do business and is in good standing in every
jurisdiction in which its failure to be so qualified would have a Material
Adverse Effect. Lessee has no Subsidiaries.
(b) Authorization; No Conflict; No Approvals, Etc. The execution and
delivery by Lessee of each of the Operative Documents to which it is a party and
the performance by Lessee of its obligations under such Operative Documents have
been duly authorized by all necessary corporate action (including any necessary
stockholder action) on its part, and do not and will not: (i) contravene any
Applicable Laws currently in effect applicable to or binding on it or the
Equipment; (ii) violate any provision of its charter or bylaws; (iii) result in
a breach of or constitute a default under (with or without the giving of notice
or lapse of time or both) any indenture, mortgage, deed of trust, lease, loan or
credit agreement, or any other agreement or instrument to which Lessee is a
party or by which Lessee or its properties may be bound or affected, which
breach or default would have, individually or in the aggregate, a Material
Adverse Effect; (iv) result in, or require, the creation or imposition of any
Lien of any nature upon or with respect to any of the properties now owned or
hereafter acquired by Lessee (other than the security interests created pursuant
to the Operative Documents); or (v) require any Governmental Approval by any
Governmental Authority, except for the filings and recordings with respect to
the rights of Certificate Trustee and the Participants intended to be created by
the Operative Documents; and Lessee is not in violation of its charter or
bylaws.
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Participation Agreement
(c) Enforceability. Each Operative Document to which Lessee is a party
constitutes the legal, valid and binding obligation of Lessee, enforceable
against Lessee in accordance with the terms thereof, except as such
enforceability may be limited by applicable bankruptcy, insolvency or similar
laws affecting creditors' rights generally and by general equitable principles.
(d) Litigation. There is no action, suit or proceeding, or any
governmental investigation or any arbitration, in each case pending or, to the
knowledge of Lessee, threatened against Lessee or any material property of
Lessee before any Governmental Authority (i) which challenges the validity of
the Operative Documents to which Lessee is a party or any action taken or to be
taken pursuant to the Operative Documents to which Lessee is a party, or (ii)
which may have a Material Adverse Effect.
(e) Title to and Nature of Equipment, etc. Lessee is not a party to any
agreement to sell any interest in any System, Equipment or part thereof, whether
under construction pursuant to the Construction Agency Agreement or subject to
the Lease, and upon completion of the transactions and deliveries of documents
contemplated by the Operative Documents at each Delivery Date, Lessor will
acquire good and marketable title to the Systems and related Equipment to be
delivered as of such date, free and clear of all Liens, except Permitted Liens.
(f) No Lease Default, Loss, etc. As of each Advance Date: no Lease
Default, Lease Event of Default, Construction Agency Event of Default, Event of
Loss or material Condemnation or Casualty has occurred and is continuing; there
is no action pending or, to the best knowledge of Lessee, threatened by a
Governmental Authority to initiate a Condemnation; no condition exists that
constitutes, or with the giving of notice or lapse of time or both would
constitute, an event of default by it under any material indenture, mortgage,
chattel mortgage, deed of trust, lease, conditional sales contract, loan or
credit arrangement or other material agreement or instrument to which it is a
party or by which it or any of its properties may be bound which individually or
in the aggregate with all such events of default could have a Material Adverse
Effect.
(g) Compliance With Law. With respect to the Equipment, (i) Lessee has
at all times complied and is in compliance with and will comply with all
Applicable Laws, including all Environmental Laws, except for any violations
which would not have, individually or in the aggregate, a Material Adverse
Effect on Lessee or any Systems or Equipment; and (ii) the Equipment and all
Systems into which Equipment is incorporated, and the use thereof by Lessee,
complies in all material respects with all Applicable Laws
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Participation Agreement
(including all applicable Environmental Laws and public utility laws and
regulations, including any laws that regulate the activities of, or issuance of
securities by, a regulated public utility) and Insurance Requirements.
(h) Investment Company Act. Lessee is not an "investment company" or a
company "controlled" by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended.
(i) Public Utility Holding Company. Lessee is not subject to regulation
as a "holding company," an "affiliate" of a "holding company," or a "subsidiary
company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
(j) Licenses, Registrations and Permits. All material licenses,
approvals, authorizations, consents, permits (including building, demolition and
environmental permits, licenses, approvals, authorizations and consents),
easements and rights-of-way, including proof and dedication, required for (i)
the use, treatment, storage, transport, disposal or disposition of any Hazardous
Material with respect to any Equipment during the construction or installation
of such Equipment, (ii) construction or installation of any Equipment or Systems
in accordance with the Construction Agency Agreement and (iii) the use and
operation of the Equipment or Systems have been obtained from the appropriate
Governmental Authorities having jurisdiction or from private parties, as the
case may be.
(k) Use and Operation of Locations Where Equipment is Located. All
material agreements, easements and other rights, public or private, which are
necessary to permit the lawful use and operation of Systems, including all
related Equipment, as Lessee intends to use the same under the Lease and which
are necessary to permit the lawful intended use and operation of all presently
intended utilities, driveways, roads and other means of egress and ingress to
and from the same have been obtained and are in full force and effect (or will
be obtained and be in full force and effect on or prior to the completion of
construction or installation thereof), and Lessee has no actual knowledge of any
pending modification or cancellation of any of the same; and all approvals and
consents material to the use and operation of the Systems, including all related
Equipment, will, on or prior to the execution and delivery of a Certificate of
Acceptance with respect thereto, have been issued and will be in full force and
effect, or shall be obtained prior to the time they are required by Applicable
Laws, and all utilities required for the operation thereof, as
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Participation Agreement
Lessee intends to use such Systems and the related Equipment under the Lease,
will be available as of such date.
(l) Securities Act. Neither Lessee nor anyone authorized to act on its
behalf has, directly or indirectly, in violation of Section 5 of the Securities
Act or any state securities laws, offered or sold any interest in the Notes, the
Certificates, the Systems and related Equipment, the Lease or any of the
Operative Documents or in any security or lease the offering of which, for
purposes of the Securities Act or any state securities laws, would be deemed to
be part of the same offering as the offering of the aforementioned interests or
leases, or solicited any offer to acquire any of the aforementioned interests or
leases.
(m) Federal Reserve Regulations. Neither Lessee, whether as Lessee or
as Construction Agent, nor any Affiliate of Lessee will, directly or indirectly,
use any of the proceeds of the sale of the Notes or issuance of the Certificates
for the purpose of purchasing or carrying any "margin security" or "margin
stock" within the meaning of Regulation G, T, U or X of the Board of Governors
of the Federal Reserve System, respectively, or for the purpose of reducing or
retiring any indebtedness which was originally incurred to purchase or carry a
margin security or margin stock or for any other purpose which might cause any
of the transactions contemplated by this Agreement or any other Operative
Document to constitute a "purpose credit" within the meaning of Regulation G, T,
U or X of the Board of Governors of the Federal Reserve System, or for the
purpose of purchasing or carrying any security, and neither Lessee, whether as
Lessee or as Construction Agent, nor any Affiliate of Lessee has taken or will
otherwise take or permit any action by Lessee, whether as Lessee or as
Construction Agent, or any of its Affiliates in connection with any of the
transactions contemplated by any of the Operative Documents which would involve
a violation of Regulation G, T, U, or X, or any other regulation of the Board of
Governors of the Federal Reserve System.
(n) No Other Filings. Upon the execution and delivery of a Certificate
of Acceptance, no filings or recordings (other than filings or recordings that
shall have been arranged to be made promptly thereafter) are necessary to
validly and effectively convey to Administrative Agent such interests in the
Collateral as contemplated by the Operative Documents, free and clear of all
Liens, other than Permitted Liens.
(o) Disclosure. The information disclosed in writing by Lessee (as
Lessee or as Construction Agent) or Guarantor (or any Person authorized or
employed by any such Person as agent or otherwise) to the Participants in
connection with the negotiation
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Participation Agreement
of the Operative Documents and the transactions contemplated thereby, when taken
as a whole with all other disclosures to such parties, do not contain an untrue
statement of a material fact or omit to state a material fact necessary to make
the statements herein or therein, in light of the circumstances under which they
were made, misleading. There is no particular fact relating to Lessee (as Lessee
or as Construction Agent), Guarantor, any System or any of the Equipment
(including related construction or installation) of which Lessee (as Lessee or
as Construction Agent), Guarantor or any of its Subsidiaries has knowledge that
has not been disclosed by Lessee, Guarantor or any of its Subsidiaries (or by
any Person authorized or employed by Lessee, Guarantor or any of its
Subsidiaries as agent or otherwise) in writing to the Participants that, as far
as Lessee, Guarantor or any of its Subsidiaries can reasonably foresee, is
reasonably likely to have a Material Adverse Effect.
(p) Subjection to Government Regulation. Except in the case of the
ownership of, or the holding of an interest in, a System pursuant to the
exercise of remedies under the Lease, none of Certificate Trustee, either Agent
or any Participant will become subject to ongoing regulation of its operations
by a Governmental Authority solely by reason of entering into the Operative
Documents or the consummation of the transactions contemplated thereby.
(q) Support Rights. The Support Rights are free and clear of all Liens
other than Permitted Liens. The Support Rights relative to each System will
constitute all material rights (other than permits and licenses granted by
Governmental Authorities or obtained by contract or otherwise from private
Persons that are by their respective terms or by Applicable Law
non-transferrable) necessary when each such System is delivered under the Lease
for any Person (other than the Lessee) to operate each such System as a revenue
producing unit in Commercial Operation.
(r) Ownership of Stock. As of the Document Closing Date, Guarantor has
sole beneficial ownership, directly or indirectly, of 100% of the issued and
outstanding capital stock of Lessee. As of the Document Closing Date, there are
no outstanding subscriptions, options, warrants, calls, rights (including
preemptive rights) or other arrangements or commitments of any nature relating
to any capital stock of Lessee.
SECTION 4.2. Representations and Warranties of each Certificate
Purchaser and each Lender. Each Certificate Purchaser and each Lender represents
and warrants severally and only as to itself to each of the other parties hereto
as follows:
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Participation Agreement
(a) Due Organization, etc. It is duly organized and validly
existing under the laws of the jurisdiction of its organization and has
full corporate power and authority to enter into and perform its
obligations as Certificate Purchaser or Lender (as the case may be)
under each Operative Document to which it is or is to be a party and
each other agreement, instrument and document to be executed and
delivered by it on or before each Advance Date in connection with or as
contemplated by each such Operative Document to which it is or is to be
a party.
(b) Authorization; No Conflict. The execution and delivery by
it of, the consummation by it of the transactions provided for in, and
the compliance by it with all the provisions of, each Operative
Document to which it is or is to be a party as Certificate Purchaser or
Lender (as the case may be) have been duly authorized by all necessary
corporate action on its part; and neither the execution and delivery
thereof, nor the consummation of the transactions contemplated thereby,
nor compliance by it as Certificate Purchaser or Lender (as the case
may be) with any of the terms and provisions thereof (i) requires any
approval of its stockholders or approval or consent of any trustee or
holders of any of its indebtedness or obligations, (ii) contravenes or
will contravene any Applicable Law currently in effect applicable to or
binding on it (except no representation or warranty is made as to any
Applicable Law to which it or the Equipment, directly or indirectly,
may be subject because of the lines of business or other activities of
Lessee) or (iii) results in any breach of, or constitutes any default
under, any indenture, mortgage, chattel mortgage, deed of trust, lease,
conditional sales contract, loan or credit arrangement, corporate
charter, by-laws or other agreement or instrument to which it is a
party or by which it or its properties may be bound or affected.
(c) ERISA. It is acquiring its interest in the Note(s) or
Certificate(s) (as the case may be) with assets that are either (i) not
assets of any Employee Benefit Plan (or its related trust) which is
subject to Title I of ERISA or Section 4975 of the Code, or (ii) assets
of any Employee Benefit Plan (or its related trust) which is subject to
Title I of ERISA or Section 4975 of the Code, but there is available an
exemption from the prohibited transaction rules under Section 406(a) of
ERISA and Section 4975 of the Code and such exemption is immediately
applicable to each transaction contemplated by the Operative Documents
to the extent that any other party to such
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Participation Agreement
transaction is a "party in interest" as defined in Section 3(14) of
ERISA with respect to such plan assets.
(d) Investment in Notes and Certificates. It is acquiring the
Notes and/or Certificates for its own account for investment and not
with a view to any distribution (as such term is used in Section 2(11)
of the Securities Act) thereof, and if in the future it should decide
to dispose of its interest in the Notes and/or Certificates, it
understands that it may do so only in compliance with the Securities
Act and the rules and regulations of the SEC thereunder and any
applicable state securities laws. Neither it nor anyone authorized to
act on its behalf has taken or will take any action which would subject
the issuance or sale of any Note or Certificate, the Trust Estate
(including all Systems and Equipment constituting a part thereof), the
Collateral or the Lease to the registration requirements of Section 5
of the Securities Act. No representation or warranty contained in this
Section 4.2(d) shall include or cover any action or inaction of Lessee
or any Affiliate thereof, whether or not purportedly on behalf of any
Certificate Purchaser, any Lender, Certificate Trustee or any of their
Affiliates. Subject to the foregoing, it is understood among the
parties that the disposition of each Participant's property shall be at
all times within its control.
SECTION 4.3. Representations and Warranties of Bank. Effective as of
the date of execution hereof and as of the initial Advance Date, Shawmut Bank
Connecticut, National Association, in its individual capacity ("Bank"),
represents and warrants to each of the other parties hereto as follows:
(a) Chief Executive Office. Bank's "chief executive office"
and "principal place of business," as such terms are used in Section
9-103(3) of the UCC, and the place where the documents, accounts and
records relating to the Overall Transaction are kept is located at 777
Main Street, MSN 238, Hartford, Connecticut 06115, attention: Corporate
Trust Administration.
(b) Due Organization, etc. Bank is a national banking
association duly organized and validly existing in good standing under
the laws of the United States and has full corporate power and
authority to execute, deliver and perform its obligations (i) in its
individual capacity under the Trust Agreement and, to the extent it is
a party hereto in its individual capacity, this Agreement, and (ii)
acting as Certificate Trustee under the Trust Agreement, under this
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Participation Agreement
Agreement and each other Operative Document to which it is or will be a
party as Certificate Trustee.
(c) Due Authorization; Enforceability. The Operative Documents
to which Bank is or will be a party have been or will be (to the extent
it is to be a party thereto in its individual capacity), duly
authorized, executed and delivered by or on behalf of Bank (in its
individual capacity) and are, or upon execution and delivery will be,
legal, valid and binding obligations of Bank (in its individual
capacity), enforceable against it in accordance with their respective
terms, except as such enforcement may be limited by applicable
bankruptcy, insolvency, or similar laws affecting creditors' rights
generally and by general equitable principles.
(d) No Conflict. The execution and delivery by (i) Bank, in
its individual capacity, of the Trust Agreement and, to the extent it
is a party hereto in its individual capacity, this Agreement, and (ii)
Bank, in its capacity as Certificate Trustee, of each Operative
Document to which Certificate Trustee is or will be a party, are not
and will not be, and the performance by Bank, in its individual
capacity or as Certificate Trustee, as the case may be, of its
obligations under each are not and will not be inconsistent with the
articles of association or by-laws of Bank, do not and will not
contravene any Applicable Laws of the United States of America or the
State of Connecticut relating to the banking or trust powers of Bank,
and do not and will not result in a breach of or constitute a default
under (with or without the giving of notice or lapse of time or both)
any indenture, mortgage, deed of trust, lease, loan or credit agreement
or any other agreement or instrument to which Bank is a party or by
which it or its properties may be bound or affected.
(e) No Approvals, etc. Neither the execution and delivery by
Certificate Trustee in its individual capacity or as Certificate
Trustee, as the case may be, of any of the Operative Documents to which
it is a party requires any Governmental Approval by any Governmental
Authority under any Applicable Laws of the United States of America or
the State of Connecticut relating to the banking or trust powers of the
Bank.
(f) Litigation. There is no action, proceeding or
investigation pending or threatened against Bank (in its individual
capacity or as Certificate Trustee) which questions the validity of the
Operative Documents or which is reasonably
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Participation Agreement
likely to result, either in any case or in the aggregate, in any
material adverse change in the ability of Bank (in its individual
capacity or as Certificate Trustee) to perform its obligations (in
either capacity) under the Operative Documents to which it is a party.
(g) Lessor Liens. The Equipment and each System are free
and clear of all Lessor Liens attributable to Bank (in its individual
capacity).
(h) Securities Act. Neither Bank (in its individual capacity
or as Certificate Trustee) nor anyone authorized to act on its behalf
has, directly or indirectly, in violation of Section 5 of the
Securities Act or any state securities laws, offered or sold any
interest in the Notes, the Certificates, the Equipment or the Lease, or
in any security or lease the offering of which, for purposes of the
Securities Act or any state securities laws, would be deemed to be part
of the same offering as the offering of the aforementioned securities
or leases, or solicited any offer to acquire any of the aforementioned
securities or leases; provided, however, that neither Bank nor
Certificate Trustee makes any representation or warranty with respect
to the transactions contemplated by the Operative Documents.
SECTION 4.4. Representations and Warranties of Administrative Agent.
Shawmut Bank Connecticut, National Association, in its individual capacity,
hereby represents and warrants to the other Participants as set forth in this
Section 4.4, with respect to its duties and obligations as Administrative Agent.
(a) Due Organization, etc. Administrative Agent is a national banking
association duly organized and validly existing in good standing under the laws
of the United States and has the corporate power and authority to execute,
deliver and perform its obligations under the Operative Documents to which it is
a party.
(b) Due Authorization; Enforceability. The Operative Documents to which
Administrative Agent is or will be a party have been or will be, on the date
required to be delivered hereby, duly authorized, executed and delivered by
Administrative Agent, and are, or, upon execution and delivery will be, legal,
valid and binding obligations of Administrative Agent, enforceable against it in
accordance with their respective terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, or similar laws affecting
creditors' rights generally and by general equitable principles.
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Participation Agreement
(c) No Conflict. Neither the execution and delivery by Administrative
Agent of the Operative Documents to which it is or will be a party, either in
its individual capacity or as Administrative Agent, or both, nor performance of
its obligations thereunder in either such capacity, results in a breach of, or
constitutes a default under (with or without the giving of notice or lapse of
time or both), or violates the terms, conditions or provisions of: (i) the
articles of association or by-laws of Administrative Agent; (ii) any agreement,
to which Administrative Agent, either in its individual capacity, as
Administrative Agent, or both, is now a party or by which it or its property,
either in its individual capacity, as Administrative Agent, or both, is bound or
affected, where such breach, default or violation would be reasonably likely to
materially and adversely affect the ability of Administrative Agent, either in
its individual capacity or as Administrative Agent or both, to perform its
obligations under any Operative Document to which it is or will be a party,
either in its individual capacity or as Administrative Agent, or both; or (iii)
any Applicable Laws of the United States of America or the State of Connecticut
relating to the banking or trust powers of the Administrative Agent, where such
conflict, breach, default or violation would be reasonably likely to materially
and adversely affect the ability of Administrative Agent, either in its
individual capacity, as Administrative Agent or both, to perform its obligations
under any Operative Document to which it is or will be a party.
(d) No Approvals, etc. No Governmental Approval by any Governmental
Authority under any Applicable Laws of the United States of America or the State
of Connecticut relating to the banking or trust powers of the Administrative
Agent is or will be required in connection with the execution and delivery by
Administrative Agent of the Operative Documents to which it is party or the
performance by Administrative Agent of its obligations under such Operative
Documents.
(e) Litigation. There is no action, proceeding or investigation pending
or threatened against Administrative Agent (in its individual capacity or as
Administrative Agent) which questions the validity of the Operative Documents or
which is reasonably likely to result, either in any case or in the aggregate, in
any material adverse change in the ability of Administrative Agent (in its
individual capacity or as Administrative Agent) to perform its obligations (in
either capacity) under the Operative Documents to which it is a party.
SECTION 4.5. Representations and Warranties of Information
Agent. BA Leasing & Capital Corporation, in its individual
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Participation Agreement
capacity, hereby represents and warrants to the Participants as set forth in
this Section 4.5, with respect to its duties and obligations as Information
Agent.
(a) Due Organization, etc. Information Agent is duly organized and
validly existing in good standing under the laws of the State of California and
has the corporate power and authority to enter into and perform its obligations
under the Operative Documents.
(b) Due Authorization; Enforceability. The Operative Documents to which
Information Agent is or will be a party have been or will be, on the date
required to be delivered hereby, duly authorized, executed and delivered by
Information Agent, and this Participation Agreement is, and such other Operative
Documents are, or, when so executed and delivered by Information Agent will be,
valid, legal and binding agreements of Information Agent, enforceable against
Information Agent in accordance with their respective terms, except as
enforcement may be limited by applicable bankruptcy, insolvency, or similar laws
affecting creditors' rights generally and by general equitable principles.
(c) No Conflict. Neither the execution and delivery by Information
Agent of the Operative Documents to which it is or will be a party, either in
its individual capacity or as Information Agent, or both, nor performance of its
obligations thereunder in either such capacity, results in a breach of, or
constitutes a default under (with or without the giving of notice or lapse of
time or both), or violates the terms, conditions or provisions of: (i) the
articles of association or by-laws of Information Agent; (ii) any agreement, to
which Information Agent, either in its individual capacity, as Information
Agent, or both, is now a party or by which it or its property, either in its
individual capacity, as Information Agent, or both, is bound or affected, where
such breach, default or violation would be reasonably likely to materially and
adversely affect the ability of Information Agent, either in its individual
capacity or as Information Agent or both, to perform its obligations under any
Operative Document to which it is or will be a party, either in its individual
capacity or as Information Agent, or both; or (iii) any Applicable Laws of the
United States of America or the State of California where such conflict, breach,
default or violation would be reasonably likely to materially and adversely
affect the ability of Information Agent, either in its individual capacity, as
Information Agent or both, to perform its obligations under any Operative
Document to which it is or will be a party.
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Participation Agreement
(d) Litigation There is no action, proceeding or investigation pending
or, to the best knowledge of Information Agent, threatened against it which
would be reasonably likely to adversely affect Information Agent's ability to
perform its obligations under the Operative Documents to which it is party.
(e) No Approvals, etc. No Governmental Approval by any Governmental
Authority under any Applicable Laws of the United States of America or the State
of California is or will be required in connection with the execution and
delivery by Information Agent of the Operative Documents to which it is party or
the performance by Information Agent of its obligations under such Operative
Documents.
SECTION 4.6. Representations and Warranties of Guarantor.
Guarantor hereby represents and warrants to each Participant that:
(a) Organization; Powers; Governmental Approvals. (i) each of
Guarantor and each Principal Subsidiary (A) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (B) has all requisite power and
authority to own its property and assets and to carry on its business
as presently conducted, and (C) is qualified to do business and in good
standing in every jurisdiction where such qualification is required,
except where the failure to so qualify would not have a Material
Adverse Effect on the condition, financial condition or otherwise,
results of operations, business, assets, operations, or prospects of
Guarantor and its Subsidiaries taken as a whole. Guarantor's execution,
delivery and performance of this Agreement and the Guaranty are within
its corporate powers, have been duly authorized by all necessary action
and do not violate or create a default under law, its constituent
documents, or any contractual provision binding upon it. This Agreement
and the Guaranty constitute the legal, valid and binding obligations of
Guarantor, enforceable against it in accordance with their terms,
except as such enforceability may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium and other laws affecting the
rights of creditors generally and general principles of equity. To the
best of Guarantor's knowledge, there is no defense, counterclaim,
setoff, deduction, diminution, abatement, recoupment, suspension,
deferment or reduction to any of its obligations under the Guaranty.
(ii) All Governmental Approvals have been duly obtained, are
in full force and effect and permit Guarantor to perform
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Participation Agreement
its obligations under this Agreement and the Guaranty, and are not the
subject of any pending or overtly threatened appeal, stay or other
challenge.
(b) Financial Statements. Guarantor has furnished to each
Participant, for itself and its Principal Subsidiaries, their most
recent filings with the SEC on Forms 10-K and 10-Q. Such Forms 10-K and
10-Q do not contain any untrue statement of a material fact or omit to
state a material fact necessary to make any statement therein, in light
of the circumstances under which it was made, not misleading. Each of
the financial statements in such Forms 10-K and 10-Q has been, and each
of the financial statements to be furnished pursuant to Section 6.6(b)
will be, prepared in accordance with GAAP, except as therein noted, and
fairly presents or will fairly present in all material respects the
consolidated financial position of Guarantor or Principal Subsidiary,
as the case may be, as of the date thereof and the consolidated results
of the operations of Guarantor or Principal Subsidiary, as the case may
be, for the period then ended.
(c) No Material Adverse Change. Since the date of Guarantor's
most recent financial statements contained in its Annual Report on Form
10-K for the fiscal year ended December 31, 1994 furnished to the
Participants pursuant to Section 4.6(b), there has been no material
adverse change in, and there has occurred no event or condition which
is likely to result in a material adverse change in, the condition,
financial or otherwise, results of operations, business, assets or
operations of Guarantor and its Subsidiaries taken as a whole.
(d) Title to Properties; Possession Under Leases.
(i) To the best of Guarantor's knowledge, Guarantor has good
and marketable title to, or valid leasehold interests in, all its
material properties and assets, except for minor defects in title that
do not interfere with its ability to conduct its business as currently
conducted or to utilize such properties and assets for their intended
purposes. All such material properties and assets are free and clear of
Liens, other than Liens expressly permitted by Section 6.7(a).
(ii) Guarantor has complied with all obligations under all
material leases to which it is a party, and all such leases are in full
force and effect, except where such failure to comply or maintain such
leases in full force and effect would not have a Material Adverse
Effect. Guarantor enjoys
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Participation Agreement
peaceful and undisturbed possession under all such material leases
except where such failure would not have a Material Adverse Effect.
(e) No Principal Subsidiaries. As of the Document
Closing Date, Guarantor has no Principal Subsidiaries.
(f) Litigation; Compliance with Laws. (i) There is no action,
suit, or proceeding, or any governmental investigation or any
arbitration, in each case pending or, to the knowledge of Guarantor,
threatened against Guarantor or any of its Subsidiaries or any material
property of any thereof before any Governmental Authority which (A)
challenges the validity of this Agreement or the Guaranty or, (B)
except as disclosed in Guarantor's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994, may have a Material Adverse
Effect.
(ii) Neither Guarantor nor any of its Subsidiaries is in
violation of any law, rule, or regulation, or in default with respect
to any judgment, writ, injunction or decree of any Governmental
Authority, where such violation or default could reasonably be
anticipated to result in a Material Adverse Effect.
(g) Agreements. (i) Neither Guarantor nor any of its
Subsidiaries is a party to any agreement or instrument or subject to
any corporate restriction that has resulted, or could reasonably be
anticipated to result, in a Material Adverse Effect.
(ii) Neither Guarantor nor any of its Subsidiaries is in
default in any manner under any provision of any indenture or other
agreement or instrument evidencing Indebtedness, or any other material
agreement or instrument to which it is a party or by which it or any of
its properties or assets are or may be bound, where such default could
reasonably be anticipated to result in a Material Adverse Effect.
(h) Investment Company Act; Public Utility Holding Company
Act. Neither Guarantor nor any of its Subsidiaries is (i) an
"investment company" as defined in, or subject to regulation under, the
Investment Company Act of 1940, as amended, or (ii) a "holding company"
as defined in, or subject to regulation under, the Public Utility
Holding Company Act of 1935, as amended.
(i) Tax Returns. Each of Guarantor and its Subsidiaries
has filed or caused to be filed all Federal, state and local
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tax returns required to have been filed by it and has paid or caused to
be paid all taxes shown to be due and payable on such returns or on any
assessments received by it, except taxes that are subject to a
Permitted Contest.
(j) No Material Misstatements. No statement, information,
report, financial statement, exhibit, or schedule furnished by or on
behalf of Guarantor to Administrative Agent, or any other Participant
in connection with the syndication or negotiation of this Agreement or
the Guaranty or included herein or therein or delivered pursuant hereto
or thereto contained, contains, or will contain any material
misstatement of fact or intentionally omitted, omits, or will omit to
state any material fact necessary to make the statements therein, in
the light of the circumstances under which they were, are, or will be
made, not misleading.
(k) Employee Benefit Plans. (i) Each Employee Benefit Plan is
in compliance with ERISA, except for such noncompliance that has not
resulted, and could not reasonably be anticipated to result, in a
Material Adverse Effect.
(ii) No Employee Benefit Plan has an accumulated or waived
funding deficiency within the meaning of Section 412 or Section 418B of
the Code, except for any such deficiency that has not resulted, and
could not reasonably be anticipated to result, in a Material Adverse
Effect.
(iii) No proceedings have been instituted to terminate any
Employee Benefit Plan, except for such proceedings where the
termination of a Employee Benefit Plan has not resulted, and could not
reasonably be anticipated to result, in a Material Adverse Effect.
(iv) Neither Guarantor nor any of its Subsidiaries or ERISA
Affiliates has incurred any liability to or on account of an Employee
Benefit Plan under ERISA (other than obligations to make contributions
in accordance with such Employee Benefit Plan), and no condition exists
which presents a material risk to Guarantor or any of its Subsidiaries
of incurring such a liability, except for such liabilities that have
not resulted, and could not reasonably be anticipated to result, in a
Material Adverse Effect.
(l) Insurance. Guarantor maintains insurance with financially
sound and reputable insurers, or self-insurance, with respect to its
properties and business against loss or damage of the kind customarily
insured against by reputable
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companies in the same or similar business and of such types and in such
amounts (with such deductible amounts) as are customary for such
companies under similar circumstances.
(m) Public Utility. Guarantor is a public utility as
defined in Subchapter II of the Federal Power Act, 16 USCA
ss.824(e).
ARTICLE V
COVENANTS OF LESSEE
SECTION 5.1. Further Assurances. Lessee, at its own cost and expense,
will cause to be promptly and duly taken, executed, acknowledged and delivered
all such further acts, documents and assurances as any Participant, Certificate
Trustee or any Agent reasonably may request from time to time in order to carry
out more effectively the intent and purposes of this Agreement and the other
Operative Documents and the Overall Transaction.
SECTION 5.2. Consolidation, Merger, Sale, etc.
(a) Lessee shall not consolidate with any Person, merge with or into
any Person or convey, transfer or lease to any Person all or substantially all
of its assets in any single transaction (or series of related transactions)
unless immediately after giving effect to such transaction, each of the
conditions set forth in clauses (i) through (vi) below shall have been satisfied
or, in the case of clause (vi) below, waived by each Participant, which waiver
shall not be unreasonably withheld or delayed:
(i) the Person formed by such consolidation with or into which
Lessee shall be merged or the Person which shall acquire by conveyance,
transfer or lease all or substantially all of the assets of Lessee (the
"Surviving Company") shall be a corporation, partnership, association
or other business entity that is organized under the laws of the United
States of America, a state thereof or the District of Columbia;
(ii) (A) the Surviving Company shall execute and deliver to
each of the parties hereto an agreement, in form and substance
reasonably satisfactory to the Participants, Certificate Trustee and
Information Agent, containing the assumption by the Surviving Company
of the due and punctual payment, performance and observation of each
obligation, covenant and agreement of Lessee under this Agreement and
each other Operative Document to which, immediately prior to such
transaction, Lessee was a party; and (B) Guarantor shall execute and
deliver to each of the parties hereto a
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reaffirmation, in form and substance satisfactory to the Participants
and Information Agent, that each and all of the obligations of
Guarantor under this Agreement and the Guaranty remain, and will
remain, in full force and effect, notwithstanding the transaction or
transactions giving rise to the requirement that such reaffirmation be
delivered hereunder;
(iii) no Lease Default, Lease Event of Default or Construction
Agency Event of Default shall have occurred or would occur as a result
thereof and be continuing, and no Event of Loss shall have occurred or
would occur as a result thereof;
(iv) the title of Certificate Trustee to the Equipment and
Systems and Certificate Trustee's rights under this Agreement and the
other Operative Documents and the first and prior Lien of the Security
Agreement on the Collateral shall not be adversely affected;
(v) Lessee shall have delivered to the Participants,
Certificate Trustee and Administrative Agent an Officer's Certificate
and an opinion of counsel reasonably satisfactory to each such Person
stating that such transaction complies with this Section 5.2, that all
conditions to the consummation of such transaction have been fulfilled
and that all Governmental Approvals required in connection with such
transaction have been obtained, given or made; and
(vi) the Indirect Beneficial Ownership Interest of Guarantor
in each of the Leased Assets and Owned Assets included in each
Qualified MAN or FCL shall be equal to or greater than forty-nine
percent (49%) after such merger, consolidation or transfer; provided,
however, that, subsequent to an initial public offering by Lessee that
reduces the Indirect Beneficial Ownership Interest of Guarantor to
below forty-nine percent (49%), no such consolidation, merger,
conveyance, transfer or lease shall reduce the Indirect Beneficial
Ownership Interest of Guarantor, calculated On a Fully Diluted Basis,
below the Indirect Beneficial Ownership Interest of Guarantor,
calculated On a Fully Diluted Basis, maintained immediately after such
initial public offering.
Upon the consummation of such transaction, the Surviving Company, shall
succeed to, and be substituted for, and may exercise every right and power of,
Lessee immediately prior to such transaction under this Agreement and each other
Operative Document to which Lessee was a party immediately prior to such
transaction,
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Participation Agreement
with the same effect as if the Surviving Company had been named herein and
therein. Notwithstanding the foregoing provisions of this Section 5.2(a), no
conveyance, transfer or lease of all or any portion of the assets of Lessee
shall, except as provided in Section 10.2 of the Lease, release either of Lessee
or Guarantor from its respective payment or other obligations under this
Agreement, the Guaranty or any other Operative Document without the prior
written consent of Certificate Trustee, Information Agent and each Participant.
(b) Lessee shall not transfer, assign or sublease any Leased Assets
except in accordance with Section 5.2(a) and Article X of the Lease. Lessee may
not assign, transfer possession of or lease, in whole or in part, any of its
right, title or interest in or to the Owned Assets relating to a Qualified MAN
or FCL to any Person at any time, and any such assignment, transfer of
possession or lease shall be void, unless: (i) after giving effect to any such
assignment, transfer of possession or lease (including all prior transactions of
any of the foregoing types) the Indirect Beneficial Ownership Interest of
Guarantor in all of the Leased Assets and in all of the Owned Assets,
respectively, included in such Qualified MAN or FCL would be equal to or greater
than forty-nine percent (49%); provided, however, that, subsequent to an initial
public offering by Lessee that reduces the Indirect Beneficial Ownership
Interest of Guarantor to below forty-nine percent (49%), no such assignment,
transfer or lease shall reduce the Indirect Beneficial Ownership Interest of
Guarantor, calculated On a Fully Diluted Basis, below the Indirect Beneficial
Ownership Interest of Guarantor, calculated On a Fully Diluted Basis, maintained
immediately after such initial public offering, or (ii) such assignment,
transfer of possession or lease is to a Subsidiary of Guarantor, in which event
such Subsidiary shall be bound by and subject to the provisions set forth in
this Section 5.2(b), or (iii) such assignment, transfer of possession or lease
is consented to by each Participant, which consent shall not be unreasonably
withheld or delayed, or (iv) such assignment, transfer of possession or lease
complies with Section 5.2(a).
(c) Each Interested Subsidiary will be bound by, and entitled to the
benefits of, Sections 5.2(a) and (b) as if it were named in each such Section in
lieu of Lessee. Any Subsidiary, upon becoming an Interested Subsidiary, shall,
as a condition precedent to the transfer or lease of Owned Assets or Leased
Assets to it, deliver to Certificate Trustee a duly authorized and executed
certificate declaring that it agrees to be bound by, and is entitled to the
benefits of, this Article V.
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Participation Agreement
SECTION 5.3. Corporate Existence, etc. Subject to Section 5.2, Lessee
shall at all times maintain its existence as a corporation in good standing
under the laws of the State of Delaware and shall preserve and keep in full
force and effect its franchises material to its business.
SECTION 5.4. Liens. Lessee shall not incur or suffer to
exist any Lien on any of the Equipment other than Permitted Liens.
SECTION 5.5. Compliance Certificates.
(a) Lease Defaults. Lessee shall furnish, following the Document
Closing Date and until the termination of the Lease, to Certificate Trustee,
Administrative Agent and each Participant a certificate of Lessee signed by a
Responsible Officer of Lessee promptly after Lessee obtains knowledge that there
exists a Lease Default, Lease Event of Default or Construction Agency Event of
Default, which such certificate shall describe such Lease Default in reasonable
detail, with a statement of Lessee's action with respect thereto taken or
proposed to be taken.
(b) Annual Certificates. Within one hundred ten (110) days after the
close of each fiscal year of Lessee, Lessee shall deliver to Certificate
Trustee, Administrative Agent, and each Participant a certificate of Lessee
signed by a Responsible Officer of Lessee to the effect that the signer is
familiar with or has reviewed the relevant terms of this Agreement, the Lease
and each other Operative Document to which Lessee is a party and has made, or
caused to be made under his or her supervision, a review of the transactions
contemplated hereby and thereby and the condition of each System and all
Equipment during the preceding fiscal year, and that such review has not
disclosed the existence during such fiscal year of any condition or event which
constitutes a Lease Default, a Lease Event of Default, a Construction Agency
Event of Default, an Event of Loss, a Condemnation or Casualty, nor does the
signer have knowledge, after due inquiry, of the existence as at the date of
such certificate, of any condition or event which constitutes a Lease Default, a
Lease Event of Default, a Construction Agency Event of Default or an Event of
Loss, Condemnation or Casualty or, if any such condition or event existed or
exists, specifying the nature and period of existence thereof and what action
Lessee has taken or is taking or proposes to take with respect thereto.
SECTION 5.6. Change of Name or Address. Lessee shall provide
Certificate Trustee, Administrative Agent, and each Participant thirty (30)
days' prior written notice of any change in name, identity or corporate
structure or the address of its chief executive office and principal place of
business or the office
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Participation Agreement
where it keeps its records concerning its accounts and the Equipment.
SECTION 5.7. Investigation by Authorities. Promptly upon Lessee's
receipt of written notice of the intent by a Governmental Authority to (a) take
an action which would constitute a Condemnation or an Event of Taking, (b)
investigate any location whereon or wherein any System or Equipment is located
for a material violation of any Applicable Law on or at such location, including
any Environmental Law, (c) investigate any such location (other than routine
fire, life-safety and similar inspections) for any violation of Applicable Laws
under which criminal liability may be imposed, or (d) revoke, change, modify or
reconsider Lessee's status as a "competitive telecommunications provider" in the
State of Oregon, Lessee shall deliver to Certificate Trustee, Administrative
Agent and each Participant a copy of such notice.
SECTION 5.8. Information Regarding Systems; Other Information. Lessee
shall maintain accurate books and records, and shall promptly upon request by
either Agent, Certificate Trustee or any Participant, supply information
regarding the identity, cost, location and condition of each System, all related
Systems and all related Equipment, including all related construction,
installation and, if applicable, Transactions Costs allocable thereto. Lessee
shall also deliver to Administrative Agent, with sufficient copies for
Administrative Agent to distribute to Certificate Trustee and each Participant,
with reasonable promptness, unless disclosure thereof is prohibited by
Applicable Laws and subject to appropriate confidentiality undertakings with
respect thereto, such other data and information (financial or otherwise) which
is either maintained in the ordinary course of Lessee's business or can be
obtained or derived without undue burden to Lessee as to the business of Lessee
or as to any System or Equipment as from time to time may be reasonably
requested by either Agent or the Required Entities.
SECTION 5.9. Securities. Lessee shall not, nor shall it permit anyone
authorized to act on its behalf to, take any action which would subject the
issuance or sale of the Notes, the Certificates, any Equipment or the Lease, or
result in any security or lease the offering of which, for purposes of the
Securities Act or any state securities laws, would be deemed to be part of the
same offering as the offering of the aforementioned interests or leases, to the
registration requirements of Section 5 of the Securities Act or any state
securities laws.
SECTION 5.10. Interest Rates. With respect to each
determination of an interest rate pursuant to the Loan Agreement
and any other amounts determined by reference thereto, including
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Participation Agreement
amounts payable pursuant to the Lease, Lessee agrees to be bound by Section 2.7
of the Loan Agreement.
SECTION 5.11. Tax Reporting. Consistent with the intention of the
parties hereto stated in Section 2.8, Lessee shall report the transactions
provided for in the Operative Documents as constituting a loan for Federal and
state income tax purposes.
SECTION 5.12. Searches. Within thirty (30) days after the earlier to
occur of (a) the date on which the aggregate Commitments shall have been
exhausted and (b) the Commitment Termination Date, Lessee shall deliver to
Administrative Agent and Information Agent a report prepared by a search company
reasonably acceptable to Information Agent, of judgment liens, lis pendens, tax
liens and UCC filings with respect to Lessee and all Systems then leased
pursuant to Lease Supplements, which are filed of record with the applicable
State and local filing offices in the jurisdiction or jurisdictions in which
such Systems are located and the State in which Lessee has its principal place
of business, if only one, or its chief executive office, if it has more than one
place of business; provided, that if the Systems to be leased comprise all or
part of an FCL, then Lessee may represent and warrant to Administrative Agent
for the benefit of the Participants the absence of any of the foregoing in lieu
of providing such report.
ARTICLE VI
OTHER COVENANTS AND AGREEMENTS
SECTION 6.1. Cooperation with Lessee. Certificate Trustee,
Administrative Agent and each Participant shall, to the extent reasonably
requested by Lessee (but without assuming additional liability on account
thereof), at Lessee's expense, cooperate to allow Lessee to (a) perform its
covenants contained in Section 5.1, including at any time and from time to time,
upon the reasonable request of Lessee, to promptly and duly execute and deliver
any and all such further instruments, documents and financing statements (and
continuation statements related thereto) as Lessee may request in order to
perform such covenants, and (b) further Lessee's requirements as lessee of the
Systems and related Equipment.
SECTION 6.2. Covenants of Certificate Trustee and the
Certificate Purchasers.
(a) Discharge of Liens. Each of the Certificate Purchasers covenants as
to itself, and not jointly with any other Certificate Purchaser, that it will
not create or permit to exist at any time, and will, at its own cost and
expense, promptly take such action as
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Participation Agreement
may be necessary duly to discharge, or to cause to be discharged, all Lessor
Liens attributable to it, and will cause restitution to be made to the Trust
Estate in the amount of any diminution of the value thereof as a result of its
failure to comply with its obligations under this Section 6.2(a). Certificate
Trustee will not create or permit to exist at any time, and will promptly take
such action as may be necessary duly to discharge, or to cause to be discharged,
all Lessor Liens attributable to it and will cause restitution to be made to the
Trust Estate in the amount of any diminution of the value thereof as a result of
its failure to comply with its obligations under this Section 6.2(a). Bank will
not create or permit to exist at any time, and will, at its own cost and
expense, promptly take such action as may be necessary duly to discharge, or to
cause to be discharged, all Lessor Liens attributable to it and will cause
restitution to be made to the Trust Estate in the amount of any diminution of
the value thereof as a result of its failure to comply with its obligations
under this Section 6.2(a). Notwithstanding the foregoing, none of the
Certificate Purchasers, Certificate Trustee or Bank, as the case may be, shall
be required to so discharge any such Lessor Lien while the same is being
contested in good faith by appropriate proceedings diligently prosecuted so long
as such proceedings shall not involve any meaningful danger of the impairment of
the Lien of the Security Agreement or of the sale, forfeiture or loss of, and
shall not interfere with the use or disposition of, any part of the Equipment,
the Lease or the Trust Estate or title thereto or any interest therein or the
payment of Rent; provided, however, that each Certificate Purchaser, Certificate
Trustee and Bank shall discharge any such Lessor Lien attributable to it,
whether or not subject to contest as provided above, upon the purchase of any
Equipment by Lessee pursuant to the Lease.
(b) Trust Agreement. Without prejudice to any right under the Trust
Agreement of Certificate Trustee to resign, or the Participants' right under the
Trust Agreement to remove Certificate Trustee, each of the Participants and
Certificate Trustee hereby agrees with Lessee, the Lenders and the Agents (i)
not to terminate or revoke the trust created by the Trust Agreement except as
permitted by Article VI of the Trust Agreement prior to the later of the Lease
Termination Date or the payment in full of the obligations under the Notes and
the Certificates, (ii) not to amend, supplement, terminate or revoke or
otherwise modify any provision of the Trust Agreement prior to the Lease
Termination Date in such a manner as to materially and adversely affect the
rights of any such party, (iii) except as otherwise expressly authorized under
the Operative Documents, not to withdraw from the Trust Estate any funds other
than amounts payable to it by Certificate Trustee as distributions of Base Rent
and Supplemental
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Participation Agreement
Rent without the prior written consent of each such party, and (iv) to comply
with all of the terms of the Trust Agreement applicable to it the nonperformance
of which would adversely affect such party.
(c) Successor Certificate Trustee. Certificate Trustee or any successor
may resign or be removed by the Certificate Purchasers as Certificate Trustee, a
successor Certificate Trustee may be appointed, and a corporation may become
Certificate Trustee under the Trust Agreement, only in accordance with the
provisions of Article IV of the Trust Agreement. Notwithstanding anything to the
contrary contained in this Agreement or the Trust Agreement, so long as no Lease
Event of Default shall be continuing, the appointment of a successor Certificate
Trustee shall be subject to the consent of Lessee (such consent not to be
unreasonably withheld or delayed).
(d) Indebtedness; Other Business. Certificate Trustee on behalf of the
Trust shall not contract for, create, incur or assume any indebtedness, or enter
into any business or other activity, other than pursuant to or under the
Operative Documents and, for the benefit of Lessee, the Agents and the Lenders,
agrees to be bound by Section 1.2(b) of the Trust Agreement.
(e) Change of Principal Place of Business. Certificate Trustee shall
give prompt notice to the Certificate Purchasers, Lessee and Administrative
Agent if Certificate Trustee's principal place of business or chief executive
office, or the office where the records concerning the accounts or contract
rights relating to the Equipment or the Overall Transaction are kept, shall
cease to be located at 777 Main Street, MSN 238, Hartford, CT, 06115, Attn:
Corporate Trust Administration or if it shall change its name, identity or
corporate structure.
(f) Depreciation. Prior to the applicable Lease Supplement Termination
Date, neither Certificate Trustee nor any Participant shall claim any federal or
state tax attributes or benefits (including depreciation) relating to any System
or Equipment unless required to do so by an appropriate taxing authority or
after a clearly applicable change in Applicable Laws or as a protective response
to a proposed adjustment by an Governmental Authority; provided, however, that
if an appropriate taxing authority shall require Certificate Trustee or any
Certificate Purchaser to claim any such federal or state tax attributes or
benefits, or if any such Person shall make any such claim as a protective
response as aforesaid, such Person shall promptly notify Lessee thereof and
shall permit Lessee to contest such requirement in a manner similar
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Participation Agreement
to the contest rights provided in, and subject to any applicable limitation to a
contest contained in, Section 7.2(b).
(g) Certificate Purchaser Amount. The Certificate Purchasers shall at
all times prior to the Commitment Termination Date maintain an aggregate
Certificate Purchaser Amount in the Trust equal to not less than three percent
(3%) of the sum of (i) the original principal amount of the Notes issued by
Certificate Trustee from time to time and (ii) the Certificate Purchaser Amounts
invested from time to time; provided, however, that this Section 6.2(g) shall
not be construed to increase or otherwise affect any Participant's Commitment.
SECTION 6.3. Restrictions on and Effect of Transfer. So long as no
Lease Event of Default or Loan Event of Default shall have occurred and be
continuing, no Participant shall assign, convey or otherwise transfer all or any
portion of its right, title or interest in, to or under any of the Operative
Documents, or any Note or Certificate, except that (x) any Participant may
pledge its interest in the ordinary course of its business without the consent
of Lessee; provided, that such pledge provides that no transfer upon a
foreclosure pursuant to such a pledge may occur unless the other provisions of
this Section are complied with, (y) any Participant may transfer all or any
portion of its interest to any other existing Participant or an Affiliate of
such Participant and, upon compliance with any applicable provisions of Section
6.4(a), may sell, assign or otherwise transfer a participation in its interest
in any of the foregoing; provided, that no Loan Participant shall become, by
means of such transfer, a Participant under the Operative Documents, and Lessee
shall be entitled to continue to deal for all purposes under the Operative
Documents exclusively with the Participant who has transferred such
participation, and (z) any Participant may transfer any or all of such right,
title and interest upon the satisfaction of each of the following conditions:
(a) Required Notice and Effective Date. Any Participant
desiring to effect a transfer of its interest shall give written notice
of each such proposed transfer to Lessee and Administrative Agent at
least five (5) days prior to such proposed transfer, setting forth the
name of such proposed transferee, the percentage of interest to be
retained by such Participant, if any, and the date on which such
transfer is proposed to become effective. All reasonable out-of-pocket
costs incurred by Administrative Agent in connection with any such
disposition by a Participant under this Section 6.3 shall be borne by
such Participant. In the event of a transfer under this Section 6.3,
any expenses incurred by the
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Participation Agreement
transferee in connection with its review of the Operative Documents and
its investigation of the transactions contemplated thereby shall be
borne by such transferee or the relevant Participant, as they may
determine, but shall not be considered costs and expenses which Lessee
is obligated to pay or reimburse under Section 9.9.
(b) Assumption of Obligations. Any transferee pursuant to this
Section 6.3 shall have executed and delivered to Administrative Agent a
letter in substantially the form of the Investor's Letter attached
hereto as Exhibit J, and thereupon the obligations of the transferring
Participant under the Operative Documents shall be proportionately
released and reduced to the extent of such transfer. Upon any such
transfer as above provided, (i) the transferring Participant shall
still be entitled to the benefit of Article VII, and (ii) the
transferee shall be deemed to be bound by all obligations (whether or
not yet accrued) under, and to have become a party to, all Operative
Documents to which its transferor was a party, shall be deemed the
pertinent "Lender" or "Certificate Purchaser" (as the case may be) for
all purposes of the Operative Documents and shall be deemed to have
made that portion of the payments pursuant to this Agreement previously
made or deemed to have been made by the transferor represented by the
interest being conveyed; and each reference herein and in the other
Operative Documents to the pertinent "Lender" or "Certificate
Purchaser" (as the case may be) shall thereafter be deemed a reference
to the transferee, to the extent of such transfer, for all purposes.
Upon any such transfer, Administrative Agent shall deliver to each
Participant, Certificate Trustee and Lessee new Schedules I, II, and
III to this Participation Agreement, as applicable, revised to reflect
the relevant information for such new Participant and the Commitment of
such new Participant (and the revised Commitment of the transferor
Participant if it shall not have transferred its entire interest).
(c) Employee Benefit Plans. No Participant may make any such
assignment, conveyance or transfer to or in connection with any
arrangement or understanding in any way involving any Employee Benefit
Plan (or its related trust), as defined in Section 3(3) of ERISA, or
with the assets of any such plan (or its related trust), as defined in
Section 4975(e)(1) of the Code (other than a governmental plan, as
defined in Section 3(32) of ERISA), with respect to which Lessee or
such Participant or any of their Affiliates is a party in interest
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Participation Agreement
within the meaning of ERISA or a "disqualified person" within
the meaning of the Code.
(d) Representations and Warranties. Notwithstanding anything
to the contrary set forth above, no Participant may assign, convey or
transfer its interest to any Person unless such Person shall have
delivered to Administrative Agent and Lessee a certificate confirming
the accuracy of the representations and warranties set forth in Section
4.2 with respect to such Person (other than as such representation or
warranty relates to the execution and delivery of Operative Documents).
(e) Financial Condition of Transferee. No transfer by a
Participant shall be effective against the other parties to this
Agreement unless the transferee is (A) a bank or other financial
institution with a combined capital and surplus of at least
$100,000,000, or (B) any subsidiary of such a bank or financial
institution; provided, that such bank or financial institution
furnishes a guaranty with respect to the transferee's obligations as a
Lender or Certificate Purchaser (as the case may be), or (C) any other
entity; provided, that the transferee's obligations as a Lender or
Certificate Purchaser (as the case may be) are guaranteed by the
transferor Participant.
(f) Amounts. (i) Any transfer of Certificates shall be in an
invested amount which is equal to or greater than $150,000 and an
integral multiple of $10,000.
(ii) Any transfer of Notes shall be in a principal amount
which is equal to or greater than $5,000,000 and an integral multiple
of $500,000.
(iii) In any event, a Participant may transfer a Note or
Certificate that is smaller than the amounts specified in clauses (i)
and (ii) if such disposition is with respect to its entire interest.
(g) Effect. From and after any transfer of its Notes or
Certificates, the transferring Lender or Certificate Purchaser shall be
released, to the extent assumed by the transferee, from its liability
and obligations hereunder and under the other Operative Documents
relating to the Equipment to which such transferor is a party in
respect of obligations to be performed on or after the date of such
transfer. Upon any transfer by a Participant as above provided, any
such transferee shall be deemed a "Lender" or "Certificate
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Participation Agreement
Purchaser" (as the case may be) for all purposes of such documents and
each reference herein to a Lender or Certificate Purchaser shall
thereafter be deemed a reference to such transferee for all purposes,
except as the context may otherwise require. Notwithstanding any
transfer as provided in this Section 6.3, the transferor shall be
entitled to all benefits accrued and all rights vested prior to such
transfer, including rights to indemnification under this Agreement or
any other Operative Document.
(h) Transfers. Notwithstanding anything contained herein to
the contrary, without the prior written consent of Lessee, which
consent shall not be unreasonably withheld or delayed, no Participant
may transfer all or any portion of its right, title or interest in, to
or under any of the Operative Documents (including any Note or
Certificate), except as set forth in clauses (x) and (y) of the
introductory language of this Section 6.3; provided, that this clause
(h) shall not apply so long as a Lease Event of Default or Loan Event
of Default shall have occurred and be continuing.
SECTION 6.4. Covenants and Agreements of Participants.
(a) Participations. Each Lender and each Certificate Purchaser
covenants and agrees that it will not grant participations in its Notes and/or
Certificates to any Person unless such Person (a "Loan Participant") (i) is a
bank or other financial institution, (ii) has capital and surplus of at least
$100,000,000 and (iii) represents and warrants, in writing, to such Participant
for the benefit of the Participants and Lessee that no part of the funds used by
it to acquire an interest in the Notes and/or Certificates constitutes assets of
any Employee Benefit Plan or its related trust. Any such Person shall require
any transferee of its interest in the Notes and/or Certificates to make the
representations and warranties set forth in the preceding sentence, in writing,
to such Person for its benefit and the benefit of the Participants and Lessee.
In the event of any such sale by a Participant of a participating interest to a
Loan Participant, such Participant's obligations under this Agreement and under
the other Operative Documents shall remain unchanged, such Participant shall
remain solely responsible for the performance thereof, such Participant shall
remain the holder of its Note and/or Certificate for all purposes under this
Agreement and under the other Operative Documents, Certificate Trustee,
Administrative Agent and, except as set forth in Section 6.4(b), Lessee shall
continue to deal solely and directly with such Participant in connection with
such Participant's rights and obligations under this Agreement and under the
other Operative Documents, and such Participant shall retain
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Participation Agreement
the sole right to enforce the obligations of the Lessee under the Operative
Documents and to approve any amendment, modification or waiver of any provision
of any Operative Document (other than amendments, modifications, or waivers
decreasing any fees payable hereunder or under any other Operative Document, or
the amount of principal or Yield of or the rate at which interest or Yield is
payable on the Loans or Certificates, extending any scheduled principal payment
date or date fixed for the payment of interest on the Loans or Certificates, or
changing or extending the Commitments).
(b) Transferee Indemnities. Each Loan Participant shall be entitled to
the benefits of Sections 2.11 and 2.12 of the Loan Agreement with respect to its
participation in the Certificates, Notes and Loans outstanding from time to
time; provided, that no Loan Participant in respect of its participation shall
be entitled to receive any greater amount pursuant to such Sections than the
transferor Lender would have been entitled to receive in respect of the amount
of the participation in the Notes and/or Certificates transferred by such
transferor Lender to such Loan Participant had no such transfer of a
participation occurred.
SECTION 6.5. Required Transfers. If at any time any Lender shall have
delivered a certificate or notice pursuant to Section 2.12(d) of the Loan
Agreement, the Certificate Purchasers hereby grant to Lessee the right to
require Certificate Trustee by written notice to take any of the actions
described in Section 2.12(f) of the Loan Agreement.
SECTION 6.6. Affirmative Covenants of Guarantor. Guarantor covenants
and agrees that, so long as any portion of the Obligations shall remain unpaid
or unperformed or any Participant shall have any outstanding Commitment,
Guarantor will, unless, with respect to any matters other than those covered by
Section 6.6(a)(ii)(B), the Required Entities shall otherwise consent in writing:
(a) Existence; Businesses and Properties. (i) Preserve and
maintain, cause each of its Principal Subsidiaries to preserve and
maintain, and cause each other Subsidiary to preserve and maintain
(where the failure by any such other Subsidiary to so preserve and
maintain would likely result in a Material Adverse Effect) its
corporate existence, rights and franchises; provided, however, that the
corporate existence of any Principal Subsidiary may be terminated if
such termination is not disadvantageous to Administrative Agent or any
Participant;
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Participation Agreement
(ii) (A) continue to own all of the outstanding
shares of common stock of each Principal Subsidiary and (B)
except as otherwise provided in Sections 5.2(a) and (b) or
Section 6.7(b)(ii), maintain its Indirect Beneficial Ownership
Interest in all of the Leased Assets and in all of the Owned
Assets, respectively, of each Qualified MAN and FCL at levels
equal to or greater than forty-nine percent (49%);
(iii) comply, and cause each of its Subsidiaries to
comply, in all material respects, with all Applicable Laws;
(iv) pay, and cause each of its Subsidiaries to pay,
before any such amounts become delinquent, (1) all taxes,
assessments and governmental charges imposed upon it or upon
its property, and (2) all claims (including without
limitation, claims for labor, materials, supplies, or
services) which might, if unpaid, become a Lien upon its
property, unless, in each case, the validity or amount thereof
is being disputed in a Permitted Contest;
(v) keep, and cause each of its Subsidiaries to keep,
proper books of record and account, containing complete and
accurate entries of all financial and business transactions of
Guarantor and such Subsidiary; and
(vi) maintain or cause to be maintained insurance
with financially sound and reputable insurers, or
self-insurance, with respect to its properties and business
and the properties and business of its Subsidiaries against
loss or damage of the kinds customarily insured against by
reputable companies in the same or similar businesses, such
insurance to be of such types and in such amounts (with such
deductible amounts) as is customary for such companies under
similar circumstances;
provided, however, that the foregoing shall not limit the right of
Guarantor or any of its Subsidiaries to engage in any transaction not
otherwise prohibited by clauses (b), (c) and (d) of Section 6.7.
(b) Financial Statements, Reports, etc. Furnish to
Administrative Agent and each Participant:
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Participation Agreement
(i) as soon as available and in any event within 110
days after the end of each fiscal year, consolidated balance
sheets and the related statements of income and cash flows of
Guarantor and its Subsidiaries (Guarantor and its Subsidiaries
being collectively referred to as the "Companies") as of the
close of such fiscal year (which requirement shall be deemed
satisfied by the delivery of Guarantor's Annual Report on Form
10-K (or any successor form) for such year), all audited by
KPMG Peat Marwick or other independent public accountants of
recognized national standing and accompanied by an opinion of
such accountants to the effect that such consolidated
financial statements fairly present in all material respects
the financial condition and results of operations of the
Companies on a consolidated basis in accordance with GAAP;
(ii) within sixty-five (65) days after the end of
each of the first three fiscal quarters of each fiscal year,
consolidated balance sheets and related statements of income
and cash flows of the Companies as of the close of such fiscal
quarter and the then elapsed portion of the fiscal year (which
requirement shall be deemed satisfied by the delivery of
Guarantor's Quarterly Report on Form 10-Q (or any successor
form) for such quarter), each certified by an officer as
fairly presenting the financial condition and results of
operations of the Companies on a consolidated basis in
accordance with GAAP, subject to normal year-end audit
adjustments;
(iii) promptly upon the mailing or filing thereof,
copies of all financial statements, reports and proxy
statements mailed to Guarantor's public shareholders, and
copies of all registration statements (other than those on
Form S-8) and Form 8-K's (to the extent that such Form 8-K's
disclose actual or potential adverse developments with respect
to Guarantor or any of its Subsidiaries that constitute, or
could reasonably be anticipated to constitute, a Material
Adverse Effect) filed with the SEC (or any successor thereto)
or any national securities exchange;
(iv) prompt notice of any reduction in the credit
rating given to Guarantor by Standard & Poor's Ratings Group,
Moody's Investors Service, Inc. or any successor to either of
the foregoing; and, if either or both of the foregoing rating
agencies shall not rate any long-term senior indebtedness of
Guarantor, a nationally recognized
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Participation Agreement
securities rating agency or agencies selected by
Guarantor and approved by the Required Entities;
(v) promptly after (A) the occurrence thereof, notice
of any ERISA Termination Event or "prohibited transaction", as
such term is defined in Section 4975 of the Code, with respect
to any Employee Benefit Plan that results, or could reasonably
be anticipated to result, in a Material Adverse Effect, which
notice shall specify the nature thereof and Guarantor's
proposed response thereto, and (B) actual knowledge thereof,
copies of any notice of PBGC's intention to terminate or to
have a trustee appointed to administer any Employee Benefit
Plan; and
(vi) promptly, from time to time, such other
information regarding its operations, business affairs and
financial condition, or compliance with the terms of this
Agreement or the Guaranty as the Administrative Agent or any
Participant may reasonably request.
(c) Litigation and Other Notices. Furnish to Administrative
Agent and each Participant prompt written notice of the following:
(i) any Construction Agency Default, Lease Default,
Lease Event of Default, Loan Default or Loan Event of
Default of which Guarantor becomes aware;
(ii) the filing or commencement of, or any threat or
notice of intention of any person to file or commence, any
action, suit or proceeding, whether at law or equity or by or
before any Governmental Authority, against Guarantor or any of
its Subsidiaries which is reasonably likely to be adversely
determined and which, if adversely determined, could
reasonably be anticipated to result in a Material Adverse
Effect; and
(iii) any development with respect to Guarantor or
any of its Subsidiaries that has resulted in, or could
reasonably be anticipated to result in, a Material Adverse
Effect.
(d) Maintaining Records. Maintain all financial records in
accordance with GAAP and, upon reasonable notice, permit any
Participant to visit and inspect the financial records of Guarantor at
reasonable times and as often as requested and to make extracts from
and copies of such financial records, and permit any representatives
designated by any Participant to
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Participation Agreement
discuss the affairs, finances and condition of Guarantor with the
appropriate officers thereof and, with Guarantor's consent (which shall
not be unreasonably withheld or delayed), the independent accountants
therefor; provided, however, that if Guarantor shall so require, a
single representative shall be appointed by the Required Entities to
exercise the rights granted under this Section 6.6(d).
SECTION 6.7. Negative Covenants of Guarantor. Guarantor covenants and
agrees that, so long as any portion of the Obligations shall remain unpaid or
unperformed or any Participant shall have any outstanding Commitment, Guarantor
will not, without the prior unanimous written consent of the Lenders and
Certificate Purchasers, which consent shall not be unreasonably withheld or
delayed, with regard to matters covered by Section 6.7(b)(ii), 6.7(c)(ii) or
6.7(d)(ii) and without the prior written consent of the Required Entities with
regard to other matters:
(a) Liens. Create, incur, assume, or suffer to exist, or
permit any of the Principal Subsidiaries to create, incur, assume, or
suffer to exist, any Lien on any of its property now owned or hereafter
acquired to secure any Indebtedness of Guarantor or any such Principal
Subsidiary, other than (i) Liens incurred or deposits made in the
ordinary course of business to secure surety and appeal bonds, leases,
return-ofmoney bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money); (ii) Liens created
under or in connection with the First Mortgage Bond Indentures or any
other indentures governing the issuance of mortgage bonds by Guarantor;
(iii) pledges or deposits to secure the utility obligations of
Guarantor incurred in the ordinary course of business; (iv) Liens upon
or in property now owned or hereafter acquired to secure Indebtedness
incurred solely for the purpose of financing the acquisition,
construction or improvement of any property; provided, that such
Indebtedness shall not exceed the fair market value of the property
being acquired, constructed or improved; (v) Liens on the assets of any
Principal Subsidiary to secure the repayment of project financing for
such Principal Subsidiary; (vi) Liens on the assets of any Person
merged or consolidated with or into (in accordance with Section 6.7(d))
Guarantor or any Principal Subsidiary that were in effect at the time
of such merger or consolidation; and (vii) Liens securing Indebtedness
of Guarantor or of any Principal Subsidiary to the U.S. Rural
Electrification Administration (or any successor agency) or to the U.S.
Rural Telephone Bank (or any successor agency); provided, however, that
Guarantor or any Principal Subsidiary may create, incur, assume or
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Participation Agreement
suffer to exist other Liens (in addition to Liens excepted by the
foregoing clauses (i) through (vii)) on its assets so long as the
assets subject to such Liens do not represent in the aggregate more
than thirty percent (30%) of Guarantor's Consolidated Tangible Assets;
provided, further, however, that any Principal Subsidiary that is also
an Interested Subsidiary shall be subject to Section 6.1 of the Lease
to the extent of Leased Assets.
(b) Ownership of Subsidiaries. (i) Sell, assign, pledge, or
otherwise transfer or dispose of any shares of common stock, voting
stock, or stock convertible into voting or common stock of any
Principal Subsidiary, except to another Subsidiary; or (ii) permit any
Subsidiary owning shares of capital stock of any Interested Subsidiary
to sell, assign, pledge, or otherwise transfer or dispose of any shares
of capital stock of any such Interested Subsidiary or permit any
Interested Subsidiary to issue, sell, assign, pledge or otherwise
dispose of any of its shares of capital stock, unless any such sale,
assignment, pledge, transfer or disposition would not, after giving
effect thereto (including treating any such pledge as an outright sale)
and to all prior transactions, reduce Guarantor's Indirect Beneficial
Ownership Interest in all of the Leased Assets and in all of the Owned
Assets, respectively, in any Qualified MAN or FCL to less than
forty-nine percent (49%), except that the restrictions of this Section
6.7(b)(ii) shall not apply to a transaction that shall constitute the
initial public offering of capital stock of Lessee; provided, however,
that, subsequent to an initial public offering by Lessee that reduces
the Indirect Beneficial Ownership Interest of Guarantor to below
forty-nine percent (49%), no such sale, assignment, pledge, transfer or
disposition shall reduce the Indirect Beneficial Ownership Interest of
Guarantor, calculated On a Fully Diluted Basis, below the Indirect
Beneficial Ownership Interest of Guarantor, calculated On a Fully
Diluted Basis, maintained immediately after such initial public
offering; provided, further, that, notwithstanding the foregoing
proviso, subsequent to an initial public offering, Lessee may issue
from time to time, pursuant to an employee stock option plan, shares of
capital stock not to exceed, at any time, in the aggregate fifteen
percent (15%) of the outstanding shares of capital stock of Lessee at
such time. If any Subsidiary owning shares of capital stock of any
Interested Subsidiary or any Interested Subsidiary would otherwise
qualify as a Principal Subsidiary under Section 6.7(b)(i), this Section
6.7(b)(ii) and not Section 6.7(b)(i) shall apply.
