<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 27, 1998.
REGISTRATION NO. 333-52247
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2 TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
PATHNET, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 4813 52-1941838
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
OF CLASSIFICATION CODE NUMBER) IDENTIFICATION
INCORPORATION OR ORGANIZATION) NUMBER)
</TABLE>
1015 31ST STREET, N.W.
WASHINGTON, DC 20007
(202) 625-7284
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MICHAEL A. LUBIN, ESQ.
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
1015 31ST STREET, N.W.
WASHINGTON, DC 20007
(202) 625-7284
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
PAUL D. GINSBERG, ESQ. ROBERT EVANS III, ESQ.
PAUL, WEISS, RIFKIND, WHARTON & SHEARMAN & STERLING
GARRISON 599 LEXINGTON AVENUE
1285 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10022
NEW YORK, NEW YORK 10019 (212) 848-4000
(212) 373-3000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED (1) PER SHARE(2) PRICE (1)(2) FEE
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share 5,390,625 shares $17.00 $91,640,625 $27,034 (3)
</TABLE>
(1) Includes shares issuable upon exercise of over-allotment option granted to
the Underwriters.
(2) Estimated pursuant to Rule 457 solely for purposes of calculating the
registration fee.
(3) Previously paid.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains a Prospectus relating to an offering in
the United States and Canada ("U.S. Offering") of an aggregate of 3,750,000
shares of common stock of Pathnet, Inc., par value $.01 per share (the "Common
Stock"), together with separate Prospectus pages relating to a concurrent
offering outside of the United States and Canada ("International Offering") of
an aggregate of 937,500 shares of Common Stock. The complete Prospectus for the
U.S. Offering follows immediately after this Explanatory Note. After such
Prospectus is the front cover page for the Prospectus for the International
Offering. All other pages of the Prospectus for the U.S. Offering are identical
and are to be used for both the U.S. Offering and the International Offering.
The complete Prospectus for each of the U.S. Offering and International Offering
in the exact forms in which they are to be used after effectiveness of this
Registration Statement will be filed with the Securities and Exchange Commission
pursuant to Rule 424(b).
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED JULY 27, 1998
4,687,500 SHARES
[LOGO]
COMMON STOCK
-----------------
ALL OF THE SHARES OF COMMON STOCK, PAR VALUE $.01 PER SHARE, OFFERED HEREBY ARE
BEING SOLD BY PATHNET, INC. OF THE 4,687,500 SHARES OF COMMON STOCK BEING
OFFERED, 3,750,000 SHARES ARE BEING OFFERED INITIALLY IN THE UNITED STATES
AND CANADA BY THE U.S. UNDERWRITERS AND 937,500 SHARES ARE BEING OFFERED
INITIALLY OUTSIDE THE UNITED STATES AND CANADA BY THE INTERNATIONAL
UNDERWRITERS. SEE "UNDERWRITERS." PRIOR TO THE OFFERING, THERE HAS
BEEN NO PUBLIC MARKET FOR THE COMMON STOCK OF THE COMPANY. IT IS
CURRENTLY ESTIMATED THAT THE INITIAL PUBLIC OFFERING PRICE PER
SHARE WILL BE BETWEEN $15.00 AND $17.00. SEE "UNDERWRITERS" FOR
A DISCUSSION OF THE FACTORS CONSIDERED IN DETERMINING THE
INITIAL PUBLIC OFFERING PRICE.
------------------------
APPLICATION HAS BEEN MADE FOR QUOTATION OF THE SHARES ON THE NASDAQ NATIONAL
MARKET UNDER THE SYMBOL "PTNT."
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-------------------
PRICE $ A SHARE
-------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
-------------------- -------------------- --------------------
<S> <C> <C> <C>
PER SHARE............................................ $ $ $
TOTAL(3)............................................. $ $ $
</TABLE>
- ---------
(1) THE COMPANY HAS AGREED TO INDEMNIFY THE UNDERWRITERS AGAINST CERTAIN
LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. SEE "UNDERWRITERS."
(2) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY ESTIMATED AT $850,000.
(3) THE COMPANY HAS GRANTED THE U.S. UNDERWRITERS AN OPTION, EXERCISABLE
WITHIN 30 DAYS OF THE DATE HEREOF, TO PURCHASE UP TO AN AGGREGATE OF
703,125 ADDITIONAL SHARES OF COMMON STOCK AT THE PRICE TO PUBLIC LESS
UNDERWRITING DISCOUNTS AND COMMISSIONS FOR THE PURPOSE OF COVERING
OVER-ALLOTMENTS, IF ANY. IF THE U.S. UNDERWRITERS EXERCISE SUCH OPTION IN
FULL, THE TOTAL PRICE TO PUBLIC, UNDERWRITING DISCOUNTS AND COMMISSIONS
AND PROCEEDS TO COMPANY WILL BE $ , $ AND $ ,
RESPECTIVELY. SEE "UNDERWRITERS."
------------------------
THE SHARES ARE OFFERED, SUBJECT TO PRIOR SALE, WHEN, AS AND IF ACCEPTED BY
THE UNDERWRITERS NAMED HEREIN AND SUBJECT TO APPROVAL OF CERTAIN LEGAL MATTERS
BY SHEARMAN & STERLING, COUNSEL FOR THE UNDERWRITERS. IT IS EXPECTED THAT
DELIVERY OF THE SHARES WILL BE MADE ON OR ABOUT , 1998, AT THE
OFFICE OF MORGAN STANLEY & CO. INCORPORATED, NEW YORK, N.Y., AGAINST PAYMENT
THEREOF IN IMMEDIATELY AVAILABLE FUNDS.
-------------------
MORGAN STANLEY DEAN WITTER
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS
J. P. MORGAN & CO.
, 1998
<PAGE>
[ARTWORK: MAP SHOWING THE COMPANY'S TARGETED NETWORK AND A PHOTOGRAPH OF THE
COMPANY'S NETWORK OPERATIONS CENTER]
<PAGE>
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITY OTHER THAN THE COMMON STOCK OFFERED HEREBY, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE
SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREBY SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.
------------------------
For investors outside the United States: No action has been or will be taken
in any jurisdiction by the Company or any Underwriter that would permit a public
offering of the Common Stock or possession or distribution of this Prospectus in
any jurisdiction where action for that purpose is required, other than in the
United States. Persons into whose possession this Prospectus comes are required
by the Company and the Underwriters to inform themselves about, and to observe
any restrictions as to, the offering of the Common Stock and the distribution of
this Prospectus.
In this Prospectus, references to "dollar" and "$" are to United States
dollars.
------------------------
Until , 1998 (25 days after the date of this Prospectus), all
dealers effecting transactions in the Common Stock, whether or not participating
in this distribution, may be required to deliver a Prospectus. This delivery
requirement is in addition to the obligation of dealers to deliver a Prospectus
when acting as Underwriters and with respect to their unsold allotments or
subscriptions.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................... 4
Risk Factors..................................... 9
Use of Proceeds.................................. 22
Dividend Policy.................................. 22
Dilution......................................... 23
Capitalization................................... 24
Selected Consolidated Financial Data............. 26
Management's Discussion and
Analysis of Financial Condition
and Results of Operations...................... 27
Business......................................... 36
Management....................................... 54
Certain Relationships and Related Transactions... 64
Security Ownership of Certain Beneficial Owners
and Management................................. 67
<CAPTION>
PAGE
-----
<S> <C>
Description of Capital Stock..................... 69
Description of Certain Indebtedness.............. 73
Shares Eligible for Future Sale.................. 74
Underwriters..................................... 76
Certain United States Federal Tax Consequences to
Non-United States Holders of Common Stock...... 79
Legal Matters.................................... 82
Experts.......................................... 82
Available Information............................ 82
Forward-Looking Statements....................... 83
Index to Financial Statements.................... F-1
Glossary......................................... A-1
</TABLE>
------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF THE COMMON
STOCK. SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE
OFFERING AND MAY BID FOR, AND PURCHASE, SHARES OF COMMON STOCK IN THE OPEN
MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS."
3
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND THE NOTES THERETO AND THE OTHER
FINANCIAL DATA CONTAINED ELSEWHERE IN THIS PROSPECTUS. PROSPECTIVE INVESTORS
SHOULD CAREFULLY CONSIDER THE FACTORS SET FORTH HEREIN UNDER THE CAPTION "RISK
FACTORS" AND ARE URGED TO READ THIS PROSPECTUS IN ITS ENTIRETY. PLEASE REFER TO
THE GLOSSARY FOR DEFINITIONS OF CERTAIN CAPITALIZED TERMS USED IN THIS SUMMARY
AND ELSEWHERE IN THE PROSPECTUS WITHOUT DEFINITION. UNLESS OTHERWISE INDICATED,
THE INFORMATION IN THIS PROSPECTUS (I) GIVES EFFECT TO A 2.9-FOR-ONE SPLIT OF
THE COMPANY'S COMMON STOCK (THE "STOCK SPLIT"), (II) ASSUMES THE CONVERSION OF
ALL OUTSTANDING SHARES OF THE COMPANY'S PREFERRED STOCK INTO 15,864,716 SHARES
OF COMMON STOCK (THE "PREFERRED STOCK CONVERSION") WHICH WILL BE EFFECTED AFTER
GIVING EFFECT TO THE STOCK SPLIT AND UPON COMPLETION OF THE OFFERING, AND (III)
ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT EXERCISED. UNLESS
OTHERWISE NOTED, STATEMENTS IN THIS PROSPECTUS CONCERNING ROUTE MILES HAVE BEEN
DERIVED FROM INFORMATION PUBLICLY AVAILABLE FROM THE FEDERAL COMMUNICATIONS
COMMISSION (THE "FCC"). UNLESS OTHERWISE SPECIFIED OR THE CONTEXT OTHERWISE
REQUIRES, REFERENCES IN THIS PROSPECTUS TO THE "UNITED STATES" MEAN THE 48
CONTINENTAL STATES OF THE UNITED STATES OF AMERICA AND REFERENCES TO THE
"COMPANY" OR "PATHNET" MEAN PATHNET, INC. AND ITS SUBSIDIARIES, COLLECTIVELY.
THE COMPANY
Pathnet intends to become a leading provider of high quality, low cost, long
haul telecommunications capacity to second and third tier markets throughout the
United States primarily by upgrading existing wireless infrastructure to develop
a state-of-the-art, digital network. The Company is positioning itself primarily
as a 'carrier's carrier,' providing a high capacity, dedicated network to
interexchange carriers ("IXCs"), local exchange carriers ("LECs"), Internet
service providers ("ISPs"), the Regional Bell Operating Companies ("RBOCs"),
other 'carrier's carriers,' cellular operators and resellers (collectively,
"Telecom Service Providers"). The Company's digital network is based on a
Synchronous Optical Network Technology ("SONET") architecture which enables
transmission of voice, data and video at very high speed. The network is being
deployed by upgrading, integrating and leveraging existing telecommunications
assets, sites and rights of way, including those utilized by railroads,
utilities, state and local governments and pipelines ("Incumbents"). By
integrating the existing networks of Incumbents, the Company expects to obtain
the equivalent of a nationwide spectrum license at minimal licensing cost.
The Company's goal is to deploy a network covering 21,000 route miles by the
middle of 2000 and eventually to deploy a network encompassing more than 100,000
route miles. Based on market research prepared for the Company by a leading
telecommunications research firm, the estimated addressable market for the
Company's services is expected to grow from approximately $6 billion in 1998 to
approximately $17 billion by 2008. The Company believes its strategy of
developing a high quality, low cost, digital network primarily in smaller
markets will enable the Company to take advantage of (i) the limited capacity
currently available or expected to be constructed in smaller markets, (ii)
higher prices generally available in those markets and (iii) technological and
cost advantages of the Company's deployment strategy. The Company is a
development stage enterprise that is currently designing, constructing, testing
and commissioning its digital network, which will initially serve markets in 34
states. The Company has completed over 800 route miles of its network located in
Iowa, Minnesota, Montana, North Dakota and South Dakota, is currently
constructing approximately 5,000 additional route miles and is providing
commercial service on a portion of its network. The Company's operations have
resulted in cumulative net losses of $8.8 million from inception in 1995 through
March 31, 1998. The Company expects that the capital expenditures needed to
deploy the first 21,000 route miles of its network through the middle of 2000
will be approximately $290 million.
The Company's core strategy for deploying its network is to form strategic
relationships with Incumbents and other owners of telecommunications assets that
enable the Company to leverage these existing assets, thereby reducing the
Company's capital costs and time to market. The Company has identified
Incumbents currently holding or operating private networks in the United States
that in the aggregate cover approximately 465,000 route miles. Through its sales
staff and other engineering, financial
4
<PAGE>
and legal professionals, the Company has held meetings with over 300 of these
Incumbents. As of June 2, 1998, 49 of these entities, which together control
approximately 95,000 route miles, have authorized the Company in writing to
prepare preliminary engineering evaluations of their networks for the purpose of
entering into long-term strategic relationships with the Company. Of these 49
entities, seven entities, which collectively control approximately 15,000 route
miles, have entered into eight binding agreements relating to the initial design
and construction of approximately 9,000 route miles of network. Seven of these
binding agreements are long-term fixed point microwave services agreements ("FPM
Agreements") with affiliates of Enron, Idaho Power Company, Northeast Missouri
Electric Power Cooperative, Northern Indiana Public Service Company ("NIPSCO"),
Texaco and two affiliates of KN Energy. The eighth agreement is a binding term
sheet with American Tower Corporation ("ATC"), which controls certain
telecommunications assets, including certain assets divested by CSX Railroad,
ARCO Pipeline and MCI Communications Corporation ("MCI"). In addition, the
Company is currently pursuing long-term strategic relationships with 25 out of
the 49 entities which control approximately 66,000 additional route miles of
network. These potential relationships are in varying stages of evaluation,
system design and business and contract negotiations. In addition to deploying
its wireless network to serve second and third tier markets by forming long-term
relationships with Incumbents, the Company may pursue opportunities to acquire
or deploy complementary telecommunications assets or technologies and to serve
other markets. See "Risk Factors--Risks of Completing the Company's Network;
Market Acceptance."
Pathnet was founded in August 1995, and its initial investors include a
group of financial sponsors led by Spectrum Equity Investors ("Spectrum") and
New Enterprise Associates ("NEA"). The Company's current investors also include
Dennis R. Patrick, former Chairman of the FCC. The Company's Chairman, David
Schaeffer, has more than 20 years of business and entrepreneurial experience,
including building and operating wireless networks. Richard A. Jalkut, the
Company's President and Chief Executive Officer, has over 30 years of
telecommunications experience, including as President of NYNEX
Telecommunications, an operating subsidiary of NYNEX Corporation with more than
$12.0 billion in annual revenues and 60,000 employees. Kevin J. Bennis, formerly
President of Frontier Communications, is Executive Vice President of the Company
serving as President of the Company's Communications Services Division. Prior to
working at Frontier Communications, Mr. Bennis served in various positions for
21 years at MCI, including as Senior Vice President of Marketing. Michael L.
Brooks, the Company's Vice President of Network Development, directed the
initial construction of the 3,500-mile digital microwave network at Qwest
Microwave Communications, a predecessor of Qwest Communications International
Inc. ("Qwest"), as its Vice President of Engineering.
COMPETITIVE ADVANTAGES
The Company believes that it will enjoy the following competitive
advantages:
UBIQUITOUS COVERAGE. The Company's goal is to deploy a network covering
21,000 route miles by the middle of 2000 and eventually to deploy a network
encompassing more than 100,000 route miles. The extensive scope and attractive
characteristics of Pathnet's wireless network architecture should enable the
Company to provide greater ubiquity than many other long haul carriers.
Pathnet's network architecture enables the Company to provide access and
termination points approximately every 25 miles, which is not economically
feasible for most fiber optic networks. This architecture increases the number
of cities that can be served cost effectively on each route.
LOWER NETWORK COST. By leveraging the resources of Incumbents and other
owners of telecommunications assets and by utilizing lower-cost wireless
technology, the Company believes it will gain a significant competitive
advantage over carriers seeking to deploy newly constructed digital networks to
serve the Company's target markets. Based upon publicly available information,
the Company believes that, for capacity of OC-24, the Company's average capital
cost per DS-0 circuit mile will be approximately $1.55 versus approximately
$1.90 for newly constructed digital microwave capacity, approximately $3.00 for
newly constructed aerial fiber and approximately $4.10 for newly constructed
fiber buried in conduit. In
5
<PAGE>
addition, the Company's relationships with Incumbents also are expected to
mitigate maintenance and ongoing administrative costs by utilizing Incumbents'
technicians to perform facility and equipment maintenance and on-site circuit
provisioning and by leaving ongoing utility, real estate taxes and other
infrastructure costs with Incumbents.
SUCCESS-BASED CAPITAL EXPENDITURE. The Company's network is designed to
reduce the risk of capital investment by deploying a substantial portion of its
network on a demand-driven basis. After an Initial System is deployed, the
Company's additional capital expenditures will relate primarily to deploying
incremental equipment to provide additional capacity in response to specific
customer demand. As a result, the Company believes that a majority of its
capital expenditures will be success-based. The Company will be able to mitigate
its capital expenditures by redeploying network equipment to respond to shifting
customer demand.
BARRIERS TO ENTRY. The Company's principal strategy is to enter into
exclusive long-term relationships with Incumbents to upgrade and develop their
fixed point microwave networks. This strategy enables the Company to minimize
the significant costs and obstacles associated with the development of long haul
telecommunications capacity. The Company believes that fiber networks, the
primary alternative source of bandwidth, may be too expensive to install in the
smaller markets targeted by the Company. The greater capacity offered by fiber
networks may not be cost effective in smaller markets due to the higher costs
per bit of capacity sold to lower volume markets.
HIGH QUALITY, TECHNOLOGICALLY ADVANCED NETWORK. The Company's network is
being designed for superior reliability and security and will be capable of
carrying a full array of voice, data and video communications. The Company's
network is being deployed using a high capacity digital SONET platform, which
will provide high quality voice, data and video transmission comparable to or
exceeding that of most fiber optic networks. The Company expects to deliver
99.999% network reliability on any individual path with an average bit error
rate of no greater than 10(-13). The capacity created by Pathnet is expected to
meet the highest industry standards, including those of AT&T Corporation
("AT&T") and MCI, and Bell Communications Research's ("Bellcore") specifications
for reliability.
BUSINESS STRATEGY
Key components of the Company's business and operating strategies are
described below:
FOCUS ON SMALLER, CAPACITY CONSTRAINED MARKETS. The Company intends to focus
on smaller markets that typically have limited access to transmission capacity
and that currently are served by incumbent local exchange carriers ("ILECs") and
few other competitors. Private line rates in second and third tier markets are
believed by the Company to be significantly higher than rates between larger
markets because these smaller markets are typically dependent on ILECs and other
facilities-based carriers. Based on FCC data and other publicly available
information, the Company estimates that most existing or planned facilities-
based long distance providers' networks are designed to connect primarily the
top 120 Metropolitan Statistical Areas ("MSAs") in the United States.
POSITION THE COMPANY AS A 'CARRIER'S CARRIER.' The Company intends to sell a
majority of its capacity to Telecom Service Providers. The Company believes
there are substantial benefits to a 'carrier's carrier' strategy, including (i)
lower sales, marketing and servicing costs, (ii) elimination of significant
capital outlays to provide switching services to end-users, (iii) the ability to
carry most of its customer traffic on its own network, thereby increasing
operating margins, and (iv) increased attractiveness to Telecom Service
Providers, who will not view the Company as a potential competitor.
ESTABLISH STRATEGIC RELATIONSHIPS. The Company's core strategy for deploying
its network is to form strategic relationships with Incumbents and other owners
of telecommunications assets that will enable the Company to utilize existing
infrastructure, permits and other regulatory approvals in order to reduce the
Company's time to market and construction costs. The Company believes that
Incumbents will find a strategic relationship with the Company to be attractive
due to the opportunity for Incumbents to (i) reduce the costs of upgrading the
Incumbent's infrastructure, (ii) receive incremental capacity which
6
<PAGE>
has greater reliability characteristics than most of the Incumbents' existing
systems, and (iii) leverage under-utilized assets and receive a share of the
incremental revenues generated by Pathnet. See "Risk Factors--Dependence on
Relationship with Incumbents; Rights of Incumbents to Certain Assets."
BUILD DIRECT SALES FORCE AND PROVIDE SUPERIOR CUSTOMER SERVICE. The Company
is building a national accounts sales force that will use a consultative
approach designed to provide a systematic review of a large carrier's network
requirements in smaller markets and to offer solutions to reduce the carrier's
network costs and improve its reliability. The Company is also building a
regional sales force that will market the Company's network capacity to smaller
carriers and to selected large end-users. In addition, pursuant to the FPM
Agreements, the Company utilizes Incumbents as an alternative sales channel to
sell to large end-users who reside near Incumbents' facilities. The Company
expects to offer high reliability and superior customer service, including
maintaining a centralized Network Operations Center (the "NOC") to initiate new
services and monitor existing circuit capacity more easily.
FINANCING PLAN
To date, the Company has funded its expenditures primarily with equity
investments made by the Company's stockholders and the proceeds from the
Company's debt financings. The development of the Company's business plan will
require substantial additional capital to fund capital expenditures, working
capital and operating losses. The Company's principal capital expenditures
include costs related to the installation of digital transmission equipment and,
to a lesser extent, site preparation work. The Company expects that a majority
of its capital expenditures will relate to deploying incremental capacity to
meet specific customer demand. The Company currently forecasts that it will
require approximately $315 million to fund the Company's operating losses,
working capital and capital expenditures through the middle of 2000, at which
time the Company expects to have completed a 21,000 route mile network. Proceeds
from the Offering and cash on hand are expected to provide the Company with
adequate resources to meet these projected capital requirements. The Company
intends to use any additional available funds to accelerate its development
plans. The Company's financing plan consists of the following components:
- DEBT OFFERING. On April 8, 1998, the Company completed the issuance and
sale of the 350,000 units (collectively, the "Units"), consisting of
Senior Notes due 2008 (the "Notes") and warrants to purchase shares of
Common Stock (the "Warrants"), resulting in net proceeds to the Company of
$339.5 million (the "Debt Offering"), of which the Company used $81.1
million to purchase securities (the "Pledged Securities") to provide for
payment in full of interest due on the Notes through April 15, 2000.
- PRIVATE EQUITY INVESTMENT. Concurrently with the Debt Offering, the
Company completed the issuance and sale of 1,879,699 shares of Series C
Preferred Stock at an aggregate price of $20.0 million (the "1998 Private
Equity Investment"), bringing the total investment by the Company's
private equity investors to $36.0 million. In connection with the
Offering, all of the Company's outstanding preferred stock will be
converted into an aggregate of 15,864,716 shares of Common Stock. The Debt
Offering, the 1998 Private Equity Investment and the Preferred Stock
Conversion are collectively referred to herein as the "Transactions."
- INITIAL PUBLIC OFFERING. Gross proceeds of the Offering to the Company are
estimated to be approximately $75.0 million.
In addition, the Company is currently exploring several equipment financing
and other financing alternatives. Although the Company has received commitments
(subject to definitive documentation) from prospective lenders in connection
with two such proposed financing facilities, as of the date of this Prospectus,
the Company has not decided to enter into any particular proposed facility.
The actual amount of the Company's future capital requirements will depend
upon many factors, including the costs of the development of its network in each
of its markets, the speed of the development of the Company's network, the
extent of competition and pricing of telecommunications services in its
7
<PAGE>
markets, other strategic opportunities pursued by the Company and the acceptance
of the Company's services. See "Risk Factors--Significant Capital Requirements;
Uncertainty of Additional Financing."
-------------------
The Company was formed under the laws of the State of Delaware and commenced
operations in August 1995. The Company's principal executive office is located
at 1015 31st Street, N.W., Washington, D.C. 20007, and its telephone number is
(202) 625-7284.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered:
U.S. Offering.............................. 3,750,000 shares
International Offering..................... 937,500 shares
Total.................................... 4,687,500 shares
Common Stock to be outstanding after the
Offering(1)................................ 23,454,574 shares
Use of proceeds.............................. The Company intends to use the net proceeds
from the Offering for capital expenditures,
working capital and other general corporate
purposes, including the funding of operating
losses. The precise allocation of funds among
these uses will depend on a variety of
factors. See "Use of Proceeds" and "Risk
Factors--Broad Management Discretion in Use
of Proceeds."
Nasdaq National Market symbol................ "PTNT"
</TABLE>
- ---------
(1) Includes 15,864,716 shares of Common Stock to be issued in connection with
the Preferred Stock Conversion. Does not include (i) 1,143,248 shares of
Common Stock issuable upon exercise of the Warrants and (ii) 2,541,381
shares of Common Stock issuable upon the exercise of outstanding options
under the Company's existing stock option plans.
RISK FACTORS
Prospective purchasers of Common Stock should carefully consider the risk
factors set forth under the caption "Risk Factors" and the other information
included in this Prospectus prior to making an investment decision. See "Risk
Factors."
8
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE COMMON STOCK INVOLVES A SIGNIFICANT DEGREE OF RISK. IN
DETERMINING WHETHER TO MAKE AN INVESTMENT IN THE COMMON STOCK, PROSPECTIVE
PURCHASERS SHOULD CONSIDER CAREFULLY ALL OF THE INFORMATION SET FORTH IN THIS
PROSPECTUS AND, IN PARTICULAR, THE FOLLOWING FACTORS.
LIMITED HISTORY OF OPERATIONS; OPERATING LOSSES AND NEGATIVE CASH FLOW
The Company was formed in August 1995 to begin development of its digital
network. The Company has completed over 800 route miles of its network, which
are commercially available, and through June 2, 1998 has entered into seven FPM
Agreements and one binding term sheet. In addition, as of the date of this
Prospectus the Company has entered into only two customer capacity contracts.
There can be no assurance that the Company will enter into any additional
contracts with Incumbents or customers. Based on its experience, Pathnet expects
that it may take between six and 18 months from the initial contact with an
Incumbent to complete a long-term contract and 12 months thereafter to complete
a commercially available system. Prospective investors therefore have extremely
limited historical financial information about the Company upon which to base an
evaluation of the Company's performance and an investment in the Common Stock.
As a result of development and operating expenses, the Company has incurred
significant operating and net losses to date. The Company's operations have
resulted in cumulative net losses of $8.8 million and cumulative net losses
before interest income (expense), income tax benefit, depreciation and
amortization of $8.7 million from inception in 1995 through March 31, 1998.
The Company expects to incur significant operating losses, to generate
negative cash flows from operating activities and to invest substantial funds to
construct its digital network during the next several years. There can be no
assurance that the Company will achieve or sustain profitability or generate
sufficient positive cash flow to meet its debt service obligations, capital
expenditure requirements or working capital requirements. If the Company cannot
achieve operating profitability or positive cash flows from operating
activities, it will not be able to meet its debt service obligations, capital
expenditure requirements or working capital requirements, which would have a
material adverse effect on the financial condition and results of operations of
the Company. See "--Significant Capital Requirements; Uncertainty of Additional
Financing," "Selected Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and the financial statements
included elsewhere in this Prospectus.
SIGNIFICANT CAPITAL REQUIREMENTS; UNCERTAINTY OF ADDITIONAL FINANCING
Deployment of the Company's network and expansion of the Company's
operations and services will require significant capital expenditures, primarily
for continued development and construction of its network and implementation of
the Company's sales and marketing strategy. The Company anticipates that it will
require approximately $100 million and $215 million for the twelve month periods
ending June 30, 1999 and 2000, respectively, to fund capital expenditures,
working capital and operating losses. By the middle of 2000, the Company expects
to have approximately 21,000 route miles of network operational. The Company
will need to seek additional financing to fund capital expenditures and working
capital to expand its network further to its eventual target of approximately
100,000 route miles. The Company estimates that this will require substantial
additional external financing but presently has no negotiated commitments for
any such additional financing. The Company may also require additional capital
for activities complementary to its currently planned businesses, or in the
event it decides to pursue network development through acquisitions, joint
ventures or strategic alliances. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources"
and "Description of Certain Indebtedness."
The actual amount of the Company's future capital requirements will depend
upon many factors, including the costs of network deployment in each of its
markets, the speed of the development of the Company's network, the extent of
competition and pricing of telecommunications services in its markets, other
strategic opportunities pursued by the Company and the acceptance of the
Company's services.
9
<PAGE>
Accordingly, there can be no assurance that the actual amount of the Company's
financing needs will not exceed, perhaps significantly, the current estimates.
There can be no assurance that the Company will be successful in raising
additional capital on terms that it will consider acceptable, that the terms of
such indebtedness or other capital will not impair the Company's ability to
develop its business or that all available capital will be sufficient to service
its indebtedness. Sources of additional capital may include equipment financing
facilities and public and private equity and debt financings. If the Company
decides to raise additional capital through the issuance of equity, the
ownership interests represented by the Common Stock will be diluted. In
addition, the Indenture relating to the Notes (the "Indenture") contains, and
other debt instruments governing future indebtedness may contain, covenants that
limit the operational and financial flexibility of the Company. Failure to raise
sufficient funds may require the Company to modify, delay or abandon some of its
planned future expansion or expenditures, which could have a material adverse
effect on the Company's business, financial condition and results of operations,
including the Company's ability to make principal and interest payments on its
indebtedness. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources" and "Description of
Certain Indebtedness."
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE DEBT; RESTRICTIVE COVENANTS
The Company is highly leveraged. As of March 31, 1998, on a pro forma basis
after giving effect to the Transactions and the Offering, the Company would have
had $350 million of indebtedness outstanding (approximately 75% of total
invested capital). The Company will likely incur substantial additional
indebtedness (including secured indebtedness) following the Offering, for the
development of its network and other capital and operating requirements. The
level of the Company's indebtedness could adversely affect the Company in a
number of ways. For example, (i) the ability of the Company to obtain necessary
financing in the future for working capital, capital expenditures, debt service
requirements or other purposes may be limited; (ii) the Company's level of
indebtedness could limit its flexibility in planning for, or reacting to,
changes in its business; (iii) the Company will be more highly leveraged than
some of its competitors, which may place it at a competitive disadvantage; (iv)
the Company's degree of indebtedness may make it more vulnerable to a downturn
in its business or the economy generally; (v) the terms of the existing and
future indebtedness restrict, or may restrict, the payment of dividends by the
Company; and (vi) a substantial portion of the Company's cash flow from
operations must be dedicated to the payment of principal and interest on its
indebtedness and will not be available for other purposes.
The Indenture and certain of the Company's FPM Agreements contain, or will
contain, restrictions on the Company and its subsidiaries that will affect, and
in certain cases significantly limit or prohibit, among other things, the
ability of the Company and its subsidiaries to create liens, make investments,
pay dividends and make certain other restricted payments, issue stock of
subsidiaries, consolidate, merge, sell assets and incur additional indebtedness.
There can be no assurance that such covenants and restrictions will not
adversely affect the Company's ability to finance its future operations or
capital needs or to engage in other business activities that may be in the
interest of the Company. See "Description of Certain Indebtedness" and
"Business--Agreements with Incumbents and Other Owners of Telecommunications
Assets--Fixed Point Microwave Services Agreements."
In addition, any future indebtedness incurred by the Company or its
subsidiaries is likely to impose similar restrictions. Failure by the Company or
its subsidiaries to comply with these restrictions could lead to a default under
the terms of the Company's indebtedness notwithstanding the ability of the
Company to meet its debt service obligations. In the event of such a default,
the holders of the Company's indebtedness could elect to declare all such
indebtedness due and payable, together with accrued and unpaid interest. In such
event, a significant portion of the Company's indebtedness may become
immediately due and payable, and there can be no assurance that the Company
would be able to make such payments or to borrow sufficient funds from
alternative sources to make any such payments. Even if additional financing
10
<PAGE>
could be obtained, there can be no assurance that it would be on terms that
would be acceptable to the Company.
The successful implementation of the Company's strategy, including expanding
its digital network and obtaining and retaining a sufficient number of
customers, and significant and sustained growth in the Company's cash flow will
be necessary for the Company to meet its debt service requirements. The Company
does not currently, and there can be no assurance that the Company will be able
to, generate sufficient cash flows to meet its debt service obligations. If the
Company is unable to generate sufficient cash flow or otherwise obtain funds
necessary to make required payments, or if the Company otherwise fails to comply
with the various covenants under the terms of its existing or future
indebtedness, it could trigger a default under the terms thereof, which would
permit the holders of such indebtedness to accelerate the maturity of such
indebtedness and could cause defaults under other indebtedness of the Company.
The ability of the Company to meet its obligations will be dependent upon the
future performance of the Company, which will be subject to prevailing economic
conditions and to financial, business, regulatory and other factors. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Description of Certain
Indebtedness."
RISKS OF COMPLETING THE COMPANY'S NETWORK; MARKET ACCEPTANCE
The Company's ability to achieve its strategic objectives will depend in
large part upon the successful, timely and cost effective completion of its
network, as well as on selling a substantial amount of its capacity. The
successful completion of the Company's network may be affected by a variety of
factors, uncertainties and contingencies, many of which are beyond the Company's
control. Although the Company believes that its cost estimates and build-out
schedules are reasonable, less than 1,000 route miles under contract have been
completed as of June 2, 1998. There can be no assurance that the Company's
network will be completed as planned at the cost and within the time frame
currently estimated, if at all. In addition, as of the date of this Prospectus,
the Company had only two contracts relating to the sale of capacity to a Telecom
Service Provider and there can be no assurance that the Company will attract
additional purchasers of capacity.
The successful and timely construction of the Company's network will depend
upon, among other things, the Company's ability to (i) obtain substantial
amounts of additional capital and financing at reasonable cost and on
satisfactory terms and conditions, (ii) manage effectively and efficiently the
construction of its network, (iii) enter into agreements with Incumbents and
other owners of telecommunications assets that will enable the Company to
leverage the assets of Incumbents and of other owners of telecommunications
assets, (iv) access markets and enter into customer contracts to sell capacity
on its network, (v) integrate successfully such networks and associated rights
acquired in connection with the development of the Company's network including
cost-effective interconnections and (vi) obtain necessary FCC licenses and other
approvals. Successful construction of the Company's network also will depend
upon the timely performance by third party contractors of their obligations.
There can be no assurance that the Company will achieve any or all of these
objectives. Any failure by the Company to accomplish these objectives may have a
material adverse affect on the Company's business, financial condition and
results of operations. See "--Significant Capital Requirements; Uncertainties of
Additional Financing" and "-- Dependence on Relationship with Incumbents; Rights
of Incumbents to Certain Assets."
The development of the Company's network and the expansion of the Company's
business may involve acquisitions of other telecommunications businesses and
assets and implementation of other technologies (such as fiber optic cable)
either in lieu of or as a supplement to the excess capacity created by upgrading
Incumbents' networks. In addition, the Company may enter into relationships with
Telecom Service Providers or other entities to manage existing assets or to
deploy alternative telecommunications technologies. Furthermore, the Company may
seek to serve markets which are not second or third tier and which may present
differing market risks (including as to pricing and competition). If pursued,
these opportunities could require additional financing, impose additional risks
(such as increased or different
11
<PAGE>
competition, additional regulatory burdens and network economics different from
those described elsewhere herein) and could divert the resources and management
time of the Company. There can be no assurance that any such opportunity, if
pursued, could be successfully integrated into the Company's operations or that
any such opportunity would perform as expected. Furthermore, as the Company
builds out its network, there can be no assurance that the Company will enter
into agreements with the best suited Incumbents or such other owners of
telecommunications assets, as the case may be, or that the Company will continue
to pursue its core strategy of leveraging the assets of Incumbents as opposed to
other telecommunications assets, technologies or other markets. Moreover, there
can be no assurance that the resulting network will match or be responsive to
the demand for telecommunications capacity or will maximize the possible revenue
to be earned by the Company. There can be no assurance the Company will be able
to develop and expand its business and enter new markets as currently planned.
Failure of the Company to implement its expansion and growth strategy
successfully could have a material adverse effect on the Company's business,
financial condition and results of operations.
DEPENDENCE ON RELATIONSHIP WITH INCUMBENTS; RIGHTS OF INCUMBENTS TO CERTAIN
ASSETS
Although the Company has entered into seven FPM Agreements with six
Incumbents and one binding term sheet with an independent tower company and is
currently pursuing FPM Agreements with 25 additional Incumbents, there can be no
assurance that existing long-term relationships will be maintained or that
additional long-term relationships will result on terms acceptable to the
Company, on terms substantially similar to those described herein or at all. If
the Company is not successful in negotiating such agreements, its ability to
deploy its network would be adversely affected.
The Company does not typically expect to own the underlying sites and
facilities upon which its network is deployed. Instead, the Company expects to
enter into long-term relationships with Incumbents whereby each such Incumbent
agrees to grant to the Company a leasehold interest in or a similar right to use
such Incumbent's facilities and infrastructure as is required for the Company to
deploy its network. In some cases, system assets may be held by subsidiaries in
which both the Company and the Incumbent own an interest. In the case of Idaho
Power, the Incumbent owns a majority interest in a subsidiary formed in April
1998 to hold the Initial System. As a result, the Company will depend on the
facilities and infrastructure of its Incumbents for the operation of its
business. Long-term relationships with Incumbents may expire or terminate if the
Company does not satisfy certain performance targets with respect to sales of
excess capacity or fails to commission an Initial System within specified time
periods. In such cases, certain equipment relating to the Initial System will be
transferred to the Incumbent. Any such expiration of a relationship with an
Incumbent, and the resulting loss of use of the corresponding Initial System and
opportunity to utilize such segment of its network, could result in the Company
not being able to recoup its initial capital expenditure with respect to such
segment and could have a material adverse effect on the business and financial
condition of the Company. In addition, such a loss under certain circumstances
could result in an event of default under the Company's existing or future
indebtedness. There can be no assurance that the Company will continue to have
access to such Incumbent's sites and facilities after the expiration of such
agreements or in the event that an Incumbent elects to terminate its agreement
with the Company. If such an agreement were terminated or expires and the
Company were forced to remove or abandon a significant portion of its network,
such termination or expiration, as the case may be, could have a material
adverse effect on the business, financial condition and results of operations of
the Company. See "Business--Agreements with Incumbents and Other Owners of
Telecommunications Assets."
The Company expects to rely significantly on its Incumbents for the
maintenance and provisioning of circuits on its network. The Company has entered
into maintenance agreements with three Incumbents and expects to enter into
agreements with additional Incumbents pursuant to which, among other things, the
Company will pay the Incumbent a monthly maintenance fee and a provisioning
services fee in exchange for such Incumbent providing maintenance and
provisioning services for that portion of the Company's network that primarily
resides along such Incumbent's system. Failure by the Company to enter
successfully into similar agreements with other Incumbents or the cancellation
or non-renewal of any of
12
<PAGE>
such existing agreements could have a material adverse effect on the Company's
business. To the extent the Company is unable to establish similar arrangements
in new markets with additional Incumbents or establish replacement arrangements
on systems where a maintenance agreement with a particular Incumbent is canceled
or not renewed, the Company may be required to maintain its network and
provision circuits on its network through establishment of its own maintenance
and provisioning workforce or by outsourcing maintenance and provisioning to a
third party. The Company's operating costs under these conditions may increase.
See "Business--Agreements with Incumbents and Other Owners of Telecommunications
Assets--Network Maintenance and Provisioning of Circuits."
MANAGEMENT OF GROWTH
The Company's business plan may, if successfully implemented, result in
rapid expansion of its operations. Rapid expansion of the Company's operations
may place a significant strain on the Company's management, financial and other
resources. The Company's ability to manage future growth, should it occur, will
depend upon its ability to monitor operations, control costs, maintain
regulatory compliance, maintain effective quality controls and expand
significantly the Company's internal management, technical, information and
accounting systems and to attract and retain additional qualified personnel. See
"--Dependence on Key Personnel." Furthermore, as the Company's business develops
and expands, the Company will need additional facilities for its growing
workforce. There can be no assurance that the Company will successfully
implement and maintain such operational and financial systems or successfully
obtain, integrate and utilize the employees and management, operational and
financial resources necessary to manage a developing and expanding business in
an evolving and increasingly competitive industry which is subject to regulatory
change. Any failure to expand these areas and to implement and improve such
systems, procedures and controls in an efficient manner at a pace consistent
with the growth of the Company's business could have a material adverse effect
on the business, financial condition and results of operations of the Company.
The expansion and development of the Company's business will depend upon,
among other things, the Company's ability to implement successfully its sales
and marketing strategy, evaluate markets, design network path routes, secure
financing, install facilities, obtain any required government authorizations,
implement interconnection to, and co-location with, facilities owned by
Incumbents, purchasers of capacity and other owners of telecommunications
assets. The Company's ability to implement its growth strategy successfully will
require the Company to enhance its operational, management, financial and
information systems and controls and to hire and retain qualified sales,
marketing, administrative, operating and technical personnel. There can be no
assurance that the Company will be able to do so, and any failure to accomplish
these objectives could result in lower than expected levels of customer service,
which could have a material adverse effect on the Company's business, financial
condition and results of operations.
DEPENDENCE ON KEY PERSONNEL
The success of the Company will depend to a significant extent upon the
abilities and continued efforts of its senior management, particularly members
of its senior management team, including David Schaeffer, Chairman, Richard A.
Jalkut, President and Chief Executive Officer, Kevin J. Bennis, Executive Vice
President serving as President of the Company's Communications Services Division
and Michael L. Brooks, Vice President of Network Development. Other than its
Employment Agreement with Richard A. Jalkut, the Company does not have any
employment agreements with, nor does the Company maintain "key man" insurance
on, these employees. The loss of the services of any such individuals could have
a material adverse effect on the Company's business, financial condition and
results of operations. The success of the Company will also depend, in part,
upon the Company's ability to identify, hire and retain additional key
management personnel, including the senior management, who are also being sought
by other businesses. Competition for qualified personnel in the
telecommunications industry is intense. The inability to identify, hire and
retain such personnel could have a material adverse effect on the Company's
13
<PAGE>
results of operations. See "--Management of Growth" and "Management--Directors
and Executive Officers."
COMPETITION; PRICING PRESSURES
The telecommunications industry is highly competitive. In particular, price
competition in the 'carrier's carrier' market has generally been intense and is
expected to increase. The Company competes and expects to compete with numerous
competitors who have substantially greater financial and technical resources,
long-standing relationships with their customers and potential to subsidize
competitive services from less competitive service revenues and from federal
universal service subsidies. Such competitors may be operators of existing or
newly deployed wireline or wireless telecommunications networks. The Company
will also face intense competition due to an increased supply of
telecommunications capacity, the effects of deregulation and the development of
new technologies, including technologies that will increase the capacity of
existing networks.
The Company anticipates that prices for its 'carrier's carrier' services
will continue to decline over the next several years. The Company is aware that
certain long distance carriers are expanding their capacity and believes that
other long distance carriers, as well as potential new entrants to the industry,
are constructing new microwave, fiber optic and other long distance transmission
networks in the United States. If industry capacity expansion results in
capacity that exceeds overall demand along the Company's routes, severe
additional pricing pressure could develop. As a result, within a few years, the
Company could face dramatic and substantial price reductions. Such pricing
pressure could have a material adverse effect on the business, financial
condition and results of operations of the Company.
While the Company generally will not compete with Telecom Service Providers
for end-user customers, the Company may compete, on certain routes, as a
'carrier's carrier' with long distance carriers such as AT&T, MCI, Sprint
Corporation ("Sprint"), WorldCom, Inc. ("WorldCom") and operators of fiber optic
systems, such as IXC Communications, Inc., The Williams Companies, Inc.
("Williams"), Qwest and Level 3 Communications, Inc. ("Level 3"), who would
otherwise be the Company's customers in second and third tier markets. The
Company will also face competition increasingly in the long haul market from
local exchange carriers, regional network providers, resellers and satellite
carriers and may eventually compete with public utilities and cable companies.
In particular, certain ILECs and competitive local exchange carriers ("CLECs")
are allowed to provide inter-LATA long distance services. Furthermore, RBOCs
will be allowed to provide inter-LATA long distance services within their
regions after meeting certain regulatory requirements intended to foster
opportunities for local telephone competition. Certain RBOCs have requested
regulatory approval to provide inter-LATA data services within their regions.
The RBOCs already have extensive fiber optic cable, switching, and other network
facilities in their respective regions that can be used for their long distance
services after a waiting period. In addition, other new competitors may build
additional fiber capacity in the geographic areas served and to be served by the
Company.
The Company may also face competitors seeking to deploy a digital wireless
network in the same manner as the Company by leveraging the assets of Incumbents
or other owners of telecommunications assets or from Incumbents leveraging their
own assets. Although the Company believes its strategy will provide it with a
cost advantage, there can be no assurance that technological developments will
not result in competitors achieving even greater cost efficiency and therefore a
competitive advantage. See "--Risk of Rapid Technological Changes."
A continuing trend toward business combinations and strategic alliances in
the telecommunications industry may create stronger competitors to the Company,
as the resulting firms and alliances are likely to have significant
technological, marketing and financing resources greater than those available to
the Company. See "Business--Competition."
14
<PAGE>
RELIANCE ON EQUIPMENT SUPPLIERS
The Company currently purchases most of its telecommunications equipment
pursuant to an agreement with NEC America, Inc. and its affiliates ("NEC") from
whom the Company has agreed to purchase $200 million of equipment by March 31,
2003 and has entered into an equipment purchase agreement with Andrew Equipment
Corporation ("Andrew"). Any reduction or interruption in supply from either
supplier or any increase in prices for such equipment could have a disruptive
effect on the Company. Currently NEC and Northern Telecom Ltd. ("Nortel") are
the only manufacturers of SONET radios that are compatible with the Company's
proposed system design and reliability standards, although Harris Corporation
and Alcatel Alsthom Compagnie Generale d'Electricite SA ("Alcatel") are in the
process of developing and testing similar and compatible products. Further, the
Company does not manufacture, nor does it have the capability to manufacture,
any of the telecommunications equipment used on its network. As a result, the
failure of the Company to procure sufficient equipment at reasonable prices and
in a timely manner could adversely affect the Company's successful deployment of
its network and results of operations. See "Business--Equipment Supply
Agreements."
TECHNICAL LIMITATIONS OF THE NETWORK
The Company will not be able to offer route diversity until such time as it
has completed a substantial portion of its mature network. In addition, the
Company's network requires a direct line of sight between two antennae (each
such interval comprising a "path") which is subject to distance limitations,
freespace fade, multipath fade and rain attenuation. In order to meet industry
standards for reliability, the maximum length of a single path similar to those
being designed by the Company is generally limited to 40 miles and, as a result,
intermediate sites in the form of back-to-back terminals or repeaters are
required to permit digital wireless transmission beyond this limit based on the
climate and topographic conditions of each path. In the absence of a direct line
of sight, additional sites may be required to circumvent obstacles, such as tall
buildings in urban areas or mountains in rural areas. Topographic conditions of
a path and climate can cause reflections of signals from the ground which can
affect the transmission quality of digital wireless services. In addition, in
areas of heavy rainfall, the intensity of rainfall and the size of the raindrops
can affect the transmission quality of digital wireless services. Paths in these
areas are engineered for shorter distances to maintain transmission quality and
use space diversity, frequency diversity, adaptive power control and forward
error correction to minimize transmission errors. The use of additional sites
and shorter paths to overcome obstructions, multipath fade or rain attenuation
will increase the Company's capital costs. While these increased costs may not
be significant in all cases, such costs may render digital wireless services
uneconomical in certain circumstances.
Due to line of sight limitations, the Company currently installs its
antennae on towers, the rooftops of buildings or other tall structures. Line of
sight and distance limitations generally do not present problems because
Incumbents have already selected, developed and constructed unobstructed
transmission sites. In certain instances, however, the additional frequencies
required for the excess capacity to be installed by the Company may not be
available from Incumbents' existing sites. In these instances, the Company
generally expects to use other developed sites already owned or leased by such
Incumbent. In some instances, however, the Company has encountered, and may in
the future encounter, line of sight, frequency blockage and distance limitations
that cannot be solved economically. While the effect on the financial condition
and results of operations of the Company resulting from such cases has been
minimal to date, there can be no assurance that such limitations will not be
encountered more frequently as the Company expands its network. Such limitations
may have a material adverse effect on the Company's future development costs and
results of operations. In addition, the current lack of compression applications
for wireless technology limits the Company's ability to increase capacity
without significant capital expenditures for additional equipment.
In order to obtain the necessary access to install its radios, antennae and
other equipment required for interconnection to the PSTN or to points of
presence ("POP") of the Company's capacity purchasers, the Company must acquire
the necessary rights and enter into the arrangements to deploy and operate such
interconnection equipment. There can be no assurance that the Company will
succeed in obtaining the
15
<PAGE>
rights necessary to deploy its interconnection equipment in its market areas on
acceptable terms, if at all, or that delays in obtaining such rights will not
have a material adverse effect on the Company's development or results of
operations.
DEPENDENCE ON INFORMATION AND PROCESSING SYSTEMS
Sophisticated information and processing systems are vital to the Company's
growth and its ability to monitor network performance, provision customer orders
for telecommunications capacity, bill customers accurately, provide high-quality
customer service and achieve operating efficiencies. As the Company grows, any
inability to operate its billing and information and processing systems, or to
upgrade internal systems and procedures as necessary, could have a material
adverse impact on the Company's ability to reach its objectives, or on its
business, financial condition and results of operations.
RISK OF RAPID TECHNOLOGICAL CHANGES
The telecommunications industry is subject to rapid and significant changes
in technology. Although the Company believes that, for the foreseeable future,
these changes will neither materially affect the continued use of its network
equipment, nor materially hinder its ability to acquire necessary technologies,
the effect of technological changes on the business of the Company, such as
changes relating to emerging wireline (including fiber optic) and wireless
(including broadband) transmission technologies, cannot be predicted. There can
be no assurance that (i) the Company's network will not be economically or
technically outmoded by technology or services now existing or developed and
implemented in the future, (ii) the Company will have sufficient resources to
develop or acquire new technologies or to introduce new services capable of
competing with future technologies or service offerings or (iii) the cost of the
equipment used on its network will decline as rapidly as that of competitive
alternatives. The occurrence of any of the foregoing events may have a material
adverse effect on the operations of the Company and the ability of the Company
to make principal and interest payments on its outstanding indebtedness.
REGULATION
The Company's arrangements with Incumbents contemplate that the Company's
digital network will provide largely "common carrier fixed point-to-point
microwave" telecommunications services under Part 101 of the FCC's Rules ("Part
101"), which services are subject to regulation by federal, state and local
governmental agencies. Changes in existing federal, state or local laws and
regulations, including those relating to the provision of Part 101
telecommunications services, any failure or significant delay in obtaining
necessary licenses, permits or renewals, or any expansion of the Company's
business that subjects the Company to additional regulatory requirements could
have a material adverse effect on the Company's business, financial condition,
and results of operations.
LICENSING BY THE COMPANY AND INCUMBENTS. Many Incumbents whose existing
systems operate in the 2 GHz band of the frequency spectrum will be required to
relocate their systems and operations to the 6 GHz band or other alternate
spectrum. In most instances the Company will enter into a strategic relationship
with an Incumbent and, as part of the upgrade of such Incumbent's system, the
Company will license the upgraded network in the 6 GHz band, which will depend
on its obtaining newly issued Part 101 licenses for the use of existing
facilities and infrastructure of such relocated Incumbents.
The Company intends to establish any such arrangement so as to ensure that
there is no DE FACTO transfer of control of a FCC license from an Incumbent,
which has obtained authorization from the FCC to operate a Part 101
telecommunications system at the newly occupied 6 GHz location (a "Licensed
Incumbent"), to the Company, because such a transfer without FCC consent would
violate the FCC's rules. Because any review by the FCC of such an arrangement
would be fact specific and would involve the review of conduct that has not yet
occurred, there can be no assurance that, if such an arrangement between the
Company and a Licensed Incumbent were challenged, the FCC would not deem such an
arrangement to constitute an unauthorized transfer of control. Such a finding
could result in a restructuring of the arrangement with a Licensed Incumbent or
the loss of the FCC license.
MUTUAL EXCLUSIVITY. Pursuant to its arrangements with Incumbents, the
Company will, in most cases, apply to the FCC for new Part 101 licenses to
operate in the 6 GHz band. As each such Part 101 license is
16
<PAGE>
granted by the FCC with respect to the frequencies to be used between two
specific points as designated by specific latitude and longitude coordinates,
and as Incumbents already own the infrastructure and sites that comprise each
such licensed point along the network, the Company expects to be the first and
only entity to apply for these licenses at or near the specific locations and in
the frequencies to be designated by the Company, and hence to have licensing
priority under the FCC's procedures. There can be no assurance, however, that
other entities will not seek licenses to operate in the same portion of the
frequency spectrum as the Company in locations geographically close to those
designated by the Company.
In the event that a mutually exclusive situation were to arise, the FCC may
hold a comparative hearing to decide which applicant will be awarded the
relevant licenses, in which case there can be no assurance that the Company
would be able to obtain the desired license. In the event that numerous mutually
exclusive applications were to be filed, the FCC may decide to impose a filing
freeze with respect to additional applications, and would, in the interim,
decide on the most appropriate manner in which to resolve the mutual
exclusivity. In this vein, the FCC may decide to seek from Congress enabling
legislation that would permit the FCC to hold an auction in order to determine
which of the competing applicants would obtain the sought-after licenses, in
which case the Company could be required to pay potentially large sums in order
to obtain the necessary license, and there would be no assurance that the
Company would be able to obtain any auctioned licenses. The FCC might also
decide to impose fees on the use of the desired spectrum, in which case the
Company would be required to pay potentially large sums in order to obtain and
use its FCC licenses.
FREQUENCY COORDINATION. Prior to applying to the FCC for authorization to
use portions of the 6 GHz band, the Company must coordinate its use of the
frequency with any existing licensees, permittees, and applicants in the same
area whose facilities could be subject to interference as a result of the
Company's proposed use of the spectrum. There can be no assurance in any
particular case that the Company will not encounter other entities and proposed
uses of the desired spectrum that would interfere with the Company's planned
use, and that the Company will be able to coordinate successfully such usage
with such entities. See "--Technical Limitations of the Network." If the Company
were unable to coordinate effectively with other users of or applicants for the
spectrum at a substantial number of proposed sites, there can be no assurance
that the Company would be able to obtain and retain the licenses necessary for
the successful operation of the Company's network.
FCC LICENSE REQUIREMENTS. As part of the requirements of obtaining a Part
101 license, the FCC requires the Company to demonstrate the site owner's
compliance with the reporting, notification and technical requirements of the
Federal Aviation Administration ("FAA") with respect to the construction,
installation, location, lighting and painting of transmitter towers and
antennae, such as those to be used by the Company in the operation of its
network. Specifically, the FCC requires compliance with the FAA's notification
requirement, and where such notification is required, a "no hazard"
determination from the FAA before granting a license with respect to a
particular facility. Any failure by the Company to comply with the FAA's
notification procedures, any finding of a hazard by the FAA with respect to a
proposed new or substantially modified facility, or any delay on the part of the
FAA in making such a finding, may have an adverse effect on the Company's
ability to obtain in a timely manner all necessary FCC licenses in accordance
with its business plan.
In addition to FAA requirements, in order to obtain the Part 101 licenses
necessary for the operation of its network, the Company, and in some cases
Licensed Incumbents, must file applications with the FCC for such licenses and
demonstrate compliance with routine technical and legal qualification to be an
FCC licensee. The Company must also obtain FCC authorization before transferring
control of any of its licenses or making certain modifications to a licensed
facility. Such requirements for obtaining such Part 101 licenses and for
transferring such licenses include items such as certifying to the FCC that
frequency coordination has been completed, disclosing the identity and
relationship of all entities directly or indirectly owning or controlling the
applicant, and demonstrating the applicant's legal, technical and other
qualifications to be an FCC licensee. Nevertheless, there can be no assurance
that the Company or any Licensed Incumbent will obtain all of the licenses or
approvals necessary for the operation of the
17
<PAGE>
Company's business, the transfer of any license, or the modification of any
facility, or that the FCC will not impose burdensome conditions or limitations
on any such license or approval.
CONSTRUCTION OF FACILITIES AND CHANNEL LOADING REQUIREMENTS. Under the
FCC's rules, the Company is required to have each licensed Part 101 facility
constructed and "in operation" (I.E., capable of providing service), and to
complete each authorized modification to an existing facility, within 18 months
of the grant of the necessary license or approval. Failure to meet the FCC's
timetable for construction or operation or to obtain an extension of said
timetable will automatically cancel the underlying license or approval, to the
detriment of the Company's ability to execute its business plan. A license or
authorization will also lapse if, after construction and operation, the facility
is removed or altered to render it non-operational for a period of 30 days or
more. Similarly, the FCC's rules provide that, in the absence of the Company
obtaining a waiver of such rule, any authorized Part 101 station that fails to
transmit operational traffic during any 12 consecutive months after construction
is complete is considered permanently discontinued under the FCC's rules, and
its underlying license is forfeited. In addition, the FCC requires that a
certain portion of the available channels on Part 101 digital systems be loaded
with traffic within 30 months of licensing. There can be no assurance that the
Company's Part 101 licenses will not lapse because of failure to meet the FCC's
construction or channel loading benchmarks or to obtain an extension of such
deadlines, or because of the Company's failure to comply with the FCC's
requirements with respect to operational traffic.
FCC LICENSE RENEWAL. The Part 101 licenses obtained by the Company or a
Licensed Incumbent have been and will be issued for a term of 10 years, after
which such licenses will have to be renewed by the filing of applications with
the FCC. Although such renewals are typically granted routinely, there can be no
assurance that necessary license renewals will be granted by the FCC.
PROVISION OF COMMON AND PRIVATE CARRIER SERVICES. The Company's and
Licensed Incumbents' Part 101 licenses allow the Company to sell excess capacity
on its network to the customers targeted under the Company's business plan.
Although the Part 101 licenses that the Company and Licensed Incumbents hold are
designated for "common carriers," under the FCC's rules, a Part 101 licensee may
provide both common carriage and private carriage over Part 101 facilities. The
Company is currently offering, and expects to offer in the future, its services
on a private carrier basis. The Company's private carrier services are
essentially unregulated, while any common carrier offerings would be subject to
additional regulations and reporting requirements including payment of
additional fees and compliance with additional rules and regulations including
that any such services must be offered pursuant to filed tariffs and
non-discriminatory terms, rates and practices. There can be no assurance that
the FCC will not find that some or all of the private carrier services offered
by the Company are in fact common carrier services, and thus subject to such
additional regulations and reporting requirements including the
non-discrimination and tariff filing requirements imposed on common carriers, in
which case the Company may be required to pay additional fees or adjust, modify
or cease provision of certain of its services in order to comply with any such
regulations, including offering such services on the same terms and conditions
to all of those seeking such services, and pursuant to rates made public in
tariff filings at the FCC.
FOREIGN OWNERSHIP. As the licensee of facilities designated for common
carriage, the Company is subject to Section 310(b)(4) of the Communications Act
of 1934, as amended (the "Communications Act"), which by its terms restricts the
holding company of an FCC common carrier licensee (the Company is such a holding
company, because it expects to hold all FCC licenses indirectly, through
subsidiaries) to a maximum of 25% foreign ownership and/or voting control. The
FCC has determined that it will allow a higher level (up to 100%) on a blanket
basis with respect to all common carrier licensees, but only for foreign
ownership by citizens of, or companies organized under the laws of, World Trade
Organization ("WTO") member countries. The FCC continues to apply the 25%
foreign ownership limitation with respect to citizens or corporations of non-WTO
nations.
Although the Company is presently, and upon completion of the Offering will
be within the 25% foreign ownership limitation, there can be no assurance that,
as a result of future financings, the Company
18
<PAGE>
will not exceed this limitation, in which case the Company would have to analyze
its foreign ownership with respect to the WTO status of the nations with which
the Company's foreign owners are associated. In addition, if any Incumbent
elects to be a Licensed Incumbent on the portion of the Company's network
relating to its system, such Licensed Incumbent would also be subject to such
foreign ownership restrictions. If such analysis showed that the Company or any
Licensed Incumbent had more than 25% foreign ownership from non-WTO member
nations, the Company or such Licensed Incumbent, as the case may be, would have
to seek a further ruling from the FCC and/or reduce its non-WTO foreign
ownership. In the event that a Licensed Incumbent were to choose to hold the
relevant Part 101 license itself, and not through a holding company, that
Licensed Incumbent would be subject to Section 310(b)(3) of the Communications
Act, which limits direct foreign ownership of FCC licenses to 20%. The FCC does
not have discretion to waive this limitation, and there can be no assurance than
such a Licensed Incumbent would not exceed the 20% limitation, in which case the
Licensed Incumbent would be required to reduce its foreign ownership in order to
obtain or retain its Part 101 license.
STATE AND LOCAL REGULATION. Although the Company expects to provide most of
its services on an interstate basis, in those instances where the Company
provides service on an intrastate basis, the Company may be required to obtain a
certification to operate from state utility commissions in certain of the states
where such intrastate services are provided, and may be required to file tariffs
covering such intrastate services. In addition, the Company may be required to
obtain authorizations from or notify such states with respect to certain
transfers or issuances of capital stock of the Company. The Company does not
expect any such state or local requirements to be burdensome; however, there can
be no assurance that the Company will obtain all of the necessary state and
local approvals and consents or that the failure to obtain such approvals and
consents will not have a material adverse affect on the Company's business,
financial condition and results of operations. In addition, there can be no
assurance that Incumbents will be able to obtain all necessary authorizations or
permits from state or local authorities, or that state or local authorities will
not impose burdensome taxes, requirements or conditions on the Incumbent or the
Company.
RADIO FREQUENCY EMISSION CONCERNS
The use of wireless equipment may pose health risks to humans due to radio
frequency ("RF") emissions from the radios and antennae. Any allegations of
health risks, if proven, could result in liability on the part of the Company.
The FCC recently adopted new guidelines and methods for evaluating the
environmental effects of RF emissions from FCC regulated transmitters, including
wireless antennae which are more stringent than those previously in effect. The
FCC also incorporated into its rules provisions of the Communications Act which
preempt state or local government regulation of wireless service facilities
based on environmental effects, to the extent such facilities comply with the
FCC's rules concerning such RF emissions. The Company cannot predict whether
more stringent laws or regulations will be enacted in the future. Compliance
with more stringent laws or regulations regarding RF emissions could in the
future require material expenditures by the Company which could have a material
adverse effect on the Company's business, financial condition and results of
operations.
CONTROL BY EXISTING STOCKHOLDERS
The Company's existing equity investors, including Spectrum, NEA, Onset
Enterprise Associates II, L.P., Toronto Dominion Capital (U.S.A.) Inc. and
Grotech Partners IV, L.P. (collectively, the "Original Investors"), David
Schaeffer, Chairman of the Company, and Richard A. Jalkut, Chief Executive
Officer of the Company, beneficially own approximately 84% of the Common Stock
on a pro forma basis after giving effect to the Transactions and the Offering.
As a result, the Original Investors and Messrs. Schaeffer and Jalkut have the
ability to control the election of the members of the Company's Board of
Directors and the outcome of all corporate actions requiring stockholder
approval. The Original Investors, as stockholders of the Company and through
their ability to control the election of directors, may authorize actions that
could have an anti-takeover effect and may delay, defer or prevent a tender
offer or takeover attempt that a stockholder might consider in its best
interest, including an attempt that might result in the
19
<PAGE>
receipt of a premium over the market price for the shares held by such
stockholder. See "Description of Capital Stock" and "Security Ownership of
Certain Beneficial Owners and Management."
BROAD MANAGEMENT DISCRETION IN USE OF PROCEEDS
A substantial portion of the net proceeds to be received by the Company in
connection with the Offering will be allocated to capital expenditures, working
capital and general corporate purposes. The Company is not yet able to estimate
with any precision the allocation of the majority of the proceeds from the
Offering among the uses of proceeds identified in this Prospectus. The timing
and amount of expenditures will vary depending upon numerous factors. The
Company's Board of Directors and management will have broad discretion to
allocate proceeds of the Offering to uses that they believe are appropriate.
There can be no assurance that the proceeds of the Offering can or will be
invested to yield an acceptable return. See "Use of Proceeds."
INVESTMENT COMPANY ACT CONSIDERATIONS
After the Offering, the Company will have substantial cash, cash equivalents
and short-term investments. The Company intends to invest the proceeds of the
Offering and other financings so as to preserve capital by investing primarily
in short-term instruments consistent with prudent cash management and not
primarily for the purpose of achieving investment returns. Investment in
securities primarily for the purpose of achieving investment returns could
result in the Company being treated as an "investment company" under the
Investment Company Act of 1940 (the "1940 Act"). The 1940 Act requires the
registration of, and imposes various substantive restrictions on, investment
companies that are, or hold themselves out as being, engaged primarily, or
propose to engage primarily in, the business of investing, reinvesting or
trading in securities, or that fail certain statistical tests regarding the
composition of assets and sources of income and are not primarily engaged in
businesses other than investing, reinvesting, owning, holding or trading
securities.
The Company believes that it is primarily engaged in a business other than
investing, reinvesting, owning, holding or trading securities and, therefore, is
not an investment company within the meaning of the 1940 Act. If the Company
were required to register as an investment company under the 1940 Act, it would
become subject to substantial regulation with respect to its capital structure,
management, operations, transactions with affiliated persons (as defined in the
1940 Act) and other matters. Application of the provisions of the 1940 Act to
the Company would have a material adverse effect on the Company's business,
financial condition and results of operations.
ABSENCE OF PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, no public market for the Common Stock has existed.
The initial public offering price will be determined by negotiation between the
Company and representatives of the Underwriters and may not be indicative of the
price at which the Common Stock will trade after the Offering. See
"Underwriters" for the factors to be considered in determining the initial
public offering price. The Company has applied for quotation of the Common Stock
on the Nasdaq National Market. No assurance can be given that an active trading
market for the Common Stock will develop or, if developed, continue after the
Offering. The market price of the Common Stock after the Offering may be subject
to significant fluctuations from time to time in response to numerous factors,
including variations in the reported periodic financial results of the Company,
changing conditions in the economy in general or in the Company's industry in
particular and unfavorable publicity affecting the Company or its industry. In
addition, stock markets generally, and the stock prices of competitors in the
Company's industry in particular, may experience significant price and volume
volatility from time to time which may affect the market price of the Common
Stock for reasons unrelated to the Company's performance.
IMMEDIATE AND SUBSTANTIAL DILUTION
Purchasers of Common Stock in the Offering will experience an immediate and
substantial dilution of $11.71 in the net tangible book value per share of their
investment based on an assumed initial public offering price of $16.00 per share
(the midpoint of the range set forth on the cover page of this Prospectus). In
the event the Company issues additional Common Stock in the future for any
purpose,
20
<PAGE>
purchasers of Common Stock in the Offering may experience further dilution in
the net tangible book value per share of their shares of Common Stock. See
"Dilution."
SHARES ELIGIBLE FOR FUTURE SALE
The Company can make no prediction as to the effect, if any, that future
sales of Common Stock or the availability of shares for future sale will have on
the market price of the Common Stock prevailing from time to time. Sales of a
substantial number of shares of Common Stock in the public market following the
Offering, or the perception that such sales could occur, could have an adverse
effect on the market price of the Common Stock. As of March 31, 1998 after
giving effect to the Transactions and the Offering, 23,454,574 shares of Common
Stock will be outstanding, 2,541,381 shares will be issuable upon exercise of
outstanding stock options (1,840,049 of which will be immediately exercisable)
and 1,143,248 shares will be issuable upon exercise of the Warrants. The
4,687,500 shares of Common Stock sold in the Offering will be freely tradeable
without restriction or further registration under the Securities Act of 1933, as
amended (the "Securities Act"), except for any shares held by an "affiliate" of
the Company (as that term is defined under the Securities Act), which will be
subject to the resale limitations of Rule 144 under the Securities Act.
Substantially all of the remaining 18,767,074 outstanding shares of Common Stock
held by the Company's current stockholders will be "restricted securities"
(within the meaning of Rule 144) and, therefore, will not be eligible for sale
to the public unless they are sold in transactions registered under the
Securities Act or pursuant to an exemption from Securities Act registration,
including pursuant to Rule 144. The shares issuable upon exercise of the
Warrants will be eligible for sale in private transactions exempt from the
registration requirements of the Securities Act and will be effectively eligible
for sale publicly through swap transactions or other agreements or transactions
that transfer to another, in whole or in part, the economic consequence of
ownership of the underlying shares of Common Stock. See "Shares Eligible for
Future Sale."
ABSENCE OF DIVIDENDS ON COMMON STOCK
The Company has not paid and does not anticipate paying any cash dividends
on its Common Stock in the foreseeable future. The Company intends to retain its
earnings, if any, for use in the Company's growth and ongoing operations. In
addition, the terms of the Indenture and the Company's future credit facilities
restrict, or may restrict, the ability of the Company to pay dividends on the
Common Stock. See "Dividend Policy" and "Description of Certain Indebtedness."
ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Amended and Restated Certificate of
Incorporation (the "Certificate of Incorporation") and Amended and Restated
Bylaws (the "Bylaws"), as well as provisions of the Delaware General Corporation
Law (the "DGCL"), may have the effect of delaying, deferring or preventing a
change of control of the Company, including transactions in which stockholders
might otherwise receive a substantial premium for their shares over then current
market prices. For example, under the Certificate of Incorporation, the Board of
Directors (or a committee thereof) is authorized to issue one or more series of
preferred stock having such designations, rights and preferences as may be
determined by the Board of Directors. Also, the Certificate of Incorporation and
the Bylaws provide for a classified Board of Directors, and the Bylaws provide
advance notice procedures for stockholders to submit proposals for consideration
at stockholders' meetings or to nominate persons for election as directors. See
"--Control by Existing Stockholders" and "Description of Capital Stock."
In addition, the Indenture includes provisions regarding a change of control
of the Company. Under the Indenture, a change of control would be triggered, if,
for among other reasons, any person other than certain permitted holders becomes
the beneficial owner, directly or indirectly, of more than 50% of the total
outstanding voting stock of the Company, thereby requiring the Company to offer
to purchase the Notes at a price equal to 101% of the principal amount thereof,
plus accrued and unpaid interest thereon. See "Description of Certain
Indebtedness."
21
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the Offering are estimated to be $68.9
million, based on an assumed initial public offering price of $16.00 per share
(the midpoint of the range set forth on the cover page of this Prospectus),
after deducting the underwriting discounts and other estimated expenses payable
by the Company. The Company intends to use the net proceeds from the Offering
for capital expenditures (including radio electronics, transmission equipment,
other telecommunications assets and installation costs), working capital, the
funding of operating losses and other general corporate purposes. The Company
expects that through the middle of 2000 approximately 75% of its capital
requirements will be for telecommunications and transmission equipment and that
the majority of the remaining capital requirements of the Company will be for
installation and other site construction related costs. The net proceeds from
the Offering, the Debt Offering and the 1998 Private Equity Investment are
expected to provide the Company with adequate resources to meet these projected
capital requirements through the middle of 2000, at which time the Company
expects to have completed 21,000 route miles of its network. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources." The Company currently intends to
allocate substantial proceeds to each of the foregoing uses; however, the
precise allocation of funds among these uses will depend on future
technological, regulatory and other developments in or affecting the Company's
business, the competitive climate in which it operates and the emergence of
future opportunities. See "Risk Factors--Broad Management Discretion in Use of
Proceeds."
DIVIDEND POLICY
Since its inception, the Company has not declared or paid any dividends on
its Common Stock and does not expect to pay cash dividends on its Common Stock.
The Company anticipates substantial net losses and negative cash flow for the
foreseeable future. It is anticipated that earnings, if any, which might be
generated from operations of the Company will be used to finance the growth of
the Company and that cash dividends will not be paid to holders of the Common
Stock. Any future decision regarding the payment of dividends, however, will be
at the discretion of the Company's Board of Directors, subject to applicable
law. In addition, the terms of the Indenture and other credit facilities
governing future indebtedness of the Company restrict, or may restrict, the
payment of dividends. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources,"
"Description of Certain Indebtedness" and Note 9 to the financial statements
included elsewhere in this Prospectus.
22
<PAGE>
DILUTION
As of March 31, 1998, the pro forma net tangible book value of the Company's
Common Stock after giving effect to the Transactions was approximately $31.6
million, or approximately $1.69 per share outstanding. As of March 31, 1998, the
pro forma net tangible book value of the Company's Common Stock after giving
effect to the Transactions and the Offering and the application of the net
proceeds from the Offering (after deducting underwriting discounts and estimated
offering expenses payable by the Company) was approximately $100.5 million, or
approximately $4.29 per share, assuming an inital public offering price of
$16.00 per share (the midpoint of the range of initial public offering prices
set forth on the cover page of this Prospectus). This represents an immediate
increase in net tangible book value of $2.60 per share to stockholders holding
shares prior to the Offering and an immediate dilution in net tangible book
value of $11.71 per share to new investors in the Offering. The net tangible
book value per share of Common Stock represents the amount of the Company's
tangible assets less its liabilities divided by the number of shares of Common
Stock outstanding.
The following table illustrates this dilution in pro forma net tangible book
value per share to new investors at March 31, 1998:
<TABLE>
<S> <C> <C>
Assumed initial public offering price(1)............... $ 16.00
Pro forma net tangible book value per share at March
31, 1998 after giving effect to the Transactions..... $ 1.69
Increase in net tangible book value per share
attributable to new investors in the Offering........ $ 2.60
Pro forma as adjusted net tangible book value per share
at March 31, 1998 after giving effect to the
Transactions and the Offering........................ $ 4.29
---------
Dilution per share to new investors.................... $ 11.71
---------
---------
</TABLE>
- ---------
(1) Before deducting underwriting discounts and estimated offering expenses
payable by the Company.
The following table sets forth, at March 31, 1998 and after giving effect to
the Transactions and the Offering, the difference between the number of shares
of Common Stock issued by the Company, the total consideration paid and the
average price per share paid by the existing holders of Common Stock (including
securities convertible into Common Stock) and to be paid by purchasers of Common
Stock in the Offering, assuming that shares in the Offering are sold at $16.00
per share (the midpoint of the range of set forth on the cover page of this
Prospectus), before deducting underwriting discounts and estimated offering
expenses payable by the Company.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------------ ------------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
------------- --------- -------------- --------- ------------
<S> <C> <C> <C> <C> <C>
Existing stockholders........................ 18,767,074 80.01% $ 36,043,500 32.46% $ 1.92
New investors................................ 4,687,500 19.99 75,000,000 67.54 16.00
------------- --------- -------------- ---------
Total.................................... 23,454,574 100.0% $ 111,043,500 100.0%
------------- --------- -------------- ---------
------------- --------- -------------- ---------
</TABLE>
23
<PAGE>
CAPITALIZATION
The following table sets forth the cash, Pledged Securities and
capitalization of the Company, as of March 31, 1998, (i) on an actual basis;
(ii) on a pro forma basis as adjusted to give effect to the Debt Offering and
the 1998 Private Equity Investment; (iii) on a pro forma basis as further
adjusted to give effect to the Offering assuming an initial public offering
price of $16.00 per share (the midpoint of the range set forth on the cover page
of this Prospectus), in each case as if the same occurred on March 31, 1998, and
the Preferred Stock Conversion. The actual capitalization data as of March 31,
1998 are derived from the Company's unaudited financial statements included
elsewhere in this Prospectus. This table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and notes thereto included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
------------------------------------
PRO FORMA PRO FORMA
AS AS FURTHER
ACTUAL ADJUSTED(1) ADJUSTED(2)
---------- ----------- -----------
<S> <C> <C> <C>
Cash and cash equivalents (excluding restricted
cash)(3).......................................... $4,856,610 $282,447,857 $351,447,705
---------- ----------- -----------
---------- ----------- -----------
Pledged Securities(4)............................... $ -- $81,128,751 $81,128,751
---------- ----------- -----------
---------- ----------- -----------
Total debt:
Senior Notes(5)................................... $ -- $345,905,000 $345,905,000
---------- ----------- -----------
Preferred stock:
Series A convertible preferred stock, par value
$0.01 per share, 1,000,000 shares authorized;
1,000,000 shares issued and outstanding, actual
and pro forma as adjusted; none issued or
outstanding, pro forma as further adjusted...... 1,000,000 1,000,000 --
Series B convertible preferred stock, par value
$0.01 per share, 1,651,046 shares authorized;
1,651,046 shares issued and outstanding, actual
and pro forma as adjusted; none issued or
outstanding, pro forma as further adjusted...... 5,008,367 5,008,367 --
Series C convertible preferred stock, par value
$0.01 per share, 2,819,549 shares authorized;
939,850 shares issued and outstanding actual;
2,819,549 shares issued and outstanding, pro
forma as adjusted; none issued or outstanding,
pro forma as further adjusted................... 9,961,274 29,961,272 --
Preferred stock, par value $0.01 per share, no
shares authorized, issued or outstanding, actual
and pro forma as adjusted; 10,000,000 shares
authorized and none issued or outstanding, pro
forma as further adjusted....................... -- -- --
---------- ----------- -----------
Total preferred stock......................... 15,969,641 35,969,639 --
---------- ----------- -----------
Stockholders' equity (deficit):
Common Stock, par value $0.01 per share,
10,200,000 shares authorized; 2,902,358 shares
issued and outstanding actual and pro forma as
adjusted; 60,000,000 shares authorized and
23,454,574 shares issued and outstanding, pro
forma as further adjusted(6).................... 29,024 29,024 234,546
Additional paid in capital........................ 382,047 4,477,047 109,141,012
Deficit accumulated during development stage...... (8,851,702) (8,851,702) (8,851,702)
---------- ----------- -----------
Total stockholders' equity (deficit).......... (8,440,631) (4,345,631) 100,523,856
---------- ----------- -----------
Total capitalization........................ $7,429,010 $377,529,008 $446,428,856
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
24
<PAGE>
- ------------------------------
(1) Gives pro forma effect to the Debt Offering and the 1998 Private Equity
Investment as if each occurred on March 31, 1998.
(2) Gives pro forma effect to the transactions described in footnote (1) above,
the Offering and the Preferred Stock Conversion.
(3) Cash and cash equivalents excludes approximately $289,000 of restricted cash
held in escrow to secure the Company's obligations under its FPM Agreement
with Texaco Pipeline, Inc. Cash and cash equivalents on a pro forma basis as
further adjusted includes the net cash proceeds of the Offering.
(4) The Company used $81.1 million of the net proceeds from the Debt Offering to
purchase the Pledged Securities. The Pledged Securities secure the Notes and
are sufficient to provide for payment in full of interest due on the Notes
through April 15, 2000. See "Description of Certain Indebtedness."
(5) Of the $350.0 million gross proceeds of the Debt Offering, $345.9 million
and $4.1 million were allocated to the Notes and the Warrants, respectively.
No assurance can be given that the value allocated to the Warrants will be
indicative of the prices at which the Warrants may actually trade.
(6) Common Stock excludes (i) 2,541,381 shares of Common Stock issuable upon
exercise of outstanding options and (ii) 1,143,248 shares of Common Stock
issuable upon exercise of the Warrants. See "Management--1995 Stock Option
Plan," "--1997 Stock Incentive Plan" and "Description of Certain
Indebtedness."
25
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following balance sheet data of the Company as of December 31, 1996 and
1997 and statement of operations data for the periods from inception to December
31, 1995, the twelve months ended December 31, 1996 and 1997 and the period from
August 25, 1995 (date of inception) to December 31, 1997, have been derived from
the Company's financial statements and the notes thereto, included elsewhere in
this Prospectus, which have been audited by PricewaterhouseCoopers LLP,
independent accountants, as stated in their report included herein. Such summary
statement of operations and balance sheet data should be read in conjunction
with such audited financial statements and the notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations." The
following balance sheet data of the Company as of December 31, 1995 have been
derived from the Company's audited financial statements which are not included
in this Prospectus, which have been audited by PricewaterhouseCoopers LLP. The
following balance sheet data as of March 31, 1997 and 1998 and statement of
operations data for the three months ended March 31, 1997 and 1998 and the
period from August 25, 1995 (date of inception) to March 31, 1998 have been
derived from unaudited consolidated financial statements of the Company included
elsewhere in this Prospectus. In the opinion of management, the unaudited
financial statements of the Company have been prepared on the same basis as the
audited financial statements and include all adjustments necessary for the fair
presentation of financial position and results of operations at these dates and
for these periods, which adjustments are only of a normal recurring nature. The
results of the three months ended March 31, 1998, as reported, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1998.
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM PERIOD FROM
AUGUST 25, 1995 AUGUST 25, 1995 AUGUST 25, 1995
(DATE OF YEAR ENDED (DATE OF THREE MONTHS ENDED (DATE OF
INCEPTION) TO DECEMBER 31, INCEPTION) TO MARCH 31, INCEPTION) TO
DECEMBER 31, ------------------------ DECEMBER 31, ------------------------ MARCH 31,
1995 1996 1997 1997 1997 1998(2) 1998(2)
--------------- ----------- ----------- --------------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue..................... $ -- $ 1,000 $ 162,500 $ 163,500 $ 10,000 $ 100,000 $ 263,500
--------------- ----------- ----------- --------------- ----------- ----------- ---------------
Expenses:
Cost of revenue........... -- -- -- -- -- 714,740 714,740
General and
administrative.......... 290,318 913,646 3,537,926 4,741,890 486,630 1,922,217 6,664,107
Research and
development............. 19,038 226,021 -- 245,059 -- -- 245,059
Legal and consulting...... 120,083 202,651 755,817 1,078,551 71,324 225,813 1,304,364
--------------- ----------- ----------- --------------- ----------- ----------- ---------------
Total expenses............ 429,439 1,342,318 4,293,743 6,065,500 557,954 2,862,770 8,928,270
--------------- ----------- ----------- --------------- ----------- ----------- ---------------
Net operating loss.......... (429,439) (1,341,318) (4,131,243) (5,902,000) (547,954) (2,762,770) (8,664,770)
Interest expense(1)......... -- (415,357) -- (415,357) -- -- (415,357)
Interest and other income,
net....................... 2,613 13,040 153,843 169,496 17,107 77,929 247,425
--------------- ----------- ----------- --------------- ----------- ----------- ---------------
Net loss.................. $ (426,826) $(1,743,635) $(3,977,400) $ (6,147,861) $ (530,847) $(2,684,841) $ (8,832,702)
--------------- ----------- ----------- --------------- ----------- ----------- ---------------
--------------- ----------- ----------- --------------- ----------- ----------- ---------------
Basic and diluted loss per
common share.............. $ (0.15) $ (0.60) $ (1.37) $ (2.12) $ (0.18) $ (0.93) $ (3.05)
--------------- ----------- ----------- --------------- ----------- ----------- ---------------
--------------- ----------- ----------- --------------- ----------- ----------- ---------------
Weighted average number of
common shares
outstanding............... 2,900,000 2,900,000 2,900,000 2,900,000 2,900,000 2,901,022 2,900,097
BALANCE SHEET DATA (AT
PERIOD END):
Cash and cash equivalents... $ 82,973 $ 2,318,037 $ 7,831,384 $ 1,688,533 $ 4,856,610
Property and equipment,
net....................... 8,551 46,180 7,207,094 77,453 9,964,580
Total assets................ 91,524 2,365,912 16,097,688 1,767,681 15,266,642
Total liabilities........... 17,350 145,016 5,892,918 77,633 7,737,632
Convertible preferred
stock..................... 500,000 4,008,367 15,969,641 4,008,367 15,969,641
Stockholders' equity
(deficit)................. $ (425,826) $(1,787,471) $(5,764,871) $(1,690,048) $(8,440,631)
</TABLE>
- ------------------------
(1) Relates to a beneficial conversion feature of a bridge loan. See Note 5 to
the financial statements included elsewhere in this Prospectus.
(2) See Note 10 to the financial statements included elsewhere in this
Prospectus for a discussion of possible additional compensation expense (not
expected to exceed $308,324 for the quarter ended March 31, 1998) that may
be recorded in connection with certain stock options granted in March 1998.
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S FINANCIAL
STATEMENTS AND THE NOTES THERETO AND THE OTHER FINANCIAL DATA APPEARING
ELSEWHERE IN THIS PROSPECTUS. CERTAIN STATEMENTS UNDER THIS CAPTION CONSTITUTE
FORWARDING-LOOKING STATEMENTS. SEE "FORWARD-LOOKING STATEMENTS."
OVERVIEW
The Company intends to capitalize on the growing demand for high quality,
low cost, long haul telecommunications capacity and the capacity constrained
long haul infrastructure that currently serves second and third tier markets
throughout the United States. The Company's core strategy for deploying its
network is to form strategic relationships with Incumbents and other owners of
telecommunications assets that enable the Company to leverage these assets,
thereby reducing the Company's time to market and capital costs. The Company
intends to offer high quality, low cost, long haul telecommunications capacity
to Telecom Service Providers as a 'carrier's carrier.' The Company believes its
strategy of developing a high quality, low cost digital network in smaller
markets will enable the Company to take advantage of (i) the limited capacity
currently available or expected to be constructed in smaller markets, (ii)
higher prices generally available in those markets and (iii) technological and
cost advantages of the Company's deployment strategy.
The Company's business commenced on August 25, 1995 and has been funded
primarily through equity investments by the Company's stockholders and the Debt
Offering in April 1998. A substantial portion of the Company's activities to
date has involved developing strategic relationships with Incumbents. The
Company has identified Incumbents currently holding or operating private
networks in the United States that in the aggregate cover approximately 465,000
route miles. As of June 2, 1998, the Company has entered into eight binding
agreements, seven of which are long-term FPM Agreements and the eighth of which
is a binding term sheet with ATC. The Company is currently pursuing long-term
relationships with 25 additional Incumbents that control approximately 66,000
route miles of network and is in varying stages of evaluation, system design and
business and contract negotiations. The Company has also entered into two
agreements relating to the sale of its network capacity. See "Risk Factors--
Dependence on Relationship with Incumbents; Rights of Incumbents to Certain
Assets" and "Business-- Commercial Roll-Out." Due to Pathnet's focus on
developing strategic relationships with Incumbents, the Company's historical
revenues only reflect certain consulting services in connection with the design,
development and construction of digital microwave infrastructure. The Company
has also been engaged in the acquisition of equipment, the development of
operating systems, the design and construction of a NOC, capital raising and the
hiring of management and other key personnel. In addition to deploying its
network serving second and third tier markets by forming long-term relationships
with Incumbents, the Company may pursue other strategic opportunities that may
arise to acquire or deploy complementary telecommunications assets or
technologies (such as fiber optic cable) and to serve markets which are not
second or third tier. See "Risk Factors--Risks of Completing the Company's
Network; Market Acceptance."
The Company has experienced significant operating and net losses and
negative operating cash flow to date and expects to continue to experience
operating and net losses and negative operating cash flow until such time as it
is able to generate revenue sufficient to cover its operating expenses. See
"Risk Factors-- Limited History of Operations; Operating Losses and Negative
Cash Flow." The Company sells capacity to Telecom Service Providers. The
opportunity to begin offering service on a route specific basis will enable the
Company to generate revenue and positive operating cash flow on a particular
route as soon as sufficient capacity can be sold. The Company expects to be able
to produce positive operating cash flow results on an individual route basis
within twelve months of commencing commercial service due to (i) low marginal
costs associated with the operation of each individual route and (ii) low fixed
costs due to the anticipated responsibility of Incumbents to pay for a majority
of the maintenance, utilities, upkeep and
27
<PAGE>
taxes associated with the network infrastructure. While individual networks may
produce positive operating cash flow relatively quickly after start-up, the
Company's ability to achieve positive operating cash flow as a whole is not
expected to be achieved until 2000 at the earliest due to the costs associated
with the operation of the Company's sales, marketing, network operation and
management activities. As the Company's network approaches maturity, the Company
expects that it will produce net income and positive free cash flow as a result
of declining capital outlays associated with network development and
construction. See "Risk Factors--Significant Capital Requirements; Uncertainty
of Additional Financing," "--Risks of Completing the Company's Network; Market
Acceptance" and "--Liquidity and Capital Resources."
FACTORS AFFECTING FUTURE OPERATIONS
ADDRESSABLE MARKET. The Company commissioned the Yankee Group, a leading
telecommunications research firm, to study the Company's addressable market in
second and third tier markets. The Yankee Group study estimated the potential
addressable market for the Company's services to be approximately $6 billion in
1998 and estimated that such market will grow to approximately $17 billion by
2008, indicating a compounded annual growth rate of approximately 11% per year.
The Yankee Group attributes this growth to (i) an expected shift in market share
of interexchange services away from established carriers, such as AT&T, MCI and
Sprint, to non-facilities-based IXCs that are more likely to rely on alternative
carriers such as the Company to transmit traffic, (ii) the development of the
Internet, (iii) growth in data traffic, including WANs, extranets, CAD/CAM and
other applications which require substantial amounts of bandwidth and (iv)
continued growth in voice traffic. See "Risk Factors--Risks of Completing the
Company's Network; Market Acceptance."
TARGET MARKET PENETRATION. The Company intends to position itself primarily
as a 'carrier's carrier' providing high quality, low cost, long haul
telecommunications capacity to Telecom Service Providers. The Company believes
that Telecom Service Providers will choose the Company's network for long haul
capacity serving second and third tier markets as a result of its (i)
availability in markets which currently have insufficient or limited high
capacity facilities, (ii) lower prices compared to those currently offered by
ILECs, (iii) ubiquity in these markets compared to many other long haul carriers
due to the projected reach of the Company's network, as well as an increased
number of access and termination points compared to most other long haul
networks, which reduces or eliminates the need to utilize multiple carriers to
transmit traffic to second and third tier markets, (iv) greater product
flexibility as a result of the ability to sell capacity in increments as small
as DS-1s and as large as OC-24s, (v) non-competitive marketing position as
primarily a 'carrier's carrier,' (vi) comparable or greater reliability due to
the SONET architecture of the Company's network and (vii) ability to provide
network redundancy and enhanced reliability by offering alternative capacity to
the ILEC or other facilities-based carriers. See "Risk Factors--Risks of
Completing the Company's Network; Market Acceptance" and "--Competition; Pricing
Pressures."
SERVICE OFFERING. Pathnet intends to derive a majority of its revenues
through the sale of dedicated, high capacity long haul circuits. As compared
with a network comprised solely of fiber optic cable, the Company's wireless
network provides more frequent access and termination points and an ability to
deliver traffic by digital microwave anywhere within an approximate 25-mile line
of sight surrounding any transmission tower on its network for interconnection
to other Telecom Service Providers. This will allow Pathnet in many cases to
bypass existing local infrastructure and deliver traffic directly to an access
tandem, local serving office, mobile switching office, ISP POP or large
end-user. The flexibility of the Pathnet wireless network, combined with its
projected ubiquity, should enable the Company to provide comprehensive capacity
arrangements for Telecom Service Providers. Specifically, Pathnet expects to be
able to provide dedicated wireless circuit capacity from most IXC POPs to access
tandems or local serving offices throughout the Pathnet network, thereby
enabling Telecom Service Providers to bypass ILECs for a substantial portion of
their transport requirements.
28
<PAGE>
PRICING. Pathnet's pricing structures will vary according to bandwidth
requirements and the demand characteristics of specific routes. Dedicated
capacity is expected to be sold on a monthly basis based on DS-0 circuit
capacity multiplied by the circuit length. Pathnet charges customers for this
capacity regardless of the actual usage of the dedicated circuits. The Company
is marketing dedicated capacity in increments as small as DS-1s and as large as
OC-24s and may offer discounts for larger volumes or multiple route purchases.
See "Risk Factors--Competition; Pricing Pressures."
CUSTOMER TURNOVER. Unlike telecommunications service providers who have a
preponderance of end-user customers, Pathnet is positioning itself as a
'carrier's carrier' providing long haul capacity to Telecom Service Providers.
The Company believes that similar companies which provide long haul dedicated
capacity have experienced levels of customer turnover which are lower than those
experienced by end-user service providers. The Company also believes that
Pathnet will encounter generally low levels of customer turnover as a result of
(i) the scarcity and expense of provisioning new circuits on other networks,
(ii) the lower prices which the Company expects to charge for capacity on its
network as compared with competing ILEC rates, and (iii) the network reliability
advantages of the Company's digital, SONET-based architecture.
NETWORK-RELATED COSTS
The limited incremental cost of operating and maintaining Pathnet's network,
as well as the financial support of Incumbents who will be responsible for a
significant portion of such operating and maintenance costs, are expected to
enable the Company to enjoy significant operating leverage. The Company's
primary network operating costs are expected to be the costs of maintenance,
provisioning of new circuits, interconnection and operation of the NOC.
MAINTENANCE COSTS. The Company's network nodes are primarily expected to be
located on sites currently owned and operated by Incumbents. Each of the
Incumbents and ATC will be required to maintain the physical assets at each site
along its route. The Company intends to enter into agreements with Incumbents
whereby Incumbents' existing maintenance staff will maintain the upgraded
network equipment. These agreements are expected to provide the Company with an
established workforce to maintain and install new capacity on the network. This
arrangement allows Incumbents to retain oversight of their allocated circuits on
the Company's network and to receive maintenance revenue from the Company. The
Company intends to maintain network nodes which are not located on an Incumbent
site through Incumbents' staff deployed nearby or through third party
maintenance suppliers. In addition, the Company expects to provide an inventory
of spare parts for maintenance of its network. See "Risk Factors--Dependence on
Relationships with Incumbents; Rights of Incumbents to Certain Assets,"
"Business--Agreements with Incumbents and Other Owners of Telecommunications
Assets" and "--Equipment Supply Agreements."
PROVISIONING COSTS. A substantial majority of the Company's network circuit
capacity will be provisioned remotely at the Company's NOC. There will be
occasions, however, when the physical configuration of portions of the network
must be modified through the installation of additional network components.
While much of this work is expected to be performed by Incumbents' staff, the
Company will also require a number of network engineers and technicians to
perform network modifications in certain areas or facilities not covered by an
Incumbent's staff.
INTERCONNECTION COSTS. Because it intends to be a 'carrier's carrier,' the
Company's network will originate and terminate at facilities owned and operated
by other Telecom Service Providers. These facilities may be IXC, ISP, or CLEC
POPs, an ILEC's access tandem, central office, or local serving office or at an
end-user. The Company will require a secure location at these facilities to
house its equipment and may be required to construct the housing for such
equipment. In addition, the Company may interconnect portions of its network via
fiber optic cable or other media.
29
<PAGE>
NETWORK OPERATIONS CENTER COSTS. The Company has constructed a
state-of-the-art NOC located in Washington, D.C., which currently monitors its
network operations during business hours. The Company is currently increasing
its NOC staff and expects to monitor its network operations 24 hours per day,
seven days per week in 1999. For the period before the NOC becomes operational
on a 24 hour per day basis, the Company has engaged TCI Wireline, Inc. ("WTCI")
to assist in monitoring its network. As this function is being assumed by the
Company's NOC, the Company is beginning to incur NOC operating costs similar to
those of other facilities-based telecommunications companies, including the cost
of additional personnel to monitor the network, to plan and provision circuits,
and to manage and monitor maintenance operations. Additional costs associated
with the NOC include software licensing and maintenance fees and the costs of
transmitting network data to and from the NOC.
COST OF OPERATIONS
Pathnet will incur costs common to all telecommunications providers,
including customer service and technical support, information systems, billing
and collections, general management and overhead expenses. As a facilities-based
'carrier's carrier,' the Company will differ from non-facilities-based Telecom
Service Providers in the scope and complexity of systems supporting its business
and network. The Company anticipates that the vast majority of its customers
will be Telecom Service Providers purchasing bulk private line transport
capacity across multiple portions of the Company's network. Consequently, the
Company's customer base is expected to be comprised of a relatively limited
number of companies that are generally sophisticated and knowledgeable regarding
telecommunications. The relatively small number of customers and the limited
additional support and servicing of customers beyond initial provisioning should
enable the Company to maintain a relatively low ratio of overhead expenses to
revenues compared to other Telecom Service Providers.
SALES AND MARKETING COSTS. The Company is building a direct national
accounts sales force that will pursue a consultative approach designed to
provide a systematic review of a large carrier's network requirements in smaller
markets and to offer solutions to reduce the carrier's network costs and improve
its network reliability. The Company is also building a regional sales force
which will market the Company's network capacity to smaller carriers and to
selected large end-users. The Company is assembling a centralized marketing
organization to focus on product development, market analysis and pricing
strategies, as well as customer communications, public relations, and branding.
ADMINISTRATION COSTS. The Company's general and administrative costs will
include expenses typical of other telecommunications service providers,
including infrastructure costs, customer care, billing, corporate
administration, and human resources. The Company expects that these costs will
grow significantly as it expands operations.
DEPRECIATION AND AMORTIZATION
Depreciation of property and equipment is computed using the straight-line
method, generally over three to ten years, based upon estimated useful lives.
Leasehold improvements are amortized over the lesser of the useful lives of the
assets or the term of the lease. Network construction costs incurred during
development are capitalized. Amortization of network construction costs begins
when the network equipment is ready for its intended use and will be amortized
over its estimated useful life.
CAPITAL EXPENDITURES
The Company's principal capital requirements for deployment of its wireless
network include installation of digital equipment and, to a lesser extent, site
preparation work. The Company's goal is to leverage the assets of Incumbents to
(i) reduce the capital costs associated with developing long haul, digital
network capacity and (ii) improve the Company's speed to market due to the
elimination of site
30
<PAGE>
preparation activities, including local permitting, power connection, securing
road access and rights of way and tower construction.
The Company believes that utilizing the Incumbent's infrastructure will also
enable the Company to reduce significantly its cost of constructing an initial
network path. For markets requiring OC-24 capacity or less, the Company believes
this deployment strategy will result in the Company having the lowest capital
costs per circuit mile in comparison to fiber or newly constructed "green field"
digital wireless networks. In addition, because more than half of all of the
Company's capital expenditures are expected to be related to incremental
capacity built to meet customer demand, the network will have substantially less
capital at risk than comparable fiber-based networks, which require that a
substantial majority of all capital expenditures be spent prior to serving any
customers. See "Risk Factors -- Significant Capital Requirements; Uncertainty of
Additional Financing."
NETWORK CONFIGURATION. The Company's network currently is expected to be
made up predominantly of digital wireless equipment designed to provide high
quality, low cost, long haul transmission capacity, although the Company may
pursue opportunities to deploy other telecommunications assets and technologies.
See "Risk Factors--Risks of Completing the Company's Network; Market
Acceptance." The Company expects the typical wireless trunk route will be
approximately 400 miles. Based upon an average length of 25 miles per wireless
path, the Company expects to upgrade the digital wireless electronics on an
average of 16 trunk paths per network route. In order to connect Pathnet's
network to the PSTN, the Company also expects to construct one interconnection
path for every three trunk paths. These interconnection paths, which the Company
estimates will average 20 miles in length, will typically originate at an
Incumbent tower site and terminate at a Telecom Service Provider facility. Most
of these facilities are designed and equipped to handle wireless traffic. In
other instances, the network will connect to the PSTN from an Incumbent facility
by fiber optic cable or alternate media. These Incumbent facilities could
include office buildings or tower sites with access to the PSTN.
The primary capital costs of deploying the Company's wireless network
include the costs of tower enhancement, site preparation work, base digital
wireless equipment and incremental digital wireless equipment. Based on its
limited experience to date, the Company expects that Incumbents will be
primarily responsible for site development costs and Pathnet will be responsible
for the costs of base and incremental digital wireless equipment. The actual
allocation of costs between the Company and each Incumbent is expected to vary,
perhaps significantly, on a case-by-case basis.
The Company currently has no plans to purchase switching equipment to
provide switched minutes of capacity on a wholesale or end-user basis. Virtually
all of the Company's capacity will be utilized for dedicated private line
capacity, which does not require such switching equipment.
WIRELESS NETWORK ECONOMICS. The following tables compare the estimated cost
and economics of the Pathnet program versus new construction of a "green field"
digital microwave network. The tables show the estimated average costs for the
Company's wireless network (i) on a path by path basis, (ii) for a 500 route
mile network consisting of 16 trunk paths and five additional interconnection
paths of 20 miles each, and (iii) per circuit mile. The following tables are
based on information and estimates available as of the date of this Prospectus,
reflect only the Company's limited experience in the construction of its network
to date and are for illustrative purposes only and do not reflect costs that may
be associated in circumstances where the Company chooses to deploy other
complementary telecommunications assets, such as fiber optic cable, in lieu of
digital microwave equipment. The site development costs under the heading
"Pathnet Program" set forth in the following tables are based on Pathnet's
estimated average contribution to site development costs negotiated with
existing Incumbents. The site development costs relating to costs of "green
field" construction appearing under the heading "Green Field" are based on the
industry experience of Pathnet's employees and consultants in the development of
similar microwave systems, including estimates by such persons of average costs
of site acquisition, towers and shelters. The cost of base and incremental
digital wireless equipment set forth in the following tables is based primarily
on
31
<PAGE>
prices for such equipment quoted by NEC and Andrew in their supply agreements
with the Company. Although the Company believes that these estimates are
reasonable, there can be no assurance that the Company's actual cost of building
its network will not vary significantly from the estimates set forth below, that
Incumbents will share costs as shown or that the actual cost of a "green field"
construction would not be lower. See "Risk Factors--Risks of Completing the
Company's Network; Market Acceptance" and "--Dependence on Relationships with
Incumbents; Rights of Incumbents to Certain Assets."
ESTIMATED WIRELESS PATH COSTS
<TABLE>
<CAPTION>
PATHNET PROGRAM
----------------------- GREEN PATHNET VS.
PATHNET INCUMBENT FIELD(1) GREEN FIELD(2)
---------- ----------- ---------- -----------------
<S> <C> <C> <C> <C>
Site Development Costs(3)..................................... $ 25,000 $ 75,000 $ 250,000
Base Digital Wireless Equipment(4)............................ 215,000 -- 215,000
---------- ----------- ----------
Base Path Cost............................................ 240,000 75,000 465,000 (48%)
Incremental Digital Wireless Equipment(5)..................... 320,000 -- 320,000
---------- ----------- ----------
Maximum Capacity Path Cost(6)............................. $ 560,000 N/A $ 785,000 (29%)
---------- ----------- ----------
---------- ----------- ----------
</TABLE>
500 MILE INCUMBENT SEGMENT INCLUDING INTERCONNECTIONS CAPITAL COSTS(6)
<TABLE>
<CAPTION>
GREEN PATHNET VS.
PATHNET FIELD(1) GREEN FIELD(2)
------------- ------------- -----------------
<S> <C> <C> <C>
Upgrade 16 Trunk Paths.............................................. $ 3,840,000 $ 7,440,000
Install Five Interconnection Paths.................................. 1,200,000 1,200,000
------------- -------------
Total Base Segment.............................................. 5,040,000 8,640,000 (42%)
Incremental Capacity................................................ 6,720,000 6,720,000
------------- -------------
Maximum Capacity................................................ $ 11,760,000 $ 15,360,000 (23%)
------------- -------------
------------- -------------
</TABLE>
ANALYSIS OF ESTIMATED COSTS PER WIRELESS CIRCUIT MILE
<TABLE>
<CAPTION>
PATHNET VS.
GREEN GREEN
PATHNET FIELD(1) FIELD(2)
---------- ---------- -------------
<S> <C> <C> <C>
Total Mileage (trunk plus interconnection paths)......................... 500 500
Base Circuit Capacity in DS-3s(7)........................................ 5 6
Maximum Circuit Capacity in DS-3s(7)..................................... 23 24
Base DS-0 Circuit Mile Capacity(7)(8).................................... 1,680,000 2,016,000
Maximum DS-0 Circuit Mile Capacity(7)(8)................................. 7,728,000 8,064,000
Capital Cost Per Circuit Mile:
Base Capacity........................................................ $3.00 $4.29 (30%)
Maximum Capacity..................................................... $1.55 $1.90 (19%)
</TABLE>
- ------------------------
(1) Company estimate based on "green field" construction by the Company and
Incumbents.
(2) Difference between "Pathnet Program" and "Green Field" columns expressed as
a percentage of the amount in the "Green Field" column.
(3) Includes site acquisition, site preparation, tower strengthening or
replacement, road and utility access and miscellaneous related costs.
(4) Based on OC-6 installation.
(5) Represents the cost to upgrade an Incumbent path to OC-24 of capacity.
(6) Assumes 16 trunk paths of 25 miles each plus five interconnection paths of
20 miles each.
(7) Assumes in the Pathnet case that one DS-3 of capacity is allocated to the
Incumbent.
(8) Factors which likely will decrease the actual measurement of the capacity
available for sale include the provisioning of protection circuits and the
variance between geographic route miles versus direct miles.
32
<PAGE>
BUSINESS DEVELOPMENT, CAPITAL EXPENDITURES AND ACQUISITIONS
From inception through March 31, 1998, expenditures for property, plant and
equipment, including construction in progress, totaled $10.1 million. In
addition, the Company incurred significant other costs and expenses in the
development of its business and has recorded cumulative losses from inception
through March 31, 1998 of $8.8 million. See "Risk Factors--Limited History of
Operations; Operating Losses and Negative Cash Flow."
RESULTS OF OPERATIONS
The Company's principal activity from inception through the third quarter of
1996 involved introducing its business plan to over 300 Incumbents with
significant private networks through face to face meetings. As the Company began
to enter into formal relationships with Incumbents in 1996, additional
engineering, legal, and financial personnel were recruited to support the
increased workflow and to negotiate Incumbent contracts. By the first quarter of
1997, the Company initiated construction on the first segment of the network,
and additional engineering and management personnel were recruited, including
Mr. Jalkut. The Company has also begun marketing and sales efforts, and hired
Mr. Bennis to develop and execute its sales efforts and marketing plan.
REVENUE. In establishing relationships with Incumbents, the Company has
acted as a provider of services for transitioning the Incumbents from their old
network system onto the Company's network. The services provided by the Company
to Incumbents, including analysis of existing facilities and system performance,
advisory services relating to PCS relocation matters, and turnkey network
construction management, provided substantially all of the Company's historical
revenues. The Company expects substantially all future revenue to be generated
from the sale of telecommunications services. For the three months ended March
31, 1998, the Company generated revenues of $100,000 from construction
management services. For the year ended December 31, 1997, the Company generated
revenues of $162,500, of which $100,000 was derived from construction management
services and $62,500 from PCS relocation advisory services compared with
revenues of $1,000 from PCS relocation advisory services for the year ended
December 31, 1996. The Company generated no revenue during the period from
inception (August 25, 1995) to December 31, 1995.
COSTS AND EXPENSES. For the three months ended March 31, 1998, the Company
incurred operating expenses of approximately $2.9 million. For the year ended
December 31, 1997, the Company incurred operating expenses of approximately $4.3
million compared to operating expenses of $1.3 million for the year ended
December 31, 1996 and $429,000 for the period from inception through December
31, 1995. The increase in expense was directly related to an increase in
selling, general and administrative expenses ("SG&A") as the Company expanded
its engineering, technical, legal, finance, and general management personnel in
connection with the continued signing of new Incumbent agreements and the
ongoing construction of the Company's network. The Company expects SG&A to
increase significantly in 1998 as additional staff is added in all functional
areas, particularly in sales and marketing.
LIQUIDITY AND CAPITAL RESOURCES
The Company expects to generate cash primarily from external financing and,
as its network matures, from operating activities. The Company's primary uses of
cash will be to fund capital expenditures, working capital and operating losses.
Deployment of the Company's digital network and expansion of the Company's
operations and services will require significant capital expenditures. Capital
expenditures will be used primarily for continued development and construction
of its network, implementing the Company's sales and marketing strategy and
constructing and improving the Company's NOC. The Company anticipates that, for
the twelve month periods ending June 30, 1999 and 2000, it will require
approximately $100 million and $215 million, respectively, to fund capital
expenditures, working capital and operating losses aggregating $290 million, $10
million and $15 million, respectively, at which time it expects to have
33
<PAGE>
completed a 21,000 route mile network. The Company also expects that during the
next two years, approximately 75% of its capital requirements will be for
telecommunications and transmission equipment. The majority of the remaining
capital requirements of the Company will be for installation and other site
construction related costs. See "Risk Factors--Significant Capital Requirements;
Uncertainty of Additional Financing."
On April 8, 1998, the Company completed the sale of the Units (comprised of
the Notes and the Warrants) for net proceeds of $339.5 million. Also on April 8,
1998, the Company completed the 1998 Private Equity Investment from which the
Company received net proceeds of $20.0 million. The Notes bear interest at
12 1/4% per annum and principal on the Notes is due in full in 2008. Of the net
proceeds from the issuance of the Units, $81.1 million were used to purchase the
Pledged Securities which secure the repayment of the Notes and are sufficient to
provide for payment in full of interest due on the Notes through April 15, 2000.
The remaining net proceeds from the issuance of the Units and the Private Equity
Investment are being used for capital expenditures, working capital and general
corporate purposes, including the funding of operating losses. The Indenture
relating to the Notes contains provisions restricting, among other things, the
incurrence of additional indebtedness, the payment of dividends, the making of
restricted payments, the sale of assets and the creation of liens. See
"Description of Certain Indebtedness--Senior Notes."
In addition, the Company is currently exploring several equipment financing
and other financing alternatives. Although the Company has received commitments
(subject to definitive documentation) from prospective lenders in connection
with two such proposed financing facilities, as of the date of this Prospectus,
the Company has not decided to enter into any particular proposed facility.
The Company has not finalized commitments for any additional financing and
there can be no assurance that the Company will be able to secure financing from
these sources on terms that are favorable to the Company. In addition, the
Company may require additional capital in the future to fund operating deficits,
net losses and debt service, and for potential strategic alliances, joint
ventures and acquisitions. Actual capital requirements may vary based upon the
timing and success of the Company's network roll out. Although there can be no
assurance, if the network roll out were delayed from the schedule currently
anticipated by the Company or if demand for the Company's services were lower
than expected, the Company expects that it would be able to defer or reduce
portions of its capital expenditures.
Immediately following the consummation of the Offering, the Company expects
to have $351.4 million in cash and cash equivalents (on a pro forma basis giving
effect to the Transactions and the Offering as if each had occurred as of March
31, 1998 and excluding the Pledged Securities). Based on its current business
plan, the Company believes that such amounts will provide sufficient liquidity
to meet the Company's capital requirements through the middle of 2000, at which
time the Company expects to have completed a 21,000 route mile network. See
"Risk Factors--Significant Capital Requirements; Uncertainty of Additional
Financing." The Company intends to use any additional available funds to
accelerate its development plans.
Because the Company's cost of rolling out its network and operating its
business, as well as its revenues, will depend on a variety of factors
(including the ability of the Company to meet its roll-out schedules, its
ability to negotiate favorable prices for purchases of network equipment, the
number of customers and the services they purchase, regulatory changes and
changes in technology), actual costs and revenues will vary from expected
amounts, possibly to a material degree, and such variations are likely to affect
the Company's future capital requirements. Accordingly, there can be no
assurance that the Company's actual capital requirements will not exceed the
anticipated amounts described above. Further, the exact amount of the Company's
future capital requirements will depend upon many factors, including the cost of
the development of its network, the extent of competition and pricing of
telecommunication services in its markets, the acceptance of the Company's
services and the development of new products.
34
<PAGE>
INFLATION
Management does not believe that its business is affected by inflation to a
significantly different extent than the general economy.
YEAR 2000
The Company has established processes for evaluating and managing the risks
and costs associated with Year 2000 software failures. Management is in the
process of taking steps to ensure a smooth Year 2000 transition, including
working with its software vendors to assure that by the end of the first quarter
of 1999, the Company is fully prepared for the Year 2000. The Company has
identified and analyzed both internally developed and acquired software that
utilizes date embedded codes that may experience operational problems when the
Year 2000 is reached. The Company is making and intends to complete necessary
modifications to the identified software by the end of the first quarter of
1999. The Company is also communicating with Incumbents, suppliers, financial
institutions and others with which it does business to coordinate Year 2000
compliance. Management does not anticipate that the Company will incur
significant operating expenses or be required to invest heavily in computer
systems improvements to be Year 2000 compliant, and does not anticipate that
business operations will be disrupted or that its customers will experience any
interruption of service as a result of the millenium change.
NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board has issued three new standards that
became effective for reporting periods beginning after December 15, 1997:
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS 130"), Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS
131"), and Statement of Financial Accounting Standards No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits" ("SFAS 132").
Effective March 31, 1998, the Company adopted SFAS 130, SFAS 131 and SFAS 132.
The adoption of these standards has no material effect on the Company's
financial statements.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133 "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"), which requires a Company to
recognize all derivatives as either assets or liabilities in the balance sheet
and measure those instruments at fair value. This standard is effective for the
Company's 1998 calendar year. The Company has not yet determined the effects
SFAS 133 will have on its financial position or the results of its operations.
35
<PAGE>
BUSINESS
THE COMPANY
Pathnet intends to become a leading provider of high quality, low cost, long
haul telecommunications capacity to second and third tier markets throughout the
United States primarily by upgrading existing wireless infrastructure to develop
a state-of-the-art, digital SONET network. The Company is positioning itself
primarily as a 'carrier's carrier,' providing a high capacity, dedicated network
to IXCs, LECs, ISPs, RBOCs and other Telecom Service Providers. The Company is
deploying its digital network by upgrading, integrating and leveraging existing
telecommunications assets, sites and rights of way, including those utilized by
Incumbents. By integrating the existing networks of Incumbents, the Company
expects to obtain the equivalent of a nationwide spectrum license at minimal
licensing cost.
The Company's goal is to deploy a network covering 21,000 route miles by the
middle of 2000 and eventually to deploy a network encompassing more than 100,000
route miles. Based on market research prepared for the Company by the Yankee
Group, a leading telecommunications research firm, the estimated addressable
market for the Company's services is expected to grow from approximately $6
billion in 1998 to approximately $17 billion by 2008. The Company believes its
strategy of developing a high quality, low cost, digital network primarily in
smaller markets will enable the Company to take advantage of (i) the limited
capacity currently available or expected to be constructed in smaller markets,
(ii) higher prices generally available in those markets and (iii) technological
and cost advantages of the Company's deployment strategy. The Company is a
development stage enterprise that is currently designing, constructing, testing
and commissioning its digital network, which will initially serve markets in 34
states. The Company has completed over 800 route miles of its network located in
Iowa, Minnesota, Montana, North Dakota and South Dakota, is currently
constructing approximately 5,000 additional route miles and is providing
commercial service on a portion of its network.
The Company's core strategy for deploying its network is to form strategic
relationships with Incumbents and other owners of telecommunications assets that
enable the Company to leverage these existing assets, thereby reducing the
Company's capital costs and time to market. The Company believes that Incumbents
will find a strategic relationship with the Company to be attractive due to the
opportunity for the Incumbents to (i) reduce the costs of upgrading internal
network infrastructure, (ii) receive incremental capacity which has greater
reliability characteristics than most of the Incumbents' existing systems and
(iii) leverage under-utilized assets and receive a share of the incremental
revenues generated by Pathnet. The Company has identified Incumbents currently
holding or operating private networks in the United States that in the aggregate
cover approximately 465,000 route miles. Through its sales staff and other
engineering, financial and legal professionals, the Company has held meetings
with over 300 of these Incumbents. As of June 2, 1998, 49 of these entities,
which together control approximately 95,000 route miles, have authorized the
Company in writing to prepare preliminary engineering evaluations of their
networks for the purpose of entering into long-term strategic relationships with
the Company. Of these 49 entities, seven entities, which collectively control
approximately 15,000 route miles, have entered into eight binding agreements
relating to the initial design and construction of approximately 9,000 route
miles of network. Seven of these binding agreements are long-term FPM Agreements
with affiliates of Enron, Idaho Power Company, Northeast Missouri Electric
Cooperative, NIPSCO, Texaco and two affiliates of KN Energy. The eighth
agreement is a binding term sheet with ATC, which controls certain
telecommunications assets including certain assets divested by CSX Railroad,
ARCO Pipeline and MCI. In addition, the Company is currently pursuing long-term
strategic relationships with 25 out of the 49 entities which control
approximately 66,000 additional route miles of network. These potential
relationships are in varying stages of evaluation, system design and business
and contract negotiations. In addition to deploying its wireless network to
serve second and third tier markets by forming long-term relationships with
Incumbents, the Company may pursue opportunities to acquire or deploy
complementary telecommunications assets or technologies (such as fiber optic
cable) and to serve other markets. See "Risk Factors--Risks of Completing the
Company's Network; Market Acceptance."
36
<PAGE>
The Company's network is being designed for maximum reliability and security
and will be capable of carrying a full array of voice, data and video
communications. Bellcore has evaluated the Company's system design and existing
network and has confirmed that the Company's wireless network will be built
using proven, off-the-shelf components and will meet or exceed prevailing
industry standards for reliability and error free operation. The Company's
network employs various design features that enhance its reliability, including
frequency diversity, space diversity and SONET architecture.
Pathnet was incorporated in August 1995, and its initial investors include a
group of financial sponsors led by Spectrum and NEA. The Company's current
investors also include Dennis R. Patrick, former Chairman of the FCC. The
Company's Chairman, David Schaeffer, has more than 20 years of business and
entrepreneurial experience, including building and operating wireless networks.
Richard A. Jalkut, the Company's President and Chief Executive Officer, has over
30 years of telecommunications experience, including as President of NYNEX
Telecommunications, an operating subsidiary of NYNEX Corporation with more than
$12.0 billion in annual revenues and 60,000 employees. Kevin J. Bennis, formerly
President of Frontier Communications, is Executive Vice President of the Company
serving as President of the Company's Communications Services Division. Prior to
working at Frontier Communications, Mr. Bennis served in various positions for
21 years at MCI, including as Senior Vice President of Marketing. Michael L.
Brooks, the Company's Vice President of Network Development, directed the
initial construction of the 3,500-mile digital microwave network at Qwest
Microwave Communications, a predecessor of Qwest, as its Vice President of
Engineering.
MARKET OPPORTUNITY
The Company believes there is a substantial market opportunity to provide
high quality, low cost, long haul telecommunications capacity for second and
third tier markets throughout the United States. The Company commissioned the
Yankee Group to study the Company's addressable market in second and third tier
markets. The Yankee Group estimated the potential addressable market for the
Company's services to be approximately $6 billion in 1998 and estimated that
such market will grow to approximately $17 billion by 2008, indicating a
compounded annual growth rate of approximately 11% per year. The Yankee Group
attributes this growth to (i) an expected shift in market share of interexchange
services away from established carriers, such as AT&T, MCI and Sprint, to
non-facilities-based IXCs that are more likely to rely on alternative carriers
such as the Company to transmit traffic, (ii) the development of the Internet,
(iii) growth in data traffic, including WANs, extranets, CAD/CAM and other
applications which require substantial amounts of bandwidth and (iv) continued
growth in voice traffic. The Yankee Group determined this addressable market
size by estimating the amount of off-network traffic in the Company's targeted
geographic markets for long distance and other services. The Yankee Group
estimates indicate that approximately 16% of the $108 billion long distance,
special access, and intra-LATA market in the United States is carried
off-network by carriers that lease capacity from other providers such as ILECs
or the Company. Of that 16% carried off-network, the Yankee Group believes that
Pathnet will be positioned to address 35% of that market based upon the
geographic and market profile of the Company's business plan.
Based on FCC data and other publicly available information, the Company
estimates that most existing or planned facilities-based long distance
providers' networks are designed to connect primarily the top 120 MSAs in the
United States. Facilities-based IXCs and other telecommunications providers must
rely, directly or indirectly, on facilities provided primarily by ILECs to
transmit calls beyond their existing owned or leased facilities. Current
facilities-based providers serve the second and third tier markets primarily
utilizing a combination of copper, fiber and microwave transport facilities. The
Company believes that many Telecom Service Providers will choose the Company's
network for long haul capacity serving second and third tier markets as a result
of its (i) availability in markets where there are currently insufficient or
limited high capacity facilities, (ii) lower prices compared to those currently
offered by ILECs or other existing facilities-based carriers, (iii) ubiquity in
these markets compared to many other
37
<PAGE>
long haul carriers due to the projected reach of the Company's network, as well
as an increased number of access and termination points compared to most other
long haul networks, (iv) greater product flexibility as a result of the ability
to sell capacity in increments as small as DS-1s and as large as OC-24s, (v)
non-competitive marketing position as primarily a 'carrier's carrier', (vi)
comparable or greater reliability due to the digital SONET architecture of the
Company's network, and (vii) ability to provide network redundancy and enhanced
reliability by offering an alternative to the ILEC or other facilities-based
carriers.
COMPETITIVE ADVANTAGES
The Company believes that it will enjoy the following competitive
advantages:
UBIQUITOUS COVERAGE. The Company's goal is to deploy a network covering
21,000 route miles by the middle of 2000 and eventually to deploy a network
encompassing more than 100,000 route miles. The extensive scope and attractive
characteristics of Pathnet's network architecture should enable the Company to
provide greater ubiquity than many other long haul carriers. Pathnet's wireless
network architecture enables the Company to provide access and termination
points approximately every 25 miles, which is not economically feasible for most
fiber optic networks. This architecture increases the number of cities that can
be served cost effectively on each route. In addition, the Company expects that
its tower rights will enable it to interconnect with Telecom Service Providers
by digital microwave anywhere within an approximate 25-mile line of sight
surrounding any transmission tower on its network. This will allow Pathnet in
many cases to bypass existing local infrastructure and deliver traffic directly
to an access tandem, local serving office, mobile switching office, ISP POP or
large end-user.
LOWER NETWORK COST. By leveraging the resources of Incumbents and other
owners of telecommunications assets and by utilizing lower-cost wireless
technology, the Company believes it will gain a significant competitive
advantage over carriers seeking to deploy newly constructed digital networks to
serve the Company's target markets. The Company intends to reduce its initial
costs by utilizing the assets, including towers and rights of way, of Incumbents
and other owners of existing telecommunications assets. In addition, the Company
will be able to utilize many of the requisite local and federal permits and
local and federal regulatory approvals already in place. Based upon publicly
available information, the Company believes that, for capacity of OC-24, the
Company's average capital cost per DS-0 circuit mile will be approximately $1.55
versus approximately $1.90 for newly constructed digital microwave capacity,
approximately $3.00 for newly constructed aerial fiber and approximately $4.10
for newly constructed fiber buried in conduit.
SUCCESS-BASED CAPITAL EXPENDITURE. The Company's network is designed to
reduce the risk of capital investment by deploying a substantial portion of its
network on a demand-driven basis. After an Initial System is deployed, the
Company's additional capital expenditures will relate primarily to deploying
incremental equipment to provide additional capacity in response to specific
customer demand. As a result, the Company believes that a majority of its
capital expenditures will be success-based. The modular design of its network
should allow the Company to expand rapidly in response to increased customer
demand or to delay the deployment of network equipment until justified by
specific customer demand. In addition, the Company will be able to mitigate its
capital expenditures by redeploying network equipment to respond to shifting
customer demand.
BARRIERS TO ENTRY. The Company's principal strategy is to enter into
exclusive long-term relationships with Incumbents to upgrade and develop their
fixed point microwave networks. This strategy enables the Company to minimize
the significant costs and obstacles associated with the development of long haul
telecommunications capacity. Leveraging the existing assets of Incumbents will
enable the Company to avoid certain capital expenditures related to real estate
and right-of-way acquisition, permits and zoning requirements, and generally is
expected to shift to Incumbents certain costs of shelter development, tower
upgrades and enhancement of utility service. The Company's relationships with
Incumbents also are
38
<PAGE>
expected to mitigate maintenance and ongoing administrative costs by utilizing
Incumbents' technicians to perform facility and equipment maintenance and
on-site circuit provisioning and by leaving ongoing utility, real estate taxes
and other infrastructure costs with Incumbents. The Company believes that fiber
networks, the primary alternative source of bandwidth, may be too expensive to
install in the smaller markets targeted by the Company. The greater capacity
offered by fiber networks may not be cost effective in smaller markets due to
the higher costs per bit of capacity sold to lower volume markets.
HIGH QUALITY, TECHNOLOGICALLY ADVANCED NETWORK. The Company's network is
being deployed using a high capacity digital SONET platform, which will provide
high quality voice, data and video transmission comparable to or exceeding that
of most fiber optic networks. The Company expects to deliver 99.999% network
reliability on any individual path with an average bit error rate of no greater
than 10(-13). The capacity created by Pathnet is expected to meet the highest
industry standards, including those of AT&T and MCI, and Bellcore's
specifications for reliability. The Company will continuously monitor and
maintain high quality control of its network on a 24 hours per day, seven days
per week basis through its NOC.
