Electric Lightwave, Inc. Form 10-Q
Quarterly Report Pursuant To Section 13 or 15(d)
of The Securities Exchange Act of 1934
For The Quarterly Period Ended March 31, 1999
<PAGE>
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1999
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to Commission file number 0-23393
ELECTRIC LIGHTWAVE, INC.
(Exact name of registrant as specified in its charter)
Delaware 93-1035711
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4400 NE 77th Avenue
Vancouver, Washington 98662
(Address, zip code of principal executive offices)
Registrant's telephone number, including area code (360) 816-3000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past ninety days.
Yes |X| No |_|
The number of shares outstanding of the registrant's class of common stock as of
April 26, 1999 were:
Common Stock Class A 8,610,614
Common Stock Class B 41,165,000
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Electric Lightwave, Inc.
<TABLE>
<CAPTION>
Index
<S> <C>
Page No.
Part I. Financial Information
Item 1. Financial Statements
Balance Sheets at March 31, 1999 and December 31, 1998 (unaudited)......... 2
Statements of Operations for the Three Months Ended
March 31, 1999 and 1998 (unaudited)...................................... 3
Condensed Statements of Cash Flows for the Three Months
Ended March 31, 1999 and 1998 (unaudited)................................ 4
Notes to Financial Statements.............................................. 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................. 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk......... 16
Part II. Other Information
Item 1. Legal Proceedings.................................................. 17
Item 2. Changes in Securities and Use of Proceeds.......................... 17
Item 3. Defaults Upon Senior Securities.................................... 17
Item 4. Submission of Matters to a Vote of Security Holders................ 17
Item 5. Other Information.................................................. 17
Item 6. Exhibits and Reports on Form 8-K................................... 17
Signature ...................................................................... 18
</TABLE>
1
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Electric Lightwave, Inc.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
Balance Sheets
(In thousands)
(Unaudited)
March 31, December 31,
1999 1998
--------------- ----------------
Assets
<S> <C> <C>
Current assets:
Cash ................................................................ $ 7,920 $ 13,120
Trade receivables, net............................................... 17,759 20,320
Other receivables.................................................... 2,038 2,671
Other current assets................................................. 2,257 1,953
--------------- ----------------
Total current assets............................................... 29,974 38,064
--------------- ----------------
Property, plant and equipment........................................... 585,533 528,582
Less accumulated depreciation and amortization.......................... (47,749) (40,912)
--------------- ----------------
Property, plant and equipment, net................................... 537,784 487,670
--------------- ----------------
Other assets............................................................ 6,660 6,575
--------------- ----------------
Total assets....................................................... $ 574,418 $ 532,309
=============== ================
Liabilities And Equity
Current liabilities:
Accounts payable and accrued liabilities............................. $ 62,853 $ 61,760
Other accrued taxes.................................................. 7,233 5,577
Due to Citizens Utilities Company.................................... 5,675 5,254
Other current liabilities............................................ 8,750 5,375
-------------- ---------------
Total current liabilities.......................................... 84,511 77,966
Deferred credits and other.............................................. 1,688 1,834
Deferred income taxes payable........................................... 2,192 1,760
Capital lease obligation................................................ 18,164 18,256
Long-term debt.......................................................... 354,000 284,000
--------------- ----------------
Total liabilities.................................................. 460,555 383,816
--------------- ----------------
Shareholders' equity:
Common stock issued, $.01 par value
Class A............................................................ 86 86
Class B............................................................ 412 412
Additional paid-in-capital........................................... 322,248 321,926
Deficit.............................................................. (208,883) (173,931)
--------------- ----------------
Total shareholders' equity......................................... 113,863 148,493
--------------- ----------------
Total liabilities and shareholders' equity......................... $ 574,418 $ 532,309
=============== ================
</TABLE>
See accompanying notes.
2
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<TABLE>
Statements of Operations
<CAPTION>
(In thousands, except per-share amounts) For the three months ended March 31,
------------------------------------
<S> <C> <C>
(Unaudited)
1999 1998
---------------- ---------------
Revenues...............................................................$ 38,216 $ 20,057
---------------- ---------------
Operating expenses:
Network access ..................................................... 25,224 9,212
Operations.......................................................... 9,034 5,246
Selling, general and administrative................................. 26,767 15,375
Depreciation and amortization....................................... 6,994 3,884
---------------- ---------------
Total operating expenses.......................................... 68,019 33,717
---------------- ---------------
Loss from operations................................................ (29,803) (13,660)
Interest expense....................................................... 5,101 911
Interest income ....................................................... (322) (167)
---------------- ---------------
Net loss before income taxes and cumulative effect of
change in accounting principle.................................... (34,582) (14,404)
Income tax expense (benefit)........................................... 370 (2,449)
---------------- ---------------
Net loss before cumulative effect of change in accounting
principle......................................................... (34,952) (11,955)
Cumulative effect of change in accounting principle
(net of $577 income tax benefit).................................... - 2,817
---------------- ---------------
Net loss............................................................$ (34,952) $ (14,772)
================ ===============
Net loss per share before cumulative effect of change in accounting
principle:
Basic.............................................................$ (.70) $ (.24)
Diluted...........................................................$ (.70) $ (.24)
Net loss per common share:
Basic.............................................................$ (.70) $ (.30)
Diluted...........................................................$ (.70) $ (.30)
Weighted average shares outstanding.................................... 49,801 49,685
</TABLE>
See accompanying notes.
3
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<TABLE>
Condensed Statements of Cash Flows
<CAPTION>
(In thousands)
(Unaudited)
For the three months ended March 31,
--------------------------------------
1999 1998
--------------- --------------
<S> <C> <C>
Net cash used for operating activities..................................$ (26,577) $ (6,541)
--------------- --------------
Cash flows used for investing activities:
Capital expenditures................................................. (48,537) (38,028)
--------------- --------------
Cash flows from financing activities:
Debt borrowings...................................................... 70,000 40,000
Reduction of capital lease obligations............................... (86) (113)
--------------- --------------
Net cash provided by financing activities.......................... 69,914 39,887
--------------- --------------
Net decrease in cash.................................................... (5,200) (4,682)
Cash at January 1,...................................................... 13,120 26,531
--------------- --------------
Cash at March 31,.......................................................$ 7,920 $ 21,849
=============== ==============
Supplemental cash flow information:
Cash paid for interest, net of capitalized portion...................$ 4,712 $ 1,153
Non-cash increase in capital lease asset and obligation.............. - 2,174
</TABLE>
See accompanying notes.
4
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Electric Lightwave, Inc.
Notes to Financial Statements
1. Summary of Significant Accounting Policies
a. Basis of Presentation and Use of Estimates
We have prepared these unaudited financial statements of Electric
Lightwave, Inc. ("we", "us" or "our") in accordance with generally
accepted accounting principles (GAAP) for interim financial
information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, we have condensed or omitted certain
information and footnote disclosures. In our opinion, these financial
statements include all adjustments and recurring accruals necessary
to present fairly the results for the interim periods shown.
Preparing financial statements in conformity with GAAP requires us to
make estimates and assumptions which affect the amounts of assets,
liabilities, revenues and expenses we have reported and our
disclosure of contingent assets and liabilities at the date of the
financial statements. The results of the interim periods are not
necessarily indicative of the results for the full year. We have made
certain reclassifications of balances previously reported to conform
to the current financial statement presentation. You should read
these financial statements in conjunction with the audited financial
statements and the related notes included in our Annual Report on
Form 10-K for the year ended December 31, 1998.
b. Capitalized Interest
Property, plant and equipment includes interest costs capitalized
during the installation and expansion of our communications networks.
Approximately $3,218,000 and $1,788,000 of interest costs were
capitalized in the first quarter 1999 and 1998, respectively.
c. Reciprocal Compensation
We have various interconnection agreements with U S WEST
Communications, Inc. (US West), the Incumbent Local Exchange Carrier
(ILEC) in the states in which we operate. These agreements govern
reciprocal compensation relating to the transport and termination of
traffic between US West's network and our network. We recognize
reciprocal compensation revenues as earned, based on the terms of the
interconnection agreements. Total net reciprocal compensation
revenues that we recognized for the quarters ended March 31, 1999 and
1998 totaled $6.6 million and $2.7 million, respectively. Total net
trade accounts receivable relating to reciprocal compensation at
March 31, 1999 totaled $8.4 million. Most of our interconnection
agreements are scheduled to expire in the second half of 1999.
We have filed complaints with the Public Utility Commissions (PUCs)
in Washington, Utah, Oregon and Arizona requesting that US West pay
us for reciprocal compensation charges relating to the termination of
calls to Internet Service Providers (ISPs), as required by the
interconnection agreements. The Washington and Utah PUCs ruled in our
favor and accordingly, US West is now paying us for reciprocal
compensation charges in these states. The Oregon PUC ruled in our
favor in April 1999. US West is disputing the start date of the
Oregon PUC approved reciprocal compensation charges. The complaint in
Arizona is pending.
5
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On February 25, 1999, the FCC issued a Declaratory Ruling and Notice
of Proposed Rulemaking that categorized calls terminated to ISPs as
"largely" interstate in nature, which could have the effect of
precluding these calls from reciprocal compensation charges. However,
the ruling stated that ILECs are bound by the existing
interconnection agreements and the state decisions that have defined
them. The FCC gave the states the authority to interpret existing
interconnection agreements.
d. Net Loss Per Share
We follow the provisions of Statement of Financial Accounting
Standards (SFAS) 128, "Earnings Per Share" which requires
presentation of both basic and diluted earnings per share (EPS) on
the face of the statement of operations. Basic EPS is computed using
the weighted average number of common shares outstanding during the
period. The diluted EPS calculation assumes that all stock options or
contracts to issue common stock were exercised or converted into
common stock at the beginning of the period. We have excluded certain
common stock equivalents from our diluted EPS calculation during the
quarters ended March 31, 1999 and 1998 because the effect would have
reduced our net loss per share.
2. Change in Accounting Principle
On April 3, 1998, the Accounting Standards Executive Committee of the
AICPA released Statement of Position (SOP) 98-5, "Reporting on the
Costs of Start-Up Activities". The SOP requires that at the beginning
of the fiscal year of adoption, any remaining deferred start-up costs
be expensed and reported as a change in accounting principle. Future
costs of start-up activities should then be expensed as incurred.
We adopted SOP 98-5 effective January 1, 1998. Previous to January 1,
1998, we had capitalized certain third party direct costs incurred in
connection with negotiating and securing initial rights-of-way and
developing network design for new markets or locations. These amounts
were being amortized over five years. We have reported the remaining
net book value of these deferred amounts of $3,394,000 as a
cumulative effect of a change in accounting principle in the
statement of operations for the first quarter 1998, net of income tax
benefit of $577,000.
3. Commitments and Contingencies
Our license agreements for the exclusive use of long-haul facilities
connecting our Portland to Seattle, Portland to Spokane and Portland
to Eugene long-haul transport networks and for the exclusive use of
the Phoenix network contain annual minimum usage requirements. If our
traffic on any of these networks falls below the minimums, the
licensor will obtain the right to share usage of a specific number of
fibers with us.
6
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In March 1999, we entered into a 20-year fiber-swap, in which we will
exchange unused fiber on our network for unused fiber on another
carrier's network. This exchange will provide us with direct access
from Salt Lake City to Denver, continuing on to Dallas. We will
provide the other carrier with unused fiber on our long-haul network
that connects Spokane and Seattle, Washington, Portland and the Bay
Area in California. We anticipate incorporating the other carrier's
fiber into our network during 2000. We will pay the other carrier
approximately $101 million over 20 years beginning in 2000. The other
carrier will pay us approximately $77 million over the same time
period.
4. Related Party Transactions
Citizens Utilities Company (Citizens) owns approximately 83% of our
common stock. During 1998, Citizens announced its intent to separate
its telecommunications businesses and its public service businesses
into two stand-alone, publicly traded companies. The separation
requires numerous federal and state regulatory approvals before it
can take effect. The approval process is ongoing. Although Citizens
continues to pursue its separation plans, the increased opportunities
that have recently become available to acquire telecommunications
properties which fit within Citizens' acquisition criteria and
long-term planning require it to consider the possible advantages of
other transactions, besides the separation, to enhance security
holder value. Therefore, Citizens is continuing to investigate and
review opportunities for the acquisition of new telecommunications
properties and the sale or other disposition of public services
properties.
This table summarizes the activity in the liability account Due to
Citizens for the first quarter 1999:
($ in thousands)
Balance beginning of period......................... $ 5,254
Guarantee fees...................................... 3,452
Administrative services:
Services provided by Citizens................... 1,880
ELI expenses paid by Citizens................... 1,589
Payments to Citizens................................ (6,500)
----------
Balance end of period............................... $ 5,675
==========
5. Significant Customer
During the quarters ended March 31, 1999 and 1998, US West accounted
for 19% and 14%, respectively, of our total revenues for the
respective quarters. Most of the US West revenues were generated from
reciprocal compensation as discussed above in Note 1(c). No other
customer accounted for 10% or more of our total revenues for the
quarters ended March 31, 1999 and 1998.
6. Income Taxes
Citizens includes us in their consolidated federal income tax return
which uses a calendar year reporting period. We record income taxes
as if we were a stand-alone company. We recorded income tax expense
of $370,000 in the first quarter 1999. This expense represents the
deferred tax effect of the increase in temporary differences between
our GAAP financial statements and our tax return that may not be
fully offset with the use of tax loss carryforwards when the
temporary differences reverse in future periods.
7
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7. Subsequent Event
We issued $325 million of five-year senior unsecured notes in April
1999. The notes have an interest rate of 6.05% and will mature on May
15, 2004. Citizens has initially guaranteed the notes for an annual
fee of 4.0% of the outstanding balance. See "Item 2, Management's
Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources".
8
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Electric Lightwave, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
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This quarterly report on Form 10-Q contains forward-looking
statements that are subject to risks and uncertainties which could
cause actual results to differ materially from those expressed or
implied in the statements. Forward-looking statements (including oral
representations) are statements about future performance or results,
and include any statements using the words "believe", "expect",
"anticipate" or similar words. All forward-looking statements are
only predictions or statements of current plans, which we are
constantly reviewing. All forward-looking statements may differ from
actual future results due to, but not limited to, changes in the
local and overall economy, the nature and pace of technological
changes, the number and effectiveness of competitors in the Company's
markets, success in overall strategy, changes in legal and regulatory
policy, relations with ILECs and their ability to provide delivery of
services including interoffice trunking, implementation of back
office service delivery systems, the Company's ability to identify
future markets and successfully expand existing ones and the mix of
products and services offered in the Company's target markets. You
should consider these important factors in evaluating any statement
contained in this report and/or made by us or on our behalf. We have
no obligation to update or revise forward-looking statements.
---------------------------------------------------------------------
The following information has not been audited. You should read this
information in conjunction with the condensed financial statements
and related notes to financial statements included in this report. In
addition, please see our Management Discussion and Analysis of
Financial Condition and Results of Operations, audited financial
statements and related notes included in our Annual Report on Form
10-K for the year ended December 31, 1998. Electric Lightwave, Inc.
is referred to as "we", "us" or "our" in this report.
Overview
We have built an extensive fiber-optic network in the western United
States, which we use to provide products and services to customers in
seven major cities and their surrounding areas. In addition, we
provide data services in certain strategic markets across the nation.
Our product offerings include:
* Network services - includes dedicated service between two points
for a customer's exclusive use. We offer this in both local and
long-haul applications.
* Local telephone services - consists of the delivery of local dial
tone and related services.
* Long distance services - includes retail and wholesale long
distance phone services, including our prepaid phone card
business.
* Data services - includes a wide range of products to deliver
large quantities of data from one location to another through
Asynchronous Transfer Mode (ATM), Frame Relay and Internet
Protocol packet technologies. These technologies group data
(voice, video, images and character-based data) into small
packets of information and transmit the packets over a network.