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Participation Agreement
(c) Asset Sales. (i) Permit any Principal Subsidiary to sell,
assign, or otherwise dispose of assets (whether in one transaction or a
series of transactions), if, after giving effect to such transaction,
such Principal Subsidiary will have disposed of, in the aggregate,
assets representing more than 25% of such Principal Subsidiary's
aggregate Consolidated Tangible Assets as of the date upon which such
Principal Subsidiary first became a Principal Subsidiary; provided,
that any Principal Subsidiary may transfer assets representing up to
100% of such Principal Subsidiary's Consolidated Tangible Assets to any
other Subsidiary or to Guarantor; or (ii) permit Lessee or any other
Subsidiary of Guarantor to sell, assign, lease, sublease or otherwise
transfer any (A) Leased Assets (including Lessee's leasehold interests
with respect thereto) relating to a Qualified MAN or FCL except as
permitted by and in accordance with the provisions of Article X of the
Lease or Sections 5.2(a) and (c), or (B) Owned Assets relating to a
Qualified MAN or FCL except as permitted by and in accordance with the
provisions of Sections 5.2(a), (b) and (c). If Lessee or any other
Subsidiary of Guarantor would otherwise qualify as a Principal
Subsidiary under Section 6.7(c)(i), this Section 6.7(c)(ii) and not
Section 6.7(c)(i) shall apply to the extent of the Leased and Owned
Assets.
(d) Mergers, etc. (i) Merge or consolidate with, or sell,
assign, lease, or otherwise dispose of (whether in one transaction or a
series of transactions) all or substantially all of its assets (whether
now owned or hereafter acquired) to any Person, or permit any Principal
Subsidiary to do so, except that any Subsidiary may merge into or,
subject to Section 6.7(c), transfer assets to Guarantor or any other
Subsidiary, and Guarantor may merge with any Person; provided, that,
immediately thereafter and after giving effect thereto, (A) no event
shall occur or be continuing which constitutes a Lease Default or a
Lease Event of Default, (B) such transaction, after giving effect
thereto and to all prior transactions, would not reduce Guarantor's
Indirect Beneficial Ownership Interest in the Leased Assets or in the
Owned Assets, respectively, included in any Qualified MAN or FCL to
less than forty-nine percent (49%); provided, however, that, subsequent
to an initial public offering by Lessee that reduces the Indirect
Beneficial Ownership Interest of Guarantor to below forty-nine percent
(49%), no such merger, consolidation or sale, assignment, lease or
disposition of assets shall reduce the Indirect Beneficial Ownership
Interest of Guarantor, calculated On a Fully Diluted Basis, below the
Indirect Beneficial Ownership Interest of Guarantor, calculated On a
Fully Diluted Basis, maintained immediately
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Participation Agreement
after such initial public offering and, in the case of any such merger
to which Guarantor is a party, either (1) Guarantor is the surviving
corporation, or (2) the surviving entity (if not Guarantor) has a
Consolidated Net Worth immediately subsequent to such merger at least
equal to the Consolidated Net Worth of Guarantor immediately prior to
such merger and expressly assumes the obligations of Guarantor under
the Operative Documents; provided, further, however, that,
notwithstanding the foregoing, each of Guarantor and any of the
Principal Subsidiaries may sell assets (other than Leased Assets and
Owned Assets) in the ordinary course of its business. Leased Assets and
Owned Assets comprising all or a portion of a Qualified MAN or FCL may
only be transferred, assigned or subleased in accordance with the
provisions of the Lease, Section 5.2(a) and (b) and Section 6.7(c) to
the extent applicable.
(ii) Permit any Interested Subsidiary to merge or consolidate
with, or to sell, assign, lease, or otherwise dispose of (whether in
one transaction or a series of transactions) all or substantially all
of its assets (whether now owned or hereafter acquired) to any Person,
except that any Interested Subsidiary may merge into or consolidate
with or transfer all or substantially all of its assets to Guarantor or
any other Subsidiary or transfer all or substantially all of its assets
to any other Person; provided, that, immediately thereafter and after
giving effect thereto, in each case, each of the requirements set forth
in Section 5.2(a) shall be satisfied or waived (to the same extent as
if that Section applied to such Interested Subsidiary). If an
Interested Subsidiary would also qualify as a Principal Subsidiary
under Section 6.7(d)(i), this Section 6.7(d)(ii) and not Section
6.7(d)(i) shall apply.
(e) Restrictions on Dividends. Enter into or permit any
Principal Subsidiary to enter into, any contract or agreement (other
than with a Governmental Authority having jurisdiction over Guarantor
or such Principal Subsidiary) restricting the ability of such Principal
Subsidiary to pay dividends or make distributions to Guarantor in any
manner that would impair the ability of Guarantor to meet its present
and future obligations hereunder. The Secretary of Guarantor or another
officer of Guarantor satisfactory to Administrative Agent, shall, prior
to entry into any contract or agreement that could restrict the ability
of any Principal Subsidiary to pay dividends or make distributions to
Guarantor, deliver to the Participants a certificate certifying (i) to
the absence of any Lease Default or Lease Event of Default after giving
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Participation Agreement
effect to the entry by such Principal Subsidiary into such contract or
agreement, and (ii) that such contract or agreement will not impair the
ability of Guarantor to meet its present and future obligations
hereunder or under the Guaranty.
(f) Transactions with Affiliates. Sell or transfer any
property or assets to, or purchase or acquire any property or assets
from, or otherwise engage in any other transactions with, any of its
Affiliates, except that as long as no Lease Default or Lease Event of
Default shall have occurred and be continuing, Guarantor or any of its
Subsidiaries may engage in any of the foregoing transactions in the
ordinary course of business at prices and on terms and conditions not
less favorable to Guarantor or such Subsidiary that could be obtained
on an arm's-length basis from unrelated third parties or as otherwise
may be required by any Governmental Authority; provided, that nothing
in this Section 6.7(f) shall be construed to restrict or prohibit any
transaction which is expressly permitted by the provisions of any of
the Operative Documents; and provided, further, that any transaction
prohibited or restricted by the provisions of any of the Operative
Documents shall not be permitted solely because it complies with the
provisions of this Section 6.7(f).
(g) Minimum Consolidated Net Worth. Permit its
Consolidated Net Worth at any time to be less than
$450,000,000.
ARTICLE VII
INDEMNIFICATION
SECTION 7.1. General Indemnification. Lessee agrees, whether or not any
of the transactions contemplated hereby shall be consummated, to assume
liability for, and to indemnify, protect, defend, save and keep harmless each
Indemnitee (on an after-tax basis in accordance with Section 7.5) from and
against any and all Claims that may be imposed on, incurred by or asserted
against such Indemnitee (whether because of action, omission or negligence by
such Indemnitee or otherwise), whether or not such Indemnitee shall also be
indemnified as to any such Claim by any other Person and whether or not such
Claim arises or accrues prior to the initial Advance Date or after the Lease
Termination Date, in any way relating to or arising out of (a) any of the
Operative Documents or any of the transactions contemplated thereby or any
investigation, litigation or proceeding in connection therewith, and any
amendment, modification or waiver in respect thereof; (b) any
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Participation Agreement
System, Equipment or any part thereof or interest therein; or (c) the
acquisition, mortgaging, design, construction, preparation, installation,
inspection, delivery, non-delivery, acceptance, rejection, purchase, ownership,
possession, rental, lease, sublease, repossession, maintenance, repair,
alteration, modification, addition or substitution, storage, transfer or title,
redelivery, use, financing, refinancing, operation, condition, sale (including
any sale pursuant to Section 4.3 of the Lease or any sale pursuant to Article
XVI of the Lease), return or other disposition of all or any part of any
interest in any System or Equipment or the imposition of any Lien (or incurrence
of any liability to refund or pay over any amount as a result of any Lien)
thereon, including: (i) claims or penalties arising from any violation of law,
including Applicable Laws or in tort (whether arising under principles of strict
liability or otherwise), (ii) loss of or damage to the environment (including
investigation costs, clean-up costs, response costs, remediation and removal
costs, costs of corrective action, costs of financial assurance, and all other
damages, costs, fees and expenses, fines and penalties, including natural
resource damages), or death or injury to any Person, and all expenses associated
with the protection of wildlife, aquatic species, vegetation, flora and fauna,
and any mitigative action required by or under Environmental Laws, (iii) latent
or other defects, whether or not discoverable by Lessee or any Indemnitee, (iv)
any Claims resulting from the existence or Release of any Hazardous Materials
from or with respect to any System or Equipment and (v) any Claim for patent,
trademark, trade name or copyright infringement; (d) the offer, issuance, sale
or delivery of the Notes or the Certificates; (e) the breach or alleged breach
by Lessee of any representation or warranty made by it or deemed made by it in
any Operative Document; (f) the transactions contemplated hereby or by any other
Operative Document, in respect of the application of Parts 4 and 5 of Subtitle B
of Title I of ERISA and any prohibited transaction described in Section 4975(c)
of the Code; or (g) any other agreement entered into or assumed by Lessee in
connection with any System or Equipment (including, in each case, matters based
on or arising from the negligence of any Indemnitee).
Lessee shall not be required to indemnify under this Section 7.1 for (1) as to
an Indemnitee, any Claim to the extent resulting from the willful misconduct or
gross negligence of such Indemnitee or to the extent resulting from a material
breach of representations, warranties or covenants of such Indemnitee, (2) any
Claims in respect of Taxes (such Claims to be subject to Section 7.2), other
than a payment necessary to make payments under this Section 7.1 on an after-tax
basis, (3) as to an Indemnitee, any Claim resulting from Lessor Liens which such
Indemnitee is responsible for
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Participation Agreement
discharging under the Operative Documents, and (4) as to an Indemnitee, any
Claim resulting from such Indemnitee's failure to distribute funds properly.
SECTION 7.2. General Tax Indemnity.
(a) Tax Indemnity. Lessee shall pay, defend and, on written demand,
indemnify, protect, defend, save and keep each Indemnitee harmless (on an
after-tax basis in accordance with Section 7.5) from and against, any and all
Taxes, howsoever imposed, on or with respect to any Indemnitee, any System or
Equipment or any portion thereof, any Operative Document or Lessee or any
sublessee or user of any System or Equipment, by any Governmental Authority in
connection with or in any way relating to (i) the acquisition, mortgaging,
design, construction, preparation, installation, inspection, delivery,
non-delivery, acceptance, rejection, purchase, ownership, possession, rental,
lease, sublease, repossession, maintenance, repair, alteration, modification,
addition or substitution, storage, transfer of title, redelivery, use,
financing, refinancing, operation, condition, sale, return or other application
or disposition of all or any part of any System or Equipment or the imposition
of any Lien (or incurrence of any liability to refund or pay over any amount as
a result of any Lien) thereon, (ii) Base Rent or Supplemental Rent or the
receipts or earnings arising from or received with respect to the Equipment or
any part thereof, or any interest therein or any applications or dispositions
thereof, (iii) any other amount paid or payable pursuant to the Notes, the
Certificates or any other Operative Documents, the property or the income or
other proceeds with respect to the property held in the Trust Estate, (iv) any
System or Equipment or any part thereof or any interest therein, (v) all or any
of the Operative Documents, any other documents contemplated thereby and any
amendments and supplements thereto, and (vi) otherwise with respect to or in
connection with the transactions contemplated by the Operative Documents;
provided, however, that the indemnification obligation of this Section 7.2(a)
shall not apply to (A) Taxes which are based upon or measured by the
Indemnitee's net income, or which relieve Indemnitee from, any actual Tax based
upon or measured by Indemnitee's net income; (B) Taxes characterized under local
law as franchise, net worth, or shareholder's capital (excluding, however, any
value-added, sales, use, rental license, property or similar Taxes); (C) Taxes
based upon the voluntary transfer, assignment or disposition by Administrative
Agent, Lessor or any Participant of any interest in any System or Equipment
(other than a transfer pursuant to the exercise of remedies under the Operative
Documents, transfers pursuant to the exercise of the Sale Option or Purchase
Option, a transfer to Lessee or otherwise pursuant to the Lease); and (D)
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Participation Agreement
Taxes based upon the voluntary transfer, assignment or disposition by
Participant of any Note or Certificate or any interest therein, except such
transfers occurring during a Lease Event of Default or Loan Event of Default.
Notwithstanding the proviso of the preceding sentence, Lessee shall pay or
reimburse, and indemnify protect, defend, save and keep harmless (on an
after-tax basis in accordance with Section 7.5), any Indemnitee which is not
incorporated under the laws of the United States, or a state thereof, and which
has complied with Section 7.3 and delivered copies of tax forms referred to in
Section 7.3 to Lessee, Certificate Trustee and Administrative Agent, from any
deduction or withholding of any United States Federal, state or local income
tax. All indemnities contained in this Section 7.2(a) are expressly made for the
benefit of, and shall be enforceable by, each Indemnitee.
(b) Contests. Lessee shall pay on or before the time or times
prescribed by law any Taxes (except any Taxes excluded by the proviso to Section
7.2(a)); provided, however, that Lessee shall be under no obligation to pay any
such Tax so long as the payment of such Tax is not delinquent or is being
contested by a Permitted Contest and Lessee shall have otherwise complied with
this Section 7.2(b). If any claim or claims is or are made against any
Indemnitee solely for any Tax which is subject to indemnification as provided in
Section 7.2(a), Indemnitee shall as soon as practicable, but in no event more
than thirty (30) days after receipt of formal written notice of the Tax or
proposed Tax, notify Lessee and if, in the reasonable opinion of Lessee and (in
the case of any Tax which may reasonably be expected to exceed $100,000 in the
aggregate) tax counsel acceptable to the Indemnitee, there exists a basis to
contest such Tax which satisfies the requirements of ABA Formal Opinion 85-352
(and if the provisos of the definition of "Permitted Contest" continue to be
satisfied and so long as no Lease Event of Default exists), Lessee at its
expense may, to the extent permitted by Applicable Laws, contest such Tax, and
subsequently may appeal any adverse determination, in the appropriate
administrative and legal forums; provided, that in all other circumstances, upon
notice from Lessee to such Indemnitee that there exists a basis to contest any
such Tax which satisfies the requirements of ABA Formal Opinion 85-352 (as
supported by an opinion of tax counsel to Lessee acceptable to the Indemnitee),
the Indemnitee, at Lessee's expense, shall contest any such Tax. Lessee shall
pay all expenses incurred by the Indemnitee in contesting any such Tax
(including all reasonable attorneys' and accountants' fees, including the
reasonable allocated costs of internal counsel), upon demand by the Indemnitee.
Lessee shall have the right to participate in the conduct of any proceedings
controlled by the Indemnitee to the extent that such participation
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Participation Agreement
by such Person does not interfere with the Indemnitee's control of such contest,
and Lessee shall in all events be kept informed, to the extent practicable, of
material developments relative to such proceedings. To the extent that more than
one Indemnitee is making a demand for indemnification under Section 7.2(a) based
upon the imposition of the same Tax and such Indemnitees' interests do not raise
actual or potential conflicts of interest, Lessee shall reimburse such
Indemnitees for only the reasonable attorney's fees of one counsel to such
Indemnitees; provided that if during any contest of such Claim any Indemnitee's
interest may conflict with the interest of the other Indemnitee, each such
Indemnitee shall be entitled to reimbursement from Lessee on demand of its
reasonable attorneys' fees in connection with such contest. The Indemnitee shall
have the right to participate in the conduct of any proceedings controlled by
Lessee, and the Indemnitee shall in all events be kept informed, to the extent
practicable, of material developments relative to such proceedings. The
Indemnitees agree that a contested claim for which Lessee would be required to
make a reimbursement payment hereunder will not be settled or compromised
without Lessee's prior written consent (which consent shall neither be
unreasonably delayed nor withheld), unless the provisos of the definition of
"Permitted Contest" would not continue to be satisfied. Indemnitee shall
endeavor to settle or compromise any such contested claim in accordance with
written instructions received from Lessees; provided that: (x) Lessee on or
before the date the Indemnitee executes a settlement or compromise pays the
contested Tax to the extent agreed upon or makes an indemnification payment to
the Indemnitee in an amount acceptable to the Indemnitee; and (y) the settlement
or compromise does not, in the reasonable opinion of the Indemnitee, materially
adversely affect the right of such Indemnitee to receive Rent or the Lease
Balance or any other payment pursuant to the Operative Documents, or involve a
material risk of sale, forfeiture or loss of any Equipment or any interest
therein or any matter described in the provisos to the definition of "Permitted
Contest". The failure of an Indemnitee to timely contest a claim against it for
any Tax which is subject to indemnification under Section 7.2(a) and for which
it has an obligation to Lessee to contest under this Section 7.2(b) in the
manner required by Applicable Laws where Lessee has timely requested that such
Indemnitee contest such claim shall relieve Lessee of its obligations to such
Indemnitee under Section 7.2(a) with respect to such claim to the extent such
failure results in the loss of an effective contest. If Applicable Laws require
the payment of a contested Tax as a condition to, or regardless of, its being
contested, and Lessee chooses to contest such Tax or to direct the Indemnitee to
contest such Tax in accordance with this Section, then Lessee shall provide the
Indemnitee with the funds to pay such Tax, such provision of funds
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to be deemed a non-interest bearing loan by Lessee to the Indemnitee to be
repaid by any recovery of such Tax from such contest and any remaining unpaid
amount not recovered to offset Lessee's obligation to indemnify the Indemnitee
for such Tax. Lessee shall indemnify the Indemnitee on a grossed-up basis in
accordance with Section 7.5 for and against any adverse consequences of any such
interest-free loan. In the event that the Indemnitee receives a refund (or like
adjustment) in respect of any Tax for which the Indemnitee has been reimbursed
by Lessee, the Indemnitee shall within ten (10) days remit the amount of such
refund (or like adjustment) to Lessee, net of all costs and expenses incurred by
such Indemnitee; provided, however, that the Indemnitee shall not be required to
remit any amount pursuant to this sentence in excess of the amounts previously
paid by Lessee to, or on behalf of, such Indemnitee with respect to such Tax
pursuant to this Article VII.
(c) Payments. Lessee shall pay any Tax indemnifiable under Section
7.2(a) directly when due to the applicable taxing authority if direct payment is
practicable and permitted. If direct payment to the applicable taxing authority
is not permitted or is otherwise not made, any amount payable to an Indemnitee
pursuant to Section 7.2(a) shall be paid within thirty (30) days after receipt
of a written demand therefor from such Indemnitee accompanied by a written
statement describing in reasonable detail the amount so payable, but not more
than ten (10) days before the date that the relevant Taxes are due. Any payments
made pursuant to Section 7.2(a) directly to the Indemnitee entitled thereto or
Lessee, as the case may be, shall be made in immediately available funds at such
bank or to such account as specified by the payee in written directions to the
payor, or, if no such direction shall have been given, by check of the payor
payable to the order of the payee by certified mail, postage prepaid at its
address as set forth in this Participation Agreement. Upon the request of any
Indemnitee with respect to a Tax that Lessee is required to pay, Lessee shall
furnish to such Indemnitee the original or a certified copy of a receipt for
Lessee's payment of such Tax or such other evidence of payment as is reasonably
acceptable to such Indemnitee.
(d) Reports. If any report, return or statement is required to be filed
with respect to any Taxes that are subject to indemnification under Section
7.2(a), Lessee shall, if Lessee is permitted by Applicable Laws, timely prepare
and file such report, return or statement; provided, however, that, if Lessee is
not permitted by Applicable Laws to file any such report, return or statement,
Lessee will promptly so notify the appropriate Indemnitee, in which case the
Indemnitee, at Lessee's expense, will file any such report after preparation
thereof by Lessee. Lessee
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will deliver any such report, return or statement, together with immediately
available funds for payment of any Tax due, to such Indemnitee, at least five
(5) days in advance of the date such report, return, statement or Tax is due.
SECTION 7.3. Withholding Tax Exemption. On or prior to the first date
on which any payment is due under any Note or Certificate for the account of any
Participant not incorporated under the laws of the United States or a state
thereof, such Participant will have delivered to each of Lessee, Certificate
Trustee and Administrative Agent two duly completed copies of United States
Internal Revenue Service Form 1001 or 4224, certifying in either case that such
Participant is entitled to receive payments of interest and/or Yield and a
return of the principal amount of the Loans and/or the Certificate Purchaser
Amount, including Capitalized Interest and Capitalized Yield, as applicable,
under the Operative Documents without deduction or withholding of any United
States Federal income taxes. Each Participant which so delivers a Form 1001 or
4224 further undertakes to deliver to each of Lessee, Certificate Trustee and
Administrative Agent two additional copies of such form (or a successor form) on
or before the date that such form expires (currently, three successive calendar
years for Form 1001 and one calendar year for Form 4224) or becomes obsolete or
after the occurrence of any event requiring a change in the most recent forms so
delivered by it, and such amendments thereto or extensions or renewals thereof
as may be reasonably requested by Lessee, Certificate Trustee or Administrative
Agent, in each case certifying that such Participant is entitled to receive
payments under the Operative Documents without deduction or withholding of any
United States Federal income taxes, unless an event (including any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Participant from duly completing and delivering any
such form with respect to it and such Participant advises Lessee, Certificate
Trustee and Administrative Agent that it is not capable of receiving payments
without any withholding of United States Federal income tax.
SECTION 7.4. Excessive Use Indemnity. In the event that at the end of
any Lease Supplement Term: (a) Lessee elects the Sale Option; and (b) after
paying to Lessor any amounts due under Section 4.5 of the Lease, including the
Proceeds and the Recourse Deficiency Amount or the Applicable Percentage Amount,
Lessor does not have sufficient funds to reduce such Lease Supplement Balance to
zero, then Lessee shall promptly pay over to Lessor the shortfall unless Lessee
delivers a report from an independent
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appraiser in form and substance satisfactory to the Required Entities which
establishes that the decline in value in the applicable System or Systems
subject to such Lease Supplement was not due to the excessive use of any such
Systems, failure to maintain any such Systems, modifications or restorations
which reduce the value of any such Systems, any adverse change in the
environmental condition of any such Systems, or any defect or exception to title
to any such System or Systems and any related Equipment.
SECTION 7.5. Gross Up. If an Indemnitee shall not be entitled to a
corresponding and equal deduction with respect to any payment or Tax which
Lessee is required to pay or reimburse under any other provision, except Section
7.4, of this Article VII (each such payment or reimbursement under this Article
VII, an "original payment") and which original payment constitutes income to
such Indemnitee, then Lessee shall pay to such Indemnitee on demand the amount
of such original payment on a grossed-up basis such that, after subtracting all
Taxes imposed on such Indemnitee with respect to such original payment by Lessee
(including any Taxes otherwise excluded by the provisions of Section 7.2(a) and
assuming for this purpose that such Indemnitee was subject to taxation at the
highest Federal marginal rates applicable to widely held corporations for the
year in which such income is taxable and at an assumed state and local income
tax rate of 9.0%), such payments shall be equal to the original payment to be
received or paid (net of any credits, deductions or other tax benefits then
actually recognized that arise from the payment by such Indemnitee of any
amount, including taxes, for which the payment to be received is made).
ARTICLE VIII
THE AGENTS
SECTION 8.1. Appointment of Administrative Agent and
Information Agent; Powers and Authorization to Take Certain Actions.
(a) Each Lender and Certificate Purchaser irrevocably appoints and
authorizes Shawmut Bank Connecticut, National Association, to act as
Administrative Agent hereunder and under the other Operative Documents, with
such powers as are specifically delegated to Administrative Agent by the terms
hereof, together with such other powers as are reasonably incidental thereto.
Each Lender and Certificate Purchaser also irrevocably appoints and authorizes
BA Leasing & Capital Corporation to act as Information Agent hereunder and under
the other Operative Documents, with such powers as are specifically delegated to
Information Agent by the
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terms hereof, together with such other powers as are reasonably incidental
thereto. Each Agent accepts the agency hereby created applicable to it and
agrees to perform its obligations in accordance with this Participation
Agreement and the other Operative Documents to which it is a party. No Agent
shall have any duties or responsibilities except those expressly set forth in
the Operative Documents. Neither Agent shall be responsible to any Lender or
Certificate Purchaser (or to any other Person) (i) for any recitals, statements,
representations or warranties of any party contained in the Lease, this
Participation Agreement, or in any certificate or other document referred to or
provided for in, or received by any of them under, the Operative Documents,
other than the representations and warranties made by Administrative Agent in
Section 4.4 and by Information Agent in Section 4.5, respectively, (ii) for the
value, validity, effectiveness, genuineness, enforceability or sufficiency of
the Collateral or the title thereto or of the Lease or any other document
referred to or provided for therein, or (iii) for any failure by Lessee,
Guarantor, any Lender, any Certificate Purchaser or any other third party (other
than Administrative Agent or Information Agent, as the case may be) to perform
any of its obligations under any Operative Document. Agents may employ agents,
trustees or attorneys-in-fact, may vest any of them with any property, title,
right or power deemed necessary for the purposes of such appointment and shall
not be responsible for the negligence or misconduct of any of them selected by
it with reasonable care. Neither any Agent nor any of its directors, officers,
employees or agents shall be liable or responsible for any action taken or
omitted to be taken by it or them hereunder, or in connection herewith, except
for its or their own gross negligence or willful misconduct.
(b) Neither Agent shall have any duty or obligation to manage, control,
use, operate, store, lease, sell, dispose of or otherwise deal with any System
or Equipment or the Lease, or to otherwise take or refrain from taking any
action under, or in connection with, this Agreement, the Lease or any related
document to which such Agent is a party, except as expressly provided by the
terms hereof or thereof, and no implied duties of any kind shall be read into
any Operative Document against any Agent. The permissive right of any Agent to
take actions enumerated in this Agreement and the Lease shall never be construed
as a duty, unless such Agent is instructed or directed to exercise, perform or
enforce one or more rights by the Required Entities (provided, that such Agent
has received indemnification reasonably satisfactory to it). Subject to clause
(c) below, no provision of the Operative Documents shall require any Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its obligations under the Operative Documents, or in the
exercise of
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any of its rights or powers thereunder. It is understood and
agreed that the duties of each Agent are ministerial in nature.
(c) Except as specifically provided herein, each Agent is acting
hereunder solely as agent and, except as specifically provided herein, is not
responsible to any party hereto in its individual capacity, except with respect
to any claim arising from such Agent's gross negligence or willful misconduct or
any breach of a representation or covenant made in its individual capacity.
(d) Any Agent may accept deposits from, lend money to and otherwise
deal with Lessee or any of its Affiliates with the same rights as it would have
if it were not a named Agent hereunder.
SECTION 8.2. Reliance. Each Agent may rely upon, and shall not be bound
or obligated to make any investigation into the facts or matters stated in, any
certificate, notice or other communication (including any communication by
telephone, telecopy, telex, telegram or cable) reasonably believed by it to be
genuine and correct and to have been made, signed or sent by or on behalf of the
proper Person or Persons, and upon advice and statements of legal counsel,
independent accountants and other experts selected by such Agent with due care
(including any expert selected by such Agent to aid such Agent in any
calculations required in connection with its duties under the Operative
Documents).
SECTION 8.3. Action Upon Instructions Generally. Subject to Sections
8.4 and 8.6, upon written instructions of the Required Entities, each Agent
shall, on behalf of the Lenders and the Certificate Purchasers, give such notice
or direction, exercise such right, remedy or power hereunder or in respect of
any Equipment, and give such consent or enter into such amendment to any
document to which it is a party as such Agent as may be specified in such
instructions (except that no Agent shall exercise any right, remedy or power
hereunder or in respect of any System if such right, remedy or power has been
expressly delegated to the other Agent in the Participation Agreement or another
Operative Document). No Agent shall have an obligation to investigate or
determine whether there has been a Lease Default. No Agent shall be deemed to
have notice or knowledge of a Lease Default unless a Responsible Officer of such
Agent is notified in writing of such Lease Default; provided, that
Administrative Agent shall be deemed to have been notified in writing of any
failure of Lessee to pay Rent in the amounts and at the times set forth in
Article III of the Lease. If Administrative Agent receives notice of a Lease
Event of Default, Administrative Agent shall give prompt notice thereof, at
Lessee's expense, to each Lender, each Certificate Purchaser and the Information
Agent. Subject to
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Sections 8.4 and 8.6 and Article IX, Administrative Agent shall take action or
refrain from taking action with respect to such Event of Default as directed by
the Required Entities; provided, that, unless and until Administrative Agent
receives such directions, Administrative Agent must refrain from taking any
action with respect to such Lease Event of Default. Prior to the date the Lease
Balance or any portion thereof shall have become due and payable by acceleration
pursuant to Section 16.1 of the Lease, the Required Entities may deliver written
instructions to Administrative Agent to waive, and Administrative Agent shall
waive pursuant thereto, any Lease Event of Default and its consequences;
provided, that, in the absence of written instructions from all Lenders,
Administrative Agent shall not waive any (a) Lease Event of Default described in
clause (a) of Article XV of the Lease or (b) covenant or provision which, under
Section 9.5, cannot be modified or amended without the consent of all Lenders
and Certificate Purchasers. As to any matters not expressly provided for by this
Agreement, each Agent shall in all cases be fully protected in acting, or in
refraining from acting, hereunder in accordance with instructions signed by the
Required Entities, and such instructions of the Required Entities and any action
taken or failure to act pursuant thereto shall be binding on each Lender and
Certificate Purchaser.
SECTION 8.4. Indemnification. Each Lender and each Certificate
Purchaser shall reimburse and hold each Agent harmless, ratably in accordance
with its pro rata share of the total investments in the Overall Transaction at
the time the indemnification is required to be given, (but only to the extent
that any such indemnified amounts have not in fact been paid to such Agent by,
or on behalf of, Lessee in accordance with Article VII) from any and all claims,
losses, damages, obligations, penalties, liabilities, demands, suits, judgments,
or causes of action, and all legal proceedings, and any reasonable costs or
expenses in connection therewith, including allocated charges, costs and
expenses of internal counsel of such Agent and all other reasonable attorneys'
fees and expenses incurred by such Agent, in any way relating to or arising in
any manner out of (a) any Operative Document, the enforcement hereof or thereof
or the consummation of the transactions contemplated hereby or thereby, or (b)
instructions from the Required Entities (including the costs and expenses that
Lessee is obligated to and does not pay hereunder, but excluding normal
administrative costs and expenses incident to the performance by such Agent of
its agency duties hereunder other than materially increased administrative costs
and expenses incurred as a result of a Lease Event of Default); provided, that
no Lender or Certificate Purchaser shall be liable for any of the foregoing to
the extent they arise from (i) the
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gross negligence or willful misconduct of such Agent, (ii) in the case of such
Agent's handling of funds, the failure to act with the same care as such Agent
uses in handling its own funds, or (iii) any taxes, fees or other charges
payable by such Agent based on or measured by any fees, commissions or
compensation received by it for acting as an Agent in connection with the
transactions contemplated by the Operative Documents.
SECTION 8.5. Independent Credit Investigation. Each Lender and each
Certificate Purchaser by entering into this Agreement agrees that it has,
independently and without reliance on any Agent or any other Lender or
Certificate Purchaser, respectively, and based on such documents and information
as it has deemed appropriate, made its own credit analysis of Lessee and its own
decision to enter into this Agreement and all related documents to which it is a
party and that it will, independently and without reliance upon any Agent or any
other Lender or Certificate Purchaser, respectively, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own analysis and decisions in taking action under this Agreement and any related
documents to which it is a party. No Agent shall be required to keep itself
informed as to the performance or observance by Lessee of any other document
referred to (directly or indirectly) or provided for herein or to inspect the
properties or books of Lessee. Except for notices or statements which an Agent
is expressly required to give under this Agreement and for notices, reports and
other documents and information expressly required to be furnished to such Agent
alone hereunder or under any other Operative Document, such Agent shall not have
any duty or responsibility to provide any Lender or Certificate Purchaser with
copies of notices or with any credit or other information concerning the
affairs, financial condition or business of Lessee (or any of its affiliates)
that may come into the possession of such Agent or any of its Affiliates.
SECTION 8.6. Refusal to Act. Except for notices and actions expressly
required of an Agent hereunder, such Agent shall in all cases be fully justified
in failing or refusing to act unless (a) it is indemnified to its reasonable
satisfaction by the Lenders and the Certificate Purchasers against any and all
liability and reasonable expense which may be incurred by it by reason of taking
or continuing to take any such action (provided that such indemnity shall not be
required to extend to liability or expense arising from such Agent's gross
negligence or willful misconduct, it being understood that no action taken by
such Agent in accordance with the instructions of the Required Entities shall be
deemed to constitute gross negligence or willful misconduct on its part) and (b)
it is reasonably satisfied that such action is not contrary to
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any Operative Document or to any Applicable Law and (c) it has received written
instructions that comply with the express terms and conditions of this
Participation Agreement or another Operative Document.
SECTION 8.7. Resignation or Removal of an Agent; Appointment of
Successor. An Agent may resign at any time by giving ninety (90) days' notice
thereof to Lessee and to each Lender, Certificate Purchaser and the other Agent,
or may be removed at any time by written notice from the Required Entities. Upon
any such resignation or removal, the Required Entities at the time of the
resignation or removal shall have the right to appoint a successor Agent which
shall be a financial institution having capital and surplus of not less than
$100,000,000. The Required Entities shall seek Lessee's consent to such
successor Agent selected by the Required Entities, but if Lessee has not
consented within ten (10) days after notice of such selection has been delivered
to Lessee, the selection made by the Required Entities shall be effective. If,
within thirty (30) calendar days after the retiring Agent's giving of notice of
resignation or receipt of a written notice of removal, a successor Agent is not
so appointed and does not accept such appointment, then the retiring or removed
Agent may appoint a successor Agent and transfer to such successor Agent all
rights and obligations of the retiring Agent. Such successor Agent shall be a
financial institution having combined capital and surplus of not less than
$100,000,000. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring or
removed Agent and the retiring or removed Agent shall be discharged from duties
and obligations as Agent thereafter arising hereunder and under any related
document. If the retiring Agent does not appoint a successor, any Lender or
Certificate Purchaser shall be entitled to apply to a court of competent
jurisdiction for such appointment, and such court may thereupon appoint a
successor to act until such time, if any, as a successor shall have been
appointed as above provided.
SECTION 8.8. Separate Agent. The Required Entities may, and if they
fail to do so at any time when they are so required, any Agent may, for the
purpose of meeting any legal requirements of any jurisdiction in which any
Equipment or Collateral may be located, appoint one or more individuals or
corporations either to act as co-agent jointly with such Agent or to act as
separate agent of all or any part of the Equipment or Collateral or the Lease,
and vest in such individuals or corporations, in such capacity, such title to
the Equipment or Collateral or the Lease or any part thereof, and such rights or
duties as such Agent may consider necessary or
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desirable. No Agent shall be required to qualify to do business in any
jurisdiction where it is not now so qualified. An Agent shall execute,
acknowledge and deliver all such instruments as may be required by any such
co-agent or separate agent more fully confirming such title, rights or duties to
such co-agent or separate agent. Upon the acceptance in writing of such
appointment by any such co-agent or separate agent, it, she or he shall be
vested with such interest in the Equipment or Collateral and the Lease or any
part thereof, and with such rights and duties, not inconsistent with the
provisions of the Operative Documents, as shall be specified in the instrument
of appointment, jointly with such Agent (except insofar as local law makes it
necessary for any such co-agent or separate agent to act alone), subject to all
terms of the Operative Documents. Any co-agent or separate agent, to the fullest
extent permitted by legal requirements of the relevant jurisdiction, at any
time, by an instrument in writing, shall constitute such Agent its
attorney-in-fact and agent, with full power and authority to do all acts and
things and to exercise all discretion on its behalf and in its name. If any
co-agent or separate agent shall die, become incapable of acting, resign or be
removed, the interest in the Equipment or Collateral and the Lease and all
rights and duties of such co-agent or separate agent shall, so far as permitted
by law, vest in and be exercised by such Agent, without the appointment of a
successor to such co-agent or separate agent.
SECTION 8.9. Termination of Agencies. The agencies created hereby shall
terminate upon the final disposition by the Administrative Agent of all
Collateral at any time subject hereto and the final distribution by the
Administrative Agent of all monies or other property or proceeds received
pursuant to the Lease in accordance with its terms; provided, that at such time
Lessee shall have complied fully with all the terms hereof.
SECTION 8.10. Compensation of Agents. Lessee shall not be obligated to
pay any fees or expenses of any Agent in connection with the performance of its
obligations hereunder, except as provided in Section 9.9.
SECTION 8.11. Limitations. It is expressly understood and agreed by and
among the parties hereto that, except as otherwise provided herein or in the
other Operative Documents: (a) this Participation Agreement and the other
Operative Documents to which either Agent is a party are executed by such Agent,
not in its individual capacity (except with respect to the representations of
such Agent in Sections 4.4 and 4.5, respectively), but solely as an Agent under
the Operative Documents in the exercise of the power and authority conferred and
vested in it as such Agent; (b) each
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and all of the undertakings and agreements herein made on the part of each Agent
are each and every one of them made and intended not as personal undertakings
and agreements by such Agent, or for the purpose or with the intention of
binding such Agent personally, but are made and intended for the purpose of
binding only the Collateral and Lessee unless expressly provided otherwise; (c)
actions to be taken by the Administrative Agent pursuant to its obligations
under the Operative Documents may, in certain circumstances, be taken by the
Administrative Agent only upon specific authority of the Lenders and the
Certificate Purchasers; (d) actions to be taken by the Information Agent
pursuant to its obligations under the Operative Documents may only be taken by
the Information Agent upon specific instructions, written or oral, from the
Required Entities; (e) nothing contained in the Operative Documents shall be
construed as creating any liability on such Agent, individually or personally,
or any incorporator or any past, present or future subscriber to the capital
stock of, or stockholder, officer or director, employee or agent of, such Agent
to perform any covenants either express or implied contained herein, all such
liability, if any, being expressly waived by the other parties hereto and by any
Person claiming by, through or under them; and (f) so far as each Agent,
individually or personally, is concerned, the other parties hereto and any
Person claiming by, through or under them shall look solely to the Collateral
and Lessee (and Guarantor, if appropriate) for the performance of any obligation
under any of the instruments referred to herein; provided, however, that nothing
in this Section 8.11 shall be construed to limit in scope or substance the
general corporate liability of an Agent in respect of its gross negligence or
willful misconduct or those representations, warranties and covenants of such
Agent in its individual capacity set forth herein or in any of the other
agreements contemplated hereby.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Survival of Agreements. The representations, warranties,
covenants, indemnities and agreements of the parties provided for in the
Operative Documents, and the parties' obligations under any and all thereof,
shall survive the execution and delivery and the termination or expiration of
this Agreement and any of the Operative Documents, the transfer of the interest
in the Systems and related Equipment to or by Certificate Trustee as provided
herein or in any other Operative Documents, any disposition of any interest of
Certificate Trustee in the Systems and related Equipment, the purchase and sale
of the Notes and Certificates, payment therefor and any disposition thereof, and
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shall be and continue in effect notwithstanding any investigation made by any
party hereto or to any of the other Operative Documents and the fact that any
such party may waive compliance with any of the other terms, provisions or
conditions of any of the Operative Documents.
SECTION 9.2. No Broker, etc. Except for Lessee's dealing with BA
Leasing & Capital Corporation, each of the parties hereto represents to the
others that it has not retained or employed any broker, finder or financial
advisor to act on its behalf in connection with this Agreement, nor has it
authorized any broker, finder or financial adviser retained or employed by any
other Person so to act, nor has it incurred any fees or commissions to which
Certificate Trustee or any Certificate Purchaser might be subjected by virtue of
their entering into the transactions contemplated by this Agreement. BA Leasing
& Capital Corporation's sole compensation for acting hereunder other than as a
Certificate Purchaser and Lender is the receipt of the amounts, including
reimbursement of expenses, provided for in the Operative Documents and the
Arrangement Fee. Any party who is in breach of this representation shall
indemnify and hold the other parties harmless from and against any liability
arising out of such breach of this representation.
SECTION 9.3. Notices. Unless otherwise specified herein, all notices,
requests, demands or other communications to or upon the respective parties
hereto shall be made in writing and shall be deemed to have been given (a) in
the case of notice by letter, the earlier of when delivered to the addressee by
hand or courier if delivered on a Business Day and, if not delivered on a
Business Day, the first Business Day thereafter; or on the third Business Day
after depositing the same in the United States mails, registered or certified
mail, postage prepaid, return receipt requested, addressed as provided on
Schedule III hereto, and (b) in the case of notice by facsimile, when receipt is
confirmed if delivered on a Business Day and, if not delivered on a Business
Day, the first Business Day thereafter, addressed as provided on Schedule III
hereto, or to such other address as any of the parties hereto may designate by
written notice.
SECTION 9.4. Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same agreement.
SECTION 9.5. Amendments. Neither this Agreement nor any of
the other Operative Documents nor any of the terms hereof or
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thereof may be terminated, amended, supplemented, waived or modified orally, but
only by an instrument in writing signed by the party against which the
enforcement of the termination, amendment, supplement, waiver or modification
shall be sought; and no such termination, amendment, supplement, waiver or
modification shall be effective unless a signed copy thereof shall have been
delivered to Certificate Trustee, Lessee, Administrative Agent and the
Participants. Certificate Trustee and Lessee shall not be permitted to amend,
modify or supplement the Lease without the written consent of the Required
Entities; provided, that without the prior written consent of each Participant,
Certificate Trustee shall not:
(a) modify any of the provisions of this Section 9.5, change
the definition of "Required Entities" or modify or waive any provision
of any Operative Document requiring action by any of the foregoing, or
release any Collateral (except as otherwise specifically provided in
any Operative Document);
(b) reduce the amount or change the time of payment of any
amount of principal owing or payable under any Certificate or interest
or Yield owing or payable on any Certificate, or modify any of the
provisions of Article III of the Trust Agreement;
(c) modify, amend, waive or supplement any of the provisions
of the Guaranty, the Support Agreement or Articles IV, X (except for
Section 10.1(b)), XV, XVI and XVIII of the Lease;
(d) reduce, modify, amend or waive any indemnities in
favor of any Participant;
(e) reduce the amount or change the time of payment of
Rent or the Lease Balance;
(f) consent to any assignment of the Lease releasing Lessee
from its obligations to pay Rent or the Lease Balance or changing the
absolute and unconditional character of such obligations;
(g) permit the creation of any Lien on the Trust Estate or any
part thereof except as contemplated by the Operative Documents, or
deprive any Participant of the benefit of the security interest and
lien secured by the Trust Estate; or
70
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Participation Agreement
(h) modify any provisions of any Operative Document that
expressly require the unanimous written consent of the Participants.
SECTION 9.6. Headings, etc. The Table of Contents and headings of the
various Articles and Sections of this Agreement are for convenience of reference
only and shall not modify, define, expand or limit any of the terms or
provisions hereof.
SECTION 9.7. Parties in Interest. Except as expressly provided herein,
none of the provisions of this Agreement is intended for the benefit of any
Person except the parties hereto, their successors and permitted assigns.
SECTION 9.8. GOVERNING LAW. THIS AGREEMENT HAS BEEN DELIVERED IN, AND
SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES OF
SUCH STATE.
SECTION 9.9. Payment of Transaction Costs and Other Costs.
(a) Transaction Costs. If the transactions contemplated by this
Agreement are consummated, as and when any portion of Transaction Costs becomes
due and payable, Lessee shall promptly (and in any event prior to the next
Advance Date) pay such costs directly or furnish Certificate Trustee funds
sufficient to pay the same (and in either case such amounts may be advanced
pursuant to Section 2.2), and Certificate Trustee shall promptly make payment of
such portion to the Person or Persons entitled to payment upon presentation to
Certificate Trustee of bills or invoices for the amount of such payment. If such
transactions are not so consummated, Lessee promptly shall pay the Transaction
Costs.
(b) Continuing Expenses. The continuing fees, expenses and
disbursements (including reasonable counsel fees) of Certificate Trustee, as
lessor under the Lease and as trustee under the Trust Agreement with respect to
the administration of the Trust Estate, and the expenses of Administrative Agent
as administrative agent under this Agreement and of Information Agent as
information agent under this Agreement, shall be paid by Lessee as Supplemental
Rent, it being understood that ordinary costs of Administrative Agent and
Certificate Trustee for required payments and distributions under the Operative
Documents are not covered by this Section 9.9(b).
(c) Amendments, Supplements and Appraisal. Without limitation of the
foregoing, Lessee agrees to pay to the Certificate Purchasers, Certificate
Trustee, Administrative Agent, Information Agent and the Lenders all costs and
expenses (including
71
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Participation Agreement
reasonable legal fees and expenses) incurred by any of them in connection with:
(i) the considering, evaluating, investigating, negotiating and entering into or
giving or withholding of any amendments or supplements or waivers or consents
with respect to any Operative Document; (ii) any Event of Loss or termination of
the Lease or any other Operative Document; (iii) the negotiation and
documentation of any restructuring or "workout," whether or not consummated, of
any Operative Document; (iv) the enforcement of the rights or remedies under the
Operative Documents; (v) any transfer by Administrative Agent or a Participant
of any interest in the Operative Documents during the continuance of a Lease
Event of Default; and (vi) any Advance Date or Delivery Date.
SECTION 9.10. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 9.11. Unconstructed Systems. During the Construction Period,
Construction Agent shall have the option to purchase any System then under
construction and not then subject to the Lease upon providing not less than
ninety (90) days' advance written notice to Administrative Agent, for an amount
equal to the sum of (a) all costs advanced with respect to such System, plus (b)
any Additional Costs payable by Lessee pursuant to Sections 2.11 and 2.12 of the
Loan Agreement, plus (c) an amount equal to the total amount payable under
clause (a) multiplied by fifty (50) basis points.
SECTION 9.12. Limited Liability of Certificate Trustee. The parties
hereto agree that Bank shall have no personal liability whatsoever to Lessee,
the Certificate Purchasers, the Lenders, Administrative Agent or any of their
respective successors and assigns for any Claim based on or in respect of this
Agreement or any of the other Operative Documents or arising in any way from the
transactions contemplated hereby or thereby; provided, however, that Bank shall
be liable in its individual capacity: (a) for its own willful misconduct or
gross negligence or negligence in the handling of funds, (b) to each Certificate
Purchaser for the breach of its obligations to the Certificate Purchasers in
respect of the Trust Agreement and the Trust Estate, (c) for liabilities that
may result from the incorrectness of any representation or warranty expressly
made by it in its individual capacity in Section 4.3 or from the failure of Bank
to perform the covenants and agreements set forth in Section 6.2(a), or (d) for
any Tax based on or
72
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Participation Agreement
measured by any fees, commission or compensation received by it for actions
contemplated by the Operative Documents. It is understood and agreed that,
except as provided in the preceding proviso: (i) Bank shall have no personal
liability under any of the Operative Documents as a result of acting pursuant to
and consistent with any of the Operative Documents; (ii) all obligations of Bank
to Lessee, the Certificate Purchasers, the Lenders, Administrative Agent or any
of their respective successors and assigns are solely nonrecourse obligations
(with liability payable solely out of the Trust Estate) except to the extent
that it has received payment from others; (iii) all such personal liability of
Bank is expressly waived and released as a condition of, and as consideration
for, the execution and delivery of the Operative Documents by Bank; and (iv)
this Agreement (except as provided in Section 4.3) is executed and delivered by
Bank solely in the exercise of the powers expressly conferred upon it as Lessor
under the Trust Agreement.
SECTION 9.13. Liabilities of the Participants. No Participant shall
have any obligation to any other Participant or to Lessee, Certificate Trustee,
Administrative Agent, Information Agent or Guarantor with respect to the
transactions contemplated by the Operative Documents except those obligations of
such Participant expressly set forth in the Operative Documents or except as set
forth in the instruments delivered in connection therewith, and no Participant
shall be liable for performance by any other party hereto of such other party's
obligations under the Operative Documents except as otherwise so set forth.
SECTION 9.14. Liabilities of Administrative Agent. Administrative Agent
shall have no duty, liability or obligation to any party to this Agreement with
respect to the transactions contemplated hereby except those duties,
liabilities, or obligations expressly set forth in this Agreement or the Loan
Agreement, and any such duty, liability or obligation of Administrative Agent
shall be as expressly limited by this Agreement or the Loan Agreement, as the
case may be.
SECTION 9.15. Limitations of Recourse. If (a) all or any part of the
Trust Estate becomes the property of, or Certificate Trustee or any Certificate
Purchaser becomes, a debtor subject to the reorganization provisions of the
Bankruptcy Code, (b) pursuant to such reorganization provisions, Certificate
Trustee (in its individual capacity) or any Certificate Purchaser is required,
by reason of Certificate Trustee (in its individual capacity or as Certificate
Trustee) or such Certificate Purchaser being held to have recourse liability to
the Lenders, directly or indirectly, to make payment on account of any amount
payable as principal or
73
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Participation Agreement
interest on the Notes and (c) any Lender actually receives any Excess Payment
(as hereinafter defined) which reflects any payment by Certificate Trustee (in
its individual capacity or as Certificate Trustee) or any Certificate Purchaser
on account of clause (ii) above, then such Lender shall promptly refund to
Certificate Trustee or such Certificate Purchaser (whichever shall have made
such payment) such Excess Payment; provided, however, that if a Lender shall
refund such Excess Payment, to the extent that such Lender's claim against the
Trust Estate may have been reduced upon the initial receipt of such Excess
Payment, such Lender's claim against the Trust Estate shall (subject to the
provisions of this Section 9.15) be reinstated by the amount of such refunded
Excess Payment. For purposes of this Section 9.15, "Excess Payment" means the
amount by which such payment exceeds the amount which would have been received
by the Lenders if neither Certificate Trustee (in its individual capacity) nor
any Certificate Purchaser had become subject to the recourse liability referred
to in clause (ii) above. Nothing contained in this Section 9.15 shall prevent
the Lenders from enforcing any personal recourse obligation (and retaining the
proceeds thereof) of Certificate Trustee (in its individual capacity) or any
Certificate Purchaser under this Agreement or the Trust Agreement (and any
exhibits or annexes thereto).
SECTION 9.16. Reproduction of Documents. This Agreement, all documents
constituting Schedules or Exhibits hereto, and all documents relating hereto
received by a party hereto, including, without limitation: (a) consents, waivers
and modifications that may hereafter be executed; (b) documents received by the
Participants, Administrative Agent or Certificate Trustee in connection with the
receipt and/or acquisition of the Equipment; and (c) financial statements,
certificates, and other information previously or hereafter furnished to
Administrative Agent, Certificate Trustee or any Participant may be reproduced
by the party receiving the same by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. Each of the parties
hereto agrees and stipulates that, to the extent permitted by law, any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by such party in the
regular course of business) and that, to the extent permitted by law, any
enlargement, facsimile, or further reproduction of such reproduction shall
likewise be admissible in evidence.
SECTION 9.17. Consideration for Consents to Waivers and
Amendments. Lessee hereby agrees that it will not, and that it
74
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Participation Agreement
will not permit any of its Affiliates to, offer or give any consideration or
benefit of any kind whatsoever to any Participant in connection with, in
exchange for, or as an inducement to, such Participant's consent to any waiver
in respect of, any modification or amendment of, any supplement to, or any other
consent or approval under, any Operative Document unless such consideration or
benefit is offered ratably to all Participants; provided, however, that the
maintenance, initiation or modification of ordinary banking relationships or the
carrying out of services or transactions by a Participant or its Affiliates for
the Lessee or its Affiliates shall not be prohibited by this Section unless the
foregoing is in exchange for, or as an inducement to, a Participant's consent to
any waiver in respect of, any modification or amendment of, any supplement to,
or any other consent or approval under any Operative Document; and provided,
further, that a Participant or potential Participant or its Affiliate may also
act as Arranger, Agent or Certificate Trustee or proposed Arranger, Agent or
Certificate Trustee under the Overall Transaction and receive compensation
therefor which may be continued or modified with the Operative Documents without
violation of this Section 9.17.
SECTION 9.18. Role of Arranger and its Affiliates. Each party hereto
acknowledges hereby that it is aware of the fact that BA Leasing & Capital
Corporation has acted as an "arranger" with respect to the transactions
contemplated by the Operative Documents, and that it will act as Information
Agent and will be a Certificate Purchaser and a Lender. Each party releases BA
Leasing & Capital Corporation and its Affiliates from any liability arising as a
result of its acting in such multiple roles.
SECTION 9.19. Notices to Certificate Trustee under Loan Agreement.
Notwithstanding anything to contrary in the Loan Agreement, the Lenders,
Certificate Trustee and Lessee hereby agree that any notice or demand to be
delivered to or made on Certificate Trustee pursuant to Sections 2.11 and 2.12
of the Loan Agreement shall, so long as no Lease Event of Default shall have
occurred and be continuing, be delivered directly to or made on Lessee, with a
copy to Certificate Trustee, and Lessee shall be entitled to any rights or
obligations inuring to, and subject to any obligations imposed upon Certificate
Trustee in respect thereof.
SECTION 9.20. Submission to Jurisdiction; Waivers. (a) Each
party hereto irrevocably and unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this Agreement or any other Operative Document,
or for recognition and enforcement of any
75
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Participation Agreement
judgment in respect thereof, to the non-exclusive general jurisdiction
of the Courts of the State of New York, the courts of the United States
of America for the Southern District of New York and appellate courts
from any thereof;
(ii) consents that any such action or proceedings may be
brought to such courts, and waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any
such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same;
(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to such party at its address set forth on Schedule III or at
such other address of which the other parties hereto shall have been
notified pursuant to Section 9.3; and
(iv) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction.
(b) EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THE OPERATIVE
DOCUMENTS AND FOR ANY COUNTERCLAIM THEREIN.
SECTION 9.21. FINAL AGREEMENT. THIS AGREEMENT, TOGETHER WITH THE LEASE,
LOAN DOCUMENTS AND THE OTHER OPERATIVE DOCUMENTS REPRESENT THE ENTIRE FINAL
AGREEMENT AMONG THE PARTIES HERETO WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREIN AND CANNOT BE MODIFIED, SUPPLEMENTED, AMENDED, RESCINDED OR CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.
SECTION 9.22. Consent to Assignment of Documents. Lessee and Guarantor
hereby consent to the assignment by Certificate Trustee to Administrative Agent
of each of the Assigned Agreements pursuant to the Security Agreement.
[signature pages follow]
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Participation Agreement
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of the
day and year first above written.
ELECTRIC LIGHTWAVE, INC., as Lessee
By:
Name: Robert J. DeSantis
Title: Chief Financial Officer
CITIZENS UTILITIES COMPANY, as Guarantor
By:
Name: Robert J. DeSantis
Title: Vice President and Treasurer
BA LEASING & CAPITAL CORPORATION not in its individual
except as expressly stated herein, but solely as
Information Agent,
By:
Name: Sara L. Fitch
Title: Vice President
<PAGE>
Participation Agreement
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION not in
its individual capacity except as expressly stated
herein, but solely as Certificate Trustee
By:
Name: Robert L. Reynolds
Title: Vice President
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION not in
its individual capacity except as expressly stated
herein, but solely as Administrative Agent
By:
Name: Robert L. Reynolds
Title: Vice President
<PAGE>
Participation Agreement
BA LEASING & CAPITAL CORPORATION,as Lender
By:
Name: Sara L. Fitch
Title: Vice President
BA LEASING & CAPITAL CORPORATION, as Certificate Purchaser
By:
Name: Sara L. Fitch
Title: Vice President
<PAGE>
Participation Agreement
THE DAI-ICHI KANGYO BANK LTD. NEW YORK BRANCH, as Lender
By:
Name: Shinya Wako
Title: Vice President
THE DAI-ICHI KANGYO BANK LTD. NEW YORK BRANCH,
as Certificate Purchaser
By:
Name: Shinya Wako
Title: Vice President
<PAGE>
Participation Agreement
THE FUJI BANK LIMITED, SAN FRANCISCO AGENCY, as Lender
By:
Name: Kazuo Kamio
Title: General Manager
<PAGE>
Participation Agreement
FBTC LEASING CORP., as Certificate Purchaser
By:
Name: _____________________________
Title:
<PAGE>
Participation Agreement
THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED, NEW YORK BRANCH,
as Lender
By:
Name: ________________________
Title:
<PAGE>
Participation Agreement
SHAWMUT BANK, N.A., as Lender
By:
Name: Robert D. Lanigan
Title: Managing Director
SHAWMUT BANK, N.A., as Certificate Purchaser
By:
Name: Robert D. Lanigan
Title: Managing Director
<PAGE>
Participation Agreement
SUMITOMO BANK AND LEASING AND FINANCE, INC., as Lender
By:
Name: William N. Ginn
Title: President
SUMITOMO BANK AND LEASING AND FINANCE, INC.,
as Certificate Purchaser
By:
Name: William N. Ginn
Title: President
<PAGE>
APPENDIX 1
to
Participation Agreement
-----------------------
(Electric Lightwave, Inc. Trust No. 1995-A)
In the Participation Agreement and each other Operative Document, unless
the context otherwise requires:
(a) any term defined below by reference to another instrument or document
shall continue to have the meaning ascribed thereto whether or not such other
instrument or document remains in effect;
(b) words importing the singular include the plural and vice versa;
(c) words importing a gender include any gender;
(d) a reference in an Operative Document to a part, clause, section, article,
exhibit or schedule is a reference to a part, clause, section and article of,
and exhibit and schedule to, such Operative Document;
(e) a reference to any statute, regulation, proclamation, ordinance or law
includes all statutes, regulations, proclamations, ordinances or laws amending,
supplementing, supplanting, varying, consolidating or replacing the same, and a
reference to a statute includes all regulations, proclamations and ordinances
issued or otherwise applicable under that statute;
(f) a reference to a document includes any amendment or supplement to, or
replacement or novation of, that document;
(g) a reference to a Person includes that Person's successors and permitted
assigns, including, with regard to Lessee, any Surviving Company; and
(i) references to "including" means including without limiting the generality
of any description preceding such term and for the purposes hereof the rule of
ejusdem generis shall not be applicable to limit a general statement followed by
- ------- -------
or referable
<PAGE>
Appendix 1 to
Participation Agreement
to an enumeration of specific matters to matters similar to those specifically
mentioned.
Further, each of the parties to the Operative Documents and their counsel have
reviewed and revised the Operative Documents, or requested revisions thereto,
and the usual rule of construction that any ambiguities are to be resolved
against the drafting party shall be inapplicable in construing and interpreting
the Operative Documents.
"Access Rights" has the meaning set forth in Section 2.1 of the Support
------------- -----------
Agreement.
"Actual Knowledge" means, as to any matter with respect to any Person, the
----------------
actual knowledge of such matter possessed by an officer of such Person and shall
include receipt of a notice of such matter by any such Person.
"Additional Costs" means the amounts payable pursuant to Sections 2.11 and
---------------- -------------
2.12 of the Loan Agreement and Section 2.3(d) of the Trust Agreement and the
- ----
other amounts due and payable by the Borrower under any Loan Document other than
principal and interest on the Notes.
"Administrative Agent" means Shawmut Bank Connecticut, National Association, a
--------------------
national banking association, not in its individual capacity but solely as
administrative agent under the Operative Documents.
"Advance" means, as the context may require, each advance of a Loan by a
-------
Lender, each advance of an allocable portion of a Certificate Purchaser Amount
by a Certificate Purchaser, and each advance by Certificate Trustee to finance
the acquisition and construction of Systems, the payment of Transaction Costs or
the payment of the Arrangement Fee.
"Advance Date(s)" means each of the actual dates on which an Advance occurs.
---------------
A-2
<PAGE>
Appendix 1 to
Participation Agreement
"Advance Request" has the meaning set forth in Section 2.5(a) of the
--------------- --------------
Participation Agreement.
"Affiliate" of any Person means any other Person directly or indirectly
---------
controlling, controlled by or under common control with, such Person. For
purposes of this definition, the term "control" (including the correlative
-------
meanings of the terms "controlling," "controlled by" and "under common control
----------- ------------- --------------------
with"), as used with respect to any Person, means the possession, directly or
- ----
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities or
by contract or otherwise; provided (but without limiting the foregoing), that no
--------
pledge of voting securities of any Person without the current right to exercise
voting rights with respect thereto shall by itself be deemed to confer control
over such Person upon the pledgee.
"Affiliated Qualified Use Agreement" has the meaning set forth in Section
---------------------------------- -------
10.1(b) of the Lease.
- -------
"Agent" and "Agents" have the meanings set forth in the preamble to the
----- ------
Participation Agreement.
"Agreed Return" has the meaning set forth in clause (a) of Article 4 of the
------------- ---------- ---------
Support Agreement.
"Allocated Share" means, with respect to any Lease Supplement, a fraction
---------------
(expressed as a percentage) the numerator of which is the aggregate Lessor's
Cost of the Systems subject to the Lease Supplement in question and the
denominator of which is the Lease Balance, it being understood that the sum of
the Allocated Shares with respect to all Lease Supplements shall always equal
100%.
"Alterations" has the meaning set forth in Section 7.2 of the Lease.
----------- -----------
A-3
<PAGE>
Appendix 1 to
Participation Agreement
"Alternate Base Rate" means, for any Interest Period, an interest rate per
-------------------
annum equal to the higher of (A) the rate of interest in effect for such day as
publicly announced by Bank of America, National Trust and Savings Association in
San Francisco, California from time to time as its reference rate for
calculating interest on certain loans, which need not be the lowest interest
rate charged by Bank of America, National Trust and Savings Association and (B)
the Federal Funds Effective Rate most recently determined by Bank of America,
National Trust and Savings Association plus .50% (50 basis points). If either
----
of the aforesaid rates changes from time to time after the Document Closing
Date, the Alternate Base Rate shall be automatically increased or decreased.
Information Agent will give notice promptly to Administrative Agent of changes
in the Alternate Base Rate; provided, that Information Agent's failure to give
--------
such notice will not relieve Borrower and Lessee of their respective obligations
relating to such changes. For the purposes of this definition, "Federal Funds
-------------
Effective Rate" means, for any day, an interest rate per annum equal to the
- --------------
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published for such day on the next succeeding Business Day by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day which
is a Business Day, the average of quotations for such day on such transactions
received by Bank of America, National Trust and Savings Association from three
Federal funds brokers of recognized standing selected by it.
"Alternate Base Rate Loan" means a Loan bearing interest by reference to the
------------------------
Alternate Base Rate.
"Applicable Index Rate" means, with respect to any Interest Period, the
---------------------
interest rate per annum (rounded upwards, if necessary, to the nearest 1/16 of
1%) determined by Bank of America, National Trust and Savings Association to be
the interest rate at which interest deposits in United States dollars are
offered by Bank of America, National Trust and Savings Association to first-
class banks in the London interbank market at
A-4
<PAGE>
Appendix 1 to
Participation Agreement
approximately 11:00 a.m. (London time) two (2) Business Days before the first
day of the applicable Interest Period for deposits of a duration equal to such
Interest Period in an amount substantially equal to BA Leasing & Capital
Corporation's portion of such LIBO Rate Loan.
"Applicable Laws" means all existing and future applicable laws, rules,
---------------
regulations (including Environmental Laws), statutes, treaties, codes,
ordinances, permits, certificates, orders and licenses of and interpretations
by, any Governmental Authority, and applicable judgments, decrees, injunctions,
writs, orders or like action of any court, arbitrator or other administrative,
judicial or quasi-judicial tribunal or agency of competent jurisdiction
(including those pertaining to health, safety or the environment and those
pertaining to the construction or operation of any Systems or Equipment).
"Applicable Margin" means 0.2425 of 1% (24.25 basis points); provided, that if
----------------- --------
Guarantor's "Long-Term Debt Rating" from either of Moody's Investors Service,
Inc. and Standard and Poor's Corporation is less than the Long-Term Debt Ratings
set forth below at the date Information Agent sets the LIBO Rate for the
immediately succeeding Interest Period, then the "Applicable Margin" for such
Interest Period shall be determined by reference to the Applicable Margin
indicated opposite the applicable Long-Term Debt Ratings set forth in the
following table; provided, further, however, that during any Holdover Period,
-------- -------
the Applicable Margin shall in each case be increased by 2.5% (250 basis
points). As used in this definition, the term "Long-Term Debt Ratings" means
the ratings assigned by Moody's Investors Service, Inc. and Standard and Poor's
Corporation for Guarantor's outstanding First Mortgage Bonds, or, if none are
outstanding, then the most senior unsecured, non-credit enhanced long-term debt
of Guarantor then outstanding, or if no such debt is outstanding, the general
long-term unsecured debt rating then assigned to Guarantor by Moody's and
Standard and Poor's;
A-5
<PAGE>
Appendix 1 to
Participation Agreement
Long-Term
Debt Rating
-----------
Applicable Margin
-----------------
below A2 and A but
at least Baa3 and BBB- 0.4425%
(44.25 basis points)
below Baa3 or BBB- 0.9925% (99.25
basis points)
"Applicable Percentage" means, for each Lease Supplement, as of the end of the
---------------------
Base Term or any Renewal Term thereof, eighty percent (80%).
"Applicable Percentage Amount" means, with respect to any Lease Supplement,
----------------------------
the product obtained by multiplying the Lessor's Cost of the Systems subject to
such Lease Supplement as of such date by the Applicable Percentage.
"Arrangement Fee" means the arrangement fee described payable to the Arranger,
---------------
and in the amount set forth, in the Fee Letter.
"Arranger" means BA Leasing & Capital Corporation.
--------
"Assigned Agreements" means each of the Participation Agreement, the Lease,
-------------------
the Lease Supplements, the Guaranty, the Construction Agency Agreement, the
Support Agreement, the Bills of Sale, the Purchase Order Assignment, the
Certificates of Acceptance and each other document assigned to Administrative
Agent as Collateral pursuant to the Security Agreement.
"Assumed Interest Rate" means, as of the date of any Advance by a Participant,
---------------------
the LIBO Rate that would have been applicable for purposes of calculating
interest and Yield in the event that the Advance Date to which such Advance
relates had occurred on such date.
A-6
<PAGE>
Appendix 1 to
Participation Agreement
"Authorized Officer" means any officer in the Corporate Trust Department of
------------------
Certificate Trustee who shall be duly authorized to execute the Operative
Documents.
"Bank" means Shawmut Bank Connecticut, National Association in its individual
----
capacity.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978.
---------------
"Base Rent" means an amount payable on each Payment Date during the Lease Term
---------
equal to the sum of (i) the aggregate amount of the Yield payable on such
Payment Date on the Certificates (which shall not include any portion of
Capitalized Yield) and (ii) the aggregate amount of interest payable on such
Payment Date on the Notes (which shall not include any portion of Capitalized
Interest).
"Base Term" has the meaning set forth in Section 2.3 of the Lease.
--------- -----------
"Beneficiary" means each of the Persons named in the definition of
-----------
"Indemnitee."
"Bill of Sale" means each bill of sale or certificate of transfer from Lessee
------------
to Certificate Trustee conveying a System or Systems, substantially in the form
of Exhibit N - 1 or N - 2 to the Participation Agreement.
------------- -----
"Borrower" means Certificate Trustee, not in its individual capacity but
--------
solely as trustee under the Trust Agreement, as the borrower under the Loan
Agreement.
"Business Day" means any day on which
------------
(a) Federal and state chartered banks in the city in which the Corporate
Trust Department is located and New York, New York are open for commercial
banking business; and
A-7
<PAGE>
Appendix 1 to
Participation Agreement
(b) solely with respect to determinations of Interest Periods and Payment
Dates, dealings in United States Dollars are carried on in the London
interbank market.
"Capitalized Interest" means all accrued interest on outstanding Notes fairly
--------------------
allocable to the Construction Period for a System, except to the extent that
such amount is not to be capitalized because sufficient unfunded Commitments are
not available therefor.
"Capitalized Yield" means all accrued Yield on outstanding Certificates fairly
-----------------
allocable to the Construction Period for a System, except to the extent that
such amount is not to be capitalized because sufficient unfunded Commitments are
not available therefor.
"Casualty" means an event of damage or casualty relating to any Systems or
--------
related Equipment subject to a Lease Supplement which does not constitute an
Event of Loss.