EXPERIENCED MANAGEMENT. Pathnet's management team includes its Chief
Executive Officer, Richard A. Jalkut, the former President of NYNEX
Telecommunications, and Kevin J. Bennis, who is Executive Vice President serving
as President of the Company's Communications Services Division and was formerly
President of Frontier Communications and Senior Vice President of Marketing at
MCI. The Company has commenced development of its network under the direction of
Michael L. Brooks, who was responsible, as Vice President of Engineering of
Qwest Microwave Communications, a predecessor of Qwest, for the initial
construction of Qwest's 3,500-mile digital microwave network. This team has
significant and proven operational, technical, financial and regulatory
experience in the telecommunications industry.
BUSINESS STRATEGY
Key components of the Company's business and operating strategies are
described below:
FOCUS ON SMALLER, CAPACITY CONSTRAINED MARKETS. The Company intends to
focus on smaller markets that typically have limited access to transmission
capacity and that currently are served by ILECs and few other competitors.
Private line rates in second and third tier markets are believed by the Company
to be significantly higher than rates between larger markets because these
smaller markets are typically dependent on ILECs and other facilities-based
carriers. Smaller markets are often unattractive to new entrants because their
relatively limited traffic does not normally economically justify new network
construction. Focusing on smaller markets should enable the Company to take
advantage of its low cost, flexible network, which is capable of servicing
markets requiring small increments of capacity.
POSITION THE COMPANY AS A 'CARRIER'S CARRIER.' The Company intends to sell
the majority of its capacity to Telecom Service Providers. The Company believes
there are substantial benefits to a 'carrier's carrier' strategy, including (i)
lower sales, marketing and servicing costs, (ii) elimination of significant
capital outlays to provide switching services to end-users, (iii) the ability to
carry most of its customer traffic on its own network, thereby increasing
operating margins, and (iv) increased attractiveness to Telecom Service
Providers, who will not view the Company as a potential competitor.
ESTABLISH STRATEGIC RELATIONSHIPS. The Company's core strategy for
deploying its network is to form strategic relationships with Incumbents and
other owners of telecommunications assets that will enable the Company to
utilize existing infrastructure, permits and other regulatory approvals in order
to reduce the Company's time to market and construction costs. The Company
believes that Incumbents will find a strategic relationship with the Company to
be attractive due to the opportunity for Incumbents to (i) reduce the costs of
upgrading the Incumbent's infrastructure, (ii) receive incremental capacity
which has greater reliability characteristics than most of the Incumbents'
existing systems, and (iii) leverage
39
<PAGE>
under-utilized assets and receive a share of the incremental revenues generated
by Pathnet. See "Risk Factors--Dependence on Relationships with Incumbents;
Rights of Incumbents to Certain Assets."
BUILD DIRECT SALES FORCE AND PROVIDE SUPERIOR CUSTOMER SERVICE. The Company
is building a national accounts sales force that will use a consultative
approach designed to provide a systematic review of a large carrier's network
requirements in smaller markets and to offer solutions to reduce the carrier's
network costs and improve its reliability. The Company is building a regional
sales force that will market the Company's network capacity to smaller carriers
and to selected large end-users. In addition, pursuant to its FPM Agreements,
the Company utilizes Incumbents as an alternative sales channel to sell to large
end-users who reside near Incumbents' facilities. The Company expects to offer
high reliability and superior customer service, including maintaining a
centralized NOC to initiate new services and monitor existing circuit capacity
more easily.
SALES AND MARKETING STRATEGY
CUSTOMERS
The Company primarily targets Telecom Service Providers as well as smaller
carriers and large end-users. The Company's marketing focus is to (i) offer
capacity to fill gaps in its customers' networks; (ii) provide alternative
capacity to ILECs, and (iii) capture demand, as a lower cost provider, from
incremental growth in the Company's addressable market. The Company markets its
network to major IXCs such as AT&T, MCI, Sprint and WorldCom to satisfy their
expanded requirements for feeder and gathering networks. The Company expects
that it will be well positioned to provide capacity to meet spot shortages in
isolated geographic areas and to provide economic transport facilities that will
complement existing IXC networks. The Company plans to exploit its network
flexibility in providing access and termination capabilities and in providing
capacity to small IXCs that need both a feeder network and backbone transport.
The Company also intends to market capacity to ISPs to facilitate the creation
of additional POPs for local dial-up connectivity to the ISPs' customer base,
thereby eliminating the ISPs' dependence on IXCs for capacity.
The Company believes there will be significant opportunities to market its
capacity to the RBOCs when they commence long distance service outside of their
current service areas. The Company also plans to market the Company's network to
RBOCs or other ILECs for use within their own service areas. The Company
believes ILECs will be attracted to the Company's ability to provide
supplemental capacity on a leased basis, permitting them to conserve capital and
providing a low-cost redundancy alternative. The Company believes its network
will allow RBOCs and ILECs to focus on larger cities while providing small
communities within their service areas with broadband connectivity.
The Company expects that mobile wireless operators (PCS, cellular and ESMR)
will be attracted to the Company's ability to provide the backhaul capacity
needed to interconnect its mobile switches with backbone transport capacity. The
Company also intends to market its capacity to competitive access providers and
CLECs who can utilize the Company's network to interconnect various service
areas on an intra-LATA and inter-LATA basis. Lastly, the Company also
anticipates offering capacity to providers of switched video services, as the
Company's 1.2 gigabyte per second OC-24 network is expected to be capable of
providing up to 150 digital video channels on demand as advances in digital
switching continue.
PRODUCTS AND SERVICES
The Company is offering dedicated private line access for voice, data and
video transmission in DS-1, DS-3 and OC-3 increments that are well suited to
second and third tier markets. The Company expects that its state-of-the-art
network architecture will enable it to provide access and termination points as
frequently as every 25 miles, thereby providing a more flexible routing capacity
than networks comprised solely of fiber optic cable. This architecture is
expected to increase the number of cities that can be cost effectively served on
each route. In addition, the Company expects this architecture to enable it to
deliver
40
<PAGE>
traffic anywhere within an approximate 25-mile line of sight surrounding any
Incumbent tower, allowing it in many cases to bypass existing local
infrastructure and deliver traffic directly to the access tandem, local serving
office, mobile switching office, ISP POP or to large end-users. This flexibility
plus the ubiquity of the Company's network is expected to appeal to a broad
variety of customers.
The Company also is offering provisioning services and other customer
service features. The Company's network architecture is designed to allow it to
deploy incremental equipment rapidly in response to customer needs. The Company
will employ a state-of-the-art operating support system that will be capable of
supporting on-line order entry and remote circuit provisioning. The Company also
employs information systems that permit customers to monitor network quality
using benchmarks such as network uptime, mean time to repair, installation
intervals, timeliness of billing and NOC responsiveness. The Company expects
that its state-of-the-art NOC will permit pro-active service monitoring and
system management on a 24 hours per day, seven days per week basis. The Company
expects to combine network management, billing and customer care on an
integrated platform to offer its customers a single point of contact.
The Company expects that it will locate network nodes near LEC and IXC
service offices and expects to be able to interconnect with customers using
multiple technologies, including both fiber optic and microwave transmission
media. The diagram below illustrates the portion of a telecommunications circuit
for which the Company intends to provide service:
[Artwork: Diagram showing a typical telecommunications circuit and the portion
served by the Company]
PRICING
Private line rates in second and third tier markets are believed by the
Company to be significantly higher than rates between larger markets because
there are fewer suppliers serving such markets. Although the Company intends to
take advantage of its lower network costs to offer competitive pricing, it
believes that demand for capacity in second and third tier markets will
nonetheless permit higher profit margins than those obtainable in larger
markets. Moreover, the Company believes that many of the services currently
available in second and third tier markets do not offer the flexibility and
route diversity that the Company's network is expected to offer.
Pathnet's pricing structures will vary according to bandwidth requirements
and the demand characteristics of specific routes. Dedicated capacity is
expected to be sold on a monthly basis based on DS-0 circuit capacity multiplied
by the circuit length. Pathnet charges customers for this capacity regardless of
the actual usage of the dedicated circuits. The Company is marketing dedicated
capacity in increments as small as DS-1s and as large as OC-24s and expects to
offer discounts for larger volumes and multiple route purchases. See
"--Competition" and "Risk Factors--Competition; Pricing Pressures."
SALES AND MARKETING RESOURCES
The Company is building a direct sales force designed to focus on large and
small carriers. A national accounts sales force will pursue a consultative
approach to provide a systematic review of a large carrier's network
requirements in smaller markets and to offer solutions to reduce the carrier's
network costs and improve its network reliability. The regional sales force
markets the Company's network capacity to smaller carriers and to selected large
end-users. The Company is deploying its sales force in regional offices
throughout the United States. The Company is recruiting an experienced and well
trained sales force and retaining its sales and marketing team with a
compensation package that includes salary, quarterly performance bonuses and
stock option incentives. In addition, the Company utilizes Incumbents as an
alternate sales channel to sell to large end-users who reside near Incumbents'
facilities in return for a referral fee.
41
<PAGE>
The Company is also assembling a centralized marketing organization to focus
on product development, market analysis and pricing strategies as well as
responsibility for customer communications, public relations and branding.
Pathnet intends to develop its brand name and its service mark, "A Network of
Opportunities" through advertising in carrier trade publications and quarterly
newsletters to update network development, service statistics and Company
highlights.
COMMERCIAL ROLL-OUT
The Company is currently deploying its network on a modular basis. In its
efforts to attract Incumbents, the Company is capitalizing on the fact that many
Incumbents currently operate on outmoded analog platforms which provide
low-quality transmission and little room for network expansion. In addition,
many Incumbents currently use a portion of the spectrum recently reallocated by
the FCC to PCS providers and other emerging technology licensees. Pursuant to
the FCC's rules and regulations, an Incumbent must relocate its operations to
another portion of the spectrum whenever the 2 GHz frequencies used by such
Incumbent are needed to implement PCS or another emerging technology. The FCC's
rules provide for a voluntary negotiation period during which the Incumbent and
PCS licensee may, but are not required to, negotiate the Incumbent's relocation.
After the expiration of such period, a mandatory negotiation period commences,
during which time the Incumbent and PCS licensee must negotiate in good faith.
The starting dates and durations of these negotiation periods vary depending on
the PCS spectrum block in which the Incumbent operates and whether the Incumbent
operates a public safety service (I.E., fire, police or emergency medical
service). Mandatory negotiation periods for all Incumbents expired or, will
expire, as follows: (i) April 1998 and April 2000, for non-public safety and
public safety Incumbents, respectively, in the PCS A and B blocks; (ii) May 1998
and May 2001, for non-public safety and public safety Incumbents, respectively,
in the PCS C block; and (iii) January 1999 and January 2002, for non-public
safety and public safety Incumbents, respectively, in the PCS D, E and F blocks.
Should any Incumbent and PCS licensee fail to agree on a relocation plan by the
end of their respective mandatory negotiation periods, the PCS licensee can
request that the Incumbent be involuntarily relocated; the FCC's rules do,
however, provide incentives for parties to agree to relocation plans on their
own.
As part of developing a long-term relationship with an Incumbent, the
Company generally will offer to assist the Incumbent in the relocation of its
system to the 6 GHz band of the spectrum and, in certain cases, assist the
Incumbent in negotiating legally mandated reimbursement for the cost of such
relocation from the new PCS entrant. Any funds received from such PCS entrants
are generally applied to the cost of the relocation and an upgrade of the
Incumbent's network and, as such, benefit both the Incumbent and the Company.
Based on Pathnet's experience, it may take between six and 18 months from
the initial contact to complete a long-term contract with an Incumbent and 12
months thereafter to complete a commercially available system utilizing the
Incumbent's assets. After a long-term agreement is signed, and throughout the
installation and construction of a system, the Company provides a project
manager for each Incumbent to provide a single point of contact for
installations across many sites and the upgrade of the Incumbent's
telecommunications system. The system replacement and upgrade is planned in two
stages. During the first stage, the Company's engineering department visits the
Incumbent to evaluate the existing system and to recommend an optimum route for
the system. The Company's engineering department develops a detailed system
design to satisfy the Incumbent's build out and routing requirements. Once
approved by the Incumbent, the Company begins the construction and build-out of
the new system.
In the second stage, the Company oversees and manages the construction,
installation, testing and cutover of the new system within a mutually agreed
upon timetable. The Incumbent is invited to observe and participate in
acceptance testing. Once the Incumbent has accepted the new system, the cutover
plan can proceed with the commissioning of circuits on the new equipment. The
Company coordinates with the Incumbent cutover of the new system to minimize
system downtime and service interruption. Once
42
<PAGE>
installed, the new system is expected to deliver 99.999% network reliability on
any individual path with an average bit error rate not greater than 10(-13). The
capacity created by Pathnet is expected to meet the highest industry standards,
including those of AT&T and MCI, and Bellcore's specifications for reliability.
See "Risk Factors--Risks of Completing the Company's Network; Market
Acceptance."
In addition to deploying its digital wireless network by leveraging the
assets of Incumbents, the Company may pursue opportunities to acquire or deploy
complementary telecommunications assets or technologies (such as fiber optic
cable) either in lieu of or as a supplement to digital wireless paths. See "Risk
Factors--Risks of Completing the Company's Network; Market Acceptance."
AGREEMENTS WITH INCUMBENTS AND OTHER OWNERS OF TELECOMMUNICATIONS ASSETS
FIXED POINT MICROWAVE SERVICES AGREEMENTS
As of June 2, 1998, the Company has entered into seven long-term FPM
Agreements with affiliates of Enron, Idaho Power Company, Northeast Missouri
Electric Power Cooperative, NIPSCO and Texaco and two affiliates of KN Energy.
Under the terms of the FPM Agreements, the Company typically leases from the
Incumbent an interest in the Incumbent's sites and facilities on which to build
and operate its network. The Company's FPM Agreements typically provide that the
Company will, in consideration of such lease, allocate to the Incumbent, solely
for its own use, a certain portion of the circuits on the upgraded system and
pay the Incumbent a portion of the revenue derived from sales capacity by the
Company of excess telecommunications on such Incumbent's system. The portion of
such revenues and the amount of such circuits typically depends on the relative
contributions of the Company and of the Incumbent to the system upgrade. The
Company expects that this portion will typically be approximately 10% of such
revenue, although the exact portion negotiated with each Incumbent is expected
to vary (possibly significantly) on a case-by-case basis. Under the FPM
Agreements signed to date, the Incumbents share between zero and approximately
50% of the revenue generated from the sale of excess capacity, with such revenue
sharing commencing up to four years after the commissioning of the Initial
System or any capacity expansion, and receive circuits ranging from 672 to 1,200
DS-0s for their internal communications needs. Generally, the Incumbent is also
entitled to purchase a certain amount of capacity in excess of its allocated
amount along its own system. The Company expects that FPM Agreements will
generally permit the Incumbent to purchase this additional capacity at the
Company's lowest market rate for such route. The Incumbent is usually required
to make certain capital investments up to a predetermined amount to upgrade its
system infrastructure to make it suitable for installation of the Company's
network system which, in most cases, includes significant modifications to
structures, towers, battery plants and equipment shelters. Certain Incumbents
who have executed FPM Agreements, however, have elected not to contribute any
capital toward the upgrade of their system and accordingly have agreed not to
participate in the revenue generated by the system. The Company is generally
responsible for capital investments relating to the Incumbent's facilities that
exceed such predetermined amount, as well as the installation cost of certain
other equipment, including new digital radios and antenna systems.
Pursuant to an FPM Agreement, the Incumbent grants to the Company an
exclusive right to market and sell excess telecommunications capacity created by
the Incumbent's system. The Company sets the selling price of such excess
capacity to maximize revenue on Pathnet's entire network rather than that
portion of the network covered by the Incumbent's system. The FPM Agreements
typically prohibit Incumbents from operating parallel microwave
telecommunications facilities for the purpose of selling digital circuits.
Moreover, the FPM Agreements usually provide that Incumbents will refer network
customers to the Company, and, in certain cases, the Incumbent will earn a fee
for a referral that results in a sale of capacity.
The FPM Agreements generally provide for a 25-year term consisting of an
initial term and two extension terms. The initial term generally includes a
design and installation period and an additional five
43
<PAGE>
years commencing upon the commissioning of the system. Generally, the FPM
Agreements also provide that the Company will be granted a first extension term
for an additional ten years if it sells 10% or more of the excess capacity
available for sale during the initial term, and a second extension term for an
additional ten years if it sells 10% or more of the excess capacity available
for sale during the first extension term. After commissioning the upgraded
system and so long as the Company satisfies such excess capacity sale
requirements, the FPM Agreements are typically non-terminable by either party.
After the 25-year period, the FPM Agreements typically provide for automatic
one-year extensions which may be terminated at the election of either the
Company or the Incumbent. Upon expiration of an FPM Agreement, the Company is
typically obligated to transfer the Initial System to the Incumbent and may
remove from the Incumbent's facilities all of its equipment utilized for
capacity expansion above the Initial System.
The FPM Agreements typically require the Company to grant the Incumbent a
security interest in the equipment required to operate the Initial System, which
includes the first radio, the protection radio and the other assets and
equipment required to operate such radios.
In the case of the Company's FPM Agreement with an affiliate of Idaho Power
Company ("Idaho Power"), in addition to granting the Incumbent a security
interest in the equipment required to operate the Initial System, the Company
contributed such equipment to a special purpose subsidiary in which Idaho Power
holds a majority interest. The Company has veto rights with regard to the taking
of certain extraordinary actions by the subsidiary. Should it enter into similar
FPM Agreements in the future, the Company expects that it will own all or a
majority of the interests in the related special purpose subsidiary and that (in
cases where such subsidiary is majority owned) the Incumbent will have veto
rights with respect to the taking of certain extraordinary actions.
AMERICAN TOWER TERM SHEET
Under the Binding Term Sheet executed by the Company and ATC, ATC has
granted the Company the right to perform due diligence on approximately 4,200
route miles of network in 25 states. Upon completion of a six-month due
diligence process that commenced on May 1, 1998, the Company has the unilateral
right to reserve each of the tower assets on which the Company would like to
install its network pursuant to a license agreement. The Binding Term Sheet
provides that the Company will have up to 14 months to commence construction of
its digital system. Prior to commencement of network construction, the Company
will enter into a license agreement with ATC that will grant to the Company a
25-year license to use the tower assets and other facilities of ATC in exchange
for three to five percent of all revenue collected from the sale of excess
capacity. As of the date of this Prospectus, the Company has entered into a
license agreement which will be effective as of August 1, 1998 with ATC relating
to the construction of approximately 250 route miles of network.
44
<PAGE>
NETWORK MAINTENANCE AND PROVISIONING OF CIRCUITS
The Company expects to enter into maintenance and provisioning services
agreements (each, a "Maintenance and Provisioning Agreement") with each
Incumbent with whom it enters into an FPM Agreement. As of the date of this
Prospectus, the Company has entered into agreements with KN Energy, NIPSCO,
Northern Border and Texaco relating to the maintenance of Pathnet's network.
Each Incumbent will be required to maintain the physical assets at each site
along its route. The Company anticipates entering into additional Maintenance
and Provisioning Agreements as its network is developed. The Maintenance and
Provisioning Agreements generally require an Incumbent to provide all services
necessary for the maintenance and operation of the Company's network, including
regularly scheduled maintenance and inspections and 24 hours per day, seven days
per week emergency repair services. They also typically provide for
certification of the Incumbent's maintenance employees and establish service
standards that the Incumbent must meet. The Incumbent receives a monthly fee per
site serviced, subject to cost of living adjustments and adjustments for changes
in the scope of the services provided. The Incumbent is also reimbursed for
certain out-of-pocket expenses, subject to certain limitations. Maintenance and
Provisioning Agreements typically have a one-year term and renew automatically
unless either party gives notice of its intention not to renew. A Maintenance
and Provisioning Agreement may be terminated sooner if an Incumbent breaches its
obligations thereunder or if the Company fails to pay charges due thereunder. An
Incumbent's performance is evaluated annually in connection with the renewal of
the related Maintenance and Provisioning Agreement.
The Company intends to expand the scope of the Maintenance and Provisioning
Agreements it has entered into that relate only to maintenance and intends to
execute additional agreements with additional Incumbents relating to the
provisioning of circuits. To the extent the Company requires manpower in the
field to provision circuits or install incremental radios, the Company plans to
utilize the Incumbents' existing maintenance staff to provide such services for
an additional fee. If the Company were unable or unwilling to establish or renew
Maintenance and Provisioning Agreements with Incumbents, or if the Company
should utilize telecommunications assets from entities other than Incumbents,
the Company may be required to hire its own staff or third parties to provide
such services. Although the Company believes that its maintenance and
provisioning support arrangements will ensure the quality and reliability of its
network, there can be no assurance that Incumbents or third-party service
providers will adequately maintain the Company's network. See "Risk
Factors--Dependence on Relationship with Incumbents; Rights of Incumbents to
Certain Assets."
EQUIPMENT SUPPLY AGREEMENTS
Pursuant to a Master Agreement entered into by the Company and NEC on August
8, 1997, the Company agreed to purchase from NEC by March 31, 2003 a total of
$200 million worth of certain equipment, services and licensed software to be
used by the Company in its network under pricing and payment terms that the
Company believes are favorable. In addition, NEC has agreed, subject to certain
conditions, to warranty equipment purchased by the Company from NEC for three
years, if defective, to repair or replace certain equipment promptly and to
maintain a stock of critical spare parts for up to 15 years. The Company's
agreement with NEC provides for fixed prices during the first three years of its
term. In addition, pursuant to a Purchase Agreement between Andrew and the
Company, the Company agreed exclusively to recommend to the Incumbents certain
products manufactured by Andrew and Andrew agreed to sell such products to
Incumbents and the Company for a three-year period, renewable for two additional
one-year periods at the option of the Company. The Company's agreement with
Andrew generally provides for discounted pricing based on projected order
volume.
45
<PAGE>
RELIABILITY OF NETWORK
Bellcore states that generally accepted industry standards for reliability
are 99.98% error free seconds for overall network reliability, 99.999% for any
individual path in the network, and bit error rate less than 10(-13). Bellcore's
analysis of the Company's system design indicates that the Company's network
consists of available, off-the-shelf components that meet or exceed the
standards listed above.
The Company has constructed a state-of-the-art NOC located in Washington,
D.C. which currently provides real-time end-to-end monitoring of Pathnet's
network operations during business hours. The Company is currently increasing
its NOC staff and expects to monitor its network operations 24 hours per day,
seven days per week in 1999. For the period before the NOC becomes operational
on a 24 hour per day basis, the Company has engaged WTCI to assist in monitoring
its network. The NOC ensures the efficient and reliable performance of the
network by enabling the Company to identify, and often prevent, potential
network disruptions, and to respond immediately to actual disruptions. In
addition, the NOC enables the Company to schedule and conduct maintenance of
Pathnet's network while minimizing interference with the use of the network.
Specific features provided by the NOC include traffic management and
forecasting, line performance reporting and alarm monitoring, remote link
restoration and coordination, and provisioning of network services.
COMPETITION
The telecommunications industry is highly competitive. In particular, price
competition in the 'carrier's carrier' market has generally been intense and is
expected to increase. The Company competes and expects to compete with numerous
competitors who have substantially greater financial and technical resources,
long-standing relationships with their customers and potential to subsidize
competitive services from less competitive service revenues and from federal
universal service subsidies. Such competitors may be operators of existing or
newly deployed wireline or wireless telecommunications networks. The Company
will also face intense competition due to an increased supply of
telecommunications capacity, the effects of deregulation and the development of
new technologies, including technologies that will increase the capacity of
existing networks.
The Company anticipates that prices for its 'carrier's carrier' services
will continue to decline over the next several years. The Company is aware that
certain long distance carriers are expanding their capacity and believes that
other long distance carriers, as well as potential new entrants to the industry,
are constructing new microwave, fiber optic and other long distance transmission
networks in the United States. If industry capacity expansion results in
capacity that exceeds overall demand along the Company's routes, severe
additional pricing pressure could develop. As a result, within a few years, the
Company could face dramatic and substantial price reductions. Such pricing
pressure could have a material adverse effect on the business, financial
condition and results of operations of the Company.
While the Company generally will not compete with Telecom Service Providers
for end-user customers, the Company may compete, on certain routes, as a
'carrier's carrier' with long-distance carriers such as AT&T, MCI, Sprint and
WorldCom and operators of fiber optic systems such as IXC Communications, Inc.,
Williams, Qwest and Level 3, who would otherwise be the Company's customers in
second and third tier markets. The Company will also face competition
increasingly in the long haul market from local exchange carriers, regional
network providers, resellers and satellite carriers and may eventually compete
with public utilities and cable companies. In particular, certain ILECs and
CLECs are allowed to provide inter-LATA long distance services. Furthermore,
RBOCs will be allowed to provide inter-LATA long distance services within their
regions after meeting certain regulatory requirements intended to foster
opportunities for local telephone competition. Certain RBOCs have requested
regulatory approval to provide inter-LATA data services within their regions.
The RBOCs already have extensive fiber optic cable, switching, and other network
facilities in their respective regions that can be used for long distance
46
<PAGE>
services after a waiting period. In addition, other new competitors may build
additional fiber capacity in the geographic areas served and to be served by the
Company.
The Company may also face competitors seeking to deploy a digital wireless
network in the same manner as the Company by leveraging the assets of Incumbents
or other owners of telecommunications assets or from Incumbents leveraging their
own assets. Although the Company believes its strategy will provide it with a
cost advantage, there can be no assurance that technological developments will
not result in competitors achieving even greater cost efficiency and therefore a
competitive advantage. See "Risk Factors--Risk of Rapid Technological Changes."
A continuing trend toward business combinations and strategic alliances in
the telecommunications industry may create stronger competitors to the Company,
as the resulting firms and alliances are likely to have significant
technological, marketing and financing resources greater than those available to
the Company. See "Risk Factors--Competition; Pricing Pressures."
REGULATION
OVERVIEW
The Company's current arrangements with its Incumbents contemplate that the
Company's digital network will be largely Part 101 telecommunications services
which are subject to regulation by federal, state and local governmental
agencies. At the federal level, the Communications Act grants the FCC exclusive
jurisdiction to set rules and policies regarding interstate telecommunications
services (I.E., services that originate in one state and terminate in another
state) and use of the electromagnetic spectrum (I.E., wireless services). The
Company or its affiliates, or in certain cases Licensed Incumbents, must obtain
licenses described below from the FCC in order to construct and operate the
communications network necessary to support the Company's business, although the
Company may commence construction of proposed facilities prior to applying for
or obtaining authorization from the FCC, and may, upon satisfaction of certain
basic requirements, begin operations over constructed facilities prior to
obtaining a final license.
The FCC is also responsible for, among other matters, granting renewals of
the Company's Part 101 licenses, granting pro forma authorizations for transfers
of such licenses, imposing regulatory fees in connection with the granting of
such licenses, performing inspections of licensed facilities, adjudicating
disputes between the Company and other telecommunications carriers, and taking
disciplinary actions against the Company for any violation of the FCC's rules or
policies.
State regulatory commissions have jurisdiction over intrastate
communications (I.E., those that originate and terminate in the same state), and
may impose certain regulatory requirements and restrictions on the Company with
respect to such services. As a result of the Company's offerings of intrastate
service to
date, the Company has registered with the Montana Public Service Commission to
provide telecommunications services within the State of Montana. In addition,
municipalities and other local jurisdictions may regulate limited aspects of the
Company's business by, for example, imposing zoning and franchise requirements
and requiring installation permits, particularly with respect to the
construction of new or modified towers necessary to the Company's business. The
Company also is subject to varying taxation at the federal, state and local
levels.
The Company has obtained and expects to obtain Part 101 authorizations and
approvals as necessary and appropriate to conduct its currently planned
operations, and believes that it is in compliance with all laws, rules and
regulations applicable to its business. Nevertheless, changes in existing laws
and regulations, including those relating to the provision of Part 101
telecommunications services in the 6 GHz band and the relocation of Incumbents
from the 2 GHz to the 6 GHz band, could have a material effect on the Company's
business, financial condition and results of operations. See "Risk
Factors--Regulation-- Licensing by the Company and Incumbents."
47
<PAGE>
As a result of the nature of the Company's business and recent regulatory
streamlining actions taken by the FCC, the Company, as compared to most other
wireless carriers, traditional IXCs and LECs, is subject to a substantially
lesser degree of FCC regulation, and is required to deal with far fewer federal
and state regulatory hurdles in the implementation of its business plan. In
connection with its 1998 biennial regulatory review, the FCC has initiated a
rulemaking proceeding that would further revise and streamline the rules
governing application procedures for the services currently planned to be
offered by the Company and make licensing procedures for such services faster,
less burdensome, and more consistent. The Company expects that these simplified
licensing procedures, if adopted by the FCC, will make it easier to obtain and
maintain the licenses required for its business.
Other regulatory hurdles that are normally encountered by traditional IXCs
and LECs will have no material bearing on the Company's current business. For
example, while IXCs have to pay access charges to LECs in order to access local
networks, the Company will sell capacity to IXCs but will not itself provide
switched traffic, thus eliminating the need to encounter the regulatory issues
surrounding such access. Similarly, while competitive LECs must interconnect
with the facilities of incumbent LECs in order to provide local service, and
must therefore deal with such regulatory issues as interconnection, number
portability, dialing parity, and unbundled network access, the Company does not
now plan to offer local switched service and therefore need not address these
issues. Finally, because the Company's business plan will rely heavily on
existing towers and facilities of Incumbents, the likelihood of encountering
burdensome state or local zoning or tower siting issues is substantially
reduced. The Company expects that its streamlined regulatory status will serve
as an asset and a competitive advantage as it pursues its business plan.
For a discussion of the risks associated with the regulation of the
Company's business, see "Risk Factors--Regulation."
FEDERAL REGULATION
LICENSING BY THE COMPANY. Because of the development and deployment of
emerging technologies such as PCS, many Incumbents operating private
telecommunications systems in the 2 GHz band of the frequency spectrum are or
will be required to relocate their systems and operations to the 6 GHz band or
alternate spectrum. At the same time, technology has made obsolete the analog
microwave systems typically operated by Incumbents. The transition to the 6 GHz
band provides these Incumbents with an opportunity to convert to more advanced,
more spectrum-efficient digital microwave systems. These two developments--one
regulatory, one technological--form the backdrop for the Company's efforts to
aggregate and deploy a digital Part 101 telecommunications network in the 6 GHz
band.
Working closely with relocated Incumbents, the Company has obtained, and
expects in most future cases to obtain, Part 101 licenses from the FCC to
conduct operations in the 6 GHz frequency band and from the same locations as
each such relocated Incumbent. Generally, the Company then upgrades each
relocated Incumbent's telecommunications system from analog to high capacity
digital, provides each Incumbent with the capacity needed by the Incumbent for
its own business, interconnect all of the digital systems to form an extensive
network, and sells excess capacity on the aggregated network to customers of the
Company.
LICENSING BY INCUMBENTS. In a limited number of instances, a relocated
Incumbent may itself obtain authorization from the FCC to operate a Part 101
telecommunications system at the newly occupied 6 GHz location, and may, as part
of its strategic relationship with the Company, construct and operate a digital
system to operate in that band of the frequency spectrum. In those instances,
the Company and the Licensed Incumbent have entered into, and will enter into,
contractual arrangements that allow the Licensed Incumbent to retain a limited
amount of capacity on the relocated network for its own purposes, and allow the
Company to market and sell the excess capacity on the network and collect the
revenue generated from such sales (a portion of which may be distributed to the
Licensed Incumbent also as part of
48
<PAGE>
such relationship). The Company intends to establish any such arrangement so as
to ensure that there is no DE FACTO transfer of control of the FCC license from
the Licensed Incumbent to the Company, because such a transfer without FCC
consent would violate the FCC's rules.
MUTUAL EXCLUSIVITY. Pursuant to its arrangements with Incumbents, the
Company has, and will, in most cases, apply to the FCC for new Part 101 licenses
to operate in the 6 GHz band. As each such Part 101 license is granted by the
FCC with respect to the frequencies to be used between two specific points as
designated by specific latitude and longitude coordinates, and as Incumbents
already own the infrastructure and sites that comprise each such licensed point
along the network, the Company expects to be the first and only entity to apply
for these licenses at or near the specific locations and in the frequencies to
be designated by the Company, and hence to have licensing priority under the
FCC's procedures. There can be no assurance that other entities will not seek
licenses to operate in the same portion of the frequency spectrum as the Company
in locations geographically close to those designated by the Company. The
Company believes, however, that such situations are not likely to create mutual
exclusivity for FCC purposes between the Company and any such other entity,
because (i) the FCC's current licensing is on a "first come, first served"
basis, (ii) it will be difficult for any such other entity to obtain tower site
locations in close enough geographical proximity to the Company's proposed tower
sites (on land typically controlled by the Incumbent) so as to cause a mutually
exclusive situation to arise and (iii) the FCC imposes construction and channel
loading requirements with respect to each frequency so licensed to prevent
warehousing of spectrum which would force any such potential mutual exclusive
licensee to invest significant capital in the form of sites, equipment and
actual traffic using such licensed frequencies in order to maintain its license.
FREQUENCY COORDINATION. Prior to applying to the FCC for authorization to
use portions of the 6 GHz band, the Company must coordinate its use of the
frequency with any existing licensees, permittees, and applicants in the same
area whose facilities could be subject to interference as a result of the
Company's proposed use of the spectrum; in applying for a license the applicant
must certify that such coordination has taken place. The Company must circulate
coordination notifications and allow 30 days for a response from other potential
applicants or licensees expressing concerns about interference; in the event of
such a response, the parties must take all reasonable steps to resolve the
potential interference. If there are no responses to the notification, the
desired frequency will effectively be "reserved" for the Company's use, and the
Company will be required to file an application for a license to use the
frequency within six months of the notification, or to file a renewal
notification. As a Part 101 licensee, the Company may itself receive
coordination notifications from would-be applicants, and would be required to
take reasonable steps to solve any interference problems.
FCC LICENSE REQUIREMENTS. As part of the requirements of obtaining a Part
101 license, the FCC requires the Company to demonstrate the site owner's
compliance with the FAA reporting and notification requirements with respect to
the construction, installation, location, lighting and painting of transmitter
towers and antennas, such as those to be used by the Company in the operation of
its network. In certain instances, the Company may be required to notify the FAA
of proposed construction of facilities (E.G., more than 200 feet above ground
level), so as to allow the FAA to determine whether the proposed construction
poses a hazard to aviation safety. The FCC requires compliance with the FAA's
notification requirement; where such FAA notification is required, the FCC
requires a "no hazard" determination from the FAA before granting a license with
respect to a particular facility. The FAA has a substantial backlog of requests
for "no hazard" determinations, and this may affect in certain situations the
timing of the FCC's issuance of a license to the Company. If the FAA finds that
a particular structure will pose a hazard, the Company will have to reduce its
size or location, or take other steps to bring the structure into compliance
with the FAA's guidelines.
In addition, in order to obtain the Part 101 licenses necessary for the
operation of its network, the Company, and in some cases Licensed Incumbents,
must file applications with the FCC for such licenses
49
<PAGE>
and demonstrate technical and legal qualification to be an FCC licensee. The
licensing procedures for Part 101 applicants have recently been streamlined by
the FCC. For example, Part 101 applicants may begin and complete the
construction of facilities to be licensed, at their own risk, even before filing
applications. An applicant is also allowed to operate such facilities at the
time of filing an application or while its formal license application is being
processed, provided the applicant certifies that, among other things: (i) it has
successfully completed the frequency coordination process; (ii) the operations
will have no significant environmental impact; (iii) no rule waiver is being
requested; and (iv) no FAA or FCC notification is required.
The Company or a Licensed Incumbent must obtain prior FCC authorization in
order to make significant modifications to existing microwave facilities
(although certain modifications can be made without prior approval or
notification). Additionally, the Company or a Licensed Incumbent is required to
provide notice to the FCC before transferring control of an FCC license to a
third party.
Under the rules of the FCC, the Company is required to have each licensed
Part 101 facility constructed and "in operation" (I.E., capable of providing
service), and to complete each authorized modification to an existing facility,
within 18 months of the grant of the necessary license or approval. Each license
also contains a separate deadline for the completion of construction of the
underlying facility. A licensee may obtain a six-month extension of these
periods upon a showing of good cause, and such extensions are routinely granted.
In addition, the FCC has eliminated the requirement that Part 101 licensees
certify to the FCC the completion of construction of licensed facilities. The
FCC also requires that a certain portion of the available channels on Part 101
digital systems be loaded with traffic within 30 months of licensing.
Failure to meet the FCC's timetable for construction or operation, or to
obtain an extension of said timetable, will automatically cancel the underlying
license or approval, to the detriment of the Company's ability to execute its
business plan. A license or authorization will also lapse if, after construction
and operation, the facility is removed or altered to render it non-operational
for a period of 30 days or more. Any authorized Part 101 station that fails to
transmit operational traffic during any twelve consecutive months after
construction is complete is considered permanently discontinued under the FCC's
files, and its underlying license is forfeited. A Part 101 license may also
lapse for failure to comply with the FCC's channel loading requirements.
There are several additional regulatory requirements with which the Company
will have to comply as a Part 101 licensee. For example, the Company must allow
the FCC, upon its request, to gain access to the licensed facilities in order to
conduct inspections. Additionally, licensees are required to give priority on
their systems to the transmission of public safety messages. Licensees are also
required to notify the FCC of any disruptions in the service offered over the
licensed facilities.
FCC LICENSE RENEWAL. Part 101 licenses obtained by the Company or an
Incumbent have been and will be issued for a term of ten years, after which such
licenses will have to be renewed by the filing of applications with the FCC.
Renewals of such licenses are generally routinely granted for companies that
have complied with all material aspects of the FCC's rules and regulations.
PROVISION OF COMMON AND PRIVATE CARRIER SERVICES. The Company's and
Licensed Incumbents' Part 101 licenses allow the Company to sell the excess
capacity on its network to the customers targeted under the Company's business
plan. Although the Part 101 licenses that the Company and Licensed Incumbents
hold or will hold are designated for "common carriers," under the FCC's rules, a
Part 101 licensee may provide both common carriage and private carriage over
Part 101 facilities.
The Company's services are and will be offered on a private carrier basis,
I.E., to selected companies on an individualized basis, subject to separately
negotiated contracts. For example, the capacity to be provided to Incumbents for
their own use will be provided on a private carrier basis. Similarly, the
Company offers and will offer services to common carriers on an individualized
basis as a 'carrier's carrier.'
50
<PAGE>
The Company's private carrier services are and will be specifically tailored to
meet the unique requirements of each customer, and will not subject the Company
to common carrier regulation, such as tariff filing requirements, with respect
to those private carriage offerings.
Although the Company does not currently plan on providing services on a
common carrier basis the Company may, in the future, provide services on such
basis, I.E., the services would be offered indiscriminately to the public, thus
making the Company a common carrier with respect to those services. Being a
common carrier with respect to the services would subject the Company to certain
regulatory requirements and restrictions. For example, with respect to the
Company's common carrier offerings, the Company would be required to offer them
to the public indiscriminately, without unreasonable discrimination in its
charges, practices, classifications, regulations, facilities, or services. In
addition, the Company would be required to file tariffs with the FCC with
respect to the rates and terms of its common carrier interexchange offerings;
this tariffing requirement may be modified or eliminated in the future. The
tariffing requirement is non-burdensome; the FCC has adopted streamlined
tariffing procedures for nondominant common carriers, allowing tariffs to become
effective within one day of filing, and presuming such tariffs to be just and
reasonable unless otherwise demonstrated.
FOREIGN OWNERSHIP. As the licensee of facilities designated for common
carriage, the Company is subject to Section 310(b)(4) of the Communications Act,
which by its terms restricts the holding company of an FCC common carrier
licensee (the Company is such a holding company, because it expects to hold all
FCC licensees indirectly, through subsidiaries) to a maximum of 25% foreign
ownership and/or voting control. In addition, any Incumbent Licensees is also
subject to such foreign ownership restrictions. The FCC has determined that it
will allow a higher level (up to 100%) on a blanket basis with respect to all
common carrier licensees, but only for foreign ownership by citizens of, or
companies organized under the laws of, WTO member countries.
The FCC continues to apply the 25% foreign ownership limitation with respect
to citizens or corporations of non-WTO nations. Although the Company is
presently, and upon completion of the Offering will be, within the 25% foreign
ownership limitation, future financings may cause the Company to exceed this
limitation, in which case the Company would have to analyze its foreign
ownership with respect to the WTO status of the nations with which the Company's
foreign owners are associated. Also, in the event that a Licensed Incumbent were
to choose to hold the relevant Part 101 licenses itself, and not through a
holding company, that Licensed Incumbent would be subject to Section 310(b)(3)
of the Communications Act, which limits direct foreign ownership of FCC licenses
to 20%. The FCC does not have discretion to waive this limitation.
UNIVERSAL SERVICE. The FCC's universal service rules require certain
providers of interstate telecommunications services to make contributions to a
fund based on their telecommunications revenues from end-users. Revenues
received by a provider from carriers that are reasonably expected to make
contributions to the fund based on their own end-user revenues need not be
included in such provider's contribution base. The proceeds in the universal
service fund are to be distributed among eligible schools and libraries, certain
carriers delivering telecommunications services to low-income consumers,
communication carriers in high cost-of-service areas and other entities
designated as eligible by a state commission.
Because the vast majority of the Company's telecommunications services will
be sold to other carriers that will themselves be contributors to the fund, the
Company does not expect to be assessed fund contributions with respect to most
of the telecommunications revenues that it receives. Such contributions will be
assessed solely with respect to revenues received by the Company from its
limited number of actual end-users, such as Incumbents, ISPs and other
non-carrier end-users, and from other carriers that are not required to
contribute to the fund because they fall under one of the contribution
exemptions established by the FCC (E.G., non-profit schools and government
agencies, and carriers whose total annual contribution would be less than
$10,000). The Company expects that, to the extent it is required to contribute
to the
51
<PAGE>
fund, it will be able to recover the amounts contributed through appropriate
charges to end-users and others.
To the extent that the Company provides capacity to carriers and other
entities eligible for universal service fund support, the Company may be able to
obtain, either directly or indirectly, some funding from the universal service
fund. The Company has no present intention to rely on any such funding, and has
not included any such funding in its financial projections.
STATE AND LOCAL REGULATION
State and local governments have regulatory authority over the provision of
intrastate communication services, including the approval of those seeking to
provide certain intrastate services. Such state and local regulatory
requirements may also include registering with regulatory authorities, paying
fees, acquiring permits, filing tariffs and notifying or obtaining approval from
regulatory authorities with respect to certain transfers or issuances of the
Company's capital stock. The Company expects that most of its services will be
provided on an interstate basis; however, in those instances where the Company
will provide intrastate services, it does not expect state regulatory
requirements to be burdensome.
The siting and construction of telecommunications equipment may be subject
to state and local zoning, land use, and other regulations. The types and timing
of approvals required to install transmitter towers, antennae and other
equipment and to conduct other aspects of the Company's business will likely
vary among local governments. Under its arrangements with Incumbents, it will be
the primary responsibility of Incumbents to obtain all necessary state and local
authorizations with respect to towers and other equipment for the Company's
network. Because the Company intends to rely heavily on existing towers and
facilities, however, the Company does not expect that Incumbents or other owners
of telecommunications assets will generally encounter burdensome state zoning or
tower siting issues.
INTELLECTUAL PROPERTY
The Company uses the name "Pathnet" as its primary business name and service
mark and has registered that name with the United States Patent and Trademark
Office. On February 26, 1998, the Company filed an application to register its
service mark "A NETWORK OF OPPORTUNITIES" in the United States Patent and
Trademark Office for communications services, namely establishing and operating
a network through the use of fiber optic and high capacity digital radio
equipment. First action upon the application is expected by the end of 1998. The
Company reasonably believes that the application will mature to registration,
but there can be no assurance that such registration will actually be issued.
The Company relies upon a combination of licenses, confidentiality
agreements and other contractual covenants to establish and protect its
technology and other intellectual property rights. The Company currently has no
patents or patent applications pending. There can be no assurance that the steps
taken by the Company will be adequate to prevent misappropriation of its
technology or other intellectual property. In addition, the Company depends on
the use of intellectual property of others, including the hardware and software
used to construct, operate and maintain its network. Although the Company
believes that its business as currently conducted does not infringe on the valid
proprietary rights of others, there can be no assurance that third parties will
not assert infringement claims against the Company or that, in the event of an
unfavorable ruling on such claim, a license or similar agreement to utilize
technology relied upon by the Company in the conduct of its business will be
available to the Company on reasonable terms. The Company's equipment supply
contracts with NEC and Andrew provide for indemnification by the supplier to the
Company for intellectual property infringement claims regarding the suppliers'
equipment. In the case of the agreement with Andrew, however, such
indemnification is limited to the purchase price paid for the particular
equipment.
52
<PAGE>
FACILITIES, REAL PROPERTY AND LEASES
As part of its network, the Company holds leasehold interests or licenses in
the land, towers, shelters and other facilities located at each Incumbent's
sites and will have leasehold and other real estate interests pursuant to its
agreements with independent tower companies and other owners of
telecommunications assets. See "--Agreements with Incumbents and Other Owners of
Telecommunications Assets--Fixed Point Microwave Services Agreements" and
"--American Tower Term Sheet." The Company expects to lease additional
facilities from Incumbents and other owners of telecommunications assets in
connection with the planned expansion of its digital network.
The Company leases its corporate headquarters space in Washington, D.C. from
6715 Kenilworth Avenue General Partnership, a general partnership of which David
Schaeffer, Chairman of the Company, is General Partner (the "Kenilworth
Partnership"), pursuant to a Lease Agreement between the Company and the
Kenilworth Partnership, dated as of August 9, 1997 (the "Headquarters Lease").
The Headquarters Lease expires on August 31, 1999 and can be renewed at the
option of the Company for two additional one-year periods on the same terms and
conditions. See "Certain Relationships and Related Transactions--Lease from the
Kenilworth Partnership." The Company also leases office space in Richardson,
Texas; Lewiston, Texas; and Independence, Kansas pursuant to leases that expire
in 2000, 2001 and 2000, respectively.
The Company believes that all of its properties are well maintained.
EMPLOYEES
As of June 2, 1998, the Company had 88 full time employees, none of whom was
represented by a union or covered by a collective bargaining agreement. The
Company believes that its relationship with its employees is good. In connection
with the construction and maintenance of its network and the conduct of its
other operations, the Company uses third party contractors, some of whose
employees may be represented by unions or covered by collective bargaining
agreements.
LEGAL PROCEEDINGS
Other than licensing and other regulatory proceedings described under "Risk
Factors--Regulation" and "--Regulation," the Company is not currently a party to
any legal proceedings, which, individually or in the aggregate, the Company
believes will have a material adverse effect on the Company's financial
condition, results of operations and cash flows.
53
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The table below sets forth certain information concerning the directors and
executive officers of the Company. Directors of the Company are elected at the
annual meeting of stockholders. Executive officers of the Company generally are
appointed at the Board of Directors' first meeting after each annual meeting of
stockholders.
<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH COMPANY
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
David Schaeffer (1).................................. 42 Chairman of the Board, Treasurer and Director
Richard A. Jalkut (1)................................ 53 President, Chief Executive Officer and Director
Kevin J. Bennis...................................... 44 Executive Vice President, and President,
Communications Services Division
William R. Smedberg, V............................... 37 Vice President, Finance and Corporate Development
Michael A. Lubin..................................... 49 Vice President, General Counsel and Secretary
Michael L. Brooks.................................... 54 Vice President, Network Development
Peter J. Barris (2).................................. 46 Director
Kevin J. Maroni (2)(3)............................... 35 Director
Patrick J. Kerins (3)................................ 43 Director
Richard K. Prins (2)(3).............................. 41 Director
Stephen A. Reinstadtler.............................. 32 Director
</TABLE>
- ------------------------
(1) Member of Contract Committee.
(2) Member of Compensation Committee.
(3) Member of Audit Committee.
Set forth below is the background of each of the Company's executive
officers and directors.
DAVID SCHAEFFER founded the Company in August 1995, has served as Chairman
of the Board, Treasurer and director of the Company since August 1997, and
served as President and Chief Executive Officer of the Company from 1995 until
August 1997. From 1986 to the present, Mr. Schaeffer has also served as
President and Chief Executive Officer of Empire Leasing, Inc., a specialized
mobile radio licensee and operator. In addition, Mr. Schaeffer founded and,
since 1992, has served as President and Chief Executive Officer of Mercury
Message Paging, Inc., a paging company which operates networks in Washington,
D.C., Baltimore and Philadelphia.
RICHARD A. JALKUT has served as President, Chief Executive Officer and
director of the Company since August 1997. Mr. Jalkut has over 30 years of
telecommunications experience. From 1995 to August 1997, he served as President
and Group Executive of NYNEX Telecommunications Group, where he was responsible
for all activities of the NYNEX Telecommunications Group, an organization with
over 60,000 employees. Prior to that, Mr. Jalkut served as President and Chief
Executive Officer of New York Telephone Co. Inc., the predecessor company to
NYNEX Telecommunications Group, from 1991 until 1995. Mr. Jalkut currently
serves as a member of the Board of Directors of Marine Midland Bank, a
commercial bank, Ikon Office Solutions, Inc., a company engaged in wholesale and
retail office equipment, and Home Wireless Networks, a start-up company
developing a wireless product for home and business premises.
KEVIN J. BENNIS has served as Executive Vice President, serving as President
of the Company's Communications Services Division since February 1998. From 1996
until he joined the Company, Mr. Bennis served as President of Frontier
Communications, a long-distance communications company, where he was responsible
for the sales, marketing and customer service activities of 3,500 employees.
Prior to that, Mr. Bennis served in various positions for 21 years at MCI,
including as President of MCI's Integrated Client Services Division from 1995 to
1996, as President and Chief Operating Officer of Avantel
54
<PAGE>
Telecommunications, MCI's joint venture with Banamex in Mexico, from 1994 to
1995, and as Senior Vice President of Marketing from 1992 to 1994.
WILLIAM R. SMEDBERG, V joined the Company initially as a consultant in 1996,
and has assumed the position of Vice President, Finance and Corporate
Development since January 1997. Prior to joining the Company, Mr. Smedberg
served in various financial and planning positions at the James River
Corporation of Virginia, Inc. ("James River") for nine years. In particular, he
served as Director, Strategic Planning and Corporate Development for Jamont, a
European consumer products joint venture among Nokia Oy, Montedison S.p.A. and
James River, from 1991 to 1996, where he was responsible for Jamont's corporate
finance, strategic planning and corporate development. Prior to that, Mr.
Smedberg worked in the defense industry as a consultant and engineer for TRW,
Inc.
MICHAEL A. LUBIN has served as Vice President, General Counsel and Secretary
of the Company since its inception in August 1995. Prior to joining the Company,
Mr. Lubin was an attorney-at-law at Michael A. Lubin, P.C., a law firm which he
founded in 1985. Mr. Lubin has experience in telecommunications matters,
copyright and intellectual property matters, corporate and commercial law,
construction claims adjudication and trial work. Earlier he served as a Federal
prosecutor with the Fraud Section, Criminal Division, United States Department
of Justice.
MICHAEL L. BROOKS has served as Vice President, Network Development of the
Company since June 1996. Mr. Brooks has extensive experience in voice and data
communications. From 1992 through May 1996, Mr. Brooks served as Vice President,
Engineering for Ikelyn, Inc. Ikelyn provided system design and technical support
for telecommunication systems and support facilities. From 1982 to 1992, Mr.
Brooks worked for Qwest Microwave Communications, a predecessor of Qwest, where
he directed the initial construction of a 3,500-mile digital network.
PETER J. BARRIS has been a director of the Company since August 1995. Since
1992, Mr. Barris has been a partner, and, in 1994, was appointed a General
Partner of New Enterprise Associates, a firm that manages venture capital
investments. Mr. Barris is also a member of the Board of Directors of Mobius
Management Systems, Inc., a computer software company which is quoted on the
Nasdaq National Market.
KEVIN J. MARONI has been a director of the Company since August 1995. Since
1994, Mr. Maroni has been a principal, and, in 1995, was appointed as a General
Partner of Spectrum Equity Investors, L.P., which manages private equity funds
focused on growth capital for telecommunications companies. From 1992 to 1994,
he served as Manager, Finance and Development at Time Warner Telecommunications,
where he was involved in corporate development projects. Mr. Maroni served as a
consultant at Harvard Management Company from 1990 to 1992, where he worked in
the private equity group. Mr. Maroni is also currently on the board of directors
of several private companies and CTC Communications Corp., an integrated
communications provider which is quoted on the Nasdaq National Market.
PATRICK J. KERINS has been a director of the Company since July 1997. Mr.
Kerins has served as Managing Director of Grotech Capital Group, which is
engaged in venture capital and other private equity investments, since March
1997. From 1987 to March 1997, he worked in the investment banking division of
Alex. Brown & Sons, Incorporated, including serving as Managing Director
beginning in January 1994. Mr. Kerins is also a member of the Board of Directors
of CDnow, Inc., an online retailer of compact discs and other music-related
products which is quoted on the Nasdaq National Market.
RICHARD K. PRINS has been a director of the Company since 1995. Since 1996,
Mr. Prins has served as Senior Vice President of Ferris Baker Watts
Incorporated, where he heads the technology and communication practice in the
investment banking division. From 1988 to 1996, he was Senior Vice President and
Managing Director in the investment banking division of Crestar Financial
Corporation. Mr. Prins is currently a director of Startec Global Communications
Corporation, a communications company which is quoted on the Nasdaq National
Market.
STEPHEN A. REINSTADTLER has been a director of the Company since October
1997. Mr. Reinstadtler has served as Vice President and Director at Toronto
Dominion Capital (U.S.A.) Inc., where he has been
55
<PAGE>
involved in private equity and mezzanine debt investments, since August 1995.
From April 1994 to July 1995, he served as Manager at The Toronto-Dominion Bank,
where he was involved in commercial lending activities to the telecommunications
industry. From August 1992 to April 1994, Mr. Reinstadtler also served as
Associate at Kansallis-Osake-Pankki, where he was involved in commercial lending
activities to the telecommunications industry.
BOARD OF DIRECTORS
The Company's Board of Directors consists of seven directors. Subject to the
restrictions set forth in the Company's Certificate of Incorporation and the
Bylaws, directors and executive officers of the Company are elected to serve
until they resign or are removed, or are otherwise disqualified to serve, or
until their successors are elected and qualified. The Certificate of
Incorporation and the Bylaws provide for the Board of Directors to be divided
into three classes of directors serving staggered three-year terms. As a result,
approximately one-third of the Board of Directors will be elected each year. The
three classes of the Board of Directors consist of the following: (i) Patrick J.
Kerins and Stephen A. Reinstadtler, whose terms of office expire at the first
annual meeting of stockholders of the Company after the end of the Company's
fiscal year ending December 31, 1998, (ii) Richard K. Prins and Peter J. Barris,
whose terms of office expire at the first annual meeting of stockholders of the
Company after the end of the Company's fiscal year ending December 31, 1999, and
(iii) Richard A. Jalkut, David Schaeffer and Kevin J. Maroni, whose terms of
office expire at the annual meeting of stockholders of the Company after the end
of the Company's fiscal year ending December 31, 2000. See "Description of
Capital Stock."
COMMITTEES OF THE BOARD OF DIRECTORS. The Board of Directors currently has
three committees, the Audit Committee, the Compensation Committee and the
Contract Committee. The Audit Committee has been established to, among other
things, make recommendations to the Board of Directors with respect to the
engagement or discharge of independent auditors, review with the independent
auditors the plan and results of the auditing engagement, and review the
Company's system of internal accounting controls. The current members of the
Audit Committee are Messrs. Maroni, Kerins and Prins.
The Compensation Committee has been established to, among other things,
administer the Company's stock incentive plans, review and make recommendations
to the Board of Directors concerning the compensation of executive officers, and
consider existing and proposed employment agreements between the Company and any
executive officer of the Company. The current members of the Compensation
Committee are Messrs. Maroni, Prins and Barris.
The Contract Committee reviews and evaluates each FPM Agreement that the
Company proposes to enter into and has the authority to authorize the Company to
execute and deliver any FPM Agreement so long as the terms and conditions of
such FPM Agreement do not differ substantially from the FPM Agreements
previously authorized and approved by the full Board of Directors. The current
members of the Contract Committee are Messrs. Schaeffer and Jalkut.
DIRECTOR COMPENSATION. Mr. Prins, a director of the Company, was granted
options to purchase 70,731 shares of Common Stock in 1995. See "Security
Ownership of Certain Beneficial Owners and Management." Directors of the Company
are currently not reimbursed for their out-of-pocket expenses incurred in
connection with attendance at meetings of, and other activities relating to
serving on, the Board of Directors and any committees thereof. The Company may
consider additional compensation arrangements for its directors from time to
time.
LIMITATION OF LIABILITY AND INDEMNIFICATION. The Restated Certificate of
Incorporation of the Company limits, to the fullest extent permitted by law, the
liability of directors to the Company and its stockholders for monetary damages
for breach of directors' fiduciary duty. This provision is intended to afford
the Company's directors benefit of the Delaware General Corporation Law (the
"DGCL"), which provides that directors of Delaware corporations may be relieved
of monetary liability for breach of their fiduciary duty of care, except under
certain circumstances, including any breach of a director's duty of loyalty,
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation
56
<PAGE>
of law, violations of the DGCL regarding the improper payment of dividends or
any transaction from which the director derived any improper personal benefit.
In addition, the Certificate of Incorporation of the Company provides that the
Company will indemnify its directors and officers to the fullest extent
authorized or permitted by law.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee consists of Messrs. Maroni, Prins and
Barris, none of whom is currently an employee of the Company. During the fiscal
year ended December 31, 1997, no executive officer of the Company served as a
member of a compensation committee or as a director of any entity of which any
of the Company's directors serves as an executive officer.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the cash and
non-cash compensation during the fiscal year ended December 31, 1997 earned by
or awarded to the Chief Executive Officer and the five other most highly
compensated executive officers of the Company whose combined salary and bonus
exceeded $100,000 during the fiscal year ended December 31, 1997 (the "Named
Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION -------------------
--------------------- SHARES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS GRANTED COMPENSATION
- ----------------------------------------------- ---------- --------- ------------------- -------------
<S> <C> <C> <C> <C>
Richard A. Jalkut.............................. $ 166,154(1) $ -- 858,754 $ 9,857(2)
President and Chief Executive Officer
David Schaeffer................................ 216,923(3) -- 430,413 --
Chairman of the Board and Treasurer
Michael A. Lubin............................... 136,115 -- -- --
Vice President, General Counsel and Secretary
David J. Daigle................................ 103,077 -- -- --
Vice President, Sales and Marketing
Michael L. Brooks.............................. 103,077 -- -- --
Vice President, Network Operations
William R. Smedberg, V......................... 103,385 -- -- --
Vice President, Finance and Corporate
Development
</TABLE>
- ------------------------
(1) Mr. Jalkut commenced employment with the Company in August 1997, and is
compensated at a rate of $400,000 per annum.
(2) Includes amounts reimbursed by the Company pursuant to the Jalkut Employment
Agreement (as defined herein) for expenses, including certain travel
expenses.
(3) Mr. Schaeffer's salary increased to $300,000 per annum from $150,000 per
annum in August 1997.
57
<PAGE>
OPTION GRANTS AND EXERCISES
The following table sets forth the aggregate number of stock options granted
to each of the Named Executive Officers during the fiscal year ended December
31, 1997. Stock options are exercisable for Common Stock of the Company. As of
December 31, 1997, no stock options had been exercised by any Named Executive
Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATE OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE THE OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ----------------------------
NAME GRANTED (#) FISCAL YEAR ($/SHARE) DATE 5% 10%
- ---------------------------------- ----------- --------------- ----------- ---------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard A. Jalkut (2)............. 858,754 66.6% $ 1.13 Aug. 4, 2007 $ 20,343,882 $ 31,430,396
David Schaeffer (3)............... 430,413 33.4 3.67 Oct. 31, 2007 9,180,709 14,892,290
Michael A. Lubin.................. -- -- -- -- -- --
David J. Daigle................... -- -- -- -- -- --
Michael L. Brooks................. -- -- -- -- -- --
William R. Smedberg, V............ -- -- -- -- -- --
</TABLE>
- ------------------------
(1) The information disclosed assumes, solely for purposes of demonstrating
potential realizable value of the stock options, that the fair market value
per share of Common Stock was $16.00 per share (the midpoint of the range
set forth on the cover page of this Prospectus) as of August 1, 1998 and
increases at the rate indicated during the option term. See Note 6 to the
financial statements included elsewhere in this Prospectus.
(2) On August 4, 1997, the Company granted stock options to purchase an
aggregate of 858,754 shares of Common Stock to Mr. Jalkut. Such stock
options will vest and become exercisable upon the consummation of the
Offering.
(3) On October 31, 1997, the Company granted stock options to purchase an
aggregate of 430,413 shares of Common Stock to Mr. Schaeffer. Such stock
options will vest and become exercisable upon the consummation of the
Offering.
58
<PAGE>
OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
None of the Named Executive Officers exercised any of their options during
the fiscal year ended December 31, 1997. The following table sets forth the
aggregate number of options held by each of the Named Executive Officers and the
fiscal year-end value of the unexercised options.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING
UNEXERCISED OPTIONS AT VALUE OF UNEXERCISED IN-THE-MONEY
DECEMBER 31, 1997 OPTIONS (1)
--------------------------- ----------------------------------
<S> <C> <C> <C> <C>
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------ ------------ ------------- ---------------- ----------------
Richard A. Jalkut (2)..................... -- 858,754 $ -- $ 12,769,672
David Schaeffer (3)....................... -- 430,413 -- 5,306,992
Michael A. Lubin.......................... 117,885 23,580 1,874,372 374,922
David J. Daigle........................... 176,830 35,366 2,811,597 562,319
Michael L. Brooks......................... -- -- -- --
William R. Smedberg, V.................... -- -- -- --
</TABLE>
- ------------------------
(1) The information disclosed assumes, solely for purposes of demonstrating
potential value of the stock options, that the fair market value per share
of Common Stock was $16.00 per share (the midpoint of the range set forth on
the cover page of this Prospectus). See Note 6 to the financial statements
included elsewhere in this prospectus.
(2) All of the stock options granted to Mr. Jalkut will vest and become
exercisable upon the consummation of the Offering.
(3) All of the stock options granted to Mr. Schaeffer will vest and become
exercisable upon the consummation of the Offering.
1995 STOCK OPTION PLAN
The Company has adopted the Pathnet, Inc. 1995 Stock Option Plan (the "1995
Plan") which originally authorized the grant of stock options (including
incentive stock options and nonqualified stock options) to participants with
respect to a maximum of 1,218,549 shares of Common Stock ("Shares"). The 1995
Plan has been frozen so that no further awards will be made under the 1995 Plan
in the future. The following is a summary of the material features of the 1995
Plan. As of June 2, 1998, options to acquire an aggregate of 495,123 Shares have
been authorized and are outstanding under the 1995 Plan, subject to adjustment
as described below.
PURPOSES
The purposes of the 1995 Plan are to encourage and enable employees of the
Company and its subsidiaries to acquire an interest in the Company through the
granting of stock options and to encourage such individuals to acquire or
increase their ownership of Common Stock in order to attract and retain the
services of persons of exceptional competence and to furnish an added incentive
for them to increase their efforts on behalf of the Company.
ADMINISTRATION/ELIGIBLE PARTICIPANTS
The 1995 Plan is administered by the Board of Directors of the Company,
acting through the Compensation Committee; PROVIDED that the Board is empowered
to appoint from its members a committee of two or more persons to exercise the
powers of the Board in granting stock options and taking any other action under
the 1995 Plan (the Board, or such committee, as applicable being referred to as
the "1995 Plan Committee"). Any actions taken by the 1995 Plan Committee are
final and conclusive for purposes of the 1995 Plan.
59
<PAGE>
Stock options may be awarded under the 1995 Plan to any employees of the
Company or its subsidiaries and any non-employee directors of the Company,
consultants to the Company and to such other persons as the Board may select
from time to time.
NUMBER OF SHARES AUTHORIZED UNDER THE 1995 PLAN
As of June 2, 1998, the 1995 Plan authorizes the grant of awards to
participants with respect to a maximum of 495,123 Shares, subject to adjustment
to avoid dilution or enlargement of intended benefits in the event of certain
significant corporate events, which awards may be made in the form of (i)
nonqualified stock options and (ii) stock options intended to qualify as
incentive stock options under section 422 of the Internal Revenue Code of 1986,
as amended. As described above, the 1995 Plan has been frozen so that no further
awards will be made under the 1995 Plan in the future.
TERMS AND CONDITIONS OF OPTIONS UNDER THE 1995 PLAN
Option grants made under the 1995 Plan are subject to such terms, including
exercise price and conditions and timing of exercise, to the extent applicable,
as may be determined by the 1995 Plan Committee and specified in the applicable
award agreement or thereafter; PROVIDED that stock options intended to qualify
as incentive stock options will be subject to terms and conditions that comply
with such rules as may be prescribed by section 422 of the Code.
TRANSFERABILITY
Options granted under the 1995 Plan will not be transferable by an optionee,
other than by will or laws of descent and distribution, and are exercisable
during the optionee's lifetime only by the optionee.
AMENDMENT TO 1995 PLAN
The Board may discontinue the 1995 Plan or amend the 1995 Plan at any time,
subject to any required regulatory approval and the limitation that no amendment
shall be effective unless approved by the stockholders of the Company. Any such
termination or amendment must be made in accordance with applicable law and
regulations at an annual or special meeting held within twelve months before or
after the date of adoption of such amendment, if such amendment will (i)
increase the number of Shares as to which options may be granted under the 1995
Plan, (ii) change in substance the participants who are eligible to participate
in the 1995 Plan or (iii) otherwise materially increase the benefits accruing to
participants under the 1995 Plan. No option granted under the 1995 Plan may be
altered or impaired by any amendment to the 1995 Plan, except with the consent
of the optionee.
1997 STOCK INCENTIVE PLAN
The Company has adopted the Pathnet, Inc. 1997 Stock Incentive Plan (the
"1997 Plan") which authorizes the grant of awards to participants with respect
to a maximum of 3,345,635 Shares, subject to adjustment as described below. As
of June 2, 1998, options to acquire an aggregate of 2,046,258 Shares have been
granted under the 1997 Plan.
PURPOSES
The purposes of the 1997 Plan are to promote the interests of the Company
and its stockholders by (i) attracting and retaining exceptional officers and
other key employees, consultants and directors of the Company and its
subsidiaries, (ii) motivating such individuals by means of performance-related
incentives to achieve performance goals and (iii) enabling such individuals to
participate in the long-term growth and financial success of the Company.
ADMINISTRATION/ELIGIBLE PARTICIPANTS
The 1997 Plan is administered by a committee (the "1997 Plan Committee")
which shall either be the Board or a committee of two or more members of the
Board designated by the Board to administer the 1997 Plan. Each such director is
expected, but not required, to be a "Non-Employee Director" (within the meaning
of Rule 16b-3 promulgated under the Exchange Act) and an "outside director"
(within the
60
<PAGE>
meaning of Internal Revenue Code section 162(m)) to the extent that Rule 16b-3
and section 162(m), respectively, are applicable to the Company and the 1997
Plan. If a 1997 Plan Committee member shall fail to qualify as a Non-Employee
Director or outside director, such failure will not invalidate any otherwise
valid award made under the 1997 Plan.
Any officer or other employee, director or consultant to the Company of any
of its subsidiaries shall be eligible to be designated as a participant under
the 1997 Plan.
The 1997 Plan Committee has the authority to determine the participants to
whom awards shall be granted under the 1997 Plan. Such committee may delegate to
one or more officers of the Company the authority to grant awards to
participants who are not officers or directors of the Company subject to section
16 of the Exchange Act or to "covered employees" within the meaning of section
162(m) of the Code.
NUMBER OF SHARES AUTHORIZED UNDER THE 1997 PLAN
The 1997 Plan authorizes the grant of awards to participants with respect to
a maximum of 3,345,635 Shares, subject to adjustment to avoid dilution or
enlargement of intended benefits in the event of certain significant corporate
events. Such awards may be made in the form of (i) nonqualified stock options,
(ii) stock options intended to qualify as incentive stock options under section
422 of the Code, (iii) stock appreciation rights, (iv) restricted stock and/or
restricted stock units, (v) performance awards and (vi) other stock based
awards; PROVIDED that the maximum number of Shares with respect to which stock
options and stock appreciation rights may be granted to any participant in the
1997 Plan in any calendar year may not exceed 1,160,000 and the maximum number
of Shares which may be paid to a participant in the 1997 Plan in connection with
the settlement of any award(s) designated as a performance compensation award
under the 1997 Plan in respect of a single performance period shall be 1,160,000
or, in the event such performance compensation award is paid in cash, the
equivalent cash value thereof. If, after the effective date of the 1997 Plan,
any Shares covered by an award granted under the 1997 Plan, or to which such an
award relates, are forfeited, or if an award has expired, terminated or been
canceled for any reason whatsoever (other than by reason of exercise or
vesting), then the Shares covered by such award shall again be, or shall become,
Shares with respect to which awards may be granted under the 1997 Plan.
SUBSTITUTE AWARDS
Awards may be made under the 1997 Plan in assumption of, or in substitution
for, outstanding awards previously granted by the Company or its affiliates or a
company acquired by the Company or with which the Company combines. The number
of Shares underlying any such assumed or substitute awards shall be counted
against the aggregate number of Shares which are available for grant under
awards made under the 1997 Plan.
TERMS AND CONDITIONS OF AWARDS UNDER THE 1997 PLAN
Awards made under the plan shall be subject to such terms, including
exercise price and a conditions and timing of exercise, to the extent
applicable, as may be determined by the 1997 Plan Committee and specified in the
applicable award agreement or thereafter; PROVIDED that stock options that are
intended to qualify as incentive stock options will be subject to terms and
conditions that comply with such rules as may be prescribed by section 422 of
the Code. Payment in respect of the exercise of an option granted under the 1997
Plan may be made in cash, or its equivalent, or (i) by exchanging Shares owned
by the optionee (which are not the subject of any pledge or other security
interest and which have been owned by such optionee for at least six months) or
(ii) subject to such rules as may be established by the 1997 Plan Committee,
through delivery of irrevocable instructions to a broker to sell the shares
being acquired upon exercise of the option and to deliver promptly to the
Company an amount equal to the aggregate exercise price, or by a combination of
the foregoing, PROVIDED that the combined value of all cash and cash equivalents
and the fair market value of such Shares so tendered to the Company as of the
date of such tender is at least equal to the aggregate exercise price of the
option.
61
<PAGE>
In addition to the foregoing, the 1997 Plan Committee shall have the
discretion to designate any award as a performance compensation award. While
awards in the form of stock options and stock appreciation rights are intended
to qualify as "performance-based compensation" under section 162(m) of the Code
provided that the exercise price or grant price, as the case may be, is
established by the Committee to be equal to the fair market value per Share as
of the date of grant, this form of award enables the 1997 Plan Committee to
treat certain other awards under the 1997 Plan as "performance-based
compensation" and thus preserve deductibility by the Company for Federal income
tax purposes of such awards which are made to individuals who are "covered
employees" as defined in section 162(m).
Each performance compensation award shall be payable only upon achievement
over a specified performance period of a duration of at least one year of a
pre-established objective performance goal established by the 1997 Plan
Committee for such period. The 1997 Plan Committee may designate one or more
performance criteria for purposes of establishing a performance goal with
respect to Performance Compensation Awards made under the 1997 Plan. The
performance criteria that will be used to establish such performance goals will
be based on attainment of specific levels of performance of the Company (or
subsidiary, affiliate, division or operational unit of the Company) and will be
limited to the following: return on net assets, return on stockholders' equity,
return on assets, return on capital, stockholder returns, profit margin,
earnings per Share, net earnings, operating earnings, price per Share and sales
or market share.
With regard to a particular performance period, the 1997 Plan Committee
shall have the discretion, subject to the 1997 Plan's terms, to select the
length of the performance period, the type(s) of performance compensation
award(s) to be issued, the performance goals that will be used to measure
performance for the period and the performance formula that will be used to
determine what portion, if any, of the performance compensation award has been
earned for the period. Such discretion shall be exercised by the 1997 Plan
Committee in writing no later than 90 days after the commencement of the
performance period and performance for the period shall be measured and
certified by the 1997 Plan Committee upon the period's close. In determining
entitlement to payment in respect of a performance compensation award, the 1997
Plan Committee may through use of negative discretion reduce or eliminate such
award, provided such discretion is permitted under section 162(m) of the Code.
TRANSFERABILITY
Each award, and each right under any award, shall be exercisable only by the
participant during the participant's lifetime, or, if permissible under
applicable law, by the participant's guardian or legal representative. Except as
otherwise provided in an applicable award agreement, no award may be assigned,
alienated, pledged, attached, sold or otherwise transferred or encumbered by a
participant otherwise than by will or by the laws of descent and distribution
and any such purported assignment, alienation, pledge, attachment, sale,
transfer or encumbrance shall be void and unenforceable against the Company or
any affiliate; PROVIDED that the designation of a beneficiary shall not
constitute an assignment, alienation, pledge, attachment, sale, transfer or
encumbrance. Notwithstanding the foregoing, the 1997 Plan Committee has the
discretion under the 1997 Plan to provide that options granted under the 1997
Plan that are not intended to qualify as incentive stock options may be
transferred without consideration to certain family members or trusts,
partnerships or limited liability companies whose only beneficiaries or partners
are the original grantee and/or such family members.
CHANGE OF CONTROL
In the event of a change of control of the Company and upon the termination
of an optionee's employment thereafter by the Company without cause or due to
the optionee's resignation due to constructive termination, that portion, if
any, of any outstanding awards then held by a participant which are
unexercisable or otherwise unvested and which would otherwise have become
exercisable or vested within one year following the date of such termination,
will be deemed automatically exercisable or otherwise vested, as the case may
be, immediately prior to termination of such optionee's employment.
62
<PAGE>
AMENDMENT TO 1997 PLAN
The Board may amend the 1997 Plan or any portion thereof at any time;
PROVIDED that no such amendment, alteration, suspension, discontinuation or
termination shall be made without stockholder approval if such approval is
necessary to comply with any tax or regulatory requirement applicable to the
1997 Plan and no such action that would adversely affect the rights of any
participant with respect to awards previously granted under the 1997 Plan shall
not that extent be effective without the participant's consent.
THE PATHNET 401(K) PLAN
The Pathnet 401(k) Plan (the "401(k) Plan") is a defined contribution
retirement benefit plan that is qualified for favorable tax treatment under
Section 401 of the Code. All employees of the Company, subject to certain
regulatory qualifications, including the Named Executive Officers, who are at
least 21 years of age and have completed the minimum service requirement are
eligible to participate in the 401(k) Plan. The 401(k) Plan participants may
defer pre-tax income by contributing to the plan up to the maximum amount
permitted by law. After-tax contributions are also permitted under the 401(k)
Plan. At present, the Company does not match any participant's contributions,
but the Company may consider matching contribution arrangements from time to
time. The amounts that are deposited into each participant's account are
invested among various investment options according to the direction of the
participant. Each participant's pre-tax and after-tax contributions are
immediately vested and nonforfeitable. Each participant is eligible to begin
receiving benefits under the 401(k) Plan on the first day of the month
coincident with or following the attainment of normal retirement age. There is
no provision for early retirement benefits under the 401(k) Plan.
JALKUT EMPLOYMENT AGREEMENT
The Employment Agreement among the Company and Richard Jalkut (the "Jalkut
Employment Agreement") took effect on August 4, 1997 and expires on August 4,
2000. The Jalkut Employment Agreement shall renew automatically for one year
terms unless terminated by either party. Under the Jalkut Employment Agreement,
Mr. Jalkut is entitled to an annual base salary of $400,000, subject to increase
at the discretion of the Company. In addition, Mr. Jalkut is entitled to
participate in the Company's benefit plans on the same basis as other salaried
employees of the Company and on the same basis as other senior executives of the
Company and is entitled to reimbursement up to a total of $50,000 per year for
certain expenses.
In addition, pursuant to the Jalkut Employment Agreement, on August 4, 1997,
Mr. Jalkut received nonqualified stock options on 858,754 shares of Common Stock
at an exercise price of $1.13 per share. Such options will vest ratably over
three years or immediately upon completion of the Offering. Under the Jalkut
Employment Agreement, under certain circumstances, upon the election of Mr.
Jalkut within 10 business days after the date of termination of Mr. Jalkut's
employment with the Company, the Company will be required to pay, subject to the
terms of the Indenture, to Mr. Jalkut the aggregate Fair Value (as defined in
the Jalkut Option Agreement) of the options then vested or held by Mr. Jalkut on
the date of such termination of employment with the Company.
The Jalkut Employment Agreement (other than certain restrictive covenants of
Mr. Jalkut and certain severance obligations of the Company) may be terminated
(i) by the Company (a) without cause by giving 60 days' prior written notice or
(b) for cause upon the Board of Directors' confirmation that Mr. Jalkut has
failed to cure the grounds for termination within 30 days of notice thereof and
(ii) by Mr. Jalkut (a) without cause by giving 180 days' prior written notice
and (b) immediately upon a "Constructive Termination" (as defined below). The
Jalkut Employment Agreement prohibits disclosure by Mr. Jalkut of any of the
Company's confidential information at any time. In addition, while he is
employed by the Company and for two years thereafter, Mr. Jalkut is prohibited
from engaging or significantly investing in competing business activities and
from soliciting any Company employee to be employed elsewhere. The Company has
granted Mr. Jalkut registration rights with respect to the shares he will
receive upon exercise of his options. "Constructive Termination" is defined in
the Jalkut Employment Agreement to mean the
63
<PAGE>
occurrence, without Mr. Jalkut's prior written consent, of one or more of the
following events: (1) a reduction in Mr. Jalkut's then current annual base
salary or the termination or material reduction of any employee benefit or
perquisite enjoyed by him (other than as part of an across-the-board reduction
applicable to all executive officers of Pathnet); (2) the failure to elect or
reelect Mr. Jalkut to the position of chief executive officer or removal of him
from such position; (3) a material diminution in Mr. Jalkut's duties or the
assignment to Mr. Jalkut of duties which are materially inconsistent with his
duties or which materially impair Mr. Jalkut's ability to function as the chief
executive officer of Pathnet; (4) the failure to continue Mr. Jalkut's
participation in any incentive compensation plan unless a plan providing a
substantially similar opportunity is substituted, or under certain other limited
circumstances; or (5) the relocation of Pathnet's principal office, or Mr.
Jalkut's own office location as assigned to him by Pathnet, to a location more
than 50 miles from Washington, D.C.
OTHER AGREEMENTS
Messrs. Schaeffer, Lubin, Daigle, Brooks, Bennis and Smedberg have entered
into Employee Agreements Regarding Non-Disclosure, Assignment of Inventions and
Non-Competition with the Company in which such officers agreed (i) not to
disclose any of the Company's confidential and proprietary information to third
parties, (ii) to assign all work products to the Company as "works for hire,"
and (iii) not to compete against the Company for a two-year period following the
termination of the respective officer's employment with the Company.
In exchange for the non-compete covenant and a restriction on soliciting any
employee of the Company to be employed elsewhere, the Company has agreed to pay
Mr. Bennis a severance payment in the aggregate amount of $275,000 paid over one
year if his employment with the Company is terminated.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SERIES A PURCHASE AGREEMENT
Pursuant to an Investment and Stockholders' Agreement, dated as of August
28, 1995 (the "Series A Purchase Agreement"), by and among the Company and
Spectrum Equity Investors, L.P., New Enterprise Associates VI, Limited
Partnership, Onset Enterprise Associates II, L.P., IAI Investment Funds VIII,
Inc., Thomas Domencich, Dennis R. Patrick and the Corman Foundation
Incorporated, (together, the "Series A Purchasers") and David Schaeffer, the
Series A Purchasers made their initial investments in the Company. The Series A
Purchasers (i) agreed, subject to the satisfaction of certain conditions, to
purchase in the aggregate 1,000,000 shares of Series A Preferred Stock for an
aggregate purchase price of $1.0 million, (ii) purchased 500,000 shares of such
1,000,000 shares of Series A Preferred Stock for an aggregate purchase price of
$500,000 and (iii) agreed to make available to the Company, under certain
circumstances, bridge loans in an aggregate principal amount of $500,000 (the
"Bridge Loan Commitment"). Pursuant to Amendment No. 1 to the Investment and
Stockholders' Agreement, dated as of February 8, 1996, the Series A Purchasers
purchased the remaining 500,000 shares of Series A Preferred Stock for an
aggregate purchase price of $500,000. Pursuant to Amendment No. 2 to the
Investment and Stockholders' Agreement dated as of August 2, 1996, the Series A
Purchasers, among other things, increased the amount of the Bridge Loan
Commitment to an aggregate principal amount of $700,000 and advanced such amount
to the Company, such loans being evidenced by bridge loan notes (collectively,
the "Bridge Loan Notes"). The Bridge Loan Notes carried an interest rate of 12%
per annum and were due and payable in full on the earlier to occur of the first
anniversary of the issuance of the Bridge Loan Notes or the closing date of the
Company's next equity financing. The Bridge Loan Notes were to be convertible
into any future equity security issued by the Company at 73% of the price to be
paid for such security by other investors. In addition, the Series A Purchasers
agreed to make available to the Company, upon the occurrence of certain events,
additional bridge loans in an aggregate principal amount of $300,000 (the
"Additional Bridge Loan Commitment").
64
<PAGE>
SERIES B PURCHASE AGREEMENT
The Company, each of the Series A Purchasers and several additional
purchasers (together, the "Series B Purchasers") and Mr. Schaeffer entered into
an Investment and Stockholders' Agreement, dated as of December 23, 1996 (the
"Series B Purchase Agreement"), pursuant to which, among other things, the
Series B Purchasers agreed to acquire in the aggregate 1,651,046 shares of
Series B Preferred Stock for an aggregate purchase price of $5.0 million. Of
these amounts, 609,756 shares of Series B Preferred Stock were purchased on
December 23, 1996, for an aggregate purchase price of $2.0 million. In addition,
the $700,000 principal amount of Bridge Loan Notes, plus $33,367 of accrued
interest, were converted into 306,242 shares of Series B Preferred Stock. At the
same time, the Series A Purchasers paid $300,000 representing the committed but
undrawn portion of the Additional Bridge Loan commitment to the Company for the
sale of 125,292 shares of Series B Preferred Stock. The Series B Purchasers
purchased the remaining 609,756 shares of Series B Preferred Stock subject to
the Series B Purchase Agreement for $2.0 million on June 18, 1997. See Note 5 to
the financial statements included elsewhere in this Prospectus.
SERIES C PURCHASE AGREEMENT
The Company, the Series A Purchasers, the Series B Purchasers and one
additional purchaser (together the "Series C Purchasers") and Mr. Schaeffer
entered into the Investment and Stockholders' Agreement, dated October 31, 1997,
as amended (the "Investment and Stockholders' Agreement"), pursuant to which,
among other things, the Series C Purchasers agreed to acquire 2,819,549 shares
of Series C Preferred Stock for an aggregate purchase price of $30.0 million.
The Series C Purchasers purchased 939,850 shares of Series C Preferred Stock for
an aggregate purchase price of $10.0 million on October 31, 1997, and purchased
an additional 1,879,699 shares of Series C Preferred Stock for an aggregate
purchase price of $20.0 million simultaneously with the closing of the Debt
Offering. In connection with the Investment and Stockholders' Agreement, the
Company, the holders of Preferred Stock (collectively, the "Investors") and Mr.
Schaeffer agreed to amend and restate, in part, the Series A Purchase Agreement,
Amendment No. 1 to the Series A Purchase Agreement, Amendment No. 2 to the
Series A Purchase Agreement, Amendment No. 3 to the Series A Purchase Agreement
and the Series B Purchase Agreement. These amendments restated the provisions of
such agreements relating to affirmative and negative covenants, transfer
restrictions, rights to purchase and registration rights. These sections of each
of the Series A Purchase Agreement, the amendments thereto, and the Series B
Purchase Agreement were similar in all material respects. In order to remove any
doubt as to this fact, to simplify matters and for convenience (to have in one
agreement the material provisions that survive the purchase and sale of the
Series Preferred Stock and the closing of an initial public offering such as the
Offering), the aforementioned sections were amended and restated in the
Investment and Stockholders' Agreement. See "--Investment and Stockholders'
Agreement."
TERMS OF THE SERIES PREFERRED STOCK
Each share of Series Preferred Stock will automatically be converted into
Common Stock immediately upon the closing of a qualified public offering of
capital stock of the Company. The Offering is a qualified public offering and,
upon the closing of the Offering, all of the outstanding shares of Series
Preferred Stock will automatically convert into an aggregate of 15,864,716
shares of Common Stock.
Each share of Series A, Series B and Series C Preferred Stock entitles its
holder to a number of votes equal to the number of shares of Common Stock into
which such share of Series A, Series B or Series C Preferred Stock is
convertible. With respect to the Board of Directors of the Company, prior to
completion of a qualified public offering (such as the Offering) (i) the holders
of Series A Preferred Stock are entitled to vote separately as a class to elect
two directors of the Company (the "Series A Investor Directors"), (ii) the
holders of Series B Preferred Stock are entitled to vote separately as a class
to elect one director (the "Series B Investor Director"), (iii) the holders of
the Series C Preferred Stock are entitled to vote separately as a class to elect
one director (the "Series C Investor Director"), (iv) the holders of Common
Stock are entitled to vote separately as a class to elect two directors (the
"Common Stock Directors"), (v) the chief executive officer (the "CEO") of the
Company is appointed by the affirmative vote of the Common Stock Directors and
the Series A Investor Directors, Series B Investor Director and Series C
65
<PAGE>
Investor Director, voting together, and (vi) the CEO will be elected to the
Board of Directors of the Company by the holders of Common Stock and Series
Preferred Stock, voting together.
The holders of the Series Preferred Stock are entitled to receive dividends
in preference to and at the same rate as dividends are paid with respect to the
Common Stock. In the event of any liquidation, dissolution, winding up or deemed
liquidation of the Company, whether voluntary or involuntary, each holder of a
share of Series Preferred Stock outstanding is entitled to be paid before any
payment may be made to the holders of any class of Common Stock or any stock
ranking on liquidation junior to the Series Preferred Stock, an amount, in cash,
equal to the original purchase price paid by such holder, appropriately adjusted
for stock splits, stock dividends and the like, plus any declared but unpaid
dividends.
The liquidation preferences of the outstanding shares of Series A, Series B
and Series C Preferred Stock were $1,000,000, $5,033,367, and $10,000,054,
respectively, as of March 31, 1998. In the event the assets of the Company are
insufficient to pay liquidation preference amounts, all of the assets available
for distribution shall be distributed to each holder of Series Preferred Stock
PRO RATA in proportion to the number of shares of Series Preferred Stock held by
such holder.
Shares of the Series Preferred Stock may be converted at any time, at the
option of the holder, into shares of Common Stock. All of the outstanding Series
Preferred Stock will automatically be converted into Common Stock immediately
upon the closing of the Offering. The number of shares of voting Common Stock to
be received upon conversion is subject to adjustment in the event of stock
dividends and subdividends, certain combinations of Common Stock, and certain
issuances of Common Stock and of securities convertible into Common Stock that
have a dilutive effect.
INVESTMENT AND STOCKHOLDERS' AGREEMENT
Pursuant to the terms of the Investment and Stockholders' Agreement, the
Investors and Mr. Jalkut are entitled to certain registration rights with
respect to securities of the Company. On any three occasions, the holders of a
majority of the securities registrable under the terms of the Investment and
Stockholders' Agreement ("Registrable Securities") may require the Company to
effect a registration under the Securities Act of their Registrable Securities,
subject to the Company's right to defer such registration for a period of up to
60 days. In addition, if the Company proposes to register securities under the
Securities Act (other than a registration relating either to the sale of
securities to employees pursuant to a stock option, stock purchase or similar
plan or a transaction under Rule 145 of the Securities Act), then any of the
holders of Registrable Securities have the right (subject to certain cut-back
limitations) to request that the Company register such holder's Registrable
Securities. All registration expenses of the Investors (exclusive of
underwriting discount and commissions) up to $60,000 per offering will be borne
by the Company. The Company has agreed to indemnify the Investors against
certain liabilities in connection with any registration effected pursuant to the
foregoing terms, including liabilities arising under the Securities Act.
LEASE FROM THE KENILWORTH PARTNERSHIP
The Company has entered into the Headquarters Lease for approximately 15,000
square feet of office space from the Kenilworth Partnership, a general
partnership of which David Schaeffer, Chairman of the Company, is general
partner. The rental rate is approximately $20 per square foot, plus fees to
cover the Company's proportional share of real estate taxes and insurance
premiums relating to the building. The Headquarters Lease expires on August 31,
1999 and may be renewed at the option of the Company for two additional one-year
periods on the same terms and conditions. Rent paid to the Kenilworth
Partnership during the year ended December 31, 1997, was approximately $60,980.
Management believes that the terms and conditions of the Headquarters Lease are
at least as favorable to the Company as those which the Company could have
received from an unaffiliated third party.
PAYMENT OF ADVISORY FEE
In connection with the placement of the Company's Series A Preferred Stock,
Crestar Securities Corporation, a subsidiary of Crestar Financial Corporation of
which Mr. Prins served as Senior Vice President and Managing Director at the
time, received an advisory fee of $60,000 from the Company in 1995.
66
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning beneficial
ownership of the capital stock of the Company as of June 2, 1998 on a pro forma
basis after giving effect to the Offering and the Preferred Stock Conversion, by
(i) each person known by the Company to be the beneficial owner of more than
five percent of the outstanding capital stock of the Company, (ii) each director
of the Company, (iii) each of the Named Executive Officers and (iv) all
directors and executive officers of the Company as a group. Unless otherwise
indicated, each of the stockholders listed below has sole voting and investment
power with respect to the shares shown as beneficially owned by them.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
OF COMMON STOCK
AFTER THE PREFERRED STOCK
CONVERSION AND AFTER
THE OFFERING(1)
-----------------------------
TOTAL SHARES PERCENTAGE(2)
------------ ---------------
<S> <C> <C>
Spectrum Equity Investors, L.P. (3).................................................. 3,773,581 16.1%
Spectrum Equity Investors II, L.P. (3)............................................... 1,363,406 5.8
New Enterprise Associates VI, Limited Partnership (4)................................ 2,581,065 11.0
Onset Enterprise Associates II, L.P. (5)............................................. 1,803,648 7.7
Toronto Dominion Capital (U.S.A.) Inc. (6)........................................... 1,890,646 8.1
Grotech Partners IV, L.P. (7)........................................................ 1,890,646 8.1
David Schaeffer (8).................................................................. 3,330,413 13.9
Richard A. Jalkut (9)................................................................ 858,754 3.5
Kevin J. Maroni (10)................................................................. 3,773,581 16.1
Peter J. Barris (11)................................................................. 2,581,065 11.0
Richard K. Prins (12)................................................................ 70,731 *
Patrick J. Kerins (13)............................................................... 1,890,646 8.1
Stephen A. Reinstadtler (14)......................................................... 1,890,646 8.1
Michael A. Lubin (15)................................................................ 117,885 *
David J. Daigle (16)................................................................. 176,831 *
Michael L. Brooks (17)............................................................... 35,363 *
William R. Smedberg, V (18).......................................................... 21,217 *
All Directors and Officers
as a Group (8)(9)(10)(11)(12)(13)(14)(15)(16)(17)(18)(19).......................... 14,747,129 58.6
</TABLE>
- ------------------------
* Less than 1%.
(1) Includes shares of Common Stock issuable upon the exercise or conversion of
options, warrants and convertible securities, if exercisable or convertible
within 60 days.
(2) The percentages of beneficial ownership as to each person, entity or group
assume the exercise or conversions of all outstanding options, warrants and
convertible securities held by such person, entity or group which are
exercisable or convertible within 60 days, but not the exercise or
conversion of options, warrants and convertible securities held by others
shown in the table.
(3) The address for Spectrum is One International Place, Boston, MA 02110.
(4) The address for NEA is 1119 Saint Paul Street, Baltimore, MD 21202.
(5) The address for Onset Enterprise Associates II, L.P. and Onset Enterprise
Associates III, L.P. is 8911 Capital of Texas Highway, Austin, TX 78759.
(6) The address for Toronto Dominion Capital (U.S.A.) Inc. is 31 West 52nd
Street, New York, NY 10019.
67
<PAGE>
(7) The address for Grotech Partners IV, L.P. is 9690 Deereco Road, Timonium, MD
21093.
(8) Includes 430,413 shares of Common Stock that can be acquired through options
exercisable within 60 days of June 2, 1998.
(9) Includes 858,754 shares of Common Stock that can be acquired through options
exercisable within 60 days of June 2, 1998.
(10) Includes 3,773,581 shares owned by Spectrum Equity Investors, L.P. Mr.
Maroni, who is a limited partner of the general partner of Spectrum and a
general partner of the general partner of Spectrum Equity Investors II,
L.P., disclaims beneficial ownership of the shares owned by Spectrum Equity
Investors, L.P. and Spectrum Equity Investors II, L.P.
(11) Includes 2,581,065 shares owned by New Enterprise Associates VI, Limited
Partnership. Mr. Barris, who is general partner of the general partner of
New Enterprise Associates VI, Limited Partnership, disclaims beneficial
ownership of the shares owned by New Enterprise Associates VI, Limited
Partnership.
(12) Includes 70,731 shares of Common Stock that can be acquired through options
exercisable within 60 days of June 2, 1998.
(13) Includes 1,890,646 shares owned by Grotech Partners IV, L.P. Mr. Kerins,
Managing Director of the general partner of Grotech Partners IV, L.P.,
disclaims beneficial ownership of the shares owned by Grotech Partners IV,
L.P.
(14) Includes 1,890,646 shares owned by Toronto Dominion Capital (U.S.A.) Inc.
Mr. Reinstadtler, Vice President and Director of Toronto Dominion Capital
(U.S.A.) Inc., disclaims beneficial ownership of the shares owned by Toronto
Dominion Capital (U.S.A.) Inc.
(15) Includes 117,885 shares of Common Stock that can be acquired through
currently exercisable options, but excludes outstanding options to purchase
23,580 shares of Common Stock which are not exercisable within sixty days of
June 2, 1998.
(16) Includes 176,831 shares of Common Stock that can be acquired through
currently exercisable options,
but excludes outstanding options to purchase 35,365 shares of Common Stock
which are not exercisable within sixty days of June 2, 1998.
(17) Includes 35,363 shares of Common Stock that can be acquired through
currently exercisable options, but excludes outstanding options to purchase
35,368 shares of Common Stock which are not exercisable within sixty days of
June 2, 1998.
(18) Includes 21,217 shares of Common Stock that can be acquired through
currently exercisable options, but excludes outstanding options to purchase
42,438 shares of Common Stock which are not exercisable within sixty days of
June 2, 1998.
(19) Excludes outstanding options to purchase 362,500 shares of Common Stock
held by Mr. Bennis, which are not exercisable within sixty days of June 2,
1998.
68
<PAGE>
DESCRIPTION OF CAPITAL STOCK
THE FOLLOWING SUMMARY OF THE OUTSTANDING CAPITAL STOCK OF THE COMPANY DOES
NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
DETAILED PROVISIONS OF THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION AND
THE COMPANY'S BYLAWS, COPIES OF WHICH HAVE BEEN FILED AS EXHIBITS TO THE
REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART. SEE "AVAILABLE
INFORMATION."
GENERAL
Upon completion of the Transactions and the Offering, the authorized capital
stock of the Company will consist of 60,000,000 shares of Common Stock, par
value $0.01 per share, and 10,000,000 shares of Preferred Stock, par value $.01
per share (the "Preferred Stock"). Of such authorized shares, (i) 23,454,574
shares of Common Stock will be issued and outstanding, (ii) no shares of
Preferred Stock will be issued and outstanding, (iii) warrants to purchase
1,143,248 shares of Common Stock will be issued and outstanding and (iv) 495,123
shares and 3,345,635 shares of Common Stock will be reserved for issuance in
connection with the 1995 Plan and the 1997 Plan, respectively. Stock options to
purchase 495,123 shares and 2,046,258 shares of Common Stock under the 1995 Plan
and the 1997 Plan, respectively, will be issued and outstanding.
Prior to the Offering, there has been no public market for the Common Stock.
See "Risk Factors-- Absence of Prior Public Market; Possible Volatility of Stock
Price."
COMMON STOCK
VOTING RIGHTS. The Company's Certificate of Incorporation provides that
holders of Common Stock are entitled to one vote per share held of record on all
matters submitted to a vote of stockholders. The stockholders are not entitled
to vote cumulatively for the election of directors.
DIVIDENDS. Subject to the preferential rights of holders of Preferred
Stock, if any, the holders of shares of Common Stock will be entitled to
receive, when, as and if declared by the Board of Directors, out of the assets
of the Company which are legally available therefor, dividends payable either in
cash, in property or in shares of capital stock. Under Delaware law, a
corporation may declare and pay dividends out of surplus or, if there is no
surplus, out of net profits for the fiscal year in which the dividend is
declared and/or the preceding year. No dividends may be declared, however, if
the capital of the corporation has been diminished by depreciation in the value
of its property, losses or otherwise to an amount less than the aggregate amount
of capital represented by any issued and outstanding stock having a preference
on the distribution of assets. See "Dividend Policy."
LIQUIDATION. In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company, after payment of debts and other
liabilities of the Company and after distribution in full of the preferential
amounts, if any, to be distributed to holders of shares of Preferred Stock,
unless otherwise required by law, holders of shares of Common Stock will be
entitled to receive all of the remaining assets of the Company of whatever kind
available for distribution to stockholders in proportion to the number of shares
of Common Stock held by them.
OTHER RIGHTS. Stockholders of the Company have no preemptive or other
rights to subscribe for additional shares. Subject to any rights of the holders
of any Preferred Stock that may be issued subsequent to the Offering, all
holders of Common Stock are entitled to share equally on a share-for-share basis
in any assets available for distribution to stockholders on liquidation,
dissolution or winding up of the Company. No shares of Common Stock are subject
to conversion, redemption or a sinking fund. All outstanding shares of Common
Stock are, and the Common Stock to be outstanding upon completion of the
Offering will be, fully paid and nonassessable.
TRANSFER AGENT AND REGISTRAR. The Transfer Agent and Registrar for the
Common Stock is American Stock Transfer & Trust Company.
69
<PAGE>
PREFERRED STOCK
The Company's Board of Directors (or a committee thereof) is authorized to
issue, without further authorization from stockholders, up to 10,000,000 shares
of Preferred Stock in one or more series and to determine, at the time of
creating each series, the distinctive designation of, and the number of shares
in, the series, its dividend rate, the number of votes, if any, for each share
of such series, the price and terms on which such shares may be redeemed, the
terms of any applicable sinking fund, the amount payable upon liquidation,
dissolution or winding up, the conversion rights, if any, and such other rights,
preferences and priorities of such series as the Board of Directors (or a
committee thereof) may be permitted to fix under the laws of the State of
Delaware as in effect at the time such series is created. The issuance of
Preferred Stock could adversely affect the voting power of the holders of Common
Stock and could have the effect of delaying, deferring or preventing a change in
control of the Company. The Company has no present plan to issue any shares of
Preferred Stock.
WARRANTS
In connection with the Debt Offering, the Company issued 350,000 Warrants,
each entitling the owner thereof to purchase 3.27 shares of Common Stock at an
exercise price of $0.01 per share. The Warrants were issued pursuant to a
Warrant Agreement dated as of April 8, 1998 (the "Warrant Agreement"), between
the Company and The Bank of New York, as Warrant Agent, and are scheduled to
expire on April 15, 2008 (the "Expiration Date"). The Warrants are not tradeable
separately from the Notes until the earliest of (the "Separability Date") (i)
October 5, 1998, (ii) the date on which a registration statement with respect to
an exchange offer for the Notes or covering the sale by holders of the Notes is
declared effective under the Securities Act; (iii) the occurrence of an Exercise
Event (as defined below); (iv) the occurrence of an Event of Default under the
indenture or (v) such earlier date as determined by Merrill Lynch & Co. in its
sole discretion. The Warrants may be exercised on the first day on or after the
Separability Date that any of the following occurs (each, an "Exercise Event"):
(i) a change of control with respect to the Company; (ii)(a) the 180th day (or
such earlier date as may be determined by the Company in its sole discretion)
following the consummation of the Offering or (b) upon the consummation of the
Offering, but only in respect of Warrants, if any, required to be exercised to
permit the holders thereof to sell shares issued upon the exercise of the
Warrants pursuant to their registration rights; or (iii) a class of equity
securities of the Company is listed on a national securities exchange or
authorized for quotation on the Nasdaq National Market or is otherwise subject
to registration under the Exchange Act (as will be the case upon completion of
the Offering); or (iv) April 8, 2000.
A majority of the holders of the Warrants or other equity securities issued
or issuable with respect to the Warrants (the "Registrable Warrant Securities")
may require the Company to effect a demand registration of the Warrants, the
shares of Common Stock issuable upon exercise of the Warrants or the Registrable
Warrant Securities (the "Subject Equity") following an Exercise Event and the
completion of the Offering. This demand registration right is subject to the
"lock-up" or "black-out" periods, if any, imposed upon the Company in connection
with any underwriting or purchase agreement relating to an underwritten Rule
144A or registered public offering of Common Stock. In connection with this
Offering, the Company will be subject to a 180-day "lock-up" period. See
"Underwriters." In addition, holders of Registrable Warrant Securities have the
right to include the Registrable Warrant Securities in a registration statement
under the Securities Act filed by the Company for its own account or for the
account of any of its security holders, subject to certain customary cut-back
limitations. Under certain circumstances, if certain specified holders of Common
Stock described in the indenture (the "Permitted Holders") or their affiliates
transfer or sell shares of Common Stock or certain other equity securities of
the Company in a transaction resulting in a change of control of the Company,
the holders of Subject Equity will have the right to require the purchasers
thereof to purchase the Subject Equity. In addition, under certain
circumstances, the Permitted Holders or their affiliates can require holders of
Subject Equity to sell such securities in the event that such Permitted Holders
or their affiliates transfer or sell all of their equity securities of the
Company to a non-affiliate in a transaction resulting in a change of control of
the Company.
70
<PAGE>
CERTAIN ANTI-TAKEOVER PROVISIONS OF THE COMPANY'S CERTIFICATE OF INCORPORATION
AND BYLAWS
Certain provisions of the Certificate of Incorporation and Bylaws of the
Company summarized below may be deemed to have an anti-takeover effect and may
delay, defer or prevent a tender offer to takeover attempt that a stockholder
might consider in its best interest, including an attempt that might result in
the receipt of a premium over the market price for the shares held by
stockholders.
CLASSIFIED BOARD OF DIRECTORS. The Certificate of Incorporation and the
Bylaws provide that the Board of Directors shall be divided into three classes
of directors serving staggered three-year terms. Notwithstanding the foregoing,
the term of any director who is also an officer of the Company shall
automatically end if he or she ceases to be an employee of the Company. As a
result, approximately one-third of the Board of Directors will be elected each
year. Moreover, under DGCL, in the case of a corporation having a classified
board, stockholders may remove a director only for cause. This provision, when
coupled with the provision of the Bylaws authorizing only the Board of Directors
to fill vacant directorships, will preclude a stockholder from removing
incumbent directors without cause and simultaneously gaining control of the
Board of Directors by filling the vacancies created by such removal with its own
nominees.
SPECIAL MEETING OF STOCKHOLDERS. The Certificate of Incorporation and the
Bylaws provide that special meetings of stockholders of the Company may be
called only by the Board of Directors, the Chairman of the Board of Directors or
the President. This provision will make it more difficult for stockholders to
take actions opposed by the Board of Directors.
STOCKHOLDER ACTION BY WRITTEN CONSENT. The Certificate of Incorporation and
the Bylaws provide that no action required or permitted to be taken at any
annual or special meeting of the stockholders of the Company may be taken
without a meeting, and the power of stockholders of the Company to consent in
writing, without a meeting, to the taking of any action is specifically denied.
ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS. The Bylaws provide that stockholders seeking to bring business
before an annual meeting of stockholders, or to the nominate candidates of
election as directors at an annual or special meeting of stockholders, must
provide timely notice thereof in writing. To be timely, a stockholder's notice
must be delivered to or mailed and received at the principal executive offices
of the Company not less than 30 days nor more than 60 days prior to the meeting;
PROVIDED, HOWEVER, that in the event that less than 40 days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be received no later than the close
of business on the tenth day following the day on which such notice of the date
of the meeting was mailed or such public discourse was made. The Bylaws also
specify certain requirements for a stockholder's notice to be in proper written
form. These provisions may preclude some stockholders from bringing matters
before the stockholders at an annual or special meeting or from making
nominations for directors at an annual or special meeting.
LIMITATION OF DIRECTORS' LIABILITY
The Company has included in its Certificate of Incorporation provisions to
eliminate the rights of the Company and its stockholders (through stockholders'
derivative suits on behalf of the Company) to recover monetary damages from a
director resulting from breaches of fiduciary duty (including breaches resulting
from grossly negligent behavior). This provision does not eliminate liability
for breaches of the duty of loyalty, acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, violations
under Section 174 of the DGCL concerning the unlawful payment of dividends or
stock redemptions or repurchases or for any transaction from which the director
derived an improper personal benefit. However, these provisions will not limit
the liability of the Company's Directors under Federal securities laws. The
Company believes that these provisions are necessary to attract and retain
qualified persons as directors and officers.
71
<PAGE>
SECTION 203 OF THE DELAWARE LAW
Section 203 of the DGCL prohibits publicly held Delaware corporations from
engaging in a "business combination" with an "interested stockholder" for a
period of three years following the time of the transaction in which the person
or entity became an interested stockholder, unless (i) prior to such time,
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder is approved by the Board of
Directors of the corporation, (ii) upon consummation of the transaction which
resulted in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the outstanding voting stock of the
corporation (excluding for this purpose certain shares owned by persons who are
directors and also officers of the corporation and by certain employee benefit
plans) or (iii) at or subsequent to such time the business combination is
approved by the Board of Directors of the corporation and by the affirmative
vote (and not by written consent) of at least 66 2/3% of the outstanding voting
stock which is not owned by the interested stockholder. For the purposes of
Section 203, a "business combination" is broadly defined to include mergers,
asset sales and other transactions resulting in a financial benefit to the
interested stockholder. An "interested stockholder" is a person who, together
with affiliates and associates, owns (or within the immediately preceding three
years did own) 15% or more of the corporation's voting stock.
72
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
SENIOR NOTES
THE FOLLOWING SUMMARY OF THE MATERIAL TERMS OF THE INDENTURE GOVERNING THE
NOTES DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE PROVISIONS OF SUCH INDENTURE, A COPY OF WHICH HAS BEEN FILED AS
AN EXHIBIT TO THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART.
On April 8, 1998, the Company issued 350,000 Units consisting of the Notes
and the Warrants. Concurrently with this Offering, the Company will offer to
exchange up to $350.0 million aggregate principal amount of its 12 1/4% Senior
Notes due 2008 (the "New Notes") for a like principal amount of its outstanding
Notes. The New Notes will be issued pursuant to, and entitled to the benefits
of, the Indenture, dated as of April 8, 1998, between the Company and The Bank
of New York, as trustee (the "Trustee"), governing the Notes. The Notes and New
Notes outstanding under the Indenture at any time are referred to collectively
herein as the "Notes."
The Notes will mature on April 15, 2008 and all outstanding principal will
be repayable on maturity. Interest on the Notes accrues at the rate of 12 1/4%
per annum and is payable semiannually in arrears on April 15 and October 15 of
each year, commencing October 15, 1998.
The Company used $81.1 million of the net proceeds of the issuance and sale
of the Notes to purchase the Pledged Securities (in such amount as will be
sufficient to provide for payment in full of the first four interest payments
due on the Notes) which are pledged as security for payment of the principal and
interest due on the Notes. Except for the pledge by the Company of the Pledged
Securities, the Notes are general unsecured obligations of the Company and rank
equally in right of payment to all existing and future unsecured debt of the
Company that is not subordinated to the Notes by its express terms. The Notes
rank senior in right of payment to any and all existing and future debt of the
Company subordinated in right of payment to the Notes. The Notes are redeemable
for cash at any time on or after April 15, 2003 at the option of the Company, in
whole or in part, at certain redemption prices set forth in the Indenture. In
addition, upon the occurrence of a "Change of Control" (as defined in the
Indenture) each holder of the Notes may require the Company to repurchase all or
a portion of such holder's Notes at a purchase price in cash equal to 101% of
the principal amount thereof.
The Indenture contains numerous affirmative and negative covenants that
restrict the activities of the Company in many respects. Among other things, the
Indenture includes covenants with respect to the following: (i) a limitation on
debt, (ii) a limitation on restricted payments, (iii) a limitation on issuances
and sales of capital stock of certain subsidiaries, (iv) a limitation on
transactions with affiliates, (v) a limitation on liens, (vi) a limitation on
issuances of certain guarantees by and debt securities of, certain subsidiaries,
(vii) a limitation of sale of assets, and (viii) a limitation on dividend and
other payment restrictions affecting certain subsidiaries.
The rights of the holders of the Notes may be modified or amended by a
supplemental indenture entered into by the Company and the Trustee with the
consent of the holders of a majority in aggregate principal amount of the Notes.
Certain modifications or amendments, however, require the consent of the holder
of each outstanding Note affected thereby.
OTHER
In addition, the Company is currently exploring several equipment financing
and other financing alternatives. Although the Company has received commitments
(subject to definitive documentation) from prospective lenders in connection
with two such proposed financing facilities, the Company has not, as of the date
of this Prospectus, decided to enter into any particular proposed facility.
73
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding
23,454,574 shares of Common Stock. Of these shares, the 4,687,500 shares sold in
the Offering will be freely tradeable without restriction or further
registration under the Securities Act, except for any shares purchased or
acquired by an "affiliate" of the Company (as that term is defined under the
rules and regulations promulgated the Securities Act), which shares will be
subject to the resale limitations of Rule 144. Substantially all of the
remaining 18,767,074 outstanding shares of Common Stock will be "restricted
securities," as that term is defined in Rule 144, that may not be sold in the
absence of registration under the Securities Act unless an exemption from
registration is available, including the exemptions contained under Rule 144.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, a person (or persons whose shares are aggregated)
who has beneficially owned restricted securities for at least one year,
including a person who may be deemed to be an affiliate of the Company, is
entitled to sell within any three-month period a number of shares that does not
exceed the greater of (i) 1% of the then outstanding shares of Common Stock of
the Company (2,345,457 shares immediately after the Offering) or (ii) the
average weekly trading volume of the Common Stock during the four calendar weeks
preceding the date on which a notice of sale is filed with the Commission. A
person (or persons whose shares are aggregated) who is not an "affiliate" at any
time during the 90 days preceding a sale is entitled to sell such shares under
Rule 144, commencing two years after the date such shares were acquired from the
Company or an affiliate of the Company, without regard to the volume limitations
described above. Sales under Rule 144 are subject to certain other restrictions
relating to the manner of sale, notice and the availability of current public
information about the Company.
Subject to the lock-up arrangements described below, 7,688,028 shares of
Common Stock owned by the Original Investors will be eligible for sale in the
public market subject to the volume and other limitations described above
because the Original Investors will be deemed to have held such shares for more
than one year. The Company's directors and executive officers and certain other
stockholders of the Company, including the Original Investors, have agreed,
subject to certain exceptions, not to directly or indirectly (i) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase or
transfer, lend dispose of, directly or indirectly, any shares of Common Stock or
securities convertible into or exchangeable or exercisable for Common Stock, or
(ii) enter into any swap or other agreement or any transaction that transfers to
another, in whole or in part, the economic consequence of ownership of the
Common Stock whether any transaction described in clause (i) or (ii) above is to
be settled by delivery of Common Stock or such other securities, in cash or
otherwise, without the prior written consent of Morgan Stanley & Co.
Incorporated on behalf of the Underwriters for a period of 180 days after the
date of this Prospectus. See "Underwriters."
Pursuant to the Investment and Stockholders' Agreement, the Company has
granted certain stockholders, including the Original Investors and Mr. Jalkut,
demand and piggy-back registration rights. See "Certain Relationships and
Related Transactions--Investment and Stockholders' Agreement."
In connection with the Debt Offering, the Company issued Warrants to
purchase an aggregate of 1,143,248 shares of Common Stock. The Warrants will
become exercisable upon completion of the Offering and the shares of Common
Stock issued upon exercise of the Warrants (the "Warrant Shares") will be
"restricted securities" under Rule 144. The Warrant Shares will be eligible for
sale in private transactions exempt from the registration requirements of the
Securities Act and will be effectively eligible for sale publicly through swap
transactions or other agreements or transactions that transfer to another, in
whole or in part, the economic consequence of ownership of the underlying shares
of Common Stock. Pursuant to a registration rights agreement (the "Warrant
Registration Rights Agreement"), upon completion of the Offering the holders of
a number of Registrable Warrant Securities equivalent to at least a majority of
the Warrant Shares subject to the Warrants originally issued at the time of the
Debt Offering
74
<PAGE>
will be entitled to require the Company to effect one registration under the
Securities Act, subject to certain limitations. This demand registration right
is subject to the "lock-up" or "black-out" periods, if any, imposed upon the
Company in connection with any underwriting or purchase agreement relating to an
underwritten Rule 144A or registered public offering of Common Stock. In
connection with this Offering, the Company will be subject to a 180-day
"lock-up" period. See "Underwriters." Holders of Registrable Warrant Securities
will also have the right to piggy-back on registration statements filed by the
Company under the Securities Act, subject to certain limitations.
In addition, an aggregate of 3,840,758 shares of Common Stock have been
reserved for issuance to employees, officers and directors of the Company upon
exercise of stock options, of which options for 2,541,381 shares of Common Stock
are outstanding as of June 2, 1998. The Company anticipates filing a
registration statement on Form S-8 under the Securities Act to register all of
the shares of Common Stock issuable or reserved for future issuance under the
1995 Plan and the 1997 Plan. Shares purchased upon exercise of options granted
pursuant to the 1995 Plan and the 1997 Plan generally will, therefore, be
available for resale in the public market to the extent the lock-up arrangements
with the Underwriters have expired, except that any such shares issued to
affiliates are subject to the volume limitations and certain other restrictions
of Rule 144. See "Management--1995 Stock Option Plan" and "--1997 Stock
Incentive Plan."
Prior to the Offering, there has been no public market for the Common Stock
of the Company and no prediction can be made as to the effect, if any, that the
sale or availability for sales of shares of Common Stock will have on the market
price of the Common Stock. Nevertheless, sales of significant amounts of such
shares in the public market, or the perception that such sales may occur, could
adversely affect the market price of Common Stock and could impair the Company's
future ability to raise capital through an offering of its equity securities.
75
<PAGE>
UNDERWRITERS
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof (the "Underwriting Agreement"), the U.S.
Underwriters named below for whom Morgan Stanley & Co. Incorporated, Bear,
Stearns & Co. Inc., Lehman Brothers Inc. and J.P. Morgan Securities Inc. are
acting as U.S. Representatives, and the International Underwriters named below
for whom Morgan Stanley & Co. International Limited, Bear, Stearns International
Limited, Lehman Brothers International (Europe) and J.P. Morgan Securities Ltd.
are acting as International Representatives, have severally agreed to purchase,
and the Company has agreed to sell to them, severally, the respective number of
shares of Common Stock set forth opposite the names of such Underwriters below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- ----------------------------------------------------------------------------------------------------- ----------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated..................................................................
Bear, Stearns & Co. Inc. ..........................................................................
Lehman Brothers Inc. ..............................................................................
J.P. Morgan Securities Inc. .......................................................................
----------
Subtotal......................................................................................... 3,750,000
International Underwriters:
Morgan Stanley & Co. International Limited.........................................................
Bear, Stearns International Limited................................................................
Lehman Brothers International (Europe).............................................................
J.P. Morgan Securities Ltd. .......................................................................
----------
Subtotal......................................................................................... 937,500
----------
Total.......................................................................................... 4,687,500
----------
----------
</TABLE>
The U.S. Underwriters and the International Underwriters, and the U.S.
Representatives and the International Representatives, are collectively referred
to as the "Underwriters" and the "Representatives", respectively. The
Underwriting Agreement provides that the obligations of the several Underwriters
to pay for and accept delivery of the shares of Common Stock offered hereby are
subject to the approval of certain legal matters by the counsel and to certain
other conditions. The Underwriters are obligated to take and pay for all of the
shares of Common Stock offered hereby (other than those covered by the U.S.
Underwriters, over-allotment option described below) if any such shares are
taken.
Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions: (i)
it is not purchasing any Shares (as defined herein) for the account of anyone
other than a United States or Canadian Person (as defined herein) and (ii) it
has not offered or sold, and will not offer or sell, directly or indirectly, any
Shares or distribute any prospectus relating to the Shares outside the United
States or Canada or to anyone other than a United States or
76
<PAGE>
Canadian Person. Pursuant to the Agreement between U.S. and International
Underwriters, each International Underwriter has represented and agreed that,
with certain exceptions: (i) it is not purchasing any Shares for the account of
any United States or Canadian Person and (ii) it has not offered or sold, and
will not offer or sell, directly or indirectly, any Shares or distribute any
prospectus relating to the Shares in the United States or Canada or to any
United States or Canadian Person. With respect to any Underwriter that is a U.S.
Underwriter and an International Underwriter, the foregoing representations and
agreements (i) made by it in its capacity as a U.S. Underwriter apply only to it
in its capacity as a U.S. Underwriter and (ii) made by it in its capacity as an
International Underwriter apply only to it in its capacity as an International
Underwriter. The foregoing limitations do not apply to stabilization
transactions or to certain other transactions specified in the Agreement between
U.S. and International Underwriters. As used herein, "United States or Canadian
Person" means any national or resident of the United States or Canada, or any
corporation, pension, profit-sharing or other trust or other entity organized
under the laws of the United States or Canada or of any political subdivision
thereof (other than a branch located outside the United States and Canada of any
United States or Canadian Person), and includes any United States or Canadian
branch of a person who is otherwise not a United States or Canadian Person. All
shares of Common Stock to be purchased by the Underwriters under the
Underwriting Agreement are referred to herein as the "Shares."
Pursuant to the Agreement between U.S. and International Underwriters, sales
may be made between the U.S. Underwriters and International Underwriters of any
number of Shares as may be mutually agreed. The per share price of any Shares so
sold shall be the public offering price set forth on the cover page hereof, in
United States dollars, less an amount not greater than the per share amount of
the concession to dealers set forth below.
Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has agreed
not to offer or sell, any Shares, directly or indirectly, in any province or
territory of Canada or to, or for the benefit of, any resident of any province
or territory of Canada in contravention of the securities laws thereof and has
represented that any offer or sale of Shares in Canada will be made only
pursuant to an exemption from the requirement to file a prospectus in the
province or territory of Canada in which such offer or sale is made. Each U.S.
Underwriter has further agreed to send to any dealer who purchases from it any
of the Shares a notice stating in substance that, by purchasing such Shares,
such dealer represents and agrees that it has not offered or sold, will not
offer or sell, directly or indirectly, any of such Shares in any province or
territory of Canada or to, or for the benefit of, any resident of any province
or territory of Canada in contravention of the securities laws thereof and that
any offer or sale of Shares in Canada will be made only pursuant to an exemption
from the requirement to file a prospectus in the province or territory of Canada
in which such offer or sale is made, and that such dealer will deliver to any
other dealer to whom it sells any of such Shares a notice containing
substantially the same statement as is contained in this sentence.
Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has represented and agreed that (i) it has not offered
or sold and, prior to the date six months after the closing date for the sale of
the Shares to the International Underwriters, will not offer or sell, any Shares
to persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Shares in, from or otherwise involving
the United Kingdom; and (iii) it has only issued or passed on and will only
issue or pass on in the United Kingdom any document received by it in connection
with the offering of the Shares to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 or is a person to whom such document may otherwise
lawfully be issued or passed on.
77
<PAGE>
The Underwriters initially propose to offer part of the shares of Common
Stock directly to the public at the public offering price set forth on the cover
page hereof and part to certain dealers at a price that represents a concession
not in excess of $ a share under the public offering price. Any Underwriter
may allow, and such dealers may reallow, a concession not in excess of $ a
share to other Underwriters or to certain dealers. After the initial offering of
the shares of Common Stock, the offering price and other selling terms may from
time to time be varied by the Representatives.
The Company has granted to the U.S. Underwriters an option, exercisable for
30 days from the date of this Prospectus, to purchase up to an aggregate of
703,125 additional shares of Common Stock at the public offering price set forth
on the cover page hereof, less underwriting discounts and commissions. The U.S.
Underwriters may exercise such option solely for the purpose of covering
over-allotments, if any, made in connection with the offering of the shares of
Common Stock offered hereby. To the extent such option is exercised, each U.S.
Underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares of Common Stock as
the number set forth next to such U.S. Underwriter's name in the preceding table
bears to the total number of shares of Common Stock set forth next to the names
of all U.S. Underwriters in the preceding table.
The Underwriters have informed the Company that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
Common Stock offered by them.
At the request of the Company, the Underwriters have reserved approximately
234,375 shares of Common Stock, representing 5% of the Shares to be sold in the
Offering, for sale to certain of its employees, officers and directors and
certain other persons at the public offering price set forth on the cover page
hereof. If such shares are not so sold to such persons, they will be sold to the
public.
Application has been made for quotation of the Shares on the Nasdaq National
Market under the symbol "PTNT".
Each of the Company and the directors, executive officers and certain other
stockholders of the Company, including the Original Investors, have agreed that,
without prior written consent of Morgan Stanley & Co. Incorporated on behalf of
the Underwriters and subject to certain exceptions, they will not, during the
period ending 180 days after the date of this Prospectus, (i) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase or
otherwise transfer, lend or dispose of, directly or indirectly, any shares of
Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock or (ii) enter into any swap or other arrangement that transfers
to another, in whole or in part, any of the economic consequences of ownership
of the Common Stock, whether any such transaction described in clause (i) or
(ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The restrictions described in this paragraph
do not apply to (x) the sale of Shares to the Underwriters, (y) the grant of
options pursuant to and on the same or similar terms as, employee benefit plans
existing on the date of this Prospectus and the issuance by the Company of
shares of Common Stock upon the exercise of an option or a warrant or the
conversion of a security outstanding on the date of this Prospectus or upon the
exercise of options granted after the date of this Prospectus under employee
benefit plans existing on the date of this Prospectus or (z) transactions by any
person other than the Company relating to shares of Common Stock or other
securities acquired in open market transactions after the completion of the
offering of the Shares.
In order to facilitate the offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Stock. Specifically, the Underwriters may over-allot in
connection with the Offering, creating a short position in the Common Stock for
their own account. In addition, to cover over-allotments or to stabilize the
price of the Common Stock, the Underwriters may bid for, and purchase, shares of
Common Stock in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an Underwriter or a dealer for distributing the
Common Stock in the Offering, if the syndicate repurchases previously
distributed
78
<PAGE>
Common Stock in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Common Stock above independent market
levels. The Underwriters are not required to engage in these activities, and may
end any of these activities at any time.
The Company and the Underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act.
PRICE OF THE OFFERING
Prior to this Offering, there has been no public market for the Common
Stock. The initial public offering price will be determined by negotiations
between the Company and the U.S. Representatives. Among the factors to be
considered in determining the initial public offering price will be the future
prospects of the Company and its industry in general, the progress that the
Company has made in recent periods toward the achievement of aspects of its
business plan, the projected cash flow of the Company and certain comparative
financial and operating information of companies engaged in activities similar
to those of the Company. The estimated initial public offering price range set
forth on the cover page of this Preliminary Prospectus is subject to change as a
result of market conditions and other factors.
CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS OF COMMON STOCK
The following is a general discussion of certain U.S. Federal income and
estate tax consequences of the ownership and disposition of Common Stock by a
"Non-United States Holder." A "Non-United States Holder" is a person or entity
that, for U.S. Federal income tax purposes, is (i) a non-resident alien
individual, (ii) a foreign corporation or partnership, or (iii) a non-resident
fiduciary of a foreign estate or trust.
This discussion is based on the Internal Revenue Code of 1986, as amended
(the "Code"), and administrative interpretations as of the date hereof, all of
which may be changed either retroactively or prospectively. This discussion does
not address all aspects of U.S. Federal income and estate taxation that may be
relevant to Non-United States Holders in light of their particular circumstances
and does not address any tax consequences arising under the laws of any state,
local or foreign taxing jurisdiction.
PROSPECTIVE HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE
UNITED STATES FEDERAL, STATE, LOCAL AND NON-UNITED STATES INCOME AND OTHER TAX
CONSEQUENCES TO THEM OF HOLDING AND DISPOSING OF COMMON STOCK.
DIVIDENDS
Subject to the discussion below, dividends paid to a Non-United States
Holder of Common Stock generally will be subject to withholding tax at a 30%
rate or such lower rate as may be specified by an applicable income tax treaty
unless the dividend is effectively connected with the conduct of a trade or
business within the United States, or, if an income tax treaty applies, is
attributable to a United States permanent establishment of the Non-United States
Holder and the Non-United States Holder provides the payor with proper
documentation (generally, Form 4224). In order to claim the benefit of an
applicable tax treaty rate, a Non-United States Holder may have to file with the
Company or its dividend paying agent an exemption or reduced treaty rate
certificate or letter in accordance with the terms of such treaty. Under United
States Treasury regulations currently in effect, for purposes of determining
whether tax is to be withheld at a 30% rate or at a reduced rate as specified by
an income tax treaty, the Company ordinarily will presume that dividends paid to
the address in a foreign country are paid to a resident of such country absent
knowledge that such presumption is not warranted (the "address rule"). However,
on October 6, 1997, the U.S. Treasury Department issued final regulations on
withholding of income tax payments to
79
<PAGE>
foreign persons, effective January 1, 2000, which will abolish the address rule
for purposes of claiming a reduced treaty rate. Effective January 1, 2000, a
Non-United States Holder seeking a reduced rate of withholding under an income
tax treaty would generally be required to provide to the Company a valid
Internal Revenue Service Form W-8 certifying that such Non-United States Holder
is entitled to benefits under an income tax treaty. The final regulations also
provide special rules for determining whether, for purposes of assessing the
applicability of an income tax treaty, dividends paid to a Non-United States
Holder that is an entity should be treated as being paid to the entity itself or
to the persons holding an interest in that entity. A Non-United States Holder
who is eligible for a reduced withholding rate may obtain a refund of any excess
amounts withheld by filing an appropriate claim for a refund with the Internal
Revenue Service.
In the case of dividends that are effectively connected with the Non-United
States Holder's conduct of a trade or business within the United States or, if
an income tax treaty applies, are attributable to a United States permanent
establishment of the Non-United States Holder, the Non-United States Holder will
generally be subject to regular U.S. income tax in the same manner as if the
Non-United States Holder were a United States resident. A Non-United States
corporation receiving effectively connected dividends also may be subject to an
additional "branch profits tax" which is imposed, under certain circumstances,
at a rate of 30% (or such lower rate as may be specified by an applicable
treaty) of the Non-United States corporation's "effectively connected earnings
and profits," subject to certain adjustments.
GAIN ON DISPOSITION OF COMMON STOCK
A Non-United States Holder generally will not be subject to U.S. Federal
income tax with respect to gain realized on a sale or other disposition of
Common Stock unless (i) the gain is effectively connected with a trade or
business of such Non-United States Holder in the U.S., (ii) in the case of
certain Non-United States Holders who are non-resident alien individuals and
hold the Common Stock as a capital asset, such individuals are present in the
U.S. for 183 or more days in the taxable year of the disposition and either (a)
such individuals have a "tax home" (as defined for United States Federal income
tax purposes) in the U.S., or (b) the gain is attributable to an office or other
fixed place of business maintained by such individuals in the U.S., (iii) the
Non-United States Holder is subject to tax, pursuant to the provisions of U.S.
tax law applicable to certain U.S. expatriates whose loss of U.S. citizenship
had as one of its principal purposes the avoidance of U.S. taxes, or (iv) the
Company is or has been a "United States real property holding corporation"
within the meaning of section 897(c)(2) of the Code and, assuming that the
Common Stock is regularly traded on an established securities market for tax
purposes, the Non-United States Holder held, directly or indirectly, at any time
within the five-year period preceding such disposition more than 5% of the
outstanding Common Stock. Based upon its current and anticipated assets, the
Company believes that it is not a United States real property holding
corporation. However, since the determination of United States real property
holding corporation status in the future will be based upon the composition of
the assets of the Company from time to time and there are uncertainties in the
application of certain relevant rules, there can be no assurance that the
Company will not become a United States real property holding corporation in the
future.
INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING
Under United States Treasury regulations, the Company must report annually
to the Internal Revenue Service and to each Non-United States Holder the amount
of dividends paid to such holder and any tax withheld with respect to such
dividends. These information reporting requirements apply even if withholding
was not required because the dividends were effectively connected with a trade
or business in the United States of the Non-United States Holder or withholding
was reduced or eliminated by an applicable income tax treaty. Copies of the
information returns reporting such dividends and withholding may also be made
available to the tax authorities in the country in which the Non-United States
Holder is a resident under the provisions of an applicable income tax treaty or
agreement.
80
<PAGE>
United States backup withholding (which generally is a withholding tax
imposed at the rate of 31% on certain payments to persons that fail to furnish
certain information under the United States information reporting requirements)
generally will not apply to (i) dividends paid to Non-United States Holders that
are subject to the 30% withholding discussed above (or that are not so subject
because a tax treaty applies that reduces or eliminates such 30% withholding) or
(ii) under current law, dividends paid to a Non-United States Holder at an
address outside of the United States. However, under final United States
Treasury regulations, effective as of January 1, 2000, a Non-United States
Holder generally would be subject to backup withholding at a 31% rate, unless
certain certification procedures (or, in the case of payments made outside the
United States with respect to an offshore account, certain documentary evidence
procedures) are complied with, directly or through an intermediary.
Backup withholding and information reporting generally will apply to
dividends paid to addresses inside the United States on shares of Common Stock
to beneficial owners that are not "exempt recipients" and that fail to provide
in the manner required certain identifying information.
The payment of the proceeds of the disposition of Common Stock to or through
the U.S. office of a broker is subject to information reporting unless the
disposing holder, under penalty of perjury, certifies its Non-United States
status or otherwise establishes an exemption. Generally, U.S. information
reporting and backup withholding will not apply to a payment of disposition
proceeds if the payment is made outside the U.S. through a Non-United States
office of a Non-United States broker. However, information reporting
requirements (but probably, prior to January 1, 2000, not backup withholding)
will apply to a payment of disposition proceeds outside the U.S. if (A) the
payment is made through an office outside the U.S. of a broker that is either
(i) a U.S. person, (ii) a foreign person which derives 50% or more of its gross
income for certain periods from the conduct of a trade or business in the U.S.,
(iii) a "controlled foreign corporation" for U.S. Federal income tax purposes,
or (iv) effective January 1, 2000, but probably not prior to such date, a
foreign broker that is (1) a foreign partnership, one or more of whose partners
are U.S. persons who, in the aggregate hold more than 50% of the income or
capital interest in the partnership at any time during its tax year, or (2) a
foreign partnership engaged at any time during its tax year in the conduct of a
trade or business in the United States, and (B) the broker fails to maintain
documentary evidence that the holder is a Non-United States Holder and that
certain conditions are met, or that the holder otherwise is entitled to an
exemption.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withhold. If withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is furnished to the Internal
Revenue Service.
FEDERAL ESTATE TAX
An individual Non-United States Holder who is treated as the owner of or has
made certain lifetime transfers of an interest in the Common Stock will be
required to include the value thereof in his gross estate for U.S. Federal
estate tax purposes, and may be subject to U.S. Federal estate tax unless an
applicable estate tax treaty provides otherwise. Estates of non-resident aliens
are generally allowed a statutory credit which generally has the effect of
offsetting the U.S. Federal estate tax imposed on the first $60,000 of the
taxable estate.
THE FOREGOING DISCUSSION IS INCLUDED FOR GENERAL INFORMATION ONLY.
ACCORDINGLY, EACH PROSPECTIVE PURCHASER IS URGED TO CONSULT HIS TAX ADVISOR WITH
RESPECT TO THE UNITED STATES FEDERAL INCOME TAX AND FEDERAL ESTATE TAX
CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION OF COMMON STOCK, INCLUDING THE
APPLICATION AND EFFECT OF THE LAWS OF ANY STATE, LOCAL, FOREIGN, OR OTHER TAXING
JURISDICTION.
81
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the validity of the Common Stock
offered hereby will be passed upon for the Company by Paul, Weiss, Rifkind,
Wharton & Garrison, New York, New York. Certain legal matters relating to the
Offering will be passed upon for the Underwriters by Shearman & Sterling, New
York, New York.
EXPERTS
The consolidated balance sheets as of December 31, 1996 and 1997 and the
consolidated statements of operations, changes in stockholders' equity
(deficit), and cash flows for the period August 25, 1995 (date of inception) to
December 31, 1995, the years ended December 31, 1996 and 1997 and the period
August 25, 1995 (date of inception) to December 31, 1997 included in this
prospectus, have been included herein in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has not previously been subject to the reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Upon
completion of the Offering, the Company will be subject to the informational
requirements of the Exchange Act, and in accordance with the Exchange Act, will
be required to file periodic reports and other information with the Securities
and Exchange Commission (the "Commission"). Such information can be inspected
without charge at the public reference facilities of the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
regional offices of the Commission located at Suite 1400, Northwest Atrium
Center, 500 West Madison Street, Chicago, Illinois 60661 and Seven World Trade
Center, 13th Floor, New York, New York 10048. Copies of such material may also
be obtained at prescribed rates from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also
maintains an Internet Web Site (http://www.sec.gov) that will contain all
information filed electronically by the Company with the Commission.
This Prospectus, which constitutes a part of a Registration Statement on
Form S-1 (the "Registration Statement") filed by the Company with the Commission
under the Securities Act, does not contain all information set forth in the
Registration Statement, including the exhibits to the Registration Statement.
For further information with respect to the Company and the Common Stock offered
by this Prospectus, reference is made to the Registration Statement and the
exhibits to the Registration Statement. Statements contained in this Prospectus
as to the contents of any contract or other document are summaries of the
material terms of such contract or other document not necessarily complete, and,
with respect to each such contract or document filed as an exhibit to the
Registration Statement, reference is made to the copy of such contract or
document, and each such statement is qualified in all respect by such reference.
A copy of the Registration Statement, including the exhibits thereto, may be
inspected and copies thereof may be obtained as described in the preceding
paragraph with respect to periodic reports and other information to be filed by
the Company under the Exchange Act.
The Company intends to furnish its stockholders with annual reports
containing financial statements audited by an independent public accounting firm
and quarterly reports for the first three quarters of each fiscal year
containing unaudited financial information for so long as required by applicable
law or regulation or by any securities exchange or other market upon which the
Common Stock is traded.
82
<PAGE>
FORWARD-LOOKING STATEMENTS
This Prospectus includes "forward-looking statements," including statements
which can be identified by the use of forward-looking terminology such as
"believes," "anticipates," "expects," "may," "will," or "should" or the negative
of such terminology or other variations on such terminology or comparable
terminology, or by discussions of strategies that involve risks and
uncertainties. All statements other than statements of historical facts included
in this Prospectus including, without limitation, such statements under
"Summary," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business" and located elsewhere in this Prospectus,
regarding the Company or any of the transactions described in this Prospectus,
including the timing, financing, strategies and effects of such transaction, are
forward-looking statements. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to have been correct. Important
factors that could cause actual results to differ materially from expectations
are disclosed in this Prospectus, including, without limitation, the amount of
capital needed to deploy the Company's network as described in this Prospectus;
the Company's substantial leverage and its need to service its indebtedness; the
restrictions imposed by the Company's current and possible future financing
arrangements; the ability of the Company to successfully manage the cost
effective and timely completion of its network and its ability to attract and
retain customers for its services; the ability of the Company to retain and
attract relationships with the incumbent owners of the telecommunications assets
with which the Company expects to build its network; the Company's ability to
retain and attract key management and other personnel as well as the Company's
ability to manage the rapid expansion of its business and operations; the
Company's ability to compete in the highly competitive telecommunications
industry in terms of price, service, reliability and technology; the Company's
dependence on the reliability of its network equipment, its reliance on key
suppliers of network equipment and the risk that its technology will become
obsolete or otherwise not economically viable; the Company's ability to conduct
its business in a regulated environment; and the other factors described in
conjunction with the forward-looking statements in this Prospectus and/or under
the caption "Risk Factors." The Company does not intend to update these
forward-looking statements.
83
<PAGE>
PATHNET, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Accountants..................................................... F-2
Consolidated Balance Sheets, as of December 31, 1996 and 1997 and March 31, 1998
(unaudited)......................................................................... F-3
Consolidated Statements of Operations for the period August 25, 1995 (date of
inception) to December 31, 1995, the years ended December 31, 1996 and 1997, the
period
August 25, 1995 (date of inception) to December 31, 1997, the three months ended
March 31, 1997 (unaudited) and 1998 (unaudited) and the period August 25, 1995 (date
of inception) to March 31, 1998 (unaudited)......................................... F-4
Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the period
August 25, 1995 (date of inception) to December 31, 1995, the years ended December
31, 1996 and 1997, and the three months ended March 31, 1998 (unaudited)............ F-5
Consolidated Statements of Cash Flows for the period August 25, 1995 (date of
inception) to December 31, 1995, the years ended December 31, 1996 and 1997, the
period
August 25, 1995 (date of inception) to December 31, 1997, the three months ended
March 31, 1997 (unaudited) and 1998 (unaudited) and the period August 25, 1995 (date
of inception) to March 31, 1998 (unaudited)......................................... F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Pathnet, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, changes in stockholders' equity (deficit)
and cash flows present fairly, in all material respects, the financial position
of Pathnet, Inc. and its subsidiary (the Company) (A Development Stage
Enterprise) at December 31, 1996 and 1997, and the results of their operations
and cash flows for the period August 25, 1995 (date of inception) to December
31, 1995, the years ended December 31, 1996 and 1997 and for the period August
25, 1995 (date of inception) to December 31, 1997, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
McLean, Virginia
February 20, 1998, except for the information in Note 9, for which the dates are
April 8, 1998, April 13, 1998, May 4, 1998 and July 24, 1998, respectively.
F-2
<PAGE>
PATHNET, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
---------
ASSETS
<TABLE>
<CAPTION>
PRO FORMA
MARCH 31,
MARCH 31, 1998
DECEMBER 31, DECEMBER 31, 1998 (NOTE 2)
1996 1997 (UNAUDITED) (UNAUDITED)
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents........................ $ 2,318,037 $ 7,831,384 $ 4,856,610 $ 282,547,705
Prepaid expenses and other current assets........ 1,695 48,571 156,716 156,716
------------- ------------- ------------- --------------
Total current assets......................... 2,319,732 7,879,955 5,013,326 282,704,421
Property and equipment, net........................ 46,180 7,207,094 9,964,580 9,964,580
Deferred financing costs........................... -- 250,428 -- 11,180,000
Restricted cash.................................... -- 760,211 288,736 288,736
Pledged securities................................. -- -- -- 81,128,751
------------- ------------- ------------- --------------
Total assets................................. $ 2,365,912 $ 16,097,688 $ 15,266,642 $ 385,266,488
------------- ------------- ------------- --------------
------------- ------------- ------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable................................. $ 114,799 $ 5,592,918 $ 7,280,298 $ 7,280,298
Accrued expenses................................. 30,217 -- 257,334 257,334
Deferred revenue................................. -- 300,000 200,000 200,000
------------- ------------- ------------- --------------
Total liabilities............................ 145,016 5,892,918 7,737,632 7,737,632
Notes payable.................................... -- -- -- 345,905,000
------------- ------------- ------------- --------------
Total current liabilities.................... 145,016 5,892,918 7,737,632 353,642,632
Series A convertible preferred stock, $0.01 par
value, 1,000,000 shares authorized, issued and
outstanding at December 31, 1996 and 1997, and
March 31, 1998, respectively (liquidation
preference $1,000,000)........................... 1,000,000 1,000,000 1,000,000 --
Series B convertible preferred stock, $0.01 par
value, 1,651,046 shares authorized; 1,041,290,
1,651,046 and 1,651,046 shares issued and
outstanding at December 31, 1996 and 1997 and
March 31, 1998, respectively (liquidation
preference $5,033,367)........................... 3,008,367 5,008,367 5,008,367 --
Series C convertible preferred stock, $0.01 par
value, 2,819,549 shares authorized; 939,850
shares issued and outstanding at December 31,
1997 and March 31, 1998, respectively
(liquidation preference $10,000,054)............. -- 9,961,274 9,961,274 --
------------- ------------- ------------- --------------
Total convertible preferred stock............ 4,008,367 15,969,641 15,969,641 --
------------- ------------- ------------- --------------
Commitments and contingencies
Stockholders' equity (deficit):
Voting common stock, $0.01 par value, 7,500,000
shares authorized at December 31, 1996 and
1997 and 10,200,000 shares authorized at March
31, 1998; 2,900,000, 2,900,000 and 2,902,358
shares issued and outstanding at December 31,
1996 and 1997 and March 31, 1998,
respectively.................................. 29,000 29,000 29,024 187,671
Note receivable from stockholder................. (9,000) (9,000) -- --
Additional paid-in capital....................... 381,990 381,990 382,047 40,287,887
Deficit accumulated during the development
stage......................................... (2,189,461) (6,166,861) (8,851,702) (8,851,702)
------------- ------------- ------------- --------------
Total stockholders' equity (deficit)......... (1,787,471) (5,764,871) (8,440,631) 31,623,856
------------- ------------- ------------- --------------
Total liabilities and stockholders' equity
(deficit).................................. $ 2,365,912 $ 16,097,688 $ 15,266,642 $ 385,266,488
------------- ------------- ------------- --------------
------------- ------------- ------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
PATHNET, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
FOR THE FOR THE PERIOD
PERIOD PERIOD AUGUST 25,
AUGUST 25, AUGUST 25, 1995
1995 1995 (DATE OF
(DATE OF (DATE OF FOR THE THREE MONTHS INCEPTION)
INCEPTION) FOR THE YEAR FOR THE YEAR INCEPTION) ENDED MARCH 31, TO
TO ENDED ENDED TO ------------------------ MARCH 31,
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1997 1998 1998
1995 1996 1997 1997 (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ------------ ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue............................ $ -- $ 1,000 $ 162,500 $ 163,500 $ 10,000 $ 100,000 $ 263,500
------------ ------------ ------------ ------------ ----------- ----------- ------------
Expenses:
Cost of revenue.................. -- -- -- -- -- 714,740 714,740
General and administrative....... 290,318 913,646 3,537,926 4,741,890 486,630 1,922,217 6,664,107
Research and development......... 19,038 226,021 -- 245,059 -- -- 245,059
Legal and consulting............. 120,083 202,651 755,817 1,078,551 71,324 225,813 1,304,364
------------ ------------ ------------ ------------ ----------- ----------- ------------
Total expenses................. 429,439 1,342,318 4,293,743 6,065,500 557,954 2,862,770 8,928,270
------------ ------------ ------------ ------------ ----------- ----------- ------------
Net operating loss................. (429,439) (1,341,318) (4,131,243) (5,902,000) (547,954) (2,762,770) (8,664,770)
------------ ------------ ------------ ------------ ----------- ----------- ------------
Interest expense................... -- (415,357) -- (415,357) -- -- (415,357)
Interest and other income, net..... 2,613 13,040 153,843 169,496 17,107 77,929 247,425
------------ ------------ ------------ ------------ ----------- ----------- ------------
Net loss................... $ (426,826) $(1,743,635) $(3,977,400) $(6,147,861) $(530,847) ($2,684,841) $(8,832,702)
------------ ------------ ------------ ------------ ----------- ----------- ------------
------------ ------------ ------------ ------------ ----------- ----------- ------------
Basic and diluted loss per
common share............. $ (0.15) $ (0.60) $ (1.37) $ (2.12) $ (0.18) $ (0.93) $ (3.05)
------------ ------------ ------------ ------------ ----------- ----------- ------------
------------ ------------ ------------ ------------ ----------- ----------- ------------
Weighted average number of
common shares
outstanding.............. 2,900,000 2,900,000 2,900,000 2,900,000 2,900,000 2,901,022 2,900,097
------------ ------------ ------------ ------------ ----------- ----------- ------------
------------ ------------ ------------ ------------ ----------- ----------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
PATHNET, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
DEFICIT
NOTE ACCUMULATED
COMMON STOCK RECEIVABLE ADDITIONAL DURING THE
------------------------- FROM PAID-IN DEVELOPMENT
SHARES AMOUNT STOCKHOLDER CAPITAL STAGE TOTAL
------------- ---------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, August 25, 1995............. -- $ -- $ -- $ -- $ -- $ --
Issuance of voting common stock...... 1,450,000 14,500 (4,500) -- (9,500) 500
Issuance of non-voting common
stock.............................. 1,450,000 14,500 (4,500) -- (9,500) 500
Net loss............................. -- -- -- -- (426,826) (426,826)
------------- ---------- ----------- ------------- ------------- -------------
Balance, December 31, 1995........... 2,900,000 29,000 (9,000) -- (445,826) (425,826)
Cancellation of non-voting common
stock.............................. (1,450,000) (14,500) -- -- -- (14,500)
Issuance of voting common stock...... 1,450,000 14,500 -- -- -- 14,500
Interest expense for beneficial
conversion feature of bridge
loan............................... -- -- -- 381,990 -- 381,990
Net loss............................. -- -- -- -- (1,743,635) (1,743,635)
------------- ---------- ----------- ------------- ------------- -------------
Balance, December 31, 1996........... 2,900,000 29,000 (9,000) 381,990 (2,189,461) (1,787,471)
Net loss............................. -- -- -- -- (3,977,400) (3,977,400)
------------- ---------- ----------- ------------- ------------- -------------
Balance, December 31, 1997........... 2,900,000 29,000 (9,000) 381,990 (6,166,861) (5,764,871)
Exercise of stock options
(unaudited)........................ 2,358 24 -- 57 -- 81
Repayment of note receivable
(unaudited)........................ -- -- 9,000 -- -- 9,000
Net loss (unaudited)................. -- -- -- -- (2,684,841) (2,684,841)
------------- ---------- ----------- ------------- ------------- -------------
Balance, March 31, 1998
(unaudited)........................ 2,902,358 $ 29,024 $ -- $ 382,047 $ (8,851,702) $ (8,440,631)
------------- ---------- ----------- ------------- ------------- -------------
------------- ---------- ----------- ------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
PATHNET, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
PERIOD FOR THE
AUGUST 25, PERIOD
1995 AUGUST 25, FOR THE THREE MONTHS
(DATE OF FOR THE YEAR FOR THE YEAR 1995 (DATE OF ENDED MARCH 31,
INCEPTION) TO ENDED ENDED INCEPTION) TO ------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1997 1998
1995 1996 1997 1997 (UNAUDITED) (UNAUDITED)
------------- ------------ ------------ ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Cash from operating activities:
Net loss............................ $ (426,826) $(1,743,635) $(3,977,400) $(6,147,861) $(530,847) ($2,684,841)
Adjustment to reconcile net loss to
net cash used in operating
activities:
Depreciation expense.............. 352 9,024 46,642 56,018 6,112 37,223
Loss on disposal of asset......... -- -- 5,500 5,500 -- --
Write-off of deferred financing
costs........................... -- -- -- -- -- 337,910
Interest expense for beneficial
conversion feature of bridge
loan............................ -- 381,990 -- 381,990 -- --
Accrued interest satisfied by
conversion of bridge loan to
Series B preferred stock........ -- 33,367 -- 33,367 -- --
Changes in assets and liabilities:
Prepaid expenses and other
current assets................ -- (1,695) (46,876) (48,571) -- (108,145)
Deferred revenue................ -- -- 300,000 300,000 -- (100,000)
Accounts payable................ 4,705 110,094 386,106 500,905 (63,259) 1,687,380
Accrued expenses................ 12,645 17,572 (30,217) -- (4,125) 257,334
------------- ------------ ------------ ------------- ----------- -----------
Net cash used in operating
activities.................. (409,124) (1,193,283) (3,316,245) (4,918,652) (592,119) (573,139)
------------- ------------ ------------ ------------- ----------- -----------
Cash flows from investing activities:
Expenditures for property and
equipment......................... (8,903) (46,653) (381,261) (436,817) (37,385) (710,337)
Expenditures for network
construction in progress.......... -- -- (1,739,782) (1,739,782) -- (2,084,372)
Restricted cash..................... -- -- (760,211) (760,211) -- 471,475
Repayment of note receivable........ -- -- -- -- -- 9,000
------------- ------------ ------------ ------------- ----------- -----------
Net cash used in investing
activities.................. (8,903) (46,653) (2,881,254) (2,936,810) (37,385) (2,314,234)
------------- ------------ ------------ ------------- ----------- -----------
Cash flows from financing activities:
Issuance of voting and non-voting
common stock...................... 1,000 -- -- 1,000 -- --
Proceeds from sale of Series A
preferred stock................... 500,000 500,000 -- 1,000,000 -- --
Proceeds from sale of Series B
preferred stock................... -- 2,000,000 2,000,000 4,000,000 -- --
Proceeds from sale of Series B
preferred stock representing the
conversion of committed but
undrawn portion of bridge loan to
Series B preferred stock.......... -- 300,000 -- 300,000 -- --
Proceeds from sale of Series C
preferred stock................... -- -- 10,000,054 10,000,054 -- --
Exercise of stock option............ -- -- -- -- -- 81
Issuance costs...................... -- (25,000) (38,780) (63,780) -- --
Financing costs..................... -- -- (250,428) (250,428) -- (87,482)
Proceeds from bridge loan........... -- 700,000 -- 700,000 -- --
------------- ------------ ------------ ------------- ----------- -----------
Net cash provided by (used in)
financing activities........ 501,000 3,475,000 11,710,846 15,686,846 -- (87,401)
------------- ------------ ------------ ------------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents...................... 82,973 2,235,064 5,513,347 7,831,384 (629,504) (2,974,774)
Cash and cash equivalents at the
beginning of period................... -- 82,973 2,318,037 -- 2,318,037 7,831,384
------------- ------------ ------------ ------------- ----------- -----------
Cash and cash equivalents at the end
of period............................. $ 82,973 $2,318,037 $7,831,384 $ 7,831,384 $1,688,533 $4,856,610
------------- ------------ ------------ ------------- ----------- -----------
------------- ------------ ------------ ------------- ----------- -----------
Supplemental disclosure:
Noncash transactions:
Conversion of bridge loan plus
accrued interest to Series B
preferred stock................. $ -- $ 733,367 $ -- $ 733,367 $ -- $ --
------------- ------------ ------------ ------------- ----------- -----------
------------- ------------ ------------ ------------- ----------- -----------
Conversion of non-voting common
stock to voting common stock.... $ -- $ 14,500 $ -- $ 14,500 $ -- $ --
------------- ------------ ------------ ------------- ----------- -----------
------------- ------------ ------------ ------------- ----------- -----------
Issuance of voting and non-voting
common stock.................... 9,000 $ -- $ -- $ 9,000 $ -- $ --
------------- ------------ ------------ ------------- ----------- -----------
------------- ------------ ------------ ------------- ----------- -----------
Acquisition of network equipment
included in accounts payable.... $ -- $ -- $5,092,013 $ 5,092,013 $ -- $ --
------------- ------------ ------------ ------------- ----------- -----------
------------- ------------ ------------ ------------- ----------- -----------
<CAPTION>
FOR THE
PERIOD
AUGUST 25,
1995
(DATE OF
INCEPTION) TO
MARCH 31,
1998
(UNAUDITED)
-------------
<S> <C>
Cash from operating activities:
Net loss............................ $(8,832,702)
Adjustment to reconcile net loss to
net cash used in operating
activities:
Depreciation expense.............. 93,241
Loss on disposal of asset......... 5,500
Write-off of deferred financing
costs........................... 337,910
Interest expense for beneficial
conversion feature of bridge
loan............................ 381,990
Accrued interest satisfied by
conversion of bridge loan to
Series B preferred stock........ 33,367
Changes in assets and liabilities:
Prepaid expenses and other
current assets................ (156,716)
Deferred revenue................ 200,000
Accounts payable................ 2,188,285
Accrued expenses................ 257,334
-------------
Net cash used in operating
activities.................. (5,491,791)
-------------
Cash flows from investing activities:
Expenditures for property and
equipment......................... (904,478)
Expenditures for network
construction in progress.......... (4,066,830)
Restricted cash..................... (288,736)
Repayment of note receivable........ 9,000
-------------
Net cash used in investing
activities.................. (5,251,044)
-------------
Cash flows from financing activities:
Issuance of voting and non-voting
common stock...................... 1,000
Proceeds from sale of Series A
preferred stock................... 1,000,000
Proceeds from sale of Series B
preferred stock................... 4,000,000
Proceeds from sale of Series B
preferred stock representing the
conversion of committed but
undrawn portion of bridge loan to
Series B preferred stock.......... 300,000
Proceeds from sale of Series C
preferred stock................... 10,000,054
Exercise of stock option............ 81
Issuance costs...................... (63,780)
Financing costs..................... (337,910)
Proceeds from bridge loan........... 700,000
-------------
Net cash provided by (used in)
financing activities........ 15,599,445
-------------
Net increase (decrease) in cash and
cash equivalents...................... 4,856,610
Cash and cash equivalents at the
beginning of period................... --
-------------
Cash and cash equivalents at the end
of period............................. $ 4,856,610
-------------
-------------
Supplemental disclosure:
Noncash transactions:
Conversion of bridge loan plus
accrued interest to Series B
preferred stock................. $ 733,367
-------------
-------------
Conversion of non-voting common
stock to voting common stock.... $ 14,500
-------------
-------------
Issuance of voting and non-voting
common stock.................... $ 9,000
-------------
-------------
Acquisition of network equipment
included in accounts payable.... $ 5,092,013
-------------
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
PATHNET, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS AND FINANCING
Pathnet, Inc. (the Company) was incorporated in the State of Delaware on
August 25, 1995. On August 28, 1995, Path Tel, Inc. (Path Tel), a shell company
with no operations, was merged with and into the Company, with the Company being
the surviving corporation. The sole owner of Path Tel was the founder (Founder)
of the Company. The business of the Company is to aggregate and build a digital
microwave network through strategic alliances with enterprises operating private
microwave networks (Incumbents) not currently connected to the public switched
telephone network.
The Company plans to deploy its digital network by upgrading, integrating
and leveraging existing telecommunications assets, sites and rights of way,
including those utilized by railroads, utilities, state and local governments
and pipelines. By integrating the existing networks of Incumbents, the Company
expects to obtain the equivalent of a nationwide spectrum license at minimal
licensing costs. In return for providing equipment, designing systems and
managing the construction of Incumbent networks, the Company will receive the
exclusive contractual right to market excess capacity created and aggregated on
Incumbent networks. The revenue generated from this activity may be shared with
the Incumbents.
The Company has in place several contracts requiring it to upgrade existing
telecommunication systems. In addition, the Company is currently in the process
of negotiating with several national long distance carriers who will likely be
purchasers of the excess capacity created. Management believes the first network
upgrade has been completed and capacity is available for commercial sale.
However, the outcome is uncertain and depends on a variety of factors, some of
which are beyond the Company's control. The Company is dependent upon the
network upgrades to achieve its objective. Management's plans to fund operations
and the transitioning services will potentially include public and private
sources and strategic corporate alliances.
The Company has incurred an accumulated deficit of $6,147,861 for the period
August 25, 1995 (date of inception) to December 31, 1997. Management believes
that as of December 31, 1997, the Company has received funding from the
preferred stock offerings consummated during 1997 (Note 5) to fund operations
through the first quarter of 1999. The Company will need to achieve positive
operational cash flow or complete additional equity or debt financings to fund
operations beyond the first quarter of 1999.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The Company's activities to date principally have been securing contractual
alliances with Incumbents, designing and constructing network segments,
obtaining capital and planning its proposed service. Accordingly, the Company's
financial statements are presented as a development stage enterprise, as
prescribed by Statement of Financial Accounting Standards No. 7, "Accounting and
Reporting by Development Stage Enterprises." As a development stage enterprise,
the Company has been relying on the issuance of preferred stock rather than
recurring revenues, for its primary sources of cash since inception.
CONSOLIDATION
The consolidated financial statements include the accounts of Pathnet, Inc.
and its wholly-owned subsidiary, Pathnet Finance I, LLC. All material
intercompany accounts and transactions have been eliminated in consolidation.
F-7
<PAGE>
PATHNET, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
UNAUDITED INTERIM FINANCIAL STATEMENTS
The unaudited consolidated balance sheet as of March 31, 1998, the unaudited
consolidated statements of operations, changes in stockholders' equity and cash
flows for the three months ended March 31, 1997 and 1998 and the unaudited
consolidated statements of operations and cash flows for the period August 25,
1995 (date of inception) through March 31, 1998, have been prepared in
accordance with generally accepted accounting principles for interim financial
information and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted accounting
principles. In the opinion of management, all adjustments (consisting of only
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months ended March 31, 1998 are
not necessarily indicative of results that may be expected for the year ending
December 31, 1998.
PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma balance sheet is based upon available information
and certain assumptions that management of the Company believes are reasonable.
The unaudited pro forma balance sheet does not purport to be indicative of the
Company's financial position had the aforementioned transactions taken place on
March 31, 1998. Unaudited pro forma financial information gives effect to (i)
the issuance and sale of 350,000 units, each consisting of a $1,000 principal
amount of 12 1/4% Senior Notes due 2008 and a warrant to purchase 3.27 shares of
common stock at an exercise price of $0.01 (see Note 9), (ii) the sale of
1,879,699 shares of Series C convertible preferred stock (see Note 9) nd (iii)
the conversion of all shares of Series A, Series B and Series C convertible
preferred stock into 15,854,716 shares of common stock (see Note 5).
LOSS PER SHARE
The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" (SFAS 128), effective December 31, 1997. Basic earnings
(loss) per share is computed by dividing net income (loss) by the weighted
average number of shares of common stock outstanding. Diluted earnings (loss)
per share is computed by dividing net income (loss) by the weighted average
common and potentially dilutive common equivalent shares outstanding. For each
of the years presented, basic and diluted loss per share are the same. The
exercising of 1,791,365 employee common stock options and the conversion of
3,590,896 shares of Series A, B and C convertible preferred stock into
10,413,598 shares of common stock as of December 31, 1997, which could
potentially dilute basic earnings per share in the future, were not included in
the computation of diluted loss per share because to do so would have been
antidilutive for each of the years presented.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company believes that the carrying amount of certain of its financial
instruments, which include cash equivalents and accounts payable, approximate
fair value due to the relatively short maturity of these instruments.
F-8
<PAGE>
PATHNET, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reported period. The estimates involve judgments with
respect to, among other things, various future factors which are difficult to
predict and are beyond the control of the Company. Therefore, actual amounts
could differ from these estimates.
CASH EQUIVALENTS
The Company considers all highly liquid instruments with an original
maturity of three months or less to be cash equivalents.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist of cash and cash equivalents and
restricted cash. The Company has invested its excess cash in a money market fund
with a commercial bank. The money market fund is collateralized by the
underlying assets of the fund. The Company's restricted cash is maintained in an
escrow account (see Note 4) at a major bank. The Company has not experienced any
losses on its cash and cash equivalents and restricted cash.
PROPERTY AND EQUIPMENT
Property and equipment, consisting of office and computer equipment,
furniture and fixtures, leasehold improvements and network construction costs,
is stated at cost. Depreciation of the office and computer equipment and
furniture and fixtures is computed using the straight-line method, generally
over three to five years, based upon estimated useful lives, commencing when the
assets are available for service. Leasehold improvements are amortized over the
lesser of the useful lives of the assets or the lease term. Expenditures for
maintenance and repairs are expensed as incurred. Network construction costs
incurred during development are capitalized. Depreciation of the network
construction costs begins when the network equipment is ready for its intended
use and will be amortized over its estimated useful life. When assets are
retired or disposed, the cost and the related accumulated depreciation are
removed from the accounts, and any resulting gain or loss is recognized in
operations for the period.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company periodically evaluates the recoverability of its long-lived
assets. This evaluation consists of a comparison of the carrying value of the
assets with the assets' expected future cash flows, undiscounted and without
interest costs. Estimates of expected future cash flows represent management's
best estimate based on reasonable and supportable assumptions and projections.
If the expected future cash flow, undiscounted and without interest charges,
exceeds the carrying value of the asset, no impairment is recognized. Impairment
losses are measured as the difference between the carrying value of long-lived
assets and their fair value. No impairment losses were recognized during the
period August 25, 1995 (date of inception) to December 31, 1995 and the years
ended December 31, 1996 and 1997.
F-9
<PAGE>
PATHNET, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEFERRED INCOME TAXES
Deferred income taxes are recognized for tax consequences in future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each year-end, based on enacted laws and statutory tax
rates applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established, when necessary, to reduce
net deferred tax assets to the amount expected to be realized. The provision for
income taxes consists of the Company's current provision for federal and state
income taxes and the change in the Company's net deferred tax assets and
liabilities during the period.
STOCK-BASED COMPENSATION
The Statement of Financial Accounting Standards No. 123, (SFAS 123),
"Accounting for Stock-Based Compensation," allows companies to account for
employee stock-based compensation either under the provisions of SFAS 123 or
under the provisions of Accounting Principles Board Opinion No. 25, (APB 25),
"Accounting for Stock Issued to Employees", but requires pro forma disclosure in
the footnotes to the financial statements as if the measurement provisions of
SFAS 123 had been adopted. The Company has continued to account for its stock
based compensation in accordance with the provisions of APB 25.
REVENUE
The Company earns revenue for project management and consulting services.
The Company defers revenue when contractual payments are received in advance of
the performance of services. Revenue is recognized over the related project
period as milestones are achieved. All of the Company's revenue to date has been
earned from four customers.
DEFERRED FINANCING COSTS
The Company has incurred costs related to obtaining future debt financing
arrangements. When the financing is obtained, the costs will be amortized over
the term of the financing arrangement. If the financing is not obtained, the
costs will be expensed.
NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board has issued three new standards that
became effective for reporting periods beginning after December 15, 1997,
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" (SFAS 130), Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" (SFAS
131), and Statement of Financial Accounting Standards No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits" (SFAS 132).
Effective March 31, 1998, the Company adopted SFAS 130, SFAS 131 and SFAS 132.
The adoption of these standards has no material affect on the Company's
consolidated financial statements.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133 "Accounting for Derivative
Instruments and Hedging Activities", which requires a company to recognize all
derivatives as either assets or liabilities in the balance sheet and measure
those instruments at fair value. This standard is effective for the Company's
1998 calendar year. The Company
F-10
<PAGE>
PATHNET, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
has not yet determined the effects SFAS 133 will have on its financial position
or the results of its operations.
3. PROPERTY AND EQUIPMENT
Property and equipment, stated at cost, is comprised of the following at
December 31, 1996 and 1997 and at March 31, 1998:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, MARCH 31,
1996 1997 1998
------------ ------------ -------------
<S> <C> <C> <C>
(UNAUDITED)
Network construction in progress................. $ -- $6,831,795 $ 8,916,167
Office and computer equipment.................... 31,006 248,880 732,748
Furniture and fixtures........................... 24,550 120,093 309,074
Leasehold improvements........................... -- 62,344 99,832
------------ ------------ -------------
55,556 7,263,112 10,057,821
Less accumulated depreciation.................... (9,376) (56,018) (93,241)
------------ ------------ -------------
Property and equipment, net...................... $ 46,180 $7,207,094 $ 9,964,580
------------ ------------ -------------
------------ ------------ -------------
</TABLE>
Network construction in progress includes all direct material and labor
costs necessary to construct components of a high capacity digital microwave
network which is owned and maintained by the Company. Network construction in
progress includes approximately $5,100,000 of telecommunications equipment
obtained from NEC Industries, Inc. (NEC). As the Company has not yet paid for
this equipment, a corresponding amount is included in accounts payable at
December 31, 1997.
4. RESTRICTED CASH
On June 3, 1997, the Company signed the Agreement to Create and Manage a
High Capacity Telecommunications System (the Agreement) with Texaco Pipeline,
Inc. (Texaco). To assure performance of the installation services to be provided
by the Company under the Agreement, Texaco and the Company entered into an
Escrow Agreement which required the Company to make an initial cash deposit of
$750,000 with a financial institution. Interest earned on these funds remains in
the escrow. Upon providing documentation to Texaco showing expenses related to
the installation, the Company obtains approval from Texaco to draw down a
corresponding amount from the escrow balance to fund the network construction in
progress. This balance is wholly restricted and may not be used for any other
purpose.
5. CAPITAL STOCK TRANSACTIONS
COMMON STOCK
The initial capitalization of the Company on August 28, 1995 occurred
through the issuance of 1,450,000 shares of voting common stock and 1,450,000
shares of non-voting common stock. The shares of both the voting and non-voting
common stock are owned by the Founder of the Company. In February 1996, the
Founder returned 1,450,000 shares of non-voting common stock in exchange for
1,450,000 shares of voting common stock.
F-11
<PAGE>
PATHNET, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. CAPITAL STOCK TRANSACTIONS (CONTINUED)
CONVERTIBLE PREFERRED STOCK
As part of its initial capitalization on August 25, 1995, the Company
initiated a private offering of 1,000,000 shares of Series A convertible
preferred stock for $1,000,000. Pursuant to the terms of the Investment and
Stockholders' Agreement, the offering closed in two phases of $500,000 each. As
of the signing of the Investment and Stockholders' Agreement, the Company
received $500,000, representing the first closing on this offering in 1995. In
addition, the offering provided for a convertible bridge loan in the amount of
$1,000,000. The bridge loan carries an interest rate of 12% per annum and is due
and payable in full on the earlier to occur of the anniversary date of the
bridge loan issuance or the closing date of the Company's next equity financing.
The bridge loan is convertible into Series B preferred stock at 73% of the price
of the preferred stock issued in an equity financing.
In February 1996, the Company issued 500,000 shares of Series A convertible
preferred stock to the original investors in exchange for $500,000, representing
the second closing of the Investment and Stockholders' Agreement. In August
1996, the Company drew $700,000 on a bridge loan with the original investors.
On December 23, 1996, the Company consummated a private offering of 609,756
shares of Series B convertible preferred stock for $2,000,000 less issuance
costs of $25,000. In addition, simultaneously, the $700,000 bridge loan plus
$33,367 of accrued interest was converted into 306,242 shares of Series B
convertible preferred stock. The Company recognized $271,107 of interest expense
to account for the beneficial conversion feature of the bridge loan. In
addition, $300,000 representing the committed but undrawn portion of the bridge
loan, was paid to the Company for the sale of 125,292 shares of Series B
convertible preferred stock at a discounted rate. The Company recognized
$110,883 of interest expense to account for the beneficial conversion feature of
the committed but undrawn bridge loan. On June 18, 1997, the Company received an
additional $2,000,000 in a second closing in exchange for 609,756 shares of
Series B convertible preferred stock. There were no issuance costs associated
with the second closing.
On October 31, 1997, the Company consummated a private offering of 939,850
shares of Series C convertible preferred stock for $10,000,054 less issuance
costs of $38,780. The Company will receive an additional $19,999,998 in a second
closing in exchange for 1,879,699 shares of Series C convertible preferred stock
upon the occurrence of all of the following: (1)(a) the Company has executed
definitive agreements, having terms and conditions which are approved by a
majority of the directors designated by the holders of the preferred stock, with
NEC or certain financial institutions, relating to credit facilities between the
Company, and NEC or such financial institutions, respectively or (b) the Company
closes a private offering of high yield debt, having terms and conditions which
are approved by a majority of the directors designated by the holders of the
preferred stock, (2) the Company has executed Fixed Point Microwave Services
Agreements or Agreements to Create and Manage a Telecommunications Network with
at least four Incumbents, (3) neither the Company nor the Founder are then in
breach of any material terms of the Series A, Series B or Series C Investor and
Stockholder Agreements and (4) all conditions of purchase set forth in the
Series C convertible preferred stock Investors and Stockholders' Agreement have
been fulfilled. As of December 31, 1997, the Company had executed Fixed Point
Microwave Services Agreements or Agreements to Create and Manage a
Telecommunications Network with four Incumbents in satisfaction of item (2)
above. None of the other events have occurred.
F-12
<PAGE>
PATHNET, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. CAPITAL STOCK TRANSACTIONS (CONTINUED)
Each share of Series A, Series B and Series C convertible preferred stock
entitles each holder to a number of votes per share equal to the number of
shares of Common Stock into which each share of Series A, Series B and Series C
convertible preferred stock is convertible.
The holders of the convertible preferred stock are entitled to receive
dividends in preference to and at the same rate as dividends are paid with
respect to the common stock. In the event of any liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, holders of each
share of Series A, Series B and Series C convertible preferred stock outstanding
are entitled to be paid before any payment shall be made to the holders of any
class of common stock or any stock ranking on liquidation junior to the
convertible preferred stock, an amount, in cash, equal to the original purchase
price paid by such holder plus any declared but unpaid dividends.
The liquidation preferences of the outstanding shares of Series A, Series B
and Series C convertible preferred stock are $1,000,000, $5,033,367, and
$10,000,054, respectively, as of December 31, 1997. In the event the assets of
the Company are insufficient to pay liquidation preference amounts, then all of
the assets available for distribution shall be distributed pro rata so that each
holder receives that portion of the assets available for distribution as the
number of shares of convertible preferred stock held by such holder bears to the
total number of shares of convertible preferred stock then outstanding.
Shares of the Series A, Series B, and Series C convertible preferred stock
may be converted at any time, at the option of the holder, into voting common
stock. The number of shares of voting common stock entitled upon conversion is
the quotient obtained by dividing the face value of the Series A, Series B and
Series C convertible preferred stock by the Applicable Conversion Rate, defined
as the Applicable Conversion Value of $0.34, $1.13 or $3.67 per share,
respectively.
Each share of convertible preferred stock shall automatically be converted
into the number of shares of voting common stock which such shares are
convertible upon application of the Applicable Conversion Rate immediately upon
the closing of a qualified underwritten public offering covering the offer and
sale of capital stock which is defined as: (i) the Company is valued on a
pre-money basis at greater than $50,000,000, (ii) the gross proceeds received by
the Company exceed $20,000,000, and (iii) the Company uses a nationally
recognized underwriter approved by holders of a majority interest of the
convertible preferred stock.
If the Company issues any additional shares of common stock of any class at
a price less than the Applicable Conversion Value, in effect for the Series A,
Series B or Series C convertible preferred stock immediately prior to such
issuance or sale, then the Applicable Conversion Value shall be adjusted
accordingly.
In the event a qualified public offering has not occurred prior to December
23, 2000, the holder of shares of Series A or Series B preferred stock can
require the Company to redeem the shares of Series A and Series B convertible
preferred stock. After receipt from any one holder of an election to have any
shares redeemed, the Company is required to send a notice to the Series A and
Series B preferred stockholders on December 24, 2000 of the redemption price. If
after sending the redemption notice to Series A and Series B preferred
stockholders, the Company receives requests for redemption on or prior to
January 11, 2001, from the holders of at least 67% of the Series A and Series B
convertible preferred stock taken together, the Company must redeem all shares
of Series A and Series B convertible preferred stock. Payment of the redemption
price is due on January 23, 2001, for a cash price equal to the original
purchase
F-13
<PAGE>
PATHNET, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. CAPITAL STOCK TRANSACTIONS (CONTINUED)
price paid by such holders for each share of Series A and Series B convertible
preferred stock as adjusted for any stock split, stock distribution or stock
dividends with respect to such shares. The successful completion of a qualified
public offering is not within the control of the Company. Therefore, the Company
does not present the Series A and Series B preferred stock as a component of
stockholders' equity.
In the event that a qualified public offering has not occurred prior to
November 3, 2001, the holder of shares of Series C preferred stock can require
the Company to redeem the shares of Series C convertible preferred stock. After
receipt from any one holder of an election to have any shares redeemed, the
Company is required to send a notice to the Series C preferred stockholders on
November 4, 2001 of the redemption price. If after sending the redemption notice
to Series C preferred stockholders, the Company receives requests for redemption
on or prior to November 21, 2001, from the holders of at least 67% of the Series
C convertible preferred stock, the Company must redeem all shares of Series C
convertible preferred stock. Payment of the redemption price is due on December
3, 2001 for a cash price equal to the original purchase price paid by such
holders for each share of Series C convertible preferred stock as adjusted for
any stock split, stock distribution or stock dividends with respect to such
shares. The successful completion of a qualified public offering is not within
the control of the Company. Therefore, the Company does not present the Series C
preferred stock as a component of stockholders' equity.
6. STOCK OPTIONS
On August 28, 1995, the Company adopted the 1995 Stock Option Plan (1995
Plan), under which incentive stock options and non-qualified stock options may
be granted to the Company's employees and certain other persons and entities in
accordance with law. The Compensation Committee, which administers the 1995
Plan, determines the number of options granted, the vesting period and the
exercise price. The 1995 Plan will terminate August 28, 2005 unless terminated
earlier by the Board of Directors.
Options granted to date under the 1995 Plan generally vest over a three
period and expire either 30 days after termination of employment or 10 years
after date of grant. As of December 31, 1997, a total of 77,805 non-qualified
stock options and 424,393 incentive stock options were issued at an exercise
price of $0.034 per share, an amount estimated to equal or exceed the per share
fair value of the common stock at the time of grant. As of December 31, 1997,
the options issued at an exercise price of $0.034 have a weighted average
contractual life of 7.77 years. As of December 31, 1997, 410,244 of the options
issued at an exercise price of $0.034 were exercisable.
On August 1, 1997, the Company adopted the 1997 Stock Incentive Plan (1997
Plan), under which incentive stock options, non-qualified stock options, stock
appreciation rights, restricted stock, performance awards and certain other
types of awards may be granted to the Company's employees and certain other
persons and entities in accordance with the law. To date, only non-qualified
stock options have been granted. The Compensation Committee, which administers
the 1997 Plan, determines the number of options granted, the vesting period and
the exercise price. The 1997 Plan will terminate July 31, 2007 unless terminated
earlier by the Board of Directors.
Options granted under the 1997 Plan generally vest over a three to seven
year period and expire after: (1) ten years after the date of grant, (2) two
years after the date of the participant's termination without cause, disability
or death, (3) three months after the date of the participant's resignation, (4)
the date of
F-14
<PAGE>
PATHNET, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. STOCK OPTIONS (CONTINUED)
the participant's termination with cause or (5) the date of any material breach
of any confidentiality or non-competition covenant or agreement entered into
between the participant and the Company.
As of December 31, 1997, a total of 1,289,167 non-qualified options were
issued, 858,754 at an exercise price of $1.13 per share and 430,413 at an
exercise price of $3.67 per share. Management estimates that the exercise price
of the options issued in 1997 is greater than the estimated per share value of
the underlying common stock. None of the options issued at $1.13 or $3.67 were
exercisable at December 31, 1997. As of December 31, 1997, the weighted average
contractual life of the options issued at $1.13 and $3.67 was 9.68 and 9.92
years, respectively. The options issued at $3.67 vest on October 31, 2004
provided, however (i) if the Company has met 80% of its revenue and Earnings
Before Interest, Taxes, Depreciation and Amortization (EBITDA) budget for the
calendar year ending December 31, 1998, which budget is approved by the Board of
Directors of the Company, 50% of the shares covered by the options shall vest
and become exercisable on January 1, 1999, (ii) if the Company has met 80% of
its revenue and EBITDA budget for the calendar year ending December 31, 1999,
which budget is approved by the Board of Directors of the Company, the remaining
50% of the shares covered by the options shall vest and become exercisable on
January 1, 2000, and (iii) in the event that the first 50% of the shares covered
by the options did not vest on January 1, 1999 as set forth in (i) above and the
Company not only meets 80% of its revenue and EBITDA budget for the year ending
December 31, 1999 but exceeds 80% of its revenue and EBITDA budget for the year
ending December 31, 1999, which budget is approved by the Board of Directors of
the Company, in an amount at least equal to the deficiency that occurred in the
year ending December 31, 1998, 100% of the shares covered by the options shall
vest and become exercisable on January 1, 2000. Unvested and uncancelled options
issued at $3.67 immediately become fully vested and exercisable upon a change of
control or a qualified public offering, as defined in the option agreement.
The options issued at $1.13 vest ratably over three consecutive years
subject to certain acceleration provisions set forth in an employment agreement,
such as the immediate vesting upon a change in control or a qualified initial
public offering. Under certain circumstances, upon the election of the employee
upon termination of employment, the Company will be required to pay the employee
the fair value of the vested options held on the date of such termination.
For the three months ended March 31, 1998, a total of 667,370 (unaudited)
options were issued at an exercise price of $1.13 per share. The estimated fair
value of the Company's underlying common stock was determined to be $1.99
(unaudited) per share. Accordingly, the Company calculated deferred compensation
expense of $573,938 (unaudited) related to the options granted during the three
months ended March 31, 1998. The Company will recognize compensation expense
over the vesting period of those stock options. The Company did not record any
adjustment for deferred compensation expense since it did not have a material
effect on total stockholders' equity (deficit) and the statement of operations
as of and for the three months ended March 31, 1998.
F-15
<PAGE>
PATHNET, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. STOCK OPTIONS (CONTINUED)
Stock option activity for the period from the August 25, 1995 (date of
inception) to March 31, 1998 was as follows:
<TABLE>
<CAPTION>
1995 PLAN 1997 PLAN
------------------------------- -------------------------
NON- NON- WEIGHTED
INCENTIVE QUALIFIED QUALIFIED AVERAGE
STOCK STOCK STOCK EXERCISE
OPTIONS OPTIONS PRICE OPTIONS PRICE PRICE
--------- --------- --------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding, August 25, 1995....... -- -- -- -- -- --
Granted.................................... 410,246 70,731 $ 0.034 -- -- $ 0.034
Exercised.................................. -- -- -- -- -- --
Canceled................................... -- -- -- -- -- --
--------- --------- ----------
Options outstanding, December 31, 1995..... 410,246 70,731 $ 0.034 -- -- $ 0.034
Granted.................................... 14,147 7,074 $ 0.034 -- -- $ 0.034
Exercised.................................. -- -- -- -- -- --
Canceled................................... -- -- -- -- -- --
--------- --------- ----------
Options outstanding, December 31, 1996..... 424,393 77,805 $ 0.034 -- -- $ 0.034
Granted.................................... -- -- -- 1,289,167 $ 1.13-$3.67 $ 1.98
Exercised.................................. -- -- -- -- -- --
Canceled................................... -- -- -- -- -- --
--------- --------- ----------
Options outstanding, December 31, 1997..... 424,393 77,805 $ 0.034 1,289,167 $ 1.13-$3.67 $ 1.43
Options granted (unaudited)................ -- -- -- 667,370 $ 1.13 $ 1.13
Options exercised (unaudited).............. -- (2,358) $ 0.034 -- -- $ 0.034
Options cancelled (unaudited).............. -- (4,716) $ 0.034 -- -- $ 0.034
--------- --------- ----------
Options outstanding at March 31, 1998
(unaudited).............................. 424,393 70,731 $ 0.034 1,956,537 $ 1.13-$3.67 $ 1.36
--------- --------- ----------
--------- --------- ----------
</TABLE>
At December 31, 1995, 1996 and 1997, 247,561, 325,366 and 410,244 options,
respectively, were exercisable. At March 31, 1998, 522,234 (unaudited) options
were exercisable. The weighted-average fair value of options granted during the
years ended December 31, 1995, 1996 and 1997, was approximately $0.007, $0.010
and $0.000, respectively. The weighted-average fair value of options granted
during the three months ended March 31, 1998 was approximately $3.29
(unaudited).
The Company accounts for the fair value of its grants in accordance with APB
25. No compensation cost has been recognized for the stock options as all
options have been granted at or above the estimated per share fair value of the
stock to employees or directors of the Company. Had compensation cost for the
Company's stock option plan been determined based on the fair value at the grant
date for awards under
F-16
<PAGE>
PATHNET, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. STOCK OPTIONS (CONTINUED)
the plan consistent with the method of SFAS 123, the Company's net loss would
have been increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
THREE MONTHS
AUGUST 25, 1995 ENDED
(DATE OF YEAR ENDED DECEMBER 31, MARCH 31,
INCEPTION) TO -------------------------- 1998
DECEMBER 31, 1995 1996 1997 (UNAUDITED)
----------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Net loss as reported................................ $ 426,826 $ 1,743,635 $ 3,977,400 $ 2,684,841
Pro forma net loss.................................. $ 427,793 $ 1,747,570 $ 3,978,164 $ 2,807,008
Basic and diluted net loss per share as reported.... $ (0.15) $ (0.60) $ (1.37) $ (0.93)
Pro forma basic and diluted net loss per share...... $ (0.15) $ (0.60) $ (1.37) $ (0.97)
</TABLE>
The fair value of each option is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions used for grants during the year ended December 31, 1995, 1996 and
1997, respectively: dividend yield of 0%, expected volatility of 0%, risk-free
interest rate of 6.02%, 6.35% and 6.55% and expected terms of 4.6, 5.8 and 5.0
years. The following weighted-average assumptions were used for grants during
the three months ended March 31, 1998: dividend yield of 0% (unaudited),
expected volatity of 0% (unaudited), risk-free interest rate of 5.56%
(unaudited) and expected terms of 5.2 years (unaudited).
As of December 31, 1997, the weighted average remaining contractual life of
the options is 9.21 years. As of March 31, 1998, the weighted average
contractual life of the options is 9.20 years (unaudited).
As of December 31, 1996 and 1997, and March 31, 1998 the pro forma tax
effects would include an increase to the deferred tax asset and the valuation
allowance of $1,535, $2.98, and $48,867 (unaudited) respectively; therefore,
there is no pro forma tax effect related to SFAS 123.
7. COMMITMENTS AND CONTINGENCIES
The Company maintains office space in Washington, D.C., Kansas and Texas.
The most significant lease relates to the Company's headquarters facility in
Washington, D.C. The partnership leasing the space in Washington, D.C. is
controlled by the Founder of the Company. The lease expires on August 31, 1999,
and is renewable by the Company for two additional years. Rent paid to this
related party during the year ended December 31, 1997, was $60,980. The Company
has no amounts due to the related party as of December 31, 1997.
The Company's future minimum rental payments under noncancellable operating
leases are as follows: $215,222 in 1998, $79,491 in 1999, $58,155 in 2000, and
$1,354 in 2001. Rent expense for the period August 25, 1995 (date of inception)
to December 31, 1995 and the years ended December 31, 1996 and 1997, was $40,
$4,399 and $114,673, respectively.
In exchange for a non-compete agreement, the Company has agreed to pay a
particular senior management employee a severance payment of $275,000 if such
employee's employment with the Company is terminated.
F-17
<PAGE>
PATHNET, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. INCOME TAXES
The tax effect of temporary differences that give rise to significant
portions of the deferred tax asset at December 31, 1996 and 1997, is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1997
------------- -------------
<S> <C> <C>
Deferred revenue................................................ $ -- $ 117,000
Capitalized start-up costs...................................... 661,000 1,271,227
Capitalized research and development costs...................... -- 79,333
Net operating loss carryforward................................. 14,000 754,458
------------- -------------
675,000 2,222,018
Less valuation allowance.................................. (675,000) (2,222,018)
------------- -------------
Net deferred tax asset.......................................... $ -- $ --
------------- -------------
------------- -------------
</TABLE>
Capitalized costs represent expenses incurred in the organization and
start-up of the Company. For federal income tax purposes, these costs will be
amortized over sixty months once business operations commence.
9. SUBSEQUENT EVENTS
Subsequent to December 31, 1997, the Company determined that certain
financing agreements being pursued may not be obtained resulting in the
immediate expensing of deferred financing costs recorded as an asset as of
December 31, 1997.
On April 8, 1998, the Company completed the issuance and sale of 350,000
units, each consisting of a $1,000 principal amount of 12 1/4% Senior Notes due
2008 (the "Notes") and a warrant to purchase 3.27 shares of common stock or
1,143,248 shares in total (the "Warrants") at an exercise price of $0.01 per
share for total gross proceeds of $350,000,000. Issuance costs of approximately
$11,200,000 have been paid. Approximately $345,900,000 of the proceeds have been
allocated to the Notes and approximately $4,100,000 have been allocated to the
Warrants based upon estimated fair values. Interest on the Notes will accrue at
an annual rate of 12 1/4% payable semiannually, in arrears, beginning October
15, 1998, with principal due in full on April 15, 2008. The Company used
$81,128,751 of the proceeds to purchase U.S. Government debt securities which
are pledged as collateral for repayment of all interest through April 15, 2000
with the balance deposited in cash accounts. The Notes are redeemable, in whole
or part, at any time on or after April 15, 2003 at the option of the Company, at
the following redemption prices plus accrued and unpaid interest (i) April 15,
2003; 106% of the principal amount, (ii) April 15, 2004; 104% of the principal
amount, (iii) April 15, 2005; 102% of the principal amount and (iv) April 15,
2006 and thereafter; 100% of the principal amount. In addition, at any time on
or prior to April 15, 2001, the Company may redeem within 60 days, from the
proceeds of one or more public equity offerings, up to 35% of the aggregate
principal at a redemption price equal to 112.25% of the principal amount plus
accrued and unpaid interest, provided that at least 65% of the principal amount
of the Notes remain outstanding. Upon a change in control, as defined, each
holder of the Notes may require the Company to repurchase all or a portion of
such holder's Notes at a purchase price of cash equal to 101% of the principal
amount.
The Notes contain certain covenants which will affect and may restrict
certain activities of the Company including limitations of indebtedness,
restricted payments, issuances and sales of capital stock, affiliate
transactions, liens, guarantees, sale of assets and dividends.
F-18
<PAGE>
PATHNET, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. SUBSEQUENT EVENTS (CONTINUED)
The Warrants expire on April 15, 2008 and are not separately transferable
until the earlier of (i) October 15, 1998, (ii) a registered exchange offer for
the Notes, (iii) the occurrence of an exercise event as defined, (iv) an event
of default as defined, and (v) a date determined by the lead initial purchaser.
On April 8, 1998, the Company completed the sale of 1,879,699 shares of
Series C convertible preferred stock for an aggregate purchase price of
approximately $20,000,000. There were no issuance costs associated with the
sale.
On April 13, 1998, Pathnet/Idaho Power License LLC and Pathnet/Idaho Power
Equipment, LLC, wholly-owned subsidiaries of the Company, were formed.
On May 4, 1998, the Company adopted the Pathnet 401(k) Plan, a defined
contribution retirement plan that is qualified for favorable tax treatment under
Section 401 of the Internal Revenue Code of 1996, as amended. The Company does
not match any participant's contributions. However, the Company may consider
matching contribution arrangements from time to time.
The Company intends to file a Registration Statement with the Securities and
Exchange Commission for an initial public offering (the Offering). On July 24,
1998, the Company's stockholders approved a 2.9-for-1 stock split. The stock
split will occur upon the effective date of the aforementioned Registration
Statement. All share and per share information in this report has been changed
to give effect to this stock split.
10. UNAUDITED INTERIM INFORMATION FOR RECENT DEVELOPMENTS SUBSEQUENT TO MARCH
31, 1998
As described in Note 6, for the three months ended March 31, 1998, a total
of 667,370 options were issued at an exercise price of $1.13 per share. On July
23, 1998, the Securities and Exchange Commission (SEC) issued a comment letter
related to the Company's intent to file a Registration Statement for an Offering
of common stock. In response to the comment letter, the Company revised its
estimate of the fair value of the common stock to $1.99 per share. Further SEC
comments may result in future revision. The Company believes the maximum
potential revised fair value of the common stock would be $3.67 per share. This
fair value is based on the per share price paid for the Company's series C
preferred stock during the same period. If the SEC requires the Company to use
$3.67 per share as the estimate of fair value of common stock, the Company would
be required to restate the March 31, 1998 interim financial statements by
recording deferred compensation expense of $1,695,120 and additional
compensation expense of $308,324, thereby, increasing the net loss to $2,993,165
for the quarter ended March 31, 1998.
In April and May 1998, a total of 89,721 options were issued at an exercise
price of $3.67 per share. In response to the July 23, 1998 SEC comment letter,
the Company has estimated the fair value of the underlying common stock to be
$16.00 per share, the midpoint of the price range for the Offering. Accordingly,
the Company will record deferred compensation expense of $1,106,260 and will
recognize compensation expense over the vesting period of these stock options.
In addition, as a result of granting these stock options at an exercise price
below fair value, pursuant to adjustments made in accordance with the Warrant
Agreement, the Warrants (see Note 9) will be adjusted to permit the holders
thereof to purchase 3.27 shares of common stock per warrant (rather than 3.19)
or 1,143,248 aggregate shares at an exercise price of $0.01 per share.
F-19
<PAGE>
GLOSSARY
<TABLE>
<S> <C>
access charges................ The fees paid by long distances carriers for LECs for
originating and terminating long distance calls on the LECs'
local networks.
access tandem................. An interconnection point on an ILEC local network where
calls from central offices are aggregated for transmission
to other central offices and IXC facilities.
Andrew........................ Andrew Corporation.
AT&T.......................... AT&T Corporation.
ATC........................... American Tower Company.
ATM (Asynchronous Transfer
Mode)....................... An information transfer standard that is one of a general
class of packet technologies that relay traffic by way of an
address contained within the first five bytes of a standard
fifty-three-byte-long packet or cell. The ATM format can be
used by many different information systems, including area
networks, to deliver traffic at varying rates, permitting a
mix of voice data and video (multimedia).
bandwidth..................... The width of a communications channel.
Bellcore...................... Bell Communications Research.
bit error rate................ The number of received bits in error compared to the total
number of bits received.
CAD/CAM....................... Software for computer aided design and computer aided
manufacturing.
carrier....................... A provider of communications transmission services.
central office................ The switching center or central switching facility of an
ILEC.
CLEC (Competitive Local
Exchange Carrier)........... A company that competes with ILECs in local services
markets.
digital....................... Describes a method of storing, processing and transmitting
information through the use of distinct electronic or
optical pulses that represent the binary digits 0 and 1.
Digital transmission/ switching technologies employ a
sequence of discrete, distinct pulses to represent
information, as opposed to the continuously variable analog
signal.
DS-0, DS-1, DS-3.............. Standard North American telecommunication industry digital
signal formats, which are distinguishable by bit rate (the
number of binary digits (0 and 1) transmitted per second).
DS-0 service has a bit rate of 64 kilobits per second. DS-1
service has a bit rate of 1.544 megabits per second and DS-3
service has a bit rate of 44.736 megabits per second. A DS-0
can transmit a single uncompressed voice conversation.
DS-0 circuit mile............. Industry measurement of bandwidth capacity. The measurement
equals the product of route miles and the number of DS-0s.
</TABLE>
A-1
<PAGE>
<TABLE>
<S> <C>
ESMR.......................... Enhanced Specialized Mobile Radio
extranet...................... The private networks of information service providers which
operate on the same principles and make use of the same
network technologies as the Internet, but are not part of
the Internet.
FAA........................... Federal Aviation Administration.
FCC........................... Federal Communication Commission.
ILEC (Incumbent Local Exchange
Carrier).................... The incumbent carrier providing local exchange services,
typically an RBOC created by the divestiture of AT&T.
Incumbents.................... Railroads, utilities, state and local governments and
pipelines who own existing telecommunications assets.
Initial System................ The initial system with a 1 x 1 configuration which is
comprised of non-protect radio and protect radio and all
radio components, antennae, waveguides, multiplexers,
software and other equipment and parts necessary for the
operation thereof.
interconnect.................. Connection of a telecommunications device or services to the
public switched telephone network ("PSTN").
interconnection............... Connection of a telecommunications device or services to the
public switched telephone network.
ISP (Internet Service
Provider)................... A company that provides businesses and consumers with access
to the Internet.
IXC........................... Inter Exchange Carrier.
LATAs (Local Access and
Transport Areas)............ The approximately 160 geographic areas that define the areas
between which the RBOCs currently are prohibited from
providing long distance services.
LEC (local exchange
carrier).................... A company providing local switched services, including ILECs
and CLECs.
long-haul circuit............. A dedicated telecommunications circuit generally between
locations in different LATAs.
MCI........................... MCI Communications, Inc.
NEA........................... New Enterprises Associates.
NEC........................... NEC Corporation together with its affiliates, including NEC
America, Inc. and NEC Industries, Inc.
NIPSCO........................ Northern Indiana Public Service Company.
NOC........................... Network Operations Center.
OC-24, OC-48.................. OC, or Optical Carrier, is a measure of a SONET transmission
optical carrier level. The number following the OC
designation is equal to the corresponding number of DS-3s
(e.g., OC-48 is equal to 48 DS-3s).
Part 101...................... Part 101 of the FCC's Rules.
</TABLE>
A-2
<PAGE>
<TABLE>
<S> <C>
path.......................... The physical spatial separation between point-to-point
towers.
PCS (Personal Communications
Service).................... A type of wireless telecommunications service competitive
with cellular.
POPs (Points of Presence)..... Locations where a Telecom Service Provider has installed
transmission equipment in a service area that serves as, or
relays calls to, a network switching center of that long
distance carrier.
PSTN.......................... Public switched telephone network.
Qwest......................... Qwest Communications International Inc.
RBOCs (Regional Bell Operating
Companies).................. The five remaining local telephone companies (formerly part
of AT&T) established as a result of the AT&T Divestiture
Decree.
reseller...................... A carrier that does not own transmission facilities, but
obtains communications services from another carrier for
resale to the public.
RF............................ Radio frequency.
route miles................... The number of miles of the telecommunications path along
which a transmission is directed as it would appear on a
network map.
SONET (Synchronous Optical
Network Technology)......... An electronics and network architecture for
variable-bandwidth products which enables transmission of
voice, data and video (multimedia) at very high speed.
Sprint........................ Sprint Corporation.
switch........................ A device that selects the paths or circuits to be used for
transmission of information and a connection. Switching is
the process of interconnecting circuits to form a
transmission path between users and it also captures
information for billing purposes.
Telecom Service Providers..... IXCs, LECs, ISPs, RBOCs, other carrier's carriers, cellular
operators and resellers.
WAN........................... Wide area network.
WorldCom...................... WorldCom, Inc.
WTO........................... World Trade Organization.
</TABLE>
A-3
<PAGE>
[LOGO]
[Artwork: inside back cover page --
Map showing universe of existing
private fixed point wireless networks;
Outside Back Cover page -- Company logo]
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED JULY 27, 1998
4,687,500 SHARES
[LOGO]
COMMON STOCK
-----------------
ALL OF THE SHARES OF COMMON STOCK, PAR VALUE $.01 PER SHARE, OFFERED HEREBY ARE
BEING SOLD BY PATHNET, INC. OF THE 4,687,500 SHARES OF COMMON STOCK BEING
OFFERED, 937,500 SHARES ARE BEING OFFERED INITIALLY OUTSIDE THE UNITED
STATES AND CANADA BY THE INTERNATIONAL UNDERWRITERS AND 3,750,000 SHARES
ARE BEING OFFERED INITIALLY IN THE UNITED STATES AND CANADA BY THE
U.S. UNDERWRITERS. SEE "UNDERWRITERS." PRIOR TO THE OFFERING,
THERE HAS BEEN NO PUBLIC MARKET FOR THE COMMON STOCK OF THE
COMPANY. IT IS CURRENTLY ESTIMATED THAT THE INITIAL PUBLIC
OFFERING PRICE PER SHARE WILL BE BETWEEN $15.00 AND $17.00.
SEE "UNDERWRITERS" FOR A DISCUSSION OF THE FACTORS
CONSIDERED IN DETERMINING THE
INITIAL PUBLIC OFFERING PRICE.
------------------------
APPLICATION HAS BEEN MADE FOR QUOTATION OF THE SHARES ON THE NASDAQ NATIONAL
MARKET UNDER THE SYMBOL "PTNT."
------------------------
SEE "RISK FACTORS" BEGINNING OF PAGE 9 FOR INFORMATION THAT SHOULD BE CONSIDERED
BY PROSPECTIVE INVESTORS.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTA TION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
-------------------
PRICE $ A SHARE
-------------------
<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS(1) COMPANY(2)
------------------ ------------------ ------------------
<S> <C> <C> <C>
PER SHARE.......................................... $ $ $
TOTAL(3)........................................... $ $ $
</TABLE>
- ---------
(1) THE COMPANY HAS AGREED TO INDEMNIFY THE UNDERWRITERS AGAINST CERTAIN
LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. SEE "UNDERWRITERS."
(2) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY ESTIMATED AT $850,000.
(3) THE COMPANY HAS GRANTED THE U.S. UNDERWRITERS AN OPTION, EXERCISABLE
WITHIN 30 DAYS OF THE DATE HEREOF, TO PURCHASE UP TO AN AGGREGATE OF
703,125 ADDITIONAL SHARES OF COMMON STOCK AT THE PRICE TO PUBLIC LESS
UNDERWRITING DISCOUNTS AND COMMISSIONS FOR THE PURPOSE OF COVERING
OVER-ALLOTMENTS, IF ANY. IF THE U.S. UNDERWRITERS EXERCISE SUCH OPTION IN
FULL, THE TOTAL PRICE TO PUBLIC, UNDERWRITING DISCOUNTS AND COMMISSIONS
AND PROCEEDS TO COMPANY WILL BE $ , $ AND $
RESPECTIVELY. SEE "UNDERWRITERS."
THE SHARES ARE OFFERED, SUBJECT TO PRIOR SALE, WHEN, AS AND IF ACCEPTED BY
THE UNDERWRITERS NAMED HEREIN AND SUBJECT TO APPROVAL OF CERTAIN LEGAL MATTERS
BY SHEARMAN & STERLING, COUNSEL FOR THE UNDERWRITERS. IT IS EXPECTED THAT
DELIVERY OF THE SHARES WILL BE MADE ON OR ABOUT , 1998, AT THE
OFFICE OF MORGAN STANLEY & CO. INCORPORATED, NEW YORK, N.Y., AGAINST PAYMENT
THEREFOR IN IMMEDIATELY AVAILABLE FUNDS.
-------------------
MORGAN STANLEY DEAN WITTER
BEAR, STEARNS INTERNATIONAL LIMITED
LEHMAN BROTHERS INTERNATIONAL
J.P. MORGAN SECURITIES LTD.
, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses payable in connection
with the offering of the shares being registered hereby, other than underwriting
discounts and commissions. All the amounts shown are estimates, except the
Securities and Exchange Commission registration fee and the NASD filing fee. All
of such expenses are being borne by Pathnet, Inc. (the "Company").
<TABLE>
<S> <C>
SEC registration fee.............................................. $ 29,500
NASD filing fee................................................... 10,500
NASDAQ listing fee................................................ 90,000
Accounting fees and expenses...................................... 150,000
Legal fees and expenses........................................... 300,000
Printing and engraving expenses................................... 180,000
Registrar and transfer agent's fees............................... 3,500
Miscellaneous fees and expenses................................... 86,500
---------
Total............................................................. $ 850,000
---------
---------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 102(b)(7) of the Delaware General Corporation Law (the "DGCL")
permits a provision in the certificate of incorporation of each corporation
organized thereunder, eliminating or limiting, with certain exceptions, the
personal liability of a director to the corporation or its stockholders for
monetary damages for certain breaches of fiduciary duty as a director. The
Amended and Restated Certificate of Incorporation of the Company (the "Restated
Certificate of Incorporation") eliminates the personal liability of directors to
the fullest extent permitted by Delaware law.
Section 145 of the DGCL ("Section 145"), in summary, empowers a Delaware
corporation, within certain limitations, to indemnify its officers, directors,
employees and agents against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement, actually and reasonably incurred by them
in connection with any suit or proceeding other than by or on behalf of the
corporation, if they acted in good faith and in a manner reasonably believed to
be in or not opposed to the best interest of the corporation, and, with respect
to a criminal action or proceeding, had no reasonable cause to believe their
conduct was unlawful.
With respect to actions by or on behalf of the corporation, Section 145
permits a corporation to indemnify its officers, directors, employees and agents
against expenses (including attorneys' fees) actually and reasonably incurred in
connection with the defense or settlement of such action or suit, provided such
person meets the standard of conduct described in the preceding paragraph,
except that no indemnification is permitted in respect of any claim where such
person has been found liable to the corporation, unless the Court of Chancery or
the court in which such action or suit was brought approves such indemnification
and determines that such person is fairly and reasonably entitled to be
indemnified.
The Restated Certificate of Incorporation and the Amended and Restated
Bylaws of the Company (the "Restated Bylaws"), provide for the indemnification
of officers and directors and certain other parties (the "Indemnitees") of the
Company to the fullest extent permitted by law.
The Underwriting Agreement by and among the Company, Morgan Stanley & Co.
Incorporated, Bear, Stearns & Co. Inc., Lehman Brothers Inc. and J.P. Morgan
Securities Inc. ("Underwriters") and Morgan Stanley & Co. International Limited,
Bear, Stearns International Limited, Lehman Brothers International (Europe) and
J.P. Morgan Securities Ltd. will provide for indemnification of the Company,
II-1
<PAGE>
its directors and officers, and persons who control the Company within the
meaning of Section 15 of the Securities Act of 1933 (the "Securities Act") for
certain liabilities, including liabilities under the Securities Act.
The Purchase Agreement by and among Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Bear, Stearns & Co. Inc., TD Securities and
Salomon Brothers Inc (together, the "Initial Purchasers") and the Company, dated
as of April 1, 1998 (the "Unit Purchase Agreement"), provides for
indemnification of the Company and persons who control the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Securities
Exchange Act of 1934 (the "Exchange Act") for certain liabilities, including
liabilities under the Securities Act.
The Notes Registration Rights Agreement by and among the Company and the
Initial Purchasers, dated as of April 8, 1998 (the "Notes Registration Rights
Agreement"), provides for indemnification of the Company, its directors and
officers, and persons who control the Company within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act for certain liabilities,
including liabilities under the Securities Act.
The Warrant Registration Rights Agreement by and among the Company, the
Initial Purchasers and certain other persons, dated as of April 8, 1998 (the
"Warrant Registration Rights Agreement"), provides for indemnification of the
Company, its directors and officers, and persons who control the Company within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act for certain liabilities, including liabilities under the Securities Act.
The Investment and Stockholders' Agreement by and among the Company, certain
stockholders of the Company, Mr. Schaeffer and Mr. Jalkut, dated October 31,
1997, as amended (the "Investment and Stockholders' Agreement"), provides for
indemnification of the Company, its directors and officers, and persons who
control the Company within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act for certain liabilities, including liabilities
under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The initial capitalization of the Company on August 28, 1995, occurred
through the issuance of 1,450,000 shares of voting common stock and 1,450,000
shares of non-voting common stock to David Schaeffer. In February 1996, David
Schaeffer returned 1,450,000 shares of non-voting common stock in exchange for
1,450,000 shares of voting stock.
On August 28, 1995, pursuant to an Investment and Stockholders' Agreement
(the "Series A Purchase Agreement"), by and among the Company and Spectrum
Equity Investors, L.P., New Enterprise Associates VI, Limited Partnership, Onset
Enterprise Associates II, L.P., IAI Investment Funds VIII, Inc., Thomas
Domencich, Dennis R. Patrick and the Corman Foundation Incorporated (together,
the "Series A Purchasers") and David Schaeffer, the Series A Purchasers (i)
agreed to purchase in the aggregate 1,000,000 shares of Series A Preferred Stock
for an aggregate purchase price of $1.0 million, (ii) purchased 500,000 shares
of such 1,000,000 shares of Series A Preferred Stock for an aggregate purchase
price of $500,000 and (iii) agreed to make available to the Company, under
certain circumstances, bridge loans in an aggregate principal amount of
$500,000. On February 8, 1996, pursuant to Amendment No. 1 to the Investment and
Stockholders' Agreement, the Series A Purchasers purchased the remaining 500,000
shares of Series A Preferred Stock for an aggregate purchase price of $500,000.
On August 2, 1996, pursuant to Amendment No. 2 to the Investment and
Stockholders' Agreement, the Series A Purchasers, among other things, increased
the amount of their bridge loan commitments to the Company to an aggregate
principal amount of $700,000 and advanced such amount to the Company, such loans
being evidenced by bridge loan notes (collectively, the "Bridge Loan Notes"). In
addition, the Series A Purchasers agreed to make available to the company, upon
the occurrence of certain events, additional bridge loans in an aggregate
principal amount of $300,000 (the "Additional Bridge Loan Commitment").
II-2
<PAGE>
On December 23, 1996, the Company, each of the Series A Purchasers, Grotech
Capital Group IV, L.P., Toronto Dominion Capital (U.S.A.), Inc., and Utech
Climate Challenge Fund, L.P. (together, the "Series B Purchasers") and Mr.
Schaeffer entered into an Investment and Stockholders' Agreement (the "Series B
Purchase Agreement"), pursuant to which, among other things, the Series B
Purchasers agreed to acquire in the aggregate 1,651,046 shares of Series B
Preferred Stock for an aggregate purchase price of $5.0 million. As part of the
purchase of such shares of Series B Preferred Stock and pursuant to the Series B
Purchase Agreement and Amendment No. 3 to the Series A Purchase Agreement of the
same date, the Series B Purchasers purchased 1,041,290 shares of Series B
Preferred Stock for an aggregate purchase price of $3.0 million (which included
conversion of the Bridge Loan Notes into shares of Series B Preferred Stock) on
December 23, 1996, and purchased 609,756 shares of Series B Preferred Stock for
an aggregate purchase price of $2.0 million on June 18, 1997.
On October 31, 1997, the Company, the Series A Purchasers, the Series B
Purchasers and FBR Technology Venture Partners, L.P. (together the "Series C
Purchasers") and Mr. Schaeffer entered into the Investment and Stockholders'
Agreement (as amended, the "Investment and Stockholders' Agreement"), pursuant
to which, among other things, the Series C Purchasers agreed to acquire
2,819,549 shares of Series C Preferred Stock for an aggregate purchase price of
$30.0 million. Pursuant to the Investment and Stockholders' Agreement, the
Series C Purchasers purchased 939,850 shares of Series C Preferred Stock for an
aggregate purchase price of $10.0 million on October 31, 1997, and purchased an
additional 1,879,699 shares of Series C Preferred Stock for an aggregate
purchase price of $20.0 million on April 8, 1998.
On April 8, 1998, the Company issued and sold 350,000 units, each consisting
of $1,000 principal amount of 12 1/4% Senior Notes due 2008 (the "Notes") and
warrants to purchase shares of Common Stock (the "Warrants") to Merrill Lynch &
Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Bear, Stearns & Co.
Inc., TD Securities and Salomon Brothers Inc (together, the "Initial
Purchasers") for resale pursuant to Rule 144A and Regulation S under the
Securities Act. The aggregate purchase price of the Notes and Warrants was
$350,000,000 (including $10,500,000 in discounts to the Initial Purchasers).
Also in the last three years, the Company has issued options to purchase an
aggregate of 495,123 shares of Common Stock under the Pathnet, Inc. 1995 Stock
Option Plan, and options to purchase an aggregate of 2,046,258 shares of Common
Stock (as of June 2, 1998) under the Pathnet, Inc. 1997 Stock Incentive Plan, to
certain of its employees.
All of these shares, units and options were issued in reliance upon the
exemption from registration contained in Section 4(2) (in the case of original
issuances) or Section 3(a)(9) (in the case of exchanges) of the Securities Act.
In addition, in connection with the Offering, an aggregate of 15,864,716
shares of Common Stock will be issued to the holders of the Company's Series A,
Series B and Series C Convertible Preferred Stock. These shares of Common Stock
will be issued in reliance upon the exemption from registration contained in
Section 3(a)(9) of the Securities Act.
II-3
<PAGE>
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- -------------- -----------------------------------------------------------------------------------------
<C> <S> <C>
1.1(1) Form of Underwriting Agreement among the Company, Morgan Stanley & Co. Incorporated,
Bear, Stearns & Co. Inc., Lehman Brothers Inc., J.P. Morgan Securities Inc., Morgan
Stanley & Co. International Limited, Bear, Stearns International Limited, Lehman Brothers
International (Europe) and J.P. Morgan Securities Ltd.
3.1(4) Form of Amended and Restated Certificate of Incorporation of the Company.
3.2(4) Form of Amended and Restated Bylaws of the Company.
4.1(4) Form of Common Stock Certificate.
5.1(4) Opinion of Paul, Weiss, Rifkind, Wharton & Garrison regarding legality of securities.
10.1(2)(6) Fixed Point Microwave Services Agreement by and between the Company and Northern Border
Pipeline Company, dated October 17, 1997.
10.2(2)(6) Fixed Point Microwave Services Agreement by and between the Company and Northern Indiana
Public Service Company, dated January 30, 1998.
10.3(2)(6) Fixed Point Microwave Services Agreement by and between the Company and Northeast
Missouri Electric Power Cooperative, dated December 1, 1997.
10.4(2)(6) Fixed Point Microwave Services Agreement by and between the Company and KN Energy, Inc.,
dated September 8, 1997.
10.5(2)(6) Fixed Point Microwave Services Agreement by and between the Company and Pathnet/Idaho
Power Equipment, LLC, dated April 17, 1998.
10.6(2)(6) Agreement to Create and Manage a High Capacity Telecommunications System by and between
the Company and Texaco Pipeline, Inc., dated June 3, 1997.
10.7(5) Binding Term Sheet, by and between the Company and American Tower Corporation, dated
February 17, 1998, as amended by Amendment No. 1, dated February 25, 1998, and Amendment
No. 2, dated April 8, 1998.
10.7.1(2)(4) License Agreement, by and between the Company and American Tower Corporation, dated as of
August 1, 1998.
10.8(5) Maintenance Services Agreement by and between the Company and KN Energy, Inc., dated
October 11, 1997.
10.9(5) Maintenance Services Agreement by and between the Company and Northern Indiana Public
Service Company, dated January 30, 1998.
10.10(5) Maintenance and Provisioning Services Agreement by and between the Company and Northern
Border Pipeline Company, dated April 29, 1998.
10.11(5) Master Agreement by and between the Company and NEC America, Inc., dated August 8, 1997,
as amended by Amendment No. 1, dated November 9, 1997 and Amendment No. 2, dated April 2,
1998.
10.11.1(5) Amendment No. 3, dated May 4, 1998 to Master Agreement by and between the Company and NEC
America, Inc.
10.11.2(5) Amendment No. 4, dated July 10, 1998 to Master Agreement to Master Agreement by and
between the Company and NEC America, Inc.
10.12(5) Letter Agreement, by and between the Company and TCI Wireline, Inc., dated December 16,
1997.
10.13(3)(5) Non-Qualified Stock Option Agreement by and between the Company and Richard A. Jalkut,
dated August 4, 1997.
10.14(3)(5) Non-Qualified Stock Option Agreement by and between the Company and David Schaeffer,
dated October 31, 1997.
10.15(5) Employment Agreement by and between the Company and Richard A. Jalkut, dated August 4,
1997, as amended by Amendment to Employment Agreement, dated April 6, 1998.
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <S> <C>
10.16(3)(5) Non-Disclosure, Assignment of Inventions and Non-Competition Agreement by and between the
Company and Kevin Bennis, dated February 2, 1998.
10.17(3)(5) Pathnet, Inc. 1995 Stock Option Plan.
10.18(3)(5) Pathnet, Inc. 1997 Stock Incentive Plan, as amended by Amendment No. 1 to 1997 Stock
Incentive Plan.
10.19(5) Indenture by and between the Company and The Bank of New York, as trustee, dated April 8,
1998.
10.20(5) Pledge Agreement by and among the Company, The Bank of New York, as trustee, and The Bank
of New York, as securities intermediary, dated April 8, 1998.
10.21(5) Notes Registration Rights Agreement by and among the Company and Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Bear, Stearns & Co., Inc., TD
Securities (USA) Inc. and Salomon Brothers Inc (collectively, the "Initial Purchasers"),
dated April 8, 1998.
10.22(5) Warrant Agreement by and between the Company and The Bank of New York, as warrant agent,
dated April 8, 1998.
10.23(5) Warrant Registration Rights Agreement by and among the Company, Spectrum Equity
Investors, L.P., New Enterprise Associates VI, Limited Partnership, Onset Enterprise
Associates II, L.P., FBR Technology Venture Partners, L.P., Toronto Dominion Capital
(U.S.A.) Inc., Grotech Partners IV, L.P., Richard A. Jalkut, David Schaeffer and the
Initial Purchasers, dated April 8, 1998.
10.24(1) Amended and Restated Investment and Stockholders' Agreement by and among the Company and
certain stockholders of the Company set forth on the signature pages.
10.25(5) Purchase Agreement by and between Andrew Corporation and Path Tel, Inc., dated July 1,
1995, as amended by Amendment One, dated September 16, 1996, and Amendment Two, dated
July 1, 1997.
10.26(5) Lease Agreement, by and between 6715 Kenilworth Avenue General Partnership and the
Company, dated August 9, 1997, as amended by Amendment to Lease, dated March 5, 1998.
10.26.1(5) Second Amendment to Lease, dated June 1, 1998.
10.27(2)(4) Fixed Point Microwave Services Agreement by and between the Company and KN
Telecommunications, Inc., dated June 2, 1998.
10.28(4) Maintenance Services Agreement by and between the Company and Texaco Pipeline, Inc.,
dated June 26, 1998.
21.1(5) Subsidiaries of the Company.
23.1(4) Consent of PricewaterhouseCoopers LLP.
23.2(4) Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in Exhibit 5.1).
24.1(5) Power of Attorney.
27.1(5) Financial Data Schedule.
99.1(5) Consent of the Yankee Group.
99.2(5) Consent of Bell Communications Research.
</TABLE>
- ------------------------
(1) To be filed by amendment.
(2) Certain portions of this exhibit have been omitted based on a request for
confidential treatment filed separately with the Securities and Exchange
Commission.
(3) Constitutes management contract or compensatory arrangement.
(4) Filed herewith.
(5) Previously filed.
(6) Replaces previously filed exhibit.
II-5
<PAGE>
(B) FINANCIAL STATEMENT SCHEDULES
All schedules for which provision is made in the applicable accounting
regulations of the Commission are not required, are inapplicable or have been
disclosed in the notes to other financial statements and therefore have been
omitted.
ITEM 17. UNDERTAKINGS
The Company hereby undertakes to provide to the underwriters at the closing
specified in the underwriting agreements certificates in such denominations and
registered in such names as required by the underwriter to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the Restated Certificate of Incorporation, the Restated Bylaws, the
Underwriting Agreement, the Unit Purchase Agreement, the Notes Registration
Rights Agreement and the Warrant Registration Rights Agreement or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of the
Company in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the
securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The Company hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) under the
Securities Act shall be deemed to be a part of this Registration Statement
as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial BONA FIDE offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 2 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the District of
Columbia on this 27th day of July, 1998.
<TABLE>
<S> <C> <C>
PATHNET, INC.
By: /s/ DAVID SCHAEFFER
-----------------------------------------
Name: David Schaeffer
Title: Chairman of the Board
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dated indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ DAVID SCHAEFFER
- ------------------------------ Chairman of the Board and July 27, 1998
David Schaeffer Director
*
- ------------------------------ Chief Executive Officer July 27, 1998
Richard A. Jalkut and Director
* Vice-President, Finance
- ------------------------------ (principal accounting July 27, 1998
William R. Smedberg, V and financial officer)
*
- ------------------------------ Director July 27, 1998
Peter J. Barris
*
- ------------------------------ Director July 27, 1998
Kevin J. Maroni
*
- ------------------------------ Director July 27, 1998
Patrick J. Kerins
*
- ------------------------------ Director July 27, 1998
Richard K. Prins
*
- ------------------------------ Director July 27, 1998
Stephen A. Reinstadtler
</TABLE>
*By: /s/ DAVID SCHAEFFER
-------------------------
Name: David Schaeffer
Title: Attorney-in-fact
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- -------------- -----------------------------------------------------------------------------------------
<C> <S> <C>
1.1(1) Form of Underwriting Agreement among the Company, Morgan Stanley & Co. Incorporated,
Bear, Stearns & Co. Inc., Lehman Brothers Inc., J.P. Morgan Securities Inc., Morgan
Stanley & Co. International Limited, Bear, Stearns International Limited, Lehman Brothers
International (Europe) and J.P. Morgan Securities Ltd.
3.1(4) Form of Amended and Restated Certificate of Incorporation of the Company.
3.2(4) Form of Amended and Restated Bylaws of the Company.
4.1(4) Form of Common Stock Certificate.
5.1(4) Opinion of Paul, Weiss, Rifkind, Wharton & Garrison regarding legality of securities.
10.1(2)(6) Fixed Point Microwave Services Agreement by and between the Company and Northern Border
Pipeline Company, dated October 17, 1997.
10.2(2)(6) Fixed Point Microwave Services Agreement by and between the Company and Northern Indiana
Public Service Company, dated January 30, 1998.
10.3(2)(6) Fixed Point Microwave Services Agreement by and between the Company and Northeast
Missouri Electric Power Cooperative, dated December 1, 1997.
10.4(2)(6) Fixed Point Microwave Services Agreement by and between the Company and KN Energy, Inc.,
dated September 8, 1997.
10.5(2)(6) Fixed Point Microwave Services Agreement by and between the Company and Pathnet/Idaho
Power Equipment, LLC, dated April 17, 1998.
10.6(2)(6) Agreement to Create and Manage a High Capacity Telecommunications System by and between
the Company and Texaco Pipeline, Inc., dated June 3, 1997.
10.7(5) Binding Term Sheet, by and between the Company and American Tower Corporation, dated
February 17, 1998, as amended by Amendment No. 1, dated February 25, 1998, and Amendment
No. 2, dated April 8, 1998.
10.7.1(2)(4) License Agreement, by and between the Company and American Tower Corporation, dated as of
August 1, 1998.
10.8(5) Maintenance Services Agreement by and between the Company and KN Energy, Inc., dated
October 11, 1997.
10.9(5) Maintenance Services Agreement by and between the Company and Northern Indiana Public
Service Company, dated January 30, 1998.
10.10(5) Maintenance and Provisioning Services Agreement by and between the Company and Northern
Border Pipeline Company, dated April 29, 1998.
10.11(5) Master Agreement by and between the Company and NEC America, Inc., dated August 8, 1997,
as amended by Amendment No. 1, dated November 9, 1997 and Amendment No. 2, dated April 2,
1998.
10.11.1(5) Amendment No. 3, dated May 4, 1998 to Master Agreement by and between the Company and NEC
America, Inc.
10.11.2(5) Amendment No. 4, dated July 10, 1998 to Master Agreement to Master Agreement by and
between the Company and NEC America, Inc.
10.12(5) Letter Agreement, by and between the Company and TCI Wireline, Inc., dated December 16,
1997.
10.13(3)(5) Non-Qualified Stock Option Agreement by and between the Company and Richard A. Jalkut,
dated August 4, 1997.
10.14(3)(5) Non-Qualified Stock Option Agreement by and between the Company and David Schaeffer,
dated October 31, 1997.
10.15(5) Employment Agreement by and between the Company and Richard A. Jalkut, dated August 4,
1997, as amended by Amendment to Employment Agreement, dated April 6, 1998.
10.16(3)(5) Non-Disclosure, Assignment of Inventions and Non-Competition Agreement by and between the
Company and Kevin Bennis, dated February 2, 1998.
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
10.17(3)(5) Pathnet, Inc. 1995 Stock Option Plan.
10.18(3)(5) Pathnet, Inc. 1997 Stock Incentive Plan, as amended by Amendment No. 1 to 1997 Stock
Incentive Plan.
10.19(5) Indenture by and between the Company and The Bank of New York, as trustee, dated April 8,
1998.
10.20(5) Pledge Agreement by and among the Company, The Bank of New York, as trustee, and The Bank
of New York, as securities intermediary, dated April 8, 1998.
10.21(5) Notes Registration Rights Agreement by and among the Company and Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Bear, Stearns & Co., Inc., TD
Securities (USA) Inc. and Salomon Brothers Inc (collectively, the "Initial Purchasers"),
dated April 8, 1998.
10.22(5) Warrant Agreement by and between the Company and The Bank of New York, as warrant agent,
dated April 8, 1998.
10.23(5) Warrant Registration Rights Agreement by and among the Company, Spectrum Equity
Investors, L.P., New Enterprise Associates VI, Limited Partnership, Onset Enterprise
Associates II, L.P., FBR Technology Venture Partners, L.P., Toronto Dominion Capital
(U.S.A.) Inc., Grotech Partners IV, L.P., Richard A. Jalkut, David Schaeffer and the
Initial Purchasers, dated April 8, 1998.
10.24(1) Amended and Restated Investment and Stockholders' Agreement by and among the Company and
certain stockholders of the Company set forth on the signature pages.
10.25(5) Purchase Agreement by and between Andrew Corporation and Path Tel, Inc., dated July 1,
1995, as amended by Amendment One, dated September 16, 1996, and Amendment Two, dated
July 1, 1997.
10.26(5) Lease Agreement, by and between 6715 Kenilworth Avenue General Partnership and the
Company, dated August 9, 1997, as amended by Amendment to Lease, dated March 5, 1998.
10.26.1(5) Second Amendment to Lease, dated June 1, 1998.
10.27(2)(4) Fixed Point Microwave Services Agreement by and between the Company and KN
Telecommunications, Inc., dated June 2, 1998.
10.28(4) Maintenance Services Agreement by and between the Company and Texaco Pipeline, Inc.,
dated June 26, 1998.
21.1(5) Subsidiaries of the Company.
23.1(4) Consent of PricewaterhouseCoopers LLP.
23.2(4) Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in Exhibit 5.1).
24.1(5) Power of Attorney.
27.1(5) Financial Data Schedule.
99.1(5) Consent of the Yankee Group.
99.2(5) Consent of Bell Communications Research.
</TABLE>
- ------------------------
(1) To be filed by amendment.
(2) Certain portions of this exhibit have been omitted based on a request for
confidential treatment filed separately with the Securities and Exchange
Commission.
(3) Constitutes management contract or compensatory arrangement.
(4) Filed herewith.
(5) Previously filed.
(6) Replaces previously filed exhibit.
<PAGE>
Exhibit 3.1
Amended and Restated Certificate of Incorporation
of
Pathnet, Inc.
Pathnet, Inc., a corporation duly incorporated under the laws of the
State of Delaware, hereby certifies as follows:
FIRST: The name of the corporation is Pathnet, Inc. (the
"Corporation"). The original Certificate of Incorporation of the Corporation
was filed with the Secretary of State of the State of Delaware on 25th day of
August, 1995, under the name PathNet, Inc.
SECOND: This Amended and Restated Certificate of Incorporation has
been duly adopted in accordance with Sections 242 and 245 of the Delaware
General Corporation Law (the "General Corporation Law").
THIRD: This Amended and Restated Certificate of Incorporation
hereby restates, integrates and amends the Certificate of Incorporation, as
amended, of the Corporation as follows:
1. Name. The name of the corporation is PATHNET, INC. (the
"Corporation").
2. Address; Registered Office and Agent. The address of the
Corporation's registered office is 1013 Centre Road, Wilmington, New Castle
County, Delaware 19805. The name of its registered agent at such address is The
Prentice-Hall Corporation System, Inc.
3. Purpose. The purpose of the Corporation is to engage in, carry
on and conduct any lawful act or activity for which corporations may be
organized under the General Corporation Law.
4. Number of Shares. The total number of shares of stock that the
Corporation shall have authority to issue is 75,470,595, divided as follows:
10,000,000 shares of Preferred Stock, par value of $0.01 per share (the
"Preferred Stock"), 1,000,000 shares of Series A Convertible Preferred Stock,
par value of $0.01 per share (the "Series A Preferred Stock"), 1,651,046 shares
of Series B Convertible Preferred Stock, par value of $0.01 per share (the
"Series B Preferred Stock"), 2,819,549 shares of Series C Convertible Preferred
Stock, par value of $0.01 per share (the "Series C Preferred Stock," and
together with the Series A Preferred Stock and the Series B Preferred Stock, the
"Series Preferred Stock"); and 60,000,000 shares of Common Stock, par value of
$0.01 per share (the "Common Stock").
<PAGE>
5. Designation of Classes; Relative Rights, Etc. The designation,
relative rights, preferences and limitations of the shares of each class are as
follows:
5.1 Preferred Stock. The shares of Preferred Stock may be
issued from time to time in one or more series of any number of shares, provided
that the aggregate number of shares issued and not canceled of any and all such
series shall not exceed the total number of shares of Preferred Stock
hereinabove authorized, and with such powers, preferences and rights and
qualifications, limitations or restrictions thereof, and such distinctive serial
designations, all as shall hereafter be stated and expressed in the resolution
or resolutions providing for the issue of such shares of Preferred Stock from
time to time adopted by the Board of Directors of the Corporation (the "Board of
Directors") pursuant to authority so to do which is hereby vested in the Board
of Directors. Each series of shares of Preferred Stock (a) may have such voting
rights or powers, full or limited, or may be without voting rights or powers;
(b) may be subject to redemption at such time or times and at such prices;
(c) may be entitled to receive dividends (which may be cumulative or
non-cumulative) at such rate or rates, on such conditions and at such times, and
payable in preference to, or in such relation to, the dividends payable on any
other class or classes or series of stock; (d) may have such rights upon the
voluntary or involuntary liquidation, winding up or dissolution of, or upon any
distribution of the assets of, the Corporation; (e) may be made convertible into
or exchangeable for, shares of any other class or classes or of any other series
of the same or any other class or classes of stock of the Corporation at such
price or prices or at such rates of exchange and with such adjustments; (f) may
be entitled to the benefit of a sinking fund to be applied to the purchase or
redemption of shares of such series in such amount or amounts; (g) may be
entitled to the benefit of conditions and restrictions upon the creation of
indebtedness of the Corporation or any subsidiary, upon the issue of any
additional shares (including additional shares of such series or of any other
series) and upon the payment of dividends or the making of other distributions
on, and the purchase, redemption or other acquisition by the Corporation or any
subsidiary of, any outstanding shares of the Corporation and (h) may have such
other relative, participating, optional or other special rights, qualifications,
limitations or restrictions thereof; all as shall be stated in said resolution
or resolutions providing for the issue of such shares of Preferred Stock. Any
of the voting powers, designations, preferences, rights and qualifications,
limitations or restrictions of any such series of Preferred Stock may be made
dependent upon facts ascertainable outside of the resolution or resolutions
providing for the issue of such Preferred Stock adopted by the Board of
Directors pursuant to the authority vested in it by this Section 5.1, provided
that the manner in which such facts shall operate upon the voting powers,
designations, preferences, rights and qualifications, limitations or
restrictions of such series of Preferred Stock is clearly and expressly set
forth in the resolution or resolutions providing for the issue of such Preferred
Stock. The term "facts" as used in the next preceding sentence shall have the
meaning given to it in Section 151(a) of the General Corporation Law. Shares of
Preferred Stock of any series that have been redeemed (whether through the
operation of a sinking fund or otherwise) or that if
2
<PAGE>
convertible or exchangeable, have been converted into or exchanged for shares of
any other class or classes shall have the status of authorized and unissued
shares of Preferred Stock undesignated as to series and may be reissued as a
part of the series of which they were originally a part or as part of a new
series of shares of Preferred Stock to be created by resolution or resolutions
of the Board of Directors or as part of any other series of shares of Preferred
Stock, all subject to the conditions or restrictions on issuance set forth in
the resolution or resolutions adopted by the Board of Directors providing for
the issue of any series of shares of Preferred Stock.
5.2 Common Stock. Subject to the provisions of any applicable
law or of the Bylaws of the Corporation, as from time to time amended (the
"Bylaws"), with respect to the closing of the transfer books or the fixing of a
record date for the determination of stockholders entitled to vote and except as
otherwise provided herein with respect to any shares of Series Preferred Stock,
by law or by the resolution or resolutions providing for the issue of any series
of shares of Preferred Stock, the holders of outstanding shares of Common Stock
shall exclusively possess voting power for the election of directors and for all
other purposes, each holder of record of shares of Common Stock being entitled
to one vote for each share of Common Stock standing in his or her name on the
books of the Corporation. Except as otherwise provided herein with respect to
any shares of Series Preferred Stock or by the resolution or resolutions
providing for the issue of any series of shares of Preferred Stock, the holders
of shares of Common Stock shall be entitled, to the exclusion of the holders of
shares of Preferred Stock of any and all series, to receive such dividends as
from time to time may be declared by the Board of Directors. In the event of
any liquidation, dissolution or winding up of the Corporation, whether voluntary
or involuntary, after payment shall have been made to the holders of shares of
any Series Preferred Stock and any Preferred Stock of the full amount to which
they shall be entitled pursuant to this Amended and Restated Certificate of
Incorporation or the resolution or resolutions providing for the issue of any
series of shares of Preferred Stock, the holders of shares of Common Stock shall
be entitled, to the exclusion of the holders of shares of Series Preferred Stock
and Preferred Stock of any and all series, to share, ratably according to the
number of shares of Common Stock held by them, in all remaining assets of the
Corporation available for distribution to its stockholders.
5.3 Series Preferred Stock.
5.3.1 Shares.
(a) Authorized Shares. The Corporation shall have
authority to issue Five Million Four Hundred Seventy Thousand Five Hundred
Ninety-Five (5,470,595) shares of Series Preferred Stock, of which One Million
(1,000,000) shares shall be designated the Series A Preferred Stock, One Million
Six Hundred Fifty One Thousand Forty Six (1,651,046) shares shall be designated
the Series B Preferred Stock and Two Million Eight Hundred Nineteen Thousand
Five
3
<PAGE>
Hundred Forty-Nine (2,819,549) shares shall be designated as the Series C
Preferred Stock.
(b) Dividends. The holders of the Series Preferred Stock
shall be entitled to receive, out of funds legally available therefor, dividends
(other than dividends paid in additional shares of Common Stock) in preference
to and at the same rate as dividends are paid with respect to the Common Stock
(treating each share of Series Preferred Stock as being equal to the number of
shares of Common Stock into which each such share of Series Preferred Stock
could be converted pursuant to the provisions of Section 5.3.4 hereof, with such
number determined as of the record date for the determination of holders of
Common Stock entitled to receive such dividend).
5.3.2 Liquidation, Dissolution or Winding Up.
(a) Distributions to Holders of Series Preferred Stock. In
the event of any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, the Series A Preferred Stock, the Series B
Preferred Stock and the Series C Preferred Stock shall rank on a parity with
each other and shall rank prior to the Common Stock or any class of stock
ranking junior to the Series Preferred Stock. Upon such liquidation, holders of
each share of Series Preferred Stock outstanding shall be entitled to be paid,
out of the assets of the Corporation available for distribution to stockholders
and before any payment shall be made to the holders of any class of Common Stock
or of any stock ranking on liquidation junior to the Series Preferred Stock, an
amount in cash equal to the original purchase price paid by such holder for each
such share of Series Preferred Stock held (appropriately adjusted for stock
splits, stock dividends and the like) plus any declared but unpaid dividends
thereon. If upon any liquidation, dissolution or winding up of the Corporation,
the assets to be distributed to the holders of the Series Preferred Stock under
the foregoing sentence shall be insufficient to permit payment to such
stockholders of the full preferential amounts aforesaid, then all of the assets
of the Corporation available for distribution to such holders under such
sentence shall be distributed among the holders of Series Preferred Stock, pro
rata in accordance with the total amount of preference which would have been
payable to such holders if funds had been available to pay the full preference
under the previous sentence. After such payment shall have been made in full to
such holders of Series Preferred Stock, or funds necessary for such payment
shall have been set aside by the Corporation in trust for the account of such
holders so as to be available for such payment, the holders of the outstanding
shares of Common Stock and any class of stock ranking junior to the Series
Preferred Stock shall share ratably in the distribution of the remaining assets
and funds of the Corporation available for distribution to shareholders.
(b) Deemed Liquidations. In the case of (i) a
consolidation or merger of the Corporation (other than a consolidation or merger
upon
4
<PAGE>
consummation of which the holders of voting securities of the Corporation
immediately prior to such transaction, continue to own directly or indirectly
not less than a majority of the voting power of the surviving corporation) or a
sale of all or substantially all of the assets of the Corporation or other
similar transaction and (ii) either receipt by the Corporation of (x)
consideration less than the equivalent of $1.00 per share (appropriately
adjusted for stock splits, stock dividends and the like) of Series A Preferred
Stock plus any declared but unpaid dividends, (y) consideration less than the
equivalent of $3.28 per share (appropriately adjusted for stock splits, stock
dividends and the like) of Series B Preferred Stock plus any declared but unpaid
dividends, or (z) consideration less than the equivalent of $10.64 per share
(appropriately adjusted for stock splits, stock dividends and the like) of
Series C Preferred Stock plus any declared but unpaid dividends, such event
shall be regarded, at the option of the holders of a majority of the then
outstanding shares of Series Preferred Stock, as a liquidation, dissolution or
winding up of the affairs of the Corporation within the meaning of this Section
5.3.2.
Notwithstanding the foregoing, each holder of Series
Preferred Stock shall have the right to elect the benefits of the provisions of
Section 5.3.4(h) hereof in lieu of receiving payment in liquidation, dissolution
or winding up of the Corporation pursuant to this Section 5.3.2(b). For
purposes of this Section 5.3.2 and Section 5.3.6 hereof, a sale of substantially
all of the assets of the Corporation shall mean (x) the sale or other
disposition other than in the ordinary course of business of more than 50% of
such assets, as determined by reference to either (A) the book value or (B) the
fair market value, of such assets, or (y) any issuance of Common Stock by the
Corporation or transfer of Common Stock by the holder thereof to any person or
persons acting in concert or a group of affiliated persons, which issuance or
transfer results in such person or persons or group holding in the aggregate
more than 50% of the issued and outstanding Common Stock after giving effect to
such issuance or transfer.
(c) Non-Cash Distributions. In the event of a liquidation,
dissolution or winding up of the Corporation resulting in the availability of
assets other than cash for distribution to the holders of the Series Preferred
Stock, the holders of the Series Preferred Stock shall be entitled to a
distribution of cash and/or assets equal in value to the liquidation preference
and other distribution rights stated in Section 5.3.2(a) and Section 5.3.2(b)
hereof. In the event that such distribution to the holders of the Series
Preferred Stock shall include any assets other than cash, the following
provisions shall govern. The Board of Directors shall first determine the value
of such assets for such purpose, and shall notify all holders of shares of
Series Preferred Stock of such determination. The value of such assets for
purposes of the distribution under this Section 5.3.2(c) shall be the value as
determined by the Board of Directors in good faith and with due care, unless the
holders of a majority of the outstanding shares of Series Preferred Stock shall
object thereto in writing within 15 days after the date of such notice. In the
event of such objection, the valuation of such assets for purposes of such
distribution shall be
5
<PAGE>
determined by an arbitrator selected by the objecting stockholders and the Board
of Directors, or in the event a single arbitrator cannot be agreed upon within
10 days after the written objection sent by the objecting stockholders in
accordance with the previous sentence, the valuation of such assets shall be
determined by arbitration in which (i) the objecting stockholders shall name in
their notice of objection one arbitrator, (ii) the Board of Directors shall name
a second arbitrator within 15 days from the receipt of such notice, (iii) the
two arbitrators thus selected shall select a third arbitrator within 15 days
thereafter, and (iv) the three arbitrators thus selected shall determine the
valuation of such assets within 15 days thereafter for purposes of such
distribution by majority vote. The costs of such arbitration shall be borne by
the Corporation or by the holders of the Series Preferred Stock (on a pro rata
basis out of the assets otherwise distributable to them) as follows: (i) if the
valuation as determined by the arbitrators is greater than 95% of the valuation
as determined by the Board of Directors, the holders of the Series Preferred
Stock shall pay the costs of the arbitration, and (ii) otherwise, the
Corporation shall bear the costs of the arbitration.
5.3.3 Voting Rights.
(a) General. Except as otherwise expressly provided herein
or as required by law, the holder of each share of the Series Preferred Stock
shall be entitled to vote on any matters presented to the holders of the Common
Stock. Each share of Series Preferred Stock shall entitle the holder thereof to
such number of votes per share as shall equal the number of shares of Common
Stock into which such share of Series Preferred Stock is convertible in
accordance with the terms of Section 5.3.4 hereof at the record date for the
determination of stockholders entitled to vote on such matter or, if no record
date is established, at the date such vote is taken or any written consent of
stockholders is solicited. Except as otherwise expressly provided herein
(including, without limitation, the provisions of Section 5.3.6 hereof) or as
required by law, the holders of shares of Series Preferred Stock and the Common
Stock shall vote together as a single class on any matters presented to the
holders of the Common Stock.
(b) Board of Directors.
(i) Investor Directors. The holders of the Series A
Preferred Stock shall be entitled to vote as a class separately from all other
classes of stock of the Corporation in any vote for the election of directors of
the Corporation, and shall be entitled to elect by such class vote two directors
(the "Series A Investor Directors"), one of which Series A Investor Directors to
be designated by Spectrum Equity Investors, L.P. ("Spectrum") for so long as it
owns shares of Series A Preferred Stock
6
<PAGE>
and thereafter by the holders of a majority of the issued and outstanding shares
of Series A Preferred Stock, and the other to be designated by New Enterprise
Associates VI, Limited Partnership or its affiliates (collectively, "NEA VI")
for so long as it owns shares of Series A Preferred Stock and thereafter by the
holders of a majority of the issued and outstanding shares of Series A Preferred
Stock. The holders of the Series B Preferred Stock shall be entitled to vote as
a class separately from all other classes of stock of the Corporation in any
vote for the election of directors of the Corporation, and shall be entitled to
elect by such class vote one director (the "Series B Investor Director") to be
designated by Grotech Capital Group IV, LLC ("Grotech IV") for so long as it
owns shares of Series B Preferred Stock and thereafter by the holders of a
majority of the issued and outstanding shares of Series B Preferred Stock. The
holders of the Series C Preferred Stock shall be entitled to vote as a class
separately from all other classes of stock of the Corporation in any vote for
the election of directors of the Corporation, and shall be entitled to elect by
such class vote one director (the "Series C Investor Director") to be designated
by the holders of a majority of the issued and outstanding shares of Series C
Preferred Stock; provided, however, that if the holders of a majority of the
issued and outstanding shares of Series C Preferred Stock designate for election
as the Series C Investor Director an individual who is not a partner or
associate of a Series C Investor or an entity under substantially the same
management as a Series C Investor, such designee shall be elected as a director
only with the vote of a majority of the Common Stock Directors and Investor
Directors, voting together. Initially, the Series C Investor Director will be
designated by Toronto Dominion Capital (U.S.A.), Inc. In no event shall the
Series C Investor Director be (i) a partner or associate of Spectrum or an
entity under substantially the same management as Spectrum for so long as
Spectrum has designation rights under this Section 5.5.3(a), (ii) a partner or
associate of NEA VI or an entity under substantially the same management as NEA
VI for so long as NEA VI has designation rights under this Section 5.3.3(a), and
(iii) a partner or associate of Grotech IV or an entity under substantially the
same management as Grotech IV for so long as Grotech IV has designation rights
under this Section 5.3.3(a).
(ii) Common Stock Directors. For so long as any Series
Preferred Stock remains outstanding, the holders of Common Stock shall be
entitled to vote as a class separately from all other classes in any vote for
the election of directors of the Corporation, and shall be entitled to elect by
such class vote two directors (the "Common Stock Directors").
(iii) Appointment of Chief Executive
Officer/Officer Director. Upon the termination or resignation of the Chief
Executive Officer of the Corporation, the Corporation will select and hire a
successor Chief Executive Officer (and any successor thereto) by the affirmative
vote of a majority of the Common Stock Directors, the Series A Investor
Directors, the Series B Investor Director and the Series C Investor Director,
voting together. The Chief Executive Officer (and any replacement or successor
Chief Executive Officer) as so selected and hired shall be elected to the
Corporation's Board of Directors by the holders of the Series Preferred Stock
and the Common Stock voting together as a single class (the "Officer Director").
David Schaeffer may serve as Chief Executive Officer of the
7
<PAGE>
Corporation in the discretion of the Board of Directors, but in no event shall
David Schaeffer be elected as the Officer Director.
(iv) Removal of Directors. The removal of any director
of the Corporation shall be as set forth in the Bylaws of the Corporation.
(c) Special Voting Rights. The holders of the Series
Preferred Stock shall be entitled to the special voting rights set forth in
Section 5.3.6 hereof.
5.3.4 Conversion. The holders of the Series Preferred Stock
shall have the following conversion rights:
(a) Right to Convert. Subject to and in compliance with
the provisions of this Section 5.3.4, any shares of the Series Preferred Stock
may, at any time or from time to time at the option of the holder, be converted
into fully-paid and non-assessable shares of Common Stock. The number of shares
of Common Stock to which a holder of the Series Preferred Stock shall be
entitled upon conversion shall be the product obtained by multiplying the
Applicable Conversion Rate (determined as provided in Section 5.3.4(c)) by the
number of shares of Series Preferred Stock being converted.
(b) Automatic Conversion.
(i) Each share of the Series Preferred Stock
outstanding shall automatically be converted into the number of shares of Common
Stock into which such shares are convertible upon application of the then
effective Applicable Conversion Rate (determined as provided in Section
5.3.4(c)) immediately upon the closing of an underwritten public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, or under such other applicable securities regulations covering
the offer and sale of capital stock of the Corporation (other than a
registration relating solely to Rule 145 under such Act (or any successor
thereto) or to an employee benefit plan of the Corporation) (i) immediately
prior to the consummation of which, the Corporation is valued (based on the
per-share price paid in such public offering, but without regard to any proceeds
to be received by the Company in connection with such offering) at greater than
$50,000,000, (ii) in which the gross proceeds received by the Corporation exceed
$20,000,000, and (iii) in which the Corporation uses a nationally recognized
underwriter approved by holders of a majority in interest of the Series
Preferred Stock (a "Qualified Public Offering").
(ii) Upon the occurrence of an event specified in
Section 5.3.4(b)(i), the outstanding shares of Series Preferred Stock shall be
converted automatically without any further action by the holders of such shares
and whether or not the certificates representing such shares are surrendered to
the
8
<PAGE>
Corporation or its transfer agent; provided, however, that the Corporation shall
not be obligated to issue certificates evidencing such shares of the Common
Stock unless certificates evidencing such shares of the Series Preferred Stock
being converted are either delivered to the Corporation or any transfer agent,
as hereinafter provided, or the holder notifies the Corporation or any transfer
agent, as hereinafter provided, that such certificates have been lost, stolen or
destroyed and executes an agreement satisfactory to the Corporation to indemnify
the Corporation from any loss incurred by it in connection therewith.
Upon the occurrence of the automatic conversion of all
of the outstanding Series Preferred Stock, the holders of the Series Preferred
Stock shall surrender the certificates representing such shares at the office of
the Corporation or of any transfer agent for the Common Stock. Thereupon, there
shall be issued and delivered to each such holder, promptly at such office and
in his name as shown on such surrendered certificate or certificates, a
certificate or certificates for the number of shares of Common Stock into which
the shares of the Series Preferred Stock surrendered were convertible on the
date on which such automatic conversion occurred and cash as provided in Section
5.3.4(k) below in respect of any fraction of a share of Common Stock issuable
upon such automatic conversion.
(c) Applicable Conversion Rate. The conversion rate in
effect at any time for the applicable series of Series Preferred Stock (the
"Applicable Conversion Rate") shall equal the quotient obtained by dividing
$1.00 in the case of Series A Preferred Stock, $3.28 in the case of Series B
Preferred Stock or $10.64 in the case of the Series C Preferred Stock by the
Applicable Conversion Value, calculated as hereinafter provided.
(d) Applicable Conversion Value. The Applicable Conversion
Value in effect initially, and until first adjusted in accordance with
Section 5.3.4(e) or Section 5.3.4(f) hereof, shall be $1.00 in the case of
Series A Preferred Stock, $3.28 in the case of Series B Preferred Stock and
$10.64 in the case of the Series C Preferred Stock.
(e) Adjustment for Common Stock Dividends, Subdividends and
Combinations of Common Stock, Etc. Upon the happening of any of the following:
(i) the issuance of additional shares of Common Stock of any class as a dividend
or other distribution of outstanding Common Stock, (ii) the subdivision of
outstanding shares of Common Stock of any class into a greater number of shares
of Common Stock, or (iii) the combination of outstanding shares of Common Stock
of any class into a smaller number of shares of Common Stock (each an
"Extraordinary Common Stock Event"), the Applicable Conversion Value shall,
simultaneously with the happening of such Extraordinary Common Stock Event, be
adjusted by dividing the then effective Applicable Conversion Value by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding (excluding treasury stock) immediately after such Extraordinary
Common Stock Event and the
9
<PAGE>
denominator of which shall be the number of shares of Common Stock outstanding
(excluding treasury stock) immediately prior to such Extraordinary Common Stock
Event, and the quotient so obtained shall thereafter be the Applicable
Conversion Value. The Applicable Conversion Value, as so adjusted, shall be
readjusted in the same manner upon the happening of any successive Extraordinary
Common Stock Event or Events.
(f) Adjustments for Diluting Issues.
(i) Except as provided in Section 5.3.4(e) above or
for Excluded Shares (as defined below), if the Corporation shall issue any
additional shares of Common Stock of any class for no consideration or at a
price per share less than the Applicable Conversion Value in effect for each
applicable series of Series Preferred Stock immediately prior to such issuance
or sale, then in each such case such Applicable Conversion Value shall be
reduced to such lower price.
For purposes of this Section 5.3.4(f), "Excluded
Shares" shall mean (i) shares issued or delivered from treasury or stock options
(and shares of Common Stock issued upon the exercise thereof) granted by the
Corporation, with the approval of the Board of Directors, to directors,
officers, employees, agents or consultants of the Corporation for up to an
aggregate of 1,325,212 shares of the Common Stock (as adjusted for stock splits,
stock dividends and the like); (ii) warrants to purchase shares of Common Stock
(and any shares of Common Stock issued upon the exercise thereof) issued by the
Corporation in connection with the Corporation's offering of units, each such
unit consisting of $1,000 principal amount at maturity of Senior Notes due 2008
(the "Notes") of the Corporation and warrants to purchase shares of Common
Stock; and (iii) warrants to purchase shares of Common Stock (and any shares of
Common Stock issued upon the exercise thereof) issued by the Corporation
in connection with the credit facilities among the Corporation and/or its
subsidiaries, its equipment vendors and certain other senior lenders.
For purposes of this Section 5.3.4(f), if a part or all
of the consideration received by the Corporation in connection with the issuance
of shares of the Common Stock or the issuance of any of the securities described
below in paragraph (ii) of this Section 5.3.4(f) consists of property other than
cash, such consideration shall be deemed to have the same value as is determined
by the Corporation's Board of Directors with respect to receipt of such property
so long as such determination was made reasonably and in good faith, and shall
otherwise be deemed to have a value equal to its fair market value.