We are investing in our network in the west and are developing
long-haul networks that will connect all of our seven major cities
and several of our data-only cities with high-capacity fiber-optic
cable and electronics. Certain segments of our long-haul networks are
currently operational, and we expect to complete the remainder of
this network in the second half of 1999. During March 1999, we
entered into a fiber-swap, which exchanges unused fiber on our
network for unused fiber on another carrier's network. This exchange
will provide us with direct access from Salt Lake City, Utah to
Denver, Colorado and continue on to Dallas, Texas. We anticipate
incorporating the other carrier's fiber into our network during 2000.
9
<PAGE>
In addition to our expansion plans in the west, we are expanding our
reach into key cities across the nation by offering high-speed data
and Internet services. We added Atlanta, Dallas, San Diego and
Washington, D.C. during the first quarter of 1999 and Cleveland and
Philadelphia in April 1999. We plan to connect Austin, Boston and
Houston by the end of 1999. Our current data cities include Atlanta,
Chicago, Cleveland, Dallas, Las Vegas, Los Angeles, New York,
Philadelphia, San Diego, San Francisco and Washington D.C.
Citizens Utilities Company (Citizens) currently owns approximately
83% of our common stock. During 1998, Citizens announced its intent
to separate its telecommunications businesses and its public services
businesses into two stand-alone, publicly traded companies. One of
these companies will be a holding company for the telecommunications
businesses, and it will hold the 83% ownership in us. The separation
requires numerous federal and state regulatory approvals before it
can take effect. The approval process is ongoing. Although Citizens
continues to pursue its separation plans, the increased opportunities
that have recently become available to acquire telecommunications
properties which fit within Citizens' acquisition criteria and
long-term planning require it to consider the possible advantages of
other transactions, besides the separation, to enhance security
holder value. Therefore, Citizens is continuing to investigate and
review opportunities for the acquisition of new telecommunications
properties and the sale or other disposition of public services
properties.
a. Liquidity and Capital Resources
We drew $70 million from our bank credit facility to fund operating
and capital expenditures during the first quarter 1999. In April
1999, we issued $325 million of five-year senior unsecured notes. The
notes have an interest rate of 6.05% and will mature on May 15, 2004.
We used the net proceeds from the issuance to repay outstanding
borrowings under our revolving bank credit facility. As a result, pro
forma at March 31, 1999, we have approximately $369 million available
through November 2002 under the revolving bank credit facility to
fund future operating and capital expenditures. Citizens has
guaranteed both the revolving bank credit facility and the notes for
a fee of 3.25% and 4.0%, respectively, based on the respective
outstanding balances.
We continue to invest in the installation, development and expansion
of our new and existing communications networks. A significant
portion of these expenditures is incurred before any revenues are
realized. Our capital additions were approximately $57 million in the
first quarter 1999. These expenditures, combined with our operating
expenses, have resulted in operating losses and negative cash flows.
We expect to continue incurring operating losses and negative cash
flows until we can establish an adequate customer base and revenue
stream to support our network. We cannot provide assurance that we
will achieve or sustain profitability or generate sufficient positive
cash flow to fund our operating and capital requirements or service
debt.
We continue to evaluate opportunities to generate revenue growth
through making substantial investments in connection with the
continued development of our existing networks, new long-haul routes
and entry into new markets. These opportunities may include
acquisitions and/or joint ventures that are consistent with our
business plan of generating revenue growth through expansion of our
network and customer base. Any such acquisitions, investments and/or
strategic arrangements, if available, could require additional
financial resources and/or reallocation of our financial resources.
10
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Other Matters
Year 2000
The Year 2000 (Y2K) issue stems from the fact that many computer
programs worldwide use two digits, rather than four, to define the
applicable year. For instance, many computers on January 1, 2000 may
assume that 01-01-00 is the first day of the year 1900 rather than
2000. Massive system failures may occur globally if this issue is not
properly addressed. We have developed a Y2K Initiative (the
Initiative) to mitigate the impact of the Y2K issue for our internal
systems and the systems that we rely on indirectly from third
parties.
Under the Initiative, we have formed a cross-functional Y2K project
team that reports to the Chief Information Officer (CIO). The CIO has
authority to establish methodologies, approve expenditures, and
marshal additional resources as necessary. A full-time consultant
project manager, who reports regularly to the CIO, manages the
Initiative and oversees the project team. The CIO is responsible for
researching, planning, executing, implementing and completing the
Initiative.
The three functional categories evaluated in the Initiative include:
* Communications Network - software and electronics that process
voice and data information relating to our communications
operations, including transmission equipment,
* Information Technology (IT) - consists of all internal hardware
and software used to support our financial and administrative
operations, and
* Facilities - consists of all systems necessary to run an office
including security systems, fire suppression, generators,
rectifiers, batteries and components with embedded technology at
our headquarters and leased facilities.
The Initiative is composed of three primary phases which we are
applying to each of the three functional categories.
* Phase I - Inventory and assessment
* Phase II - Remediation
* Phase III - Testing, contingency planning and certification
Phase I is substantially complete for all systems. Phase II is
substantially complete for all categories except the transmission
equipment segment of the Communications Network category and
Facilities which we expect to complete by July 31, 1999. Phase III is
underway and should be completed by June 30, 1999 for all categories
except the transmission equipment segment of the Communications
Network category and Facilities, which we anticipate to be completed
by August 31, 1999.
We anticipate the cost to address the Y2K issue to be $2 million.
This cost estimate is based on current information, and there are no
guarantees that costs will not be higher than we anticipate. As of
March 31, 1999, we had incurred $.6 million of Y2K costs.
11
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Within the Communications Network, we depend on the ILEC and other
carriers to provide systems that are Y2K compliant to allow us to
connect with some of our customers. Within IT, we depend on
appropriately skilled internal and external experts to develop
software. Within Facilities, we depend on utility suppliers to
provide services to allow our network to continue to operate. If we
do not comply with Y2K, the worst case scenario would be a disruption
of service or the inability to bill or collect revenues from our
customers, which could have a material adverse effect on our
business. However, we believe this is unlikely and that we will
succeed in mitigating Y2K issues. As an added precaution, we have
formed a Y2K Rapid Response Team composed of experts from key
operational departments that will be able to quickly respond in the
event of Y2K failures.
Reciprocal Compensation
We have various interconnection agreements with US West, the ILEC in
the states in which we operate. These agreements govern reciprocal
compensation relating to the transport and termination of traffic
between US West's network and our network. We recognize reciprocal
compensation revenues as earned, based on the terms of the
interconnection agreements. Total net reciprocal compensation
revenues that we recognized for the quarters ended March 31, 1999 and
1998 were $6.6 million and $2.7 million, respectively. Total net
trade accounts receivable relating to reciprocal compensation at
March 31, 1999 were $8.4 million. Most of our interconnection
agreements are scheduled to expire in the second half of 1999.
We have filed complaints with the Public Utility Commissions (PUCs)
in Washington, Utah, Oregon and Arizona requesting that US West pay
us for reciprocal compensation charges relating to the termination of
calls to Internet Service Providers (ISPs), as required by the
interconnection agreements. The Washington and Utah PUCs ruled in our
favor and accordingly, US West is now paying us for reciprocal
compensation charges in these states. The Oregon PUC ruled in our
favor in April 1999. US West is disputing the start date of the
Oregon PUC approved reciprocal compensation charges. The complaint in
Arizona is pending.
On February 25, 1999, the FCC issued a Declaratory Ruling and Notice
of Proposed Rulemaking that categorized calls terminated to ISPs as
"largely" interstate in nature, which could have the effect of
precluding these calls from reciprocal compensation charges. However,
the ruling stated that ILECs are bound by the existing
interconnection agreements and the state decisions that have defined
them. The FCC gave the states authority to interpret existing
interconnection agreements.
The reciprocal compensation rates defined in our interconnection
agreements are subject to change by state PUC cost proceedings. The
Oregon PUC has established a lower rate than is reflected in our
existing interconnection agreements. The new rate is approximately
70% less than the rate in the existing agreement. We expect that the
new rate will become effective at some point in the first half of
1999. Both the Washington and Utah PUCs have begun proceedings to set
new reciprocal compensation rates. Our best estimate is that the
current rates will be reduced by 50% or more in the second half of
1999.
12
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b. Results of Operations
Revenues
Revenues increased approximately $18.2 million or 91% in the first
quarter 1999 over the first quarter 1998 due to the expansion of our
network and customer base. Since the first quarter 1998, we completed
fiber networks in Boise, Idaho and Spokane, Washington. We are
providing our full suite of services in both of these markets. Also,
since the first quarter 1998, we began providing high-speed data and
Internet services in various cities across the nation, including
Atlanta, Chicago, Dallas, Las Vegas, Los Angeles, New York, San
Diego, San Francisco and Washington, D.C. We also added 617 customers
and 152 building connections, 50% and 24% increases, respectively.
For the three months ended March 31,
-------------------------------------
($ in thousands) 1999 1998 % Increase
---------- -------- -----------
Network services............. $ 10,424 $ 9,107 14%
Local telephone services..... 14,308 6,024 138%
Long distance services....... 8,530 1,822 368%
Data services................ 4,954 3,104 60%
-------- --------
Total.................... $ 38,216 $ 20,057 91%
======== ========
Network Services
Network services revenues increased $1.3 million, or 14%, in the
first quarter 1999 over the first quarter 1998. This increase
resulted from sales of additional circuits to new and existing
customers. The increased revenues were partially offset by a decrease
in revenue of $1.0 million from a significant customer primarily due
to the expiration of a short-term contract in the first quarter 1998.
Local Telephone Services
Local telephone services revenues increased $8.3 million, or 138%, in
the first quarter 1999 over the first quarter 1998. The primary
reasons for the increase in this category were increased reciprocal
compensation revenues of $3.9 million, or 142%; increased revenues
from our ISDN PRI product of $2.4 million, or 174%; and an increase
in local dial tone services of $1.0 million, or 70%. These increases
were the result of an increase in access line equivalents installed
of 57,736, or 140%, from the end of the first quarter 1998 to the end
of the first quarter 1999. In the first quarter 1999, reciprocal
compensation revenues were generated in Washington, Utah, Oregon and
Arizona, compared to only Washington in the first quarter 1998. The
ISDN PRI growth has largely come from sales to Internet Service
Providers.
Long Distance Services
Long distance services revenues increased $6.7 million, or 368%, in
the first quarter 1999 over the first quarter 1998. The primary
reason for the increase was a $6.0 million, or 3,772%, increase in
revenues from prepaid services. Prepaid services increased due to an
increase in minutes processed as a result of adding large volume
customers. The remaining $.7 million increase was caused by increased
minutes processed in both retail and wholesale long distance
services.
13
<PAGE>
Data Services
Data services increased $1.9 million, or 60%, in the first quarter
1999 over the first quarter 1998. The primary reasons for the
increase in this category were increased revenues from Internet
services of $1.1 million, or 110%, and frame relay services of $.8
million, or 72%. Both of these increases were the result of strong
customer demand for these services.
Operating Expenses
Operating expenses increased $34.3 million, or 102%, in the first
quarter 1999 over the first quarter 1998. This was due to our growth
in network and customer base as reflected in revenues, as well as
increased long distance network access costs, expansion of our sales
force, additions to our integrated provisioning system and the costs
incurred to support our national data expansion.
For the three months ended March 31,
-------------------------------------
($ in thousands) 1999 1998 % Increase
-------- -------- ---------
Network access......................$ 25,224 $ 9,212 174%
Operations.......................... 9,034 5,246 72%
Selling, general and administrative. 26,767 15,375 74%
Depreciation and amortization....... 6,994 3,884 80%
--------- ---------
Total...........................$ 68,019 $ 33,717 102%
========= =========
Network Access
Network access expenses include resold product expenses. The primary
components are usage-based charges for carrying and terminating
traffic on another carrier's network.
Network access expenses for the first quarter 1999 increased $16.0
million, or 174%, over the first quarter 1998. This increase is due
to an increase in long distance costs related to our prepaid services
programs, expenses related to our national data expansion before we
have been able to realize significant related revenues and overall
revenue growth.
Operations
Operations expenses consist of costs related to providing facilities
based network and enhanced communications services other than network
access costs. The primary components of these expenses are
right-of-way and telecommunications equipment leases as well as
operations and engineering personnel costs.
Operations expenses for the first quarter 1999 increased $3.8
million, or 72%, over the first quarter 1998. This was primarily due
to increases in payroll and related expenses to support the expanded
delivery of services, and an expanded customer service organization.
Selling, General and Administrative
Selling, general and administrative expenses include all direct and
indirect sales channel expenses and commissions, as well as all
general and administrative expenses.
Selling, general and administrative expenses for the first quarter
1999 increased $11.4 million, or 74%, over the first quarter 1998.
This was primarily due to increases in payroll and related expenses
to support the delivery of services in existing and new markets
including the national data expansion. We increased our sales force
to 176 employees, a 98% increase over March 31, 1998.
14
<PAGE>
Depreciation and Amortization
Depreciation and amortization expenses include depreciation of
communications network assets including fiber-optic cable, network
electronics, network switching and network data equipment.
Depreciation and amortization expense for the first quarter 1999
increased $3.1 million, or 80%, over the first quarter 1998. This was
primarily due to higher plant in service balances for newly completed
communications network facilities and electronics.
Interest Expense and Interest Income
For the three months ended March 31,
-------------------------------------
($ in thousands) 1999 1998 % Increase
-------- -------- ------------
Interest expense........... $ 5,101 $ 911 460%
Interest income............ (322) (167) 93%
Interest expense increased $4.2 million, or 460%, in the first
quarter 1999 over the first quarter 1998. The primary reason for the
increase is a higher amount outstanding on our bank credit facility.
The higher balance led to increased interest and guarantee fees.
Interest expense is net of capitalized interest of $3.2 million and
$1.8 million for 1999 and 1998, respectively.
Interest income increased $.2 million, or 93%, in the first quarter
1999 over the first quarter 1998. This was primarily due to interest
earned on higher cash balances.
Income Tax Expense (Benefit)
For the three months ended March 31,
-------------------------------------
($ in thousands) 1999 1998 % Increase
-------- -------- ------------
Income tax expense (benefit)...$ 370 $ (2,449) n/a
In the first quarter 1998, we were able to recognize a tax benefit
for our tax loss carryforwards to a limited extent of our deferred
tax liabilities. In 1999, the benefit of our tax loss carryforwards
is not able to fully offset the deferred tax expense associated with
current year temporary differences.
Cumulative Effect of Change in Accounting Principle
For the three months ended March 31,
-------------------------------------
($ in thousands) 1999 1998 % Increase
-------- -------- ---------------
Cumulative effect of change
in accounting principle $ - $ 3,394 n/a
Cumulative effect of change in accounting principle represented a
write-off of the unamortized portion of deferred start-up costs due
to our adoption of AICPA Statement of Position 98-5, "Reporting on
the costs of Start-Up Activities" in the first quarter 1998.
15
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We reduced our interest rate risk by issuing $325 million, five-year
senior unsecured notes in April 1999 that are guaranteed by Citizens.
The notes have a fixed interest rate of 6.05% and a guarantee fee of
4.0%. We used the net proceeds from the issuance to repay outstanding
borrowings under our floating rate bank credit facility.
16
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are party to routine litigation arising in the normal course of
business, except for an ongoing US West arbitration and federal
court case as discussed in our 1998 Form 10-K. We do not expect
these matters, individually or in the aggregate, to have a
material adverse effect on our financial position, results of
operations or cash flows. We are also party to various proceedings
before state PUCs. These proceedings typically relate to authority
to operate in state and regulatory arbitration proceedings
concerning our interconnection agreements. See "Part I.,
Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources - Other
Matters - Reciprocal Compensation".
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
a) The exhibits below are filed as part of this report:
Exhibit No. Description
---------- -----------
10.23* IRU Fiber Construction and Lease Agreement between
us and IXC Communication Services, Inc. dated
February 28, 1999
27.1 Financial Data Schedule for the three months ended
March 31, 1999.
27.2 Restated Financial Data Schedule for the three
months ended March 31, 1998.