"Certificate of Acceptance" means each Certificate of Acceptance, fully
-------------------------
executed by Lessee, accepting a System or Systems under a Lease Supplement,
substantially in the form of Exhibit M to the Participation Agreement.
---------
"Certificate Purchaser" has the meaning set forth in the preamble to the Trust
---------------------
Agreement.
"Certificate Purchaser Amount" means, with respect to any Certificate
----------------------------
Purchaser as of any date of determination, the aggregate amount invested by such
Certificate Purchaser in the Trust for the purchase of Certificates pursuant to
Section 2.4 of the Participation Agreement plus the total Capitalized Yield with
- -----------
respect thereto, net of any repayments.
"Certificate Register" has the meaning set forth in Section 2.7(a) of the
-------------------- --------------
Trust Agreement.
A-8
<PAGE>
Appendix 1 to
Participation Agreement
"Certificate Trustee" means Shawmut Bank Connecticut, National Association, a
-------------------
national banking association, not in its individual capacity but solely as
trustee under the Trust Agreement, and any co-trustee appointed pursuant to the
terms of the Trust Agreement.
"Certificates" means those certain certificates issued to the Certificate
------------
Purchasers pursuant to the Trust Agreement, substantially in the form of Exhibit
-------
A thereto, and any and all Certificates issued in replacement or exchange
- -
therefor.
"Change in Control" means any of the following: (a) any person or group
-----------------
(within the meaning of Rule 13d-5 of the SEC as in effect on the date hereof)
shall acquire ownership directly or indirectly, beneficially or of record, of
shares representing more than 49% of the aggregate ordinary voting power
represented by the issued and outstanding capital stock of the Guarantor; or (b)
a majority of the seats (other than vacant seats) on the board of directors of
the Guarantor shall at any time become occupied by persons who were neither (i)
nominated by the management of the Guarantor, nor (ii) appointed by directors so
nominated; or (iii) any person or group shall otherwise directly or indirectly
acquire Control the Guarantor.
"Claims" means liabilities, obligations, damages, losses, demands, penalties,
------
fines, claims, actions, suits, judgments and settlements, and any costs, fees,
expenses and disbursements (including legal fees and expenses and costs of
investigation which, in the case of counsel or investigators retained by an
Indemnitee, shall be reasonable) of any kind and nature whatsoever related to
any of the foregoing.
"Code" means the Internal Revenue Code of 1986.
----
"Collateral" has the meaning set forth in Section 2.1 of the Security
---------- -----------
Agreement and shall not include any real estate interest.
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<PAGE>
Appendix 1 to
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"Commercial Operation" means, with respect to any System, the capability of
--------------------
such System to perform in continuous commercial operation at design capacity for
its entire expected economic useful life as measured at the time of
determination.
"Commitment" means, as to any Certificate Purchaser or any Lender, its
----------
obligation to make amounts available, or Loans, as the case may be, to
Certificate Trustee, in an aggregate amount not to exceed at any one time
outstanding the amount set forth opposite such Certificate Purchaser's name on
Schedule I to the Participation Agreement or such Lender's name on Schedule II
to the Participation Agreement, as such amounts may be decreased or increased in
accordance with Sections 2.10 and 2.11, respectively, of the Participation
-------------------------------------
Agreement.
"Commitment Fee" has the meaning set forth in Section 2.6 of the Participation
-------------- -----------
Agreement.
"Commitment Percentage" means, as to any Participant, at a particular time,
---------------------
the percentage of the aggregate Commitments in effect at such time represented
by such Participant's Commitment, as such percentage is initially shown on
Schedule I to the Participation Agreement, in the case of the Certificate
Purchasers, and Schedule II to the Participation Agreement, in the case of the
Lenders, and as such percentages may thereafter be changed upon the occurrence
of certain events pursuant to the Participation Agreement.
"Commitment Termination Date" means April 30, 1998.
---------------------------
"Companies" has the meaning set forth in Section 6.6(b)(i) of the
--------- -----------------
Participation Agreement.
"Completion Date" means, with respect to any System the construction of which
---------------
is to be financed under the Operative Documents, the date on which such System
would be deemed placed in service under GAAP if Lessee owned such System.
A-10
<PAGE>
Appendix 1 to
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"Condemnation" means any condemnation, requisition, confiscation, seizure or
------------
other taking or sale of the use, operation or title to any Systems or related
Equipment or any part thereof in, by or on account of any actual or threatened
eminent domain proceeding or other action by any Governmental Authority or other
Person under the power of eminent domain or otherwise or any transfer in lieu of
or in anticipation thereof, which in any case does not constitute an Event of
Taking. A Condemnation shall be deemed to have "occurred" on the earliest of
the dates that use, occupancy or title is taken.
"Consolidated Net Worth" means, as at any date of determination, the
----------------------
consolidated stockholders' equity of Guarantor and its Consolidated
Subsidiaries, as determined on a consolidated basis in conformity with GAAP.
"Consolidated Subsidiary" means, as to any Person at any date, any Subsidiary
-----------------------
or other entity the accounts of which would, in conformity with GAAP, be
consolidated with those of such Person in such Person's consolidated financial
statements as of such date.
"Consolidated Tangible Assets" of any Person means the total assets of such
----------------------------
Person and its Consolidated Subsidiaries, less goodwill, patents, trademarks and
other assets classified as intangible assets in conformity with GAAP.
"Construction Agency Agreement" means the Construction Agency Agreement, dated
-----------------------------
concurrently with the Participation Agreement, between Certificate Trustee and
Lessee, substantially in the form of Exhibit B to the Participation Agreement.
---------
"Construction Agency Event of Default" has the meaning set forth in Section 5.1
------------------------------------ -----------
of the Construction Agency Agreement.
"Construction Agent" means Lessee, as construction agent under the Construction
------------------
Agency Agreement.
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<PAGE>
Appendix 1 to
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"Construction Agreement Termination Date" has the meaning set forth in Section
--------------------------------------- -------
2.5 of the Construction Agency Agreement.
- ---
"Construction Commencement Date" has the meaning set forth in Section 2.3 of the
------------------------------ -----------
Construction Agency Agreement.
"Construction Documents" has the meaning set forth in Section 2.6 of the
---------------------- -----------
Construction Agency Agreement.
"Construction Period" means, with respect to any System, the period commencing
-------------------
on the Document Closing Date and ending on the earlier of (i) the Commitment
Termination Date, (ii) the Construction Agreement Termination Date or (iii) the
Completion Date for such System; provided that if an event of Force Majeure has
occurred, the Construction Period for all Systems then under construction and
suffering an event of Force Majeure shall be extended for a commercially
reasonable period not to exceed six (6) months.
"Continuation/Conversion Request" means a Continuation/Conversion Request
-------------------------------
substantially in the form of Exhibit D-2 to the Participation Agreement.
-----------
"Control" means the possession, directly or indirectly, of the power to direct
-------
or cause the direction of the management or policies of a person, whether
through the ownership of voting securities, by contract or otherwise, and
"Controlling" and "Controlled" shall have meanings correlative thereto.
"Corporate Trust Department" means the principal corporate trust office of
--------------------------
Shawmut Bank Connecticut, National Association, located at 777 Main Street, MSN
238, Hartford, Connecticut 06115, Attention: Corporate Trust Administration, or
at such other office at which the corporate trust business of such bank or its
successor shall be administered which such bank or its successor shall have
specified by notice in writing to Lessee, each Certificate Purchaser,
Administrative Agent and each Lender.
A-12
<PAGE>
Appendix 1 to
Participation Agreement
"CUCC" means CUCapital Corp., a Delaware corporation.
----
"Defaulted Amount" has the meaning set forth in Section 2.5(f) of the
---------------- --------------
Participation Agreement.
"Defaulting Participant" has the meaning set forth in Section 2.5(f) of the
---------------------- --------------
Participation Agreement.
"Delivery Date" means each date on which any System becomes subject to the
-------------
Lease.
"Design Objectives" has the meaning set forth in Section 2.2 of the
----------------- -----------
Construction Agency Agreement.
"Designated Location" means each of the metropolitan areas of Seattle,
-------------------
Washington, Portland, Oregon, Phoenix, Arizona, Salt Lake City, Utah,
Sacramento, California, San Diego, California and the corridor between Las
Vegas, Nevada and Phoenix, Arizona on which the Southwest FCL is located, and
any other location that may hereafter be approved by the holders of Notes and
Certificates comprising 66 2/3% or more of the aggregate of the principal
amounts and Certificate Purchaser Amounts of all Notes and Certificates then
outstanding.
"Document Closing Date" has the meaning set forth in Section 2.1 of the
--------------------- -----------
Participation Agreement.
"Employee Benefit Plan" means an employee benefit plan (within the meaning of
---------------------
Section 3(3) of ERISA, including any multiemployer plan (within the meaning of
Section 3(37) (A) of ERISA)), or any "plan" as defined in Section 4975(e)(1) of
the Code and as interpreted by the Internal Revenue Service and the Department
of Labor in rules, regulations, releases or bulletins in effect at the time of
any determination under the Operative Documents, in each case, of Guarantor or
any ERISA Affiliate. The assets of an Employee Benefit Plan shall be determined
using the foregoing criteria, including on the date hereof the Department of
Labor plan asset regulation (29 C.F.R. ' 2510.3-101).
A-13
<PAGE>
Appendix 1 to
Participation Agreement
"Environmental Laws" means the Resource Conservation and Recovery Act of 1976
------------------
(RCRA) 42 U.S.C. (S)(S) 6901-6987, as amended by the Hazardous and Solid Waste
Amendments of 1984, the Comprehensive Environmental Response, Compensation and
Liability Act, as amended by the Superfund Amendments and Reauthorization Act of
1986, 42 U.S.C. (S)(S) 9601-9657 (CERCLA), the Hazardous Materials
Transportation Act of 1975, 49 U.S.C. (S)(S) 1801-1812, the Toxic Substances
Control Act, 15 U.S.C. (S)(S) 2601-2671, the Clean Air Act, 42 U.S.C. (S)(S)
7401 et seq., the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C.
(S)(S) 136 et seq. and all similar foreign, federal, state and local
environmental laws, ordinances, rules, orders, statutes, decrees, judgments,
injunctions, codes and regulations, and any other foreign, federal, state or
local laws, ordinances, rules, codes and regulations, and any other foreign,
federal, state or local laws, ordinances, rules, codes and regulations relating
to the environment, human health or natural resources or the regulation or
control of or imposing liability or standards of conduct concerning human
health, the environment, Hazardous Materials or the clean-up or other
remediation of any location wherein the Systems or Equipment are to be located,
or any part thereof.
"Equipment" has the meaning set forth in the Recitals to the Participation
---------
Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974.
------
"ERISA Affiliate" means each entity required to be aggregated with Guarantor
---------------
pursuant to the requirement of Section 414(b) or 414(c) of the Code.
"ERISA Termination Event" means (i) a "Reportable Event" described in Section
-----------------------
4043 of ERISA (other than a "Reportable Event" not subject to the provision for
30-day notice to the PBGC under such regulations), or (ii) the withdrawal of
Guarantor or any of its ERISA Affiliates from a Plan during a plan year in
A-14
<PAGE>
Appendix 1 to
Participation Agreement
which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA,
or (iii) the filing of a notice of intent to terminate a Plan or the treatment
of a Plan amendment as a termination under Section 4041 of ERISA, or (iv) the
institution of a proceeding to terminate a Plan by the PBGC or (v) any other
event or condition which might constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any Plan.
"Event of Loss" means (x) the actual or constructive total loss of thirty
-------------
percent (30%) or more of the aggregate fair market value of all of the Systems
subject to a Lease Supplement due to damage or casualty, in any case as
reasonably determined in good faith by a Responsible Officer of Guarantor, such
determination to be made promptly after the occurrence of such event and to be
evidenced by an Officer's Certificate of Guarantor, delivered to Certificate
Trustee, each Certificate Purchaser and Administrative Agent, or (y) damage or
casualty to any of the Systems subject to a Lease Supplement which results in an
insurance settlement on the basis of a loss of thirty percent (30%) or more of
the aggregate fair market value of such Systems.
"Event of Taking" means (A) taking of title to any System subject to a Lease
---------------
Supplement, (B) any condemnation (other than a requisition for temporary use) or
requisition for use of any System subject to a Lease Supplement for a period
scheduled to last beyond the end of the Lease Term, or (C) taking of title to
substantially all of the premises whereon or wherein Equipment in a System is
located or to be located, in each case resulting in the loss of use or
possession of substantially all of the Systems subject to a Lease Supplement, as
reasonably determined in good faith by a Responsible Officer of Guarantor, such
determination to be made promptly after the occurrence of such event and to be
evidenced by an Officer's Certificate executed by such Responsible Officer and
delivered to Certificate Trustee and Administrative Agent.
A-15
<PAGE>
Appendix 1 to
Participation Agreement
"Excluded Amounts" means:
----------------
(a) all indemnity payments and expenses to which Bank or any Certificate
Purchaser (or any Indemnitee) is entitled pursuant to the Operative Documents;
(b) any amounts payable under any Operative Documents to reimburse
Certificate Trustee or any Certificate Purchaser (including the reasonable
expenses of Certificate Trustee and any Certificate Purchaser incurred in
connection with any such payment) for performing any of the obligations of
Lessee under and as permitted by any Operative Document;
(c) any insurance proceeds (or corresponding amounts with respect to risks
that are self-insured by Lessee and the amounts of any policy deductibles) under
liability policies payable to Certificate Trustee in its individual capacity or
any Certificate Purchaser (or the respective successors, assigns, agents,
officers, directors or employees of Bank or of any Certificate Purchaser);
(d) any insurance proceeds under policies maintained by Certificate Trustee
or any Certificate Purchaser and not required to be maintained by Lessee under
the Lease;
(e) any amount payable to Certificate Trustee or any Certificate Purchaser
pursuant to Section 9.9 of the Participation Agreement;
-----------
(f) any amount payable as an Arrangement Fee; and
(g) any payments of interest on payments referred to in clauses (a) through
-----------
(f) above.
- ---
"Fair Market Sales Value" with respect to any System or any portion thereof
-----------------------
means, as of the date of determination, the gross sale proceeds, as determined
by an independent appraiser chosen by
A-16
<PAGE>
Appendix 1 to
Participation Agreement
Lessor (at the direction of the Required Entities), that would be obtained in an
arm's-length transaction between an informed and willing buyer (other than a
buyer currently in possession) and an informed and willing seller, respectively,
under no compulsion to buy or sell, neither of which is related to Lessee, for
the purchase of such System. The Fair Market Sales Value shall be calculated as
the value for the use in place of the System, assuming that the System is in the
condition and repair required to be maintained by the terms of the Lease and is
accompanied by all applicable Support Rights (unless such Fair Market Sales
Value is being determined for purposes of Section 7.3 of the Lease, in which
-----------
case this assumption shall not be made).
"FCL" means a fiber optic cable link, which may be comprised of one or more
---
Systems, the function of which is to serve as a facility for the transmission of
voice, data, video or other communications between disparate geographic areas.
"Fee Letter" means that certain letter agreement dated December 21, 1994, and
----------
executed by Guarantor as of December 23, 1994, between Arranger and Guarantor.
"Final Maturity Date" means April 30, 2002.
-------------------
"Financing" has the meaning set forth in the Recitals to the Participation
---------
Agreement.
"First Mortgage Bond Indentures" means (i) the First Mortgage and Collateral
------------------------------
Trust Indenture, dated as of March 1, 1947, from the Guarantor to The Marine
Midland Trust Company of New York, as Trustee, and (ii) the Mortgage and Deed of
Trust Indenture, dated as of June 1, 1962, from the Guarantor to Manufacturers
Hanover Trust Company, as Trustee, as the same have been and may from time to
time be amended or supplemented and in effect.
"Force Majeure" means acts of God, fire, windstorm, flood, explosion, collapse
-------------
of structures, riot, war, inability to obtain or use necessary materials or
reasonable substitutes, or any other
A-17
<PAGE>
Appendix 1 to
Participation Agreement
cause beyond the reasonable control of Lessee, other than lack of funds.
"GAAP" means generally accepted accounting principles in the United States as
----
in effect from time to time consistently applied; provided, that, for purposes
--------
of determining compliance with financial covenants, GAAP shall refer to
generally accepted accounting principles as of December 16, 1993.
"Governmental Approval" means any authorization, consent, approval, license,
---------------------
franchise, lease, ruling, tariff, rate, permit, certificate, order, exemption
of, or filing or registration with, any Governmental Authority, or required by
any Applicable Laws, and shall include all environmental permits and operating
permits and licenses that are required for the construction, use, zoning and
operation of the Systems and related Equipment included or to be included in any
Qualified MAN or FCL at a specified Designated Location.
"Governmental Authority" means any Federal, state, local or foreign court or
----------------------
governmental agency, authority, instrumentality or regulatory body.
"Guaranteed Residual Amount" has the meaning provided in Section 4.5(c) of the
-------------------------- --------------
Lease.
"Guaranty" means the unconditional Guaranty, dated concurrently herewith, by
--------
Guarantor of all payment and performance obligations of Lessee under the
Operative Documents, substantially in the form of Exhibit A to the Participation
---------
Agreement.
"Guarantor" means Citizens Utilities Company, a Delaware corporation.
---------
"Hazardous Material" means any substance, waste or material which is toxic,
------------------
explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic or otherwise hazardous by listing characteristic or definition under
any Environmental Law,
A-18
<PAGE>
Appendix 1 to
Participation Agreement
including petroleum, crude oil or any fraction thereof, petroleum derivatives,
by-products and other hydrocarbons and is or becomes regulated by any
Governmental Authority, including any agency, department, commission, board or
instrumentality of the United States, the States in which any System or related
Equipment are located or any political subdivision thereof and also including
asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls ("PCBs")
----
and radon gas.
"Holdover Period" means, with respect to any Lease Supplement, any period
---------------
after a Lease Supplement Termination Date until the reduction of the related
Lease Supplement Balance to zero and payment of all other amounts then due and
payable by Lessee under the Operative Documents.
"Holdover Rent" has the meaning set forth in Section 3.1 of the Lease.
------------- -----------
"Indebtedness" of any Person means, without duplication:
------------
(a) all obligations of such Person for borrowed money and all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments;
(b) all obligations, contingent or otherwise, relative to the face amount of
all letters of credit, whether or not drawn, and banker's acceptances issued for
the account of such Person;
(c) all obligations of such Person as lessee under leases which have been or
should be, in accordance with GAAP, recorded as Capitalized Lease Liabilities;
(d) net liabilities of such Person under all Hedging Obligations;
(e) whether or not so included as liabilities in accordance with GAAP, (i)
all obligations of such Person to
A-19
<PAGE>
Appendix 1 to
Participation Agreement
pay the deferred purchase price of property or services (other than trade
accounts payable in the ordinary course of business), and (ii) indebtedness
(excluding prepaid interest thereon) secured by a Lien on property owned or
being purchased by such Person (including indebtedness arising under conditional
sales or other title retention agreements), whether or not such indebtedness
shall have been assumed by such Person or is limited in recourse; and
(f) all Contingent Liabilities of such Person in respect of any of the
foregoing.
For all purposes of this Agreement, the Indebtedness of any Person shall include
the Indebtedness of any partnership or joint venture in which such Person is a
general partner or a joint venturer. For the purposes of this definition:
(i) "Capitalized Lease Liabilities" means all monetary obligations of
-----------------------------
any Person under any leasing or similar arrangement which, in accordance
with GAAP, would be classified as capitalized leases, and, for purposes of
the Operative Documents, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP.
(ii) "Contingent Liability" means any agreement, undertaking or
--------------------
arrangement by which any Person guarantees, endorses or otherwise becomes or
is contingently liable upon (by direct or indirect agreement, contingent or
otherwise, to provide funds for payment, to supply funds to, or otherwise to
invest in, a debtor, or otherwise to assure a creditor against loss) the
indebtedness, obligation or any other liability of any other Person (other
than by endorsements of instruments in the course of collection), or
guarantees the payment of dividends or other distributions upon the shares
of any other Person. The amount of any Person's obligation under
A-20
<PAGE>
Appendix 1 to
Participation Agreement
any Contingent Liability shall (subject to any limitation set forth therein)
be deemed to be the outstanding principal amount (or maximum principal
amount, if larger) of the debt, obligation or other liability guaranteed
thereby.
(iii) "Hedging Obligations" means, with respect to any Person, all
-------------------
liabilities of such Person under interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements, and all other
agreements or arrangements designed to protect such Person against
fluctuations in interest rates or currency exchange rates.
"Indemnitee" means each Participant, the Certificate Trustee (in its
----------
individual capacity and as trustee), any additional, separate or co-trustee
appointed in accordance with the terms of the Trust Agreement, each Agent (each
in its individual capacity and as Agent) and the respective Affiliates,
successors, permitted assigns, permitted transferees, employees, officers,
directors, representatives and agents of each of the foregoing Persons;
provided, however, that in no event shall Lessee be an Indemnitee.
- -------- -------
"Indirect Beneficial Ownership Interest" means, from time to time, the
--------------------------------------
aggregate indirect beneficial ownership interest of Guarantor (a) in all of the
Leased Assets and (b) in all of the Owned Assets, each as included in a
Qualified MAN or FCL, which interest shall be determined by taking the sum of
the percentages, calculated for each Subsidiary owning a Qualified MAN or FCL,
that are the product of the "Equity Ownership Percentage" of Guarantor in that
Subsidiary and the "Asset Ownership Percentage" of that Subsidiary in such
Leased Assets or Owned Assets, as the case may be; provided, that for purposes
--------
of the foregoing calculations, Lessor's ownership of the Leased Assets as
contemplated by the Operative Documents shall be deemed to constitute ownership
thereof (i) by Lessee to the extent Lessee remains liable under the outstanding
Lease Supplement or (ii) by any permitted assignee under Section 10.2 of the
------------
Lease, in each case with respect to
A-21
<PAGE>
Appendix 1 to
Participation Agreement
those Leased Assets subject to such Lease Supplement to which Lessee or such
assignee is a party; and provided, further, that if Guarantor shall become
-------- -------
the direct owner of any Qualified MAN or an FCL, Guarantor shall be treated as a
wholly owned Subsidiary of Guarantor for purposes of the foregoing calculations.
The "Equity Ownership Percentage" of Guarantor in a Subsidiary of Guarantor
---------------------------
is the fraction (expressed as a percentage), the numerator of which is the
number of equity shares having ordinary voting power (or, in the case of a
Subsidiary that is not a corporation, equivalent units of ownership interest) of
that Subsidiary which are owned by Guarantor, (i.e., taking into account, in the
case of indirect ownership through multiple Subsidiaries, the respective equity
ownership percentages, in each Subsidiary, of Guarantor and each other
Subsidiary), and the denominator of which is the total number of issued and
outstanding equity shares having ordinary voting power (or, in the case of a
Subsidiary that is not a corporation, equivalent units of ownership interest) of
that Subsidiary; and the "Asset Ownership Percentage" of a Subsidiary is the
--------------------------
fraction (expressed as a percentage) which (A) as applied to Leased Assets, has
a numerator equal to the aggregate of the Lessor's Cost of all of the Leased
Assets included in a Qualified MAN or FCL that are leased directly by that
Subsidiary, and has a denominator equal to the aggregate of the Lessor's Cost of
all of the Leased Assets included in the Qualified MAN or FCL, and (B) as
applied to Owned Assets, has a numerator equal to the aggregate cost (including
purchase costs and costs of construction and installation) of all of the Owned
Assets included in a Qualified MAN or FCL owned directly by that Subsidiary, and
has a denominator equal to the aggregate cost (including purchase costs and
costs of construction and installation) of all of the Owned Assets included in
the Qualified MAN or FCL.
"Information Agent" means BA Leasing & Capital Corporation, a California
-----------------
corporation, not in its individual capacity but solely as information agent
under the Operative Documents, or its successor.
A-22
<PAGE>
Appendix 1 to
Participation Agreement
"Inspecting Parties" has the meaning set forth in Section 13.1 of the Lease.
------------------ ------------
"Insolvency Event" means any event pursuant to which a Person or any of its
----------------
Subsidiaries shall
(a) become insolvent or generally fail to pay, or admit in writing its
inability or unwillingness to pay, debts as they become due;
(b) apply for, consent to, or acquiesce in, the appointment of a trustee,
receiver, sequestrator or other custodian for such Person or any of its
Subsidiaries or any property of any thereof, or make a general assignment for
the benefit of creditors;
(c) in the absence of such application, consent or acquiescence, permit or
suffer to exist the appointment of a trustee, receiver, sequestrator or other
custodian for such Person or any of its Subsidiaries or for a substantial part
of the property of any thereof, and such trustee, receiver, sequestrator or
other custodian shall not be discharged within sixty (60) days, provided that
such Person and each Subsidiary hereby expressly authorizes the Certificate
Trustee to appear in any court conducting any relevant proceeding during such
sixty (60) day period to preserve, protect and defend its rights under the
Loan Documents;
(d) permit or suffer to exist the commencement of any bankruptcy,
reorganization, debt arrangement or other case or proceeding under any
bankruptcy or insolvency law, or any dissolution, winding up or liquidation
proceeding, in respect of such Person or any of its Subsidiaries, and, if any
such case or proceeding is not commenced by the Borrower or such Subsidiary,
such case or proceeding shall be consented to or acquiesced in by such Person
or such Subsidiary or shall result in the entry of an order for relief or
shall remain for sixty (60) days undismissed, provided that such Person
A-23
<PAGE>
Appendix 1 to
Participation Agreement
and each Subsidiary hereby expressly authorizes Certificate Trustee to appear
in any court conducting any such case or proceeding during such sixty (60) day
period to preserve, protect and defend its rights under the Loan Documents; or
(e) take any action authorizing, or in furtherance of, any of the foregoing.
"Insurance Requirements" means all terms and conditions of any insurance
----------------------
policy either required by the Lease to be maintained by Lessee or required by
the Construction Agency Agreement to be maintained by Construction Agent, and
all requirements of the issuer of any such policy.
"Interest Period" means, (a) with respect to any LIBO Rate Loan, the period
---------------
commencing on (and including) the Advance Date or the date on which such LIBO
Rate Loan is continued or the date on which an Alternate Base Rate Loan is
converted into a LIBO Rate Loan and ending on (but excluding) the day which
numerically corresponds to such date one, two, three, six, or, if available,
nine or twelve months thereafter (or, if such month has no numerically
corresponding day, on the last Business Day of such month), and (b) with respect
to any Alternate Base Rate Loan, the period commencing on (and including) the
date the Alternate Base Rate Loan is made or continued and ending on the earlier
of the Final Maturity Date or the date on which such Alternate Base Rate Loan is
converted into a LIBO Rate Loan, in each case as Construction Agent may select
in its Advance Request or Continuation/Conversion Request, as the case may be;
provided, however, that:
- -------- -------
(i) if such Interest Period would otherwise end on a day which is not a
Business Day, such Interest Period shall end on the next following Business
Day (unless, in the case of a LIBO Rate Loan only, such next following
Business Day is the first Business Day of another calendar month, in which
case such Interest Period shall end on the Business Day next preceding such
numerically corresponding day);
A-24
<PAGE>
Appendix 1 to
Participation Agreement
(ii) no Interest Period during any Base Term may extend beyond the last day
of such Base Term and no Interest Period during any Renewal Term may extend
beyond the last day of such Renewal Term; and
(iii) Interest Periods shall not be permitted to be in effect at any one
time which have expiration dates occurring on more than six different dates.
"Interest Rate" means, with respect to each Interest Period, the applicable
-------------
interest rate payable from time to time on the Notes.
"Interested Subsidiary" means any Subsidiary having a direct interest in Owned
---------------------
Assets and/or Leased Assets in any Qualified MAN or FCL and, for the purposes of
Section 6.7(b)(ii) of the Participation Agreement only, Lessee.
- ------------------
"Lease" means the Lease (Electric Lightwave, Inc. Trust No. 1995-A), dated
-----
concurrently herewith between Certificate Trustee and Lessee, substantially in
the form of Exhibit C to the Participation Agreement.
---------
"Lease Balance" means, as of any date of determination, the sum of the
-------------
aggregate outstanding principal amounts of the Notes (including Capitalized
Interest) plus the aggregate Certificate Purchaser Amounts (including
----
Capitalized Yield).
"Lease Default" means any event, condition or failure which, with notice or
-------------
lapse of time or both, would become a Lease Event of Default.
"Lease Event of Default" means any event condition or failure designated as a
----------------------
"Lease Event of Default" in Article XV of the Lease.
----------
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<PAGE>
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"Lease Supplement" means each Lease Supplement, in the form of Exhibit A to
---------------- ---------
the Lease, executed and delivered by Lessee to Lessor on the Document Closing
Date.
"Lease Supplement Balance" means the product of the Allocated Share of the
------------------------
applicable Lease Supplement and the Lease Balance.
"Lease Supplement Term" has the meaning set forth in Section 2.3 of the Lease.
--------------------- -----------
"Lease Supplement Termination Date" means the last day of the Base Term or the
---------------------------------
last exercised Renewal Term, if any, or any other date on which a Lease
Supplement is terminated, including pursuant to Articles IV or XVI of the Lease.
----------- ---
"Lease Term" has the meaning set forth in Section 2.3 of the Lease.
---------- -----------
"Lease Termination Date" means the last Lease Supplement Termination Date to
----------------------
occur.
"Leasehold Estate" means Lessee's interest in the Systems and Equipment
----------------
subject to the Lease.
"Leased Assets" means the Systems and Equipment (including related
-------------
construction and installation and the costs thereof) that are subject to a Lease
Supplement or that is designated by Construction Agent to become subject to a
Lease Supplement.
"Lenders" means the holders of the Notes.
-------
"Lessee" means Electric Lightwave, Inc., a Delaware corporation or any other
------
Person that becomes the Lessee under the Lease.
"Lessor" means Certificate Trustee.
------
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<PAGE>
Appendix 1 to
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"Lessor Liens" means Liens on or against any System or related Equipment, the
------------
Lease, the Trust Estate or any payment of Rent (a) which result from any act of,
or any Claim against, Bank, Certificate Trustee, in its individual capacity, any
Certificate Purchaser or any Agent, each in its individual capacity, in either
case unrelated to the transactions contemplated by the Operative Documents or
(b) which result from any tax owed by Bank or any Certificate Purchaser, except
any Tax for which Lessee is obligated to indemnify.
"Lessor's Cost" means, with respect to the Systems and related Equipment
-------------
subject to each Lease Supplement, the aggregate amount paid or advanced by
Lessor on each Advance Date for all Systems and related Equipment subject to
such Lease Supplement plus the Capitalized Interest and Capitalized Yield with
respect to the Notes and Certificates fairly allocable thereto, plus the portion
of Transaction Costs and the Arrangement Fee fairly allocable thereto.
"Letters" means (a) the Letter Agreement between Lessee and Certificate
-------
Trustee, dated the date of the Participation Agreement, regarding the Commitment
Fee, and (b) the Letter Agreement between Lessee and Certificate Trustee, dated
the date of the Participation Agreement, regarding the assignment of Rent.
"LIBO Rate" means, with respect to each LIBO Rate Loan for any Interest
---------
Period, the sum of (a) the Applicable Margin plus (b) the Applicable Index Rate.
Information Agent will give notice promptly to Administrative Agent upon
determining the applicable LIBO Rate; provided, that Information Agent's failure
--------
to give such notice will not relieve Borrower and Lessee of their respective
obligations relating to such change.
"LIBO Rate Loans" means Loans bearing interest by reference to a LIBO Rate.
---------------
"LIBOR Office" means initially, the funding office of each Participant
------------
designated as such in Schedule III to the
A-27
<PAGE>
Appendix 1 to
Participation Agreement
Participation Agreement; and thereafter, such other office of such Participant,
if any, which shall be making or maintaining such Participant's investment in
Notes and/or Certificates.
"Lien" means any lien, mortgage, deed of trust, encumbrance, pledge, charge,
----
lease, easement, servitude, right of others or security interest of any kind,
including any thereof arising under any conditional sale or other title
retention agreement.
"Loan" has the meaning set forth in Section 2.1 of the Loan Agreement.
---- -----------
"Loan Agreement" means the Loan Agreement (Electric Lightwave, Inc. Trust No.
--------------
1995-A), dated as of the date of the Participation Agreement, among Borrower,
Administrative Agent and the Lenders, substantially in the form of Exhibit E to
---------
the Participation Agreement.
"Loan Default" means any event, condition or failure which, with notice or
------------
lapse of time or both, would become a Loan Event of Default.
"Loan Documents" means the Loan Agreement, the Notes, the Security Agreement
--------------
and all documents and instruments executed and delivered in connection with each
of the foregoing.
"Loan Event of Default" means any event, condition or failure designated as a
---------------------
"Loan Event of Default" in Section 6.1 of the Loan Agreement.
-----------
"Loan Participant" has the meaning set forth in Section 6.4(a) of the
---------------- --------------
Participation Agreement.
"MAN" has the meaning set forth in the Recitals to the Participation
---
Agreement.
"Material Adverse Effect" means a materially adverse effect on (i) the
-----------------------
business, assets, operations, condition (financial or
A-28
<PAGE>
Appendix 1 to
Participation Agreement
otherwise), or results of operations of Guarantor and its Subsidiaries taken as
a whole, (ii) the legality of the transactions contemplated by the Operative
Documents, (iii) the ability of Lessee or Guarantor to perform their respective
obligations under the Operative Documents or (iv) the validity or enforceability
of any of the Operative Documents or any rights or remedies under any thereof.
"Net Condemnation Proceeds" means all payments received from any Governmental
-------------------------
Authority or other Person relating to an Event of Taking after deducting the
costs incurred by Lessee, Certificate Trustee, Administrative Agent or any
Participant in respect of the receipt thereof.
"Non-Affiliated Qualified Use Agreement" has the meaning set forth in Section
-------------------------------------- -------
10.1(b) of the Lease.
- -------
"Non-Defaulting Participant" has the meaning set forth in Section 2.5(f) of
-------------------------- --------------
the Participation Agreement.
"Notes" means the notes issued by the Borrower under the Loan Agreement and
-----
denominated as such, substantially in the form of Exhibit A to the Loan
---------
Agreement, and any and all Notes issued in replacement or exchange therefor in
accordance with the provisions thereof.
"Obligations" has the meaning set forth in Section 1 of the Guaranty.
----------- ---------
"OCC" means the Office of the Comptroller of the Currency or any successor
---
thereto.
"Officer's Certificate" of a Person means a certificate signed by the Chairman
---------------------
of the Board of Directors, the President or any Executive Vice President or any
Senior Vice President, any other Vice President, the Treasurer or any Assistant
Treasurer or the Controller or any Assistant Controller of such Person.
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<PAGE>
Appendix 1 to
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"On a Fully Diluted Basis" means after giving effect to the exercise of all
outstanding options or other rights to subscribe for or purchase capital stock
of Lessee, the conversion or exchange of all securities convertible into or
exchangeable for capital stock of Lessee and the consummation of all contracts
for the issuance of capital stock of Lessee by Lessee.
"Operative Documents" means the Participation Agreement, the Bills of Sale,
-------------------
the Letters, the Lease, the Certificates of Acceptance, the Guaranty, the Lease
Supplements, the Construction Agency Agreement, the Purchase Order Assignment,
the Certificates, the Loan Agreement, the Notes, the Security Agreement, the
Support Agreement, the Trust Agreement, and all documents and instruments
executed and delivered in connection with each of the foregoing.
"Overall Transaction" means all the transactions and activities referred to in
-------------------
or contemplated by the Operative Documents.
"Overdue Rate" means the lesser of (a) the highest interest rate permitted by
------------
Applicable Laws or (b) an interest rate per annum equal to, in the case of the
Notes, the rate of interest otherwise payable with respect thereto plus 2% per
----
annum, and, in the case of the Certificates, the Yield plus 2% per annum.
----
"Owned Assets" means those components and other assets (including related
------------
construction and installation and the costs thereof) owned by Lessee or another
subsidiary of Guarantor that are included in a Qualified MAN or FCL and that do
not constitute Leased Assets.
"Owned System" means any System that Lessee or a Subsidiary of Guarantor owns
------------
beneficially and of record which is part of a Qualified MAN or FCL (it being
understood that any System subject to a Lease Supplement shall not be an "Owned
System").
"Participants" means the Certificate Purchasers and the Lenders, collectively.
------------
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<PAGE>
Appendix 1 to
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"Participation Agreement" means the Participation Agreement (Electric
-----------------------
Lightwave, Inc. Trust No. 1995-A), dated as of April 28, 1995, among Lessee,
Certificate Trustee, the Certificate Purchasers, the Lenders, Administrative
Agent, Information Agent and Guarantor.
"Payment Dates" means (a) the Final Maturity Date; (b) the date of any payment
-------------
or prepayment, in whole or in part, of principal outstanding on a Loan or the
return, in whole or in part, of the Certificate Purchaser Amount on a
Certificate; (c) with respect to Alternate Base Rate Loans, the last day of each
March, June, September and December or the date such Loan converts to a LIBO
Rate Loan, or, if any such day is not a Business Day, the next following
Business Day occurring after the Document Closing Date; and (d) with respect to
LIBO Rate Loans, the last day of each applicable Interest Period (and, if such
Interest Period shall exceed 90 days, on the 90th, 180th and 270th day of such
Interest Period if a Business Day, or the next succeeding Business Day after
such date).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding
----
to any or all of its functions under ERISA.
"Permitted Contest" means actions taken by a Person to contest in good faith,
-----------------
by appropriate proceedings initiated timely and diligently prosecuted, the
legality, validity or applicability to any System or related Equipment or any
location whereon or wherein any System or related Equipment is located or to be
located or any interest therein of any Person of: (a) any law, regulation, rule,
judgment, order, or other legal provision or judicial or administrative
requirements; (b) any term or condition of, or any revocation or amendment of,
or other proceeding relating to, any authorization or other consent, approval or
other action by any Governmental Authority; or (c) any Lien or Tax; provided
--------
that the initiation and prosecution of such contest would not: (i) result in, or
materially increase the risk of, the imposition of any criminal liability on any
Indemnitee;
A-31
<PAGE>
Appendix 1 to
Participation Agreement
(ii) materially and adversely affect the security interests created by the
Operative Documents or the right, title or interest of Lessee in or to any of
location whereon or wherein a System or related Equipment is located or to be
located or the right of Lessor, Administrative Agent or any Participant to
receive payment of the principal of or interest on any Note, Certificate
Purchaser Amount of or Yield on any Certificate, Rent or the Lease Balance or
any interest therein; or (iii) materially and adversely affect the fair market
value, utility or remaining useful life of any System or any Equipment
comprising a part thereof, or any interest therein or the continued economic
operation thereof; and provided further that in any event adequate reserves in
-------- -------
accordance with GAAP are maintained against any adverse determination of such
contest.
"Permitted Investments" means (i) full faith and credit obligations of the
---------------------
United States of America, or fully guaranteed as to interest and principal by
the full faith and credit of the United States of America, maturing in not more
than one year from the date such investment is made, (ii) certificates of
deposit having a final maturity of not more than one year after the date of
issuance thereof of a Lender or of any other commercial bank incorporated under
the laws of the United States of America or any state thereof or the District of
Columbia, which bank is a member of the Federal Reserve System and has a
combined capital and surplus of not less than $500,000,000 and with a senior
unsecured debt credit rating of at least A by Moody's Investors Service, Inc.
and A by Standard & Poor's Corporation, (iii) commercial paper of the Lenders
having a remaining term until maturity of not more than 180 days from the date
such investment is made, (iv) commercial paper of companies, banks, trust
companies or national banking associations (in each case excluding Lessee and
its Affiliates) incorporated or doing business under the laws of the United
States or one of the States thereof, and (v) a money market fund registered
under the Investment Company Act of 1940, the portfolio of which is invested
entirely in United States governmental, and United States Agency, obligations in
each case having a remaining term until maturity of not more than 180 days
A-32
<PAGE>
Appendix 1 to
Participation Agreement
from the date such investment is made and rated at least P-1 by Moody's
Investors Service, Inc. or at least A-1 by Standard & Poor's Corporation.
"Permitted Liens" means (a) the respective rights and interests of Lessee, any
---------------
Person acting by, through or under Lessee pursuant to the terms of the Lease,
the Certificate Purchasers, Certificate Trustee, Qualified Users, Agents and the
Lenders, as provided in the Operative Documents; (b) Lessor Liens; (c) Liens for
Taxes either not yet due or being contested in good faith and by appropriate
proceedings diligently conducted, so long as (i) such proceedings shall not
involve any meaningful risk of a Lien being placed on the Systems or related
Equipment, and (ii) any reserve or other appropriate provision required by GAAP
shall have been made in respect of the Lien; (d) materialmen's, mechanics',
workers', repairmen's, employee's, landlord's or other statutory Liens arising
in the ordinary course of business for amounts either not yet due or being
contested in good faith and by appropriate proceedings so long as (i) no Lease
Event of Default shall have occurred and be continuing, (ii) such proceedings
shall not involve any meaningful risk in the circumstances of the sale,
forfeiture or loss of any part of the Trust Estate, title thereto or any
interest therein and shall not interfere with the use or disposition of any
System or related Equipment, or the Trust Estate, or the payment of Rent, and
(iii) any reserve or other appropriate provision required by GAAP shall have
been made in respect of the Lien; (e) Liens arising after an Advance Date out of
judgments or awards with respect to which at the time an appeal or proceeding
for review is being prosecuted in good faith and either have been bonded to the
satisfaction of Information Agent or the enforcement of such Lien has been
stayed pending such appeal or review; and (f) any Lien or Liens (excluding any
Lien described in clauses (a) through (e)) securing obligations in the aggregate
amount not to exceed, when added to the Liens described in clause (d) above,
----------
$5,000,000.
"Person" means an individual, corporation, partnership, joint venture,
------
association, joint-stock company, trust, limited
A-33
<PAGE>
Appendix 1 to
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liability company, unincorporated organization or Governmental Authority.
"Plan" means any pension plan (including a multiemployer plan) subject to the
----
provisions of Title IV of ERISA or Section 412 of the Code which is maintained
for or to which contributions are made for employees of Lessee or any ERISA
Affiliate.
"Principal Subsidiary" means, as of any date, any Subsidiary of Guarantor
--------------------
whose Consolidated Tangible Assets comprise in excess of 40% of the Consolidated
Tangible Assets of Guarantor and its consolidated Subsidiaries.
"Prohibited Transaction" means a transaction that is prohibited under Code
----------------------
Section 4975 or ERISA Section 406 and not exempt under Code Section 4975 or
ERISA Section 408.
"Purchase Option" has the meaning set forth in Section 4.2 of the Lease.
--------------- -----------
"Purchase Option Exercise Amount" means, with respect to any Lease Supplement,
-------------------------------
as of any date of determination, the sum of (a) the applicable Lease Supplement
Balance with respect to such Lease Supplement, as of the date of purchase, plus
----
(b) all accrued but unpaid Rent, including any amount of Supplemental Rent owed
by Lessee under Section 3.2 of the Lease with respect to such Lease Supplement,
-----------
plus (c) all other sums then due and payable under the Operative Documents by
- ----
Lessee and any of its Affiliates (including, without limitation, any breakage
fees pursuant to Section 2.12 of the Loan Agreement, plus (d) a prepayment
------------ ----
charge in an amount equal to the product of (i) the amount of the applicable
Lease Supplement Balance with respect to such Lease Supplement, as of the date
of purchase, and (ii) 0.36 of 1% (thirty-six (36) basis points) in the first
month of the Base Term and declining ratably each succeeding month of the Base
Term so that the prepayment charge would be equal to zero at the end of the Base
Term.
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<PAGE>
Appendix 1 to
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"Purchase Order" has the meaning set forth in the recitals to the Purchase
--------------
Order Assignment.
"Purchase Order Assignment" means the Purchase Order Assignment, dated the
-------------------------
date of the Participation Agreement, between the Construction Agent and Lessor,
substantially in the form of Exhibit L to the Participation Agreement.
---------
"Qualified MAN or FCL" means, at any date of determination, any MAN or FCL
--------------------
which is composed, in whole or in part, of Leased Assets.
"Qualified Use Agreement" has the meaning set forth in Section 10.1(b) of the
----------------------- ---------------
Lease.
"Qualified User" has the meaning set forth in Section 10.1(b) of the Lease.
-------------- ---------------
"Recourse Deficiency Amount" means, with respect to the exercise of the Sale
--------------------------
Option with respect to any Lease Supplement, the difference between (i) the
applicable Purchase Option Exercise Amount at the end of any Renewal Term in
which such Sale Option was elected and (ii) the product of (A) 20.0% and (B) the
Fair Market Sales Value of the System, including the Equipment, subject to such
Lease Supplement as of the first day of the Renewal Term in which such Sale
Option was elected.
"Recourse Sale Proceeds" has the meaning set forth in Section 4.5(c) of the
---------------------- --------------
Lease.
"Regulated Activity" means the use, Release, generation, treatment, storage,
------------------
recycling, transportation or disposal of Hazardous Material to the extent such
activities are regulated by any Governmental Authority.
"Regulations" means the income tax regulations promulgated from time to time
-----------
under and pursuant to the Code.
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<PAGE>
Appendix 1 to
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"Release" means the release, deposit, disposal or leak of any Hazardous
-------
Material into or upon or under any land or water or air, or otherwise into the
environment, including by means of burial, disposal, discharge, emission,
injection, spillage, leakage, seepage, leaching, dumping, pumping, pouring,
escaping, emptying, placement and the like.
"Remaining Commitment" means, as to any Participant, the difference between
--------------------
such Participant's Commitment and the total amounts advanced by such
Participant, including all amounts of Capitalized Interest and Capitalized
Yield, as of the date of determination.
"Renewal Term" has the meaning set forth in Section 2.4 of the Lease.
------------ -----------
"Rent" means Base Rent, Holdover Rent and Supplemental Rent, collectively.
----
"Replacement Participant" has the meaning set forth in Section 2.11(a) of the
----------------------- ---------------
Participation Agreement.
"Required Certificate Purchasers" means, as of the date of the determination,
-------------------------------
Certificate Purchasers having unpaid Certificate Purchaser Amounts equal to more
than 50% of the aggregate unpaid Certificate Purchaser Amounts.
"Required Entities" means, as of the date of the determination, Lenders and
-----------------
Certificate Purchasers having aggregate investments in the Overall Transaction
(as measured by the outstanding principal amount of the Notes then outstanding
and the Certificate Purchaser Amounts then invested) equal to more than 50% of
the aggregate total of all such investments.
"Responsible Officer" means with respect to the Bank, Certificate Trustee or
-------------------
Administrative Agent, any officer in its Corporate Trust Department, and with
respect to any other Person, the Chairman or Vice Chairman of the Board of
Directors, the
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<PAGE>
Appendix 1 to
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Chairman or Vice Chairman of the Executive Committee of the Board of Directors,
the President, any Senior Vice President or Executive Vice President, any Vice
President, the Secretary or the Treasurer.
"Rights of Use" has the meaning set forth in Section 2.2 of the Support
------------- -----------
Agreement.
"Sale Deposit" has the meaning set forth in Section 4.5(a) of the Lease.
------------ --------------
"Sale Deposit Escrow Agreement" has the meaning set forth in Section 4.5(a) of
----------------------------- --------------
the Lease.
"Sale Option" has the meaning specified in Section 4.3 of the Lease.
----------- -----------
"Sale Option Purchaser" has the meaning set forth in Section 2.1 of the
--------------------- -----------
Support Agreement.
"SEC" means the United States Securities and Exchange Commission.
---
"Securities Act" means the Securities Act of 1933.
--------------
"Security Agreement" means the Security Agreement and Assignment of Lease,
------------------
dated the date of the Participation Agreement, between Borrower and
Administrative Agent, substantially in the form of Exhibit K to the
---------
Participation Agreement.
"Settlement Actions" has the meaning set forth in Section 6.2 of the Trust
------------------ -----------
Agreement.
"Southwest FCL" has the meaning set forth in the Recitals of to the
-------------
Participation Agreement.
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<PAGE>
Appendix 1 to
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"Stated Maturity" means, with respect to any Note or Certificate, the date
---------------
specified in such Note or Certificate as the fixed date on which the principal
of such Note or the Certificate Purchaser Amount of such Certificate shall be
due and payable.
"Subsidiary" means for any Person (herein referred to as the "parent"), any
----------
corporation, partnership, association or other business entity (a) of which
securities or other ownership interests representing more than 50% of the equity
or more than 50% of the ordinary voting power or more than 50% of the general
partnership interests are, at the time any determination is being made, owned,
controlled, or held, (b) which is, at the time any determination is made,
otherwise Controlled by the parent and/or one or more Subsidiaries of the
parent, or (c) for purposes of the definition of "Indirect Beneficial Ownership
Interest" of which securities or any other ownership interests are, at the time
any determination is being made, owned, controlled or held.
"Supplemental Funding" has the meaning set forth in Section 2.11(a) of the
-------------------- ---------------
Participation Agreement.
"Supplemental Rent" means any and all amounts, liabilities and obligations
-----------------
other than Base Rent which Lessee assumes or agrees or is otherwise obligated or
designated to pay under the Lease or any other Operative Document (whether or
not designated as Supplemental Rent) to Certificate Trustee, Administrative
Agent, the Certificate Purchasers, the Lenders or any other Person, including
Additional Costs, indemnities and damages for breach of any covenants,
representations, warranties or agreements.
"Support Agreement" means the Support Agreement, dated the date of the
-----------------
Participation Agreement, between Lessee and Certificate Trustee, substantially
in the form of Exhibit G to the Participation Agreement.
---------
"Support Items" has the meaning set forth in Section 2.3 of the Support
------------- -----------
Agreement.
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<PAGE>
Appendix 1 to
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"Support Rights" means all Access Rights, Rights of Use, Support Items and
--------------
Governmental Approvals granted pursuant to Article 2 of the Support Agreement.
---------
"Surviving Company" has the meaning set forth in Section 5.2(a) of the
----------------- --------------
Participation Agreement.
"System" means an integrated assembly of Equipment that is economically
------
operable, in conjunction with the related Support Rights, as a discrete revenue-
producing unit for telephone, data transmission, video or other communications
or other data transmissions purposes at, within or among one or more Designated
Locations, and which forms all, or a component part, of a MAN or an FCL.
"Taxes" and "Tax" mean any and all fees (including documentation, recording,
----- ---
license and registration fees), taxes (including income (whether net, gross or
adjusted gross), franchise, gross receipts, sales, rental, use, turnover, value-
added, property, excise and stamp taxes), levies, imposts, duties, charges,
assessments or withholdings of any nature whatsoever, together with any
penalties, fines or interest thereon or additions thereto.
"Transaction Costs" means transaction costs and expenses incurred (a) by the
-----------------
Arranger, Certificate Trustee, Administrative Agent, Information Agent and the
Participants in connection with the consummation and closing of the transactions
contemplated by the Operative Documents, and the preparation, negotiation,
execution and delivery of the Operative Documents, including (1) subject to a
maximum of $275,000, the reasonable fees and expenses of Mayer, Brown & Platt,
or any other firm which is the primary special counsel to the Participants
through the Document Closing Date, (2) the reasonable legal fees and expenses of
Mayer, Brown & Platt, or any other firm which is the primary special counsel to
the Participants incurred after the Document Closing Date; (3) the reasonable
fees and expenses of regulatory counsel
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<PAGE>
Appendix 1 to
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(which shall be selected by Information Agent after consultation with Lessee) in
connection with FERC or state public utility commission hearings arising out of
the Overall Transaction; (4) the ongoing fees and reasonable expenses of
Certificate Trustee and its special counsel; (5) all appraisal fees and
reasonable expenses; and (6) all fees, costs and expenses of Administrative
Agent, subject to the letter agreement dated December 21, 1994, and, (b) subject
to a maximum of $300,000, by Lessee and Guarantor in connection with the
consummation and closing of the transactions contemplated by the Operative
Documents, and the preparation, negotiation, execution and delivery of the
Operative Documents.
"Trust" means the trust created by the Trust Agreement.
-----
"Trust Agreement" means the Trust Agreement (Electric Lightwave, Inc. Trust
---------------
No. 1995-A), dated the date of the Participation Agreement, among Certificate
Trustee and the Certificate Purchasers, substantially in the form of Exhibit F
---------
to the Participation Agreement.
"Trust Estate" means all estate, right, title and interest of Certificate
------------
Trustee in, to and under the Systems and related Equipment, the Trust Agreement,
the Lease, and all of the other Operative Documents, including (i) all amounts
(other than Excluded Amounts) of Rent and other payments due or to become due of
any kind for or with respect to the Systems and related Equipment or payable
under any of the foregoing, (ii) any or all payments or proceeds received by
Certificate Trustee after the termination of the Lease with respect to the
Systems and related Equipment as the result of the sale, lease or other
disposition thereof and (iii) proceeds of the Loans and the investments in the
Certificates, together with any other moneys, proceeds or property at any time
received by Certificate Trustee under or in connection with the Operative
Documents.
"UCC" means the Uniform Commercial Code of New York or any other applicable
---
jurisdiction.
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<PAGE>
Appendix 1 to
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"Yield" means, during the Lease Term with respect to each Interest Period, the
-----
product of (a) the applicable Yield Rate payable from time to time and (b) the
aggregate Certificate Purchaser Amounts outstanding.
"Yield Rate" means, with respect to each Interest Period, the applicable
----------
interest rate payable from time to time on the Certificates, which interest rate
shall be (a) for an Interest Period for which a LIBO Rate Loan is made, the
interest rate per annum equal to (i) the Blended Rate Differential, as defined
below, plus (ii) the Applicable Index Rate, or (b) for an Interest Period for
which an Alternate Base Rate Loan is made, the Alternate Base Rate.
For purposes of the foregoing calculation, the "Blended Rate Differential" shall
-------------------------
mean, for any Interest Period for which a LIBO Rate Loan is made, with reference
to any Applicable Margin set forth below in effect as of the date of
determination, the interest rate per annum which would cause the total of all
interest and Yield payable during such Interest Period on the total outstanding
principal amount of such LIBO Rate Loan and the aggregate related Certificate
Purchaser Amounts to equal the product of (A) the sum of the then outstanding
principal balance of such LIBO Rate Loan and the aggregate related Certificate
Purchaser Amounts and (B) the Applicable Index Rate plus the Blended Margin
(expressed as a per annum interest rate) set forth below opposite such
Applicable Margin:
Applicable Margin Blended Margin
----------------- --------------
0.2425% 0.25%
0.4425% 0.45%
0.9925% 1.00%
A-41
<PAGE>
Appendix 2 to
Participation Agreement
APPENDIX 2
to
Participation Agreement
-----------------------
(Electric Lightwave Inc. Trust No. 1995-A)
CONDITIONS PRECEDENT TO DOCUMENT CLOSING DATE
(a) Authorization, Execution and Delivery of Documents; No Default. The
--------------------------------------------------------------
Participation Agreement, the Lease, the Construction Agency Agreement, the
Guaranty, the Trust Agreement, the Loan Agreement, the Notes and the
Certificates and each other Operative Document shall have been duly authorized,
executed and delivered by each of the parties thereto, shall (to the extent the
form and substance thereof shall not be prescribed hereby) be in form and
substance satisfactory to such parties and an executed counterpart of each
thereof shall have been delivered to each of the Certificate Purchasers,
Certificate Trustee, the Lenders and Administrative Agent. Each Lender shall
have received an original, duly executed Note registered in such Lender's name,
and each Certificate Purchaser shall have received an original, duly executed
Certificate registered in such Certificate Purchaser's name. Each of the
Participation Agreement, the Lease, the Construction Agency Agreement, the
Guaranty, the Trust Agreement, the Loan Agreement, the Notes and the
Certificates shall be in full force and effect as to all other parties and no
Lease Default or Lease Event of Default shall have occurred or be continuing.
(b) Litigation. No action or proceeding shall have been instituted or
----------
threatened nor shall any Governmental Approval be instituted or threatened
before any Governmental Authority, nor shall any order, judgment or decree have
been issued or proposed to be issued by any Governmental Authority, to set
aside, restrain, enjoin or prevent the performance of this Agreement, any other
Operative Document or the Overall
1
<PAGE>
Appendix 2 to
Participation Agreement
Transaction or which is reasonably likely, in the sole opinion of the Required
Entities, to have a Material Adverse Effect.
(c) Legality, etc. In the opinion of each Participant or its counsel, the
-------------
transactions contemplated by the Operative Documents shall not violate any
Applicable Laws and no change shall have occurred or been proposed in Applicable
Laws that would make it uneconomic or illegal for any party to any Operative
Document to participate in any of the transactions
contemplated by the Operative Documents or otherwise would prohibit the
consummation of any transaction contemplated by the Operative Documents or
expand the duties, obligations and risks of such Participant.
(d) Governmental and Other Approvals. All necessary (or, in the reasonable
--------------------------------
opinion of Certificate Trustee, the Required Entities, Administrative Agent
or any of their respective counsel, advisable) Governmental Approvals, in
each case required by any Applicable Laws, and other required third party
approvals, including (i) a final, nonappealable order of the Federal Energy
Regulatory Commission approving the Guaranty and (ii) either (A) approvals
of the state public utility commissions in each State in which all or any
part of a System will be located or (B) opinions of local regulatory
counsel in each such State to the effect that no such approval is required,
shall have been obtained or made and be in full force and effect.
(e) Requirements of Law. In the reasonable opinion of Lessor, the Information
-------------------
Agent and their respective counsel, the transactions contemplated by the
Operative Documents do not and will not violate in any Applicable Laws and
do not and will not subject Lessor, any Certificate Purchaser, either Agent
or any Lender to any adverse regulatory prohibitions or constraints.
(f) Opinions. The following opinions, each dated the Document Closing Date,
--------
substantially in the form set forth in the Exhibit noted below, and containing
such other matters as the
2
<PAGE>
Appendix 2 to
Participation Agreement
parties to whom they are addressed shall reasonably request, shall have been
delivered and addressed to each of Certificate Trustee, the Certificate
Purchasers, Administrative Agent and the Lenders:
(i) the opinion of Boulanger, Hicks, Stein & Churchill, counsel
for Lessee (Exhibit H-1/H-2);
---------------
(ii) the opinion of internal counsel for Lessee (Exhibit H-1/H-
-------------
2);
(iii) the opinion of Shipman & Goodwin, special counsel for
Certificate Trustee (Exhibit H-3); and
-----------
(iv) the opinion of Boulanger, Hicks, Stein & Churchill, counsel
for Guarantor (Exhibit H-5)).
-------------
(g) Corporate Status and Proceedings. On or prior to the
--------------------------------
Document Closing Date, each of the Participants, Certificate Trustee and
Administrative Agent shall have received:
(i) certificates of existence and good standing with respect to
each of Lessee and Guarantor from (A) the Secretary of the State of the
State of Delaware and (B) the Secretary of State of each State in which all
or any part of any System is located, each dated no earlier than the 10th
day prior to the Document Closing Date;
(ii) copies of each of Lessee's and Guarantor's certificate of
incorporation, certified by the Secretary of State of the State of Delaware
no earlier than the 10th day prior to the Document Closing Date; and
(ii) with respect to Lessee and Guarantor, an Officer's
Certificate substantially in the form of Exhibits I-1 and I-2,
--------------------
respectively, dated the Document Closing Date, with respect to such
Person's governing documents, resolutions
3
<PAGE>
Appendix 2 to
Participation Agreement
and incumbent officers, representations and warranties and absence of
defaults.
(h) No Material Adverse Effect. There shall not have occurred
--------------------------
any Material Adverse Effect.
(i) Certificate Trustee Officer's Certificate. Each Participant
-----------------------------------------
and Administrative Agent shall have received (x) a certificate of the Secretary
or Assistant Secretary of Certificate Trustee attaching and certifying as to (i)
the corporate authority for the execution, delivery and performance by
Certificate Trustee of each Operative Document to which it is or will be a
party, (ii) its organizational documents, (iii) its by-laws, and (iv) the
incumbency and signature of persons authorized to execute and deliver such
documents on behalf of Certificate Trustee, and (y) a good standing certificate
from the appropriate Governmental Authority as to Certificate Trustee's good
standing.
(j) Arrangement Fee. Lessee shall have paid the Arrangement Fee
---------------
to BA Leasing & Capital Corporation.
(k) UCC Filings. All required UCC filings shall have been made
-----------
sufficient to perfect Administrative Agent's security interest in the
Collateral.
(l) Lease Supplements. Lessee and Lessor shall have executed
-----------------
and delivered a separate Lease Supplement with regard to each group of Systems
to be leased under the Lease that will comprise part or all of a single MAN or
the Southwest FCL.
(m) Letter Agreements. In the opinion of Administrative Agent,
-----------------
all appropriate letter agreements between the parties to the Participation
Agreement shall have been executed by and delivered to the appropriate parties.
4
<PAGE>
Appendix 2 to
Participation Agreement
(n) Purchase Order Assignment. Administrative Agent shall have
-------------------------
received, with sufficient counterpart originals for Certificate Trustee,
Information Agent and each Participant, a Purchase Order Assignment, fully
executed by the Construction Agent and Lessor.
(o) Insurance. Administrative Agent shall have received
---------
certificates of insurance conforming with the requirements of Section 9.1 of the
-----------
Lease.
(p) Other Documents. Participants shall have received such
---------------
other documents as they may reasonably require.
All documents and instruments required to be delivered on the Document Closing
Date shall be delivered at the offices of Mayer, Brown & Platt, 1675 Broadway,
New York, New York 10019-5820, or at such other location as may be determined by
Certificate Trustee, Administrative Agent and Lessee.
5
<PAGE>
================================================================================
GUARANTY
dated as of April 28, 1995
of
CITIZENS UTILITIES COMPANY
in favor of
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
individually and as Certificate
Trustee and Administrative Agent
and
BA LEASING & CAPITAL CORPORATION,
individually and as
Information Agent
and
OTHER BENEFICIARIES
================================================================================
<PAGE>
TABLE OF CONTENTS
-------------------------
Page
----
SECTION 1. Guaranty.................................. 2
SECTION 2. Guarantor's Obligations Unconditional..... 3
SECTION 3. Waiver and Agreement...................... 5
SECTION 4. Waiver of Subrogation..................... 6
SECTION 5. Rights of the Beneficiaries............... 7
SECTION 6. Term of Guaranty.......................... 7
SECTION 7. Further Assurances........................ 7
SECTION 8. Notices, etc.............................. 7
SECTION 9. Amendments, etc........................... 7
SECTION 10. Severability............................. 7
SECTION 11. Choice of Law............................ 7
SECTION 12. Successors and Assigns................... 8
SECTION 13. Table of Contents........................ 8
<PAGE>
Guaranty
GUARANTY
--------
This GUARANTY (the "Guaranty"), dated as of April 28, 1995, of CITIZENS
--------
UTILITIES COMPANY, a Delaware corporation (the "Guarantor"), is made in favor of
---------
the Beneficiaries, as such term is defined in Appendix 1 to that certain
Participation Agreement (Electric Lightwave, Inc. Trust No. 1995-A), dated as of
April 28, 1995, among Electric Lightwave, Inc., a Delaware corporation
("Lessee"), Certificate Trustee, the Agents, the Guarantor and the Lenders and
------
Certificate Purchasers identified therein. Capitalized terms used herein and
not otherwise defined shall have the meanings assigned to them in the
Participation Agreement, unless the context otherwise requires.
WHEREAS, Guarantor is the beneficial owner of all of the issued and
outstanding capital stock of Lessee;
WHEREAS, pursuant to the Lease, the Construction Agency Agreement and the
Participation Agreement, Certificate Trustee has agreed to lease the Systems
referred to therein to Lessee after the construction thereof is completed, and
Lessee has agreed to lease the Systems at such time from Certificate Trustee;
WHEREAS, pursuant to the Construction Agency Agreement, Construction Agent has
agreed to construct the Systems;
WHEREAS, pursuant to the Loan Agreement, Lenders have agreed to fund ninety-
seven percent (97%) of the costs of the construction of the Systems, including
the costs of purchasing and installing the related Equipment, and, pursuant to
the Trust Agreement, Certificate Purchasers have agreed to fund three percent
(3%) of such costs;
WHEREAS, Lenders and Certificate Purchasers are unwilling to enter into the
transactions contemplated by the Participation Agreement, Shawmut Bank
Connecticut, National Association is unwilling to accept its appointment as
Certificate Trustee and Administrative Agent set forth in the Trust Agreement
and the
<PAGE>
Guaranty
Participation Agreement, respectively, and BA Leasing & Capital Corporation is
unwilling to accept its appointment as Information Agent, unless Guarantor
executes this Guaranty, and as a material and necessary inducement to the
Lenders, the Certificate Purchasers and the Agents, Guarantor is entering into
this Guaranty and the guaranty provided for herein; and
WHEREAS, it is in the best interest of Guarantor to execute this Guaranty
inasmuch as Guarantor will derive substantial direct and indirect economic
benefits from the transactions contemplated by the Participation Agreement;
NOW, THEREFORE, Guarantor covenants and agrees as follows:
SECTION 1. Guaranty. Guarantor hereby unconditionally and irrevocably
--------
guarantees to each Beneficiary as their respective interests may appear: (a)
the due, punctual and full payment by Lessee of all amounts (including, without
limitation, amounts payable as damages in case of default) to be paid by Lessee
pursuant to the Construction Agency Agreement, the Lease, the Participation
Agreement and any other Operative Documents to which Lessee is or is to be a
party, whether such obligations now exist or arise hereafter, as and when the
same shall become due and payable, in accordance with the terms thereof; and (b)
the due, prompt and faithful performance of, and compliance with, all other
obligations, covenants, terms, conditions and undertakings of Lessee contained
in the Construction Agency Agreement, the Lease, the Participation Agreement or
any other Operative Document to which Lessee is or is to be a party in
accordance with the terms thereof (such obligations referred to in clauses (a)
-----------
and (b) above being hereinafter called the "Obligations"). Guarantor further
--- -----------
agrees to pay any and all reasonable costs and expenses (including reasonable
fees and disbursements of counsel) that may be paid or incurred by any
Beneficiary in collecting any Obligations and/or in preserving or enforcing any
rights under this Guaranty or under the Obligations.
The Guaranty is an unconditional and irrevocable guaranty of payment,
performance and compliance and not of collectability, is in no way conditioned
or contingent upon any attempt to collect
-2-
<PAGE>
Guaranty
from or enforce performance or compliance by Lessee, and shall be binding upon
and against Guarantor without regard to the validity or enforceability of the
Construction Agency Agreement, the Lease, the Participation Agreement or any
other Operative Document.
If for any reason whatsoever Lessee shall fail or be unable duly, punctually
and fully to pay such amounts as and when the same shall become due and payable
or to perform or comply with any such obligation, covenant, term, condition or
undertaking, Guarantor will immediately pay or cause to be paid such amounts to
the Person or Persons entitled to receive the same (according to their
respective interests) under the terms of the Operative Documents, as
appropriate, or perform or comply with any such obligation, covenant, term,
condition or undertaking or cause the same to be performed or complied with,
together with interest on any amount due and owing from the date the same shall
have become due and payable to the date of payment.