(ii) For the purpose of this Section 5.3.4(f), the
issuance of any warrants, options or other subscription or purchase rights with
respect to shares of Common Stock of any class and the issuance of any
securities convertible into shares of Common Stock of any class (or the issuance
of any
10
<PAGE>
warrants, options or any rights with respect to such convertible securities)
shall be deemed an issuance at such time of such Common Stock if the Net
Consideration Per Share which may be received by the Corporation for such Common
Stock (as hereinafter determined) shall be less than the Applicable Conversion
Value at the time of such issuance and, except as hereinafter provided, an
adjustment in the Applicable Conversion Value shall be made upon each such
issuance in the manner provided in paragraph (i) of this Section 5.3.4(f) as if
such Common Stock were issued at such Net Consideration Per Share. No
adjustment of the Applicable Conversion Value shall be made under this Section
5.3.4(f) upon the issuance of any additional shares of Common Stock which are
issued pursuant to the exercise of any warrants, options or other subscription
or purchase rights or pursuant to the exercise of any conversion or exchange
rights in any convertible securities if any adjustment shall previously have
been made upon the issuance of such warrants, options or other rights. Any
adjustment of the Applicable Conversion Value with respect to this paragraph
(ii) of this Section 5.3.4(f) shall be disregarded if, as and when the rights to
acquire shares of Common Stock upon exercise or conversion of the warrants,
options, rights or convertible securities which gave rise to such adjustment
expire or are canceled without having been exercised, so that the Applicable
Conversion Value effective immediately upon such cancellation or expiration
shall be equal to the Applicable Conversion Value in effect immediately prior to
the time of the issuance of the expired or canceled warrants, options, rights or
convertible securities, with such additional adjustments as would have been made
to that Applicable Conversion Value had the expired or canceled warrants,
options, rights or convertible securities not been issued; provided, however,
that no such readjustment of the Applicable Conversion Value shall have the
effect of increasing the Applicable Conversion Value to an amount which exceeds
the lower of (x) the Applicable Conversion Value on the original adjustment
date, or (y) the Applicable Conversion Value that would have resulted from any
issuance of any additional shares of Common Stock pursuant to such warrants,
options, rights or convertible securities between the original adjustment date
and such readjustment date. In the event that the terms of any warrants,
options, other subscription or purchase rights or convertible securities
previously issued by the Corporation are changed (whether by their terms or for
any other reason) so as to change the Net Consideration Per Share payable with
respect thereto (whether or not the issuance of such warrants, options, rights
or convertible securities originally gave rise to an adjustment of the
Applicable Conversion Value), the Applicable Conversion Value shall be
recomputed as of the date of such change, so that the Applicable Conversion
Value effective immediately upon such change shall be equal to the Applicable
Conversion Value in effect at the time of the issuance of the warrants, options,
rights or convertible securities subject to such change, adjusted for the
issuance thereof in accordance with the terms thereof after giving effect to
such change, and with such additional adjustments as would have been made to
that Applicable Conversion Value had the warrants, options, rights or
convertible securities been issued on such changed terms. For purposes of this
paragraph (ii), the Net Consideration Per Share which may be received by the
Corporation shall be determined as follows:
11
<PAGE>
(A) The Net Consideration Per Share shall mean
the amount equal to the total amount of consideration, if any, received by the
Corporation for the issuance of such warrants, options, rights or convertible
securities, plus the minimum amount of consideration, if any, payable to the
Corporation upon exercise or conversion thereof, divided by the aggregate number
of shares of Common Stock that would be issued if all such warrants, options,
subscriptions, or other purchase rights or convertible securities were exercised
or converted at such net consideration per share.
(B) The Net Consideration Per Share which may be
received by the Corporation shall be determined in each instance as of the date
of issuance of warrants, options, rights or convertible securities without
giving effect to any possible future price adjustments or rate adjustments which
may be applicable with respect to such warrants, options, rights or convertible
securities and which are contingent upon future events; provided that in the
case of an adjustment to be made as a result of a change in terms of such
warrants, options, rights or convertible securities, the Net Consideration Per
Share shall be determined as of the date of such change.
(g) Adjustments for Reclassification. If the Common Stock
issuable upon the conversion of the Series Preferred Stock shall be changed into
the same or different number of shares of any class or classes of stock, whether
by reclassification or otherwise (other than an Extraordinary Common Stock
Event, or a reorganization, merger, consolidation or sale of assets provided for
elsewhere in this Section 5.3.4), then and in each such event the holder of each
share of Series Preferred Stock shall have the right thereafter to convert such
share into the kind and amount of shares of stock and other securities and
property receivable upon such reorganization, reclassification or other change
by holders of the number of shares of Common Stock into which such shares of
Series Preferred Stock might have been converted immediately prior to such
reorganization, reclassification or change, all subject to further adjustment as
provided herein. Without limiting the generality of the foregoing, the
Applicable Conversion Rate, as defined in this Section 5.3.4, in respect of such
other shares or securities so receivable upon conversion of shares of Series
Preferred Stock shall thereafter be adjusted, and shall be subject to further
adjustment from time to time, in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to Common Stock contained in this
Section 5.3.4, and the remaining provisions herein with respect to the Common
Stock shall apply on like or similar terms to any such other shares or
securities.
(h) Adjustments for Reorganizations. If at any time or
from time to time there shall be a capital reorganization of the Common Stock
(other than a subdivision, combination, reclassification or exchange of shares
provided for elsewhere in this Section 5.3.4) or a merger or consolidation of
the Corporation with or into another corporation or the sale of all or
substantially all of the Corporation's properties and assets to any other
person, then, as a part of and as a
12
<PAGE>
condition to the effectiveness of such reorganization, merger, consolidation or
sale, lawful and adequate provision shall be made so that if the Corporation is
not the surviving corporation, the Series Preferred Stock shall be converted
into preferred stock of the surviving corporation having equivalent preferences,
rights and privileges except that in lieu of being able to convert into shares
of Common Stock of the Corporation or the successor corporation the holders of
the Series Preferred Stock (including any such preferred stock issued upon
conversion of the Series Preferred Stock) shall thereafter be entitled to
receive upon conversion of the Series Preferred Stock (including any such
preferred stock issued upon conversion of the Series Preferred Stock) the number
of shares of stock or other securities or property of the Corporation or of the
successor corporation resulting from such merger or consolidation or sale, to
which a holder of the number of shares of Common Stock deliverable upon
conversion of the Series Preferred Stock immediately prior to the capital
reorganization, merger, consolidation or sale would have been entitled on such
capital reorganization, merger, consolidation, or sale. In any such case,
appropriate provisions shall be made with respect to the rights of the holders
of the Series Preferred Stock (including any such preferred stock issued upon
conversion of the Series Preferred Stock) after the reorganization, merger,
consolidation or sale to the end that the provisions of this Section 5.3.4
(including, without limitation, provisions for adjustment of the Applicable
Conversion Value and the number of shares purchasable upon conversion of the
Series Preferred Stock or such preferred stock) shall thereafter be applicable,
as nearly as may be, with respect to any shares of stock, securities or assets
to be deliverable thereafter upon the conversion of the Series Preferred Stock
or such preferred stock.
Each holder of Series Preferred Stock upon the occurrence of
a capital reorganization, merger or consolidation of the Corporation or the sale
of all or substantially all of its assets and properties as such events are more
fully set forth in the first paragraph of this Section 5.3.4(h), shall have the
option of electing treatment of his shares of Series Preferred Stock under
either this Section 5.3.4(h) or Section 5.3.2(b) hereof, and except as otherwise
provided in said Section 5.3.2(b), notice of which election shall be submitted
in writing to the Corporation at its principal offices no later than 10 days
before the effective date of such event, provided that any such notice shall be
effective if given not later than 15 days after the date of the Corporation's
notice, pursuant to Section 5.3.8, with respect to such event.
(i) Certificate as to Adjustments. In each case of an
adjustment or readjustment of the Applicable Conversion Rate, the Corporation
will promptly furnish each holder of Series Preferred Stock with a certificate,
prepared by the chief financial officer of the Corporation, showing such
adjustment or readjustment, and stating in detail the facts upon which such
adjustment or readjustment is based.
13
<PAGE>
(j) Mechanics of Conversion. To exercise its conversion
privilege, a holder of Series Preferred Stock shall surrender the certificate or
certificates representing the shares being converted to the Corporation at its
principal office, and shall give written notice to the Corporation at that
office that such holder elects to convert such shares. Such notice shall also
state the name or names (with address or addresses) in which the certificate or
certificates for shares of Common Stock issuable upon such conversion shall be
issued. The certificate or certificates for shares of Series Preferred Stock
surrendered for conversion shall be accompanied by proper assignment thereof to
the Corporation or in blank. The date when such written notice is received by
the Corporation together with the certificate or certificates representing the
shares of Series Preferred Stock being converted, shall be the "Conversion
Date." As promptly as practicable after the Conversion Date, the Corporation
shall issue and shall deliver to the holder of the shares of Series Preferred
Stock being converted, a certificate or certificates in such denominations as it
may request in writing for the number of full shares of Common Stock issuable
upon the conversion of such shares of Series Preferred Stock in accordance with
the provisions of this Section 5.3.4 and cash as provided in Section 5.3.4(k)
below in respect of any fraction of a share of Common Stock issuable upon such
conversion. Such conversion shall be deemed to have been effected immediately
prior to the close of business on the Conversion Date, and at such time the
rights of the holder as holder of the converted shares of Series Preferred Stock
shall cease and the person or persons in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable upon such conversion
shall be deemed to have become the holder or holders of record of shares of
Common Stock represented thereby.
(k) Fractional Shares. No fractional shares of Common
Stock or scrip representing fractional shares shall be issued upon conversion of
Series Preferred Stock. Instead of any fractional shares of Common Stock that
would otherwise be issuable upon conversion of Series Preferred Stock, the
Corporation shall pay to the holder of the shares of Series Preferred Stock that
were converted a cash adjustment in respect of such fraction in an amount equal
to the same fraction of the market price per share of the Common Stock (as
determined in a manner prescribed in good faith by the Board of Directors) at
the close of business on the Conversion Date.
(l) Partial Conversion. In the event some but not all of
the shares of Series Preferred Stock represented by a certificate or
certificates surrendered by a holder are converted, the Corporation shall
execute and deliver to or on the order of the holder, at the expense of the
Corporation, a new certificate representing the number of shares of Series
Preferred Stock which were not converted.
(m) Reservation of Common Stock. The Corporation shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock, solely for the purpose of effecting the conversion of the
shares of
14
<PAGE>
the Series Preferred Stock, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of the Series Preferred Stock, and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series Preferred Stock, the
Corporation shall take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
5.3.5 Redemption.
(a) Optional Redemption.
(i) Optional Redemption of Series A Preferred Stock
and Series B Preferred Stock. In the event that there shall not have occurred a
closing of a Qualified Public Offering (as defined in Section 5.3.4(b) hereof)
prior to December 23, 2000, at the election of any holder of shares of Series A
Preferred Stock or any holder of Series B Preferred Stock outstanding as of
December 24, 2000, the Corporation shall redeem all (but not part) of the shares
of Series A Preferred Stock and Series B Preferred Stock then held by such
holder. Payment of the Series A Redemption Price (as defined below) to the
holders of Series A Preferred Stock and the Series B Redemption Price (as
defined below) to the holders of shares of Series B Preferred Stock, shall be
made by the Corporation on January 23, 2001, for a cash price equal to the
original purchase price paid by such holders for each share of Series A
Preferred Stock and Series B Preferred Stock outstanding, adjusted for any stock
split, combined consolidation or stock distribution or stock dividends with
respect to such shares (the "Series A Redemption Price" and the "Series B
Redemption Price," respectively). On or prior to December 24, 2000, the
Corporation shall give written notice (the "Series A and Series B Redemption
Notice") by mail, postage prepaid, to the holders of the then outstanding shares
of Series A Preferred Stock and Series B Preferred Stock at the address of each
such holder appearing on the books of the Corporation or given by such holder to
the Corporation for the purpose of notice. Such notice shall set forth the
Series A Redemption Price and the Series B Redemption Price, as the case may be,
and shall further state that any holder of shares of Series A Preferred Stock or
Series B Preferred Stock who intends to request redemption of its Series A
Preferred Stock or Series B Preferred Stock, respectively, pursuant to this
Section 5.3.5(a) must give written notice to the Corporation of its request for
redemption on or before January 11, 2001. On or after January 11, 2001, each
holder of shares of Series A Preferred Stock and Series B Preferred Stock who
requested that such holder's shares of Series A Preferred Stock and Series B
Preferred Stock be so redeemed, shall surrender the certificate or certificates
evidencing such shares to the Corporation. In the case of any certificate or
certificates which have been lost, stolen or destroyed, the holder of such
certificate or certificates shall make and deliver an affidavit of that fact to
the Corporation without the necessity of giving the Corporation a bond.
15
<PAGE>
(ii) Mandatory Redemption of Series A Preferred Stock
and Series B Preferred Stock. If after sending the Series A and Series B
Redemption Notice, the Corporation receives requests for redemption on or prior
to January 11, 2001 from the holders of at least sixty-seven percent (67%) of
the Series A Preferred Stock and Series B Preferred Stock taken together, it
shall give written notice by mail, postage prepaid, to the holders of Series A
Preferred Stock and Series B Preferred Stock that all shares of the Series A
Preferred Stock and Series B Preferred Stock then outstanding will be redeemed
on January 23, 2001 (the "Series A and Series B Redemption Date") for a per
share cash price equal to the Series A Redemption Price and the Series B
Redemption Price, as the case may be. The notice shall further call upon such
holders to surrender to the Corporation on or before the Series A and Series B
Redemption Date at the place designated in the notice such holder's certificate
or certificates representing the shares to be redeemed. On or after the Series
A and Series B Redemption Date, each holder of shares of Series A Preferred
Stock and Series B Preferred Stock called for redemption shall surrender the
certificate or certificates evidencing such shares to the Corporation. In the
case of any certificate or certificates which have been lost, stolen or
destroyed, the holder of such certificate or certificates shall make and deliver
an affidavit of that fact to the Corporation without the necessity of giving the
Corporation a bond.
(iii) Optional Redemption of Series C Preferred
Stock. In the event there shall not have occurred a closing of a Qualified
Public Offering (as defined in Section 5.3.4(b) hereof) prior to November 3,
2001, at the election of each holder of shares of Series C Preferred Stock
outstanding as of November 4, 2001, the Corporation shall redeem all (but not
part) of the shares of Series C Preferred Stock then held by such holder.
Payment of the applicable Series C Redemption Price (as defined below) to the
holders of Series C Preferred Stock shall be made by the Corporation on December
3, 2001, for a cash price equal to the original purchase price paid by such
holders for each share of Series C Preferred Stock outstanding, adjusted for any
stock split, combined consolidation or stock distribution or stock dividends
with respect to such shares (the "Series C Redemption Price"). On or prior to
November 4, 2001, the Corporation shall give written notice (the "Series C
Redemption Notice") by mail, postage prepaid, to the holders of the then
outstanding shares of Series C Preferred Stock at the address of each such
holder appearing on the books of the Corporation or given by such holder to the
Corporation for the purpose of notice. The Series C Redemption Notice shall set
forth the Series C Redemption Price and shall further state that any holder of
shares of Series C Preferred Stock who intends to request redemption of its
Series C Preferred Stock pursuant to this Section 5.3.5(a) must give written
notice to the Corporation of its request for redemption on or before November
21, 2001. On or after December 3, 2001, each holder of shares of Series C
Preferred Stock who requested that such holder's shares of Series C Preferred
Stock be so redeemed, shall surrender the certificate or certificates evidencing
such shares to the Corporation. In the case of any certificate or certificates
which have been lost, stolen or destroyed,
16
<PAGE>
the holder of such certificate or certificates shall make and deliver an
affidavit of that fact to the Corporation without the necessity of giving the
Corporation a bond.
(iv) Mandatory Redemption of Series C Preferred Stock.
If after sending the Series C Redemption Notice, the Corporation receives
requests for redemption on or prior to November 21, 2001 from the holders of at
least sixty-seven percent (67%) of the Series C Preferred Stock, it shall give
written notice by mail, postage prepaid, to the holders of Series C Preferred
Stock that all shares of Series C Preferred Stock then outstanding will be
redeemed on December 3, 2001 (the "Series C Redemption Date") for a per share
cash price equal to the Series C Redemption Price. The notice shall further
call upon such holders to surrender to the Corporation on or before the Series C
Redemption Date at the place designated in the notice such holder's certificate
or certificates representing the shares to be redeemed on or after the Series C
Redemption Date, each holder of shares of Series C Preferred Stock called for
redemption shall surrender the certificate or certificates evidencing such
shares to the Corporation. In the case of any certificate or certificates which
have been lost, stolen or destroyed, the holder of such certificate or
certificates shall make and deliver an affidavit of that fact to the Corporation
without the necessity of giving the Corporation a bond.
(v) Extension of Redemption Dates. Notwithstanding
the foregoing clauses (i) through (iv), in the event any indebtedness under the
Notes remains outstanding, the holders of shares of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock shall not have the right
to require the Corporation to redeem any of such shares until ninety (90) days
after the later of (x) the date on which such Notes shall be indefeasibly paid
in full and (y) the applicable Redemption Date.
(b) Termination of Rights. From and after the Series A and
Series B Redemption Date or the Series C Redemption Date (each a "Redemption
Date"), as the case may be, unless there shall have been a default in payment or
tender by the Corporation of the Series A Redemption Price and the Series B
Redemption Price or the Series C Redemption Price (each a "Redemption Price"),
as the case may be, all rights of the holders with respect to such redeemed
shares of the Series Preferred Stock (except the right to receive the applicable
Redemption Price upon surrender or their certificate) shall cease and such
shares shall not thereafter be transferred on the books of this Corporation or
be deemed to be outstanding for any purpose whatsoever.
(c) Insufficient Funds. If the funds of the Corporation
legally available for redemption of shares of the Series Preferred Stock on the
applicable Redemption Date are insufficient to redeem the total number of shares
of Series A Preferred Stock and Series B Preferred Stock or Series C Preferred
Stock, as the case may be, on such Redemption Date, the Corporation will use its
best efforts to engage in a recapitalization or the sale of its business or
businesses to
17
<PAGE>
generate sufficient funds to redeem all of the shares of the Series A Preferred
Stock and Series B Preferred Stock or the Series C Preferred Stock, as the case
may be. The Corporation shall use those funds which are legally available to
redeem the maximum possible number of such shares ratably among the holders of
such shares to be redeemed. At any time thereafter when additional funds of the
Corporation are legally available for the redemption of shares of the Series
Preferred Stock, such funds will immediately be used to redeem the balance of
the shares which the Corporation has become obligated to redeem on the
applicable Redemption Date but which it has not redeemed at the applicable
Redemption Price. If any shares of the Series Preferred Stock are not redeemed
for the foregoing reason or because the Corporation otherwise failed to pay or
tender to pay the aggregate applicable Redemption Price on all outstanding
shares of Series Preferred Stock, all shares which have not been redeemed shall
remain outstanding and entitled to all the rights and preferences provided
herein, and the Corporation shall pay interest on the applicable Redemption
Price for the unredeemed portion at an aggregate per annum rate equal to the
greater of (i) twelve percent (12%) or (ii) the Base Rate or any similar lending
rate announced from time to time by The First National Bank of Boston or any
successor entity plus five percent (5%), increased, in each case, by one percent
(1%) at the end of each calendar quarter thereafter. All provisions hereof are
hereby expressly limited so that in no contingency or event whatsoever shall the
amount paid or agreed to be paid to the holders of the Series Preferred Stock
exceed the maximum amount which the holder is permitted to receive under
applicable law. If fulfillment of any provision hereof shall involve exceeding
such amount, then the obligation to be fulfilled shall automatically be reduced
to the limit of such maximum amount. As used herein, the term "applicable law"
shall mean the law in effect as of the date hereof, provided, however, that in
the event that there is a change in the law which results in a higher
permissible rate of interest, then these provisions shall be governed by such
new law as of its effective date.
5.3.6 Restrictions and Limitations. The Corporation shall
not without the affirmative vote or written consent of the holders of a majority
of the then outstanding shares of the Series Preferred Stock:
(i) Redeem, purchase or otherwise acquire for value (or pay
into or set aside for a sinking fund for such purpose), any share or shares of
Series Preferred Stock other than pursuant to Section 5.3.5 hereof;
(ii) Redeem, purchase or otherwise acquire for value (or pay
into or set aside for a sinking fund for such purpose) any of the Common Stock
of any class or any other capital stock of the Corporation other than the Series
Preferred Stock or any of the Corporation's options, warrants or convertible or
exchangeable securities, except that these provisions will not prohibit the
Corporation from repurchasing or redeeming any shares of capital stock from
individuals and entities who have entered into stockholder agreements, stock
option agreements, employment agreements or other similar agreements with the
Corporation in each case
18
<PAGE>
approved by a majority of the Series A Investor Directors, Series B Investor
Director and Series C Investor Director under which the Corporation has the
option to repurchase such shares upon the occurrence of certain events,
including the termination of employment and involuntary transfers by operation
of law (and their permitted transferees); provided, however, that any such
agreement between such individual and the Corporation under which the
Corporation has such options to repurchase, must be approved by the affirmative
vote or written consent of the holders of a majority of the then outstanding
Series Preferred Stock before such agreement is executed by the Corporation;
(iii) Authorize or issue, or obligate itself to issue,
any other debt or equity security, other than as provided in that certain
Investment and Stockholder's Agreement, by and among the Corporation and the
Investors named therein, dated as of October 31, 1997 (the "Investment
Agreement");
(iv) Increase or decrease (other than by conversion as
permitted hereby) the total number of authorized shares of Series Preferred
Stock;
(v) Pay or declare any dividend or distribution on any of
its capital stock;
(vi) Authorize any merger, consolidation of the Corporation
with or into any other company or entity, or authorize the reorganization or
sale of the Corporation or the sale of substantially all of the assets of the
Corporation;
(vii) Amend the charter documents of the Corporation or
amend the Bylaws of the Corporation in any manner that adversely affects the
preferences, powers, rights or privileges of the holders of Series Preferred
Stock;
(viii) Authorize any reclassification or recapitalization
of the outstanding capital stock of the Corporation;
(ix) Approve the annual operating budget of the Corporation;
(x) Change the composition or compensation of management of
the Corporation except as provided in the Investment Agreement; or
(xi) Incur, create, assume, become or be liable in any
manner with respect to, or permit to exist, any new or additional indebtedness
or liability in excess of $50,000, except as provided in the Investment
Agreement.
5.3.7 No Reissuance of Series Preferred Stock. No share or
shares of the Series Preferred Stock acquired by the Corporation by reason of
19
<PAGE>
redemption, purchase, conversion or otherwise shall be reissued, and all such
shares shall be canceled, retired, and eliminated from the shares which the
Corporation shall be authorized to issue. The Corporation may from time to time
take such appropriate corporate action as may be necessary to reduce the
authorized number of shares of the Series Preferred Stock accordingly.
5.3.8 Notices of Record Date. In the event (i) the
Corporation establishes a record date to determine the holders of any class of
securities who are entitled to receive any dividend or other distribution, or
(ii) there occurs any capital reorganization of the Corporation, any
reclassification or recapitalization of the capital stock of the Corporation,
any merger or consolidation of the Corporation, or any transfer of all or
substantially all of the assets of the Corporation to any other company, or any
other entity or person, or any voluntary or involuntary dissolution, liquidation
or winding up of the Corporation, the Corporation shall mail to each holder of
Series Preferred Stock at least 20 days prior to the record date specified
therein, a notice specifying (a) the date of such record date for the purpose of
such dividend or distribution and a description of such dividend or
distribution, (b) the date on which any such reorganization, reclassification,
transfer, consolidation, merger, dissolution, liquidation or winding up is
expected to become effective, and (c) the time, if any, that is to be fixed, as
to when the holders of record of Common Stock (or other securities) shall be
entitled to exchange their shares of Common Stock (or other securities) for
securities or other property deliverable upon such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation or
winding up.
5.3.9 Other Rights. Except as otherwise provided in this
Amended and Restated Certificate of Incorporation shares of each series of the
Series Preferred Stock and shares of Common Stock shall be identical in all
respects (each share of Series Preferred Stock having equivalent rights to the
number of shares of Common Stock into which it is then convertible), shall have
the same powers, preferences and rights, without preference of any such class or
share over any other such class or share, and shall be treated as a single class
of stock for all purposes.
5.3.10 Ranking. Each series of Series Preferred Stock shall rank
on a parity with the other series of Series Preferred Stock as to the
distribution of assets on liquidation, dissolution and winding up of the
Corporation. The Series Preferred Stock shall rank senior to the Common Stock
as to the distribution of assets on liquidation, dissolution and winding up of
the Corporation.
5.3.11 Miscellaneous.
(a) All notices referred to herein shall be in writing, and
all notices hereunder shall be deemed to have been given, upon the earlier of
delivery thereof by hand delivery, by courier, or by standard form of
telecommunication, addressed: (i) if to the Corporation, to its principal
executive
20
<PAGE>
office (Attention: President) and to the transfer agent, if any, for the Series
Preferred Stock or other agent of the Corporation designated as permitted hereby
or (ii) if to any holder of the Series Preferred Stock or Common Stock, as the
case may be, to such holder at the address of such holder as listed in the stock
record books of the Corporation (which may include the records of any transfer
agent for the Series Preferred Stock or Common Stock, as the case may be) or
(iii) to such other address as the Corporation or any such holder, as the case
may be, shall have designated by notice similarly given.
(b) The Corporation shall pay any and all stock transfer
and documentary stamp taxes that may be payable in respect of any issuance or
delivery of shares of Series Preferred Stock or shares of Common Stock or other
securities issued on account of Series Preferred Stock pursuant hereto or
certificates representing such shares or securities. The Corporation shall not,
however, be required to pay any such tax which may be payable in respect of any
transfer involved in the issuance or delivery of shares of Series Preferred
Stock or Common Stock or other securities in a name other than that in which the
shares of Series Preferred Stock with respect to which such shares or other
securities are issued or delivered were registered, or in respect of any payment
to any person with respect to any such shares or securities other than a payment
to the registered holder thereof, and shall not be required to make any such
issuance, delivery or payment unless and until the person otherwise entitled to
such issuance, delivery or payment has paid to the Corporation the amount of any
such tax or has established, to the satisfaction of the Corporation, that such
tax has been paid or is not payable.
(c) The Corporation may appoint, and from time to time
discharge and change, a transfer agent of the Series Preferred Stock. Upon any
such appointment or discharge of a transfer agent, the Corporation shall send
notice thereof by hand delivery, by courier, by standard form of
telecommunication or by first class mail (postage prepaid), to each holder of
record of the Series Preferred Stock.
5.4 Subject to the provisions of this Amended and Restated
Certificate of Incorporation and except as otherwise provided by law, the stock
of the Corporation, regardless of class, may be issued for such consideration
and for such corporate purposes as the Board of Directors may from time to time
determine.
6. Compromise, Arrangement or Reorganization. Whenever a compromise
or arrangement is proposed between this Corporation and its creditors or any
class of them and/or between this Corporation and its stockholders or any class
of them, any court of equitable jurisdiction within the State of Delaware may,
on the application in a summary way of this Corporation or of any creditor or
stockholder thereof or on the application of any receiver or receivers appointed
21
<PAGE>
for this Corporation under the provisions of Section 291 of the General
Corporation Law or on the application of trustees in dissolution or of any
receiver or receivers appointed for this Corporation under the provisions of
Section 279 of General Corporation Law order a meeting of the creditors or class
of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all stockholders or class of stockholders of this Corporation, as the case may
be, and also on this Corporation.
7. Limitation of Liability. No director of the Corporation shall be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (a) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(b) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (c) under Section 174 of the General
Corporation Law or (d) for any transaction from which the director derived any
improper personal benefits. If the General Corporation Law is hereafter amended
to authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the General
Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
8. Indemnification.
8.1 Indemnity Undertaking. To the extent not prohibited by law,
the Corporation shall indemnify any person (an "Eligible Person") who is or was
made, or threatened to be made, a party to any threatened, pending or completed
action, suit or proceeding (a "Proceeding"), whether civil, criminal,
administrative or investigative, including, without limitation, an action by or
in the right of the Corporation to procure a judgment in its favor, by reason of
the fact that such person, or a person of whom such person is the legal
representative, is or was a Director or officer of the Corporation, or, while a
Director or officer of the Corporation, is or was serving, at the request of the
Corporation, as a director or officer of any other corporation or in a capacity
with comparable authority or responsibilities for any partnership, joint
venture, trust, employee benefit plan or other enterprise (an "Other Entity"),
against judgments, fines, penalties, excise taxes, amounts paid in settlement
and costs, charges and expenses (including attorneys' fees, disbursements and
other charges).
22
<PAGE>
8.2 Payment of Expenses. The Corporation shall, from time to
time pay to an Eligible Person the funds necessary for payment of expenses,
including attorneys' fees and disbursements, incurred by or on behalf of such
Eligible Person in connection with any Proceeding, as such expenses are incurred
in advance of the final disposition of such Proceeding; provided, however, that,
if required by the General Corporation Law, such expenses incurred by or on
behalf of such Eligible Person may be paid in advance of the final disposition
of a Proceeding only upon receipt by the Corporation of an undertaking, by or on
behalf of such Eligible Person, to repay any such amount so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right of appeal that such Eligible Person is not entitled to be
indemnified for such expenses.
8.3 Certain Exclusions. Section 8.1 and 8.2 shall not include
any Proceeding commenced by any Eligible Person without the advance approval of
the Board of Directors.
8.4 Binding Effect. The provisions of this Section 8 shall be a
contract between the Corporation, on the one hand, and each Eligible Person, on
the other hand, pursuant to which the Corporation and each such Eligible Person
intend to be, and shall be, legally bound. No repeal or modification of this
Section 8 shall affect any rights or obligations with respect to any state of
facts then or theretofore existing or any proceeding theretofore or thereafter
brought or threatened based in whole or in part upon any such state of facts.
8.5 Procedural Rights. The rights to indemnification and
payment of expenses provided by, or granted pursuant to, this Section 8 shall be
enforceable by an Eligible Person entitled to such indemnification or payment of
expenses in any court of competent jurisdiction. The burden of proving that
such indemnification or payment of expenses is not appropriate shall be on the
Corporation. Neither the failure of the Corporation (including the
disinterested Directors on its Board of Directors, a committee of such
disinterested Directors, the Corporation's independent legal counsel and its
stockholders) to have made a determination prior to the commencement of such
action that such indemnification or payment of expenses is proper in the
circumstances, nor an actual determination by the Corporation (including the
disinterested Directors on its Board of Directors, a committee of such
disinterested Directors, the Corporation's independent legal counsel and its
stockholders) that such person is not entitled to such indemnification or
payment of expenses shall constitute a defense to the action or create a
presumption that such person is not so entitled. Notwithstanding anything to
the contrary in Section 8.3, such Eligible Person shall also be indemnified for
any expenses incurred in connection with successfully establishing his or her
right to such indemnification or payment of expenses, in whole or in part, in
any such proceeding.
8.6 Service Deemed at Corporation's Request. Any Director or
officer of the Corporation serving (a) as a director or officer of another
corporation
23
<PAGE>
of which a majority of the shares entitled to vote in the election of its
directors is held, directly or indirectly, by the Corporation or (b) any
employee benefit plan of the Corporation or any corporation referred to in
clause (a) shall be deemed to be doing so at the request of the Corporation.
8.7 Election of Applicable Law. Any person entitled to be
indemnified or to payment of expenses as a matter of right pursuant to this
Section 8 may elect to have the right to indemnification or payment of expenses
interpreted on the basis of the applicable law in effect at the time of the
occurrence of the event or events giving rise to the applicable Proceeding, to
the extent permitted by law, or on the basis of the applicable law in effect at
the time such indemnification or payment of expenses is sought. Such election
shall be made, by a notice in writing to the Corporation, at the time
indemnification or payment of expenses is sought; provided, however, that if no
such notice is given, the right to indemnification or payment of expenses shall
be determined by the law in effect at the time indemnification or payment of
expenses is sought.
8.8 Rights Not Exclusive. The rights to indemnification and
reimbursement or advancement of expenses provided by, or granted pursuant to,
this Section 8 shall not be deemed exclusive of any other rights to which a
person seeking indemnification or reimbursement or advancement of expenses may
have or hereafter be entitled under any statute, this Restated Certificate of
Incorporation, the By-laws, any agreement, any vote of stockholders or
disinterested Directors or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding such office.
8.9 Continuation of Benefits. The rights to indemnification and
reimbursement or advancement of expenses provided by, or granted pursuant to,
this Section 8 shall continue as to a person who has ceased to be a Director or
officer (or other person indemnified hereunder) and shall inure to the benefit
of the executors, administrators, legatees and distributees of such person.
8.10 Insurance. The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of an Other Entity,
against any liability asserted against such person and incurred by such person
in any such capacity, or arising out of such person's status as such, whether or
not the Corporation would have the power to indemnify such person against such
liability under the provisions of this Section 8 or under Section 145 of the
General Corporation Law or any other provision of law.
9. Directors. This Section is inserted for the management of the
business and for the conduct of the affairs of the Corporation and it is
expressly
24
<PAGE>
provided that it is intended to be in furtherance of and not in limitation or
exclusion of the powers conferred by applicable law.
9.1 Number, Election, and Terms of Office of Board of Directors.
The business of the Corporation shall be managed by a Board of Directors
consisting of not less than three or more than 15 members. The exact number of
directors within the minimum and maximum limitations specified in the preceding
sentence shall be fixed from time to time by resolution adopted by a majority of
the entire Board of Directors then in office, whether or not present at a
meeting. Directors need not be stockholders of the Corporation. The directors
shall be divided into three classes of approximately equal size with the term of
office of the first class to expire at the first annual meeting of stockholders
of the Corporation next following the end of the Corporation's fiscal year
ending December 31, 1998, the term of office of the second class to expire at
the first annual meeting of stockholders of the Corporation next following the
end of the Corporation's fiscal year ending December 31, 1999 and the term of
office of the third class to expire at the annual meeting of stockholders of the
Corporation next following the end of the Corporation's fiscal year ending
December 31, 2000. At each annual meeting of stockholders following such
initial election as specified above, directors elected to succeed those
directors whose terms expire shall be elected for a term of office to expire at
the third succeeding annual meeting of stockholders after their election.
Notwithstanding the foregoing, whenever, pursuant to the
provisions of Section 5.1 of this Amended and Restated Certificate of
Incorporation, the holders of any one or more series of Preferred Stock shall
have the right, voting separately as a series or together with holders of other
such series, to elect Directors at an annual or special meeting of stockholders,
the election, term of office, filling of vacancies and other features of such
directorships shall be governed by the terms of this Amended and Restated
Certificate of Incorporation and any certificate of designations applicable
thereto.
During any period when the holders of any series of Preferred
Stock have the right to elect additional Directors as provided for or fixed
pursuant to the provisions of this Amended and Restated Certificate of
Incorporation or any certificate of designation related thereto, then upon
commencement and for the duration of the period during which such right
continues: (i) the then otherwise total authorized number of Directors of the
Corporation shall automatically be increased by such specified number of
Directors, and the holders of such Preferred Stock shall be entitled to elect
the additional Directors so provided for or fixed pursuant to said provisions,
and (ii) each such additional Director shall serve until such Director's
successor shall have been duly elected and qualified, or until such Director's
right to hold such office terminates pursuant to said provisions, whichever
occurs earlier, subject to such Director's earlier death, disqualification,
resignation or removal. Except as otherwise provided by the Board in the
resolution or resolutions establishing such series, whenever the holders of any
series of Preferred Stock having such right
25
<PAGE>
to elect additional Directors are divested of such right pursuant to the
provisions of such stock, the terms of office of all such additional Directors
elected by the holders of such stock, or elected to fill any vacancies resulting
from the death, resignation, disqualification or removal of such additional
Directors, shall forthwith terminate and the total and authorized number of
Directors of the Corporation shall be reduced accordingly.
9.2 Tenure. Notwithstanding any provisions to the contrary
contained herein, (i) each director shall hold office until his or her successor
is elected and qualified, or until the earlier of such director's death,
resignation or removal and (ii) the term of any director who is also an officer
of the Corporation shall terminate if he or she ceases to be an officer of the
Corporation.
9.3 Newly Created Directorships and Vacancies. Subject to the
rights of the holders of any series of Preferred Stock then outstanding, newly
created directorships resulting from any increase in the authorized number of
directors or any vacancies in the Board of Directors resulting from death,
resignation, retirement, disqualification, removal from office or other cause
shall be filled by a majority vote of the remaining directors then in office
although less than a quorum, or by a sole remaining director and directors so
chosen shall hold office for a term expiring at the annual meeting of
stockholders at which the term of the class to which they have been elected
expires or, in each case, until their respective successors are duly elected and
qualified. No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director. When any director
shall give notice of resignation effective at a future date, the Board of
Directors may fill such vacancy to take effect when such resignation shall
become effective. In the event of a vacancy in the Board of Directors, the
remaining Directors, except as otherwise provided by law, may exercise the
powers of the full Board of Directors until the vacancy is filled.
9.4 Removal of Directors. Any one or more or all of the
directors may be removed, at any time, but only for cause by the stockholders
having at least a majority in voting power of the then issued and outstanding
shares of capital stock of the Corporation.
10. Action by Stockholders. Notwithstanding the provisions of
Section 228 of the General Corporation Law (or any successor statute), any
action required or permitted by the General Corporation Law to be taken at any
annual or special meeting of stockholders of the Corporation may be taken only
at such an annual or special meeting of stockholders and cannot be taken by
written consent without a meeting. At any annual meeting or special meeting of
stockholders of the Corporation, only such business shall be conducted as shall
have been brought before such meeting in the manner provided by the By-laws.
26
<PAGE>
11. Adoption, Amendment and/or Repeal of Bylaws. The Board of
Directors may from time to time adopt, amend or repeal the Bylaws; provided,
however, that any Bylaws adopted or amended by the Board of Directors may be
amended or repealed, and any Bylaws may be adopted, by a vote of the
stockholders having at least two-thirds of the voting power of the then issued
and outstanding shares of capital stock of the Corporation.
IN WITNESS WHEREOF, the undersigned has executed this Restated
Certification of Incorporation this _____ day of July, 1998.
PATHNET, INC.
By: ----------------------------------
Richard A. Jalkut
President and Chief Executive Officer
Attest:
By: --------------------------------------
Michael A. Lubin
Vice President, General Counsel and Secretary
27
<PAGE>
Exhibit 3.2
Amended and Restated Bylaws
of
Pathnet, Inc.
A Delaware Corporation
________________________
ARTICLE 1
DEFINITIONS
As used in these Bylaws, unless the context otherwise requires, the
term:
1.1 "Assistant Secretary" means an Assistant Secretary of the
Corporation.
1.2 "Assistant Treasurer" means an Assistant Treasurer of the
Corporation.
1.3 "Board" means the Board of Directors of the Corporation.
1.4 "Business Day" means any day which is not a Saturday, a Sunday,
or a day on which banks are authorized to close in the City of New York.
1.5 "Bylaws" means the bylaws of the Corporation, as amended from
time to time.
1.6 "Certificate of Incorporation" means the certificate of
incorporation of the Corporation, as amended, supplemented or restated from time
to time.
1.7 "Chairman" means the Chairman of the Board of the Corporation.
1.8 "Chief Executive Officer" means the Chief Executive Officer of
the Corporation.
1.9 "Corporation" means Pathnet, Inc.
1.10 "Directors" means directors of the Corporation.
<PAGE>
1.11 "Entire Board" means all Directors of the Corporation in office,
whether or not present at a meeting of the Board, but disregarding vacancies.
1.12 "Executive Vice President" means an Executive Vice President of
the Corporation.
1.13 "General Corporation Law" means the General Corporation Law of
the State of Delaware, as amended from time to time.
1.14 "Office of the Corporation" means the executive office of the
Corporation, anything in Section 131 of the General Corporation Law to the
contrary notwithstanding.
1.15 "President" means the President of the Corporation.
1.16 "Secretary" means the Secretary of the Corporation.
1.17 "Stockholders" means stockholders of the Corporation.
1.18 "Treasurer" means the Treasurer of the Corporation.
1.19 "Vice President" means a Vice President of the Corporation.
ARTICLE 2
STOCKHOLDERS
2.1 Place of Meetings. Every meeting of Stockholders shall be held
at the Office of the Corporation or at such other place within or without the
State of Delaware as shall be designated, from time to time, by the Board, the
Chairman or the President, and specified or fixed in the notice of such meeting
or in the waiver of notice thereof.
2.2 Annual Meeting. A meeting of Stockholders shall be held annually
for the election of Directors and the transaction of other business at such hour
and on such business day in each year as may be determined by resolution adopted
by affirmative vote of a majority vote of the Entire Board and designated in the
notice of meeting.
2.3 Deferred Meeting for Election of Directors, Etc. If the annual
meeting of Stockholders for the election of Directors and the transaction of
other business is not held on the date designated therefor or at any adjournment
of a meeting convened on such date, the Board shall call a meeting of
Stockholders for the
2
<PAGE>
election of Directors and the transaction of other business as soon thereafter
as convenient.
2.4 Special Meetings. A special meeting of Stockholders, unless
otherwise prescribed by statute, may be called at any time by the Board, the
Chairman or by the President. At any special meeting of Stockholders, no
business may be transacted other than (i) such business stated in the notice
thereof given pursuant to Section 2.6 hereof or in any waiver of notice thereof
given pursuant to Section 2.7 hereof (in a form prepared by the Secretary) or
(ii) such business as is related to the purpose or purposes of such meeting and
which is properly brought before the meeting by or at the direction of the
Board.
2.5 Fixing Record Date. For the purpose of (a) determining the
Stockholders entitled (i) to notice of or to vote at any meeting of Stockholders
or any adjournment thereof or (ii) to receive payment of any dividend or other
distribution or allotment of any rights, or to exercise any rights in respect of
any change, conversion or exchange of stock; or (b) any other lawful action, the
Board may fix a record date, which record date shall not precede the date upon
which the resolution fixing the record date was adopted by the Board and which
record date shall not be (x) in the case of clause (a)(i) above, more than sixty
nor less than ten days before the date of such meeting and (y) in the case of
clause (a)(ii) or (b) above, more than sixty days prior to such action. If no
such record date is fixed:
2.5.1 the record date for determining Stockholders
entitled to notice of or to vote at a meeting of Stockholders shall be at
the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; and
2.5.2 the record date for determining Stockholders for
any purpose other than those specified in Section 2.5.1 hereof shall be at
the close of business on the day on which the Board adopts the resolution
relating thereto.
When a determination of Stockholders entitled to notice of or to vote at any
meeting of Stockholders has been made as provided in this Section 2.5, such
determination shall apply to any adjournment thereof unless the Board fixes a
new record date for the adjourned meeting.
2.6 Notice of Meetings of Stockholders. Except as otherwise provided
in Section 2.7 hereof, whenever under the provisions of any statute, the
Certificate of Incorporation or these Bylaws, Stockholders are required or
permitted to take any action at a meeting, written notice shall be given stating
the place, date and hour of the meeting and, in the case of a special meeting,
the purpose or purposes for which the meeting is called. Unless otherwise
provided by any statute, the
3
<PAGE>
Certificate of Incorporation or these By-laws, a copy of the notice of any
meeting shall be given, personally or by mail, not less than ten nor more than
sixty days before the date of the meeting, to each Stockholder entitled to
notice of or to vote at such meeting. If mailed, such notice shall be deemed to
be given when deposited in the United States mail, with postage prepaid,
directed to the Stockholder at his or her address as it appears on the records
of the Corporation. An affidavit of the Secretary or an Assistant Secretary or
of the transfer agent of the Corporation that the notice required by this
Section 2.6 has been given shall, in the absence of fraud, be prima facie
evidence of the facts stated therein. When a meeting is adjourned to another
time or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken,
and at the adjourned meeting any business may be transacted that might have been
transacted at the meeting as originally called. If, however, the adjournment is
for more than thirty days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each Stockholder of record entitled to vote at the meeting.
2.7 Waivers of Notice. Whenever the giving of any notice is required
by statute, the Certificate of Incorporation or these Bylaws, a waiver thereof,
in writing, signed by the Stockholder or Stockholders entitled to said notice,
whether before or after the event as to which such notice is required, shall be
deemed equivalent to notice. Attendance by a Stockholder at a meeting shall
constitute a waiver of notice of such meeting except when the Stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business on the ground that the meeting has
not been lawfully called or convened.
2.8 List of Stockholders. The Secretary shall prepare and make, or
cause to be prepared and made, at least ten days before every meeting of
Stockholders, a complete list of the Stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
Stockholder and the number of shares registered in the name of each Stockholder.
If any voting group exists, such list shall be arranged by voting group and
within each voting group by series or class of shares. Such list shall be open
to the examination of any Stockholder, the Stockholder's agent or attorney, at
the Stockholder's expense, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof, and may be
inspected by any Stockholder who is present. The Corporation shall maintain the
list of Stockholders in written form or in another form capable of conversion
into written form within a reasonable time. Upon the willful neglect or refusal
of the Directors to produce such a list at any meeting for the election of
Directors, they shall be ineligible for election to any office at such meeting.
The stock ledger shall be the only evidence as to who are the Stockholders
entitled to
4
<PAGE>
examine the stock ledger, the list of Stockholders or the books of the
Corporation, or to vote in person or by proxy at any meeting of Stockholders.
2.9 Quorum of Stockholders; Adjournment. Except as otherwise
provided by any statute, the Certificate of Incorporation or these Bylaws, the
holders of a majority of all outstanding shares of stock entitled to vote at any
meeting of Stockholders, present in person or represented by proxy, shall
constitute a quorum for the transaction of any business at such meeting. When a
quorum is once present to organize a meeting of Stockholders, it is not broken
by the subsequent withdrawal of any Stockholders. The holders of a majority of
the shares of stock present in person or represented by proxy at any meeting of
Stockholders, including an adjourned meeting, whether or not a quorum is
present, may adjourn such meeting to another time and place. Shares of its own
stock belonging to the Corporation or to another corporation, if a majority of
the shares entitled to vote in the election of Directors of such other
corporation is held, directly or indirectly, by the Corporation, shall neither
be entitled to vote nor be counted for quorum purposes; provided, however, that
the foregoing shall not limit the right of the Corporation to vote stock,
including but not limited to its own stock, held by it in a fiduciary capacity.
2.10 Voting; Proxies. Unless otherwise provided in the Certificate of
Incorporation, every Stockholder of record shall be entitled at every meeting of
Stockholders to one vote for each share of capital stock standing in his or her
name on the record of Stockholders determined in accordance with Section 2.5
hereof. If the Certificate of Incorporation provides for more or less than one
vote for any share on any matter, each reference in the Bylaws or the General
Corporation Law to a majority or other proportion of stock shall refer to such
majority or other proportion of the votes of such stock. The provisions of
Sections 212 and 217 of the General Corporation Law shall apply in determining
whether any shares of capital stock may be voted and the persons, if any,
entitled to vote such shares; but the Corporation shall be protected in assuming
that the persons in whose names shares of capital stock stand on the stock
ledger of the Corporation are entitled to vote such shares. Holders of
redeemable shares of stock are not entitled to vote after the notice of
redemption is mailed to such holders and a sum sufficient to redeem the stocks
has been deposited with a bank, trust company, or other financial institution
under an irrevocable obligation to pay the holders the redemption price on
surrender of the shares of stock. At any meeting of Stockholders (at which a
quorum was present to organize the meeting), all matters, except as otherwise
provided by statute or by the Certificate of Incorporation or by these Bylaws,
shall be decided by a majority of the votes cast at such meeting by the holders
of shares present in person or represented by proxy and entitled to vote
thereon, whether or not a quorum is present when the vote is taken. Where a
separate vote by a class or classes of stock is required by statute, the
Certificate of Incorporation or these Bylaws, a majority of the outstanding
shares of such class or classes present in
5
<PAGE>
person or represented by proxy shall constitute a quorum entitled to take action
with respect to that vote on that matter, and such matter shall be decided by a
majority of the votes of such class or classes present in person or represented
by proxy at the meeting. Directors may be elected either by written ballot or
by voice vote. In voting on any other question on which a vote by ballot is
required by law or is demanded by any Stockholder entitled to vote, the voting
shall be by ballot. Each ballot shall be signed by the Stockholder voting or
the Stockholder's proxy and shall state the number of shares voted. On all
other questions, the voting may be by voice vote. Each Stockholder entitled to
vote at a meeting of Stockholders may authorize another person or persons to act
for such Stockholder by proxy. The validity and enforceability of any proxy
shall be determined in accordance with Section 212 of the General Corporation
Law. A Stockholder may revoke any proxy that is not irrevocable by attending
the meeting and voting in person or by filing an instrument in writing revoking
the proxy or by delivering a proxy in accordance with applicable law bearing a
later date to the Secretary.
2.11 Voting Procedures and Inspectors of Election at Meetings of
Stockholders. The Corporation, in advance of any meeting of Stockholders, shall
appoint one or more inspectors to act at the meeting and make a written report
thereof. The Corporation may designate one or more persons as alternate
inspectors to replace any inspector who fails to act. If no inspector or
alternate is able to act at a meeting, the person presiding at the meeting shall
appoint, one or more inspectors to act at the meeting. Each inspector, before
entering upon the discharge of his or her duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his or her ability. The inspectors shall (a) ascertain
the number of shares outstanding and the voting power of each, (b) determine the
shares represented at the meeting and the validity of proxies and ballots,
(c) count all votes and ballots, (d) determine and retain for a reasonable
period a record of the disposition of any challenges made to any determination
by the inspectors, and (e) certify their determination of the number of shares
represented at the meeting and their count of all votes and ballots. The
inspectors may appoint or retain other persons or entities to assist the
inspectors in the performance of their duties. The date and time of the opening
and the closing of the polls for each matter upon which the Stockholders will
vote at a meeting shall be determined by the person presiding at the meeting and
shall be announced at the meeting. No ballot, proxies or votes, or any
revocation thereof or change thereto, shall be accepted by the inspectors after
the closing of the polls unless the Court of Chancery of the State of Delaware
upon application by a Stockholder shall determine otherwise.
2.12 Conduct of Meetings. At each meeting of Stockholders, the
President, or in the absence of the President, the Chairman, or if there is no
Chairman or if there be one and the Chairman is absent, an Executive Vice
President, and in case more than one Executive Vice President shall be present,
that Executive Vice President designated by the Board (or in the absence of any
such designation, in the order of their first election, present), or it there is
no Executive Vice President or if there be one and the Executive Vice President
is absent, a Vice President, and in case more than one Vice President shall be
present, that Vice President designated by
6
<PAGE>
the Board (or in the absence of any such designation, in the order of their
first election, present), shall act as chairman of the meeting. The Secretary,
or in his or her absence one of the Assistant Secretaries, shall act as
secretary of the meeting. In case none of the officers above designated to act
as chairman or secretary of the meeting, respectively, shall be present, a
chairman or a secretary of the meeting, as the case may be, shall be chosen by a
majority of the votes cast at such meeting by the holders of shares of capital
stock present in person or represented by proxy and entitled to vote at the
meeting.
(b) Only persons who are nominated in accordance with the
following procedures shall be eligible for election as Directors. Nominations
of persons for election to the Board may be made at an annual meeting or special
meeting of Stockholders (i) by or at the direction of the Board, (ii) by any
nominating committee or person appointed by the Board or (iii) by any
Stockholder of the Corporation entitled to vote for the election of Directors at
the meeting who complies with the provisions of the following paragraph (persons
nominated in accordance with (iii) above are referred to herein as "Stockholder
nominees").
In addition to any other applicable requirements, all
nominations of Stockholder nominees must be made by written notice given by or
on behalf of a Stockholder of record of the Corporation (the "Notice of
Nomination"). The Notice of Nomination must be delivered personally to, or
mailed to, and received at the principal executive offices of the Corporation,
addressed to the attention of the Secretary, not less than 30 days nor more than
60 days prior to the annual meeting or special meeting of Stockholders;
provided, however, that in the event that less than 40 days' notice or prior
public disclosure of the date of the meeting is given or made to Stockholders,
notice by the Stockholder to be timely, must be received no later than the close
of business on the tenth day following the day on which such notice of the date
of the meeting was mailed or such public disclosure was made. Such Notice of
Nomination shall set forth (i) the name and record address of the Stockholder
proposing to make nominations, (ii) the class and number of shares of capital
stock held of record, held beneficially and represented by proxy held by such
person as of the record date for the meeting and as of the date of such Notice
of Nomination, (iii) all information regarding each Stockholder nominee that
would be required to be set forth in a definitive proxy statement filed with the
Securities and Exchange Commission pursuant to Section 14 of the Securities
Exchange Act of 1934, as amended, or any successor statute thereto (the
"Exchange Act"), and the written consent of each such Stockholder nominee to
serve if elected, and (iv) all other information that would be required to be
filed with the Securities and Exchange Commission if the person proposing such
nominations were a participant in a solicitation subject to Section 14 of the
Exchange Act or any successor statute thereto. To the extent not included in
items (i) to (iv) above, such Notice of Nomination shall further set forth as to
the Stockholder giving such notice: (a) the name and address, as they appear on
the Corporation's stock transfer books, of such Stockholder and of the
beneficial owners (if any) of the Corporation's capital stock registered in such
7
<PAGE>
Stockholder's name and the name and address of other Stockholders known by such
Stockholder to be supporting such Stockholder nominee(s), (b) the class and
number of shares of the Corporation's capital stock which are held of record,
beneficially owned or represented by proxy by such Stockholder and by any other
Stockholders known by such Stockholder to be supporting such Stockholder
nominee(s) on the record date for the meeting in question (if such date shall
then have been made publicly available) and on the date of such Stockholder's
Notice of Nomination, and (c) a description of all arrangements or
understandings between such Stockholder and each Stockholder nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by such Stockholder. The chairman of
the meeting shall, if the facts warrant, determine and declare to the meeting,
that any proposed nomination of a Stockholder nominee was not made in accordance
with the foregoing procedures and, if he should so determine, he shall declare
to the meeting and the defective nomination shall be discarded. For purposes of
Sections 2.12(b) and (c) hereof, public disclosure shall be deemed to be first
made when disclosure of such date of the annual meeting of Stockholders is first
made in a press release reported by the Dow Jones News Services, Associated
Press or comparable national news service, or in a document publicly filed by
the Corporation with the Securities and Exchange Commission pursuant to
Sections 13, 14 or 15(d) of the Exchange Act or any successor statute thereto.
(c) At any annual meeting of Stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. To
be properly brought before an annual meeting of Stockholders, (i) business must
be specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board, (ii) otherwise properly brought before the meeting
by or at the direction of the Board or (iii) otherwise properly brought before
the meeting by a Stockholder in accordance with the terms of the following
paragraph (business brought before the meeting in accordance with (iii) above is
referred to as "Stockholder business").
In addition to any other applicable requirements, all
proposals of Stockholder business must be made by written notice given by or on
behalf of a Stockholder of record of the Corporation (the "Notice of Business").
The Notice of Business must be delivered personally to, or mailed to, and
received at the principal executive offices of the Corporation, addressed to the
attention of the Secretary, not less than 30 days nor more than 60 days prior to
the annual meeting of Stockholders; provided, however, that in the event that
less than 40 days' notice or prior public disclosure of the date of the meeting
is given or made to Stockholders, notice by the Stockholder to be timely, must
be received no later than the close of business on the tenth day following the
day on which such notice of the date of the meeting was mailed or such public
disclosure was made. Such Notice of Business shall set forth (i) the name and
record address of the Stockholder proposing such Stockholder business, (ii) the
class and number of shares of capital stock held of record, held beneficially
and represented by proxy held by such person as of the
8
<PAGE>
record date for the meeting and as of the date of such Notice of Business,
(iii) a brief description of the Stockholder business desired to be brought
before the annual meeting and the reasons for conducting such Stockholder
business at the annual meeting, (iv) any material interest of the Stockholder in
such Stockholder business and (v) all other information that would be required
to be filed with the Securities and Exchange Commission if the person proposing
such Stockholder business were a participant in a solicitation subject to
Section 14 of the Exchange Act. Notwithstanding anything in these Bylaws to the
contrary, no business shall be conducted at the annual meeting of Stockholders
except in accordance with the procedures set forth in this Section 2.12(c),
provided, however, that nothing in this Section 2.12(c) shall be deemed to
preclude discussion by any Stockholder of any business properly brought before
the annual meeting in accordance with said procedure. The chairman of the
meeting shall, if the facts warrant, determine and declare to the meeting, that
business was not properly brought before the meeting in accordance with the
foregoing procedures and, if he should so determine, he shall declare to the
meeting and any such business not properly brought before the meeting shall not
be transacted.
2.13 Order of Business. The order of business at all meetings of
Stockholders shall be as determined by the chairman of the meeting, but the
order of business to be followed at any meeting at which a quorum is present may
be changed by a majority of the votes cast at such meeting by the holders of
shares of capital stock present in person or represented by proxy and entitled
to vote at the meeting.
2.14 Action by Stockholders. Notwithstanding the provisions of
section 228 of the General Corporation Law (or any successor statute), any
action required or permitted by the General Corporation Law to be taken at any
annual or special meeting of Stockholders of the Corporation may be taken only
at such an annual or special meeting of Stockholders and cannot be taken by
written consent without a meeting.
ARTICLE 3
DIRECTORS
3.1 General Powers. Except as otherwise provided in the Certificate
of Incorporation, the business and affairs of the Corporation shall be managed
by or under the direction of the Board. The Board may adopt such rules and
regulations, not inconsistent with the Certificate of Incorporation or these
Bylaws or applicable laws, as it may deem proper for the conduct of its meetings
and the management of the Corporation. In addition to the powers expressly
conferred by these Bylaws, the Board may exercise all powers and perform all
acts that are not required, by these Bylaws or the Certificate of Incorporation
or by statute, to be exercised and performed by the Stockholders.
9
<PAGE>
3.2 Number; Qualification; Term of Office. The Board shall consist
of not less than three or more than 15 members. The exact number of Directors
within the minimum and maximum limitations specified in the preceding sentence
shall be fixed from time to time by resolution adopted by a majority of the
Entire Board then in office, whether or not present at a meeting. Directors
need not be Stockholders. The Directors shall be divided into three classes
with the term of office of the first class to expire at the first annual meeting
of Stockholders of the Corporation next following the end of the Corporation's
fiscal year ending December 31, 1998, the term of office of the second class to
expire at the first annual meeting of Stockholders of the Corporation next
following the end of the Corporation's fiscal year ending December 31, 1999 and
the term of office of the third class to expire at the annual meeting of
Stockholders of the Corporation next following the end of the Corporation's
fiscal year ending December 31, 2000. At each annual meeting of Stockholders
following such initial election as specified above, Directors elected to succeed
those Directors whose terms expire shall be elected for a term of office to
expire at the third succeeding annual meeting of Stockholders after their
election.
3.3 Tenure. Notwithstanding any provisions to the contrary contained
herein, (i) each Director shall hold office until his or her successor is
elected and qualified, or until the earlier of such Director's death,
resignation or removal and (ii) the term of any director who is also an officer
of the Corporation shall terminate if he or she ceases to be an officer of the
Corporation.
3.4 Election. Directors shall, except as otherwise required by
statute or by the Certificate of Incorporation, be elected by a plurality of the
votes cast at a meeting of Stockholders by the holders of shares present in
person or represented by proxy at the meeting and entitled to vote in the
election.
3.5 Newly Created Directorships and Vacancies. Subject to the rights
of the holders of any series of preferred stock of the Corporation then
outstanding, newly created directorships resulting from any increase in the
authorized number of Directors or any vacancies in the Board resulting from
death, resignation, retirement, disqualification, removal from office or other
cause shall be filled by a majority vote of the remaining Directors then in
office although less than a quorum, or by a sole remaining Director and
Directors so chosen shall hold office for a term expiring at the annual meeting
of stockholders at which the term of the class to which they have been elected
expires or, in each case, until their respective successors are duly elected and
qualified. No decrease in the number of Directors constituting the Board shall
shorten the term of any incumbent Director. When any Director shall give notice
of resignation effective at a future date, the Board may fill such vacancy to
take effect when such resignation shall become effective.
3.6 Resignation. Any Director may resign at any time by written
notice to the Corporation. Such resignation shall take effect at the time
therein
10
<PAGE>
specified, and, unless otherwise specified in such resignation, the acceptance
of such resignation shall not be necessary to make it effective.
3.7 Removal. Any one or more or all of the Directors may be removed,
at any time, but only for cause by the Stockholders having at least a majority
in voting power of the then issued and outstanding shares of capital stock of
the Corporation. If pursuant to the Certificate of Incorporation a Director is
elected by a voting group of Stockholders, only the Stockholders of the voting
group may participate in the vote to remove such Director.
3.8 Compensation. Each Director, in consideration of his or her
service as such, may receive from the Corporation such amount per annum or such
fees for attendance at Directors' meetings, or both, as the Board may from time
to time determine, together with reimbursement for the reasonable out-of-pocket
expenses, if any, incurred by such Director in connection with the performance
of his or her duties. Each Director who shall serve as a member of any
committee of Directors in consideration of serving as such may receive such
additional amount per annum or such fees for attendance at committee meetings,
or both, as the Board may from time to time determine, together with
reimbursement for the reasonable out-of-pocket expenses, if any, incurred by
such Director in the performance of his or her duties. Nothing contained in
this Section 3.8 shall preclude any Director from serving the Corporation or its
subsidiaries in any other capacity and receiving proper compensation therefor.
3.9 Times and Places of Meetings. The Board may hold meetings, both
regular and special, either within or without the State of Delaware. The times
and places for holding meetings of the Board may be fixed from time to time by
resolution of the Board or (unless contrary to a resolution of the Board) in the
notice of the meeting.
3.10 Annual Meetings. On the day when and at the place where the
annual meeting of Stockholders for the election of Directors is held, and as
soon as practicable thereafter, the Board may hold its annual meeting, without
notice of such meeting, provided a quorum shall be present, for the purposes of
organization, the election of officers and the transaction of other business.
The annual meeting of the Board may be held at any other time and place
specified in a notice given as provided in Section 3.12 hereof for special
meetings of the Board or in a waiver of notice thereof.
3.11 Regular Meetings. Regular meetings of the Board may be held
without notice at such times and at such places as shall from time to time be
determined by the Board.
3.12 Special Meetings. Special meetings of the Board may be called by
the President or any Director then serving on at least one day's notice to each
11
<PAGE>
Director given by one of the means specified in Section 3.15 hereof other than
by mail, or on at least three days' notice if given by mail.
3.13 Telephone Meetings. Directors or members of any committee
designated by the Board may participate in a meeting of the Board or of such
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Section 3.13 shall constitute
presence in person at such meeting.
3.14 Adjourned Meetings. A majority of the Directors present at any
meeting of the Board, including an adjourned meeting, whether or not a quorum is
present, may adjourn such meeting to another time and place. At least one day's
notice of any adjourned meeting of the Board shall be given to each Director
whether or not present at the time of the adjournment, if such notice shall be
given by one of the means specified in Section 3.15 hereof other than by mail,
or at least three days' notice if by mail. Any business may be transacted at an
adjourned meeting that might have been transacted at the meeting as originally
called.
3.15 Notice Procedure. Subject to Sections 3.13 and 3.16 hereof,
whenever, under the provisions of any statute, the Certificate of Incorporation
or these Bylaws, notice is required to be given to any Director, such notice
shall be deemed given effectively if given in person or by telephone, by mail
addressed to such Director at such Director's address as it appears on the
records of the Corporation, with postage thereon prepaid, or by telegram, telex,
telecopy or similar means addressed as aforesaid.
3.16 Waiver of Notice. Whenever the giving of any notice is required
by statute, the Certificate of Incorporation or these Bylaws, a waiver thereof,
in writing, signed by the person or persons entitled to said notice, whether
before or after the event as to which such notice is required, shall be deemed
equivalent to notice. Attendance by a person at a meeting shall constitute a
waiver of notice of such meeting except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business on the ground that the meeting has not been lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the Directors or a committee of Directors
need be specified in any written waiver of notice unless so required by statute,
the Certificate of Incorporation or these Bylaws.
3.17 Organization. At each meeting of the Board, the Chairman, or in
the absence of the Chairman, the President, or in the absence of the President,
a chairman chosen by a majority of the Directors present, shall preside. The
Secretary shall act as secretary at each meeting of the Board. In case the
Secretary shall be absent from any meeting of the Board, an Assistant Secretary
shall perform the duties of secretary at such meeting; and in the absence from
any such meeting of the
12
<PAGE>
Secretary and all Assistant Secretaries, the person presiding at the meeting may
appoint any person to act as secretary of the meeting.
3.18 Quorum of Directors. Except as otherwise expressly provided by
statute or the Certificate of Incorporation, the presence in person of a
majority of the Entire Board shall be necessary and sufficient to constitute a
quorum for the transaction of business at any meeting of the Board, but a
majority of a smaller number may adjourn any such meeting to a later date.
3.19 Action by Majority Vote. Except as otherwise expressly required
by statute, the Certificate of Incorporation or these Bylaws, the act of a
majority of the Directors present at a meeting at which a quorum is present
shall be the act of the Board.
3.20 Action Without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these By-laws, any action required or permitted
to be taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if all Directors or members of such committee, as the case may
be, consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee.
ARTICLE 4
COMMITTEES OF THE BOARD
The Board, by resolution adopted by a majority of the Entire Board,
may designate one or more committees, each committee to consist of one or more
of the Directors of the Corporation. The Board may designate one or more
Directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of such committee. If a member of a
committee shall be absent from any meeting, or disqualified from voting thereat,
the remaining member or members present and not disqualified from voting,
whether or not such member or members constitute a quorum, may, by a unanimous
vote, appoint another member of the Board to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the Board or these Bylaws, shall have and may
exercise all the powers and authority of the Board in the management of the
business and affairs of the Corporation, and may authorize the seal of the
Corporation to be impressed on all papers that may require it, but no such
committee shall have the power or authority of the Board in reference to: (i)
approving, or recommending to the Stockholders, any action that the Delaware
General Corporation Law requires to be approved by the Stockholders; (ii)
filling vacancies on the Board or on any of its committees; (iii) amending the
Certificate of Incorporation; (iv) adopting, amending, or repealing these
Bylaws; (v) approving a plan of merger not requiring approval of the
Stockholders; (vi) authorizing or
13
<PAGE>
approving a distribution, except according to a general formula or method
prescribed by the Board; or (vii) authorizing or approving the issuance or sale
or contract for sale of shares, or determine the designation and relative
rights, preferences, and limitations of a class or series of shares, except that
the Board may authorize a committee, or a senior executive officer of the
Corporation, to do so within limits specifically prescribed by the Board.
Unless otherwise specified in the resolution of the Board designating a
committee, at all meetings of such committee a majority of the total number of
members of the committee shall constitute a quorum for the transaction of
business, and the vote of a majority of the members of the committee present at
any meeting at which there is a quorum shall be the act of the committee. Each
committee shall keep regular minutes of its meetings and report the same to the
Board when required. Unless the Board otherwise provides, each committee
designated by the Board may make, alter and repeal rules for the conduct of its
business. In the absence of such rules each committee shall conduct its
business in the same manner as the Board conducts its business pursuant to
Article 3 of these Bylaws.
ARTICLE 5
OFFICERS
5.1 Positions. The officers of the Corporation shall be a President,
a Secretary, a Treasurer and such other officers as the Board may appoint,
including a Chairman, a Chief Executive Officer, one or more Executive Vice
Presidents, one or more Vice Presidents and one or more Assistant Secretaries
and Assistant Treasurers, who shall exercise such powers and perform such duties
as shall be determined from time to time by the Board. The Board may use
descriptive words or phrases to designate the standing, seniority or areas of
special competence of the Vice Presidents elected or appointed by it. Any
number of offices may be held by the same person unless the Certificate of
Incorporation or these Bylaws otherwise provide.
5.2 Appointment. The officers of the Corporation shall be chosen by
the Board at its annual meeting or at such other time or times as the Board
shall determine.
5.3 Compensation. The compensation of all officers of the
Corporation shall be fixed by, or in the manner prescribed by, the Board. No
officer shall be prevented from receiving a salary or other compensation by
reason of the fact that the officer is also a Director.
5.4 Term of Office. Each officer of the Corporation shall hold
office for the term for which he or she is elected and until such officer's
successor is chosen and qualifies or until such officer's earlier death,
resignation or removal. Any officer may resign at any time upon written notice
to the Corporation. Such
14
<PAGE>
resignation shall take effect at the date of receipt of such notice or at such
later time as is therein specified, and, unless otherwise specified, the
acceptance of such resignation shall not be necessary to make it effective. The
resignation of an officer shall be without prejudice to the contract rights of
the Corporation, if any. Any officer elected or appointed by the Board may be
removed at any time, with or without cause, by vote of a majority of the Entire
Board. Any vacancy occurring in any office of the Corporation shall be filled
by the Board. The removal of an officer without cause shall be without
prejudice to the officer's contract rights, if any. The election or appointment
of an officer shall not of itself create contract rights.
5.5 Fidelity Bonds. The Corporation may secure the fidelity of any
or all of its officers or agents by bond or otherwise.
5.6 Chairman. The Chairman shall exercise such duties as are and
may be prescribed from time to time by the Board. In the absence of or
disability of the Chairman, an officer appointed by the Chairman, or if the
Chairman fails to make such appointment, by the Board, shall perform the duties
and exercise the powers of the Chairman. The Chairman may sign, execute and
deliver, in the name of the Corporation, powers of attorney, contracts, bonds
and other obligations which implement policies established by the Board. The
Chairman shall preside at all meetings the Board at which he is present, and
shall perform such other duties as may be prescribed from time to time by the
Board or these Bylaws.
5.7 Chief Executive Officer. The Chief Executive Officer shall
exercise such duties as are and may be prescribed from time to time by the
Board. The Chief Executive Officer may sign, execute and deliver, in the name
of the Corporation, powers of attorney, contracts bonds and other obligations
which implement policies established by the Board.
5.8 President. The President shall be responsible to, and shall
exercise such duties as are and may be prescribed from time to time by, the
Board. The President may sign, execute and deliver, in the name of the
Corporation, powers of attorney, contracts, bonds and other obligations which
implement policies established by the Board.
5.9 Executive Vice President. In the absence of the President or in
the event of his death, inability or refusal to act, the Executive Vice
President, if any, or in the event there be more than one Executive Vice
President, the Executive Vice Presidents, in the order designated, or in the
absence of any designation, then in the order of their first election, shall
perform the duties of the President, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the President. The
Executive Vice President shall generally assist the President and shall perform
such other duties and have such other powers as the Board may from time to time
prescribe.
15
<PAGE>
5.10 Vice President. In the absence of the Executive Vice President
or in the event of his death, inability or refusal to act, the Vice President,
if any, or in the event there be more than one Vice President, the Vice
Presidents, in the order designated, or in the absence of any designation, then
in the order of their first election, shall perform the duties of the Executive
Vice President, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the Executive Vice President. The Vice President
shall generally assist the President and shall perform such other duties and
have such other powers as the Board may from time to time prescribe.
5.11 Secretary. The Secretary shall attend all meetings of the Board
and all meetings of the stockholders and shall record all the proceedings of the
meetings of the stockholders and of the Board in a book to be kept for that
purpose and shall perform like duties for the standing committees when requested
by such committees. The Secretary shall give, or cause to be given, required
notice of all meetings of the stockholders and the Board, and shall perform such
other duties as may be prescribed by the Board or assigned by the President or
Chairman. The Secretary shall have custody of the stock certificate books and
stockholder records and such other books and records as the Board may direct.
The Secretary shall have custody of the corporate seal of the Corporation and
shall have authority to affix the same to any instrument, and when so affixed,
it may be attested by the Secretary's signature. The Board may give general
authority to any other officer to affix the seal of the Corporation and to
attest the affixing thereof by his signature.
5.12 Assistant Secretary. Any Assistant Secretary elected by the
Board shall have the same duties as prescribed for the Secretary and shall
perform such duties at the direction of the Secretary, to assist the Secretary,
and in the absence of the Secretary, at the direction of the Chairman, the
President or any Vice President, and otherwise as directed from time to time by
the Chairman, the President or the Board.
5.13 Treasurer or Chief Financial Officer. The Treasurer or Chief
Financial Officer shall have the custody of the corporate funds and securities
and shall keep full and accurate accounts of receipts and disbursements in books
belonging to the Corporation, and shall deposit all moneys and other valuable
effects in the name and to the credit of the Corporation in such depositories as
may be designated by the Board, and shall disburse the funds of the Corporation,
as may be ordered by the Board, taking proper vouchers for such disbursements,
and shall render to the Chairman, the President and the Board at its regular
meetings, or when the Board so requires, an account of all his transactions as
treasurer and of the financial condition of the Corporation, and shall perform
such other duties and have such other powers as the Board, the Chairman or the
President may from time to time prescribe.
5.14 Assistant Treasurer. Any Assistant Treasurer elected by the
Board shall have the same duties as prescribed for the Treasurer and shall
perform
16
<PAGE>
such duties at the direction of the Treasurer, to assist the Treasurer, and in
the absence of the Treasurer, at the direction of the Chairman, the President or
any Vice President, and otherwise as directed from time to time by the Chairman,
the President or the Board.
ARTICLE 6
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
6.1 Execution of Contracts. The Board, except as otherwise provided
in these Bylaws, may prospectively or retroactively authorize any officer or
officers, employee or employees or agent or agents, in the name and on behalf of
the Corporation, to enter into any contract or execute and deliver any
instrument, and any such authority may be general or confined to specific
instances, or otherwise limited.
6.2 Loans. The Board may prospectively or retroactively authorize
the President or any other officer, employee or agent of the Corporation to
effect loans and advances at any time for the Corporation from any bank, trust
company or other institution, or from any firm, corporation or individual, and
for such loans and advances the person so authorized may make, execute and
deliver promissory notes, bonds or other certificates or evidences of
indebtedness of the Corporation, and, when authorized by the Board so to do, may
pledge and hypothecate or transfer any securities or other property of the
Corporation as security for any such loans or advances. Such authority
conferred by the Board may be general or confined to specific instances, or
otherwise limited.
6.3 Checks, Drafts, Etc. All checks, drafts and other orders for the
payment of money out of the funds of the Corporation and all evidences of
indebtedness of the Corporation shall be signed on behalf of the Corporation in
such manner as shall from time to time be determined by resolution of the Board.
6.4 Deposits. The funds of the Corporation not otherwise employed
shall be deposited from time to time to the order of the Corporation with such
banks, trust companies, investment banking firms, financial institutions or
other depositaries as the Board may select or as may be selected by an officer,
employee or agent of the Corporation to whom such power to select may from time
to time be delegated by the Board.
17
<PAGE>
ARTICLE 7
STOCK AND DIVIDENDS
7.1 Certificates Representing Shares. The shares of capital stock of
the Corporation shall be represented by certificates in such form (consistent
with the provisions of Section 158 of the General Corporation Law) as shall be
approved by the Board. Such certificates shall be signed by the Chairman, the
President, an Executive Vice President or a Vice President and by the Secretary
or an Assistant Secretary or the Treasurer or an Assistant Treasurer, and may be
impressed with the seal of the Corporation or a facsimile thereof. If the
Corporation is authorized to issue direct classes of shares or different series
within a class, the designations, relative rights, preferences, and limitations
applicable to each class and the variations in rights, preferences, and
limitations determined for each series (and the authority of the Board to
determine variations for future series) shall be summarized on the front or back
of each certificate of shares of such class or series. Alternatively, each
certificate may state conspicuously on its front or back that the Corporation
will furnish the Stockholder this information on request in writing and without
charge. All certificates for shares shall be consecutively numbered or
otherwise identified. The name and address of the person to whom the shares
represented thereby are issued, with the number of shares and date of issue,
shall be entered on the stock transfer books of the Corporation. The signatures
of the officers upon a certificate may be facsimiles, if the certificate is
countersigned, manually or by facsimile signature, by a transfer agent or
registrar other than the Corporation itself or its employee. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon any certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, such certificate
may, unless otherwise ordered by the Board, be issued by the Corporation with
the same effect as if such person were such officer, transfer agent or registrar
at the date of issue.
7.2 Transfer of Shares. Transfers of shares of capital stock of the
Corporation shall be made only on the books of the Corporation by the holder
thereof or by the holder's duly authorized attorney appointed by a power of
attorney duly executed and filed with the Secretary or a transfer agent of the
Corporation, and on surrender of the certificate or certificates representing
such shares of capital stock properly endorsed for transfer and upon payment of
all necessary transfer taxes. Every certificate exchanged, returned or
surrendered to the Corporation shall be marked "Canceled," with the date of
cancellation, by the Secretary or an Assistant Secretary or the transfer agent
of the Corporation. A person in whose name shares of capital stock shall stand
on the books of the Corporation shall be deemed the owner thereof to receive
dividends, to vote as such owner and for all other purposes as respects the
Corporation. No transfer of shares of capital stock shall be valid as against
the Corporation, its Stockholders and creditors for any purpose, except to
render the transferee liable for the debts of the Corporation to the extent
provided by
18
<PAGE>
law, until such transfer shall have been entered on the books of the Corporation
by an entry showing from and to whom transferred.
7.3 Transfer and Registry Agents. The Corporation may from time to
time maintain one or more transfer offices or agents and registry offices or
agents at such place or places as may be determined from time to time by the
Board.
7.4 Lost, Destroyed, Stolen and Mutilated Certificates. The holder
of any shares of capital stock of the Corporation shall immediately notify the
Corporation of any loss, destruction, theft or mutilation of the certificate
representing such shares, and the Corporation may issue a new certificate to
replace the certificate alleged to have been lost, destroyed, stolen or
mutilated. The Board may, in its discretion, as a condition to the issue of any
such new certificate, require the owner of the lost, destroyed, stolen or
mutilated certificate, or his or her legal representatives, to make proof
satisfactory to the Board of such loss, destruction, theft or mutilation and to
advertise such fact in such manner as the Board may require, and to give the
Corporation and its transfer agents and registrars, or such of them as the Board
may require, a bond in such form, in such sums and with such surety or sureties
as the Board may direct, to indemnify the Corporation and its transfer agents
and registrars against any claim that may be made against any of them on account
of the continued existence of any such certificate so alleged to have been lost,
destroyed, stolen or mutilated and against any expense in connection with such
claim.
7.5 Rules and Regulations. The Board may make such rules and
regulations as it may deem expedient, not inconsistent with these Bylaws or with
the Certificate of Incorporation, concerning the issue, transfer and
registration of certificates representing shares of its capital stock.
7.6 Restriction on Transfer of Stock. A written restriction on the
transfer or registration of transfer of capital stock of the Corporation, if
permitted by Section 202 of the General Corporation Law and noted conspicuously
on the certificate representing such capital stock, may be enforced against the
holder of the restricted capital stock or any successor or transferee of the
holder, including an executor, administrator, trustee, guardian or other
fiduciary entrusted with like responsibility for the person or estate of the
holder. Unless noted conspicuously on the certificate representing such capital
stock, a restriction, even though permitted by Section 202 of the General
Corporation Law, shall be ineffective except against a person with actual
knowledge of the restriction. A restriction on the transfer or registration of
transfer of capital stock of the Corporation may be imposed either by the
Certificate of Incorporation or by an agreement among any number of Stockholders
or among such Stockholders and the Corporation. No restriction so imposed shall
be binding with respect to capital stock issued prior to the adoption of the
restriction unless the holders of such capital stock are parties to an agreement
or voted in favor of the restriction.
19
<PAGE>
7.7 Dividends, Surplus, Etc. Subject to the provisions of the
Certificate of Incorporation and of law, the Board:
7.7.1 may declare and pay dividends or make other
distributions on the outstanding shares of capital stock in such amounts
and at such time or times as it, in its discretion, shall deem advisable
giving due consideration to the condition of the affairs of the
Corporation;
7.7.2 may use and apply, in its discretion, any of the
surplus of the Corporation in purchasing or acquiring any shares of capital
stock of the Corporation, or purchase warrants therefor, in accordance with
law, or any of its bonds, debentures, notes, scrip or other securities or
evidences of indebtedness; and
7.7.3 may set aside from time to time out of such
surplus or net profits such sum or sums as, in its discretion, it may think
proper, as a reserve fund to meet contingencies, or for equalizing
dividends or for the purpose of maintaining or increasing the property or
business of the Corporation, or for any purpose it may think conducive to
the best interests of the Corporation.
ARTICLE 8
BOOKS AND RECORDS
8.1 Books and Records. There shall be kept at the Office of the
Corporation correct and complete records and books of account recording the
financial transactions of the Corporation and minutes of the proceedings of the
Stockholders, the Board and any committee of the Board. The Corporation shall
keep at its principal office, or at the office of the transfer agent or
registrar of the Corporation, a record containing the names and addresses of all
Stockholders, the number and class of shares held by each and the dates when
they respectively became the owners of record thereof.
8.2 Form of Records. Any records maintained by the Corporation in
the regular course of its business, including its stock ledger, books of
account, and minute books, may be kept on, or be in the form of, punch cards,
magnetic tape, photographs, microphotographs, or any other information storage
device, provided that the records so kept can be converted into clearly legible
written form within a reasonable time. The Corporation shall so convert any
records so kept upon the request of any person entitled to inspect the same.
8.3 Inspection of Books and Records. Except as otherwise provided by
law, the Board shall determine from time to time whether, and, if allowed, when
20
<PAGE>
and under what conditions and regulations, the accounts, books, minutes and
other records of the Corporation, or any of them, shall be open to the
Stockholders for inspection.
ARTICLE 9
SEAL
The corporate seal, if the Board elects to adopt one, shall have
inscribed thereon the name of the Corporation, the year of its organization and
the words "Corporate Seal, Delaware." The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or otherwise reproduced.
ARTICLE 10
FISCAL YEAR
The fiscal year of the Corporation shall end on December 31 of each
calendar year, and may be changed, by resolution of the Board.
ARTICLE 11
PROXIES AND CONSENTS
Unless otherwise directed by the Board, the Chairman, the President,
any Executive Vice President, any Vice President, the Secretary or the
Treasurer, or any one of them, may execute and deliver on behalf of the
Corporation proxies respecting any and all shares or other ownership interests
of any Other Entity owned by the Corporation appointing such person or persons
as the officer executing the same shall deem proper to represent and vote the
shares or other ownership interests so owned at any and all meetings of holders
of shares or other ownership interests, whether general or special, and/or to
execute and deliver consents respecting such shares or other ownership
interests; or any of the aforesaid officers may attend any meeting of the
holders of shares or other ownership interests of such Other Entity and thereat
vote or exercise any or all other powers of the Corporation as the holder of
such shares or other ownership interests.
21
<PAGE>
ARTICLE 12
OFFICES
12.1 Registered Office. The registered office of the Corporation
shall be at 32 Loockerman Square, Suite L-100, in the City of Dover, County of
Kent, State of Delaware. The registered agent of the corporation at such
address is The Prentice-Hall Corporation System, Inc.
12.2 Other Offices. The Corporation may also have offices, including
its principal office, at such other places both within and without the State of
Delaware as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE 13
EMERGENCY BYLAWS
Unless the Certificate of Incorporation provides otherwise, the
following provisions of this Article 13 shall be effective during an emergency
resulting from an attack on the United States or during any nuclear or atomic
disaster or during the existence of a similar catastrophe. During such
emergency:
13.1 Notice to Board Members. Any one member of the Board or any one
of the following officers: Chairman, President, any Executive Vice President,
any Vice President, Secretary, or Treasurer, may call a meeting of the Board.
Such person shall use reasonable efforts to notify all members of the Board, but
notice of such meeting need be given only to those Directors whom after
reasonable effort it is practicable to reach, and may be given in any practical
manner, including by publication and radio. Such notice shall be given at least
six hours prior to commencement of the meeting.
13.2 Temporary Directors and Quorum. One or more officers of the
Corporation present at the emergency Board meeting, as is necessary to achieve a
quorum, shall be considered to be Directors for the meeting, and shall so serve
in order of rank, and within the same rank, in order of seniority. In the event
that less than a quorum of the Directors are present (including any officers who
are to serve as Directors for the meeting), those Directors present (including
the officers serving as Directors) shall constitute a quorum. Notwithstanding
the foregoing, no meeting of the Board shall take place pursuant to this Article
13 without the presence of at least three Directors (not including officers
serving as Directors for the meeting).
13.3 Actions Permitted To Be Taken. The Board as constituted in
Section 13.2 hereof, and after notice as set forth in Section 13.1 hereof may:
22
<PAGE>
13.3.1 prescribe emergency powers to any officer of the
Corporation;
13.3.2 delegate to any officer or Director, any of the powers of
the Board;
13.3.3 designate lines of succession of officers and agents, in
the event that any of them are unable to discharge their duties;
13.3.4 relocate the principal place of business, or designate
successive or simultaneous principal places of business; and
13.3.5 take any other action reasonably necessary to carry on the
business of the Corporation.
13.4 Effectiveness of Emergency Bylaws. To the extent that they are
not inconsistent with the provisions of this Article 13, all other provisions of
these Bylaws shall remain in effect during an emergency. Upon termination of
the emergency, the provisions of this Article 13 shall cease to be operative.
ARTICLE 14
AMENDMENTS
Except as otherwise expressly specified in the Certificate of
Incorporation or these Bylaws, the Board may from time to time adopt, amend or
repeal the Bylaws; provided, however, that any Bylaws adopted or amended by the
Board may be amended or repealed, and any Bylaws may be adopted, by a vote of
the Stockholders having at least two-thirds of the voting power of the then
issued and outstanding shares of capital stock of the Corporation.
* * *
23
<PAGE>
CERTIFICATION
The undersigned, in his capacity as Secretary of the Corporation,
hereby certifies that the foregoing is the Amended and Restated Bylaws of the
Corporation adopted by the Board of the Corporation on this _____ day of July,
1998.
______________________________
Michael A. Lubin
Secretary of Pathnet, Inc.
24
<PAGE>
HJ 48966
NUMBER [PATHNET LOGO] SHARES
PATHNET, INC.
P
COMMON STOCK INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE SEE
REVERSE
FOR CERTAIN
DEFINITIONS
CUSIP 70321G 20 8
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK,
PAR VALUE OF $.01 PER SHARE OF
PATHNET, INC
transferable on the books of the Corporation by the holder hereof in person
or by duly authorized attorney upon surrender of this certificate properly
endorsed or assigned. This certificate and the shares represented hereby are
issued and shall be subject to the laws of the State of Delaware and the
Certificate of Incorporation and Bylaws of the Corporation as now or
hereafter amended, to all of which the holder of this certificate by
acceptance hereof assents.
This certificate is not valid unless countersigned and registered by the
Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
/s/Michael A. Lubin /s/David Schaeffer
------------------- ---------------------------------
SECRETARY CHAIRMAN OF THE BOARD OF DIRECTORS
[PATHNET SEAL]
<PAGE>
PATHNET, INC.
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS A STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR
SERIES THEREOF OF THE CORPORATION AND THE QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS. SUCH REQUEST MAY BE MADE TO
THE CORPORATION OR THE TRANSFER AGENT.
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN OR DESTROYED,
THE CORPORATION MAY REQUIRE A BOND OF INDEMNITY AS A CONDITION TO THE
ISSUANCE OF A REPLACEMENT CERTIFICATE.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common UNIF GIFT MIN ACT - -------Custodian-----
(Cust) (Minor)
TEN ENT -- as tenants by the entireties under Uniform Gifts to Minors
JT TEN -- as joint tenants with right of Act
survivorship and not as tenants -------------------------
in common (State)
Additional abbreviations may also be used though not in the above list
For value received, ----------------- hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL OR OTHER
IDENTIFICATION NUMBER OR ASSIGNEE
---------------------------------
- -------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE, OF ASSIGNEE)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
- ------------------------------------------------------------------------Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated-------------------------------
NOTICE------------------------------------------------
THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME WRITTEN UPON THE FACE
OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATEVER
SIGNATURE(S) GUARANTEED:----------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND
CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION PROGRAM) PURSUANT
TO S.E.C. RULE 17Ad-15.
<PAGE>
[Paul, Weiss, Rifkind, Wharton & Garrison Letterhead]
(212) 373-3000
(212) 757-3990
July 27, 1998
Pathnet, Inc.
1015 31st Street, N.W.
Washington, D.C. 20007
Registration Statement on Form S-1
(Registration No. 333-52247)
----------------------------------
Ladies and Gentlemen:
We are furnishing this opinion at your request in connection with the
above-referenced Registration Statement on Form S-1 (as amended, the
"Registration Statement") of Pathnet, Inc., a Delaware corporation (the
"Company"), intially filed on May 8, 1998 with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"), relating to the public offering (the "Offering") by the
Company of an aggregate of 5,390,625 shares (including 703,125 shares subject to
an over-allotment option) of Common Stock, par value $0.01 per share, of the
Company (the "Common Stock").
In connection with the furnishing of this opinion, we have examined
originals, or copies certified or otherwise identified to our satisfaction, of
(i) the Registration Statement (including all amendments through the date of
this letter), (ii) the form of Amended and Restated Certificate of Incorporation
of the Company (filed as Exhibit 3.1 to the Registration Statement), (iii) the
form of Amended and Restated Bylaws of the Company (filed as Exhibit 3.2 to the
Registration Statement), (iv) the Certificate of Incorporation and Bylaws of the
Company as in effect on the date of this letter and (v) the form of Underwriting
Agreement to be used in connection with
<PAGE>
Pathnet, Inc. 2
the Offering (to be filed as Exhibit 1.1 to the Registration Statement). In
addition, we have examined such corporate records, agreements, documents and
other instruments as we have deemed relevant and necessary as a basis for the
opinion expressed below. We have also relied upon the factual matters
contained in certificates or comparable documents of public officials and of
officers and representatives of the Company.
In our examination of the documents referred to above, we have
assumed, without independent investigation, the genuineness of all signatures,
the legal capacity of all individuals who have executed any of the documents
reviewed by us, the authenticity of all documents submitted to us as originals,
the conformity to original documents of all documents submitted to us as
certified, photostatic, reproduced or conformed copies of valid existing
agreements or other documents, the authenticity of the latter documents and that
the statements regarding matters of fact in the certificates, records,
agreements, instruments and documents that we have examined are accurate and
complete.
Based upon the foregoing, and subject to the assumptions, exceptions
and qualifications set forth in this letter, we are of the opinion that the
shares of Common Stock to be registered for sale by the Company under the
Registration Statement have been duly authorized by all necessary corporate
action on the part of the Company, and, when issued, delivered and paid for as
contemplated by the Underwriting Agreement, will be validly issued, fully paid
and non-assessable.
The opinion expressed above is limited to the General Corporation Law
of the State of Delaware as in effect on the date hereof.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving such consent, we do not admit that we are in
the category of persons whose consent is required by the Securities Act or the
rules and regulations of the Securities and Exchange Commission under the
Securities Act.
Very truly yours,
/s/ Paul, Weiss, Rifkind, Wharton & Garrison
Paul, Weiss, Rifkind, Wharton & Garrison
<PAGE>
Exhibit 10.1
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. SUCH PORTIONS ARE DESIGNATED "[***]."
THIS FIXED POINT MICROWAVE SERVICES AGREEMENT is made and entered into
as of the 17th day of October, 1997 (the "EFFECTIVE DATE"), by and between
PathNet, Inc. ("PATHNET"), a Delaware corporation and Northern Border
Pipeline Company ("INCUMBENT"), a Texas partnership (collectively, the
"PARTIES" and each, a "PARTY").
W I T N E S S E T H:
WHEREAS, PathNet is engaged in the business of creating high capacity,
digital, microwave communications systems for purposes of marketing and selling
the excess long distance telecommunications capacity created by such systems;
WHEREAS, Incumbent is the owner and operator of an existing microwave
telecommunications system; and
WHEREAS, Incumbent desires to engage PathNet as, and PathNet desires to act
as, Incumbent's sole representative for the purpose of (i) installing, managing,
and operating a high capacity digital microwave system along Incumbent's
microwave paths and (ii) marketing and selling any Excess Capacity created by
such high capacity digital microwave system.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the Parties agree as follows:
SECTION 1. DEFINITIONS
1.1 DEFINITIONS: As used in this Agreement, the following terms
shall have the meanings indicated:
1.1.1 1/0 MULTIPLEXER: Any device that multiplexes capacity
between the DS-1 and the DS-0 levels.
1.1.2 1 X 1: A microwave radio configuration consisting of a
primary and a protect radio.
1.1.3 AFFILIATE: With respect to any Person, any other Person
that directly or indirectly controls, is controlled by, or is under common
control with such Person. For the purposes of this definition, "control"
(including the terms "controlled by" and "under common control with"), as
used with respect to any Person, shall mean the possession, directly or
indirectly, the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting
securities, by contract, or otherwise.
1.1.4 AGREEMENT: This Fixed Point Microwave Services Agreement,
including the Schedules and Exhibits attached hereto, as the same may be
amended, supplemented or modified in accordance with the terms hereof.
1.1.5 ALARM AND EVENT REPORT: As defined in SECTION 7.7 of
SCHEDULE A.
<PAGE>
1.1.6 ARBITRATION RULES: As defined in SECTION 16.2.3.
1.1.7 AS-BUILT DRAWING: As defined in SECTION 4.1.4 of SCHEDULE
A.
1.1.8 AVAILABLE EXCESS CAPACITY: The total PathNet Excess
Capacity available (and not allocated) for use or sale on the System at any
given time from Commissioning through the Expiration Date.
1.1.9 AVERAGE SOLD EXCESS CAPACITY: The cumulative daily average
of [(PathNet Excess Capacity -- Available Excess Capacity)/PathNet Excess
Capacity], taken as a percentage.
1.1.10 BIT ERROR RATE: The number of received bits in error
compared to the total number of bits received.
1.1.11 BREACHING PARTY: As defined in SECTION 16.1.2.
1.1.12 BUSINESS DAY: Any day other than a Saturday, a Sunday, or a
day on which the banking institutions in either New York, New York, or the
city and state in which the principal executive offices of PathNet within
the United States are located, are not open for business.
1.1.13 CAPACITY EXPANSION: An increase in telecommunication
channels a System is able to transmit, receive and transport above those
created by the installation of the Initial System, achieved by an addition
to or change in equipment.
1.1.14 CAPACITY EXPANSION SCHEDULE: As defined in SECTION 7.1 of
SCHEDULE A.
1.1.15 CENTER: As defined in SECTION 16.2.3.
1.1.16 CERCLA: Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. SECTION 6901 ET SEQ., as amended.
1.1.17 CHANNEL PLAN: As defined in SECTION 1.1 of SCHEDULE A.
1.1.18 COMMISSIONING: With respect to each path or Segment, the
date on which the circuits of such path or Segment are available for
service after completion of all required site acceptance testing.
1.1.19 CONFIDENTIAL INFORMATION: Any and all technical, business
and financial information, in whatever form, furnished or disclosed by one
Party to the other Party, including but not limited to information on the
System, cost estimates, technical data, information, pricing, and the terms
and conditions of this Agreement.
2
<PAGE>
1.1.20 CUSTOMER AGREEMENTS: As defined in SECTION 9.8.1.
1.1.21 CUTOVER PLAN: As defined in SECTION 4.1.1 of SCHEDULE A.
1.1.22 DEFICIENCY LIST: As defined in SECTION 5.7 of SCHEDULE A.
1.1.23 DISPUTE: As defined in SECTION 16.2.1.
1.1.24 DROP AND INSERT: That process wherein a part of the
information carried in a transmission system is demodulated (dropped) at an
intermediate point and different information is entered (inserted) for
subsequent transmission.
1.1.25 DS-0: 64,000 bits per second; The world-wide standard speed
for digitizing one voice conversation using pulse code modulation, which is
approximately equivalent to a single voice or data channel.
1.1.26 DS-1: 24 DS-0's.
1.1.27 DS-3: 672 DS-0's or 28 DS-1's.
1.1.28 EFFECTIVE DATE: As defined in the introductory paragraph of
this Agreement.
1.1.29 ELECTION PAYMENT: As defined in SECTION 4.3.1 for Segment
A.
1.1.30 ELECTION PERIOD: The eighty-four (84) month period
following Commissioning of the Initial System on Segment A during which
Incumbent shall fund the Initial System up to the Incumbent Payment cap.
1.1.31 ENCUMBRANCES: Any security interests, mortgages, liens,
pledges, charges, claims, easements, reservations, restrictions, clouds,
equities, rights of way, options, rights of first refusal and other
encumbrances whether or not relating to the extension of credit or the
borrowing of money. To "Encumber" shall mean to effect any Encumbrance.
1.1.32 EQUIPMENT: Any and all digital microwave radios, radio
components, cards, antennas, waveguides, multiplexers, software and other
equipment or parts required for the operation of the System provided and
installed by PathNet and its subcontractors, as set forth on EXHIBIT A-1 to
SCHEDULE A.
1.1.33 ERROR FREE SECOND: Any one-second interval that does not
contain a measurable bit error.
1.1.34 ERRORED SECONDS: Any one-second interval during which one
or more bit errors occur.
3
<PAGE>
1.1.35 EXCESS CAPACITY: The PathNet Excess Capacity and the
Incumbent Excess Capacity.
1.1.36 EXISTING SYSTEM INVENTORY: As defined in SECTION 1.1 of
SCHEDULE A.
1.1.37 EXPIRATION DATE: The date on which this Agreement and the
rights and obligations hereunder are terminated or expire in accordance
with SECTION 3.
1.1.38 FAA: The Federal Aviation Administration, or any other
Federal agency at the time administering tower registration requirements
and regulations.
1.1.39 FACILITIES: Incumbent's towers, shelters, sites and all
equipment owned by Incumbent relating to and used in association with such
towers, shelters and sites for the purpose of operating the System.
1.1.40 FAILED SECOND: Any one-second interval that has 1,544 bit
errors at a DS-1 rate.
1.1.41 FCC: The Federal Communications Commission, or any other
Federal agency at the time administering the Communications Act of 1934, as
amended, the Telecommunications Act of 1996, as amended and the rules and
regulations promulgated thereunder.
1.1.42 FCC CODE: The Communications Act of 1934, as amended, the
Telecommunications Act of 1996, as amended and the rules and regulations
promulgated thereunder and related thereto.
1.1.43 FIRST EXTENSION PERIOD: As defined in SECTION 3.2.2.
1.1.44 FORCE MAJEURE EVENT: As defined in SECTION 15.3.
1.1.45 FORM 415: As defined in SECTION 10.1.1.
1.1.46 FREQUENCY AVAILABILITY MODEL: As defined in SECTION 1.1 of
SCHEDULE A.
1.1.47 FREQUENCY DIVERSITY: A method of protecting a radio signal
by providing a second radio signal on a different frequency, which will
assume the radio signal load when the regular channel fails.
1.1.48 GOVERNMENTAL AUTHORITY: Any nation or government, any state
or other political subdivision thereof and any court, panel, judge, board,
bureau, commission, agency or other entity, body or other person exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government.
4
<PAGE>
1.1.49 HAZARDOUS MATERIAL: Any material amount of any substance,
matter or waste which is or becomes regulated by any Federal, state or
local law, ordinance, order, rule, regulation, code or any government
restrictions or requirement including, but not limited to, asbestos,
petroleum products and "Hazardous Substances" and "Hazardous Wastes" (as
such terms are defined in CERCLA and RCRA.)
1.1.50 INCUMBENT: As defined in the introductory paragraph.
1.1.51 INCUMBENT DESIRED PATH: As defined in SECTION 9.3.
1.1.52 INCUMBENT EXCESS CAPACITY: As defined in SECTION 9.1.2.
1.1.53 INCUMBENT INITIAL ALLOCATION OF CAPACITY: [***]
1.1.54 INCUMBENT ITEMS: As defined in SECTION 4.1.1(A).
1.1.55 INCUMBENT OUT-OF-POCKET PATH FUNDING: [Path Replacement
Costs -- ((i) Path PCS Recovery + (ii) any and all PathNet Funding for a
given Path + (iii) AFUDC + (iv) Overhead)].
1.1.56 INCUMBENT PAYMENT CAP: As defined in SECTION 4.1.1(B).
1.1.57 INCUMBENT REPRESENTATIVE: As defined in SECTION 17.11.
1.1.58 INITIAL PERIOD: As defined in SECTION 3.2.1.
1.1.59 INITIAL SYSTEM: The initial system with a 1 x 1
configuration which is comprised of the first 85 DS-1's (which is
equivalent to 2,040 DS-0's) of the System and the System's 85 DS-1 protect
channels.
1.1.60 INTERCONNECTION: The point at which a private network is
connected to (i) the PSTN, which can include IXC POPs, tandem access
points, the central office, internet service providers, or major industrial
customer points of presence or (ii) another private network.
1.1.61 INTERFERENCE: Any measurable impairment in the performance
of the System or the quality of the signals received or transmitted on the
System.
1.1.62 IXC: An inter-exchange carrier; a telephone company that
provides long-distance telephone service between LATA's but not within any
one LATA.
1.1.63 JUDGMENT: Any order, judgment, writ, decree, award or other
determination, decision or ruling of any court, judge, justice or
magistrate, any other Governmental Authority or any arbitrator.
5
<PAGE>
1.1.64 LATA: Local Access and Transport Area; one of 161 local
geographic areas in the United States within which a local telephone
company may offer telecommunications services.
1.1.65 LOSSES: Any and all losses, claims, shortages, damages,
liabilities, expenses (including reasonable attorneys' and accountants'
fees), assessments, tax deficiencies and taxes (including interest and
penalties thereon) sustained, suffered or incurred by any Person, including
the Parties hereto, arising from any matter which is the subject of
indemnification under SECTION 14.
1.1.66 MAINTENANCE SERVICES AGREEMENT: The Maintenance Services
Agreement, by and between PathNet and Incumbent, as the same may be amended
from time to time in accordance with its terms.
1.1.67 MATERIAL ADVERSE EFFECT: Any event, fact, circumstance or
occurrence, which results or would result in a material adverse change in
or a material adverse effect on any of: (i) the condition (financial or
otherwise), business, performance, operations, properties, or prospects of
such Person; (ii) the legality, validity or enforceability of this
Agreement; or (iii) the ability of such Person to perform its material
obligations under this Agreement.
1.1.68 MODIFICATIONS SOW: As defined in SECTION 2.1 of SCHEDULE A.
1.1.69 NETWORK MANAGEMENT SYSTEM: As defined in SECTION 7.6 of
SCHEDULE A.
1.1.70 NETWORK MONITORING CENTER: As defined in SECTION 7.5 of
SCHEDULE A.
1.1.71 NON-BREACHING PARTY: As defined in SECTION 16.1.2.
1.1.72 NOTICE OF ELECTION: As defined in SECTION 14.3.
1.1.73 OC-3 MULTIPLEXER: Any device that multiplexes capacity
between the OC-3 and the DS-1 levels.
1.1.74 OPERATOR: Northern Plains Natural Gas Company, Operator of
Incumbent.
1.1.75 ORDER WIRE: A service channel consisting of a 64,000 bit
per second circuit between sites.
1.1.76 OSHA: The Occupational Safety and Health Act, as amended.
1.1.77 OUTAGE: When the Bit Error Rate in each second is worse
than 10-3 for a period of ten (10) consecutive seconds.
6
<PAGE>
1.1.78 PART 101: Part 101 of Title 47 of the Code of Federal
Regulations, as amended.
1.1.79 PARTNER: Shall mean partners of Incumbent and the partners
of any Partner.
1.1.80 PARTY: As defined in the introductory paragraph.
1.1.81 PATH: The spatial separation between two microwave tower
facilities in the System.
1.1.82 PATH PCS RECOVERY: The total amounts actually recovered
from PCS bid winners on every Path comprising Segment A, as such amount may
change from time to time.
1.1.83 PATH REPLACEMENT COSTS: Total costs of the Incumbent Items
as defined in SECTION 4.1.1(A)(I) herein for Segment A, as reasonably
documented by PathNet and Incumbent, including Incumbent's Allowance for
Funds Used During Construction ("AFUDC") + Incumbent's Overhead
("Overhead") deferred in accordance with generally accepted accounting
principles per Path, PROVIDED, HOWEVER, that (i) the incremental costs of
providing back-to-back terminals at every site over the cost of a repeater
terminal for those sites planned by PathNet as repeater sites and (ii) any
costs associated with multiplexing from the DS-1 to DS-0 levels are
excluded from the definition of Path Replacement Costs. (Costs for any
tower, shelter, right-of-way and infrastructure currently existing and
owned by Incumbent are also excluded.)
1.1.84 PATH STUDIES: As defined in SECTION 1.1 of SCHEDULE A.
1.1.85 PATHNET: As defined in the introductory paragraph.
1.1.86 PATHNET ALLOCABLE REVENUE PERCENTAGE: [***]
1.1.87 PATHNET EXCESS CAPACITY: At any given time, the
telecommunications channels or DS-0's on a per mile basis that the System
creates, transports and receives, less the capacity allocated to Incumbent
and the protect channels, pursuant to the Channel Plan, as amended from
time to time.
1.1.88 PATHNET FUNDING: Any payment made by PathNet to Incumbent
for (i) Path Replacement Costs, (ii) any payment made by PathNet pursuant
to SECTION 4.1.1(B), and (iii) or the value of any services provided by
PathNet and included in Incumbent Items for Segment A and not paid for by
Incumbent, provided PathNet Funding shall equal [Path Replacement Costs -
(Incumbent Out-of-Pocket Path Funding + Path PCS Recovery + AFUDC +
Overhead)].
7
<PAGE>
1.1.89 PATHNET SOFTWARE: The software (including applications
software and systems software) owned or licensed from a third party by
PathNet used to provide the services covered in this Agreement.
1.1.90 PCN: A Prior Coordination Notice sent pursuant to Part 101.
1.1.91 PERMITS: Any and all authorizations, approvals, consents,
licenses, permits, easements, certificates and other rights and permissions
necessary to conduct such Person's business and to own, lease and operate
such Person's properties as currently conducted, owned, leased or operated.
1.1.92 PERSON: An individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock
company, or other entity of any kind or any Governmental Authority.
1.193 POP: Point Of Presence - the interconnection between any
two facilities based networks.
1.1.94 PRE-COMMISSIONING TEST EQUIPMENT: All equipment required
for the testing required to be performed on the System pursuant to SECTION
5 of SCHEDULE A, including, but not limited to, all required digital volt
meters, optical power meters, oscilloscopes, RF signal generators, noise
figure meters, noise figure test sets, RF variable attenuators, DADE adjust
cables, receiver card extenders and extension cords.
1.1.95 PRELIMINARY CONSTRUCTION SCHEDULE: As defined in SECTION
1.1 of SCHEDULE A.
1.1.96 PROGRESS REPORT: As defined in SECTION 4.1.2 of SCHEDULE A.
1.1.97 PROJECT DRAWINGS: As defined in SECTION 1.3 of SCHEDULE A.
1.1.98 PROJECT MANAGEMENT PLAN: As defined in SECTION 4.1.1 of
SCHEDULE A.
1.1.99 PROJECT SCHEDULE: As defined in SECTION 4.1.1 of SCHEDULE
A.
1.1.100 PROTECTION CONFIGURATION: An engineering plan under which
channel capacity is protected either on a fully redundant basis or on a 1 x
n protection basis.
1.1.101 PSTN: Publicly Switched Telephone Network.
1.1.102 QUARTERLY REVENUE REPORT: As defined in SECTION 9.10.
1.1.103 RCRA: Resource Conservation and Recovery Act, 42 U.S.C.
SECTION 9601 ET SEQ., as amended.
8
<PAGE>
1.1.104 REQUIREMENT OF LAW: With respect to any Person, all
Federal, state and local laws, rules, regulations, Judgments, injunctions,
standards, codes, limitations, restrictions, conditions, prohibitions,
notices, demands or other requirements or determinations of a court or
other Governmental Authority or an arbitrator, applicable to or binding
upon such Person, any of its property or any business conducted by it or to
which such Person, any of its assets or any business conducted by it is
subject.
1.1.105 REVENUE: As defined in SECTION 9.12.3.
1.1.106 SECOND EXTENSION PERIOD: As defined in SECTION 3.2.3.
1.1.107 SEGMENT: The portion of a microwave communications network
existing between two geographic points. For purposes of this Agreement,
SEGMENT A is the portion of Incumbent's microwave communications network
between Port of Morgan, Montana and Ventura, Iowa. For purposes of this
Agreement, SEGMENT B is the portion of Incumbent's microwave communications
network between Ventura, Iowa and the terminus of Incumbent's System in
Illinois.
1.1.108 SERVICES: As defined in SECTION 7.1.
1.1.109 SEVERELY ERRORED SECONDS: Any one second interval where the
Bit Error Rate is greater than or equal to 1 x 10-3 at a DS-1 rate
regardless of the cause of degradation affecting the channel error
performance including, but not limited to, unprotected equipment failures
and any other factors that contribute to poor performance.
1.1.110 SONET: Synchronous Optical Network; a family of fiber-optic
transmission rates from 51.84 Mbps to 13.22 Gbps, created to provide the
flexibility needed to transport many digital signals with different
capacities and to provide a standard to which manufacturers may design.
1.1.111 SPACE DIVERSITY: Protection of a radio signal by providing
a separate antenna on the same tower to assume the radio signal load when
the regular transmission path on the primary antenna fades, thereby
ensuring continuous transmission.
1.1.112 SPARE PARTS: The equipment and parts provided by PathNet to
Incumbent pursuant to the performance of Incumbent's obligations under the
Maintenance Services Agreement.
1.1.113 SPECIFICATIONS: As defined in SECTION 7.2.
1.1.114 STATION LOG BOOK: As defined in SECTION 6.2 of SCHEDULE A.
1.1.115 SUBCONTRACTORS: Any firm, corporation, or person working
directly or indirectly for a company that furnishes or performs a portion
of the work, labor or material.
9
<PAGE>
1.1.116 SWITCHED MOD SECTION: A section of network between two
adjacent back-to-back terminals.
1.1.117 SYSTEM: The high-capacity digital SONET microwave radio
equipment, antenna, waveguide, Facilities, Network Management System, all
other equipment and materials related thereto, and FCC licenses and other
licenses and Permits related thereof, operated for the purpose of
transmitting, receiving and transporting telecommunications signals over
Incumbent's Segments set forth on SCHEDULE B.
1.1.118 SYSTEM BUDGET: As defined in SECTION 1.1 of SCHEDULE A.
1.1.119 SYSTEM DESIGN: As defined in SECTION 1.1 of SCHEDULE A.
1.1.120 SYSTEM PAYMENT: As defined in SECTION 4.3.2(A) for Segment
B.
1.1.121 TECHNOLOGY: Inventions, ideas, processes, formulas, and
know-how.
1.1.122 TOWER ANALYSIS: As defined in SECTION 1.1 of SCHEDULE A.
1.1.123 WAYSIDE CHANNELS: The additional DS-1 of telecommunications
capacity within each radio beyond the base OC-3 capacity.
1.2 TERMS GENERALLY. The definitions in SECTION 1.1 and elsewhere in this
Agreement shall apply equally to both the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "herein",
"hereof", "hereto" and "hereunder" and words of similar import refer to this
Agreement (including the Schedules and Exhibits) in its entirety and not to any
part hereto unless the context shall otherwise require. All references herein
to Sections, Exhibits and Schedules shall be deemed references to Sections of,
and Exhibits and Schedules to, this Agreement unless the context shall otherwise
require. Unless otherwise expressly provided herein or unless the context shall
otherwise require, any references as of any time to the "Certificate of
Incorporation," "Articles of Incorporation," "charter," "organizational or
constituent documents" or "Bylaws" of any Entity, to any agreement (including
this Agreement) or other contract, instrument or document or to any agreement
statute or regulation are to it as amended and supplemented from time to time
(and, in the case of a statute or regulation to any corresponding provisions of
successor statutes or regulations) up to and including the Effective Date. Any
reference in this Agreement to a "day" or number and "days" (without the
explicit qualification of "Business") shall be interpreted as a reference to a
calendar day or number of calendar days. If any action or notice is to be taken
or given on or by a particular calendar day, and such calendar day is not a
Business Day, then such action or notice shall be deferred until, or may be
taken or given on, the next Business Day.
SECTION 2. RELATIONSHIP OF THE PARTIES
10
<PAGE>
2.1 INDEPENDENT CONTRACTOR, REPRESENTATIVE AND NETWORK MANAGER. Incumbent
shall appoint PathNet and PathNet shall serve in the following capacities during
the term of this Agreement:
2.1.1 INDEPENDENT CONTRACTOR. As an independent contractor,
PathNet will serve as Incumbent's representative in performing analytical
pre-design and design services and installing, testing and ensuring the
performance of the System, except that for any Capacity Expansion, PathNet
shall serve as Incumbent's sole and exclusive representative in accordance
with the terms and conditions set forth in SECTION 6 and in SCHEDULE A.
2.1.2 EXCLUSIVE MARKETING REPRESENTATIVE. As the exclusive
representative for the marketing and sale of Excess Capacity for Incumbent,
PathNet will market and sell the Excess Capacity created by System, as
described in SECTION 9.
2.1.3 NETWORK MANAGER. In the role of a network manager, PathNet
will serve as the point of contact for any Outage or trouble on the System
and shall operate the Network Management System and the Network Monitoring
Center as described in SECTION 7.5 and SECTION 7.6 of SCHEDULE A.
2.2 NO JOINT VENTURE, ETC. The Parties expressly disclaim any intention
to create, and nothing herein shall be construed as creating, a partnership,
joint venture, agency or employment relationship between PathNet and Incumbent.
2.3 RESTRICTIONS ON ACTIONS OF INCUMBENT. For the term of this Agreement,
Incumbent shall not operate parallel microwave telecommunications facilities or
systems to those set forth in SCHEDULE B for the purpose of selling or otherwise
providing any capacity on such parallel facilities or systems.
SECTION 3. TERM AND EXPIRATION
3.1 TERM, EXTENSION PERIODS AND RENEWAL.
3.1.1 TERM. This Agreement shall commence on the Effective Date
and shall be in full force and effect until the later of the expiration of
the Initial Period or any Extension Period of either Segment A or B, as set
forth in this SECTION 3, or until terminated by Incumbent as provided in
SECTION 3.3.
3.2 INITIAL AND EXTENSION PERIODS
3.2.1 INITIAL PERIOD. The initial term (the "INITIAL PERIOD")
shall commence upon the receipt of the FCC common carrier license for
Segment A and shall expire on the fourth (4th) anniversary of the
Commissioning of Segment B.
11
<PAGE>
3.2.2 FIRST EXTENSION PERIOD. In the event the Average Sold
Excess Capacity is at least ten percent (10%) during the Initial Period,
the term of the Agreement shall be automatically extended for an extension
period (the "FIRST EXTENSION PERIOD") commencing on the day after the
expiration of the Initial Period and expiring on the tenth (10th)
anniversary thereafter; provided PathNet shall notify Incumbent of its
intent to exercise its option to extend the term of the Agreement at least
one hundred and eighty (180) days prior to the end of the preceding term.
3.2.3 SECOND EXTENSION PERIOD. In the event the Average Sold
Excess Capacity is at least twenty percent (20%) during the Initial Period
and the First Extension Period, the term of the Agreement shall be
automatically extended for a second extension period (the "SECOND EXTENSION
PERIOD") commencing on the day after the expiration of the First Extension
Period and expiring on the tenth (10th) anniversary thereafter; provided
PathNet shall notify Incumbent of its intent to exercise its option to
extend the term of the Agreement at least one hundred and eighty (180) days
prior to the end of the preceding term.
3.2.4 SUBSEQUENT EXTENSIONS. Upon expiration of the Second
Extension Period thereof this Agreement shall be automatically renewed for
a one-year term, and at the end of such one-year term for additional
one-year terms for each year thereafter, unless terminated by either Party
upon written notice to the other Party to that effect delivered at least
ninety (90) days before the end of the second extension period or any such
one-year term.
3.3 TERMINATION. To the extent PathNet (a) fails to make payment on the
undisputed portion of any of the following payments: (i) Election Payment
pursuant to the terms of SECTION 4.3.1(A), (ii) Any payment exceeding the amount
of the Incumbent Payment Cap pursuant to SECTION 4.1.1(B), (iii) System Payment
pursuant to SECTION 4.3.2(A), (iv) Payment of Revenue pursuant to SECTION
9.12.4; or (b) fails to meet the Average Sold Excess Capacity threshold as set
forth in SECTION 3.2.2 and SECTION 3.2.3, Incumbent shall have the right to
terminate this Agreement upon written notice to PathNet; provided that PathNet
shall have the right to cure its default caused by the failure to make any
payment pursuant to this SECTION 3.3(A), for a period of fifteen (15) days
following receipt of the written notice of default from Incumbent.
SECTION 4. COSTS
4.1 INCUMBENT COSTS.
4.1.1 INCUMBENT ITEMS AND INCUMBENT PAYMENT CAP
(a) INCUMBENT ITEMS. Incumbent shall pay for the services,
functions, materials and other items listed in (i)
SECTION 1.A and (ii) SECTION 1.B of SCHEDULE C
(collectively, the "INCUMBENT ITEMS") in the manner set
forth in SECTION 4.1.2.
12
<PAGE>
(b) INCUMBENT PAYMENT CAP. Incumbent shall pay an amount
not to exceed [***] (the "INCUMBENT PAYMENT CAP") in
the aggregate for the performance and completion of the
Incumbent Items for Segment A. PathNet shall pay for
all amounts incurred over the Incumbent Payment Cap in
the completion and performance of the Incumbent Items
for Segment A provided that such costs will be included
as part of the PathNet Funding. As soon as Incumbent
is aware that the actual costs of Incumbent Items for
Segment A will exceed the Incumbent Payment Cap,
Incumbent shall notify PathNet to that effect.
4.1.2 PAYMENT FOR INCUMBENT ITEMS. Incumbent shall within thirty
(30) days pay for any Incumbent Items upon receipt of an invoice or other
bill from PathNet or from an equipment vendor or service provider (pursuant
to any PathNet requested retention), provided PathNet has approved such
purchase order, invoice or bill before any payment is made by Incumbent.
4.2 INCUMBENT OPERATING AND ADMINISTRATION COSTS. Incumbent shall pay the
operating and administration costs for Segments A and B, as set forth in SECTION
2 of SCHEDULE C as such costs are actually incurred and become due and payable
in the course of the Incumbent's performance of its obligations under this
Agreement.
4.3 PATHNET COSTS.
4.3.1 SEGMENT A.
(a) ELECTION PAYMENT. At any time during the Election
Period and from time to time, PathNet, in its sole
discretion, shall have the right to pay Incumbent any
amount of the Incumbent Out-of-Pocket Path Funding for
the right to additional future Revenue from the sale of
Excess Capacity on the System, provided any such
payment shall be included as part of PathNet Funding
(and the Incumbent Out-of-Pocket Funding shall be
recalculated) and the percentage Revenue paid to
Incumbent shall be adjusted pursuant to SECTION 5.1.1
to reflect an increase in PathNet Allocable Revenue
Percentage. As of the date of completion of the
Election Period or at any time during the Election
Period, PathNet, in its sole discretion, shall pay
Incumbent an amount equal to the current Incumbent
Out-of-Pocket Path Funding for the applicable paths (as
such Funding may be adjusted pursuant to any and all
additional PathNet Funding) on at least ninety (90%)
percent of Incumbent's Paths comprising Segment A of
the System ("Election Payment"), provided the
percentage Revenue paid to Incumbent shall be adjusted
pursuant to SECTION 5.1.1. If PathNet fails to pay the
13
<PAGE>
Election Payment upon completion of the Election
Period, Incumbent shall have the right to terminate
this Agreement.
4.3.2 SEGMENT B.
(a) SYSTEM PAYMENT. Upon Commissioning of the Initial
System on Segment B, PathNet shall pay Incumbent the
quarterly payments as set forth in EXHIBIT C-2 to
SCHEDULE C ("System Payment").
4.4 PATHNET OPERATING AND ADMINISTRATION COSTS. PathNet shall pay for the
operating and administration costs on Segments A and B, as set forth in SECTION
3 of SCHEDULE C as such costs are actually incurred and become due and payable
in the course of PathNet's performance of its obligations under this Agreement.
4.5 CHANGE ORDERS. This Agreement anticipates (i) future issuance of
change orders for equipment and services beyond the scope of this SECTION 4, and
(ii) PathNet's provision of related equipment and services in accordance with
such orders. To the extent mutually agreed upon by the Parties, all such orders
shall be deemed to be supplements to and governed by the terms of this
Agreement; provided PathNet and Incumbent's Estimated Costs may be modified to
reflect any agreed upon change orders.
SECTION 5. REVENUE SHARING
5.1 SEGMENTS A AND B.
5.1.1 ALLOCATION OF CAPACITY AND REVENUE SHARING - SEGMENT A.
PathNet shall provide Incumbent Initial Allocation of Capacity and pay to
the Incumbent Revenue pursuant to the formulas set forth below: (i) upon
Commissioning of the Initial System, a percentage of Revenue, if any, from
the sale of PathNet Excess Capacity on Segment A of the Initial System
equal to [***]
14
<PAGE>
5.1.2 REVENUE SHARING - SEGMENT B. PathNet shall pay to Incumbent
the following Revenue pursuant to the formulas set forth below: [***]
5.2 USE OF FACILITIES.
5.2.1 RIGHT TO OPERATE. Incumbent shall provide to PathNet the
exclusive right and PathNet shall have the right to install and operate the
System (including, without limitation, full access to such System) at each
of Incumbent's sites and Facilities, as set forth in SCHEDULE B, as is
required and necessary for the performance of PathNet's rights and
obligations under this Agreement.
5.2.2 PEACEFUL ENJOYMENT, USE AND ACCESS. Incumbent shall grant
to PathNet the right to the peaceful use, enjoyment and possession of the
Facilities during the term of this Agreement as required for the
performance of PathNet's rights and obligations under this Agreement, which
rights shall include, but not be limited to (i) the right to use
Incumbent's Facilities and (ii) upon the reasonable request by PathNet, the
right to full and free access to Incumbent's Facilities and related
equipment; PROVIDED, HOWEVER, any such access granted by Incumbent to
PathNet shall be subject to the security, health and safety and other
regulatory, procedural and policy requirements of Incumbent, as set forth
in SECTION 5.4. PathNet's continuous and uninterrupted non-use of the
Facilities for purposes described in this Agreement for one (1) year shall
be sufficient to demonstrate abandonment unless PathNet shall have notified
Incumbent in writing of its reasons for non-use.
5.2.3 INTERFERENCE. During the term of this Agreement, Incumbent
shall not license or otherwise permit any Person to use its Facilities
(including the transfer of any rights to the Facilities) if the use of such
Facilities by such Person would cause any Interference on the System. In
the event another tenant of Incumbent causes any Interference on the
System, Incumbent shall compel such tenant to immediately take all steps
necessary to correct and eliminate such Interference, including, without
limitation, enforcing provisions in any license or other agreement between
Incumbent and such tenant and compelling such tenant to cease operation of
such tenant's system, to remove such tenant's equipment or materials or to
modify such tenant's equipment or materials. Incumbent acknowledges that
any Interference shall cause irreparable harm to PathNet and the prompt
cessation of Interference is material to PathNet's interest in the
Facilities and PathNet's performance under this Agreement and, as such,
PathNet shall be entitled to injunctive relief in the enforcement of this
section.
15
<PAGE>
5.3 VISITING AND EXITING FACILITIES. Upon exiting any Facility, PathNet,
on behalf of itself and its employees, agents and Subcontractors, shall ensure
that such Facility is returned to a condition, which existed immediately prior
to such visit.
5.4 INCUMBENT SECURITY PROCEDURES, POLICY ON DRUGS AND ALCOHOL AND SAFETY
REQUIREMENTS.
5.4.1 INCUMBENT SECURITY PROCEDURES. At the request of Incumbent,
PathNet shall require its employees, agents and Subcontractors upon any
site visit to comply with Incumbent's reasonable security procedures in
effect as of the Effective Date, which procedures are attached hereto as
SCHEDULE E. If and to the extent Incumbent requires PathNet employees,
agents or Subcontractors to be escorted to Incumbent facilities, such
requirements shall be explicitly set forth in SCHEDULE E. Notwithstanding
the foregoing, Incumbent shall allow PathNet employees, agents or
Subcontractors to bring any testing equipment, photographic equipment or
both video and audio recording equipment necessary for the performance of
PathNet's obligations under this Agreement.
5.4.2 INCUMBENT POLICY ON DRUGS AND ALCOHOL IN THE WORKPLACE. At
the request of Incumbent, PathNet shall require its employees, agents or
Subcontractors to comply with Incumbent's reasonable substance abuse
policies and procedures in effect as of the Effective Date, which policies
and procedures are attached hereto as SCHEDULE G.