* Material has been omitted pursuant to a request for
confidential treatment filed with the Securities and Exchange
Commission.
b) Reports on Form 8-K
None.
17
<PAGE>
Signature
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
ELECTRIC LIGHTWAVE, INC.
(Registrant)
By: /s/ Kerry D. Rea
Kerry D. Rea
Vice President and Controller
May 4, 1999
Exhibit 10.23
-------------
SWAP IRU - Salt Lake City ELI/IXC Proprietary Rev.02/99
IRU FIBER
CONSTRUCTION AND LEASE AGREEMENT
between
IXC COMMUNICATIONS SERVICES, INC.
and
ELECTRIC LIGHTWAVE, INC.
SWAP IRU - Salt Lake City ELI/IXC PROPRIETARY Rev.2/99
<PAGE>
TABLE OF CONTENTS
1. Introduction and Defined Terms.........................................2
------------------------------
2. Term...................................................................4
----
3. Dark Fiber Construction................................................4
-----------------------
4. Permits, Physical Plant and Required Rights............................6
-------------------------------------------
5. Taxes and Franchise, Lease and Permit Fees.............................6
------------------------------------------
6. Testing and Acceptance of the IRU Fibers...............................7
----------------------------------------
7. Completion of the Cable Systems........................................8
-------------------------------
8. Consideration and Delivery of Fibers..................................8
-------------------------------------
9. Access to Cable System.................................................9
----------------------
10. Use of Cable System.................................................10
-------------------
11. Operation, Maintenance and Repair of the Cable Systems..............10
------------------------------------------------------
12. Relocation; Economic Useful Life....................................10
--------------------------------
13. Representations and Warranties......................................11
------------------------------
14. DISCLAIMER OF WARRANTY; LIMITATION OF LIABILITY.....................12
-----------------------------------------------
15. Indemnification.....................................................13
---------------
16. Insurance...........................................................14
---------
17. Default.............................................................15
-------
18. Force Majeure.......................................................16
-------------
19. Dispute Resolution..................................................16
------------------
20. Termination and Remedies............................................17
------------------------
21. Notice..............................................................17
------
22. Confidentiality and Proprietary Information.........................18
-------------------------------------------
23. Publicity and Advertising...........................................20
-------------------------
24. Waiver..............................................................21
------
25. Governing Law.......................................................21
-------------
26. Rules of Construction...............................................21
---------------------
27. Assignment..........................................................22
----------
28. Relationship of the Parties.........................................23
---------------------------
29. Unenforceable Provisions............................................23
------------------------
30. Entire Agreement; Amendment.........................................23
---------------------------
31. Counterparts........................................................23
------------
SWAP IRU - Salt Lake City ELI/IXC PROPRIETARY Rev.2/99
i
<PAGE>
IRU FIBER CONSTRUCTION AND LEASE AGREEMENT
THIS IRU FIBER CONSTRUCTION AND LEASE AGREEMENT (this
"Agreement") is made as of the 28th day of February, 1999 (the "Effective
Date"), by and between Electric Lightwave, Inc., a Delaware corporation ("ELI")
and IXC Communications Services, Inc., a Delaware corporation ("IXC").
RECITALS
WHEREAS, ELI is constructing or has constructed a fiber optic
cable system along a route from Seattle, Washington to Portland, Oregon
("Segment 1; Route A") and from Portland, Oregon to San Francisco, California
("Segment 2; Route A") and from Seattle, Washington to Spokane, Washington
("Segment 3, Route A") all comprising approximately * miles set forth in
Exhibit A attached hereto (the "ELI Cable System" referred to hereinafter as
"Cable System" when referring to ELI as Lessor).
WHEREAS, IXC is constructing or has constructed a fiber optic
cable System along a route from Salt Lake City, Utah, to Denver, Colorado,
("Segment 1, Route B") and from Denver, Colorado to Dallas, Texas, ("Segment 2,
Route B") all comprising approximately * miles as set forth in Exhibit B
attached hereto (the "IXC Cable System" referred to hereinafter as "Cable
System" when referring to IXC as Lessor).
WHEREAS, each Party is referred to as the "Lessor" for its
Cable System and as the "Lessee" for the other Party's Cable System.
WHEREAS, IXC and ELI desire to lease to each other their
respective IRU Fibers, all upon the terms and conditions set forth below.
Accordingly, in consideration of the mutual promises set forth
below, and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties hereby agree as follows:
* Confidential information has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with the
Securities and Exchange Commission.
1
<PAGE>
TERMS AND CONDITIONS OF THE AGREEMENT
1. Introduction and Defined Terms
1.1 This Agreement sets forth the terms, conditions, and consideration
under which Lessor agrees to lease to Lessee a specified number of dark fiber
optic fibers ("Dark Fiber") and to grant Lessee an Indefeasible Right of Use
(IRU) at the locations set forth in Exhibits A and B, as applicable. With
respect to the leased fibers, this Agreement does not prohibit Lessee from
entering into leases, licenses or IRU agreements with other parties.
1.2 IXC has advised ELI, and ELI acknowledges, that IXC is in
negotiations with a third party for a portion of Route B, and that IXC must
secure approval from its Board of Directors. IXC's obligations pursuant hereto
are, until March 31, 1999, contingent upon IXC securing said agreement with such
third party and said Board approval. If IXC has not secured a signed agreement
from said third party and said Board approval on or before March 31, 1999, then,
in that event, this Agreement shall automatically terminate without further
obligation by either party hereto to the other. IXC shall provide written notice
to ELI upon execution of said third party agreement and Board approval, or upon
its failure to secure said agreement or Board approval by March 31, 1999.
1.3 The following terms shall have the stated definitions in this
Agreement.
(a)"Acceptance Date" has the meaning set forth in Section 6.3.
(b)"Affiliate" or "affiliate" means, with respect to either
Party, a corporation or other entity directly or indirectly controlled
by, controlling or under common control with such party. "Control"
means the power to direct the management and policies of the entity
whether through the ownership of voting securities, by arrangement or
otherwise.
(c)"Cable System" means the fiber optic cable and the fibers
contained therein, and associated splicing connections, splice boxes
and vaults, and conduit to be installed by Lessor.
(d)"Completion Date" has the meaning set forth in Section 6.
(e)"Dark Fiber" or "dark fiber" means one or more fiber optic
strands subject to this Agreement through which an associated light
communication transmission must be provided by the Lessee to furnish
service to its customers.
(f)"Economic Useful Life" is the period of time from the
Acceptance Date to the date that the cable (substantially all of the
fibers in the Cable System) becomes commercially unusable along the
majority of a system route.
2
<PAGE>
(g)"Effective Date" has the meaning set forth in the first
paragraph of this Agreement.
(h) "Environmental, Safety and Health Laws" means any federal,
state, or local statute, regulation, rule, ordinance or applicable
governmental order, decree, or settlement agreement, or principle or
requirement of common law, regulating or protecting the environment or
human health or safety, including without limitation the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C.
ss.9601 et seq.), as amended, the Resource Conservation and Recovery
Act (42 U.S.C. ss.6901 et seq.), as amended, and the Occupational
Safety and Health Act (29 U.S.C. ss.651 et seq.), as amended, and
regulations promulgated thereunder.
(i)"Fiber Acceptance Testing" is a condition precedent to the
Completion Date as set forth in Section 6.1.
(j)"Final Completion Date" means the Lessee's Acceptance Date
with respect to the last Segment to be completed on both Cable Routes A
and B.
(k)"Hazardous Discharge" means any release, spill, leak,
pumping, emission, discharge, injection, leaching, pouring, disposing
or dumping of a Hazardous Substance.
(l)"Hazardous Substance" means any pollutant or containment
or any hazardous or toxic chemical, waste, material, or substance,
including without limitation any defined as such under Environmental,
Health and Safety Laws, and including without limitation asbestos,
petroleum products and wastes, and polychlorinated biphenyls.
(m)"Indefeasible Right of Use" or "IRU" is an exclusive and
irrevocable right to use the leased fibers provided, however, that
granting of such IRU does not convey legal title to the fibers.
(n)"IRU Fibers" means SMF-28 Fibers leased or granted by a
Lessor to a Lessee: * fibers on Segment 1, Route A; * fibers on
Segment 2, Route A; * fibers on Segment 3, Route A; * fibers on
Segment 1, Route B; * fibers on Segment 2, Route B.
(o)"Lessee" means either ELI or IXC as respects the leased
fiber on the other Party's Cable System.
(p)"Lessor" means either ELI or IXC as respects that Party's
Cable System.
(q)"Minimum Term" means the period from the Final Completion
Date of the Cable Systems until the twentieth (20th) anniversary of
such date.
(r)"Planned System Work Period" or "PSWP" means a
pre-arranged period of time reserved for performing certain work on the
Lessor's Cable System that may potentially impact traffic. Generally,
* Confidential information has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with the
Securities and Exchange Commission.
3
<PAGE>
this will be restricted to weekends, avoiding the first and last
weekend of each month and high-traffic weekends. The PSWP is further
outlined in Exhibit C of this Agreement.
(s)"POP" means point of presence.
(t)"Relocation Costs" means actual and related costs
including, without limitation, the following: (1) labor costs,
including wages and salaries, and benefits and overhead allocable to
such labor costs. Overhead allocation percentage shall not exceed the
lesser of (i) the percentage Lessor allocates to its internal projects
or (ii) thirty percent (30%); and (2) other direct costs and
out-of-pocket expenses on a pass-through basis (e.g., equipment,
materials, supplies, contract services, etc.).
(u)"Required Rights" means all right-of-way agreements,
including without limitation, rights, licenses, authorizations,
rights-of-way and other agreements necessary for the use of poles,
conduit, cable, wire or other physical plant facilities, as well as any
other such rights, licenses, authorizations (including any necessary
state, tribal or federal authorizations such as environmental permits).
(v)"Right of Way" means all agreements with right of way
owners, property owners, utilities, government entities or other
parties which the Lessor must reasonably obtain in order to get access
to and/or the authority to undertake activities on the route where the
Cable System is located.
2. Term
Subject to the provisions of Section 7, the term of this Agreement
("Term") shall begin on the Effective Date and shall end on the twentieth
anniversary of the Final Completion Date.
3. Dark Fiber Construction
3.1 Lessor shall, at Lessor's sole cost and expense, (i) design,
engineer, install and construct its Cable System and (ii) install, splice and
test the IRU Fibers. Lessor warrants and represents that its Cable System, by
the Final Completion Date shall have been designed, engineered, installed and
constructed (i) in compliance with any and all applicable building, construction
and safety codes for such construction and installation, as well as any and all
other applicable governmental laws, codes, ordinances, statutes and regulations;
(ii) in accordance with each Parties' construction specifications; and (iii) to
perform in accordance with the manufacturers' specifications set forth in, and
to operate in accordance with Exhibit E (Standard Construction and Fiber
Specifications).
3.2 Both Parties acknowledge that some or all of said design,
engineering, installation, construction, splicing and testing may have already
taken place.
4
<PAGE>
3.3 Lessor warrants and represents that by the Final Completion Date,
to the best of its knowledge, it will have performed all necessary actions
regarding acquisition of land and easements and other Required Rights for its
Cable System, including, without limitation:
(a) Such limited title searches to ascertain the validity of
title in present landowners along the route of the Cable System as such
Party deems necessary.
(b) Acquired easements, IRUs, rights-of-way, conduit or other
leases, fee interests and other rights which are recorded (as
applicable and to the extent deemed necessary by the obtaining Party)
in the office of the Recorder of Deeds of the appropriate county or in
such other offices as may be appropriate, secured permits for highway,
railroad and waterway crossings as well as secured any and all other
permits necessary and requisite to the construction of the Cable System
and to enable the Lessor to grant the IRU contemplated by this
Agreement. During the construction, the Lessee and/or its designees
shall have the right, but not the obligation, to inspect and/or observe
all right-of-way installations, splicing and testing of the Cable
System and the IRU Fibers and any other work performed by personnel of
the Lessor or any subcontractor of the Lessor and any documents related
thereto. Any inspection by the Lessee or its designees shall be in
compliance with and subject to all Right of Way Agreements.
(c) To the best knowledge of Lessor, there is no litigation
pending or threatened regarding any of the acquired easements, IRUs,
rights of way, conduits or other leases, fee interests or other
Required Rights of such Lessor regarding the Cable System of such
Lessor.
3.4 Each Party shall afford the other the opportunity to perform all
due diligence which it deems necessary regarding the easements, IRUs,
rights-of-way, conduits or other leases, fee interests and other rights held by
the other Party which are necessary and requisite to the construction of such
other Party's Cable System and shall provide copies of any such Right of Way
documents upon request. Each Party acknowledges and agrees that subject to the
obligations set forth in Sections 4.1 and 4.2, it is taking its respective IRU
and is receiving the interests in such IRU Fibers as set forth in this Agreement
only to the extent such interests are held by the conveying Party.
3.5 Prior to construction of the Cable System, Licensor will provide
Licensee notice, and permit Licensee to participate in its pre-construction
meeting or the equivalent thereof. Such meeting will occur at least fourteen
(14) days prior to commencement of construction of the Cable System and will
include Licensor's contractors, if appropriate. If, upon execution of the
Agreement, construction of the Cable System has commenced, Licensor and its
contractors, if appropriate, will meet with Licensee within thirty (30) days of
the Effective Date to discuss the construction.
5
<PAGE>
3.6 Within 90 days after the Acceptance Date (as defined in Section
6.3), the Lessor shall provide the Lessee with as-built drawings as set forth in
Exhibit E (Standard Construction and Fiber Specifications).
4. Permits, Physical Plant and Required Rights
4.1 Lessor will secure rights necessary for the installation and use of
the Cable System hereunder ("Required Rights"). Lessor shall maintain the
Required Rights and will, at its cost, exercise any renewal right thereunder,
and use commercially reasonable efforts to acquire extension, additions and/or
replacements as are necessary to cause the Required Right to continue through
the Minimum Term. Lessee shall have the right to review all documents related to
the Required Rights.
4.2 In the event of the Lessor's refusal or claimed inability to take
the steps described in Section 4.1, such circumstances shall be communicated to
the Lessee in writing.
5. Taxes and Franchise, Lease and Permit Fees
5.1 As used in this Section 5, "Tax" or "Taxes" shall mean any and all
taxes, fees, franchise fees, assessments, charges, levies, together with any
penalties, fines or interest thereon, imposed by any authority having the power
to tax, including any city, county, state or federal governmental or
quasi-governmental agency or taxing district.
5.2 Any Tax consequence arising from the transaction described herein
shall be the financial responsibility of the Party upon which such incident
falls. The Parties agree to file their respective Tax returns on such basis and,
except as otherwise required by law, not to take any positions inconsistent
therewith.
5.3 On and after the effective date of the grant of the IRU in the IRU
Fibers, Lessee shall be responsible for any and all sales, use, income, gross
receipts or other Tax assessed on the basis of revenues received by Lessee
pursuant to its use of the IRU Fibers.
5.4 Lessee shall be solely responsible for any real or personal
property Taxes arising from the use of the IRU Fibers. Lessor shall be solely
responsible for Right of Way payments on its Cable System.
5.5 Notwithstanding any provision to the contrary contained herein,
both Parties shall have the right to protest by appropriate proceedings the
imposition and/or amount of any taxes or franchise, lease or permit fees,
interest or penalties imposed or assessed against either Party due to its use of
the Cable System and/or based on the physical location of the Cable System
and/or the construction thereof ("Additional Taxes"). In such event, the
6
<PAGE>
protesting Party shall protect, indemnify, hold harmless and defend the other
Party for any costs and expenses, including reasonable attorney's fees, which
are incurred by the other Party in connection with the payment of the Additional
Taxes to cure any deficiency asserted by any taxing authority. Without the prior
consent of the Lessee, Lessor shall not enter into any agreement relating to any
easement, right-of-way, or similar right for its Cable System which provides for
payment by Lessee with respect to the IRU Fiber.