SECTION 2. Guarantor's Obligations Unconditional. The covenants and
-------------------------------------
agreements of Guarantor set forth in this Guaranty shall be primary obligations
of Guarantor, and such obligations shall be continuing, absolute and
unconditional, shall not be subject to any counterclaim, setoff, deduction,
diminution, abatement, recoupment, suspension, deferment or reduction or defense
available to a surety or guarantor (other than full and strict compliance by
Guarantor with its expressed obligations hereunder and under the Participation
Agreement or by Lessee under the Operative Documents to which it is a party),
whether based upon any claim that Lessee, Guarantor, or any other Person may
have against any Beneficiary or any other Person or otherwise, and shall remain
in full force and effect without regard to, and shall not be released,
discharged or in any way affected by, any circumstance or condition whatsoever
(whether or not Guarantor or Lessee shall have any knowledge or notice thereof)
including, without limitation:
(a) any amendment, modification, addition, deletion, supplement or renewal
to or of or other change in the Obligations, including a change in the
amount of Rent, or any Operative Document or any of the agreements
-3-
<PAGE>
Guaranty
referred to in any thereof, or any other instrument or agreement
applicable to any Operative Document or any of the parties to such
agreements, or to the Equipment, or any assignment, mortgage or
transfer thereof or of any interest therein, or any furnishing or
acceptance of additional security for, guaranty of or right of offset
with respect to, any of the Obligations; or the failure of any
security or the failure of any Beneficiary to perfect or insure any
interest in any collateral (Guarantor acknowledges that the
Beneficiaries do not intend to have a perfected security interest in
the Equipment);
(b) any failure, omission or delay on the part of Lessee to conform or
comply with any term of any instrument or agreement referred to in
clause (a) above;
----------
(c) any waiver, consent, extension, indulgence, compromise, release or
other action or inaction under or in respect of any instrument,
agreement, guaranty, right of offset or security referred to in clause
------
(a) above or any obligation or liability of Lessee or any Beneficiary,
---
or any exercise or non-exercise by any Beneficiary of any right,
remedy, power or privilege under or in respect of any such instrument,
agreement, guaranty, right of offset or security or any such
obligation or liability;
(d) any bankruptcy, insolvency, reorganization, arrangement, readjustment,
composition, liquidation or similar proceeding with respect to Lessee,
or any of its properties or creditors, the imposition of any stay or
injunction in connection with any such proceeding, including the
automatic stay imposed by '362(a) of the Bankruptcy Code, or any
action taken by any trustee or receiver or by any court in any such
proceeding;
(e) any limitation on the liability or obligations of any Person under the
Lease or any other Operative Document, the Obligations, any collateral
security for the
-4-
<PAGE>
Guaranty
Obligations or any other guaranty of the Obligations
or any discharge, termination, cancellation, frustration,
irregularity, invalidity or unenforceability, in whole or in part, of
any of the foregoing, or any other agreement, instrument, guaranty or
security referred to in clause (a) above or any term of any thereof;
----------
(f) any defect in the title, compliance with specifications, condition,
design, operation or fitness for use of, or any damage to or loss or
destruction of, or any interruption or cessation in the use of the
Systems or Equipment subject to a Lease Supplement by Lessee or any
other Person for any reason whatsoever (including, without limitation,
any governmental prohibition or restriction, condemnation,
requisition, seizure or any other act on the part of any governmental
or military authority, or any act of God or of the public enemy)
regardless of the duration thereof (even though such duration would
otherwise constitute a frustration of a lease), whether or not
resulting from accident and whether or not without fault on the part
of Lessee or any other Person;
(g) any merger or consolidation of Lessee (or any sublessee or assignee)
or Guarantor into or with any other Person or any sale, lease or
transfer of any of the assets of Lessee or Guarantor to any other
Person;
(h) any change in the ownership of any shares of capital stock of Lessee
or any corporate change in Lessee; or
(i) any other occurrence or circumstance which is similar to the
foregoing, and any other circumstance that might otherwise constitute
a legal or equitable defense or discharge of the liabilities of a
guarantor or surety.
The obligations of Guarantor set forth herein constitute the full recourse
obligations of Guarantor, enforceable against it to the full extent of all its
assets and properties.
-5-
<PAGE>
Guaranty
SECTION 3. Waiver and Agreement. Guarantor waives any and all notice of the
--------------------
creation, renewal, extension or accrual of any of the Obligations and notice of
or proof of reliance by any Beneficiary upon this Guaranty or acceptance of this
Guaranty, and the Obligations, and any of them, shall conclusively be deemed to
have been created, contracted or incurred in reliance upon this Guaranty.
Guarantor unconditionally waives, to the extent permitted by law: (a)
acceptance of this Guaranty and proof of reliance by any Beneficiary hereon; (b)
notice of any of the matters referred to in Section 2, or any right to consent
---------
or assent to any thereof; (c) all notices that may be required by statute, rule
of law or otherwise, now or hereafter in effect, to preserve intact any rights
against Guarantor, including without limitation, any demand, presentment,
protest, proof or notice of nonpayment under the Construction Agency Agreement,
the Lease, the Participation Agreement or any other Operative Document (other
than notice of legal proceedings against Guarantor; provided, that the filing of
--------
any suit against Guarantor in accordance with Applicable Laws and rules of court
shall be deemed to constitute such notice), and notice of default or any failure
on the part of Lessee to perform and comply with any covenant, agreement, term
or condition of the Construction Agency Agreement, the Lease, the Participation
Agreement or any other Operative Document; (d) any right to the enforcement,
assertion or exercise against Lessee of any right, power, privilege or remedy
conferred in the Construction Agency Agreement, the Lease, the Participation
Agreement or any other Operative Document or otherwise; (e) any requirement of
diligence on the part of any Person; (f) any requirement of any Beneficiary to
take any action whatsoever, to exhaust any remedies or to mitigate the damages
resulting from a default by any Person under the Construction Agency Agreement,
the Lease, the Participation Agreement, or any other Operative Document; (g) any
notice of any sale, transfer or other disposition by any Person of any right
under, title to or interest in the Construction Agency Agreement, the Lease, the
Participation Agreement, any other Operative Document or the Collateral; (h) any
circumstance similar to the foregoing which might otherwise limit recourse
against Guarantor by any Beneficiary, and (i) any other
-6-
<PAGE>
Guaranty
circumstance whatsoever that might otherwise constitute a legal or equitable
discharge, release or defense of a guarantor or surety.
Guarantor agrees that this Guaranty shall be automatically reinstated if and
to the extent that for any reason any payment by or on behalf of Lessee is
rescinded or must be otherwise restored by any of the Beneficiaries, whether as
a result of any proceedings in bankruptcy or reorganization or otherwise.
Guarantor further agrees that, without limiting the generality of this
Guaranty, if a Lease Event of Default shall have occurred and be continuing and
Certificate Trustee is prevented by Applicable Laws, including, without
limitation, the imposition of an automatic stay under Section 312(a) of the
Bankruptcy Code or the imposition of an injunction under Section 105 of the
Bankruptcy Code, from exercising its remedies under the Lease, Certificate
Trustee shall be entitled to receive hereunder from Guarantor, upon demand
therefor, the sums which would have otherwise been due from Lessee had such
remedies been exercised.
SECTION 4. Waiver of Subrogation. Guarantor hereby irrevocably waives any
---------------------
claim or other rights which it may now or hereafter acquire against Lessee that
arise from the existence, payment, performance or enforcement of Guarantor's
obligations under this Guaranty or any other Operative Document, including any
right of subrogation, reimbursement, exoneration, or indemnification, any right
to participate in any claim or remedy of the Beneficiaries against Lessee or any
Collateral which Administrative Agent or Certificate Trustee now has or
hereafter acquires, whether or not such claim, remedy or right arises in equity
or under contract, statute or common law, including the right to take or receive
from Lessee, directly or indirectly, in cash or other property or by set-off or
in any manner, payment or security on account of such claim or other rights. If
any amount shall be paid to Guarantor in violation of the preceding sentence and
the Obligations shall not have been indefeasibly paid in cash, such amount shall
be deemed to have been paid to Guarantor for the benefit of, and held in trust
for, the Beneficiaries, and shall forthwith be paid to Certificate Trustee to be
credited and applied pursuant to the terms of the Participation Agreement and
-7-
<PAGE>
Guaranty
the Lease. Guarantor acknowledges that it will receive direct and indirect
benefits from the financing arrangements contemplated by the Participation
Agreement and that the waiver set forth in this Section 4 is knowingly made in
---------
contemplation of such benefits. Guarantor hereby absolutely, unconditionally
and irrevocably waives and agrees not to assert or take advantage of any defense
based upon an election of remedies by Certificate Trustee, including an election
to proceed by non-judicial rather than judicial foreclosure, which destroys or
impairs any right of subrogation of Guarantor or the right of Guarantor to
proceed against any Person for reimbursement or both.
SECTION 5. Rights of the Beneficiaries. This Guaranty is made for the
---------------------------
benefit of, and shall be enforceable by, each Beneficiary as its interest may
appear.
SECTION 6. Term of Guaranty. This Guaranty and all guaranties, covenants and
----------------
agreements of Guarantor contained herein shall continue in full force and effect
and shall not be discharged until such time as all the Obligations shall be
indefeasibly paid in full in cash and all the agreements of Lessee and Guarantor
hereunder and under Construction Agency Agreement, the Lease, the Participation
Agreement and the other Operative Documents shall have been duly performed. If,
as a result of any bankruptcy, dissolution, reorganization, insolvency,
arrangement or liquidation proceedings (or proceedings similar in purpose or
effect), or if for any other reason any payment received by any Beneficiary in
respect of the Obligations is rescinded or must be returned by such Beneficiary,
this Guaranty shall continue to be effective as if such payment had not been
made and, in any event, as provided in the preceding sentence.
SECTION 7. Further Assurances. Guarantor hereby agrees to execute and
------------------
deliver all such instruments and take all such action as Administrative Agent or
any other Beneficiary may from time to time reasonably request in order to fully
effectuate the purposes of this Guaranty.
SECTION 8. Notices, etc. All notices, demands, requests, consents, approvals
-------------
and other instruments hereunder shall be in
-8-
<PAGE>
Guaranty
writing and shall be deemed to have been properly given if given as provided for
in Section 9.3 of the Participation Agreement.
SECTION 9. Amendments, etc. No amendment to or waiver of any provision of
----------------
this Guaranty, nor consent to any departure by Guarantor herefrom, shall in any
event be effective unless the same shall be in writing and signed by
Administrative Agent, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
SECTION 10. Severability. In case any provisions of this Guaranty or any
------------
application thereof shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions and statements and any
other application thereof shall not in any way be affected or impaired thereby.
To the extent permitted by law, Guarantor hereby waives any provision of law
that renders any term or provision hereof invalid or unenforceable in any
respect.
SECTION 11. Choice of Law. THIS GUARANTY SHALL IN ALL RESPECTS BE GOVERNED
-------------
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO THE CONFLICTS OF LAWS PRINCIPLES OF SUCH STATE.
SECTION 12. Successors and Assigns. This Guaranty shall be binding upon
----------------------
Guarantor and its successors, transferees and assigns and inure to the benefit
of and be enforceable by the respective successors, transferees, and assigns of
the Beneficiaries, provided, however, that Guarantor may not delegate any of its
-------- -------
obligations hereunder without the prior written consent of Administrative Agent,
each Lender and each Certificate Purchaser.
SECTION 13. Table of Contents. The table of contents and headings in this
-----------------
Guaranty are for purposes of reference only, and shall not limit or otherwise
affect the meaning hereof.
[signature page follows]
-9-
<PAGE>
Guaranty
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be executed as of
the date first above written.
CITIZENS UTILITIES COMPANY
By:
------------------------------------------
Name: Robert J. DeSantis
Title: Vice President and Treasurer
-10-
<PAGE>
================================================================================
CONSTRUCTION AGENCY AGREEMENT
dated as of April 28, 1995
between
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
not in its individual capacity
but solely as Certificate Trustee
and
ELECTRIC LIGHTWAVE, INC.,
as Construction Agent
<PAGE>
Construction Agency Agreement
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS
1.1. Defined Terms................................................. 2
ARTICLE II APPOINTMENT OF CONSTRUCTION AGENT
2.1. Appointment................................................... 2
2.2. Acceptance; Construction...................................... 2
2.3. Commencement of Construction.................................. 2
2.4. Application to this Agreement................................. 2
2.5. Term.......................................................... 3
2.6. Delegation; Construction Documents............................ 3
2.7. Scope of Authority............................................ 3
2.8. Covenants of Construction Agent............................... 4
ARTICLE III THE SYSTEMS
3.1. Construction.................................................. 5
3.2. Casualty, Condemnation and Events of Force Majeure............ 5
ARTICLE IV PAYMENT OF FUNDS
4.1. Funding of Construction Costs................................. 5
ARTICLE V CONSTRUCTION AGENCY EVENTS OF DEFAULT
5.1. Construction Agency Events of Default......................... 7
5.2. Survival...................................................... 8
5.3. Remedies; Remedies Cumulative................................. 8
ARTICLE VI NO CONSTRUCTION AGENCY FEE
6.1. Lease as Fulfillment of Certificate Trustee's
Obligations.................................................. 8
S-1
<PAGE>
Construction Agency Agreement
ARTICLE VII CERTIFICATE TRUSTEE'S RIGHTS; CONSTRUCTION
AGENT'S RIGHTS
7.1. Exercise of Certificate Trustee's Rights.................... 9
7.2. Certificate Trustee's Right to Cure Construction
Agent's Defaults............................................ 9
7.3. No Certificate Trustee Consent or Liability................. 9
S-2
<PAGE>
Construction Agency Agreement
ARTICLE IX MISCELLANEOUS
8.1. Notices........................................................ 10
8.2. Successors and Assigns......................................... 10
8.3. GOVERNING LAW.................................................. 10
8.4. Amendments and Waivers......................................... 10
8.5. Counterparts................................................... 10
8.6. Severability................................................... 10
8.7. Headings and Table of Contents................................. 11
8.8. Limitations on Recourse........................................ 11
8.9. Knowledge of Certificate Trustee and Bank...................... 11
S-3
<PAGE>
Construction Agency Agreement
CONSTRUCTION AGENCY AGREEMENT
-----------------------------
THIS CONSTRUCTION AGENCY AGREEMENT, dated as of April 28, 1995 (this
"Agreement"), is entered into between SHAWMUT BANK CONNECTICUT, NATIONAL
- ----------
ASSOCIATION, not in its individual capacity but solely as Certificate Trustee
("Certificate Trustee"), and ELECTRIC LIGHTWAVE, INC., a Delaware corporation
- ---------------------
(in its capacity as construction agent, "Construction Agent").
------------------
PRELIMINARY STATEMENT
A. Electric Lightwave, Inc., as Lessee, and Certificate Trustee, as Lessor,
are parties to that certain Lease, dated as of even date herewith (as amended,
supplemented or otherwise modified from time to time pursuant thereto, the
"Lease"), pursuant to which Lessee has agreed to lease from Certificate Trustee,
- ------
and Certificate Trustee has agreed to lease to Lessee, certain Systems and
Equipment.
B. Certificate Trustee and Lessee are also parties to that certain
Participation Agreement (Electric Lightwave, Inc. Trust No. 1995-A), dated of
even date herewith (as amended, supplemented or otherwise modified, the
"Participation Agreement"), among Certificate Trustee, Electric Lightwave, Inc.,
- ------------------------
as Lessee and as Construction Agent, Shawmut Bank Connecticut, National
Association, as Certificate Trustee and Administrative Agent, the Lenders and
the Certificate Purchasers identified therein, BA Leasing & Capital Corporation,
as Information Agent, and Citizens Utilities Company, as Guarantor.
C. In accordance with the terms and conditions hereof and pursuant to the
Participation Agreement, (i) Certificate Trustee desires to appoint Construction
Agent as its sole and exclusive agent for the construction of each System, and
(ii) Construction Agent desires, for the benefit of Certificate Trustee, to
cause each System to be constructed.
<PAGE>
Construction Agency Agreement
NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS
I.1. Defined Terms. Capitalized terms used but not otherwise defined in this
-------------
Agreement shall have the meanings set forth in Appendix 1 to the Participation
Agreement.
ARTICLE II
APPOINTMENT OF CONSTRUCTION AGENT
II.1. Appointment. Pursuant to and subject to the terms and conditions set
-----------
forth herein and in the Participation Agreement and the other Operative
Documents, Certificate Trustee hereby irrevocably designates and appoints
Construction Agent as its exclusive agent for the construction of each System.
II.2. Acceptance; Construction. Construction Agent hereby unconditionally
------------------------
and irrevocably accepts the designation and appointment as Construction Agent.
Construction Agent will cause each System to be constructed so that at the end
of the Construction Period (a) each System has the demonstrated capability of
performing in Commercial Operation; (b) the equipment in each System is fully
integrated and self-contained, (c) each component of a System is interrelated to
the other components of such System in terms of economic useful life, function
and design, and (d) each System is designed or intended for use in Commercial
Operation by a Person (other than Lessee) as a separate and independent system
which, in conjunction with the Support Rights, will permit the operation of each
System in a commercially reasonable manner (collectively, the "Design
------
Objectives").
- ----------
-2-
<PAGE>
Construction Agency Agreement
II.3. Commencement of Construction. Construction Agent hereby agrees,
----------------------------
unconditionally and for the benefit of Certificate Trustee, to commence
construction of each System no later than April 1, 1996 or, if Construction
Agent has extended the term hereof, April 1, 1998 (with respect to each System,
the "Construction Commencement Date"). Without limiting the foregoing, no such
------------------------------
construction shall be undertaken until all required permits have been issued
therefor.
II.4. Application to this Agreement. In connection with the initial Advance
-----------------------------
Request for each System, Construction Agent shall identify the location at which
the System is to be constructed or completed and shall, among other things,
acknowledge and agree that the construction and development of such System will
be governed by the terms of this Agreement.
II.5. Term. This Agreement shall commence on the date hereof and shall
----
terminate (the "Construction Agreement Termination Date") with respect to any
---------------------------------------
given System upon the first to occur of:
(a) the Lease Termination Date;
(b) termination of this Agreement pursuant to Article V; and
---------
(c) April 30, 1998 or, with respect to any System suffering an event of Force
Majeure, the last day of the Construction Period with respect to that
System.
II.6. Delegation; Construction Documents. Construction Agent may execute any
----------------------------------
of its duties under this Agreement by or through agents, contractors, employees
or attorneys-in-fact, and Construction Agent shall enter into such agreements
with contractors, equipment suppliers and other parties as Construction Agent
deems necessary or desirable for the construction of each System pursuant hereto
(the "Construction Documents"); provided, however, that no such delegation shall
---------------------- -------- -------
limit or reduce in any way Construction Agent's duties and obligations under
this Agreement.
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<PAGE>
Construction Agency Agreement
II.7. Scope of Authority. (a) Subject to the terms, conditions,
------------------
restrictions and limitations set forth in the Operative Documents, Certificate
Trustee hereby expressly authorizes Construction Agent, or any agent or
contractor of Construction Agent, and Construction Agent unconditionally agrees,
for the benefit of Certificate Trustee, to take all action necessary or
desirable for the performance and satisfaction of all of Construction Agent's
obligations hereunder, including, without limitation:
(i) performing all design and supervisory functions relating to the
construction of each System and all engineering work related to the construction
of each System;
(ii) negotiating and entering into all Purchase Orders or arrangements to
procure the Equipment necessary to construct each System on such terms and
conditions as are customary and reasonable in light of local standards and
practices; provided, that each such Purchase Order shall be assigned to the
--------
Certificate Trustee pursuant to a Purchase Order Assignment;
(iii) obtaining all necessary permits, licenses, consents, approvals and
other authorizations, including those required under Applicable Laws, from all
Governmental Authorities in connection with the development and construction of
each System in accordance with the terms hereof and of the Participation
Agreement;
(iv) maintaining all books and records with respect to the construction,
operation and management of each System; and
(v) performing any other acts necessary in connection with the construction
and development of each System in accordance with the terms hereof and of
the Participation Agreement.
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<PAGE>
Construction Agency Agreement
(b) Neither Construction Agent nor any of its Affiliates or agents shall
enter into any contract which would, directly or indirectly, impose any
liability or obligation on Certificate Trustee or any Participant.
(c) Subject to the terms and conditions of this Agreement and the other
Operative Documents, Construction Agent shall have sole management and control
over the means, methods, sequences and procedures with respect to the
construction of each System.
II.8. Covenants of Construction Agent. Construction Agent hereby covenants and
-------------------------------
agrees that it will:
(a) following the Construction Commencement Date for each System, cause
construction of such System to be prosecuted diligently without
interruption and completed by the Construction Agreement Termination Date
in accordance with (i) the Design Objectives for such System, (ii) good
engineering and construction practices, (iii) all Applicable Laws, and (iv)
the Insurance Requirements. Construction Agent's obligation under this
Section 2.8(a) shall be absolute and unconditional, notwithstanding any
--------------
excess of the cost of construction of any System or Systems over the
aggregate Commitments, the payment of which excess shall be the recourse
obligation of Construction Agent;
(b) notify Certificate Trustee in writing not less than ten (10) Business Days
after the occurrence of each event of Force Majeure;
(c) take all reasonable and practical steps to minimize the disruption of the
construction process arising from events of Force Majeure;
(d) cause the Completion Date for each System to occur on or prior to the
Commitment Termination Date, and cause all Liens (including, without
limitation, Liens or claims for materials supplied or labor or services
performed in connection with the construction of such System), other than
Permitted Liens, to be discharged;
-5-
<PAGE>
Construction Agency Agreement
(e) execute, prior to the completion of any System and without any consent of
the Participants, any change order, modification or addition to any System
to be built, so long as such change order, modification or addition does
not materially and adversely affect the residual value, utility and
expected economic useful life of such System or the MAN or the FCL of which
it is a component, as built, in accordance with the Design Objectives; and
(f) at all times during the Construction Period, maintain for the benefit of
Certificate Trustee all insurance required to be maintained during the
Lease Term under Section 9.1 of the Lease.
ARTICLE III
THE SYSTEMS
III.1. Construction. Construction Agent shall cause each System to be
------------
constructed, equipped, maintained and used in accordance with the Design
Objectives and in compliance with all Applicable Laws and the Insurance
Requirements.
III.2. Casualty, Condemnation and Events of Force Majeure. If at any time
--------------------------------------------------
prior to the Completion Date with respect to any System there occurs a Casualty
or a Condemnation or Certificate Trustee or Construction Agent receives notice
of a Condemnation, then, in each case, Construction Agent shall promptly and
diligently complete the construction of such System in accordance with the
Design Objectives and cause the Completion Date to occur on or prior to the last
day of the Construction Period.
-6-
<PAGE>
Construction Agency Agreement
ARTICLE IV
PAYMENT OF FUNDS
IV.1. Funding of Construction Costs. (a) In connection with and during the
-----------------------------
course of the construction of each System, Construction Agent may request that
Certificate Trustee advance funds for the payment of the cost of constructing
such System. Certificate Trustee will comply with such request to the extent
provided for under, and subject to the conditions, restrictions and limitations
contained in, the Participation Agreement. Construction Agent and Certificate
Trustee acknowledge and agree that Construction Agent's right to request funds
and Certificate Trustee's obligation to advance funds for the payment of
construction costs is subject in all respects to the terms and conditions of the
Participation Agreement and each of the other Operative Documents. Construction
Agent's obligations hereunder shall not be limited or reduced by virtue of (i)
any failure of Certificate Trustee to provide any funds, or (ii) any lack of
funds of Construction Agent, except if such failure constitutes, or such lack of
funds is caused by the failure of Certificate Trustee to provide any funds to
Construction Agent which failure constitutes, a breach of Certificate Trustee's
obligations under the Participation Agreement after all conditions to such
funding shall have been duly and timely satisfied.
(b) The proceeds of any funds made available to Certificate Trustee to pay
construction costs shall be made available to Construction Agent in accordance
with the Advance Request relating thereto, this Agreement and the Participation
Agreement. To the extent that Advances made in order to fund the cost of
construction of any System are paid into a deposit account maintained by
Certificate Trustee, Construction Agent shall be granted a power of attorney to
withdraw funds from such account in accordance with the terms of the
Participation Agreement, including the requirement that all conditions precedent
to the making of the relevant Advance to Lessee under the Participation
Agreement shall be either satisfied or waived in writing before funds relating
to such Advance may be withdrawn by the
-7-
<PAGE>
Construction Agency Agreement
Construction Agent from such account, and Lessor shall not allow Construction
Agent to withdraw funds from such account unless and until Lessor has received
timely notice from the Administrative Agent that all conditions precedent to the
making of the relevant advance to Lessee under the Lease have been either
satisfied or waived in writing. Construction Agent will use all such proceeds
only to pay or reimburse itself for the costs related to construction, including
installation and internally allocated overheard properly allocable to the
construction of a System in accordance with Construction Agent's then current
accounting practices, as set forth in the Advance Request relating to such
funds. If, for any reason, the aggregate cost, including Capitalized Interest
and Capitalized Yield on the Notes and Certificates, respectively, to complete
construction of all the Systems exceeds the sum of the then available
Commitments, then all such costs (including such Capitalized Interest and
Capitalized Yield) in excess of the available Commitments shall be borne by
Construction Agent from its own funds.
ARTICLE V
CONSTRUCTION AGENCY EVENTS OF DEFAULT
V.1. Construction Agency Events of Default. If any one or more of the
-------------------------------------
following events (each a "Construction Agency Event of Default") shall occur:
------------------------------------
(a) Construction Agent shall fail to apply any funds paid by Certificate
Trustee to Construction Agent (or withdrawn by Construction Agent from a
deposit account maintained for such purpose by Certificate Trustee in the
name of Certificate Trustee) for, or for reimbursement of itself for, the
construction of any System to the payment of such construction costs in
accordance with the terms hereof;
(b) the construction with respect to any System shall fail to commence for any
reason on or prior to the Construction Commencement Date;
-8-
<PAGE>
Construction Agency Agreement
(c) the Completion Date with respect to any System shall fail to occur for any
reason on or prior to the last day of the Construction Period;
(d) Construction Agent shall fail to observe or perform any term, covenant or
condition of this Agreement (except those specified in clauses (a) through
-----------
(c) above), and such failure shall remain uncured for a period of thirty
---
(30) days after receipt of notice thereof by Construction Agent; provided,
--------
however, no Construction Agency Event of Default shall be deemed to occur
-------
if such failure or breach cannot reasonably be cured within such period, so
long as Construction Agent shall have promptly commenced the cure thereof
within such thirty (30) day period, continues to act with diligence to cure
such failure or breach and cures such failure or breach within ninety (90)
days after receipt of the original notice of such failure or breach by
Construction Agent; or
(e) any Lease Event of Default shall have occurred and be continuing;
then, in any such event, Certificate Trustee may, in addition to the other
rights and remedies provided for in this Article V, (A) immediately terminate
---------
this Agreement as to any System or each and every System, separately,
successively or concurrently (all in Certificate Trustee's sole discretion) by
giving Construction Agent written notice of such termination, and upon the
giving of such notice, this Agreement shall terminate as to such System or each
and every System (as the case may be) and all rights of Construction Agent and
all obligations of Certificate Trustee under this Agreement with respect to such
System or each and every System (as the case may be) shall cease. Construction
Agent shall pay upon demand all costs, expenses, losses, expenditures and
damages (including, without limitation, attorneys' fees and the fees and
expenses of any construction agent thereafter appointed by the Certificate
Trustee from time to time) incurred by or on behalf of Certificate Trustee in
connection with any Construction Agency Event of Default, and the obligations of
the Construction Agent shall survive any termination of this Agreement.
-9-
<PAGE>
Construction Agency Agreement
With respect to any System as to which this Agreement shall be so terminated,
(i) the Construction Period for such System shall automatically terminate, in
which event the Equipment in such System shall become subject to the Lease
pursuant to Section 2.1 and Section 2.2 thereof, and (ii) Lessor and the
Participants shall not be obligated to make any further Advances (including any
Advances in respect of Capitalized Interest or Capitalized Yield) with respect
to such System.
V.2. Survival. The termination of this Agreement pursuant to Section 5.1
-------- -----------
shall in no event relieve Construction Agent of (i) its liability and
obligations hereunder which accrued prior to such termination, all of which
shall survive any such termination, or (ii) its liability under Section 2.8 or
-----------
7.2.
- ---
V.3. Remedies; Remedies Cumulative. No failure to exercise and no delay in
-----------------------------
exercising, on the part of Certificate Trustee, any right, remedy, power or
privilege under this Agreement or under the other Operative Documents shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, remedy, power or privilege under this Agreement preclude any other or
further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges provided in this
Agreement are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law.
-10-
<PAGE>
Construction Agency Agreement
ARTICLE VI
NO CONSTRUCTION AGENCY FEE
VI.1. Lease as Fulfillment of Certificate Trustee's Obligations . All
---------------------------------------------------------
obligations, duties and requirements imposed upon or allocated to Construction
Agent hereunder shall be performed by Construction Agent at Construction Agent's
sole cost and expense, and Construction Agent will not be entitled to receive,
and Certificate Trustee shall have no obligation to pay, any agency fee or other
fee or compensation, and Construction Agent shall not be entitled to receive,
and Certificate Trustee shall have no obligation to make or pay, any
reimbursement therefor, it being understood that this Agreement is being entered
into as consideration for and as an inducement to Certificate Trustee and
Construction Agent entering into the Lease and the other Operative Documents.
ARTICLE VII
CERTIFICATE TRUSTEE'S RIGHTS; CONSTRUCTION AGENT'S RIGHTS
VII.1. Exercise of Certificate Trustee's Rights . Construction Agent hereby
----------------------------------------
acknowledges and agrees that, subject to and in accordance with the terms of the
assignment made by Certificate Trustee in favor of Administrative Agent pursuant
to the Security Agreement, the rights and powers of Certificate Trustee under
this Agreement have been assigned to and may be exercised by Administrative
Agent. Construction Agent hereby consents to the assignment by Certificate
Trustee to Administrative Agent of Certificate Trustee's right, title and
interest in, to and under this Agreement pursuant to the Security Agreement.
VII.2. Certificate Trustee's Right to Cure Construction Agent's Defaults .
-----------------------------------------------------------------
Without waiving or releasing any obligation or Construction Agency Event of
Default, Certificate Trustee may (but shall be under no obligation to) remedy
any Construction Agency
-11-
<PAGE>
Construction Agency Agreement
Event of Default for the account of and at the sole cost and expense of
Construction Agent. Construction Agent shall pay, on demand, to Certificate
Trustee all reasonable costs and expenses so incurred (including, without
limitation, reasonable fees and expenses of counsel, together with interest
thereon at the Overdue Rate from the date on which such costs or expenses are
paid by Certificate Trustee).
VII.3. No Certificate Trustee Consent or Liability . Nothing contained in
-------------------------------------------
this Agreement shall be construed as constituting the consent or request of the
Certificate Trustee, express or implied, to or for the performance by any
contractor, mechanic, laborer, materialman, supplier or vendor of any labor or
services or for the furnishing of any materials for any construction,
alteration, addition, repair or demolition of or to the Equipment or any part
thereof. NOTICE IS HEREBY GIVEN THAT NONE OF CERTIFICATE TRUSTEE, ANY
CERTIFICATE PURCHASER, ANY LENDER OR ANY AGENT (OTHER THAN CONSTRUCTION AGENT)
IS OR SHALL BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE
FURNISHED TO CONSTRUCTION AGENT, OR TO ANYONE HOLDING THE EQUIPMENT OR ANY PART
THEREOF THROUGH OR UNDER CONSTRUCTION AGENT, AND THAT NO MECHANIC'S OR OTHER
LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE
INTEREST OF CERTIFICATE TRUSTEE, ANY CERTIFICATE PURCHASER, ANY LENDER, OR ANY
AGENT (OTHER THAN CONSTRUCTION AGENT) IN AND TO THE EQUIPMENT.
ARTICLE VIII
MISCELLANEOUS
VIII.1. Notices. All notices, consents, directions, approvals, instructions,
-------
requests, demands and other communications required or permitted by the terms
hereof to be given to any Person shall be given in writing in the manner
provided in, shall be sent to the respective addresses set forth in, and the
effectiveness thereof shall be governed by the provisions of, Section 9.3 of the
Participation Agreement.
-12-
<PAGE>
Construction Agency Agreement
VIII.2. Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of Certificate Trustee, Construction Agent and their
respective successors and assigns; provided, however, that Construction Agent
-------- -------
shall not assign any of its rights or, except as permitted by Section 2.6,
-----------
delegate any of its duties or obligations under this Agreement without the prior
written consent of Certificate Trustee and Administrative Agent, which consent
may be granted or withheld in Certificate Trustee's and Administrative Agent's
sole and absolute discretion.
VIII.3. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
-------------
PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES.
VIII.4. Amendments and Waivers. Subject to Section 9.5 of the Participation
----------------------
Agreement, Certificate Trustee and Construction Agent may from time to time
enter into written amendments, supplements or modifications hereto.
VIII.5. Counterparts. This Agreement may be executed on any number of
------------
separate counterparts, and by different parties on different counterparts, and
all of said counterparts taken together shall be deemed to constitute one and
the same instrument.
VIII.6. Severability. Any provision of this Agreement which is prohibited or
------------
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
VIII.7. Headings and Table of Contents. The headings and table of contents
------------------------------
contained in this Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.
-13-
<PAGE>
Construction Agency Agreement
VIII.8. Limitations on Recourse. The parties hereto agree that Bank shall
-----------------------
have no personal liability whatsoever to Construction Agent or its successors
and assigns for any claim based on or in respect of this Agreement or any of the
other Operative Documents or arising in any way from the transactions
contemplated hereby or thereby; provided, however, that Bank shall be liable in
-------- -------
its individual capacity (a) for its own willful misconduct or gross negligence
(or negligence in the handling of funds), (b) for liabilities that may result
from the incorrectness of any representation or warranty expressly made by it in
its individual capacity in Section 4.3 of the Participation Agreement or from
the failure of Bank to perform its covenants and agreements set forth in Section
6.2(a) of the Participation Agreement, or (c) for any Tax based on or measured
by any fees, commission or compensation received by it for acting as Certificate
Trustee as contemplated by the Operative Documents. It is understood and agreed
that, except as provided in the preceding proviso: (i) Bank shall have no
personal liability under any of the Operative Documents as a result of acting
pursuant to and consistent with any of the Operative Documents; (ii) all
obligations of Bank to Construction Agent are solely nonrecourse obligations
(with liability payable solely out of the Trust Estate) except to the extent
that it has received payment from others; (iii) all such personal liability of
Bank hereunder or under the other Operative Documents is expressly waived and
released as a condition of, and as consideration for, the execution and delivery
of the Operative Documents by Bank; and (iv) this Agreement is executed and
delivered by Bank solely in the exercise of the powers expressly conferred upon
it as Certificate Trustee under the Trust Agreement.
VIII.9. Knowledge of Certificate Trustee and Bank. For all purposes of this
-----------------------------------------
Agreement and the other Operative Documents, in the absence of actual knowledge
of an officer in the Corporate Trust Department of Bank, Certificate Trustee and
Bank shall not be deemed to have knowledge of any Construction Agency Event of
Default unless Certificate Trustee or Bank receives written notice thereof given
by or on behalf of Administrative Agent or a Participant.
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<PAGE>
Construction Agency Agreement
8.10. Failure of Requisite Governmental Approvals.
-------------------------------------------
If any System or Systems constructed hereunder and to be located in the State of
Oregon may not be leased to Electric Lightwave, Inc. under the Lease without
obtaining prior Governmental Approval or waivers, then, unless such Approvals or
waivers have been obtained no later than the date such System or Systems are to
be delivered and become subject to the Lease, Construction Agent shall purchase
such System or Systems for Lessor's Cost upon completion of the System or
Systems. Payment by Construction Agent shall be in immediately available funds
and paid to the Certificate Trustee on the date of purchase.
[signature page follows]
-15-
<PAGE>
Construction Agency Agreement
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
ELECTRIC LIGHTWAVE, INC.
By: _______________________________
Name: Robert J. DeSantis
Title: Chief Financial Officer
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity but solely as
Certificate Trustee
By: _____________________________
Name: Robert L. Reynolds
Title: Vice President
<PAGE>
================================================================================
LEASE
(Electric Lightwave, Inc. Trust No. 1995-A)
Dated as of April 28, 1995
between
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
not in its individual capacity, except as
expressly stated herein, but solely as
Certificate Trustee, as Lessor,
and
ELECTRIC LIGHTWAVE, INC., as Lessee
================================================================================
ALL RIGHT, TITLE AND INTEREST OF LESSOR UNDER THIS LEASE AND THE PROPERTY RIGHTS
SUBJECT HERETO HAVE BEEN ASSIGNED TO, AND ARE SUBJECT TO A SECURITY INTEREST IN
FAVOR OF SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, AS ADMINISTRATIVE AGENT
("ADMINISTRATIVE AGENT"), UNDER THE SECURITY AGREEMENT, DATED AS OF APRIL 28,
--------------------
1995, FOR THE BENEFIT OF THE ADMINISTRATIVE AGENT AND THE LENDERS AND
CERTIFICATE PURCHASERS REFERRED TO IN SUCH SECURITY AGREEMENT. THIS LEASE HAS
BEEN EXECUTED IN SEVERAL COUNTERPARTS. TO THE EXTENT, IF ANY, THAT THIS LEASE
CONSTITUTES
<PAGE>
CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL
CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS
LEASE MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART
HEREOF OTHER THAN THE "ORIGINAL EXECUTED COUNTERPART NO. 1", WHICH SHALL BE
IDENTIFIED AS THE COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY
ADMINISTRATIVE AGENT ON OR FOLLOWING THE SIGNATURE PAGE THEREOF.
THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART NO. 1.
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
ARTICLE I DEFINITIONS; LESSEE LIABILITY..................... 1
ARTICLE II LEASE OF SYSTEMS; LEASE TERM...................... 1
SECTION 2.1. Acceptance and Lease of Systems..................... 1
SECTION 2.2. Acceptance Procedure................................ 1
SECTION 2.3. Lease Term and Lease Supplement Term................ 2
SECTION 2.4. Lease Supplement Renewal............................ 2
ARTICLE III RENT.............................................. 2
SECTION 3.1. Base Rent........................................... 2
SECTION 3.2. Supplemental Rent................................... 2
SECTION 3.3. Method and Amount of Payment........................ 2
SECTION 3.4. Late Payment........................................ 3
SECTION 3.5. Net Lease; No Setoff; Etc........................... 3
ARTICLE IV RENEWAL OPTIONS; SALE, RETURN AND PURCHASE OPTIONS 5
SECTION 4.1. Renewal Terms....................................... 5
SECTION 4.2. Purchase Option..................................... 5
SECTION 4.3. Sale Option......................................... 6
SECTION 4.4. Exercise of Options................................. 6
SECTION 4.5. Sale Option Procedure............................... 7
SECTION 4.6. Return of Equipment................................. 9
SECTION 4.7. Completion of Systems............................... 10
SECTION 4.8. Failure of Lessee to Sell System.................... 10
ARTICLE V CONDITION OF EQUIPMENT; DISCLAIMER OF WARRANTIES.. 12
SECTION 5.1. Waivers............................................. 12
ARTICLE VI LIENS............................................. 13
SECTION 6.1. Liens............................................... 13
SECTION 6.2. No Lessor Consent or Liability...................... 14
-i-
<PAGE>
TABLE OF CONTENTS
-----------------
(continued)
PAGE
----
ARTICLE VII MAINTENANCE AND REPAIR; ALTERATIONS AND ADDITIONS. 14
SECTION 7.1. Maintenance and Repair; Compliance With Law......... 14
SECTION 7.2. Alterations......................................... 15
SECTION 7.3. Title to Alterations................................ 16
SECTION 7.4. Maintenance and Repair Reports...................... 17
ARTICLE VIII USE............................................... 17
ARTICLE IX INSURANCE......................................... 18
SECTION 9.1. Required Coverage................................... 18
SECTION 9.2. Delivery of Insurance Certificates.................. 19
ARTICLE X ASSIGNMENT AND SUBLEASING......................... 19
SECTION 10.1. Assignment and Subleasing.......................... 19
SECTION 10.2. Release from Obligations........................... 20
ARTICLE XI LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE......... 21
SECTION 11.1. Event of Taking.................................... 21
SECTION 11.2. Application of Certain Payments Relating to
Condemnation...................................... 22
SECTION 11.3. Event of Loss...................................... 22
SECTION 11.4. Casualty........................................... 22
SECTION 11.5. [Intentionally Deleted]............................ 23
SECTION 11.6. Other Dispositions................................. 23
SECTION 11.7. Negotiations....................................... 23
SECTION 11.8. No Rent Abatement.................................. 23
ARTICLE XII NON-INTERFERENCE.................................. 24
SECTION 12.1. Non-Interference................................... 24
SECTION 12.2. Certain Duties and Responsibilities of Lessor...... 24
ARTICLE XIII INSPECTION AND REPORTS............................ 24
-ii-
<PAGE>
TABLE OF CONTENTS
-----------------
(continued)
PAGE
----
SECTION 13.1. Inspection......................................... 24
SECTION 13.2. Reports............................................ 25
ARTICLE XIV
[INTENTIONALLY DELETED]........................................... 25
ARTICLE XV LEASE EVENTS OF DEFAULT........................... 25
ARTICLE XVI ENFORCEMENT....................................... 27
SECTION 16.1. Remedies........................................... 27
SECTION 16.2. Sale of Systems.................................... 28
SECTION 16.3. Application of Proceeds............................ 28
SECTION 16.4. Power of Attorney.................................. 29
SECTION 16.5. Remedies Cumulative; No Waiver; Consents........... 29
ARTICLE XVII RIGHT TO PERFORM FOR LESSEE....................... 30
ARTICLE XVIII MISCELLANEOUS..................................... 30
SECTION 18.1. Binding Effect; Successors and Assigns; Survival... 30
SECTION 18.2. Severability....................................... 30
SECTION 18.3. Notices............................................ 31
SECTION 18.4. Amendment; Complete Agreements..................... 31
SECTION 18.5. Headings........................................... 31
SECTION 18.6. Original Lease..................................... 31
SECTION 18.7. GOVERNING LAW...................................... 31
SECTION 18.8. Discharge of Lessee's Obligations by its Affiliates 32
SECTION 18.9. Liability of Trustee Limited....................... 32
SECTION 18.10. Estoppel Certificates............................. 32
SECTION 18.11. No Joint Venture.................................. 33
SECTION 18.12. No Accord and Satisfaction........................ 33
SECTION 18.13. Successor Lessor.................................. 33
SECTION 18.14. Survival.......................................... 34
SECTION 18.15. Transfer of Systems to Lessee..................... 34
SECTION 18.16. Enforcement of Certain Warranties................. 34
SECTION 18.17. Investment of Security Funds...................... 35
-iii-
<PAGE>
TABLE OF CONTENTS
-----------------
(continued)
PAGE
----
EXHIBIT A Form of Lease Supplement
-iv-
<PAGE>
Lease
THIS LEASE dated as of April 28, 1995 (as amended, supplemented, or otherwise
modified from time to time, this "Lease"), is between SHAWMUT BANK CONNECTICUT,
-----
NATIONAL ASSOCIATION, not in its individual capacity, except as expressly stated
herein, but solely as Certificate Trustee under the Trust Agreement, as Lessor
("Lessor"), and ELECTRIC LIGHTWAVE, INC., a Delaware corporation, as Lessee
------
("Lessee").
- --------
In consideration of the mutual agreements herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound hereby, hereby
agree as follows:
ARTICLE I
DEFINITIONS; LESSEE LIABILITY
-----------------------------
For all purposes hereof, the capitalized terms used herein and not otherwise
defined shall have the meanings assigned thereto in Appendix 1 to that certain
Participation Agreement (Electric Lightwave, Inc. Trust No. 1995-A) dated as of
April 28, 1995, among Lessee, Lessor, the Certificate Purchasers and Lenders
identified therein, Administrative Agent, Information Agent and Guarantor (the
"Participation Agreement"). All obligations imposed on the "Lessee" in this
- ------------------------ ------
Lease shall be the full recourse liability of Lessee.
ARTICLE II
LEASE OF SYSTEMS; LEASE TERM
----------------------------
SECTION II.1. Acceptance and Lease of Systems. On each Delivery Date,
-------------------------------
Lessor, subject to the satisfaction or waiver of the conditions set forth in
Article III of the Participation Agreement, hereby agrees to lease the Systems
delivered on such Delivery Date to Lessee hereunder, and Lessee, subject to the
satisfaction or waiver of the conditions set forth in Article III of the
Participation Agreement, hereby agrees, expressly for the direct benefit of
Lessor, to lease such Systems from Lessor for the applicable Lease Supplement
Term.
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SECTION II.2. Acceptance Procedure. Lessee hereby agrees that the execution
--------------------
and delivery by Lessee on each Delivery Date of a Certificate of Acceptance in
the form of Exhibit M to the Participation Agreement (appropriately completed)
---------
shall, without further act, constitute the irrevocable acceptance by Lessee on
behalf of Lessor of the Systems which are the subject thereof and the Lease
Supplement referred to in the Certificate of Acceptance for all purposes of
this Lease, such Lease Supplement and the other Operative Documents.
SECTION II.3. Lease Term and Lease Supplement Term. The term of this Lease
------------------------------------
(the "Lease Term") shall commence on the date of execution of this Lease by
----------
Lessor and Lessee, and shall expire on the Lease Termination Date. Unless
earlier terminated, the term of each Lease Supplement shall consist of a base
period, commencing on and including the initial Delivery Date with respect to
such Lease Supplement and ending on, but not including, the third anniversary of
such initial Delivery Date (the "Base Term") and one or more Renewal Terms, if
---------
exercised (collectively, the applicable "Lease Supplement Term").
---------------------
Notwithstanding anything to the contrary contained herein or in any other
Operative Document, the term of this Lease and all Lease Supplements shall
expire no later than April 30, 2002.
SECTION II.4. Lease Supplement Renewal. Lessee may elect to renew any Lease
------------------------
Supplement for one or more one-year renewal terms (each, a "Renewal Term") as
------------
provided in Section 4.1 and in the applicable Lease Supplement; provided, that
----------- --------
no Renewal Term may extend beyond April 30, 2002.
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ARTICLE III
RENT
----
SECTION III.1. Base Rent. During the Lease Term, Lessee shall pay to Lessor
---------
Base Rent on each Payment Date determined in accordance with the definition of
"Base Rent." During any Holdover Period, Lessee shall pay rent to Lessor from
time to time on demand in an amount equal to the sum of (i) Base Rent (as
determined in accordance with the definition thereof) during the Holdover Period
plus (ii) $40,000 per day ("Holdover Rent") and Lessor shall apply the amounts
-------------
set forth in this clause (ii) from time to time paid by Lessee in reduction of
-----------
the Lease Balance.
SECTION III.2. Supplemental Rent. Lessee shall pay to Lessor, or to whomever
-----------------
shall be entitled to payment thereof as expressly provided herein or in any
other Operative Document (and Lessor hereby directs Lessee, on behalf of Lessor,
so to pay any such other Person) any and all Supplemental Rent promptly as the
same shall become due and payable, and, in the event of any failure on the part
of Lessee to pay any Supplemental Rent, Lessor shall have all rights, powers and
remedies provided for herein or by law or in equity or otherwise in the case of
nonpayment of Base Rent. Lessee hereby reaffirms its obligation to pay as
Supplemental Rent (i) any and all Additional Costs as the same become due and
payable, and (ii) all amounts determined to be due and payable pursuant to
Section 7.1(a) of the Trust Agreement in accordance with its terms.
SECTION III.3. Method and Amount of Payment. Base Rent and Supplemental Rent
----------------------------
shall be paid to Lessor (or, in the case of Supplemental Rent, to such Person as
may be entitled thereto) at such place as Lessor (or such other Person) shall
specify in writing to Lessee at least five (5) Business Days prior to the due
date therefor; provided that, so long as the Notes remain outstanding, such Rent
--------
shall be paid directly to Administrative Agent. Each payment of Rent shall be
made by Lessee prior to 12:00 noon, Hartford, Connecticut time (and payments
made after such time shall be deemed to have been made on the next day) at the
place of payment in funds consisting of lawful currency of the United States of
America which (in the case of any amount payable
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to Lessor, either Agent or any Participant) shall be immediately available on
the scheduled date when such payment shall be due, unless the scheduled date
shall not be a Business Day, in which case such payment shall be made on the
next succeeding Business Day (unless, in the case of any payment the amount of
which is determined by reference to LIBOR, the result of such extension would be
to carry such payment into the next calendar month, in which event such payment
shall be made on the next preceding Business Day). The provisions of the
foregoing sentence of this Section 3.3 shall be applicable only to Base Rent and
-----------
to Supplemental Rent payable to, or on behalf or for the account of, Lessor, any
Participant, either Agent and any other Indemnitee.
SECTION III.4. Late Payment. If any Base Rent shall not be paid when due,
------------
Lessee shall pay to Lessor, or if any Supplemental Rent payable to or on behalf
or for the account of Lessor, any Participant, either Agent or any other
Indemnitee is not paid when due, Lessee shall pay to whomever shall be entitled
thereto, in each case as Supplemental Rent, interest at the Overdue Rate on such
overdue amount from and including the due date thereof (not including any
applicable grace period) to but excluding the Business Day of payment thereof.
SECTION III.5. Net Lease; No Setoff; Etc. This Lease shall constitute a net
-------------------------
lease and, notwithstanding any other provision of this Lease, it is intended
that Base Rent and Supplemental Rent shall be paid without counterclaim, setoff,
deduction or defense of any kind and without abatement, suspension, deferment,
diminution or reduction of any kind, and Lessee's obligation to pay all such
amounts, throughout the Base Term and any Renewal Term, if applicable, is
absolute and unconditional. The obligations and liabilities of Lessee hereunder
shall in no way be released, discharged or otherwise affected for any reason,
including, without limitation, to the maximum extent permitted by law: (a) any
defect in the condition, merchantability, design, construction, quality or
fitness for use of any portion of a System or any related Equipment, or any
failure of a System or any related Equipment to comply with all Applicable Laws,
including any inability to use a System or any related Equipment by reason of
such non-compliance; (b) any damage to, abandonment, loss, destruction,
requisition, taking or contamination of or Release
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from a System or any related Equipment or any part thereof, including
eviction; (c) any restriction, prevention or curtailment of or interference with
any use of a System or any related Equipment or any part thereof, including
eviction; (d) the attachment of any Lien of any third party to a System or any
related Equipment; (e) any prohibition or restriction of or interference with
Lessee's use of any or all of a System or any related Equipment by any Person;
(f) any change, waiver, extension, indulgence or other action or omission or
breach in respect of any obligation or liability of or by Lessor, either Agent
or any Participant; (g) any bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation or other like proceedings relating to
Lessee, Lessor, either Agent, any Participant or any other Person, or any action
taken with respect to this Lease by any trustee or receiver of Lessee, Lessor,
either Agent, any Participant or any other Person, or by any court, in any such
proceeding; (h) any claim that Lessee has or might have against any Person,
including, without limitation, Lessor, either Agent or any Participant; (i) any
failure on the part of Lessor to perform or comply with any of the terms of this
Lease, any other Operative Document or of any other agreement whether or not
related to the Overall Transaction; (j) any invalidity or unenforceability or
disaffirmance against or by Lessee of this Lease or any provision hereof or any
of the other Operative Documents or any provision of any thereof; (k) the
impossibility of performance by Lessee, Lessor or both; (l) any action by any
court, administrative agency or other Governmental Authority; (m) any
restriction, prevention or curtailment of or any interference with the
construction or any use of a System or any related Equipment; or (n) any other
occurrence whatsoever, whether similar or dissimilar to the foregoing, whether
or not Lessee shall have notice or knowledge of any of the foregoing. Except as
specifically set forth in Articles IV, XI, XVI or XVIII of this Lease, this
----------- -- --- -----
Lease shall be noncancellable by Lessee for any reason whatsoever, and Lessee,
to the extent permitted by Applicable Laws, waives all rights now or hereafter
conferred by statute or otherwise to quit, terminate or surrender this Lease, or
to any diminution, abatement or reduction of Rent payable by Lessee hereunder.
If for any reason whatsoever this Lease shall be terminated in whole or in part
by operation of law or otherwise, except as expressly provided in Articles IV,
-----------
XI, XVI or
- -- ---
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XVIII of this Lease, Lessee shall, unless prohibited by Applicable Laws,
- -----
nonetheless pay to Lessor (or, in the case of Supplemental Rent, to whomever
shall be entitled thereto) an amount equal to each Rent payment at the time and
in the manner that such payment would have become due and payable under the
terms of this Lease if it had not been terminated in whole or in part, and in
such case, so long as such payments are made and no Lease Event of Default shall
have occurred and be continuing, Lessor will deem this Lease to have remained in
effect. Each payment of Rent made by Lessee hereunder shall be final and, absent
manifest error in the determination of the amount thereof, Lessee shall not seek
or have any right to recover all or any part of such payment from Lessor,
Administrative Agent or any party to any agreements related thereto for any
reason whatsoever. Lessee assumes the sole responsibility for the condition,
use, operation, maintenance and management of the Equipment, and Lessor shall
have no responsibility in respect thereof and shall have no liability for damage
to the property of either Lessee or any subtenant of Lessee on any account or
for any reason whatsoever other than by reason of Lessor's willful misconduct or
gross negligence or breach of any of its obligations under any Operative
Document.
ARTICLE IV
RENEWAL OPTIONS; SALE, RETURN AND PURCHASE OPTIONS
--------------------------------------------------
SECTION IV.1. Renewal Terms. In accordance with Section 4.4, but subject to
------------- -----------
the limitations of Section 2.3, Lessee shall have the right, at its option, to
-----------
renew all or any of the Lease Supplements for one or more Renewal Terms,
commencing (i) in the case of the first Renewal Term, immediately following the
expiration of the Base Term, and (ii) in the case of any subsequent Renewal
Term, immediately following the expiration of the immediately preceding Renewal
Term. Lessee shall continue to pay Rent, including Base Rent, during each
Renewal Term on each Payment Date occurring during such Renewal Term. All of
the provisions of this Lease shall remain in effect during any Renewal Term.
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SECTION IV.2. Purchase Option. In accordance with Section 4.4, Lessee will
--------------- -----------
have the right, at its option at any time and from time to time, to purchase all
(but not less than all) of the Systems then subject to a Lease Supplement at a
price equal to the applicable Purchase Option Exercise Amount (the "Purchase
--------
Option"). If Lessee elects to purchase the Systems subject to a Lease
- ------
Supplement, Lessor shall transfer by bill of sale all of Lessor's right, title
and interest in and to the Systems subject to such Lease Supplement to Lessee or
its designee, without recourse or warranty (except as to the absence of Lessor
Liens), against payment by Lessee of an amount equal to such Purchase Option
Exercise Amount in immediately available funds. After written exercise of the
Purchase Option pursuant to Section 4.4, Lessee, at its option, may assign its
-----------
right to purchase the Systems subject to the Purchase Option to any Person;
provided, that (i) such assignee shall be bound by the provisions of this
- --------
Article IV applicable to the Purchase Option and (ii) no such assignment shall
- ----------
release Guarantor from any of its obligations under the Guaranty or Lessee from
its obligations under this Article IV, and Lessee shall remain primarily liable
----------
to Lessor for the payment of all amounts due under this Article IV in respect of
----------
the Purchase Option.
SECTION IV.3. Sale Option. If no Lease Default or Lease Event of Default
-----------
shall have occurred and be continuing, then Lessee may cause all (but not less
than all) Systems that are subject to a Lease Supplement to be sold on the last
day of the applicable Lease Supplement Term for cash to a purchaser or
purchasers not affiliated in any way with Lessee (the "Sale Option") in
-----------
accordance with Sections 4.4 and 4.5. In the event Lessee timely elects the
------------ ---
Sale Option, Lessee shall pay to Lessor on the last day of the applicable Lease
Supplement Term, as Supplemental Rent or Base Rent, as applicable, the amounts
determined in accordance with Sections 4.5(c) and 4.5(d).
--------------- ------
SECTION IV.4. Exercise of Options. In order to exercise either the Renewal
-------------------
Option or the Sale Option with respect to a Lease Supplement, Lessee shall give
irrevocable written notice to Lessor not more than 290 days nor less than 270
days prior to the end of the applicable Base Term or Renewal Term (except that,
in the case of a Renewal Term of less than 270 days, such notice
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shall be given at the commencement of such Renewal Term), as the case may be,
that Lessee intends to exercise either the Renewal Option or the Sale Option and
specifying such option. If Lessee shall fail to deliver such written notice in
the time required during the Base Term or a Renewal Term, Lessee shall be
deemed, in the case of the Base Term and each Renewal Term (other than the
Renewal Term that would end on April 30, 2002), to have elected to renew the
related Lease Supplement or Supplements pursuant to Section 4.1 and in the case
-----------
of the Renewal Term ending April 30, 2002, to have elected the Purchase Option
pursuant to Section 4.2. If a Lease Event of Default exists at the date of
-----------
election of either a Renewal Term or the Sale Option or on the last day of the
Base Term or a Renewal Term, Lessee shall be deemed to have chosen the Purchase
Option with respect to all of the Lease Supplements. In addition, if no Lease
Event of Default shall have occurred and then be continuing, Lessee may at any
time notify Lessor that it chooses to exercise the Purchase Option in respect of
one or more Lease Supplements, such purchase to be effected as of the first
Payment Date which is not less than ninety (90) days after the date of such
notice, specified by Lessee and otherwise in accordance with the provisions of
this Section 4.4. Lessee's election (or deemed election) of the Purchase
-----------
Option in respect of one or more Lease Supplements shall be irrevocable at the
time it is made or deemed made. Further, an election of the Sale Option in
respect of a Lease Supplement shall be deemed automatically revoked if the
Lessee does not comply with the terms and conditions of Section 4.6 and execute
-----------
and deliver to the buyer a Support Agreement, conforming with the requirements
therefor set forth in the Operative Documents, together with grants, in
recordable form, of easements or licenses and all other rights and authorities
necessary for the operation in place-in use of any such Systems subject to such
Lease Supplement.
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SECTION IV.5. Sale Option Procedure.
---------------------
(a) In the event that the Sale Option with respect to one or more Lease
Supplements shall be elected pursuant to Sections 4.3 and 4.4, Lessee shall
------------ ---
cause all (but not less than all) Systems subject to such Lease Supplement or
Lease Supplements to be sold in accordance with the procedures set forth in this
Section 4.5. Lessee shall, within five (5) Business Days after notice of its
- -----------
election of the Sale Option, execute and deliver an escrow, pledge and security
agreement (the "Sale Deposit Escrow Agreement") with Administrative Agent and an
-----------------------------
escrow agent selected by Administrative Agent (which may be Administrative
Agent) and reasonably acceptable to Lessee, which Sale Deposit Escrow Agreement
shall be in form and substance acceptable to Information Agent and shall include
provisions consistent with the provisions of Section 4.8, and pursuant thereto,
-----------
Lessee shall contemporaneously make a security deposit (the "Sale Deposit") in
------------
cash equal to the sum of (i) the Applicable Percentage Amount for the Systems
subject to each Lease Supplement for which the Sale Option has been elected, and
(ii) the aggregate amount of estimated sales costs for such Systems, as
reasonably estimated by the Information Agent after consultation with Lessee.
Any failure of Lessee to make the Sale Deposit or to execute and deliver the
Sale Deposit Escrow Agreement within five (5) Business Days after such election
of the Sale Option shall be deemed an election of the Purchase Option pursuant
to Section 4.2. All amounts from time to time held pursuant to the Sale Deposit
-----------
Escrow Agreement shall be invested at the direction of Lessee (or, upon the
occurrence and during the continuance of a Lease Event of Default, at the
direction of Administrative Agent) in Permitted Investments. All net interest
earned on such Permitted Investments shall be held pursuant to the Sale Deposit
Escrow Agreement and shall constitute part of the Sale Deposit. Upon
termination of the Sale Deposit Escrow Agreement, after payment by Lessee of all
amounts owed by Lessee under this Lease and the other Operative Documents, any
remaining amount of such interest shall be remitted to Lessee.
(b) During the period commencing on the date 270 days prior to the
scheduled end of any Base Term or Renewal Term for
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such Lease Supplement, as the case may be, Lessee, on behalf of Lessor, shall
use best commercial efforts, as nonexclusive agent for Lessor, to obtain the
highest cash bids for the purchase of the Systems subject to such Lease
Supplement and, in the event it receives any bid, Lessee shall, within five (5)
Business Days after receipt thereof and at least twenty (20) Business Days prior
to the applicable Lease Supplement Termination Date, certify to Lessor in
writing the amount and terms of such bid or bids, and the name and address of
the party or parties (who shall not be Lessee or any Affiliate of Lessee or any
Person with whom Lessee has an understanding or arrangement regarding the future
use of such Systems by Lessee or such Affiliate, but who may be Lessor or a
Participant, any Affiliate thereof or any Person contacted by a Participant)
submitting such bid or bids. Lessee shall bear its own expenses and pay, as
Supplemental Rent, the expenses of Lessor and each Participant in connection
with any such bidding and sale process pursuant to this Section 4.5,
-----------
as well as all costs and expenses incurred by any party (including a buyer or
potential buyer) to place such System or Systems in the condition required by
Section 4.6 and the costs of repairs and reasonable Alterations or improvements
- -----------
desired by such buyer or buyers.
(c) After Lessee shall have certified to Lessor all bids received, any
Participant, any Affiliate thereof or any Person contacted by any Participant
may submit a further bid or bids to Lessee not later than five (5) Business Days
prior to the applicable Lease Supplement Termination Date. On or before the
applicable Lease Supplement Termination Date, so long as no Lease Event of
Default or Lease Default shall have occurred and be continuing: (i) Lessee
shall transfer all of Lessee's right, title and interest in such Systems, or
cause such Systems to be transferred, to the bidder(s), if any, which shall have
submitted the highest cash bid therefor, at least twenty (20) (or, in the case
of a Participant, any Affiliate thereof or Person contacted by a Participant,
five (5)) Business Days prior to such Lease Supplement Termination Date, in the
same manner and in the condition required by Section 4.6 and otherwise in
-----------
accordance with all the terms of this Lease; and (ii) Lessee shall
simultaneously pay or cause to be paid to Lessor in immediately available funds
an amount equal to the sum of (p) any unpaid Base Rent due on or prior to such
Lease Supplement Termination Date, all Supplemental
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Rent due on or prior to such date and any other amounts due and payable by
Lessee to Lessor, Administrative Agent and each Participant; plus (q) the gross
sale proceeds of the Systems sold by Lessor (the "Recourse Sale Proceeds"); plus
---------------------- ----
(r) the excess, if any, of the Lease Supplement Balance over the Recourse Sale
Proceeds; provided, that the amount of such excess so payable shall not
--------
be greater than the Applicable Percentage Amount, or if the sale occurs at the
end of a Renewal Term, then at Lessor's option (at the direction of the
Participants) not more than the Recourse Deficiency Amount (the selected amount
being referred to as the "Guaranteed Residual Amount"). To the extent the
--------------------------
Recourse Sale Proceeds shall exceed the Lease Supplement Balance, upon receipt
of the amounts described in clause (p) of the preceding sentence, Lessor shall
pay the amount of such excess to Lessee.
(d) If Lessee exercises the Sale Option, Lessor may, at its option, engage
an appraiser of nationally recognized standing, at Lessee's expense, to
determine (by appraisal methods satisfactory to Lessor) the Fair Market Sales
Value of the Systems that were subject to the applicable Lease Supplement as of
the last day of the Base Term or as of the first and last day of the applicable
Renewal Term. The appraiser shall assume for this purpose that the Systems are
in the condition required by, and have been maintained in accordance with, this
Lease. If the appraisal concludes that the Fair Market Sales Value of such
Equipment as of the Lease Supplement Termination Date was in excess of the
Recourse Sale Proceeds from a sale pursuant to the Sale Option, Lessee shall
promptly pay to Lessor, to the extent of the corresponding Lease Supplement
Balance after application of the Recourse Sale Proceeds and the Guaranteed
Residual Amount, such excess as Supplemental Rent.
SECTION IV.6. Return of Equipment. On each Lease Supplement Termination
-------------------
Date, unless the Systems covered by the related Lease Supplement are to be
transferred pursuant to Section 4.2, Lessee shall, at its own expense, (i)
-----------
execute and deliver to Lessor (or a buyer meeting the independence requirements
hereof) in recordable form any grants of easements or of licenses with respect
to real property that may be necessary, in addition to the rights granted
pursuant the related Support Agreement, for the continuous operation of the
Systems subject to such Lease Supplement,
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(ii) transfer such Systems (together with the reports described in Section 7.4
-----------
relating thereto) to the Lessor or independent buyer thereof pursuant to Section
-------
4.5, free and clear of all Liens other than Lessor Liens, in as good
- ---
condition as such Systems were on the Delivery Date applicable to such Systems
(as modified by Alterations permitted by this Lease), ordinary wear and tear
excepted, and in compliance with all Applicable Laws and the other requirements
of Article VII, (iii) represent to the buyer of the Systems that each
-----------
such System meets the Design Objectives as of the date of transfer, and (iv)
either (A) assign to the Lessor or independent buyer Lessee's interest in a Non-
Affiliated Qualified Use Agreement, and obtain the consent of such Qualified
User to such assignment, or (B) pay to Lessor or the independent buyer the
excess by which the then fair market value of such right of use over the
remaining term of such Non-Affiliated Qualified Use Agreement exceeds the
present value (discounted quarterly in arrears at the Alternate Base Rate as of
the date of such determination) of the fair market value of the consideration,
if any, to be derived by or paid to the Lessor or independent buyer thereunder
throughout the remaining term of such Non-Affiliated Qualified Use Agreement.
Lessee shall cooperate with the independent buyer of the Systems in order to
facilitate the ownership and operation by such buyer of such Systems after the
Lease Supplement Termination Date, including providing all books, reports and
records regarding the maintenance, repair and ownership of such Systems and all
know-how, data and technical information relating thereto, granting or assigning
all licenses necessary for the operation and maintenance of such Systems and
cooperating in seeking all necessary Governmental Approval. Lessee also shall
have paid the total cost for the completion of all Alterations commenced prior
to such Lease Supplement Termination Date and all Alterations described in
Section 7.2, and shall satisfy each of the conditions set forth in
- -----------
clauses (i) through (iii) thereof. The obligations of Lessee under this Article
- ----------- ----- -------
IV shall survive the expiration or termination of this Lease. Unless Lessee
- --
shall have exercised or been deemed to have exercised the Purchase Option not
less than 270 days prior to such Lease Supplement Termination Date, Lessor shall
at Lessee's expense be entitled to perform such investigation, including
obtaining reports of engineers and other experts as to the condition and state
of repair and maintenance required by this
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Section 4.6, as it deems appropriate. Lessee, at its sole cost and expense,
- -----------
shall cause the repair or other remediation of any discrepancies between the
actual condition of any Systems and the condition required under this Lease.
SECTION IV.7. Completion of Systems. In the event that any System becomes
---------------------
subject to a Lease Supplement pursuant to Sections 2.1 and 2.2 prior to the
------------ ---
Completion Date thereof due to the termination of the Construction Period
applicable thereto under Section 5.1 of the Construction Agency Agreement,
Lessee (at its cost) shall diligently pursue construction of such System to meet
Design Objectives and, as applicable, in accordance with the construction-
related provisions of the Operative Documents (notwithstanding that the
Participants shall not be obligated to make any Advances in respect of such
construction) and shall cause the Completion Date of such System or Systems, as
applicable, not later than the earlier of the Commitment Termination Date or 360
days after such System becomes subject to a Lease Supplement.
SECTION IV.8. Failure of Lessee to Sell System. If Lessee shall exercise the
--------------------------------
Sale Option and shall fail to sell any Systems relating to such Sale Option on
or before the applicable Lease Supplement Termination Date in accordance with
and subject to the provisions of Sections 4.4 and 4.5, then Lessee and Lessor
------------ ---
hereby agree in respect of the unsold Systems as follows:
(a) At any time on or after the applicable Lease Supplement Termination
Date, Lessor shall have the right to withdraw from the Sale Deposit an amount
equal to the Applicable Percentage Amount for such System or Systems related
thereto and apply such amount to a reduction of the Lease Supplement Balance
(in which event, Lessor shall apply such amount to a reduction of the amounts
outstanding under the Notes). At the direction of the Participants, Lessee
shall also pay to Lessor on the Lease Supplement Termination Date the excess
of the Recourse Deficiency Amount over the Applicable Percentage Amount.