5.4.3 INCUMBENT SAFETY PROCEDURES. At the request of Incumbent,
PathNet shall require its employees, agents and Subcontractors to comply
with Incumbent's reasonable rules and regulations governing the health and
safety of its employees in effect on the Effective Date, which rules and
regulations are attached hereto as SCHEDULE H.
5.4.4 CLEARANCES AND OTHER REQUIREMENTS. At the request of
Incumbent, PathNet shall require its employees, agents or Subcontractors to
(i) apply to Incumbent for any necessary reasonable clearances and (ii)
comply with all other reasonable and applicable requirements, rules,
regulations or ordinances regarding any Person's ability to have access to
Incumbent's sites and Facilities.
5.5 CO-LOCATION. Incumbent shall allow PathNet, at no additional charge,
to co-locate at Incumbent's Facilities all equipment necessary to support the
Interconnections set forth on EXHIBIT A-7 to SCHEDULE A and any additional
interconnections equipment that may be added by PathNet from time to time and at
any time during the term of this Agreement, subject to the limitations set forth
in SECTION 3 of SCHEDULE A.
5.6 REMOVAL OF EQUIPMENT. PathNet shall, at Incumbent's request,
remove any or all Equipment from any Capacity Expansion from Incumbent's
Facilities within sixty (60) days after the Expiration Date. In the event
PathNet fails to perform such requested removal within such sixty (60) day
period, as determined by Incumbent in its sole discretion, Incumbent may restore
each site to its condition as of Commissioning, (reasonable wear and tear and
damage
16
<PAGE>
from the elements excepted), and PathNet shall promptly pay Incumbent all costs
reasonably incurred by Incumbent for such removal and restoration.
5.7 REMOVAL OF HAZARDOUS MATERIALS. Within ninety (90) days after
the Expiration Date, PathNet shall remove from Incumbent's sites any and all
Hazardous Materials, which were brought to Incumbent's sites by PathNet during
the term of this Agreement.
SECTION 6. PROGRAM MANAGEMENT; PROJECT MANAGEMENT; PROJECT SCHEDULE
6.1 PROGRAM MANAGER. In connection with the Services and other services
performed by PathNet under this Agreement, PathNet shall provide a program
manager whose duties shall include (i) supervising the project through design,
installation and operation, (ii) supervising the project manager, (iii)
overseeing the field manager and the other PathNet personnel, (iv) coordinating
the business operations of the System including the sale of Excess Capacity as
set forth in SECTION 9 and (v) ensuring the performance of PathNet's rights and
obligations under this Agreement.
6.2 PROJECT MANAGEMENT. In connection with the modifications and
installation of the Facilities set forth in SECTION 2 and SECTION 4 of SCHEDULE
A, PathNet shall provide a project manager, a field manager, an applications
engineer and a project engineer, each of whom shall have the duties as set forth
below:
6.2.1 PROJECT MANAGER. PathNet shall provide a project manager
whose duties shall include ensuring the overall functional integrity of the
delivered System, the preparation, amendment and adherence to a
construction schedule, and compliance with PathNet's other obligations
under SCHEDULE A.
6.2.2 FIELD MANAGER. PathNet shall provide a field manager whose
duties shall include the oversight and direction of all on-site activities,
the coordination of all Subcontractors and all required communication with
the project manager.
6.2.3 APPLICATIONS ENGINEER. PathNet shall provide an
applications engineer, whose duties shall include the review and
translation of the System configuration into specific hardware
requirements, precise interface levels, intra and inter-rack cabling and
all other necessary peripheral equipment, rack profiles and required
Interconnection data.
6.2.4 PROJECT ENGINEER. PathNet shall provide a project engineer
whose duties shall include the performance of all planning and support
activities and a detailed site survey to gather data for development of the
installation plan and testing plan.
6.3 PROJECT SCHEDULE. PathNet shall provide all reasonable efforts to
construct Segments A and B within seven (7) months from the time all permits and
approvals have been received; PROVIDED, HOWEVER, PathNet shall complete the
installation and construction of
17
<PAGE>
Segment A by no later than December 31, 1997 and Segment B by no later than the
date of commencement of pipeline commercial operations.
SECTION 7. SERVICES AND SYSTEMS SPECIFICATIONS
7.1 SERVICES.
7.1.1 SYSTEM DESIGN, MODIFICATION, INSTALLATION, OPERATION AND
PERFORMANCE. PathNet and Incumbent shall perform their respective
functions with respect to the design, modification, installation, operation
and performance of the System as set forth on SCHEDULE A and in this
SECTION 7 (the "SERVICES").
7.1.2 UPGRADE OF SYSTEM. In the event PathNet sells at least
fifty (50%) percent of the Average Sold Excess Capacity of the System
configured at any time or can demonstrate commitments for the sale of such
Average Sold Excess Capacity, PathNet may, at its own expense, upgrade the
System and Equipment, and the System and Equipment operation policies and
procedures, including, but not limited to, (i) replacing Equipment, (ii)
adding newly available improved Equipment, and (iii) modifying policies,
procedures and specifications relating to the System, to conform such
policies, procedures and specifications with new Technology or industry
standards.
7.1.3 INCUMBENT TRAINING. PathNet shall provide to Incumbent the
training as set forth on SCHEDULE J.
7.1.4 PERFORMANCE OF THE SERVICES. PathNet shall have the right,
subject to Incumbent's approval, such approval shall not be unreasonably
withheld, to engage Subcontractors to perform any of the Services.
7.2 SPECIFICATIONS.
7.2.1 GENERAL. PathNet and Incumbent shall perform the Services
in accordance with any and all technical and operational specifications set
forth in SCHEDULE A (the "SPECIFICATIONS").
7.2.2 CHANNEL PLAN.
(a) ORIGINAL CHANNEL PLAN. On the Effective Date, Incumbent shall
deliver to PathNet a proposed T-1 channelization plan, as
detailed in EXHIBIT A-4, setting forth its proposed capacity
needs at each site listed on SCHEDULE B. Such capacity shall in
no event exceed Incumbent Initial Allocation of Capacity and
shall be subject to Drop and Insert capacity at each Switched Mod
Section. PathNet shall incorporate Incumbent's proposed
channelization plan into the Channel Plan subject to the
limitations set forth above.
18
<PAGE>
(b) AMENDED CHANNEL PLAN. Incumbent shall have the right to modify,
its allocated capacity (as described in the Channel Plan) along
the network any time after Commissioning, provided that
sufficient Drop and Insert capacity exists between each Switched
Mod Section using available Wayside Channels to effect such
modification, by providing written notice to PathNet to such
effect. Within ninety (90) days after receipt of any such
written notice from Incumbent, PathNet shall make such
modification to the configuration of the Channel Plan at no
charge to Incumbent. Incumbent shall not reconfigure the Channel
Plan in any manner other than as set forth in this section.
7.2.3 SPECIFICATIONS, STANDARDS AND INSPECTIONS. In connection with
the Services set forth in SECTION 2 and SECTION 4 of SCHEDULE A, PathNet
shall comply with the following requirements:
(a) REASONABLE EFFORTS. PathNet shall use commercially reasonable
efforts to ensure that the modification of the System set forth
in SECTION 2 of SCHEDULE A and the installation of the System set
forth in SECTION 4 of SCHEDULE A occur as expeditiously as
possible.
(b) INDUSTRY STANDARDS. All Services and materials supplied pursuant
to SCHEDULE A must meet or exceed all applicable Specifications.
Where Specifications are not stated, such work performed and
materials supplied will meet all applicable provisions of the
following standards: (i) EIA RS-195 (latest edition), (ii)
EIA/TIA-222 (latest edition), (iii) American Society of Testing
Materials A 325 and A 572, (iv) the applicable sections of the
National Electric Code, (v) the American National Standards
Institute, (vi) ACI 318-83, (vii) ACI-305, (viii) ACI-306, (ix)
OSHA 29 CFR 1910 and (x) all other applicable Federal, state and
local regulations of all Governmental Authorities with
jurisdiction; PROVIDED, HOWEVER, in the case of a conflicting
requirement of standards, the more stringent standard shall
apply.
(c) SITE INSPECTIONS. During the performance of the Services,
Incumbent shall allow PathNet to perform site inspections at any
hour, on any day subject to the access limitations set forth in
SECTION 5.4.1.
SECTION 8. OWNERSHIP, DEPRECIATION AND ENCUMBRANCE OF SYSTEM
8.1 OWNERSHIP OF EQUIPMENT AND ASSETS.
19
<PAGE>
8.1.1 EQUIPMENT AND ASSETS OWNED BY INCUMBENT. Incumbent shall
own the equipment and assets relating to Segments A and B of the System as
set forth in SCHEDULE K.
8.1.2 EQUIPMENT AND ASSETS OWNED BY PATHNET. PathNet shall own
the equipment and assets relating to Segments A and B of the System as set
forth in SCHEDULE K.
8.2 DEPRECIATION OF EQUIPMENT.
8.2.1 DEPRECIATION BY INCUMBENT. Incumbent shall have the right
to fully depreciate for federal and state income tax purposes the equipment
and assets currently owned or to be owned by Incumbent as listed in
SCHEDULE K.
8.2.2 DEPRECIATION BY PATHNET. PathNet shall have the right to
fully depreciate for federal and state income tax purposes the equipment
and assets currently owned or to be owned by PathNet as listed in SCHEDULE
K.
8.3 ENCUMBRANCE.
8.3.1 INITIAL SYSTEM. PathNet shall not Encumber the radios,
radio software, antenna or waveguide used in the Initial System on Segments
A and B or any equipment or assets owned by Incumbent pursuant to SCHEDULE
K, or otherwise owned or leased by Incumbent, or any real estate or
infrastructure owned by Incumbent.
8.3.2 OTHER EQUIPMENT, MATERIALS, AGREEMENTS AND ASSETS. PathNet
shall have the right to Encumber (i) the Equipment used in any Capacity
Expansion on Segment A and B or any other equipment owned by PathNet
pursuant to SCHEDULE K, (ii) PathNet's share of Revenue as determined
under SECTION 5 of this Agreement, (iii) any Customer Agreement relating to
the System provided, however, that PathNet shall not encumber any of
Incumbent's rights under said Customer Agreements, (iv) PathNet's rights in
this Agreement and PathNet's rights in any related documents, instruments
and agreements executed and delivered in connection with this Agreement and
any rights and obligations hereunder or thereunder.
8.4 TAXES. The Parties' respective responsibilities for taxes arising
under or in connection with this Agreement shall be as follows: (i) each Party
shall be responsible for any personal or real property taxes on property it owns
or leases, for franchise and privilege taxes on its business and for taxes based
on its net income or gross revenue and (ii) PathNet shall be responsible for any
sales, use, excise, value-added services, consumption and other taxes and duties
payable by Incumbent on any goods and services used or consumed in providing the
services to be performed by PathNet under this Agreement, where the tax is
imposed on Incumbent's acquisition or use of such goods or services and the
amount of the tax is measured by Incumbent's costs in acquiring such goods or
services; PROVIDED, HOWEVER, that PathNet shall not be responsible for any
Federal, state or local income taxes of Incumbent or any franchise taxes of
Incumbent.
20
<PAGE>
8.5 MAINTENANCE FOR SYSTEMS. Incumbent shall be responsible for the
maintenance of the System pursuant to the terms of a separate written agreement
to be entered into by the parties. The separate maintenance agreement shall
provide for ongoing maintenance of PathNet's microwave facilities.
SECTION 9. EXCESS CAPACITY MARKETING AND SALES
9.1 EXCLUSIVE REPRESENTATIVE.
9.1.1 PATHNET EXCESS CAPACITY. PathNet shall have the exclusive
right to market and sell any and all PathNet Excess Capacity.
9.1.2 INCUMBENT EXCESS CAPACITY. At any time and from time to
time, Incumbent shall have the right to request in writing that PathNet
serve as Incumbent's exclusive representative for the marketing and sale of
all or any portion of the capacity allocated to Incumbent in accordance
with the Channel Plan (the "INCUMBENT EXCESS CAPACITY"). In the event
PathNet sells any Incumbent Excess Capacity, PathNet shall receive a
marketing fee [***] of the revenue generated from the sale of such
Incumbent Excess Capacity actually collected, less any applicable
deduction set forth in SECTION 9.12.1 and SECTION 9.12.2 [***]. Incumbent
Excess Capacity shall be marketed on a pro rata basis with PathNet Excess
Capacity.
9.1.3 MARKETING AND SALE BY INCUMBENT. Incumbent or any
Affiliates of Incumbent shall not market or sell any Incumbent Excess
Capacity or any capacity purchased by Incumbent pursuant to SECTION 9.3 to
any third party without the prior written consent of PathNet; PROVIDED,
HOWEVER, Incumbent may market and sell all or any portion of the Incumbent
Excess Capacity or any capacity purchased by Incumbent pursuant to SECTION
9.3, to Affiliates of Incumbent for and only for such Affiliates' internal
communications needs and not for resale to third parties.
9.2 REFERRALS OF CUSTOMERS BY INCUMBENT. Incumbent shall refer any
potential third party customer of Excess Capacity to PathNet; PROVIDED that
if Incumbent is successful at referring a new (and previously unsolicited by
PathNet) Customer to PathNet, Incumbent shall receive a marketing fee not to
exceed [***] (in addition to other Revenue to be received by Incumbent) from
the sale of Excess Capacity on the System.
9.3 PURCHASE OF AVAILABLE EXCESS CAPACITY BY INCUMBENT. Incumbent
shall have the right to purchase Available Excess Capacity on any path or
Segment of the System (each such path or Segment being referred to herein as an
"INCUMBENT DESIRED PATH"), at a price equal to either (i) the lowest price paid
to PathNet for like capacity and for a similar term by any purchaser during the
one hundred eighty (180) days immediately preceding the purchase by Incumbent of
capacity on such Incumbent Desired Path less twenty-five (25%) percent or (ii)
if no PathNet Excess Capacity has been purchased on such Incumbent Desired Path
during such one hundred eighty (180) day period, the last price paid for such
Incumbent Desired Path less
21
<PAGE>
twenty-five (25%) percent; PROVIDED, HOWEVER, Incumbent shall in no event
purchase more than twenty percent (20%) of the Available Excess Capacity on any
Segment or path within the System at any given time.
9.4 COMMERCIALLY REASONABLE EFFORTS. PathNet shall use commercially
reasonable efforts to obtain the best available price and terms in the marketing
and sale of any Excess Capacity. PathNet shall not, now or in the future,
guarantee any Revenue disbursements nor does PathNet warrant its ability to sell
the Excess Capacity.
9.5 SELLING PRICES FOR EXCESS CAPACITY. Notwithstanding anything set
forth herein to the contrary, PathNet shall have the right to (i) sell Excess
Capacity at prices determined by PathNet to be appropriate on specific routes,
which prices may be below or above current competitive market pricing, (ii)
package the Excess Capacity in sales increments of DS-1's, DS-3's or OC-3's, or
any other increments and (iii) aggregate the paths sold in various combinations,
each as determined by PathNet in its sole discretion.
9.6 BARTER ARRANGEMENTS. Incumbent shall be permitted to barter Incumbent
Excess Capacity, with PathNet's assistance, for telecommunications capacity of
other incumbents engaged by PathNet; PROVIDED, HOWEVER, PathNet shall have the
right to approve any barter arrangement relating to Incumbent Excess Capacity,
which approval shall not be unreasonably withheld. Neither PathNet nor
Incumbent shall derive any fee from facilitating any such barter arrangements.
9.7 ASSUMED NAME; TRADENAMES AND TRADEMARKS. PathNet shall have the right
to market Excess Capacity under its name or any other assumed name, tradename or
trademark which PathNet is authorized to use for such purpose; PROVIDED,
HOWEVER, PathNet shall not use any trademark or tradename of Incumbent or any
Affiliate of Incumbent in written material for purposes of marketing any Excess
Capacity without the prior written consent of Incumbent.
9.8 CUSTOMER AGREEMENTS.
9.8.1 AUTHORIZATION. PathNet shall negotiate, execute and
deliver, on behalf of itself and Incumbent, all agreements and arrangements
("CUSTOMER AGREEMENTS") for customers of Excess Capacity, which Customer
Agreements shall contain, terms and conditions determined by PathNet.
9.8.2 APPROVAL AND CONSENT BY INCUMBENT. If the terms of any
Customer Agreement require the written approval or consent of Incumbent as
a condition to the execution, delivery or performance, Incumbent shall
promptly provide such written approval or consent.
9.8.3 USE OF INCUMBENT'S NAME IN CUSTOMER AGREEMENTS FORBIDDEN.
In any customer agreements, PathNet shall not use Incumbent's name or name
of Incumbent's Operator or any of its Affiliates or imply in any manner
that Incumbent or its Operator or Affiliates are responsible in any manner
for the services provided in any Customer Agreements. Incumbent shall have
the right to review any Customer Agreements
22
<PAGE>
executed between PathNet and its customers to verify that the terms
contained herein have not been violated.
9.8.4 MODIFICATIONS TO SYSTEM. In the event that any Customer
Agreement requires that the System be modified in any way, PathNet shall
ensure that any such modifications (i) shall not compromise the integrity
and performance of the System in accordance with the Specifications and
(ii) shall be made at no additional cost to Incumbent.
9.9 MAINTENANCE OF BOOKS AND RECORDS AND AUDIT PROCEDURES.
9.9.1 BOOKS AND RECORDS. PathNet shall maintain and keep detailed
and accurate books and records with regard to sales of Excess Capacity and
the Revenue generated and collected from such sales.
9.9.2 INCUMBENT REVIEW AND AUDIT PROCEDURES. No more than once
during any consecutive twelve (12) month period, Incumbent shall be
entitled to review and audit PathNet's books and records relating to the
sale of Excess Capacity during business hours upon ten (10) days written
notice to PathNet. Incumbent shall not have the right pursuant to this
SECTION 9.9.2, to review or audit PathNet's corporate income statements,
balance sheets or other forms of general corporate reporting. Incumbent
shall not disclose, at any time before or after the Expiration Date, any
information related to PathNet or PathNet's business obtained by Incumbent
pursuant to a review or audit performed under this SECTION 9.9.2 unless
such information has previously come into the public domain (other than
through unauthorized disclosure) or except as required by law.
9.9.3 EXPENSES OF INCUMBENT REVIEWS AND AUDITS. Incumbent shall
pay the cost of any such review or audit performed pursuant to SECTION
9.9.2.
9.9.4. APPROVAL OF AUTHORIZED REPRESENTATIVE. In the event that
Incumbent hires an authorized representative of Incumbent to perform any
such review or audit pursuant to SECTION 9.9.2, PathNet shall have the
right to approve such authorized representative before any access is
granted to such authorized representative to PathNet's books and records,
which approval shall not be unreasonably withheld.
9.10 QUARTERLY REVENUE REPORTS. PathNet shall issue to Incumbent quarterly
Revenue reports substantially in the form of SCHEDULE L (each a "QUARTERLY
REVENUE REPORT") within thirty (30) days after the end of each calendar quarter.
Each such Quarterly Revenue Report shall be an unaudited statement produced by
PathNet.
9.11 ANNUAL CERTIFIED REVENUE REPORTS. PathNet shall provide to Incumbent
on an annual basis an audited annual revenue report from a national accounting
firm.
9.12 COLLECTION AND PAYMENT OF REVENUE.
23
<PAGE>
9.12.1 COSTS OF COLLECTION. PathNet shall deduct any costs
reasonably incurred by PathNet in connection with the collection of any and
all delinquent Revenue, including, but not limited to, the cost of any
legal actions, collection fees, court proceedings, audits, or other
enforcement actions. PathNet shall deduct such costs from gross revenue
collected prior to the disbursement of such revenue to PathNet and
Incumbent pursuant to SECTION 5.1 and SECTION 9.
9.12.2 TAXES ON GROSS REVENUE. The amount of any taxes on gross
revenue paid by PathNet on behalf of Incumbent shall be deducted from any
revenue to be disbursed to Incumbent prior to disbursement of such revenue
as set forth in this SECTION 9.12.
9.12.3 DEFINITION OF REVENUE. For purposes of this Agreement,
"REVENUE" shall mean the gross revenue generated from the sale of Excess
Capacity actually collected less any deductions set forth in SECTION 9.12.1
and SECTION 9.12.2.
9.12.4 PAYMENTS TO INCUMBENT. PathNet shall pay Incumbent its
allocated portion of Revenue actually received from the sale of Excess
Capacity either monthly or within thirty (30) days after the end of each
calendar quarter in accordance with the payment instructions set forth in
SCHEDULE M. If such payments are to be made quarterly, during the quarter,
until payment, PathNet shall place the Revenue due to Incumbent in an
interest bearing escrow account in the name of the Incumbent.
9.12.5 INTEREST EARNED ON UNDISTRIBUTED REVENUE. Incumbent shall
retain any and all interest earned on any Revenue collected but not yet
distributed to Incumbent in accordance with SECTION 5.1 and SECTION 9.
9.12.6 INCUMBENT'S ASSIGNEES OF REVENUE. Incumbent shall have the
right to designate other entities to receive its disbursements by written
notice to PathNet to such effect; PROVIDED, HOWEVER, any such designation
by Incumbent shall not relieve Incumbent of any tax liability resulting
from its receipt of such disbursements pursuant to SECTION 5.1 and SECTION
9.
SECTION 10. FCC LICENSES AND OTHER REGULATORY APPROVALS AND LICENSES
10.1 FCC RULES AND REGULATIONS.
10.1.1 MICROWAVE RADIO STATION LICENSES.
(a) Segments A and B.
i. PREPARATION AND FILING OF FORMS 415. PathNet shall prepare
and timely file all required Form 415, Applications for
Authorization in the Microwave Services (each a "FORM 415"),
or any successor forms,
24
<PAGE>
documents or instruments to such Form 415 as the FCC may
prescribe, including but not limited to, the preparation or
ordering of all frequency coordinations required pursuant to
SCHEDULE B and SCHEDULE C of Form 415, in order to own,
operate and sell the Excess Capacity of Segments A and B of
the System in accordance with the terms and conditions of
this Agreement.
ii. IDENTITY OF LICENSEE. All Microwave Radio Station Licenses
issued by the FCC relating to the Initial System of Segments
A and B shall be licensed in the name of Incumbent or a
wholly-owned subsidiary of Incumbent. All Microwave Radio
Station Licenses issued by the FCC relating to any Capacity
Expansion on Segments A and B shall be licensed in the name
of PathNet or a wholly-owned subsidiary of PathNet.
Incumbent shall be permitted to continue to own and be
licensed as a private microwave operator at the stations
licensed to PathNet relating to Segments A and B of the
System, provided that (i) such private licenses are for
different frequency pairs than those assigned to the System
(including, but not limited to, any Capacity Expansion of
the System) and (ii) such private licenses are permitted
under the FCC Code.
iii. MAINTENANCE OF LICENSE. PathNet shall maintain in good
standing each Microwave Radio Station License relating to
the System, including, but not limited to, preparing and
filing any required amendments to the Forms 415 relating to
the System and submitting and filing any supplementary
information as required by the FCC.
10.1.2 COMMON CARRIER REPORTING OBLIGATIONS. Incumbent and PathNet
shall prepare and file all forms, reports, instruments, documents and
agreements required by the FCC and FCC Code relating to Incumbent's status
as a "common carrier" under the FCC Code.
10.1.3 TARIFF FILINGS. PathNet shall prepare and timely file all
tariff applications pursuant to 47 CFR 61, as amended, or any successor
statute, rule or regulation and shall request and file all necessary
waivers of such tariff requirements, as determined by PathNet in its sole
discretion.
10.1.4 FREQUENCY COORDINATION NOTICES. During the term of this
Agreement, PathNet shall prepare and send all required frequency
coordination notices required under 47 CFR 101.103, as amended, or any
successor statute, rule or regulation and shall respond as appropriate to
all PCNs received by PathNet or Incumbent relating to the System.
10.1.5 DELIVERY OF COPIES. PathNet shall provide to Incumbent a
copy of all filings and submissions with the FCC, relating to the System
within thirty (30) days of such filings and submissions.
25
<PAGE>
10.1.6 ASSISTANCE IN PREPARATION OF LICENSE APPLICATIONS. Upon
request by PathNet and in a timely manner, Incumbent shall provide to
PathNet all information necessary for the completion of all required
filings and submissions with the FCC including, but not limited to
Incumbent's authorized signature on any filings or other submissions to the
FCC or any documents, instruments or agreements completed in connection
with such filings and submissions.
10.1.7 FUTURE CHANGES IN FCC REQUIREMENTS. If FCC requirements
relating to the Form 415, common carriers, frequency coordination or any
other matters relating to the System change or are modified, PathNet shall
be responsible for compliance with such new requirements including, but not
limited to, the payment of any costs or fees associated therewith and
Incumbent shall cooperate with PathNet with respect to such compliance;
PROVIDED, HOWEVER, if the FCC establishes user fees or other such fees
relating to the frequencies used in and the communications business
conducted over the System, the cost of such additional fees shall be
divided between PathNet and Incumbent, as determined by PathNet and
Incumbent at such time. In the event that fees are required for any FCC
mandated Universal Service Support Mechanism or any universal service fund
obligations are required by any federal or state law or regulation, PathNet
shall be solely responsible for such fees or obligations.
10.1.8 SPECTRAL LOADING REQUIREMENTS. PathNet shall (i) ensure
that the System, as licensed, shall comply with all spectral loading
requirements set forth in 47 CFR 101.141, or any successor statute, rule or
regulation or (ii) obtain a waiver of any or all of such requirements;
PROVIDED, HOWEVER, if the System does not meet such spectral loading
requirements and PathNet is unable to obtain a waiver of such requirements,
PathNet shall have the right to modify the System to a hot-standby
Protection Configuration until such time as the spectral loading
requirements can be met.
10.1.9 DEFAULT IN FCC LICENSE. In the event that the FCC
institutes a penalty against or fine imposed on PathNet, Incumbent, or the
System, due to non-compliance with any FCC requirements, PathNet shall
promptly pay such penalty or fine (in the case such penalty or fine is
instituted as the result of an act or omission on the part of PathNet) or
Incumbent shall promptly pay such penalty or fine (in the event such
penalty or fine is instituted as the result of an act or omission on the
part of Incumbent).
10.2 ZONING REQUIREMENTS. Incumbent shall be responsible for compliance
with all zoning requirements applicable to the System and its Facilities,
including, but not limited to, the Facilities. Incumbent shall advise PathNet
of zoning requirements, which, in the reasonable opinion of Incumbent, differ
from those generally applicable to microwave facilities. PathNet shall provide
to Incumbent all required information and shall cooperate with Incumbent in
connection with Incumbent's compliance with all zoning requirements pursuant to
this SECTION 10.2.
10.3 BUREAU OF LAND MANAGEMENT REQUIREMENTS. Incumbent shall be
responsible for compliance with all United States Department of Interior Bureau
of Land Management
26
<PAGE>
requirements applicable to the System and its Facilities, including, but not
limited to, the Facilities. PathNet shall provide Incumbent with all requested
information and shall cooperate with Incumbent in connection with Incumbent's
compliance with such United States Department of Interior Bureau of Land
Management requirements pursuant to this SECTION 10.3.
10.4 TOWER REGISTRATION. Incumbent shall ensure compliance with all FAA
and FCC tower registration requirements including, but not limited to, the
preparation of any filings with or the obtaining of any waivers or extensions
from the FAA or FCC. Incumbent shall promptly notify PathNet of any deficiency
on non-compliance with any such tower registration requirements, filings,
waivers or extensions.
SECTION 11. INSURANCE
11.1 DELIVERY OF CERTIFICATES OF INSURANCE. Upon Incumbent's request and
prior to the commencement of any Services by PathNet, PathNet shall deliver to
Incumbent Certificates of Insurance relating to PathNet's Commercial General
Liability Insurance Policy, Workers Compensation Insurance Policy, Automobile
Liability Insurance and Excess Liability Insurance Policy.
11.2 PATHNET INSURANCE COVERAGE. During the term of this Agreement,
PathNet shall maintain the types of insurance at the coverage limits set forth
below:
11.2.1 WORKERS COMPENSATION AND EMPLOYER'S LIABILITY INSURANCE.
Workers Compensation Insurance with a limit of not less than $500,000;
11.2.2 COMMERCIAL GENERAL LIABILITY INSURANCE. Commercial General
Liability Insurance with a limit of not less than $1,000,000 per occurrence
and $1,000,000 in the aggregate;
11.2.3 AUTOMOBILE LIABILITY INSURANCE. Automobile Liability
Insurance, which includes coverage for non-owned and hired vehicles with a
limit of not less than $1,000,000; and
11.2.4 EXCESS LIABILITY INSURANCE. Excess Liability Insurance with
a limit of not less than $4,000,000.
11.3 INCUMBENT INSURANCE COVERAGE. Incumbent shall maintain insurance
coverage on the System which coverage shall include general liability and other
forms of insurance covering such risks as are usually insured against by prudent
companies engaged in the business and activities in which the Incumbent is
engaged, in amount which are adequate in relation to the business and properties
of Incumbent, and all premiums to date have been paid in full.
11.4 PROOF OF LICENSED SUBCONTRACTORS. Upon reasonable request of
Incumbent, PathNet shall provide to Incumbent proof of licensing and
certification of insurance for coverage
27
<PAGE>
in types and amounts as set forth in SECTION 11.2 for any Subcontractors engaged
by PathNet to provide Services, during the term of such engagement.
SECTION 12. SOFTWARE AND PROPRIETARY RIGHTS
12.1 PATHNET SOFTWARE. PathNet retains all right, title and interest in
and to PathNet Software. As of the Effective Date and pursuant to the PathNet
Sublicense Agreement attached hereto as SCHEDULE N, Incumbent is granted a
nonexclusive sublicense to use PathNet Software for the sole purpose of
receiving the services pursuant to this Agreement. PathNet Software will be
made available to Incumbent in such form and on such media as exists on the
Effective Date, together with existing documentation and any other related
materials. Incumbent shall not be permitted to use PathNet Software for the
benefit of any entities other than PathNet without the prior written consent
which may be withheld at PathNet's sole discretion. Except as otherwise
requested or approved by PathNet, Incumbent shall cease all use of PathNet
Software upon expiration of this Agreement.
12.2 PROPRIETARY RIGHTS. Incumbent acknowledges and agrees that all or
portions of the information and materials, including but not limited to the
PathNet Software and related documentation to be supplied by PathNet hereunder
are owned by PathNet and/or others and are proprietary in nature. Incumbent
also acknowledges and agrees that PathNet and/or its suppliers have and will
retain all proprietary rights in such information and materials. Incumbent (i)
shall respect such claim of proprietary right, (ii) shall protect such
information at least to the extent that it protects its own proprietary
information, (iii) shall not use such information except for the purposes for
which its is being made available as set forth in this Agreement and (iv) shall
not reproduce, print, disclose, or otherwise make said information available to
any third party, in whole or in part, in whatever form.
SECTION 13. REPRESENTATIONS AND WARRANTIES
13.1 REPRESENTATIONS AND WARRANTIES OF EACH PARTY. Each Party hereby
represents and warrants the other Party as follows:
13.1.1 DUE INCORPORATION AND FORMATION; AUTHORIZATION OF
AGREEMENTS; BINDING EFFECT. Such Party is a corporation or partnership, as
the case may be, duly formed or organized, and validly existing under the
laws of its state of incorporation or organization, and has the corporate
or partnership authority to own its property and carry on its business as
owned and carried on as of the Effective Date. Such Party is duly licensed
or qualified to do business and is in good standing (if applicable) in each
jurisdiction in which the failure to be so licensed or qualified would have
a Material Adverse Effect on such Party. Such Party has the corporate or
partnership authority to execute and deliver this Agreement, to perform its
obligations hereunder, and to consummate the transactions contemplated
hereby. This Agreement has been duly authorized, executed and delivered by
such Party and this Agreement constitutes a legal, valid and binding
obligation of such Party enforceable in accordance with its terms,
28
<PAGE>
subject as to enforceability to limits imposed by bankruptcy, insolvency or
similar laws affecting creditors rights generally and the availability of
equitable remedies.
13.1.2 NO CONFLICT; NO DEFAULT. Neither the execution or delivery
of this Agreement by such Party, nor (except as would not have a Material
Adverse Effect on such Party), the performance of this Agreement by such
Party or the consummation by such Party of the transactions contemplated
hereby in accordance with the terms and conditions hereof: (i) will
conflict with, violate, result in a breach of or constitute a default under
any of the terms, conditions or provisions of the certificate or articles
of incorporation or bylaws (or other governing documents) of such Party or
any material agreement or instrument to which such Party is a party or by
which such Party may be bound, (ii) will conflict with, violate or result
in a breach of, constitute a default under (whether with notice or lapse of
time or both), accelerate or permit the acceleration of the performance
required by, give to others any interests or rights or require any consent,
authorization or approval under any contract to which such Party is a party
or by which such Party is or may be bound or to which any equity interest
held by such Party or any of its material properties or assets is subject
or (iii) will result in the creation or imposition of any Encumbrance upon
any equity interest held by such Party or any of the other material
properties or assets of such Party, other than Permitted Encumbrances.
13.1.3 NO CONSENT. No consent, approval, order or authorization
of, or registration, declaration or filing with any Governmental Authority,
domestic or foreign, is required to be obtained by such Party in connection
with the execution and delivery of this Agreement. If and to the extent
any such consent, approval, order, or communication of registration,
delcaration or filing with any Governmental Authority, domestic or foreign
is required to perform under this Agreement or to consummate the
transaction contemplated hereby, such Party shall use good faith efforts to
obtain such consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Authority, domestic or foreign.
13.1.4 COMPLIANCE WITH LAWS AND REGULATIONS. That such Party is
not and that the performance of its obligations under this Agreement will
not result in a violation in any respect of (i) any applicable Federal,
state, local or foreign laws, ordinances, regulations, rulings and orders
of government agencies applicable to its business in any respect the
violation of which could have a Material Adverse Effect (including
Requirements of Law relating to pollution, protection of the environment,
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic, hazardous or regulated
substances or wastes into the environment or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage disposal,
transport or handling of pollutants or other such hazardous or regulated
substances or wastes) or (ii) any applicable order, Judgment, injunction,
award or decree in any respect which could have a Material Adverse Effect
on such Party.
13.1.5 PERMITS. Such Party has or will obtain all authorizations,
approvals, consents, licenses, Permits and certificates (including, but not
limited to all required approvals from the FCC) necessary to conduct their
respective businesses and to own, lease and operate its properties as
currently or anticipated to be conducted, owned, leased
29
<PAGE>
or operated, as the case may be, for which the failure to possess would
result in a Material Adverse Effect. No violations are outstanding or
uncured with respect to any such Permits and no proceeding is pending to
revoke or limit any Permit.
13.1.6 LABOR MATTERS. Such Party has complied in all material
respects with all applicable Federal, state and local laws and ordinances
relating to the employment of labor, including the provisions thereof
relating to wages, hours, employee benefit plans and the payment of social
security taxes, and is not liable for any arrears of wages or any tax
related thereto (except for currently accrued and unpaid wages and except
for currently accrued withholding, payroll, unemployment and social
security taxes payment of which is not overdue) or penalties for failure to
comply with any of the foregoing, and neither has received a notice to the
contrary from any Governmental Authority. Such Party has not suffered any
strike, slowdown, picketing or work stoppage by any union or other group or
employees affecting the business of such Party, and no such event or action
is threatened.
13.1.7 NO DISCRIMINATION. Such Party currently subscribes and
offers and will continue to subscribe and offer to all customers,
employees, licensees, and invitees the opportunity to obtain all the goods,
services, accommodations, advantages, facilities and privileges of such
Party without discrimination because of race, creed, color, sex, age,
national origin or ancestry, in accordance with all applicable Federal,
state, and local laws relating to equal opportunity and discrimination.
13.1.8 DISCLAIMER. EXCEPT AS EXPRESSLY PROVIDED HEREIN, NEITHER
PATHNET NOR INCUMBENT MAKES ANY OTHER EXPRESS WARRANTY AND THERE ARE NO
IMPLIED WARRANTIES WITH RESPECT TO ANY TECHNOLOGY, GOODS, SERVICES, RIGHTS
OR OTHER SUBJECT MATTER OF THIS AGREEMENT. PATHNET AND INCUMBENT HEREBY
DISCLAIM THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE WITH RESPECT TO ANY AND ALL OF THE FOREGOING.
13.2 REPRESENTATIONS AND WARRANTIES OF PATHNET.
13.2.1 HAZARDOUS MATERIALS. PathNet represents and warrants that
(i) PathNet is and shall remain in compliance with any and all Federal,
state or local laws, regulations or permits in regard to Hazardous
Materials, (ii) PathNet shall report to Incumbent and to applicable
Governmental Authorities any release of reportable quantities of a
hazardous substance as mandated by SECTION 103 (A) of CERCLA and (iii)
PathNet will, within five (5) Business Days of receipt, send to Incumbent a
copy of any notice, order, inspection report or other document issued by
any government authorities relating to PathNet's status with environmental
or health and safety laws.
13.2.2 SERVICES. PathNet warrants (i) that the Services will be
performed in a workmanlike manner and (ii) that it has or will obtain
agreements or arrangements with
30
<PAGE>
its employees, agents and Subcontractors sufficient to allow it to provide
Incumbent with the Services;
13.2.3 TITLE TO ASSETS, PROPERTIES AND RIGHTS AND RELATED MATTERS.
Except as set forth herein, PathNet has good and marketable title to all
assets necessary for the conduct of PathNet's business and for the
transactions contemplated by this Agreement free and clear of all
Encumbrances of any kind or character, except (i) liens for current taxes
not yet due and payable, (ii) Encumbrances securing taxes, assessments,
governmental charges or levies or the Encumbrances of material, carriers,
landlords and like persons, all of which are not yet due and payable and
(iii) Encumbrances of a character that do not substantially impair the
ability of PathNet to carry out its obligations under this Agreement.
13.3 REPRESENTATIONS AND WARRANTIES OF INCUMBENT.
13.3.1 INDEPENDENT INVESTIGATION. Incumbent represents and
warrants that it has independently investigated the potential for the
success of PathNet's ability to create, aggregate and sell Excess Capacity
and has not relied upon any inducements or representations of PathNet or
its agents, other than those contained in this Agreement.
13.3.2 TITLE TO ASSETS, PROPERTIES AND RELATED MATTERS. Except as
set forth herein, Incumbent represents and warrants that it has good and
marketable title to all the properties, interests in properties and assets,
real, personal or mixed, (or the right to occupy said property by virtue of
easements, leases, permits, licenses or right-of-way grants) as set forth
on SCHEDULE D for Segment A (including, but not limited to, any
rights-of-way, leasehold interests, easements, and rights necessary to
insure vehicular and pedestrian ingress and egress to and from any such
properties or assets), free and clear of all Encumbrances of any kind or
character, except (i) liens for current taxes not yet due and payable, (ii)
Encumbrances securing taxes, assessments, governmental charges or levies or
the Encumbrances of materialman, landlords and like persons, all of which
are not yet due and payable and (iii) Encumbrances of a character that do
not substantially impair the ability of Incumbent to carry out its
obligations under this Agreement.
Incumbent is in the process of acquiring the property rights necessary
for the transactions contemplated by this Agreement on Segment B, but makes
no representations or warranties as to its ability to acquire such property
rights.
SECTION 14. INDEMNIFICATION
14.1 INDEMNIFICATION BY INCUMBENT. Incumbent agrees to indemnify, defend
and hold harmless PathNet and its Affiliates and their respective officers,
directors, employees, agents, successors and assigns from and against any and
all Losses and threatened Losses arising from, in connection with, or based on
allegations of, any of the following:
31
<PAGE>
14.1.1 Any claims of infringement of any patent, trade secret,
copyright or other proprietary rights alleged to have occurred because of
systems or other resources provided to PathNet by Incumbent.
14.1.2 Any claims arising out of the untruth, inaccuracy or breach
of any representation or warranty of Incumbent set forth in this Agreement.
14.1.3 (i) Any personal injury, disease or death of any Person,
(ii) damage to or loss of any property, money damages or specific
performance owed to any Person (by contract or operation of law) or (iii)
any fines, penalties, taxes, claims, demands, charges, actions, causes of
action, assessments, environmental response costs, environmental penalties,
injunctive obligations caused by, arising out of, or in any way incidental
to, or in connection with, actions or omissions of Incumbent, its
employees, Subcontractors or agents.
14.2 INDEMNIFICATION BY PATHNET. PathNet agrees to indemnify, defend and
hold harmless Incumbent, its Partners, Operator, and Affiliates and their
respective officers, directors, employees, agents, successors and assigns from
and against any and all Losses and threatened Losses arising from, in connection
with, or based on allegations of, any of the following:
14.2.1 Any claims of infringement of any patent, trade secret,
copyright or other proprietary rights alleged to have occurred because of
systems or other resources provided to Incumbent by PathNet.
14.2.2 Any claims arising out of the untruth, inaccuracy or breach
of any representation or warranty of PathNet set forth in this Agreement.
14.2.3 (i) Any personal injury, disease or death of any person,
(ii) damage to or loss of any property, money damages or specific
performance owed to any Person (by contract or operation of law) or (iii)
any fines, penalties, taxes, assessments, environmental response costs,
environmental penalties or injunctive obligations caused by, arising out
of, or in any way incidental to, or in connection with, actions or
omissions of PathNet, its employees, Subcontractors or agents.
14.2.4 Any Losses, causes of action or suits arising out of
Customer Agreements.
14.3 INDEMNIFICATION PROCEDURES. With respect to any claims, the following
procedures shall apply:
14.3.1 NOTICE. Promptly after receipt by an entity entitled to
indemnification under SECTION 14.1 or SECTION 14.2 of notice of the
commencement or threatened commencement of any civil, criminal,
administrative or investigative action or proceeding involving a claim in
respect of which the indemnitee will seek indemnification pursuant to any
such Section, the indemnitee shall notify the indemnitor of such claim in
writing. No failure to so notify an indemnitor shall relieve it of its
obligations under this Agreement except to the extent that it can
demonstrate damages
32
<PAGE>
attributable to such failure. Within fifteen (15) days following receipt
of written notice from the indemnitee relating to any claim, but no later
than ten (10) days before the date on which any response to a complaint or
summons is due, the indemnitor shall notify the indemnitee in writing if
the indemnitor elects to assume control of the defense and settlement of
that claim (a "NOTICE OF ELECTION").
14.3.2 PROCEDURE FOLLOWING NOTICE OF ELECTION. If the indemnitor
delivers a Notice of Election relating to any claim within the required
notice period, the indemnitor shall be entitled to have sole control over
the defense and settlement of such claim; provided that, (i) the indemnitee
shall be entitled to participate in the defense of such claim and to employ
counsel at its own expense to assist in the handling of such claim, and
(ii) the indemnitor shall obtain the prior written approval of the
indemnitee before entering into any settlement of such claim or ceasing to
defend against such claim. After the indemnitor has delivered a Notice of
Election relating to any claim in accordance with the section (a) above,
the indemnitor shall not be liable to the indemnitee for any legal expenses
incurred by the indemnitee in connection with the defense of that claim.
In addition, the indemnitor shall not be required to indemnify the
indemnitee for any amount paid or payable by the indemnitee in the
settlement of any claim for which the indemnitor has delivered a timely
Notice of Election, if such amount was agreed to without the written
consent of the indemnitor.
14.3.3 PROCEDURE WHERE NO NOTICE OF ELECTION IS DELIVERED. If the
indemnitor does not deliver a Notice of Election relating to any claim
within the required notice period, the indemnitee shall have the right to
defend the claim in such manner as it may deem appropriate, at the cost and
expense of the indemnitor. The indemnitor shall promptly reimburse the
indemnitee for all such costs and expenses.
14.4 SUBROGATION. In the event that an indemnitor shall be obligated to
indemnify an indemnitee pursuant to SECTION 14.1 or SECTION 14.2, the indemnitor
shall, upon payment of such indemnity in full, be subrogated to all rights of
the indemnitee with respect to the claims to which such indemnification relates.
SECTION 15. LIABILITY OF THE PARTIES TO EACH OTHER
15.1 LIABILITY GENERALLY. Subject to the specific provisions of this
SECTION 15, it is the intent of the Parties that each Party shall be liable to
the other Party for any actual damages incurred by the non-breaching Party as a
result of the breaching Party's failure to perform its obligations in the manner
required by this Agreement and failure to cure such nonperformance as set forth
in SECTION 16.1.2.
15.2 LIABILITY RESTRICTIONS.
15.2.1 SUBJECT TO SECTION 15.2.2 BELOW, IN NO EVENT, WHETHER IN
CONTRACT OR IN TORT (INCLUDING BREACH OF WARRANTY, NEGLIGENCE AND STRICT
LIABILITY IN TORT), SHALL A PARTY BE LIABLE
33
<PAGE>
TO THE OTHER PARTY FOR INDIRECT, CONSEQUENTIAL, EXEMPLARY, PUNITIVE OR
SPECIAL DAMAGES EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES IN ADVANCE.
15.2.2 The limitations set forth in SECTION 15.2.1 shall not apply
with respect to: (i) damages occasioned by the willful misconduct or gross
negligence of a Party, (ii) damages occasioned by improper or wrongful
termination of this Agreement or (iii) damages occasioned by a violation of
SECTION 12 of this Agreement.
15.2.3 Each Party shall have a duty to mitigate damages for which
the other Party is responsible.
15.2.4 Each Party shall be liable to the other Party for any actual
damages as set forth in SECTION 15.1 only if, and to the extent that the
aggregate of all losses arising from or in connection with any such failure
to perform obligations in the manner required by this Agreement exceeds ten
thousand dollars ($10,000.00).
15.2.5 PathNet agrees that all claims arising from and out of the
terms of this Agreement shall be limited to the assets of Incumbent and
that all rights or remedies at law or in equity against Incumbent's
Partners by PathNet, its successors, assigns and representatives are hereby
expressly waived.
15.3 FORCE MAJEURE. No Party shall be liable for any breach, default or
delay in the performance of its obligations under this Agreement (i) if and to
the extent such default or delay is caused, directly or indirectly, by: fire,
flood, earthquake, elements of nature or acts of God, riots, civil disorders,
rebellions or revolutions in any country, Requirements of Law relating to the
System or to the sale of Excess Capacity, or any other cause beyond the
reasonable control of such Party (a "FORCE MAJEURE EVENT"), (ii) provided the
non-performing Party is without fault in causing such breach, default or delay,
and such breach, default or delay could not have been prevented by reasonable
precautions and cannot reasonably be circumvented by the non-performing Party
through the use of alternate sources, work around plans or other means.
SECTION 16. INFORMAL DISPUTE RESOLUTION; ARBITRATION
16.1 INFORMAL DISPUTE RESOLUTION.
16.1.1 ROLE OF PROGRAM MANAGER. In the event Incumbent has a
dispute, controversy or other complaint relating to PathNet's performance
of PathNet's rights and obligations under this Agreement, Incumbent shall
have the right to first contact the Program Manager to resolve such
dispute, controversy or other complaint. If Incumbent is not satisfied
with the resolution provided by the Program Manager, Incumbent may resort
to the arbitration procedures set forth in this SECTION 16.
16.1.2 NOTICE OF BREACH, CURE AND REMEDIES. In the event of a
material breach by either PathNet or Incumbent (the "BREACHING PARTY"), the
other Party (the "NON-
34
<PAGE>
BREACHING PARTY") shall send by certified mail a written notice of such
material breach to the Breaching Party setting forth the specific
allegations of such breach. Upon receipt of the notice of breach, the
Breaching Party shall have thirty (30) days to cure such breach. In the
event the Breaching Party fails to cure such breach, as determined by the
Non-Breaching Party in its sole discretion, or the Breaching Party
determines, in its sole discretion, that it has cured such breach, either
the Breaching Party or the Non-Breaching Party may invoke the arbitration
procedures set forth in SECTION 16.2 to resolve whether such breach has
been cured.
16.1.3 SCOPE OF ARBITRATION AND DISPUTE RESOLUTION. SECTION 16 and
the arbitration and dispute resolution mechanisms provided herein shall not
apply to Incumbent's right to terminate this Agreement as provided in
SECTION 3.3.
16.2 ARBITRATION.
16.2.1 ARBITRATION; RESOLUTION OF DISPUTES. Except as provided in
SECTION 16.1.3, any and all disputes and controversies between Incumbent
and PathNet concerning the negotiation, interpretation, performance,
determination of amounts due either Party, breach or termination of this
Agreement (each a "DISPUTE") shall be subject to resolution as set forth in
this SECTION 16.
16.2.2 SETTLEMENT DISCUSSIONS. Subject to SECTION 16.1, any
Dispute shall be attempted to be resolved first through amicable settlement
discussions and each Party shall bear its own costs of such settlement
discussions. Each Party hereby agrees to use good faith efforts to reach a
settlement through such amicable settlement discussions.
16.2.3 REFERRAL TO BINDING ARBITRATION. In the event the Parties
fail to reach a settlement of the Dispute pursuant to settlement
discussions in accordance with SECTION 16.2.2, each Party shall have the
right, but not the obligation, to refer such Dispute for final resolution
by binding arbitration in accordance with the Center for Public Resources'
(the "CENTER") Rules for Non-Administered Arbitration of Business Disputes
(the "ARBITRATION RULES").
16.2.4 BINDING EFFECT. The Parties acknowledge and agree that (i)
the award in any arbitration shall be final, conclusive and binding on the
Parties and (ii) any such arbitration award be a final resolution of the
Dispute between the Parties to the same extent as a final judgment of a
court of competent jurisdiction.
16.2.5 USE OF COURTS AND OTHER LEGAL REMEDIES. Each Party
covenants and agrees that it shall not resort to any court for legal
remedies concerning any Dispute other than to enforce a final decision by
the arbitrators or for preliminary, interim or provisional equitable relief
in aid of arbitration.
16.2.6 ARBITRATION PROCESS.
(a) NOTICE. If the Parties cannot resolve a Dispute to their
mutual satisfaction pursuant to SECTION 16.2.2, either Party
may deliver to
35
<PAGE>
the other Party a written notice in accordance with the
Arbitration Rules.
(b) SITE AND ARBITRATION TRIBUNAL. Absent agreement to the
contrary by the Parties, the arbitration will be conducted
in Omaha, Nebraska by a panel of three (3) arbitrators with
expertise in the fields of telecommunications engineering
and construction, PROVIDED, HOWEVER, in the case of
particular witnesses not subject to subpoena at the
designated hearing site, hearings may be held at any place
designated by the arbitrators where such witnesses can be
compelled to attend, and, with the consent of the Parties,
before a single member of the arbitration tribunal. Within
thirty (30) days after the filing of the notice of
arbitration, each Party must select one (1) arbitrator and a
third arbitrator will be selected by agreement of the two
(2) arbitrators selected by the Parties. If either Party
fails to select an arbitrator or there is no agreement on
the selection of the third arbitrator, the Center will
select such arbitrators.
(c) TRANSCRIPTS AND EVIDENCE. Both Parties shall cause a
written transcript of all proceedings and testimony shall be
kept and the cost of such transcript shall be borne equally
by the Parties pending the final award. All documents that
either Party proposes to offer in evidence, except for those
objected to by the other Party, shall be deemed to be
self-authenticating.
(d) APPLICABLE LAW. The arbitrator shall determine the claims
of the Parties and render their final award in accordance
with the governing law of this Agreement as set forth in
SECTION 17.5. Notwithstanding anything set forth in the
Arbitration Rules to the contrary, the provisions of this
SECTION 16 shall govern any arbitration proceeding brought
in relation to this Agreement or the transactions
contemplated thereby.
(e) SANCTIONS. The Parties acknowledge that, in addition to any
other remedy allowed or specified in or under the
Arbitration Rules, the failure of a Party to comply with any
interim, partial or interlocutory order, after due notice
and opportunity to cure such non-compliance, may be treated
by the arbitrators as a default and all or some of the
claims or defenses of the defaulting Party may be stricken
and partial or final award entered against such Party, as
determined by the arbitrators in their sole discretion,
sanctions as such arbitrators deem appropriate.
(f) LIMITATION ON AWARDS. Except as provided in SECTION 15.2.2,
arbitrators may not award (i) incidental, special,
consequential or
36
<PAGE>
punitive damages in the resolutions of any Dispute and the
Parties hereby waive all rights to and claims for monetary
awards other than compensatory damages, (ii) the right to
terminate this Agreement or any of the rights and
obligations hereunder, or (iii) any other right or remedy
that contravenes the terms and conditions of this Agreement.
(g) PERIOD OF LIMITATIONS. In the event the Party claiming a
Dispute does not institute binding arbitration within one
(1) year after the commencement of settlement discussions
pursuant to SUBSECTION 16.2.2, such Party shall forever be
barred from bringing a claim on the specific subject matter
of such Dispute.
(h) ARBITRATION AWARD. Any arbitration award must be in writing
and must contain findings of fact and conclusions of law
upon which the arbitrators relied in making the decision
relating to such award.
(i) ATTORNEYS' FEES. The arbitrator shall award the reasonable
cost, including attorneys' fees, to the prevailing Party.
SECTION 17. MISCELLANEOUS
17.1 NOTICES. All notices pertaining to disputes arising from this
Agreement shall be directed to a corporate entity or employee designated by the
signatories as having full rights and responsibilities to address such issues.
Notices under this Agreement shall be sufficient only if personally delivered by
a commercial prepaid delivery or courier service or mailed by certified or
registered mail, return receipt requested to a Party at its address set forth
below or as amended by notice pursuant to this SECTION 17.1. If not received
sooner, notice by mail shall be deemed received five (5) business days after
deposit in the U.S. mail. All notices shall be delivered as follows:
If to PathNet:
Michael A. Lubin, Esquire
Vice President and General Counsel
PathNet, Inc.
1015-31st Street, NW
Washington, DC 20007
Tel: 202.625.7284
Fax: 202.625.7369
If to Incumbent:
Mr. Al Behrens
Director, Functional Strategies
Northern Border Pipeline Company
1111 South 103rd Street
37
<PAGE>
Omaha, NE 68103-0330
Tel: (402) 398-7135
Fax: (402) 398-7874
17.2 BINDING NATURE; ENTIRE AGREEMENT. PathNet and Incumbent acknowledge
that (i) each has read and understands the terms and conditions of this
Agreement and agrees to be bound by such terms and conditions, (ii) this
Agreement shall be binding on each of PathNet and Incumbent and their respective
successors and assigns, (iii) this Agreement is the complete and conclusive
statement of the agreement between the Parties, (iv) this Agreement supersedes
any and all prior agreements and arrangements between the Parties and all
understandings and agreements, oral and written, heretofore made between
Incumbent and PathNet are merged in this Agreement which alone, fully and
completely expresses their agreement on the subject matter of this Agreement and
(v) this Agreement sets forth the entire agreement on the subject matter hereof.
17.3 AMENDMENT. No modifications of, additions to or waiver of this
Agreement shall be binding upon Incumbent or PathNet unless such modification,
addition or waiver is in writing and signed by an authorized representative of
each Party.
17.4 SEVERABILITY. If any term or provision of this Agreement shall to any
extent be held by a court or other tribunal to be invalid, void or
unenforceable, then such term or provision shall be inoperative and void insofar
as it is in conflict with the law, but the remaining terms and provisions of
this Agreement shall nevertheless continue in full force and effect and the
rights and obligations of the Parties shall be deemed to be restated to reflect
as nearly as possible the original intentions of the Parties in accordance with
applicable law.
17.5 GOVERNING LAW. This Agreement, and the rights and obligations of the
Parties hereunder, shall be governed and interpreted in accordance with the laws
of the State of Nebraska (other than the choice of law rules thereof).
17.6 SURVIVAL. Any provision of this Agreement which completes performance
or observance subsequent to any termination or expiration of this Agreement
shall survive such termination of expiration and continue in full force and
effect.
17.7 ASSIGNMENT. At any time and from time to time, PathNet shall have the
right to assign this Agreement or any of PathNet's rights and obligations under
this Agreement; provided, that in no event shall any such assignment relieve
PathNet of its obligations under this Agreement. Incumbent may not or shall not
have the right to assign this Agreement or any of its rights and obligations
hereunder, PROVIDED, HOWEVER, Incumbent may assign its right and obligations, in
whole but not in part, under this Agreement without the approval of PathNet, to
any entity which acquires all or substantially all of the assets of Incumbent or
to any subsidiary, Affiliate or successor in a merger or consolidation of
Incumbent; provided, that in no event shall any such assignment relieve
Incumbent of its obligations under this Agreement.
38
<PAGE>
17.8 WAIVER. Failure or delay on the part of Incumbent or PathNet to
exercise any right, power or privilege under this Agreement shall not constitute
a waiver of any right power or privilege of this Agreement.
17.9 GOOD FAITH RENEGOTIATION. Notwithstanding anything set forth herein
to the contrary, the Parties hereby agree that in the event a Governmental
Authority issues a decision, order, rule or other rulemaking of any kind, which
necessitates any modification or amendment to this Agreement, the Parties shall
negotiate in good faith to modify or amend this Agreement to comply with such
decision, order, rule or other rulemaking.
17.10 CONFIDENTIALITY. Except as otherwise provided in this section,
the Parties agree that all Confidential Information shall be kept in confidence
and shall not, without the prior written consent of the disclosing Party, be
disclosed by the receiving Party in any manner whatsoever, in whole or in part,
and that they will use the Confidential Information disclosed to them solely for
the purposes of this Agreement unless otherwise specifically authorized in
writing by the disclosing Party, or specifically required by an order of a
regulatory agency or court of competent jurisdiction, in which case the Parties
agree to use their best efforts to limit disclosure through a protective order
or other similar means. Notwithstanding the foregoing,the existence of this
Agreement shall not be Confidential Information and either Party may disclose
Confidential Information to its partners, operator, Affiliates, parent
corporations, investors, investment bankers, creditors, third party contractors,
capacity purchasers and their applicable respective employees, attorneys and
agents, provided that such disclosure is made only to those persons with a
legitimate need to know such Confidential Information for purposes consistent
with this Agreement.
17.11 INCUMBENT'S DESIGNATED REPRESENTATIVE. Incumbent shall on the
Effective Date designate in writing a representative who shall have express
authority to bind Incumbent with respect to all matters requiring Incumbent's
approval or authorization in connection with this Agreement (the "INCUMBENT
REPRESENTATIVE"). Such Incumbent Representative shall have the authority to
make decisions and grant any and all consents required under this Agreement on
behalf of Incumbent and PathNet shall be entitled to rely on any such decision
or consent by the Incumbent Representative.
17.12 OUTSOURCING. In addition to, and not in place of, any rights of
PathNet under this Agreement, PathNet shall have the right to engage third party
Subcontractors to perform any or all of PathNet's rights and obligations under
this Agreement.
17.13 UNION AND LABOR RELATIONS. With respect to any services
performed pursuant to this Agreement, Incumbent shall ensure all such services
comply with all applicable labor or union-related agreements, regulations and
ordinances and shall not require PathNet to join any union or other labor
organization as a condition to performing services contemplated by this
Agreement.
39
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement, as of the
date first written above.
PATHNET, INC.
By: /s/ Dave Schaeffer
---------------------------------
Name: Dave Schaeffer
Title: Chairman
NORTHERN BORDER PIPELINE COMPANY
By: Northern Plains Natural Gas Company, Operator
By: /s/ Larry L. DeRoin
---------------------------------
Name: Larry L. DeRoin
Title: President
<PAGE>
SCHEDULE A
SERVICES AND SYSTEM SPECIFICATIONS
This Schedule A describes certain services and specifications that PathNet
and Incumbent shall respectively perform with respect to Segments A and B of the
System. PathNet's and Incumbent's responsibilities with respect to particular
Services and Specifications described in this Schedule A, if any, are
specifically indicated where such Services and Specifications are described.
PathNet's and Incumbent's payment responsibilities with respect to the Services
and Specifications shall be as set forth in Section 4 and Schedule C.
SECTION 1. PRELIMINARY ENGINEERING STUDIES AND EVALUATION OF EXISTING SYSTEM
1.1 Preliminary Analysis. PathNet shall complete a detailed analysis of
the existing microwave system operated by Incumbent along each Segment set forth
in Schedule B and upon completion of such analysis shall deliver the results of
such analysis to Incumbent. Such analysis shall include:
1.1.1 an inventory and survey of Incumbent's existing microwave
sites and supporting facilities (the "Existing System Inventory");
1.1.2 microwave path studies and reliability analysis to provide
performance data to serve as the engineering basis for the design of the
System (the "Path Studies");
1.1.3 a preliminary evaluation of the probability of successfully
coordinating frequencies on the System (the "Frequency Availability
Model");
1.1.4 a determination of whether structural analysis of towers and
loading factors (for metal towers only) is required and, in the event such
structural analysis is required, the analysis of Incumbent's towers,
including, but not limited to, the wind loading and weight requirements
for the proposed antenna systems as well as any feedlines necessary to
support the such antenna systems (the "Tower Analysis");
1.1.5 the design of the System (the "System Design") which System
Design conforms with the terms and conditions of Section 3 of this
Schedule A;
1.1.6 a detailed line item budget for the System (the "System
Budget");
1.1.7 a proposed T-1 plan for channelization of the System the
("Channel Plan"); and
1.1.8 a preliminary construction management schedule for each
replacement Segment (the "Preliminary Construction Schedule").
A-1
<PAGE>
1.2 Cooperation of Incumbent with Preliminary Analysis. Incumbent shall
fully cooperate with PathNet in PathNet's performance of the preliminary
analysis set forth in Section 1.1 of this Schedule A, including, but not limited
to, providing to PathNet any requested information and documents relating to
Incumbent or Incumbent's existing system.
1.3 Project Drawings. Upon completion of the preliminary engineering
studies and analysis and documentation as set forth in Section 1.1 of this
Schedule A, PathNet shall deliver to Incumbent the following project drawings:
(i) a System layout drawing, (ii) the rack profiles, (iii) block drawings, and
(iv) equipment wiring drawings (collectively, the "Project Drawings.")
SECTION 2. MODIFICATION TO EXISTING INFRASTRUCTURE
2.1 Documentation. Upon completion of the preliminary analysis as set
forth in Section 1.1 of this Schedule A, PathNet shall prepare and deliver to
Incumbent a project management schedule and scope of work (the "Modifications
SOW") setting forth a detailed plan to complete all required modifications of
Incumbent's existing sites and Facilities necessary for the installation and
operation of the new System in accordance with the terms and conditions of this
Agreement. Incumbent shall have twenty (20) days to either (i) approve by
written notice to PathNet such Modifications SOW or (ii) deliver to PathNet a
written list of Incumbent's modifications to the Modifications SOW. PathNet
shall review any such modifications and, incorporate any reasonable suggested
modifications into the Modifications SOW pursuant to the Specifications and
Services provided herein. In the event Incumbent does not notify PathNet in
writing within the prescribed time period, PathNet shall assume that Incumbent
has granted such approval.
2.2 Modifications Required. PathNet or its designated subcontractors shall
perform all of the modifications set forth in the Modifications SOW. Such
modifications shall include the following:
2.2.1 any required modifications to the towers necessary to conform
the towers to the Specifications;
2.2.2 any required modifications to the battery reserves necessary
to conform the battery reserves to the Specifications and the installation
of any required generators, in accordance with the Specifications;
2.2.3 any required modifications to the environmental control
systems of the existing shelters necessary to conform such environmental
control systems to the Specifications;
2.2.4 the provision of all necessary D.C. and A.C. power cable
engineering for all racks, including, but not limited to, the installation
of all necessary conduits required to carry D.C. and A.C. power,
terminating cables and alarm cables and the installation of all necessary
A.C. distribution and A.C. wiring as required to meet the Specifications;
A-2
<PAGE>
2.2.5 the installation of all required new equipment shelters, or
modification of existing equipment shelters, to conform to the
Specifications;
2.2.6 the installation of all required liquid petroleum from the
existing liquid petroleum tank or source, as the case may be, to the new
shelter in accordance with the Specifications;
2.2.7 any required modifications to the foundation of any of the
towers, shelters or sites as set forth in the Tower Analysis;
2.2.8 any upgrades required to conform the sites and Facilities to
local building code provisions and any other regulatory Requirements of
Law, including, but not limited to, those related to health and safety;
2.2.9 the removal of any above or below ground obstructions or
materials such as trees and power lines which may affect the performance
of the System or other activities contemplated by this Agreement;
2.2.10 all required fence extensions and replacements;
2.2.11 any required modifications to the grounding and bonding
Systems at each site to conform to the Specifications;
2.2.12 any required modifications to the pressurizing equipment to
conform to the Specifications, including the pressurizing equipment
manifolds and dehydrators; and
2.2.13 any other miscellaneous site work necessary to prepare
Incumbent's sites for the installation and operation of the new System.
2.3 Cooperation by Incumbent. Incumbent shall fully cooperate with PathNet
and shall provide PathNet with all required assistance in completion of such
obligations in PathNet's performance of its obligations under this Section 2 of
this Schedule A.
2.4 Maintenance of Modifications. Incumbent shall ensure that all
modifications performed pursuant to this Section 2 of this Schedule A are
maintained in accordance with the Specifications, including, but not limited to,
the upgrade or replacement of any equipment and materials described in the
Modifications SOW.
2.5 Choice of Equipment Vendors and Service Providers.
2.5.1 Engagement. In the event Incumbent engages an equipment vendor
or service provider directly in accordance with this Section 2.5 of
Schedule A (i) PathNet shall have the right to approve any equipment
vendors or service providers, which approval shall not be unreasonably
withheld, (ii) all invoices, purchase orders or other bills relating to
such equipment or services shall be sent to both PathNet and Incumbent
A-3
<PAGE>
and (iii) Incumbent shall not pay any such invoice, purchase order or bill
without the prior approval of PathNet, which approval shall not be
unreasonably withheld.
2.5.2 Approval. Incumbent shall have the right to reasonably approve
any Subcontractor engaged to perform the Services set forth in this
Section 2 of Schedule A.
SECTION 3. DESIGN OF NEW SYSTEM
3.1 Approval of System Design. Within twenty (20) days after receipt by
Incumbent of the System Design from PathNet, Incumbent shall either (i) deliver
to PathNet written approval of such System Design or (ii) deliver to PathNet a
written list of Incumbent's design modifications. PathNet shall review any such
modifications and, incorporate all reasonable modifications into the System
Design. PathNet shall, within thirty (30) days of receipt of Incumbent's
suggested modifications, deliver a revised System Design to Incumbent. In the
event Incumbent fails to deliver to PathNet in writing its approval as set forth
above within the prescribed time period, PathNet shall assume that Incumbent has
approved such System Design.
3.2 Modification of System Design. At any time and from time to time,
PathNet shall have the right to modify the System Design upon written notice and
prior written approval by Incumbent of any material modifications, as new
versions of Equipment used in the System may become available from manufacturers
or software providers, as Technology is improved and as determined by PathNet in
its sole discretion.
3.3 System Technical Specifications. PathNet shall (i) design the System
in accordance with the minimum network performance standards set forth in
Section 3 of this Schedule A, (ii) in each instance where reasonably possible,
use the towers, antennas, waveguide, and other system components of Incumbent's
existing system in the System Design and (iii) design the System to meet the
following technical specifications:
3.3.1 Radio System Design. The active radio components of the System
shall be designed to conform to the Specifications and the manufacturer
specifications set forth in Exhibit A-2 to this Schedule A.
3.3.2 Radio Software Design. The software used to operate the radios
shall conform to the Specifications and the manufacturer specifications
set forth in Exhibit A-2 to this Schedule A.
3.3.3 Antenna and Frequency Specifications. The radio communications
equipment shall transmit and receive on the frequencies as set forth in
the System Design. All antenna reflectors used in the System shall conform
to (i) Category A standards as defined by the FCC and (ii) the
specifications set forth in any PCN relating to the System, and each high
performance antenna shall be fitted with a radome. All antenna mounting
hardware shall meet wind and loading requirements for the applicable
county and shall substantially conform to EIA-222-F.
A-4
<PAGE>
3.3.4 Tower Specifications. All towers shall substantially conform
to (i) the EIA/TIA-222-F-1991, Structural Standards for Steel Antenna
Towers and Antenna Supporting Structures, 1996, (ii) EIA/222-F
Specifications for loading for the appropriate county, and (iii) any other
required FCC and FAA rules and regulations.
3.3.5 Waveguide Specifications. Waveguide used in the System
specified for transmission line shall be of a premium grade to ensure
minimum return.
3.3.6 D.C. Power Requirements. The radio components of the System
shall be powered by 48 volts DC with at least eight to ten (8-10) hours of
battery capability (assuming less than 20 amp loads for Incumbent
Equipment), and all necessary chargers, distribution systems and transfer
switches for generators as set forth in Exhibit A-3 to this Schedule A.
3.3.7 A.C. Power Requirements. A.C. electrical power required by the
System shall be consistent with local requirements and the usage at each
of the sites set forth in Schedule B and shall be 120/240 volt single
phase 200 amp service as set forth in Exhibit A-3 to this Schedule A.
3.3.8 Bonding and Grounding Specifications. The System and all
associated electrical components shall be grounded and bonded to current
EIA and IEEE specifications.
3.3.9 Order Wire Specification. Each equipment shelter shall be
equipped with an Order Wire and a handset, which will be used as a talk
circuit for System operation and maintenance purposes and which will be
carried by PathNet as part of the System payload.
3.3.10 Diagnostic Circuit. Each equipment shelter shall be equipped
with a diagnostic circuit that will be used to connect each such shelter
and the Equipment housed in such shelter to the Network Management System.
3.3.11 Multiplexing from OC-3 to DS-1 Level. The System Design shall
provide for any required multiplexing of the OC-3 to the DS-1 level at
each site using an OC-3 Multiplexer.
3.3.12 Multiplexing from DS-1 to DS-0 Level. Within thirty (30) days
after the date hereof, Incumbent shall deliver to PathNet a Schedule
substantially in the form of Exhibit A-4 to this Schedule A setting forth
Incumbent's multiplexing requirements. Upon receipt of such Exhibit A-4 to
this Schedule A, PathNet will reflect in the System Design the requested
multiplexing of the DS-1 to the DS-0 level at each site using a 1/0
Multiplexer subject to limitations in Drop and Insert Capacity between
each Switched Mod Section using available Wayside Channels.
3.3.13 Wayside Channels. Incumbent or PathNet as reflected in the
System Design, as determined by PathNet in its sole discretion, shall use
the Wayside Channels.
A-5
<PAGE>
3.3.14 Spectral Loading Requirements. The System shall meet the then
current FCC requirements of spectrum efficiency outlined, 47 C.F.R. 101
and any successor rule or regulation.
3.3.15 Capacity of System. The System shall be comprised of, at a
minimum, 3 DS-3 capability and will have a 1 x n protection switch
allowing for upward migration to a minimum of 1 x 7 protection. The
capacity of the System may be expanded to a 2 x 14 protection level, using
additional spectrum or crossband filters, provided, such Capacity
Expansion does not degrade the System below the performance standards set
forth in this Section 3 of this Schedule A.
3.3.16 SONET Architecture. The digital microwave radios used in the
System shall operate under a SONET format.
3.3.17 Shelters Design. A proposed building layout for the new
shelters to be constructed and the existing shelters to be modified shall
be as set forth in Exhibit A-5 to this Schedule A and shall comply with
all applicable local laws, regulations and ordinances.
3.3.18 Channel Plan. The System shall be designed such that
Incumbent and PathNet shall be allocated capacity as set forth in the
Channel Plan and Section 7.2.2.
3.3.19 Interconnections Limitations. The System shall have no more
than four (4) Interconnections per LATA. No more than two (2) of such
Interconnections shall be to other segments of the PathNet network created
from facilities of other Persons and no more than two (2) of such two
Interconnections shall be to the PSTN. At each Interconnection site, there
shall be no more than two (2) additional antennas used solely for such
Interconnection purposes. Interconnections may be by microwave or other
media. To the extent PathNet develops spurs, PathNet shall specify the
Interconnections at such spurs on Exhibit A-7 to this Schedule A. To the
extent Incumbent develops spurs for its own connectivity purposes,
Incumbent shall specify the Interconnections at such spurs on Exhibit A-8
to this Schedule A.
3.3.20 Protection Switching Requirement. Power, radio, and
multiplexing equipment shall be redundant with automatic protection
switching to minimize Outages as a result of equipment failure.
3.3.21 Generator Requirements. Generators shall be required at all
sites with a history of power outages and all sites that are difficult to
access and shall be the type and size, each as set forth in Exhibit A-3 to
this Schedule A.
3.3.22 System Integration. The System shall be integrated into the
total PathNet telecommunications network as set forth in the System
Design.
3.3.23 Transmission Line Requirements. One (1) or more transmission
lines
A-6
<PAGE>
shall be connected to each antenna and such lines will be anchored firmly
to the tower in accordance with the manufacturer's recommendation.
3.3.24 Equipment Rack Specifications. Each equipment rack shall be
firmly anchored to the floor, and the overhead channel iron or the
adjacent racks and shall have the dimensions as forth in Exhibit A-5 to
this Schedule A.
3.3.25 Environmental Control of Shelters. Equipment shelters shall
be environmentally controlled to standards, between 55(degrees) and
80(degrees) and shall be maintained within the desired humidity range, as
set forth in the manufacturer's specifications in Exhibit A-2 to this
Schedule A.
3.3.26 Spurs. The System shall be designed to allow the build-out of
spurs set forth on Exhibit A-7 to this Schedule A from the backbone
network for PathNet's and Incumbent's own network and internal
communications purposes.
3.3.27 Network Management System. The System Design shall include
the Network Management System that complies with the specifications set
forth in Section 7.6 of this Schedule A.
3.3.28 Fuel Tanks and Lines. All liquid petroleum, diesel and
natural gas tanks and lines required shall meet all applicable
environmental and health and safety standards and Requirements of Law.
3.3.29 Pressurizing Equipment. The System Design shall include all
required pressurizing equipment, manifolds and dehydrators.
3.4 System Performance Criteria.
3.4.1 Availability. The System shall be designed to meet or exceed
the long haul objective of 99.98% availability on an annual basis for a
4,000 mile system, which is equivalent to a one way system Outage of less
than 0.4 seconds, per mile, per year.
3.4.2 Circuit Acceptance Level. The System shall be designed such
that any continuous five hundred (500) mile segment of the System during
any consecutive twenty-four hour period shall have no more than one (1)
Errored Second, shall have 99.998% Error Free Seconds and shall have no
Severely Errored Seconds, measured at the DS-1 level.
SECTION 4. INSTALLATION AND CONSTRUCTION
4.1 Documentation.
4.1.1 Project Management Plan, Project Schedule and Cutover Plan.
Upon approval of the System Design, PathNet shall deliver to Incumbent (i)
a plan of the
A-7
<PAGE>
respective responsibilities of each Party and other related items relating
to the construction and installation of the System (the "Project
Management Plan"), (ii) a schedule for the installation of the System (the
"Project Schedule"), and (iii) a schedule for the cutover of the System
(the "Cutover Plan"). Incumbent shall have twenty (20) days to either (i)
approve by written notice to PathNet such Project Management Plan, Project
Schedule and Cutover Plan or (ii) deliver to PathNet a written list of
Incumbent's modifications to such Project Management Plan, Project
Schedule and Cutover Plan, as the case may be. PathNet shall review any
such suggested modifications and incorporate all of such suggested
modifications into the Project Management Plan, Project Schedule and
Cutover Plan, respectively. In the event Incumbent does not notify PathNet
in writing of its approval or suggested modifications of the Project
Management Plan, Project Schedule and Cutover Plan as set forth above
within the prescribed time period, PathNet shall assume that Incumbent has
granted such approval.
4.1.2 Installation Reports. After installation has begun and
continuing until Commissioning, PathNet shall provide to Incumbent a
bi-weekly progress report (each a "Progress Report") setting forth, (i) a
description of the work performed during the immediately preceding period,
(ii) a list of any material deviations from the proposed schedule of work
and (iii) an analysis of such deviations with respect to their impact upon
the timely deployment of the System.
4.1.3 Changes to Drawings. In the event that during the process of
Installation any of the Project Drawings delivered pursuant to Section 1.3
of this Schedule A require any modifications, PathNet shall make any such
modifications to such Project Drawings, shall deliver the revised Project
Drawings to Incumbent, and shall place a copy of such revised Project
Drawings at each site.
4.1.4 As-Built Drawings. Upon completion of each phase of
installation as set forth in the Project Schedule, PathNet shall deliver
to Incumbent an as-built drawing of the System (each an "As-Built
Drawing") and shall incorporate the final As-Built Drawing into the
appropriate equipment manuals.
4.2 Installation by PathNet. PathNet or its designated subcontractors
shall construct and install the System as set forth below and in accordance with
this Schedule A and the documents and schedules prepared and delivered pursuant
to this Schedule A.
4.2.1 Radios. PathNet shall recommend and PathNet or its designated
subcontractors the digital radios that meet the Specifications.
4.2.2 Antennas and Frequencies. PathNet shall recommend and PathNet
or its designated subcontractors shall install (i) the antennas that meet
the Specifications and (ii) any required antenna mounting hardware to
secure such antennas to the towers in accordance with the Specifications.
4.2.3 Waveguide Bridge and Supports. PathNet shall recommend and
PathNet or its designated subcontractors shall install (i) waveguides that
meet the
A-8
<PAGE>
Specifications, (ii) new waveguide bridges on two faces of the existing
towers and (iii) all additional supports required of the waveguide from
the tower to termination inside the shelter.
4.2.4 Bonding and Grounding. PathNet shall recommend and PathNet or
its designated subcontractors shall install all required ground kits in
accordance with the Specifications, including, but not limited to,
waveguide ground kits at the antenna, the bottom of the tower and at the
entry port of the shelter, tower anchor grounding kits, and ground wire
rings for the shelters.
4.2.5 Moving Company. During installation of the System, PathNet, or
a full service moving and warehousing company hired by PathNet, shall
handle the pick up of necessary equipment for temporary warehousing in all
required areas at and near the installation sites.
4.2.6 Order Wire. PathNet shall recommend and PathNet or its
designated subcontractors shall install an Order Wire at each site in
accordance with the Specifications and shall establish Order Wire
connectivity, including, but not limited to, connectivity to all necessary
external interfaces.
4.2.7 OC-3 Multiplexers. PathNet shall recommend and PathNet or its
designated subcontractors shall install all required OC-3 Multiplexers to
the DS-1 level as set forth in Section 3 of this Schedule A.
4.2.8 Channel Plan. PathNet or its designated subcontractors shall
perform cross-connects of T-1 lines in accordance with the Channel Plan
and the Specifications.
4.2.9 Interconnection Placement. PathNet shall furnish and install
connecting facilities from the System to the PSTN, including but not
limited to connections to POP's of purchasers of Excess Capacity and
PathNet shall furnish and install all cables required to interconnect
project equipment within the System.
4.2.10 Transmission Lines. PathNet shall recommend and PathNet or
its designated subcontractors shall (i) furnish and install all required
transmission lines on the towers, (ii) route such transmission lines to
the equipment racks in the shelters, (iii) connect both ends of such
transmission lines and (iv) interface such transmission lines to the radio
equipment in accordance with the Specifications.
4.2.11 Equipment Racks. PathNet shall recommend and PathNet or its
designated subcontractors shall install all equipment racks necessary for
the Equipment installed by PathNet in accordance with the Specifications.
4.2.12 Network Management System. PathNet shall recommend and
PathNet or its designated subcontractors shall install the Network
Management System, including, but not limited to, all required alarms,
panels, terminals, software and cables at all appropriate demarcation
points in accordance with the Specifications.
A-9
<PAGE>
4.2.13 Spurs. PathNet shall recommend and PathNet or its designated
subcontractors shall install all of the necessary equipment to build-out
PathNet's spurs and Incumbent's spurs (as requested and paid for by
Incumbent), each as set forth in Exhibit A-7 to this Schedule A in
accordance with the Specifications.
4.2.14 Deconstruction of Existing System. As required at each site,
PathNet or its designated subcontractors shall move Incumbent's existing
system to one side, providing space for permanent installation of the new
System.
4.2.15 Pre-Commissioning System. PathNet or its designated
subcontractors shall install an "initial" digital System in such a way
that it can be operated and tested without interfering with Incumbent's
existing system performance.
4.2.16 Parallel Systems. In order to minimize system downtime,
PathNet shall provide parallel operations to the Incumbent's existing
analog system with the digital equipment system using new frequencies and
antenna configurations.
4.3 Cooperation During Installation. During installation, Incumbent shall
provide all necessary cooperation to PathNet, including, but not limited to,
posting at each site any Permits or licenses for building or tower work related
to the construction at such site and providing reasonable access to its
Facilities as set forth in Section 5.
4.4 Installation by Incumbent. Incumbent shall furnish and install all
required equipment and materials at each point of demarkation to meet
Incumbent's internal communication needs, including, but not limited to,
furnishing and installing all 1/0 Multiplexers as set forth in Section 3 of this
Schedule A and all other interconnection equipment relating to Incumbent's spurs
set forth in Exhibit A-8 to this Schedule A.
SECTION 5. PRE-COMMISSIONING TESTING
5.1 Factory Acceptance Test.
5.1.1 Tests to be Performed. PathNet shall coordinate all factory
acceptance testing on the Equipment. Such factory acceptance testing shall
include (i) linking together of all racks in each Switched Mod Section to
simulate the System as it will be configured in the field, (ii) testing at
the panel terminal and System level for certification and compliance with
the Specifications, (iii) connecting the radio bays by coaxial cables
through attenuators to simulate "RSL" conditions as encountered in the
field, (iv) testing on a path basis to the applicable configuration of the
System, (v) testing of all miscellaneous Equipment such as supervisory
fault alarm and control and service channel units and (vi) testing the
equipment as a System to resolve all interface problems.
5.1.2 Observing Factory Testing. Incumbent shall have the right, at
its own expense, to witness in person the factory testing of the
Equipment.
A-10
<PAGE>
5.2 Rack Test. PathNet or its designated subcontractors shall perform a
rack test once the radio cabinet has been installed.
5.3 Path Test. PathNet or its designated subcontractors shall perform a
path test after each site has been turned up.
5.4 End-To-End Test. PathNet or its designated subcontractors shall
perform an end-to-end test for each Switched Mod Section on the System once all
sites have been turned up.
5.5 Field Test. Once the Equipment is installed and operational, PathNet
or its designated subcontractors shall test each path pursuant to the following
field tests to ensure performance of the Equipment over the designated path in
accordance with the criteria and standards set forth in this Schedule A.
5.5.1 Radio Hop Test: PathNet or its designated subcontractors shall
(i) align all digital microwave paths, (ii) measure and record transmitter
frequency, (iii) measure and record transmitter power, (iv) calculate and
record receiver fade margin, (iv) perform Bit Error Rate checks and (v)
record results of such Bit Error Rate checks.
5.5.2 Digital Multiplex Test: PathNet or its designated
subcontractors shall (i) perform standard loop-back tests and (ii) verify
the performance of all local alarm points to the DS-1 level.
5.5.3 System Test: PathNet or its designated subcontractors shall
(i) perform an end-to-end Bit Error Rate test of the message one radio for
a 24-hour period and an end-to-end Bit Error Rate test of the protect
radio for 1 hour, (ii) verify equipped channel units through microwave
system, (iii) verify performance of Order Wires and Wayside Channels, and
(iv) verify performance of the alarm points function throughout the
System.
5.6 Site Acceptance Testing. PathNet or its designated subcontractors
shall perform all site acceptance tests as recommended by the manufacturers of
the Equipment and PathNet shall provide the results of any such site acceptance
testing to Incumbent promptly after completion of such testing.
5.7 Acceptance Procedure. After completion of site acceptance testing as
set forth in Section 5.6 of this Schedule A, PathNet shall implement the
following acceptance procedure:
5.7.1 Incumbent shall promptly perform an installation inspection
and deliver to PathNet a written list of all material deficiencies from
the Specifications to be corrected by PathNet (the "Deficiency List").
5.7.2 PathNet shall promptly correct such material deficiencies on
the Deficiency List and shall, upon completion, certify to Incumbent that
such items have been corrected.
A-11
<PAGE>
5.7.3 PathNet shall submit to Incumbent all of the test data
collected through the performance of the tests set forth in Section 5 of
this Schedule A for Incumbent's approval, which approval shall not be
unreasonably withheld.
5.7.4 Incumbent shall deliver to PathNet a Certificate of Acceptance
substantially in the form of Exhibit A-9 to this Schedule A.
5.8 Equipment Required for Pre-Commissioning Testing. PathNet shall
furnish all Pre-Commissioning Test Equipment.
SECTION 6. CUTOVER
6.1 Cutover.
6.1.1 PathNet Responsibilities. PathNet shall (i) manage the cutover
process for the System, (ii) perform such cutover in accordance with the
Cutover Plan and (iii) notify Incumbent of the circuit activity that will
occur upon Commissioning of each path or Segment and the impact that such
activity may have on the Incumbent's existing system. Promptly after each
site has been cutover, PathNet shall notify Incumbent of the completion of
such cutovers.
6.1.2 Incumbent Responsibilities. Incumbent shall (i) cooperate and
coordinate its cutover of its voice and data circuits with PathNet and the
Cutover Plan, (ii) complete its cutover of its voice and data circuits no
more than ninety (90) days after Commissioning of each path or Segment by
PathNet and (iii) no more than ninety (90) days after cutover by Incumbent
of its voice and data systems, remove all unused equipment from
Incumbent's sites in compliance with all applicable Requirements of Law.
6.2 Station Log Books. PathNet shall establish station logs books in
accordance with all FCC rules and regulations (each a "Station Log Book") and at
Commissioning shall deliver to Incumbent an original of each Station Log Book at
Commissioning.
SECTION 7. SYSTEM OPERATION.
7.1 Increases in Capacity. At any time, and from time to time, PathNet
shall have the right, subject to the terms in Section 7.1.2 of this agreement,
to increase the capacity of the System beyond the capacity created in the
initial build-out; provided, that PathNet fulfills the following conditions
before Commissioning any such proposed Capacity Expansion:
7.1.1 Capacity Expansion Schedule. At least fifteen (15) days prior
to any Capacity Expansion, PathNet shall provide to Incumbent a capacity
expansion schedule (each, a "Capacity Expansion Schedule") setting forth
the amount of capacity to be
A-12
<PAGE>
included in such Capacity Expansion, the specific paths to be expanded,
the expansion name (including each path that is affected), and the
expected Commissioning of such Capacity Expansion.
7.1.2 Performance of Capacity Expansion. Prior to the Commissioning
of any Capacity Expansion, (i) PathNet shall perform all required testing
on such Capacity Expansion to confirm that any such Capacity Expansion
will not degrade the System below the Specifications (ii) PathNet shall
provide the results of such testing upon receipt of such test results to
Incumbent for its review and approval and (iii) PathNet shall obtain from
Incumbent a Certificate of Acceptance substantially in the form attached
hereto as Exhibit A-9 to this Schedule A with respect to such Capacity
Expansion.
7.1.3 Incumbent's Right to Contest Capacity Expansion. In the event,
after receipt of the test results as set forth above, Incumbent reasonably
determines that a proposed Capacity Expansion will degrade the System
below the Specifications, Incumbent shall have the right to withhold
delivery of any Certificate of Acceptance with respect to such Capacity
Expansion and shall hire an independent third party approved by PathNet
(which approval shall not be unreasonably withheld) to perform additional
testing on such Capacity Expansion. In the event such independent third
party reports that the proposed Capacity Expansion will not result in the
degradation of the System below the Specifications, Incumbent (i) shall
promptly deliver to PathNet a Certificate of Acceptance with respect to
such proposed Capacity Expansion and (ii) shall pay for the reasonable
costs of such independent third party evaluation. In the event that such
independent third party reports that the proposed Capacity Expansion will
result in the degradation of the System below the Specifications (i)
PathNet shall make all required modifications to the System and the
proposed Capacity Expansion such that, in the opinion of such independent
third party, the proposed Capacity Expansion shall not degrade the System
below the Specifications, (ii) upon verification by such independent third
party that the proposed Capacity Expansion, as modified by PathNet, shall
not degrade the System below the Specifications, Incumbent shall promptly
deliver to PathNet a Certificate of Acceptance substantially in the form
attached as Exhibit A-9 to this Schedule A with respect to such Capacity
Expansion and (iii) PathNet shall pay for the reasonable costs of such
independent third party evaluation.
7.2 Maintenance of System. Within sixty (60) days after the Effective
Date, PathNet and Incumbent shall execute and deliver the Maintenance Services
Agreement. PathNet shall have the right to supplement at its own expense at any
time, and from time to time, any maintenance performed on the System, as
determined by PathNet in its sole discretion.
7.3 Additional Transmission Lines and Antennas. After Commissioning, if
the System is expanded pursuant to any Capacity Expansion, PathNet shall have
the right to elect to install a second transmission feed line or a third antenna
to any tower. In such instance, PathNet shall (i) perform any tower analysis
that may be required before the installation of such transmission line or
antenna, (ii) furnish and install such additional transmission line and any
associated connectors and mounting hardware for securing such transmission line
to the towers, (iii) furnish and install such antenna and other devices and
equipment associated with such
A-13
<PAGE>
antenna and (iv) perform strengthening to the tower required for such
transmission line or third antenna.
7.4 Additional Order Wires and Diagnostic Circuits. At any time and from
time to time, PathNet shall have the right to install additional Order Wires and
diagnostic circuits at System sites, which Order Wires and diagnostic circuit
may or may not be carried as part of the System payload as determined to be
necessary or appropriate by PathNet in its sole discretion.
7.5 24-Hour Network Monitoring Center. Upon Commissioning and for the
period thereafter until the Expiration Date, PathNet shall operate a network
monitoring center (the "Network Monitoring Center") twenty-four (24) hours a
day, seven (7) days a week, which Network Monitoring Center shall, among other
things, handle all problems and trouble reports that may arise and monitor the
System as set forth in Section 7.6 of this Schedule A.
7.6 Network Management System. At all times after Commissioning until the
Expiration Date, PathNet shall provide a network management system to be
operated at the Network Monitoring Center (the "Network Management System")
which Network Management System will (i) manage all network elements within the
System (21 SMX or equivalent), (ii) monitor and control the facilities system,
the radio system, and the OC-3/DS-1 multiplex system, (iii) collect performance
data such as Errored Seconds, Severely Errored Seconds, frame loss and Failed
Seconds consistent with the manufacturer's specifications set forth in Exhibit
A-2 to this Schedule A, (iv) monitor the shelter environments (including
commercial power failure, door alarms, charger failures, low waveguide pressure,
air conditioner failure, tower light alarms, generator runs (if any), waveguide
dehydrator excessive runs, smoke alarms, high temperature and low temperature),
radio equipment, multiplexing equipment, and Incumbent equipment (as reasonably
requested by Incumbent) and (v) provide Incumbent with the ability to monitor
the System separately from the overall PathNet network.
7.7 Alarm and Event Logging and Reports. Within thirty (30) days after the
end of each calendar quarter, PathNet shall provide to Incumbent a report (each
an "Alarm and Event Report") setting forth a log of all alarms and events
recorded by the Network Management System.
7.8 System Outages. Each Party shall use its best efforts to avoid
unscheduled System Outages in the performance of each Party's respective rights
and obligations under this Agreement.
7.9 Replacement of Radios. Beginning in the fifteenth (15th) year after
Commissioning, PathNet shall begin replacing the radios and radio software
relating to the System and shall replace such radios and radio software at an
average rate of ten percent (10%) a year for ten (10) years.
7.10 Network Loops. In the event in the construction of the PathNet
network a network loop is created relating to the System, PathNet shall
facilitate allowing Incumbent to benefit from the existence of such network loop
in the event of a System Outage.
A-14
<PAGE>
SECTION 8. GENERAL
8.1 Access to Sites. In addition to any access rights relating to the
Facilities set forth in Section 5 of the Agreement, Incumbent shall provide upon
the reasonable request of PathNet, access for all construction vehicles, which
access may involve the construction by Incumbent of additional roads and paths.
8.2 Parking at Sites. At the request of PathNet, Incumbent shall provide
for vehicular parking at each site at no charge to PathNet for use during the
term of this Agreement; provided, however, in the event sites are located in
urban areas where vehicles are parked in privately operated lots or garages,
PathNet shall be responsible for any and all parking charges at such urban
sites.
8.3 Use of Telecommunications Devices. While visiting Incumbent's sites,
Incumbent shall allow PathNet to use existing telephone lines or Order Wires in
connection with PathNet's performance of its rights and obligations under this
Agreement.
8.4 Fuel Tanks. Incumbent shall ensure that all liquid petroleum tanks are
adequately supplied throughout the term of this Agreement.
8.5 Retaining of Records. All records and reports required pursuant to
this Schedule A, shall be retained by PathNet or Incumbent, as the case may be,
for at least five (5) years or any longer period as may be required by law.
8.6 Work Permits. Incumbent shall obtain all necessary local, state and
Federal permits as required to perform all of the services set forth in this
Agreement.
8.7 Hazardous Material.
8.7.1 Existence of Hazardous Material. Without the written consent
of Incumbent as described below, PathNet shall not bring or cause or
permit, knowingly or unknowingly, any Hazardous Material to be brought or
remain upon, kept, used discharged, leaked or emitted on any of
Incumbent's sites or Facilities.
8.7.2 Compliance with Environmental Laws. In the event that
Incumbent allows PathNet to bring Hazardous Materials to Incumbent's sites
as set forth in the Environmental Audit, PathNet shall strictly obey and
adhere to any and all Federal, state or local laws, ordinances, orders,
rules, regulations, codes or any other government restrictions or
requirements (including, but not limited to, CERCLA and RCRA) which in any
way regulates, governs, or impacts PathNet's possession, use, storage,
treatment or disposal of such Hazardous Material.
8.8 Transportation. PathNet shall provide transportation for all PathNet
personnel or Subcontractors to each of Incumbents sites and between such sites
in connection with the performance of the Services.
A-15
<PAGE>
8.9 Storage. Incumbent shall provide at no charge to PathNet or any vendor
providing materials for use in the System, secure and appropriate storage for
all equipment and materials to be installed or used for the installation,
testing or operation of the System, which storage facilities shall also serve as
the drop-ship point for staging all installation equipment used in the System.
8.10 Unpacking and Trash Removal. PathNet shall (i) unpack all crates and
boxes, (ii) remove all trash created by such unpacking from Incumbent's sites
and (iii) verify all packing lists. Incumbent shall regularly remove all other
trash from its sites and Facilities.
8.11 Manufacturing and Ordering of Equipment. As the System is installed
or upgraded after Commissioning, PathNet shall order all required equipment and
materials, including, but not limited to, all required installation materials,
from the respective manufacturers in accordance with the timing set forth in the
Project Schedule.
8.12 Ship and Delivery Schedules. At least two (2) weeks prior to receipt
of any equipment or materials to be used in the modifications or installation
set forth in Section 2 and Section 4 to this Schedule A, respectively, PathNet
shall provide to Incumbent detailed ship and delivery schedules relating to such
equipment and materials.
8.13 Electricity. Incumbent shall provide all required electricity for the
design, modification, installation, operation and monitoring of the System in
accordance with the specifications set forth in Exhibit A-3 to this Schedule A.
A-16
<PAGE>
EXHIBIT A-1
EQUIPMENT
SYSTEM EQUIPMENT, TOWERS AND SHELTERS
Type of Equipment Quantity
- ----------------- --------
Towers: 0
Buildings: 34
Generators: 24 (includes 3 portable)
DC Charger Systems: 40
Battery Plants: 40
Antennas: 148
Waveguide: 35,246 feet
NEC 2000 SONET Radios: 148 TRR's
NEC 2600 Digital Radios: 0
OC-3 Multiplexers: 22 Shelves
CoastCom T1 Multiplex 45 Shelves
Note: California Microwave Model SST 1 are to be installed at CS-13 and Welcome,
Minnesota sites. All other radios are NEC 2000.
A-17
<PAGE>
EXHIBIT A-2
MANUFACTURERS SPECIFICATIONS FOR RADIOS
NEC OC-3 MULTIPLEXER SPECIFICATIONS
IMT-150
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Power
Physical: Requirements: Interface: Features:
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Mounts in a 23-inch -48 volts DC High Speed: OC-3 Software Provisioning
EIA rack Approximately 125 Optical Full Bandwidth Time
Height 11.4 inches watts (ADM Low Speed: OC-1, Slot Assignment
Width 21.4 inches configuraton) STS-1, DS3, or DS1 X.25 Gateway for OSS
Depth 10 inches DS1 PM Monitoring
Capability
- ---------------------------------------------------------------------------------------------
</TABLE>
NEC 2000 SERIES
Specifications:
Physical:
One cabinet (600 mm wide, 300 mm deep and 2.2 m high) for 4 radio channels
(Includes OC-3 interface per channel, space diversity receiver, order wire and
wayside DS1 interface, and 1:N switch).
Power Requirements:
- -24 or -48 volts DC
Approximately 200 watts per radio channel for a terminal configuration
Approximately 150 watts per radio channel direction (1 TRR) for a repeater
configuration
Interface:
OC-3
Operating Specifications:
Frequency Band: 5.945 to 6.425 GHz
Modulation: 128 QAM MLCM
Capacity: 155.52 Mb/s plus radio overhead (Wayside DS1, Order Wires, ATPC
signals, 1:N commands, monitoring)
Transmit Power at interface to transmit waveguide: +29.7 dBm
A-18
<PAGE>
System Gain (Waveguide interface to waveguide interface - no ATPC): 101.1 dB
System Gain (Waveguide interface to waveguide interface - with ATPC): 103.1 dB
Dispersive Fade Margin (10^-3): 48 dB
FCC Identifier: BSF6P155-S02A
Emission Designator: 30M0D7W
Nec 2600 Series Digital Microwave Radio Specifications
Models Available:
8 DS-1: 6G13MB
12 DS-1: 6G19MB
16 DS-1: 6G26MB
32 DS-1: 6G52MB
Physical:
One Hot-Standby with Space Diversity receiver (2 TRR) Subsystem is 482 mm (19")
Wide by 798.5 mm (31.5") High weighing 75 lbs. A total of two (2) HSB systems
for a repeater or a terminal 3:1 multiline system (4 TRR) will fit in a standard
19" by 7' 6" Rack.
Power Requirements:
- -24 or -48 volts DC
Approximately 130 watts per HSB radio system (2 TRR)
Approximately 150 watts per HSB radio system for 32 DS-1 model.
System Configuration Options:
The following system configurations are available for 8, 12, 16, or 32 DS-1
capacity systems:
HS/HS=Hot Standby Transmitter and Hot Standby Receiver (2 TR)
HS/SD=Hot Standby Transmitter and Space Diversity Receiver (2 TR)
1+0/SD=Single Transmitter with Space Diversity Receiver (1 TRR)
1+0=Single Transmitter and Single Receiver (1 TR)
Features:
Automatic Transmit Power Control (ATPC)
Can be site configured for a Terminal or Regenerative Repeater with any
channel drop and insert capabilities.
Forward Error Correction (FEC)
Decision Feedback Equalizer (DFE) for fading countermeasures.
In-Service capacity upgrades.
Two (2) VF Orderwire channels Per Radio
One (1) Data channel up to 9.6Kbs
Operating Specifications:
Frequency Band: 5.925 to 6.425 Ghz or 6.525 to 6.825 Ghz
Modulation: 128 QAM
Transmit Power at Interface to waveguide: +30 dBm
A-19
<PAGE>
- --------------------------------------------------------------------------------
8 DS-1 12 DS-1 16 DS-1 32 DS-1
- --------------------------------------------------------------------------------
System Gain: 106.0 dB 104.0 dB 103.0 dB 100.0 dB
- --------------------------------------------------------------------------------
Receiver Threshold:
(BER 10^-6) -80.0 dBm -78.0 dBm -77.0 dBm -74.0 dBm
- --------------------------------------------------------------------------------
Dispersive Fade
margin: (BER 10^-6) 64.0 dB 63.0 dB 62.0 dB 59.0 dB
- --------------------------------------------------------------------------------
Emission Designator: 10MOD7W 50MOD7W 3M7507W 2M50D7W
- --------------------------------------------------------------------------------
FCC Identifier: BSF89N6P52-S BSF89N6P26-S BSF89N6P19-S BSF89N6P7-S
- --------------------------------------------------------------------------------
A-20
<PAGE>
EXHIBIT A-3
ELECTRICITY AND POWER SPECIFICATIONS OF THE SYSTEM
DC POWER SPECIFICATIONS
<TABLE>
<CAPTION>
Site Configuration Radio Mux Chan bank Incumbent Site Total Site Total Battery Size
7:1(Watts) OC-3(Watts) (Watts) Equip(Watts) WATTS DC AMPS 10 Hour Reserve
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Terminal End 1:3 800 330 250 720 2,100 44 Amps 440 AH
Terminal End 1:7 1,600 770 250 720 3,340 70 Amps 700 AH
Repeater 1:3 1,200 None 250 720 2,170 45 Amps 530 AH
Repeater 1:7 2,400 None 250 720 3,370 70 Amps 700 AH
2 Way Junction 1:3 1,600 125 250 720 2,695 56 Amps 600 AH
2 Way Junction 1:7 3,200 125 250 720 4,295 90 Amps 900 AH
</TABLE>
AC POWER SPECIFICATIONS
<TABLE>
<CAPTION>
DC Heat & Air Total Total
Site Configuration Chargers Conditioning Lights Miscellaneous AC WattsAC Amps @ 220 VAC
<S> <C> <C> <C> <C> <C> <C>
Terminal End Nominal 3,696 3,000 300 1,500 8,496 39
Terminal End Maximum 8,712 6,000 1,600 2,800 19,112 87
Repeater Nominal 3,696 4,500 300 1,500 9,996 45
Repeater Maximum 8,712 9,000 1,600 2,800 22,112 101
2 Way Junction Nominal 4,752 6,000 500 1,800 13,052 59
2 Way Junction Maximum 8,712 12,000 2,000 3,200 2,512 118
</TABLE>
Note: All New Shelters are AC equipped for 200 Amps, single phase, 220VAC
Service
A-21
<PAGE>
EXHIBIT A-4
INITIAL INCUMBENT CHANNEL PLAN
INITIAL DS-1 REQUIREMENTS
Site Name DS-1's Wired DS-1's Equipped
- --------- ------------ ---------------
Monchy [***] [***]
Crow Creek [***] [***]
CS 1 [***] [***]
Porcupine [***] [***]
East Fork [***] [***]
Glasgow [***] [***]
CS 2 [***] [***]
Hay Creek [***] [***]
CS 3 [***] [***]
Hardscrabble [***] [***]
CS 4 [***] [***]
Grassy Butte [***] [***]
CS 5 [***] [***]
Ziner Butte [***] [***]
Elm Creek [***] [***]
CS 6 [***] [***]
Judson [***] [***]
Mandan [***] [***]
CS 7 [***] [***]
Linton [***] [***]
CS 8 [***] [***]
Ashley [***] [***]
Long Lake [***] [***]
CS 9 [***] [***]
Aberdeen [***] [***]
CS 10 [***] [***]
Garden City [***] [***]
Codington [***] [***]
CS 11 [***] [***]
Brookings [***] [***]
Lake Shaokatan [***] [***]
Lake Stay [***] [***]
CS 12 [***] [***]
Jeffers [***] [***]
CS 13 [***] [***]
Welcome [***] [***]
East Chain [***] [***]
Crystal Lake [***] [***]
Ventura [***] [***]
A-22
<PAGE>
EXHIBIT A-5
EQUIPMENT SHELTERS SPECIFICATIONS AND DESIGN
1. Summary
This "Equipment Shelter Specification" applies to concrete pre-cast,
pre-equipped, transportable equipment shelters for use in conjunction with
equipment installed by PathNet, Inc. and covers material and workmanship
standards. This document is designed to assist the user in defining your
specific equipment shelter requirements. The shelter must be designed for the
explicit purpose of housing electronic equipment, fiberoptics equipment,
measuring devices and other related components, within a controlled environment
required for the proper operating conditions for the equipment. The shelter
manufacturer must adhere to compliance with all national building codes. All
shelters will be assumed to be placed within ten (10) feet of the base of the
tower.
2. Foundation
The shelter shall be designed for any of the following foundation types:
o Pier & Beam
o Slab
o Perimeter Beam
3. Shelter Type
The shelter shall be constructed of pre-cast, pre-assembled Portland concrete
and shall be manufactured in a controlled environment.
4. Shelter Size
The shelter should conform to the following dimensions unless otherwise noted:
o One room shelter (no generator) - 12' X 20' OD
o Two room shelter (equipment room and generator room) - 12' X 28' OD
5. Operating Environment
5.1. Temperature
The optimum operating temperature of the equipment to be installed is 75
degrees F (24 degrees C) unless otherwise specified by PathNet.
5.2. HVAC
The heating and cooling requirements for a shelter are based upon the
outside maximum and minimum temperature expected for the shelter location
and the equipment heat
A-23
<PAGE>
output specified by PathNet. Typical heat load values are 12,000 to 18,000
BTU/HR. Design heat loads for specific shelters will be provided by
Pathnet. Two wall-mounted air conditioners are required. The units are to
be sized so that one unit will maintain an interior temperature of 75
degrees F with the highest exterior temperature expected for shelter
location.
6. Hardware
All external hardware will be galvanized or coated to protect against corrosion.
7. Structural
Structural design and manufacturing shall conform to ACI 318-89 requirements.
7.1. Floor
The floor section shall be constructed of 8" waffled structural pre-cast
concrete. The ribs shall be 2'-0" O.C. transverse and 4'-0" O.C
longitudinal. All surfaces shall be smooth. The interior surface shall be
covered with 1/8" X 12" X 12" square vinyl floor covering, bonded with a
waterproof contact adhesive.
7.2. Roof
The roof section shall be constructed of pre-cast concrete with 1/4" per
foot drainage slope. The ceiling insulation and finish shall be foamboard
insulation with 3/8" vinyl coated board. All joints will be covered by
plastic joint or corner trim. The roof section shall provide a 2" overhang
on all sides. The roof will be a hip type sloping in 4 directions. It
shall be constructed as a cap and should fit over the walls, leaving no
exposed roof-to-wall joint.
7.3. Wall
The wall section shall be constructed of 4" solid concrete, cast in one
piece to minimize joints, with an exposed aggregate exterior finish and
capable of withstanding gun fire from a 30.06 at 50 feet. The wall
insulation and finish shall be foamboard insulation with 1/2" vinyl coated
board. All joints will be covered by plastic joint or corner trim. All
floor/wall intersections will be finished with 4" vinyl baseboard. There
will be no exposed wall-to-floor joint.
8. Thermal
Standard wall and ceiling thickness shall be 1" foamboard insulation. The
calculated system value is R9.6 with 4" thick lightweight concrete walls/roof
sections, 1" foamboard insulation covered by 1/2" fiberglass reinforced plastic
surfaced board. (Thicker insulation and higher R-values must be specified
according to the locality.)
9. Concrete
All sections must be constructed of concrete with a compressive strength of 3000
PSI at 28 days.
A-24
<PAGE>
9.1. Cement Type
Cement used in concrete shall be standard Portland cement conforming to
the requirements of the "Standard Specifications for Portland Cement",
ASTM Designation C150.
9.2. Mix
The mix design shall be 114-118 lbs./cu. ft. structural lightweight
concrete using expanded shale or expanded clay aggregate and shall be
homogeneous. Seeding of aggregates for exposed aggregate finish is not
allowed.
Water will be free from injurious quantities of oil, alkali, vegetable
matter and salt. Non-potable water shall not be used in mixing concrete.
9.3. Concrete Standards
Concrete aggregates will conform to one of the following standards:
o Specifications for Concrete Aggregates (ASTM Designation: C33)
o Specifications for Lightweight Aggregates for Structural Concrete
o (ASTM Designation: C330)
9.4. Reinforcement
Reinforcement bars shall be deformed steel bars conforming to the
requirements of the "Specifications for Deformed and Plain Billet-Steel
Bars for Concrete Reinforcement," ASTM Designation: A615. Welded smooth
wire fabric shall be steel wire fabric conforming to the "Specifications
for Welded Steel Wire Fabric for Concrete Reinforcement", ASTM
Designation: A185.
10. Sealing
o The shelter shall be sealed to resist dust and water infiltration.
o All joints shall be sealed with a compressible resilient sealant.
o There shall be no exposed roof-to-wall or wall-to-floor joints.
o Exterior surfaces of walls and roof shall be sealed with two (2) coats of
Thoroglaze H Sealer, or acceptable equivalent unless otherwise noted.
11. Door
11.1. Door Construction
The door shall be 3' X 7' X 3/4", 18 gauge galvanized steel, insulated
(minimum R12), primed, painted and installed flush with the door check,
door stop, weather stripping, mortise lockset and stainless steel ball
bearing hinges.
11.2. Door Frame
The doorframe shall be of at least 16 gauge galvanized steel, primed,
painted and cast into the wall panel.
A-25
<PAGE>
11.3. Door Locks
All doors shall have a deadbolt locking mechanism with a minimum 1" throw
and an anti-pick lock guard.
12. Structural Loading
12.1. Floor
A minimum of 140 lbs. per sq. ft. as defined in "Uniform Distributed
Load," ASCE 7-88. The battery area should be reinforced to support 5000
lbs. per battery rack. The battery area will be shown on the floor plan.
12.2. Roof
A minimum of 50 lbs. per sq. ft. as defined in "Roof Snow Load
Specification," ASCE 7-88.
12.3. Wind
A minimum of 115 MPH as defined in "Basic Wind Speed Specifications," ASCE
7-88.
12.4. Earthquake
Shelters shall be designed for the most stringent earthquake rating
conditions as defined in ASCE 7-88, Zone 4.
13. Electrical System
Electrical installation and wiring shall conform to the latest edition of the
National Electrical Code (NEC) and shall consist of the following as a minimum:
13.1. Minimum Requirements
o 200 Amp, 220 VAC Single Phase Main
o 200 Amp Manual Transfer Switch
o 200 Amp Generator Interface
o Forty (40) Position Breaker Box (With 32 single pole, 20 Amp
breakers.)
o 120/240VAC 3-Wire Arrester With Alarms (65kVA Peak Capacity)
o Surface Mounted EMT Conduit
o Grounded Duplex Outlets (One every 4 ft. on 3 walls.)
o Four (4) Fluorescent Lights (2 bulb fixtures with
inside switch mounted by door.)
o Incandescent Porch Light (With 0-30 minute timer)
13.2. Surge
Arresters An interior-mounted surge arrester is designed to protect
against transients caused by lightning or power switching surges. Primary
arresters protect the building's electrical components and are
automatically restored following activation due to a surge. It should be
installed across the main breaker on the line side unless otherwise
specified by PathNet. Secondary arresters protect individual branch
circuits. Visual inspection is required to determine whether the arrester
must be replaced following a surge.
A-26
<PAGE>
14. Grounding
A halo ground system should consist of at least a #2 AWG green insulated
stranded copper wire mounted around the perimeter of the interior wall just
below the ceiling. A 1/4" X 4" X 24" copper ground bar should be located
externally just below each waveguide entry plate. A #2 AWG green insulated
copper jumper should be used to bond the ground bar to the exterior halo ring.
Bonding on either interior or exterior grounding systems will be clean of dirt
and corrosion and applied with non-oxidizing grease.
14.1. Interior Halo Grounding
All cable ladder, racks, lights, equipment and exterior ground are to be
bonded to an interior halo grounding system.
The following items are required for halo grounding:
o #2 Green Insulated Stranded Copper Halo
o One (1) Master Ground Bar 1/4" X 4" X 24"
o Four (4) #2 Tinned Solid Copper Drops with 10' Pigtails
o Eight (8) #2 Green Insulated Stranded Copper Equipment Ground Drops
14.2. External Ground System
An exterior halo ring is required and will be bonded to the interior halo
grounding system with 8' pigtails listed above.
14.3. Conduit Grounding
All conduit, conduit couplings, light fixtures, junction boxes and service
equipment shall be grounded with mechanical clamps to electrically bond
the conduit. The bonding wire will be a minimum #10 AWG green insulated
copper wire for all except light fixtures. The minimum for light fixtures
is #12 AWG green insulated copper wire.
15. Waveguide Entrance
The shelter will have two 8 port waveguide entry panels and two blank panels
located on opposite walls. Two waveguide entry panels will be installed on one
wall and two blank panels mounted on the opposite wall. PathNet will define the
location of the waveguide entry panels. Each waveguide port shall have a minimum
interior diameter of 4 inches.
16. Alarms
The shelter will have general housekeeping alarms wired to a central location
associated with the following:
o Door Open
o Smoke Detection
o AC Electrical Fail (sense before manual or automatic transfer switch)
o Surge Protector Fail
o Air-conditioning Fail
o High Temperature
o Low Temperature
A-27
<PAGE>
o Charger Fail
o Breaker Alarm
o Fuse Alarm
o Low Waveguide pressure
o Dehydrator excess run alarm
o Generator Fail
o Generator Run
A-28
<PAGE>
EXHIBIT A-6
GROUNDING AND LIGHTNING PROTECTION GUIDELINES AND SPECIFICATIONS FOR
COMMUNICATIONS SHELTERS
Preface
An effective ground system for a communications equipment shelter is necessary
to ensure protection of personnel and equipment when a fault occurs. The ground
system limits excessive voltages from various electrical conditions such as
lightning and utility switching, and contributes to superior performance of the
electronic equipment by reducing noise induction.
1. Grounding Introduction
Communications equipment shelters are subject to electrical noise and
high-voltage surges. These transients occur predominantly in the common mode
(line to ground), and are typically caused by lightning or power switching.
1.1. Lightning
When lightning induced surges appear at the point of connection to a
building (the service entrance), a high common mode potential is generated
between the current carrying conductors and ground. This potential
produces a flow of current that seeks a path to earth to complete the
circuit.
Lightning can easily induce a 3000-ampere transient into a power line.
When this transient reaches a building, the building ground at the service
entrance can rise to 60,000 volts (assuming a building earth resistance of
20 ohms). The reference potential for ground in the rest of the building
would rise proportionately.
In order to protect the building against these high voltage surges, it is
important to establish a low resistance earth ground at the service
entrance. The National Electrical Code (Article 250, Part 4) specifies
that the grounding at a building's service entrance should have a
resistance to ground of 25 ohms or less. The IEEE Green Book (Recommended
Practice for Grounding, ANSI/IEEE Standard 142-1982) recommends that the
ground resistance be less than 5 ohms. If the building contains highly
sensitive electronic communications equipment, a ground resistance of 5
ohms or less is recommended if this value can be practically achieved with
the given site conditions.
1.2. Types of Grounding
There are two major types of grounding that should be considered when
designing an electrical system: power distribution system grounding and
telecommunications equipment grounding.
A-29
<PAGE>
1.2.1. Power Distribution System Grounding
The power distribution system pertains to the incoming AC service,
service entrance equipment, power panels, and electrical conductors
providing the power to various electrical/mechanical equipment.
Grounding of the power distribution system is essential to:
o protect occupants from exposure to dangerous shock voltage
o provide a path for ground fault current
o limit excessive voltages due to lightning or utility switching
Typical grounding components for the power distribution system
include:
o grounding electrode at the service entrance
o ground bus in the power panel
o ground lugs in the other service entrance equipment such as
the safety disconnect or transfer switch
o third wire grounding conductor for all the electrical
equipment
o lightning and surge arresters.
1.2.2. Telecommunications Equipment Grounding
Electronic equipment such as radio systems, telephone switches,
battery chargers and rectifiers, uninterrupted power supply (UPS)
equipment, and any other equipment that encloses or is adjacent to
energized conductors require additional grounding. This sensitive
electronic equipment must be protected from the following:
o excessive transients caused by lightning or utility switching
o degraded performance due to electromagnetic noise
Equipment grounding frequently utilizes a ground ring encircling the
interior of the shelter (halo ground ring). Ground lugs attached to
the various equipment housings and racks are connected to the ground
ring. Ground bars at the waveguide entry and at each section of the
cable ladder are also tied to the ground ring. Multiple external
drops connect the internal ground ring to the exterior site ground
ring.
2. Grounding Practices
2.1. The Grounding Conductor
In order to reduce inductance and surge voltages in a power distribution
system, a ground path for protected devices should be provided. One method
is to rely upon the conduit system to carry these transient currents. This
is allowed by the National Electrical Code in Article 250-91 (b). The best
method, however, is to include an extra conductor in the
A-30
<PAGE>
same conduit or raceway as the current carrying conductor. The grounding
conductor should extend to the ground connection in the service entrance
equipment.
2.2. Equipment Ground Wires
When lightning strikes, it takes the path of least impedance (resistance
and inductance). Cable bends increase inductance. Therefore, equipment
ground wires should be large, and run straight for minimum inductance and
voltage drop. The recommended bending radius is 6" when bends are
unavoidable. Equipment ground wires should be separated from all other
conductors, and should not be run through metal conduit unless the conduit
and ground wires are bonded at both ends.
2.3. Bonding
Even when the ground to earth connection's impedance of the service
entrance is minimized and grounding conductors are used in the feeder and
branch circuits, high transient voltages can still occur in the power
distribution system as a result of utility power switching. An effective
method of limiting this noise (especially common mode voltage
differentials) is to bond all the equipment ground wires to a halo ground
system that is connected to the site ground system and power distribution
system ground.
Bonding is the connection of all potential ground conductors (including
racks, frames, cable ladder, conduits, metal enclosures, and exposed
metallic members of the building structure) to each other. Bonding does
not eliminate voltage drops since transient currents will continue to take
the path of least inductance. However, the current is sufficiently
distributed throughout the bonded system to reduce the voltage gradients
in any area to levels that prevent personal injury or equipment damage.
Proper bonding procedures produce cross connections of all equipment and
structures. It provides many paths to ground from any one point. Since the
bonded ground network does not form a part of the normal electrical power
path, multiple inductive loops are not a concern. Only transient or fault
currents can flow in the ground network.
In addition to preventing the development of voltage gradients, cross
connection reduces the system's susceptibility to high frequency noise.
Since all conductors have some impedance, resonance will occur at some
frequencies. At those frequencies, the impedance of the grounding
conductor may be very high, and allow noise currents to develop increased
voltage drops. By bonding the ground network, however, there may be other
conductors nearby that are not resonating, and a low impedance path for
the noise signal can be maintained.
2.4. Faraday Cage
A Faraday cage provides an EMI shield to further reduce noise. The cage
usually consists of multiple conductors in a box like configuration. A
halo ground system with multiple down conductors can act as a quasi
Faraday cage, and give some low frequency shielding.
A-31
<PAGE>
When lightning hits the tower, the tower will pass the current to ground
and radiate RF energy. A Faraday cage can reduce this energy by adding
distance (as seen by the magnetic field) between the tower and the
equipment shelter. The steel reinforcing in the concrete shelter walls can
form a highly effective Faraday cage if bonded to the grounding system.
The amount of shielding depends on the size and spacing of the welded wire
fabric. Additionally, all rebar must be bonded together.
2.5. Site Ground System
When a tower is struck by lightning, equipotential voltage rings form
around the tower until the energy is diffused into the surrounding ground
soil via the grounding system.
The tower ground ring will disperse the energy away from the tower base or
guy wires. The ground rods will transfer the energy deeper into more
conductive soil layers. This is important to keep lightning surges out of
the equipment shelter. Unless the energy is properly dispersed into the
soil, the voltage will build up in the tower, and attempt to go to
another, less desirable path.
The equipment shelter is protected by a perimeter ground system that forms
an equipotential plane. Also, ground rods should be driven into the soil
at the following points:
o each corner of the shelter
o the service entrance
o the waveguide entry port
o each external halo ground drop
o every 10' (or less) along the exterior ground ring
The shelter ground ring system should have a connection to the tower
ground system just below the coaxial cable runs. A second connection
between the two ground systems should be installed for redundancy. All
metal work (waveguide bridge and supporting posts) should be bonded to the
ring/radial ground system.
2.6. Grounding System Performance Check
Test the original installation periodically to determine whether
resistance is remaining constant or is increasing. An increase in
resistance can be caused by several factors.
In lower conductive soils, high electric fields can develop at the ends of
the ground rods, which can cause arcing in the soil. This arcing can cause
glassification around the rods, beginning at the tip, and working its way
upward. This glassification of the silica in the soil acts as an
insulator, severely impairing the grounding characteristics of the rod. If
resistance increases over time to an undesirable level, reduce the
resistance by adding electrodes or chemically treating the soil to
increase moisture content.
A-32
<PAGE>
3. Computing Resistance to Ground
3.1. Resistance to Earth
The resistance of a grounding electrode is dependent on the:
o resistance of the electrode,
o contact resistance between the electrode and the soil, and
o resistance of the soil from the electrode surface outward as
described by the geometry set up by the flow of current from the
electrode to infinite earth.
The first two resistances are negligible, and can be disregarded. The
third resistance is larger and must be considered.
Around a ground rod this resistance is the sum of the series resistances
of virtual shells of earth, located progressively outward from the rod.
The shell nearest the rod has the smallest circumferential area or cross
section, so it has the highest resistance. Each successive shell has
progressively larger areas, and thus, progressively lower resistances. For
an 8-foot ground rod, the incremental increase in resistance decreases to
nearly zero when the rods are spaced 16 feet apart. Therefore, when using
multiple ground rods, the optimal spacing between rods should be double
the length of the rod.
3.2. Resistance Calculations
When computing resistance to ground, treat the tower grounding and the
shelter grounding as two separate systems. Within each of these two
systems are two subsystems. The shelter has a grounding ring and the
grounding rods. The tower has a grounding ring, grounding rods, and
occasionally, grounding radials.
The IEEE Green Book provides several formulas for calculating the
resistance to ground for several different systems.
4. Typical Grounding Configurations
Several options are available when deciding on a ground system for a
communication shelter, depending upon the soil conditions and thunderstorm
activity of a particular site. The U.S. Weather Bureau publishes an isoplethic
map of the United States showing the average number of days each year on which
thunderstorms occur. Any area with an isoplethic level above 90 should be
considered a high-risk area, and serious consideration should be given to
providing a more stringent grounding system.
4.1. Ground Bar System
In shelters where very little lightning protection is needed, a simple
ground bar system can be used. A system of this type would consist of a
single copper ground bar located under the waveguide port, telephone
entry, or both, with an external drop to be connected to the external
ground system. Transmission lines should be grounded to this ground bar.
A-33
<PAGE>
4.2. Halo Ground System
PathNet shelters will use a halo ground system. This system includes a #2
AWG copper wire completely encircling the equipment room. The halo is
located 3 to 6 inches below the ceiling. External drops are located at
each corner of the shelter. Wall penetrations should be angled at 45
degrees to minimize bending.
4.3. External Ground System
The external ground system for all shelters consists of ground rods placed
at each corner of the shelter and 10' intervals along the ground ring,
below the waveguide entry, and at the AC service entrance. The rods should
be exothermically welded to a perimeter ground ring of #2 AWG solid tinned
copper wire. (Tinned copper is recommended to reduce corrosion of the
wire). The wire should be buried below the frost line (minimum 30", deep
per NEC Sec 250-8(d)), and at least 24", away (measured horizontally) from
the foundation. The ground ring should be bonded to the tower ground
system at two locations, to the externally mounted ground bars under the
waveguide ports and to the AC service ground as close as possible to the
service entrance.
5. General Specifications
This section covers grounding and lightning protection of pre-cast,
pre-equipped, and transportable equipment shelters. It establishes minimum
standards for grounding of all PathNet Equipment Shelters, and provides
standards for additional customer grounding options.
5.1. General Guidelines
5.1.1 Workmanship
Equipment grounding wire conductor runs will be as short and
straight as possible. All equipment and bonding grounding conductors
will have radii bends 6" or greater.
5.1.2. Design
Where possible, the AC service entrance, waveguide entry port, and
telephone line entry will all be located in close proximity to each
other, and their associated grounding systems will be bonded
together.
5.1.3. Connections
Unless specified otherwise, minimum connection requirements will be
of the mechanical type made with a crimp type connector. A one hole
copper ground lug will be used for equipment connections. An
oxidizing preventative compound will be applied to all mechanical
connections, and paint will be removed as necessary to insure
positive bonding of all grounded equipment.
A-34
<PAGE>
All external, buried connections will be of the exothermically
welded type. These include, but are not limited to, halo drops to
ground rod, buried ground ring to ground rod, halo drops to ground
ring, service entrance ground to ground rod.