5.6 To the extent a Party possesses rights that would exempt it from
any taxation, the Parties shall cooperate in good faith so as to allow such
Party the opportunity to benefit from any such exemption from Taxes. Nothing
herein is intended to serve as evidence that any Taxes are due or arise as a
matter of course from this transaction.
6. Testing and Acceptance of the IRU Fibers
6.1. Except as provided below, Lessor shall test the IRU Fibers in
accordance with the procedures specified in Exhibit D (the "Fiber Cable
Splicing, Testing and Acceptance Procedures") to verify that the IRU Fibers are
installed and operating in accordance with the specifications in Exhibit D
(Fiber Acceptance Testing) and Exhibit E. Lessor shall provide Lessee with five
(5) business days written notice prior to the first day of testing. Within
fourteen (14) days of the conclusion of the Fiber Acceptance Testing of the IRU
Fibers, Lessor shall provide Lessee with a copy of the test results.
6.2. In the event the Fiber Acceptance Testing results show that the
IRU Fibers are not installed or operating within the parameters of the
applicable specifications, the Lessor shall, within fourteen (14) days of
completion of said non-conforming tests, take such action as shall be reasonably
necessary to bring the installation and operating standards of such portion of
the IRU Fibers within such parameters. After taking such actions, the Lessor
shall provide the Lessee with a copy of the new test results within fourteen
(14) days of the conclusion of the Fiber Acceptance Testing. The cycle described
above of testing, taking corrective action and re-testing shall take place as
many times as necessary to ensure that the IRU Fibers operate within the
parameters of the applicable specifications on the Final Completion Date.
6.3. If the Fiber Acceptance Testing results are within the parameters
of the specifications in Exhibit D, the Lessee shall, within fourteen (14) days
of receipt of the test results, provide the Lessor with a written notice
accepting the IRU Fibers. If the Lessee fails to accept its IRU Fibers within
fourteen (14) days of receipt of the Lessor 's Fiber Acceptance Testing results,
then the Lessee shall be deemed to have accepted its IRU Fibers unless it
notifies the Lessor within fourteen (14) days of receipt of the Lessor 's Fiber
Acceptance Testing results that such results do not comply with the
specifications in Exhibit D. If the Lessee utilizes one or more IRU Fibers it
shall be deemed to have accepted all IRU Fiber regardless of test results. The
date of this notice or the date of deemed acceptance of the Lessee's IRU Fibers,
as the case may be, shall be the Acceptance Date (also referred to as the
Completion Date). Notwithstanding the above, the Acceptance Date shall be
postponed until such time as collocation space, as provided herein, shall be
made available to the Lessee.
6.4 The Parties acknowledge and agree that on and after the Final
Completion Date, the Lessee's sole rights and remedies with respect to any
defect in or failure of its IRU Fibers to perform in accordance with the
7
<PAGE>
applicable vendor's or manufacturer's shall be limited to maintenance services
as provided herein and the particular vendor's or manufacturer's warranty with
respect thereto, which warranty, to the extent permitted by the terms thereof,
shall be assigned to the Lessee.
7. Completion of the Cable Systems
The Scheduled Completion Date for completion of all construction,
installation and Fiber Acceptance Testing of each Cable System shall be on or
before June 30, 2000. Lessor shall use commercially reasonable efforts to
complete all construction and testing obligations by such date, and shall
provide construction progress reports to Lessee on a quarterly basis. In the
event Lessor fails to complete its Cable System on or before June 30, 2000
Lessor shall, within 14 days, provide a plan to complete construction by Sept.
30, 2000. In the event Lessor is unable to provide said plan by the due date, or
fails to complete construction by September 30th, 2000, then in that event
Lessee may complete construction of the Cable System at Lessor's cost and
expense.
8. Consideration and Delivery of Fibers
8.1 Beginning on the Acceptance Date for any segment described herein
and through the Final Completion Date for the respective segment, the Lessee,
with respect to any such segment, shall have the right to lease * (*)
fibers along such segment, pursuant to the terms and conditions hereof, at a
rate of * Dollars ($* ) per fiber per mile per month (Lease) due and
payable in advance on the first of each month. On the Final Completion Date any
Lease in place between the Parties shall automatically terminate and be replaced
by the IRU as outlined in Section 8.3. A Lessee may exercise its Lease rights by
providing written notice to the Lessor with respect to the subject segment which
shall begin the later of the Acceptance Date or the date the notice is received.
8.2 Beginning on the Acceptance Date of the IRU Fibers for Segment 1 in
Route A, and through the Final Completion Date for all segments, IXC shall
provide to ELI capacity for protected OC-48 increments with the option to
upgrade to a protected OC-192 sufficient to accommodate a working and protect
system, from Phoenix, Arizona to Dallas, Texas (Route C, described in Exhibit B)
at a rate of $* per DSO mile, up to an 0C-192 under a Master Services
Agreement, terminating following a reasonable time period from the Final
Completion Date for all segments (but no more than six (6) months). Delivery
date of OC-48s or the OC-192 shall be determined at the time of order, and based
on availability. IXC shall exercise reasonable best efforts to deliver ordered
OC-48s or the OC-192 as soon as it can provision and make said services
available to ELI as a priority project.
8.3 Effective on the Final Completion Date, Lessor hereby grants to
Lessee an IRU to use the IRU Fibers in the Cable System (IRU), and any Leases in
place at that time shall automatically be replaced by an IRU. The term of each
IRU shall end on the twentieth anniversary of the Final Completion Date.
* Confidential information has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with the
Securities and Exchange Commission.
8
<PAGE>
(a) ELI shall pay to IXC an IRU Fee of *
Dollars ($ * ) per fiber per mile each year during the IRU Term for
Route B, based upon mileage confirmed by as-builts at the Final
Completion Date. The first payment of the IRU Fee shall be due and
payable within thirty (30) days after the Final Completion Date.
Thereafter, ELI shall pay the IRU Fee on or before the anniversary date
of the Final Completion Date each year.
(b) IXC shall pay to ELI an IRU Fee of *
Dollars ($ * ) per fiber per mile per year during the IRU Term for
Route A, based upon mileage confirmed by as-builts at the Final
Completion Date. The first payment of the IRU Fee shall be due and
payable within thirty (30) days after the Final Completion Date.
Thereafter, IXC shall pay the IRU Fee on or before the anniversary date
of the Final Completion Date each year.
9. Access to Cable System
9.1 Lessor shall provide Lessee access to the IRU Fibers at a fiber
distribution panel in Lessor's designated collocate area or at existing,
available splice points as mutually agreed by the Parties. The cost of any fiber
extension beyond either of those existing fiber meet points will be born by
Lessee and based on and in accordance with Exhibit G. It is the responsibility
of Lessee to obtain any related governmental or other authority necessary.
9.2 Except as expressly provided herein Lessee shall be responsible for
obtaining its own optical amplifier, regeneration, junction and terminal sites
(collectively "Transmission Sites") along Lessor's Cable System.
9.3 Lessor shall provide the Lessee with access to the Lessee's fibers
as provided above and, if available, Lessor shall provide the Lessee collocate
space in Lessor's designated equipment shelter at Lessor's Transmission Sites
for the location of the Lessee's Equipment, similar to the shelter utilized by
the Lessor at the subject Transmission Site as more fully described in Exhibit
F. In the event that collocation space is not available, Lessor shall provide
cable termination space and allow Lessee to cable to another shelter. The Lessor
hereby grants a to the Lessee, license under the terms of the License Agreement
attached as Exhibit G, to use said collocate space for the term of this
Agreement. The Lessee shall perform the installation of such equipment and all
maintenance and repair of such equipment at its sole cost and expense.
9.4 Lessee shall pay Lessor's costs for each such connection performed
by Lessor within thirty (30) days of the date of receipt of Lessor's invoice
therefor. In order to schedule a connection of this type, Lessee shall request
and coordinate such work not less than ninety (90) days in advance of the date
the connection is requested to be completed. Such work will be restricted to a
Planned System Work Period ("PSWP"), unless otherwise agreed to in writing for
specific projects.
* Confidential information 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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9.5 Lessee shall keep the Lessor's Cable Route free and clear from all
liens and encumbrances resulting from Lessee's use of the fiber. Lessor has the
right, but not the obligation, to pay all amounts due and discharge any lien or
encumbrance, upon 30 calendar days prior written notice to Lessee. In that
event, Lessee shall reimburse Lessor upon demand, with interest accruing from
the date of discharge.
10. Use of Cable System
10.1 Lessee warrants that its use of Lessor's Cable System shall comply
with all applicable governmental codes, ordinances, laws, rules, regulations
and/or restrictions.
10.2 Lessee shall have the right to abandon its ownership of IRUs (in
which event the right to the use thereof would revert to Lessor), by providing
written notice thereof Lessor. Upon receipt of such notice, Lessee shall have no
further rights with respect to its IRU. Such abandonment shall not reduce or
otherwise affect Lessee's obligations hereunder, including the obligation to pay
the IRU fee, but excluding payment for any abandoned collocation space.
10.3 Each Party may use its IRU for any lawful purpose. Each Party
agrees and acknowledges that it has no right to use the other Party's IRU Fibers
during the Term hereof.
10.4 Neither Party shall use its Cable System or IRU Fibers in a way
which interferes in any way with or adversely affects the use of the other
Party.
10.5 The Parties agree to cooperate with and support the other in
complying with any requirements applicable to the fiber by any governmental or
regulatory agency or authority. The Parties agree to execute such further
instruments as may be necessary or appropriate to carry out the intent of this
Agreement.
11. Operation, Maintenance and Repair of the Cable Systems
During the term hereof, Lessor shall maintain all fibers in its Cable
System in accordance with the fiber specifications in Exhibit E. Maintenance
shall be provided in accordance with the requirements and procedures set forth
in Exhibit C. Each Party will provide maintenance to its Cable System in
consideration for maintenance by the other Party on its Cable System.
12. Relocation; Economic Useful Life
12.1 If for any reason, Lessor is required by a third party with legal
authority to so require (including, without limitation, the grantor of a
Required Right or a Party exercising condemnation authority) to relocate its
Cable System, the Lessor shall give the Lessee sixty (60) days prior notice of
any such relocation, if possible, and shall then proceed with such relocation,
including, but not limited to, determining the extent of, the timing of, and
methods to use for such relocation; provided that any such relocation: (i) shall
be constructed and tested in accordance with the specifications and requirements
set forth in Exhibits D and E and (ii) shall not result in an adverse change to
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<PAGE>
the operations, performance, connection points with the network of the other
Party, or end points of the applicable Cable System. The Lessor shall relocate
the affected portion of its Cable System and so long as such relocation (i) is
not done solely at the option of the Lessor, (ii) is not necessitated by a
breach of the Lessor's obligations under this Agreement, or (iii) is not
required because the Lessor does not have the Required Rights necessary for the
affected portion of the Cable System (but failure to have such necessary
Required Rights does not constitute any breach of any warranty or the inaccuracy
of any representation of the Lessor set forth in this Agreement), then subject
to the terms of this Section, the Lessee shall reimburse the Lessor for the
Lessee's proportionate share of all Relocation Costs, including, without
limitation, fiber acquisition, splicing and testing, pro rated based on the
proportionate number of the IRU Fibers in the Lessor 's Cable System.
12.2. In the event that a third party (which does not have an interest
in the fibers on the Cable) reimburses the Lessor for all of or a portion of the
cost to relocate the Lessor's Cable System, then this reimbursement amount shall
reduce on a dollar for dollar basis the aggregate amount of Relocation Costs
deemed to have been spent by the Lessor under Section 12.1. The Lessor agrees
that no request for reimbursement from the Lessee shall be made unless the
Lessee's proportional amount of the Relocation Costs for such project exceeds
$5,000. The Lessor shall deliver to Lessee updated as-built drawings as set
forth in Exhibit E with respect to any relocated portion of its Cable System not
later than ninety (90) days following the completion of such relocation.
12.3. Should the Lessee's proportionate amount of Relocation Costs
exceed $5,000.00, the Lessor must provide the Lessee with invoices for actual
charges for engineering, construction and material. Each Party agrees to pay for
any and all of those actual expenses attributable to any work, supplies or
material required solely for that Party's facilities or system. Each Party will
absorb its respective normal corporate overhead charges and internal labor
charges on all materials, engineering and construction expenses and for any
processing expenses incurred in the administration of the relocation.
12.4. The Lessor's invoice for the Lessee's proportional amount of the
Relocation Costs shall be paid within thirty (30) days after receipt of the
invoice by Lessee. Upon request Lessor will promptly provide the necessary
substantiating information which will allow the Lessee to verify the accuracy
and reasonableness of the invoice.
12.5 Lessee has the right to review and request modification of
relocation plans fourteen (14) days prior to any relocation activity.
13. Representations and Warranties
Each Party represents and warrants that:
(i) It has the full right and authority to enter into,
execute, deliver and perform its obligations under this Agreement;
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<PAGE>
(ii) It has taken all requisite corporate action to approve
the execution, delivery and performance of this Agreement;
(iii) This Agreement constitutes a legal, valid and binding
obligation enforceable against such Party in accordance with its terms;
and
(iv) Its execution of and performance under this Agreement
shall not violate any applicable existing regulations, rules, statutes
or court orders of any local, state or federal government agency, court
or body.
14. DISCLAIMER OF WARRANTY; LIMITATION OF LIABILITY
EXCEPT AS OTHERWISE SPECIFICALLY SET FORTH IN THIS AGREEMENT, NEITHER
PARTY MAKES ANY WARRANTY TO THE OTHER PARTY OR ANY OTHER PERSON OR ENTITY,
WHETHER EXPRESS, IMPLIED OR STATUTORY, AS TO THE DESCRIPTION, QUALITY,
MERCHANTABILITY, COMPLETENESS OR FITNESS FOR ANY PURPOSE OF ANY FIBERS OR ANY
SERVICE PROVIDED HEREUNDER OR DESCRIBED HEREIN, OR AS TO ANY OTHER MATTER, ALL
OF WHICH WARRANTIES ARE HEREBY EXCLUDED AND DISCLAIMED.
NOTWITHSTANDING ANY PROVISION OF THIS AGREEMENT TO THE CONTRARY, IN NO
EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL,
INCIDENTAL, INDIRECT, PUNITIVE, RELIANCE OR CONSEQUENTIAL DAMAGES, WHETHER
FORESEEABLE OR NOT, ARISING OUT OF, OR IN CONNECTION WITH, TRANSMISSION
INTERRUPTIONS OR PROBLEMS, INCLUDING, BUT NOT LIMITED TO, DAMAGE OR LOSS OF
PROPERTY OR EQUIPMENT, LOSS OF PROFITS OR REVENUE, COST OF CAPITAL, COST OF
REPLACEMENT SERVICES, OR CLAIMS OF CUSTOMERS, WHETHER OCCASIONED BY ANY REPAIR
OR MAINTENANCE PERFORMED BY, OR FAILED TO BE PERFORMED BY, THE FIRST PARTY OR
ANY OTHER CAUSE WHATSOEVER, INCLUDING, WITHOUT LIMITATION, BREACH OF CONTRACT,
BREACH OF WARRANTY, NEGLIGENCE OR STRICT LIABILITY. THE PARTIES AGREE TO REQUIRE
THEIR RESPECTIVE CUSTOMERS TO EXECUTE SIMILAR WAIVERS OF LIABILITY.
PURSUANT TO THIS SECTION 14, NO PARTY SHALL BE PREVENTED FROM MAKING A
CLAIM OR FILING SUIT AGAINST AN INDEPENDENT CONTRACTOR FOR SPECIAL, INCIDENTAL,
INDIRECT, PUNITIVE, RELIANCE OR CONSEQUENTIAL DAMAGES ARISING OUT OF SUCH
INDEPENDENT CONTRACTOR'S PERFORMANCE OF MAINTENANCE OR REPAIR SERVICES FOR THE
CABLE SYSTEM OWNER, BUT THE PARTY MAKING THE CLAIM OR FILING SUIT AGREES THAT IT
WILL NOT SEEK RECOVERY OF SUCH DAMAGES TO THE EXTENT SUCH INDEPENDENT CONTRACTOR
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HAS A CONTRACTUAL OR COMMON LAW RIGHT OF RECOVERY AGAINST OR AN INDEMNITY FROM
THE CABLE SYSTEM OWNER.