(b) On or after the applicable Lease Supplement Termination Date, Lessor
shall have the right, but not the obligation, to sell the applicable Systems
for such purchase
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price and upon such terms as Lessor shall determine in its sole discretion.
In the event that Lessor shall elect to sell the applicable Systems, Lessor
shall notify Lessee, Administrative Agent and the Participants thereof, and
each thereof shall have the right to cause any Person to submit a bid to
Lessor not later than twenty (20) Business Days prior to the date Lessor
desires to sell the applicable Systems (as set forth in the notice thereof to
Lessee); provided, however, that Lessor shall have the right, in its sole
-------- -------
discretion, from time to time, to defer such proposed sale date, in which
event the rights of Lessee, Administrative Agent, Information Agent and each
Participant to cause any Person to submit a bid to Lessor shall be extended
to the date that is twenty (20) Business Days prior to the revised proposed
sale date. At no time shall Lessor be obligated to accept any bid for the
sale of the applicable Systems (whether such bid was obtained by Lessee,
Administrative Agent, any Participant or otherwise) or to consummate any
proposed sale.
(c) At any time and from time to time on or after the applicable Lease
Supplement Termination Date, Lessor shall have the right to withdraw from the
Sale Deposit (other than the portion thereof constituting the Applicable
Percentage Amount) amounts sufficient to pay, or reimburse itself for the
payment of, expenses of Lessor, Administrative Agent, Information Agent and
each Participant in connection with any bidding and sale (or proposed sale,
whether or not consummated) described in clause (b). In the event that
----------
there are insufficient funds remaining from the Sale Deposit to pay such
expenses, Lessee shall pay such expenses from time to time upon demand.
(d) Contemporaneously with the consummation of any sale of the applicable
Systems by Lessor pursuant to this Section 4.8, (i) Lessee will transfer
-----------
all of Lessee's right, title and interest in the applicable Systems to be
transferred and all Support Rights associated therewith to the purchaser;
(ii) subject to prior or concurrent payment by Lessee of all amounts due
under clause (iii) of this sentence and receipt by Lessor of the Recourse
-----
Sales Proceeds from
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such sale, Lessor shall exercise such rights as it has to cause the
applicable Systems to be released from the Lien of this Lease and shall,
without recourse or warranty (except as to the absence of Lessor Liens),
transfer by bill of sale Lessor's right, title and interest in and to the
applicable Systems to such purchaser in the manner contemplated by Section
-------
18.15; and (iii) Lessee shall simultaneously pay or cause to be
-----
paid to Lessor in immediately available funds an amount equal to all unpaid
Base Rent, Holdover Rent and all Supplemental Rent due on or prior thereto
and any other amounts due and payable by Lessee to Lessor, Administrative
Agent and each Participant. Any Recourse Sales Proceeds in excess of the sum
of (x) the applicable Lease Supplement Balance, plus (y) all unpaid Base
Rent, Holdover Rent and Supplemental Rent due on or prior thereto and any
other amounts due and payable by Lessee to Lessor, Administrative Agent and
each Participant, shall be remitted to Lessee promptly after receipt.
(e) Until a sale of the Systems by Lessor pursuant to this Section 4.8,
-----------
Lessee shall be bound by all of the obligations and duties of Lessee under
this Lease, notwithstanding the occurrence of the applicable Lease Supplement
Termination Date.
(f) Lessor reserves all rights under this Lease and the other Operative
Documents arising out of Lessee's breach of any provisions of this Lease
(including this Article IV), whether occurring prior to, on or after the
----------
applicable Lease Supplement Termination Date, and including Lessee's breach
of any of its obligations under Sections 4.3 and 4.5, including the right
------------ ---
to sue Lessee for damages.
(g) To the greatest extent permitted by law, Lessee hereby
unconditionally and irrevocably waives, and releases Lessor from, any right
to require Lessor to sell the applicable Systems under this Section 4.8 at
-----------
all or for any minimum purchase price or on any particular terms and
conditions, Lessee hereby agreeing that if Lessee shall elect the Sale
Option, its ability to sell the applicable Systems on or prior to the
applicable Lease Supplement Termination
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Date and its right thereafter to cause any Person to submit a bid to Lessor
pursuant to Section 4.8(b) in the event Lessor shall elect to sell the
--------------
applicable Systems shall constitute full and complete protection of Lessee's
interest hereunder.
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ARTICLE V
CONDITION OF EQUIPMENT; DISCLAIMER OF WARRANTIES
------------------------------------------------
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SECTION V.1. Waivers. LESSEE ACKNOWLEDGES AND AGREES THAT, ALTHOUGH LESSOR
-------
WILL OWN AND HOLD TITLE TO THE SYSTEMS THAT ARE THE SUBJECT OF LEASE
SUPPLEMENTS, LESSEE IS SOLELY RESPONSIBLE UNDER THE TERMS OF THE CONSTRUCTION
AGENCY AGREEMENT FOR THE DESIGN, DEVELOPMENT, BUDGETING AND CONSTRUCTION OF SUCH
SYSTEMS AND ALL RELATED EQUIPMENT AND ANY ALTERATIONS. The Systems are let by
Lessor "AS IS" in its present or then condition, as the case may be, subject to
(a) any rights of any parties in possession thereof, (b) the state of the title
thereto existing at the time Lessor acquired its interest in the Systems, (c)
any state of facts which a physical inspection might show, (d) all Applicable
Laws, and (e) any violations of Applicable Laws which may exist at the
commencement of the applicable Lease Supplement Term. Lessee has examined the
Systems and (insofar as Lessor is concerned) has found the same to be
satisfactory. NEITHER LESSOR, ANY AGENT NOR ANY PARTICIPANT HAS MADE OR SHALL
BE DEEMED TO HAVE MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OR
SHALL BE DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE TITLE TO THE SYSTEMS
OR ANY RELATED EQUIPMENT OR TO THE VALUE, MERCHANTABILITY, HABITABILITY,
CONDITION, OR FITNESS FOR USE OF THE SAME, OR ANY PART THEREOF, OR ANY OTHER
REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE
SYSTEMS OR ANY RELATED EQUIPMENT, OR ANY PART THEREOF, AND NEITHER LESSOR, ANY
AGENT NOR ANY PARTICIPANT SHALL BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT
DEFECT THEREIN OR THE FAILURE OF THE EQUIPMENT, OR ANY PART THEREOF, TO COMPLY
WITH ANY APPLICABLE LAWS, except that Lessor hereby represents and warrants that
each System is and shall be free of Lessor Liens (such Lessor representation and
warranty being made by (x) Bank with respect to any Lessor Liens attributable to
Bank, and (y) Certificate Trustee with respect to any Lessor Liens attributable
to Certificate Trustee). Lessee has been afforded full opportunity to inspect
the Systems and all related Equipment, is satisfied with the results of its
inspections and is entering into this Lease solely on the basis of the results
of its own inspections, and all risks incident to the matters discussed in the
preceding sentence, as between Lessor, any Agent and the Participants, on the
one hand, and Lessee, on the other, are to be borne by Lessee. The provisions
of this Article V have been negotiated, and, except to the extent otherwise
---------
expressly stated, the foregoing provisions are intended to be a complete
exclusion and negation of any representations or
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warranties by any of Lessor, any Agent or the Participants, express or implied,
with respect to the Systems and all related Equipment (or any interest therein),
that may arise pursuant to any law now or hereafter in effect, or otherwise.
ARTICLE VI
LIENS
-----
SECTION VI.1. Liens. Lessee shall not directly or indirectly create, incur,
-----
assume or suffer to exist any Lien, attachment, levy, title retention agreement
or claim upon any Equipment or Alteration, the title thereto, or any interest
therein, including all Liens which arise out of the possession, use, occupancy
or construction of the Equipment or by reason of labor or materials furnished or
claimed to have been furnished to Lessee or any of its contractors or agents or
by reason of the financing of any Alterations constructed by or for the benefit
of Lessee and not financed by Lessor, except in all cases Permitted Liens.
Lessee shall promptly, but not later than sixty (60) days after the filing
thereof, at its own expense, take such action as may be necessary duly to
discharge or eliminate or bond any Lien (other than Permitted Liens) in a manner
reasonably satisfactory to Lessor.
SECTION VI.2. No Lessor Consent or Liability. Nothing contained in this
------------------------------
Lease shall be construed as constituting the consent or request of Lessor,
express or implied, to or for the performance by any contractor, mechanic,
laborer, materialman, supplier or vendor of any labor or services or for the
furnishing of any materials for any construction, alteration, addition, repair
or demolition of or to the Equipment or any part thereof. NOTICE IS HEREBY
GIVEN THAT NONE OF LESSOR, THE CERTIFICATE PURCHASERS, CERTIFICATE TRUSTEE, ANY
LENDER NOR ANY AGENT IS OR SHALL BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS
FURNISHED OR TO BE FURNISHED TO LESSEE, OR TO ANYONE HOLDING THE EQUIPMENT OR
ANY PART THEREOF THROUGH OR UNDER LESSEE, AND THAT NO MECHANIC'S OR OTHER LIENS
FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST
OF LESSOR, CERTIFICATE TRUSTEE, ANY AGENT OR ANY PARTICIPANT IN AND TO THE
EQUIPMENT.
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ARTICLE VII
MAINTENANCE AND REPAIR;
ALTERATIONS AND ADDITIONS
-------------------------
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SECTION VII.1. Maintenance and Repair; Compliance With Law. Lessee, at its
-------------------------------------------
own expense, shall at all times (a) maintain the Leased Assets in good and safe
repair and condition, subject to ordinary wear and tear; provided, that the
--------
condition of all Leased Assets shall be maintained in at least as good and safe
repair and condition as similar systems and equipment that Lessee (or its
Affiliates) owns or leases from others; (b) maintain, manage and monitor the
Leased Assets in accordance with all Applicable Laws, whether or not such
maintenance requires structural modifications, noncompliance with which (i)
would have a material adverse effect on Lessee's right to use all or a material
portion of the Leased Assets or Lessee's business or financial condition, (ii)
would result in an injunction preventing or otherwise interfere with the
disposition of any System in any material respect after the Lease Termination
Date, (iii) would adversely affect the fair market value, utility, remaining
economic useful life or residual value of any System comprising a portion of the
Leased Assets, or (iv) would adversely affect Lessor's interest in any System
comprising a portion of the Leased Assets; (c) comply with the standards imposed
by any insurance policies required to be maintained hereunder which are in
effect at any time with respect to the Leased Assets; (d) maintain, manage and
monitor the Leased Assets in accordance with all applicable contracts, including
service contracts and insurance contracts; (e) conduct all scheduled maintenance
of the Leased Assets in conformity with maintenance and repair guidelines, if
any, for similar property (including, without limitation, Lessee's maintenance
program for such property); (f) cause each System subject to a Lease Supplement
to continue to have at all times at least the capacity and functional ability to
be used for, on a continuing basis (subject to normal interruption in the
ordinary course of business for maintenance, inspection and repair) and in
Commercial Operation, the purposes for which it was specifically designed; (g)
make all necessary or appropriate repairs, replacements, substitutions and
renewals of the Leased Assets or any part thereof which may be required to keep
the Leased Assets in the condition required by the preceding clauses (a) through
-----------
(f), in accordance with standard industry practice; and (h) procure, maintain
- ---
and comply in all material respects with all material licenses, permits, orders,
approvals, consents and other authorizations required for the construction, use,
maintenance,
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repair, restoration and operation of the Leased Assets. The foregoing
obligations of Lessee shall apply whether the repairs, replacements,
substitutions or renewals are made to the interior or exterior of a System, are
structural or nonstructural, ordinary or extraordinary, are foreseen or
unforeseen, and include, without limitation, repairs, replacements and renewals
that would constitute capital expenditures under GAAP if incurred by an owner of
property. Leased items of Equipment that have been substituted or replaced
pursuant to this Section 7.1 shall become the property of Lessee, and title
-----------
thereto shall automatically vest in Lessee upon such permitted substitution or
replacement. Lessee waives any right that it may now have or hereafter acquire
to (x) require Lessor to maintain, repair, replace, alter, remove or rebuild all
or any part of the Leased Assets or (y) make repairs at the expense of Lessor
pursuant to any Applicable Laws or other agreements.
SECTION VII.2. Alterations. At Lessee's own cost and expense,
-----------
(a) Lessee shall make alterations, renovations, improvements, additions,
substitutions and replacements to any and all Leased Assets (collectively,
"Alterations") so long as such Alterations are (i) made to repair or
-----------
maintain the Leased Assets in the condition required by Section 7.1; (ii)
-----------
necessary in order for the Leased Assets to be in compliance with
Applicable Laws; (iii) necessary to restore the Leased Assets to their
condition existing prior to an Event of Loss, Casualty or Condemnation; or
(iv) of a type not described in clauses (i) through (iii) above and which
----------- -----
comply with the provisions of Section 7.2(b); and
--------------
(b) so long as no Lease Event of Default has occurred and is then
continuing, Lessee may undertake other Alterations on any Leased Assets so
long as Lessee complies, in each case provided for in Section 7.2(a) or (b)
-------------- ---
with each of the following requirements:
(i) Lessee shall not make any Alterations in violation of the terms of
any restriction, easement, condition or covenant or other matter affecting
title to any of the
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Leased Assets or which would adversely affect Lessor's interest in any of
the Leased Assets.
(ii) Alterations shall be completed in a commercially reasonable
manner.
(iii) Alterations shall be, when completed, of such a character as not
materially adversely to affect the fair market value, utility, remaining
economic useful life or residual value of the affected System or Systems
from the fair market value, utility, remaining economic useful life or
residual value of or such System or Systems immediately prior to the making
thereof or the occurrence of the Event of Loss, Casualty or Condemnation,
as the case may be.
Neither Lessor nor Administrative Agent need inquire into or confirm that the
Alterations were made in conformity with these requirements.
SECTION VII.3. Title to Alterations. Title to Alterations shall without
--------------------
further act vest in Lessor and shall be deemed to constitute a part of the
Leased Assets in each of the following cases:
(a) such Alterations shall be in replacement of or in substitution for a
portion of the Leased Assets;
(b) such Alterations shall be required to be made pursuant to the terms of
Section 7.1 or 7.2(a)(i), (ii) or (iii);
- ----------- --------------- -----
(c) such Alterations shall not be removable from the Leased Assets to
which they are attached without causing material damage thereto;
(d) the removal of such Alteration would impair the fair market value,
utility, remaining economic useful life or residual value of the leased
System as compared in each case with that which such leased System would have
had such Alteration not been made; or
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(e) such Alteration is necessary for the continued Commercial Operation
of a System included in the Leased Assets.
Lessee, at Lessor's request, shall execute and deliver to Lessor any
assignments or other documents of conveyance reasonably necessary to evidence
the vesting of title in and to such Alterations.
If such Alterations are not within any of the categories set forth in clauses
-------
(a) through (e) of this Section 7.3, then title to such Alterations shall vest
- --- --- -----------
in Lessee and such Alterations shall not be deemed to be Alterations which are
Leased Assets. All Alterations to which Lessee shall have title may be removed
at any time, so long as removal thereof shall not result in the violation of any
Applicable Laws and no Lease Event of Default or Lease Default is continuing.
Any such Alterations shall be removed by Lessee at its expense, if Lessor shall
so request, prior to the return of the System to Lessor in accordance with the
provisions of this Lease, and Lessee shall at its expense repair any damage to
any System caused by the removal of such Alterations. Lessor may purchase from
Lessee Alterations (if not already owned by Lessor) which Lessee intends to
remove from any System prior to the return of the System to Lessor, which
purchase shall be at the Fair Market Sales Value of such Alterations. Title to
any Lessee Alterations shall vest in Lessor if not removed from the Leased
Assets by Lessee prior to the return of the Leased Assets to Lessor.
SECTION VII.4. Maintenance and Repair Reports. Lessee shall keep maintenance
------------------------------
and repair reports in sufficient detail, and as customary for owners of
communications systems, to indicate the nature and date of major work done.
Such reports shall be kept on file by Lessee at its offices during the Lease
Term, and shall be made available to Lessor upon reasonable request. Lessee
shall give notice to Lessor and Administrative Agent of any Condemnation or
Casualty the cost to repair which is reasonably expected by Lessee to exceed
$1,000,000, promptly after Lessee has knowledge thereof.
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ARTICLE VIII
USE
---
Lessee shall not use any System subject to a Lease Supplement or any part
thereof for any purpose or in any manner that would materially adversely affect
the fair market value, utility, remaining economic useful life or residual value
thereof or that would violate or conflict with, or constitute or result in a
violation or default under (a) any Applicable Laws, whether now existing or
hereafter in effect, foreseen or unforeseen, except for Permitted Contests, (b)
any insurance policies required by Article IX, or (c) any Operative Document.
----------
ARTICLE IX
INSURANCE
---------
SECTION IX.1. Required Coverage. Lessee will keep insured all property of a
-----------------
character usually insured by corporations engaged in the same or similar
business similarly situated against loss or damage of the kinds and in the
amounts customarily insured against by such corporations, and carry such other
insurance as is usually carried by such corporations; provided, that in any
--------
event Lessee will maintain:
(a) Comprehensive General Liability Insurance. Combined single limit
-----------------------------------------
insurance against claims for bodily injury, death or third-party property
damage occurring on, in or about the Equipment in an amount at least equal to
$10,000,000 per occurrence (subject to a deductible of $250,000 per
occurrence).
(b) Property Insurance. Insurance against loss of damage covering the
------------------
Equipment or any portion thereof by reason of any peril in an amount and with
such deductibles as are carried by companies similar to Lessee owning or
leasing equipment similar to the Equipment; provided, however, that at
-------- -------
no time shall the amount of such coverage, on a replacement cost basis, be
less than the then outstanding Lease Balance. Notwithstanding the foregoing,
Lessee may
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elect to self-insure against property damage for any of the Equipment.
(c) Workers' Compensation Insurance. Lessee shall, in the operation of
-------------------------------
the Equipment, comply with the applicable workers' compensation laws.
Such insurance shall be written by reputable insurance companies that are
financially sound and solvent and otherwise reasonably appropriate considering
the amount and type of insurance being provided by such companies. In the case
of liability insurance maintained by Lessee, it shall name Bank, Administrative
Agent, Lessor and all Participants, as additional insureds. Each policy of
liability insurance referred to in this Section 9.1 shall provide that: (i) it
-----------
will not be cancelled or its limits materially reduced, or allowed to lapse
without renewal, except after not less than thirty (30) days' prior written
notice to Administrative Agent; (ii) the interests of Bank, Administrative
Agent, Lessor and all Participants shall not be invalidated by any act or
negligence of Lessee or any Person having an interest in the Equipment; (iii)
such insurance is primary with respect to any other insurance carried by or
available to Bank, Administrative Agent, Lessor and each Participant; (iv) the
insurer shall waive any right of subrogation, setoff, counterclaim, or other
deduction, whether by attachment or otherwise, against Bank, Administrative
Agent or Lessor; and (v) such policy shall contain a cross-liability clause
providing for coverage of Bank, Administrative Agent, Lessor and each
Participant as if separate policies had been issued to each of them. Lessee
will notify Administrative Agent promptly of any cancellation, material
reduction in policy limits, material modification or amendment of any liability
policy.
SECTION IX.2. Delivery of Insurance Certificates. On or before the initial
----------------------------------
Advance Date and thereafter upon written request of Lessor after a Lease Event
of Default, Lessee shall deliver to each Agent certificates of insurance
satisfactory to Bank (as to itself only) and Information Agent evidencing the
existence of all insurance required to be maintained hereunder and setting forth
the respective coverage, limits of liability, carrier, policy number and period
of coverage.
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ARTICLE X
ASSIGNMENT AND SUBLEASING
-------------------------
SECTION X.1. Assignment and Subleasing. (a) Lessee may not assign, transfer
-------------------------
possession of or sublease, in whole or in part, any of its right, title or
interest in, to or under this Lease or any portion of any System or any related
Equipment subject to this Lease to any Person at any time, and any such
assignment, transfer of possession or sublease shall be void, unless: (i) after
------
giving effect to any such assignment, transfer of possession or sublease
(including all prior transactions of any of the foregoing types) the Indirect
Beneficial Ownership Interest of Guarantor in all of the Leased Assets and in
all of the Owned Assets, respectively, included in any Qualified MAN or FCL
would be equal to or greater than forty-nine percent (49%); provided, however,
-------- -------
that, subsequent to an initial public offering by Lessee that reduces the
Indirect Beneficial Ownership Interest of Guarantor to below 49%, no such
assignment, transfer or sublease shall reduce the Indirect Beneficial Ownership
Interest of Guarantor, calculated On a Fully Diluted Basis, below the Indirect
Beneficial Ownership Interest of Guarantor, calculated On a Fully Diluted Basis,
maintained immediately after such initial public offering, or (ii) such
assignment, transfer of possession or sublease is to a Subsidiary of Guarantor,
in which event such Subsidiary shall be bound by and subject to each of the
provisions set forth herein, or (iii) such assignment, transfer of possession or
sublease is consented to by each Participant, which consent shall not be
unreasonably withheld or delayed. Any sublease, assignment or similar agreement
in respect of a System shall be expressly subject and subordinate to this Lease.
Lessee shall execute and deliver an assignment of its interest in any sublease
permitted by this Section 10.1 to Lessor.
------------
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<PAGE>
(b) Notwithstanding anything to the contrary contained in Section 10.1(a),
---------------
Lessee shall have the right, without the prior written consent of Lessor,
to enter into, or have entered into, agreements ("Qualified Use
-------------
Agreements") with any Person (a "Qualified User") by which such Qualified
--------------
User acquires a right (which may be indefeasible) to use one or more fibers
in a cable that is part of an FCL or MAN, for a term that in the case of a
Qualified User that is not an Affiliate of Lessee or Guarantor (a "Non-
---
Affiliated Qualified Use Agreement") may extend beyond the Lease
- ----------------------------------
Termination Date or, in the case of a Qualified User that is an Affiliate
of Lessee or Guarantor, shall automatically terminate upon termination of
this Lease for any reason (an "Affiliate Qualified Use Agreement");
---------------------------------
provided, that the aggregate rights to use granted by all Qualified Use
- --------
Agreements made with regard to a particular MAN shall not exceed twenty
percent (20%) of the capacity of the affected cables in such MAN. A
Qualified Use Agreement shall contain terms, as of the date the Qualified
Use Agreement is entered into, reflective of an arms-length transaction in
the geographical location in which the fiber is intended to be used.
Lessee agrees to provide notice to Lessor of the existence of any such
Qualified Use Agreement within ten (10) Business Days of entering into any
such Qualified Use Agreement. Lessor covenants to each Qualified User
under a Non-Affiliated Qualified Use Agreement that it will not disturb
such Qualified User's peaceful and undisturbed use of the rights it
acquires pursuant to any such Non-Affiliated Qualified Use Agreement,
notwithstanding any Lease Default or Lease Event of Default; provided, that
--------
such Qualified User timely and completely performs its obligations under
such Non-Affiliated Qualified Use Agreement. An Affiliated Qualified Use
Agreement shall be subject and subordinate to this Lease and shall also
comply with the provisions of Section 6.7(f) of the Participation
--------------
Agreement.
SECTION X.2. Release from Obligations. Regardless of Lessor's consent, no
------------------------
assignment, transfer of possession or sublease shall release Guarantor from any
of its obligations under the Guaranty or, except as hereinafter provided, Lessee
of Lessee's obligations hereunder or alter the primary liability of Lessee to
pay Rent hereunder (including, without limitation, Base Rent and Supplemental
Rent) and to perform all other obligations to be performed by Lessee hereunder.
The acceptance of Rent by
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Lessor from any other Person shall not be deemed to be a waiver by Lessor of any
provision hereof. Consent to one assignment or subletting shall not be deemed
consent to any subsequent or further assignment, subletting, hypothecation or
third party use. Lessor may proceed directly against Lessee without the
necessity of exhausting remedies against said assignee or successor. Lessor may
consent to subsequent assignments or subletting of this Lease or amendments or
modifications to this Lease with assignees of Lessee without notifying Lessee,
or any successor of Lessee, and without obtaining its or their consent thereto,
and such action shall not relieve Lessee or any successor of Lessee of liability
under the Lease. In the event Lessee or a Subsidiary enters into a permitted
assignment of all of the Leased Assets in a Qualified MAN or FCL and such
assignment is accompanied by the transfer to the assignee of all of the Owned
Assets included in such Qualified MAN or FCL, then Lessee shall be released from
its obligations under the Lease Supplement covering the Leased Assets so
assigned upon Lessor's receipt of a new Lease Supplement covering such Leased
Assets duly executed and delivered by such assignee, the reaffirmation by
Guarantor of the Guaranty, together with an opinion of counsel of such assignee,
reasonably acceptable to the Lessor, covering such matters as were covered in
the legal opinion rendered by Lessee's counsel at the Document Closing Date.
ARTICLE XI
LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE
-----------------------------------------
SECTION XI.1. Event of Taking.
---------------
(a) If an Event of Taking shall occur, Lessee shall give Lessor and
Administrative Agent prompt written notice of such occurrence and the date
thereof, and Lessee shall purchase all of the Systems subject to the Lease
Supplement affected thereby from Lessor on the next succeeding Payment Date
after the date on which such Event of Taking shall have occurred at a purchase
price equal to the sum of (i) the applicable Lease Supplement Balance plus (ii)
----
all accrued but unpaid Rent, plus (iii) all other sums due and payable by Lessee
----
to Lessor with respect to such Systems under any of the Operative Documents.
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All proceeds received by Lessee up to the amounts owed by Lessee under this
Section 11.1(a) from an Event of Taking shall be promptly remitted to Lessor or
- ---------------
Administrative Agent and shall be applied in accordance with the next sentence.
In connection with the purchase of Systems pursuant to this Section 11.1(a), all
---------------
such proceeds from an Event of Taking for such Systems then held by Lessor or
Administrative Agent shall be credited against such purchase price, if not
already paid by Lessee, and any such proceeds remaining thereafter shall be paid
over to, or retained by, Lessee, or as Lessee may direct.
(b) Upon payment in full of all amounts payable pursuant to
Section 11.1(a), (i) the applicable Lease Supplement Term shall end, and (ii)
- ---------------
the obligations of Lessee hereunder with respect to the affected Systems (other
than any obligations expressed herein as surviving termination of this Lease)
shall terminate as of the date of such payment.
SECTION XI.2. Application of Certain Payments Relating to Condemnation. In
--------------------------------------------------------
case of a Condemnation with regard to one or more Systems (or portions thereof)
subject to a Lease Supplement, this Lease shall remain in full force and effect,
without any abatement or reduction of Rent, and the proceeds received from any
Governmental Authority relating to such Condemnation for the affected System
shall be paid to Lessee.
SECTION XI.3. Event of Loss. (a) If an Event of Loss shall occur, Lessee
-------------
shall give Lessor and Administrative Agent prompt written notice of such
occurrence and the date thereof, and Lessee shall either (i) purchase the
affected Systems from Lessor on the next succeeding Payment Date after the date
such Event of Loss shall have occurred at a purchase price equal to the sum of
(x) the related Lease Supplement Balance, plus (y) all accrued but unpaid Rent,
----
plus (z) all other sums due and payable by Lessee to Lessor, either Agent or any
- ----
Participant with respect to such affected System under any of the Operative
Documents, or (ii) as soon as practicable after the Event of Loss, repair and
rebuild the Systems suffering such Event of Loss (or cause such affected System
to be repaired and rebuilt) to the condition required to be maintained by
Section 7.1; provided, that the fair market value, utility, remaining economic
- ----------- --------
useful life and residual value of such
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Systems as repaired are at least equivalent to the fair market value, utility,
remaining economic useful life and residual value of such Systems as in effect
immediately prior to the occurrence of such Event of Loss; and provided,
--------
further, that any Equipment installed in such repair or rebuilding of any System
- -------
shall become subject to this Lease and the relevant Lease Supplement, and that
Lessee shall execute and deliver an Acceptance Certificate, as appropriate, for
all such replacement Equipment.
(b) Upon payment in full of all amounts payable pursuant to Section
-------
11.3(a)(i), (i) the Lease Supplement Term shall end with respect to the affected
- ----------
Lease Supplement, and (ii) the obligations of Lessee hereunder with respect to
the Lease Supplement (other than any obligations expressed herein as surviving
termination of this Lease) shall terminate as of the date of such payment.
SECTION XI.4. Casualty. Upon any Casualty with respect to a System, Lessee
--------
shall repair and rebuild the affected portions of the System suffering such
Casualty (or cause such affected portions to be repaired and rebuilt) to the
condition required to be maintained by Section 7.1; provided, that the fair
----------- --------
market value, utility, remaining economic useful life and residual value of such
System as restored is at least equivalent to the fair market value, utility,
remaining economic useful life and residual value of such item as in effect
immediately prior to the occurrence of such Casualty.
SECTION XI.5. [Intentionally Deleted.]
---------------------
SECTION XI.6. Other Dispositions. Notwithstanding the foregoing provisions
------------------
of this Article XI, so long as a Lease Default shall have occurred and be
----------
continuing, any amount that would otherwise be payable to or for the account of,
or that would otherwise be retained by, Lessee pursuant to this Article XI shall
----------
be paid to Administrative Agent as security for the obligations of Lessee under
this Lease, shall be invested by Administrative Agent in accordance with Section
-------
19.17 in Permitted Investments and, if a Lease Event of Default is continuing,
- -----
may be applied to the obligations of Lessee hereunder, and, at such time
thereafter as no Lease Default shall be continuing, such amount and gain thereon
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shall be paid promptly to Lessee to the extent not previously applied in
accordance with the terms of this Lease.
SECTION XI.7. Negotiations. In the event any part of a System becomes
------------
subject to condemnation or requisition proceedings, Lessee shall give notice
thereof to Lessor and Administrative Agent promptly after Lessee has knowledge
thereof, or Lessor shall give notice thereof to Lessee, as applicable, and
Lessee, to the extent permitted by any Applicable Laws, shall control the
negotiations with the relevant Governmental Authority unless a Lease Default
shall have occurred and be continuing, in which case Lessor shall control such
negotiations; provided, that in any event Lessor may participate at Lessor's
--------
expense in such negotiations; and no settlement shall be made without Lessor's
prior written consent, which consent shall not be unreasonably withheld or
delayed. Lessee shall give to Lessor and Administrative Agent such information,
and copies of such documents, which relate to such proceedings, or which relate
to the settlement of amounts due under insurance policies required by Article IX
----------
and are in the possession of Lessee as are reasonably requested by Lessor or
Administrative Agent.
SECTION XI.8. No Rent Abatement. Rent shall not abate hereunder by reason of
-----------------
any casualty, any Event of Taking, any Event of Loss or any Condemnation of any
System, and Lessee shall continue to perform and fulfill all of Lessee's
obligations, covenants and agreements hereunder notwithstanding such casualty,
Event of Loss, Event of Taking or Condemnation until the Lease Supplement
Termination Date(s) with respect to the affected System.
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ARTICLE XII
NON-INTERFERENCE
----------------
SECTION XII.1. Non-Interference. Lessor covenants that it will not interfere
----------------
in Lessee's use of any System subject to this Lease during the Lease Term, so
long as no Lease Event of Default has occurred and is continuing, it being
agreed that Lessee's remedies for breach of the foregoing covenant shall be
limited to a claim for damages or the commencement of proceedings to enjoin such
breach. Such right is independent of and shall not affect Lessor's rights
otherwise to initiate legal action to enforce the obligations of Lessee under
this Lease.
SECTION XII.2. Certain Duties and Responsibilities of Lessor. Except during
---------------------------------------------
the continuance of a Lease Event of Default or a Loan Event of Default, Lessor
undertakes to perform such duties and only such duties as are specifically set
forth herein and in the other Operative Documents, and no implied covenants or
obligations shall be read into this Lease against Lessor, and Lessor agrees that
it shall not, nor shall it have a duty to, manage, control, use, sell, maintain,
insure, register, lease, operate, modify, dispose of or otherwise deal with any
System or any related Equipment or any other part of the Trust Estate in any
manner whatsoever, except as required by the terms of the Operative Documents
and as otherwise provided herein.
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ARTICLE XIII
INSPECTION AND REPORTS
----------------------
SECTION XIII.1. Inspection. Upon fifteen (15) Business Days prior notice to
----------
Lessee, each of Administrative Agent, Lessor, any Participant and their
respective authorized representatives (the "Inspecting Parties") may inspect (a)
------------------
any System in a Qualified MAN or FCL and (b) the books and records of Lessee
relating directly and primarily to any such System or Systems and make copies
and abstracts therefrom. All such inspections shall be at the expense and risk
of the Inspecting Parties, except that if a Lease Event of Default or Lease
Default has occurred and is continuing, Lessee shall reimburse the Inspecting
Parties for the reasonable costs of such inspections and such inspection shall
be at Lessee's risk. None of the Inspecting Parties shall have any duty to make
any such inspection or inquiry, and none of the Inspecting Parties shall incur
any liability or obligation by reason of not making any such inspection or
inquiry. None of the Inspecting Parties shall incur any liability or obligation
by reason of making any such inspection or inquiry unless and to the extent, so
long as no Lease Event of Default has occurred and is continuing at the time of
inspection, such Inspecting Party causes damage to any System or any property of
Lessee or any other Person during the course of such inspection.
SECTION XIII.2. Reports. To the extent permissible under Applicable Laws,
-------
Lessee shall prepare and file in timely fashion, or, where Lessor shall be
required to file, Lessee shall prepare and make available to Lessor and
Administrative Agent within a reasonable time prior to the date for filing and
Lessor shall file, any reports with respect to the condition or operation of the
System and all related Equipment subject to a Lease Supplement that shall be
required to be filed with any Governmental Authority.
ARTICLE XIV
[INTENTIONALLY DELETED]
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ARTICLE XV
LEASE EVENTS OF DEFAULT
-----------------------
The occurrence of any one or more of the following events, whether any such
event shall be voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any administrative or
governmental body, shall constitute a "Lease Event of Default":
----------------------
(a) Lessee shall fail to make any payment when due (i) of Base Rent and such
failure shall continue for a period of five (5) Business Days, or (ii) in
connection with the exercise of the Purchase Option or Sale Option;
(b) Lessee shall fail to make any payment of any other amount payable
hereunder or under any of the other Operative Documents (other than the
Construction Agency Agreement) and such failure shall continue for a period of
five (5) Business Days after such amount became due and payable;
(c) Lessee shall fail to maintain insurance as required by Section 9.1, or
-----------
Guarantor shall default in the performance or observance of any term, covenant,
condition or agreement on its part to be performed or observed pursuant to
Section 6.6(a)(vi) of the Participation Agreement;
(d) any representation or warranty by Lessee or Guarantor in any Operative
Document or in any certificate or document delivered to Lessor, either Agent or
any Participant pursuant to any Operative Document shall have been incorrect in
any material respect when made;
(e) Lessee or Guarantor shall fail in any material respect timely to perform
or observe any covenant, condition or agreement (and not constituting an Event
of Default under any other paragraph of this Article XV) to be performed or
----------
observed by it hereunder or under any other Operative Document and such failure
shall continue for a period of thirty (30) days after the earlier to occur of:
(i) written notice thereof by Administrative
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Agent or any Participant to Lessee or Guarantor, or (ii) the date on which
Lessee or Guarantor has Actual Knowledge thereof;
(f) (i) any of Lessee, Guarantor, any Subsidiary that is a sublessee,
assignee or transferee of any Leased Assets, or any Interested Subsidiary shall
generally fail to pay, or admit in writing its inability to pay, its debts as
they become due, or shall voluntarily commence any case or proceeding or file
any petition under any bankruptcy, insolvency or similar law or seeking
dissolution, liquidation or reorganization or the appointment of a receiver,
trustee, custodian or liquidator for itself or a substantial portion of its
property, assets or business or to effect a plan or other arrangement with its
creditors, or shall file any answer admitting the jurisdiction of the court and
the material allegations of any involuntary petition filed against it in any
bankruptcy, insolvency or similar case or proceeding, or shall be adjudicated
bankrupt, or shall make a general assignment for the benefit or creditors, or
shall consent to, or acquiesce in the appointment of, a receiver, trustee,
custodian or liquidator for itself or a substantial portion of its property,
assets or business, or (ii) corporate action shall be taken by Lessee,
Guarantor, any Subsidiary that is a sublessee, assignee or transferee of any
Leased Assets, or any Interested Subsidiary for the purpose of effectuating any
of the foregoing;
(g) involuntary proceedings or an involuntary petition shall be commenced or
filed against Lessee, Guarantor, any Subsidiary that is a sublessee, assignee or
transferee of any Leased Assets or any Interested Subsidiary under any
bankruptcy, insolvency or similar law or seeking the dissolution, liquidation or
reorganization of Lessee, Guarantor, any Subsidiary that is a sublessee,
assignee or transferee of any Leased Assets or any Interested Subsidiary or the
appointment of a receiver, trustee, custodian or liquidator for Lessee,
Guarantor, any Subsidiary that is a sublessee, assignee or transferee of any
Leased Assets or any Interested Subsidiary or of a substantial part of the
property, assets or business of Lessee, or any writ, judgment, warrant of
attachment, execution or similar process shall be issued or levied against a
substantial part of the property, assets or business of Lessee, Guarantor, any
Subsidiary that is a sublessee, assignee or transferee of any Leased Assets or
any Interested Subsidiary, and
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such proceedings or petition shall not be dismissed, or such writ, judgment,
warrant of attachment, execution or similar process shall not be released,
vacated or fully bonded within sixty (60) days after commencement, filing or
levy, as the case may be;
(h) a final judgment or final judgments for the payment of money are entered
by a court or courts of competent jurisdiction against Guarantor or any
Subsidiary and such judgment or judgements remain undischarged, unbonded or
unstayed for a period (during which execution shall be effectively stayed) of
thirty (30) days; provided, that the aggregate of all such judgments exceeds
--------
$50,000,000;
(i) any Operative Agreement shall (except in accordance with its terms), in
whole or in part, terminate, cease to be effective or cease (or fail) to be the
legally valid, binding and enforceable obligation of Lessee or Guarantor, as the
case may be, or Lessee or Guarantor or any Affiliate of either of them shall,
directly or indirectly, contest in any manner in any court the effectiveness,
validity, binding nature or enforceability thereof;
(j) (i) an event of default shall occur in the payment when due (subject to
any applicable grace period), whether by acceleration or otherwise, of any
Indebtedness of Lessee, Guarantor, any Subsidiary that is a sublessee, assignee
or transferee of any Leased Assets, any Interested Subsidiary or any Principal
Subsidiary that individually or in the aggregate exceeds $50,000,000 or (ii) any
other event of default shall occur with respect to any Indebtedness that
individually or in the aggregate exceeds $50,000,000;
(k) a Plan shall fail to maintain the minimum funding standard required by
Section 412(d) of the Code for any plan year or a waiver of such standard is
sought or granted under Section 412(d), or a Plan is or shall have been
terminated or the subject of termination proceedings under ERISA, or the
Borrower or an ERISA Affiliate has incurred a liability to or on account of a
Plan under Section 4062, 4063, 4064, 4201 or 4204 of ERISA, and there shall
result from any such event or events a Material Adverse Effect; and
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(l) there shall have occurred a Change in Control.
ARTICLE XVI
ENFORCEMENT
-----------
SECTION XVI.1. Remedies. If any Lease Event of Default exists, Lessor shall
--------
have the rights, options and remedies of a secured party under the UCC
(regardless of whether the UCC or a law similar thereto has been enacted in a
jurisdiction wherein the rights or remedies are asserted), and, without limiting
the foregoing, Lessor also may exercise in any order one or more or all of the
following remedies (it being understood that no remedy herein conferred is
intended to be exclusive of any other remedy or remedies, but each and every
remedy shall be cumulative and shall be in addition to every other remedy given
herein or now or hereafter existing at law or in equity or by statute): (i)
terminate this Lease by notice in writing to Lessee, but Lessee shall remain
liable as hereinafter provided; (ii) declare the entire outstanding Lease
Balance or any portion thereof (including any Lease Supplement Balance) to be
due and payable, together with accrued unpaid Rent and any other amounts payable
under the Operative Documents; (iii) enforce the security interest given
hereunder pursuant to the UCC or any other law; (iv) enter upon the premises
where any of the Equipment comprising one or more Systems may be and take
possession of all or any of such Equipment; (v) proceed by appropriate court
action or actions either at law or in equity to enforce performance by Lessee of
the applicable covenants of this Lease or to recover damages for the breach
thereof; and (vi) require Lessee to return the Systems and any or all related
Equipment as provided in Section 4.6.
-----------
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Notwithstanding the foregoing,
(a) if any Lease Event of Default described in Article XV exists, Lessor
----------
(at the direction of the Required Entities) may, by notice to Lessee, declare
the then outstanding Lease Balance or any portion thereof (including any
Lease Supplement Balance) to be due and payable together with the interest
component of all accrued unpaid Rent and any other amounts accrued and
payable under the Operative Documents; and
(b) if any Lease Event of Default described in Section (f) or (g) of
----------- ---
Article XV exists, then the entire outstanding Lease Balance and all
----------
accrued Rent and other amounts payable under the Operative Documents shall
automatically and immediately become due and payable, without presentment,
demand, notice, declaration, protest or other requirements of any kind, all
of which are hereby expressly waived.
SECTION XVI.2. Sale of Systems. In addition to the remedies set forth in
---------------
Section 16.1, if any Lease Event of Default occurs, Lessor may, but is not
- ------------
required to, sell the Systems and any or all related Equipment in one or more
sales. Lessor or any Participant may purchase all or any part of the Equipment
at such sale. Lessee acknowledges that sales for cash or on credit to a
wholesaler, retailer or user of such Equipment, or at public or private auction,
are all commercially reasonable. Any notice of intended disposition by Lessor
required by law shall be deemed reasonably and properly given if given at least
ten (10) days before such disposition.
SECTION XVI.3. Application of Proceeds. The proceeds of such sale or
-----------------------
exercise of other remedies shall be applied first in the order set forth in
Section 3.3 of the Loan Agreement and then in the order set forth in Section 3.3
of the Trust Agreement. If there is a deficiency in any amounts due hereunder
after Lessor has exercised remedies, Lessee will promptly pay the same to
Lessor.
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SECTION XVI.4. Power of Attorney. Lessee unconditionally and irrevocably
-----------------
appoints Lessor as its true and lawful attorney-in-fact, with full power of
substitution, to the extent permitted by Applicable Laws, in its name and stead
and on its behalf, for the purpose of effectuating any sale, assignment,
transfer or delivery hereunder, if a Lease Event of Default occurs, whether
pursuant to foreclosure or power of sale or otherwise, and in connection
therewith to execute and deliver all such deeds, bills of sale, assignments,
releases (including releases of this Lease on the records of any Governmental
Authority) and other proper instruments as Lessor may reasonably consider
necessary or appropriate. Lessee ratifies and confirms all that such attorney
or any substitute shall lawfully do by virtue hereof. If requested by Lessor or
any purchaser, Lessee shall ratify and confirm any such lawful sale, assignment,
transfer or delivery by executing and delivering to Lessor or such purchaser,
all deeds, bills of sale, assignments, releases and other proper instruments to
effect such ratification and confirmation as may be designated in any such
request.
SECTION XVI.5. Remedies Cumulative; No Waiver; Consents. To the extent
----------------------------------------
permitted by, and subject to the mandatory requirements of, Applicable Laws,
each and every right, power and remedy herein specifically given to Lessor or
otherwise in this Lease shall be cumulative and shall be in addition to every
other right, power and remedy herein specifically given or now or hereafter
existing at law, in equity or by statute, and each and every right, power and
remedy whether specifically herein given or otherwise existing may be exercised
from time to time and as often and in such order as may be deemed expedient by
Lessor, and the exercise or the beginning of the exercise of any power or remedy
shall not be construed to be a waiver of the right to exercise at the same time
or thereafter any right, power or remedy. No delay or omission by Lessor in the
exercise of any right, power or remedy or in the pursuit of any remedy shall
impair any such right, power or remedy or be construed to be a waiver of any
default on the part of Lessee or be an acquiescence therein. Lessor's consent to
any request made by Lessee shall not be deemed to constitute or preclude the
necessity for obtaining Lessor's consent, in the future, to all similar
requests. No express or implied waiver by Lessor of any Lease Event of Default
shall in any way be, or be
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construed to be, a waiver of any future or subsequent Lease Default or Lease
Event of Default. To the extent permitted by Applicable Laws, Lessee hereby
waives any rights now or hereafter conferred by statute or otherwise that may
require Lessor to sell, lease or otherwise use the Systems or any related
Equipment in mitigation of Lessor's damages upon the occurrence of a Lease Event
of Default or that may otherwise limit or modify any of Lessor's rights or
remedies under this Article XVI.
-----------
ARTICLE XVII
RIGHT TO PERFORM FOR LESSEE
---------------------------
If Lessee shall fail to perform or comply with any of its agreements contained
herein, Lessor may, but shall not be obligated to, on five (5) Business Days'
prior notice to Lessee (except in the event of an emergency, in which case only
one (1) Business Day's prior notice shall be required), perform or comply with
such agreement, and Lessor shall not thereby be deemed to have waived any
default caused by such failure, and the amount of such payment and the amount of
the expenses of Lessor (including reasonable attorneys' fees and expenses)
incurred in connection with such payment or the performance of or compliance
with such agreement, as the case may be, together with interest thereon at the
Overdue Rate, shall be deemed Supplemental Rent, payable by Lessee to Lessor
upon demand; provided, that in the case of an emergency Lessee shall permit
--------
Lessor so to perform or comply on less than one Business Day's notice unless
Lessee has a good faith reason not to permit Lessor to do so.
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ARTICLE XVIII
MISCELLANEOUS
-------------
SECTION XVIII.1. Binding Effect; Successors and Assigns; Survival. The terms
------------------------------------------------
and provisions of this Lease, and the respective rights and obligations
hereunder of Lessor, Lessee, Administrative Agent and the Participants shall be
binding upon them and their respective successors, legal representatives and
assigns (including, in the case of Lessor, any Person to whom Lessor may
transfer any System or related Equipment or any interest therein in accordance
with the provisions of the Operative Documents), and inure to their benefit and
the benefit of their respective permitted successors, legal representatives and
assigns.
SECTION XVIII.2. Severability. Any provision of this Lease that shall be
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction, and Lessee shall remain
liable to perform its obligations hereunder except to the extent of such
unenforceability. To the extent permitted by Applicable Laws, Lessee hereby
waives any provision of law that renders any provision hereof prohibited or
unenforceable in any respect.
SECTION XVIII.3. Notices. Unless otherwise specified herein, all notices,
-------
requests, demands or other communications to or upon the respective parties
hereto shall be in writing and shall be delivered and shall be deemed to have
been given in accordance with Section 9.3 of the Participation Agreement.
SECTION XVIII.4. Amendment; Complete Agreements. Neither this Lease nor any
------------------------------
of the terms hereof may be terminated, amended, supplemented, waived or modified
orally, but only by an instrument in writing signed by the party against which
the enforcement of the termination, amendment, supplement, waiver or
modification
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shall be sought. This Lease, together with the other Operative Documents, is
intended by the parties as a final expression of their agreement and as a
complete and exclusive statement of the terms thereof, all negotiations,
considerations and representations between the parties having been incorporated
herein and therein. No course of prior dealings between the parties or their
officers, employees, agents or Affiliates shall be relevant or admissible to
supplement, explain, or vary any of the terms of this Lease or any other
Operative Document. Acceptance of, or acquiescence in, a course of performance
rendered under this or any prior agreement between the parties or their
Affiliates shall not be relevant or admissible to determine the meaning of any
of the terms of this Lease or any other Operative Document or the Letter. No
representations, undertakings, or agreements have been made or relied upon in
the making of this Lease other than those specifically set forth in the
Operative Documents.
SECTION XVIII.5. Headings. The Table of Contents and headings of the various
--------
Articles and Sections of this Lease are for convenience of reference only and
shall not modify, define or limit any of the terms or provisions hereof.
SECTION XVIII.6. Original Lease. The single executed original of this Lease
--------------
containing the receipt of Lessor therefor on or following the signature page
thereof shall be the "original executed counterpart" of this Lease. To the
extent that this Lease constitutes chattel paper, as such term is defined in the
Uniform Commercial Code as in effect in any applicable jurisdiction, no security
interest in this Lease may be created through the transfer or possession of any
counterpart other than the "original executed counterpart".
SECTION XVIII.7. GOVERNING LAW. THIS LEASE HAS BEEN DELIVERED IN, AND SHALL
-------------
IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY
WITHIN SUCH STATE, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, EXCEPT AS TO MATTERS RELATING TO THE CREATION AND ENFORCEMENT OF
LIENS AND SECURITY INTERESTS AND THE EXERCISE OF REMEDIES WITH RESPECT THERETO,
WHICH SHALL BE GOVERNED BY, AND
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CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE IN WHICH THE APPLICABLE
EQUIPMENT IS LOCATED.
SECTION XVIII.8. Discharge of Lessee's Obligations by its Affiliates. Lessor
---------------------------------------------------
agrees that performance of any of Lessee's obligations hereunder by one or more
of its Affiliates or one or more permitted sublessees of the Equipment or any
part thereof shall constitute performance by Lessee of such obligations to the
same extent and with the same effect hereunder as if such obligations were
performed by Lessee, but no such performance shall excuse Lessee from any
obligation not performed by it or on its behalf under the Operative Documents.
SECTION XVIII.9. Liability of Trustee Limited. The parties hereto agree that
----------------------------
Shawmut Bank Connecticut, National Association, in its individual capacity (the
"Bank"), shall have no personal liability whatsoever to Lessee or its respective
----
successors and assigns for any Claim based on or in respect of this Lease or any
of the other Operative Documents or arising in any way from the transactions
contemplated hereby or thereby; provided, however, that the Bank shall be liable
-------- -------
in its individual capacity (a) for its own willful misconduct or gross
negligence (or negligence in the handling of funds), (b) for liabilities that
may result from the incorrectness of any representation or warranty expressly
made by it in its individual capacity in Section 4.3 of the Participation
Agreement or from the failure of the Bank to perform its covenants and
agreements set forth in Section 6.2 of the Participation Agreement, or (c) for
any Tax based on or measured by any fees, commission or compensation received by
it for acting as Lessor as contemplated by the Operative Documents. It is
understood and agreed that, except as provided in the preceding proviso: (i)
the Bank shall have no personal liability under any of the Operative Documents
as a result of acting pursuant to and consistent with any of the Operative
Documents; (ii) all obligations of the Bank to Lessee are solely nonrecourse
obligations except to the extent that it has received payment from others; (iii)
all such personal liability of the Bank is expressly waived and released as a
condition of, and as consideration for, the execution and delivery of the
Operative Documents by the Bank; and (iv) this Lease is executed and delivered
by the Bank solely
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in the exercise of the powers expressly conferred upon it as Lessor under the
Trust Agreement.
SECTION XVIII.10. Estoppel Certificates. Each party hereto agrees that at
---------------------
any time and from time to time during the Lease Term, it will promptly, but in
no event later than fifteen (15) days after request by the other party hereto,
execute, acknowledge and deliver to such other party or to any prospective
purchaser (if such prospective purchaser or lessee has signed a commitment
letter or letter of intent to purchase or lease one or more Systems subject to a
Lease Supplement or any part thereof or to purchase any Note or Certificate or
to purchase shares of capital stock of an Interested Subsidiary or to merge or
consolidate with or into Lessee), assignee or mortgagee or third party
designated by such other party, a certificate stating (a) that this Lease is
unmodified and in force and effect (or if there have been modifications, that
this Lease is in force and effect as modified, and identifying the modification
agreements); (b) the date to which Base Rent has been paid; (c) in the case of
an estoppel certificate to be given by Lessee, whether or not there is any
existing default by Lessee in the payment of Base Rent or any other sum of money
hereunder, and whether or not there is any other existing Lease Default or Lease
Event of Default with respect to which a notice of default has been served, and,
if there is any such default, specifying the nature and extent thereof; (d) that
such purchase, merger, transfer or lease does not constitute a Lease Default or
Lease Event of Default; (e) other items that may be reasonably requested;
provided, that no such items may be requested unless the requesting party
- --------
has a good faith reason for such request; and (f) in the case of an estoppel
certificate to be given by Lessor, whether or not title to a proposed or
constructed Alteration will vest in Lessor in accordance with Section 7.3;
-----------
provided, that no such certificate may be requested unless the requesting
- --------
party has a good faith reason for such request.
SECTION XVIII.11. No Joint Venture. Any intention to create a joint venture
----------------
or partnership relation between Lessor and Lessee is hereby expressly
disclaimed.
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SECTION XVIII.12. No Accord and Satisfaction. The acceptance by Lessor of
--------------------------
any sums from Lessee (whether as Base Rent or otherwise) in amounts which are
less than the amounts due and payable by Lessee hereunder is not intended, nor
shall be construed, to constitute an accord and satisfaction of any dispute
between Lessor and Lessee regarding sums due and payable by Lessee hereunder,
unless the Required Entities specifically deem it as such in writing.
SECTION XVIII.13. Successor Lessor. Lessee agrees that, in the case of the
----------------
appointment of any successor owner trustee pursuant to the terms hereof and of
the Trust Agreement, such successor owner trustee shall, upon written notice by
such successor owner trustee to Lessee, succeed to all the rights, powers and
title of Lessor hereunder and shall be deemed to be Lessor for all purposes
hereof and without in any way altering the terms of this Lease or Lessee's
obligations hereunder. Such appointment and designation of a successor owner
trustee shall not exhaust the right to appoint and designate further successor
owner trustees pursuant to the Trust Agreement, but such right may be exercised
repeatedly as long as this Lease shall be in effect.
SECTION XVIII.14. Survival. The obligations of Lessee to be performed under
--------
this Lease prior to any Lease Supplement Termination Date shall survive the
expiration or termination of this Lease. The extension of any applicable
statute of limitations by Lessor, Administrative Agent, Lessee, the Certificate
Purchasers or any other Indemnitee shall not affect such survival.
SECTION XVIII.15. Transfer of Systems to Lessee. Whenever pursuant to any
-----------------------------
provision of this Lease, Lessor is required to transfer a System to Lessee or to
an independent third party, such transfer shall be made at Lessee's expense by
the bill of sale transfer of all of Lessor's right, title and interest in and to
the Equipment on an "as is, where is, with all faults" basis free and clear of
all Lessor Liens, and otherwise without recourse, representation or warranty of
any kind, and together with the due assumption by Lessee (or such third party)
of, and due release of Lessor from, all obligations relating to the Equipment or
the Operative Documents. In connection with any such transfer to an
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independent third party, Lessee shall execute and deliver such documents as may
be required to facilitate the transfer of the Systems. Any provision in this
Lease or other Operative Document to the purchaser thereof to the contrary
notwithstanding, Lessor shall not be obligated to make any such transfer until
Lenders and the Certificate Purchasers have received all Rent and other amounts
due and owing hereunder.
SECTION XVIII.16. Enforcement of Certain Warranties.
---------------------------------
(a) Unless a Lease Event of Default shall have occurred and be continuing,
Lessor authorizes Lessee (directly or through agents), at Lessee's expense,
to assert, during the Lease Term, all of Lessor's rights (if any) under any
applicable warranty and any other claim that Lessee or Lessor may have
under the warranties provided to Lessor in connection with the purchase of
the Equipment, and Lessor agrees to cooperate, at Lessee's expense, with
Lessee and its agents in asserting such rights. Any amount recovered by
Lessee under any such warranties shall be paid to Lessee.
(b) Notwithstanding the foregoing provisions of this Section 18.16,
-------------
so long as a Lease Default shall have occurred and be continuing, any amount
that would otherwise be retained by Lessee pursuant to Section 18.16(a) shall be
----------------
paid to Lessor as security for the obligations of Lessee under this Lease, shall
be invested by Lessor in accordance with Section 18.17 in Permitted Investments
-------------
and, if a Lease Event of Default is continuing, may be applied to the
obligations of Lessee hereunder, and, at such time thereafter as no Lease
Default shall be continuing, such amount and gain thereon shall be paid promptly
to Lessee to the extent not previously applied in accordance with the terms of
this Lease.
SECTION XVIII.17. Investment of Security Funds. Any amounts not payable to
----------------------------
Lessee and paid to or retained by Lessor pursuant to any provision hereof solely
because a Lease Event of Default or Lease Default shall have occurred and be
continuing or because Lessee shall not have performed in full its obligations
under Article XI shall be held by Lessor as security for the obligations of
----------
Lessee under this Lease and the other Operative Documents. At such time as no
Lease Event of Default or Lease Default, or
-48-
<PAGE>
Lease
failure to perform shall be continuing, such amounts, net of any amounts
previously applied to Lessee's obligations hereunder or under any other
Operative Documents, shall be paid to Lessee. Any such amounts which are held
pending payment to Lessee or application hereunder shall be invested by Lessor
(or Administrative Agent) as directed from time to time in writing by Lessee
(provided, however, if a Lease Event of Default has occurred and is
- -------- -------
continuing, such investment will be directed by Lessor), and at the expense and
risk of Lessee, in Permitted Investments. Any gain (including interest
received) realized as the result of any such investment (net of any fees,
commissions and other expenses, if any, incurred in connection with such
investment) shall be applied from time to time in the same manner as the
principal invested. Lessee will promptly pay to Lessor on demand, the amount of
any loss realized as the result of any such investment (together with any fees,
commissions and other expenses, if any, incurred in connection with such
investment), such amount to be held, paid and applied in the same manner as
other amounts subject to this Section 18.17.
-------------
[signature page follows]
-49-
<PAGE>
IN WITNESS WHEREOF, the undersigned have each caused this Lease to be duly
executed and delivered by their respective officers thereunto duly authorized as
of the day and year first above written.
SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION,
not in its individual capacity except as
expressly stated herein, but solely as
Certificate Trustee, as Lessor
By_____________________________
Name: Robert L. Reynolds
Title: Vice President
ELECTRIC LIGHTWAVE, INC.,
as Lessee
By______________________________
Name: Robert J. DeSantis
Title: Chief Financial Officer
<PAGE>
RECEIPT FOR COUNTERPART NO. 1
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
as Administrative Agent
By_____________________________
Name: Robert L. Reynolds
Title: Vice President
<PAGE>
Lease
EXHIBIT A
TO
LEASE
FORM OF LEASE SUPPLEMENT
THIS LEASE SUPPLEMENT dated April 28, 1995 (this "Lease Supplement") is
----------------
between Shawmut Bank Connecticut, National Association, not in its individual
capacity, except as expressly stated herein, but solely as Certificate Trustee
under the Trust Agreement, as Lessor (the "Lessor"), and ELECTRIC LIGHTWAVE,
------
INC., a Delaware corporation, as Lessee (the "Lessee");
------
W I T N E S S E T H:
-------------------
WHEREAS, Lessee and Lessor have heretofore entered into that certain Lease
dated as of April 28, 1995 (as amended, supplemented, or otherwise modified from
time to time, the "Lease"). Unless otherwise defined herein, capitalized terms
-----
used herein shall have the meanings specified in the Lease; and
WHEREAS, the Lease provides for the execution and delivery of a Lease
Supplement on the Document Closing Date substantially in the form hereof for the
purpose of confirming the acceptance and lease of certain Equipment, specifying
the Rent applicable to such Equipment and setting forth certain other matters,
all as required pursuant to the Lease;
NOW, THEREFORE, in consideration of the premises and other good and sufficient
consideration, Lessor and Lessee hereby agree as follows:
=================================================================
TO THE EXTENT, IF ANY, THAT THIS LEASE SUPPLEMENT CONSTITUTES CHATTEL PAPER
(AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY
APPLICABLE JURISDICTION), NO SECURITY
-1-
<PAGE>
Lease Supplement
INTEREST IN THIS LEASE SUPPLEMENT MAY BE CREATED THROUGH THE TRANSFER OR
POSSESSION OF ANY COUNTERPART HEREOF OTHER THAN THE "ORIGINAL EXECUTED
COUNTERPART NO. 1", WHICH SHALL BE IDENTIFIED AS THE COUNTERPART CONTAINING THE
RECEIPT THEREFOR EXECUTED BY ADMINISTRATIVE AGENT ON OR FOLLOWING THE SIGNATURE
PAGE THEREOF.
THIS COUNTERPART IS [NOT] THE ORIGINAL EXECUTED COUNTERPART NO. 1.
-2-
<PAGE>
Lease Supplement
1. Systems Subject to Lease Supplement. All Systems located in [identify
-----------------------------------
metropolitan area] that the Lessor has had constructed for its benefit pursuant
to the Construction Agency Agreement shall become, upon satisfaction or waiver
of the conditions set forth in Article III of the Participation Agreement,
subject to the terms and conditions of this Lease Supplement and the Lease.
2. Base Term. The Base Term of this Lease Supplement shall commence on the
---------
initial Delivery Date, as evidenced by a Certificate of Acceptance for Systems
subject to this Lease Supplement, and shall end on the third anniversary of such
initial Delivery Date.
3. Renewal Terms and Lessor's Cost. With respect to the Systems covered by
-------------------------------
this Lease Supplement, Lessee shall have up to four one-year renewal options
that may be exercised pursuant, and subject, to Section 4.1 of the Lease;
provided that no such renewal option may extend beyond April 30, 2002 and the
- --------
final renewal option may have a term of less than one year if necessary to
comply with this requirement.
4. Confirmation. Lessee hereby confirms its agreement, in accordance with
------------
the Lease as supplemented by this Lease Supplement to pay Rent to Lessor for the
Equipment leased hereunder. Nothing herein shall reduce Lessee's obligation to
make all other payments required under the Lease, including those payments to be
made on the last day of the Lease Term pursuant to Article IV of the Lease.
5. Incorporation into Lease. This Lease Supplement shall be construed in
------------------------
connection with and as part of the Lease, and all terms, conditions and
covenants contained in the Lease, as supplemented by this Lease Supplement,
shall be and remain in full force and effect.
6. References. Any and all notices, requests, certificates and other
----------
instruments executed and delivered concurrently with or after the execution and
delivery of this Lease Supplement may refer to the "Lease, dated as of April 28,
1995", or may identify the Lease in any other respect without making specific
reference
-3-
<PAGE>
Lease Supplement
to this Lease Supplement, but nevertheless all such references shall be deemed
to include this Lease Supplement, unless the context shall otherwise require.
7. Counterparts. This Lease Supplement may be executed in any number of
------------
counterparts, each executed counterpart constitute an original but all together
one and the same instrument.
8. Governing Law. THIS LEASE SUPPLEMENT HAS BEEN DELIVERED IN, AND SHALL IN
-------------
ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY
WITHIN SUCH STATE, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE.
[signature page follows]
-4-
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Supplement to be
duly executed and delivered on the day and year first above written.
SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, not in its individual capacity
except as expressly stated herein, but
solely as Certificate Trustee, as Lessor
By___________________________
Name: Robert L. Reynolds
Title: Vice President
ELECTRIC LIGHTWAVE, INC., as Lessee
By___________________________
Name: Robert J. DeSantis
Title: Chief Financial Officer
<PAGE>
================================================================================
LOAN AGREEMENT
(Electric Lightwave, Inc. Trust No. 1995-A)
dated as of April 28, 1995
among
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity but solely
as Certificate Trustee under the Trust
Agreement for the Certificate Purchasers
named therein, as Borrower,
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity but solely
as Administrative Agent
and
THE PERSONS NAMED ON SCHEDULE I,
as Lenders
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I
DEFINITIONS
SECTION 1.1. Defined Terms............................................ 1
SECTION 1.2. Other Definitional Provisions............................ 1
ARTICLE II
AMOUNT AND TERMS OF COMMITMENTS;
REPAYMENT AND PREPAYMENT OF LOANS
SECTION 2.1. Commitment; Term......................................... 2
SECTION 2.2. Notes.................................................... 2
SECTION 2.3. Procedure for Borrowing.................................. 3
SECTION 2.4. Prepayments and Lease Termination Payments............... 3
SECTION 2.5. Reserved................................................. 4
SECTION 2.6. Interest Rates........................................... 4
SECTION 2.7. Determination of Interest Rate........................... 4
SECTION 2.8............................................................ 5
SECTION 2.9. Pro Rata Treatment among Loans........................... 5
SECTION 2.10. Payment from Trust Estate Only.......................... 5
SECTION 2.11. Illegality.............................................. 6
SECTION 2.12. Other Costs; Increased Costs............................ 6
ARTICLE III
RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME
FROM THE TRUST ESTATE
SECTION 3.1. Rent Distribution........................................ 10
SECTION 3.2. Distribution of Mandatory Prepayments and Other Amounts.. 11
SECTION 3.3. Distribution of Payments After Loan Event of Default..... 12
SECTION 3.4. Other Payments........................................... 13
SECTION 3.5. Distribution to Certificate Purchasers................... 14
SECTION 3.6. Distribution of Excluded Amounts......................... 14
SECTION 3.7. Supplemental Rent........................................ 14
SECTION 3.8. Guaranty Payments........................................ 14
<PAGE>
TABLE OF CONTENTS
-----------------
(CONTINUED)
Page
----
ARTICLE IV
CONDITIONS PRECEDENT
ARTICLE V
AFFIRMATIVE COVENANTS OF BORROWER
SECTION 5.1. Performance by Borrower.............................. 15
SECTION 5.2. Waiver by Borrower................................... 15
ARTICLE VI
LOAN EVENTS OF DEFAULT; REMEDIES
SECTION 6.1. Loan Events of Default................................ 15
SECTION 6.2. Remedies.............................................. 17
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. Amendments and Waivers................................ 19
SECTION 7.2. Notices............................................... 19
SECTION 7.3. Successors and Assigns; Transfers and Participations.. 19
SECTION 7.4. Adjustments........................................... 19
SECTION 7.5. Counterparts.......................................... 20
SECTION 7.6. GOVERNING LAW......................................... 20
SECTION 7.7. Survival and Termination of Agreement................. 20
SECTION 7.8. Entire Agreement...................................... 20
SECTION 7.9. Severability.......................................... 21
SECTION 7.10. Limitations of Borrower's Liability................... 21
SCHEDULE I Lenders
EXHIBIT A Form of Note
- 2 -
<PAGE>
THIS LOAN AGREEMENT (Electric Lightwave, Inc. Trust No. 1995-A) (this "Loan
----
Agreement") is entered into as of April 28, 1995 among SHAWMUT BANK CONNECTICUT,
- ---------
NATIONAL ASSOCIATION, a national banking association, not in its individual
capacity, but solely as Certificate Trustee under the Trust Agreement of even
date herewith with the Persons listed on Schedule I thereto (the "Borrower");
--------
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, a national banking association,
as Administrative Agent; and the Persons named on Schedule I hereto, as Lenders.
----------
W I T N E S S E T H:
-------------------
WHEREAS, pursuant to the Participation Agreement, the Construction Agency
Agreement and the Lease, on each Advance Date Borrower desires to pay for the
purchase, construction or installation of Equipment to comprise one or more
Systems, or to pay certain Transaction Costs and the Arrangement Fee related
thereto, and to lease the Systems to Lessee pursuant to the Lease, all as more
particularly described in the Participation Agreement of even date herewith and
in each of the other Operative Documents; and
WHEREAS, Borrower desires to borrow from Lenders all or a portion of the cost
of the acquisition and construction of the Equipment and all or a portion of the
Transaction Costs and the Arrangement Fee;
NOW, THEREFORE, in consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION I.1. Defined Terms. The capitalized terms used herein and not
-------------
otherwise defined shall have the meanings ascribed thereto in Appendix 1 to the
Participation Agreement (Electric Lightwave, Inc. Trust No. 1995-A) dated as of
the date hereof among Electric Lightwave, Inc., Citizens Utilities Company,
Borrower, the Agents, the Lenders identified therein and the
<PAGE>
Loan Agreement
Certificate Purchasers identified therein (the "Participation Agreement") for
-----------------------
all purposes hereof.