5.1.4. Wire
All equipment grounds will be #6 AWG. Circuit grounding conductors
will be no more than two wire sizes smaller than the current
carrying conductors of the same circuit (minimum #12 AWG). All
external ground wire, including but not limited to the external
ground ring and external halo drops, will be #2 AWG solid tinned
copper.
5.2. Interior Grounding
5.2.1. Halo Ground
The halo ground will consist of a minimum #2 AWG wire located 3" to
12", below the finished ceiling, and will completely encircle the
equipment room. The wire will be green insulated stranded copper,
bare stranded copper, or bare tinned solid copper. Each corner of
the equipment room will have an omni-directional drop to the floor
of the same wire size and type as the halo ring. Connection of these
drops to the halo will be at least the defined minimum (see Section
5.1.3). If solid tinned wire is used, the drop will be one
continuous wire that is long enough to extend 8 feet beyond the
exterior of the shelter. If insulated wire is used, the drop will
extend to the floor, and then be connected in the same manner as the
halo, to an 8 foot length of solid tinned wire of the same size. The
exterior penetrations will be at 45 degree angles (to minimize
ground drop bend radii) and approximately one (1) inch in diameter.
5.2.2. Waveguide Entry Ground Bar
There will be a 1/4" x 4" x 20" (minimum) copper ground bar located
outside the shelter approximately 6" below the waveguide entry plate
(NEC Sec 800-33). This bar will be connected to the exterior ground
ring exothermic weld. The grounding conductor will be of the same
size and type as the halo ring.
5.2.3. AC Service
The AC service ground conductor will be bonded to the ground rod
located at the service entrance. Ground lugs provided in all service
entrance equipment will be bonded to the service ground conductor.
The system ground and neutral will be bonded at one location, as
close as practicable to the service entrance. All service grounding
shall conform to Article 250 of the National Electrical Code.
A-35
<PAGE>
5.2.4. Primary Surge Arrester
There will be a surge protective device applied at the first piece
of service equipment inside the equipment shelter. This device will
be considered the primary surge protector. Conductors connecting the
surge protective device will be as short as possible, and will
contain no sharp bends or loops.
The operating characteristics of the primary surge arrester will
coordinate with the equipment surge withstand voltage capabilities.
The surge arrester should be capable of suppressing up to 65kVA, be
self restoring after operation, and may be equipped with a failure
alarm over current protective device and visual status indicators.
5.2.5. Cable Ladder
Cable ladder assemblies will be bonded to the halo ring with a #6
AWG or larger ground conductor. All cable ladder splices and
junctions will be bonded on at least one side with a #6 AWG or
larger conductor, and use grounding clips suitable for the purpose.
Paint will be removed as necessary for an electrically sound
connection.
5.2.6. Conduit Grounding
Each conduit discontinuity, including but not limited to conduit
couplings, junction boxes, light fixtures, and service equipment,
will be provided with ground clamps to electrically bond the
conduit. The bonding wire will be green insulated #6 AWG or larger.
5.2.7. Tower Light Controller Penetration
There will be a 1-1/2" penetration cast in place near the waveguide
entry port to allow for connection of the tower light controller.
The penetration will be lined with a 1" PVC running thread to
provide isolation between the interior and exterior conduit. The
running thread will be connected to interior and waterproof exterior
6" x 6" junction boxes.
5.3. Exterior Grounding
5.3.1. Ground Rods
There will be driven ground rods located at each corner of the
building, and at the AC service entrance and waveguide entry port.
These rods will be made of copper clad high strength steel with
minimum dimensions of 5/8" x 8'. The rods will be located at least
24" from the edge of the foundations, and driven such that the top
of the rod is below the frost line of the installation site. The
rods will be exothermically welded to the external halo drops.
A-36
<PAGE>
5.3.2. Ground Ring
There will be a buried horizontal wire completely encircling the
equipment shelter. This wire will be solid tinned copper wire of #2
AWG or larger. The ground ring will not be closer than 24" from the
shelter foundations, and will be exothermically welded to each
ground rod. The ring will be buried 30" below grade or below the
frost line of the installation, whichever is greater.
The ground ring will be connected to the tower ground system from
the ground rod located at the waveguide port to the nearest ground
rod of the tower system. A second connection will be made from a rod
at a corner of the shelter to an alternate rod of the tower. These
connections will be made with a #2 AWG wire, or a wire of the same
size as the tower ground ring, whichever is larger.
5.3.3. Testing
The external ground system will be tested after installation, and
its resistance to earth ground will be less than 5 ohms. It is
recommended that tests be performed twice a year to insure ground
system integrity.
Biddle Instruments Model DET2/2 Digital Ground Tester, or
equivalent, will be used for testing and all manufacturers'
instructions will be followed.
A-37
<PAGE>
EXHIBIT A-7
NETWORK INTERCONNECTIONS SCHEDULE
SYSTEM SITE CODE OTHER SYSTEM SITE CODE HEIGHT AZIMUTH
- ---------------- ---------------------- ------ -------
A-38
<PAGE>
EXHIBIT A-8
SYSTEM SPURS
PATHNET SPURS
The System shall contain the following spurs, which shall be
installed and operated for PathNet's network purposes:
Facility Name Latitude Longitude
- -------- ---- -------- ---------
Hardscrabble, ND 48-03-36 103-59-58 Fox Creek, MT
(future WTCI)
Judson, ND 46-48-17 101-13-45 Bismark, ND
Glasgow, MT 48-11-03 106-35-49 (future B/N)
SPURS
The System shall contain the following Northern Border Pipeline spurs,
which shall be engineered, furnished, installed, and operated for Northern
Border Pipeline's internal communications requirements:
Facility Name Latitude Longitude Spur to:
- ------------- -------- --------- --------
Porcupine, MT 48-33-27 106-02-42 East Fork
East Fork, MT 48-21-53 106-19-48 Glasgow, MT
Judson, ND 46-48-17 101-13-47 Mandan, ND
CS 11, SD 44-39-53 96-45-05 Brookings, SD
CS 13, MN 43-45-37 94-45-05 Welcome, MN
A-39
<PAGE>
EXHIBIT A-9
FORM OF CERTIFICATE OF ACCEPTANCE
The undersigned, ___________________, who is ______________________ of
_________________, a ___________ [partnership/corporation] ("Incumbent") hereby
certifies as follows:
1. Incumbent has received from PathNet, Inc., a Delaware corporation
("PathNet") the results of all acceptance testing performed pursuant to Section
5 of Schedule A of the Fixed Point Microwave Services Agreement between PathNet
and Incumbent (the "FPM Agreement").
2. Incumbent has reviewed the results of such acceptance testing and
hereby acknowledges that the System (as defined in the FPM Agreement), as tested
and to be maintained by Incumbent, performs in accordance the Specifications, as
set forth in the FPM Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Acceptance as of the ___ day of ______, 199__.
-----------------------------
A-40
<PAGE>
SCHEDULE B
THE SYSTEM
1. System
The System extends from Port of Morgan, Montana to near the terminus of
Incumbent's system in Illinois with Facilities at the sites listed below.
2. Segment A
Incumbent Segment A extends from Port of Morgan, Montana to Ventura, Iowa,
with Facilities at the sites listed below.
FACILITY NAME LATITUDE LONGITUDE
- ------------- -------- ---------
Monchy, MT 48-59-59 107-32-36
Crow Creek, MT 48-58-23 107-14-12
CS1, MT 48-37-44 106-40-44
Porcupine, MT 48-33-27 106-02-42
East Fork, MT 58-21-53 106-19-48
Glasgow, MT 48-11-03 106-35-49
CS2, MT 48-25-03 105-32-06
Hay Creek, MT 48-23-03 104-54-30
CS3, MT 48-12-47 104-23-59
Hardscrabble, ND 48-03-36 103-59-58
CS4, ND 47-46-14 103-30-00
Grassy Butte, ND 47-23-35 103-11-47
CS5, ND 47-15-14 102-43-04
Ziner Butte, ND 47-13-10 102-07-26
Elm Creek, ND 46-59-00 101-57-49
CS6, ND 46-49-16 101-45-22
Judson, ND 46-48-17 101-13-47
Mandan, ND 46-51-54 101-09-17
CS7, ND 46-30-55 100-48-03
Linton, ND 46-16-59 100-12-01
CS8, ND 46-03-58 99-37-11
Ashley, ND 45-59-28 99-11-53
Long Lake, SD 45-47-13 99-11-53
CS9, SD 45-31-55 98-47-04
Aberdeen, SD 45-19-45 98-21-59
CS10, SD 45-03-58 97-31-58
Garden City, SD 44-56-23 97-31-58
B-1
<PAGE>
Codington, SD 44-49-09 97-11-50
CS11, SD 44-39-53 96-48-30
Brookings, SD 44-19-29 96-47-57
Lake Shaokatan, MN 44-24-48 96-28-03
Lake Stay, MN 44-21-54 96-08-27
CS12, MN 44-14-05 95-46-26
Jeffers, MN 44-01-54 95-14-21
CS13, MN 43-45-37 94-27-03
Welcome, MN 43-40-24 94-35-28
East Chain, MN 43-30-42 94-27-03
Crystal Lake, IA 43-15-12 93-46-18
Ventura, IA 43-06-47 93-31-22
3. Segment B
Incumbent Segment B extends from Ventura, Iowa to near the terminus of
Incumbent's system in Illinois, with Facilities at the sites listed below.
FACILITY NAME LATITUDE LONGITUDE
- ------------- -------- ---------
B-2
<PAGE>
SCHEDULE C
ESTIMATED AND OPERATING COSTS
SECTION 1. INCUMBENT ITEMS AND ESTIMATED COSTS
A. Segment A
The Incumbent Estimated Costs and Items are set forth in Exhibit C-1.
B. Segment B
The Incumbent Estimated Costs shall be developed and approved by the
parties and shall be set forth in detail in an Amended Exhibit C-1.
SECTION 2. INCUMBENT OPERATING AND ADMINISRATION COSTS
1. [***]
2. [***]
3. [***]
4. [***]
5. [***]
6. [***]
7. [***]
8. [***]
9. [***]
10. [***]
C-1
<PAGE>
11. [***]
12. [***]
13. [***]
14. [***]
15. [***]
16. [***]
17. [***]
18. [***]
19. [***]
20. [***]
21. [***]
22. [***]
23. [***]
24. [***]
C-2
<PAGE>
[***]
25. [***]
26. [***]
27. [***]
28 [***]
30. [***]
SECTION 3. PATHNET ADMINISTRATION AND OPERATING COSTS
1. [***]
2. [***]
3. [***]
4. [***]
5. [***]
C-3
<PAGE>
6. [***]
7. [***]
8. [***]
9. [***]
10. [***]
11. [***]
12. [***]
13. [***]
14. [***]
15. [***]
16. [***]
17. [***]
18. [***]
19. [***]
20. [***]
21. [***]
22. [***]
C-4
<PAGE>
[***]
23. [***]
24. [***]
25. [***]
26. [***]
27. [***]
28. [***]
29. [***]
30. [***]
31. [***]
32. [***]
33. [***]
34. [***]
35. [***]
C-5
<PAGE>
36. [***]
37. [***]
38. [***]
39. [***]
40. [***]
C-6
<PAGE>
EXHIBIT C-1
INCUMBENT ESTIMATED COSTS AND ITEMS
CROW EAST
MONCHY CREEK CS 1 PORCUPINE FORK
------ ----- ---- --------- ----
3 Way Jct Spur-rptr
PCN Coordination: [***] [***] [***] [***] [***]
Site Survey: [***] [***] [***] [***] [***]
PLEM ENG: [***] [***] [***] [***] [***]
Site Clearing/Level:
Fence & Gate
Mods: [***] [***]
Road Const/Repair:
SITE WORK: [***] [***] [***] [***] [***]
Tower Analysis: [***] [***] [***] [***] [***]
Tower Strength
Material: [***] [***] [***] [***] [***]
Tower Labor: [***] [***] [***] [***] [***]
Waveguide
Bridge: [***] [***] [***] [***]
Tower Ground:
TOWERS: [***] [***] [***] [***] [***]
Exist Bldg. Mods: [***]
New Building: [***] [***] [***] [***]
New Bldg
Delivery: [***] [***] [***] [***]
New Bldg
Fondation: [***] [***] [***] [***]
Building Ground: [***] [***] [***] [***]
AC Power : [***] [***] [***] [***]
BUILDINGS: [***] [***] [***] [***] [***]
15KW
25KW [***] [***] [***]
35KW
Transfer Panel:
Install & Test
Labor: [***] [***] [***]
GENERATORS: [***] [***] [***] [***] [***]
Chargers: [***] [***] [***] [***] [***]
Batterys: [***] [***] [***] [***] [***]
Power
Board/Panel: [***] [***] [***] [***] [***]
Install & Test
Labor: [***] [***] [***] [***] [***]
D.C. PLANT: [***] [***] [***] [***] [***]
C-7
<PAGE>
CROW EAST
MONCHY CREEK CS 1 PORCUPINE FORK
------ ----- ---- --------- ----
3 Way Jct Spur-rptr
Antenna
Material: [***] [***] [***] [***] [***]
Install & Align
Labor: [***] [***] [***] [***] [***]
ANTENNAS: [***] [***] [***] [***] [***]
Waveguide
Material: [***] [***] [***] [***] [***]
Install & Test
Labor: [***] [***] [***] [***] [***]
WAVEGUIDE: [***] [***] [***] [***] [***]
1:1 Terminal: &
2Way [***] [***] [***] [***] [***]
1:1 Repeater:
OAM&P Software/LT
Maint Kit:
Radio Spares:
Install: [***] [***] [***] [***] [***]
Test & Turnup: [***] [***] [***] [***] [***]
RADIOS: [***] [***] [***] [***] [***]
OC-3 to 56 DS-1: [***]
OC-3 to 28 DS-1: [***]
ADM 8 DS-1
OC-3 Spares:
Install: [***] [***]
Test & Turnup: [***] [***]
OC3 MULTIPLEX: [***] [***] [***] [***] [***]
Channel Bank: [***] [***] [***] [***]
DS-1 MUX
I/O DAX:
Install: [***] [***] [***] [***]
Test & Turnup: [***] [***] [***] [***]
C/B MUX/ DAX: [***] [***] [***] [***] [***]
FREIGHT: [***] [***] [***] [***] [***]
SALES TAXES : [***] [***] [***] [***] [***]
Path
Engineering: [***] [***] [***] [***] [***]
System
Engineering: [***] [***] [***] [***] [***]
Project
Engineering: [***] [***] [***] [***] [***]
PATHNET ENG: [***] [***] [***] [***] [***]
PROJECT TOTAL: [***] [***] [***] [***] [***]
C-8
<PAGE>
HAY HARD
GLASGOW CS 2 CREEK CS 3 SCRABBLE
------- ---- ----- ---- --------
Spur-term
PCN Coordination: [***] [***] [***] [***] [***]
Site Survey: [***] [***] [***] [***] [***]
PLEM ENG: [***] [***] [***] [***] [***]
Site Clearing/Level:
Fence & Gate
Mods: [***] [***]
Road Const/Repair:
SITE WORK: [***] [***] [***] [***] [***]
Tower Analysis: [***] [***] [***] [***] [***]
Tower Strength
Material: [***] [***] [***] [***] [***]
Tower Labor: [***] [***] [***] [***] [***]
Waveguide
Bridge: [***] [***] [***] [***]
Tower Ground:
TOWERS: [***] [***] [***] [***] [***]
Exist Bldg. Mods: [***]
New Building: [***] [***] [***] [***]
New Bldg
Delivery: [***] [***] [***] [***]
New Bldg
Fondation: [***] [***] [***] [***]
Building Ground: [***] [***] [***] [***]
AC Power : [***] [***] [***] [***]
BUILDINGS: [***] [***] [***] [***] [***]
15KW
25KW [***] [***] [***]
35KW
Transfer Panel:
Install & Test
Labor: [***] [***]
GENERATORS: [***] [***] [***] [***] [***]
Chargers: [***] [***] [***] [***]
Batterys: [***] [***] [***] [***]
Power
Board/Panel: [***] [***] [***] [***] [***]
Install & Test
Labor: [***] [***] [***] [***]
D.C. PLANT: [***] [***] [***] [***] [***]
C-9
<PAGE>
HAY HARD
GLASGOW CS 2 CREEK CS 3 SCRABBLE
------- ---- ----- ---- --------
Spur-term
Antenna
Material: [***] [***] [***] [***] [***]
Install & Align
Labor: [***] [***] [***] [***] [***]
ANTENNAS: [***] [***] [***] [***] [***]
Waveguide
Material: [***] [***] [***] [***] [***]
Install & Test
Labor: [***] [***] [***] [***] [***]
WAVEGUIDE: [***] [***] [***] [***] [***]
1:1 Terminal: &
2 Way [***] [***] [***] [***] [***]
1:1 Repeater:
OAM&P
Software/LT [***]
Maint Kit: [***]
Radio Spares: [***]
Install: [***] [***] [***] [***] [***]
Test & Turnup: [***] [***] [***] [***] [***]
RADIOS: [***] [***] [***] [***] [***]
OC-3 to 56 DS-1:
OC-3 to 28 DS-1: [***]
ADM 8 DS-1 [***]
OC-3 Spares: [***]
Install: [***] [***]
Test & Turnup: [***] [***]
OC3 MULTIPLEX: [***] [***] [***] [***] [***]
Channel Bank: [***] [***] [***] [***]
DS-1 MUX
I/O DAX:
Install: [***] [***] [***] [***]
Test & Turnup: [***] [***] [***] [***]
C/B MUX/ DAX: [***] [***] [***] [***] [***]
FREIGHT: [***] [***] [***] [***] [***]
SALES TAXES : [***] [***] [***] [***] [***]
Path
Engineering: [***] [***] [***] [***] [***]
System
Engineering: [***] [***] [***] [***] [***]
Project
Engineering: [***] [***] [***] [***] [***]
PATHNET ENG: [***] [***] [***] [***] [***]
PROJECT TOTAL: [***] [***] [***] [***] [***]
C-10
<PAGE>
GRASSY ZINNER ELM
CS 4 BUTTE CS 5 BUTTE CREEK
---- ----- ---- ----- -----
PCN Coordination: [***] [***] [***] [***] [***]
Site Survey: [***] [***] [***] [***] [***]
PLEM ENG: [***] [***] [***] [***] [***]
Site Clearing/Level:
Fence & Gate
Mods: [***] [***] [***]
Road
Const/Repair:
SITE WORK: [***] [***] [***] [***] [***]
Tower Analysis: [***] [***] [***] [***] [***]
Tower Strength
Material: [***] [***] [***] [***] [***]
Tower Labor: [***] [***] [***] [***] [***]
Waveguide
Bridge: [***] [***] [***] [***] [***]
Tower Ground:
TOWERS: [***] [***] [***] [***] [***]
Exist Bldg. Mods:
New Building: [***] [***] [***] [***] [***]
New Bldg
Delivery: [***] [***] [***] [***] [***]
New Bldg
Fondation: [***] [***] [***] [***] [***]
Building Ground: [***] [***] [***] [***] [***]
AC Power : [***] [***] [***] [***] [***]
BUILDINGS: [***] [***] [***] [***] [***]
15KW
25KW [***] [***] [***]
35KW
Transfer Panel:
Install & Test
Labor: [***] [***] [***]
GENERATORS: [***] [***] [***] [***] [***]
Chargers: [***] [***] [***] [***] [***]
Batterys: [***] [***] [***] [***] [***]
Power
Board/Panel: [***] [***] [***] [***] [***]
Install & Test
Labor: [***] [***] [***] [***] [***]
D.C. PLANT: [***] [***] [***] [***] [***]
C-11
<PAGE>
GRASSY ZINNER ELM
CS 4 BUTTE CS 5 BUTTE CREEK
---- ----- ---- ----- -----
Antenna Material: [***] [***] [***] [***] [***]
Install & Align
Labor: [***] [***] [***] [***] [***]
ANTENNAS: [***] [***] [***] [***] [***]
Waveguide
Material: [***] [***] [***] [***] [***]
Install & Test
Labor: [***] [***] [***] [***] [***]
WAVEGUIDE: [***] [***] [***] [***] [***]
1:1 Terminal: &
2 Way [***] [***] [***] [***] [***]
1:1 Repeater:
OAM&P
Software/LT
Maint Kit:
Radio Spares:
Install: [***] [***] [***] [***] [***]
Test & Turnup: [***] [***] [***] [***] [***]
RADIOS: [***] [***] [***] [***] [***]
OC-3 to 56 DS-1:
OC-3 to 28 DS-1:
ADM 8 DS-1 [***] [***]
OC-3 Spares:
Install: [***] [***]
Test & Turnup: [***] [***]
OC3 MULTIPLEX: [***] [***] [***] [***] [***]
Channel Bank: [***] [***] [***] [***]
DS-1 MUX
I/O DAX:
Install: [***] [***] [***] [***]
Test & Turnup: [***] [***] [***] [***]
C/B MUX/ DAX: [***] [***] [***] [***] [***]
FREIGHT: [***] [***] [***] [***] [***]
SALES TAXES : [***] [***] [***] [***] [***]
Path
Engineering: [***] [***] [***] [***] [***]
System
Engineering: [***] [***] [***] [***] [***]
Project
Engineering: [***] [***] [***] [***] [***]
PATHNET ENG: [***] [***] [***] [***] [***]
PROJECT TOTAL: [***] [***] [***] [***] [***]
C-12
<PAGE>
CS 6 JUDSON MANDAN CS 7 LINTON
---- ------ ------ ---- ------
3 Way Jct Spur-term
PCN Coordination: [***] [***] [***] [***] [***]
Site Survey: [***] [***] [***] [***] [***]
PLEM ENG: [***] [***] [***] [***] [***]
Site Clearing/Level:
Fence & Gate Mods: [***] [***]
Road
Const/Repair:
SITE WORK: [***] [***] [***] [***] [***]
Tower Analysis: [***] [***] [***] [***] [***]
Tower Strength
Material: [***] [***] [***] [***] [***]
Tower Labor: [***] [***] [***] [***] [***]
Waveguide
Bridge: [***] [***] [***] [***]
Tower Ground:
TOWERS: [***] [***] [***] [***] [***]
Exist Bldg. Mods: [***]
New Building: [***] [***] [***] [***]
New Bldg
Delivery: [***] [***] [***] [***]
New Bldg
Fondation: [***] [***] [***] [***]
Building Ground: [***] [***] [***] [***]
AC Power : [***] [***] [***] [***]
BUILDINGS: [***] [***] [***] [***] [***]
15KW
25KW [***] [***] [***]
35KW
Transfer Panel:
Install & Test
Labor: [***] [***]
GENERATORS: [***] [***] [***] [***] [***]
Chargers: [***] [***] [***] [***]
Batterys: [***] [***] [***] [***]
Power
Board/Panel: [***] [***] [***] [***] [***]
Install & Test
Labor: [***] [***] [***] [***]
D.C. PLANT: [***] [***] [***] [***] [***]
C-13
<PAGE>
CS 6 JUDSON MANDAN CS 7 LINTON
---- ------ ------ ---- ------
3 Way Jct Spur-term
Antenna
Material: [***] [***] [***] [***] [***]
Install & Align
Labor: [***] [***] [***] [***] [***]
ANTENNAS: [***] [***] [***] [***] [***]
Waveguide
Material: [***] [***] [***] [***] [***]
Install & Test
Labor: [***] [***] [***] [***] [***]
WAVEGUIDE: [***] [***] [***] [***] [***]
1:1 Terminal: &
2Way [***] [***] [***] [***] [***]
1:1 Repeater:
OAM&P
Software/LT
Maint Kit: [***]
Radio Spares: [***]
Install: [***] [***] [***] [***] [***]
Test & Turnup: [***] [***] [***] [***] [***]
RADIOS: [***] [***] [***] [***] [***]
OC-3 to 56 DS-1: [***] [***]
OC-3 to 28 DS-1:
ADM 8 DS-1
OC-3 Spares: [***]
Install: [***] [***]
Test & Turnup: [***] [***]
OC3 MULTIPLEX: [***] [***] [***] [***] [***]
Channel Bank: [***] [***] [***] [***] [***]
DS-1 MUX
I/O DAX:
Install: [***] [***] [***] [***] [***]
Test & Turnup: [***] [***] [***] [***] [***]
C/B MUX/ DAX: [***] [***] [***] [***] [***]
FREIGHT: [***] [***] [***] [***] [***]
SALES TAXES: [***] [***] [***] [***] [***]
Path
Engineering: [***] [***] [***] [***] [***]
System
Engineering: [***] [***] [***] [***] [***]
Project
Engineering: [***] [***] [***] [***] [***]
PATHNET ENG: [***] [***] [***] [***] [***]
PROJECT TOTAL: [***] [***] [***] [***] [***]
C-14
<PAGE>
CS 8 ASHLEY LAKE CS 9 ABERDEEN
---- ------ ---- ---- --------
PCN Coordination: [***] [***] [***] [***] [***]
Site Survey: [***] [***] [***] [***] [***]
PLEM ENG: [***] [***] [***] [***] [***]
Site Clearing/Level:
Fence & Gate Mods: [***] [***]
Road
Const/Repair:
SITE WORK: [***] [***] [***] [***] [***]
Tower Analysis: [***] [***] [***] [***] [***]
Tower Strength
Material: [***] [***] [***] [***] [***]
Tower Labor: [***] [***] [***] [***] [***]
Waveguide
Bridge: [***] [***] [***] [***] [***]
Tower Ground:
TOWERS: [***] [***] [***] [***] [***]
Exist Bldg. Mods:
New Building: [***] [***] [***] [***] [***]
New Bldg
Delivery: [***] [***] [***] [***] [***]
New Bldg
Fondation: [***] [***] [***] [***] [***]
Building
Ground: [***] [***] [***] [***] [***]
AC Power : [***] [***] [***] [***] [***]
BUILDINGS: [***] [***] [***] [***] [***]
15KW
25KW [***] [***] [***]
35KW
Transfer Panel:
Install & Test
Labor: [***] [***] [***]
GENERATORS: [***] [***] [***] [***] [***]
Chargers: [***] [***] [***] [***] [***]
Batterys: [***] [***] [***] [***] [***]
Power
Board/Panel: [***] [***] [***] [***] [***]
Install & Test
Labor: [***] [***] [***] [***] [***]
D.C. PLANT: [***] [***] [***] [***] [***]
C-15
<PAGE>
CS 8 ASHLEY LAKE CS 9 ABERDEEN
---- ------ ---- ---- --------
Antenna
Material: [***] [***] [***] [***] [***]
Install &
Align Labor: [***] [***] [***] [***] [***]
ANTENNAS: [***] [***] [***] [***] [***]
Waveguide
Material: [***] [***] [***] [***] [***]
Install & Test
Labor: [***] [***] [***] [***] [***]
WAVEGUIDE: [***] [***] [***] [***] [***]
1:1 Terminal:
& 2Way [***] [***] [***] [***] [***]
1:1 Repeater:
OAM&P
Software/LT
Maint Kit:
Radio Spares:
Install: [***] [***] [***] [***] [***]
Test & Turnup: [***] [***] [***] [***] [***]
RADIOS: [***] [***] [***] [***] [***]
OC-3 to 56
DS-1:
OC-3 to 28
DS-1:
ADM 8 DS-1 [***] [***]
OC-3 Spares:
Install: [***] [***]
Test & Turnup: [***] [***]
OC3 MULTIPLEX: [***] [***] [***] [***] [***]
Channel Bank: [***] [***] [***] [***]
DS-1 MUX
I/O DAX:
Install: [***] [***] [***]
Test & Turnup: [***] [***] [***]
C/B MUX/ DAX: [***] [***] [***] [***] [***]
FREIGHT: [***] [***] [***] [***] [***]
SALES TAXES: [***] [***] [***] [***] [***]
Path
Engineering: [***] [***] [***] [***] [***]
System
Engineering: [***] [***] [***] [***] [***]
Project
Engineering: [***] [***] [***] [***] [***]
PATHNET ENG: [***] [***] [***] [***] [***]
PROJECT TOTAL: [***] [***] [***] [***] [***]
C-16
<PAGE>
GARDEN
CS 10 CITY CODINGTON CS 11 BROOKINGS
----- ---- --------- ----- ---------
3 Way Jct Spur-term
PCN Coordination: [***] [***] [***] [***] [***]
Site Survey: [***] [***] [***] [***] [***]
PLEM ENG: [***] [***] [***] [***] [***]
Site Clearing/Level:
Fence & Gate Mods: [***] [***]
Road Const/Repair:
SITE WORK: [***] [***] [***] [***] [***]
Tower Analysis: [***] [***] [***] [***] [***]
Tower Strength
Material: [***] [***] [***] [***] [***]
Tower Labor: [***] [***] [***] [***] [***]
Waveguide
Bridge: [***] [***] [***] [***]
Tower Ground:
TOWERS: [***] [***] [***] [***] [***]
Exist Bldg.
Mods: [***]
New Building: [***] [***] [***] [***]
New Bldg
Delivery: [***] [***] [***] [***]
New Bldg
Fondation: [***] [***] [***] [***]
Building
Ground: [***] [***] [***] [***]
AC Power: [***] [***] [***] [***]
BUILDINGS: [***] [***] [***] [***] [***]
15KW
25KW [***] [***] [***]
35KW
Transfer Panel:
Install & Test
Labor: [***] [***]
GENERATORS: [***] [***] [***] [***] [***]
Chargers: [***] [***] [***] [***]
Batterys: [***] [***] [***] [***]
Power
Board/Panel: [***] [***] [***] [***] [***]
Install & Test
Labor: [***] [***] [***] [***]
D.C. PLANT: [***] [***] [***] [***] [***]
C-17
<PAGE>
GARDEN
CS 10 CITY CODINGTON CS 11 BROOKINGS
----- ---- --------- ----- ---------
3 Way Jct Spur-term
Antenna
Material: [***] [***] [***] [***] [***]
Install &
Align Labor: [***] [***] [***] [***] [***]
ANTENNAS: [***] [***] [***] [***] [***]
Waveguide
Material: [***] [***] [***] [***] [***]
Install & Test
Labor: [***] [***] [***] [***] [***]
WAVEGUIDE: [***] [***] [***] [***] [***]
1:1 Terminal:
& 2Way [***] [***] [***] [***] [***]
1:1 Repeater:
OAM&P
Software/LT
Maint Kit: [***]
Radio Spares:
Install: [***] [***] [***] [***] [***]
Test & Turnup: [***] [***] [***] [***] [***]
RADIOS: [***] [***] [***] [***] [***]
OC-3 to 56
DS-1:
OC-3 to 28
DS-1: [***] [***]
ADM 8 DS-1 [***]
OC-3 Spares:
Install: [***] [***] [***]
Test & Turnup: [***] [***] [***]
OC3 MULTIPLEX: [***] [***] [***] [***] [***]
Channel Bank: [***] [***] [***] [***]
DS-1 MUX
I/O DAX:
Install: [***] [***] [***] [***]
Test & Turnup: [***] [***] [***] [***]
C/B MUX/ DAX: [***] [***] [***] [***] [***]
FREIGHT: [***] [***] [***] [***] [***]
SALES TAXES: [***] [***] [***] [***] [***]
Path
Engineering: [***] [***] [***] [***] [***]
System
Engineering: [***] [***] [***] [***] [***]
Project
Engineering: [***] [***] [***] [***] [***]
PATHNET ENG: [***] [***] [***] [***] [***]
PROJECT TOTAL: [***] [***] [***] [***] [***]
C-18
<PAGE>
LAKE LAKE
SHAOKATAN STAY CS 12 JEFFERS CS 13
--------- ---- ----- ------- -----
3 Way Jct
PCN Coordination: [***] [***] [***] [***] [***]
Site Survey: [***] [***] [***] [***] [***]
PLEM ENG: [***] [***] [***] [***] [***]
Site Clearing/Level:
Fence & Gate Mods: [***] [***]
Road Const/Repair:
SITE WORK: [***] [***] [***] [***] [***]
Tower Analysis: [***] [***] [***] [***] [***]
Tower Strength
Material: [***] [***] [***] [***] [***]
Tower Labor: [***] [***] [***] [***] [***]
Waveguide
Bridge: [***] [***] [***] [***] [***]
Tower Ground:
TOWERS: [***] [***] [***] [***] [***]
Exist Bldg.
Mods:
New Building: [***] [***] [***] [***] [***]
New Bldg
Delivery: [***] [***] [***] [***] [***]
New Bldg
Fondation: [***] [***] [***] [***] [***]
Building Ground: [***] [***] [***] [***] [***]
AC Power : [***] [***] [***] [***] [***]
BUILDINGS: [***] [***] [***] [***] [***]
15KW
25KW [***] [***] [***]
35KW
Transfer Panel:
Install & Test
Labor: [***] [***] [***]
GENERATORS: [***] [***] [***] [***] [***]
Chargers: [***] [***] [***] [***] [***]
Batterys: [***] [***] [***] [***] [***]
Power
Board/Panel: [***] [***] [***] [***] [***]
Install & Test
Labor: [***] [***] [***] [***] [***]
D.C. PLANT: [***] [***] [***] [***] [***]
C-19
<PAGE>
LAKE LAKE
SHAOKATAN STAY CS 12 JEFFERS CS 13
--------- ---- ----- - ------- -----
3 Way Jct
Antenna
Material: [***] [***] [***] [***] [***]
Install & Align
Labor: [***] [***] [***] [***] [***]
ANTENNAS: [***] [***] [***] [***] [***]
Waveguide
Material: [***] [***] [***] [***] [***]
Install & Test
Labor: [***] [***] [***] [***] [***]
WAVEGUIDE: [***] [***] [***] [***] [***]
1:1 Terminal: &
2Way [***] [***] [***] [***] [***]
1:1 Repeater:
OAM&P
Software/LT
Maint Kit:
Radio Spares:
Install: [***] [***] [***] [***] [***]
Test & Turnup: [***] [***] [***] [***] [***]
RADIOS: [***] [***] [***] [***] [***]
OC-3 to 56 DS-1:
OC-3 to 28 DS-1: [***]
ADM 8 DS-1 [***]
OC-3 Spares:
Install: [***] [***]
Test & Turnup: [***] [***]
OC3 MULTIPLEX: [***] [***] [***] [***] [***]
Channel Bank: [***] [***] [***] [***] [***]
DS-1 MUX
I/O DAX:
Install: [***] [***] [***] [***] [***]
Test & Turnup: [***] [***] [***] [***] [***]
C/B MUX/ DAX: [***] [***] [***] [***] [***]
FREIGHT: [***] [***] [***] [***] [***]
SALES TAXES: [***] [***] [***] [***] [***]
Path
Engineering: [***] [***] [***] [***] [***]
System
Engineering: [***] [***] [***] [***] [***]
Project
Engineering: [***] [***] [***] [***] [***]
PATHNET ENG: [***] [***] [***] [***] [***]
PROJECT TOTAL: [***] [***] [***] [***] [***]
C-20
<PAGE>
EAST CRYSTAL
WELCOME CHAIN LAKE VENTURA TOTALS
------- ----- ---- ------- ------
Spur-term
PCN Coordination: [***] [***] [***] [***] [***]
Site Survey: [***] [***] [***] [***] [***]
PLEM ENG: [***] [***] [***] [***] [***]
Site Clearing/Level: [***]
Fence & Gate Mods: [***] [***] [***]
Road Const/Repair: [***]
SITE WORK: [***] [***] [***] [***] [***]
Tower Analysis: [***] [***] [***] [***] [***]
Tower Strength
Material: [***] [***] [***] [***] [***]
Tower Labor: [***] [***] [***] [***] [***]
Waveguide
Bridge: [***] [***] [***] [***]
Tower Ground: [***]
TOWERS: [***] [***] [***] [***] [***]
Exist Bldg.
Mods: [***] [***]
New Building: [***] [***] [***] [***]
New Bldg
Delivery: [***] [***] [***] [***]
New Bldg
Fondation: [***] [***] [***] [***]
Building Ground: [***] [***] [***] [***]
AC Power: [***] [***] [***] [***]
BUILDINGS: [***] [***] [***] [***] [***]
15KW [***]
25KW [***] [***] [***] [***]
35KW [***]
Transfer Panel: [***]
Install & Test
Labor: [***] [***] [***] [***]
GENERATORS: [***] [***] [***] [***] [***]
Chargers: [***] [***] [***] [***]
Batterys: [***] [***] [***] [***]
Power
Board/Panel: [***] [***] [***] [***] [***]
Install & Test
Labor: [***] [***] [***] [***]
D.C. PLANT: [***] [***] [***] [***] [***]
C-21
<PAGE>
EAST CRYSTAL
WELCOME CHAIN LAKE VENTURA TOTALS
------- ----- ---- ------- ------
Spur-term
Antenna
Material: [***] [***] [***] [***] [***]
Install & Align
Labor: [***] [***] [***] [***] [***]
ANTENNAS: [***] [***] [***] [***] [***]
Waveguide
Material: [***] [***] [***] [***] [***]
Install & Test
Labor: [***] [***] [***] [***] [***]
WAVEGUIDE: [***] [***] [***] [***] [***]
1:1 Terminal: &
2Way [***] [***] [***] [***] [***]
1:1 Repeater: [***]
OAM&P
Software/LT [***] [***]
Maint Kit: [***] [***]
Radio Spares: [***] [***]
Install: [***] [***] [***] [***] [***]
Test & Turnup: [***] [***] [***] [***] [***]
RADIOS: [***] [***] [***] [***] [***]
OC-3 to 56 DS-1: [***] [***]
OC-3 to 28 DS-1: [***] [***]
ADM 8 DS-1 [***]
OC-3 Spares: [***] [***]
Install: [***] [***] [***]
Test & Turnup: [***] [***] [***]
OC3 MULTIPLEX: [***] [***] [***] [***] [***]
Channel Bank: [***] [***] [***] [***] [***]
DS-1 MUX [***]
I/O DAX: [***]
Install: [***] [***] [***] [***]
Test & Turnup: [***] [***] [***] [***]
C/B MUX/ DAX: [***] [***] [***] [***] [***]
FREIGHT: [***] [***] [***] [***] [***]
SALES TAXES: [***] [***] [***] [***] [***]
Path
Engineering: [***] [***] [***] [***] [***]
System
Engineering: [***] [***] [***] [***] [***]
Project
Engineering: [***] [***] [***] [***] [***]
PATHNET ENG: [***] [***] [***] [***] [***]
PROJECT TOTAL: [***] [***] [***] [***] [***]
C-22
<PAGE>
INCUMBENT ESTIMATED COSTS AND ITEMS SUMMARY
PLEM ENG [***]
SITE WORK [***]
TOWERS [***]
BUILDINGS [***]
GENERATORS [***]
D.C. PLANT [***]
ANTENNAS [***]
WAVEGUIDE [***]
RADIOS [***]
OC3 MULTIPLEX [***]
C/B MUX/ DAX [***]
FREIGHT [***]
SALES TAXES [***]
PATHNET ENG [***]
TOTAL [***]
Note: PathNet Engineering Summary Totals as set forth in the Project Totals of
this Exhibit are not items to be paid by Incumbent.
C-23
<PAGE>
EXHIBIT C-2
SYSTEM PAYMENT*
------------------------------------------------------
Time Period Payment
------------------------------------------------------
Year 1
------------------------------------------------------
Quarter 1 [***]
------------------------------------------------------
Quarter 2 [***]
------------------------------------------------------
Quarter 3 [***]
------------------------------------------------------
Quarter 4 [***]
------------------------------------------------------
Year 2
------------------------------------------------------
Quarter 1 [***]
------------------------------------------------------
Quarter 2 [***]
------------------------------------------------------
Quarter 3 [***]
------------------------------------------------------
Quarter 4 [***]
------------------------------------------------------
Year 3
------------------------------------------------------
Quarter 1 [***]
------------------------------------------------------
Quarter 2 [***]
------------------------------------------------------
Quarter 3 [***]
------------------------------------------------------
Quarter 4 [***]
------------------------------------------------------
Year 4
------------------------------------------------------
Quarter 1 [***]
------------------------------------------------------
Quarter 2 [***]
------------------------------------------------------
Quarter 3 [***]
------------------------------------------------------
Quarter 4 [***]
------------------------------------------------------
Total Payment [***]
------------------------------------------------------
*Assumes total R/F costs of $2.5 million (excludes costs of multiplexing to DS-0
level and incremental costs of all back-to-back terminals) and an interest rate
of 10%. AMOUNTS TO BE ADJUSTED FOR FINAL BUDGETED RF COSTS.
C-24
<PAGE>
SCHEDULE D
OWNERSHIP STATUS OF INCUMBENT SITES
================================================================
Ownership
Site County Status
- ----------------------------------------------------------------
Crow Creek Phillips 3
- ----------------------------------------------------------------
CS-1 Valley 2
- ----------------------------------------------------------------
Porcupine Valley 1
- ----------------------------------------------------------------
CS-2 Roosevelt 1
- ----------------------------------------------------------------
Hay Creek Roosevelt 1
- ----------------------------------------------------------------
CS-3 Roosevelt 1
- ----------------------------------------------------------------
Hardscrabble Williams 1
- ----------------------------------------------------------------
CS-4 McKenzie 1
- ----------------------------------------------------------------
Grassy Butte McKenzie 1
- ----------------------------------------------------------------
CS-5 Dunn 1
- ----------------------------------------------------------------
Ziner Butte Mercer 1
- ----------------------------------------------------------------
Elm Creek Mercer 1
- ----------------------------------------------------------------
CS-6 Morton 1
- ----------------------------------------------------------------
Judson Morton 3
- ----------------------------------------------------------------
CS-7 Morton 1
- ----------------------------------------------------------------
Linton Emmons 1
- ----------------------------------------------------------------
CS-8 McIntosh 1
- ----------------------------------------------------------------
CS-9 Edmunds 1
- ----------------------------------------------------------------
Aberdeen Measurement
Station Brown 1
- ----------------------------------------------------------------
CS-10 Clark 1
- ----------------------------------------------------------------
Garden City Clark 1
- ----------------------------------------------------------------
Codington Codington 1
- ----------------------------------------------------------------
Brookings Brookings 1
- ----------------------------------------------------------------
CS-11 Deuel 1
- ----------------------------------------------------------------
Lake Shaokatan Brookings 1
- ----------------------------------------------------------------
Lake Stay Lincoln 1
- ----------------------------------------------------------------
CS-12 Lyon 1
- ----------------------------------------------------------------
Jeffers Cottonwood 1
- ----------------------------------------------------------------
CS-13 Martin 1
- ----------------------------------------------------------------
East Chain Martin 1
- ----------------------------------------------------------------
Crystal Lake Hancock 1
- ----------------------------------------------------------------
Monchy Phillips 2
- ----------------------------------------------------------------
East Fork Valley 1
- ----------------------------------------------------------------
Glasgow Valley 1
- ----------------------------------------------------------------
Mandan Morton 1
- ----------------------------------------------------------------
Ashley McIntosh 1
- ----------------------------------------------------------------
Welcome Measurement
Station Martin 1
- ----------------------------------------------------------------
Long Lake McPherson 1
================================================================
1- Sites owned in Fee by Incumbent
2- Sites occupied by Incumbent pursuant to Right-of-Way Grant from the Bureau
of Land Management (No. M-29897)
3- Sites leased by Incumbent
D-1
<PAGE>
SCHEDULE E
INCUMBENT SECURITY PROCEDURES
See attached Northern Border Pipeline Company Operating Procedures for Visitor
and Facility Security consisting of 1 page.
E-1
<PAGE>
- --------------------------------------------------------------------------------
OPERATING PROCEDURES
- --------------------------------------------------------------------------------
[NORTHERN BORDER Visitors and Facility Security Procedure No.: 120.202
PIPELINE COMPANY Section: Security
LOGO] Revision: 3
Effective date: 12-15-95
- --------------------------------------------------------------------------------
PURPOSE:
This procedure establishes requirements for access by visitors to Company
properties in order to safeguard the visitors and the security and welfare of
Company employees and properties and helps achieve compliance with DOT
Regulations 192.163(d).
RESPONSIBILITY FOR ADMINISTRATION:
Location Team.
RELATED PROCEDURES:
80.302 Signs - Specifications and Applications
PROCEDURE:
I. Do not allow visitors unknown to the Location Team or his immediate
subordinates to enter further than the office at any location unless they
provide proper identification and a justifiable purpose for the visit.
II. Allow visits only during normal daytime working hours, unless special
arrangements for visits have been made.
III. Require all visitors to sign a guest register and record the purpose of
the visit.
IV. Provide all visitors with appropriate safety protection and a Company
employee escort at all times.
V. Post a sign at each entrance from a public road reading:
A. "Visitors - Apply at Office" at locations with offices with employee
present during normal working hours.
B. "Authorized Personnel Only" at all other locations.
C. Reference Procedure 80.302 for information on signs.
VI. Lock property entrance gates:
A. When locations are unattended.
B. During times outside of normal working hours at continuously
attended locations.
C. If closed, the main entrance gates and all gates within 200 feet of
a compressor building must be openable without a key.
RECORDS:
Retain guest register information for twelve months.
RESPONSIBILITY FOR PROCEDURE:
Address all questions on this procedure to the V.P., Operations and
Administration.
- --------------------------------------------------------------------------------
Bold Print Denotes Revision Page 1 of 1
<PAGE>
SCHEDULE F
[RESERVED]
F-1
<PAGE>
SCHEDULE G
INCUMBENT POLICY ON DRUGS AND ALCOHOL IN THE WORKPLACE
[Policy on Drugs and Alcohol provided by Incumbent to Pathnet
under separate cover]
G-1
<PAGE>
SCHEDULE H
INCUMBENT SAFETY PROCEDURES
[Safety procedures provided by Incumbent to Pathnet under separate cover]
H-1
<PAGE>
SCHEDULE I
[RESERVED]
I-1
<PAGE>
SCHEDULE J
INCUMBENT TRAINING
1. Pre-Commissioning Training. Prior to Commissioning of the System, PathNet
shall provide to Incumbent one training course for Incumbent's employees and
other designees of Incumbent, which training shall include, among other things,
the following:
(a) comprehensive instruction for trouble-free operation maintenance;
(b) hands-on experience with the operation of the equipment deployed in
the System;
(c) review of the similarities and differences of an analog versus a
digital system;
(d) review of the latest state-of-the-art Technology and applications
used in the System;
(e) review of procedures designed to eliminate equipment damage,
incorrect handling of equipment and System downtime;
(f) comprehensive instruction in the use of all required test equipment
used in connection with the System;
(g) the distribution of manuals and other course materials that include
descriptive information publications, alignment procedures,
maintenance procedures, technical information publications,
schematic drawings, wiring lists and system assembly drawings; and
(h) a certificate of completion for each student who successfully
completes the training course.
2. Certification of Incumbent's Field Technicians. Each of Incumbent's Field
Technicians (as defined in the Maintenance Services Agreement) must either
successfully complete the training course described in Section 1 of this
Schedule J, or must be certified by PathNet that such Field Technician is
qualified to perform services on the System.
3. Training for Upgrades. Upon any upgrade of the system, Incumbent may request
that PathNet provide additional training with respect to such upgrade and
PathNet shall provide such training to Incumbent as soon as practicable after
such request.
4. Training Locations. All such training shall be provided at PathNet's
Richardson, Texas office, Washington D.C. metropolitan area headquarters or at
such other location as determined by PathNet in its sole discretion.
J-1
<PAGE>
5. Travel and Lodging.[***]
J-2
<PAGE>
SCHEDULE K
OWNERSHIP
A. OWNERSHIP OF SEGMENTS A AND B INITIAL SYSTEM EQUIPMENT ASSETS AND
MATERIALS
Segment A
- -------------------------------------------------------------------------------
System Component Owned By
- -------------------------------------------------------------------------------
Existing Shelters [***]
- -------------------------------------------------------------------------------
New Shelters for System [***]
- -------------------------------------------------------------------------------
New Shelters at PathNet Spur sites [***]
- -------------------------------------------------------------------------------
New Shelters at Incumbent Spur sites [***]
- -------------------------------------------------------------------------------
Towers for System [***]
- -------------------------------------------------------------------------------
Towers for Incumbent Spurs [***]
- -------------------------------------------------------------------------------
Towers for PathNet Spurs [***]
- -------------------------------------------------------------------------------
A.C. and D.C. Power system as set forth on Schedule J [***]
- -------------------------------------------------------------------------------
Pressurizing Equipment for sites including manifolds and [***]
dehydrators
- -------------------------------------------------------------------------------
1/0 Multiplexers [***]
- -------------------------------------------------------------------------------
Environmental Control Systems of Shelters of System [***]
- -------------------------------------------------------------------------------
Environmental Control Systems of Shelters of Incumbent Spurs [***]
- -------------------------------------------------------------------------------
Environmental Control Systems of Shelters of PathNet Spurs [***]
- -------------------------------------------------------------------------------
Common Equipment existing Before Effective Date [***]
- -------------------------------------------------------------------------------
Common Equipment newly installed [***]
- -------------------------------------------------------------------------------
Equipment Racks for System Radios [***]
- -------------------------------------------------------------------------------
Antennas and Antenna Mounts relating to System [***]
- -------------------------------------------------------------------------------
Antennas and Antenna Mounts relating to Incumbent Spurs [***]
- -------------------------------------------------------------------------------
Antennas and Antenna Mounts relating to PathNet Spurs [***]
- -------------------------------------------------------------------------------
Waveguide and Waveguide bridges relating to System [***]
- -------------------------------------------------------------------------------
Waveguide and Waveguide bridges relating to Incumbent Spurs [***]
- -------------------------------------------------------------------------------
Waveguide and Waveguide bridges relating to PathNet Spurs [***]
- -------------------------------------------------------------------------------
Radios relating to System [***]
- -------------------------------------------------------------------------------
Radios relating to Incumbent Spurs [***]
- -------------------------------------------------------------------------------
Radios relating to PathNet Spurs [***]
- -------------------------------------------------------------------------------
OC-3 Multiplexers [***]
- -------------------------------------------------------------------------------
Radio Bays and Radio Bay Equipment relating to the System [***]
- -------------------------------------------------------------------------------
Radio Bays and Radio Bay Equipment relating to Incumbent Spurs [***]
- -------------------------------------------------------------------------------
Radio Bays and Radio Bay Equipment relating to the PathNet Spurs [***]
- -------------------------------------------------------------------------------
Interconnection Equipment relating to PathNet Spurs and [***]
Interconnections
- -------------------------------------------------------------------------------
Interconnection Equipment relating to Incumbent Spurs and [***]
Interconnections
- -------------------------------------------------------------------------------
Results of the Preliminary Engineering Studies and Project [***]
Drawings set forth in
- -------------------------------------------------------------------------------
K-1
<PAGE>
- -------------------------------------------------------------------------------
System Component Owned By
- -------------------------------------------------------------------------------
Section 6.2
- -------------------------------------------------------------------------------
Microwave Radio System Licenses and other FCC, Federal, state and [***]
local licenses and Permits relating to the System
- -------------------------------------------------------------------------------
Panels, terminals, Software, Source Codes and other Assets and [***]
Equipment relating to the Network Management System
- -------------------------------------------------------------------------------
B. OWNERSHIP OF ANY SEGMENT A OR B CAPACITY EXPANSION SYSTEM EQUIPMENT,
ASSETS AND MATERIALS
All equipment required for Capacity Expansions on Segments A and B will be
owned by [***].
K-2
<PAGE>
SCHEDULE L
FORM OF QUARTERLY REVENUE REPORT
<TABLE>
<CAPTION>
PATHNET INCUMBENT
PATH OR NUMBER OF PRICE PER REVENUE REVENUE REVENUE TO REVENUE TO
SEGMENT START DATE END DATE DS-0'S SOLD CIRCUIT MILE COLLECTED OUTSTANDING BE PAID BE PAID
- ------- ---------- -------- ----------- ------------ --------- ----------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
L-1
<PAGE>
SCHEDULE M
INCUMBENT'S PAYMENT INSTRUCTIONS
Payments to Incumbent shall be by wire transfer in accordance with the following
wire transfer instructions:
M-1
<PAGE>
SCHEDULE N
PATHNET PROGRAM SUBLICENSE AGREEMENT
This Sublicense Agreement (the "Agreement") is made on _____________, 1997
(the "Effective Date") by and between PathNet, Inc. ("PathNet") and Northern
Border Pipeline Company ("Incumbent") for the use of VERTEL Corporation
("Licensor") programs.
WHEREAS, Incumbent desires to sublicense the programs as further defined
herein; and
WHEREAS, PathNet is willing to grant such sublicense under the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the Parties mutually agree as follows:
I. DEFINITIONS.
1.1 "Licensed Program" shall mean each program in software or firmware
form provided by PathNet to Incumbent pursuant to the Fixed Point Microwave
Services Agreement, dated the date hereof between Incumbent and PathNet (the
"FPM Agreement"), as such Licensed Program is licensed by PathNet from Licensor,
including future additions and updates to such Licensed Program. The term
"Licensed Program" shall specifically include documentation and related
materials pertinent to such program and any updated program or portion of a
program hereinafter furnished to Incumbent for use in connection with or
replacement of the Licensed Programs.
1.2 "Equipment" shall mean Intel compatible servers running Windows NT.
1.3 "Use" shall mean the copying or duplication of any portion of a
Licensed Program from storage units or media into the Equipment for processing
or the utilization of any Licensed Program in the course of the operation of the
Equipment.
II. LICENSE GRANT.
2.1 Use of Object/Binary Licensed Program with Designated Equipment.
PathNet hereby grants Incumbent a non-exclusive, non-transferable (except as
provided in Section 5.1), non-licensable, non-assignable license to Use in
machine readable form, the Licensed Program specified in Section 1.1 solely on
the Equipment specified in Section 1.2. No license is granted to use any
Licensed Program on any configuration of equipment which is different from or
less than the configuration indicated in Section 1.2.
N-1
<PAGE>
III. PROPRIETARY RIGHTS.
3.1 Proprietary Rights. The Licensed Program is owned by Licensor and/or
others and is proprietary in nature. Incumbent shall respect such proprietary
rights and shall not use such Licensed Program except for the purposes for which
it is being made available as set forth in this Agreement and shall not
reproduce, print, sublicense, duplicate, reverse engineer, distribute, disclose,
or otherwise make the Licensed Program available to any third party, in whole or
in part, in whatever form.
3.2 Confidentiality. Incumbent shall take all actions required to maintain
control of the Licensed Program including securing written records, agreements,
and other reasonable measures with its employees and agents to satisfy its
obligations under this Agreement with respect to the use, copying, protection,
and security of the Licensed Program.
IV. LIMIT OF LIABILITY.
4.1 NO WARRANTY. LICENSOR GRANTS A WARRANTY IN THE LICENSED PROGRAM ONLY
TO PATHNET AND DOES NOT EXTEND ITS WARRANTY TO INCUMBENT OR ANY OTHER END USER.
WARRANTY OF THE LICENSED PROGRAM IS PROVIDED BY LICENSOR DIRECTLY TO PATHNET.
LICENSOR AND PATHNET MAKE NO EXPRESS OR IMPLIED WARRANTIES OF ANY KIND,
INCLUDING WITHOUT LIMITATION, MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE WITH REGARD TO ANY LICENSED PROGRAM AND/OR RELATED MATERIALS TO BE
FURNISHED BY VERTEL.
4.2 NO CONSEQUENTIAL DAMAGES. IN NO EVENT SHALL LICENSOR OR PATHNET BE
LIABLE FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH OR
ARISING OUT OF THE EXISTENCE, FURNISHING, FAILURE TO FURNISH, OR USE OF ANY
LICENSED PROGRAM AND/OR RELATED MATERIAL AND/OR DEVISE.
4.3 Licensor shall have no liability for any claim of copyright or patent
infringement based on (1) use of other than a current unaltered release of the
Licensed Program available from Licensor if such infringement would have been
avoided by the use of such current unaltered release of the Licensed Program or
(2) Use or combination of the Licensed Program with programs not supplied by
Licensor and which Use or combination results in the infringement of any patent
or copyright.
V. TRANSFER OF LICENSE.
5.1 Terms for Transfer of License. This license may only be transferred
upon written approval of PathNet and in connection with the transfer of all of
the Equipment; provided
N-2
<PAGE>
all copies of the Licensed Program are delivered to the transferee and no copies
or related materials are retained by Incumbent and provided further that the
transferee agrees to be bound by all the Terms and Conditions of this Agreement.
NOW THEREFORE, the Parties hereto have caused this Agreement to be
executed by their respective duly authorized representatives.
PATHNET, INC.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
NORTHERN BORDER PIPELINE COMPANY
By: Northern Plains Natural Gas Company,
Operator
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
N-3
<PAGE>
INDEX OF SCHEDULES AND EXHIBITS TO
FIXED POINT MICROWAVE SERVICES AGREEMENT
SCHEDULE A: Services and System Specifications
Exhibit A-1: Equipment
Exhibit A-2: Manufacturers Specifications for Radios
Exhibit A-3: Electricity and Power Specifications of the System
Exhibit A-4: Initial Incumbent Channel Plan
Exhibit A-5: Equipment Shelters Specifications and Design
Exhibit A-6: Grounding and Lightning Protection Guidelines and
Specifications for Communications Shelters
Exhibit A-7: Network Interconnections Schedule
Exhibit A-8: System Spurs
Exhibit A-9: Form of Certificate of Acceptance
SCHEDULE B: The System
SCHEDULE C: Estimated and Operating Costs
Exhibit C-1: Incumbent Estimated Costs and Items
Exhibit C-2: System Payment
SCHEDULE D: Ownership Status of Incumbent Sites
SCHEDULE E: Incumbent Security Procedures
SCHEDULE F: Reserved
SCHEDULE G: Incumbent Policy on Drugs and Alcohol in the Workplace
SCHEDULE H: Incumbent Safety Procedures
SCHEDULE I: Reserved
SCHEDULE J: Incumbent Training
<PAGE>
SCHEDULE K: Ownership
SCHEDULE L: Form of Quarterly Revenue Report
SCHEDULE M: Incumbent's Payment Instructions
SCHEDULE N: PathNet Program Sublicense Agreement
2
<PAGE>
Exhibit 10.2
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION. SUCH PORTIONS ARE DESIGNATED "[***]."
THIS FIXED POINT MICROWAVE SERVICES AGREEMENT is made and entered into as
of the 30th day of January, 1998 (the "Effective Date"), by and between Pathnet,
Inc. ("Pathnet"), a Delaware corporation and Northern Indiana Public Service
Company ("Incumbent"), an Indiana corporation (collectively, the "Parties" and
each, a "Party".
WITNESSETH:
WHEREAS, Pathnet is engaged in the business of creating high capacity,
digital, microwave communications systems for purposes of marketing and selling
the excess long distance telecommunications capacity created by such systems;
WHEREAS, Incumbent is the owner and operator of an existing analog and
digital microwave telecommunications system; and
WHEREAS, Incumbent desires to engage Pathnet as, and Pathnet desires to
act as, Incumbent's sole representative for the purpose of (i) installing,
managing, and operating a high capacity digital microwave system along
Incumbent's current microwave paths and (ii) marketing and selling any Excess
Capacity created by such high capacity digital microwave system.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the Parties agree as follows:
SECTION 1. DEFINITIONS
1.1 Definitions: As used in this Agreement, the following terms shall have
the meanings indicated:
1.1.1 1/0 Multiplexer: Any device that multiplexes capacity between
the DS-l and the DS-O levels.
1.1.2 1 x 1: A microwave radio configuration consisting of a primary
and a protect radio.
1.1.3 Affiliate: With respect to any Person, any other Person that
directly or indirectly controls, is controlled by, or is under common
control with such Person. For the purposes of this definition, "control"
(including the terms "controlled by" and "under common control with"), as
used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of
voting securities, by contract, or otherwise.
1.1.4 Agreement: This Fixed Point Microwave Services Agreement,
including the Schedules and Exhibits attached hereto, as the same may be
amended, supplemented or modified in accordance with the terms hereof.
1.1.5 Alarm and Event Report: As defined in Section 7.7 of Schedule
A.
1.1.6 Amended Schedule B: As defined in Section 18.15.
<PAGE>
1.1.7 Arbitration Association: As defined in Section 17.2.3.
1.1.8 Arbitration Rules: As defined in Section 17.2.3.
1.1.9 As-Built Drawing: As defined in Section 4.1.4 of Schedule A.
1.1.10 Assignment Documents: As defined in Section 8.6.1.
1.1.11 Available Excess Capacity: The total Pathnet Excess Capacity
available (and not allocated) for use or sale on the System at any given
time from Commissioning through the Expiration Date.
1.1.12 Bit Error Rate: ("BER") shall mean the percentage of received
bits in error compared to the total number of bits received.
1.1.13 Breaching Party: As defined in Section 17.1.2.
1.1.14 Business Day: Any day other than a Saturday, a Sunday, or a
day on which the banking institutions in either New York, New York, or the
city and state in which the principal executive offices of Pathnet within
the United States are located, are not open for business.
1.1.15 Capacity Expansion: An increase in telecommunication channels
a System is able to transmit, receive and transport above those created by
the installation of the Initial System, achieved by an addition to or
change in equipment. Capacity Expansion does not include the expansion to
new Sites or the creation of new Segments.
1.1.16 Capacity Expansion Requirements: As defined in Section 7.1 of
Schedule A.
1.1.17 Capacity Expansion Schedule: As defined in Section 7.1 of
Schedule A.
1.1.18 CERCLA: Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. Section 6901 et seq., as amended.
1.1.19 Channel Plan: As defined in Section 1.1 of Schedule A.
1.1.20 Commissioning: With respect to each Path or Segment, the date
on which the circuits of such Path or Segment are available for service
after completion of all required site acceptance testing on the Initial
System or any Capacity Expansion.
1.1.21 Customer Agreements: As defined in Section 9.5.1.
1.1.22 Cutover Plan: As defined in Section 4.1.1 of Schedule A.
1.1.23 DS-0: 64,000 bits per second; The world-wide standard speed
for digitizing one voice conversation using pulse code modulation, which
is approximately equivalent to a single voice or data channel.
2
<PAGE>
1.1.24 DS-1: 24 DS-0's.
1.1.25 DS-3: 672 DS-0's or 28 DS-1's.
1.1.26 Deficiency List: As defined in Section 5.7 of Schedule A.
1.1.27 Dispute: As defined in Section 17.2.1.
1.1.28 Drop and Insert: That process wherein a part of the
information carried in a transmission system is demodulated (dropped) at
an intermediate point and different information is entered (inserted) for
subsequent transmission.
1.1.29 Effective Date: As defined in the introductory paragraph of
this Agreement or the date of any Amended Schedule B, as the context
indicates.
1.1.30 Encumbrances: Any security interests, mortgages, liens,
pledges, charges, claims, easements, reservations, restrictions, clouds,
equities, rights of way, options, rights of first refusal and other
encumbrances whether or not relating to the extension of credit or the
borrowing of money. To "Encumber" shall mean to effect any Encumbrance.
1.1.31 Equipment: Any and all digital microwave radios, radio
components, cards, antennas, waveguides, multiplexers, software and other
equipment or parts required for the operation of the System provided and
installed by Pathnet as set forth on Exhibit A-1 to Schedule A.
1.1.32 Error Free Second: ("EFS") Any one-second time interval which
does not contain a measurable bit error. (This term may be expressed as a
percent EFS by taking the ratio of non-errored to total seconds and
multiplying by 100.)
1.1.33 Errored Seconds: ("ES") Any one-second interval during which
one or more bit errors occurs. (For example, at the DS-1 rate, an ES will
contain 1 to 1,544,000 bit errors.)
1.1.34 Escrow Agreement: As defined in Section 4.2.4.
1.1.35 Excess Capacity: At any given time, the telecommunications
channels or DS-0's that the System creates, transports and receives, less
the capacity allocated to Incumbent pursuant to the Channel Plan, as
amended from time to time.
1.1.36 Existing System Inventory: As defined in Section 1.1 of
Schedule A.
1.1.37 Expiration Date: The date on which this Agreement and the
rights and obligations hereunder are terminated or expire in accordance
with Section 3.
1.1.38 FAA: The Federal Aviation Administration, or any other
Federal agency at the time administering tower registration requirements
and regulations.
3
<PAGE>
1.1.39 Failed Second: Any one-second interval that has 1,544 bit
errors at a DS-l rate.
1.1.40 Facilities: Incumbent's towers, shelters, buildings, sites
and all equipment owned by Incumbent relating to and used in association
with such towers, shelters and sites for the purpose of operating the
System.
1.1.41 FCC: The Federal Communications Commission, or any other
Federal agency at the time administering the Communications Act of 1934,
as amended, the Telecommunications Act of 1996, as amended and the rules
and regulations promulgated thereunder.
1.1.42 FCC Code: The Communications Act of 1934, as amended, the
Telecommunications Act of 1996, as amended and the rules and regulations
promulgated thereunder and related thereto.
1.1.43 Force Majeure Event: As defined in Section 16.3.
1.1.44 Form 415: As defined in Section 10.1.1.
1.1.45 Frequency Availability Model: As defined in Section 1.1 of
Schedule A.
1.1.46 Frequency Diversity: A method of protecting a radio signal by
providing a second radio signal on a different frequency, which will
assume the radio signal load when the regular channel fails.
1.1.47 Governmental Authority: Any nation or government, any state
or other political subdivision thereof and any court, panel, judge, board,
bureau, commission, agency or other entity, body or other person
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
1.1.48 Hazardous Material: Any material amount of any substance,
matter or waste which is or becomes regulated by any Federal, state or
local law, ordinance, order, rule, regulation, code or any government
restrictions or requirement including, but not limited to, asbestos,
petroleum products and "Hazardous Substances" and "Hazardous Wastes" (as
such terms are defined in CERCLA and RCRA.)
1.1.49 Incumbent: As defined in the introductory paragraph.
1.1.50 Incumbent Collateral: As defined in Section 8.5.1.
1.1.51 Incumbent Desired Path: As defined in Section 9.3.
1.1.52 Incumbent Representative: As defined in Section 18.12.
1.1.53 Initial System: The portion of the System constituting the
initial system with a 1 x 1 configuration which is comprised of the first
84 DS-1's (which is equivalent to 2,040 DS-0's) of the System and the
System's 84 DS-1 protect channels.
4
<PAGE>
1.1.54 Initial System Equipment: The Equipment and other equipment
and materials, and Microwave Radio Station Licenses and other licenses and
Permits related thereto, comprising and necessary for the operation of the
Initial System, including but not limited to, the Incumbent Collateral,
radios, radio software, antennas, waveguides, chargers, generators,
multiplexers, towers, shelters, batteries and racks, end user equipment
for the Network Monitoring Center (including hardware and object form
software) and all replacements thereof and substitutions therefor.
1.1.55 Interconnection: The point at which a private network is
connected to (i) the PSTN, which can include IXC POPs, tandem access
points, the central office, internet service providers, or major
industrial customer points of presence or (ii) another private network.
1.1.56 Interference: Any measurable impairment in the performance of
the System or the quality of the signals received or transmitted on the
System exceeding the technical standards set forth in Section 101.105 of
the FCC Code as such standards may apply to co-channel or adjacent channel
interferences.
1.1.57 IXC: An inter-exchange carrier; a telephone company that
provides long-distance telephone service between LATA's but not within any
one LATA.
1.1.58 Judgment: Any order, judgment, writ, decree, award or other
determination, decision or ruling of any court, judge, justice or
magistrate, any other Governmental Authority or any arbitrator.
1.1.59 LATA: Local Access and Transport Area; one of 161 local
geographic areas in the United States within which a local telephone
company may offer telecommunications services.
1.1.60 Leased Premises: As defined in Section 5.1.
1.1.61 Leased Premises Encumbrance: As defined in Section 5.10.
1.1.62 Losses: Any and all losses, claims, shortages, damages,
liabilities, expenses (including reasonable attorneys' and accountants'
fees), assessments, tax deficiencies and taxes (including interest and
penalties thereon) sustained, suffered or incurred by any third party
arising from any matter which is the subject of indemnification under
Section 15.
1.1.63 Maintenance Services Agreement: The Maintenance Services
Agreement, by and between Pathnet and Incumbent, as the same may be
amended from time to time in accordance with its terms.
1.1.64 Material Adverse Effect: Any event, fact, circumstance or
occurrence, which results or would result in a material adverse change in
or a material adverse effect on any of: (i) the condition (financial or
otherwise), business, performance, operations, properties, or prospects of
such Person; (ii) the legality, validity or enforceability of this
Agreement; or (iii) the ability of such Person to perform its material
obligations under this Agreement.
5
<PAGE>
1.1.65 Microwave Radio Station Licenses: As defined in Section
10.1.1(b).
1.1.66 Modifications SOW: As defined in Section 2.1 of Schedule A.
1.1.67 Network Monitoring Center: As defined in Section 7.5 of
Schedule A.
1.1.68 Network Management System: As defined in Section 7.6 of
Schedule A.
1.1.69 Non-Breaching Party: As defined in Section 17.1.2.
1.1.70 Notice of Election: As defined in Section 15.3.
1.1.71 OC-3 Multiplexer: Any device that multiplexes capacity
between the OC-3 and the DS-1 levels.
1.1.72 Order Wire: A service channel consisting of a 64,000 bit per
second circuit between sites.
1.1.73 OSHA: The Occupational Safety and Health Act, as amended.
1.1.74 Outage: Any unscheduled interruption in telecommunication
services (usually measured in "Outage Seconds") along a segment that
consists of ten (10) consecutive Severely Errored Seconds (i.e., when the
BER in each second is worse than 10^-3 for a period of ten (10)
consecutive seconds). These ten (10) seconds are considered to be
unavailable. The unavailable time is counted from when the first of ten
(10) Severely Errored Seconds (SESs) occurs, and ends when the first of
ten (10) consecutive non-SESs occurs second in the sequence.
1.1.75 Part 101: Part 101 of Title 47 of the Code of Federal
Regulations, as
1.1.76 Party: As defined in the introductory paragraph.
1.1.77 Path: The physical spatial separation between point-to-point
towers, housing and microwave antenna.
1.1.78 Path Studies: As defined in Section 1.1 of Schedule A.
1.1.79 Pathnet: As defined in the introductory paragraph.
1.1.80 Pathnet Estimated Costs: As defined in Section 4.2.2.
1.1.81 Pathnet Items: As defined in Section 4.2.1.
1.1.82 Pathnet Software: The software (including applications
software and systems software) owned or licensed from a third party by
Pathnet and used to provide the services covered in this Agreement.
6
<PAGE>
1.1.83 PCN: A Prior Coordination Notice sent pursuant to Part 101.
1.1.84 Permits: Any and all authorizations, approvals, consents,
licenses, permits, easements, certificates and other rights and
permissions necessary to conduct such Person's business and to own, lease
and operate such Person's properties as currently conducted, owned, leased
or operated.
1.1.85 Person: An individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock
company, or other entity of any kind or any Governmental Authority.
1.1.86 POP: Point Of Presence; The interconnection between any two
facilities based networks.
1.1.87 Progress Report: As defined in Section 4.1.2 of Schedule A.
1.1.88 Pre-Commissioning Test Equipment: All equipment required for
the testing required to be performed on the System pursuant to Section 5
of Schedule A, including, but not limited to, all required digital volt
meters, optical power meters, oscilloscopes, RF signal generators, noise
figure meters, noise figure test sets, RF variable attenuators, DADE
adjust cables, receiver card extenders and extension cords.
1.1.89 Preliminary Construction Schedule: As defined in Section 1.1
of Schedule A.
1.1.90 Project Drawings: As defined in Section 1.3 of Schedule A.
1.1.91 Project Management Plan: As defined in Section 4.1.1 of
Schedule A.
1.1.92 Project Schedule: As defined in Section 4.1.1 of Schedule A.
1.1.93 Proprietary Information: Any information of a Party which is
identified as confidential or which is customarily considered
confidential, including the Pathnet Software and related documentation (in
the case of Pathnet) and any trade secrets, business and financial
information, techniques, specifications, inventions, strategies and any
information that is not generally known in the relevant industry or which
affords possessors of the information a commercial or business advantage,
and any corrections, modifications, revisions and copies thereof, whether
in machine readable or visually readable form.
1.1.94 Protection Configuration: An engineering plan under which
channel capacity is protected either on a fully redundant basis or on a 1
x n protection basis.
1.1.95 PSTN: Publicly Switched Telephone Network.
1.1.96 RCRA: Resource Conservation and Recovery Act, 42 U.S.C.
Section 9601 et seq., as amended.
1.1.97 Requirement of Law: With respect to any Person, all Federal,
state and local laws, rules, regulations, Judgments, injunctions,
standards, codes, limitations,
7
<PAGE>
restrictions, conditions, prohibitions, notices, demands or other
requirements or determinations of a court or other Governmental Authority
or an arbitrator, applicable to or binding upon such Person, any of its
property or any business conducted by it or to which such Person, any of
its assets or any business conducted by it is subject.
1.1.98 Segment: The portion of a microwave communications network
existing between two geographic points. For purposes of this Agreement,
Segment A is the portion of Incumbent's microwave communications network
between Hammond, Indiana and (i) South Bend, Indiana and (ii) and
Monticello, Indiana, as set forth in Schedule B. Segment B is the portion
of Incumbent's microwave communications network between Plymouth, Indiana
and Ft. Wayne, Indiana, as set forth in Schedule B. The additional
Segments added to the System pursuant to an Amended Schedule B are
identified as Segment C, and Segment D, etc.
1.1.99 Services: As defined in Section 7.1.
1.1.100 Severely Errored Seconds: ("SES") shall mean (i) at the DS-I
rate, any one second interval during which the BER is greater than or
equal to 1 x 10E^-3 regardless of the cause of degradation affecting the
channel error performance including, but not limited to, unprotected
equipment failures and any other factors that contribute to poor
performance (at the DS-l rate, this equates to 1,544 or more bit errors
occurring within one second), and (ii) at the DS-3 rate, any one-second
interval during which the BER is equal to or worse than 1 x 10E^-6.
1.1.101 Site: A physical location on which a tower or other
structure is located which houses microwave antenna, radios and other
communications equipment used in the System.
1.1.102 SONET: Synchronous Optical Network; a family of fiber-optic
transmission rates from 51.84 Mbps to 13.22 Gbps, created to provide the
flexibility needed to transport many digital signals with different
capacities and to provide a standard to which manufacturers may design.
1.1.103 Space Diversity: Protection of a radio signal by providing a
separate antenna on the same tower to assume the radio signal load when
the regular transmission path on the primary antenna fades, thereby
ensuring continuous transmission.
1.1.104 Spare Parts: The equipment, modules, and parts provided by
Pathnet to Incumbent pursuant to the performance of Incumbent's
obligations under the Maintenance Services Agreement.
1.1.105 Specifications: As defined in Section 7.2.
1.1.106 Station Log Book: As defined in Section 6.2 of Schedule A.
1.1.107 Subcontractors: Any firm, corporation, or person working
directly or indirectly for a company that furnishes or performs a portion
of the work, labor or material.
1.1.108 Switched Mod Section: A section of network between two
adjacent back to-back terminals.
8
<PAGE>
1.1.109 System: The high capacity digital SONET microwave radio
equipment (6 GHz/30 MHz), antenna, waveguide, components, Facilities,
Equipment, Network Management System, all other equipment and materials
related thereto, and Microwave Radio Station Licenses and other licenses
and Permits related thereof, operated for the purpose of transmitting,
receiving and transporting telecommunications signals over Segments set
forth on Schedule B.
1.1.110 System Budget: As defined in Section 1.1 of Schedule A.
1.1.111 System Design: As defined in Section 1.1 of Schedule A.
1.1.112 Technology: Inventions, ideas, processes, formulas, and
know-how.
1.1.113 Term: As defined in Section 3.1.1.
1.1.114 Tower Analysis: As defined in Section 1.1 of Schedule A.
1.1.115 Vendor Credit Assurances: As defined in Section 4.2.4(a).
1.1.116 Wayside Channels: The additional DS-1 of telecommunications
capacity within each radio beyond the base OC-3 capacity.
1.2 Terms Generally. The definitions in Section 1.1 and elsewhere in this
Agreement shall apply equally to both the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "herein",
"hereof", "hereto" and "hereunder" and words of similar import refer to this
Agreement (including the Schedules and Exhibits) in its entirety and not to any
part hereto unless the context shall otherwise require. All references herein to
Sections, Exhibits and Schedules shall be deemed references to Sections of, and
Exhibits and Schedules to, this Agreement unless the context shall otherwise
require. Any reference in this Agreement to a "day" or number and "days"
(without the explicit qualification of "Business") shall be interpreted as a
reference to a calendar day or number of calendar days. If any action or notice
is to be taken or given on or by a particular calendar day, and such calendar
day is not a Business Day, then such action or notice shall be deferred until,
or may be taken or given on, the next Business Day.
SECTION 2. RELATIONSHIP OF THE PARTIES
2.1 Lessee, Independent Contractor, Representative and Network Manager.
Incumbent shall appoint Pathnet and Pathnet shall serve in the following
capacities during the term of this Agreement:
(i) In the role of lessee, Pathnet will lease from Incumbent an
interest in Incumbent's sites and Facilities on which to build and operate
the System. As consideration for such leasehold interest, Pathnet will pay
rent to Incumbent as set forth in Section 5.
9
<PAGE>
(ii) As an independent contractor, Pathnet will serve as Incumbent's
sole and exclusive representative in performing analytical pre-design and
design services and installing, testing and ensuring the performance of
the System, as well as any upgrades to such System in accordance with the
terms and conditions set forth in Section 6 and in Schedule A.
(iii) As the exclusive representative for the marketing and sale of
Excess Capacity for Incumbent, Pathnet will market and sell the Excess
Capacity created by System, as described in Section 9.
(iv) In the role of a network manager, Pathnet will serve as the
point of contact for any Outage or trouble on the System and shall operate
the Network Management System and the Network Monitoring Center as
described in Section 7.6 and Section 7.7 of Schedule A.
2.2 No Joint Venture, etc. The Parties expressly disclaim any intention to
create, and nothing herein shall be construed as creating, a partnership, joint
venture, agency or employment relationship between Pathnet and Incumbent.
2.3 Restrictions on Actions of Incumbent. For the term of this Agreement,
neither Incumbent, nor any Affiliate of Incumbent, shall operate parallel
microwave telecommunications facilities or systems to those set forth in
Schedule B for the purpose of selling or otherwise providing any capacity on
such parallel facilities or systems to third parties for commercial use in
competition with Pathnet. Notwithstanding the foregoing, Incumbent shall be
permitted to continue to operate Incumbent's existing analog or digital
microwave system, as such system may be modified provided no Interference shall
occur on the System, for the intended uses of Incumbent and its Affiliates and
any other use for which such analog or digital system was used as of the
Effective Date.
SECTION 3. TERM AND EXPIRATION
3.1 Term, Extension Periods, and Renewal.
3.1.1 Term. This Agreement shall commence on the Effective Date and
shall expire on the twenty-fifth (25th) anniversary of the Commissioning
of Segment A of the Initial System (the "Term").
3.1.2 Renewal. Upon expiration of the Term, this Agreement shall be
automatically renewed for additional one-year terms thereafter, unless
terminated by either Party upon written notice to the other Party to that
effect delivered within the ninety (90) day period immediately before the
renewal date for any such additional one-year term.
3.2 Limited Right to Terminate. Neither Party shall have the right to
terminate this Agreement or any rights or obligations of either Party pursuant
to this Agreement, except:
(a) incumbent shall have the right to terminate this Agreement by
serving written notice to Pathnet in the event (i) Pathnet is liquidated
or dissolved under Chapter 7 of the Federal bankruptcy laws and (ii)
Incumbent receives written notice from one of Pathnet's equipment vendors
or other lenders stating that such vendor or lender will waive its right
to operate the System for the purpose of generating Revenue from the sale
of Excess Capacity.
10
<PAGE>
(b) Pathnet shall have the right to terminate this Agreement
pursuant to Section 13.1.5 of this Agreement.
SECTION 4. COSTS
4.1 Incumbent Costs.
4.1.1 Incumbent Operating and Administration Costs. Incumbent shall
pay the operating and administration costs set forth in Section 1 of
Schedule C as such costs are actually incurred and become due and payable
in the course of the Incumbent's performance of its obligations under this
Agreement.
4.2 Pathnet Costs.
4.2.1 Pathnet Items. Pathnet shall pay for services, functions,
materials and other items listed in Section 2 of Schedule C (the "Pathnet
Items") to build and implement the System.
4.2.2 Estimated Cost of Pathnet Items. On the Effective Date, the
total estimated cost of the Pathnet Items is [***] (the "Pathnet
Estimated Costs").
4.2.3 No Cap on Pathnet Items. Pathnet shall pay for all amounts
incurred in completing the Pathnet Items whether or not the cost of
completing such items is less than, equal to or exceeds the Pathnet
Estimated Costs.
4.2.4 Payment of Pathnet Items. To ensure payment of the Pathnet
Estimated Costs, simultaneously with the execution and delivery of this
Agreement Pathnet shall:
(a) deliver to Incumbent vendor credit assurances (the "Vendor
Credit Assurances"), which Vendor Credit Assurances shall establish
and confirm, among other things, that Pathnet has an adequate credit
facility to acquire the Equipment and Services provided by such
vendor. (As determined by Pathnet in its sole discretion, such
Vendor Credit Assurances may be in the form of a copy of the
applicable vendor's term sheet or excerpts from the vendor's credit
agreement with Pathnet); and
(b) deliver to Incumbent an escrow agreement substantially in
the form attached hereto as Schedule D (the "Escrow Agreement")
pursuant to which, among other things, (i) Pathnet shall place in
escrow funds for each Segment in an amount equal to fifty percent
(50%) of (the Pathnet Estimated Costs less the cost of any equipment
provided by the vendors referred to in the Vendor Credit
Assurances), (ii) the escrow agent named in such Escrow Agreement
shall disburse to Pathnet the funds necessary to pay for the cost of
the Pathnet Items as such Pathnet Items are completed and as Pathnet
receives invoices relating to such Pathnet Items, (iii) in the event
that Pathnet fails to timely meet its payment responsibilities with
respect to the Pathnet Items, the escrow agent named in such Escrow
Agreement shall disburse to
11
<PAGE>
Incumbent the funds necessary to cure such failure to pay by Pathnet
and (iv) such Escrow Agreement shall terminate upon Commissioning of
the System and upon such termination any funds remaining in escrow,
including any interest accrued on such funds shall be disbursed to
Pathnet.
4.2.5 Pathnet Operating and Administration Costs. Pathnet shall pay
for the operating and administration costs set forth in Section 3 of
Schedule C as such costs are actually incurred and become due and payable
in the course of Pathnet's performance of its obligations under this
Agreement.
4.3 Change Orders.
a) This Agreement anticipates (i) future issuance of change orders
for equipment and services beyond the scope of this Section 4, and (ii)
Pathnet's provision of related equipment and services in accordance with
such orders. To the extent mutually agreed upon by the Parties, all such
orders shall be deemed to be supplements to and governed by the terms of
this Agreement
b) If and to the extent Pathnet and/or Incumbent do not (i) obtain
any permit or license pursuant to Section 10.2, Section 10.3 and Section
13.1.5, (ii) obtain use and enjoyment of the Licensed Premises pursuant to
Section 5.4.1, or (iii) clear any Interference pursuant to Section 5.4.2
at any site, each as required to construct and operate the System, the
Parties shall use commercially reasonable efforts to find an alternate and
equivalent Facility available for the installation and operation of the
System. If and to the extent the Parties cannot find an alternate and
equivalent Facility available for the installation and operation of the
System, the Parties shall mutually amend the Facilities and System listed
on Schedule B and Exhibit A-l to Schedule A and the appropriate schedules
of the Maintenance Services Agreement; provided such amendment shall
include a modified System route that does not substantially differ from
the proposed System. Notwithstanding the foregoing, neither Party shall be
obligated to construct or operate any Facility that cannot be developed as
a result of (i), (ii), or (iii) of this Subsection (b) or cannot be
frequency coordinated, and the System and each Segment thereof as defined
in Schedule B shall be mutually modified by the Parties in order to
resolve any site or frequency availability limitations, including the
deletion of any such Facilities or any portion of a Segment. The Parties
hereby acknowledge that as to Segment B certain Facilities require
finalization of permits and frequency coordination, and the Parties shall
use commercially reasonable efforts to obtain such permits and frequency
availability. In no event shall Incumbent be required by the terms of this
Agreement to purchase or lease and develop additional land or sites
without its consent.
12
<PAGE>
SECTION 5. LEASEHOLD INTEREST
5.1 Lease. Incumbent shall lease to Pathnet and Pathnet shall lease from
Incumbent an interest in each of Incumbent's Sites and in the Facilities at such
Sites set forth on Schedule B as is necessary for the performance of Pathnet's
rights and obligations under this Agreement (the "Leased Premises"); provided
(i) such performance shall not unreasonably inhibit Incumbent from performing
its current and future operations at the Leased Premises and (ii) Incumbent's
current and future operations shall comply with the Interference provisions set
forth in Section 5.4.2 of this Agreement. Pathnet acknowledges it shall not have
the right through any expansion of the System to use other property or Sites of
Incumbent, including undeveloped property or Sites, without the written
agreement of Incumbent.
5.2 Rent for Leased Premises. Pathnet shall pay to Incumbent, as rent
for the Leased Premises, commencing on Commissioning of the Initial System,
an allocation of up to [***] of digital capacity, as set forth by the
Parties in the Channel Plan; provided, that Incumbent and Incumbent's
Affiliates use such allocation [***] only for their own respective internal
communications needs.
5.3 Term of Lease. The term of Pathnet's interest in the Leased Premises
and the Parties obligations under this Section 5, including, but not limited to,
Pathnet's obligation to pay rent as set forth in Section 5.2, shall commence on
the Effective Date and shall end on the Expiration Date.
5.4 Use of Leased Premises.
5.4.1 Peaceful Enjoyment, Use and Access. Incumbent shall grant to
Pathnet the right to the peaceful use, enjoyment and possession of the
Leased Premises during the term of this Agreement as required for the
performance of Pathnet's rights and obligations under this Agreement,
provided (i) such performance shall not unreasonably inhibit Incumbent
from performing its current and future operations at the Leased Premises
and (ii) Incumbent's current and future operations shall comply with the
Interference provisions set forth in Section 5.4.2 of this Agreement. Such
rights shall include, but not be limited to, (i) the right to use
Incumbent's Facilities and (ii) upon the reasonable request by Pathnet,
the right to full and free access to Incumbent's Sites, Facilities and
related equipment; provided, however, any such access granted by Incumbent
to Pathnet (a) shall be subject to the security, health and safety and
other regulatory, procedural and policy requirements of Incumbent, as set
forth in Section 5.6 and (b) shall not unreasonably interfere with the
access rights granted to third party telecommunication providers prior to
the Effective Date as set forth in Schedule I. Pathnet shall not make or
permit any use of the Leased Premises, or any part thereof, which violates
any applicable statute, ordinance, regulation, or other requirement of any
Governmental Authority or which constitutes a nuisance, public or private,
or which may render void or voidable, as a result of Pathnet's negligent
use of such Leased Premises, any of Incumbent's insurance then in place.
5.4.2 Interference. During the Term of this Agreement, Incumbent
shall not license or otherwise permit any Person to use its Facilities if
the use of such Facilities by such Person would cause any Interference on
the System. Notwithstanding the foregoing, in the event any Person causes
any Interference on the System, Incumbent shall use all best efforts to
compel such Person to immediately take any and all steps necessary to
correct and eliminate such Interference, including, without limitation,
enforcing provisions in any license
13
<PAGE>
or other agreement between Incumbent and such Person and compelling such
Person to cease operation of such Person's system, to remove such Person's
equipment or materials or to modify such Person's equipment or materials.
Incumbent acknowledges that any Interference shall cause irreparable harm
to Pathnet and the prompt cessation of Interference is material to
Pathnet's interest in the Leased Premises and Pathnet's performance under
this Agreement and, as such, Pathnet shall be entitled to injunctive
relief in the enforcement of this Section 5.4.2.
5.5 Visiting and Exiting Facilities. Upon exiting any Facility at the
Leased Premises, Pathnet, on behalf of itself and its employees, agents and
Subcontractors, shall ensure that such Facility is returned to a condition,
which existed immediately prior to such visit.
5.6 Security, Drug Testing, Substance Abuse and Health and Safety.
5.6.1 Security. At the request of Incumbent, Pathnet shall require
its employees, agents and Subcontractors upon any Site visit to comply
with Incumbent's reasonable security procedures in effect as of the
Effective Date, which procedures are attached hereto as Schedule E as may
be updated from time to time. If and to the extent Incumbent requires
Pathnet employees, agents or Subcontractors to be escorted to Incumbent
facilities, such requirements shall be explicitly set forth in Schedule E.
Notwithstanding the foregoing, Incumbent shall allow Pathnet employees,
agents or Subcontractors to bring any reasonable testing equipment,
photographic equipment or both video and audio recording equipment
necessary for the performance of Pathnet's obligations under this
Agreement, except as provided by Incumbent in Schedule E.
5.6.2 Drug Testing. At the request of Incumbent, Pathnet shall
require its employees, agents and Subcontractors to comply with
Incumbent's reasonable drug testing policies and procedures (i) in effect
as of the Effective Date, which policies and procedures, if any, are
attached hereto as Schedule F and (ii) as may be proposed by Incumbent
from time to time. Notwithstanding the foregoing, Pathnet shall take
reasonable measures to ensure that its employees, agents and
Subcontractors comply with commercially reasonable policies and
procedures.
5.6.3 Substance Abuse Policy. At the request of Incumbent, Pathnet
shall require its employees, agents or Subcontractors to comply with
Incumbent's reasonable substance abuse policies and procedures (i) in
effect as of the Effective Date, which additional policies and procedures,
if any, are attached hereto as Schedule G and (ii) as may be proposed by
Incumbent from time to time. Notwithstanding the foregoing, Pathnet shall
take reasonable measures to ensure that its employees, agents and
Subcontractors comply with commercially reasonable policies and
procedures.
5.6.4 Health and Safety. At the request of Incumbent, Pathnet shall
require its employees, agents and Subcontractors to comply with all of the
applicable regulations of the United States and Indiana Occupational
Safety and Health Acts and Incumbent's additional reasonable rules and
regulations governing the health and safety of its employees in effect on
the Effective Date, which additional rules and regulations, if any, are
attached hereto as Schedule H.
14
<PAGE>
5.6.5 Clearances and Other Requirements. At the request of
Incumbent, Pathnet shall require its employees, agents or Subcontractors
to (i) apply to Incumbent for any necessary reasonable clearances and (ii)
comply with all other reasonable and applicable requirements, rules,
regulations or ordinances regarding any Person's ability to have access to
Incumbent's sites and Facilities, including, but not limited to, the
Leased Premises, which requirements are set forth as Schedule I.
5.7 Subletting. Pathnet shall not sublet its interest in the Leased
Premises, in whole or in part, without the prior written consent of Incumbent;
provided, however, Pathnet shall have the right to transfer and assign its
rights or obligations under this Agreement to any successor or assign in
accordance with Section 18.7.
5.8 Surrender. Upon the expiration or termination of the Agreement in
accordance with Section 3, Pathnet shall peacefully and quietly surrender
occupation of the Leased Premises to Incumbent, or Incumbent's successors and
assigns, without delivery by Incumbent to Pathnet of any notice to quit or
demand for possession in good order, condition and repair, except for reasonable
wear and tear.
5.9 Colocation. Incumbent shall allow Pathnet, at no additional charge, to
colocate at Incumbent's sites all equipment necessary to support the
Interconnections set forth on Exhibit A-7 to Schedule A and any additional
interconnections equipment that may be added by Pathnet from time to time and at
any time during the term of this Agreement, subject to the limitations set forth
in Section 3 of Schedule A.
5.10 Subordination. Pathnet shall subordinate its interest in the Leased
Premises to (i) all deeds of trust, deeds to secure debts, mortgages and other
security instruments now or hereafter Encumbering all or any portion of the real
property described on Schedule B (each, a "Leased Premises Encumbrance") and
(ii) any increases, renewals, modifications, consolidations, replacements and
extensions of any such Leased Premises Encumbrance. In connection with such
subordination of Pathnet's interest in the Leased Premises to all Leased
Premises Encumbrances, Pathnet shall, as requested by Incumbent, within sixty
(60) days after the Effective Date, execute and deliver a commercially
reasonable subordination, non-disturbance and attornment agreement with all
Persons secured by such Leased Premises Encumbrances. Pathnet shall, as
requested by Incumbent, execute and deliver similar subordination,
non-disturbance and attornment agreements with each future Person secured by a
Leased Premises Encumbrance.
5.11 Removal of Equipment. Pathnet shall, at Incumbent's request, remove
any or all Equipment from Incumbent's Facilities within sixty (60) days after
the Expiration Date. In the event Pathnet fails to perform such requested
removal within such sixty (60) day period, as determined by Incumbent in its
sole discretion, Incumbent may restore each Site to its condition as of
Commissioning, (reasonable wear and tear and damage from the elements excepted),
and Pathnet shall promptly pay Incumbent all costs reasonably incurred by
Incumbent for such removal and restoration.
5.12 Removal of Hazardous Materials. Within ninety (90) days after the
Expiration Date, Pathnet shall remove from Incumbent's Sites any and all
Hazardous Materials, which were brought to Incumbent's Sites by Pathnet during
the Term of this Agreement. Pathnet shall bear all liability associated with
such Hazardous Materials physically brought to the Sites by Pathnet or its
Subcontractors during the Term of this Agreement, which liability shall survive
the termination or
15
<PAGE>
expiration of this Agreement. Pathnet shall immediately notify Incumbent of any
release, discharge or use of any Hazardous Materials on the Leased Premises,
which release, discharge or use is caused by Pathnet or any of its
Subcontractors or which is known by Pathnet.
5.13 Sale of Initial System. Any time after the Expiration Date or the
expiration of the initial twenty-five year Term, Pathnet shall, upon written
request from Incumbent, sell to Incumbent all of the Initial System Equipment
for a purchase price of one dollar ($1.00). Upon exercise of such purchase
option, all of the Initial System Equipment shall become the property of
Incumbent, and Pathnet agrees to execute any documents reasonably requested by
Incumbent to effectuate or evidence such transfer of ownership and to transfer
or cancel the necessary Microwave Station Licenses in accordance with Section
8.5.4.
5.14 Condemnation. If, during the Term of this Agreement, a portion of the
Leased Premises shall be taken as a result of the power of eminent domain, this
Agreement shall terminate with respect to such portion of the Leased Premises.
In the event a portion of the Leased Premises is taken as a result of eminent
domain, Incumbent shall use its best efforts to find alternate Sites to replace
such condemned Sites. Notwithstanding any judicial allocation of any award
resulting from any such condemnation, any award from such condemnation shall be
split by Pathnet and Incumbent in accordance with the value of their respective
estates in the Leased Premises, with Pathnet's estate valued at the fair market
value price of any nonremoveable Equipment that is a fixture of the Leased
premises.
SECTION 6. PROGRAM MANAGEMENT AND PROJECT MANAGEMENT
6.1 Program Manager. In connection with the Services and other services
performed by Pathnet under this Agreement, Pathnet shall provide a Program
Manager whose duties shall include (i) supervising the project through design,
installation and operation, (ii) supervising the Project Manager, (iii)
overseeing the Field Manager and the other Pathnet personnel, (iv) coordinating
the business operations of the System including the sale of Excess Capacity as
set forth in Section 9 and (v) ensuring the performance of Pathnet's rights and
obligations under this Agreement.
6.2 Project Management for Modifications and Installation. In connection
with the modifications of the Facilities set forth in Section 2 and Section 4 of
Schedule A, Pathnet shall provide a Project Manager, a Field Manager, an
Applications Engineer and a Project Engineer, each of whom shall have the duties
as set forth in Section 6.3 with respect to such modifications and installation
at the Facilities.
6.3 Pathnet Project Management Personnel. The Project Managers, Field
Managers, Applications Engineers and Project Engineers shall each have the
duties as set forth below:
(a) Project Manager. Pathnet shall provide a Project Manager whose
duties shall include ensuring the overall functional integrity of the
delivered System, the preparation, amendment and adherence to a
construction schedule, and compliance with Pathnet's other obligations
under Schedule A.
16
<PAGE>
(b) Field Manager. Pathnet shall provide a Field Manager whose
duties shall include the oversight and direction of all on-site
activities, the coordination of all Subcontractors and all required
communication with the Project Manager.
(c) Applications Engineer. Pathnet shall provide an Applications
Engineer, whose duties shall include the review and translation of the
System configuration into specific hardware requirements, precise
interface levels, intra and inter-rack cabling and all other necessary
peripheral equipment, rack profiles and required Interconnection data.
(d) Project Engineer. Pathnet shall provide a Project Engineer whose
duties shall include the performance of all planning and support
activities and a detailed site survey to gather data for development of
the installation plan and testing plan.
SECTION 7. SERVICES AND SYSTEMS SPECIFICATIONS
7.1 Services.
7.1.1 System Design, Modification. Installation, Operation and
Performance. Pathnet and Incumbent shall perform their respective
functions with respect to the design, modification, installation,
operation and performance of the System as set forth on Schedule A
(including Exhibit A-10) and in this Section 7 (the "Services").
7.1.2 Upgrade of System. In accordance with its performance of the
Services, Pathnet shall, in its sole discretion and, at its own expense,
upgrade the System and Equipment, and the System and Equipment operation
policies and procedures, including, but not limited to, (i) replacing
Equipment, (ii) adding newly available improved Equipment and (iii)
modifying policies, procedures and specifications relating to the System,
to conform such policies, procedures and specifications with new
Technology or industry standards.
7.1.3 Incumbent Training. Pathnet shall provide to Incumbent the
training as set forth on Schedule J.
7.1.4 Performance of the Services. Pathnet shall have the right to
engage Subcontractors to perform any of the Services in accordance with
Section 18.13.
7.2 Specifications.
7.2.1 General. Pathnet and Incumbent shall perform the Services in
accordance with any and all technical and operational specifications set
forth in Schedule A (the "Specifications").
17
<PAGE>
7.2.2 Channel Plan.
(a) Original Channel Plan. On the Effective Date, Incumbent shall
deliver to Pathnet a proposed T-1 channelization plan setting forth its
proposed capacity needs at each Site listed on Schedule B. Such capacity
shall in no event exceed the capacity granted to Incumbent by Pathnet as
rent as set forth in Section 5.2 and shall be subject to Drop and Insert
capacity at each Switched Mod Section. Pathnet shall incorporate
Incumbent's proposed channelization plan into the Channel Plan subject to
the limitations set forth above.
(b) Amended Channel Plan. Incumbent shall have the right to modify,
its allocated capacity (as described in the Channel Plan) along the
network any time after Commissioning, provided that sufficient Drop and
Insert capacity exists between each Switched Mod Section using available
Wayside Channels to effect such modification, by providing written notice
to Pathnet to such effect. Within ninety (90) days after receipt of any
such written notice from Incumbent, Pathnet shall make such modification
to the configuration of the Channel Plan at no charge to Incumbent.
Incumbent shall not reconfigure the Channel Plan in any manner other than
as set forth in this Section 7.2.2. Any amendments that Pathnet may make
to the Incumbent Channel Plan shall not Interfere with Incumbent's ability
to use the System at any of the Sites and shall be subject to the approval
of Incumbent, which shall not be unreasonably withheld. Pathnet's use of
the Wayside Channels that are part of the Initial System shall be subject
to the approval of Incumbent, which shall not be unreasonably withheld.
7.2.3 Specifications, Standards and Inspections. In connection with the
Services set forth in Section 2 and Section 4 of Schedule A, Pathnet shall
comply with the following requirements:
(a) Reasonable Efforts. Pathnet shall use commercially reasonable
efforts to ensure that the modification of the Facilities and System set
forth in Section 2 of Schedule A and the installation of the System set
forth in Section 4 of Schedule A occur as expeditiously as possible.
(b) Industry Standards. All Services and materials supplied pursuant
to Schedule A must meet or exceed all applicable Specifications. Where
Specifications are not stated, such work performed and materials supplied
will meet all applicable provisions of the following standards: (i) EIA
RS-195 (latest edition), (ii) EIA/TIA-222 (latest edition), (iii) American
Society of Testing Materials A 325 and A 572, (iv) the applicable sections
of the National Electric Code, (v) the American National Standards
Institute, (vi) ACI 318-83, (vii) ACI-305, (viii) ACI-306, (ix) OSHA 29
CFR 1910 and (x) all other applicable Federal, state and local regulations
of all Governmental Authorities with jurisdiction; provided, however, in
the case of a conflicting requirement of standards, the more stringent
standard shall apply.
(c) Site Inspections. During the performance of the Services,
Incumbent shall allow Pathnet to reasonably perform Site inspections at
any hour, on any day subject to the access limitations set forth in
Section 5.6 and provided such inspections
18
<PAGE>
do not unreasonably interfere with the access rights granted by Incumbent
to others prior to the Effective Date.
SECTION 8. OWNERSHIP, DEPRECIATION AND ENCUMBRANCE OF SYSTEM
8.1 Ownership of Equipment and Assets.
8.1.1 Equipment and Assets Owned by Incumbent. Incumbent shall own
the equipment and assets relating to the System as set forth in Schedule
K. Incumbent shall be responsible for insuring such assets against force
majeure, damage, casualty and theft. Nothing in this Agreement shall be
deemed to transfer ownership of Incumbent's assets existing as of the
Effective Date to Pathnet and Incumbent shall continue to own all of its
equipment and assets at the Sites and Facilities as of the Effective Date
of this Agreement.
8.1.2 Equipment and Assets Owned by Pathnet. Subject of Incumbent's
purchase option in Section 5.13, Pathnet shall own the equipment and
assets relating to the System as set forth in Schedule K. Pathnet shall be
responsible for insuring such assets against force majeure, damage,
casualty and theft.
8.1.3 Pathnet Contributed Towers and Shelters. The Parties hereby
acknowledge that Pathnet shall contribute certain assets or modifications
to assets to Incumbent pursuant to Schedule K of this Agreement. Incumbent
shall reserve space availability in or on such assets for Pathnet
colocated equipment, including without limitation, equipment used for
Interconnections. If and to the extent Incumbent desires to colocate
Incumbent equipment or third party equipment in or on such assets,
Incumbent shall receive Pathnet prior approval; provided that during the
Term the Parties shall divide evenly any revenues or rents received from
the use of such assets by any third parties.
8.2 Depreciation of Equipment.
8.2.1 Depreciation by Incumbent. Incumbent shall have the right to
fully depreciate the equipment and assets currently owned or to be owned
by Incumbent as listed in Schedule K.
8.2.2 Depreciation by Pathnet. Pathnet shall have the right to fully
depreciate the equipment and assets currently owned or to be owned by
Pathnet as listed in Schedule K.
8.3 Encumbrance.
8.3.1 Initial System. Pathnet shall not Encumber the Incumbent
Collateral.
8.3.2 Other Equipment, Materials, Agreements and Assets. Pathnet
shall have the right to Encumber (i) the Equipment used in any Capacity
Expansion, (ii) the revenue from the sale of Excess Capacity in accordance
with Section 8, (iii) any Customer Agreement relating to the System, (iv)
this Agreement and any related documents, instruments and agreements
executed and delivered in connection with this Agreement and any rights
and obligations hereunder or thereunder, (v) its leasehold interest in the
Leased Premises and (vi) the Equipment relating to the Initial System
other than the Incumbent Collateral.
19
<PAGE>
8.3.3 Vendor Remedies. Incumbent hereby acknowledges that pursuant
to the Encumbrances granted by Pathnet to certain equipment vendors,
service providers or other lenders in accordance with Section 8.3.2, such
vendors, service providers or other lenders shall have the right to assume
and perform Pathnet's rights and obligations under this Agreement and
other documents, instruments and agreements executed in connection
herewith.
8.4 Taxes. The Parties' respective responsibilities for taxes arising
under or in connection with this Agreement shall be as follows: (i) each Party
shall be responsible for any personal or real property taxes on property it owns
or leases, for franchise and privilege taxes on its business and for taxes based
on its net income or gross revenue and (ii) Pathnet shall be responsible for any
sales, use, excise, value-added services, consumption and other taxes and duties
payable by Incumbent on any goods and services used or consumed in providing the
services to be performed by Pathnet under this Agreement, where the tax is
imposed on Incumbent's acquisition or use of such goods or services and the
amount of the tax is measured by Incumbent's costs in acquiring such goods or
services; provided, however, that Pathnet shall not be responsible for any
Federal, state or local income taxes of Incumbent or any franchise taxes of
Incumbent.
8.5 Security Interest in Initial System; Cancellation of Initial System
FCC Licenses.
8.5.1 Collateral. Pathnet shall grant Incumbent a security interest
(the Incumbent Security Interest") in, and lien on, and shall assign and
pledge to Incumbent the Initial System Equipment, both now and hereafter
acquired, together with all replacements thereof and substitutions
therefor (collectively, the "Incumbent Collateral").
8.5.2 Default. The occurrence of any one or more of the following
events shall constitute a default with respect to the Incumbent Security
Interest: (i) the liquidation or dissolution of Pathnet under Chapter 7 of
the Federal bankruptcy laws, (ii) the Expiration Date or (iii) Pathnet
defaulting under its financing arrangement with one of its equipment
vendors or other lenders and receipt by Incumbent of written notice from
such vendor or lender stating its intention to waive its right to operate
the System for the purpose of generating Revenue from the sale of Excess
Capacity.
8.5.3 Rights and Remedies Upon Default. In the event of a default as
set forth in Section 8.5.2 (and in addition to any and all of Incumbent's
rights, powers and remedies under this Agreement), Incumbent shall have
the right to (i) take possession or control of, store, lease, operate,
manage, sell or otherwise dispose of all or any part of the Incumbent
Collateral, (ii) notify all parties under any account or contract forming
all or any part of the Incumbent Collateral to make any payments due to
Pathnet directly to Incumbent, (iii) in the name of Incumbent or in the
name of Pathnet, demand, collect, receive, sure for and give receipts and
releases for, any and all amounts due under such accounts and contract
rights, (iv) endorse as the agent of Pathnet any check, note chattel
paper, documents, or instruments forming all or any part of the Incumbent
Collateral, (v) make formal application for the transfer to Incumbent (or
to any assignee of Incumbent or to any purchaser of the Incumbent
Collateral) of all of Pathnet's Permits, licenses, approvals, and the like
relating to the Incumbent Collateral (other than the Microwave Radio
Station Licenses related to the Initial System) and (vi) take any action
which Incumbent deems necessary or desirable to protect and realize upon
the Incumbent Security Interest.
20
<PAGE>
8.5.4 Cancellation of FCC Licenses. Upon expiration or termination
of this Agreement pursuant to Section 3 of this Agreement or the
occurrence of an event of default set forth in Section 8.5.2 and at
Incumbent's request, Pathnet shall, if and to the extent permitted by law,
file with the FCC any and all documents necessary to transfer Pathnet's
Microwave Radio Station Licenses and other FCC licenses required to
operate the Initial System, to Incumbent, or if no transfer is possible,
file with the FCC any and all documents necessary to cancel Pathnet's
Microwave Radio Station Licenses and other FCC licenses required to
operate the Initial System after coordinating with Incumbent in order to
permit Incumbent to promptly file for such licenses.
8.6 Escrow of Manufacturer's Warranties.
8.6.1 Escrow of Assignment Documents by Pathnet. On the Effective
Date, Pathnet shall complete, execute and place in escrow certain
documents (the "Assignment Documents") that shall provide Incumbent with
the required tools to unilaterally effect the assignment to Incumbent of
all of the then effective manufacturer's warranties relating to the
Equipment of the Initial System.
8.6.2 Removal of Assignment Documents by Incumbent. Pursuant to the
escrow arrangement described in Section 8.6.1 above, Incumbent shall have
the right to remove the Assignment Documents from escrow upon the
occurrence of an event of default set forth in Section 8.5.2.
SECTION 9. EXCESS CAPACITY MARKETING AND SALES
9.1 Exclusive Representative.
9.1.1 Pathnet Excess Capacity. Pathnet shall have the exclusive
right to market and sell any and all Excess Capacity.
9.1.2 Marketing and Sale by Incumbent. Incumbent or any Affiliates
of Incumbent shall not market or sell any Incumbent excess capacity or any
capacity purchased by Incumbent pursuant to Section 9.3 to any third party
without the prior written consent of Pathnet; provided, however, Incumbent
may market and sell all or any portion of the Incumbent excess capacity or
any capacity purchased by Incumbent pursuant to Section 9.3, to Affiliates
of Incumbent for and only for such Affiliates' internal communications
needs and not for resale to third parties.
9.2 Referrals of Customers by Incumbent. Incumbent shall refer any
potential third party customer of Excess Capacity to Pathnet.
9.3 Purchase of Available Excess Capacity by Incumbent. Incumbent shall
have the right to purchase Available Excess Capacity on any Path or Segment of
the System (each such Path or Segment being referred to herein as an "Incumbent
Desired Path"), at a price equal to either (i) the lowest price paid to Pathnet
for like capacity and for a similar term by any purchaser during the one hundred
eighty (180) days immediately preceding the purchase by Incumbent of capacity on
such Incumbent Desired Path or (ii) if no Pathnet Excess Capacity has been
purchased on such Incumbent
21
<PAGE>
Desired Path during such one hundred eighty (180) day period, the last price
paid for such Incumbent Desired Path; provided, however, Incumbent shall in no
event purchase more than twenty percent (20%) of the Available Excess Capacity
on any Segment or Path within the System at any given time.
9.4 Assumed Name: Tradenames and Trademarks. Pathnet shall have the right
to market Excess Capacity under its name or any other assumed name, tradename or
trademark which Pathnet is authorized to use for such purpose; provided,
however, Pathnet shall not use any trademark or tradename of Incumbent or any
Affiliate of Incumbent for any purpose, including the marketing of any excess
capacity without the prior written consent of Incumbent.
9.5 Customer Agreements.
9.5.1 Authorization. Pathnet shall negotiate, execute and deliver,
on behalf of itself and Incumbent, all agreements and arrangements
("Customer Agreements") for customers of Excess Capacity, which Customer
Agreements shall contain, terms and conditions determined by Pathnet in
its sole discretion.
9.5.2 Approval and Consent by Incumbent. If the terms of any
Customer Agreement require the written approval or consent of Incumbent as
a condition to the execution, delivery or performance, Incumbent shall
promptly provide such written approval or consent, provided such approval
or consent shall not require Incumbent to incur any extra liabilities or
duties or waive any of its rights set forth in this Agreement through
consent to the terms of a Customer Agreement.
9.5.3 Modifications to System. In the event that any Customer
Agreement requires that the System be modified in any way, Pathnet shall
ensure that any such modifications (i) shall not compromise the integrity
and performance of the System in accordance with the Specifications, (ii)
shall be made at no additional cost to Incumbent, and (iii) shall not
unreasonably interfere with the access rights to the Sites and Facilities
granted to others as set forth in Schedule I.
SECTION 10. FCC LICENSES AND OTHER REGULATORY APPROVALS AND LICENSES
10.1 FCC Rules and Regulations.
10.1.1 Microwave Radio Station Licenses.
(a) Preparation and Filing of Forms 415. Pathnet shall prepare
and timely file all required Form 415, Applications for
Authorization in the Microwave Services (each a "Form 415"), or any
successor forms, documents or instruments to such Form 415 as the
FCC may prescribe, including but not limited to, the preparation or
ordering of all frequency coordinations required pursuant to
Schedule B and Schedule C of Form 415, in order to own, operate and
sell the Excess Capacity of the System in accordance with the terms
and conditions of this Agreement.
22
<PAGE>
(b) Identity of Licensee. All Microwave Radio Station Licenses
issued by the FCC relating to the System ("Microwave Radio Station
Licenses") shall be licensed in the name of Pathnet or a
wholly-owned subsidiary of Pathnet. Incumbent shall be permitted to
continue to own and be licensed as a private microwave operator at
the stations licensed to Pathnet relating to the System, provided
that (i) such private licenses are for different frequency pairs
than those assigned to the System (including, but not limited to,
any Capacity Expansion of the System) and (ii) such private licenses
are permitted under the FCC Code.
(c) Maintenance of License. Pathnet shall maintain in good
standing each Microwave Radio Station License relating to the
System, including, but not limited to, preparing and filing any
required amendments to the Forms 415 relating to the System and
submitting and filing any supplementary information as required by
the FCC.
10.1.2 Common Carrier Reporting Obligations. Pathnet shall prepare
and file all forms, reports, instruments, documents and agreements
required by the FCC and FCC Code relating to the operation of the System,
use and sale of Excess Capacity, and Pathnet's status as a "common
carrier" under the FCC Code and bear all expenses related thereto. In no
event shall Incumbent be responsible for any expense, cost, tax, charge or
fee related to Pathnet's status as a "common carrier" and Pathnet shall
reimburse Incumbent for any such expense, cost, tax, charge or fee. In no
event shall Pathnet cause Incumbent to become regulated by the FCC or the
Indiana Utility Regulatory Commission ("IURC") or be designated a "common
carrier" without Incumbent's consent; provided, however, in no case shall
Pathnet be responsible for any future changes in Requirements of Law that
may cause Incumbent to be regulated by the FCC or IURC or to be designated
as a "common carrier."
10.1.3 Tariff Filings. Pathnet shall prepare and timely file all
tariff applications pursuant to 47 CFR 61, as amended, or any successor
statute, rule or regulation and shall request and file all necessary
waivers of such tariff requirements, as determined by Pathnet in its sole
discretion.
10.1.4 Frequency Coordination Notices. During the term of this
Agreement, Pathnet shall prepare and send all required frequency
coordination notices required under 47 CFR 101.103, as amended, or any
successor statute, rule or regulation and shall respond as appropriate to
all PCNs received by Pathnet or Incumbent relating to the System.
10.1.5 Delivery of Copies. Upon Incumbent's request, Pathnet shall
provide to Incumbent a copy of all filings and submissions with the FCC,
relating to the System within thirty (30) days of such request by
Incumbent.
10.1.6 Assistance in Preparation of License Applications. Upon
request by Pathnet and in a timely manner, Incumbent shall provide to
Pathnet all information necessary for the completion of all required
filings and submissions with the FCC including, but not limited to
Incumbent's authorized signature on any filings or other submissions to
the FCC or any documents, instruments or agreements completed in
connection with such filings and submissions.
23
<PAGE>
10.1.7 Future Changes in FCC Requirements. If FCC requirements
relating to the Form 415, common carriers, frequency coordination or any
other matters relating to the System change or are modified, Pathnet shall
be responsible for compliance with such new requirements including, but
not limited to, the payment of any costs or fees associated therewith and
Incumbent shall reasonably cooperate with Pathnet with respect to such
compliance.
10.1.8 Spectral Loading Requirements. Pathnet shall (i) ensure that
the System, as licensed, shall comply with all spectral loading
requirements set forth in 47 CFR 101.141, or any successor statute, rule
or regulation or (ii) obtain a waiver of any or all of such requirements;
provided, however, if the System does not meet such spectral loading
requirements and Pathnet is unable to obtain a waiver of such
requirements, Pathnet shall have the right to modify the System to a
hot-standby Protection Configuration until such time as the spectral
loading requirements can be met.
10.1.9 Default in FCC License. In the event that the FCC institutes
a penalty against or fine imposed on Pathnet, Incumbent, or the System,
due to non-compliance with any FCC requirements, Pathnet shall promptly
pay such penalty or fine (in the case such penalty or fine is instituted
as the result of an act or omission on the part of Pathnet) or Incumbent
shall promptly pay such penalty or fine (in the event such penalty or fine
is instituted as the result of an act or omission on the part of
Incumbent).
10.2 Zoning Requirements. Incumbent shall be responsible for compliance
with all zoning requirements applicable to the System and its Facilities,
including, but not limited to, the Leased Premises. Incumbent shall advise
Pathnet of zoning requirements, which, in the reasonable opinion of Incumbent,
differ from those generally applicable to microwave facilities. Pathnet shall
provide to Incumbent all required information and shall reasonably cooperate
with Incumbent in connection with Incumbent's compliance with all zoning
requirements pursuant to this Section 10.2.
10.3 Tower Registration. Incumbent shall ensure compliance with all FAA
and FCC tower registration requirements including, but not limited to, the
preparation of any filings with or the obtaining of any waivers or extensions
from the FAA or FCC. Incumbent shall promptly notify Pathnet of any deficiency
on non-compliance with any such tower registration requirements, filings,
waivers or extensions.
SECTION 11. INSURANCE
11.1 Delivery of Certificates of Insurance. Upon Incumbent's request and
prior to the commencement of any Services by Pathnet, Pathnet shall deliver to
Incumbent Certificates of Insurance relating to Pathnet's Commercial General
Liability Insurance Policy, Workers Compensation Insurance Policy, Automobile
Liability Insurance and Excess Liability Insurance Policy.
11.2 Pathnet Insurance Coverage. During the term of this Agreement,
Pathnet shall maintain the types of insurance at the coverage limits set forth
below:
24
<PAGE>
(a) Worker's Compensation Insurance. Workers Compensation Insurance
as required by laws and regulations applicable to and covering Persons
performing the Services, including, but not limited to, disability and
unemployment insurance;
(b) Commercial General Liability Insurance. Commercial General
Liability Insurance with a limit of not less than $1,000,000 per
occurrence and $1,000,000 in the aggregate;
(c) Automobile Liability Insurance. Automobile Liability Insurance,
which includes coverage for non-owned and hired vehicles with a limit of
not less than $1,000,000;
(d) Excess Liability Insurance. Excess Liability Insurance with a
limit of not less than $4,000,000; and
(e) Other Insurance. Such other insurance and in such levels of
coverage as provided in Section 8.1.2.
11.3 Incumbent Insurance Coverage. Incumbent shall maintain insurance
coverage on properties and operations of Incumbent which coverage shall include
general liability and other forms of insurance covering such risks as are
usually insured against by prudent companies engaged in the business and
activities in which the Incumbent is engaged, in amount which are adequate in
relation to the business and properties of Incumbent, and all premiums to date
have been paid in full. Pathnet hereby acknowledges that Incumbent maintains
self insured reserves as part of its general liability insurance.
11.4 Proof of Licensed Subcontractors. Upon reasonable request of
Incumbent, Pathnet shall provide to Incumbent proof of licensing and
certification of insurance for any Subcontractors engaged by Pathnet to provide
Services, during the term of such engagement.
SECTION 12. SOFTWARE AND PROPRIETARY RIGHTS
12.1 Pathnet Software. Pathnet or Pathnet's licensors retains all right,
title and interest in and to Pathnet Software. As of the Effective Date and
pursuant to the Pathnet Sublicense Agreement attached hereto as Schedule N,
Incumbent is granted a nonexclusive sublicense to use Pathnet Software for the
sole purpose of receiving the services pursuant to this Agreement. Pathnet
Software will be made available to Incumbent in such form and on such media as
exists on the Effective Date, together with existing documentation and any other
related materials. Incumbent shall not be permitted to use Pathnet Software for
the benefit of any entities other than Pathnet, Incumbent or their affiliates
exclusively for the purposes intended in this Agreement without the prior
written consent of Pathnet which may be withheld at Pathnet's sole discretion.
Except as otherwise requested or approved by Pathnet, Incumbent shall cease all
use of Pathnet Software upon the Expiration Date.
12.2 Proprietary Rights. Each Party acknowledges and agrees that the other
Party and/or its suppliers have and will retain all proprietary rights in such
other Party's Proprietary Information. A Party receiving Proprietary Information
(the "Receiving Party") (i) shall respect the claim of the other Party (the
"Disclosing Party") of a proprietary right in such Information, (ii) shall
protect the Disclosing Party's Proprietary Information at least to the extent
that the Receiving Party protects its
25
<PAGE>
own Proprietary Information (and in no event less than commercially reasonable
measures), (iii) shall not use the Disclosing Party's Proprietary Information
except for the purposes for which its is being made available as set forth in
this Agreement and (iv) shall not reproduce, print, disclose, or otherwise make
the Disclosing Party's Proprietary Information available to any third party, in
whole or in part, in whatever form.
SECTION 13. REPRESENTATIONS AND WARRANTIES
13.1 Representations and Warranties of Each Party. Each Party hereby
represents and warrants the other Party as follows:
13.1.1 Due Incorporation and Formation; Authorization of Agreements;
Binding Effect. Such Party is a corporation or partnership, as the case
may be, duly formed or organized, and validly existing under the laws of
its state of incorporation or organization, and has the corporate or
partnership authority to own its property and carry on its business as
owned and carried on as of the Effective Date. Such Party is duly licensed
or qualified to do business and is in good standing (if applicable) in
each jurisdiction in which the failure to be so licensed or qualified
would have a Material Adverse Effect on such Party. Such Party has the
corporate or partnership authority to execute and deliver this Agreement,
to perform its obligations hereunder, and to consummate the transactions
contemplated hereby. This Agreement has been duly authorized, executed and
delivered by such Party and this Agreement constitutes a legal, valid and
binding obligation of such Party enforceable in accordance with its terms,
subject as to enforceability to limits imposed by bankruptcy, insolvency
or similar laws affecting creditors rights generally and the availability
of equitable remedies.
13.1.2 No Conflict; No Default. Neither the execution or delivery of
this Agreement by such Party, nor (except as would not have a Material
Adverse Effect on such Party), the performance of this Agreement by such
Party or the consummation by such Party of the transactions contemplated
hereby in accordance with the terms and conditions hereof: (i) will
conflict with, violate, result in a breach of or constitute a default
under any of the terms, conditions or provisions of the certificate or
articles of incorporation or bylaws (or other governing documents) of such
Party or any material agreement or instrument to which such Party is a
party or by which such Party may be bound, (ii) will conflict with,
violate or result in a breach of, constitute a default under (whether with
notice or lapse of time or both), accelerate or permit the acceleration of
the performance required by, give to others any interests or rights or
require any consent, authorization or approval under any contract to which
such Party is a party or by which such Party is or may be bound or to
which any equity interest held by such Party or any of its material
properties or assets is subject or (iii) will result in the creation or
imposition of any Encumbrance upon any equity interest held by such Party
or any of the other material properties or assets of such Party, other
than Permitted Encumbrances.
13.1.3 No Consent. No consent, approval, order or authorization of,
or registration, declaration or filing with any Governmental Authority,
domestic or foreign, is required to be obtained by such Party in
connection with the execution, delivery and performance of this Agreement
or the consummation of the transactions contemplated hereby.
26
<PAGE>
13.1.4 Compliance with Laws and Regulations. That such Party is not
and that the performance of its obligations under this Agreement will not
result in a violation in any respect of (i) any applicable Federal, state,
local or foreign laws, ordinances, regulations, rulings and orders of
government agencies applicable to its business in any respect the
violation of which could have a Material Adverse Effect (including
Requirements of Law relating to pollution, protection of the environment,
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic, hazardous or regulated
substances or wastes into the environment or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage disposal,
transport or handling of pollutants or other such hazardous or regulated
substances or wastes) or (ii) any applicable order, Judgment, injunction,
award or decree in any respect which could have a Material Adverse Effect
on such Party.
13.1.5 Permits. Such Party has or will take all commercially
reasonable measures to obtain all authorizations, approvals, consents,
licenses, Permits and certificates (including, but not limited to all
required approvals from the FCC) necessary to conduct their respective
businesses and to own, lease and operate its properties as currently or
anticipated to be conducted, owned, leased or operated, as the case may
be, for which the failure to possess would result in a Material Adverse
Effect. No violations are outstanding or uncured with respect to any such
Permits and no proceeding is pending to revoke or limit any Permit.
Neither Party shall be liable for the decision of any Governmental
Authority to deny any Permit, including building permits or FCC licenses,
provided such Party shall use all commercially reasonable efforts to
provide an alternate Site in the event a Facility listed in Schedule B is
not available as a result of such Party's inability to obtain required
authorization, approvals, consents, Permits or certificates. Pathnet shall
have the right to terminate this Agreement in the event (i) Incumbent
cannot obtain the requisite authorization, approvals, consents, licenses,
Permits or certificates required to install and operate the Initial System
at a Facility listed on Schedule B and (ii) Incumbent does not timely
provide a reasonable alternate Site to such Facility.