15. Indemnification
15.1 Each Party (the "Indemnifying Party") shall indemnify, defend, and
hold the other Party (the "Indemnified Party") (including all officers,
directors, employees, agents and affiliates, successors and assigns of the
Indemnified Party) harmless from and against any and all claims, demands,
actions, losses, damages, assessments, charges, liabilities, costs and expenses
(including without limitation, interest, penalties, and attorney's fees and
disbursements) which may from time to time be suffered or incurred by, or
asserted against, the Indemnified Party, directly or indirectly, on account of
or in connection with:
(a) The Indemnifying Party's breach of any provision of this
Agreement or failure in any way by the Indemnifying Party to perform
any obligation under this Agreement; or
(b) A claim for bodily injury (including death) or damage to
property to any person (including without limitation any employee of
either Party and any third person), and any damage to or loss of use of
any property, arising out of the Indemnifying Party's negligent or
intentional acts or omissions relating to this Agreement.
Provided, however, that in the event that Lessor is unable to obtain
and maintain all Required Rights, and there has been no breach by Lessee of the
representations and warranties, Lessor shall not be entitled to indemnification
by Lessee and its sole remedy shall be to terminate this Agreement pursuant to
Section 20.1(i.).
15.2 The Parties will cooperate with each other in every reasonable way
to facilitate either Party's defense or settlement of any third party claims,
lawsuits, or demands that relate to or arise out of either Party's performance
of its obligations under this Agreement. Each Party will provide the other with
notice of any such claim within fourteen (14) days of the date upon which that
Party first becomes aware of the claim.
15.3 The Indemnified Party's right to indemnity under this Section 15
is expressly contingent upon the Indemnified Party providing notice to the
Indemnifying Party as required by Section 15.2; provided, however, that failure
to give such notice shall not relieve the Indemnifying Party of its obligations
hereunder except to the extent it shall have been prejudiced by such failure.
15.4 Subject to Section 14, and notwithstanding any other provisions of
this Agreement, with respect to the performance or interruption of any services
provided by the Indemnified Party for the IRU Fibers, the Indemnifying Party
will not be liable for any damages (including without limitation, damages for
harm to business, lost revenues, lost savings, or lost profits) claimed by the
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Indemnified Party or its end user customers or those to whom the Indemnified
Party has entered into leases with or to whom it has granted IRUs.
15.5 The Indemnifying Party further shall indemnify the Indemnified
Party, its officers, directors, employees and agents, and its successors and
assigns from and against any claims, liabilities, losses, damages, fines,
penalties, and costs (including reasonable attorney fees) whether foreseen or
unforeseen, which the Indemnified Party suffers or incurs because of: (i)
failure of the Indemnifying Party or its Cable System, including its respective
Routes, to comply with Environmental, Health and Safety Laws; (ii) any past,
present, or future Hazardous Discharge at, on, or affecting the Indemnifying
Party's Cable System; or (iii) any acts or omissions of the Indemnifying Party
in connection with any environmental remediation or cleanup required by law.
15.6 Nothing contained herein shall operate as a limitation on the
right of either party hereto to bring an action for damages against any third
party, including indirect, special or consequential damages including lost
revenue and profits, based on any acts or omissions of such third party as such
acts or omissions may affect the construction, operation or use of the IRU
Fibers, however, the Party making the claim or filing suit agrees that it will
not seek recovery of such damages to the extent such third party has a
contractual or common law right of recovery against or an indemnity from the
Cable System owner.
16. Insurance
16.1 During the Term of this Agreement, each Party shall obtain and
maintain and shall require any of its contractors to obtain and maintain not
less than the following insurance:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Type of Coverage Amount of Coverage
- --------------------------------------------------------------------------------
Worker's Compensation Insurance Statutory Amount
- --------------------------------------------------------------------------------
<S> <C>
Employer's Liability Occupational Disease $1 million each accident
and Bodily Injury Insurance $1 million disease each employee
$1 million disease-policy limit
- --------------------------------------------------------------------------------
Commercial General Liability Insurance, Combined single limit personal
including premises - operations, injury and property damage on an
products/completed operations, independent occurrence policy form with
contractors, contractual (blanket), policy amounts of (i) not less
broad form property damage, with umbrella than $5 million per occurrence
excess liability (collectively, (without a limitation on
"Comprehensive Coverage aggregate amount); or (ii) not
less than $5 million per
occurrence with an aggregate
annual amount of not less than
$5 million
- --------------------------------------------------------------------------------
Automobile Liability Insurance for $2 million
owned, hired and non-owned autos combined single limit bodily
("Automobile Liability Coverage") injury/property damage
- --------------------------------------------------------------------------------
</TABLE>
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<PAGE>
The limits set forth above are minimum limits and will not be construed to limit
either Party's liability.
16.2 This insurance shall cover the amounts and types of liability
listed above with respect to each Party's obligations under this Agreement.
16.3 Each policy evidencing the insurance described in this Section 16
must contain a provision that the insurance policy, and the coverage it
provides, shall be primary and noncontributing with respect to any policies
carried by the other Party and its affiliates, and that any policies carried by
the other Party and its affiliates shall be excess insurance.
16.4 The comprehensive general liability policies and umbrella excess
liability policies of the Party and its subcontractors each shall contain a
provision naming the other Party, its parent, subsidiaries and affiliates, and
each of its respective officers, directors, employees, agents, contractors, and
suppliers and any other Parties in interest designated by the Party, as
additional insureds.
16.5 Prior to commencement of any work under this Agreement, each Party
must furnish to the other certificates of insurance stating that the insurer
will use best efforts to notify the other Party at least 30 days prior to
cancellation of, or any material change in, the coverage provided.
17. Default
Neither Party shall be in default under this Agreement herein unless
and until the Party shall have received written notice of such default from the
other Party, and shall have failed to cure the same within thirty (30) days
after receipt of such notice (except for a payment default, in which case the
payment default must be cured within ten (10) days after receipt of such
notice); provided however, that where such default cannot reasonably be cured
within such thirty (30) day period, if the Party shall proceed promptly to cure
the same and prosecute such curing with due diligence, the time for curing such
default shall be extended for a period no longer than sixty (60) days from the
date of the receipt of the default notice (except for a payment default which
shall not be so extended). Events of default shall include, but not be limited
to (i) making a general assignment for the benefit of its creditors, (ii) filing
a voluntary petition in bankruptcy or the filing of a petition in bankruptcy or
other insolvency protection against the Party which is not dismissed within
ninety (90) days thereafter, or (iii) filing any petition or answer seeking,
consenting to, or acquiescing in reorganization, arrangement, adjustment,
composition, liquidation, dissolution or similar relief. Any event of default
may be waived under the terms of this Agreement at the other Party's option.
Upon the failure by the Party to timely cure any such default after notice
thereof from the other Party, the other Party may (i) take such action as it
determines, in its sole discretion, to be necessary to correct the default, and
(ii) pursue any legal remedies it may have under applicable law or principles of
equity relating to such breach. Notwithstanding the above, if the Party
certifies to the other Party in writing that a default has been cured, such
default shall be deemed to be cured unless the other Party otherwise notifies
the party in writing within fifteen (15) days of receipt of such notice.
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18. Force Majeure
Neither Party shall be in default under this Agreement with respect to
any delay in performance caused by any of the following conditions: (i) act of
God, (ii) fire, (iii) flood, (iv) material shortage or unavailability or delay
in provision of services by any third party not resulting from the responsible
Party's failure to timely place orders or take other necessary actions therefor,
(v) lack of transportation, (vi) legal inability to access property, (vii)
government codes, ordinances, laws, rules, regulations or restrictions, (viii)
war or civil disorder, or (ix) any other cause beyond the reasonable control of
such Party. In the event of the occurrence of one of the conditions identified
in clause (i) through (ix) which results in damage to the Cable System and/or
IRU Fibers, both Parties will share costs and expenses in repairing such Cable
System on a proportionate basis determined by dividing the number of IRU Fibers
by the number of Fibers in the Cable System.
19. Dispute Resolution
19.1 To the extent not inconsistent with the jurisdiction and authority
of any state or federal regulatory body that might have jurisdiction or
authority over this Agreement or any aspect or performance of this Agreement,
any dispute, disagreement, controversy or claim, whether based on contract, tort
or other legal theory (including, but not limited to, any claim of fraud or
misrepresentation), arising between the Parties out of or related to this
Agreement which is not settled to the mutual satisfaction of both Parties within
thirty (30) days from the date that either Party informs the other in writing
that such dispute, disagreement, controversy or claim exists, shall be settled
by arbitration in Chicago, Illinois (unless both parties agree on a different
location), in accordance with the Commercial Arbitration Rules of the American
Arbitration Association in effect on the date that such notice is given. The
duty to arbitrate shall extend to any officer, employee, agent, subsidiary,
parent or affiliate making or defending any claim which would otherwise be
arbitrable under this Agreement. The parties, by mutual agreement, shall appoint
a sole arbitrator who shall preside over each dispute submitted for arbitration
under this Agreement. If the parties are unable to agree on a single arbitrator
within fifteen (15) days from the date of receipt of the notice notifying a
Party of a dispute or disagreement, each Party shall select an arbitrator within
fifteen (15) days and the two (2) arbitrators shall select a third arbitrator
within ten (10) days. The decision of the arbitrator(s) shall be final and
binding upon the parties and shall include written findings of law and fact, and
judgment may be obtained thereon by either Party in a court of competent
jurisdiction, provided however that the arbitrators shall have no authority to
award consequential, punitive or exemplary changes. Each Party shall bear the
cost of preparing and presenting its own case. The cost of the arbitration,
including the fees and expenses of the arbitrator(s), shall be shared equally by
the parties hereto unless the award otherwise provides. The arbitrator(s) shall
be instructed by the parties to establish procedures such that a decision can be
rendered by the arbitrator(s) within sixty (60) days of their appointment.
Issues of arbitrability shall be determined in accordance with the federal
substantive and procedural laws relating to arbitration; all other aspects shall
be interpreted in accordance with the laws of jurisdiction where the action is
initiated. If any portion of this Section 19 is held to be unenforceable, it
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<PAGE>
shall be severed and shall not affect either the duty to arbitrate under this
Agreement or any other part of this Section 19.
19.2 The obligation herein to arbitrate shall not be binding upon any Party with
respect to requests for preliminary injunctions, temporary restraining orders,
specific performance or other procedures in a court of competent jurisdiction to
obtain interim relief when deemed necessary by such court to preserve the status
quo or prevent irreparable injury pending resolution by arbitration of the
actual dispute.
20. Termination and Remedies
20.1 Notwithstanding anything in this Agreement to the contrary, this
Agreement may be terminated at any time as set forth below:
(i) By Lessee in the event the Lessor is unable to obtain and
cause to remain effective through the Minimum Term all Required Rights
as described, and shall have failed to obtain and maintain such
Required Rights within the waiting period between notice of termination
and actual termination as required by Section 20.2.
(ii) By Lessee in the event of the occurrence of a failure of
the Economic Useful Life of the IRU Fibers leased to them.
20.2. Any Party desiring to terminate this Agreement pursuant to
Section 20.1 shall give advance written notice not less than sixty (60) days
prior to such termination to the other Party in this Agreement.
20.3. Notwithstanding the foregoing, no termination of this Agreement
shall affect the rights or obligations of any Party hereto with respect to any
payment hereunder for services rendered prior to the date of termination or
pursuant to Sections 15, 16, 5 and 19 (Taxes, Franchise, Lease and Permit Fees;
Indemnification; Insurance; and Dispute Resolution, respectively).
20.4 In the event of a payment default which has not been cured
pursuant to Section 17, Lessor may suspend Lessee's use of the IRU fibers,
without further notice and by whatever means Lessor deems appropriate, until the
payment default is cured and for as long as thirty (30) days. If the payment
default has not been cured within thirty (30) days, then Lessee's IRU or Lease
shall automatically terminate without further notice and without effect on any
other terms of this agreement, including without limitation, Section 8, 9, 10,
11, 15 and 16.
21. Notice
21.1 Unless otherwise provided herein, all notices and communications
concerning this Agreement shall be in writing and addressed to the other Party
as follows:
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<PAGE>
If to IXC: IXC Communications Services, Inc.
Attn: President, Network Services
1122 Capital of Texas Highway South
Austin, TX 78746
Facsimile No.: (512) 328-0239
with a copy to: IXC Communications Services, Inc.
Attn: General Counsel
1122 Capital of Texas Highway South
Austin, TX 78746
Facsimile No.: (512) 328-7902
If to ELI: Electric Lightwave, Inc.
Attn: Vice President, Wholesale Division
and Vice President, Engineering
4400 N.E. 77th Avenue
Vancouver, WA 98662
Facsimile No.: (360) 816-0485
with a copy to: Electric Lightwave, Inc.
Attn: General Counsel
4400 N.E. 77th Avenue
Vancouver, WA 98662
Facsimile No.: (360) 816-0999
or at such other address as may be designated in writing. The Parties may agree
to designate in writing, other notice methods and recipients for any type of
notice other than default.
21.2 Unless otherwise provided herein, notices shall be sent by
registered or certified U.S. Mail, postage prepaid, or by commercial overnight
delivery service, and shall be deemed served or delivered to the addressee or
its office on the date of receipt acknowledgment or, if by facsimile upon
verification of receipt of a complete and fully legible Notice, or if postal
claim notices are given and returned marked "unclaimed", on the date of its
return marked "unclaimed," provided, however, that upon receipt of a returned
notice marked "unclaimed," the sending Party shall make reasonable effort to
contact and notify the other Party by telephone.
22. Confidentiality and Proprietary Information
22.1 In connection with this Agreement, either Party may furnish to the
other certain information that is marked or otherwise specifically identified as
proprietary or confidential ("Confidential Information"). This Confidential
Information may include, among other things, documentation, data, drawings,
specifications, plans, and other technical or business information. For purposes
of this Section 22, the Party that discloses Confidential Information is
18
<PAGE>
referred to as the "Disclosing Party", and the Party that receives Information
is referred to as the "Receiving Party".
22.2 When Confidential Information is furnished in tangible form, the
Disclosing Party shall mark it as proprietary or confidential. When Confidential
Information is provided orally, the Disclosing Party shall, at the time of
disclosure or promptly thereafter, identify the Confidential Information as
being proprietary or confidential.
22.3 With respect to Confidential Information disclosed under this
Agreement, the Receiving Party shall:
(a) hold the Confidential Information in confidence,
exercising a degree of care not less than the care used by the
Receiving Party to protect its own proprietary or confidential
information that it does not wish to disclose;
(b) restrict disclosure of the Confidential Information solely
to those of its employees, contractors or consultants who have a need
to know, require such contractors or consultants to sign a
confidentiality agreement that contains use and disclosure restrictions
as restrictive as in this Section 22, and not disclose the Confidential
Information to any other person or entity without the prior written
consent of the Disclosing Party;
(c) advise those employees of their obligations with respect
to the Confidential Information; and
(d) use the Confidential Information only in connection with
the performance of this Agreement (which shall include utilization of
the respective IRU Fibers by the Receiving Party), except as the
Disclosing Party may otherwise agree in writing.
22.4 Confidential Information shall be deemed the property of the
Disclosing Party. Upon request of the Disclosing Party, the Receiving Party
shall return all Confidential Information received in tangible form, or shall
destroy it and provide written certification of destruction to the Disclosing
Party. If the Receiving Party loses or makes an unauthorized disclosure of
Confidential Information, it shall notify the Disclosing Party and use
reasonable efforts to retrieve the Confidential Information.