SECTION I.2. Other Definitional Provisions. Unless otherwise specified
-----------------------------
therein, all terms defined in this Loan Agreement shall have such defined
meanings when used in the Notes or any certificate or other document made or
delivered pursuant hereto.
ARTICLE II
AMOUNT AND TERMS OF COMMITMENTS;
REPAYMENT AND PREPAYMENT OF LOANS
SECTION II.1. Commitment; Term. Subject to the terms and conditions hereof
----------------
and of the Participation Agreement, each Lender severally agrees to make term
loans to Borrower ("Loans") on each Advance Date and, during a Construction
-----
Period, on any Payment Date on which interest shall be capitalized, in an
aggregate principal amount not to exceed, for all dates on which Loans are made,
the amount of such Lender's Commitment. LIBO Rate Loans shall be made by each
Lender at its LIBOR Office. The term of this Loan Agreement shall expire on the
Final Maturity Date.
SECTION II.2. Notes. (a) The Loans made by each Lender shall be evidenced
-----
by a Note of Borrower, substantially in the form of Exhibit A hereto, with
---------
appropriate insertions as to payee and principal amount, payable to the order of
such Lender and in a principal amount equal to the aggregate principal amount of
the Commitment of such Lender, or such lesser amount, from time to time, of the
Loan or Loans, as the case may be, made by such Lender and evidenced by such
Note. Each Note shall (i) be dated the Document Closing Date, (ii) be stated to
mature on the Final Maturity Date, (iii) have attached a grid for the purpose of
evidencing all of the Loans (including accruals and payments of interest
thereon) made by such Lender, and (iv) bear interest on the unpaid principal
amount thereof from time to time outstanding at the applicable interest rate per
annum determined as provided in, and payable as specified in, Section 2.6.
-----------
- 2 -
<PAGE>
Loan Agreement
(b) Upon the consummation of each Advance, each Lender shall make a notation
on the grid attached to such Lender's Note indicating the amount of the Loan
advanced by such Lender on such Advance Date. Each Lender is also hereby
authorized to record the date and amount of each Advance made by such Lender,
each continuation or conversion thereof, the length of each Interest Period with
respect thereto and the date and amount of each payment of principal and/or
interest relating thereto, on the grid attached to each Note held by such
Lender, and any such recordation shall constitute prima facie evidence of the
----- -----
accuracy of the information so recorded; provided, that the failure to make any
--------
such recordation or any error in such recordation shall not affect the
obligation of Certificate Trustee under such instrument or the corresponding
obligation of Lessee to pay Rent. In addition, on each Payment Date during any
Construction Period, each Lender shall make a notation on the grid attached to
such Lender's Note indicating the amount of Capitalized Interest accruing on
such Lender's Note during the Interest Period ending on such Payment Date (which
Capitalized Interest shall thereby be added to the principal amount of such
Note).
SECTION II.3. Procedure for Borrowing. (a) Subject to the terms and
-----------------------
conditions of the Participation Agreement and this Loan Agreement, Borrower
shall borrow under the Commitments on each Advance Date upon receipt by
Administrative Agent from Lessee of an Advance Request in accordance with
Section 2.5(a) of the Participation Agreement.
(b) Administrative Agent shall notify each Lender of Administrative Agent's
receipt of any Advance Request on the date of such receipt. Each Lender will
make the amount of its pro rata share of the Advance available to Administrative
Agent for the account of Borrower at the office of Administrative Agent referred
to in Section 7.2 prior to 1:00 p.m., Hartford, Connecticut time, on the
-----------
scheduled Advance Date in funds immediately available to Administrative Agent.
The proceeds of all such Loans will then be made available to Borrower by
Administrative Agent by crediting the account of Borrower on the books of
Administrative Agent, or
- 3 -
<PAGE>
Loan Agreement
such other account of Borrower as shall have been designated by Borrower to
Administrative Agent, with the aggregate of the amounts made available by the
Lenders in like funds as received by Administrative Agent.
SECTION II.4. Prepayments and Lease Termination Payments. Borrower shall
------------------------------------------
repay in full the unpaid principal amount of each Loan (including any Additional
Costs) upon the Final Maturity Date therefor, except with respect to the
aggregate of all amounts that Borrower is not required to pay pursuant to the
proviso of clause (a) below. No principal amortization of the Loans will be
----------
required prior to the Stated Maturity thereof, except as follows:
(a) on any Lease Supplement Termination Date, Borrower shall prepay a
portion of the aggregate outstanding principal amount of the Loans that is
equal to the Lease Supplement Balance being repaid, together with interest
accrued to the date of such prepayment on the principal amount so prepaid,
plus an amount equal to the amount paid by Lessee pursuant to Section 9.11(c)
of the Participation Agreement or pursuant to clause (d) of the definition of
----------
"Purchase Option Exercise Amount;" provided, that if such Lease Supplement
--------
Termination Date results from Lessee's exercise of the Sale Option in respect
of such Lease Supplement, the aggregate amount paid pursuant to such exercise
shall not exceed the sum of the Recourse Sale Proceeds plus the Guaranteed
Residual Payment plus any amount payable under Section 7.4 of the
Participation Agreement and Sections 3.1 (ii) and 4.5(d) of the Lease, each in
respect of such Lease Supplement being terminated; and
(b) upon the occurrence of an Event of Taking or an Event of Loss that has
resulted in Lessee exercising its Purchase Option pursuant to Section
11.3(a)(i) of the Lease, Borrower shall prepay a portion of the aggregate
outstanding principal amount of the Loans that is equal to the Lease
Supplement Balance with respect to the System or Systems suffering such Event
of Taking or Event of Loss, together
- 4 -
<PAGE>
Loan Agreement
with interest accrued to the date of such prepayment on the principal amount
so prepaid.
SECTION II.5. Reserved.
--------
SECTION II.6. Interest Rates. Pursuant to an appropriately delivered Advance
--------------
Request or Continuation/Conversion Request, Borrower may elect that the Loans
accrue interest at a rate per annum:
(a) on that portion maintained from time to time as an Alternate Base Rate
Loan, equal to the Alternate Base Rate from time to time in effect;
(b) on that portion maintained as a LIBO Rate Loan, during each Interest
Period applicable thereto, equal to the LIBO Rate from time to time in effect.
Interest accrued on each Loan (other than Capitalized Interest) shall be payable
in arrears on each Payment Date.
If all or a portion of the principal amount of or interest on the Notes shall
not be paid when due (whether at the Stated Maturity thereof, by acceleration or
otherwise), such overdue amount shall, without limiting the rights of any Lender
under Section 6.2, bear interest at the Overdue Rate, in each case from the date
-----------
first due until paid in full (as well after as before judgment).
SECTION II.7. Determination of Interest Rate. (a) During such time as a
------------------------------
LIBO Rate applies to any of the Notes, interest in respect of such Notes shall
be calculated on the basis of a 360 day year and the actual days elapsed.
During such time as the Alternate Base Rate applies to any of the Notes,
interest in respect of such Notes shall be calculated on the basis of a 365 (or
366, as applicable) day year and the actual number of days elapsed.
Administrative Agent, solely in reliance upon information furnished to it by
Information Agent, shall as soon as practicable, but in no event later than
12:00 noon, Hartford,
- 5 -
<PAGE>
Loan Agreement
Connecticut time, one (1) Business Day prior to the effectiveness of each LIBO
Rate, notify Borrower, Lessee and the Participants of such LIBO Rate and the
corresponding Yield. Administrative Agent, solely in reliance upon information
furnished to it by Information Agent, shall from time to time, as necessary,
notify Borrower, Lessee and the Participants of the Alternate Base Rate and the
corresponding Yield. Any change in the interest rate on the Loan or Yield on
the Certificates resulting from a change in the Applicable Margin shall become
effective as of the opening of business on the day on which such Applicable
Margin changes as provided herein.
(b) Each determination of an interest rate pursuant to any provision of this
Loan Agreement and the determination of the corresponding Yield shall be
conclusive and binding on Borrower, Lessee and the Participants in the absence
of manifest error.
SECTION II.8. Reserved.
--------
SECTION II.9. Pro Rata Treatment among Loans. Except as otherwise expressly
------------------------------
set forth in Article III, each payment (including each prepayment) by Borrower
-----------
on account of principal of and interest on the Loans shall be made pro rata
among the Loans of the same type and, if applicable, having the same Interest
Period. Administrative Agent shall apply any prepayments in reduction of Loans
so that Borrower's funded losses under Section 2.12(h) are minimized. All
---------------
payments (including prepayments) to be made by Borrower hereunder and under the
Notes shall be made without set-off or counterclaim and shall be made to
Administrative Agent, for the account of the Lenders, at Administrative Agent's
office referred to in Section 7.2, in lawful money of the United States of
-----------
America and in immediately available funds. Administrative Agent shall
distribute such payments to each Lender to its LIBOR Office, promptly upon
receipt in like funds as received.
SECTION II.10. Payment from Trust Estate Only. All payments to be made by
------------------------------
Borrower in respect of the Loans and this Loan Agreement shall be made only from
the income and the proceeds from
- 6 -
<PAGE>
Loan Agreement
the Trust Estate and only to the extent that Borrower shall have received
sufficient income or proceeds from the Trust Estate to make such payments in
accordance with the terms of Article III. Each Lender agrees that it will look
-----------
solely to the income and proceeds from the Trust Estate to the extent available
for distribution to such Lender as herein provided and that none of Borrower,
any Certificate Purchaser or Administrative Agent is or shall be personally
liable to any Lender for any amount payable hereunder or under any Note.
SECTION II.11. Illegality. (a) Notwithstanding any other provision herein,
----------
if any change in any law or regulation or in the interpretation thereof by any
governmental authority charged with the administration or interpretation thereof
shall make it unlawful for any Lender to make or maintain any LIBO Rate Loan or
to give effect to its obligations as contemplated hereby with respect to any
LIBO Rate Loan, then, by written notice to Lessee, Borrower and Administrative
Agent, such Lender may:
(i) declare that such LIBO Rate Loans will not thereafter be made by such
Lender hereunder, whereupon any request by Lessee for an Advance bearing
interest with reference to the LIBO Rate shall, as to such Lender only, be
deemed a request for an Advance bearing interest with reference to the
Alternate Base Rate (or for a conversion thereto pursuant to Section 2.5(i) of
the Participation Agreement) unless such declaration shall be subsequently
withdrawn; and
(ii) require that all outstanding LIBO Rate Loans made by it be converted
to Alternative Base Rate Loans, in which event all such LIBO Rate Loans shall
automatically be converted to Alternative Base Rate Loans as of the effective
date of such notice as provided in paragraph (b) below.
-------------
In the event any Lender shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal which would otherwise have been applied to
repay the LIBO Rate Loans that would have been made by such Lender or the
converted LIBO Rate
- 7 -
<PAGE>
Loan Agreement
Loans of such Lender shall instead be applied to repay the Alternative Base Rate
Loans made by such Lender in lieu of, or resulting from the conversion of, such
LIBO Rate Loans.
(b) For purposes of this Section 2.11, a notice to Lessee by any Lender
------------
shall be effective as to each LIBO Rate Loan, if lawful, on the last day of the
Interest Period currently applicable to such LIBO Rate Loan; in all other cases
such notice shall be effective on the date of receipt by Lessee, the Borrower
and Administrative Agent.
SECTION II.12. Other Costs; Increased Costs. (a) LIBOR Reserve Adjustment.
---------------------------- ------------------------
It is understood that the cost to each Lender of making or maintaining any of
the LIBO Rate Loans may fluctuate as a result of the applicability of reserve
requirements imposed by the Board of Governors of the Federal Reserve System at
the ratios provided for in Regulation D thereof. Borrower agrees to pay to each
of the Lenders from time to time as Supplemental Rent such amounts as shall be
necessary to compensate such Lender for the portion of the cost of making or
maintaining LIBO Rate Loans resulting from any such reserve requirements
provided for in Regulation D.
(b) Indemnification for Charges. Notwithstanding any other provision herein,
---------------------------
if after the date of this Loan Agreement any change in applicable law or
regulation (including, without limitation, Regulation D) or in the
interpretation or administration thereof by any governmental authority charged
with the interpretation or administration thereof (whether or not having the
force of law) shall change the basis of taxation of payments to any Lender of
the principal of or interest on any LIBO Rate Loan or Alternative Base Rate Loan
made by such Lender or any fees or other amounts payable hereunder (other than
changes in respect of taxes imposed on the overall net income of such Lender and
franchise taxes imposed on it by the jurisdiction in which such Lender has its
principal office or by any political subdivision or taxing authority therein),
or shall impose, modify, or deem applicable any reserve, special deposit, or
similar requirement against assets of, deposits with or for the account of
- 8 -
<PAGE>
Loan Agreement
or credit extended by such Lender, or shall impose on such Lender or the London
interbank market any other condition affecting this Loan Agreement or any LIBO
Rate Loan or Alternative Base Rate Loan made by such Lender, and the result of
any of the foregoing shall be to increase the cost to such Lender of making or
maintaining any LIBO Rate Loan or Alternative Base Rate Loan or to reduce the
amount of any sum received or receivable by such Lender hereunder or under the
Notes (whether of principal, interest, or otherwise) by an amount deemed by such
Lender to be material, then the Borrower will pay to such Lender upon demand
such additional amount or amounts as will compensate such Lender for such
additional costs incurred or reduction suffered.
(c) Capital Adequacy. If any Lender shall have determined that the adoption
----------------
after the date hereof of any law, rule, regulation, or guideline regarding
capital adequacy, or any change in any existing law, rule, regulation, or
guideline regarding capital adequacy or in the interpretation or administration
of any of the foregoing by any governmental authority, central bank, or
comparable agency charged with the interpretation or administration thereof, or
compliance by any Lender (or any lending office of such Lender) or any Lender's
holding company with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank, or
comparable agency, has or would have the effect of reducing the rate of return
on such Lender's capital or on the capital of such Lender's holding company, if
any, as a consequence of this Agreement or the Loans made by such Lender
pursuant hereto to a level below that which such Lender or such Lender's holding
company could have achieved but for such adoption, change, or compliance (taking
into consideration such Lender's policies and the policies of such Lender's
holding company with respect to capital adequacy) by an amount deemed by such
Lender to be material, then from time to time the Borrower shall pay to such
Lender such additional amount or amounts as will compensate such Lender or such
Lender's holding company for any such reduction suffered.
- 9 -
<PAGE>
Loan Agreement
(d) Lender's Certificate. A certificate of a Lender setting forth such
--------------------
amount or amounts as shall be necessary to compensate such Lender as specified
in clauses (a), (b), and (c) above, as the case may be, and all of the relevant
----------- --- ---
factors and the calculations supporting such amount or amounts, shall be
delivered to the Borrower and shall be conclusive absent manifest error. The
Borrower shall pay each Lender the amount shown as due on any such certificate
delivered by it within ten (10) days after the receipt of the same.
(e) Limitation on Increased Costs. Notwithstanding the provisions of clauses
----------------------------- -------
(a), (b) and (c), above, to the contrary, no Lender shall be entitled to demand
- --- --- ---
compensation for any increased costs or reduction in amounts received or
receivable or reduction in return on capital to the extent that such
compensation relates to any period of time prior to the date upon which such
Lender first notified the Borrower of the occurrence of the event entitling such
Lender to such compensation (unless, and to the extent, that any such
compensation so demanded shall relate to the retroactive application of any
event so notified to the Borrower required by any governmental authority,
central bank or comparable agency).
(f) Transfers. If any Lender shall have delivered a notice or certificate
---------
pursuant to clause (d) above or shall have exercised its rights under Sections
---------- --------
2.11(a)(i) or (ii), Lessee shall have the right, at its own expense, to notify
- ---------- ----
Certificate Trustee, on behalf of Certificate Purchasers, to require such Lender
to (i) terminate its Commitment or (ii) transfer and assign without recourse (in
accordance with and subject to the restrictions contained in Section 6.3 of the
Participation Agreement) all or a portion of its interest, rights and
obligations under this Loan Agreement to another financial institution which
shall assume such obligations; provided, that (A) no such termination or
--------
assignment shall conflict with any law, rule or regulation or order of any
Governmental Authority and (B) the Borrower or the assignee, as the case may be,
shall pay to the affected Lender in immediately available funds on the date of
such termination or assignment the principal of and interest accrued to
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<PAGE>
Loan Agreement
the date of payment on the Loans made by it hereunder and all other amounts
accrued for its account or owed to it hereunder.
(g) Non-United States Persons. Each Lender that is not a United States
-------------------------
Person as such term is defined in(S) 7701(a)(30) of the Code (a "United States
-------------
Person") shall complete and deliver to Borrower, prior to the date on which the
- ------
first payment to such Lender is due hereunder, a duly certified Internal Revenue
Service Form 1001 in duplicate claiming that it is entitled to complete
exemption from United States withholding tax under an income tax treaty to which
the United States is a party or a duly certified Internal Revenue Service Form
4224 in duplicate claiming that the payments of interest and the return of the
principal amount of Loans, including Capitalized Interest to be received under
this Loan Agreement are effectively connected with the conduct of a trade or
business of such Lender in the United States, as appropriate. Each Lender
further agrees to complete and deliver to Borrower from time to time as required
by Applicable Law any successor or additional form or certificate required by
the Internal Revenue Service in order to secure complete exemption from United
States withholding tax. If for any reason during the term of this Loan
Agreement, a Lender becomes unable to submit the forms or certificate referred
to above or the information or representations contained therein is no longer
accurate in any material respect, such Lender shall notify Administrative Agent
and Borrower in writing to that effect.
(h) Funding Losses. If (i) Borrower makes any payment (including a
--------------
prepayment) of principal with respect to any LIBO Rate Loan (pursuant to any
provision of this Loan Agreement or otherwise) on any day other than the last
day of the Interest Period applicable thereto, or (ii) Borrower shall default in
payment when due of the principal amount of or interest on any Note, or (iii)
Borrower fails to borrow, convert to or continue any LIBO Rate Loan after notice
has been given to any Lender in accordance with Section 2.12(i), Borrower shall
---------------
reimburse each Lender on demand for any resulting loss or reasonable expense
incurred by it (or by any existing or prospective participant in the related
Loan), including (without limitation) any loss
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<PAGE>
Loan Agreement
incurred in obtaining, liquidating or employing deposits from third parties;
provided, that such Lender shall have delivered to Borrower a certificate as
- --------
to the amount of such loss or expense, which certificate shall be conclusive in
the absence of manifest error. Without limiting the effect of the preceding
sentence, such reimbursement shall include an amount equal to the excess, if
any, of (i) the amount of interest which otherwise would have accrued on the
principal amount so paid, prepaid or not borrowed, converted or continued for
the period from the date of such payment, prepayment, or failure to borrow,
convert or continue to the last day of the then current Interest Period for such
LIBO Rate Loan (or, in the case of a failure to borrow, convert or continue, the
Interest Period for such LIBO Rate Loan which would have commenced on the date
specified for such borrowing, conversion or continuation) at the applicable rate
of interest for such LIBO Rate Loan provided for herein over (ii) the interest
----
component of the amount such Lender (or any corporation controlling such Lender)
would have bid in the London interbank market for U.S. Dollar deposits of
leading banks in amounts comparable to such principal amount and with maturities
comparable to such period (as reasonably determined by such Lender).
(i) Alternative Base Rate Loans Substituted for Affected LIBO Rate Loans. If
--------------------------------------------------------------------
(i) any Lender has demanded compensation under Section 2.12(b), and Borrower, by
---------------
at least five (5) Business Days' prior notice to such Lender through
Administrative Agent, shall have elected that the provisions of this Section
-------
2.12(i) shall apply to such Lender, or (ii) the obligation of any Lender to make
- -------
LIBO Rate Loans has been suspended pursuant to Section 2.11, then, unless and
------------
until such Lender notifies Borrower that the circumstances giving rise to such
suspension or demand for compensation no longer apply:
(a) all Loans which would otherwise be made by such Lender as LIBO Rate
Loans shall be made instead as Loans bearing interest at the Alternate Base
Rate (on which interest shall be payable contemporaneously with the related
LIBO Rate Loans of the other Lenders), and
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Loan Agreement
(b) after each of its LIBO Rate Loans has been repaid, all payments of
principal which would otherwise be applied to repay such LIBO Rate Loans shall
be applied to repay its Loans bearing interest at the Alternate Base Rate
instead.
ARTICLE III
RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME
FROM THE TRUST ESTATE
SECTION III.1. Rent Distribution. (a) Except as otherwise provided in
-----------------
Section 3.3, each payment of Base Rent under the Lease as well as any payment of
- -----------
interest on overdue installments of Base Rent under the Lease, and any other
monies paid over by Lessee or Borrower to Administrative Agent for such purpose,
shall be distributed as promptly as possible (it being understood that any
payments of Base Rent received by Administrative Agent under the Lease on a
timely basis and in accordance with the provisions of the Lease shall be
distributed on the date received in the funds so received) in the following
order of priority:
first, an amount equal to the aggregate amount of the payment of interest
-----
(as well as any interest on (to the extent permitted by Applicable Laws)
overdue interest) then due shall be distributed and paid to the Lenders;
second, an amount equal to the aggregate amount of the payment of principal
------
then due shall be distributed and paid to the Lenders, pro rata among the
Lenders, without priority of one such Lender over the other, in the
proportion that the unpaid principal amount of the Notes held by each Lender
bears to the aggregate unpaid principal amount of the Notes; and
third, the balance, if any, of such payment remaining thereafter shall be
-----
distributed at Borrower's direction in accordance with Section 3.2(b) of
the Trust Agreement.
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Loan Agreement
(b) Except as otherwise provided in Section 3.3, the amounts, if any, from
-----------
time to time received by Administrative Agent which constitute payments of
Supplemental Rent shall be paid to or upon the order of the Person owed the
same.
SECTION III.2. Distribution of Mandatory Prepayments and Other Amounts.
-------------------------------------------------------
(a) Except as otherwise provided in Section 3.2(b) and Section 3.3, the
-------------- -----------
amount of any prepayment and other amounts received pursuant to Section 2.4
-----------
shall in each case be distributed and paid in the following order of priority:
first, an amount equal to the aggregate unpaid principal, and accrued
-----
interest on, the outstanding Notes, together with the other amounts required
to be paid by Borrower pursuant to Section 2.4 (other than Excluded Amounts),
-----------
shall be distributed and paid to the Lenders pro rata among the Lenders; and
second, the balance, if any, of such payment remaining thereafter shall be
------
distributed at Borrower's direction in accordance with Section 3.2(d) of
the Trust Agreement.
(b) Except as otherwise provided in Section 3.3, any amounts received
-----------
directly or through Lessee from any insurer or from any Governmental Authority
in connection with an Event of Loss or an Event of Taking, to the extent that
such amounts are not at the time required to be paid to Lessee pursuant to the
Lease, shall, except as otherwise provided in the next sentence, be held and
distributed on the Payment Date referred to in Section 11.1(a) of the Lease in
accordance with Section 3.2(a). Any portion of any such amount referred to in
--------------
the preceding sentence which is not required to be so paid to Lessee pursuant to
the Lease solely because a Lease Default shall have occurred shall be held by
Administrative Agent as security for the obligations of Lessee under the Lease
and the other Operative Documents and invested in Permitted Investments, and at
such time as there shall not be continuing any such Lease Default, such portion
shall be paid to
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<PAGE>
Loan Agreement
Lessee, unless Administrative Agent (as assignee of Borrower) shall have
theretofore declared the Lease to be in default pursuant to Section 16.1 of the
Lease, in which event such portion shall be distributed forthwith upon such
declaration in accordance with the provisions of Section 3.3.
-----------
SECTION III.3. Distribution of Payments After Loan Event of Default.
----------------------------------------------------
(a) Except as otherwise required in Section 3.4(b), all payments received and
--------------
amounts realized by Administrative Agent after a Loan Event of Default shall
have occurred and be continuing, as well as all payments or amounts then held or
thereafter received by Administrative Agent as part of the Trust Estate while
such Loan Event of Default shall be continuing, shall be distributed forthwith
by Administrative Agent in the following order of priority:
first, so much of such payments or amounts as shall be required to reimburse
-----
Administrative Agent for any tax, expense or other loss incurred by
Administrative Agent (to the extent not previously reimbursed and to the
extent incurred in connection with its duties as Administrative Agent) and any
unpaid ongoing fees of Administrative Agent shall be distributed to
Administrative Agent for its own account;
second, so much of such payments or amounts as shall be required to
------
reimburse Information Agent for any tax, expense or other loss incurred by
Information Agent (to the extent not previously reimbursed and to the extent
incurred in connection with its duties as Information Agent) and any unpaid
ongoing fees of Information Agent shall be distributed to Information Agent
for its own account;
third, so much of such payments or amounts as shall be required to
-----
reimburse the then existing or prior Lenders and (so long as the Loan Events
of Default that have occurred and are continuing arise solely from a Lease
Event of Default)
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<PAGE>
Loan Agreement
the Certificate Purchasers for payments made by them to Administrative Agent
pursuant to Section 8.4 of the Participation Agreement (to the extent not
previously reimbursed), and to pay such then existing or prior Lenders and (so
long as the Loan Events of Default that have occurred and are continuing arise
solely from a Lease Event of Default) the Certificate Purchasers the amounts
payable to them pursuant to any expense reimbursement provisions of the
Operative Documents shall be distributed to each such Participant, pro rata
among such Participants without priority of one over the other, in accordance
with the amount of such payment or payments payable to each such Participant;
fourth, so much of such amount as shall be required to pay in full the
------
aggregate unpaid principal amount of the Notes, together with the accrued but
unpaid interest on the Notes to the date of distribution shall be distributed
to the Lenders holding Notes, and in the case the amount so to be distributed
shall be insufficient to pay in full as aforesaid, then, pro rata among such
Lenders, without priority of one such Lender over the other, in the proportion
that the unpaid principal amount of the Notes held by each Lender bears to the
aggregate unpaid principal amount of the Notes; and
fifth, the balance, if any, of such payments or amounts remaining thereafter
-----
shall be promptly distributed as directed by Borrower in accordance with
Section 3.3 of the Trust Agreement.
(b) During the occurrence and continuance of any Loan Event of Default, all
amounts (other than Excluded Amounts) received or realized by Administrative
Agent and otherwise distributable pursuant to Section 3.1 or 3.2 shall be
----------- ---
distributed as provided in Section 3.3(a).
--------------
SECTION III.4. Other Payments.
--------------
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<PAGE>
Loan Agreement
(a) Except as otherwise provided in Sections 3.1, 3.2 and 3.3 and paragraph
------------ --- --- ---------
(b) below,
- ---
(i) any payments received by Administrative Agent for which no provision
as to the application thereof is made in the Operative Documents or elsewhere
in this Article III, and
-----------
(ii) all payments received and amounts realized by Administrative Agent
under the Lease or otherwise with respect to the Leasehold Estate to the
extent received or realized at any time after payment in full of the principal
of and interest on all Loans, as well as any other amounts remaining as part
of the Trust Estate after payment in full of the principal of and interest on
all Loans issued hereunder,
shall be distributed forthwith by Administrative Agent in the order of priority
set forth in Section 3.1 (in the case of any payment described in clause (i)
----------- ----------
above) or in Section 3.3(a) (in the case of any payment described in clause (ii)
-------------- -----------
above), except that in the case of any payment described in clause (ii) above,
-----------
such payment shall be distributed omitting clause "fourth" of such Section
------ ------ -------
3.3(a).
- ------
(b) Except after a Loan Event of Default has occurred and is continuing and
as to which Section 3.3(a) applies, any payment received by Administrative Agent
--------------
for which provision as to the application thereof is made in an Operative
Document but not elsewhere in this Article III shall be distributed forthwith by
-----------
Administrative Agent to the Person for the purpose for which such payment was
made in accordance with the terms of such Operative Document.
SECTION III.5. Distribution to Certificate Purchasers. Notwithstanding
--------------------------------------
anything in this Agreement to the contrary, Administrative Agent shall make
payment of all amounts from time to time distributable to the Certificate
Purchasers pursuant to this Article III directly to the Certificate Purchasers,
-----------
unless it
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<PAGE>
Loan Agreement
shall have received written instructions from Borrower to the contrary.
SECTION III.6. Distribution of Excluded Amounts. All amounts constituting
--------------------------------
Excluded Amounts received by Administrative Agent shall be paid by
Administrative Agent to the Person or Persons entitled thereto pursuant to the
Operative Documents.
SECTION III.7. Supplemental Rent. Except as otherwise provided in Section
----------------- -------
3.3, the amounts, if any, from time to time received by Administrative Agent
- ---
which constitute payments of Supplemental Rent shall be paid to or upon the
order of the Person entitled thereto pursuant to the Operative Documents.
SECTION III.8. Guaranty Payments. Any payment received by Administrative
-----------------
Agent pursuant to the Guaranty shall be distributed forthwith or retained by
Administrative Agent in the same manner and subject to the same conditions as
provided in this Article III with respect to payments received by Administrative
-----------
Agent in respect of Borrower's obligation as to which such payment relates, all
as if such payment had been made by Borrower.
ARTICLE IV
CONDITIONS PRECEDENT
The agreement of each Lender to make the Loan requested to be made by it on
any Advance Date is subject to the satisfaction on the Advance Date of the
applicable conditions precedent set forth in Article III of the Participation
Agreement.
ARTICLE V
AFFIRMATIVE COVENANTS OF BORROWER
SECTION V.1. Performance by Borrower. Subject to Section 2.10, so long as
----------------------- ------------
any Note remains outstanding and unpaid or any other amount is owing to any
Lender hereunder, Borrower will promptly pay all amounts payable by it under
this Loan
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<PAGE>
Loan Agreement
Agreement and the Notes in accordance with the terms hereof and thereof and
shall duly perform each of its obligations under this Loan Agreement and the
Notes.
SECTION V.2. Waiver by Borrower. (a) To the extent permitted by Applicable
------------------
Laws, Borrower is hereby deemed to have irrevocably waived:
(i) the protection of any stay (automatic or otherwise) arising out of or
in connection with any proceedings for the reorganization or liquidation of
Borrower under the Bankruptcy Code or otherwise of the exercise by the Lenders
or Administrative Agent of rights and remedies under the Operative Documents;
and
(ii) any right that Borrower might otherwise have to enjoin, limit or
restrict the good faith exercise of such rights and remedies.
(b) To the extent permitted by Applicable Laws, the Lenders and
Administrative Agent are hereby expressly relieved from any obligation to comply
with any such stay which might otherwise affect their exercise at any time of
such rights and remedies.
ARTICLE VI
LOAN EVENTS OF DEFAULT; REMEDIES
SECTION VI.1. Loan Events of Default. Each of the following events shall
----------------------
constitute a "Loan Event of Default" (whether any such event shall be voluntary
---------------------
or involuntary or come about or be effected by operation of law or pursuant to
or in compliance with any judgment, decree or order of any court or any order,
rule or regulation of any Governmental Authority) and each such Loan Event of
Default shall continue so long as, but only as long as, it shall not have been
remedied:
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<PAGE>
Loan Agreement
(a) the failure by Borrower to pay any principal of or interest on any Note
when due and such failure shall continue for a period of five (5) Business Days;
or
(b) the failure by Borrower in any material respect to timely perform any
other covenant or condition herein or in any other Operative Document to which
Borrower is a party and such failure shall continue for a period of thirty (30)
days after written notice thereof to Borrower and Lessee from Administrative
Agent; or
(c) any representation or warranty by Borrower in any Operative Document or in
any certificate or document delivered thereunder shall have been incorrect in a
material respect when made and shall remain material when discovered and if
curable shall continue for a period of thirty (30) days after written notice
thereof to Borrower and the Certificate Purchasers from Administrative Agent; or
(d) the filing by Borrower of any petition for dissolution or liquidation of
Borrower; or the commencement by Borrower of a voluntary case under any
applicable bankruptcy, insolvency or other similar law for the relief of
debtors, foreign or domestic, now or hereafter in effect; or the consent by
Borrower to the entry of an order for relief in an involuntary case under any
such law; or the failure of Borrower generally to pay, or the admission by
Borrower in writing that it is unable to pay, its debts as such debts become due
(within the meaning of the Bankruptcy Code); or the failure by Borrower promptly
to satisfy or discharge any execution, garnishment or attachment of such
consequence as will impair its ability to carry out its obligations under the
Operative Documents; or the appointment of or taking possession by a receiver,
custodian or trustee (or other similar official) for Borrower or any substantial
part of its property; or a general assignment by Borrower for the benefit of
creditors; or the entry by Borrower into an agreement of composition with its
creditors; or the taking by Borrower of any corporate action in furtherance of
any of the foregoing;
- 20 -
<PAGE>
Loan Agreement
or the filing against Borrower of an involuntary petition in bankruptcy which
results in an order for relief being entered or, notwithstanding that an order
for relief has not been entered, the petition not being dismissed within sixty
(60) days of the date of the filing of the petition; or the filing under any law
relating to bankruptcy, insolvency or relief of debtors of any petition against
Borrower which either (i) results in a finding or adjudication of insolvency of
Borrower or (ii) is not dismissed within sixty (60) days of the date of the
filing of such petition; or
(e) a Lease Event of Default shall occur and be continuing.
SECTION VI.2. Remedies.
--------
(a) Upon the occurrence of a Loan Event of Default hereunder, (i) if such
event is a Loan Event of Default specified in clause (d) of Section 6.1 or
---------- -----------
clause (f) or (g) of Article XV of the Lease, automatically the Loans hereunder
(with accrued interest thereon) and all other amounts owing under this Loan
Agreement and the Notes shall immediately become due and payable, and (ii) if
such event is any other Loan Event of Default, with the consent of the Required
Entities, Administrative Agent may, or upon the request of the Required
Entities, Administrative Agent shall, by notice of default to Borrower, declare
the Loans hereunder (with accrued interest thereon) and all other amounts owing
under this Loan Agreement and the Notes to be due and payable forthwith,
whereupon the same shall immediately become due and payable; provided, that the
--------
sole remedies of Administrative Agent upon the occurrence of a Loan Event of
Default specified in clause (b), (c) (but only to the extent the representation
----------- ---
was made in the Borrower's individual capacity) or (d) of Section 6.1 that does
--- -----------
not also constitute a Lease Event of Default shall be to cause the Certificate
Purchasers to remove and replace the Borrower as Certificate Trustee and to
bring suit against Borrower for damages. Except as expressly provided above in
this Section 6.2, presentment, demand, protest and all other notices of any kind
-----------
are hereby expressly waived.
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<PAGE>
Loan Agreement
(b) Upon the occurrence of any Loan Event of Default and at any time
thereafter so long as any Loan Event of Default shall be continuing,
Administrative Agent may, and upon the written instructions of the Required
Entities shall, exercise any or all of the rights and powers and pursue any and
all of the remedies available to it hereunder and under the Lease, the Guaranty
and the other Operative Documents, and shall have and may exercise any and all
rights and remedies available under the Uniform Commercial Code or any provision
of law.
(c) Upon the occurrence of any Loan Event of Default and at any time
thereafter so long as any Loan Event of Default shall be continuing,
Administrative Agent may proceed to protect and enforce this Loan Agreement, the
Notes, the Lease, the Guaranty and the other Operative Documents by suit or
suits or proceedings in equity, at law or in bankruptcy, and whether for the
specific performance of any covenant or agreement herein contained or in
execution or aid of any power herein granted, or for foreclosure hereunder, or
for the appointment of a receiver or receivers for the Leasehold Estate, or for
the recovery of judgment for the indebtedness secured thereby or for the
enforcement of any other proper, legal or equitable remedy available under
Applicable Laws.
(d) Borrower shall be liable for any and all accrued and unpaid amounts due
hereunder before, after or during the exercise of any of the foregoing remedies,
including all reasonable legal fees and other reasonable costs and expenses
incurred by Administrative Agent or any Lender by reason of the occurrence of
any Loan Event of Default or the exercise of remedies with respect thereto.
(e) Except as expressly provided above, no remedy under this Section 6.2 is
-----------
intended to be exclusive, but each shall be cumulative and in addition to any
other remedy provided under this Section 6.2 or under the other Operative
-----------
Documents or otherwise available at law or in equity. The exercise by
Administrative Agent or any Lender of any one or more of such remedies shall not
preclude the simultaneous or later exercise of any other remedy or
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<PAGE>
Loan Agreement
remedies. No express or implied waiver by Administrative Agent or any Lender of
any Loan Event of Default shall in any way be, or be construed to be, a waiver
of any future or subsequent Loan Event of Default. The failure or delay of
Administrative Agent or any Lender in exercising any rights granted it hereunder
upon any occurrence of any of the contingencies set forth herein shall not
constitute a waiver of any such right upon the continuation or recurrence of any
such contingencies or similar contingencies and any single or partial exercise
of any particular right by Administrative Agent or any Lender shall not exhaust
the same or constitute a waiver of any other right provided herein.
(f) No failure to exercise and no delay in exercising, on the part of
Administrative Agent or any Lender, any right, remedy, power or privilege
hereunder, shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege.
ARTICLE VII
MISCELLANEOUS
SECTION VII.1. Amendments and Waivers. Neither this Loan Agreement, any Note
----------------------
nor any terms hereof or thereof may be amended, supplemented or modified except
in accordance with the provisions of the Participation Agreement.
SECTION VII.2. Notices. Unless otherwise specified herein, all notices,
-------
requests, demands or other communications to or upon the respective parties
hereto shall be delivered in accordance with, and shall be deemed to have been
given as provided in, Section 9.3 of the Participation Agreement; provided, that
--------
any notice, request, demand or other communication to or upon Administrative
Agent or the Lenders pursuant to Section 2.3 shall not be effective until
-----------
received.
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<PAGE>
Loan Agreement
SECTION VII.3. Successors and Assigns; Transfers and Participations.
----------------------------------------------------
(a) This Loan Agreement shall be binding upon and inure to the benefit of
Borrower, the Lenders, Administrative Agent, all future holders of the Notes and
their respective successors and assigns.
(b) Any transfer by a Lender of its Notes or any sale by a Lender of any
participating interest in the Loans evidenced by its Notes shall comply with
Sections 6.3 and 6.4 of the Participation Agreement. Any Lender transferring
its Notes shall pay, or cause the transferee to pay, the costs and expenses
(including reasonable counsel fees) incurred by Administrative Agent in
connection with such transfer.
SECTION VII.4. Adjustments. If the holder of any Note (a "benefitted
----------- ----------
Lender") shall at any time receive any payment of all or part of its Note, or
interest thereon, or receive any collateral in respect thereof (whether
voluntarily or involuntarily, by set-off, pursuant to events or proceedings of
the nature referred to in Section 6.1(d), or otherwise) in a greater
--------------
proportion than any such payment to and collateral received by any other holders
of Notes in respect of such other Lender's Notes, or interest thereon, such
benefitted Lender shall purchase for cash from the other Lenders such portion of
each such other Lender's Notes, or shall provide such other Lenders with the
benefits of any such collateral, or the proceeds thereof, as shall be necessary
to cause such benefitted Lender to share the excess payment or benefits of such
collateral or proceeds ratably with each of such holders; provided, however,
-------- -------
that if all or any portion of such excess payment or benefits is thereafter
recovered from such benefitted Lender, such purchase shall be rescinded, and the
purchase price and benefits returned, to the extent of such recovery, but
without interest. Borrower agrees that each Lender purchasing a portion of
another Lender's portion of the Loans pursuant to this Section 7.4 may exercise
-----------
all rights of payment (including, without limitation, rights of set-off) with
respect to
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<PAGE>
Loan Agreement
such portion as fully as if such Lender were the direct holder of such portion.
SECTION VII.5. Counterparts. This Loan Agreement may be executed by one or
------------
more of the parties to this Loan Agreement on any number of separate
counterparts and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. A set of the copies of this Loan
Agreement signed by all the parties hereto shall be lodged with Borrower and
Administrative Agent.
SECTION VII.6. GOVERNING LAW. THIS LOAN AGREEMENT AND THE NOTES HAVE BEEN
-------------
DELIVERED IN, AND THIS LOAN AGREEMENT AND THE NOTES AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS LOAN AGREEMENT AND THE NOTES SHALL IN ALL
RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK, WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES OF SUCH STATE.
SECTION VII.7. Survival and Termination of Agreement. All covenants,
-------------------------------------
agreements, representations and warranties made herein and in any certificate,
document or statement delivered pursuant hereto or in connection herewith shall
survive the execution and delivery of this Loan Agreement and the Notes and
shall continue in full force and effect so long as any Note or any amount
payable to any Lender under or in connection with this Loan Agreement or the
Notes is unpaid, at which time this Loan Agreement shall terminate, it being
expressly understood that the obligations of Borrower, as the case may be, to
Administrative Agent and each Lender under Section 2.12 and the obligations of
------------
the Lenders to Administrative Agent under Section 8.4 of the Participation
Agreement shall survive the payment in full of the Notes; provided, that with
--------
respect to amounts payable under Section 2.12 and Section 8.4 of the
------------
Participation Agreement, such amounts shall be deemed to have been paid if no
claim therefor is made within six months after payment in full of the Notes.
SECTION VII.8. Entire Agreement. This Loan Agreement sets forth the entire
----------------
agreement of the parties hereto with respect to
- 25 -
<PAGE>
Loan Agreement
its subject matter, and supersedes all previous understandings, written or oral,
with respect thereto.
SECTION VII.9. Severability. Any provision of this Loan Agreement or of the
------------
Notes which is prohibited, unenforceable or not authorized in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition, unenforceability or non-authorization without invalidating the
remaining provisions hereof or thereof or affecting the validity, enforceability
or legality of any such provision in any other jurisdiction.
SECTION VII.10. Limitations of Borrower's Liability. Except in the case of
-----------------------------------
the representations, warranties and covenants of Borrower in its individual
capacity set forth in Section 4.3 of the Participation Agreement and in the case
of the gross negligence or willful misconduct of Borrower, as to which in any
such case individual liability shall attach, anything in this Loan Agreement to
the contrary notwithstanding, neither Administrative Agent nor any other holder
of Notes nor the successors or assigns of any of said Persons, shall have any
claim, remedy or right to proceed against Borrower in its individual capacity or
any past, present or future stockholder, subscriber of capital stock, officer,
employee, director, incorporator or partner of Borrower whether by virtue of any
constitutional provision, statute or rule of law or by enforcement of any
penalty or assessment or otherwise, for the payment of any deficiency or any
other sum owing on account of the indebtedness evidenced by the Notes or for the
payment of any liability resulting from the breach of any representation,
agreement or warranty of any nature whatsoever in this Loan Agreement or any
other Operative Document, from any source other than any collateral securing the
Notes, including the Rent, and the Trust Estate, but excluding Excluded Amounts.
Administrative Agent by the acceptance of this Loan Agreement and the holders of
the Notes by acceptance of this Loan Agreement and the Notes, waive and release
any liability of Borrower in its individual capacity or any past, present or
future stockholder, subscriber of capital stock, officer, employee, director,
incorporator or partner of Borrower for and on account of such indebtedness or
such liability, and Administrative Agent and the
- 26 -
<PAGE>
Loan Agreement
holders of the Notes agree to look solely to any collateral securing the Notes,
including the Rent, and the Trust Estate, but excluding Excluded Amounts, for
the payment of said indebtedness or the satisfaction of such liability;
provided, however, that nothing herein contained shall limit, restrict or
- -------- -------
impair the rights of Administrative Agent to accelerate the maturity of the
Notes upon a Loan Event of Default or, subject to the limitations hereinabove
described, to bring suit and obtain a judgment against Borrower on the Notes or
to exercise all rights and remedies provided under this Loan Agreement or
otherwise realize upon the Collateral.
[SIGNATURE PAGES FOLLOW]
- 27 -
<PAGE>
Loan Agreement
IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, not
in its individual capacity, but solely as
Certificate Trustee, as Borrower
By: _______________________________
Name: Robert L. Reynolds
Title: Vice President
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, not
in its individual capacity, but solely as
Administrative Agent
By: ______________________________
Name: Robert L. Reynolds
Title: Vice President
<PAGE>
Loan Agreement
BA LEASING & CAPITAL CORPORATION, as Lender
By:_________________________________
Name: Sara L. Fitch
Title: Vice President
Loan Agreement
<PAGE>
Loan Agreement
THE DAI-ICHI KANGYO BANK Ltd. New
York Branch, as Lender
By:_________________________________
Name: Shinya Wako
Title: Vice President
<PAGE>
Loan Agreement
THE FUJI BANK LIMITED, SAN FRANCISCO
AGENCY, as Lender
By:_________________________________
Name: Kazuo Kamio
Title: General Manager
<PAGE>
Loan Agreement
THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED, NEW YORK BRANCH, as Lender
By:_________________________________
Name:_______________________________
Title:______________________________
<PAGE>
Loan Agreement
SHAWMUT BANK, N.A., as Lender
By:_________________________________
Name: Robert D. Lanigan
Title: Managing Director
<PAGE>
Loan Agreement
SUMITOMO BANK AND LEASING AND
FINANCE, INC., as Lender
By:_________________________________
Name: William N. Ginn
Title: President
<PAGE>
Loan Agreement
SCHEDULE I
Lenders
Commitment
Lender Commitment Percentage
- ------ -------------- ----------
BA LEASING & CAPITAL $18,950,000.00 17.22727272
CORPORATION
DAI-ICHI KANGYO BANK LTD., $19,400,000.00 17.63636364
NEW YORK BRANCH
THE FUJI BANK LIMITED, SAN $ 9,700,000.00 8.81818182
FRANCISCO AGENCY
THE LONG-TERM CREDIT BANK OF $15,000,000.00 13.63636364
JAPAN, LIMITED, NEW YORK
BRANCH
SUMITOMO BANK LEASING $19,400,000.00 17.63636364
AND FINANCE, INC.
SHAWMUT BANK, N.A. $24,250,000.00 22.04545454
-------------- -----------
TOTAL$106,700,000.00 97.00000000%
<PAGE>
Loan Agreement
EXHIBIT A
TO LOAN AGREEMENT
FORM OF NOTE
NOTE NO. __
Dated as of April __, 1995
FOR VALUE RECEIVED, the undersigned, SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, a national banking association, not in its individual capacity but
solely as Certificate Trustee under the Trust Agreement relating to the Electric
Lightwave, Inc. Trust No. 1995-A for the Certificate Purchasers named therein
(the "Borrower"), promises to pay to the order of [NAME OF LENDER], a
--------
_____________________ (the "Lender"), the aggregate unpaid principal amount of
------
all Loans made by the Lender to, or for the benefit of, the Borrower, as
recorded either on the grid attached to this Note or in the records of the
Lender (and such recordation shall constitute prima facie evidence of the
----- -----
information so recorded; provided, however, that the failure to make any such
-------- -------
recordation or any error in such recordation shall not in any way affect the
Borrower's obligation to repay this Note). The principal amount of each Loan
evidenced hereby shall be payable on or prior to the Final Maturity Date as
provided in that certain Loan Agreement, dated as of April 28, 1995, among the
Borrower, Shawmut Bank Connecticut, National Association, as administrative
agent (the "Administrative Agent"), and the various lenders named therein (the
--------------------
"Loan Agreement").
- ---------------
The Borrower also promises to pay interest on the unpaid principal amount
hereof from time to time outstanding at the rates per annum, on the dates
specified in, and in accordance with the terms of the Loan Agreement.
Payments of both principal and interest are to be made in lawful money of the
United States of America in same day or
<PAGE>
Loan Agreement
immediately available funds to the account designated by the Lender pursuant to
the Loan Agreement.
This Note is one of the Notes referred to in, and evidences indebtedness
incurred under, the Loan Agreement, to which reference is made for a statement
of the terms and conditions on which the Borrower is required to make
prepayments and repayments of principal of the indebtedness evidenced by this
Note and on which such indebtedness may be declared to be immediately due and
payable. Capitalized terms used herein without definition shall have the
meanings provided in the Loan Agreement. This Note is secured pursuant to the
Security Agreement made by the Borrower in favor of the Administrative Agent
referred to in the Loan Agreement and reference is hereby made to the Loan
Agreement and such Security Agreement for a statement of the terms and
provisions of such security.
Anything to the contrary herein notwithstanding, the Borrower's liability for
any sums due hereunder shall be limited in accordance with Section 7.10 of the
Loan Agreement.
All parties hereto, whether as makers, endorsers, or otherwise, severally
waive presentment for payment, demand, protest, and notice of dishonor, notice
of the existence, creation or nonpayment of all or any of the Loans and all
other notices whatsoever.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
[signature page follows]
<PAGE>
Loan Agreement
IN WITNESS WHEREOF, the Certificate Trustee has caused this Note to be executed
in its corporate name by its duly authorized officer as of the date hereof.
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, not
in its individual capacity but solely as
Certificate Trustee, as Borrower
By: _______________________________
Name: Robert L. Reynolds
Title: Vice President
<PAGE>
Loan Agreement
GRID ATTACHED TO NOTE
DATED APRIL __, 1995 OF
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
AS CERTIFICATE TRUSTEE
PAYABLE TO THE ORDER OF [INSERT LENDER'S NAME]
Loans made by the Lender to Certificate Trustee, as Borrower, and payments of
principal of such Loans.
<TABLE>
<CAPTION>
Date Principal Amount Interest Principal Amount Principal Amount Notation Made
Period Total
(If Ap-
plic-
able)
Advances C.I.*
<S> <C>
</TABLE>
<PAGE>
________________________________________________________________________
TRUST AGREEMENT
(Electric Lightwave, Inc. Trust No. 1995-A)
Dated as of April 28, 1995
between
THE PERSONS NAMED ON SCHEDULE I,
as Certificate Purchasers
and
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
as Certificate Trustee
________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I THE TRUST ESTATE................................................... 1
SECTION 1.1. Appointment, Authorization and Direction to Certificate Trustee.... 1
SECTION 1.2. Declaration and Purpose............................................ 2
ARTICLE II CERTIFICATES....................................................... 2
SECTION 2.1. Certificates; Procedure for Investment............................. 2
SECTION 2.2. Scheduled Return of Investment..................................... 3
SECTION 2.3. Yield.............................................................. 4
SECTION 2.4. Determination of Yield Rate........................................ 4
SECTION 2.5. Loan Event of Default.............................................. 4
SECTION 2.6. Payment from Trust Estate Only..................................... 5
SECTION 2.7. Registration, Transfers, Exchanges and Cancellation of Certificates 5
SECTION 2.8. Persons Deemed Owners.............................................. 7
SECTION 2.9. Mutilated, Destroyed, Lost or Stolen Certificates.................. 8
ARTICLE III COLLECTIONS AND DISTRIBUTIONS...................................... 8
SECTION 3.1. Collections and Remittances by Certificate Trustee................. 8
SECTION 3.2. Distribution of Payments........................................... 9
SECTION 3.3. Distributions after Default........................................ 10
SECTION 3.4. Effect of Sales by Certificate Trustee............................. 11
ARTICLE IV CERTAIN PROVISIONS RESPECTING CERTIFICATE TRUSTEE................. 11
SECTION 4.1. Acceptance of Trusts and Duties.................................... 11
SECTION 4.2. Limitation of Power................................................ 11
SECTION 4.3. Notice of Event of Default......................................... 12
SECTION 4.4. Action Upon Instructions........................................... 12
SECTION 4.5. Certain Duties and Responsibilities of Certificate Trustee......... 13
SECTION 4.6. Certain Rights of Certificate Trustee.............................. 15
SECTION 4.7. NO REPRESENTATIONS OR WARRANTIES AS TO
THE LEASEHOLD ESTATE OR DOCUMENTS.................................. 17
SECTION 4.8. Status of Moneys Received.......................................... 17
SECTION 4.9. Permitted Activities............................................... 17
SECTION 4.10. Resignation or Removal of Certificate Trustee..................... 18
SECTION 4.11. Estate and Rights of Successor Certificate Trustee................ 18
SECTION 4.12. Merger or Consolidation of Certificate Trustee..................... 19
SECTION 4.13. CoTrustees......................................................... 19
SECTION 4.14. Doing Business in Other Jurisdictions.............................. 19
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE V TRANSFER OF CERTIFICATE PURCHASER'S INTEREST....................... 20
ARTICLE VI TERMINATION OF AND AMENDMENTS TO TRUST............................. 20
SECTION 6.1. Termination........................................................ 20
SECTION 6.2. Distribution of Trust Estate Upon Termination...................... 21
SECTION 6.3. Amendments......................................................... 22
ARTICLE VII MISCELLANEOUS...................................................... 23
SECTION 7.1. Compensation and Indemnification................................... 23
SECTION 7.2. Notices............................................................ 24
SECTION 7.3. Applicable Law..................................................... 24
SECTION 7.4. Tax Reports........................................................ 24
SECTION 7.5. Headings........................................................... 25
SECTION 7.6. Successors and Assigns............................................. 25
SECTION 7.7. Severability....................................................... 25
SECTION 7.8. Only Written Waivers............................................... 25
SECTION 7.9. Counterparts....................................................... 25
SECTION 7.10. Rights in Trust Agreement.......................................... 25
SECTION 7.11. Identification of Trust............................................ 25
</TABLE>
Schedule I Certificate Purchasers
EXHIBIT A Form of Trust Certificate
ii
<PAGE>
TRUST AGREEMENT
THIS TRUST AGREEMENT (Electric Lightwave, Inc., Trust No. 1995-A) dated as
of April 28, 1995 is between SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, a
national banking association bank ("Bank"; Bank and any institution that shall
----
act as a successor certificate trustee in accordance with the terms of Section
-------
4.10, "Certificate Trustee"), and the Persons listed on Schedule I hereto
---------------------------- ----------
(together with any permitted successor or assign, each a "Certificate
------------
Purchaser" and collectively the "Certificate Purchasers"). Capitalized terms
---------- -------------------------
used in this Trust Agreement without specific definition herein shall have the
meanings assigned thereto in Appendix 1 to that certain Participation Agreement
(Electric Lightwave, Inc. Trust No. 1995-A) dated as of the date hereof, among
Certificate Trustee, Electric Lightwave, Inc., a Delaware corporation, as
Lessee, the Lenders identified therein, the Certificate Purchasers identified
therein, Shawmut Bank Connecticut, National Association, not in its individual
capacity, but solely as Administrative Agent, BA Leasing & Capital Corporation,
not in its individual capacity, but solely as Information Agent, and Citizens
Utilities Company, as Guarantor.
ARTICLE I
THE TRUST ESTATE
SECTION 1. 1. Appointment, Authorization and Direction to Certificate
-------------------------------------------------------
Trustee. The Certificate Purchasers hereby request that Bank act as
-------
Certificate Trustee of the trust created hereunder (the "Trust"), appoint Bank
--------
as Certificate Trustee hereunder and authorize and direct Certificate Trustee,
subject to confirmation by the Certificate Purchasers of the satisfaction or
waiver of all appropriate conditions set forth in the Participation Agreement,
to enter into, execute and deliver:
(a) on the Document Closing Date and from time to time thereafter
(including on each Advance Date), the Operative Documents to which
Certificate Trustee is to become a party on such date;
(b) from time to time, the Notes in the manner and subject to the
terms and conditions provided in the Participation Agreement and in the
Loan Agreement;
(c) from time to time, the Certificates in the manner and subject to
the terms and conditions provided herein and in the Participation
Agreement; and
(d) all other documents;
<PAGE>
TRUST AGREEMENT
and to do all such things and take all such actions, as may be necessary or
convenient to consummate the Overall Transaction and to perform the terms
and conditions of this Trust Agreement, all as contemplated herein or in
the documents referred to herein.
Each Certificate Purchaser agrees that the making of its monies available
pursuant to Section 2.4 of the Participation Agreement shall constitute,
without further act, authorization or direction by such Certificate
Purchaser to Certificate Trustee to take the actions specified in this
Section 1.1.
SECTION 1. 2. Declaration and Purpose. (a) Certificate Trustee hereby
-----------------------
declares, undertakes and agrees that it will and does receive, take and hold all
estate, right, title and interest of Certificate Trustee in and to the Trust
Estate for the use and benefit of the Certificate Purchasers.
(b) The purpose of the Trust is to hold title to the Equipment and the
remainder of the Trust Estate for the benefit of the Certificate Purchasers and
to engage in activities ancillary and incidental thereto as set forth in the
Operative Documents. Except in connection with the foregoing, Certificate
Trustee in its capacity as Trustee shall not (i) engage in any business or
activity, (ii) have any property, rights or interest, whether real or personal,
tangible or intangible, (iii) incur any legal liability or obligation, whether
fixed or contingent, matured or unmatured, other than in the normal course of
the administration of the Trust or (iv) subject any of the Trust Estate to any
mortgage, lien, security interest or other claim or encumbrance, other than in
favor of Administrative Agent and the Lenders pursuant to the provisions of the
Loan Documents. THE TRUST IS NOT A BUSINESS TRUST. THE SOLE PURPOSE OF THE
TRUST IS TO ACQUIRE AND HOLD TITLE TO THE EQUIPMENT AND TO COLLECT AND CONSERVE
THE VALUE THEREOF AND OF THE REMAINDER OF THE TRUST ESTATE, SUBJECT TO THE
RIGHTS OF ADMINISTRATIVE AGENT, LENDERS AND LESSEE, FOR THE BENEFIT OF THE
CERTIFICATE PURCHASERS. CERTIFICATE TRUSTEE MAY NOT TRANSACT BUSINESS OF ANY
KIND WITH RESPECT TO THE TRUST ESTATE NOR SHALL THIS TRUST AGREEMENT BE DEEMED
TO BE, OR CREATE OR EVIDENCE THE EXISTENCE OF, A CORPORATION DE FACTO OR DE
JURE, OR A MASSACHUSETTS TRUST, OR ANY OTHER TYPE OF BUSINESS TRUST, ASSOCIATION
OR JOINT VENTURE BETWEEN OR AMONG CERTIFICATE TRUSTEE, THE CERTIFICATE
PURCHASERS, ADMINISTRATIVE AGENT AND THE LENDERS.
ARTICLE II
CERTIFICATES
SECTION 2.1. Certificates; Procedure for Investment. (a) The investment made
--------------------------------------
by each Certificate Purchaser in the Trust Estate shall be evidenced by a
certificate (the "Certificate") of
--------------
-2-
<PAGE>
TRUST AGREEMENT
Certificate Trustee, substantially in the form of Exhibit A hereto, with
---------
appropriate insertions and schedules, issued in the name of such Certificate
Purchaser and in a face amount equal to such Certificate Purchaser's Commitment.
Each Certificate shall (i) be dated the Document Closing Date, (ii) be stated to
mature on the Final Maturity Date and (iii) bear a Yield on the unpaid
Certificate Purchaser Amount thereof from time to time outstanding at a rate
equal to the Yield Rate.
(b) Upon receipt of an Advance Request, and subject to the terms and
conditions of the Participation Agreement, each Certificate Purchaser severally
(and not jointly) agrees that it shall make its pro-rata amount of the Advance
available to Certificate Trustee at the office of Administrative Agent referred
to in Schedule III to the Participation Agreement prior to 1:00 p.m., Hartford,
Connecticut time, on the applicable Advance Date in funds immediately available
to Certificate Trustee.
(c) Upon the consummation of each Advance, each Certificate Purchaser
shall make a notation on the grid attached to such Certificate Purchaser's
Certificate indicating the Certificate Purchaser Amount advanced by such
Certificate Purchaser on such Advance Date. Each Certificate Purchaser is
hereby authorized to record the date and amount of each Advance made by such
Certificate Purchaser, each continuation thereof, the date and amount of each
payment of Certificate Purchaser Amount relating thereto and the length of each
Interest Period with respect thereto, on the grid annexed to and constituting a
part of each Certificate held by such Certificate Purchaser, and any such
recordation shall constitute prima facie evidence of the accuracy of the
-----
information so recorded; provided, that the failure to make any such
--------
recordation or any error in such recordation shall not affect the obligation of
Certificate Trustee under such instrument or the corresponding obligation of
Lessee to pay Rent. In addition, on each Payment Date during any Construction
Period, each Certificate Purchaser shall make a notation on the grid attached
to such Certificate Purchaser's Certificate indicating the amount of
Capitalized Yield on such Certificate Purchaser's Certificate during the
Interest Period ending on such Payment Date (which Capitalized Yield shall
thereby be added to the Certificate Purchaser Amount of such Certificate).
SECTION 2.2. Scheduled Return of Investment. Except in the case of a
------------------------------
required return related to an Event of Loss with respect to all of the Leased
Assets, the exercise of the Purchase Option or Sale Option with respect to all
of the Leased Assets or upon default, the outstanding Certificate Purchaser
Amounts shall be paid in full on the Final Maturity Date. On the Final
Maturity Date, Certificate Trustee shall pay, from the Trust, as a return of
-3-
<PAGE>
TRUST AGREEMENT
equity the aggregate unpaid Certificate Purchaser Amount of the Certificates as
of such date.
SECTION 2.3. Yield. (a) Each Certificate, and its related Certificate
-----
Purchaser Amount, shall be entitled to Yield on the unpaid amount thereof at a
rate per annum equal to the Yield Rate.
(b) If all or a portion of the investment amount of or Yield on a
Certificate shall not be paid when due (whether at the Stated Maturity thereof,
by acceleration or otherwise), such overdue amount shall, without limiting the
rights of the Certificate Purchasers under any Operative Document, bear interest
at the Overdue Rate, in each case from the date of nonpayment until paid (as
well after as before judgment).
(c) Yield, other than Capitalized Yield, on each Certificate shall
be payable in arrears on each Payment Date.
(d) Each Certificate Purchaser shall be entitled to the benefits of
Section 2.11 and 2.12 of the Loan Agreement as if it were a party thereto. A
Certificate Purchaser shall make a demand under either Section 2.11 or 2.12 of
the Loan Agreement in accordance with the procedures set forth in such Sections
as if it were a Lender. Upon receipt by Certificate Trustee of a payment of
Supplemental Rent constituting payment of Additional Costs, Certificate Trustee
shall pay to each Certificate Purchaser the amount of such Additional Costs to
which it is entitled.
SECTION 2.4. Determination of Yield Rate. (a) During such time as a LIBO
---------------------------
Rate applies to any of the Certificates, Yield in respect of such Certificates
shall be calculated on the basis of a 360 day year for the actual days elapsed.
During such time as the Alternate Base Rate applies to any of the Certificates,
interest in respect of such Certificates shall be calculated on the basis of a
365 (or 366, as applicable) day year for the actual number of days elapsed. The
LIBO Rate and Alternate Base Rate components of the Yield Rate shall be
determined in accordance with Section 2.6 of the Loan Agreement.
(b) Each determination of a Yield Rate pursuant to any provision of
this Trust Agreement shall be conclusive and binding on Certificate Trustee,
Lessee and the Participants in the absence of manifest error.
SECTION 2.5. Loan Event of Default. Upon the occurrence of a Loan Event
---------------------
of Default and the Loans becoming due and payable, whether automatically or with
the consent, or at the request, of the Required Entities, the Certificate
Purchaser Amounts evidenced by the Certificates (with accrued Yield thereon) and
all other
-4-
<PAGE>
TRUST AGREEMENT
amounts owing under this Trust Agreement and the Certificate shall immediately
become due and payable, subject to the rights and interests of the holders of
the Notes under the Loan Documents.
SECTION 2.6. Payment from Trust Estate Only. All payments to be made by
------------------------------
Certificate Trustee in respect of the Certificates and this Trust Agreement
shall be made only from the income and the proceeds from the Trust Estate and
only to the extent that Certificate Trustee shall have received sufficient
income or proceeds from the Trust Estate to make such payments in accordance
with the terms of Article III. The Certificate Purchasers agree that they will
-------
look solely to the income and proceeds from the Trust Estate to the extent
available for distribution to them as herein provided and that Certificate
Trustee is not nor shall be liable in its individual capacity to any Certificate
Purchaser for any amount payable hereunder or under the Certificates.
SECTION 2.7. Registration, Transfers, Exchanges and Cancellation of
----------------------- -----------------------------
Certificates. (a) Certificate Trustee shall maintain at the Corporate Trust
- ------------
Department a register for the purpose of registering all Certificates and
transfers (other than transfers of a participation in a Certificate pursuant to
Section 2.7(g) and a pledge of a Certificate) and exchanges thereof (the
- --------------
"Certificate Register"). Subject to Section 6.3 of the Participation Agreement,
- ------------ ----------
a Certificate Purchaser that intends to transfer (other than pursuant to this
Section 2.7 or a pledge of a Certificate) a Certificate, or to exchange
- -----------
Certificate(s) of different denominations, shall surrender such Certificate to
Certificate Trustee at the Corporate Trust Department, together with a written
request from such Certificate Purchaser for the issuance of one or more new
Certificates. Such notice shall specify the denomination or denominations of
such new Certificate (s) and, in the case of a surrender for registration of
transfer, the name and address of the Person in whose name such new
Certificate(s) are to be registered together with a duly executed Investor's
Letter substantially in the form of Exhibit i to the Participation Agreement
from each such transferee. Promptly upon receipt of such documents by
Certificate Trustee, Certificate Trustee shall execute and deliver to such
Certificate Purchaser new Certificates in the same aggregate original
Certificate Purchaser Amount, and dated the same date, as such surrendered
Certificate(s). Such new Certificate(s) shall be in such denomination or
denominations and registered in such name or names as shall be specified in the
written request from such Certificate Purchaser. Each Certificate so
surrendered shall be accompanied by a written instrument of transfer duly
executed by the Certificate Purchaser of such Certificate or its attorney duly
authorized in writing. Each new Certificate issued pursuant to this Section 2.7
-----------
shall bear a notation by Certificate Trustee of: (i) the aggregate
-5-
<PAGE>
TRUST AGREEMENT
Certificate Purchaser Amount of, and Yield on, the Certificate so surrendered
that: (1) were paid to any holder thereof at any time prior to the delivery of
such new Certificate(s); and (2) are allocable to such new Certificate on the
basis of the respective original Certificate Purchaser Amounts thereof; and (ii)
the date to which Yield on such Certificate had been paid to any holder thereof
at the time of such delivery. All Certificates issued upon any registration of
transfer or exchange of Certificates shall be valid obligations of the Trust,
and shall be entitled to the same security and benefits under this Trust
Agreement as the Certificates surrendered upon -such registration of transfer or
exchange. No transfer of any Certificate shall be valid unless and until such
transfer is registered on the Certificate Register maintained by Certificate
Trustee pursuant to this Section 2.7 (a) .
---------------
(b) The Certificate Register shall at all reasonable times be open for
inspection by Administrative Agent or any Certificate Purchaser. Upon request
by any Certificate Purchaser, Certificate Trustee shall furnish such Certificate
Purchaser a list of the names and addresses of all Certificate Purchasers,
indicating the respective unpaid Certificate Purchaser Amounts and numbers of
the Certificates held by such holders. Every Certificate Purchaser, by
receiving and holding a Certificate, agrees with Certificate Trustee that
neither Certificate Trustee, nor any agents of Certificate Trustee, shall be
held accountable by reason of the disclosure of any such information.
(c) Each Certificate surrendered to Certificate Trustee pursuant to this
Section 2.7 or Section 2.9 shall be canceled by Certificate Trustee, and no
- ----------- -----------
Certificate shall be issued in lieu thereof except as expressly permitted by
this Section 2.7 or Section 2.9.