13.1.6 Title to Assets, Properties and Rights and Related Matters.
Except as set forth on Schedule O, such Party has good and marketable
title to all the properties, interests in properties and assets, real,
personal or mixed, necessary for the conduct of such Party's business and
for the transactions contemplated by this Agreement (including, but not
limited to, any rights of way, leasehold interests, easements, proofs of
dedication and rights necessary for Pathnet to perform its obligations
hereunder without any Interference, provided that prevention of such
Interference is within the reasonable control of Incumbent) free and clear
of all Encumbrances of any kind or character, except (i) liens for current
taxes not yet due and payable, (ii) Encumbrances securing taxes,
assessments, governmental charges or levies or the Encumbrances of
materialmen, carriers, landlords and like persons, all of which are not
yet due and payable and (iii) minor Encumbrances of a character that do
not substantially impair the assets or properties of such Party or which
will not have a Material Adverse Effect on such Party.
13.1.7 Labor Matters. Such Party has complied in all material
respects with all applicable Federal, state and local laws and ordinances
relating to the employment of labor, including the provisions thereof
relating to wages, hours, employee benefit plans and the payment of social
security taxes, and is not liable for any arrears of wages or any tax
related thereto (except for currently accrued and unpaid wages and except
for currently accrued
27
<PAGE>
withholding, payroll, unemployment and social security taxes payment of
which is not overdue) or penalties for failure to comply with any of the
foregoing, and neither has received a notice to the contrary from any
Governmental Authority.
13.1.8 No Discrimination. Such Party currently subscribes and offers
and will continue to subscribe and offer to all customers, employees,
licensees, and invitees the opportunity to obtain all the goods, services,
accommodations, advantages, facilities and privileges of such Party
without discrimination because of race, creed, color, sex, age, national
origin or ancestry, in accordance with all applicable Federal, state, and
local laws relating to equal opportunity and discrimination.
13.1.9 Disclaimer. EXCEPT AS EXPRESSLY PROVIDED HEREIN, NEITHER
PATHNET NOR INCUMBENT MAKES ANY OTHER EXPRESS WARRANTY AND THERE ARE NO
IMPLIED WARRANTIES WITH RESPECT TO ANY TECHNOLOGY, GOODS, SERVICES, RIGHTS
OR OTHER SUBJECT MATTER OF THIS AGREEMENT. PATHNET AND INCUMBENT HEREBY
DISCLAIM THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE WITH RESPECT TO ANY AND ALL OF THE FOREGOING.
13.2 Representations and Warranties of Pathnet.
13.2.1 Services. Pathnet warrants (i) that the Services will be
performed in a workmanlike manner and (ii) that it has or will obtain
agreements or arrangements with its employees, agents and Subcontractors
sufficient to allow it to provide Incumbent with the Services;
13.2.2 Licenses. During the Term, Pathnet warrants that it shall
maintain in good standing, to the extent permitted by law and required to
operate the Initial System, all Microwave Radio Station Licenses in
accordance with Section 10.1.1(c).
13.2.3 Century Compliancy. Pathnet warrants that the Pathnet
Software provided by Pathnet shall be century compliant meaning that the
introduction of the Year 2000 as data to the Pathnet Software shall not
cause the Pathnet Software to fail or function incorrectly.
13.3 Representations and Warranties of Incumbent.
13.3.1 Independent Investigation. Incumbent represents and warrants
that it has independently investigated the potential for the success of
Pathnet's ability to create, aggregate and sell Excess Capacity and has
not relied upon any inducements or representations of Pathnet or its
agents, other than those contained in this Agreement.
28
<PAGE>
SECTION 14. DELIVERIES
14.1 Deliveries by Incumbent. Incumbent shall provide to Pathnet the items
as set forth in Schedule P.
14.2 Deliveries by Pathnet. Pathnet shall provide to Incumbent the items
as set forth in Schedule Q.
SECTION 15. INDEMNIFICATION
15.1 Indemnification by Incumbent. Incumbent agrees to indemnify, defend
and hold harmless Pathnet and its Affiliates and their respective officers,
directors, employees, agents, successors and assigns from and against any and
all Losses and threatened Losses arising from, in connection with, or based on
allegations of, any of the following:
(a) any claims resulting from the infringement by Incumbent, its
Affiliates or Subcontractors of any patent, trade secret, copyright or
other proprietary rights alleged to have occurred as a result of the use
of systems, software, or other resources provided by Pathnet to Incumbent
in violation of any applicable licenses or the terms of this Agreement.
(b) any claims arising out of the untruth, inaccuracy or breach of
any representation or warranty of Incumbent set forth in this Agreement.
(c) the liability of Pathnet for (i) any personal injury, disease or
death of any person, (ii) damage to or loss of any property, money damages
or specific performance owed to any third party (by contract or operation
of law) or (iii) any fines, penalties, taxes, claims, demands, charges,
actions, causes of action, assessments, environmental response costs,
environmental penalties, injunctive obligations to the extent caused by,
arising out of, or in any way incidental to, or in connection with,
actions or omissions or willful misconduct of Incumbent, its employees,
Subcontractors or agents.
15.2 Indemnification by Pathnet. Pathnet agrees to indemnify, defend and
hold harmless Incumbent and its Affiliates and their respective officers,
directors, employees, agents, successors and assigns from and against any and
all Losses and threatened Losses arising from, in connection with, or based on
allegations of, any of the following:
(a) except as set forth in Section 15.1(a), any claims of
infringement of any patent, trade secret, copyright or other proprietary
rights alleged to have occurred because of systems, software or other
resources provided by Pathnet to Incumbent.
(b) any claims arising out of the untruth, inaccuracy or breach of
any representation or warranty of Pathnet set forth in this Agreement.
(c) the liability of Incumbent for (i) any personal injury, disease
or death of any person, (ii) damage to or loss of any property, money
damages or specific performance owed to any third party (by contract or
operation of law) or (iii) any fines, penalties, taxes, assessments,
environmental response costs, environmental penalties or injunctive
obligations
29
<PAGE>
to the extent caused by, arising out of, or in connection with, actions or
omissions or willful misconduct of Pathnet, its employees, Subcontractors
or agents.
(d) the liability of Incumbent arising out of any or all obligations
to or contracts with customers to purchase Excess Capacity.
(e) any claims (including, but not limited to, claims for personal
injury, property damage and fines, environmental response costs, and
environmental penalties) relating to or arising out of any Hazardous
Material physically brought, kept, used, discharged or emitted on any of
Incumbent's Sites or Facilities by Pathnet, to the extent caused by,
arising out of, or in connection with, any actions or omissions of
Pathnet, its employees, Subcontractors or agents; in such event Pathnet
shall bear the expense of and cause to be performed any cleanup or other
remedial action to return the Leased Premises to their prior state and to
comply with any environmental laws and regulations.
15.3 Indemnification Procedures. With respect to any third party claims
the following procedures shall apply:
(a) Notice. Promptly after receipt by an entity entitled to
indemnification under Section 15.1 or Section 15.2 of notice of the
commencement or threatened commencement of any civil, criminal,
administrative or investigative action or proceeding involving a claim in
respect of which the indemnitee will seek indemnification pursuant to any
such Section, the indemnitee shall notify the indemnitor of such claim in
writing. No failure to so notify an indemnitor shall relieve it of its
obligations under this Agreement except to the extent that it can
demonstrate damages attributable to such failure. Within fifteen (15) days
following receipt of written notice from the indemnitee relating to any
claim, but no later than ten (10) days before the date on which any
response to a complaint or summons is due, the indemnitor shall notify the
indemnitee in writing if the indemnitor elects to assume control of the
defense and settlement of that claim (a "Notice of Election").
(b) Procedure Following Notice of Election. If the indemnitor
delivers a Notice of Election relating to any claim within the required
notice period, the indemnitor shall be entitled to have sole control over
the defense and settlement of such claim; provided that, (i) the
indemnitee shall be entitled to participate in the defense of such claim
and to employ counsel at its own expense to assist in the handling of such
claim, and (ii) the indemnitor shall obtain the prior written approval of
the indemnitee before entering into any settlement of such claim or
ceasing to defend against such claim. After the indemnitor has delivered a
Notice of Election relating to any claim in accordance with the subsection
(a) above, the indemnitor shall not be liable to the indemnitee for any
legal expenses incurred by the indemnitee in connection with the defense
of that claim. In addition, the indemnitor shall not be required to
indemnify the indemnitee for any amount paid or payable by the indemnitee
in the settlement of any claim for which the indemnitor has delivered a
timely Notice of Election, if such amount was agreed to without the
written consent of the indemnitor.
(c) Procedure Where No Notice of Election Is Delivered. If the
indemnitor does not deliver a Notice of Election relating to any claim
within the required notice period, the indemnitee shall have the right to
defend the claim in such manner as it may deem appropriate, at the cost
and expense of the indemnitor. The indemnitor shall promptly reimburse the
indemnitee for all such costs and expenses.
30
<PAGE>
15.4 Subrogation. In the event that an indemnitor shall be obligated to
indemnify an indemnitee pursuant to Section 15.1 or Section 15.2, the indemnitor
shall, upon payment of such indemnity in full, be subrogated to all rights of
the indemnitee with respect to the claims to which such indemnification relates.
SECTION 16. LIABILITY
16.1 Liability Generally. Subject to the specific provisions of this
Section 15, it is the intent of the Parties that each Party shall be liable to
the other Party for any actual damages incurred by the Non-Breaching Party as a
result of the Breaching Party's failure to perform its obligations in the manner
required by this Agreement and failure to cure such nonperformance as set forth
in Section 17.1.2.
16.2 Liability Restrictions.
(a) SUBJECT TO SUBSECTION (b) BELOW, IN NO EVENT, WHETHER IN
CONTRACT OR IN TORT (INCLUDING BREACH OF WARRANTY, NEGLIGENCE AND STRICT
LIABILITY IN TORT), SHALL A PARTY BE LIABLE TO THE OTHER PARTY FOR
INDIRECT OR CONSEQUENTIAL, EXEMPLARY, PUNITIVE OR SPECIAL DAMAGES EVEN IF
SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES IN ADVANCE.
(b) The limitations set forth in subsection (a) shall not apply with
respect to: (i) damages occasioned by the willful misconduct or gross
negligence of a Party, (ii) damages occasioned as a result of the
indemnification obligations set forth in Section 15 to the extent any
third party shall be awarded such damages explicitly excluded in Section
16.2(a), (iii) damages occasioned by improper or wrongful termination of
this Agreement or (iv) damages occasioned by a violation of Section 12.1
of this Agreement.
(c) Each Party shall have a duty to mitigate damages for which the
other Party is responsible.
(d) Each Party shall be liable to the other Party for any actual
damages as set forth in Section 16.1 only if, and to the extent that the
aggregate of all losses arising from or in connection with any such
failure to perform obligations in the manner required by this Agreement
exceeds one thousand dollars ($1,000).
16.3 Force Majeure. No Party shall be liable for any breach, default or
delay in the performance of its obligations under this Agreement (i) if and to
the extent such default or delay is caused, directly or indirectly, by: fire,
flood, earthquake, elements of nature or acts of God, riots, civil disorders,
rebellions or revolutions in any country, changes in Requirements of Law
relating to the System or to the sale of Excess Capacity, or any other cause
beyond the reasonable control of such Party (a "Force Majeure Event"), (ii)
provided the non-performing Party is without fault in causing such breach,
default or delay, and such breach, default or delay could not have been
prevented by reasonable precautions and cannot reasonably be circumvented by the
non-performing Party through the use of alternate sources, work around plans or
other means.
31
<PAGE>
SECTION 17. INFORMAL DISPUTE RESOLUTION; ARBITRATION
17.1 Informal Dispute Resolution.
17.1.1 Role of Program Manager. In the event Incumbent has a
dispute, controversy or other complaint relating to Pathnet's performance
of Pathnet's rights and obligations under this Agreement, Incumbent shall
have the right to first contact the Program Manager to resolve such
dispute, controversy or other complaint. If Incumbent is not satisfied
with the resolution provided by the Program Manager, Incumbent may resort
to the arbitration procedures set forth in this Section 17.
17.1.2 Notice of Breach, Cure and Remedies. In the event of a
material breach by either Pathnet or Incumbent (the "Breaching Party"),
the other Party (the "Non-Breaching Party") shall send by certified mail a
written notice of such material breach to the Breaching Party setting
forth the specific allegations of such breach. Upon receipt of the notice
of breach, the Breaching Party shall have thirty (30) days to cure such
breach. In the event the Breaching Party fails to cure such breach, as
determined by the Non-Breaching Party in its sole discretion, or the
Breaching Party determines, in its sole discretion, that it has cured such
breach, either the Breaching Party or the Non-Breaching Party may invoke
the arbitration procedures set forth in Section 17.2 to resolve whether
such breach has been cured.
17.2 Arbitration.
17.2.1 Arbitration; Resolution of Disputes. Subject to Section 17.1,
any and all disputes and controversies between Incumbent and Pathnet
concerning the negotiation, interpretation, performance, breach or
termination of this Agreement (each a "Dispute") shall be subject to
resolution as set forth in this Section 17.
17.2.2 Settlement Discussions. Subject to Section 17.1, the Parties
shall first attempt to resolve any Dispute through amicable settlement
discussions and each Party shall bear its own costs of such settlement
discussions. Each Party hereby agrees to use good faith efforts to reach a
settlement through such amicable settlement discussions. Any Dispute shall
first be referred to the appropriate project managers of both parties for
settlement discussions. Should such managers be unable to agree upon a
solution, the Dispute shall be submitted successively to the next higher
level of management at each company for resolution. If the persons at the
highest appropriate level of each company cannot agree on a resolution or
if the informal resolution process lasts for more than ninety (90) days,
either Party shall be entitled to pursue any of its available remedies
through Arbitration in accordance with Section 17.2.3.
17.2.3 Referral to Binding Arbitration. In the event the Parties
fail to reach a settlement of the Dispute pursuant to settlement
discussions in accordance with Section 17.2.2, each Party shall have the
right, but not the obligation, to refer such Dispute for final resolution
by binding arbitration in accordance with the commercial arbitration rules
(the "Arbitration Rules") of the American Arbitration Association (the
"Arbitration Association").
17.2.4 Binding Effect. The Parties acknowledge and agree that (i)
the award in any arbitration shall be final, conclusive and binding on the
Parties and (ii) any such arbitration
32
<PAGE>
award be a final resolution of the Dispute between the Parties to the same
extent as a final judgment of a court of competent jurisdiction.
17.2.5 Use of Courts and Other Legal Remedies. Each Party covenants
and agrees that it shall not resort to any court for legal remedies
concerning any Dispute other than to enforce a final decision by the
arbitrators or for preliminary, interim or provisional equitable relief in
aid of arbitration.
17.2.6 Arbitration Process.
(a) Notice. If the Parties cannot resolve a Dispute to their mutual
satisfaction pursuant to Section 17.2.2, either Party may deliver to the
other Party a written notice in accordance with the Arbitration Rules.
(b) Site and Arbitration Tribunal. Absent agreement to the contrary
by the Parties, the arbitration will be conducted in Chicago, Illinois, by
a panel of three (3) arbitrators with expertise in the fields of
telecommunications engineering and construction, provided, however, in the
case of particular witnesses not subject to subpoena at the designated
hearing site, hearings may be held at any place designated by the
arbitrators where such witnesses can be compelled to attend, and, with the
consent of the Parties, before a single member of the arbitration
tribunal. Within thirty (30) days after the filing of the notice of
arbitration, each Party must select one (1) arbitrator and a third
arbitrator will be selected by agreement of the two (2) arbitrators
selected by the Parties. If either Party fails to select an arbitrator or
there is no agreement on the selection of the third arbitrator, the
Arbitration Association will select such arbitrators in accordance with
Arbitration Rules.
(c) Transcripts and Evidence. Both Parties shall cause a written
transcript of all proceedings and testimony shall be kept and the cost of
such transcript shall be borne equally by the Parties pending the final
award. All documents that either Party proposes to offer in evidence,
except for those objected to by the other Party, shall be deemed to be
self-authenticating.
(d) Applicable Law. The arbitrator shall determine the claims of the
Parties and render their final award in accordance with the governing law
of this Agreement as set forth in Section 18.5. Notwithstanding anything
set forth in the Arbitration Rules to the contrary, the provisions of this
Section 17 shall govern any arbitration proceeding brought in relation to
this Agreement or the transactions contemplated thereby.
(e) Sanctions. The Parties acknowledge that, in addition to any
other remedy allowed or specified in or under the Arbitration Rules, the
failure of a Party to comply with any interim, partial or interlocutory
order, after due notice and opportunity to cure such non-compliance, may
be treated by the arbitrators as a default and all or some of the claims
or defenses of the defaulting Party may be stricken and partial or final
award entered against such Party, as determined by the arbitrators in
their sole discretion, sanctions as such arbitrators deem appropriate.
33
<PAGE>
(f) Limitation on Awards. Except as provided in Section 16.2(b),
Arbitrators may not award (i) incidental, consequential or punitive
damages in the resolutions of any Dispute and the Parties hereby waive all
rights to and claims for monetary awards other than compensatory damages,
(ii) the right to terminate this Agreement or any of the rights and
obligations hereunder, or (iii) any other right or remedy that contravenes
the terms and conditions of this Agreement.
(g) Period of Limitations. In the event the Party claiming a Dispute
does not institute binding arbitration within four (4) years after the
commencement of settlement discussions pursuant to Section 17.2.2, such
Party shall forever be barred from bringing a claim on the specific
subject matter of such Dispute.
(h) Arbitration Award. Any arbitration award must be in writing and
must contain findings of fact and conclusions of law upon which the
arbitrators relied in making the decision relating to such award.
(i) Attorneys' Fees. The arbitrator shall award the reasonable cost,
including attorneys' fees, to the prevailing Party.
SECTION 18. MISCELLANEOUS
18.1 Notices. All notices pertaining to disputes arising from this
Agreement shall be directed to a corporate entity or employee designated by the
signatories as having full rights and responsibilities to address such issues.
Notices under this Agreement shall be sufficient only if personally delivered by
a commercial prepaid delivery or courier service or mailed by certified or
registered mail, return receipt requested to a Party at its address set forth
below or as amended by notice pursuant to this Section 18.1. If not received
sooner, notice by mail shall be deemed received five (5) Business Days after
deposit in the U.S. mail. All notices shall be delivered as follows:
If to Pathnet:
Michael A. Lubin, Esquire
Vice President and General Counsel
Pathnet, Inc.
1015 31st Street, NW
Washington, DC 20007
Tel: 202.625.7284
Fax: 202.625.7369
If to Incumbent:
Alan P. Severance
Manager, Network Services
Northern Indiana Public Service Co.
5265 Hohman Avenue
Hammond, Indiana 46320-1775
Tel: (219) 647-4300
Fax: (219) 647-4010
34
<PAGE>
18.2 Binding Nature; Entire Agreement. Pathnet and Incumbent acknowledge
that (i) each has read and understands the terms and conditions of this
Agreement and agrees to be bound by such terms and conditions, (ii) this
Agreement shall be binding on each of Pathnet and Incumbent and their respective
successors and assigns, (iii) this Agreement is the complete and conclusive
statement of the agreement between the Parties, (iv) this Agreement supersedes
any and all prior agreements and arrangements between the Parties and all
understandings and agreements, oral and written, heretofore made between
Incumbent and Pathnet are merged in this Agreement which alone, fully and
completely expresses their agreement on the subject matter of this Agreement and
(v) this Agreement sets forth the entire agreement on the subject matter hereof.
18.3 Amendment. No modifications of, additions to or waiver of this
Agreement shall be binding upon Incumbent or Pathnet unless such modification,
addition or waiver is in writing and signed by an authorized representative of
each Party.
18.4 Severability. If any term or provision of this Agreement shall to any
extent be held by a court or other tribunal to be invalid, void or
unenforceable, then such term or provision shall be inoperative and void insofar
as it is in conflict with the law, but the remaining terms and provisions of
this Agreement shall nevertheless continue in full force and effect and the
rights and obligations of the Parties shall be deemed to be restated to reflect
as nearly as possible the original intentions of the Parties in accordance with
applicable law.
18.5 Governing Law. This Agreement, and the rights and obligations of the
Parties hereunder, shall be governed and interpreted in accordance with the laws
of the State of Indiana (other than the choice of law rules thereof).
18.6 Survival. Any provision of this Agreement which completes performance
or observance subsequent to any termination or expiration of this Agreement
shall survive such termination of expiration and continue in full force and
effect.
18.7 Assignment. At any time and from time to time, Pathnet shall have the
right to assign this Agreement or any of Pathnet's rights and obligations under
this Agreement; provided that in no event shall any such assignment relieve
Pathnet of its obligations under this Agreement. Incumbent may not or shall not
have the right to assign this Agreement or any of its rights and obligations
hereunder without the prior written consent of Pathnet, which consent shall not
be unreasonably withheld; provided, however, Incumbent may assign its right and
obligations, in whole but not in part, under this Agreement without the approval
of Pathnet, to any entity which acquires all or substantially all of the assets
of Incumbent or to any subsidiary, Affiliate or successor in a merger or
consolidation of Incumbent; provided, that in no event shall any such assignment
relieve Incumbent of its obligations under this Agreement.
18.8 Waiver. Failure or delay on the part of Incumbent or Pathnet to
exercise any right, power or privilege under this Agreement shall not constitute
a waiver of any right power or privilege of this Agreement.
18.9 Recordation. Each Party hereby acknowledges that this Agreement may
be subject to recordation and the costs, fees or expenses associated with any
such recordation shall be borne by the recording Party.
35
<PAGE>
18.10 Good Faith Renegotiation. Notwithstanding anything set forth herein
to the contrary, the Parties hereby agree that in the event a Governmental
Authority issues a decision, order, rule or other rulemaking of any kind, which
necessitates any modification or amendment to this Agreement, the Parties shall
negotiate in good faith to modify or amend this Agreement to comply with such
decision, order, rule or other rulemaking.
18.11 Confidential Terms and Conditions. Neither Party shall disclose,
except as required by law, the terms and conditions of this Agreement to any
third party without the prior written consent of the other Party; provided
Pathnet shall have the right to (i) disclose the terms of this Agreement to any
equity owner, debt provider, lender, or other creditor, any potential purchaser
or customer of excess capacity, any potential party to a merger or acquisition,
any third party service provider under this Agreement or any of their attorneys,
consultants or financial advisors and (ii) disclose the existence of this
Agreement without disclosing the terms thereof.
18.12 Incumbent's Designated Representative. Incumbent shall on the
Effective Date designate in writing a representative who shall have express
authority to bind Incumbent with respect to all matters requiring Incumbent's
approval or authorization in connection with this Agreement (the "Incumbent
Representative"). Such Incumbent Representative shall have the authority to make
decisions and grant any and all consents required under this Agreement on behalf
of Incumbent and Pathnet shall be entitled to rely on any such decision or
consent by the Incumbent Representative.
18.13 Outsourcing. In addition to, and not in place of, any rights of
Pathnet under this Agreement, Pathnet shall have the right, with prior notice to
Incumbent, to engage third party Subcontractors to perform any or all of the
Services or Pathnet's rights and obligations under this Agreement. Incumbent
shall have the limited right to prevent Pathnet from engaging such Subcontractor
to provide any or all of the Services in the event such Subcontractor: (i) has
demonstrated financial instability to Incumbent in the past or (ii) has been or
is currently in litigation with Incumbent. In the event that Pathnet hires
Subcontractors to carry out any of its responsibilities hereunder, Pathnet shall
advise each Subcontractor of the confidentiality obligations for Proprietary
Information under Section 12.2 and use commercially reasonable efforts to cause,
prior to performance, each such Subcontractor to agree to maintain the
confidentiality of the Proprietary Information on terms substantially similar to
the terms applicable to Pathnet.
18.14 Union and Labor Relations. With respect to any services performed
pursuant to this Agreement, Incumbent shall ensure all such services comply with
all applicable labor or union-related agreements, regulations and ordinances and
shall not require Pathnet to join any union or other labor organization as a
condition to performing services contemplated by this Agreement.
36
<PAGE>
18.15 Execution of an Amended Schedule B. In the event that both Incumbent
and Pathnet elect to add additional Segments to the System, each of Incumbent
and Pathnet shall execute and deliver an "Amended Schedule B" setting forth (i)
the additional paths, sites and specific location information of the additional
Segment or Segments and (ii) the rent Pathnet shall pay to Incumbent for such
additional Segment (thereby amending Section 5.2 with respect to such additional
Segment; provided, however, Section 5.2 shall remain in full force and effect
with respect to Segments A and B or any other existing Segment). Pathnet's and
Incumbent's rights and obligations under this Agreement will commence with
respect to such additional Segment or Segments on the date of execution of such
Amended Schedule B by both Parties which date shall be deemed the "Effective
Date" with respect to such Segment for purposes of this Agreement and each
reference to Schedule B in this Agreement shall be deemed to refer to such
Amended Schedule B.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement, as of
the date first written above.
PATHNET, INC.
By: /s/ Dave Schaeffer
-----------------------------
Name: Dave Schaeffer
Title: Chairman
NORTHERN INDIANA PUBLIC SERVICE
COMPANY
By: /s/ Robert J. Schacht
-----------------------------
Name: Robert J. Schacht
Title: VP, Energy Distribution Operations
37
<PAGE>
SCHEDULE A
SERVICES AND SYSTEM SPECIFICATIONS
This Schedule A describes certain services and specifications that Pathnet
and Incumbent shall respectively perform. Pathnet's and Incumbent's
responsibilities with respect to particular Services and Specifications
described in this Schedule A, if any, are specifically indicated where such
Services and Specifications are described. Pathnet's and Incumbent's payment
responsibilities with respect to the Services and Specifications shall be as set
forth in Section 4 and Schedule C.
SECTION 1. PRELIMINARY ENGINEERING STUDIES AND EVALUATION OF EXISTING SYSTEM
1.1 Preliminary Analysis. Pathnet shall complete a detailed analysis of
the existing microwave system operated by Incumbent along each Segment set forth
in Schedule B and upon completion of such analysis shall deliver the results of
such analysis to Incumbent. Such analysis shall include:
(a) an inventory and survey of Incumbent's existing microwave sites
and supporting facilities (the "Existing System Inventory");
(b) microwave path studies and reliability analysis to provide
performance data to serve as the engineering basis for the design of the
System (the "Path Studies");
(c) a preliminary evaluation of the probability of successfully
coordinating frequencies on the System (the "Frequency Availability
Model");
(d) a determination of whether structural analysis of towers and
loading factors (for metal towers only) is required and, in the event such
structural analysis is required, the analysis of Incumbent's towers,
including, but not limited to, the wind loading and weight requirements
for the proposed antenna systems as well as any feedlines necessary to
support the such antenna systems (the "Tower Analysis");
(e) the design of the System (the "System Design") which System
Design conforms with the terms and conditions of Section 3 of this
Schedule A;
(f) a detailed line item budget for the System (the "System
Budget");
(g) a proposed T-1 plan for channelization of the System the
("Channel Plan"); and
(h) a preliminary construction management schedule for each
replacement Segment (the "Preliminary Construction Schedule").
A-1
<PAGE>
1.2 Cooperation of Incumbent with Preliminary Analysis. Incumbent shall
fully cooperate with Pathnet in Pathnet's performance of the preliminary
analysis set forth in Section 1.1 of this Schedule A, including, but not limited
to, providing to Pathnet any reasonable requested information and documents
relating to Incumbent or Incumbent's existing system.
1.3 Project Drawings. Upon completion of the preliminary engineering
studies and analysis and documentation as set forth in Section 1.1 of this
Schedule A, Pathnet shall deliver to Incumbent the following project drawings:
(i) a System layout drawing, (ii) the rack profiles, (iii) block drawings, and
(iv) equipment wiring drawings (collectively, the "Project Drawings.")
SECTION 2. MODIFICATION TO EXISTING INFRASTRUCTURE.
2.1 Documentation. Upon completion of the preliminary analysis as set
forth in Section 1.1 of this Schedule A, Pathnet shall prepare and deliver to
Incumbent a project management schedule and scope of work (the "Modifications
SOW") setting forth a detailed plan to complete all required modifications of
Incumbent's existing sites and Facilities (including drawings of any proposed
shelter modifications and proposed grounding for tower modifications) necessary
for the installation and operation of the new System in accordance with the
terms and conditions of this Agreement. Incumbent shall have ten (10) days to
either (i) approve by written notice to Pathnet such Modifications SOW or (ii)
deliver to Pathnet a written list of Incumbent's suggested modifications to the
Modifications SOW. Pathnet shall review any such suggested modifications and
incorporate all commercially reasonable suggested modifications into the
Modifications SOW; provided the proposed modifications (i) shall not adversely
impact Incumbent's performance of its current or future operations; (ii) shall
comply with the Interference provisions set forth in Section 5.4.2 of this
Agreement; (iii) shall not materially increase the cost of the Services and
Specifications set forth in Section 1 of Schedule C; and (iv) shall not
materially change the System Design criteria and Specifications including,
without limitation, the requirement that the System be designed to meet a 1x7
radio configuration. In the event Incumbent does not notify Pathnet in writing
within the prescribed time period, Pathnet shall assume that Incumbent has
granted approval of the Modifications SOW. In the event Pathnet does not
incorporate modifications of Incumbent, the Parties shall work together in good
faith to mutually agree on a compromise. Any Dispute arising out of Pathnet's
refusal to include a suggested modification shall be subject to the Dispute
Resolution Process of Section 17 of this Agreement.
2.2 Modifications Required. Pathnet shall perform all of the modifications
set forth in the Modifications SOW. Such modifications shall include the
following:
(a) any required modifications to the towers necessary to conform
the towers to the Specifications including strengthening or stiffening
existing structures;
(b) any required modifications to the battery reserves necessary to
conform the battery reserves to the Specifications and the installation of
any required generators, in accordance with the Specifications;
A-2
<PAGE>
(c) any required modifications to the environmental control systems
of the existing shelters necessary to conform such environmental control
systems to the Specifications;
(d) the provision of all necessary D.C. and A.C. power cable
engineering for all racks, including, but not limited to, the installation
of all necessary conduits required to carry D.C. and A.C. power,
terminating cables and alarm cables and the installation of all necessary
A.C. distribution and A.C. wiring as required to meet the Specifications;
(e) the installation of all required new equipment shelters, or
modification of existing equipment shelters, to conform to the
Specifications;
(f) the installation of all required liquid petroleum, diesel or
natural gas lines from the existing liquid petroleum diesel or natural gas
tank or source, as the case may be, to the new shelter in accordance with
the Specifications;
(g) any required modifications to the foundation of any of the
towers, shelters or sites as set forth in the Tower Analysis;
(h) any upgrades required to conform the sites and Facilities to
local building code provisions and any other regulatory Requirements of
Law, including, but not limited to, those related to health and safety;
(i) the removal of any above or below ground obstructions or
materials such as trees and power lines which may affect the performance
of the System or other activities contemplated by this Agreement;
(j) all required fence extensions and replacements;
(k) any required modifications to the grounding and bonding Systems
at each Site to conform to the Specifications;
(l) any required modifications to the pressurizing equipment to
conform to the Specifications, including the pressurizing equipment
manifolds and dehydrators; and
(m) any other miscellaneous Site work necessary to prepare
Incumbent's sites for the installation and operation of the new System.
2.3 Cooperation by Incumbent. Incumbent shall fully cooperate with Pathnet
and shall provide Pathnet with all reasonably required assistance in completion
of such obligations in Pathnet's performance of its obligations under this
Section 2 of this Schedule A.
2.4 Maintenance of Modifications. Incumbent shall ensure that all
modifications performed pursuant to this Section 2 of this Schedule A are
maintained in accordance with the Specifications, including, but not limited to,
the upgrade or replacement of any equipment and materials described in the
Modifications SOW, but excluding any materials for which Pathnet
A-3
<PAGE>
has the obligation to upgrade, including the System and the Equipment pursuant
to Section 7.1.2 of the Agreement.
2.5 Choice of Equipment Vendors and Service Providers.
2.5.1 Engagement. In the event Incumbent engages an equipment vendor
or service provider directly in accordance with this Section 2.5 of
Schedule A (i) Pathnet shall have the right to approve any equipment
vendors or service providers, which approval shall not be unreasonably
withheld, (ii) all invoices, purchase orders or other bills relating to
such equipment or services shall be sent to both Pathnet and Incumbent and
(iii) Incumbent shall not pay any such invoice, purchase order or bill
without the prior approval of Pathnet, which approval shall not be
unreasonably withheld.
2.5.2 Approval. Incumbent shall have the right to reasonably approve
any Subcontractor engaged by Pathnet to perform the Services set forth in
this Section 2 of Schedule A.
2.6 Ownership by Incumbent of Modifications. As of the date such
modifications are made, Incumbent shall own all non-removable modifications made
in accordance with this Section 2 of Schedule A and any such modifications
relating to or necessary for the operation of the Initial System. Without
limiting the foregoing, Incumbent shall own any modifications constituting a
fixture of the Leased Premises.
SECTION 3. DESIGN OF NEW SYSTEM.
3.1 Approval of System Design. Within ten (10) days after receipt by
Incumbent of the System Design from Pathnet, Incumbent shall either (i) deliver
to Pathnet written approval of such System Design or (ii) deliver to Pathnet a
written list of Incumbent's suggested design modifications. Pathnet shall review
any such suggested modifications and, incorporate all commercially reasonable
suggested modifications into the System Design; provided such proposed
modifications (i) shall comply with the Interference provisions set forth in
Section 5.4.2 of this Agreement; (ii) shall not materially increase the cost of
the Services and Specifications set forth in Section 1 of Schedule C; and (iii)
shall not materially change the System Design criteria and Specifications
including, without limitation, the requirement that the System be designed to
meet a 1 x 7 radio configuration. Pathnet shall, within thirty (30) days of
receipt of Incumbent's suggested modifications, deliver a revised System Design
to Incumbent. In the event Incumbent fails to deliver to Pathnet in writing its
approval as set forth above within the prescribed time period, Pathnet shall
assume that Incumbent has approved such System Design. In the event Pathnet does
not incorporate a suggested modification, the Parties shall work together in
good faith to mutually agree on a compromise. Any Dispute arising out of
Pathnet's refusal to include a suggested modification shall be subject to the
Dispute Resolution Process of Section 17 of this Agreement.
3.2 Modification of System Design. At any time and from time to time,
Pathnet shall have the right to modify the System Design upon written notice to
Incumbent of such modifications, as new versions of Equipment used in the System
may become available from
A-4
<PAGE>
manufacturers or software providers, as Technology is improved and as determined
by Pathnet in its reasonable discretion, provided that such modifications do not
materially impact Incumbent's ability to use the System or degrade the operation
of the System below the Specifications. Prior to implementation of any
modifications to Incumbent's towers or other physical infrastructure, Pathnet
shall submit any such proposed modifications to Incumbent for approval, which
approval shall not be unreasonably withheld.
3.3 System Technical Specifications. Pathnet shall (i) design the System
in accordance with the minimum network performance standards set forth in
Section 3 of this Schedule A, (ii) in each instance where reasonably possible,
use the towers, antennas, waveguide, and other system components of Incumbent's
existing system in the System Design and (iii) design the System to meet the
following technical specifications:
(a) Radio System Design. The active radio components of the System
shall be designed to conform to the Specifications and the manufacturer
specifications set forth in Exhibit A-2 to this Schedule A.
(b) Radio Software Design. The software used to operate the radios
shall conform to the Specifications and the manufacturer specifications
set forth in Exhibit A-2 to this Schedule A.
(c) Antenna and Frequency Specifications. The radio communications
equipment shall transmit and receive on the frequencies as set forth in
the System Design. All antenna reflectors used in the System shall conform
to (i) Category A standards as defined by the FCC and (ii) the
specifications set forth in any PCN relating to the System, and each high
performance antenna shall be fitted with a radome. All antenna mounting
hardware shall meet wind and loading requirements for the applicable
county and shall substantially conform to EIA-222-F.
(d) Tower Specifications. All towers shall substantially conform to
(i) the EIA/TIA-222-F-1991, Structural Standards for Steel Antenna Towers
and Antenna Supporting Structures, 1996, (ii) EIA/222-F Specifications for
loading for the appropriate county, and (iii) any other required FCC and
FAA rules and regulations.
(e) Waveguide Specifications. Waveguide used in the System specified
for transmission line shall be of a premium grade to ensure minimum return
loss.
(f) D.C. Power Requirements. The radio components of the System
shall be powered by 48 volts DC with at least eight ( hours of battery
capability, and all necessary chargers, distribution systems and transfer
switches for generators as set forth in Exhibit A-3 to this Schedule A.
(g) A.C. Power Requirements. A.C. electrical power required by the
System shall be consistent with local requirements and the usage at each
of the sites set forth in Schedule B and shall be 120/240 volt single
phase 200 amp service as set forth in Exhibit A-3 to this Schedule A.
A-5
<PAGE>
(h) Bonding and Grounding Specifications. The System and all
associated electrical components shall be grounded and bonded to current
EIA and IEEE specifications.
(i) Order Wire Specification. Each equipment shelter shall be
equipped with an Order Wire and a handset, which will be used as a talk
circuit for System operation and maintenance purposes and which will be
carried by Pathnet as part of the System payload.
(j) Diagnostic Circuit. Each equipment shelter shall be equipped
with a diagnostic circuit that will be used to connect each such shelter
and the Equipment housed in such shelter to the Network Management System.
(k) Multiplexing from OC-3 to DS-1 Level. The System Design shall
provide for any required multiplexing of the OC-3 to the DS-1 level at
each Site using an OC-3 Multiplexer.
(l) Multiplexing from DS-1 to DS-0 Level. Within one hundred eighty
(180) days after the date hereof, Incumbent shall deliver to Pathnet a
Schedule substantially in the form of Exhibit A-4 to this Schedule A
setting forth Incumbent's multiplexing requirements; provided such
requirements be limited by the multiplexor configuration at each Facility
as set forth in this Agreement. Upon receipt of such Exhibit A-4 to this
Schedule A, Pathnet will reflect in the System Design the requested
multiplexing of the DS-1 to the DS-0 level at each Site using a 1/0
Multiplexer subject to limitations in Drop and Insert Capacity between
each Switched Mod Section using available Wayside Channels.
(m) Wayside Channels. Incumbent or Pathnet as reflected in the
System Design, as determined by Pathnet in its reasonable discretion,
shall use the Wayside Channels. Pathnet's use of Wayside Channels that are
part of the Initial System shall be subject to the approval of Incumbent,
which shall not be unreasonably withheld.
(n) Spectral Loading Requirements. The System shall meet the then
current FCC requirements of spectrum efficiency outlined in 47 C.F.R. 101
and any successor rule or regulation.
(o) Capacity of System. The System shall be comprised of, at a
minimum, 3 DS-3 capability and will have a 1 x n protection switch
allowing for upward migration to a minimum of 1 x 7 protection. The
capacity of the System may be expanded to a 2 x 14 protection level, using
additional spectrum or crossband filters, provided, such Capacity
Expansion does not degrade the System below the performance standards set
forth in this Section 3 of this Schedule A and otherwise meets the
Capacity Expansion Requirements as set forth in Section 7.1 of this
Schedule A.
(p) SONET Architecture. The digital microwave radios used in the
System shall operate under a SONET format.
A-6
<PAGE>
(q) Shelters Design. A proposed building layout for the new shelters
(either concrete or metal) to be constructed and the existing shelters to
be modified shall be as set forth in Exhibit A-5 to this Schedule A and
shall comply with all applicable local laws, regulations and ordinances.
(r) Channel Plan. The System shall be designed such that Incumbent
and Pathnet shall be allocated capacity as set forth in the Channel Plan
and Section 7.2.2.
(s) Interconnections Limitations. The System shall have no more than
four (4) Interconnections per LATA. No more than two (2) of such
Interconnections shall be to other segments of the Pathnet network created
from facilities of other Persons and no more than two (2) of such two
Interconnections shall be to the PSTN. At each Interconnection site, there
shall be no more than two (2) additional antennas used solely for such
Interconnection purposes. Interconnections may be by microwave or other
media. To the extent Pathnet develops spurs, Pathnet shall specify the
Interconnections at such spurs on Exhibit A-7 to this Schedule A, as such
exhibit shall be amended from time to time. To the extent Incumbent
develops spurs for its own connectivity purposes, Incumbent shall specify
the Interconnections at such spurs on Exhibit A-7 to this Schedule A, as
such exhibit shall be amended from time to time.
(t) Protection Switching Requirement. Power, radio, and multiplexing
equipment shall be redundant with automatic protection switching to
minimize Outages as a result of equipment failure.
(u) Battery Reserve Specifications. All Equipment at each Site shall
have a minimum battery reserve (assuming a 1 x 7 Protection Configuration)
as set forth in Exhibit A-3 to this Schedule A.
(v) Generator Requirements. Generators shall be required at all
sites with a history of power outages and all sites that are difficult to
access and shall be the type and size, each as set forth in Exhibit A-3 to
this Schedule A.
(w) System Integration. The System shall be integrated into the
total Pathnet telecommunications network as set forth in the System
Design.
(x) Transmission Line Requirements. One (1) or more transmission
lines shall be connected to each antenna and such lines will be anchored
firmly to the tower in accordance with the manufacturer's recommendation.
(y) Equipment Rack Specifications. Each equipment rack shall be
firmly anchored to the floor, and the overhead channel iron or the
adjacent racks and shall have the dimensions as forth in Exhibit A-5 to
this Schedule A.
(z) Environmental Control of Shelters. Equipment shelters shall be
environmentally controlled to standards, between 55(degree) and 80(degree)
and shall be maintained within the desired humidity range, as set forth in
the manufacturer's specifications in Exhibit A-2 to this Schedule A.
A-7
<PAGE>
(aa) Spurs. The System shall be designed to allow the build-out of
spurs set forth on Exhibit A-8 to this Schedule A, as such exhibit may be
amended from time-to-time, from the backbone network for Pathnet's and
Incumbent's own network and internal communications purposes.
(bb) Network Management System. The System Design shall include the
Network Management System that complies with the specifications set forth
in Section 7.6 of this Schedule A.
(cc) Fuel Tanks and Lines. All liquid petroleum, diesel and natural
gas tanks and lines required shall meet all applicable environmental and
health and safety standards and Requirements of Law.
(dd) Pressurizing Equipment. The System Design shall include all
required pressurizing equipment, manifolds and dehydrators.
(ee) Segregated Traffic. The System Design shall provide that
Pathnet's and Incumbent's telecommunication capacities will be segregated
from the common carrier traffic passing through the System. Pathnet shall
provide for data and voice transmissions via TDMA standard multiplexing
and will maintain Stratum One Clocking via signals provided by the PSTN or
will maintain internal Stratum Three Clocking via oscillator standards
provided internally by the System or GPS signal.
(ff) Existing System. The System Design shall be designed so that
the high capacity 6 GHz/30 MHz System allows unimpaired, continuous
operation of Incumbent's existing low capacity 6 GHz/10 MHz system until
Cutover; provided Pathnet shall have the right to temporarily turn down
the signal on Incumbent's 6 GHz/10MHz system upon Incumbent's prior
written approval as to schedule for such outage.
3.4 System Performance Criteria
3.4.1 Availability. The System shall be designed to meet or exceed
the long haul objective of 99.98% availability on an annual basis for a
four thousand (4,000) mile system, which is equivalent to a one way system
Outage of less than 0.4 seconds, per mile, per year.
3.4.2 Circuit Acceptance Level. The System shall be designed such
that any continuous five hundred (500) mile segment of the System during
any consecutive twenty-four hour period shall have no more than one (1)
Errored Second, shall have 99.998% Error Free Seconds and shall have no
Severely Errored Seconds, measured at the DS-1 level.
A-8
<PAGE>
SECTION 4. INSTALLATION AND CONSTRUCTION.
4.1 Documentation.
4.1.1 Project Management Plan, Project Schedule and Cutover Plan.
Upon approval of the System Design, Pathnet shall deliver to Incumbent (i)
a plan of the respective responsibilities of each Party and other related
items relating to the construction and installation of the System (the
"Project Management Plan"), (ii) a schedule for the installation of the
System (the "Project Schedule"), and (iii) a schedule, as determined by
Incumbent, for the cutover to the System from Incumbent's existing analog
or digital system (the "Cutover Plan"). Incumbent shall have ten (10) days
to either (i) approve by written notice to Pathnet such Project Management
Plan, Project Schedule and Cutover Plan or (ii) deliver to Pathnet a
written list of Incumbent's suggested modifications to such Project
Management Plan, Project Schedule and Cutover Plan, as the case may be.
Pathnet shall review any such suggested modifications and, incorporate all
commercially reasonable suggested modifications into the Project
Management Plan, Project Schedule and Cutover Plan, respectively; provided
the proposed modifications (i) shall not adversely impact Incumbent's
performance of its current operations or scheduling requirements, (ii)
shall comply with the Interference provisions set forth in Section 5.4.2
of this Agreement; (iii) shall not materially increase the cost of the
Services and Specifications set forth in Section 1 of Schedule C; and (iv)
shall not materially change the System Design criteria and Specifications
including, without limitation, the requirement that the System be designed
to meet a 1x7 radio configuration. In the event Incumbent does not notify
Pathnet in writing of its approval or suggested modifications of the
Project Management Plan, Project Schedule and Cutover Plan as set forth
above within the prescribed time period, Pathnet shall assume that
Incumbent has granted such approval. In the event Pathnet does not
incorporate a suggested modification, the Parties shall work together in
good faith to mutually agree on a compromise. Any Dispute arising out of
Pathnet's refusal to include a suggested modification shall be subject to
the Dispute Resolution Process of Section 17 of this Agreement.
Notwithstanding the foregoing, Pathnet agrees and acknowledges that
Incumbent shall have the ultimate decision, in Incumbent's sole
discretion, as to the date when cutover occurs.
4.1.2 Installation Reports. After installation has begun and
continuing until Commissioning, Pathnet shall provide to Incumbent a
bi-weekly progress report (each a "Progress Report") setting forth, (i) a
description of the work performed during the immediately preceding period,
(ii) a list of any material deviations from the proposed schedule of work
and (iii) an analysis of such deviations with respect to their impact upon
the timely deployment of the System.
4.1.3 Changes to Drawings. In the event that during the process of
installation any of the Project Drawings delivered pursuant to Section 1.3
of this Schedule A require any modifications, Pathnet shall make any such
modifications to such Project Drawings, shall deliver the revised Project
Drawings to Incumbent, and shall place a copy of such revised Project
Drawings at each site.
A-9
<PAGE>
4.1.4 As-Built Drawings. Upon completion of each phase of
installation as set forth in the Project Schedule, Pathnet shall deliver
to Incumbent an as-built drawing of the System (including any vendor
manuals or drawings) (each an "As-Built Drawing") and shall incorporate
the final As-Built Drawing into the appropriate equipment manuals.
4.2 Installation by Pathnet. Pathnet shall construct and install the
System as set forth below and in accordance with this Schedule A and the
documents and schedules prepared and delivered pursuant to this Schedule A.
(a) Radios. Pathnet shall furnish and install the digital radios
that meet the Specifications.
(b) Antennas and Frequencies. Pathnet shall furnish and install (i)
the antennas that meet the Specifications and (ii) any required antenna
mounting hardware to secure such antennas to the towers in accordance with
the Specifications.
(c) Waveguide Bridge and Supports. Pathnet shall furnish and install
(i) waveguides that meet the Specifications, (ii) new waveguide bridges on
two faces of the existing towers and (iii) all additional supports
required of the waveguide from the tower to termination inside the
shelter.
(d) Bonding and Grounding. Pathnet shall furnish and install all
required ground kits in accordance with the Specifications, including, but
not limited to, waveguide ground kits at the antenna, the bottom of the
tower and at the entry port of the shelter, tower anchor grounding kits,
and ground wire rings for the shelters.
(e) Moving Company. During installation of the System, Pathnet, or a
full service moving and warehousing company hired by Pathnet, shall handle
the pick up of necessary equipment for temporary warehousing in all
required areas at and near the installation sites.
(f) Order Wire. Pathnet shall furnish and install an Order Wire at
each Site in accordance with the Specifications and shall establish Order
Wire connectivity, including, but not limited to, connectivity to all
necessary external interfaces.
(g) OC-3 Multiplexers. Pathnet shall furnish and install all
required OC-3 Multiplexers to the DS-1 level as set forth in Section 3 of
this Schedule A.
(h) Channel Plan. Pathnet shall perform cross-connects of T-1 lines
in accordance with the Channel Plan and the Specifications.
(i) Interconnection Placement. Pathnet shall furnish and install
connecting facilities from the System to the PSTN, including but not
limited to connections to POP's of purchasers of Excess Capacity and
Pathnet shall furnish and install all cables required to interconnect
project equipment within the System.
A-10
<PAGE>
(j) Transmission Lines. Pathnet shall (i) furnish and install all
required transmission lines on the towers, (ii) route such transmission
lines to the equipment racks in the shelters, (iii) connect both ends of
such transmission lines and (iv) interface such transmission lines to the
radio equipment in accordance with the Specifications.
(k) Equipment Racks. Pathnet shall furnish and install all equipment
racks necessary for the Equipment installed by Pathnet in accordance with
the Specifications.
(l) Network Management System. Pathnet shall furnish and install the
Network Management System, including, but not limited to, all required
alarms, panels, terminals, software and cables at all appropriate
demarcation points in accordance with the Specifications.
(m) Spurs. Pathnet shall furnish and install all of the necessary
equipment to build-out Pathnet's spurs and Incumbent's spurs (as requested
and paid for by Incumbent), each as set forth in Exhibit A-8 to this
Schedule A in accordance with the Specifications.
(n) Deconstruction of Existing System. As required at each Site,
Pathnet shall move Incumbent's existing analog or digital system to one
side, providing space for permanent installation of the new System;
provided (i) such moving does not interfere with the operation of
Incumbent's existing analog or digital communications system and (ii)
modification of Incumbent's existing racks shall be subject to Incumbent's
approval. In the event the moving of Incumbent's existing equipment shall
result in outages or reduced operation in the existing analog or digital
system, the Parties shall agree on the schedule for moving such equipment
so as to minimize disruption on Incumbent's existing system.
(o) Pre-Commissioning System. Pathnet shall install an "initial"
digital System in such a way that it can be operated and tested without
interfering with the performance of Incumbent's existing analog or digital
system.
(p) Parallel Systems. In order to minimize system downtime, Pathnet
shall provide parallel operations to the Incumbent's existing analog or
digital system with the digital equipment system using new frequencies and
antenna configurations.
4.3 Cooperation During Installation. During installation, Incumbent shall
provide all necessary and reasonable cooperation to Pathnet, including, but not
limited to, posting at each Site any Permits or licenses for building or tower
work related to the construction at such Site and providing reasonable access to
its Facilities as set forth in Section 5; provided that in the event of an
Incumbent capacity alert causing a work stoppage, Incumbent shall cooperate with
Pathnet as soon as reasonably possible after correction of the capacity alert.
4.4 Installation by Incumbent. Incumbent shall furnish and install all
required equipment and materials at each point of demarcation to meet
Incumbent's internal communication needs, including, but not limited to,
furnishing and installing all 1/0 Multiplexers
A-11
<PAGE>
as set forth in the System Design and all other interconnection equipment
relating to Incumbent's spurs set forth in Exhibit A-7 to this Schedule A.
SECTION 5. PRE-COMMISSIONING TESTING.
5.1 Factory Acceptance Test.
5.1.1 Tests to be Performed. Pathnet shall coordinate all factory
acceptance testing on the Equipment. Such factory acceptance testing shall
include (i) linking together of all racks in each Switched Mod Section to
simulate the System as it will be configured in the field, (ii) testing at
the panel terminal and System level for certification and compliance with
the Specifications, (iii) connecting the radio bays by coaxial cables
through attenuators to simulate "RSL" conditions as encountered in the
field, (iv) testing on a Path basis to the applicable configuration of the
System, (v) testing of all miscellaneous Equipment such as supervisory
fault alarm and control and service channel units and (vi) testing the
equipment as a System to resolve all interface problems.
5.1.2 Observing Factory Testing. Incumbent shall have the right, at
its own expense, to witness in person the factory testing of the
Equipment.
5.2 Rack Test. Pathnet shall perform a rack test once the radio cabinet
has been installed.
5.3 Path Test. Pathnet shall perform a Path test after each Site has been
turned up.
5.4 End-To-End Test. Pathnet shall perform an end-to-end test for each
Switched Mod Section on the System once all sites have been turned up.
5.5 Field Test. Once the Equipment is installed and operational, Pathnet
shall test each Path pursuant to the following field tests to ensure performance
of the Equipment over the designated Path in accordance with the criteria and
standards set forth in this Schedule A.
(a) Radio Hop Test: Pathnet shall (i) align all digital microwave
paths, (ii) measure and record transmitter frequency, (iii) measure and
record transmitter power, (iv) calculate and record receiver fade margin,
(iv) perform Bit Error Rate checks and (v) record results of such Bit
Error Rate checks.
(b) Digital Multiplex Test: Pathnet shall (i) perform standard
loop-back tests and (ii) verify the performance of all local alarm points
to the DS-1 level.
(c) System Test: Pathnet shall (i) perform an end-to-end Bit Error
Rate test of the message one radio for a 24-hour period and an end-to-end
Bit Error Rate test of the protect radio for 1 hour, (ii) verify equipped
channel units through microwave system, (iii) verify performance of Order
Wires and Wayside Channels, and (iv) verify performance of the alarm
points function throughout the System.
A-12
<PAGE>
5.6 Site Acceptance Testing. Pathnet shall perform all site acceptance
tests as recommended by the manufacturers of the Equipment and Pathnet shall
provide the results of any such site acceptance testing to Incumbent promptly
after completion of such testing.
5.7 Acceptance Procedure. After completion of site acceptance testing as
set forth in Section 5.6 of this Schedule A, Pathnet shall implement the
following acceptance procedure:
(a) Incumbent shall promptly perform an installation inspection and
deliver to Pathnet a written list of all material deficiencies from the
Specifications to be corrected by Pathnet (the "Deficiency List").
(b) Pathnet shall promptly correct such material deficiencies on the
Deficiency List and shall, upon completion, certify to Incumbent that such
items have been corrected.
(c) Pathnet shall submit to Incumbent all of the test data collected
through the performance of the tests set forth in Section 5 of this
Schedule A for Incumbent's approval, which approval shall not be
unreasonably withheld.
(d) Upon satisfaction of the conditions set forth in Sections
(a)-(c), Incumbent shall deliver to Pathnet a Certificate of Acceptance
substantially in the form of Exhibit A-9 to this Schedule A.
5.8 Equipment Required for Pre-Commissioning Testing. Pathnet shall
furnish all Equipment necessary for conducting Pre-Commissioning Testing.
SECTION 6. CUTOVER.
6.1 Cutover.
6.1.1 Pathnet Responsibilities. Pathnet shall (i) manage the cutover
process for the System, (ii) perform such cutover in accordance with the
Cutover Plan and (iii) notify Incumbent of the circuit activity that will
occur upon Commissioning of each Path or Segment and the impact that such
activity may have on the Incumbent's existing analog or digital system.
Promptly after each Site has been cutover, Pathnet shall notify Incumbent
of the completion of such cutovers.
6.1.2 Incumbent Responsibilities. Subject to Section 4.1.1 of this
Schedule A, Incumbent shall (i) cooperate and coordinate its cutover of
its voice and data circuits with Pathnet and the Cutover Plan, and (ii)
complete its cutover of its voice and data circuits no later than the time
period set forth in the Cutover Plan after Commissioning of each Path or
Segment by Pathnet.
6.2 Station Log Books. Pathnet shall establish station logs books in
accordance with all FCC rules and regulations (each a "Station Log Book") and
shall deliver to Incumbent an original of each Station Log Book at
Commissioning.
A-13
<PAGE>
SECTION 7. SYSTEM OPERATION.
7.1 Increases in Capacity. At any time, and from time to time, Pathnet
shall have the right, at its sole discretion, to increase the capacity of the
System beyond the capacity created in the initial build-out; provided that
Pathnet fulfills the following conditions before Commissioning any such proposed
Capacity Expansion:
(a) Capacity Expansion Schedule. At least fifteen (15) days prior to
any Capacity Expansion, Pathnet shall provide to Incumbent a capacity
expansion schedule (each, a "Capacity Expansion Schedule") setting forth
the amount of capacity to be included in such Capacity Expansion, the
specific paths to be expanded, the expansion name (including each Path
that is affected), and the expected Commissioning of such Capacity
Expansion.
(b) Capacity Expansion Requirements. Any Capacity Expansion must
meet the following requirements: (i) it must not degrade the System below
the Specifications, (ii) it must not significantly increase the use of
power beyond that specified in the Equipment and Systems specifications,
(iii) it must not unreasonably interfere with gas or electricity utility
operations, (iv) it must not increase tower loading beyond the
specifications established in the Tower Analysis and System Design, (v) it
must not increase space requirements or affect access to the Site beyond
that specified in the Equipment and System specifications, and (vi) it
must not unreasonably interfere with the access rights granted to others
prior to the Effective Date or interfere with the operations of such
entities' existing systems as set forth in Schedule I (collectively, the
"Capacity Expansion Requirements").
(c) Performance of Capacity Expansion. Prior to the Commissioning of
any Capacity Expansion, (i) Pathnet shall perform all required testing on
such Capacity Expansion to confirm that any such Capacity Expansion will
meet the Capacity Expansion Requirements (ii) Pathnet shall provide the
results of such testing upon receipt of such test results to Incumbent for
its review and approval and (iii) Pathnet shall obtain from Incumbent a
Certificate of Acceptance substantially in the form attached hereto as
Exhibit A-9 to this Schedule A with respect to such Capacity Expansion.
(d) Incumbent's Right to Contest Capacity Expansion. In the event,
after receipt of the test results as set forth above, Incumbent reasonably
determines that a proposed Capacity Expansion will not meet the Capacity
Expansion Requirements, Incumbent shall have the right to withhold
delivery of any Certificate of Acceptance with respect to such Capacity
Expansion and shall hire an independent third party approved by Pathnet
(which approval shall not be unreasonably withheld) to perform additional
testing on such Capacity Expansion. In the event such independent third
party reports that the proposed Capacity Expansion will meet the Capacity
Expansion Requirements, Incumbent (i) shall promptly deliver to Pathnet a
Certificate of Acceptance with respect to such proposed Capacity Expansion
and (ii) shall pay for the reasonable costs of such independent third
party evaluation. In the event that such independent third party reports
A-14
<PAGE>
that the proposed Capacity Expansion will not meet the Capacity Expansion
Requirements (i) Pathnet shall make all required modifications to the
System and the proposed Capacity Expansion such that, in the opinion of
such independent third party, the proposed Capacity Expansion shall not
violate the Capacity Expansion Requirements, (ii) upon verification by
such independent third party that the proposed Capacity Expansion, as
modified by Pathnet, meets the Capacity Expansion Requirements, Incumbent
shall promptly deliver to Pathnet a Certificate of Acceptance
substantially in the form attached as Exhibit A-9 to this Schedule A with
respect to such Capacity Expansion and (iii) Pathnet shall pay for the
reasonable costs of such independent third party evaluation.
(e) Pathnet acknowledges that, except as otherwise explicitly
provided in this Agreement, Incumbent makes no guaranty that any unused
loading capacity on a tower will remain available for Capacity Expansion.
Incumbent may utilize such unused capacity or loading at any time, subject
to its obligations under this Agreement, and shall not be responsible for
the later unavailability of any such unused capacity or loading or its
effect on Pathnet's plans for expansion, provided Incumbent shall permit
Pathnet to modify the tower, at Pathnet's costs, in order to accommodate
any Interconnection or Capacity Expansion pursuant to the terms of this
Agreement
7.2 Maintenance of System. Within sixty (60) days after the Effective Date
of this Agreement, Pathnet and Incumbent shall execute and deliver the
Maintenance Services Agreement. Pathnet shall have the right to supplement at
its own expense at any time, and from time to time, any maintenance performed on
the System, as determined by Pathnet in its sole discretion provided (i) such
maintenance shall be conducted in accordance with the terms of this Agreement
and the Maintenance Services Agreement, (ii) Pathnet shall supply any and all
replacement Equipment or parts therefor (including, but not limited to, Spare
Parts) to Incumbent for all Equipment required to operate the Initial System,
and (iii) neither Party shall materially degrade the operation of the System in
performing the Maintenance Services set forth in the Maintenance Agreement.
7.3 Additional Transmission Lines and Antennas. After Commissioning, if
the System is expanded pursuant to any Capacity Expansion, Pathnet shall have
the right to elect to install a second transmission feed line or a third antenna
to any tower; provided such installation does not degrade the System below
Specifications or contravene any Requirement of Law or tower loading limit. In
such instance, Pathnet shall (i) perform any tower analysis that may be required
before the installation of such transmission line or antenna, (ii) furnish and
install such additional transmission line and any associated connectors and
mounting hardware for securing such transmission line to the towers, (iii)
furnish and install such antenna and other devices and equipment associated with
such antenna and (iv) perform strengthening to the tower required for such
transmission line or third antenna.
7.4 Additional Order Wires and Diagnostic Circuits. At any time and from
time to time, Pathnet shall have the right to install additional Order Wires and
diagnostic circuits at System sites, which Order Wires and diagnostic circuit
may or may not be carried as part of the System payload as determined to be
necessary or appropriate by Pathnet in its sole discretion;
A-15
<PAGE>
provided Incumbent shall receive at least one (1) wayside channel in each
direction at each Facility.
7.5 24-Hour Network Monitoring Center. Upon Commissioning and for the
period thereafter until the Expiration Date, Pathnet shall operate a network
monitoring center (the "Network Monitoring Center") twenty-four (24) hours a
day, seven (7) days a week, which Network Monitoring Center shall, among other
things, handle all problems and trouble reports that may arise and monitor the
System as set forth in Section 7.6 of this Schedule A.
7.6 Network Management System. At all times after Commissioning until the
Expiration Date, Pathnet shall provide a network management system to be
operated at the Network Monitoring Center (the "Network Management System")
which Network Management System will (i) manage all network elements within the
System (21 SMX or equivalent), (ii) monitor and control the facilities system,
the radio system, and the OC-3/DS-1 multiplex system, (iii) collect performance
data such as Errored Seconds, Severely Errored Seconds, frame loss and Failed
Seconds consistent with the manufacturer's specifications set forth in Exhibit
A-2 to this Schedule A, (iv) monitor and maintain the shelter environments
(including commercial power failure, door alarms, charger failures, low
waveguide pressure, air conditioner failure, tower light alarms, generator runs
(if any), waveguide dehydrator excessive runs, smoke alarms, high temperature
and low temperature), radio equipment, multiplexing equipment, and Incumbent
equipment (as reasonably requested by Incumbent) and (v) provide Incumbent with
the ability to monitor the System separately from the overall Pathnet network.
As part of the Network Monitoring System, Pathnet shall provide Incumbent with
hardware meeting the following Specifications (or the equivalent): Windows NT
compatible computer comprising the following general functions: 24 MB Ram, 4 GB
hard drive space, and Modem. Pathnet shall provide software for alarm monitoring
of variable inputs.
7.7 Alarm and Event Logging and Reports. Within thirty (30) days after the
end of each calendar quarter, Pathnet shall provide to Incumbent a report (each
an "Alarm and Event Report") setting forth a log of all alarms and events
recorded by the Network Management System.
7.8 System Outages. Each Party shall use its best efforts to avoid
unscheduled System Outages in the performance of each Party's respective rights
and obligations under this Agreement.
7.9 Replacement of Radios. Beginning in the fifteenth (15th) year after
Commissioning of the Initial System, Pathnet shall begin replacing the radios
and radio software relating to the System with new Equipment and shall replace
such radios and radio software at an average rate of ten percent (10%) a year
for ten (10) years.
7.10 Network Loops. In the event that during the construction of the
Pathnet network a network loop is created relating to the System, Pathnet shall
facilitate allowing Incumbent to benefit from the existence of such network loop
in the event of a System Outage.
A-16
<PAGE>
SECTION 8. GENERAL.
8.1 Access to Sites. In addition to any access rights relating to the
Leased Premises set forth in Section 5 of the Agreement, Incumbent shall provide
upon the reasonable request of Pathnet, road access for all construction
vehicles. In the event that access for the Pathnet System installation is the
primary reason for the construction by Incumbent of additional roads and paths,
Pathnet and Incumbent shall mutually agree on the cost to be borne by each Party
to perform such construction.
8.2 Parking at Sites. At the request of Pathnet, Incumbent shall provide
for vehicular parking at each Site at no charge to Pathnet for use during the
term of this Agreement; provided, however, in the event sites are located in
urban areas where vehicles are parked in privately operated lots or garages,
Pathnet shall be responsible for any and all parking charges at such urban
sites.
8.3 Use of Telecommunications Devices. While visiting Incumbent's sites,
Incumbent shall allow Pathnet to reasonably use existing telephone lines or
Order Wires in connection with Pathnet's performance of its rights and
obligations under this Agreement.
8.4 Fuel Tanks. Incumbent shall ensure that all liquid petroleum, diesel
or natural gas tanks, as the case may be, are adequately supplied throughout the
term of this Agreement.
8.5 Retaining of Records. All records and reports required pursuant to
this Schedule A, shall be retained by Pathnet or Incumbent, as the case may be,
for at least five (5) years after creation or any longer period as may be
required by law.
8.6 Work Permits. Incumbent shall obtain all necessary local, state and
Federal construction and work permits as required to perform all of the services
set forth in this Agreement.
8.7 Hazardous Material.
8.7.1 Existence of Hazardous Material. Without the consent of
Incumbent as described below, Pathnet shall not bring or cause or permit,
knowingly or unknowingly, any Hazardous Material to be brought or remain
upon, kept, used discharged, leaked or emitted on any of Incumbent's sites
or Facilities.
8.7.2 Compliance with Environmental Laws. In the event that
Incumbent allows Pathnet to bring Hazardous Materials to Incumbent's sites
as set forth in the Environmental Audit, Pathnet shall strictly obey and
adhere to any and all Federal, state or local laws, ordinances, orders,
rules, regulations, codes or any other government restrictions or
requirements (including, but not limited to, CERCLA and RCRA) which in any
way regulates, governs, or impacts Pathnet's possession, use, storage,
treatment or disposal of such Hazardous Material (including, where
required by law, providing material safety data sheets for Hazardous
Materials).
A-17
<PAGE>
8.8 Transportation. Pathnet shall provide transportation for all Pathnet
personnel or Subcontractors to each of Incumbents sites and between such sites
in connection with the performance of the Services.
8.9 Storage. Incumbent shall provide at no charge to Pathnet or any vendor
providing materials for use in the System, reasonable storage for all equipment
and materials to be installed or used for the installation, testing or operation
of the System, which storage facilities shall also serve as the drop-ship point
for staging all installation equipment used in the System. All storage
facilities are provided on an "as is" basis, and Incumbent shall not be
responsible for ensuring that any storage facilities shall be suitable for
storage of any materials Pathnet or any vendor may elect to store in such
storage areas. Pathnet shall bear all responsibility and expense associated with
the receipt or shipment of equipment to or from such storage facilities and
shall provide personnel to be present, if necessary, for any deliveries.
8.10 Unpacking and Trash Removal. Pathnet shall (i) unpack all crates and
boxes, (ii) remove all trash created by such unpacking from Incumbent's sites
and (iii) verify all packing lists. Incumbent shall regularly remove all other
trash from its sites and Facilities in accordance with its normal procedures.
8.11 Manufacturing and Ordering of Equipment. As the System is installed
or upgraded after Commissioning, Pathnet shall furnish and order all required
equipment and materials, including, but not limited to, all required
installation materials, from the respective manufacturers in accordance with the
timing set forth in the Project Schedule.
8.12 Ship and Delivery Schedules. At least two (2) weeks prior to receipt
of any equipment or materials to be used in the modifications or installation
set forth in Section 2 and Section 4 to this Schedule A, respectively, Pathnet
shall provide to Incumbent detailed ship and delivery schedules relating to such
equipment and materials.
8.13 Electricity. Incumbent shall provide all required electricity for the
design, modification, installation, operation and monitoring of the System in
accordance with the specifications set forth in Exhibit A-3 to this Schedule A;
provided Pathnet shall pay for any reasonable costs of connecting to the
Incumbent provided electricity at each Facility.
A-18
<PAGE>
EXHIBIT A-1
SYSTEM EQUIPMENT
SEGMENT A
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Equipment Hammond Babcock Maple Stillwell South Plymouth Winamac Monticello
Bend
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Generators 0 0 0 0 0 0 0 0
- --------------------------------------------------------------------------------------
DC 1 1 1 1 1 1 1 1
Charger
Systems
- --------------------------------------------------------------------------------------
Battery 1 1 1 1 1 1 1 1
Plants
- --------------------------------------------------------------------------------------
Antennas 2 4 4 6 2 6 4 2
- --------------------------------------------------------------------------------------
Waveguide 460 1,340 1,180 1,500 260 1,692 1,220 296
- --------------------------------------------------------------------------------------
NEC 2000 2 4 4 6 2 6 4 2
Sonet
Radios
- --------------------------------------------------------------------------------------
OC-3 1 1 0 2 1 2 0 1
Multiplexers
- --------------------------------------------------------------------------------------
Network 0 0 0 0 0 1 0 0
Servers
- --------------------------------------------------------------------------------------
New 0 0 1 0 1 0 0 0
Shelters
- --------------------------------------------------------------------------------------
New Towers 0 1 1 1 0 0 1 1
- --------------------------------------------------------------------------------------
</TABLE>
A-19
<PAGE>
SEGMENT B
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
Equipment Northeast Albion Ft. Wayne SYSTEM TOTAL
- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
Generators 0 0 0 0
- -------------------------------------------------------------------
DC Charger Systems 1 1 1 11
- -------------------------------------------------------------------
Battery Plants 1 1 1 11
- -------------------------------------------------------------------
Antennas 4 4 2 40
- -------------------------------------------------------------------
Waveguide 1,400 1,370 500 11,218 feet
- -------------------------------------------------------------------
NEC 2000 Sonet 4 4 2 40 TRR's
Radios
- -------------------------------------------------------------------
OC-3 Multiplexers 0 0 1 8 Shelves
- -------------------------------------------------------------------
Network Servers 0 0 0 1
- -------------------------------------------------------------------
New Shelters 0 0 1 3
- -------------------------------------------------------------------
New Towers 1 0 0 6
- -------------------------------------------------------------------
</TABLE>
A-20
<PAGE>
EXHIBIT A-2
MANUFACTURERS SPECIFICATIONS FOR RADIOS
NEC OC-3 MULTIPLEXER SPECIFICATIONS
<TABLE>
<CAPTION>
IMT-150
- -------------------------------------------------------------------------------------------
Power
Physical: Requirements: Interface: Features:
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Mounts in a 23-inch EIA -48 volts DC High Speed: OC-3 Software
rack Approximately 125 Optical Provisioning
Height 11.4 inches watts (ADM Low Speed: OC-1, Full Bandwidth Time
Width 21.4 inches configuration) STS-1, DS3, or DS1 Slot Assignment
Depth 10 inches X.25 Gateway for OSS
DS1 PM Monitoring
Capability
- -------------------------------------------------------------------------------------------
</TABLE>
NEC 2000 SERIES
Specifications:
Physical:
One cabinet (600 mm wide, 300 mm deep and 2.2 m high) for 4 radio channels
(Includes OC-3 interface per channel, space diversity receiver, order wire and
wayside DS1 interface, and 1:N switch).
Power Requirements:
- -24 or -48 volts DC
Approximately 200 watts per radio channel for a terminal configuration
Approximately 150 watts per radio channel direction (1 TRR) for a repeater
configuration
Interface:
OC-3
Operating Specifications:
Frequency Band: 5.945 to 6.425 GHz
Modulation: 128 QAM MLCM
Capacity: 155.52 Mb/s plus radio overhead (Wayside DS1, Order Wires, ATPC
signals, 1:N commands, monitoring)
Transmit Power at interface to transmit waveguide: +29.7 dBm
System Gain (Waveguide interface to waveguide interface - no ATPC): 101.1 dB
System Gain (Waveguide interface to waveguide interface - with ATPC): 103.1 dB
A-21
<PAGE>
Dispersive Fade Margin (10^-3): 48 dB
FCC Identifier: BSF6P155-S02A
Emission Designator: 30M0D7W
Nec 2600 Series Digital Microwave Radio Specifications
Models Available:
8 DS-1: 6G13MB
12 DS-1: 6G19MB
16 DS-1: 6G26MB
32 DS-1: 6G52MB
Physical:
One Hot-Standby with Space Diversity receiver (2 TRR) Subsystem is 482 mm (19")
Wide by 798.5 mm (31.5") High weighing 75 lbs. A total of two (2) HSB systems
for a repeater or a terminal 3:1 multi-line system (4 TRR) will fit in a
standard 19" by 7' 6" Rack.
Power Requirements:
- -24 or -48 volts DC
Approximately 130 watts per HSB radio system (2 TRR)
Approximately 150 watts per HSB radio system for 32 DS-1 model.
System Configuration Options:
The following system configurations are available for 8, 12, 16, or 32 DS-1
capacity systems:
HS/HS=Hot Standby Transmitter and Hot Standby Receiver (2 TR)
HS/SD=Hot Standby Transmitter and Space Diversity Receiver (2 TR)
1+0/SD=Single Transmitter with Space Diversity Receiver (1 TRR)
1+0=Single Transmitter and Single Receiver (1 TR)
Features:
Automatic Transmit Power Control (ATPC)
Can be site configured for a Terminal or Regenerative Repeater with any
channel drop and insert capabilities.
Forward Error Correction (FEC)
Decision Feedback Equalizer (DFE) for fading countermeasures.
In-Service capacity upgrades.
Two (2) VF Orderwire channels Per Radio
One (1) Data channel up to 9.6Kbs
Operating Specifications:
Frequency Band: 5.925 to 6.425 Ghz or 6.525 to 6.825 Ghz
Modulation: 128 QAM
Transmit Power at Interface to waveguide: + 30 dBm
A-22
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
8 DS-1 12 DS-1 16 DS-1 32 DS-1
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
System Gain: 106.0 dB 104.0 dB 103.0 dB 100.0 dB
- --------------------------------------------------------------------------------
Receiver Threshold: -80.0 dBm -78.0 dBm -77.0 dBm -74.0 dBm
(BER 10^-6)
- --------------------------------------------------------------------------------
Dispersive Fade 64.0 dB 63.0 dB 62.0 dB 59.0 dB
margin: (BER 10^-6)
- --------------------------------------------------------------------------------
Emission Designator: 10MOD7W 50MOD7W 3M7507W 2M50D7W
- --------------------------------------------------------------------------------
FCC Identifier: BSF89N6P52-S BSF89N6P26-S BSF89N6P19-SO BSF89N6P7-SO
- --------------------------------------------------------------------------------
</TABLE>
A-23
<PAGE>
EXHIBIT A-3
ELECTRICITY AND POWER SPECIFICATIONS OF THE SYSTEM
DC POWER SPECIFICATIONS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
Site Configuration Radio Mux Chan bank Incumbent Site Total Site Total Battery Size
7:1(Watts) OC-3(Watts) (Watts) Equip(Watts) WATTS DC AMPS 10 Hour Reserve
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Terminal End 1:3 800 330 250 720 2,100 44 Amps 440 AH
- -------------------------------------------------------------------------------------------------------------------------------
Terminal End 1:7 1,600 770 250 720 3,340 70 Amps 700 AH
- -------------------------------------------------------------------------------------------------------------------------------
Repeater 1:3 1,200 None 250 720 2,170 45 Amps 530 AH
- -------------------------------------------------------------------------------------------------------------------------------
Repeater 1:7 2,400 None 250 720 3,370 70 Amps 700 AH
- -------------------------------------------------------------------------------------------------------------------------------
2 Way Junction 1:3 1,600 125 250 720 2,695 56 Amps 600 AH
- -------------------------------------------------------------------------------------------------------------------------------
2 Way Junction 1:7 3,200 125 250 720 4,295 90 Amps 900 AH
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
AC POWER SPECIFICATIONS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Site Configuration DC Heat & Air Lights Total Total
Chargers Conditioning Miscellaneous AC WattsAC Amps @ 220 VAC
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Terminal End Nominal 3,696 3,000 300 1,500 8,496 39
- --------------------------------------------------------------------------------------------------------------------
Terminal End Maximum 8,712 6,000 1,600 2,800 19,112 87
- --------------------------------------------------------------------------------------------------------------------
Repeater Nominal 3,696 4,500 300 1,500 9,996 45
- --------------------------------------------------------------------------------------------------------------------
Repeater Maximum 8,712 9,000 1,600 2,800 22,112 101
- --------------------------------------------------------------------------------------------------------------------
2 Way Junction Nominal 4,752 6,000 500 1,800 13,052 59
- --------------------------------------------------------------------------------------------------------------------
2 Way Junction Maximum 8,712 12,000 2,000 3,200 2,512 118
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: All New Shelters are AC equipped for 200 Amps, single phase, 220VAC
Service
A-24
<PAGE>
EXHIBIT A-4
INCUMBENT MULTIPLEXING REQUIREMENTS
<TABLE>
<CAPTION>
Site Name 1/0 Multiplexer DS-0's Wired DS-0's Equipped
- --------- --------------- ------------ ---------------
<S> <C> <C> <C>
</TABLE>
[TO BE AMENDED PURSUANT TO SECTION 3.3(l) OF THIS SCHEDULE A]
A-25
<PAGE>
EXHIBIT A-5
EQUIPMENT SHELTERS SPECIFICATIONS AND DESIGN
1. Summary
This "Equipment Shelter Specification" applies to concrete pre-cast,
pre-equipped, transportable equipment shelters for use in conjunction with
equipment installed by Pathnet, Inc. and covers material and workmanship
standards. This document is designed to assist the user in defining your
specific equipment shelter requirements. The shelter must be designed for the
explicit purpose of housing electronic equipment, fiberoptics equipment,
measuring devices and other related components, within a controlled environment
required for the proper operating conditions for the equipment. The shelter
manufacturer must adhere to compliance with all national building codes. All
shelters will be assumed to be placed within ten (10) feet of the base of the
tower.
2. Foundation
The shelter shall be designed for any of the following foundation types:
-- Pier & Beam
-- Slab
-- Perimeter Beam
3. Shelter Type
The shelter shall be constructed of pre-cast, pre-assembled Portland concrete
and shall be manufactured in a controlled environment.
4. Shelter Size
The shelter should conform to the following dimensions unless otherwise noted:
-- One room shelter (no generator) - 12' X 20' OD
-- Two room shelter (equipment room and generator room) - 12' X 28' OD
5. Operating Environment
5.1. Temperature
The optimum operating temperature of the equipment to be installed is 75
degrees F (24 degrees C) unless otherwise specified by Pathnet.
5.2. HVAC
The heating and cooling requirements for a shelter are based upon the
outside maximum and minimum temperature expected for the shelter location
and the equipment heat output specified by Pathnet. Typical heat load
values are 12,000 to 18,000 BTU/HR. Design heat
A-26
<PAGE>
loads for specific shelters will be provided by Pathnet. Two wall-mounted
air conditioners are required. The units are to be sized so that one unit
will maintain an interior temperature of 75 degrees F with the highest
exterior temperature expected for shelter location.
6. Hardware
All external hardware will be galvanized or coated to protect against corrosion.
7. Structural Structural design and manufacturing shall conform to ACI 318-89
requirements.
7.1. Floor
The floor section shall be constructed of 8" waffled structural pre-cast
concrete. The ribs shall be 2'-0" O.C. transverse and 4'-0" O.C
longitudinal. All surfaces shall be smooth. The interior surface shall be
covered with 1/8" X 12" X 12" square vinyl floor covering, bonded with a
waterproof contact adhesive.
7.2. Roof
The roof section shall be constructed of pre-cast concrete with 1/4" per
foot drainage slope. The ceiling insulation and finish shall be foamboard
insulation with 3/8" vinyl coated board. All joints will be covered by
plastic joint or corner trim. The roof section shall provide a 2" overhang
on all sides. The roof will be a hip type sloping in 4 directions. It
shall be constructed as a cap and should fit over the walls, leaving no
exposed roof-to-wall joint.
7.3. Wall
The wall section shall be constructed of 4" solid concrete, cast in one
piece to minimize joints, with an exposed aggregate exterior finish and
capable of withstanding gun fire from a 30.06 at 50 feet. The wall
insulation and finish shall be foamboard insulation with 1/2" vinyl coated
board. All joints will be covered by plastic joint or corner trim. All
floor/wall intersections will be finished with 4" vinyl baseboard. There
will be no exposed wall-to-floor joint.
8. Thermal
Standard wall and ceiling thickness shall be 1" foamboard insulation. The
calculated system value is R9.6 with 4" thick lightweight concrete walls/roof
sections, 1" foamboard insulation covered by 1/2" fiberglass reinforced plastic
surfaced board. (Thicker insulation and higher R-values must be specified
according to the locality.)
9. Concrete
All sections must be constructed of concrete with a compressive strength of 3000
PSI at 28 days.
A-27
<PAGE>
9.1. Cement Type
Cement used in concrete shall be standard Portland cement conforming to
the requirements of the "Standard Specifications for Portland Cement",
ASTM Designation C150.
9.2. Mix
The mix design shall be 114-118 lbs./cu. ft. structural lightweight
concrete using expanded shale or expanded clay aggregate and shall be
homogeneous. Seeding of aggregates for exposed aggregate finish is not
allowed.
Water will be free from injurious quantities of oil, alkali, vegetable
matter and salt. Non-potable water shall not be used in mixing concrete.
9.3. Concrete Standards
Concrete aggregates will conform to one of the following standards:
-- Specifications for Concrete Aggregates (ASTM Designation: C33)
-- Specifications for Lightweight Aggregates for Structural Concrete
-- (ASTM Designation: C330)
9.4. Reinforcement
Reinforcement bars shall be deformed steel bars conforming to the
requirements of the "Specifications for Deformed and Plain Billet-Steel
Bars for Concrete Reinforcement", ASTM Designation: A615. Welded smooth
wire fabric shall be steel wire fabric conforming to the "Specifications
for Welded Steel Wire Fabric for Concrete Reinforcement", ASTM
Designation: A185.
10. Sealing
-- The shelter shall be sealed to resist dust and water infiltration.
-- All joints shall be sealed with a compressible resilient sealant.
-- There shall be no exposed roof-to-wall or wall-to-floor joints.
-- Exterior surfaces of walls and roof shall be sealed with two (2)
coats of Thoroglaze H Sealer, or acceptable equivalent unless
otherwise noted.
11. Door
11.1. Door Construction
The door shall be 3' X 7' X 3/4", 18 gauge galvanized steel, insulated
(minimum R12), primed, painted and installed flush with the door check,
door stop, weather stripping, mortise lockset and stainless steel ball
bearing hinges.
A-28
<PAGE>
11.2. Door Frame
The doorframe shall be of at least16 gauge galvanized steel, primed,
painted and cast into the wall panel.
11.3. Door Locks
All doors shall have a deadbolt locking mechanism with a minimum 1" throw
and an anti-pick lock guard.
12. Structural Loading
12.1. Floor
A minimum of 140 lbs. per sq. ft. as defined in "Uniform Distributed
Load", ASCE 7-88. The battery area should be reinforced to support 5000
lbs. per battery rack. The battery area will be shown on the floor plan.
12.2. Roof
A minimum of 50 lbs. per sq. ft. as defined in "Roof Snow Load
Specification", ASCE 7-88.
12.3. Wind
A minimum of 115 MPH as defined in "Basic Wind Speed Specifications", ASCE
7-88.
12.4. Earthquake
Shelters shall be designed for the most stringent earthquake rating
conditions as defined in ASCE 7-88, Zone 4.
13. Electrical System
Electrical installation and wiring shall conform to the latest edition of the
National Electrical Code (NEC) and shall consist of the following as a minimum:
13.1. Minimum Requirements
-- 200 Amp, 220 VAC Single Phase Main
-- 200 Amp Manual Transfer Switch
-- 200 Amp Generator Interface
-- Forty (40) Position Breaker Box (With 32 single pole, 20 Amp
breakers.)
-- 120/240VAC 3-Wire Arrester With Alarms (65kVA Peak Capacity)
-- Surface Mounted EMT Conduit
-- Grounded Duplex Outlets (One every 4 ft. on 3 walls.)
-- Four (4) Fluorescent Lights (2 bulb fixtures with inside
switch mounted by door.)
-- Incandescent Porch Light (With 0-30 minute timer)
A-29
<PAGE>
13.2. Surge Arresters
An interior-mounted surge arrester is designed to protect against
transients caused by lightning or power switching surges. Primary
arresters protect the building's electrical components and are
automatically restored following activation due to a surge. It should be
installed across the main breaker on the line side unless otherwise
specified by Pathnet. Secondary arresters protect individual branch
circuits. Visual inspection is required to determine whether the arrester
must be replaced following a surge.
14. Grounding
A halo ground system should consist of at least a #2 AWG green insulated
stranded copper wire mounted around the perimeter of the interior wall just
below the ceiling. A 1/4" X 4" X 24" copper ground bar should be located
externally just below each waveguide entry plate. A #2 AWG green insulated
copper jumper should be used to bond the ground bar to the exterior halo ring.
Bonding on either interior or exterior grounding systems will be clean of dirt
and corrosion and applied with non-oxidizing grease.
14.1. Interior Halo Grounding
All cable ladder, racks, lights, equipment and exterior ground are to be
bonded to an interior halo grounding system.
The following items are required for halo grounding:
-- #2 Green Insulated Stranded Copper Halo
-- One (1) Master Ground Bar 1/4" X 4" X 24"
-- Four (4) #2 Tinned Solid Copper Drops with 10' Pigtails
-- Eight (8) #2 Green Insulated Stranded Copper Equipment Ground Drops
14.2. External Ground System
An exterior halo ring is required and will be bonded to the interior halo
grounding system with 8' pigtails listed above.
14.3. Conduit Grounding
All conduit, conduit couplings, light fixtures, junction boxes and service
equipment shall be grounded with mechanical clamps to electrically bond the
conduit. The bonding wire will be a minimum #10 AWG green insulated copper wire
for all except light fixtures. The minimum for light fixtures is #12 AWG green
insulated copper wire.
15. Waveguide Entrance
The shelter will have two 8 port waveguide entry panels and two blank panels
located on opposite walls. Two waveguide entry panels will be installed on one
wall and two blank panels mounted on the opposite wall. Pathnet will define the
location of the waveguide entry panels. Each waveguide port shall have a minimum
interior diameter of 4 inches.
A-30
<PAGE>
16. Alarms
The shelter will have general housekeeping alarms wired to a central location
associated with the following:
-- Door Open
-- Smoke Detection
-- AC Electrical Fail (sense before manual or automatic transfer
switch)
-- Surge Protector Fail
-- Air-conditioning Fail
-- High Temperature
-- Low Temperature
-- Charger Fail
-- Breaker Alarm
-- Fuse Alarm
-- Low Waveguide pressure
-- Dehydrator excess run alarm
-- Generator Fail
-- Generator Run
A-31
<PAGE>
EXHIBIT A-6
GROUNDING AND LIGHTNING PROTECTION GUIDELINES AND SPECIFICATIONS
FOR COMMUNICATIONS SHELTERS
Preface
An effective ground system for a communications equipment shelter is necessary
to ensure protection of personnel and equipment when a fault occurs. The ground
system limits excessive voltages from various electrical conditions such as
lightning and utility switching, and contributes to superior performance of the
electronic equipment by reducing noise induction.
1. Grounding Introduction Communications equipment shelters are subject to
electrical noise and high-voltage surges. These transients occur predominantly
in the common mode (line to ground), and are typically caused by lightning or
power switching.
1.1 Lightning
When lightning induced surges appear at the point of connection to a
building (the service entrance), a high common mode potential is generated
between the current carrying conductors and ground. This potential
produces a flow of current that seeks a path to earth to complete the
circuit.
Lightning can easily induce a 3000-ampere transient into a power line.
When this transient reaches a building, the building ground at the service
entrance can rise to 60,000 volts (assuming a building earth resistance of
20 ohms). The reference potential for ground in the rest of the building
would rise proportionately.
In order to protect the building against these high voltage surges, it is
important to establish a low resistance earth ground at the service
entrance. The National Electrical Code (Article 250, Part 4) specifies
that the grounding at a building's service entrance should have a
resistance to ground of 25 ohms or less. The IEEE Green Book (Recommended
Practice for Grounding, ANSI/IEEE Standard 142-1982) recommends that the
ground resistance be less than 5 ohms. If the building contains highly
sensitive electronic communications equipment, a ground resistance of 5
ohms or less is recommended if this value can be practically achieved with
the given site conditions.
1.2 Types of Grounding
There are two major types of grounding that should be considered when
designing an electrical system: power distribution system grounding and
telecommunications equipment grounding.
1.2.1. Power Distribution System Grounding
A-32
<PAGE>
The power distribution system pertains to the incoming AC service,
service entrance equipment, power panels, and electrical conductors
providing the power to various electrical/mechanical equipment.
Grounding of the power distribution system is essential to:
-- protect occupants from exposure to dangerous shock voltage
-- provide a path for ground fault current
-- limit excessive voltages due to lightning or utility switching
Typical grounding components for the power distribution system
include:
-- grounding electrode at the service entrance
-- ground bus in the power panel
-- ground lugs in the other service entrance equipment such as
the safety disconnect or transfer switch
-- third wire grounding conductor for all the electrical
equipment
-- lightning and surge arresters.
1.2.2. Telecommunications Equipment Grounding. Electronic equipment
such as radio systems, telephone switches, battery chargers and
rectifiers, uninterrupted power supply (UPS) equipment, and any
other equipment that encloses or is adjacent to energized conductors
require additional grounding. This sensitive electronic equipment
must be protected from the following:
-- excessive transients caused by lightning or utility switching
-- degraded performance due to electromagnetic noise
Equipment grounding frequently utilizes a ground ring encircling the
interior of the shelter (halo ground ring). Ground lugs attached to
the various equipment housings and racks are connected to the ground
ring. Ground bars at the waveguide entry and at each section of the
cable ladder are also tied to the ground ring. Multiple external
drops connect the internal ground ring to the exterior site ground
ring.
2. Grounding Practices
2.1. The Grounding Conductor
In order to reduce inductance and surge voltages in a power distribution
system, a ground path for protected devices should be provided. One method
is to rely upon the conduit system to carry these transient currents. This
is allowed by the National Electrical Code in Article 250-91 (b). The best
method, however, is to include an extra conductor in the same conduit or
raceway as the current carrying conductor. The grounding conductor should
extend to the ground connection in the service entrance equipment.
A-33
<PAGE>
2.2. Equipment Ground Wires
When lightning strikes, it takes the path of least impedance (resistance
and inductance). Cable bends increase inductance. Therefore, equipment
ground wires should be large, and run straight for minimum inductance and
voltage drop. The recommended bending radius is 6" when bends are
unavoidable. Equipment ground wires should be separated from all other
conductors, and should not be run through metal conduit unless the conduit
and ground wires are bonded at both ends.
2.3. Bonding
Even when the ground to earth connection's impedance of the service
entrance is minimized and grounding conductors are used in the feeder and
branch circuits, high transient voltages can still occur in the power
distribution system as a result of utility power switching. An effective
method of limiting this noise (especially common mode voltage
differentials) is to bond all the equipment ground wires to a halo ground
system that is connected to the site ground system and power distribution
system ground.
Bonding is the connection of all potential ground conductors (including
racks, frames, cable ladder, conduits, metal enclosures, and exposed
metallic members of the building structure) to each other. Bonding does
not eliminate voltage drops since transient currents will continue to take
the path of least inductance. However, the current is sufficiently
distributed throughout the bonded system to reduce the voltage gradients
in any area to levels that prevent personal injury or equipment damage.
Proper bonding procedures produce cross connections of all equipment and
structures. It provides many paths to ground from any one point. Since the
bonded ground network does not form a part of the normal electrical power
path, multiple inductive loops are not a concern. Only transient or fault
currents can flow in the ground network.
In addition to preventing the development of voltage gradients, cross
connection reduces the system's susceptibility to high frequency noise.
Since all conductors have some impedance, resonance will occur at some
frequencies. At those frequencies, the impedance of the grounding
conductor may be very high, and allow noise currents to develop increased
voltage drops. By bonding the ground network, however, there may be other
conductors nearby that are not resonating, and a low impedance path for
the noise signal can be maintained.
2.4. Faraday Cage
A Faraday cage provides an EMI shield to further reduce noise. The cage
usually consists of multiple conductors in a box like configuration. A
halo ground system with multiple down conductors can act as a quasi
Faraday cage, and give some low frequency shielding.
When lightning hits the tower, the tower will pass the current to ground
and radiate RF energy. A Faraday cage can reduce this energy by adding
distance (as seen by the magnetic field) between the tower and the
equipment shelter. The steel reinforcing in the
A-34
<PAGE>
concrete shelter walls can form a highly effective Faraday cage if bonded
to the grounding system. The amount of shielding depends on the size and
spacing of the welded wire fabric. Additionally, all rebar must be bonded
together.
2.5. Site Ground System
When a tower is struck by lightning, equipotential voltage rings form
around the tower until the energy is diffused into the surrounding ground
soil via the grounding system.
The tower ground ring will disperse the energy away from the tower base or
guy wires. The ground rods will transfer the energy deeper into more
conductive soil layers. This is important to keep lightning surges out of
the equipment shelter. Unless the energy is properly dispersed into the
soil, the voltage will build up in the tower, and attempt to go to
another, less desirable path.
The equipment shelter is protected by a perimeter ground system that forms
an equipotential plane. Also, ground rods should be driven into the soil
at the following points:
-- each corner of the shelter
-- the service entrance
-- the waveguide entry port
-- each external halo ground drop
-- every 10' (or less) along the exterior ground ring
The shelter ground ring system should have a connection to the tower
ground system just below the coaxial cable runs. A second connection
between the two ground systems should be installed for redundancy. All
metal work (waveguide bridge and supporting posts) should be bonded to the
ring/radial ground system.
2.6. Grounding System Performance Check
Test the original installation periodically to determine whether
resistance is remaining constant or is increasing. An increase in
resistance can be caused by several factors.
In lower conductive soils, high electric fields can develop at the ends of
the ground rods, which can cause arcing in the soil. This arcing can cause
glassification around the rods, beginning at the tip, and working its way
upward. This glassification of the silica in the soil acts as an
insulator, severely impairing the grounding characteristics of the rod. If
resistance increases over time to an undesirable level, reduce the
resistance by adding electrodes or chemically treating the soil to
increase moisture content.
3. Computing Resistance to Ground
3.1. Resistance to Earth
The resistance of a grounding electrode is dependent on the:
A-35
<PAGE>
-- resistance of the electrode,
-- contact resistance between the electrode and the soil, and
-- resistance of the soil from the electrode surface outward as
described by the geometry set up by the flow of current from the
electrode to infinite earth.
The first two resistances are negligible, and can be disregarded. The
third resistance is larger and must be considered.
Around a ground rod this resistance is the sum of the series resistances
of virtual shells of earth, located progressively outward from the rod.
The shell nearest the rod has the smallest circumferential area or cross
section, so it has the highest resistance. Each successive shell has
progressively larger areas, and thus, progressively lower resistances. For
an 8-foot ground rod, the incremental increase in resistance decreases to
nearly zero when the rods are spaced 16 feet apart. Therefore, when using
multiple ground rods, the optimal spacing between rods should be double
the length of the rod.
3.2. Resistance Calculations
When computing resistance to ground, treat the tower grounding and the
shelter grounding as two separate systems. Within each of these two
systems are two subsystems. The shelter has a grounding ring and the
grounding rods. The tower has a grounding ring, grounding rods, and
occasionally, grounding radials.
The IEEE Green Book provides several formulas for calculating the
resistance to ground for several different systems.
4. Typical Grounding Configurations
Several options are available when deciding on a ground system for a
communication shelter, depending upon the soil conditions and thunderstorm
activity of a particular site. The U.S. Weather Bureau publishes an isoplethic
map of the United States showing the average number of days each year on which
thunderstorms occur. Any area with an isoplethic level above 90 should be
considered a high-risk area, and serious consideration should be given to
providing a more stringent grounding system.
4.1. Ground Bar System
In shelters where very little lightning protection is needed, a simple
ground bar system can be used. A system of this type would consist of a
single copper ground bar located under the waveguide port, telephone
entry, or both, with an external drop to be connected to the external
ground system. Transmission lines should be grounded to this ground bar.
4.2. Halo Ground System
Pathnet shelters will use a halo ground system. This system includes a #2
AWG copper wire completely encircling the equipment room. The halo is
located 3 to 6 inches below
A-36
<PAGE>
the ceiling. External drops are located at each corner of the shelter.
Wall penetrations should be angled at 45 degrees to minimize bending.
4.3. External Ground System
The external ground system for all shelters consists of ground rods placed
at each corner of the shelter and 10' intervals along the ground ring,
below the waveguide entry, and at the AC service entrance. The rods should
be exothermically welded to a perimeter ground ring of #2 AWG solid tinned
copper wire. (Tinned copper is recommended to reduce corrosion of the
wire). The wire should be buried below the frost line (minimum 30", deep
per NEC Sec 250-8(d)), and at least 24", away (measured horizontally) from
the foundation. The ground ring should be bonded to the tower ground
system at two locations, to the externally mounted ground bars under the
waveguide ports and to the AC service ground as close as possible to the
service entrance.
5. General Specifications
This section covers grounding and lightning protection of pre-cast,
pre-equipped, and transportable equipment shelters. It establishes minimum
standards for grounding of all Pathnet Equipment Shelters, and provides
standards for additional customer grounding options.
5.1. General Guidelines
5.1.1 Workmanship
Equipment grounding wire conductor runs will be as short and
straight as possible. All equipment and bonding grounding conductors
will have radii bends 6" or greater.
5.1.2. Design
Where possible, the AC service entrance, waveguide entry port, and
telephone line entry will all be located in close proximity to each
other, and their associated grounding systems will be bonded
together.
5.1.3. Connections
Unless specified otherwise, minimum connection requirements will be
of the mechanical type made with a crimp type connector. A one hole
copper ground lug will be used for equipment connections. An
oxidizing preventative compound will be applied to all mechanical
connections, and paint will be removed as necessary to insure
positive bonding of all grounded equipment.
All external, buried connections will be of the exothermically
welded type. These include, but are not limited to, halo drops to
ground rod, buried ground ring to ground rod, halo drops to ground
ring, service entrance ground to ground rod.
5.1.4. Wire
A-37
<PAGE>
All equipment grounds will be #6 AWG. Circuit grounding conductors
will be no more than two wire sizes smaller than the current
carrying conductors of the same circuit (minimum #12 AWG). All
external ground wire, including but not limited to the external
ground ring and external halo drops, will be #2 AWG solid tinned
copper.
5.2 Interior Grounding
5.2.1. Halo Ground
The halo ground will consist of a minimum #2 AWG wire located 3" to
12", below the finished ceiling, and will completely encircle the
equipment room. The wire will be green insulated stranded copper,
bare stranded copper, or bare tinned solid copper. Each corner of
the equipment room will have an omni-directional drop to the floor
of the same wire size and type as the halo ring. Connection of these
drops to the halo will be at least the defined minimum (see section
5.1.3). If solid tinned wire is used, the drop will be one
continuous wire that is long enough to extend 8 feet beyond the
exterior of the shelter. If insulated wire is used, the drop will
extend to the floor, and then be connected in the same manner as the
halo, to an 8 foot length of solid tinned wire of the same size. The
exterior penetrations will be at 45 degree angles (to minimize
ground drop bend radii) and approximately one (1) inch in diameter.
5.2.2. Waveguide Entry Ground Bar
There will be a 1/4" x 4" x 20" (minimum) copper ground bar located
outside the shelter approximately 6" below the waveguide entry plate
(NEC Sec 800-33). This bar will be connected to the exterior ground
ring exothermic weld. The grounding conductor will be of the same
size and type as the halo ring.
5.2.3. AC Service
The AC service ground conductor will be bonded to the ground rod
located at the service entrance. Ground lugs provided in all service
entrance equipment will be bonded to the service ground conductor.
The system ground and neutral will be bonded at one location, as
close as practicable to the service entrance. All service grounding
shall conform to Article 250 of the National Electrical Code.
5.2.4. Primary Surge Arrester
There will be a surge protective device applied at the first piece
of service equipment inside the equipment shelter. This device will
be considered the primary surge protector. Conductors connecting the
surge protective device will be as short as possible, and will
contain no sharp bends or loops.
The operating characteristics of the primary surge arrester will
coordinate with the equipment surge withstand voltage capabilities.
The surge arrester should be
A-38
<PAGE>
capable of suppressing up to 65kVA, be self restoring after
operation, and may be equipped with a failure alarm over current
protective device and visual status indicators.
5.2.5. Cable Ladder
Cable ladder assemblies will be bonded to the halo ring with a #6
AWG or larger ground conductor. All cable ladder splices and
junctions will be bonded on at least one side with a #6 AWG or
larger conductor, and use grounding clips suitable for the purpose.
Paint will be removed as necessary for an electrically sound
connection.
5.2.6. Conduit Grounding
Each conduit discontinuity, including but not limited to conduit
couplings, junction boxes, light fixtures, and service equipment,
will be provided with ground clamps to electrically bond the
conduit. The bonding wire will be green insulated #6 AWG or larger.
5.2.7. Tower Light Controller Penetration
There will be a 1-1/2" penetration cast in place near the waveguide
entry port to allow for connection of the tower light controller.
The penetration will be lined with a 1" PVC running thread to
provide isolation between the interior and exterior conduit. The
running thread will be connected to interior and waterproof exterior
6" x 6" junction boxes.
5.3. Exterior Grounding
5.3.1. Ground Rods
There will be driven ground rods located at each corner of the
building, and at the AC service entrance and waveguide entry port.
These rods will be made of copper clad high strength steel with
minimum dimensions of 5/8" x 8'. The rods will be located at least
24" from the edge of the foundations, and driven such that the top
of the rod is below the frost line of the installation site. The
rods will be exothermically welded to the external halo drops.
5.3.2. Ground Ring
There will be a buried horizontal wire completely encircling the
equipment shelter. This wire will be solid tinned copper wire of #2
AWG or larger. The ground ring will not be closer than 24" from the
shelter foundations, and will be exothermically welded to each
ground rod. The ring will be buried 30" below grade or below the
frost line of the installation, whichever is greater.
A-39
<PAGE>
The ground ring will be connected to the tower ground system from
the ground rod located at the waveguide port to the nearest ground
rod of the tower system. A second connection will be made from a rod
at a corner of the shelter to an alternate rod of the tower. These
connections will be made with a #2 AWG wire, or a wire of the same
size as the tower ground ring, whichever is larger.
5.3.3. Testing
The external ground system will be tested after installation, and
its resistance to earth ground will be less than 10 ohms. It is
recommended that tests be performed twice a year to insure ground
system integrity.
Biddle Instruments Model DET2/2 Digital Ground Tester, or
equivalent, will be used for testing and all manufacturers'
instructions will be followed.
A-40
<PAGE>
EXHIBIT A-7
NETWORK INTERCONNECTIONS SCHEDULE
<TABLE>
<CAPTION>
SYSTEM SITE CODE OTHER SYSTEM SITE CODE HEIGHT AZIMUTH
<S> <C> <C> <C>
</TABLE>
[TO BE AMENDED PURSUANT TO SECTION 3.3(s) OF SCHEDULE A]
A-41
<PAGE>
EXHIBIT A-8
SYSTEM SPURS
PATHNET SPURS
The System shall contain the following spurs, which shall be
installed and operated for Pathnet's network purposes:
<TABLE>
<CAPTION>
FACILITY NAME LATITUDE LONGITUDE
- ------------- -------- ---------
<S> <C> <C>
</TABLE>
INCUMBENT SPURS
The System shall contain the following spurs, which shall be
installed and operated for Incumbent's internal communications needs:
<TABLE>
<CAPTION>
FACILITY NAME LATITUDE LONGITUDE
- ------------- -------- ---------
<S> <C> <C>
</TABLE>
[TO BE AMENDED PURSUANT TO SECTION 3.3(aa) OF THIS SCHEDULE A]
A-42
<PAGE>
EXHIBIT A-9
FORM OF CERTIFICATE OF ACCEPTANCE
The undersigned, ___________________, who is ______________________ of
_________________, a Northern Indiana Public Service Company ("Incumbent")
hereby certifies as follows:
1. Incumbent has received from Pathnet, Inc., a Delaware corporation
("Pathnet") the results of all acceptance testing performed pursuant to Section
5 of Schedule A of the Fixed Point Microwave Services Agreement between Pathnet
and Incumbent (the "FPM Agreement").
2. Incumbent has reviewed the results of such acceptance testing and
hereby acknowledges that the System (as defined in the FPM Agreement), as tested
and to be maintained by Incumbent, performs in accordance with the
Specifications, as set forth in the FPM Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Acceptance as of the ___ day of ______, 199__.
------------------------------------
A-43
<PAGE>
EXHIBIT A-10
STATEMENT OF WORK
A. GENERAL
1) GENERAL INFORMATION
All equipment/materials are to be shipped to a predetermined warehouse. At that
location all inter-rack wiring will be performed to reduce the field
installation time. Pathnet personnel and/or contractors will deliver the racked
equipment to their respective sites.
NIPSCO is responsible for obtaining usage permits/permission for all property
that is required to implement all new construction on Incumbent property. The
assumption has been made that NIPSCO will determine the necessary area within
their site for the proposed new towers and associated work as required. Where
existing structures are to be re-used, NIPSCO will obtain necessary building
permits for the work effort required.
Installation/test is to be performed on a hop-by-hop basis, starting with the
Monticello, IN. path, followed by the South Bend, IN Terminal Spur path and
concluding with the Ft Wayne, IN path. NIPSCO personnel will be available to
accept the hops as they are completed.
Any equipment requiring decommissioning and removal, will be removed from site
by NIPSCO after decommissioning and de-installation.
The current path between Albion and Ft Wayne, IN may require a new 400'
self-supporting or an additional 120' added to the existing tower at Albion to
meet path requirements. If this can not be done, then the original proposed
unnamed site #505 should be reconsidered. Any changes to the Facilities shall be
subject to the change order procedures of Section 4.3 of the Agreement.
The Northeast site also requires a new 350' tower. Due to the location of two
airports, Nappanee and Goshen, it has not been determined if the tower can be
built. NIPSCO will file FAA Form 7460-1 (Notice of Proposed Construction or
Alteration) to determine if this can be done. If not, then a new site will be
required. Any changes to the Facilities shall be subject to the change order
procedures of Section 4.3 of the Agreement.
All materials and services to be provided and installations contemplated in this
Exhibit A-10 shall be provided by Pathnet as set forth in Schedule C.
B. MONTICELLO, IN
1) SITE WORK
Site work required to prepare site for installation of new tower. No additional
site work is anticipated at this time. No access issues.
2) TOWERS
A-44
<PAGE>
A new 190' tower is required.
3) BUILDINGS
Planning to locate new equipment in existing building. Additional Air
Conditioning is not planned at this time. Moderate building and electrical
upgrade is required. Transmission Line feed-thru to be provided and installed.
4) GENERATORS
No generator required at this time.
5) DC PLANT
New DC Power bay (dual 50A) and 700AH battery plant is to be provided at this
location.
6) ANTENNAS
Two 8' UHX antennas (facing Winamac) are to be provided and installed.
7) TRANSMISSION LINE
Approximately 296' of waveguide with accessories provided and installed.
8) RADIO
Space-Diversity Terminal, 6GHz (to Winamac) is to be provided and installed.
9) MULTIPLEX
New OC-3, 28 DS1, Terminal (28 wired, 12 equipped) is to be provided and
installed.
10) MISCELLANEOUS EQUIPMENT
Orderwire, Alarm, Interconnect, Fuse Panel are to be provided and installed.
C. WINAMAC, IN
1) SITE WORK
Site work required to prepare site for installation of new tower. No additional
site work is anticipated at this time. No access issues.
2) TOWERS
A new 300' tower is required.
3) BUILDINGS
Planning to locate new equipment in existing building. Additional Air
Conditioning is not planned at this time. Moderate building and electrical
upgrade is required. Transmission Line feed-thru to be provided and installed.
4) GENERATORS
No generator required at this time.
5) DC PLANT
New DC Power bay (dual 50A) and 700AH battery plant is to be provided at this
location.
6) ANTENNAS
Two 8' UHX antennas (facing Monticello) and two 8' UHX antennas (facing
Plymouth) are to be provided and installed.
7) TRANSMISSION LINE
Approximately 1220' of waveguide with accessories provided and installed.
8) RADIO
Space-Diversity Terminals, 6GHz (to Monticello and Plymouth) are to be provided
and installed.
9) MULTIPLEX
N/A.
10) MISCELLANEOUS EQUIPMENT
Orderwire, Alarm, Interconnect, Fuse Panel are to be provided and installed.
A-45
<PAGE>
D. PLYMOUTH, IN
1) SITE WORK
Site work required to prepare site for installation of new tower. No additional
site work is anticipated at this time. No access issues.
2) TOWERS
A new 284' tower is required.
3) BUILDINGS
Planning to locate new equipment in existing building. Additional Air
Conditioning is not planned at this time. Moderate building and electrical
upgrade is required. Transmission Line feed-thru to be provided and installed.
4) GENERATORS
No generator required at this time.
5) DC PLANT
New DC Power bay (dual 50A) and 700AH battery plant is to be provided at this
location.
6) ANTENNAS
Two 8' UHX antennas (facing Winamac), two 8' UHX antennas (facing Stillwell) and
two 8' UHX antennas (facing Northeast) are to be provided and installed.
7) TRANSMISSION LINE
Approximately 1692' of waveguide with accessories provided and installed.
8) RADIO
Space-Diversity Terminals, 6GHz (to Winamac, Stillwell and Northeast) is to be
provided and installed.
9) MULTIPLEX
New OC-3, 28 DS1, Terminal (28 wired, 12 equipped) is to be provided and
installed.
10) MISCELLANEOUS EQUIPMENT
Orderwire, Alarm, Interconnect, Fuse Panel are to be provided and installed.
E. STILLWELL, IN
1) SITE WORK
Site work required to prepare site for installation of new tower. No additional
site work is anticipated at this time. No access issues.
2) TOWERS
A new 200' is required.
3) BUILDINGS
Planning to locate new equipment in existing building. The existing radio
equipment room will need to be expanded to accommodate the proposed radios
transmitting to/from South Bend, Maple and Plymouth. The proposed expansion
could require additional Air Conditioning and Heating. This will need to be
determined at a future date. Moderate building and electrical upgrade is
required. Transmission Line feed-thru to be provided and installed. The existing
battery room will require the addition of the new 48 VDC batteries.
4) GENERATORS
No generator required at this time.
A-46
<PAGE>
5) DC PLANT
New DC Power bay (dual 50A) and 700AH battery plant is to be provided at this
location.
6) ANTENNAS
Two 8' UHX antennas (facing Maple), two 8' UHX antennas (facing Plymouth) and
two UHX antennas (facing South Bend) are to be provided and installed.
7) TRANSMISSION LINE
Approximately 1500' of waveguide with accessories provided and installed.
8) RADIO
Space-Diversity Terminals, 6GHz (to Maple, Plymouth and South Bend) are to be
provided and installed.
9) MULTIPLEX
New OC-3, 28 DS1, ADM (28 wired, 12 equipped) is to be provided and installed.
10) MISCELLANEOUS EQUIPMENT
Orderwire, Alarm, Interconnect, Fuse Panel are to be provided and installed.
F. MAPLE, IN
1) SITE WORK
Site work required to prepare site for installation of new tower and new
shelter. No additional site work is anticipated at this time. No access issues.
2) TOWERS
A new 300' tower is required.
3) BUILDINGS
A new shelter will be provided at this site.
4) GENERATORS
No generator required at this time.
5) DC PLANT
New DC Power bay (dual 50A) and 700AH battery plant is to be provided at this
location.
6) ANTENNAS
Two 8' UHX antennas (facing Stillwell) and two 8' UHX antennas (facing Babcock)
are to be provided and installed.
7) WAVEGUIDE
Approximately 1800' of waveguide with accessories provided and installed.
8) RADIO
Space-Diversity Terminal, 6GHz (to Stillwell and Babcock) is to be provided and
installed.
9) MULTIPLEX
N/A
10) MISCELLANEOUS EQUIPMENT
Orderwire, Alarm, Interconnect, Fuse Panel are to be provided and installed.
G. BABCOCK, IN
1) SITE WORK
Site work required to prepare site for installation of new tower. No additional
site work is anticipated at this time. No access issues.
A-47
<PAGE>
2) TOWERS
A new 350' tower is required.
3) BUILDINGS
Planning to locate new equipment in existing building. Additional Air
Conditioning is not planned at this time. Moderate building and electrical
upgrade is required. Transmission Line feed-thru to be provided and installed.
4) GENERATORS
No generator required at this time.
5) DC PLANT
New DC Power bay (dual 50A) and 700AH battery plant is to be provided at this
location.
6) ANTENNAS
Two 8' UHX antennas (facing Maple) and two 8' UHX antennas (facing Hammond) are
to be provided and installed.
7) WAVEGUIDE
Approximately 1340' of waveguide with accessories provided and installed.
8) RADIO
Space-Diversity Terminals, 6GHz (to Maple and Hammond) are to be provided and
installed.
9) MULTIPLEX
New OC-3, 28 DS1, Terminal (28 wired, 12 equipped) is to be provided and
installed.
10) MISCELLANEOUS EQUIPMENT
Orderwire, Alarm, Interconnect, Fuse Panel are to be provided and installed.
H. SDO HAMMOND, IN
1) SITE WORK
No site work is required. No access issues.
2) TOWERS
Utilizing the existing 130' tower. Tower upgrade.
3) BUILDINGS
Planning to locate new equipment in existing building. Additional Air
Conditioning, building and electrical upgrade is not planned at this time.
Transmission Line feed-thru to be provided and installed.
4) GENERATORS
No generator required at this time.
5) DC PLANT
New DC Power bay (dual 50A) and 700AH battery plant is to be provided at this
location.
6) ANTENNAS
Two 10' UHX antennas (facing Babcock) are to be provided and installed.
7) WAVEGUIDE
Approximately 460' of waveguide with accessories provided and installed.
8) RADIO
Space-Diversity Terminals, 6GHz (to Babcock) are to be provided and installed.
9) MULTIPLEX
New OC-3, 28 DS1, ADM (28 wired, 12 equipped) is to be provided and installed.
10) MISCELLANEOUS EQUIPMENT
Orderwire, Alarm, Interconnect, Fuse Panel are to be provided and installed.
A-48
<PAGE>
I. SOUTH BEND, IN
1) SITE WORK
Site work required to prepare site for installation of new shelter. No
additional site work is anticipated at this time. No access issues.
2) TOWERS
Utilizing the existing 250' tower. Tower upgrade.
3) BUILDINGS
A new shelter will be provided at this site.
4) GENERATORS
No generator required at this time.
5) DC PLANT
New DC Power bay (dual 50A) and 700AH battery plant is to be provided at this
location.
6) ANTENNAS
Two 8' UHX antennas (facing Stillwell) are to be provided and installed.
7) WAVEGUIDE
Approximately 260' of waveguide with accessories provided and installed.
8) RADIO
Space-Diversity Terminal (to Stillwell) is to be provided and installed.
9) MULTIPLEX
New OC-3, 28 DS1 Terminal (28 wired, 12 equipped) is to be provided and
installed.
10) MISCELLANEOUS EQUIPMENT
Orderwire, Alarm, Interconnect, Fuse Panel are to be provided and installed.
J. NORTHEAST, IN
1) SITE WORK
Site work required to prepare site for installation of new tower. No additional
site work is anticipated at this time. No access issues.
2) TOWERS
A new 350' S.S. tower is required.
3) BUILDINGS
Planning to locate new equipment in existing building. Additional Air
Conditioning is not planned at this time. Moderate building and electrical
upgrade is required. Transmission Line feed-thru to be provided and installed.
4) GENERATORS
No generator required at this time.
5) DC PLANT
New DC Power bay (dual 50A) and 700AH battery plant is to be provided at this
location.
6) ANTENNAS
Two 8' UHX antennas (facing Plymouth) and two 8' UHX antennas (facing Albion)
are to be provided and installed.
7) WAVEGUIDE
Approximately 1400' of waveguide with accessories provided and installed.
A-49
<PAGE>
8) RADIO
Space-Diversity Terminal, 6GHz (to Plymouth and Albion) is to be provided and
installed.
9) MULTIPLEX
N/A.
10) MISCELLANEOUS EQUIPMENT
Orderwire, Alarm, Interconnect, Fuse Panel are to be provided and installed.
K. ALBION, IN
1) SITE WORK
In the event that a new 400' Guyed tower is required new tower the site will
need preparation. No access issues.
2) TOWERS
A new 400' Guyed tower could be required or the existing tower modified by
adding 120' to the structure. Awaiting final analysis of tower.
3) BUILDINGS
Planning to locate new equipment in existing building which will require
modifications to the building. Additional Air Conditioning is not planned at
this time. Moderate building and electrical upgrade is required. Transmission
Line feed-thru to be provided and installed.
4) GENERATORS
No generator required at this time.
5) DC PLANT
New DC Power bay (dual 50A) and 700AH battery plant is to be provided at this
location.
6) ANTENNAS
Two 8' UHX antennas (facing Northeast) and two 8' UHX antennas (facing Ft Wayne)
are to be provided and installed.
7) WAVEGUIDE
Approximately 1370' of waveguide with accessories provided and installed.
8) RADIO
Space-Diversity Terminal, 6GHz (to Northeast and Ft Wayne) is to be provided and
installed.
9) MULTIPLEX
N/A.
10) MISCELLANEOUS EQUIPMENT
Orderwire, Alarm, Interconnect, Fuse Panel are to be provided and installed.
L. FT WAYNE, IN
1) SITE WORK
Site work required to prepare site for installation of new shelter. Fenced area
will need to be enlarged to accommodate the new shelter. No additional site work
is anticipated at this time. No access issues.
2) TOWERS
Utilizing the existing 250' tower. Tower upgrade
3) BUILDINGS
A new shelter will be provided at this site.
A-50
<PAGE>
4) GENERATORS
No generator required at this time.
5) DC PLANT
New DC Power bay (dual 50A) and 700AH battery plant is to be provided at this
location.
6) ANTENNAS
Two 8' UHX antennas (facing Albion) are to be provided and installed.
7) WAVEGUIDE
Approximately 500' of waveguide with accessories provided and installed.
8) RADIO
Space-Diversity Terminals, 6GHz (to Albion) are to be provided and installed.
9) MULTIPLEX
New OC-3, 28 DS1 ADM (28 wired, 12 equipped) is to be provided and installed.
10) MISCELLANEOUS EQUIPMENT
Orderwire, Alarm, Interconnect, Fuse Panel are to be provided and installed.