22.5 The Receiving Party shall have no obligation to preserve the
proprietary nature of Confidential Information which:
(a)was previously known to the Receiving Party free of any
obligation to keep it confidential; or
(b) is or becomes publicly available by means other than
unauthorized disclosure; or
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<PAGE>
(c) is developed by or on behalf of the Receiving Party
independently of any Confidential Information furnished under this
Agreement; or
(d) is received from a third party whose disclosure does not
violate any confidentiality obligation.
22.6 The contents and existence of this Agreement, and all information
that may be disclosed to Receiving Party pertaining to the identities,
locations, and requirements of the Disclosing Party's customers, is Confidential
Information of Disclosing Party.
22.7 Under no circumstances shall either Party disclose the other
Party's customer Confidential Information to any third party (even if under
contract to that Party) without prior consent.
22.8 If the Receiving Party is required to disclose the Disclosing
Party's Confidential Information by an order or a lawful process of a court or
governmental body, the Receiving Party shall promptly notify the Disclosing
Party, and shall cooperate with the Disclosing Party in seeking reasonable
protective arrangements before the Confidential Information is produced;
provided, however, that after notice to and consultation with the Disclosing
Party, the Receiving Party may release Confidential Information to governmental
bodies which is required to comply with federal or state securities laws.
22.9 Each Party agrees that the Disclosing Party would be irreparably
injured by a breach of this Section 22 by the Receiving Party or its
representatives and that the Disclosing Party may be entitled to equitable
relief, including injunctive relief and specific performance, in the event of
any breach of the provisions of this Section 22 Such remedies shall not be
deemed to be the exclusive remedies for a breach of this Section 22, but shall
be in addition to all other remedies available at law or in equity.
23. Publicity and Advertising
23.1. Neither Party shall publish or use any advertising, sales
promotions, or other publicity materials that use the other Party's logo,
trademarks, or service marks without the prior written approval of the other
Party.
23.2. Each Party shall have the right to review and approve any
publicity material, press releases, or other public statements by the other that
refer to such Party or that describe any aspect of this Agreement. Each Party
agrees not to issue any such publicity materials, press releases, or public
statements without the prior written approval of the other Party, except as is
required to comply with federal or state securities laws.
23.3. Nothing in this Agreement establishes a lease for either Party to
use any of the other Party's brands, marks, or logos without prior written
approval of the other Party.
20
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24. Waiver
The failure of either Party hereto to enforce any of the provisions of
this Agreement, or the waiver thereof in any instance, shall not be construed as
a general waiver or relinquishment on its part of any such provision, but the
same shall nevertheless be and remain in full force and effect.
25. Governing Law
This Agreement shall be governed by and construed in accordance with
the domestic laws of the State of New York without reference to its choice of
law principles.
26. Rules of Construction
26.1 The captions or headings in this Agreement are strictly for
convenience and shall not be considered in interpreting this Agreement or as
amplifying or limiting any of its content. Words in this Agreement which import
the singular connotation shall be interpreted as plural, and words which import
the plural connotation shall be interpreted as singular, as the identity of the
Parties or objects referred to may require.
26.2 Unless expressly defined herein, words having well-known technical
or trade meanings shall be so construed. All listing of items shall not be taken
to be exclusive, but shall include other items, whether similar or dissimilar to
those listed, as the context reasonably requires.
26.3 Except as set forth to the contrary herein, any right or remedy of
ELI or IXC shall be cumulative and without prejudice to any other right or
remedy, whether or not contained herein.
26.4 Except as set forth in this Agreement, nothing in this Agreement
is intended to provide any legal rights to anyone not an executing Party of this
Agreement. Except as otherwise stated, this Agreement does not provide and is
not intended to provide third parties with any remedy, claim, liability,
reimbursement, cause of action, or other privilege.
26.5 This Agreement has been fully negotiated between and jointly
drafted by the Parties.
26.6 In the event of a conflict between the provisions of this
Agreement and those of any Exhibit, the provisions of this Agreement shall
prevail and such Exhibits shall be corrected accordingly.
26.7 All actions, activities, consents, approvals and other
undertakings of the Parties in this Agreement shall be performed in a reasonable
and timely manner. Except as specifically set forth herein, for the purpose of
<PAGE>
21
this Section 26 the normal standards of performance within the
telecommunications industry in the relevant market shall be the measure of
whether a Party's performance is reasonable and timely.
26.8 Each action or claim against any Party arising under or relating
to this Agreement shall be made only against such Party as a corporation, and
any liability relating thereto shall be enforceable only against the corporate
assets of such Party. No Party shall seek to pierce the corporate veil or
otherwise seek to impose any liability relating to, or arising from, this
Agreement against any shareholder, employee, officer or director of the other
Party. Each of such persons is an intended beneficiary of the mutual promises
set forth in this Section and shall be entitled to enforce the obligations of
this Section.
27. Assignment
27.1 Except as provided in this Section 27, neither Party shall assign,
encumber or otherwise transfer this Agreement or all or any portion of its
rights or obligations hereunder to any other party without the prior written
consent of the other Party, which consent will not be unreasonably withheld or
delayed. Notwithstanding the foregoing, both Parties shall have the right,
without consent, to (a) subcontract any of its construction or maintenance
obligations hereunder, or (b) assign or otherwise transfer this Agreement in
whole or in part (1) as collateral to any institutional lender to, or trustee
under an indenture (or institutional lender to, or trustee under an indenture
with any permitted transferee or assignee of the Party) subject to the prior
rights and provided hereunder, or (2) to any parent, subsidiary or affiliate
which shall control, be under the control of or be under common control with the
Party, or (3) any corporation or other entity into which the Party may be merged
or consolidated or which purchases all or substantially all of the stock or
assets of the Party; provided that the assignee or transferee in any such
circumstance shall continue to be subject to all of the provisions of this
Agreement, (except that any lender or trustee referred to in clause (b) (1)
above shall not incur any obligations under this Agreement nor shall it be
restricted from exercising any right of enforcement or foreclosure with respect
to any related security interest or lien, so long as the purchaser in
foreclosure is subject to the provisions of this Agreement); and provided
further that promptly following any such assignment or transfer, said Party
shall give the other Party written notice identifying the assignee or
transferee. In the event of any permitted partial assignment of any rights
hereunder, said Party shall remain the sole point of contact with the other
Party. No permitted partial or complete assignment shall release or discharge
said Party from its duties and obligations hereunder, except as otherwise agreed
in writing.
27.2 Notwithstanding the provisions of Section 27.1, without the prior
written consent of Lessor, Lessee shall have the right to assign, lease, grant
an IRU with respect to, or otherwise in any manner transfer or make available in
any manner to any third party the right to use, or use of, or access in any
manner to, any of Lessee's rights in some or all of the IRU Fibers.
22
<PAGE>
27.3 This Agreement and each Party's respective rights and obligations
under this Agreement shall be binding upon and shall inure to the benefit of the
Party and its permitted successors and assigns.
28. Relationship of the Parties
The relationship between the Parties shall not be that of partners,
agents or joint venturers for one another, and nothing contained in this
Agreement shall be deemed to constitute a partnership or agency agreement
between them for any purposes, including, but not limited to federal income tax
purposes. In performing any of their obligations hereunder, the Parties shall be
independent contractors or independent Parties and shall discharge their
contractual obligations at their own risk.
29. Unenforceable Provisions
No provision of this Agreement shall be interpreted to require any
unlawful action by either Party. If any section or clause of this Agreement is
held to be invalid or unenforceable, then the meaning of that section or clause
shall be construed so as to render it enforceable to the extent feasible. If no
feasible interpretation would save the section or clause, it shall be severed
from this Agreement with respect to the matter in question, and the remainder of
the Agreement shall remain in full force and effect. However, in the event such
a section or clause is an essential element of the Agreement, the Parties shall
promptly negotiate a replacement that will achieve the intent of such
unenforceable section or clause to the extent permitted by law.
30. Entire Agreement; Amendment
This Agreement constitutes the entire and final agreement and
understanding between the Parties with respect to the subject matter hereof and
supersedes all prior agreements relating to the subject matter hereof, which are
of no further force or effect. The Exhibits referred to herein are integral
parts hereof and are hereby made a part of this Agreement. This Agreement may
only be modified or supplemented by an instrument in writing executed by a duly
authorized representative of each Party.
31. Counterparts
This Agreement may be executed in one or more counterparts, all of
which taken together shall constitute one and the same instrument. In
confirmation of their consent to the terms and conditions contained in this
Agreement and intending to be legally bound hereby, the Parties have executed
this Agreement as of the date first above written.
23
<PAGE>
IN WITNESS WHEREOF THE PARTIES HAVE EXECUTED THIS AGREEMENT EFFECTIVE AS OF THE
DATE FIRST WRITTEN ABOVE.
IXC Communications Services, Inc. Electric Lightwave, Inc.
a Delaware corporation a Delaware corporation
By: /s/ Mike Jones By: /s/ Michael Miller
(For Daryl Ferguson)
Name: Mike Jones Name: Michael Miller
Title: _____Vice President Title: V.P. Finance & Planning
Date: ____________________________ Date: 3/22/99
24
<PAGE>
EXHIBITS
Exhibit A Route A: ELI Cable System Route (includes fiber
type, mileage and Transmission Facility locations)
Exhibit B Route B & C:
IXC Cable System Route (includes fiber type, mileage
and Transmission Facility locations)
Exhibit C Maintenance and Operations Specifications and
Procedures
Exhibit D Fiber Cable Splicing, Testing and Acceptance Procedures
Exhibit E 1 Buried Cable Specifications
2 ADSS Construction Specifications
3 OPGW Construction Specifications
4 Fiber Performance Specifications
Exhibit F Equipment Shelters
Exhibit G Collocation Terms and Conditions
25
<PAGE>
EXHIBIT A
*
* Confidential information 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
Route B*
Route C: A map showing the route between Phoenix and Dallas
* Confidential information 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
Operations Specifications
These operations specifications specify terms and conditions for the
maintenance and repair of the Cable System. Defined terms used herein and not
otherwise defined shall have the meaning set forth in the IRU Fiber Construction
and Lease Agreement between IXC Communications Services, Inc. and Electric
Lightwave, Inc. dated February 28, 1998. Lessor is defined as the party
responsible for operating and maintaining the Cable System.
Lessee is defined as the party receiving benefit from the Lessor.
1. General
a. Lessor shall operate and maintain a Network Control Center ("NCC")
staffed twenty-four (24) hours a day, (7) seven days a week, by trained
and qualified personnel. Lessor shall maintain a toll-free number to
contact personnel at NCC. Lessor's NCC personnel shall dispatch
maintenance and repair personnel along the Cable System to handle and
repair problems detected through the NCC's remote surveillance
equipment, by the Lessee, or otherwise.
b. Lessor's maintenance employees shall be available for dispatch
twenty-four (24) hours a day, seven (7) days a week. If emergency
maintenance is required, Lessor will use reasonable efforts to provide
a maintenance employee on site within two (2) hours of Lessee's notice
to Lessor's NCC. Emergency maintenance is defined as any service
affecting situations requiring an immediate response.
c. Lessee shall utilize the attached Operations Escalation List, to report
and seek immediate initial redress of exceptions noted in the
performance of Lessor in meeting maintenance service objectives.
d. In performing its services hereunder, Lessor shall take workmanlike
care to prevent impairment to the signal continuity and performance of
the Cable System. The precautions to be taken by Lessor shall include
notification to Lessee prior to beginning the repair. In addition,
Lessor shall reasonably cooperate with Lessee in sharing information
and analyzing the disturbances regarding the Cable System.
e. Lessor shall use his best effort to notify Lessee seven (7) days prior
to the date of any planned non-emergency fiber activity. In the event
that a planned activity is canceled or delayed for whatever reason as
previously notified, Lessor shall notify Lessee at Lessor's earliest
opportunity and will comply with the provisions of the previous
sentence to reschedule the delayed activity.
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f. The Lessor shall provide Lessee, upon request, new or updated as-built
drawings within ninety (90) days of completion for any cable relocation
or other engineering changes affecting the Cable System.
g. Lessor and Lessee will maintain an updated list of local area qualified
maintenance support contractors with the necessary equipment and
personnel.
2. Facilities
a. Lessor shall maintain the Cable System in a manner which will permit
the normal operation of the equipment.
b. Lessor shall perform appropriate routine maintenance on the Cable
System and equipment in accordance with Lessor's then current
preventive maintenance procedures which shall not substantially deviate
from industry practice and shall be responsible for correcting
dysfunction.
c. At a minimum, Lessors NCC shall monitor the same Housekeeping Alarms
attached to this Exhibit as it does for the rest of the Network. Lessee
may monitor Lessor's Housekeeping Alarms. In such cases, Lessee will
receive reasonable support from Lessor to attach such alarms. Any
additional cost, apart from this support incurred by Lessee, for alarm
attachment shall be born by Lessor. Upon receipt of an alarm, Lessor
shall take appropriate action and notify Lessee of any major service
jeopardy situation.
d. Lessor shall use reasonable efforts to provide emergency generators on
site with sufficient capability to restore one (1) unit of all
redundant HVAC systems and a sufficient number of rectifiers to carry
the site load and recharge batteries within 4 to 9 hours after a power
outage. Battery plants shall have a minimum eight (8) hours reserve.
3. Cable System Fibers
a. Subject to the provisions of paragraph 3.b., hereof, Lessor shall
maintain the Cable System in good and operable condition and shall
repair the Cable System in workmanlike manner pursuant to paragraph
3.d., hereof.
b. Lessor shall patrol the Cable System on a reasonable, routine basis and
shall perform all required locates. Lessor shall have qualified
representatives on site at any time another company is crossing the
Cable System or digging within 1.52 meters of the Cable System.
c. Lessor shall be responsible for correcting or repairing Cable System
discontinuity or damage, including but not limited to, the emergency
repair of the Cable System. Lessor shall use reasonable efforts to
repair Cable System traffic affecting discontinuity within four (4)
hours after the maintenance employee's arrival at the problem site.
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<PAGE>
Lessor shall teleconference with Lessee during an emergency repair in
order to provide continuous communication. Within twenty-four (24)
hours after completion of an emergency repair, Lessor shall begin
planning for repair, notify Lessee of such plans, and implement such
repair within an appropriate time thereafter. Restoration of open
fibers on fiber strands not immediately required for service, shall be
scheduled as soon as reasonably possible.
c. Lessor shall comply with the Splicing Specifications as provided in
Exhibit E. Lessor shall provide to Lessee any modifications to these
specifications for Lessee's approval, which shall not be unreasonably
withheld. The Lessee shall have the right, but not the obligation, at
its sole expense to conduct its own fiber acceptance testing to verify
that the fibers are operating in accordance with the test
specifications.
d. The Lessee will not install or connect additional fiber optic cables or
equipment in transmission sites without first notifying the Lessor in
advance. Such notification will include, engineering plans, drawings,
schedules, equipment detail and layouts, power and HVAC requirements,
and other such information as may be necessary. Lessor shall approve,
or request modifications of the plans. Additionally, Lessor will inform
the recipient as to the availability of resources to accommodate the
request, and any additional recurring or non-recurring charges which
may be necessary.
4. Planned Service Work Period (PWSP)
Non-emergency work which is reasonably expected to produce any signal
discontinuity must be coordinated between parties. Generally, this work
should be scheduled after midnight and before 6:00 a.m., local time.
5. Restoration
a. When restoring a cut cable, the parties agree to work together to
restore all traffic as quickly as possible. The Lessor, immediately
upon arriving on the site of the cut, shall determine the best course
of action to be taken to restore the Cable System and shall begin
restoration efforts.
b. The goal of emergency restorations splicing is to get service up as
quickly as possible. This requires the a mechanical splice such as the
"3M fiber Lock" to complete the temporary restorations.
c. If at any time it becomes apparent that the service outage is going to
extend beyond 8 hours, the corresponding Vice Presidents of each
company will work together to determine a plan to restore the Cable
System.