----------- -----------
(d) Each Certificate delivered to a Certificate Purchaser pursuant to
Section 2.1 and each Certificate delivered pursuant to this Section 2.7 or
- ----------- -----------
Section 2.9 shall be issued without registration of such Certificate under the
- -----------
Securities Act or under any state securities or "blue sky" law, and without
qualification of this Trust Agreement under the Trust Indenture Act of 1939, as
amended. All Certificates issued hereunder shall bear a legend that shall read
substantially as follows:
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES OR --BLUE SKY" LAW, AND
MAY NOT BE TRANSFERRED, SOLD OR OFFERED FOR SALE IN VIOLATION OF
SUCH ACT OR LAWS.
-6-
<PAGE>
TRUST AGREEMENT
Promptly after registration of transfer of any Certificate pursuant to this
Section 2.7, Certificate Trustee will give notice thereof to Administrative
- -----------
Agent, Lessee and each other Certificate Purchaser specifying the name and
address for notices of the transferee or transferees.
(e) If Certificate Trustee shall acquire any of the Certificates, such
acquisition shall not operate as a redemption of, or the satisfaction of, such
Certificates unless and until the same shall be delivered to Certificate Trustee
for cancellation pursuant to this Trust Agreement. Any Certificate Purchaser
transferring its Certificates shall also pay or cause the transferee to pay the
costs and expenses (including reasonable counsel fees) incurred by Certificate
Trustee in connection with such transfer.
(f) No service charge shall be made for the issuance of Certificates
pursuant to Sections 2.1, 2.7 or 2.9, but Certificate Trustee may require from
------------ --- ---
the person requesting the transfer of such Certificates pursuant to Sections 2.7
------------
or 2.9 payment of a sum sufficient to reimburse Certificate Trustee for, or to
--
provide sufficient funds for, the payment of any tax or other governmental
charge in connection therewith or any charges and expenses connected with such
tax or other governmental charge paid or payable by Certificate Trustee.
(g) Certificate Trustee shall not be required to register any transfer or
exchange of a Certificate pursuant to this Section 2.7 if such Certificate is
surrendered to Certificate Trustee for transfer or exchange and such request is
made five (5) or fewer Business Days prior to a Payment Date.
SECTION 2.8. Persons Deemed Owners. Prior to due presentation of a
----------------------
Certificate for registration of transfer, Certificate Trustee and any agent of
Certificate Trustee may treat the person in whose name any Certificate is
registered in the Certificate Register as the owner of such Certificate for the
purpose of receiving distributions pursuant to Article III and for all other
-----------
purposes whatsoever, and neither Certificate Trustee nor any agent of
Certificate Trustee shall be affected by any notice to the contrary; provided,
---------
however, that in determining whether the Certificate Purchasers evidencing the
- -------
requisite principal amount have given any request, demand, authorization,
direction, notice, consent or waiver hereunder, Certificates owned by the Lessee
or any Affiliate thereof shall be disregarded and deemed not to be outstanding,
except that, in determining whether Certificate Trustee shall be protected in
relying upon any such request, demand, authorization, direction, notice, consent
or waiver, only Certificates which a Responsible Officer in the Corporate Trust
-7-
<PAGE>
TRUST AGREEMENT
Department of Certificate Trustee knows to be so owned shall be so disregarded.
SECTION 2.9. Mutilated, Destroyed, - Lost or Stolen Certificates.
---------------------------------------------------
(a) If any Certificate shall become mutilated, destroyed, lost or stolen,
then upon the written request of the holder thereof, Certificate Trustee shall
execute and deliver to such holder a new Certificate. Such new Certificate
shall be: (i) registered in the name in which such mutilated, destroyed, lost or
stolen Certificate was registered; (ii) in the same original Certificate
Purchaser Amount as such mutilated, destroyed, lost or stolen Certificate; and
(iii) dated the date of such mutilated, destroyed, lost or stolen Certificate.
If the Certificate being replaced has become mutilated, it shall be surrendered
to Certificate Trustee. If the Certificate being replaced has been destroyed,
lost or stolen, the holder thereof shall furnish to Certificate Trustee such
security or indemnity as reasonably may be required by it to save Certificate
Trustee harmless from any loss and evidence reasonably satisfactory to
Certificate Trustee of the destruction, loss or theft of such Certificate and
the ownership thereof. Each Certificate issued pursuant to this Section 2.9
shall bear a notation by Certificate Trustee of: (i) the aggregate amounts of
Certificate Purchaser Amount of, and Yield on, such mutilated, destroyed, lost
or stolen Certificate that were paid to any holder thereof at any time prior to
the delivery of such new Certificate; and (ii) the date to which Yield on such
mutilated, destroyed, lost or stolen Certificate had been paid to any holder
thereof at the time of such delivery.
(b) Any duplicate Certificate issued pursuant to this Section 2.9 shall
-----------
constitute complete and indefeasible evidence of ownership of such Certificate,
as if originally issued, whether or not the lost, stolen or destroyed
Certificate shall be found at any time.
ARTICLE III
COLLECTIONS AND DISTRIBUTIONS
SECTION 3. 1. Collections and Remittances by Certificate Trustee.
--------------------------------------------------
Certificate Trustee agrees that, subject to the provisions of this Trust
Agreement, it will during the term of this Trust administer the Trust Estate
and, at the direction of the Required Entities, take steps to collect all sums
payable to Certificate Trustee by Lessee under the Lease (to the extent not
payable directly to Administrative Agent pursuant to the Participation
Agreement or to the Lenders pursuant to the Loan Documents). Certificate
Trustee agrees to distribute all proceeds
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<PAGE>
TRUST AGREEMENT
received from the Trust Estate in accordance with Sections 3.2 and 3.3.
------------- ----
Certificate Trustee shall make such distribution promptly upon receipt of such
proceeds (provided such proceeds are available for distribution) by Certificate
Trustee, it being understood and agreed that Certificate Trustee shall not be
obligated to make such distribution until the funds for such distribution have
been received by Certificate Trustee in cash or its equivalent reasonably
acceptable to Certificate Trustee. All distributions to a Certificate Purchaser
shall be made by Certificate Trustee to the order of such Certificate Purchaser,
delivered to such Certificate Purchaser at its address referred to in Section
9.3 of the Participation Agreement.
SECTION 3.2. Distribution of Payments.
------------------------
(a) Payments to Administrative Agent. Subject to a letter Agreement of
--------------------------------
even date herewith among Lessee, Guarantor, Certificate Trustee and
Administrative Agent, until the Loan Agreement shall have been discharged
pursuant to the terms thereof, all Base Rent, Supplemental Rent, insurance
proceeds and requisition or other payments of any kind included in the Trust
Estate (other than Excluded Amounts) payable to Certificate Trustee shall be
payable directly to Administrative Agent (and if any of the same are received by
Certificate Trustee shall upon receipt be paid over to Administrative Agent
without deduction, set-off or adjustment of any kind) for distribution in
accordance with the provisions of Article III of the Loan Agreement; provided,
---------
however, that any payments received by Certificate Trustee from (i) Lessee with
- --------
respect to Certificate Trustee's fees and disbursement, or (ii) the Certificate
Purchasers pursuant to Section 7.1, shall not be paid over to Administrative
-----------
Agent but shall be retained by Certificate Trustee and applied toward the
purpose for which such payments were made.
(b) Payments of Base Rent. All amounts to be distributed pursuant to
---------------------
clause "third" of Section 3.1(a) of the Loan Agreement shall be distributed
forthwith upon receipt by Certificate Trustee from Administrative Agent in the
following order of priority: first, to the Certificate Purchasers (pro rata
-----
among the Certificate Purchasers, without priority of one Certificate Purchaser
over the other, in the proportion that the outstanding Certificate Purchaser
Amount of each Certificate Purchaser bears to the aggregate outstanding
Certificate Purchaser Amounts), to the extent the Certificate Purchasers shall
be entitled to such amounts under this Trust Agreement or any other Operative
Document; and second, the balance, if any, of such payment remaining thereafter
------
shall be distributed to Lessee or at Lessee's direction.
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<PAGE>
TRUST AGREEMENT
(c) Payments After Event of Loss or Termination. Except as otherwise
--------------------------------------------
provided in Section 3.3, all amounts received by Certificate Trustee from
Administrative Agent (other than Excluded Amounts) pursuant to clause "second"
of Section 3.2(a) of the Loan Agreement shall be distributed forthwith upon
receipt by Certificate Trustee in the following order of priority: first, so
much of such payment as shall be required to reimburse Certificate Trustee for
any expenses not otherwise reimbursed as to which Certificate Trustee is
entitled to be so reimbursed pursuant to the provisions hereof shall be retained
by Certificate Trustee; second, so much of such payment as shall be required to
pay in full the aggregate Certificate Purchaser Amounts and all accrued but
unpaid Yield thereon to the date of distribution shall be paid to the
Certificate Purchasers (pro rata among the Certificate Purchasers, without
priority of one Certificate Purchaser over the other, in the proportion that the
outstanding Certificate Purchaser Amount of each Certificate Purchaser bears to
the aggregate outstanding Certificate Purchaser Amounts); and third, the
balance, if any, shall be paid to Lessee.
(d) Payments to Certificate Trustee after Discharge of Loan Agreement;
------------------------------------------------------------------
Other Payments. Except as otherwise provided in Section 3.3, any payment of the
- --------------
type referred to in Section 3.2(a) (other than Excluded Amounts) received by
--------------
Certificate Trustee after the Loan Agreement shall have been discharged pursuant
to the terms thereof and any other amount received from Administrative Agent or
as part of the Trust Estate and for the application or distribution of which no
provision is made herein, shall be distributed forthwith upon receipt by
Certificate Trustee in the following order of priority: first, in the manner set
-----
forth in clause "first" of Section 3.2(c); second, in the manner set forth in
-------------- -------------- ------
clause "second" of Section 3. 2(c); third, so much of the remainder for which
- --------------- -------------- -----
provision as to the application thereof is contained in the Lease or any of the
other Operative Documents (other than the Loan Documents) shall be applied and
distributed in accordance with the terms of the Lease or such other Operative
Document; and fourth, the balance, if any, shall be paid to Lessee.
------
(e) Excluded Amounts. Any Excluded Amounts received by Certificate Trustee
----------------
shall be paid by Certificate Trustee to the Person to whom such Excluded Amounts
are payable under the provisions of the Participation Agreement or any other
Operative Document.
SECTION 3.3. Distributions after Default. Subject to the terms of Section
--------------------------- -------
4.5, the proceeds received by Certificate Trustee from the exercise of any
- ---
remedy under the Lease shall be distributed forthwith upon receipt by
Certificate Trustee from Administrative Agent in the following order of
priority: first, in
-----
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<PAGE>
TRUST AGREEMENT
the manner set forth in clause "first" of Section 3.2(c); second, in the manner
-------------- --------------- ------
set forth in clause "second" of Section 3.2(c); third, so much of the remainder
--------------- --------------- -----
for which provision as to the application thereof is contained in the Lease or
any of the other Operative Documents (other than the Loan Documents) shall be
applied and distributed in accordance with the terms of the Lease or such other
Operative Document; and fourth, the balance, if any, shall be paid to the Person
------
lawfully entitled thereto. This Trust shall cease and terminate in accordance
with the terms set forth in Section 6.1, upon the final disposition by
-----------
Certificate Trustee of all of the Trust Estate pursuant to this Section 3.3.
-----------
SECTION 3.4. Effect of Sales by Certificate Trustee. Any sale of all or any
--------------------------------------
part of the Trust Estate by Certificate Trustee permitted hereunder shall bind
the Certificate Purchasers and shall be effective for the benefit of the
purchasers thereof and their respective successors and assigns to divest and
transfer all right, title and interest vested in Certificate Trustee or the
Certificate Purchasers hereunder in the property so sold, and no purchaser shall
be required to inquire as to compliance by Certificate Trustee with any of the
terms hereof or to see to the application of any purchase money therefor.
ARTICLE IV
CERTAIN PROVISIONS RESPECTING CERTIFICATE TRUSTEE
SECTION 4.1. Acceptance of Trusts and Duties. Bank accepts the trusts
-------------------------------
hereby created and Agreements to perform the same as herein expressed and to
receive and disburse all moneys constituting part of the Trust Estate in
accordance with the terms hereof.
SECTION 4.2. Limitation of Power. Certificate Trustee shall have no power,
-------------------
right, duty or authority to manage, control, possess, use, sell, lease, dispose
of or otherwise deal with the Equipment or any other property at any time
constituting a part of the Trust Estate, or otherwise to take or refrain from
taking any action under or in connection with the Operative Documents, except
(a) to execute and deliver the Operative Documents to which Certificate Trustee
is to be a party, (b) to exercise and carry out or cause to be exercised and
carried out the rights, duties and obligations of Certificate Trustee hereunder
and under the Operative Documents, (c) to receive, collect and distribute and
deal with the sums due under the Lease and the proceeds thereof as provided in
the Lease and in this Trust Agreement, and (d) as expressly provided in written
instructions from the Required Entities given pursuant to Section 4.3 or 4.4.
----------- ---
Other than as expressly provided in this Trust Agreement, Certificate Trustee
shall not have the authority to make management decisions relating
39084341.13 -11-
-11-
<PAGE>
TRUST AGREEMENT
to the Trust Estate and may take only ministerial actions without consent of the
Required Entities.
SECTION 4.3. Notice of Event of Default. In the event an Authorized
--------------------------
Officer of Certificate Trustee shall have actual knowledge of a Lease Event of
Default or a Loan Event of Default, Certificate Trustee shall give prompt
written notice of such event to the Certificate Purchasers, Lessee and
Administrative Agent by facsimile and confirmed by overnight courier. Subject
to the terms' of Sections 4.5, 4.6 and 7.1, Certificate Trustee shall take such
------------ --- ---
action with respect to any such event as shall be specified in written
instructions from the Required Entities. For all purposes of this Trust
Agreement and the Lease, in the absence of such actual knowledge, Certificate
Trustee shall not be deemed to have knowledge of a Lease Event of Default or a
Loan Event of Default unless any of its Authorized Officers is notified in
writing by a Certificate Purchaser, Administrative Agent or a Lender. if
Certificate Trustee shall not have received instructions as provided above
within thirty (30) days after mailing notice of such a Lease Event of Default or
a Loan Event of Default to the Certificate Purchasers, Lessee and Administrative
Agent, Certificate Trustee shall provide written notice to the Certificate
Purchasers, Lessee and Administrative Agent five (5) days in advance of the date
it proposes to take any action, describing such action and may, following the
giving of such notice, subject to the terms of the Loan Documents, take such
action, or refrain from taking such action, with respect to such Lease Event of
Default or Loan Event of Default as it shall deem advisable and in the best
interests of the Certificate Purchasers; provided, however, that Certificate
-----------------
Trustee shall have no obligation to take action in the event it receives no
direction from the Required Entities.
SECTION 4.4. Action Upon Instructions. Subject to the terms of Sections
------------------------ --------
4.5. 4.6 and 7.1 and the Loan Documents, upon the written instructions at any
--- ---
time and from time to time of the Required Entities, Certificate Trustee shall
take such of the following actions as may be specified in such instructions:
(a) give such notice or direction or exercise such right or power under
the Lease or any other Operative Document as shall be specified in such
instructions;
(b) approve as satisfactory to it all matters required by the terms of any
Operative Document to be satisfactory to Certificate Trustee;
(c) after the expiration of the applicable Lease Supplement Term, unless
Lessee shall have purchased the Equipment or any portion thereof in accordance
with the Lease,
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<PAGE>
TRUST AGREEMENT
convey all of Certificate Trustee's right, title and interest in and to the
Equipment or any portion thereof f or such amount, on such terms and to such
purchaser or purchasers as shall be designated in such instructions, or
otherwise lease or dispose of such Equipment or any portion thereof on such
terms as shall be designated in such instructions; and
(d) any other action as specified by the Required Entities.
SECTION 4.5. Certain Duties and Responsibilities of Certificate Trustee.
----------------------------------------------------------
(a) Except during the continuance of a Lease Event of Default or a Loan
Event of Default:
(i) Certificate Trustee undertakes to perform such duties and
only such duties as are specifically set forth herein and in the other
Operative Documents, and no implied covenants or obligations shall be
read into this Trust Agreement against Certificate Trustee, and
Certificate Trustee Agreement that it shall not, nor shall it have a
duty to, manage, control, use, sell, maintain, insure, register,
lease, operate, modify, dispose of or otherwise deal with the
Equipment or any other part of the Trust Estate in any manner
whatsoever, except as required by the terms of the Operative Documents
and as otherwise provided herein; and
(ii) in the absence of bad faith or gross negligence on its
part, Certificate Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed therein,
upon certificates or opinions furnished to Certificate Trustee and
conforming to the requirements of this Trust Agreement.
(b) In case a Lease Event of Default or a Loan Event of Default has
occurred and is continuing, Certificate Trustee may, if it does not timely
receive the instructions referred to in the first sentence of Section 4.3,
-----------
subject to the terms of the Loan Documents, exercise such of the rights and
powers vested in Certificate Trustee pursuant to the last sentence of Section
-------
4.3 as it shall deem advisable and in the best interests of the Certificate
- ---
Purchasers; provided, however, that Certificate Trustee in exercising such
-----------------
rights and powers shall be liable only for its gross negligence or willful
misconduct (except that it shall be liable for its negligence in the handling of
funds).
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<PAGE>
TRUST AGREEMENT
(c) No provision hereof shall be construed to relieve Bank in its
individual capacity or Certificate Trustee of liability for its gross negligence
or willful misconduct or its negligence in the handling of funds, it being
understood that, without limiting the foregoing:
(i) Certificate Trustee shall not be liable for any error of
judgment made in good faith by an Authorized Officer of Certificate
Trustee, unless it shall be proved that Certificate Trustee was
grossly negligent;
(ii) Certificate Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Required Entities pursuant to the
express provisions hereof;
(iii) no provision hereof shall require Bank in its individual
capacity to expend or risk its own funds in the performance of any of
its duties hereunder or under any of the other Operative Documents, or
in the exercise of any of its rights or powers;
(iv) Certificate Trustee shall not be personally responsible
for or in respect of the validity or sufficiency of this Trust
Agreement or for the due execution hereof by any Certificate
Purchaser;
(v) Except as expressly provided in this Trust Agreement, in
accepting the trust created hereby, Certificate Trustee acts solely as
trustee and not in its individual capacity, and all persons having any
claim against Certificate Trustee by reason of the transactions
contemplated by this Trust Agreement shall, other than as expressly
provided in this Trust Agreement and the other Operative Documents,
look solely to the Trust's property for payment or satisfaction
thereof; and
(vi) Bank shall be liable for (A) any taxes on, with respect to
or measured by any amounts paid to it as compensation for services or
otherwise under the Operative Documents, (B) acts or omissions not
related to the transactions contemplated by the Operative Documents,
(C) the inaccuracy of representations and warranties made by Bank in
its individual capacity in the Participation Agreement or any
certificate or document delivered pursuant thereto, and (D) its
negligence in the handling of funds.
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<PAGE>
TRUST AGREEMENT
(d) Certificate Trustee shall not be required to take any action hereunder
or under the Operative Documents, nor shall any other provision of this Trust
Agreement or any Operative Document be deemed to impose a duty on Certificate
Trustee to take any action, if Certificate Trustee shall determine, or shall
have been advised by counsel, that such action is likely to result in personal
liability or is contrary to Applicable Laws or the Operative Documents.
(e) Whether or not therein expressly so provided, every provision of this
Trust Agreement relating to the conduct or affecting the liability of or
affording protection to Certificate Trustee shall be subject to the provisions
of this Section 4.5.
-----------
SECTION 4.6. Certain Rights of Certificate Trustee. Except as otherwise
-------------------------------------
provided in Section 4.5:
-----------
(a) Certificate Trustee may rely and shall be protected in acting or
refraining from acting upon any signature, resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order or other
paper or document reasonably believed by it to be genuine and to have been
signed or presented by the proper party or parties;
(b) any request, direction or authorization by any party hereto or to any
other Operative Document shall be sufficiently evidenced by a request, direction
or authorization in writing, delivered to Certificate Trustee and signed in the
name of such party by the president, any vice president, the treasurer or the
secretary of such party, as the case may be, and any resolution of the board of
directors or committee thereof of such party shall be sufficiently evidenced by
a copy of such resolution certified by the secretary or an assistant secretary
of such party, as the case may be, to have been duly adopted and to be in full
force and effect on the date of such certification, and delivered to Certificate
Trustee;
(c) whenever in the administration of this Trust Agreement Certificate
Trustee shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, Certificate Trustee may in
good faith rely upon a certificate in writing, delivered to Certificate Trustee
and signed by the president, any vice president, any assistant vice president,
the treasurer, any assistant treasurer, the secretary or any assistant secretary
of a Certificate Purchaser;
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<PAGE>
TRUST AGREEMENT
(d) Certificate Trustee may exercise its powers and perform its duties by
or through such attorneys, agents and servants as it shall appoint; and it shall
be entitled to the advice of counsel and shall be protected by the advice of
such counsel in anything done or omitted to be done in accordance with such
advice (provided that such advice pertains to such matters as Certificate
Trustee may reasonably presume to be within the scope of such counsels area of
expertise);
(e) Certificate Trustee shall not be under any obligation to exercise any
of the rights or powers vested in it by this Trust Agreement at the request or
direction of the Required Entities, unless the Required Entities shall have
offered to Certificate Trustee reasonable security or indemnity against the
costs, expenses (including reasonable fees and expenses of its legal counsel)
and liabilities which may be incurred by it in compliance with such request or
direction;
(f) provided no Authorized Officer has actual knowledge of the inaccuracy
thereof, Certificate Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent or other paper
or document, but Certificate Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit, and, if
Certificate Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books and records of Lessee
related to the Leasehold Estate to reasonably determine whether Lessee is in
compliance with the terms and conditions of the Lease and to examine the
Equipment, by agent or attorney, all upon the terms and conditions contained in
the Lease; and
(g) without limiting the generality of Section 4.5, Certificate Trustee
-----------
shall not have any duty (i) to see to any recording or filing of the Operative
Documents or any Uniform Commercial Code financing statements or to see to the
maintenance of any such recording or filing, (ii) to see to any insurance on the
Equipment or to effect or maintain any such insurance, whether or not Lessee
shall be in default with respect thereto, other than to promptly forward to the
Certificate Purchasers copies of all certificates, reports And other written
information which it receives from Lessee pursuant to the requirements of the
Lease or the Participation Agreement (unless the Certificate Purchasers are to
receive such certificates, reports and other written information directly from
Lessee), (iii) to see to the payment or
-16-
<PAGE>
TRUST AGREEMENT
discharge of any tax, assessment or other governmental charge or any Lien owing
with respect to, assessed or levied against any part of the Trust Estate, except
as provided in Section 6.2(a) of the Participation Agreement, (iv) to confirm or
verify any financial statements of Lessee or Guarantor, or (v) to inspect the
Equipment at any time or ascertain or inquire as to the performance or
observance of any of Lessee' s covenants under the Operative Documents with
respect to the Equipment.
SECTION 4.7. NO REPRESENTATIONS OR WARRANTIES AS TO THE LEASEHOLD ESTATE
-----------------------------------------------------------
OR DOCUMENTS. BANK IS NOT A BUILDER, DEVELOPER OR MANUFACTURER OF THE SYSTEMS
- ------------
OR ANY RELATED EQUIPMENT OR A DEALER IN SIMILAR PROPERTY AND HAS NOT INSPECTED
THE EQUIPMENT PRIOR TO DELIVERY TO AND ACCEPTANCE BY LESSEE. BANK HAS NOT MADE
NOR DOES IT MAKE (A) ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO
ANY ENVIRONMENTAL MATTER OR CONDITION, VALUE, DESIGN, OPERATION, CONDITION,
QUALITY, DURABILITY, SUITABILITY, MERCHANTABILITY OR FITNESS FOR USE OR FITNESS
FOR A PARTICULAR PURPOSE, ABSENCE OF LATENT OR OTHER DEFECTS WHETHER OR NOT
DISCOVERABLE, ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT,
OR ANY OTHER WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE
EQUIPMENT, OR AS TO TITLE THERETO, OR (B) ANY REPRESENTATION OR WARRANTY AS TO
THE VALIDITY, LEGALITY OR ENFORCEABILITY OF THE OPERATIVE DOCUMENTS (OTHER THAN
AS TO THIS TRUST AGREEMENT AGAINST BANK), OR AS TO THE CORRECTNESS OF ANY
STATEMENT CONTAINED IN ANY THEREOF, EXCEPT AS SET FORTH IN SECTION 4.3 OF THE
PARTICIPATION AGREEMENT.
SECTION 4.8. Status of Moneys Received. All moneys received by Certificate
-------------------------
Trustee under or pursuant to any provision of this Trust Agreement (other than
Excluded Amounts to be paid to Bank) shall constitute trust funds for the
purpose for which they were paid or are held, but need not be segregated in any
manner from any other moneys and may be deposited by Certificate Trustee under
such conditions as may be prescribed or permitted by Applicable Laws for trust
funds, or, at the direction of the Required Entities may be invested in
Permitted Investments.
SECTION 4.9. Permitted Activities. Certificate Trustee or any corporation
--------------------
in or with which Certificate Trustee may be interested or affiliated or any
officer or director of' any such corporation may acquire and hold Certificates
hereunder (subject to the restrictions of Sections 6.3 and 6.4 of the
Participation Agreement), and have commercial relations and otherwise deal with
Lessee or with any other corporation having relations with Lessee to the full
extent permitted by Applicable Laws.
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<PAGE>
TRUST AGREEMENT
SECTION 4.10. Resignation or Removal of Certificate Trustee. Certificate
---------------------------------------------
Trustee or any successor thereto may resign at any time without cause by giving
at least sixty (60) days' prior written notice to each Certificate Purchaser,
Administrative Agent and Lessee, and the Required Entities may at any time
remove Certificate Trustee without cause by an instrument in writing delivered
to Certificate Trustee, Administrative Agent and Lessee, such resignation or
removal to be effective on the later of the date specified in such notice or
written instrument or the date on which a successor certificate trustee is
appointed hereunder. With the written consent of Administrative Agent and, so
long as a Lease Event of Default shall not have occurred and, be continuing, the
Required Entities may, at any time upon thirty (30) days' prior written notice
to Administrative Agent and Lessee by an instrument in writing, appoint a
successor certificate trustee, provided, however, that a successor certificate
-------- -------
trustee shall be a bank or trust company which is organized under the laws of
the United States of America or any state thereof and has a combined capital and
surplus of at least $100,000,000. If the Required Entities shall not have
appointed a successor certificate trustee within thirty (30) days after the
giving of notice of such resignation or removal, Administrative Agent or
Certificate Trustee may apply to any court of competent jurisdiction to appoint
a successor certificate trustee to act until such time, if any, as a successor
or successors shall have been appointed by the Required Entities as above
provided. Any successor certificate trustee so appointed by such court shall
immediately and without further act be superseded by a successor certificate
trustee appointed by the Required Entities.
SECTION 4. 11. Estate and Rights of Successor Certificate Trustee. Any
--------------------------------------------------
successor certificate trustee, whether appointed by the Required Participants or
a court, shall execute and deliver to the predecessor Certificate Trustee an
instrument accepting such appointment, and thereupon each successor Certificate
trustee, without further act, shall become vested with all the estates,
properties, rights, powers, duties and trusts of the predecessor Certificate
Trustee in the trusts hereunder with like effect as if originally named as an
Certificate Trustee herein, but nevertheless upon the written request of such
successor Certificate trustee, such predecessor Certificate Trustee shall
execute and deliver an instrument transferring to such successor certificate
trustee, upon the trusts herein expressed, all the estates, properties, rights,
powers and trusts of such predecessor Certificate Trustee, and such predecessor
Certificate Trustee shall duly assign, transfer, deliver and pay over to such
successor certificate trustee any property or moneys then held by such
predecessor Certificate Trustee upon the trusts herein expressed.
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<PAGE>
TRUST AGREEMENT
SECTION 4.12. Merger or Consolidation of Certificate Trustee. Any
-----------------------------------------------
corporation into which Certificate Trustee may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which Certificate Trustee shall be a party, or any corporation to which
substantially all of the corporate trust business of Certificate Trustee may be
transferred, shall be a successor certificate trustee under this Trust Agreement
without further act.
SECTION 4.13. Co-Trustees. At any time, for the purpose of meeting any
-----------
legal requirements of any jurisdiction in which any part of the Trust Estate may
at the time be located, the Required Entities and Certificate Trustee jointly
shall have the power, and shall execute and deliver all instruments, to appoint
one or more persons approved by the Required Entities and Certificate Trustee,
to act as co-trustee, or co-trustees, jointly with Certificate Trustee, or
separate trustee or separate trustees, of all or any part of the Trust Estate,
and to vest in such person or persons, in such capacity, such title to the Trust
Estate or any part thereof, and such rights, powers, duties, trusts or
obligations as the Required Entities and Certificate Trustee may consider
necessary or desirable. If the Required Entities shall not have joined in such
appointment within fifteen (15) days after the receipt by it of a request to do
so, Certificate Trustee alone shall have power to make such appointment.
Certificate Trustee shall not be liable for any act or omission of any co-
trustee or separate trustee appointed under this Section 4.13.
------------
SECTION 4.14. Doing Business in Other Jurisdictions. Notwithstanding
-------------------------------------
anything contained herein to the contrary, Certificate Trustee shall not be
required to take any action in any jurisdiction, other than in the state in
which the Corporate Trust Department is located and other than in any other
jurisdiction in which Certificate Trustee is authorized to do business, if
solely as a result of such action, (i) the taking of such action would require
the consent or approval or authorization or order of or the giving of notice to,
or the registration with or the taking of any other action in respect of, any
Governmental Authority of any jurisdiction, other than the state in which the
Corporate Trust Department is located or any other jurisdiction in which
Certificate Trustee is authorized to do business; (ii) Bank would incur any fee,
tax or other governmental charge under the laws of any Jurisdiction or any
political subdivision thereof in existence on the date hereof, other than the
state in which the Corporate Trust Department is located or any other
jurisdiction in which Certificate Trustee is authorized to do business; or (iii)
Bank would become subject to personal jurisdiction in any jurisdiction, other
than the state of Certificate Trustee's organization or any other jurisdiction
in which Certificate Trustee is authorized to do
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<PAGE>
TRUST AGREEMENT
business, for causes of action arising from acts unrelated to the consummation
of the Overall Transaction by Bank or Certificate Trustee; provided, that if
pursuant to the foregoing paragraph Certificate Trustee shall not be required to
take an action, Certificate Trustee shall promptly appoint an additional trustee
pursuant to Section 4.13 to proceed with such action.
------------
ARTICLE V
TRANSFER OF CERTIFICATE PURCHASER'S INTEREST
Any transfer by a Certificate Purchaser of its Certificates and its
interests under this Trust and in and to the Trust Estate shall comply with
Sections 6.3 and 6.4 of the Participation Agreement.
ARTICLE VI
TERMINATION OF AND AMENDMENTS TO TRUST
SECTION 6. 1. Termination. The Trust created and provided for hereby shall
-----------
cease and be terminated in any one of the following events, whichever shall
first occur:
(a) if the Required Entities shall by notice in writing to Certificate
Trustee, the Lenders, Administrative Agent and Lessee revoke and terminate the
Trust on and as of a date stated in such notice, which date shall not be less
than ten (10) nor more than thirty (30) days from the date of mailing such
notice, then on the date specified in such notice the Trust created and provided
for hereby shall cease and terminate; provided, however, that this Trust shall
-------- -------
not be subject to revocation or termination by the Required Entities prior to
the payment in full and discharge of the Loans and all other indebtedness
secured by the Loan Documents and the termination of the Loan Documents and the
release of the Liens granted thereby; or
(b) the sale or other final disposition by Certificate Trustee of all
property constituting the Trust Estate and the final disposition by Certificate
Trustee of all moneys or other property or proceeds constituting part of the
Trust Estate in accordance with the terms hereof; provided, however that the
-----------------
Trust Estate shall not be subject to sale or other final disposition by
Certificate Trustee prior to the payment in full and discharge of the Loans and
all other indebtedness secured by the Loan Documents and the release of the Loan
Documents and the Liens granted thereby and the payment in full of the
Certificate Purchaser Amounts;
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<PAGE>
TRUST AGREEMENT
(c) 110 years after the date hereof; or
(d) an Insolvency Event with respect to any Certificate Purchaser; provided
--------
that this Trust Agreement shall not be so terminated if, before the end of the
thirty (30) day period referred to in clause (a), Certificate Trustee receives
-----------
written instructions from the Required Certificate Purchasers (other than a
Certificate Purchaser that is the subject of an Insolvency Event and any of its
Affiliates), to the effect that each such Certificate Purchaser disapproves of
the liquidation of the Trust Estate and termination of the Trust and naming a
successor to the Certificate Purchaser that is the subject of an Insolvency
Event. Promptly after the occurrence of any Insolvency Event with respect to
any Certificate Purchaser: (i) such Certificate Purchaser shall give Certificate
Trustee written notice of such Insolvency Event; and (ii) Certificate Trustee
shall, upon the receipt of such written notice from such Certificate Purchaser,
give prompt written notice to the other Certificate Purchasers of the occurrence
of such event; provided, however, that any failure to give a notice required by
-------- -------
this sentence shall not prevent or delay in any manner a termination of the
Trust pursuant to any other provision of this Section 6.1. Upon a termination
------- ----
pursuant to this Section 6.1, subject to Section 4.4, Certificate Trustee shall
----------- -----------
collect all amounts due the Trust pursuant to any of the Operative Documents.
SECTION 6.2. Distribution of Trust Estate Upon Termination. Upon any
---------------------------------------------
termination of this Trust pursuant to the provisions of Section 6.1, Certificate
-----------
Trustee shall convey the Trust Estate to such purchaser or purchasers thereof or
other Person entitled thereto and for such amount and on such terms as shall be
specified in written instructions from the Required Entities delivered to
Certificate Trustee prior to the date of termination; provided that (a) if at
--------
the time of any termination the Lease remains in force and effect, then the
Trust Estate shall be sold as a whole and subject to the Lease, and (b) in the
event such written instructions are not delivered to Certificate Trustee on or
before the date of termination, Certificate Trustee shall transfer title to the
Trust Estate to the Certificate Purchasers. Upon making such transfer or sale,
Certificate Trustee shall be entitled to immediate receipt of any sums due and
owing to Certificate Trustee for expenses (including reasonable attorneys' fees
and expenses) incurred pursuant hereto or as compensation for services rendered
hereunder and not theretofore paid, and Certificate Trustee shall be discharged
and free of any further liability hereunder subject to Section 4.5(c).
--------------
-21-
<PAGE>
TRUST AGREEMENT
Notwithstanding the foregoing provisions of this Section 6.2, upon the
-----------
termination of this Trust pursuant to the provisions of Section 6.1(d), the
---------------
Certificate Purchasers hereby appoint Certificate Trustee to act as liquidating
trustee and the Certificate Trustee, as liquidating trustee, shall gradually
settle and close the Trust's business, dispose of and convey the Trust's
property, discharge or make reasonable provision for the Trust's liabilities,
and distribute to the Certificate Purchasers any assets of the Trust
(collectively the "Settlement Actions"); provided, that, consistent with the
--------------------- --------
rights and obligations of the Trust under the Operative Documents, (A)
Certificate Trustee, as liquidating trustee, shall, without limitation, (i)
continue to collect payments under the Lease and otherwise continue to perform
the obligations of the Lessor under the Lease and continue to exercise the
rights and remedies of the Lessor under the Lease, and (ii) continue to make or
cause to be made payments under the Loan Agreement and otherwise continue to
perform the obligations of the Borrower under the Loan Agreement and continue to
exercise the rights and remedies of the Borrower under the Loan Agreement, and
(B) prior to the satisfaction by Lessee of all its obligations arising under the
Operative Documents and the satisfaction by the Trust of all its obligation
arising under the Operative Documents, Certificate Trustee, as liquidating
trustee, shall not take any Settlement Action (nor shall any Participant direct
Certificate Trustee, as liquidating trustee, or any other party to take any
Settlement Action) which would adversely affect (i) the parties' continuing
rights and obligations under the Operative Documents, (including, without
limitation, the term of the Lease, the Loan Agreement or any other Operative
Documents) or (ii) the rights of any Participant to receive any amounts as
contemplated by and at such times as set forth in the Operative Documents;
provided, further, that it is expressly understood that a termination of the
- -----------------
Trust pursuant to the provisions of Section 6.1(d) shall not constitute a Lease
--------------
Event of Default or a Loan Event of Default.
SECTION 6.3. Amendments. Subject to Section 9.5 of the Participation
----------
Agreement, at any time and from time to time, upon the written request of the
Required Entities, (i) Certificate Trustee shall execute a supplement hereto for
the purpose of adding provisions to, or changing or eliminating provisions of
this Trust Agreement as specified in such request, and (ii) Certificate Trustee
shall enter into or consent to such written amendment of or supplement to the
Operative Documents as Lessee or Administrative Agent, as the case may be, may
agree to and as may be specified in such request, or execute and deliver such
written waiver or modification of the terms of the Operative Documents as may be
specified in such request; provided, however, if in the reasonable opinion of
-----------------
Certificate Trustee, any document required to be executed by it pursuant to this
Section 6.3 affects any right or
- -----------
-22-
<PAGE>
TRUST AGREEMENT
duty of, or immunity or indemnity in favor of, Certificate Trustee under this
Trust Agreement or the other Operative Documents, Certificate Trustee may in its
reasonable discretion decline to execute such document.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. Compensation and Indemnification.
--------------------------------
(a) Bank shall receive reasonable compensation for its services hereunder,
including reasonable compensation for acting as liquidating trustee if so
required, from Lessee and shall be reimbursed by Lessee for Bank's reasonable
fees and expenses (including the disbursements and reasonable fees of counsel).
In the event a Lease Event of Default or a Loan Event of Default shall have
occurred and be continuing and Certificate Trustee shall be required pursuant to
the provisions of this Trust Agreement to take any action in connection
therewith or act as liquidating trustee, Lessee shall reimburse it for any
expenses it may incur in relation to taking any such action (including the
disbursements And fees of counsel) except any expenses Certificate Trustee may
incur as a result of its gross negligence or willful misconduct. Certificate
Trustee (at the direction of the Certificate Purchasers) grants to Bank a Lien
on the Trust Estate to secure payment of reasonable compensation and expenses
incurred by it in its performance of any duties it may have as liquidating
trustee.
(b) The Certificate Purchasers shall reimburse, indemnify, protect and save
harmless Certificate Trustee from and against any and all losses, damages,
liabilities, claims, actions, suits, obligations, penalties, demands,
disbursements and expenses, including taxes and counsel fees, and including tort
claims for which Certificate Trustee is strictly liable, which may be asserted
against or incurred by reason of Bank's being Certificate Trustee or acting
hereunder or under the Operative Documents or the performance or enforcement of
any of the terms hereof, or arising out of or relating to this Trust Agreement
or the Operative Documents or the Equipment or the Rent and other sums payable
therefor, or the building, manufacture, purchase, installation, acceptance,
resection, ownership, delivery, lease, possession, use, operation, condition,
sale, return or other disposition of the Equipment or in any way relating to or
arising out of the Trust Estate or the action or the inaction of Certificate
Trustee hereunder or by reason of any occurrence while so acting; provided, that
the Certificate Purchasers shall not be so obligated in respect of any such
losses, damages, liabilities, claims, actions, suits, obligations, penalties,
demands, disbursements and expenses,
-23-
<PAGE>
TRUST AGREEMENT
including taxes and counsel fees pursuant to this Section 7.1, arising from or
-----------
as a result of (a) the willful misconduct or gross negligence of Bank, (b) any
taxes on, with respect to or measured by any amounts paid to Bank as
compensation for services or otherwise under the Operative Documents, or (c) the
inaccuracy of representations and warranties made by Bank in its individual
capacity in the Participation Agreement or in any certificate or documents
delivered pursuant thereto; and, provided, further, that neither Bank nor
-----------------
Certificate Trustee shall make any claim under this Section 7.1 for any claim or
-----------
expense indemnified against by Lessee under Article VII of the Participation
Agreement without first making demand on such Lessee for payment of such claim
or expense and reasonably attempting to collect same. The provisions of this
Section 7.1 (other than the requirements for compensation of Certificate Trustee
- -----------
after its resignation, which shall terminate upon -the resignation or removal of
Certificate Trustee) shall continue in force and effect notwithstanding the
termination of this Trust, the resignation or removal of Certificate Trustee or
the obligation of any other party to any other Operative Document to make any
payment to Certificate Trustee which a Certificate Purchaser is required to make
pursuant to this Section 7.1. The obligations of the Certificate Purchasers
-----------
under this Section 7.1 shall be several and not joint and pro rata in accordance
------------
with their respective Certificate Purchaser Amounts (and if a determination is
to be made after all Certificate Purchaser Amounts are paid, such determination
shall be made based upon the Certificate Purchaser Amounts immediately prior to
final payment thereof). To secure the same, Certificate Trustee shall have a
lien on the Trust Estate which shall be prior to any interest therein of the
Certificate Purchasers.
SECTION 7.2. Notices. All notices and communications provided for herein
-------
shall be in writing and shall be deemed to have been given when delivered in
accordance with Section 9.3 of the Participation Agreement.
SECTION 7.3. Applicable Law. This Trust is being created in the State of
--------------
New York and the validity, construction and all rights under this Trust shall be
governed by the laws of that State. if any provision of this Trust shall be
invalid or unenforceable, the remaining provisions hereof shall continue to be
fully effective, provided that such remaining provisions do not increase the
obligations or liabilities of Certificate Trustee.
SECTION 7.4. Tax Reports. In the event any tax report or tax return is
-----------
required to be made by Certificate Trustee with respect to the Trust Estate and
Lessee is not required to prepare and file the same pursuant to the Lease, each
Certificate Purchaser will prepare such tax report or return in respect of its
interest in the
-24-
<PAGE>
TRUST AGREEMENT
Trust and deliver a copy thereof to Certificate Trustee. Certificate Trustee
Agreements to promptly forward to each Certificate Purchaser any communications
with respect to taxes pertaining to the Trust Estate which are received by
Certificate Trustee from tax authorities or from Lessee.
SECTION 7.5. Headings. The headings of the various Sections herein are for
--------
convenience of reference only and shall not define or limit any of the terms or
provisions hereof.
SECTION 7.6. Successors and Assigns. All covenants and Agreements
----------------------
contained herein shall be binding upon, and inure to the benefit of, the parties
hereto and their respective successors and assigns.
SECTION 7.7. Severabilitv. Any provision of this Trust Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition on unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provisions in any other jurisdiction.
SECTION 7.8. Only Written Waivers. No term or provision of this Trust
--------------------
Agreement may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by the party or other person against whom
enforcement of the change, waiver, discharge or termination is sought; and any
waiver of the terms hereof shall be effective only in the specific instance and
for the specific purpose given.
SECTION 7.9. Counterparts. This instrument may be simultaneously executed
------------
in any number of counterparts, each of which when so executed shall be deemed to
be an original, and such counterparts together shall constitute and be one and
the same instrument.
SECTION 7.10. Rights in Trust Agreement. Except as expressly provided to
-------------------------
the contrary in the Operative Documents, nothing in this Trust Agreement,
whether express or implied, shall be construed to give any person other than
Certificate Trustee and each Certificate Purchaser and their respective
successors and assigns, any legal or equitable right, remedy or claim under or
in respect of this Trust Agreement.
SECTION 7.11. Identification of Trust. This trust may for convenience be
-----------------------
referred to as Electric Lightwave, Inc. Trust No. 1995-A.
<PAGE>
TRUST AGREEMENT
[Signature page follows]
<PAGE>
TRUST AGREEMENT
IN WITNESS WHEREOF, the Certificate Purchasers and Certificate Trustee
have caused this instrument to be duly executed all as of the day and year first
above written.
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity,
but solely as Certificate Trustee
BY: /s/ Robert L. Reynolds
-----------------------------
Name: Robert L. Reynolds
Title: Vice President
<PAGE>
TRUST AGREEMENT
SUMITOMO BANK LEASING AND FINANCE,
INC., as Cerfiticate Purchaser
By: /s/ William M. Ginn
--------------------------
Name: William M. Ginn
Title: President
<PAGE>
TRUST AGREEMENT
SHAWMUT BANK, N.A., as Certificate
Purchaser
By: /s/ Robert D. Linagan
---------------------------------
Name: Robert D. Lanigan
Title: Managing Director
<PAGE>
TRUST AGREEMENT
FBTC LEASING CORP., as Certificate Purchaser
By: /s/ Akahiro Hashimoto
------------------------------
Name: Akihiro Hashimoto
Title: Treasurer
<PAGE>
TRUST AGREEMENT
THE DAI-ICHI KANGYO BANK
Ltd. New York Branch, as
Certificate Purchaser
By: /s/ Shinya Wako
-----------------------
Name: Shinya Wako
Title: Vice President
<PAGE>
TRUST AGREEMENT
BA LEASING & CAPITAL CORPORATION, as
Certificate Purchaser
By: /s/ Sara L. Fitch
-----------------------
Name: Sara L. Fitch
Title: Vice President
<PAGE>
TRUST AGREEMENT
SCHEDULE I
----------
CERTIFICATE PURCHASERS AND
CERTIFICATE PURCHASER AMOUNTS
<TABLE>
<CAPTION>
Commitment
Certificate Purchaser Commitment Percentage
--------------------- ------------ ----------
<S> <C> <C>
BA LEASING & CAPITAL $1,050,000.00 0.95454545
CORPORATION
DAI-ICHI KANGYO BANK LTD., $ 600,000.00 0.54545455
NEW YORK BRANCH
FBTC LEASING CORP. $ 300,000.00 0.27272727
SUMITOMO BANK LEASING $ 600,000.00 0.54545455
AND FINANCE, INC.
SHAWMUT BANK, N.A. $ 750,000.00 0.68181818
------------- ----------
TOTAL $3,300,000.00 3.00000000%
</TABLE>
<PAGE>
EXHIBIT A
TO
TRUST AGREEMENT
FORM OF TRUST CERTIFICATE
THIS CERTIFICATE HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES OR "BLUE SKY" LAW,
AND MAY NOT BE TRANSFERRED, SOLD OR OFFERED
FOR SALE IN VIOLATION OF SUCH ACT OR LAWS.
ELECTRIC LIGHTWAVE, INC. TRUST NO. 1995-A
TRUST CERTIFICATE
Evidencing an interest in the
Trust Estate, as defined below.
Number R- __________
Dated as of April ______, 1995
THIS CERTIFIES THAT ___________________________________________________
(the "Certificate Purchaser") is the registered owner of a
__________________________________________ Dollars ($ _________________ )
Certificate, evidencing an interest n the Trust Estate created pursuant to (and
defined in) that certain Trust Agreement, dated as of April 28, 1995, (the
"Trust Agreement") among the Persons named on Schedule I thereto, as
Certificate Purchasers, and SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, as
Certificate Trustee, which creates the trust identified under the title hereof.
To the extent not otherwise defined herein, capitalized terms used herein shall
have the meanings assigned to such terms in Appendix 1 to the Participation
Agreement (as defined in the Trust Agreement) , unless the context otherwise
requires. This Certificate is one of the duly authorized Trust Certificates.
This Certificate is being delivered pursuant to, is entitled to the benefits
of, and is subject to the terms, provisions and conditions of' the Trust
Agreement, to which Trust Agreement the holder of this Certificate by virtue of
its acceptance hereof assents and by which such holder is bound.
-1-
<PAGE>
This Certificate entitles the registered owner hereof to the payment of a
principal sum equal to the aggregate unpaid Certificate Purchaser Amounts
advanced by the Certificate Purchaser to, or for the benefit of, Certificate
Trustee, as recorded either on the grid attached to this Certificate or in the
records of the Certificate Purchaser (and such recordation shall constitute
prima facie evidence of the information so recorded); provided, however, that
-----------------
the failure to make any such recordation or any error in such recordation shall
not in any way affect Certificate Trustee's obligation to repay this
Certificate) together with the Yield on the amount of said principal sum
outstanding and remaining unpaid from time to time from the date of this
Certificate until payment hereof is made or duly provided. All payments of the
principal hereof and Yield on such principal amount shall be due and payable in
such amounts and at the times provided in the Trust Agreement, including on the
Final Maturity Date.
Interest on any overdue principal and (to the extent permitted by
Applicable Law) Yield shall be paid from the due date thereof at the Overdue
Rate.
All payments of principal and Yield and other amounts hereunder to be made
by Certificate Trustee shall be made only from the income and proceeds from the
Trust Estate and only to the extent that Certificate Trustee shall have
sufficient income or proceeds from the Trust Estate to make such payments in
accordance with the terms of Articles II and III of the Trust Agreement. Each
holder hereof, by its acceptance of this Certificate, Agreement: (i) that it
will look solely to the income and proceeds from the Trust Estate to the extent
available for distribution to the holder hereof; and (ii) that in any action or
proceeding brought on this Certificate or on any obligation evidenced hereby,
no deficiency or other monetary judgment shall be sought or obtained against
Certificate Trustee by reason of the ownership of this Certificate, except as
is necessary to enforce the rights and remedies of such holder under the Trust
Agreement and the other operative Documents, in which event any such judgment
shall be enforceable against Certificate Trustee only to the extent of the
interest of Certificate Trustee in the Trust Estate, and any such judgment
shall not be enforceable by execution or by a Lien on any of the assets of
Certificate Trustee or Bank other than the interest of Certificate Trustee in
the Trust Estate.
All principal of and Yield on this Certificate shall be payable in
immediately available funds as provided in Article III of the Trust Agreement,
but in any event no later than the Final Maturity Date.
There shall be maintained a register for the purpose of registering
transfers and exchanges of Certificates, at Certificate Trustee's Corporate
Trust Department.
-2-
<PAGE>
Each holder of this Certificate, by its acceptance hereof, agrees that each
payment received by such holder hereunder on account of principal of, or Yield
on, this Certificate shall be applied in the manner set forth in Article III of
the Trust Agreement.
This Certificate is one of the Certificates referred to in the Trust
Agreement that have been delivered pursuant to the terms of the Trust Agreement.
Reference is hereby made to the Trust Agreement and the Operative Documents for
a statement of: (i) the rights of the holder of, and the nature and extent of
the security for, this Certificate; (ii) the rights of the holders of, and the
nature and extent of the security for, other Certificates; and (iii) the terms,
rights and conditions of the trusts created by the Trust Agreement.
This Certificate is not subject to prepayment except as provided in the
Trust Agreement.
This Certificate is a registered Certificate and is transferable, as provided in
the Trust Agreement, only upon surrender of this Certificate for registration
and transfer duly accompanied by a written instrument of transfer duly executed
by the registered holder hereof or his attorney duly authorized in writing.
Prior to due registration of transfer of this Certificate, Certificate Trustee
may treat the Person in whose name this Certificate is registered as the owner
hereof for the purpose of receiving payments of principal and Yield hereunder
and under the Trust Agreement and for all other purposes whatsoever, whether or
not this Certificate be overdue, and Certificate Trustee shall not be affected
by notice to the contrary.
(signature page follows)
-3-
<PAGE>
IN WITNESS WHEREOF, Certificate Trustee has caused this Certificate to be
executed in its corporate name by its duly Authorized Officer as of the date
hereof.
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity but solely as
Certificate Trustee
By: /s/ Robert L. Reynolds
-----------------------------
Name: Robert L. Reynolds
Title: Vice President
This Certificate is one of the Certificates
referred to in the within-mentioned Trust
Agreement.
-4-
<PAGE>
GRID ATTACHED TO TRUST CERTIFICATE
DATED APRIL ___, 1995 OF
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
AS CERTIFICATE TRUSTEE
PAYABLE TO THE ORDER OF [INSERT CERTIFICATE PURCHASER'S NAME]
Certificate Purchaser Amounts advanced by the Certificate Purchaser to
Certificate Trustee, and payments of principal of such Certificate Purchaser
amounts.
<TABLE>
<CAPTION>
Principal Amount Bearing
Prinicpal Amount Interest Paid
Interest Period Base LIBO Base LIBO Principal Amount Notation
Date Advances C.I. * (If Applicable) RATE RATE Rate RATE C.I. Total Made By
- ---- -------- --- --------------- ---- ---- ---- ---- --- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* C.I. = Capitalized Interest
<PAGE>
================================================================================
SECURITY AGREEMENT AND ASSIGNMENT OF LEASE
(Electric Lightwave, Inc. Trust No. 1995-A)
dated as of April 28, 1995
among
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity but solely
as Certificate Trustee,
and
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity but solely
as Administrative Agent
================================================================================
<PAGE>
-2-
<PAGE>
EXHIBIT K
TO PARTICIPATION AGREEMENT
(Electric Lightwave, Inc. Trust No. 1995-A)
FORM OF
SECURITY AGREEMENT AND ASSIGNMENT OF LEASE
------------------------------------------
THIS SECURITY AGREEMENT AND ASSIGNMENT OF LEASE (this "Security Agreement"),
------------------
dated as of April 28, 1995, is made by SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, a national banking association, not in its individual capacity but
solely as Certificate Trustee ("Grantor") under Electric Lightwave, Inc. Trust
-------
No. 1995-A, created by that certain Trust Agreement dated as of April 28, 1995
among the Persons named on Schedule I thereto, as Certificate Purchasers, and
Grantor, in favor of SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, a national
banking association, not in its individual capacity but solely as Administrative
Agent ("Administrative Agent") for the Certificate Purchasers and the Lenders.
--------------------
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Grantor, the Certificate Purchasers, Administrative Agent,
Information Agent, the Lenders, Guarantor and Electric Lightwave, Inc., a
Delaware corporation ("Lessee"), have entered into that certain Participation
------
Agreement (Electric Lightwave, Inc. Trust No. 1995-A), dated as of April 28,
1995 (as amended, modified or supplemented from time to time, the "Participation
-------------
Agreement"); and
- ---------
WHEREAS, concurrently herewith pursuant to the Participation Agreement, (i)
the Trust is providing funding for the purchase, construction and installation
of certain Equipment and Systems comprising one or more MANs and the Southwest
FCL, and (ii)
<PAGE>
Grantor, as lessor, and Lessee, as lessee, are entering into the
Lease; and
WHEREAS, it is a condition precedent to the consummation by the Participants
of the transactions to be consummated on each Advance Date that Grantor execute
and deliver this Security Agreement as security for Grantor's obligations under
the Loan Agreement; and
WHEREAS, it is in the best interests of Grantor that the Overall Transaction
occur; and
WHEREAS, Grantor has duly authorized the execution, delivery and performance
of this Security Agreement;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the
Participants to enter into the Overall Transaction, Grantor agrees as follows:
ARTICLE I
DEFINITIONS
SECTION I.1. Certain Terms. The following terms (whether or not underscored)
-------------
when used in this Security Agreement, including its preamble and recitals, shall
have the following meanings (such definitions to be equally applicable to the
singular and plural forms thereof):
"Collateral" is defined in Section 2.1.
---------- -----------
"Secured Obligations" is defined in Section 2.2.
------------------- -----------
"UCC" means the Uniform Commercial Code, as in effect in the State of New
---
York.
SECTION I.2. Participation Agreement Definitions. Unless otherwise defined
-----------------------------------
herein or the context otherwise requires, terms used in this Security Agreement,
including its preamble and
-2-
<PAGE>
Security Agreement
recitals, have the meanings provided in Appendix 1 to the Participation
Agreement.
SECTION I.3. UCC Definitions. Unless otherwise defined herein or the context
---------------
otherwise requires, terms for which meanings are provided in the UCC are used in
this Security Agreement, including its preamble and recitals, with such
meanings.
ARTICLE II
SECURITY INTEREST
SECTION II.1. (a) Grant of Security. Grantor hereby assigns and pledges to
-----------------
Administrative Agent, and hereby grants to Administrative Agent, for the benefit
of the Participants, a security interest in and to all of the following, whether
now existing or hereafter arising or acquired (the "Collateral"):
----------
(i) all of Grantor's right, title and interest in, to and under each
Bill of Sale and each Certificate of Acceptance;
(ii) all of Grantor's right, title and interest in, to and under the
Participation Agreement, the Lease and each Lease Supplement, including all
rights to receive payments thereunder other than Excluded Amounts;
(iii) all of Grantor's right, title and interest in, to and under the
Guaranty;
(iv) all of Grantor's right, title and interest in, to and under the
Construction Agency Agreement, the Support Agreement, the Purchase Order
Assignment and each Qualified Use Agreement;
(v) all books, records, writings, databases, information and other
property relating to, used or useful in connection with, evidencing,
embodying, incorporating or referring to, any of the foregoing; and
-3-
<PAGE>
Security Agreement
(vi) all products, accessions, rents, issues, profits, returns, income
and proceeds of and from any and all of the foregoing Collateral (including
proceeds which constitute property of the types described in the foregoing
clauses of this Section 2.1, proceeds deposited from time to time in any
-----------
lockboxes of the Grantor, and, to the extent not otherwise included, all
payments under insurance (whether or not the Administrative Agent is the
loss payee thereof), or any indemnity, warranty or guaranty payable by
reason of loss or damage to or otherwise with respect to any of the
foregoing Collateral).
(b) Assignment of Interest. Grantor hereby sells, assigns, transfers and
----------------------
sets over unto Administrative Agent all of Grantor's right, title and interest
in and to the Lease, including all Lease Supplements, and all Systems and
Equipment subject thereto, including, without limitation, the right to receive
directly all payments and notices due thereunder. This assignment is made with
full recourse to Grantor and is provided as security for the performance of all
of Grantor's obligations to the Administrative Agent for the benefit of the
Participants pursuant to the Participation Agreement and the other Operative
Documents to which it is a party.
SECTION II.2. Security for Obligations. This Security Agreement secures the
------------------------
payment of all obligations of Grantor now or hereafter existing under the
Certificates, the Notes, the Loan Agreement and any other Operative Document to
which it is a party, whether for principal, interest, costs, fees, expenses or
otherwise, and all other obligations of Grantor to the Participants howsoever
created, arising or evidenced, whether direct or indirect, absolute or
contingent or now or hereinafter existing or due or to become due (all such
obligations being the "Secured Obligations").
-------------------
SECTION II.3. Continuing Security Interest; Transfer of Notes. This Security
-----------------------------------------------
Agreement shall create a continuing security interest in the Collateral and
shall
-4-
<PAGE>
Security Agreement
(a) remain in full force and effect until the payment in full of all
Secured Obligations and the termination of the Commitments and any other
commitments of the Lenders to or for the benefit of Grantor;
(b) be binding upon Grantor, its successors, transferees and assigns;
and
(c) inure, together with the rights and remedies of Administrative Agent
hereunder, to the benefit of Administrative Agent and its successors,
transferees and assigns.
Without limiting the generality of the foregoing clause (c), each transferee of
----------
a Note shall, upon such transfer, become vested with all the rights and benefits
in respect thereof granted under any Operative Document (including this Security
Agreement) or otherwise, subject, however, to any contrary provisions in such
assignment or transfer. Upon the payment in full of all Secured Obligations and
the termination of the Commitments, and any other commitments of the Lenders to
Grantor, the security interest granted herein shall terminate and all rights to
the Collateral shall revert to Grantor. Upon any such termination,
Administrative Agent will, on behalf of the Participants and at Grantor's sole
expense, execute and deliver to Grantor such documents as Grantor shall
reasonably request to evidence such termination.
SECTION II.4. Grantor Remains Liable. Anything herein to the contrary
----------------------
notwithstanding
-5-
<PAGE>
Security Agreement
(a) Grantor shall remain liable under the contracts and agreements
included in the Collateral to the extent set forth therein, and shall
perform all of its duties and obligations under such contracts and
agreements to the same extent as if this Security Agreement had not been
executed;
(b) the exercise by Administrative Agent of any of its rights hereunder
shall not release Grantor from any of its duties or obligations under any
such contracts or agreements included in the Collateral; and
(c) Administrative Agent shall not have any obligation or liability
under any such contracts or agreements included in the Collateral by reason
of this Security Agreement, nor shall Administrative Agent be obligated to
perform any of the obligations or duties of Grantor thereunder or to take
any action to collect or enforce any claim for payment assigned hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION III.1. Representations and Warranties. Grantor represents and
------------------------------
warrants unto Administrative Agent as set forth in this Article.
SECTION III.1.1. Ownership, No Liens, etc. Grantor owns the Collateral free
------------------------
and clear of any lien, security interest, charge or encumbrance except for the
security interest created by this Security Agreement.
SECTION III.1.2. Validity, etc. This Security Agreement creates a valid
-------------
first priority security interest in the Collateral, securing the payment of the
Secured Obligations, and all filings and other actions necessary or desirable to
perfect and protect such security interest have been duly taken. The Assigned
Agreements have been duly authorized, executed and delivered by the parties
thereto, have not been amended or otherwise modified, are in full force and
effect, and are binding
-6-
<PAGE>
Security Agreement
upon and enforceable against the parties thereto in accordance with their terms.
SECTION III.1.3. Authorization, Approval, etc. No authorization, approval or
----------------------------
other action by, and no notice to or filing with, any Governmental Authority is
required either
(a) for the grant by Grantor of the security interest granted hereby or
for the execution, delivery and performance of this Security Agreement by
Grantor; or
(b) for the perfection of or the exercise by the Administrative Agent of
its rights and remedies hereunder, except for filing of UCC financing
statements with the office of the Secretary of State of Connecticut.
SECTION III.1.4. Compliance with Laws. Grantor is in compliance with all
--------------------
Applicable Laws of every Governmental Authority, the non-compliance with which
might materially adversely affect the business, properties, assets, operations,
condition (financial or otherwise) or prospects of Grantor, the ability of
Grantor to perform its obligations hereunder, the enforceability of this
Security Agreement, or the value of the Collateral or the worth of the
Collateral as collateral security.
ARTICLE IV
COVENANTS
SECTION IV.1. Certain Covenants. Grantor covenants and agrees that, so long
-----------------
as any portion of the Secured Obligations shall remain unpaid or the
Participants shall have any outstanding Commitments to Grantor, Administrative
Agent may exercise, in its sole and absolute discretion, any and all rights and
powers set forth in this Section.
SECTION IV.1.1. As to Collateral.
----------------
-7-
<PAGE>
Security Agreement
(a) Administrative Agent may, at the expense of Grantor, endeavor to
collect, as and when due, all amounts due with respect to any of the
Collateral. Administrative Agent, as assignee hereunder of the Lease, may,
at any time, enforce collection of any of the Collateral by suit or
otherwise and surrender, release, or exchange all or any part thereof, or
compromise or extend or renew for any period (whether or not longer than
the original period) any indebtedness thereunder or evidenced thereby.
(b) Administrative Agent is authorized to endorse, in the name of
Grantor, any item, howsoever received by Administrative Agent, representing
any payment on or other proceeds of any of the Collateral.
(c) If a Lease Default shall have occurred and be continuing, then the
Administrative Agent, as assignee hereunder of the Lease, when required
pursuant to the provisions of the Participation Agreement or the Lease,
shall declare a Lease Event of Default and shall, when required pursuant to
the provisions of the Participation Agreement or the Lease, exercise any or
all of the rights and powers and pursue any or all of the remedies of
Lessor pursuant to Article XVI of the Lease.
SECTION IV.1.2. Transfers and Other Liens. Grantor shall not:
-------------------------
(a) sell, assign (by operation of law or otherwise) or otherwise dispose
of any of the Collateral;
(b) cancel or terminate the Assigned Agreements or consent to or accept
any cancellation or termination thereof;
(c) amend or otherwise modify the Assigned Agreements or give any
consent, waiver or approval thereunder;
(d) waive any default under or breach of the Assigned Agreements;
-8-
<PAGE>
Security Agreement
(e) create or suffer to exist any Lien or other charge or encumbrance
upon or with respect to any of the Collateral to secure indebtedness of any
Person or entity, except for the security interest created by this Security
Agreement; or
(f) take any other action in connection with the Assigned Agreements
which would impair the value of the interest or rights of Grantor
thereunder or which would impair the interest or rights of Administrative
Agent.
SECTION IV.1.3. Further Assurances, etc. Grantor agrees that, from time to
-----------------------
time and at its own expense, it will promptly execute and deliver all further
instruments and documents, and take all further action that may be necessary or
desirable, or that Administrative Agent may request, in order to perfect,
preserve and protect any security interest granted or purported to be granted
hereby or to enable Administrative Agent to exercise and enforce its rights and
remedies hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, Grantor will:
(a) execute and file or record such instruments or notices as may be
necessary or desirable, or as Administrative Agent may request, in order to
perfect and preserve the security interests and other rights granted or
purported to be granted to Administrative Agent hereby; and
(b) furnish to Administrative Agent, from time to time at Administrative
Agent's request, statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as Administrative Agent may reasonably request, all in
reasonable detail.
-9-
<PAGE>
Security Agreement
ARTICLE V
THE ADMINISTRATIVE AGENT
SECTION V.1. Administrative Agent Appointed Attorney-in-Fact. Grantor
-----------------------------------------------
hereby irrevocably appoints Administrative Agent as Grantor's attorney-in-fact,
with full authority in the place and stead of Grantor and in the name of Grantor
or otherwise, from time to time in Administrative Agent's discretion, after the
occurrence of a Loan Event of Default (subject to Section 6.2 of the Loan
Agreement) to take any action and to execute any instrument which Administrative
Agent may deem necessary or advisable to accomplish the purposes of this
Security Agreement, including, without limitation:
(a) to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (a) above;
----------
(c) to file any claims or take any action or institute any proceedings
which Administrative Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
Administrative Agent with respect to any of the Collateral; and
(d) to perform the affirmative obligations of Grantor hereunder
(including all obligations of Grantor pursuant to Section 4.1.3).
-------------
Grantor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
-10-
<PAGE>
Security Agreement
SECTION V.2. Administrative Agent May Perform. If Grantor fails to perform
--------------------------------
any agreement contained herein, Administrative Agent may itself perform, or
cause performance of, such agreement, and the expenses of Administrative Agent
incurred in connection therewith shall be payable by Grantor pursuant to Section
-------
6.2.
- ---
SECTION V.3. Administrative Agent Has No Duty. In addition to, and not in
--------------------------------
limitation of, Section 2.4, the powers conferred on Administrative Agent
-----------
hereunder are solely to protect Administrative Agent's interest in the
Collateral and shall not impose any duty on it to exercise any such powers.
Except for the reasonable care of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, Administrative Agent
shall not have any duty as to any Collateral or as to the taking of any
necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral.
SECTION V.4. Reasonable Care. Administrative Agent is required to exercise
---------------
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, however, that Administrative Agent shall be deemed to have
-------- -------
exercised reasonable care in the custody and preservation of any of the
Collateral if it takes such action for that purpose as Grantor reasonably
requests in writing at times other than upon the occurrence and during the
continuance of any Loan Event of Default, but failure of Administrative Agent to
comply with any such request at any time shall not in itself be deemed a failure
to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION VI.1. Certain Remedies. If any Loan Event of Default shall have
----------------
occurred and be continuing:
-11-
<PAGE>
Security Agreement
(a) Administrative Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the UCC (whether or not the UCC applies to the affected Collateral),
and also may exercise any and all rights and remedies of Grantor under or
in connection with the Collateral, including, without limitation, any and
all rights of Grantor to demand or otherwise require payment of any amount
under, or performance of any provision of, the Assigned Agreements. Grantor
agrees that, to the extent notice of sale shall be required by law, at
least ten (10) days' prior notice to Grantor of the time and place of any
public sale or the time after which any private sale is to be made shall
constitute reasonable notification. Administrative Agent shall not be
obligated to make any sale of Collateral regardless of whether notice of
sale has been given. Administrative Agent may adjourn any public or private
sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned.
(b) All payments received by Grantor under or in connection with the
Assigned Agreements or otherwise in respect of the Collateral shall be
received in trust for the benefit of Administrative Agent, shall be
segregated from other funds of Grantor, and shall be forthwith paid over to
Administrative Agent in the same form as so received (with any necessary
endorsement).