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<PAGE>
d. It will be the responsibility of the Lessor and the Lessee to report
any known environmental hazards which would restrict or jeopardize any
maintenance work activities in shelters or right of ways areas of
operations.
e. Lessor's representatives that are responsible for initial restorations
of a cut cable in Exhibit H shall carry the appropriate equipment put
the cable back together using a temporary splice. Lessor shall also
maintain an emergency restoration plan and an inventory of spare cable
at strategic locations to facilitate timely restoration.
f. Upon a Cable System's emergency restoration event, the Lessor will
notify the Lessee at (1) hour intervals until the emergency event or
restoration is completed.
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<PAGE>
Exhibit D
Fiber Cable Splicing, Testing and Acceptance Standards
1. Lessor will perform all tests, provide documentation, and meet the
standards identified in this exhibit. Analysis of final bi-directional OTDR
data will be the tool used to make final acceptance of the fibers.
2. Acceptance Standards
A. Pigtail Traces
When pigtails are attached to the end of the cable, the pigtail test
will be performed for that site. A 1-km launch reel that matches the
backbone cable will be attached between the OTDR and the pigtail. The
loss of the pigtail splice and connector will be measured and recorded
at 1550 nm. Lessor will provide the Lessee with a copy of the OTDR
traces of all pigtail splices stored on diskette.
The loss value of the pigtail connector and its associated splice with
matching mode field diameters will not exceed .5dB at 1550 nm. The loss
value of the pigtail connector and its associated splice with
mismatched mode field diameters should not exceed .8 dB.
B. Bi-directional Traces
Bi-directional OTDR traces will be taken without a launch reel. OTDR
traces should be taken in both directions at 1550 nm. Loss measurements
for each splice point should be measured and recorded in both
directions. These loss values should then be averaged. The traces for
all fibers should be recorded on diskette and provided to the Lessee.
NOTE:These measurements MUST BE MADE AFTER THE SPLICE HANDHOLE OR
MANHOLE IS CLOSED in order to check for macro-bending problems.
1. Field Splices
The objective for each splice is an averaged loss value of 0.1
dB or less when measured bi-directionally with an OTDR at 1550
nm. If after 3 attempts, Lessor is not able to produce a loss
value of 0.1 dB or less bi-directionally at 1550 nm, then 0.3
dB or less bi-directionally at 1550 nm will be acceptable.
Fibers not meeting the 0.1 dB or less specification will be
identified as Out Of Specification (OOS). Documentation of the
three attempts (reburns) to bring the OOS fiber within
specification will be provided.
C. Light Source and Power Meter Test
A bi-directional End to End test will be performed on each fiber in a
span at 1550 nm with a Light Source and Power Meter. The purpose of
this test is to determine actual span loss and to prove there is a
one-to-one correspondence of all fibers. It is the Lessor's
responsibility to insure proper continuity of all fibers at the fiber
level, not just the pigtail level. Any "frogs" or fibers that cross in
the route will be remedied by Lessor. The following span loss
calculation will be used:
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(A * L) + (0.1 * N) + C = Acceptable Span Loss
A = Attenuation per KM at 1550 nm
L = Optical length of cable measured in kilometers (from OTDR
Trace) N = Number of splices in a span C = Connector loss. The
connector loss will not exceed .5dB. The section
test will have (2) pigtail connectors/splices under
test, so 1.0dB will be allowed for this loss.
NOTE: IXC CABLE ACCEPTANCE CAN PROVIDE AN EXCEL SPREADSHEET FORMATED
ON DISK FOR ENTRY OF DATA
3. Naming of Traces
OTDR traces taken for bi-directional testing, and the OTDR traces of
the pigtail splice must be recorded on floppy diskette and provided to
Lessee. To name the traces, each party will provide alpha abbreviations
for the sites. The 8-character file name plus 3-character file
extension name should follow this example:
First four letters = source point Letters 5, 6, 7 =
Destination point 8th letter = wavelength Extension = fiber
number
Examples:
Springfield to Lebanon at 1550 nm, fiber 96 = sgfdlbn5.096
Springfield to Monett pigtail trace on fiber 1 = sgfdmntp.001
NOTE: ALL HEADER INFORMATION ON OTDR TRACE MUST BE COMPLETED.
4. OTDR Setup
NOTE: BEFORE THE START OF ANY TESTING, ALL CONNECTORS WILL BE CLEANED
PURSUANT TO MANUFACTURER'S SPECIFICATIONS
A. The OTDRs that are acceptable for testing are the Laser Precision
TD3000 and CMA 4000. These must have a floppy disk drive for storing
the trace files. Again, it should be noted that it is vital that during
all tests (OTDR, power meter, etc.), that all connectors are clean.
This can dramatically affect test results. The following settings
should be used.
Index of Refraction
Fiber type 1550 nm
AT&T TruWave 1.4700
AT&T Depress Clading 1.4670
Corning SMF-28 1.4684
Sumitomo 1.4670
Corning SMF-LS 1.4700
LEAF 1.4690
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OTDR Parameters TD3000 TD4000
1550 nm 1550 nm
----------------------------------------------------
Pigtail 8 km range 4 km Range
50 ns pulse 50 ns pulse
1 m resolution .5 resolution
10 Seconds 30 Seconds
NOTE: INSURE NOTE: INSURE
VERTICLE AND VERTICLE AND
HORIZONTAL OFFSETS HORIZONTAL OFFSETS
ARE SET AT 0 ARE SET AT 0
Bi-directional 1550 nm 1550 nm
----------------------------------------------------
64 km range 64 km range
500 ns pulse 1001 ns pulse
4 m resolution 4 m resolution
Medium averaging Time: 1.5 min.
NOTE: FOR SPANS NOTE: FOR SPANS
LONGER THAN 64 KM, LONGER THAN 64 KM,
SET AT 128 KM SET AT 128 KM
SETTING SETTING
2000 ns 2500 ns
----------------------------------------------------
4 m resolution 4 m resolution
Time: 1.5 min Time: 1.5 min
5. Test Packages
Lessor shall provide a package containing the following test data for
each fiber. All data provided should be saved on diskette.
A. OTDR span traces taken at 1550 nm.
B. Pigtail traces taken for each fiber.
C. An Excel spreadsheet containing the power meter and light source
data for both directions at 1550 nm. Should also include the
average for each fiber.
D. A document identifying splice points with OOS test results. Should
also include documentation supporting the three reburn attempts.
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<PAGE>
EXHIBIT E - 1
Standard Construction and Fiber Specifications
Buried Cable Specifications
1. General
The intent of this document is to outline the specifications for
construction of a fiber optic cable system. In all cases the standards
contained in this document, or the standards of the federal, state,
local or private agency having jurisdiction, whichever is stricter,
shall be followed.
2. Material
Steel or PVC conduit shall be minimum schedule 40 wall thickness.
Any exposed steel conduit, brackets or hardware (i.e., bridge
attachments) shall be hot-dipped galvanized after fabrication.
All split steel shall be flanged.
Handholes shall have a minimum H-15 loading rating.
Manholes shall have a minimum H-20 loading rating.
Buried cable warning tape shall be a minimum of three inches (3") wide
and display "Warning-Buried Fiber Optic Cable," a company name, logo
and emergency One Call 800 number repeated every twenty-four inches
(24").
Warning signs will display universal do not dig symbol, "Warning-Buried
Fiber Optic Cable," company name and logo, local and emergency One Call
800 numbers.
3. Minimum Depths
Minimum cover required in the placement conduit/cable shall be
forty-two inches (42"), except in the following instances:
The minimum cover in ditches adjacent to roads, highways, railroads and
interstates is forty-eight inches (48") below the clean out line or
existing grade, whichever is greater.
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The minimum cover across streams, river washes, and other waterways is
sixty inches (60") below the clean out line or existing grade,
whichever is greater.
At locations where fiber optic cable cross other subsurface utilities
or other structures, the fiber optic cable/conduit shall be installed
to provide a minimum of twelve inches (12") of vertical clearance from
utility/obstacle. The fiber optic cable/conduit can be placed above the
utility/obstacle, provided the minimum clearance and applicable minimum
depth can be maintained; otherwise the fiber optic cable/conduit will
be installed under the existing utility or other structure.
In rock, the cable/conduit shall be placed to provide a minimum of
eighteen inches (18") below the surface of the solid rock, or provide a
minimum of forty-two (42") of total cover, whichever requires the least
rock excavation.
Where existing pipe is used, current depth is sufficient. However,
either party will exercise commercially reasonable efforts to lower any
exposed pipe to avoid damage to the pipe, innerduct and fiber cable due
to foreseeable operations over the affected right-of-way.
4. Buried Cable Warning Tape
All cable/conduit will be installed with buried cable warning tape. The
warning tape shall be laid a minimum of twelve inches (12") above the
cable/conduit. The warning tape shall generally be placed at a depth of
twenty-four (24") below grade and directly above the cable/conduit.
5. Conduit Construction
Conduits may be placed by means of trenching, plowing, jack and bore,
mini-directional bore or directional bore. Conduits will generally be
placed on a level grade parallel to the surface, with only gradual
changes in grade elevation.
Steel conduit will be joined with threaded collars, Zap-Lok or welding.
(Welding is the preferred method.)
All paved city, county, state, federal and interstate highways, and
railroad crossings will be encased in steel conduit, where required by
permitting agency only.
All longitudinal cable run under paved streets will be placed in steel
or concrete encased PVC conduit, where required by permitting agency
only.
All cable placed in metro areas will be placed in steel or concrete PVC
conduit, where required by permitting agency only.
Metro areas shall be defined as areas where either of the following
conditions exist:
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1) Developed and improved areas.
2) High growth areas.
All crossings of major streams, rivers, bays and navigable waterways
will be placed in HDPE, PVC or steel conduit.
At all foreign utility/underground obstacle crossings, steel conduit
will be placed and will extend at least five feet (5') beyond the outer
limits of the obstacle in both directions, where required by permitting
agency only.
All jack and bores will use steel conduit.
All directional and mini-directional bores will use HDPE or steel
conduit.
Any cable placed in swamp or wetland areas will be placed in HDPE, PVC
or steel conduit.
All conduits placed on bridges will be steel.
All conduits placed on bridges shall have an expansion joint placed at
each structural (bridge) expansion joint or at least every
one-hundred-fifty feet (150'), whichever is the shorter distance.
6. Innerduct Installation
Innerduct(s) shall be installed in all steel conduits. No cable will be
placed directly in any split/solid steel conduit without innerduct.
Innerduct(s) shall extend beyond the end of all conduits a minimum of
eighteen inches (18").
7. Cable Installation in Conduit
The fiber optic cable shall be installed using a power pulling winch
and hydraulic powered assist pulling wheels. The maximum pulling force
to be applied to the fiber optic cable shall be six hundred pounds (600
lbs.). Sufficient pulling assists will be available and used to insure
the maximum pulling force is not exceeded at any point along the pull.
The cable shall be lubricated at the reel and all pulling assist
locations.
A pulling swivel breakaway rated at six hundred pounds (600 lbs.) shall
be used at all times.
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Splices will only be allowed at planned junctions and reel ends. The
cable will not be cut and spliced for the contractor's convenience
during the cable pulling operation.
A minimum of twenty meters (20m) of slack cable will be left in all
intermediate handholes and manholes.
A minimum of thirty meters (30m) of slack cable will be left in all
splice locations.
A minimum of fifty meters (50m) of slack cable will be left in all
facility locations, i.e., POP sites, switch sites, regens or CEV's.
8. Manholes and Handholes
Manholes shall be placed in traveled surface streets, and shall have
locking lids.
Handholes shall be placed in all other areas, and be installed with a
minimum of eighteen (18") of soil covering lid.
9. EMS Markers
EMS Markers shall be placed directly above the lid of all buried
handholes. EMS markers fabricated into the lids of the handholes are
acceptable.
10. Cable Markers (Warning Signs)
Cable markers shall be installed at all changes in cable running line
direction, splices, pull boxes, assist pulling locations, and at both
sides of street, highway or railroad crossings. At no time shall any
markers be spaced more than five hundred feet (500') apart in metro
areas or within line of site exceeding one thousand feet (1,000') in
non-metro areas. Markers shall be positioned so that they can be seen
from the location of the cable and generally set facing perpendicular
to the cable running line.
Splices and pull boxes shall be marked on the cable marker post.
11. Safety and Environmental
All work will be done in strict accordance with federal, state, and
local applicable private rules and laws regarding safety and
environmental issues, including those set forth by OSHA and the EPA.
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This section of Exhibit E contains various schematic drawings of fiber optic
equipment.
<PAGE>
TABLE OF CONTENTS
1.0 INTRODUCTION 1
2.0 INSTALLATION OVERVIEW 1
2.1 EQUIPMENT/SETUP 2
2.2 STRINGING 6
2.3 SAGGING/CLIPPING IN 8
2.4 HARDWARE 10
3.0 SPLICING PROCEDURES 12
3.1 SPLICE ENCLOSURE 18
3.2 CABLE PREPARATION 13
<PAGE>
FOCAS SkyLite(TM) Installation Guideline
1.0 INTRODUCTION
SkyLite(TM), FOCAS OPGW (Optical Ground Wire) comes in a wide range of
diameters, fiber counts, weights and tensile strengths. However, installation
procedures for OPGW do not vary much over this range. This document is intended
as a broad guideline which should be applicable to most OPGW installations.
FOCAS recommends that the IEEE Guide to the Installation of Overhead
Transmission Line Conductors (IEEE Std. 524), latest revision, be used in
conjunction with this document as a guideline for the Installation of
SkyLite(TM). This document is intended as a broad guideline for power utilities
and contractors and therefore does not attempt to cover every possible
installation configuration. Any inquiries for more detail on a specific topic
relating to SkyLite(TM) installations should be directed to the FOCAS
Engineering Department who will be glad to provide any possible help.
2.0 INSTALLATION OVERVIEW
This section discusses the methods and hardware utilized during the installation
of SkyLite(TM), "Tension Stringing" is recommended wherever possible. This
method is accomplished by stringing the SkyLite(TM) through a series of
temporary sheave wheels located at each structure. Constant tension is applied
to the SkyLite(TM) by a tensioner located at the payoff end. The SkyLite(TM) is
supported by the sheave wheels until tensioning is complete and hardware is
installed. Adequate tension must be maintained to provide clearance from
conductors and the ground underneath the SkyLite(TM). Other methods such as the
"Moving Reel/Payoff" method can be used, but are not covered in this document.
Please consult FOCAS Engineering Department if intending to pursue any
installation method other than "Tension Stringing". During installation of
SkyLite(TM), standard shield wire support hardware must not be used under any
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circumstances. Most standard shield wires are spliced using compression or
preformed type connectors. It is not possible to splice the SkyLite(TM) with
this type of hardware.
OPGW hardware must be used during installation of SkyLite(TM). This includes
deadends, suspensions, vibration dampers and other attachment hardware designed
specifically for OPGW. Recommended hardware and manufacturers will be covered in
section 2.4
Cable splice locations must be determined before installation of the
SkyLite(TM). These locations are normally determined by field investigation
where access can be readily made for splicing and future maintenance. The reel
length should be of sufficient length to allow enough excess cable for splicing.
2.1 EQUIPMENT / SETUP
Standard conductor stringing equipment (tensioners, pullers, etc.) can usually
be utilized to install SkyLite(TM), however they must meet IEEE std. 524, latest
version.
One important distinction is that OPGW generally requires sheave wheels with
larger groove diameters than regular shield wire or conductor. The following
minimum sheave wheel dimensions are required by FOCAS:
1. For tangent structures the minimum groove diameter of sheave wheels must
be 25 x OPGW outer diameter.
2. For angle structures the minimum groove diameter of sheave wheels varies
2
<PAGE>
with the degree of deflection angle. The following is minimum groove
diameter for various angles:
Up to 20 degrees 30 x OPGW outer diameter
Up to 40 degrees 40 x OPGW outer diameter
Up to 60 degrees 60 x OPGW outer diameter
These diameters are based on a maximum stringing tension of 20% of the Rated
Breaking Strength (RBS) of the SkyLite(TM). Reduced groove diameter of sheave
wheels may be utilized if the stringing tension is also reduced.