-12-
<PAGE>
Security Agreement
(c) All cash proceeds received by Administrative Agent in respect of any
sale of, collection from, or other realization upon all or any part of the
Collateral may, in the discretion of Administrative Agent, be held by
Administrative Agent as collateral for, and/or then or at any time
thereafter applied (after payment of any amounts payable to Administrative
Agent pursuant to Section 6.2) in whole or in part by Administrative Agent
-----------
against, all or any part of the Secured Obligations in such order as
Administrative Agent shall elect. Any surplus of such cash or cash
proceeds held by Administrative Agent and remaining after payment in full
of all the Secured Obligations shall be paid over to Grantor or to
whomsoever may be lawfully entitled to receive such surplus.
SECTION VI.2. Indemnity and Expenses.
----------------------
(a) Grantor agrees to indemnify Administrative Agent from and against
any and all claims, losses and liabilities arising out of or resulting from
this Security Agreement (including, without limitation, enforcement of this
Security Agreement), except claims, losses or liabilities resulting from
Administrative Agent's gross negligence or wilful misconduct.
(b) Grantor will upon demand pay to Administrative Agent the amount of
any and all reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, which
Administrative Agent may incur in connection with
(i) the administration of this Security Agreement,
(ii) the custody, preservation, use or operation of, or the sale
of, collection from, or other realization upon, any of the Collateral,
-13-
<PAGE>
Security Agreement
(iii) the exercise or enforcement of any of the rights of
Administrative Agent hereunder or
(iv) the failure by Grantor to perform or observe any of the
provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION VII.1. Operative Document. This Security Agreement is an Operative
------------------
Document executed pursuant to the Participation Agreement and shall (unless
otherwise expressly indicated herein) be construed, administered and applied in
accordance with the terms and provisions thereof.
SECTION VII.2. Amendments; etc. No amendment to or waiver of any provision
---------------
of this Security Agreement nor consent to any departure by Grantor herefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Administrative Agent, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
SECTION VII.3. Addresses for Notices. Unless otherwise specified herein, all
---------------------
notices, requests, demands or other communications to or upon the respective
parties hereto shall be delivered in accordance with, and shall be deemed to
have been given as provided in, Section 9.3 of the Participation Agreement.
SECTION VII.4. Section Captions. Section captions used in this Security
----------------
Agreement are for convenience of reference only, and shall not affect the
construction of this Security Agreement.
SECTION VII.5. Severability. Wherever possible, each provision of this
------------
Security Agreement shall be interpreted in such manner as to be effective and
valid under Applicable Laws, but if any provision of this Security Agreement
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the
-14-
<PAGE>
Security Agreement
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Security Agreement.
SECTION VII.6. Governing Law, Entire Agreement, etc. THIS SECURITY AGREEMENT
------------------------------------
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF, EXCEPT TO
THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER,
OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY
THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. THIS SECURITY
AGREEMENT AND THE OTHER OPERATIVE DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING
AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE
ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
[signature page follows]
-15-
<PAGE>
IN WITNESS WHEREOF, Grantor has caused this Security Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, not in
its individual capacity but solely as Certificate
Trustee under Electric Lightwave, Inc. Trust No. 1995-
A, created by the Trust Agreement
By: _______________________________
Name: Robert L. Reynolds
Title: Vice President
Address: 777 Main Street, MSN 238
Hartford, Connecticut 06115
Attention: Corporate Trust Administration
(Electric Lightwave, Inc.
Trust No. 1995-A)
Telecopier: (203) 986-7920
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, not in
its individual capacity but solely as Administrative
Agent under the Participation Agreement
By: _______________________________
Name: Robert L. Reynolds
Title: Vice President
Address: 777 Main Street, MSN 238
Hartford, Connecticut 06115
Attention: Corporate Trust Administration
-16-
<PAGE>
Security Agreement
(Electric Lightwave, Inc. Trust No. 1995-A)
Telecopier: (203) 986-7920
-17-
<PAGE>
_________________________________________________________________
_________________________________________________________________
PURCHASE ORDER ASSIGNMENT
Dated as of April 28, 1995
Between
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
as Certificate Trustee under
Electric Lightwave, Inc. Trust No. 1995-A
and
ELECTRIC LIGHTWAVE, INC.
as Lessee and Construction Agent
_________________________________________________________________
_________________________________________________________________
<PAGE>
PURCHASE ORDER ASSIGNMENT
-------------------------
THIS PURCHASE ORDER ASSIGNMENT ("Assignment"), dated as of April 28, 1995,
----------
is entered into between Electric Lightwave, Inc., a Delaware corporation
("Lessee"), and Shawmut Bank Connecticut, National Association, not in its
individual capacity but solely as Certificate Trustee. Capitalized terms used
herein and not otherwise defined shall have the meanings ascribed thereto in
Appendix 1 to the Participation Agreement (Electric Lightwave, Inc. Trust No.
1995-A), dated as of the date hereof, among Lessee, Certificate Trustee, Shawmut
Bank Connecticut, National
<PAGE>
Association, not in its individual capacity but solely as Administrative Agent,
BA Leasing & Capital Corporation, not in its individual capacity but solely as
Information Agent, the Certificate Purchasers and Lenders identified therein,
and Citizens Utilities Company, as Guarantor.
PRELIMINARY STATEMENT
---------------------
A. Pursuant to the Participation Agreement, Lessee shall, as
Construction Agent, purchase from certain vendors (each a "Seller"), certain
------
Equipment (and/or related construction and installation services) comprising, as
constructed and installed,
<PAGE>
one or more Systems that are to be operated for voice, data transmission, video
or other communications purposes as component parts or the whole of, or as
enhancements to, one or more MANs or FCLs. Lessee's purchase of the Equipment
shall be made pursuant to certain purchase orders (the "Purchase Orders").
---------------
B. Lessee desires to lease the Equipment from Certificate Trustee rather
than purchase the Equipment from Sellers. Certificate Trustee is willing to
acquire certain of Lessee's rights and interests under the Purchase Orders,
which rights have been incurred in Lessee's capacity as Construction Agent, all
on the terms and conditions hereinafter set forth.
<PAGE>
C. Upon purchase of the Equipment by Certificate Trustee, Lessee shall
lease the Equipment from the Certificate Trustee under the Lease.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and in reliance on the above recitals, Certificate Trustee and Lessee hereby
agree as follows:
<PAGE>
SECTION 1. ASSIGNMENT
----------------------
Lessee does hereby assign and set over to Certificate Trustee all of
Lessee's title, rights and interests to and in the Purchase Orders to the extent
they relate to the Equipment and all of Lessee's rights to purchase the
Equipment identified in an Advance Request, except and to the extent reserved
below, including without limitation (a) the right to purchase the Equipment
pursuant to the Purchase Orders and the right to take title to the Equipment and
to be named the purchaser in the bill or bills of sale for the Equipment to be
delivered pursuant to the Purchase Orders, (b) all claims for damages in respect
of the
<PAGE>
Equipment (including related construction and installation services) arising as
a result of any default by the Seller under the Purchase Orders, including
without limitation, all warranty and indemnity provisions contained in the
Purchase Orders, and all claims arising thereunder in respect of the Equipment,
and (c) any and all rights of Lessee to compel performance of the terms of the
Purchase Orders, reserving to Lessee, however, so long and only so long as the
Equipment shall be subject to the Lease and Lessee shall be entitled to
possession of the Equipment thereunder: (i) the rights to demand, accept and
retain all rights in and to all property (other than the Equipment), data and
services which the Seller is obligated to provide, or does provide, pursuant to
<PAGE>
the Purchase Orders, (ii) all rights, if any, in respect to spare parts as
provided in the Purchase Orders, and (iii) the right, if any, to obtain
instructions and data pursuant to the Purchase Orders.
Notwithstanding the foregoing, so long and only so long as Certificate
Trustee shall not have notified the Seller in writing that a Lease Event of
Default has occurred and is continuing, Certificate Trustee authorizes Lessee,
to the exclusion of Certificate Trustee, to exercise in its own name all rights
and powers of the purchaser under the Purchase Orders and to retain any recovery
or benefit resulting from the enforcement of any
<PAGE>
warranty or indemnity under the Purchase Orders in respect of the Equipment
(including related construction and installation services); provided, however,
-------- -------
that Lessee may not exercise any of the rights to purchase such Equipment
unless, prior to the exercise thereof by Certificate Trustee as to the
Equipment, Certificate Trustee shall have delivered to the Seller written notice
that Certificate Trustee has released such rights to purchase such Equipment.
All the provisions of this Section 1 shall, to the extent inconsistent with the
Lease, be governed by the Lease.
<PAGE>
SECTION 2. ASSUMPTION OF PURCHASE OBLIGATION BY LESSOR,
--------------------------------------------------------
CONTINUING LIABILITY OF LESSEE FOR EXCLUDED EQUIPMENT
-----------------------------------------------------
Except as provided to the contrary in this Section 2, and subject to
---------
Lessee's satisfaction of each of the conditions and covenants described herein,
Lessee shall not be responsible for any payment due to the Seller as required in
Section 4.
- ---------
<PAGE>
Notwithstanding the foregoing paragraph, Certificate Trustee and the
Participants shall not have any obligation hereunder to the Seller (i) in
respect of Equipment not delivered and accepted on or before April 30, 1998,
(ii) in respect of Equipment with respect to which payment therefor would cause
the aggregate purchase price under all Purchase Orders to exceed the aggregate
of the Commitments, or (iii) in respect of Equipment for which sufficient funds
have not been advanced to Certificate Trustee by the Participants to pay the
full purchase price thereof. Equipment for which such obligations are so
terminated shall be immediately excluded from the terms and provisions of this
Assignment and all other Operative Documents, and in the event of
<PAGE>
such exclusion, Lessee agrees with Certificate Trustee and covenants, for the
benefit of the Seller, that Lessee will purchase from the Seller and will accept
delivery of and pay for the Equipment so excluded from this Assignment upon the
same terms and conditions as those contained in the Purchase Orders.
Notwithstanding the foregoing or any other provision of this Assignment to
the contrary, the delivery to and acceptance by or on behalf of Certificate
Trustee of the Equipment excluded from this Assignment pursuant to the second
paragraph of this Section 2 shall be ineffective, ab initio, to create in or
--------- -- ------
transfer to Certificate Trustee any legal interest in such item of Equipment
<PAGE>
or to impose on Certificate Trustee any liability, obligation or responsibility
with respect thereto. Any right or interest in the Equipment created in or
transferred to, or purported to be created in or transferred to, Certificate
Trustee shall be held by Certificate Trustee solely as trustee for the benefit
of Lessee.
SECTION 3. POWER OF ATTORNEY
-----------------------------
<PAGE>
Lessee does hereby appoint Certificate Trustee the true and lawful
attorney of Lessee, irrevocably, with full power (in the name of Lessee or
otherwise) to ask, require, demand, receive, compound and give acquittance for
any and all monies and claims for money due and to become due under, or arising
out of, the Purchase Orders to the extent that the same have been assigned by
this Assignment, to endorse any checks or other instruments or orders in
connection therewith and to file any claims or take any action or institute any
proceedings which to Certificate Trustee may seem necessary or advisable with
respect thereto; provided, however that the exercise of the power of attorney
-------- -------
conferred by this Section 3 shall be limited so that such power shall be
---------
<PAGE>
exercised only at such times when, pursuant to the terms of the Lease and this
Assignment, the Certificate Trustee is permitted to exercise such rights and
remedies under the Purchase Orders.
SECTION 4. PURCHASE OF EQUIPMENT; LIMITATION OF
------------------------------------------------
CERTIFICATE TRUSTEE'S LIABILITY
-------------------------------
On each Advance Date, Certificate Trustee shall pay to the Seller the
unreimbursed portion of the purchase price of the Equipment to be purchased
under the Purchase Order. All such amounts shall be payable to the Seller in
same day funds for
<PAGE>
credit to such accounts as designated in writing by the Seller as applicable, at
least one business day prior to the date such payment is to be made. Certificate
Trustee shall have no obligation to make the aforesaid payments in its
individual or general corporate capacity, but such obligation shall be payable
solely from funds advanced to Certificate Trustee by the Participants pursuant
to the Trust Agreement.
SECTION 5. FURTHER ASSURANCE
-----------------------------
<PAGE>
At any time and from time to time, upon the written request of Certificate
Trustee, Lessee shall promptly and duly execute and deliver any and all such
further instruments and documents and take such further action as Certificate
Trustee may reasonably request in order to obtain the full benefits of this
Assignment and of the rights and powers herein granted.
SECTION 6. WARRANTIES AND INDEMNITIES OF LESSEE
------------------------------------------------
Lessee as Construction Agent does hereby represent and warrant that it has
not assigned or pledged, and hereby covenants
<PAGE>
that it will not assign or pledge so long as this Assignment shall remain in
effect, the whole or any part of the rights hereby assigned to anyone other than
Certificate Trustee.
<PAGE>
SECTION 7. GOVERNING LAW
-------------------------
This Agreement, and all of the rights and obligations hereunder, including
matters of construction, validity and performance, shall be governed by the
laws of the State of New York, without regard to the conflicts of laws
principles thereof.
[signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Assignment.
SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION not in its individual capacity
but solely as Certificate Trustee under
Electric Lightwave, Inc. Trust No. 1995-A
By:
________________________
Name: Robert L. Reynolds
Title: Vice President
ELECTRIC LIGHTWAVE, INC.
By:
________________________
Name:
________________________
Title:
________________________
<PAGE>
================================================================================
EXHIBIT G TO
PARTICIPATION AGREEMENT
FORM OF SUPPORT AGREEMENT
Dated as of April 28, 1995
Between
ELECTRIC LIGHTWAVE, INC.
and
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
not in its individual capacity
but solely as Certificate Trustee
================================================================================
<PAGE>
Support Agreement
SUPPORT AGREEMENT
-----------------
THIS SUPPORT AGREEMENT (this "Support Agreement") is made as of April 28, 1995
-----------------
by and between ELECTRIC LIGHTWAVE, INC. ("ELI"), and SHAWMUT BANK CONNECTICUT,
---
NATIONAL ASSOCIATION, not in its individual capacity but solely as Certificate
Trustee under the Trust Agreement dated as of April 28, 1995 ("Certificate
-----------
Trustee").
- -------
WHEREAS, ELI as Lessee, Certificate Trustee, Shawmut Bank Connecticut,
National Association, as Administrative Agent, BA Leasing & Capital Corporation,
as Information Agent, Citizens Utilities Company, as Guarantor and the Persons
named on Schedules I and II thereto are parties to that certain Participation
Agreement (Electric Lightwave, Inc. Trust No. 1955-A) dated as of the date
hereof (such agreement, as originally executed or as modified, assigned, amended
or supplemented pursuant to the applicable provisions thereof, the
"Participation Agreement"), and ELI and Certificate Trustees are parties to that
- ------------------------
certain Lease dated as of the date hereof (the "Lease"); and
-----
WHEREAS, in the Participation Agreement, ELI agrees to execute and deliver this
Support Agreement; and
WHEREAS, the Participants, Certificate Trustee, and the Agents are each
unwilling to enter into the transactions contemplated by the Operative Documents
unless ELI executes this Support Agreement, and ELI is therefore entering into
this Support Agreement as a material and necessary inducement to the
Participants, Certificate Trustee and the Agents to execute and deliver the
Operative Documents; and
WHEREAS, it is in the best interest of ELI to execute this Support Agreement
because ELI will derive substantial economic benefits from the transactions
contemplated by the Operative Documents;
1
<PAGE>
Support Agreement
NOW, THEREFORE, for valuable consideration, the sufficiency and receipt of
which are hereby acknowledged, ELI and Certificate Trustee agree as follows:
ARTICLE I. DEFINITIONS
-----------
For all purposes hereof, the capitalized terms used herein and not otherwise
defined shall have the meanings assigned thereto in Appendix 1 to the
Participation Agreement.
"Access Rights" has the meaning set forth in Section 2.1.
------------- -----------
"Agreed Return" has the meaning set forth in clause (a) of Article 4.
------------- ---------- ---------
"Rights of Use" has the meaning set forth in Section 2.2.
------------- -----------
"Sale Option Purchaser" has the meaning set forth in Section 2.1.
---------------------
"Support Items" has the meaning set forth in Section 2.3.
------------- -----------
"Support Rights" means all Access Rights, Rights of Use, Support Items and
--------------
Governmental Approvals.
ARTICLE 2. GRANT OF RIGHTS AND INTERESTS.
-----------------------------
Section 2.1 Grant of Rights and Interests in Real Property. Upon the
----------------------------------------------
effectiveness of any sale of Equipment subject to a Lease Supplement pursuant to
the exercise of the Sale Option under the Lease, ELI shall grant, assign and
transfer to the purchaser of such Equipment (a "Sale Option Purchaser") all
---------------------
sufficient rights of entry or use, licenses, easements, permits, entitlements,
leases of real property, and other authorizations and rights, whether obtained
by contract, by operation of law or otherwise, which ELI now has or may
hereafter acquire that are
2
<PAGE>
Support Agreement
necessary or useful to the ownership, lease, operation, inspection, repair and
replacement of each of the Systems and items of Equipment that at any time are,
were or may become subject to such Lease Supplement, including without
limitation, (a) contractual rights or permission from building owners or from
business entities or other end users to locate any such Systems on their
respective premises or to use any such Systems to provide or deliver services
(whether such services are provided by Certificate Trustee or any third party)
to such premises or to such end users, and (b) all easements, pole attachment
rights or agreements, rights of access, ingress and egress to install Equipment
comprising all or part of any such System on, over or under any real estate, and
to inspect, repair or replace any such Equipment (all rights referred to in this
Section 2.1 being herein referred to collectively as "Access Rights").
- ----------- -------------
Section 2.2 Grant of Right of Use. Upon the effectiveness of any sale of
---------------------
Equipment subject to a Lease Supplement pursuant to the exercise of the Sale
Option under the Lease, ELI shall grant, assign and transfer to the Sale Option
Purchaser an indefeasible right to use ELI's Owned Assets comprising a MAN or
FCL in the same Designated Location for the purpose, among others, of using such
Systems to provide or make available to building owners and other end users the
types of services which such System is capable of providing, including services
provided or made available at the time by ELI to other similar Persons as part
of ELI's business of operating MANs and FCLs, including, without limitation, the
right to connect each of the Systems that at any time are, were or may become
subject to such Lease Supplement to ELI's Owned Assets (all rights referred to
in this Section 2.2 being herein referred to collectively as "Rights of Use");
----------- -------------
provided, that ELI shall receive compensation from the Sale Option Purchaser for
- --------
such use in accordance with the terms of Article 4.
---------
Section 2.3 Grant of Materials and Services. (a) Upon the effectiveness of
-------------------------------
any sale of Equipment subject to a Lease
3
<PAGE>
Support Agreement
Supplement pursuant to the exercise of the Sale Option under the Lease, ELI
shall grant, assign and transfer or make available to the Sale Option Purchaser
all materials, facilities, Systems, equipment, services and supplies, and ELI's
interest in any contracts to provide the same (all items and services referred
to in this Section 2.3 being herein referred to collectively as "Support
----------- -------
Items") which ELI now has or may hereafter acquire that are necessary or useful
- -----
to the ownership, lease, operation, repair or replacement of each of the Systems
and items of Equipment subject to such Lease Supplement or any other Operative
Document, including without limitation, (i) any computer software or hardware
used in connection with the operation or maintenance of such Systems and
Equipment, (ii) supplemental or replacement voice and data transmission services
provided by another Person of a nature similar to the service provided by ELI
through the operation of such Systems, (iii) access to or use of, or an option
to access or use, telecommunications equipment of another Person, including
without limitation cables or a part of the capacity of cables carrying voice or
data transmissions, and (iv) ELI's interest in any contracts by which any Person
provides a service to ELI which enables ELI to operate such Systems and
Equipment on a commercially feasible and economic basis.
(b) Within thirty (30) days following the date on which ELI notifies
Certificate Trustee of any election by ELI of the Sale Option pursuant to
Section 4.5 of the Lease, ELI shall deliver to Certificate Trustee a certificate
of an officer of ELI setting forth a list of those materials, facilities,
services and supplies that, in the good faith opinion of ELI, constitute
relevant Support Items, which list shall indicate, for each material Support
Item, (i) whether such Support Item is to be supplied or made available by ELI
or an Affiliate of ELI, or is a Support Item that ELI obtains or has the legal
right or ability to obtain from a third party (and identifying all such third
parties) and (ii) the proposed initial price therefor, which price shall not
exceed ELI's cost for such Support Item.
4
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Support Agreement
(c) Following receipt of the certificate referred to in Section 2.3(b),
--------------
but no later than thirty (30) days after consummation of the Sale Option, the
Sale Option Purchaser may provide written notice to ELI identifying which of the
Support Items the Sale Option Purchaser elects to be provided by ELI or an
Affiliate of ELI at the price indicated. ELI shall submit to the Sale Option
Purchaser an invoice for all Support Items provided in the prior month and, upon
request, appropriate documentation supporting the determination of the price.
The Sale Option Purchaser shall pay the purchase price properly invoiced within
thirty (30) days following receipt of the invoice. The Sale Option Purchaser
shall have the right, at its option, to arrange to make direct payment to any
third party supplier of a Support Item for such Support Item, and ELI shall
cooperate with the Sale Option Purchaser in that regard.
(d) ELI shall provide all material Support Items hereunder to such point
or points where such Support Items customarily have been delivered or to such
other point or point as the Sale Option Purchaser may from time to time
reasonably request.
Section 2.4 Grant of Permits. Upon the effectiveness of any sale of
----------------
Equipment subject to a Lease Supplement pursuant to the exercise of the Sale
Option under the Lease, ELI shall grant, assign and transfer to the Sale Option
Purchaser sufficient rights to all Governmental Approvals which ELI now has or
may hereafter acquire that are necessary or useful to the ownership, lease,
operation, inspection, repair and replacement of each of the Systems and items
of Equipment subject to such Lease Supplement that any time are, were or may
become subject to the Lease or any other Operative Document.
ARTICLE 3. GENERAL PROVISIONS
------------------
5
<PAGE>
Support Agreement
Section 3.1 Term of Support Agreement and Support Rights. ELI's grant of
--------------------------------------------
rights to a Sale Option Purchaser pursuant to this Support Agreement shall be
effective as of the effective date of the related sale of Equipment and shall
continue in full force and effect, without being impaired, waived or lost in
whole or in part either as a consequence of non-use thereof by the Sale Option
Purchaser or any transferee or for any other reason (other than as otherwise
provided in this Support Agreement), for a term of thirty (30) years from the
date of grant or, if shorter, for such period as ELI has authority or right to
grant; provided, that if ELI thereafter obtains such rights for an additional
--------
period (whether through renewal of any underlying rights by ELI or otherwise),
ELI shall extend the corresponding rights granted to a Sale Option Purchaser
pursuant hereto for such additional period, up to thirty (30) years from the
date of grant.
Section 3.2 Availability of Support Items. None of ELI or its Affiliates
-----------------------------
shall, in contemplation of a default by ELI under the Lease or a decision by ELI
not to repurchase the Systems and Equipment at the expiration of the term of the
Lease, cause any existing right or item granted hereunder to cease to be
available to or obtainable by it if the result of such cessation would be that
such item no longer would be available to any Sale Option Purchaser or
Purchasers pursuant to this Support Agreement.
Section 3.3 Assignability. ELI shall not be obligated to assign any rights
-------------
granted in Article 2, including contract rights, easements, government permits,
---------
franchises or licenses, that are by their terms or by law nonassignable. If ELI
does not have the unilateral right to assign any such rights, ELI shall use its
best efforts to obtain on behalf of any Sale Option Purchaser, or to cooperate
with and assist Certificate Trustee or such Sale Option Purchaser in obtaining,
any such nonassignable rights or permits or rights equivalent thereto.
Section 3.4 Form of Grant or Assignment. All grants, transfers and
---------------------------
assignments of Support Rights to a Sale Option
6
<PAGE>
Support Agreement
Purchaser hereunder shall be in form and substance satisfactory to such Sale
Option Purchaser, including being in recordable form in the case of easements or
other rights or interests that are customarily recorded in the real property
records of applicable jurisdictions.
Section 3.5 Intention of the Parties. It is the intention of the parties
------------------------
hereto that the grant of Support Rights shall be sufficient to enable each Sale
Option Purchaser to operate each System sold pursuant to the exercise of the
Sale Option in Commercial Operation and in compliance with Design Objectives.
ARTICLE 4. COMPENSATION FOR USE.
--------------------
To the extent that a Sale Option Purchaser shall exercise the indefeasible
rights of use granted in Section 2.2, such Sale Option Purchaser shall pay
-----------
compensation to ELI in accordance with the following:
7
<PAGE>
Support Agreement
(a) With respect to Systems that connect to facilities of end users,
such compensation shall equal the amount charged similar end users by ELI
(or its assignee) at the time; provided, that, if the return on the equity
--------
investment of such Sale Option Purchaser in such Systems is less than the
Agreed Return (defined below), then the compensation to be paid to ELI (or
its assignee) shall be reduced, but not below zero, by the amount of the
shortfall between the actual return on equity investment of such Sale
Option Purchaser for the previous calendar quarter and the Agreed Return.
The Agreed Return shall be (i) the return on equity investment authorized
in the most recent rate case for companies rendering telecommunications
services by the regulatory commission in the jurisdiction in which such
System or Systems are located in which such regulatory commission
authorized rates based on tradition utility rate-making concepts of an
allowed rate of return on investment, or (ii) in the absence of a rate case
decided within two (2) years of the determination, an annual rate equal to
the average yield rate on long-term debt obligations of United States
corporate entities having long-term debt ratings, as assigned by Moody's
Investor's Service, Inc. and Standard and Poor's Corporation (or the higher
such rating assigned by such rating agencies, if they do not then assign
corresponding investment ratings to Guarantor) that are the same as those
assigned by such rating agencies at such times to Guarantor, plus 4.0% (400
basis points) as determined for a calendar quarter of such use, with the
relevant average rate determined for any calendar quarter period being
applicable to such use for the following calendar quarter;
(b) With respect to any Systems not described in clause (a) above and
----------
as to which or for which Lessee is to provide Rights to Use, such
compensation shall be in such amount and on such basis as ELI shall charge
to others for similar leasing or shared use arrangements; provided, that if
--------
8
<PAGE>
Support Agreement
ELI then charges different rates for such services, the compensation
required hereunder shall be at the lowest and otherwise most advantageous
(to the user) rate so charged and, if no other similar arrangements
involving ELI then exist, the compensation required hereunder shall be
determined in accordance with then prevailing industry standards; and
(c) With respect to any Systems (or compensation for use thereof) not
described in clauses (a) or (b) above, such compensation shall be
------------------
determined on the basis of ELI's then existing practices and prevailing
industry standards, which shall be applied in such fashion so as to provide
to the Sale Option Purchaser a rate of return, taking into account
reasonably projected usage of such System and other relevant factors, equal
to the Agreed Return.
ARTICLE 5. MAINTENANCE, REPAIR, ETC.
-------------------------
Section 5.1 Compliance with Laws. ELI shall comply with all laws,
--------------------
ordinances, rules and regulations applicable to the Support Rights (including
any easements or other real property interests) and to the exercise of the
rights and the ownership and operation of the items granted pursuant to this
Support Agreement, and with the terms of all contracts relating to such land,
rights and items.
ARTICLE 6. NONEXCLUSIVE.
------------
Certificate Trustee hereby acknowledges that ELI and its successors and
assigns shall retain, subject to this Support Agreement, the following:
(a) The right to amend and modify at any time the terms and provisions
of all or any agreements affecting the
9
<PAGE>
Support Agreement
land on which the Systems and Equipment are located (other than this
Support Agreement and any Operative Document) without notice to or the
consent of Certificate Trustee;
(b) The right to grant third parties interests in the land on which
the Systems and Equipment are located; and
(c) The right to do such other things as shall be necessary or
convenient for the business of ELI;
provided, however, that: (i) so long as a Lease Default has occurred and is
- -------- -------
continuing, ELI shall not take any actions under clause (a), (b) or (c) above
---------- --- ---
that are adverse to the business, property or financial prospects of the Sale
Option Purchaser, (ii) any such right is subject and subordinate to this Support
Agreement and the paramount rights of Certificate Trustee and any Sale Option
Purchasers hereunder, and (iii) the exercise of such right shall not (A) during
the term of this Support Agreement and the term of any Support Rights granted to
a Sale Option Purchaser, whether before or after the exercise of such right,
interfere with or impair the use, marketability, value or operation of the
Systems and Equipment to or by Certificate Trustee or any Sale Option Purchaser
or (B) result in additional costs to any Sale Option Purchaser (unless such
costs are reflected in a reduction of the amounts payable by any Sale Option
Purchaser under this Support Agreement).
10
<PAGE>
Support Agreement
ARTICLE 7. REMEDIES
--------
The failure of Certificate Trustee or any Sale Option Purchaser to insist on
the performance of any one or more covenants provided in this Support Agreement
or to exercise any option herein contained shall not be construed as a waiver or
a relinquishment for the future of such covenant or option. No waiver of any
provision of this Support Agreement shall be deemed to have been made unless
expressed in writing and signed by the party to be changed. Certificate Trustee
and any Sale Option Purchaser shall be entitled to all legal and equitable
remedies available under Applicable Law (including, without limitation, specific
performance and money damages). ELI hereby acknowledges that monetary damages
would not be an adequate remedy for Certificate Trustee or any Sale Option
Purchaser in the event of ELI's default hereunder, and ELI expressly agrees that
Certificate Trustee or any Sale Option Purchaser shall be entitled to the remedy
of specific performance.
If ELI shall at any time fail to perform any act on its part to be performed
under this Support Agreement beyond the expiration of the applicable grace
period, then Certificate Trustee may, but shall not be obligated to, perform any
act on the defaulting party's part to be performed under this Support Agreement,
without further notice or demand upon the defaulting party and without waiving
or releasing the defaulting party from any obligations of the defaulting party
contained in this Support Agreement. Upon performing any of ELI's covenants
pursuant to this Article 7, Certificate Trustee shall promptly give notice
---------
thereof to ELI, but such notice shall not constitute a waiver or release of the
defaulting party from any obligations of the defaulting party contained in this
Support Agreement. All sums paid or payable by Certificate Trustee pursuant to
this Article 7 and all reasonably necessary incidental costs and expenses paid
---------
or incurred in connection with any performance pursuant to this Article 7 shall
---------
be promptly paid by ELI upon demand thereof.
11
<PAGE>
Support Agreement
ARTICLE 8. FURTHER ASSURANCES
------------------
Each party shall promptly and duly execute and deliver to the other party such
documents and take such further action as either party may reasonably request to
carry out more effectively the intent and purpose of this Support Agreement.
ELI shall pay to Certificate Trustee all costs and expenses incurred by
Certificate Trustee in connection with this Article 8. ELI shall acquire and
---------
subject make to this Support Agreement such property so that Certificate Trustee
may be granted such Support Rights as were not initially granted hereby if the
same are reasonably necessary for the use and operation of the Systems and the
Equipment.
12
<PAGE>
Support Agreement
ARTICLE 9. SUCCESSORS AND ASSIGNS
----------------------
Section 9.1 Successor Trustee. If a successor Certificate Trustee or co-
-----------------
trustee, as the case may be, is appointed in accordance with the terms of the
Trust Agreement, such successor Certificate Trustee or co-trustee, as the case
may be, shall, without further act, succeed to all the rights, duties,
immunities and obligations of Certificate Trustee hereunder and the predecessor
Certificate Trustee or co-trustee, as the case may be, shall be released from
all further duties and obligations hereunder, all without the necessity of any
consent or approval by ELI and without in any way altering the terms of this
Support Agreement or ELI's obligations hereunder. ELI shall, at its expense,
upon receipt of written notice of the appointment of a successor Certificate
Trustee or co-trustee, as the case may be, under the Trust Agreement, promptly
make such modifications and changes to reflect such appointment as shall be
reasonably requested by such successor Certificate Trustee or co-trustee, as the
case may be, in such insurance policies, schedules, certificates and other
instruments relating to the Support Agreement as shall be specified by such
successor Certificate Trustee or co-trustee, as the case may be, all in form and
substance satisfactory to such successor Certificate Trustee or co-trustee, as
the case may be.
Section 9.2 Assignment. This Support Agreement shall be binding upon and
----------
shall inure to the benefit of ELI, Certificate Trustee and their respective
successors and assigns. Specifically, Certificate Trustee shall have the right
to grant, reassign and retransfer to other Persons all Support Rights that are
to be granted pursuant to this Support Agreement without the consent of ELI.
Any Person to whom ELI (or a transferee of an ELI transferee) transfers all or
any portion of a System, whether owned or leased, shall agree to be bound by the
terms and conditions of this Support Agreement and to provide to any Sale Option
Purchaser all Support Rights that ELI or its predecessor in interest otherwise
would be obligated to grant; provided, that the
--------
13
<PAGE>
Support Agreement
obligations of such transferee under this Support Agreement shall arise only to
the extent that such obligations relate to the MAN or FCL such transferee
receives in the transfer from ELI or its predecessor.
Section 9.3 ELI's Obligations. To the extent that, upon a transfer of
-----------------
Systems or Equipment, ELI does not transfer to such transferee any right or item
that ELI would be obligated to provide to Certificate Trustee pursuant to this
Support Agreement were ELI to continue as owner of the Systems and Equipment,
then ELI's obligation to provide such right or item to Certificate Trustee shall
not be extinguished by such transfer of Systems or Equipment, but shall instead
continue in full, as if ELI continued to be the owner of the Systems or
Equipment so transferred.
ARTICLE 10. MISCELLANEOUS
-------------
Section 10.1 Severability. If any provision of this Support Agreement or the
------------
application thereof to any person or circumstance shall to any extent be invalid
or unenforceable, the remainder of this Support Agreement, or the application of
such provision to persons or circumstances other than those as to which it is
invalid or unenforceable, shall not be affected thereby, and each provision of
this Support Agreement shall be valid and be enforced to the fullest extent
permitted by law.
Section 10.2 Termination. Notwithstanding anything to the contrary contained
-----------
in this Support Agreement, so long as the Lease is in effect, ELI shall have no
right to terminate this Support Agreement. Upon the expiration or earlier
termination of the Lease, Certificate Trustee shall have the option to terminate
this Support Agreement or the applicability of this Support Agreement to a Lease
Supplement at any time thereafter by notice to ELI, and upon the giving of such
notice this Support Agreement shall terminate as to the Lease Supplement
specified by Certificate Trustee; provided, that no such termination shall apply
--------
to or
14
<PAGE>
Support Agreement
affect any Support Rights theretofore granted to a Sale Option Purchaser.
Section 10.3 Modification. This Support Agreement may not be modified or
------------
terminated except by a writing signed by ELI and Certificate Trustee. Any such
modification or termination made otherwise than as expressly permitted by this
Section 10.3 shall be void.
- ------------
Section 10.4 Headings. The headings preceding the various sections hereof
--------
are for convenience of reference only and shall not be deemed to affect the
meaning or construction hereof.
Section 10.5 Counterparts. This Support Agreement may be executed in any
------------
number of counterparts, each counterpart constituting an original but all
together one and the same instrument and contract.
Section 10.6 GOVERNING LAW. THIS SUPPORT AGREEMENT AND ALL OF THE RIGHTS AND
-------------
OBLIGATIONS HEREUNDER, INCLUDING, WITHOUT LIMITATION, MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES OF SUCH JURISDICTION.
Section 10.7 Notices. Any notices or consents provided for in this Support
-------
Agreement shall be in writing and shall be given in the manner provided in the
Participation Agreement.
Section 10.8 FINAL AGREEMENT. THIS AGREEMENT REPRESENTS THE ENTIRE FINAL
---------------
AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREIN AND CANNOT BE MODIFIED, SUPPLEMENTED, AMENDED, RESCINDED OR CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES, EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY THE PARTIES HERETO. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
15
<PAGE>
Support Agreement
Section 10.9 JURY TRIAL. EACH OF ELI AND CERTIFICATE TRUSTEE WAIVES, TO THE
----------
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR ANY
RELATED DOCUMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR
THEREWITH OR ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS
AGREEMENT OR ANY RELATED DOCUMENT AND AGREES THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
[signature page follows]
16
<PAGE>
Support Agreement
IN WITNESS WHEREOF, the parties hereto have caused this Support Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
ELECTRIC LIGHTWAVE, INC.
By: _______________________________
Name: Robert J. DeSantis
Title: Chief Financial Officer
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity but solely as
Certificate Trustee
By: _____________________________
Name: Robert L. Reynolds
Title: Vice President
<PAGE>
EXHIBIT 10.6
AGREEMENT FOR LEASE OF
DARK FIBER
This Agreement, made and entered into this 24th day of March 1995 by and
between Electric Lightwave, Inc. a Delaware Corporation (hereinafter referred to
as "ELI"), having an office at 8100 N.E. Parkway Drive, Suite 150, Vancouver, WA
98662 and Citizens Utilities Rural Company, Inc. (hereinafter referred to as
"CITIZENS"), a Delaware Corporation, having an office at 2202 Stockton Hill
Road, Kingman, Arizona 86402, ELI and CITIZENS being collectively referred to
herein as the "Parties".
WHEREAS, ELI has designed engineered, constructed or caused to be
constructed, facilities and acquired appropriate interests in real property or
their rights, all as required to provide, and maintain a fiber optics cable
between Las Vegas, Nevada and Phoenix, Arizona (the "Route"); and
WHEREAS, ELI will lease to CITIZENS the following dark fiber facilities
located within the Route (hereinafter referred to as the "Citizens Fibers"):
1. Twelve (12) dark fibers from the Golden Valley Central Office to
Landon Road - 26.5 route miles;
2. Twelve (12) dark fibers from the Golden Valley Central Office to Oatman
Road - 12.8 route miles;
3. Twelve (12) dark fibers from Oatman Road to the Yucca Central Office -
18.5 miles; and
4. Twelve (12) dark fibers from Yucca Central Office to El Paso - 9.2
route miles.
NOW, THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
ARTICLE 1. SCOPE OF AGREEMENT
1.1 ELI hereby grants to CITIZENS access to the CITIZENS Fibers,
including, but not limited to, drop and insert capabilities, upgrade capacity
and replacement of the CITIZENS Electronics. Such replacement of the CITIZENS
Electronics will not result in a modification of the payment obligations of
CITIZENS to ELI. ELI or ELI's contractors will, at ELI's sole expense, perform
all maintenance on the CITIZENS Fibers in accordance with industry standards.
<PAGE>
2
ARTICLE 2. DEFINITIONS
Unless otherwise defined herein, the terms in this Agreement shall have
their normal or customary meanings., In addition, for the purpose of this
Agreement, the following terms shall have the earnings set forth:
CITIZENS Electronics: The fiber optic telecommunications equipment owned and
used by CITIZENS to facilitate the transmission of communications
over the CITIZENS Fibers.
CITIZENS Fibers: As described in the second "Whereas" clause and Article 1.
Dark fibers: Fiber optic facilities provided by ELI without the necessary
electronics and other equipment required for the transmission of
communications services.
Right of Way: Easement or right to use real property owned by railroads,
individual property owners or other entities.
ARTICLE 3. TERM/TERMINATION
The initial Term of this Agreement shall commence as of the date of the Interim
Agreement between the parties, dated November 28, 1994 and shall continue for a
period of ten (10) years thereafter. Thereafter, CITIZENS will have four (4)
five (5) year options to extend the Term. Each option to extend the Term shall
be exercisable by CITIZENS at the present rate with an adjustment to reflect
inflation using the CPI or equivalent index.
ARTICLE 4. COMPENSATION
4.1 LEASE OF DARK FIBER
During the Initial Term of this Agreement, CITIZENS shall pay $30,000.00 per
month to ELI for the lease and maintenance of the dark fibers described in
Article 1 beginning on the date of the Interim Agreement and monthly thereafter
for the term of the Agreement, including all extensions.
ELI shall send all invoices for the charges hereunder to:
Citizens Utilities Rural Company, Inc.
Attn: Bill Kirby
2202 Stockman Hill Road
Kingman, Arizona 86402
<PAGE>
3
CITIZENS shall send all payments hereunder, to:
Electric Lightwave, Inc.
8100 N.E. Parkway Drive
Vancouver, Washington 98862
ARTICLE 5. WARRANTIES
5.1 The Warranties and remedies set forth in this Agreement constitute the
only warranties and remedies with respect to this Agreement. Such Warranties
are in lieu of all other warranties, written and oral, statutory, express or
implied, including without limitation the Warranty of merchantability and the
Warranty of fitness for a particular purpose.
5.2 ELI represents and warrants to CITIZENS that it has the right to
perform as required hereunder and/or provide to CITIZENS the CITIZENS fibers
specified herein, and that it is an entity duly organized, validly existing and
in good standing under the laws of its origin, with all requisite power to enter
into and perform the obligations under this Agreement in accordance with its
terms.
ARTICLES 6. INDEMNIFICATION
Each party agrees to indemnify and hold harmless the other Party from claims by
persons not a party to this Agreement for injuries or damage from the negligent
or willful actions of the indemnifying Party's employees, agents, contractors or
representatives.
ARTICLE 7. LIABILITIES
Neither Party shall be liable for any consequential, incidental, indirect,
special or punitive damages or lost profits
ARTICLE 8. MISCELLANEOUS
8.1 Any work performed by either party on the premises of the other shall
be performed while taking all necessary precautions to prevent the occurrence of
any injury to persons or property during the progress of such work.
8.2 The invalidity in whole or in part of any provision shall not
affect the validity of any other provision.
8.3 Notices shall be in writing, effective upon receipt and sent to:
CITIZENS: Citizens Utilities Rural Company, Inc.
2202 Stockton Hill Road
Kingman, Arizona 86402
<PAGE>
4
ELI: Electric Lightwave, Inc.
8100 N.E. Parkway Drive
Vancouver, Washington 98662
ARTICLE 9. COUNTERPARTS
To facilitate execution, this Agreement may be executed in as many
counterparts as may be required. It shall not be necessary that the signature
of or on behalf of each party appears on each counterpart, but it shall be
sufficient that the signature of or on behalf of each party appears on one or
more counterparts. All counterparts shall collectively constitute a single
agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the day and year first set forth above.
ELECTRIC LIGHTWAVE, INC. CITIZENS UTILITIES RURAL
COMPANY, INC.
By: _______________________ By: __________________________
Name: _______________________ Name: __________________________
Title: _______________________ Title: __________________________
<PAGE>
EXHIBIT 10.8
FORM OF TAX-SHARING AGREEMENT
THIS AGREEMENT is entered into as of the ______ day of ___________________,
1997, between Citizens Utilities Company, a Delaware corporation ("Citizens"),
and Electric Lightwaves, Inc., a Delaware corporation ("Lightwave").
RECITALS
(A) Citizens owns all of the issued and outstanding Common Stock of
Lightwave.
(B) Lightwave is effecting an initial public offering (the "Offering")
of shares of [Class A] Common Stock of Lightwave (the "Class A Common Stock").
(C) Upon completion of the Offering, Lightwave will cease to be a
wholly-owned subsidiary of Citizens and Lightwave will cease, for United States
federal income tax purposes, to be a member of Citizens' consolidated group.
(D) For state or local franchise or income tax purposes Lightwave may
continue to be a member of certain unified, combined or consolidated groups
which include Citizens notwithstanding the results of the Offering.
(E) The parties wish to address certain tax matters which may arise as a
result of the Offering.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, and for other good and valuable consideration, and intending to be
legally bound hereby, the parties hereby agree as follows:
1.1 As used in this Agreement, in addition to the terms defined in the
Preamble and Recital, the following terms will have the following meanings,
applicable to both the singular and plural forms of the terms described:
"STATE CONSOLIDATED PERIODS": shall mean, with respect to Lightwave, the
taxable periods or portions thereof in which Lightwaves will be a member of the
Citizens Group.
"EFFECTIVE DATE": means the date of this Agreement.
"CITIZENS GROUP": shall mean any unified, combined or consolidated
groups for state or local franchise or income tax purposes which include
Citizens as the common parent.
1.2 INTERNAL REFERENCES. Unless the context indicates otherwise,
-------------------
references to articles, sections and paragraphs shall refer to the corresponding
articles, sections and paragraphs in this Agreement, and references to the
parties shall mean the parties to this Agreement.
2. With respect to each of the State Consolidated Periods:
<PAGE>
(a) Lightwave shall be responsible for any and all liabilities arising
as a result of state or local income, franchise, excise, single business, gross
receipts or withholding tax returns filed by, or on behalf of, Lightwave on a
separate-return basis. With respect to the portions of the Citizens Group state
or local unitary, combined or consolidated income or franchise tax liabilities
that are allocable to Lightwave, Lightwave shall pay to Citizens an amount equal
to the aggregate relevant state or local income or franchise taxes which
Lightwave would have been required to pay for such period if Lightwave had filed
a separate state or local income tax return in such jurisdictions at such time.
(b) Lightwave shall be responsible for any tax liability due any foreign
jurisdiction arising as a result of its business activities and/or domicile.
(c) Except as set forth below, payments required pursuant to Paragraphs
2(a) and (b) of this Agreement shall be billed to Lightwave by Citizens based
upon estimated payments made by Citizens to taxing authorities, with final
billing being made after filing of the returns. Such payments will be due within
thirty (30) days of receipt of the bill therefore. If income tax deficiencies or
tax refunds relating to Lightwave or its subsidiaries result from a tax audit,
amended return, claim, final determination by any court or otherwise are related
to the relevant tax returns for the State Consolidated Period, the amounts due
under Paragraphs 2(a) and (b) of this Agreement shall be recalculated by
Citizens' Tax Department in accordance with the terms of such Paragraphs, and an
appropriate adjustment to payments due under those Paragraphs shall be made.
3. Notwithstanding anything to the contrary herein, neither party shall
be entitled to duplicate payments from the other party hereunder. Citizens' Vice
President of Taxes, in his sole discretion, may net any payments due to Citizens
from Lightwave pursuant to this Agreement against any amount due from Citizens
to Lightwave pursuant to this Agreement or otherwise.
4. Interest shall accrue, on payments due or advances made under this
Agreement at the interest rate then being charged by the Internal Revenue
Service on United States federal income tax deficiencies.
5. Citizens agrees that it will indemnify and hold Lightwave harmless
from and against any state or local unitary, combined or consolidated income or
franchise tax liabilities (including interest, penalties, additions to tax,
legal fees, court costs and any other reasonable costs of defense) with respect
to the portion of the Citizens' Group state or local unitary, combined or
consolidated income or franchise tax liability which is allocable to members of
the Citizens' Group, other than Lightwave.
6. Lightwave agrees to: (i) provide Citizens access to Lightwave books
and records; (ii) provide Citizens with papers, schedules and any other
information or assistance necessary to prepare tax returns or make computations
pursuant to this Agreement; (iii) maintain and preserve books, records and other
information as may be needed by Citizens pursuant to this Agreement or pursuant
to the preparation of any required tax return or the conduct of any tax audit by
a governmental authority for at least such time as has been customary; (iv)
cooperate in any audit or investigation of tax returns and execute appropriate
powers of attorney in connection
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therewith in favor of Citizens; and (v) sign all documents, including settlement
agreements, relating to the tax returns for State Consolidated Periods.
7. With respect to all taxable periods during a State Consolidated
Period, Citizens shall have sole and exclusive authority and responsibility for:
(i) preparing any state and local income, franchise, excise, single business,
gross receipts or withholding tax returns (including any amended returns or
claims for refund) of Lightwave; (ii) representing Lightwave with respect to any
state and local income, franchise, excise, single business, gross receipts or
withholding tax audit or state and local income, franchise, excise, single
business, gross receipts or withholding tax contest (including, without
limitation, any litigation regarding state and local income, franchise, excise,
single business, gross receipts or withholding taxes or refunds); (iii) engaging
outside counsel and accountants with respect to tax matters regarding Lightwave;
and (iv) performing such other acts and duties with respect to Lightwave tax
returns as Citizens determines is appropriate. Citizens' Vice President of Taxes
shall have the discretion to reasonably determine the intent of, and resolve any
ambiguities under this Agreement. Payments due under this Agreement may, in
Citizens' discretion, be evidenced by a demand promissory note bearing interest
as provided in Paragraph 4.
8. This Agreement is entered into by the parties hereto on their own
behalf as well as on behalf of Citizen's other subsidiaries. This Agreement
shall be deemed to have been joined in and consented to by all such
subsidiaries, without further action of them or the parties hereto. The parties
hereto hereby guarantee the performance by such subsidiaries of all the terms of
this Agreement. This Agreement shall also be binding upon, and inure to the
benefit of, the successors and assigns of the parties hereto.
9. This Agreement may be executed in several counterparts, each of which
shall be an original, but all of which shall constitute one document.
10. This Agreement will be governed by, and construed in accordance with,
the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
By: By:
---------------------- --------------------------
Name: Name:
------------------- -----------------------
Title: Title:
------------------ ----------------------
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EXHIBIT 10.9
FORM OF INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this "Agreement") is made and entered
into this ____ day of _______________, 1997, by and between Citizens Utilities
Company, a Delaware corporation ("Citizens"), and Electric Lightwave Inc., a
Delaware corporation ("ELI")
RECITALS
A. Citizens owns all of the issued and outstanding Class B Common Stock,
par value $.01 per share, of ELI.
B. ELI is effecting an initial public offering (the "Offering") of
shares of its Class A Common Stock, par value $.01 per share (the "Class A
Common Stock").
C. Upon completion of the Offering, ELI will cease to be a wholly owned
subsidiary of Citizens.
D. In connection with the Offering, ELI has filed a registration
statement with the Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "1933 Act").
E. Each of Citizens and ELI desires to indemnify the other, and to be
indemnified by the other, against certain liabilities relating to, arising out
of or resulting from their respective businesses, operations and assets and the
above-mentioned registration statement, on the terms set forth in this
Agreement.
NOW, THEREFORE, the parties hereto agree, intending to be legally bound
hereby, as follows:
ARTICLE I
DEFINITIONS
-----------
Section 1.01 DEFINITIONS. As used in this Agreement, in addition to the
-----------
terms defined in the Preamble and Recitals hereof, the following terms shall
have the following meanings, applicable to both the singular and plural forms of
the terms described:
"1933 ACT" shall have the meaning ascribed to it in Recital D.
"1934 ACT" means the Securities and Exchange Act of 1934, as amended.
"AGREEMENT" shall have the meaning ascribed to it in the Preamble.
<PAGE>
"BUSINESS DAY" means any calendar day which is not a Saturday, Sunday or
public holiday under the laws of the State of New York.
"CITIZENS" shall have the meaning ascribed to it in the Preamble.
"CITIZENS COMPANIES" means (unless otherwise expressly provided)
Citizens and each of its direct and indirect subsidiaries other than ELI.
"CITIZENS EMPLOYEES" means all employees or former employees of any of
the Citizens Companies other than the current or former ELI Employees.
"CITIZENS GUARANTEE" means any guarantee, surety or performance bond,
letter of credit or other contractual arrangement in effect as of the Closing
pursuant to which any Citizens Company has guaranteed or secured, or caused a
Third-Party to guarantee or secure, any liability or obligation of ELI.
"CITIZENS LIABILITIES" means all Liabilities (other than any Liabilities
for Taxes which are allocated pursuant to the Tax Agreement) relating to,
resulting from or arising out of the businesses or operations conducted or
assets owned by any of the Citizens Companies.
"CITIZENS SECURITIES LIABILITIES" means any Liability under the 1933
Act, the 1934 Act or any other federal or state securities law or regulation
resulting from or arising out of the Offering, including, without limitation,
any such Liabilities arising out of or based upon: (i) any untrue statement or
alleged untrue statement of a material fact contained in a Registration
Statement or in any Prospectus; or (ii) the omission or alleged omission to
state in a Registration Statement or Prospectus a material fact required to be
stated therein or necessary to make the statements made therein not misleading;
but only to the extent that such Liability arises out of or is based upon any
such untrue statement or alleged untrue statement or omission or alleged
omission concerning the business and operations of any of the Citizens
Companies.
"CLASS A COMMON STOCK" shall have the meaning ascribed to it in Recital
B.
"CLOSING" means the consummation of the first purchase and sale of
shares of the Class A Common Stock pursuant to the Offering.
"CLOSING DATE" means the date on which the Closing occurs.
"CODE" means the Internal Revenue Code of 1986.
"EFFECTIVE DATE" means the date on which the purchase and sale of shares
of Class A Common Stock pursuant to the Offering first occurs.
"INDEMNIFIABLE LOSSES" shall have the meaning ascribed to it in Section
2.
"INDEMNIFYING PARTY" shall have the meaning ascribed to it in Section
5(a).
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"INDEMNITEE" shall have the meaning ascribed to it in Section 5(a).
"ELI" shall have the meaning ascribed to it in the Preamble.
"ELI EMPLOYEES" means all employees or former employees of ELI other
than any person who as of the Closing is an employee of any of the Citizens
Companies.
"ELI LIABILITIES" means all Liabilities [(OTHER THAN LIABILITIES FOR
TAXES THAT ARE ALLOCATED PURSUANT TO THE TAX AGREEMENT)] relating to, resulting
from or arising out of the businesses or operations conducted or formerly
conducted or assets owned or formerly owned by ELI.
"ELI SECURITIES LIABILITIES" means any Liability under the 1933 Act, the
1934 Act, or any other federal or state securities law or regulation resulting
from or arising out of the Offering, including, without limitation, any such
Liability arising out of or based upon: (i) any untrue statement or alleged
untrue statement of a material fact contained in a Registration Statement or in
any Prospectus; or (ii) the omission or alleged omission to state in a
Registration Statement or Prospectus a material fact required to be stated
therein or necessary to make the statements made therein not misleading, but
only to the extent that such Liability arises out of or is based upon any such
untrue statement or alleged untrue statement or any such omission or alleged
omission concerning the businesses and operations of ELI.
"LIABILITIES" means all liabilities and obligations, actual or
contingent, liquidated or unliquidated, accrued or unaccrued, known or unknown,
whenever and however arising, including all costs and expenses (including
reasonable fees and disbursements of counsel) relating thereto, and including
without limitation liabilities and obligations arising in connection with any
actual or threatened claim, action, suit or proceeding by or before any court or
regulatory or administrative agency or commission or any arbitration panel.
"OFFERING" shall have the meaning ascribed to it in Recital B.
"PROSPECTUS" means any prospectus relating to the Offering or any
amendment or supplement thereto.
"REGISTRATION RIGHTS AGREEMENT" means that certain Registration Rights
Agreement by and between Citizens and ELI dated as of the date hereof.
"REGISTRATION STATEMENT" means any registration statement filed with the
SEC in connection with the Offering or any amendment or supplement thereto.
"SEC" shall have the meaning ascribed to it in Recital D.
["TAX AGREEMENT" means that certain Tax Sharing Agreement between
Citizens and ELI dated as of the date hereof.]
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"TAXES" means any and all taxes (including interest, penalties and
additions to tax), fees and charges (including sales, use, excise, value added,
personal property and other taxes) imposed by any federal, state or local or
government tax authority in the United States of America or by any foreign
government or taxing authority.
"THIRD-PARTY CLAIM" shall have the meaning ascribed to it in Section
5(a).
"UNDERWRITING AGREEMENT" means that certain Underwriting Agreement
between and among [________] (as representatives of the several underwriters)
[and Citizens] and ELI dated ___________ ___, 1997.
Section 1.02 INTERNAL REFERENCES. Unless the context indicates
-------------------
otherwise, references to Articles, Sections and paragraphs shall refer to the
corresponding articles, sections and paragraphs in this Agreement, and
references to the parties shall mean the parties to this Agreement.
ARTICLE II
INDEMNIFICATION BY ELI
----------------------
Section 2.01 INDEMNIFICATION BY ELI. ELI shall indemnify, defend and
----------------------
hold harmless the Citizens Companies and the respective past, present and future
directors, officers, partners, employees, agents and representatives thereof
(regardless in each case of whether any such person serves in one or more
similar capacities for ELI) from and against any and all losses, claims,
damages, liabilities, demands, suits and actions, including all reasonable
attorneys' fees and disbursements and other costs and expenses incurred in
connection therewith (collectively, "Indemnifiable Losses"), relating to,
resulting from or arising out of: (a) any ELI Liabilities; (b) any ELI
Securities Liabilities; or (c) any misrepresentation or material breach by ELI
of any covenant of ELI or any failure by ELI to satisfy any condition required
to be satisfied by ELI or any liability of ELI for taxes arising prior to the
Offering determined to be owing by ELI for which Citizens or its consolidated
Affiliates may have a secondary liability, contained in this Agreement, the
Underwriting Agreement or any other agreement executed by ELI in connection with
the Offering, including, without limitation, the Registration Rights Agreement
[and the Tax Agreement], and in addition to and notwithstanding any other
indemnification between the parties hereto as provided in any such agreement,
except to the extent that such misrepresentation, breach or failure was caused
by or resulted from any statement, act or omission within the exclusive
knowledge or control of Citizens.
ARTICLE III
INDEMNIFICATION BY CITIZENS
---------------------------
Section 3.01 INDEMNIFICATION BY CITIZENS. Citizens shall indemnify,
---------------------------
defend and hold harmless ELI and the respective past, present and future
directors, officers, employees, partners, agents and representatives thereof
(regardless in each case
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of whether any such person serves in one or more similar capacities for the
Citizens Companies) from and against any and all Indemnifiable Losses relating
to, resulting from or arising out of: (a) any Citizens Liabilities; (b) any
Citizens Securities Liabilities; or (c) any misrepresentation or material breach
by Citizens of any covenant of Citizens or any failure of Citizens to satisfy
any condition required to be satisfied by Citizens or any liability of Citizens
for taxes arising prior to the Offering determined to be owing by Citizens for
which ELI may have a secondary liability, contained in this Agreement, the
Underwriting Agreement, or any other agreement executed by Citizens in
connection with the Offering, including, without limitation, the Registration
Rights Agreement [and the Tax Agreement], and in addition to and notwithstanding
any other indemnification between the parties hereto as provided in any such
agreement, except to the extent that such misrepresentation, breach or failure
was caused by or resulted from any statement, act or omission within the
exclusive knowledge or control of ELI.
ARTICLE IV
GUARANTEE.
----------
Section 4.01 GUARANTEE. ELI shall indemnify, defend and hold harmless
---------
the Citizens Companies, and their respective directors, officers, employees,
agents and representatives, from and against any Indemnifiable Losses relating
to, resulting from, or arising out of any Citizens Guarantee, except as
prohibited by, or would conflict with, the terms of the Guaranty dated as of
April 28, 1995, of Citizens in favor of Shawmut Bank Connecticut, National
Association, BA Leasing & Capital Corporation and other Beneficiaries. Citizens
shall not terminate unilaterally or withdraw any Citizens Guarantee and shall
abide by the terms of the Citizens Guarantee. ELI shall reimburse each Citizens
Company for its direct costs (or, in the case of any Citizens Guarantee that
relates to both liabilities or obligations of ELI and one or more third parties,
a pro rata share of such direct costs), if any, of maintaining the Citizens
Guarantee.
ARTICLE V
THIRD-PARTY CLAIMS
------------------
Section 5.01 THIRD-PARTY CLAIMS. (a) If any person entitled to
------------------
indemnification under this Agreement (an "Indemnitee") receives notice of the
assertion of any claim or of the commencement of any action or proceeding by any
person that is not a party to this Agreement or a subsidiary of any such party
(a "Third-Party Claim") against such Indemnitee, the Indemnitee shall promptly
provide written notice thereof (including a description of the Third-Party Claim
and an estimate of any Indemnifiable Losses (which estimate shall not be
conclusive as to the final amount of such Indemnifiable Losses) to the party
required to provide indemnification under this Agreement (the "Indemnifying
Party") within ten (10) Business Days after the Indemnitee's receipt of notice
of such Third-Party Claim. Any delay by the Indemnitee in providing such written
notice shall not relieve the Indemnifying Party of any liability for
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<PAGE>
indemnification hereunder except to the extent that the rights of the
Indemnifying Party are materially prejudiced by such delay.
(b) The Indemnifying Party shall have the right to participate in or, by
giving written notice to the Indemnitee, to assume the defense of any Third-
Party Claim at such Indemnifying Party's expense and by such Indemnifying
Party's own counsel (which shall be reasonably satisfactory to the Indemnitee),
and the Indemnitee will cooperate in good faith in such defense. The
Indemnifying Party shall not be liable for any legal expenses incurred by the
Indemnitee after the Indemnitee has received notice of the Indemnifying Party's
intent to assume the defense of a Third-Party Claim; provided, however, that if
the Indemnifying Party fails to take steps reasonably necessary to diligently
pursue the defense of such Third-Party Claim within ten (10) Business Days of
receipt of notice from the Indemnitee that such steps are not being taken, the
Indemnitee may assume its own defense and the Indemnifying Party shall be liable
for the reasonable costs thereof.
(c) The Indemnifying Party may settle any Third-Party Claim which it has
elected to defend so long as the written consent of the Indemnitee to such
settlement is first obtained (which consent shall not be unreasonably withheld).
The Indemnitee shall not settle any Third-Party Claim without the written
consent of the Indemnifying Party (which consent shall not be unreasonably
withheld).
(d) In the event that a Third-Party Claim involves a proceeding as to
which both Citizens and ELI may be Indemnifying Parties, the parties hereto
agree to cooperate in good faith in a joint defense of such Third-Party Claim.
ARTICLE VI
CONTRIBUTION
------------
Section 6.01 CONTRIBUTION. If the indemnification provided for in this
------------
Agreement with respect to ELI Securities Liabilities or Citizens Securities
Liabilities is for any reason held by a court or other tribunal to be
unavailable on policy grounds or otherwise, Citizens and ELI shall contribute to
any Indemnifiable Losses relating to, resulting from or arising out of the ELI
Securities Liabilities or the Citizens Securities Liabilities in such proportion
as to reflect each party's relative fault in connection with such Indemnifiable
Losses. The relative fault of the parties shall be determined by reference to,
among other things, whether the conduct or information giving rise to the
Indemnifiable Losses is attributable to Citizens or ELI and each party's
relative intent, access to information and opportunity to prevent or correct the
Indemnifiable Losses. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any person who is not guilty of fraudulent misrepresentation.
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ARTICLE VII
COOPERATION
-----------
Section 7.01 COOPERATION. So long as any books, records and files
-----------
retained after the Closing Date by Citizens (or any of the other Citizens
Companies), on the one hand, or ELI on the other hand, relating to the
businesses, operations or assets of the other party and its subsidiaries
(including any books, records and files retained by ELI relating to the conduct
of its businesses or operations or the ownership of its assets prior to the
Closing) remain in existence and are available, such other party shall have the
right upon prior written notice to inspect and copy the same at any time during
business hours for any proper purpose, provided that such right will not extend
to any books, records or files the disclosure of which in accordance herewith
would result in a waiver of the attorney-client, work-product or other
privileges which permit non-disclosure of otherwise relevant material in
litigation or other proceedings, or which are subject on the date hereof and at
the time inspection is requested to a non-disclosure agreement with a Third-
Party and a waiver cannot reasonably be obtained. Citizens and ELI agree that
neither they nor any of their subsidiaries shall destroy any such books, records
or files without reasonable notice to the other party or if such party receives
within ten (10) Business Days of such notice any reasonable objection from the
other party to such destruction. Except in the case of dispute between the
parties hereto, Citizens and ELI shall cooperate with one another in a timely
manner in any administrative or judicial proceeding involving any matter
affecting the actual or potential liability of either party hereunder. Such
cooperation shall include, without limitation, making available to the other
party during normal business hours all books, records and information, and
officers and employees (without substantial disruption of operations or
employment) necessary or useful in connection with any inquiry, audit,
investigation or dispute, any litigation or any other matter requiring any such
books, records, information, officers or employees for any reasonable business
purpose. The party requesting or otherwise entitled to any books, records,
information, officers or employees pursuant to this Section 7 shall bear all
reasonable out-of-pocket costs and expenses (except for salaries, employee
benefits and general overhead) incurred in connection with providing such books,
records, information, officers or employees.
ARTICLE VIII
EFFECTIVENESS
-------------
Section 8.01 EFFECTIVENESS. This Agreement shall become effective at
-------------
Closing.
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ARTICLE IX
SUCCESSORS AND ASSIGNS
----------------------
Section 9.01 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
----------------------
upon the parties hereto and their respective successors and permitted assigns
and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns. This Agreement may not be assigned by either
party hereto to any other person without the prior written consent of the other
party hereto.
ARTICLE X
NO THIRD-PARTY BENEFICIARIES
----------------------------
Section 10.01 NO THIRD-PARTY BENEFICIARIES. Except for the persons
----------------------------
entitled to indemnification pursuant to Section 2 or Section 3 hereof, each of
whom is an intended third-party beneficiary hereunder, nothing expressed or
implied in this Agreement shall be construed to give any person or entity other
than the parties hereto any legal or equitable rights hereunder.
ARTICLE XI
ENTIRE AGREEMENT
----------------
Section 11.01 ENTIRE AGREEMENT. This Agreement constitutes the entire
----------------
agreement among the parties with respect to the subject matter hereof.
ARTICLE XII
AMENDMENT
---------
Section 12.01 AMENDMENT. This Agreement may not be amended except by an
---------
instrument signed by the parties hereto.
ARTICLE XIII
WAIVERS
-------
Section 13.01 WAIVERS. No waiver of any term shall be construed as a
-------
subsequent waiver of the same term, or a waiver of any other term, of this
Agreement. The failure of any party to assert any of its rights hereunder will
not constitute a waiver of any such rights.
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ARTICLE XIV
SEVERABILITY
------------
Section 14.01 SEVERABILITY. If any provision of this Agreement is
------------
invalid, illegal or incapable of being enforced by any rule of law or public
policy, such provision shall be deemed severable and all other provisions of
this Agreement shall nevertheless remain in full force and effect.
ARTICLE XV
HEADINGS
--------
Sectiion 15.01 HEADINGS. Section headings in this Agreement are
--------
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
ARTICLE XVI
NOTICES
-------
Section 16.01 NOTICES. All notices given in connection with this
-------
Agreement shall be in writing. Service of such notices shall be deemed complete:
(i) if hand delivered, on the date of delivery; (ii) if by mail, on the fourth
business day following the day of deposit in the United States mail, by
certified or registered mail, first-class postage prepaid; (iii) if sent by
Federal Express or equivalent courier service, on the next business day; or (iv)
if by telecopier, upon receipt by the sender of confirmation of successful
transmission. Such notices shall be addressed to the parties at the following
addresses or at such other address for a party as shall be specified by like
notice (except that notices of change of address shall be effective upon
receipt):
IF TO CITIZENS:
Citizens Utilities Company
High Ridge Park
P. O. Box 3801
Stamford, Connecticut 06905
Attn:
Fax No.:
IF TO ELI:
Electric Lightwave Inc.
8100 N.E. Parkway Drive, Suite 200
Vancouver, Washington 98662
Attn:
Fax No.:
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ARTICLE XVII
GOVERNING LAW
-------------
Section 17.04 GOVERNING LAW. This Agreement shall be governed by and
-------------
construed in accordance with, the laws of the State of New York, without giving
effect to the principles of conflict of laws of such State or any other
jurisdiction.
ARTICLE XVIII
COUNTERPARTS
------------
Section 18.01 COUNTERPARTS. This Agreement may be executed in
------------
counterparts, each of which shall be an original, but all of which together
shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties have duly executed this Indemnification
Agreement as of the date first above written.
ELECTRIC LIGHTWAVE INC.
By ___________________________
Name:
Title:
CITIZENS UTILITIES COMPANY
By ___________________________
Name:
Title:
10