Consult FOCAS for recommendations.
3. For angle structure up to 90 degrees, multi-sheave wheel assemblies must
be used along with reduced stringing tension. Consult FOCAS for
recommendations.
Variations to these requirements must be made under certain conditions. The
FOCAS Engineering Department will assist in determining specifications for
varying conditions.
All sheave wheels must be lined with neoprene or elastomer product. This lining
must be continually inspected to assure it is in good condition.
On angle structures where one or two sheave assemblies are being used it is most
important that the sheave assembly be properly installed so the SkyLite(TM) will
not jump out of the groove and be damaged.
Uplift rollers (which attach to the installation sheave wheel) or holddown
blocks (which are separate blocks) need to be placed where uplift of the pulling
line is likely to occur (due to its higher tension/weight ratio than the
conductor). This will typically occur going up inclines or at a low point in a
<PAGE>
3
section. These devices should also have a breakaway feature in the event of
fouling or incorrect installation.
The bull wheel tensioners must be of the multi-groove type. All grooves must be
lined with neoprene or an acceptable elastomer coating. Single V-groove bull
wheel tensioners must be evaluated on an individual basis to determine if they
are acceptable to be used under certain conditions.
Groove diameter of all bull wheels must be a minimum of 70 X D (where "D"
represents the outer diameter of the OPGW).
Tandem bull wheels must be so aligned that the offset of grooves will be
approximately one half (1/2) of groove spacing.
The tensioner must be capable of sustaining the recommended pulling tension even
when stopped. The tensioner must have an accurate tension control system. The
pulling and braking systems should operate smoothly and must never cause any
sudden jerking or bouncing of the SkyLite(TM).
The reel stand must be an integral part of the tensioner or attached solidly to
the tensioner to prevent movement between the tensioner and the SkyLite(TM)
reel.
The SkyLite(TM) reel must be placed on the reel stand with the SkyLite(TM)
feeding off the top of the reel. For left-hand direction of lay of outer
strands, the SkyLite(TM) must enter the bull wheel on the right side and pull
off from the left. This arrangement is necessary to avoid any tendency to loosen
the outer layer of strands as the SkyLite(TM) passes over the bull wheels. The
payoff reel and tensioner must be setup so that the horizontal distance from the
4
<PAGE>
tensioner to the first structure is three times the height of the attachment
point on the first structure or a 3:1 ratio. Likewise the puller and take-up
reel must be located away from the last structure with the same 3:1 ratio of
horizontal distance to vertical height. The cable reel must not be used as a
tensioning device during installation. The reels are not designed for this
purpose and the cable could be damaged.
GRAPHIC ILLUSTRATED TEXT
Wood reels with SkyLite(TM) require special handling. To life a wood reel a
chain or cable around the mandrel or through the arbor holes must be attached to
a spreader bar to prevent smashing the reel top and damaging the fibers.
All wood lagging must remain in place on all reels until placed on pay-out racks
and rack is in position for cable stringing.
All reels with SkyLite(TM) must be stored and transported on edge.
When SkyLite(TM) cables are received from the manufacturing plant, they should
be tested to verify continuity and actual length of the cable. It should be
pointed out that the actual length of the SkyLite(TM) cable is shorter than the
length of the fibers.
5
<PAGE>
GRAPHIC ILLUSTRATED TEXT
2.2 STRINGING
FOCAS recommends that the maximum pulling tension must be 20% of the SkyLite(TM)
Rated Breaking Strength (RBS). The actual tension used must be kept constant and
chosen such that adequate clearance is maintained both by the SkyLite(TM) and
the attached anti-rotation devices (see drawing in back of manual) over any
conductors and the ground underneath the SkyLite(TM). Contact with the ground,
buildings, trees and other conductors could damage the cable. The maximum
pulling speed must be 250 feet per minute (2.85 mph) (4.59 km/h).
The speed of the pull should always be slowed considerably as an anti-rotation
device approaches a sheave wheel in order to allow the anti-rotation device to
pass smoothly through the sheave wheel.
Stranded wire or nylon ropes can be used as pulling lines. The line must also be
rated strong enough to withstand the installation tension required. If an
existing shield wire is being replaced by SkyLite(TM), then it can potentially
be used as a pulling line for the SkyLite(TM). However, its condition must be
carefully assessed in advance to ensure that it will withstand the pulling
6
<PAGE>
tensions and will not fail during the pulling operation. In particular all
splices on the existing groundwire must be tested for adequate strength. If the
strength of the existing cable is questionable, then it must be replaced with a
pulling line.
An anti-rotation device must be used between the pulling line and the
SkyLite(TM) to insure that the cable does not rotate while being pulled.
Variations of these devices have been successfully used. Please consult the
FOCAS Engineering Department for any inquiries regarding a particular form of
anti-rotation device.
SkyLite(TM) must be attached with Kellem grips of the appropriate size and
firmly fastened to the cable with screw type or punch clamps. The Kellem grip is
then attached to a dummy swivel which is then attached to an anti-rotation
device if the anti-rotation device is separate from the SkyLite(TM) cable. The
leading edge of the anti-rotation device is attached to the pulling line with a
full swivel. If the tails of the anti-rotational device are mounted directly on
the SkyLite(TM), then the Kellem grip is attached to the full swivel and pulling
line.
Traveling grounds must be installed on the SkyLite(TM) as it leaves the bull
wheel tensioner to protect craftsmen in case the cable may inadvertently come in
contact with an energized circuit or be energized by induction from a parallel
circuit or be hit by a lightning strike. The tensioner and pulling equipment
must also be grounded.
Guard structures or miscellaneous types of rope or insulator guards must be
installed for foreign power and telephone lines, miscellaneous obstructions and
road and railroad crossings.
When SkyLite(TM) has been strung (installed) and while still under stringing
tension, screw type (tubing) clamps must be installed at each end of the
7
<PAGE>
SkyLite(TM) cable. These clamps will prevent the outer strands from unwinding
from the channel core.
It is possible to pull through several large angles on one stringing section. If
a customer has any concerns regarding the number/severity of angles on a
stringing section they should contact the FOCAS Engineering Department for
advice or recommendations.
At all angles greater than 60 degrees, FOCAS recommends that a lineman be
positioned close enough to the sheave wheel to assist the anti-rotation device
as it passes through the sheave wheel. If this is not feasible then there should
be a lineman on the ground, in direct contact with the puller operator, in case
of any problems that may arise as the anti-rotation devices pass through sheave
wheels. Communications should be maintained between the puller operator,
tensioner operator and at each structure as the anti-rotation device passes
through the sheave wheel.
Proper communications between all craftsmen when installing SkyLite(TM) are
critical to assure safe and efficient installations. Radio communications on a
private local frequency is the most viable mode of communications.
2.3 SAGGING/CLIPPING IN
SkyLite(TM) is sagged in an identical manner to standard shield wires.
Three methods of sagging to arrive at the correct sag/tension are:
1. Stop watch
2. Target
<PAGE>
8
3. Dynamometer
The stop watch method is satisfactory for short spans only. The target method is
the most accurate method used on a wide range of spans. The dynamometer method
is acceptable if used on all sag sections.
Sag checks must be made for each 1 -1/4 miles (2kms) of line section to assure
proper sags and tensions between deadend towers. The correct sag and tension is
dependent on a number of factors including span length and temperature. Sag
tables are available from FOCAS for this purpose.
When the SkyLite(TM) is to be tensioned for sagging and deadending, a pocketbook
type (come-along) grip is to be used for clamping on the cable. This grip must
have a groove diameter honed to match the exact outer diameter of the
SkyLite(TM) cable. The only substitute for this would be an OPGW deadend.
SkyLite(TM) should be clipped in and grounds installed within 24 hours of
sagging and deadending. In an emergency this may be extended to 48 hours if
during the first 24 hours, grounds are installed to dissipate a lightning
strike.
Aeolian vibration can cause damage to unclipped and undampered SkyLite(TM) if it
is left for extended periods of time in stringing sheaves. Vibration can be at
its highest at initial installation tensions.
Always be familiar and observe all of your company's safety rules when working
with overhead electric lines. These installation recommendations should not
supersede any safety practices.
9
<PAGE>
2.4 HARDWARE
Under no circumstances should standard shield wire hardware be used during an
SkyLite(TM) installation. Many hardware manufacturers provide hardware designed
specifically for use with OPGW. FOCAS recommends Preformed Line Products,
Dulmison or Alcoa. If a customer wishes to use any other manufacturer they
should first contact the FOCAS Engineering Department.
Hardware for SkyLite(TM) installations includes deadends, suspensions, vibration
dampers, downlead cushions, splice enclosures and miscellaneous tower attachment
hardware (anchor shackles, clevises etc.).
Deadends are installed at the first and last tower of any stringing section and
also on angles which are too great for suspensions. Suspensions or double
suspensions are used at all other towers. The maximum angle for single
suspensions is 30 degrees and for double suspensions is 60 degrees. Downlead
cushions are used to guide the SkyLite(TM) down the tower from the deadend to
the splice enclosure.
Downlead cushions should be spaced approximately every five- (5) feet (1.5m). On
wood or laminated poles, lag screws or bolts are used to attach downlead
cushions. On steel poles some utilities will allow holes to be bored and tapped,
while others will require stainless steel banding be used. Concrete poles also
call for stainless steel banding for all downlead cushions. On lattice steel
towers, downlead cushions are installed by boring and installing bolts or the
use of clamps over the steel members.
10
<PAGE>
GRAPHIC ILLUSTRATED TEXT
Appropriate downlead cushion extensions must be located so the SkyLite(TM) will
clear all steel members. Lattice steel towers tend to vibrate under certain
atmospheric conditions. If the SkyLite(TM) is allowed to touch the steel members
the vibration could cause abrasion resulting in failure of the cable and optical
fibers.
On certain power lines the shield wire is insulated. This could require downlead
cushions to be mounted on insulators and must assure there is no contact with
steel tower members. A special investigation and/or design is required for each
installation. Contact FOCAS Engineering for questions regarding insulated OPGW
system.
The splice box enclosure contains the trays for mounting the optical fiber
splices which are normally fusion spliced. Most utilities require the enclosure
to be placed inside a bullet-proof container. This container is either bolted or
banded to the tower leg approximately eighteen (18) feet (5.5m) above the ground
line.
11
<PAGE>
Vibration dampers are installed to suppress Aeolian vibration which can be
induced in the installed SkyLite(TM) by local environmental conditions. The
number of vibration dampers to be installed is dependent on several factors
including ruling span, tensions and loading conditions. Recommendations for
vibration dampers are available from the FOCAS Engineering Department or from
the vibration damper manufacturer.
Vibration dampers are manufactured in three basic designs. They are the
stockbridge, dogbone, and spiral type. Other designs are being investigated
including mid-span dampers.
Stockbridge and dogbone type vibration dampers are mounted on the SkyLite(TM)
with bolted clamps. These clamps must be tightened to a specified torque using
calibrated torque wrenches. Torque specifications are recommended by the
manufacturers of vibration dampers.
3.0 SPLICING PROCEDURES
The fibers of consecutive stringing sections must be spliced together to form an
optical path. These splices are inserted in a splice enclosure for protection.
Several methods are available to splice the fibers but fusion splicing is by far
the most popular.
Allowance must be made for splicing when calculating reel lengths in advance of
installation and when cutting the SkyLite(TM) after pulling, sagging, and
clipping in. Adequate excess must be left to allow the SkyLite(TM) to run down
the tower and some extra to allow the person performing the splicing room to
work with the SkyLite(TM) at ground level.
12
<PAGE>
Splicing procedures are maintained by the splicing contractor. Consult your
splicing contractor for splicing procedures. See section 3.2 for a description
on cable preparation for splicing.
3.1 SPLICE ENCLOSURE
The splice enclosure is typically mounted on the side of the tower roughly
eighteen (18) feet (5.5m) above the ground. The height above ground is usually
adequate to keep the splice enclosure out of reach of vandals, children etc.
Once the fibers are spliced together and the splices are mounted on splice
trays, the trays are inserted into the splice enclosure which is attached to the
tower. The splice enclosure can be attached to the structure by means of several
methods, or inserted into a bulletproof container. Consult the splice enclosure
manufacturer for details. Excess SkyLite(TM) is coiled up and attached to the
tower under, around or beside the splice enclosure. The cable coil can be
attached to the structure by the use of modified downlead cushions or stainless
steel banding. This will allow the enclosure to be easily accessed for future
maintenance if required. The coil should be at least three- (3) feet (0.91 m) in
diameter to avoid excessive bending and damage to the cable and fibers.
3.2 CABLE PREPARATION
Measure and mark ten (10) feet (3 m) of cable for splice preparation. Attach a
hose clamp at the ten (10) feet (3 m) mark. This will keep the outer strands in
place while the strands are cut. Use a hacksaw to cut the strands six (6) inches
(15 cm) from the clamp making sure not to cut too far and damage the channel
core and fiber. Remove the strands (and aluminum tape if present) from the
13
<PAGE>
cable, exposing the aluminum core with the buffer tubes. Unwrap the additional
six (6) inches (15 cm) of strands (and remove additional aluminum tape if
present) so that it will be possible to apply sealing tape around the core
underneath the ends of the wires. Sealing tape is available from Preformed Line
Products part # 80801796 and General Sealant Co. part #GS-37.
Clean the surface under the wires and around the channel core so that the tape
will adhere to the core. Apply one (1) or two (2) half-lapped layers of tape
around the channel core so that when the wires are again wrapped around the
core, the excess tape will fill the interstices between the wires when the end
cap is applied. Rewrap the wires around the core and the sealing tape. The
sealing tape should be located under the last six (6) inches (15 cm) of wire.
Prepare the outside of the wires in a similar fashion applying sealing tape to
the last six (6) inches (15 cm) of stranding.
Install the cable in the splice enclosure end cap per manufacturer's
recommendations. Carefully remove the buffer tubes from the exposed core one at
a time. Be careful not to kink the tubes during the handling. Cut the core so
that two (2) inches (5 cm) will extend from the ends of the stranded wire.
Remove any burrs from the channel core slots that may appear after cutting so
the tubes will fit in place. Replace tubes in the slots and wrap electrical tape
around the remaining two (2) inches (5 cm) of core over lapping one half (1/2)
inch (1.2 cm) beyond the core. This will secure the tubes and help prevent
kinking the tubes during handling. Secure the buffer tubes in the splice tray
per the manufacturer's instructions. After completion of the splicing operation,
assemble the splice enclosure in accordance with the manufacturer's
recommendations. Repeat the above procedure for each cable end that will need
splicing.
14
<PAGE>
GRAPHIC ILLUSTRATED TEXT
For additional questions, please contact FOCAS Engineering Department at
770-664-4949.
<PAGE>
GRAPHIC ILLUSTRATED DIAGRAM
OPGW ANTI-ROTATIONAL DEVICE
<PAGE>
EXHIBIT E
Fiber Performance Specifications
The following span loss calculation will be used:
(A * L) + (0.1 * N) + C = Acceptable Span Loss
A = Attenuation per KM at 1550 nm (see note below) L = Optical
length of cable measured in kilometers (from OTDR Trace) N =
Number of splices in a span C = Connector loss. The connector
loss will not exceed .5dB. The section test will have (2)
pigtail connectors/splices under test, so 1.0dB will be
allowed for this loss.
Acceptable Attenuation ("A") on any span shall be equal to or less than
0.24 dB per KM.
<PAGE>
EXHIBIT F
Equipment Shelters
[To be Added Later by Amendment as Negotiated by Both Parties]
<PAGE>
EXHIBIT G
Collocation Agreement Form
[To be Added Later by Amendment as Negotiated by Both Parties]
<TABLE> <S> <C>
<ARTICLE> 5
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This schedule contains summary financial information extracted from Electric
Lightwave, Inc.'s Financial Statements for the period ended March 31, 1999
and is qualified in its entirety by reference to such financial statements.
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and is qualified in its entirety by reference to such financial statements.
</LEGEND>
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