A-51
<PAGE>
SCHEDULE B
THE SYSTEM
Incumbent Segment A extends from SDO Hammond, Indiana, to (i) South Bend,
Indiana and (ii) Monticello, Indiana, with Facilities at the sites listed below,
as such Facilities may be amended. Segment B extends from Plymouth, IN to Fort
Wayne, IN with Facilities of the sites listed below, as such Facilities may be
amended:
INCUMBENT SEGMENT A
<TABLE>
<CAPTION>
FACILITY NAME LATITUDE LONGITUDE PATH TO:
- ------------- -------- --------- --------
<S> <C> <C> <C>
Hammond, Indiana 41-35-39 87-29-29 Babcock, IN
Babcock, Indiana 41-32-07 87-06-09 Maple, IN
Maple, Indiana 41-38-14 86-42-29 Babcock, IN
Stillwell, IN
Stillwell, Indiana 41-32-14 86-34-41 South Bend, IN
Plymouth, IN
Maple, IN
South Bend, Indiana 41-39-42 86-14-12 Stillwell, IN
Plymouth, Indiana 41-20-17 86-18-54 Stillwell, IN
Northeast, IN
Winamac 41-03-23 86-33-27 Plymouth, IN
Monticello, IN
Monticello 40-45-08 86-46-05 Winnamac, IN
</TABLE>
B-1
<PAGE>
INCUMBENT SEGMENT B
<TABLE>
<CAPTION>
FACILITY NAME LATITUDE LONGITUDE PATH TO:
- ------------- -------- --------- --------
<S> <C> <C> <C>
Northeast, Indiana 41-27-21 85-51-49 Plymouth, IN
Albion, IN
Albion, Indiana 41-22-21 85-25-34 Northeast, IN
Ft. Wayne, IN
Ft. Wayne, Indiana 41-03-52 85-09-29 Albion, IN
</TABLE>
B-2
<PAGE>
SCHEDULE C
ESTIMATED AND OPERATING COSTS
SECTION 1. OPERATING AND ADMINISRATION COSTS TO BE PAID BY INCUMBENT
1. [***]
2. [***]
3. [***]
4. [***]
5. [***]
6. [***]
7. [***]
8. [***]
9. [***]
10. [***]
11. [***]
12. [***]
13. [***]
14. [***]
C-1
<PAGE>
15. [***]
16. [***]
17. [***]
18. [***]
19. [***]
20. [***]
21. [***]
22. [***]
23. [***]
24. [***]
25. [***]
C-2
<PAGE>
26. [***]
27. [***]
28. [***]
SECTION 2. ESTIMATED COSTS TO BE PAID BY PATHNET
The Pathnet Estimated Costs shall be allocated as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Item Cost
---- ----
- --------------------------------------------------------------------------------
DRAFT
<S> <C>
Site Survey [***]
Site Work [***]
Towers [***]
Buildings [***]
Generators [***]
D.C. Plant [***]
Project Engineering [***]
PCN Coordination [***]
Antenna [***]
Waveguide [***]
Radios [***]
OC-3 Multiplexing [***]
Misc. Equipment Racks [***]
Network Management [***]
Path Engineering [***]
FCC Licensing Application [***]
System Engineering [***]
Project Engineering [***]
- --------------------------------------------------------------------------------
Total PathNet Costs [***]
- --------------------------------------------------------------------------------
</TABLE>
C-3
<PAGE>
SECTION 3. ADMINISTRATION AND OPERATING COSTS TO BE PAID BY PATHNET
1. [***]
2. [***]
3. [***]
4. [***]
5. [***]
6. [***]
7. [***]
8. [***]
9. [***]
10. [***]
11. [***]
12. [***]
13. [***]
14. [***]
15. [***]
16. [***]
C-4
<PAGE>
17. [***]
18. [***]
19. [***]
20. [***]
21. [***]
22. [***]
23. [***]
24. [***]
25. [***]
26. [***]
27. [***]
28. [***]
29. [***]
C-5
<PAGE>
30. [***]
32. [***]
31. [***]
32. [***]
33. [***]
34. [***]
35. [***]
36. [***]
37. [***]
38. [***]
C-6
<PAGE>
EXHIBIT C-1
PATHNET ESTIMATED COSTS
<TABLE>
<CAPTION>
249
Hammond 12 Babcock 4 Winamac 3 Monticello 13 Maple Stillwell
<S> <C> <C> <C> <C> <C> <C>
SITE SURVEY
Site Survey [***]
Taxes [***]
SITE SURVEY [***]
SITE WORK
Soil Reports [***]
Site Clearing /Level [***]
Fence & Gate Mods [***]
Road Const/Repair [***]
Taxes [***]
SITE WORK [***]
TOWERS
Tower/Building Analysis [***]
New Tower [***]
Tower Strength Material [***]
Tower Labor [***]
Waveguide Bridge [***]
Tower Ground [***]
Freight [***]
Taxes [***]
TOWERS [***]
BUILDINGS
Exist Bldg. Mods [***]
New Building [***]
New Bldg Delivery [***]
New Bldg Fondation [***]
Building Ground [***]
AC Power [***]
Freight(incl. in Bldg
Delivery) [***]
Taxes [***]
BUILDINGS [***]
GENERATORS
25KW MOBILE [***]
30KW [***]
LP Tank [***]
Install & Test Labor [***]
Freight [***]
Taxes [***]
GENERATORS [***]
D.C. PLANT
Chargers [***]
Chargers Spares [***]
Batteries [***]
Power Board/Panel [***]
Install & Test Labor [***]
Freight [***]
Taxes [***]
D.C. PLANT [***]
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
249
Hammond 12 Babcock 4 Winamac 3 Monticello 13 Maple Stillwell
<S> <C> <C> <C> <C> <C> <C>
PCN COORDINATION
PCN Coordination [***]
Taxes [***]
PCN COORDINATION [***]
ANTENNAS
Antenna Material [***]
Install & Align Labor [***]
Freight [***]
Taxes [***]
ANTENNAS [***]
WAVEGUIDE
Waveguide Material [***]
Install & Test Labor [***]
Freight [***]
Taxes [***]
WAVEGUIDE [***]
RADIOS
1:1 Terminal: 2 & 3 Way [***]
1:1 Repeater [***]
Add RF Channel (2:1) [***]
OAM&P Software/LT [***]
Maint Accessory Kit [***]
Basic Radio Spares [***]
Enhanced Radio Spares [***]
Install [***]
Test & Turnup [***]
Freight [***]
Taxes [***]
RADIOS [***]
OC-3 MULTIPLEX
OC-3 to 84 DS-1 [***]
OC-3 to 28 DS-1 [***]
ADM 4/8/12/28 DS-1 [***]
OC-3 Spares [***]
Install [***]
Test & Turnup [***]
Freight [***]
Taxes [***]
OC-3 MULTIPLEX [***]
MISC EQUIP/RACKS
Racks,Fuse Panel,Misc [***]
Install [***]
Test & Turnup [***]
Freight [***]
Taxes [***]
MISC EQUIP/RACKS [***]
NETWORK MANAGEMENT
Network Server [***]
Network Software [***]
Network Database [***]
Interface Equipment [***]
Install & Test [***]
Freight [***]
Taxes [***]
NETWORK MGT [***]
PATH ENGINEERING [***]
FCC LICENSE APPLICATION [***]
SYSTEM ENGINEERING [***]
PROJECT ENGINEERING [***]
PATHNET COSTS [***]
</TABLE>
C-8
<PAGE>
<TABLE>
<CAPTION>
14 South 5 Plymouth 255 North 8 Albion 9 Fort TOTAL
Bend East Wayne
<S> <C> <C> <C> <C> <C> <C>
SITE SURVEY
Site Survey [***]
Taxes [***]
SITE SURVEY [***]
SITE WORK
Soil Reports [***]
Site Clearing /Level [***]
Fence & Gate Mods [***]
Road Const/Repair [***]
Taxes [***]
SITE WORK [***]
TOWERS
Tower/Building [***]
Analysis [***]
New Tower [***]
Tower Strength [***]
Material [***]
Tower Labor [***]
Waveguide Bridge [***]
Tower Ground [***]
Freight [***]
Taxes [***]
TOWERS [***]
BUILDINGS
Exist Bldg. Mods [***]
New Building [***]
New Bldg Delivery [***]
New Bldg Fondation [***]
Building Ground [***]
AC Power [***]
Freight(incl. in Bldg [***]
Delivery) [***]
Taxes [***]
BUILDINGS [***]
GENERATORS
25KW MOBILE [***]
30KW [***]
LP Tank [***]
Install & Test Labor [***]
Freight [***]
Taxes [***]
GENERATORS [***]
D.C. PLANT
Chargers [***]
Chargers Spares [***]
Batteries [***]
Power Board/Panel [***]
Install & Test Labor [***]
Freight [***]
Taxes [***]
D.C. PLANT [***]
</TABLE>
C-9
<PAGE>
<TABLE>
<CAPTION>
14 South 5 Plymouth 255 North 8 Albion 9 Fort TOTAL
Bend East Wayne
<S> <C> <C> <C> <C> <C> <C>
PCN COORDINATION
PCN Coordination [***]
Taxes [***]
PCN COORDINATION [***]
ANTENNAS
Antenna Material [***]
Install & Align Labor [***]
Freight [***]
Taxes [***]
ANTENNAS [***]
WAVEGUIDE
Waveguide Material [***]
Install & Test Labor [***]
Freight [***]
Taxes [***]
WAVEGUIDE [***]
RADIOS
1:1 Terminal: 2 & 3 Way [***]
1:1 Repeater [***]
Add RF Channel (2:1) [***]
OAM&P Software/LT [***]
Maint Accessory Kit [***]
Basic Radio Spares [***]
Enhanced Radio Spares [***]
Install [***]
Test & Turnup [***]
Freight [***]
Taxes [***]
RADIOS [***]
OC-3 MULTIPLEX
OC-3 to 84 DS-1 [***]
OC-3 to 28 DS-1 [***]
ADM 4/8/12/28 DS-1 [***]
OC-3 Spares [***]
Install [***]
Test & Turnup [***]
Freight [***]
Taxes [***]
OC-3 MULTIPLEX [***]
MISC EQUIP/RACKS
Racks,Fuse Panel,Misc [***]
Install [***]
Test & Turnup [***]
Freight [***]
Taxes [***]
MISC EQUIP/RACKS [***]
NETWORK MANAGEMENT
Network Server [***]
Network Software [***]
Network Database [***]
Interface Equipment [***]
Install & Test [***]
Freight [***]
Taxes [***]
NETWORK MGT [***]
PATH ENGINEERING [***]
FCC LICENSE APPLICATION [***]
SYSTEM ENGINEERING [***]
PROJECT ENGINEERING [***]
PATHNET COSTS [***]
</TABLE>
C-10
<PAGE>
SCHEDULE D
FORM OF ESCROW AGREEMENT
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Escrow Agreement") is entered into as of
____________, 1998, by and among Pathnet, Inc., a Delaware corporation
("Pathnet") and Northern Indiana Public Service Company ("Incumbent"), and
Crestar Bank (the "Escrow Agent");
WHEREAS, Pathnet and Incumbent have entered into a Fixed Point Microwave
Services Agreement dated as of the date hereof (the "FPM Agreement"), pursuant
to which, among other things, Incumbent has engaged Pathnet as, and Pathnet has
agreed to act as, Incumbent's sole representative for the purpose of (i)
installing, managing and operating a high capacity digital microwave system
along Incumbent's current microwave paths and (ii) marketing and selling any
Excess Capacity created by such high capacity digital microwave system.
WHEREAS, all capitalized terms used herein and not defined herein shall
have the meanings ascribed to such terms in the FPM Agreement;
WHEREAS, pursuant to Section 4.2.4(b) of the FPM Agreement, Pathnet
shall deliver to the Escrow Agent (in two payments corresponding to each
Segment) the amount equal to fifty percent (50%) of [ [***] less
the cost of any equipment provided by the vendors referred to in the Vendor
Credit Assurances (as defined in the FPM Agreement)], (each a "Pathnet Escrow
Deposit"); and
WHEREAS, the Escrow Agent has agreed to act as escrow agent hereunder in
accordance with the terms and conditions hereinafter set forth;
NOW, THEREFORE, for and in consideration of the foregoing and of the
mutual covenants and agreements hereinafter set forth, the parties hereto hereby
agree as follows:
SECTION 1. Appointment of Escrow Agent. Pathnet and Incumbent hereby
mutually appoint and designate the Escrow Agent to receive, hold and disburse
the Pathnet Escrow Deposit, in accordance with the terms and conditions of this
Escrow Agreement, and the Escrow Agent hereby accepts such appointment and
designation. Except as set forth in Section 3.2.3, Pathnet shall pay all
reasonable fees and expenses of the Escrow Agent in connection with this Escrow
Agreement.
D-1
<PAGE>
SECTION 2. Escrow.
2.1 Escrow of Funds by Pathnet
2.1.1 Delivery of Escrow Deposit. Within ninety (90) days after
delivery by Pathnet to Incumbent of the System Design on each Segment,
Pathnet shall deposit the amount in cash equal to the Pathnet Escrow
Deposit for such Segment in an escrow account with the Escrow Agent to be
held, drawn upon and returned by the Escrow Agent in accordance with the
terms and conditions hereinafter set forth.
2.1.2 Term of Escrow Agreement. The Escrow Agent shall hold the
Pathnet Escrow Deposit until Commissioning and upon Commissioning any
remaining funds, together with interest that has accrued and been paid
thereon, shall be paid by the Escrow Agent to Pathnet or its designee.
2.2 Release Conditions. As used in this Agreement, the term "Release
Condition" shall mean (i) receipt of a joint certification in the form attached
hereto seeking payment of an invoice relating to the performance of services by
Pathnet in accordance with the terms of the FPM Agreement or (ii) receipt of a
written Release Affidavit from Incumbent.
2.2.1 Release of Funds to Pathnet. Upon receipt by the Escrow Agent
of a written joint certification of Pathnet and Incumbent substantially in
form attached hereto as Attachment A to the effect that Pathnet is
entitled to receive a portion of or all of the Pathnet Escrow Deposit in
accordance with Section 4.2.4(b) of the FPM Agreement, the Escrow Agent
shall promptly deliver to Pathnet such portions of or all of the Pathnet
Escrow Deposit.
2.2.2 Release of Funds to Incumbent. Upon receipt by the Escrow
Agent of a Release Affidavit (as defined below) to the effect that
Incumbent is entitled to receive a portion of or all of the Pathnet Escrow
Deposit in accordance with Section 4.2.4(b) of the FPM Agreement or upon
receipt by the Escrow Agent or a court order directing payment to
Incumbent of a portion of or all of the Pathnet Escrow Deposit, the Escrow
Agent shall promptly deliver to Incumbent such portions of or all of the
Pathnet Escrow Deposit necessary to cure such failure to pay by Pathnet.
Incumbent shall be entitled to serve the Escrow Agent with a written
affidavit (a "Release Affidavit") if Incumbent believes in good faith that
Pathnet has failed to timely meet its payment responsibilities with
respect to the Pathnet Items (as that term is defined in the FPM
Agreement). Any Release Affidavit shall be signed by an officer of
Incumbent, and certify that a Release Condition has occurred by setting
forth in reasonable detail a description of the facts and circumstances
surrounding Pathnet's failure to pay. Incumbent shall furnish a copy of
any such Release Affidavit to Pathnet via facsimile transmission. If (i)
Pathnet disagrees that a Release Condition has occurred, (ii) Pathnet
submits such issue to binding arbitration in accordance with the FPM
Agreement, and (iii) there is a ruling that a Release Condition had not
occurred, then Incumbent shall immediately return the corresponding monies
it received from the escrow account to the Escrow Agent.
D-2
<PAGE>
2.3 Interest and Permitted Investments. Pathnet shall be entitled to
receive at Commissioning, any and all interest accrued on the Pathnet Escrow
Deposit during the term of the escrow as described in this Agreement and the
Escrow Agent shall invest the funds comprising the Pathnet Escrow Deposit as
designated by Pathnet.
SECTION 3. Concerning the Escrow Agent.
3.1 Duties. The Escrow Agent undertakes to perform all duties, which are
expressly set forth herein.
3.2 Indemnification.
3.2.1 The Escrow Agent may rely upon and shall be protected in
acting or refraining from acting upon any written notice, instruction,
certification, or request furnished to it hereunder and believed by it to
be genuine and to have been signed or presented by the proper parties or
party.
3.2.2 The Escrow Agent shall not be liable for any action taken by
it in good faith and without negligence, and believed by it to be
authorized or within the rights or powers conferred upon it by this Escrow
Agreement.
3.2.3 Pathnet and Incumbent hereby agree to indemnify the Escrow
Agent for and to hold the Escrow Agent harmless against, any loss,
liability or reasonable expense incurred without negligence or bad faith
on the part of the Escrow Agent, arising out of or in connection with the
Escrow Agent entering into this Escrow Agreement and carrying out its
duties hereunder, including costs and expenses of successfully defending
the Escrow Agent against any claim of liability with respect thereto.
Pathnet shall pay one half of any payment made pursuant to this Section
3.2.3 and Incumbent shall pay one half.
3.3 Other Matters. The Escrow Agent (and any successor escrow agent)
reserves the right to resign as the Escrow Agent at any time upon thirty (30)
days prior written notice to each of Pathnet and Incumbent. Upon mutual
agreement, Pathnet and Incumbent reserve the right to remove the Escrow Agent at
any time. In the event of any litigation or dispute by the parties hereunder
affecting its duties, the Escrow Agent shall take no action until such action is
agreed to in writing by the parties hereto, or until receipt of an order of a
court having jurisdiction directing the Escrow Agent with respect to the action
which is the subject of such litigation or dispute. The Escrow Agent neither
approves nor disapproves of the transactions contemplated by the FPM Agreement
or this Escrow Agreement, nor does it recommend for or against, or have an
opinion as to the legality or validity of, this transaction.
3.4 Statements of Account. Upon termination of the escrow as set forth in
this Agreement, the Escrow Agent shall deliver to each of Pathnet and the
Incumbent a Statement of Account setting forth each disbursement from the
Pathnet Escrow Deposit and the respective interest accrued on the Pathnet Escrow
Deposit. In addition, each of Pathnet and Incumbent
D-3
<PAGE>
shall have the right at any time during the term of this Agreement to request a
current Statement of Account from the Escrow Agent and the Escrow Agent shall
deliver such Statement of Account to Pathnet or Incumbent, as the case may be,
promptly after receipt of any such request.
SECTION 4. Termination. This Escrow Agreement shall terminate (i)
automatically upon the return of the Pathnet Escrow Deposit pursuant to Section
2.1.2, (ii) automatically upon the delivery of the entire Pathnet Escrow Deposit
made pursuant to Section 2.1.3 or Section 2.1.4 or (iii) upon written mutual
consent signed by Pathnet and Incumbent.
SECTION 5. Additional Actions and Documents. Each of the parties hereto
agrees to take or cause to be taken such further actions, to execute, deliver
and file or cause to be executed, delivered and filed such further documents,
instruments and agreement, and will obtain such consents as may be necessary or
as may reasonably be requested in order to fully effectuate the purposes, terms
and conditions of this Escrow Agreement.
SECTION 6. Notice. All notices, demands, requests, or other communications
which may be or are required to be given, served or sent by any party pursuant
to this Escrow Agreement shall be in writing and shall be hand delivered, mailed
by first-class, registered or certified mail, return receipt requested, postage
prepaid, delivered by overnight air courier or transmitted by telegram or telex
addressed as follows:
If to Pathnet:
Pathnet, Inc.
1015 31st Street, NW
Washington, D.C. 20007
Attention: Michael Lubin
Vice President and General Counsel
Tel: 202.625.7284
Fax: 202.625.7369
If to Incumbent:
Northern Indiana Public Service Co.
5265 Hohman Avenue
Hammond, IN 46320-1775
Attention: Alan P. Severance
Manager, Network Services
Tel: 219.647.4300
Fax: 219.647.4010
If to Escrow Agent:
Crestar Bank
Corporate Trust Department
919 East Main Street
P.O. Box 26665
D-4
<PAGE>
Richmond, VA 23261-6665
Attention: William F. Michie III
Tel: 804.782.5581
Fax: 804.782.7855
Or such other address as the addressee may indicate by written notice to the
other parties. Each notice, demand, request or communication which shall be
given or made in the manner described above shall be deemed sufficiently given
or made for all purposes at such time as it is delivered to the addressee (with
return receipt, the delivery receipt or the affidavit of messenger being deemed
conclusive but not exclusive evidence of such delivery) or at such time as
delivery is refused by the addressee upon presentation.
SECTION 7. Benefit and Assignment. This Escrow Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns as permitted hereunder. No person or entity other than
the parties hereto is or shall be entitled to bring any action to enforce any
provisions of this Escrow Agreement against any of the parties hereto or their
respective successors and assigns as permitted hereunder. At any time and from
time to time, Pathnet shall have the right to assign this Agreement or any of
Pathnet's rights and obligations under this Agreement; provided, that in no
event shall any such assignment relieve Pathnet of its obligations under this
Agreement. Incumbent may not or shall not have the right to assign this
Agreement or any of its rights and obligations hereunder without the prior
written consent of Pathnet, which consent shall not be unreasonably withheld;
provided, however, Incumbent may assign its right and obligations, in whole but
not in part, under this Agreement without the approval of Pathnet, to any entity
which acquires all or substantially all of the assets of Incumbent or to any
subsidiary, Affiliate or successor in a merger or consolidation of Incumbent;
provided, that in no event shall any such assignment relieve Incumbent of its
obligations under this Agreement.
SECTION 8. Entire Agreement; Amendment. This Escrow Agreement together
with the schedules, exhibits and attachments hereto contains the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all prior oral or written agreements, commitments or understandings
with respect to such matters. Pathnet and Incumbent shall furnish the Escrow
Agent with a copy (without Schedules and Exhibits) of the FPM Agreement. The
Escrow Agreement agrees to maintain the confidentiality of the terms of the FPM
Agreement and not to disclose such terms to third parties. This Escrow Agreement
may not be changed orally, but only by an instrument in writing signed by the
party against whom enforcement of any waiver, change, modification, extension or
discharge is sought.
SECTION 9. Waiver. No delay or failure on the part of any party hereto in
exercising any right, power or privilege under this Escrow Agreement shall
impair any such right, power or privilege or be construed as a waiver of any
default or any acquiescence therein. No single or partial exercise of any such
right, power or privilege shall preclude the further exercise of such right
power or privilege or the exercise of any other right, power or privilege. No
waiver shall be valid against any party hereto unless made in writing and signed
by the party against whom enforcement of such waiver is sought and then only to
the extent expressly specified therein.
D-5
<PAGE>
SECTION 10. Expenses. Subject to the provisions of Section 1 and Section
3.2.3 each party shall pay its own expenses incident to this Escrow Agreement
and the transactions contemplated hereunder, including all legal and accounting
fees and disbursements.
SECTION 11. Consent to Jurisdiction; Enforceability. This Escrow Agreement
and the duties and obligations of the parties hereunder shall be enforceable
against any of the parties in the courts of the Untied States of America and of
the State of Delaware. For such purpose, each party hereto hereby irrevocable
submits to the non-exclusive jurisdiction of such court or courts and agrees
that all claims in respect of this Escrow Agreement and such other agreements,
documents and instruments may be heard and determined in such courts. Each party
hereby irrevocably agrees that a final judgment of any of the courts specified
above in any action or proceeding relating to this Escrow Agreement or to any of
the other agreements, documents or instruments referred to herein or therein
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.
SECTION 12. Severability. If any part of any provision of this Escrow
Agreement shall be invalid or unenforceable in any respect, such part shall be
ineffective to the extent of such invalidity or unenforceability only, without
in any way affecting the remaining parts of such provision or the remaining
provisions of this Escrow Agreement.
SECTION 13. Governing Law. This Escrow Agreement, the rights and
obligation of the parties hereto, and any claims or disputes relating thereto,
shall be governed by and construed in accordance with the laws of the State of
Delaware (excluding the choice of law rules thereof.)
SECTION 14. Limitation on Benefits. The covenants, undertaking and
agreements set forth in this Escrow Agreement shall be solely for the benefit
of, and shall be enforceable only by, the parties hereto, and their respective
successors, heirs, executors, administrators, legal representatives and
permitted assigns.
SECTION 15. Binding Effect. Subject to any provisions hereof restricting
assignment, this Escrow Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors, heirs, executors,
administrators, legal representatives and assigns.
SECTION 16. Headings. The headings of the sections and subsections
contained in this Escrow Agreement are inserted for convenience only and do not
form a part or affect the meaning, construction or scope thereof.
SECTION 17. Signature in Counterparts. This Escrow Agreement may be
executed in separate counterparts, none of which need contain the signatures of
all parties, each of which shall be deemed to be an original, and all of which
taken together constitute one and the same instrument. It shall not be necessary
in making proof of this Escrow Agreement to produce or account for more that the
number of counterparts containing the respective signatures of, or on behalf of,
all of the parties hereto.
D-6
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed or has caused
this Escrow Agreement to be executed on its behalf, all as of the date first
above written.
PATHNET, INC.
By:
------------------------
Name:
----------------------
Title:
---------------------
NORTHERN INDIANA PUBLIC
SERVICE COMPANY
By:
------------------------
Name:
----------------------
Title:
---------------------
CRESTAR BANK
By:
------------------------
Name:
----------------------
Title:
---------------------
D-7
<PAGE>
ATTACHMENT A
JOINT CERTIFICATION
I, ______________, ____________________ of Pathnet, Inc. ("Pathnet") and
I, ___________, _________________ of Northern Indiana Public Service Company
("Incumbent"), hereby certify as follows:
1. Pathnet and Incumbent entered into a Fixed Point Microwave Services
Agreement, dated as of ____________, 199__ (the "FPM Agreement") pursuant to
which among other things, Incumbent engaged Pathnet as, and Pathnet agreed to
act as, Incumbent's sole representative for the purpose of (i) installing,
managing and operating a high capacity digital microwave system along
Incumbent's current microwave paths and (ii) marketing and selling any excess
capacity created by such high capacity digital microwave system, all in
accordance with and subject to the terms and conditions set forth in the FPM
Agreement.
2. Pursuant to the FPM Agreement, Pathnet, Incumbent and Crestar Bank (the
"Escrow Agent") entered into an Escrow Agreement, dated as of _______________,
199__ (the "Escrow Agreement"), in accordance with which Pathnet delivered to
the Escrow Agent the sum of ____________________ ($________________) (the
"Pathnet Escrow Deposit"), subject to the terms of the FPM Agreement and the
Escrow Agreement.
3. Attached to this Joint Certification is [an invoice or other such
purchase order or bill relating to a Pathnet Item (as such term is defined in
the FPM Agreement) evidencing the performance of certain services by Pathnet as
set forth in the FPM Agreement.] [An affidavit of Incumbent certifying that
Pathnet has failed to timely meet its payment responsibilities with respect to
the Pathnet Items (as such term is defined in the FPM Agreement) in accordance
with the terms and provisions of the FPM Agreement and setting forth in detail a
description of the facts and circumstances surrounding such failure.]
4. Pursuant to Section 4.2.4(b) of the FPM Agreement and [Section
2.2.1/Section 2.2.2] of the Escrow Agreement, [Pathnet/Incumbent] is entitled to
receive, from the Pathnet Escrow Deposit, the following sum: _______________
($__________).
5. The Escrow Agent is hereby directed promptly upon receipt of this
certification to release the portion of the Escrow Deposit as set forth in
Section 3, above to [Pathnet/Incumbent] pursuant to [Section 2.2.1/Section
2.2.2] of the Escrow Agreement.
D-8
<PAGE>
Each of _______ and ________ on behalf of Pathnet and Incumbent,
respectively, certify that the foregoing is true and correct.
PATHNET, INC. NORTHERN INDIANA PUBLIC
SERVICE COMPANY
By: By:
------------------------ ------------------------
Name: Name:
---------------------- ----------------------
Title: Title:
--------------------- ---------------------
D-9
<PAGE>
SCHEDULE E
INCUMBENT SECURITY PROCEDURES
[Pursuant to Section 5.6.1 of the FPM Agreement, Schedule not provided by
Incumbent.]
E-1
<PAGE>
SCHEDULE F
INCUMBENT DRUG TESTING PROCEDURES
[Pursuant to Section 5.6.2 of the FPM Agreement, Schedule not provided by
Incumbent.]
F-1
<PAGE>
SCHEDULE G
INCUMBENT SUBSTANCE ABUSE POLICY
[Pursuant to Section 5.6.3 of the FPM Agreement, Schedule not provided by
Incumbent.]
G-1
<PAGE>
SCHEDULE H
INCUMBENT HEALTH AND SAFETY REQUIREMENTS
[Pursuant to Section 5.6.4 of the FPM Agreement, Schedule not provided by
Incumbent.]
H-1
<PAGE>
SCHEDULE I
OTHER REQUIREMENTS OF INCUMBENT
[Pursuant to Section 5.6.5 of the FPM Agreement, Schedule not provided by
Incumbent.]
I-1
<PAGE>
SCHEDULE J
INCUMBENT TRAINING
1. Pre-Commissioning Training. Prior to Commissioning of the Initial System,
Pathnet shall provide to Incumbent a training course for an unlimited number of
Incumbent's employees as required to maintain the System and other designees of
Incumbent, which training shall include, among other things, the following:
(a) comprehensive instruction for trouble-free operation maintenance;
(b) hands-on experience with the operation of the equipment deployed in
the System;
(c) review of the similarities and differences of an analog versus a
digital system;
(d) review of the latest state-of-the-art Technology and applications
used in the System;
(e) review of procedures designed to eliminate equipment damage,
incorrect handling of equipment and System downtime;
(f) comprehensive instruction in the use of all required test equipment
used in connection with the System;
(g) the distribution of manuals and other course materials that include
descriptive information publications, alignment procedures,
maintenance procedures, technical information publications,
schematic drawings, wiring lists and system assembly drawings; and
(h) a certificate of completion for each student who successfully
completes the training course.
2. Certification of Incumbent's Field Technicians. Each of Incumbent's Field
Technicians (as defined in the Maintenance Services Agreement) must either
successfully complete the training course described in Section 1 of this
Schedule J, or must be certified by Pathnet that such Field Technician is
qualified to perform services on the System which certification shall not be
unreasonably withheld.
3. Training for Upgrades. Upon any upgrade of the system, Incumbent may request
that Pathnet provide additional training with respect to such upgrade and
Pathnet shall provide such training to Incumbent as soon as practicable after
such request.
4. Training Locations. All such training shall be provided at Pathnet's
Richardson, Texas office, Washington D.C. metropolitan area headquarters or at
such other location as determined by Pathnet in its sole discretion.
J-1
<PAGE>
5. Travel and Lodging. [***]
6. Additional Training. Incumbent or any Incumbent third-party Subcontractor
provider may request additional training courses covering the items specified in
Section 1 of Schedule J. [***]
J-2
<PAGE>
SCHEDULE K
INITIAL OWNERSHIP OF SYSTEM EQUIPMENT ASSETS AND MATERIALS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
System Component Initially Owned By
- --------------------------------------------------------------------------------
<S> <C>
Existing Shelters [***]
- --------------------------------------------------------------------------------
New Shelters for System [***]
- --------------------------------------------------------------------------------
New Shelters at Pathnet Spur sites [***]
- --------------------------------------------------------------------------------
New Shelters at Incumbent Spur sites [***]
- --------------------------------------------------------------------------------
Towers for System [***]
- --------------------------------------------------------------------------------
Towers for Incumbent Spurs [***]
- --------------------------------------------------------------------------------
Towers for Pathnet Spurs [***]
- --------------------------------------------------------------------------------
A.C. and D.C. Power system [***]
- --------------------------------------------------------------------------------
Pressurizing Equipment for sites including manifolds
and dehydrators [***]
- --------------------------------------------------------------------------------
1/0 Multiplexers [***]
- --------------------------------------------------------------------------------
Environmental Control Systems of Shelters of System [***]
- --------------------------------------------------------------------------------
Environmental Control Systems of Shelters of
Incumbent Spurs [***]
- --------------------------------------------------------------------------------
Environmental Control Systems of Shelters of
Pathnet Spurs [***]
- --------------------------------------------------------------------------------
Common Equipment existing Before Effective Date [***]
- --------------------------------------------------------------------------------
Common Equipment newly installed [***]
- --------------------------------------------------------------------------------
Equipment Racks for System Radios [***]
- --------------------------------------------------------------------------------
Antennas and Antenna Mounts relating to System [***]
- --------------------------------------------------------------------------------
Antennas and Antenna Mounts relating to
Incumbent Spurs [***]
- --------------------------------------------------------------------------------
Antennas and Antenna Mounts relating to
Pathnet Spurs [***]
- --------------------------------------------------------------------------------
Waveguide and Waveguide bridges relating to System [***]
- --------------------------------------------------------------------------------
Waveguide and Waveguide bridges relating to
Incumbent Spurs [***]
- --------------------------------------------------------------------------------
Waveguide and Waveguide bridges relating to
Pathnet Spurs [***]
- --------------------------------------------------------------------------------
Radios relating to System [***]
- --------------------------------------------------------------------------------
Radios relating to Incumbent Spurs [***]
- --------------------------------------------------------------------------------
Radios relating to Pathnet Spurs [***]
- --------------------------------------------------------------------------------
OC-3 Multiplexers [***]
- --------------------------------------------------------------------------------
Radio Bays and Radio Bay Equipment relating to
the System [***]
- --------------------------------------------------------------------------------
Radio Bays and Radio Bay Equipment relating to
Incumbent Spurs [***]
- --------------------------------------------------------------------------------
Radio Bays and Radio Bay Equipment relating to
the Pathnet Spurs [***]
- --------------------------------------------------------------------------------
Interconnection Equipment relating to Pathnet Spurs and
Interconnections [***]
- --------------------------------------------------------------------------------
Interconnection Equipment relating to Incumbent Spurs
and Interconnections [***]
- --------------------------------------------------------------------------------
Results of the Preliminary Engineering Studies and Project
Drawings set forth in Section 6.2 [***]
- --------------------------------------------------------------------------------
Upgraded equipment added to the System [***]
- --------------------------------------------------------------------------------
Microwave Radio System Licenses and other FCC,
Federal, state and local Licenses and Permits
relating to the System [***]
- --------------------------------------------------------------------------------
Panels, terminals, Software, Source Codes and
other Assets and Equipment relating to the
Network Management System [***]
- --------------------------------------------------------------------------------
</TABLE>
K-1
<PAGE>
SCHEDULE L
[RESERVED]
L-1
<PAGE>
SCHEDULE M
[RESERVED]
M-1
<PAGE>
SCHEDULE N
FORM OF PATHNET SUBLICENSE AGREEMENT
This Sublicense Agreement (the "Agreement") is made on _____________, 1998
(the "Effective Date") by and between Pathnet, Inc. ("Pathnet") and Northern
Indiana Public Service Company and its Affiliates ("Incumbent") for the use of
VERTEL Corporation ("Licensor") programs.
WHEREAS, Incumbent desires to sublicense the programs as further defined
herein; and
WHEREAS, Pathnet is willing to grant such sublicense under the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the Parties mutually agree as follows:
I. DEFINITIONS.
1.1 "Licensed Program" shall mean each program in software or firmware
form provided by Pathnet to Incumbent pursuant to the Fixed Point Microwave
Services Agreement, dated the date hereof between Incumbent and Pathnet (the
"FPM Agreement"), as such Licensed Program is licensed by Pathnet from Licensor,
including future additions and updates to such Licensed Program. The term
"Licensed Program" shall specifically include documentation and related
materials pertinent to such program and any updated program or portion of a
program hereinafter furnished to Incumbent for use in connection with or
replacement of the Licensed Programs.
1.2 "Equipment" shall mean Intel compatible servers running Windows NT.
1.3 "Use" shall mean the copying or duplication of any portion of a
Licensed Program from storage units or media into the Equipment for processing
or the utilization of any Licensed Program in the course of the operation of the
Equipment.
1.4 "Affiliates" shall mean any person or entity that directly or
indirectly controls, is controlled by, or is under common control with
Incumbent.
II. LICENSE GRANT.
2.1 Use of Object/Binary Licensed Program with Designated Equipment.
Pathnet hereby grants Incumbent and its Affiliates a non-exclusive,
non-transferable (except as provided
N-1
<PAGE>
in Section 5.1), non-licensable, non-assignable license to Use in machine
readable form, the Licensed Program specified in Section 1.1 solely on the
Equipment specified in Section 1.2. No license is granted to Use any Licensed
Program on any configuration of equipment which is different from or less than
the configuration indicated in Section 1.2.
2.2 Pathnet warrants that it has the right to grant to Incumbent a license
to use the Licensed Program and that it has the right and power to enter into
this Agreement.
III. PROPRIETARY RIGHTS.
3.1 Proprietary Rights. The Licensed Program is owned by Licensor and/or
others and is proprietary in nature. Incumbent shall respect such proprietary
rights and shall not use such Licensed Program except for the purposes for which
it is being made available as set forth in this Agreement and shall not
reproduce, print, sublicense, duplicate, reverse engineer, distribute, disclose,
or otherwise make the Licensed Program available to any third party (other than
an Affiliate), in whole or in part, in whatever form.
3.2 Confidentiality. Incumbent shall take all actions required to maintain
control of the Licensed Program including securing written records, agreements,
and other reasonable measures with its employees and agents to satisfy its
obligations under this Agreement with respect to the use, copying, protection,
and security of the Licensed Program.
IV. LIMIT OF LIABILITY.
4.1 NO WARRANTY. LICENSOR GRANTS A WARRANTY IN THE LICENSED PROGRAM ONLY
TO PATHNET AND DOES NOT EXTEND ITS WARRANTY TO INCUMBENT OR ANY OTHER END USER.
WARRANTY OF THE LICENSED PROGRAM IS PROVIDED BY LICENSOR DIRECTLY TO PATHNET.
EXCEPT AS PROVIDED IN SECTION 2.2, LICENSOR AND PATHNET MAKE NO EXPRESS OR
IMPLIED WARRANTIES OF ANY KIND, INCLUDING WITHOUT LIMITATION, MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE WITH REGARD TO ANY LICENSED PROGRAM AND/OR
RELATED MATERIALS TO BE FURNISHED BY VERTEL.
4.2 NO CONSEQUENTIAL DAMAGES. IN NO EVENT SHALL LICENSOR OR PATHNET BE
LIABLE FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH OR
ARISING OUT OF THE EXISTENCE, FURNISHING, FAILURE TO FURNISH, OR USE OF ANY
LICENSED PROGRAM AND/OR RELATED MATERIAL AND/OR DEVISE.
4.3 Licensor shall have no liability for any claim of copyright or patent
infringement based on (1) use of other than a current unaltered release of the
Licensed Program available from Licensor if such infringement would have been
avoided by the use of such current unaltered release of the Licensed Program or
(2) Use or combination of the Licensed Program with
N-2
<PAGE>
programs not supplied by Licensor and which Use or combination results in the
infringement of any patent or copyright.
4.4 Incumbent shall indemnify Pathnet and hold it harmless from any loss,
claim or damage to person or property arising out of Incumbent's negligence in
the use or possession of the Licensed Program or related materials to the extent
that such loss, claim or damage was not caused by the fault or negligence of
Pathnet.
V. TRANSFER OF LICENSE.
5.1 Terms for Transfer of License. This license may only be transferred
upon written approval of Pathnet and in connection with the transfer of all of
the Equipment; provided all copies of the Licensed Program are delivered to the
transferee and no copies or related materials are retained by Incumbent and
provided further that the transferee agrees to be bound by all the Terms and
Conditions of this Agreement.
NOW THEREFORE, the Parties hereto have caused this Agreement to be
executed by their respective duly authorized representatives.
PATHNET, INC.
By:
-----------------------
Name:
---------------------
Title:
--------------------
NORTHERN INDIANA PUBLIC
SERVICE COMPANY
By:
-----------------------
Name:
---------------------
Title:
--------------------
N-3
<PAGE>
SCHEDULE O
TITLE TO ASSETS
[INTENTIONALLY LEFT BLANK]
O-1
<PAGE>
SCHEDULE P
DELIVERIES OF INCUMBENT
1. Within thirty (30) days of the Effective Date, any existing and available
tower drawings and specifications, inventory lists and other documents
relating to the sites set forth on Schedule B reasonably necessary for
Pathnet to perform its obligations under this Agreement.
2. On or before the Effective Date, evidence of ownership by Incumbent of the
sites set forth on Schedule B or, in the event Incumbent leases such
sites, evidence of Incumbent's leasehold interest in such sites.
3. On or before the Effective Date, copies of all environmental reports,
title reports, surveys, specified or legal access, and zoning Permits and
licenses relating to the sites set forth on Schedule B.
4. Within thirty (30) days of the Effective Date, evidence that Incumbent's
existing analog or digital system is in compliance, as of the date hereof,
with all applicable Federal, state and local laws.
5. Within thirty (30) days of the Effective Date, the results of any
structural, mechanical, and electrical inspections and reports relating to
Incumbent's existing analog or digital system facilities or sites, which
have been performed pursuant to the requirements of any applicable
Federal, state or local law or by Incumbent at its discretion.
6. Within thirty (30) days of the Effective Date, the names, addresses and
contact persons of any consultants or Subcontractors engaged by Incumbent
in connection with Incumbent's existing analog or digital system,
Facilities or sites and copies of any reports or documents produced by
such consultants or Subcontractors.
7. Upon the reasonable request of Pathnet, any information requested by
Pathnet pursuant to Section 1.2 of Schedule A.
8. Within ten (10) days after receipt of the System Design, written approval
of the System Design or a list of suggested modifications to such System
Design, as described in Section 3.1 of Schedule A.
9. Within ten (10) days after receipt of each of the Project Schedule, the
Cutover Plan and the Project Management Plan, written approval of such
Project Schedule, Cutover Plan and Project Management Plan, respectively,
or a list of suggested modifications to such Project Schedule, Cutover
Plan and Project Management Plan, as the case may be, as described in
Section 4.1.1 of Schedule A.
10. Promptly after completion of the site acceptance testing, the Deficiency
List as set forth in Section 5.7 of Schedule A.
P-1
<PAGE>
11. Promptly after approval of the site acceptance test data as set forth in
Section 5.7 of Schedule A, and satisfaction of the conditions set forth in
Section (a)-(c) of Section 5.7, a Certificate of Acceptance substantially
in the form attached hereto as Exhibit A-9 to this Schedule A.
12. Upon acceptance of any Capacity Expansion in accordance with the
procedures set forth in Section 7.1 of Schedule A, a Certificate of
Acceptance relating to such Capacity Expansion substantially in the form
attached hereto as Exhibit A-9 to this Schedule A.
P-2
<PAGE>
SCHEDULE Q
DELIVERIES BY PATHNET
1. Within sixty (60) days of the Effective Date, the Vendor Credit Assurances
described in Section 4.
2. Simultaneously with the execution and delivery of this Agreement, an
executed Escrow Agreement, as described in Section 4.
3. Within sixty (60) days after the Effective Date, all required
subordination agreements as set forth in Section 5.11.
4. At the reasonable request of Incumbent, the proof of licensing, as
described in Section 11.4.
5. Upon completion of the preliminary analysis set forth in Section 1.1 of
Schedule A, the results of such analysis, including, but not limited to,
the Existing System Inventory, the Path Studies, the Frequency
Availability Model, the Tower Analysis, the Economic Model, the System
Design, the System Budget, the Channel Plan, and the Preliminary
Construction Schedule.
6. Upon completion of the preliminary analysis set forth in Section 1.1 of
Schedule A, the Project Drawings set forth in Section 1.3 of Schedule A.
7. Prior to the commencement of any services set forth in Schedule A, and at
the request of Incumbent, the Certificates of Insurance described in
Section 11.1.
8. Upon completion of the preliminary analysis set forth in Section 1.1 of
Schedule A, the Modifications SOW, as set forth in Section 2.1 of Schedule
A.
9. At any time, a copy of any revised System Design, as described in Section
3 of Schedule A.
10. Upon approval by Incumbent of the System Design, the Project Schedule, as
set forth in Section 4.1.1 of Schedule A.
11. Upon approval by Incumbent of the System Design, the Cutover Plan, as set
forth in Section 4.1.1 of Schedule A.
12. Upon approval by Incumbent of the System Design, the Project Management
Plan, as set forth in Section 4.1.1 of Schedule A.
Q-1
<PAGE>
13. Promptly after receipt of a list of suggested modifications from
Incumbent, a revised Project Schedule, Cutover Plan or Project Management
Plan, as the case may be, as set forth in Section 4.1.1 of Schedule A.
14. After installation has begun and until Commissioning a bi-weekly Progress
Report, as set forth in Section 4.1.2 of Schedule A.
15. At any time, any revised Project Drawing, as described in Section 4.1.3 of
Schedule A.
16. Promptly after completion of the site acceptance testing set forth in
Section 5 of Schedule A, a copy of the results of such testing in
accordance with Section 5.7(c) of Schedule A.
17. At Commissioning, the Station Log Books as set forth in Section 6.2 of
Schedule A.
18. At least fifteen (15) days prior to any Capacity Expansion, the Capacity
Expansion Schedule, as set forth in Section 7.1 of Schedule A.
19. Upon receipt of the result of the testing performed on any Capacity
Expansion, a copy of such results, as set forth in Section 7.1 of Schedule
A.
20. At least two (2) weeks prior to the receipt of any equipment or materials,
the ship and delivery schedules set forth in Section 8.12 of Schedule A.
Q-2
<PAGE>
INDEX OF SCHEDULES AND EXHIBITS TO
FIXED POINT MICROWAVE SERVICES AGREEMENT
SCHEDULE A: Services and System Specifications
Exhibit A-1: System Equipment
Exhibit A-2: Manufacturers Specifications for Radios
Exhibit A-3: Electricity and Power Specifications of the System
Exhibit A-4: Incumbent Multiplexing Requirements
Exhibit A-5: Equipment Shelters Specification and Design
Exhibit A-6: Grounding and Lighting Protection Guidelines and
Specifications for Communications Shelters
Exhibit A-7: Network Interconnections Schedule
Exhibit A-8: System Spurs
Exhibit A-9: Form of Certificate of Acceptance
Exhibit A-10: Statement of Work
SCHEDULE B: The System
SCHEDULE C: Estimated and Operating Costs
SCHEDULE D: Form of Escrow Agreement
SCHEDULE E: Incumbent Security Procedures
SCHEDULE F: Incumbent Drug Testing Procedures
SCHEDULE G: Incumbent Substance Abuse Policy
SCHEDULE H: Incumbent Health and Safety Requirements
SCHEDULE I: Other Requirements of Incumbent
SCHEDULE J: Incumbent Training
SCHEDULE K: Ownership of System Equipment, Assets and Materials
SCHEDULE L: Reserved
<PAGE>
SCHEDULE M: Reserved
SCHEDULE N: Form of Pathnet Sublicense Agreement
SCHEDULE O: Title to Assets
SCHEDULE P: Deliveries by Incumbent
SCHEDULE Q: Deliveries by Pathnet
<PAGE>
Exhibit 10.3
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISION. SUCH PORTIONS ARE DESIGNATED "[* * *]."
THIS FIXED POINT MICROWAVE SERVICES AGREEMENT is made and entered into as
of the 1st day of December, 1997 (the "EFFECTIVE DATE"), by and between PathNet,
Inc. ("PATHNET"), a Delaware corporation and Northeast Missouri Electric Power
Cooperative ("INCUMBENT"), a Missouri corporation (collectively, the "PARTIES"
and each, a "PARTY".
W I T N E S S E T H:
WHEREAS, PathNet is engaged in the business of creating high capacity,
digital, microwave communications systems for purposes of marketing and selling
the excess long distance telecommunications capacity created by such systems;
WHEREAS, Incumbent is the owner and operator of an existing microwave
telecommunications system that is used for critical communications in
Incumbent's business;
WHEREAS, Incumbent desires to engage PathNet as, and PathNet desires to act
as, Incumbent's sole representative for the purpose of (i) installing, managing
and operating a high capacity digital microwave system along Incumbent's current
microwave paths, and (ii) marketing and selling any Excess Capacity (as defined
below) created by such high capacity digital microwave system;
WHEREAS, following the installation of the high-capacity, digital
communications system described herein, Incumbent will be allocated capacity on
channels from the Initial System (as defined below) for the necessary expansion
and enhancement of Incumbent's internal communications and operational needs;
WHEREAS, given the critical nature of the operational communications
contemplated to be conducted by Incumbent through the high capacity digital
microwave system to be installed by PathNet, the parties recognize that any
interruption in Incumbent's communications service, other than as may be
provided by the terms hereof, would be materially adverse to the public interest
and could involve adverse public safety consequences;
WHEREAS, the intentions of the parties hereto are to provide Incumbent with
a reliable long-term communications capability;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the Parties agree as follows:
SECTION 1. DEFINITIONS.
<PAGE>
1.1 DEFINITIONS As used in this Agreement, the following terms shall have
the meanings indicated:
1.1.1 1/0 MULTIPLEXER: Any device that multiplexes capacity
between the DS-1 and the DS-0 levels.
1.1.2 1 X 1: A microwave radio configuration consisting of a
primary and a protect radio.
1.1.3 AFFILIATE: With respect to any Person, any other Person
that directly or indirectly controls, is controlled by, or is under common
control with such Person. For the purposes of this definition, "control"
(including the terms "controlled by" and "under common control with"), as
used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting
securities, by contract, or otherwise.
1.1.4 AGREEMENT: This Fixed Point Microwave Services Agreement,
including the Schedules and Exhibits attached hereto, as the same may be
amended, supplemented or modified in accordance with the terms hereof.
1.1.5 ALARM AND EVENT REPORT: As defined in SECTION 7.7 of
SCHEDULE A.
1.1.6 AMENDED SCHEDULE B: As defined in SECTION 19.15.
1.1.7 AS-BUILT DRAWING: As defined in SECTION 4.1.4 of
SCHEDULE A.
1.1.8 AVAILABLE EXCESS CAPACITY: The total PathNet Excess
Capacity available for use or sale on the System at any given time from
Commissioning through the Expiration Date.
1.1.9 AVERAGE SOLD EXCESS CAPACITY: The cumulative average of
[(PathNet Excess Capacity - Available Excess Capacity)/PathNet Excess
Capacity] taken as a percentage.
1.1.10 BIT ERROR RATE: The number of received bits in error
compared to the total number of bits received.
1.1.11 BREACHING PARTY: As defined in SECTION 18.2.3.
1.1.12 BUSINESS DAY: Any day other than a Saturday, a Sunday, or a
day on which the banking institutions in either New York, New York, or the
city and state in which the principal executive offices of PathNet within
the United States are located, are not open for business.
2
<PAGE>
1.1.13 CAPACITY EXPANSION: An increase in telecommunication
channels a System is able to transmit, receive and transport above those
created by the installation of the Initial System, achieved by an addition
to or change in equipment.
1.1.14 CAPACITY EXPANSION SCHEDULE: As defined in SECTION 7.1 of
SCHEDULE A.
1.1.15 CERCLA: Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. Section 6901 ET SEQ., as amended.
1.1.16 CHANNEL PLAN: As defined in SECTION 1.1 of SCHEDULE A.
1.1.17 COMMISSIONING: With respect to each path or Segment, the
date on which the circuits of such path or Segment are available for
service after completion of all required site acceptance testing on the
Initial System or any Capacity Expansion.
1.1.18 CUSTOMER AGREEMENTS: As defined in SECTION 10.8.1.
1.1.19 CUTOVER PLAN: As defined in SECTION 4.1.1 of SCHEDULE A.
1.1.20 DEFICIENCY LIST: As defined in SECTION 5.7 of SCHEDULE A.
1.1.21 DISPUTE: As defined in SECTION 18.2.1.
1.1.22 DROP AND INSERT: That process wherein a part of the
information carried in a transmission system is demodulated (dropped) at an
intermediate point and different information is entered (inserted) for
subsequent transmission.
1.1.23 DS-0: 64,000 bits per second; The world-wide standard speed
for digitizing one voice conversation using pulse code modulation, which is
approximately equivalent to a single voice or data channel.
1.1.24 DS-1: 24 DS-0's.
1.1.25 DS-3: 672 DS-0's or 28 DS-1's.
1.1.26 EFFECTIVE DATE: As defined in the introductory paragraph of
this Agreement or the date of any AMENDED SCHEDULE B, as the context
indicates.
1.1.27 ERROR FREE SECOND: Any one-second interval that does not
contain a measurable bit error.
1.1.28 ENCUMBRANCES: Any security interests, mortgages, liens,
pledges, charges, claims, easements, reservations, restrictions, clouds,
equities, rights of way, options, rights of first refusal and other
encumbrances whether or not relating to the
3
<PAGE>
extension of credit or the borrowing of money. To "Encumber" shall mean to
effect any Encumbrance.
1.1.29 EQUIPMENT: Any and all digital microwave radios, radio
components, cards, antennas, waveguides, multiplexers, software and other
equipment or parts required for the operation of the System provided and
installed by PathNet as set forth on EXHIBIT A-1 to SCHEDULE A.
1.1.30 ERRORED SECONDS: Any one-second interval during which one
or more bit errors occur.
1.1.31 ESCROW AGREEMENT: As defined in SECTION 5 .
1.1.32 EXCESS CAPACITY: The PathNet Excess Capacity and the
Incumbent Excess Capacity.
1.1.33 EXISTING SYSTEM INVENTORY: As defined in SECTION 1.1 of
SCHEDULE A.
1.1.34 EXPIRATION DATE: The date on which this Agreement and the
rights and obligations hereunder are terminated or expire in accordance
with SECTION 3.
1.1.35 FAA: The Federal Aviation Administration, or any other
Federal agency at the time administering tower registration requirements
and regulations.
1.1.36 FACILITIES: Incumbent's towers, shelters, sites and all
equipment owned by Incumbent relating to and used in association with such
towers, shelters and sites for the purpose of operating the System.
1.1.37 FAILED SECOND: Any one-second interval that has 1,544 bit
errors at a DS-1 rate.
1.1.38 FCC: The Federal Communications Commission, or any other
Federal agency at the time administering the Communications Act of 1934, as
amended, the Telecommunications Act of 1996, as amended and the rules and
regulations promulgated thereunder.
1.1.39 FCC CODE: The Communications Act of 1934, as amended, the
Telecommunications Act of 1996, as amended and the rules, regulations and
policies promulgated thereunder and related thereto.
1.1.40 FIRST EXTENSION PERIOD: As defined in SECTION 3.1.3.
1.1.41 FORCE MAJEURE EVENT: As defined in SECTION 17.3.
1.1.42 FORM 415: As defined in SECTION 11.1.1.
4
<PAGE>
1.1.43 FREQUENCY AVAILABILITY MODEL: As defined in SECTION 1.1 of
SCHEDULE A.
1.1.44 FREQUENCY DIVERSITY: A method of protecting a radio signal
by providing a second radio signal on a different frequency, which will
assume the radio signal load when the regular channel fails.
1.1.45 GOVERNMENTAL AUTHORITY: Any nation or government, any state
or other political subdivision thereof and any court, panel, judge, board,
bureau, commission, agency or other entity, body or other person exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government.
1.1.46 INCUMBENT: As defined in the introductory paragraph.
1.1.47 INCUMBENT DESIRED PATH: As defined in SECTION 10.3.
1.1.48 INCUMBENT ESTIMATED COSTS: As defined in SECTION 4.1.2.
1.1.49 INCUMBENT EXCESS CAPACITY: As defined in SECTION 10.1.2.
1.1.50 INCUMBENT ITEMS: As defined in SECTION 4.1.1.
1.1.51 INCUMBENT PAYMENT CAP: As defined in SECTION 4.1.3.
1.1.52 INCUMBENT REPRESENTATIVE: As defined in SECTION 19.12.
1.1.53 INITIAL PERIOD: As defined in SECTION 3.1.2.
1.1.54 INITIAL SYSTEM: The initial system with a 1 x 1
configuration which is comprised of the first 84 DS-1's (which is
equivalent to 2,040 DS-0's) of the System and the System's 84 DS-1 protect
channels.
1.1.55 INTERCONNECTION: The point at which a private network is
connected to (i) the PSTN, which can include IXC POPs, tandem access
points, the central office, internet service providers, or major industrial
customer points of presence or (ii) another private network.
1.1.56 INTERFERENCE: Any measurable impairment in the performance
of the System or the quality of the signals received or transmitted on the
System.
1.1.57 IXC: An inter-exchange carrier; a telephone company that
provides long-distance telephone service between LATA's but not within any
one LATA.
5
<PAGE>
1.1.58 JUDGMENT: Any order, judgment, writ, decree, award or other
determination, decision or ruling of any court, judge, justice or
magistrate, any other Governmental Authority or any arbitrator.
1.1.59 LATA: Local Access and Transport Area; one of 161 local
geographic areas in the United States within which a local telephone
company may offer telecommunications services.
1.1.60 LEASED PREMISES: As defined in SECTION 6.1.
1.1.61 LEASED PREMISES ENCUMBRANCE: As defined in SECTION 6.10.
1.1.62 LOSSES: Any and all losses, claims, shortages, damages,
liabilities, expenses (including reasonable attorneys' and accountants'
fees), assessments, tax deficiencies and taxes (including interest and
penalties thereon) sustained, suffered or incurred by any third party
arising from any matter which is the subject of indemnification under
SECTION 15.
1.1.63 MAINTENANCE SERVICES AGREEMENT: The Maintenance Services
Agreement, by and between PathNet and Incumbent, as the same may be amended
from time to time in accordance with its terms.
1.1.64 MATERIAL ADVERSE EFFECT: Any event, fact, circumstance or
occurrence, which results or would result in a material adverse change in
or a material adverse effect on any of: (i) the condition (financial or
otherwise), business, performance, operations, properties, or prospects of
such Person; (ii) the legality, validity or enforceability of this
Agreement; or (iii) the ability of such Person to perform its material
obligations under this Agreement.
1.1.65 MODIFICATIONS SOW: As defined in SECTION 2.1 of SCHEDULE A.
1.1.66 NETWORK MANAGEMENT SYSTEM: As defined in SECTION 7.6 of
SCHEDULE A.
1.1.67 NETWORK MONITORING CENTER: As defined in SECTION 7.5 of
SCHEDULE A.
1.1.68 NON-BREACHING PARTY: As defined in SECTION 18.1.2.
1.1.69 NOTICE OF ELECTION: As defined in SECTION 16.3.
1.1.70 OC-3 MULTIPLEXER: Any device that multiplexes capacity
between the OC-3 and the DS-1 levels.
1.1.71 ORDER WIRE: A service channel consisting of a 64,000 bit
per second circuit between sites.
6
<PAGE>
1.1.72 OSHA: The Occupational Safety and Health Act, as amended.
1.1.73 OTHER AGREEMENTS. As defined in SECTION 19.4.
1.1.74 OUTAGE: When the Bit Error Rate in each second is worse
than 10-3 for a period of ten (10) consecutive seconds.
1.1.75 PART 101: Part 101 of Title 47 of the Code of Federal
Regulations, as amended.
1.1.76 PARTY: As defined in the introductory paragraph.
1.1.77 PATH STUDIES: As defined in SECTION 1.1 of SCHEDULE A.
1.1.78 PATHNET: As defined in the introductory paragraph.
1.1.79 PATHNET ESTIMATED COSTS: As defined in SECTION 4.3.2.
1.1.80 PATHNET EXCESS CAPACITY: At any given time, the
telecommunications channels or DS-0's that the System creates, transports
and receives, less the capacity allocated to Incumbent and to the protect
channels pursuant to the Channel Plan, as amended from time to time.
1.1.81 PATHNET ITEMS: As defined in SECTION 4.3.1.
1.1.82 PATHNET SOFTWARE: The software (including applications
software and systems software) owned or licensed from a third party by
PathNet or owned or developed by PathNet used to provide the services
covered in this Agreement.
1.1.83 PCN: A Prior Coordination Notice sent pursuant to Part 101.
1.1.84 PERMITS: Any and all authorizations, approvals, consents,
licenses, permits, easements, certificates and other rights and permissions
necessary to conduct such Person's business and to own, lease and operate
such Person's properties as currently or as anticipated to be conducted,
owned, leased or operated.
1.1.85 PERSON: An individual or a corporation, partnership,
limited liability company, trust, incorporated or unincorporated
association, joint venture, joint stock company, or other entity of any
kind or any Governmental Authority.
1.1.86 POP: Point Of Presence; The interconnection between any two
facilities based networks.
1.1.87 PROGRESS REPORT: As defined in SECTION 4.1.2 of SCHEDULE A.
7
<PAGE>
1.1.88 PRE-COMMISSIONING TEST EQUIPMENT: All equipment required
for the testing required to be performed on the System pursuant to SECTION
5 of SCHEDULE A, including, but not limited to, all required digital volt
meters, optical power meters, oscilloscopes, RF signal generators, noise
figure meters, noise figure test sets, RF variable attenuators, DADE adjust
cables, receiver card extenders and extension cords.
1.1.89 PRELIMINARY CONSTRUCTION SCHEDULE: As defined in SECTION
1.1 of SCHEDULE A.
1.1.90 PROJECT DRAWINGS: As defined in SECTION 1.3 of SCHEDULE A.
1.1.91 PROJECT MANAGEMENT PLAN: As defined in SECTION 4.1.1 of
SCHEDULE A.
1.1.92 PROJECT SCHEDULE: As defined in SECTION 4.1.1 of
SCHEDULE A.
1.1.93 PROTECTION CONFIGURATION: An engineering plan under which
channel capacity is protected either on a fully redundant basis or on a 1 x
n protection basis.
1.1.94 PSTN: Public Switched Telephone Network.
1.1.95 QUARTERLY REVENUE REPORT: As defined in SECTION 10.10.
1.1.96 RCRA: Resource Conservation and Recovery Act, 42 U.S.C.
Section 9601 ET SEQ., as amended.
1.1.97 REQUIREMENT OF LAW: With respect to any Person, all
Federal, state and local laws, rules, regulations, Judgments, injunctions,
standards, codes, limitations, restrictions, conditions, prohibitions,
notices, demands or other requirements or determinations of a court or
other Governmental Authority or an arbitrator, applicable to or binding
upon such Person, any of its property or any business conducted by it or to
which such Person, any of its assets or any business conducted by it is
subject.
1.1.98 REVENUE: As defined in SECTION 10.11.4 .
1.1.99 SECOND EXTENSION PERIOD: As defined in SECTION 3.1.4.
1.1.100 SEGMENT: The portion of a microwave communications network
existing between two geographic points. For purposes of this Agreement,
Segment A is the portion of Incumbent's microwave communications network
between Sawyer and Thomas Hill, Missouri, as set forth in SCHEDULE B and
any additional Segments added to the System pursuant to an AMENDED SCHEDULE
B are identified as Segment B, Segment C, and Segment D, etc.
1.1.101 SERVICES: As defined in SECTION 8.1 .
8
<PAGE>
1.1.102 SEVERELY ERRORED SECONDS: Any one second interval where the
Bit Error Rate is greater than or equal to 1 x 10-3 at a DS-1 rate
regardless of the cause of degradation affecting the channel error
performance including, but not limited to, unprotected equipment failures
and any other factors that contribute to poor performance.
1.1.103 SONET: Synchronous Optical Network; a family of fiber-optic
transmission rates from 51.84 Mbps to 13.22 Gbps, created to provide the
flexibility needed to transport many digital signals with different
capacities and to provide a standard to which manufacturers may design.
1.1.104 SPACE DIVERSITY: Protection of a radio signal by providing
a separate antenna on the same tower to assume the radio signal load when
the regular transmission path on the primary antenna fades, thereby
ensuring continuous transmission.
1.1.105 SPARE PARTS: The equipment and parts provided by PathNet to
Incumbent pursuant to the performance of Incumbent's obligations under the
Maintenance Services Agreement.
1.1.106 SPECIFICATIONS: As defined in SECTION 8.2.
1.1.107 STATION LOG BOOK: As defined in SECTION 6.2 of SCHEDULE A.
1.1.108 SUBCONTRACTORS: Any firm, corporation, or person working
directly or indirectly for a company that furnishes or performs a portion
of the work, labor or material.
1.1.109 SWITCHED MOD SECTION: A section of network between two
adjacent back-to-back terminals.
1.1.110 SYSTEM: The high capacity digital SONET microwave radio
equipment, antenna, waveguide, Facilities, Network Management System, all
other equipment and materials related thereto, and FCC licenses and other
licenses and Permits related thereof, operated for the purpose of
transmitting, receiving and transporting telecommunications signals over
Incumbent's Segments set forth on SCHEDULE B.
1.1.111 SYSTEM BUDGET: As defined in SECTION 1.1 of SCHEDULE A.
1.1.112 SYSTEM DESIGN: As defined in SECTION 1.1 of SCHEDULE A.
1.1.113 TECHNOLOGY: Inventions, ideas, processes, formulas, and
know-how.
1.1.114 TOWER ANALYSIS: As defined in SECTION 1.1 of SCHEDULE A.
1.1.115 VENDOR CREDIT ASSURANCES: As defined in SECTION 4.5.1.
9
<PAGE>
1.1.116 WAYSIDE CHANNELS: The additional DS-1 of telecommunications
capacity within each radio beyond the base OC-3 capacity.
1.2 TERMS GENERALLY The definitions in SECTION 1.1 and elsewhere in this
Agreement shall apply equally to both the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "herein,"
"hereof," "hereto" and "hereunder" and words of similar import refer to this
Agreement (including the Schedules and Exhibits) in its entirety and not to any
part hereto unless the context shall otherwise require. All references herein
to Sections, Exhibits and Schedules shall be deemed references to Sections of,
and Exhibits and Schedules to, this Agreement unless the context shall otherwise
require. Unless otherwise expressly provided herein or unless the context shall
otherwise require, any references as of any time to the "certificate of
incorporation," "articles of incorporation," "charter," "organizational or
constituent documents", "operating agreement" or "bylaws" of any Entity, to any
agreement (including this Agreement) or other contract, instrument or document
or to any agreement statute or regulation are to it as amended and supplemented
from time to time (and, in the case of a statute or regulation to any
corresponding provisions of successor statutes or regulations). Any reference
in this Agreement to a "day" or number and "days" (without the explicit
qualification of "Business") shall be interpreted as a reference to a calendar
day or number of calendar days. If any action or notice is to be taken or given
on or by a particular calendar day, and such calendar day is not a Business Day,
then such action or notice shall be deferred until, or may be taken or given on,
the next Business Day.
SECTION 2. RELATIONSHIP OF THE PARTIES.
2.1 LESSEE, INDEPENDENT CONTRACTOR, REPRESENTATIVE AND NETWORK MANAGER
Incumbent shall appoint PathNet and PathNet shall serve in the following
capacities during the term of this Agreement:
(i) In the role of lessee, PathNet will lease from Incumbent an
interest in Incumbent's sites and Facilities on which to build and operate
the System. As consideration for such leasehold interest and the other
rights and obligations set forth in this Agreement, PathNet will pay the
consideration to Incumbent as set forth in SECTION 5.
(ii) As an independent contractor, PathNet will serve as Incumbent's
sole and exclusive representative in performing analytical pre-design and
design services and installing, testing and ensuring the performance of the
System, as well as any upgrades to such System in accordance with the terms
and conditions set forth in SECTION 7 and in SCHEDULE A.
(iii) As the exclusive representative for the marketing and sale of
Excess Capacity for Incumbent, PathNet will market and sell the Excess
Capacity created by System, as described in SECTION 10.
10
<PAGE>
(iv) In the role of a network manager, PathNet will serve as the
point of contact for any Outage or trouble on the System and shall operate
the Network Management System and the Network Monitoring Center as
described in SECTION 8.6 and SECTION 7.7 of SCHEDULE A.
2.2 NO JOINT VENTURE, ETC The Parties expressly disclaim any intention to
create, and nothing herein shall be construed as creating, a partnership, joint
venture, agency or employment relationship between PathNet and Incumbent.
2.3 RESTRICTIONS ON ACTIONS OF INCUMBENT
2.3.1 NO PARALLEL SYSTEM For the term of this Agreement, neither
Incumbent, nor any Affiliate of Incumbent, shall operate parallel microwave
telecommunications facilities or systems to those set forth in SCHEDULE B
for the purpose of selling or otherwise providing any capacity on such
parallel facilities or systems.
2.3.2 NOTIFICATION AND RIGHT OF FIRST REFUSAL In the event any
time after the Effective Date, Incumbent elects to construct or build a
fiber path or paths anywhere along Incumbent's then existing system,
Incumbent shall notify PathNet in writing of such intention to construct or
build such fiber path or paths and PathNet shall have a right of first
refusal to construct or build such fiber path or paths on behalf of
Incumbent and to act as Incumbent's exclusive representative for the sale
of excess capacity from such fiber path or paths, exercisable by PathNet by
written notice to Incumbent to such effect within ninety (90) days of
receipt of such notice by Incumbent. In the event Incumbent does not
receive such notice from PathNet stating PathNet's intention to exercise
such right of first refusal or any part thereof during such ninety (90) day
period, Incumbent may engage any person to construct or build such fiber
path or paths and to market and sell the excess capacity from such fiber
path or paths; PROVIDED, HOWEVER, if Incumbent elects to construct or build
any other fiber path or paths not described in the original notification to
PathNet, Incumbent may not so construct or build such additional path or
paths without first complying with the provisions of this SECTION 2.3.2.
SECTION 3. TERM AND EXPIRATION.
3.1 TERM, EXTENSION PERIODS, AND RENEWAL.
3.1.1 TERM This Agreement shall commence on the Effective Date
and shall be in full force and effect for the term as set forth in this
SECTION 3.
3.1.2 INITIAL PERIOD The initial period (the "INITIAL PERIOD")
shall commence upon Commissioning and shall expire on the fifth (5th)
anniversary of the Commissioning.
11
<PAGE>
3.1.3 FIRST EXTENSION PERIOD In the event the Average Sold Excess
Capacity is at least ten percent (10%) during the Initial Period, the term
of the Agreement shall be automatically extended for an extension period
(the "FIRST EXTENSION PERIOD") commencing on the day after the expiration
of the Initial Period and expiring on the tenth (10th) anniversary
thereafter.
3.1.4 SECOND EXTENSION PERIOD In the event the Average Sold
Excess Capacity is at least ten percent (10%) during the Initial Period and
the First Extension Period, the term of the Agreement shall be
automatically extended for a second extension period (the "SECOND EXTENSION
PERIOD") commencing on the day after the expiration of the First Extension
Period and expiring on the tenth (10th) anniversary thereafter.
3.1.5 RENEWAL Upon expiration of the Initial Period or any
Extension Period thereof, this Agreement shall be automatically renewed for
a one-year term, and at the end of such one-year term for additional
one-year terms for each year thereafter, unless terminated by either Party
upon written notice to the other Party delivered within the ninety (90) day
period immediately before the end of the Second Extension Period or any
such one-year term.
3.2 NO UNILATERAL RIGHT TO TERMINATE Neither Party shall have the right
to terminate this Agreement or any rights or obligations of either Party
pursuant to this Agreement.
SECTION 4. COSTS.
4.1 INCUMBENT COSTS.
4.1.1 INCUMBENT ITEMS Incumbent shall pay for the services,
functions, materials and other items listed in SECTION 1 of SCHEDULE C
(collectively, the "INCUMBENT ITEMS") in the manner set forth in SECTION
4.1.5.
4.1.2 ESTIMATED COST OF INCUMBENT ITEMS On the Effective Date,
the total estimated cost of the Incumbent Items is [* * *] (the "INCUMBENT
ESTIMATED COSTS"). Subject to the Incumbent Payment Cap, the costs of such
Incumbent Items and such Incumbent Estimated Costs are estimates and may be
subject to increases or decreases.
4.1.3 INCUMBENT PAYMENT CAP Incumbent shall pay an amount not to
exceed [* * *] (the "INCUMBENT PAYMENT CAP") in the aggregate for the
performance and completion of the Incumbent Items. The cost of Incumbent
Items shall be accrued in accordance with generally accepted accounting
principles. PathNet shall pay for all amounts incurred over the Incumbent
Payment Cap in the completion and performance of the Incumbent Items. As
soon as Incumbent is aware that Incumbent will pay an amount in excess of
the Incumbent Payment Cap, Incumbent shall notify PathNet to that effect.
12
<PAGE>
4.1.4 EXPANSION OF SYSTEM. To allow for the expansion of the
System beyond a 1x1 configuration, in addition to the Incumbent Items and
the Incumbent Estimated Costs, Incumbent shall pay for any additional new
shelters to be installed to replace existing shelters, even if such
payments exceed the Incumbent Payment Cap. Incumbent also shall be
responsible for payment of all costs relating directly or indirectly to the
replacement of such shelters, in the event that PathNet expands the System
beyond a 1x1 configuration and Incumbent shelters are insufficient to
accommodate the expansion equipment.
4.1.5 PAYMENT OF INCUMBENT ITEMS. Pursuant to the Escrow Agreement
by and between PathNet and Incumbent substantially in form attached hereto
as SCHEDULE D (the "Escrow Agreement"), on the Effective Date, Incumbent
shall deposit in an escrow account, an amount equal to the Incumbent
Estimated Costs which funds shall be disbursed to equipment vendors or
service providers by PathNet, with Incumbent's approval, upon completion
and performance of the Incumbents Items and PathNet receiving an invoice
for such Incumbent Items. In the event at any time prior to completion of
the Incumbent Items, the escrowed funds are depleted below ten percent
(10%) of the Incumbent Estimated Costs, upon PathNet's request Incumbent
shall place in escrow an additional amount equal to twenty percent (20%) of
the Incumbent Estimated Costs which additional funds shall be disbursed to
PathNet as of the cost of the completed of the Incumbent Items are actually
incurred. In the event that any funds remain in escrow upon Commissioning
of the Initial System such funds shall be returned to Incumbent.
4.2 INCUMBENT OPERATING AND ADMINISTRATION COSTS Incumbent shall pay the
operating and administration costs set forth in SECTION 2 of SCHEDULE C as such
costs are actually incurred and become due and payable in the course of the
Incumbent's performance of its obligations under this Agreement.
4.3 PATHNET COSTS.
4.3.1 PATHNET ITEMS PathNet shall pay for services, functions,
materials and other items listed in SECTION 3 of SCHEDULE C (the "PATHNET
ITEMS").
4.3.2 ESTIMATED COST OF PATHNET ITEMS On the Effective Date, the
total estimated cost of the PathNet Items is [* * *] (the "PATHNET
ESTIMATED COSTS").
4.3.3 NO CAP ON PATHNET ITEMS PathNet shall pay for all amounts
incurred in completing the PathNet Items whether or not the cost of
completing such items is less than, equal to or exceeds the PathNet
Estimated Costs.
13
<PAGE>
4.3.4 PAYMENT OF PATHNET ITEMS To ensure payment of the PathNet
Estimated Costs PathNet shall:
(a) deliver to Incumbent vendor credit assurances (the "VENDOR
CREDIT ASSURANCES"), which Vendor Credit Assurances shall establish
and confirm, among other things, that PathNet has an adequate credit
facility to acquire the Equipment and Services provided by such
vendor; and
(b) deliver to Incumbent the Escrow Agreement pursuant to which,
among other things, (i) PathNet shall place in escrow funds in an
amount equal to fifty percent (50%) the PathNet Estimated Costs less
the cost of any equipment provided by the vendors referred to in the
Vendor Credit Assurances, (ii) the escrow agent named in such Escrow
Agreement shall disburse to PathNet the funds necessary to pay for the
cost of the PathNet Items as such PathNet Items are completed and as
PathNet receives invoices relating to such PathNet Items, (iii) in the
event that PathNet fails to timely meet its payment responsibilities
with respect to the PathNet Items, the escrow agent named in such
Escrow Agreement shall disburse to Incumbent the funds necessary to
cure such failure to pay by PathNet and (iv) such Escrow Agreement
shall terminate upon Commissioning of the System and upon such
termination any funds remaining in escrow, including any interest
accrued on such funds shall be disbursed to PathNet.
4.4 PATHNET OPERATING AND ADMINISTRATION COSTS PathNet shall pay for the
operating and administration costs set forth in SECTION 4 of SCHEDULE C as such
costs are actually incurred and become due and payable in the course of
PathNet's performance of its obligations under this Agreement.
4.5 CHANGE ORDERS This Agreement anticipates (i) future issuance of
change orders for equipment and services beyond the scope of the Services and
the items set forth on SCHEDULE C, and (ii) PathNet's provision of additional
equipment and services in accordance with such orders. To the extent mutually
agreed upon by the Parties, all such orders shall be deemed to be supplements to
and governed by the terms of this Agreement; provided PathNet and Incumbent's
Estimated Costs may be modified to reflect any agreed upon change orders.
SECTION 5. CONSIDERATION
5.1 CONSIDERATION PAID BY PATHNET. PathNet shall pay to Incumbent, as
consideration for all the rights and Incumbent obligations set forth in this
Agreement (including use of the Leased Premises):
(i) commencing on Commissioning, an allocation of up to [* * *] of
digital capacity, as set forth by the Parties in the Channel Plan;
PROVIDED, that Incumbent and Incumbent's Affiliates use such allocation of
DS-1's only for their own respective internal communications
needs;
14
<PAGE>
(ii) commencing on the [* * *]; and
(iii) commencing on the [* * *])
SECTION 6. LEASEHOLD INTEREST.
6.1 LEASE Incumbent shall lease to PathNet and PathNet shall lease from
Incumbent an interest in each of Incumbent's sites and in the Facilities at such
sites set forth on SCHEDULE B as is necessary for the performance of PathNet's
rights and obligations under this Agreement (the "LEASED PREMISES").
6.2 TERM OF LEASE The term of PathNet's interest in the Leased Premises
and the Parties obligations under this SECTION 6, shall commence on the
Effective Date and shall end on the Expiration Date.
6.3 USE OF LEASED PREMISES.
6.3.1 PEACEFUL ENJOYMENT, USE AND ACCESS Incumbent shall grant to
PathNet the right to the peaceful use, enjoyment and possession of the
Leased Premises during the term of this Agreement as required for the
performance of PathNet's rights and obligations under this Agreement, which
rights shall include, but not be limited to (i) the right to use
Incumbent's Facilities and (ii) upon the reasonable request by PathNet, the
right to full and free access to Incumbent's sites, Facilities and related
equipment; PROVIDED, HOWEVER, any such access granted by Incumbent to
PathNet shall be subject to the security, health and safety and other
regulatory, procedural and policy requirements of Incumbent, as set forth
in SECTION 6.5.
6.3.2 INTERFERENCE During the term of this Agreement, Incumbent
shall not license or otherwise permit any Person to use its Facilities if
the use of such Facilities by such Person would cause any Interference on
the System. As of the Effective Date, Incumbent shall not permit any
Person to use its Facilities which use would in any way cause any
Interference on the System. Notwithstanding the foregoing in the event any
Person causes any Interference on the System, Incumbent shall use all best
efforts to compel such Person to immediately take any and all steps
necessary to correct and eliminate such Interference, including, without
limitation, enforcing provisions in any license or other agreement between
Incumbent and such Person and compelling such Person to cease operation of
such Person's system, to remove such Person's equipment or materials or to
modify such Person's equipment or materials. Incumbent acknowledges that
any Interference shall cause irreparable harm to PathNet and the prompt
cessation of
15
<PAGE>
Interference is material to PathNet's interest in the Leased Premises and
PathNet's performance under this Agreement and, as such, PathNet shall be
entitled to injunctive relief in the enforcement of this SECTION 6.3.2.
6.4 VISITING AND EXITING FACILITIES Upon exiting any Facility at the
Leased Premises, PathNet, on behalf of itself and its employees, agents and
Subcontractors, shall ensure that such Facility is returned to the condition
which existed immediately prior to such visit except for such maintenance and
improvements performed during such visit.
6.5 SECURITY, DRUG TESTING, SUBSTANCE ABUSE AND HEALTH AND SAFETY.
6.5.1 SECURITY At the request of Incumbent, PathNet shall require
its employees, agents and Subcontractors upon any site visit to comply with
Incumbent's reasonable security procedures in effect as of the Effective
Date, which procedures are attached hereto as SCHEDULE E. If and to the
extent Incumbent requires PathNet employees, agents or Subcontractors to be
escorted to Incumbent facilities, such requirements shall be explicitly set
forth in SCHEDULE E. Notwithstanding the foregoing, Incumbent shall allow
PathNet employees, agents or Subcontractors to bring any testing equipment,
photographic equipment or both video and audio recording equipment
necessary for the performance of PathNet's obligations under this
Agreement.
6.5.2 DRUG TESTING At the request of Incumbent, PathNet shall
require its employees, agents and Subcontractors to submit to reasonable
drug testing in accordance with Incumbent's drug testing policies and
procedures in effect as of the Effective Date, which policies and
procedures are attached hereto as SCHEDULE F.
6.5.3 SUBSTANCE ABUSE POLICY At the request of Incumbent, PathNet
shall require its employees, agents or Subcontractors to comply with
Incumbent's reasonable substance abuse policies and procedures in effect as
of the Effective Date, which policies and procedures are attached hereto as
SCHEDULE G.
6.5.4 HEALTH AND SAFETY At the request of Incumbent, PathNet
shall require its employees, agents and Subcontractors to comply with
Incumbent's reasonable rules and regulations governing the health and
safety of its employees in effect on the Effective Date, which rules and
regulations are attached hereto as SCHEDULE H.
6.5.5 CLEARANCES AND OTHER REQUIREMENTS At the request of
Incumbent, PathNet shall require its employees, agents or Subcontractors to
(i) apply to Incumbent for any necessary reasonable clearances and (ii)
comply with all other reasonable and applicable requirements, rules,
regulations or ordinances regarding any Person's ability to have access to
Incumbent's sites and Facilities, including, but not limited to, the Leased
Premises, which requirements are set forth as SCHEDULE I.
6.6. SUBLETTING PathNet shall not sublet its interest in the Leased
Premises, in whole or in part, without the prior written consent of Incumbent;
PROVIDED, HOWEVER, PathNet shall have
16
<PAGE>
the right to transfer and assign its rights or obligations under this Agreement
to any successor or assign in accordance with SECTION 19.7.
6.7 SURRENDER Upon the expiration of the Agreement in accordance with
SECTION 3, PathNet shall peacefully and quietly surrender occupation of the
Leased Premises to Incumbent, or Incumbent's successors and assigns, without
delivery by Incumbent to PathNet of any notice to quit or demand for possession.
6.8 COLOCATION Incumbent shall allow PathNet, at no additional charge, to
colocate at Incumbent's sites all equipment necessary to support the
Interconnections set forth on EXHIBIT A-6 to SCHEDULE A and any additional
interconnections equipment that may be added by PathNet from time to time and at
any time during the term of this Agreement, subject to the limitations set forth
in SECTION 3 of SCHEDULE A.
6.9 SUBORDINATION PathNet shall subordinate its interest in the Leased
Premises to (i) all deeds of trust, deeds to secure debts, mortgages and other
security instruments now or hereafter Encumbering all or any portion of the real
property described on SCHEDULE B (each, a "LEASED PREMISES ENCUMBRANCE") and
(ii) any increases, renewals, modifications, consolidations, replacements and
extensions of any such Leased Premises Encumbrance. In connection with such
subordination of PathNet's interest in the Leased Premises to all Leased
Premises Encumbrances, PathNet shall, as requested by Incumbent, within sixty
(60) days after the Effective Date, execute and deliver a commercially
reasonable subordination, non-disturbance and attornment agreement with all
Persons secured by such Leased Premises Encumbrances. PathNet shall, as
requested by Incumbent, execute and deliver similar subordination,
non-disturbance and attornment agreements with each future Person secured by a
Leased Premises Encumbrance.
6.10 REMOVAL OF EQUIPMENT PathNet shall, at Incumbent's request, remove
any or all Equipment from Incumbent's Facilities within sixty (60) days after
the Expiration Date. In the event PathNet fails to perform such requested
removal within such sixty (60) day period, as determined by Incumbent in its
sole discretion, Incumbent may restore each site to its condition as of
Commissioning, (reasonable wear and tear and damage from the elements excepted),
and PathNet shall promptly pay Incumbent all costs reasonably incurred by
Incumbent for such removal and restoration.
6.11 REMOVAL OF HAZARDOUS MATERIALS Within ninety (90) days after the
Expiration Date, PathNet shall remove from Incumbent's sites any and all
Hazardous Materials, which were brought to Incumbent's sites by PathNet during
the term of this Agreement.
6.12 SALE OF INITIAL SYSTEM Within ten (10) days after the expiration of
the Second Extension Period, if any, PathNet shall, upon request by Incumbent,
sell to Incumbent the radios and radio software relating to the Initial System
for a purchase price of one dollar ($1.00).
SECTION 7. PROGRAM MANAGEMENT AND PROJECT MANAGEMENT.
17
<PAGE>
7.1 PROGRAM MANAGER In connection with the Services and other services
performed by PathNet under this Agreement, PathNet shall provide a Program
Manager whose duties shall include (i) supervising the project through design,
installation and operation, (ii) supervising the Project Manager, (iii)
overseeing the Field Manager and the other PathNet personnel, (iv) coordinating
the business operations of the System including the sale of Excess Capacity as
set forth in SECTION 10, (v) ensuring the performance of PathNet's rights and
obligations under this Agreement and (vi) coordinating with Incumbent to ensure
the integrity of Incumbent's existing system through cutover.
7.2 PROJECT MANAGEMENT FOR MODIFICATIONS In connection with the
modifications of the Facilities set forth in SECTION 2 of SCHEDULE A, PathNet
shall provide a Project Manager, a Field Manager, an Applications Engineer and a
Project Engineer, each of whom shall have the duties as set forth in SECTION 7.4
with respect to such modifications of the Facilities.
7.3 PROJECT MANAGEMENT FOR INSTALLATION In connection with the
installation of the System set forth in SECTION 4 of SCHEDULE A, PathNet shall
provide a Project Manager, a Field Manager, an Applications Engineer and a
Project Engineer, each of whom shall have the duties as set forth in SECTION 7.4
with respect to such installation of the System.
7.4 PATHNET PROJECT MANAGEMENT PERSONNEL The Project Managers, Field
Managers, Applications Engineers and Project Engineers shall each have the
duties as set forth below:
(a) PROJECT MANAGER. Duties shall include ensuring the overall
functional integrity of the delivered System, the preparation, amendment
and adherence to a construction schedule, and compliance with PathNet's
other obligations under SCHEDULE A.
(b) FIELD MANAGER. Duties shall include the oversight and direction
of all on-site activities, the coordination of all Subcontractors and all
required communication with the Project Manager.
(c) APPLICATIONS ENGINEER. Duties shall include the review and
translation of the System configuration into specific hardware
requirements, precise interface levels, intra and inter-rack cabling and
all other necessary peripheral equipment, rack profiles and required
Interconnection data.
(d) PROJECT ENGINEER. Duties shall include the performance of all
planning and support activities and a detailed site survey to gather data
for development of the installation plan and testing plan.
SECTION 8. SERVICES AND SYSTEMS SPECIFICATIONS.
8.1 SERVICES.
18
<PAGE>
8.1.1 SYSTEM DESIGN, MODIFICATION, INSTALLATION, OPERATION AND
PERFORMANCE PathNet and Incumbent shall perform their respective functions
with respect to the design, modification, installation, operation and
performance of the System as set forth on SCHEDULE A and in this SECTION 8
(the "SERVICES").
8.1.2 UPGRADE OF SYSTEM In accordance with its performance of the
Services, PathNet shall have the right to, at its own expense, upgrade the
System and Equipment, and the System and Equipment operation policies and
procedures, including, but not limited to, (i) replacing Equipment, (ii)
adding newly available improved Equipment and (iii) modifying policies,
procedures and specifications relating to the System, to conform such
policies, procedures and specifications with new Technology or industry
standards.
8.1.3 INCUMBENT TRAINING PathNet shall provide to Incumbent the
training as set forth on SCHEDULE J.
8.1.4 PERFORMANCE OF THE SERVICES PathNet shall have the right to
engage Subcontractors to perform any of the Services.
8.2 SPECIFICATIONS.
8.2.1 GENERAL PathNet and Incumbent shall perform the Services in
accordance with any and all technical and operational specifications set
forth in SCHEDULE A (the "SPECIFICATIONS").
8.2.2 CHANNEL PLAN.
(a) ORIGINAL CHANNEL PLAN. On the Effective Date, Incumbent
shall deliver to PathNet a proposed T-1 channelization plan setting
forth its proposed capacity needs at each site listed on SCHEDULE B.
Such capacity shall in no event exceed the capacity granted to
Incumbent by PathNet as consideration as set forth in SECTION 5 and
shall be subject to Drop and Insert capacity at each Switched Mod
Section. PathNet shall incorporate Incumbent's proposed
channelization plan into the Channel Plan subject to the limitations
set forth in this SECTION 8.2.2.
(b) AMENDED CHANNEL PLAN. Incumbent shall have the right to
modify its allocated capacity (as described in the Channel Plan) along
the network any time after Commissioning, provided that sufficient
Drop and Insert capacity exists between each Switched Mod Section
using available Wayside Channels to effect such modification, by
providing written notice to PathNet to such effect. Within ninety
(90) days after receipt of any such written notice from Incumbent,
PathNet shall make such modification to the configuration of the
Channel Plan at no charge to Incumbent. Incumbent shall not
reconfigure the Channel Plan in any manner other than as set forth in
this SECTION 8.2.2..
19
<PAGE>
8.2.3 SPECIFICATIONS, STANDARDS AND INSPECTIONS In connection
with the Services set forth in SECTION 2 and SECTION 4 of SCHEDULE A,
PathNet shall comply with the following requirements:
(a) REASONABLE EFFORTS. PathNet shall use commercially
reasonable efforts to ensure that the modification of the System set
forth in SECTION 2 of SCHEDULE A and the installation of the System
set forth in SECTION 4 of SCHEDULE A occur as expeditiously as
possible.
(b) INDUSTRY STANDARDS. All Services and materials supplied
pursuant to SCHEDULE A must meet or exceed all applicable
Specifications. Where Specifications are not stated, such work
performed and materials supplied will meet all applicable provisions
of the following standards: (i) EIA RS-195 (latest edition), (ii)
EIA/TIA-222 (latest edition), (iii) American Society of Testing
Materials A 325 and A 572, (iv) the applicable sections of the
National Electric Code, (v) the American National Standards Institute,
(vi) ACI 318-83, (vii) ACI-305, (viii) ACI-306, (ix) OSHA 29 CFR 1910
and (x) all other applicable Federal, state and local regulations of
all Governmental Authorities with jurisdiction; PROVIDED, HOWEVER, in
the case of a conflicting requirement of standards, the more stringent
standard shall apply.
(c) SITE INSPECTIONS. During the performance of the Services,
Incumbent shall allow PathNet to perform site inspections at any hour,
on any day subject to the access limitations set forth in SECTION
6.5.1.
8.3 MAINTENANCE OF THE SYSTEM. Within sixty (60) days after the Effective
Date, Incumbent and PathNet shall execute and deliver the Maintenance Services
Agreement. PathNet shall have the right to supplement at its own expense at any
time, and from time to time, any maintenance performed on the System as
determined by PathNet.
SECTION 9. OWNERSHIP, DEPRECIATION AND ENCUMBRANCE OF SYSTEM.
9.1 OWNERSHIP OF EQUIPMENT AND ASSETS.
9.1.1 EQUIPMENT AND ASSETS OWNED BY INCUMBENT Incumbent shall own
the equipment and assets relating to the System as set forth in SCHEDULE K.
9.1.2 EQUIPMENT AND ASSETS OWNED BY PATHNET PathNet shall own the
equipment and assets relating to the System as set forth in SCHEDULE K.
9.2 DEPRECIATION OF EQUIPMENT.
20
<PAGE>
9.2.1 DEPRECIATION BY INCUMBENT Incumbent shall have the right to
fully depreciate the equipment and assets currently owned or to be owned by
Incumbent as listed in SCHEDULE K.
9.2.2 DEPRECIATION BY PATHNET PathNet shall have the right to
fully depreciate the equipment and assets currently owned or to be owned by
PathNet as listed in SCHEDULE K.
9.3 ENCUMBRANCE.
9.3.1 INITIAL SYSTEM PathNet shall not Encumber the radios, radio
software, antenna, waveguide multiplexers or any other equipment required
to operate the Initial System in accordance with the Specifications.
9.3.2 OTHER EQUIPMENT, MATERIALS, AGREEMENTS AND ASSETS PathNet
shall have the right to Encumber (i) the Equipment used in any Capacity
Expansion, (ii) the Revenue generated from the sale of Excess Capacity in
accordance with SECTION 9, (iii) any Customer Agreement relating to the
System, (iv) this Agreement and any related documents, instruments and
agreements executed and delivered in connection with this Agreement and any
rights or obligations hereunder or thereunder and (v) its leasehold
interest in the Leased Premises.
9.3.3 VENDOR REMEDIES Incumbent hereby acknowledges that pursuant
to the Encumbrances granted by PathNet to certain equipment vendors or
service providers or other lenders in accordance with SECTION 9.3.2, such
vendors or providers shall have the right to assume and perform PathNet's
rights and obligations under this Agreement and the other documents,
instruments and agreements executed in connection hereto.
9.4 TAXES The Parties' respective responsibilities for taxes arising
under or in connection with this Agreement shall be as follows: (i) each Party
shall be responsible for any personal or real property taxes on property it owns
or leases, for franchise and privilege taxes on its business and for taxes based
on its net income or gross revenue and (ii) PathNet shall be responsible for any
sales, use, excise, value-added services, consumption and other taxes and duties
payable by Incumbent on any goods and services used or consumed in providing the
services to be performed by PathNet under this Agreement, where the tax is
imposed on Incumbent's acquisition or use of such goods or services and the
amount of the tax is measured by Incumbent's costs in acquiring such goods or
services; PROVIDED, HOWEVER, that PathNet shall not be responsible for any
Federal, state or local income taxes of Incumbent or any franchise taxes of
Incumbent.
9.5 SECURITY INTEREST IN INITIAL SYSTEM On the Effective Date, PathNet
and Incumbent shall execute and deliver the Security Agreement substantially on
the form attached hereto as SCHEDULE O, pursuant to which, among other things,
PathNet shall grant Incumbent a
21
<PAGE>
security interest in the radio, radio software, antenna, waveguide, multiplexers
and any other Equipment required to operate the Initial System.
SECTION 10. EXCESS CAPACITY MARKETING AND SALES.
10.1 EXCLUSIVE REPRESENTATIVE.
10.1.1 PATHNET EXCESS CAPACITY PathNet shall have the exclusive
right to market and sell any and all PathNet Excess Capacity.
10.1.2 INCUMBENT EXCESS CAPACITY At any time and from time to
time, Incumbent shall have the right to request in writing that PathNet
serve as Incumbent's exclusive representative for the marketing and sale of
all or any portion of the capacity allocated to Incumbent in accordance
with the Channel Plan (the "INCUMBENT EXCESS CAPACITY"). Such written
notice shall set forth, (i) that portion of the Incumbent Excess Capacity
to be marketed and sold by PathNet, (ii) the length of time that such
portion of the Incumbent Excess Capacity will be available to be marketed
and sold, and (iii) that Incumbent acknowledges that such Incumbent Excess
Capacity shall not be available for Incumbent's use during the time
specified in such written notice. Upon receipt of such written notice
PathNet shall serve as Incumbent's exclusive representative for the
marketing and sale of such Incumbent Excess Capacity; PROVIDED, HOWEVER,
that PathNet shall have the right, as determined by PathNet in its sole
discretion, to sell the PathNet Excess Capacity on any path or Segment
before selling the Incumbent Excess Capacity on such path or Segment.
10.1.3 MARKETING FEE FOR SALE OF INCUMBENT EXCESS CAPACITY In the
event PathNet sells any Incumbent Excess Capacity, PathNet shall receive a
marketing fee in the amount of [* * *] of such Revenue).
10.1.4 MARKETING AND SALE BY INCUMBENT Incumbent or any Affiliates
of Incumbent shall not market or sell any Incumbent Excess Capacity or any
capacity purchased by Incumbent pursuant to SECTION 10.3 to any third party
without the prior written consent of PathNet; PROVIDED, HOWEVER, Incumbent
may market and sell all or any portion of the Incumbent Excess Capacity or
any capacity purchased by Incumbent pursuant to SECTION 10.3, to Affiliates
of Incumbent for and only for such Affiliates' internal communications
needs and not for resale to third parties.
10.2 REFERRALS OF CUSTOMERS BY INCUMBENT Incumbent shall refer any
potential third party customer of Excess Capacity to PathNet.
10.3 PURCHASE OF AVAILABLE EXCESS CAPACITY BY INCUMBENT Incumbent shall
have the right to purchase Available Excess Capacity on any path or Segment of
the System (each
22
<PAGE>
such path or Segment being referred to herein as an "INCUMBENT DESIRED PATH"),
at a price equal to either (i) the lowest price paid to PathNet for like
capacity and for a similar term by any purchaser during the one hundred eighty
(180) days immediately preceding the purchase by Incumbent of capacity on such
Incumbent Desired Path or (ii) if no PathNet Excess Capacity has been purchased
on such Incumbent Desired Path during such one hundred eighty (180) day period,
the last price paid for such Incumbent Desired Path; PROVIDED, HOWEVER,
Incumbent shall in no event under clause (i) or clause (ii) above purchase more
than twenty percent (20%) of the Available Excess Capacity on any Segment or
path within the System at any given time.
10.4 COMMERCIALLY REASONABLE EFFORTS PathNet shall use commercially
reasonable efforts to obtain the best available price and terms in the marketing
and sale of any Excess Capacity. PathNet shall not, now or in the future,
guarantee any Revenue disbursements nor does PathNet warrant as to its ability
to sell the Excess Capacity.
10.5 SELLING PRICES FOR EXCESS CAPACITY Notwithstanding anything set forth
herein to the contrary, PathNet shall have the right to (i) sell Excess Capacity
at prices determined by PathNet to be appropriate on specific routes, which
prices may be below or above current competitive market pricing, (ii) package
the Excess Capacity in sales increments of DS-1's, DS-3's or OC-3's, or any
other increments and (iii) aggregate the paths sold in various combinations,
each as determined by PathNet in its sole discretion.
10.6 BARTER ARRANGEMENTS Incumbent shall be permitted to barter Incumbent
Excess Capacity for telecommunications capacity of other incumbents engaged by
PathNet; PROVIDED, HOWEVER, PathNet shall have the right to approve any barter
arrangement relating to Incumbent Excess Capacity, which approval shall not be
unreasonably withheld. Neither PathNet nor Incumbent shall derive any fee from
facilitating any such barter arrangements.
10.7 ASSUMED NAME; TRADENAMES AND TRADEMARKS PathNet shall have the right
to market Excess Capacity under its name or any other assumed name, tradename or
trademark which PathNet is authorized to use for such purpose; PROVIDED,
HOWEVER, PathNet shall not use any trademark or tradename of Incumbent or any
Affiliate of Incumbent in written material for purposes of marketing any Excess
Capacity without the prior written consent of Incumbent.
10.8 CUSTOMER AGREEMENTS.
10.8.1 AUTHORIZATION PathNet shall negotiate, execute and deliver,
on behalf of itself and Incumbent, all agreements and arrangements
("CUSTOMER AGREEMENTS") for customers of Excess Capacity, which Customer
Agreements shall contain, terms and conditions determined by PathNet in its
sole discretion.
10.8.2 APPROVAL AND CONSENT BY INCUMBENT If the terms of any
Customer Agreement require the written approval or consent of Incumbent as
a condition to the execution, delivery or performance, Incumbent shall
promptly provide such written approval or consent.
23
<PAGE>
10.8.3 MODIFICATIONS TO SYSTEM In the event that any Customer
Agreement requires that the System be modified in any way, PathNet shall
ensure that any such modifications (i) shall not compromise the integrity
and performance of the System in accordance with the Specifications and
(ii) shall be made at no additional cost to Incumbent.
10.9 MAINTENANCE OF BOOKS AND RECORDS AND AUDIT PROCEDURES.
10.9.1 BOOKS AND RECORDS PathNet shall maintain and keep detailed
and accurate books and records with regard to sales of Excess Capacity and
the Revenue from such sales.
10.9.2 INCUMBENT REVIEW AND AUDIT PROCEDURES No more than once
during any consecutive twelve (12) month period, Incumbent shall be
entitled to review and audit PathNet's books and records relating to the
sale of Excess Capacity during business hours upon ten (10) days written
notice to PathNet. Incumbent shall not have the right pursuant to this
SECTION 10.9.2, to review or audit PathNet's corporate income statements,
balance sheets or other forms of general corporate reporting, except that
Incumbent shall receive a copy of an excerpt from PathNet's annual audit
report that relates to the sale of excess capacity from its System.
Incumbent shall not disclose, at any time before or after the Expiration
Date, any information related to PathNet or PathNet's business obtained by
Incumbent pursuant to a review or audit performed under this SECTION 10.9.2
unless such information has previously come into the public domain (other
than through unauthorized disclosure) or except as required by law.
10.9.3 EXPENSES OF INCUMBENT REVIEWS AND AUDITS Incumbent shall
pay the cost of any such review or audit performed pursuant to SECTION
10.9.2.
10.9.4 APPROVAL OF AUTHORIZED REPRESENTATIVE In the event that
Incumbent hires an authorized representative of Incumbent to perform any
such review or audit pursuant to SECTION 9.9.2, PathNet shall have the
right to approve such authorized representative before any access is
granted to such authorized representative to PathNet's books and records,
which approval shall not be unreasonably withheld.
10.10 QUARTERLY REVENUE REPORTS PathNet shall issue to Incumbent
quarterly revenue reports substantially in the form of SCHEDULE L (each a
"QUARTERLY REVENUE REPORT") within thirty (30) days after the end of each
calendar quarter. Each such Quarterly Revenue Report shall be an unaudited
statement produced by PathNet.
10.11 COLLECTION AND PAYMENT OF REVENUE.
10.11.1 COSTS OF COLLECTION PathNet shall deduct any costs
reasonably incurred by PathNet in connection with the collection of any and
all revenue generated from the sale of Excess Capacity, including, but not
limited to, the cost of any legal actions, collection fees, court
proceedings, audits, or other enforcement actions. PathNet
24
<PAGE>
shall deduct such costs from gross revenue collected prior to the
disbursement of such revenue to PathNet and Incumbent pursuant to SECTION 5
and SECTION 10.
10.11.2 MAINTENANCE MONTHLY SERVICE CHARGES The amount of any
Maintenance Monthly Service Charges (as such term is defined in the
Maintenance Services Agreement) paid by PathNet to Incumbent pursuant to
the Maintenance Services Agreement, shall be deducted from gross revenue
collected prior to disbursement of such revenue to PathNet and Incumbent
pursuant to SECTION 5 and SECTION 10.
10.11.3 TAXES ON GROSS REVENUES The amount of any taxes on gross
revenue paid by PathNet on behalf of Incumbent shall be deducted from any
revenue to be disbursed to Incumbent prior to disbursement of such revenue
as set forth in this SECTION 10.11.
10.11.4 DEFINITION OF REVENUE For purposes of this Agreement,
"REVENUE" shall mean the gross revenue generated from the sale of Excess
Capacity actually collected less any deductions set forth in SECTION
10.11.1, SECTION 10.9.2 and SECTION 10.11.3.
10.11.5 PAYMENTS TO INCUMBENT PathNet shall pay Incumbent its
allocated portion of Revenue actually received from the sale of Excess
Capacity within thirty (30) days after the end of each calendar quarter in
accordance with the payment instructions set forth in SCHEDULE M.
10.11.6 INTEREST EARNED ON UNDISTRIBUTED REVENUE PathNet shall
retain any and all interest earned by PathNet on any Revenue collected but
not yet distributed to Incumbent in accordance with SECTION 5 and SECTION
10.
10.11.7 INCUMBENT'S ASSIGNEES OF REVENUES Incumbent shall have the
right to designate other entities to receive its disbursements by written
notice to PathNet to such effect; PROVIDED, HOWEVER, any such designation
by Incumbent shall not relieve Incumbent of any tax liability resulting
from its receipt of such disbursements pursuant to SECTION 5 and SECTION
10.
SECTION 11. FCC LICENSES AND OTHER REGULATORY APPROVALS AND LICENSES.
11.1 FCC RULES AND REGULATIONS.
11.1.1 MICROWAVE RADIO STATION LICENSES.
(a) PREPARATION AND FILING OF FORMS 415. PathNet shall
prepare and timely file all required Form 415, Applications for
Authorization in the Microwave Services (each a "FORM 415"), or
any successor forms, documents or instruments to such Form 415 as
the FCC may prescribe, including but not limited
25
<PAGE>
to, the preparation or ordering of all frequency coordinations
required pursuant to Schedule B and Schedule C of Form 415, in
order to own, operate and sell the Excess Capacity of the System
in accordance with the terms and conditions of this Agreement.
(b) IDENTITY OF LICENSEE. All Microwave Radio Station
Licenses issued by the FCC relating to the System shall be
licensed in the name of PathNet or a wholly-owned subsidiary of
PathNet. Incumbent shall be permitted to continue to own and be
licensed as a private microwave operator at the stations licensed
to PathNet relating to the System, provided that (i) such private
licenses are for different frequency pairs than those assigned to
the System (including, but not limited to, any Capacity Expansion
of the System) and (ii) such private licenses are permitted under
the FCC Code.
(c) MAINTENANCE OF LICENSE. PathNet shall maintain in good
standing each Microwave Radio Station License relating to the
System, including, but not limited to, preparing and filing any
required amendments to the Forms 415 relating to the System and
submitting and filing any supplementary information as required
by the FCC.
11.1.2 COMMON CARRIER REPORTING OBLIGATIONS PathNet shall prepare
and file all forms, reports, instruments, documents and agreements required
by the FCC and FCC Code relating to PathNet's status as a "common carrier"
under the FCC Code.
11.1.3 TARIFF FILINGS PathNet shall prepare and timely file all
tariff applications pursuant to 47 CFR 61.1, as amended, or any successor
statute, rule or regulation and shall request and file all necessary
waivers of such tariff requirements, as determined by PathNet in its sole
discretion.
11.1.4 FREQUENCY COORDINATION NOTICES During the term of this
Agreement, PathNet shall prepare and send all required frequency
coordination notices required under 47 CFR 101.103, as amended, or any
successor statute, rule or regulation and shall respond as appropriate to
all PCNs received by PathNet or Incumbent relating to the System.
11.1.5 DELIVERY OF COPIES Upon Incumbent's request, PathNet shall
provide to Incumbent a copy of all filings and submissions with the FCC,
relating to the System within thirty (30) days of such request by
Incumbent.
11.1.6 ASSISTANCE IN PREPARATION OF LICENSE APPLICATIONS Upon
request by PathNet and in a timely manner, Incumbent shall provide to
PathNet all information necessary for the completion of all required
filings and submissions with the FCC including, but not limited to
Incumbent's authorized signature on any filings or other submissions to the
FCC or any documents, instruments or agreements completed in connection
with such filings and submissions.
26
<PAGE>
11.1.7 FUTURE CHANGES IN FCC REQUIREMENTS If FCC requirements
relating to the Form 415, common carriers, frequency coordination or any
other matters relating to the System change or are modified, PathNet shall
be responsible for compliance with such new requirements including, but not
limited to, the payment of any costs or fees associated therewith and
Incumbent shall cooperate with PathNet with respect to such compliance;
PROVIDED, HOWEVER, if the FCC establishes user fees regulatory fees,
universal service fees, forfeitures or other such fees relating to the
frequencies used in and the communications business conducted over the
System, the cost of such additional fees shall be divided between PathNet
and Incumbent, as determined by PathNet and Incumbent at such time.
11.1.8 SPECTRAL LOADING REQUIREMENTS PathNet shall (i) ensure that
the System, as licensed, shall comply with all spectral loading
requirements set forth in 47 CFR 101.141, or any successor statute, rule or
regulation or (ii) obtain a waiver of any or all of such requirements;
PROVIDED, HOWEVER, if the System does not meet such spectral loading
requirements and PathNet is unable to obtain a waiver of such requirements,
PathNet shall have the right to modify the System to a hot-standby
Protection Configuration until such time as the spectral loading
requirements can be met.
11.1.9 DEFAULT IN FCC LICENSE In the event that the FCC institutes
a penalty against or fine imposed on PathNet, Incumbent, or the System, by
a final, non-appealable order, due to non-compliance with any FCC
requirements, PathNet shall promptly pay such penalty or fine (in the case
such penalty or fine is instituted as the result of an act or omission on
the part of PathNet) or Incumbent shall promptly pay such penalty or fine
(in the event such penalty or fine is instituted as the result of an act or
omission on the part of Incumbent).
11.2 ZONING REQUIREMENTS Incumbent shall be responsible for compliance
with all zoning requirements applicable to the System and its Facilities,
including, but not limited to, the Leased Premises. Incumbent shall advise
PathNet of zoning requirements, which, in the reasonable opinion of Incumbent,
differ from those generally applicable to microwave facilities. PathNet shall
provide to Incumbent all required information and shall cooperate with Incumbent
in connection with Incumbent's compliance with all zoning requirements pursuant
to this SECTION 11.2.
11.3 BUREAU OF LAND MANAGEMENT REQUIREMENTS Incumbent shall be responsible
for compliance with all United States Department of Interior Bureau of Land
Management requirements applicable to the System and its Facilities, including,
but not limited to, the Leased Premises. PathNet shall provide Incumbent with
all requested information and shall cooperate with Incumbent in connection with
Incumbent's compliance with such United States Department of Interior Bureau of
Land Management requirements pursuant to this SECTION 11.3.
11.4 TOWER REGISTRATION Incumbent shall ensure compliance with all FAA and
FCC tower registration requirements including, but not limited to, the
preparation of any filings with or the obtaining of any waivers or extensions
from the FAA or FCC. Incumbent shall promptly
27
<PAGE>
notify PathNet of any deficiency on non-compliance with any such tower
registration requirements, filings, waivers or extensions.
SECTION 12. INSURANCE.
12.1 DELIVERY OF CERTIFICATES OF INSURANCE Prior to the commencement of
any Services by PathNet, PathNet shall deliver to Incumbent Certificates of
Insurance relating to PathNet's Commercial General Liability Insurance Policy,
Workers Compensation Insurance Policy, Automobile Liability Insurance and Excess
Liability Insurance Policy.
12.2 PATHNET INSURANCE COVERAGE During the term of this Agreement, PathNet
shall maintain the types of insurance at the coverage limits set forth below:
(a) WORKER'S COMPENSATION INSURANCE. Workers Compensation Insurance
as required by laws and regulations applicable to and covering Persons
performing the Services;
(b) COMMERCIAL GENERAL LIABILITY INSURANCE. Commercial General
Liability Insurance with a limit of not less than $3,000,000 per occurrence
and $ 5,000,000 in the aggregate;
(c) AUTOMOBILE LIABILITY INSURANCE. Automobile Liability Insurance,
which includes coverage for non-owned and hired vehicles with a limit of
not less than $1,000,000; and
(d) EXCESS LIABILITY INSURANCE. Excess Liability Insurance with a
limit of not less than $4,000,000.
12.3 INCUMBENT INSURANCE COVERAGE Incumbent shall maintain insurance
coverage on properties and operations of Incumbent to the extent necessary to
permit PathNet to operate the System and perform its obligations in event of any
property or operations damages or losses which coverage shall include general
liability and other forms of insurance covering such risks as are usually
insured against by prudent companies engaged in the business and activities in
which the Incumbent is engaged, in amount which are adequate in relation to the
business and properties of Incumbent, and all premiums to date have been paid in
full.
12.4 PROOF OF LICENSED SUBCONTRACTORS PathNet shall provide to Incumbent
proof of licensing and certification of insurance for any Subcontractors engaged
by PathNet to provide Services, during the term of such engagement.
SECTION 13. SOFTWARE AND PROPRIETARY RIGHTS.
13.1 PATHNET SOFTWARE PathNet retains all right, title and interest in and
to PathNet Software. As of the Effective Date and pursuant to the PathNet
Sublicense Agreement attached
28
<PAGE>
hereto as SCHEDULE N, Incumbent is granted a nonexclusive sublicense to use
PathNet Software for the sole purpose of receiving the services pursuant to this
Agreement. PathNet Software will be made available to Incumbent in such form
and on such media as exists on the Effective Date, together with existing
documentation and any other related materials. Incumbent shall not be permitted
to use PathNet Software for the benefit of any entities other than PathNet
without the prior written consent which may be withheld at PathNet's sole
discretion. Except as otherwise requested or approved by PathNet, Incumbent
shall cease all use of PathNet Software upon expiration of this Agreement.
13.2 PROPRIETARY RIGHTS Incumbent acknowledges and agrees that all or
portions of the information and materials, including but not limited to the
PathNet Software and related documentation to be supplied by PathNet hereunder
are owned by PathNet and/or others and are proprietary in nature. Incumbent
also acknowledges and agrees that PathNet and/or its suppliers have and will
retain all proprietary rights in such information and materials. Incumbent (i)
shall respect such claim of proprietary right, (ii) shall protect such
information at least to the extent that it protects its own proprietary
information, (iii) shall not use such information except for the purposes for
which its is being made available as set forth in this Agreement and (iv) shall
not reproduce, print, disclose, or otherwise make said information available to
any third party, in whole or in part, in whatever form.
SECTION 14. REPRESENTATIONS AND WARRANTIES.
14.1 REPRESENTATIONS AND WARRANTIES OF EACH PARTY Each Party hereby
represents and warrants as follows:
14.1.1 DUE INCORPORATION AND FORMATION; AUTHORIZATION OF
AGREEMENTS; BINDING EFFECT Such Party is a corporation or partnership, as
the case may be, duly formed or organized, and validly existing under the
laws of its state of incorporation or organization, and has the corporate
or partnership authority to own its property and carry on its business as
owned and carried on as of the Effective Date. Such Party is duly licensed
or qualified to do business and is in good standing (if applicable) in each
jurisdiction in which the failure to be so licensed or qualified would have
a Material Adverse Effect on such Party. Such Party has the corporate or
partnership authority to execute and deliver this Agreement, to perform its
obligations hereunder, and to consummate the transactions contemplated
hereby. This Agreement has been duly authorized, executed and delivered by
such Party and this Agreement constitutes a legal, valid and binding
obligation of such Party enforceable in accordance with its terms, subject
as to enforceability to limits imposed by bankruptcy, insolvency or similar
laws affecting creditors rights generally and the availability of equitable
remedies.
14.1.2 NO CONFLICT; NO DEFAULT Neither the execution or delivery
of this Agreement by such Party, nor the performance of this Agreement by
such Party or the consummation by such Party of the transactions
contemplated hereby in accordance with the terms and conditions hereof:
(i) will conflict with, violate, result in a breach of or constitute a
default under any of the terms, conditions or provisions of the certificate
or
29
<PAGE>
articles of incorporation or bylaws (or other governing documents) of such
Party or any material agreement or instrument to which such Party is a
party or by which such Party may be bound, (ii) will conflict with, violate
or result in a breach of, constitute a default under (whether with notice
or lapse of time or both), accelerate or permit the acceleration of the
performance required by, give to others any interests or rights or require
any consent, authorization or approval under any contract to which such
Party is a party or by which such Party is or may be bound or to which any
equity interest held by such Party or any of its material properties or
assets is subject or (iii) will result in the creation or imposition of any
Encumbrance upon any equity interest held by such Party or any of the other
material properties or assets of such Party, other than Permitted
Encumbrances.
14.1.3 NO CONSENT No consent, approval, order or authorization of,
or registration, declaration or filing with any Governmental Authority,
domestic or foreign, is required to be obtained by such Party in connection
with the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby, except those that
have been obtained and are in full force and effect pursuant to Section
14.1.5, except that the approval of Rural Utilities Service, United States
Department of Agriculture, is required on behalf of Incumbent.
14.1.4 COMPLIANCE WITH LAWS AND REGULATIONS That the performance
of such Party's obligations under this Agreement will not result in a
violation in any respect of (i) any applicable Federal, state, local or
foreign laws, ordinances, regulations, rulings and orders of government
agencies applicable to its business in any respect the violation of which
could have a Material Adverse Effect (including Requirements of Law
relating to pollution, protection of the environment, releases or
threatened releases of pollutants, contaminants, hazardous or regulated
substances or wastes into the environment or (ii) any applicable order,
Judgment, injunction, award or decree in any respect which could have a
Material Adverse Effect on such Party.
14.1.5 PERMITS Such Party has or will obtain all authorizations,
approvals, consents, licenses, Permits and certificates (including, but not
limited to all required approvals from the FCC) necessary to conduct their
respective businesses and to own, lease and operate its properties as
currently or anticipated to be conducted, owned, leased or operated, as the
case may be, for which the failure to possess would result in a Material
Adverse Effect. No violations are outstanding or uncured with respect to
any such Permits and no proceeding is pending to revoke or limit any
Permit.
14.1.6 TITLE TO ASSETS, PROPERTIES AND RIGHTS AND RELATED MATTERS
Except as set forth on SCHEDULE K, such Party has, and will continue to
have for the term of this Agreement as set forth in SECTION 3, good and
marketable title to all the properties, interests in properties and assets,
real, personal or mixed, necessary for the conduct of such Party's business
and for the transactions contemplated by this Agreement (including, but not
limited to, any rights of way, leasehold interests, easements, proofs of
dedication and rights necessary for PathNet to perform its obligations
hereunder without any Interference, provided that prevention of such
Interference is within the reasonable control of Incumbent) free and clear
of all Encumbrances of any kind or character, except
30
<PAGE>
(i) liens for current taxes not yet due and payable, (ii) Encumbrances
securing taxes, assessments, governmental charges or levies or the
Encumbrances of materialmen, carriers, landlords and like persons, all of
which are not yet due and payable, (iii) minor Encumbrances of a character
that do not substantially impair the assets or properties of such Party or
which will not have a Material Adverse Effect on such Party and (iv) first
mortgage of Rural Utilities Service, United States Department of
Agriculture on all assets of Incumbent.
14.1.7 LABOR MATTERS Such Party has complied in all material
respects with all applicable Federal, state and local laws and ordinances
relating to the employment of labor, including the provisions thereof
relating to wages, hours, employee benefit plans and the payment of social
security taxes, and is not liable for any arrears of wages or any tax
related thereto (except for currently accrued and unpaid wages and except
for currently accrued withholding, payroll, unemployment and social
security taxes payment of which is not overdue) or penalties for failure to
comply with any of the foregoing, and neither has received a notice to the
contrary from any Governmental Authority. Such Party has not suffered any
strike, slowdown, picketing or work stoppage by any union or other group or
employees affecting the business of such Party, and no such event or action
is threatened.
14.1.8 NO DISCRIMINATION Such Party currently subscribes and
offers and will continue to subscribe and offer to all customers,
employees, licensees, and invitees the opportunity to obtain all the goods,
services, accommodations, advantages, facilities and privileges of such
Party without discrimination because of race, creed, color, sex, age,
national origin or ancestry, in accordance with all applicable Federal,
state, and local laws relating to equal opportunity and discrimination.
14.1.9 DISCLAIMER EXCEPT AS EXPRESSLY PROVIDED HEREIN, NEITHER
PATHNET NOR INCUMBENT MAKES ANY OTHER EXPRESS WARRANTY AND THERE ARE NO
IMPLIED WARRANTIES WITH RESPECT TO ANY TECHNOLOGY, GOODS, SERVICES, RIGHTS
OR OTHER SUBJECT MATTER OF THIS AGREEMENT. PATHNET AND INCUMBENT HEREBY
DISCLAIM THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE WITH RESPECT TO ANY AND ALL OF THE FOREGOING.
14.2 REPRESENTATIONS AND WARRANTIES OF PATHNET.
14.2.1 SERVICES PathNet warrants (i) that the Services will be
performed in a workmanlike manner and (ii) that it has or will obtain
agreements or arrangements with its employees, agents and Subcontractors
sufficient to allow it to provide Incumbent with the Services;
SECTION 15. DELIVERIES.
31
<PAGE>
15.1 DELIVERIES BY INCUMBENT On or before the Effective Date, Incumbent
shall provide to PathNet (i) evidence of ownership by Incumbent of the sites set
forth on SCHEDULE B or, in the event Incumbent leases such sites, evidence of
Incumbent's leasehold interest in such sites and (ii) copies of all
environmental reports, title reports, surveys, specified or legal access, and
zoning Permits and licenses relating to the sites set forth on SCHEDULE B.
SECTION 16. INDEMNIFICATION AS A RESULT OF THIRD PARTY CLAIMS.
16.1 INDEMNIFICATION BY INCUMBENT Incumbent agrees to indemnify, defend
and hold harmless PathNet and its Affiliates and their respective officers,
directors, employees, agents, successors and assigns from and against any and
all Losses and threatened Losses arising from, in connection with, or based on
allegations of, any of the following:
(a) any claims of infringement of any patent, trade secret,
copyright or other proprietary rights alleged to have occurred because of
systems or other resources provided to PathNet by Incumbent.
(b) any claims arising out of the untruth, inaccuracy or breach
of any representation or warranty of Incumbent set forth in this Agreement.
(c) the liability of PathNet for (i) any personal injury,
disease or death of any person, (ii) damage to or loss of any property,
money damages or specific performance owed to any third party (by contract
or operation of law) or (iii) any fines, penalties, taxes, claims, demands,
charges, actions, causes of action, assessments, environmental response
costs, environmental penalties or injunctive obligations caused by, arising
out of, or in any way incidental to, or in connection with, actions or
omissions of Incumbent, its officers, directors, employees, Subcontractors
or agents.
16.2 INDEMNIFICATION BY PATHNET
. PathNet agrees to indemnify, defend and hold harmless Incumbent and its
Affiliates and their respective officers, directors, employees, agents,
successors and assigns from and against any and all Losses and threatened Losses
arising from, in connection with, or based on allegations of, any of the
following:
(a) Any claims of infringement of any patent, trade secret,
copyright or other proprietary rights alleged to have occurred because of
systems or other resources provided by Incumbent to PathNet.
(b) Any claims arising out of the untruth, inaccuracy or breach
of any representation or warranty of PathNet set forth in this Agreement.
(c) The liability of Incumbent for (i) any personal injury,
disease or death of any person, (ii) damage to or loss of any property,
money damages or specific performance owed to any third party (by contract
or operation of law) or (iii) any fines, penalties, taxes, claims, demand
charges, actions, causes of action assessments, environmental response
costs, environmental penalties or injunctive obligations caused
32
<PAGE>
by, arising out of, or in any way incidental to, or in connection with,
actions or omissions of PathNet, its officers, directors, employees,
Subcontractors or agents.
(d) The liability of Incumbent arising out of any or all
obligations to or contracts with customers to purchase Excess Capacity.
16.3 INDEMNIFICATION PROCEDURES With respect to any third party claims,
the following procedures shall apply:
(a) NOTICE. Promptly after receipt by an entity entitled to
indemnification under SECTION 16.1 or SECTION 16.2 of notice of the
commencement or threatened commencement of any civil, criminal,
administrative or investigative action or proceeding involving a claim in
respect of which the indemnitee will seek indemnification pursuant to any
such Section, the indemnitee shall notify the indemnitor of such claim in
writing. No failure to so notify an indemnitor shall relieve it of its
obligations under this Agreement except to the extent that it can
demonstrate damages attributable to such failure. Within fifteen (15) days
following receipt of written notice from the indemnitee relating to any
claim, but no later than ten (10) days before the date on which any
response to a complaint or summons is due, the indemnitor shall notify the
indemnitee in writing if the indemnitor elects to assume control of the
defense and settlement of that claim (a "NOTICE OF ELECTION").
(b) PROCEDURE FOLLOWING NOTICE OF ELECTION. If the indemnitor
delivers a Notice of Election relating to any claim within the required
notice period, the indemnitor shall be entitled to have sole control over
the defense and settlement of such claim; provided that, (i) the indemnitee
shall be entitled to participate in the defense of such claim and to employ
counsel at its own expense to assist in the handling of such claim, and
(ii) the indemnitor shall obtain the prior written approval of the
indemnitee before entering into any settlement of such claim or ceasing to
defend against such claim. After the indemnitor has delivered a Notice of
Election relating to any claim in accordance with the subsection (a) above,
the indemnitor shall not be liable to the indemnitee for any legal expenses
incurred by the indemnitee in connection with the defense of that claim.
In addition, the indemnitor shall not be required to indemnify the
indemnitee for any amount paid or payable by the indemnitee in the
settlement of any claim for which the indemnitor has delivered a timely
Notice of Election, if such amount was agreed to without the written
consent of the indemnitor.
(c) PROCEDURE WHERE NO NOTICE OF ELECTION IS DELIVERED. If the
indemnitor does not deliver a Notice of Election relating to any claim
within the required notice period, the indemnitee shall have the right to
defend the claim in such manner as it may deem appropriate, at the cost and
expense of the indemnitor. The indemnitor shall promptly reimburse the
indemnitee for all such costs and expenses.
16.4 SUBROGATION In the event that an indemnitor shall be obligated to
indemnify an indemnitee pursuant to SECTION 16.1 or SECTION 16.2, the indemnitor
shall, upon payment of such
33
<PAGE>
indemnity in full, be subrogated to all rights of the indemnitee with respect to
the claims to which such indemnification relates.
SECTION 17. LIABILITY OF THE PARTIES TO EACH OTHER.
17.1 LIABILITY GENERALLY Subject to the specific provisions of this
SECTION 16, it is the intent of the Parties that each Party shall be liable to
the other Party for any actual damages incurred by the Non-Breaching Party as a
result of the Breaching Party's failure to perform its obligations in the manner
required by this Agreement and failure to cure such nonperformance as set forth
in SECTION 18.1.2.
17.2 LIABILITY RESTRICTIONS.
(a) SUBJECT TO SUBSECTION (b) BELOW, IN NO EVENT, WHETHER IN
CONTRACT OR IN TORT (INCLUDING BREACH OF WARRANTY, NEGLIGENCE AND STRICT
LIABILITY IN TORT), SHALL A PARTY BE LIABLE TO THE OTHER PARTY FOR INDIRECT
OR CONSEQUENTIAL, EXEMPLARY, PUNITIVE OR SPECIAL DAMAGES EVEN IF SUCH PARTY
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES IN ADVANCE.
(b) The limitations set forth in subsection (a) shall not apply
with respect to: (i) damages occasioned by the willful misconduct or gross
negligence of a Party, (ii) damages occasioned by a non-compliance with any
Requirements of Law by either Party, (iii) damages occasioned by improper
or wrongful termination of this Agreement or (iv) damages occasioned by a
violation of SECTION 12 of this Agreement.
(c) Each Party shall have a duty to mitigate damages for which
the other Party is responsible.
(d) Each Party shall be liable to the other Party for any actual
damages as set forth in SECTION 16.1 only if, and to the extent that the
aggregate of all losses arising from or in connection with any such failure
to perform obligations in the manner required by this Agreement exceeds ten
thousand dollars ($10,000.00), except with respect to any payment
obligations set forth in SECTION 4.
17.3 FORCE MAJEURE
(a) No Party shall be liable for any breach, default or delay in the
performance of its obligations under this Agreement (i) if and to the
extent such default or delay is caused, directly or indirectly, by: fire,
flood, earthquake, elements of nature or acts of God, riots, civil
disorders, rebellions or revolutions in any country, changes in
Requirements of Law relating to the System or to the sale of Excess
Capacity, or any other cause beyond the reasonable control of such Party (a
"FORCE MAJEURE EVENT"), (ii) provided the non-performing Party is without
fault in causing such breach, default or delay, and such breach, default or
delay could not have been prevented by reasonable
34
<PAGE>
precautions and cannot reasonably be circumvented by the non-performing
Party through the use of alternate sources, work around plans or other
means.
(b) In such event the non-performing Party shall be excused from
further performance or observance of the obligation(s) so affected for as
long as such circumstances prevail and such Party continues to use its best
efforts to recommence performance or observance whenever and to whatever
extent possible without delay. Any Party so delayed in its performance
shall immediately notify the Party to whom performance is due by telephone
(to be confirmed in writing within two (2) days of the inception of such
delay) and describe at a reasonable level of detail the circumstances
causing such delay.
SECTION 18. INFORMAL DISPUTE RESOLUTION; ARBITRATION.
18.1 INFORMAL DISPUTE RESOLUTION.
18.1.1 ROLE OF PROGRAM MANAGER. In the event Incumbent has a
dispute, controversy or other complaint relating to PathNet's performance
of PathNet's rights and obligations under this Agreement, Incumbent shall
have the right to first contact the Program Manager to resolve such
dispute, controversy or other complaint. If Incumbent is not satisfied
with the resolution provided by the Program Manager, Incumbent may resort
to the arbitration procedures set forth in this SECTION 18.
18.1.2 NOTICE OF BREACH, CURE AND REMEDIES. In the event of a
breach by either PathNet or Incumbent (the "BREACHING PARTY"), the other
Party (the "NON-BREACHING PARTY") shall send by certified mail a written
notice of such breach to the Breaching Party setting forth the specific
allegations of such breach. Upon receipt of the notice of breach, the
Breaching Party shall have thirty (30) days to cure such breach. In the
event the Breaching Party fails to cure such breach, as determined by the
Non-Breaching Party in its sole discretion, or the Breaching Party
determines, in its sole discretion, that it has cured such breach, either
the Breaching Party or the Non-Breaching Party may invoke the arbitration
procedures set forth in SECTION 18.2 to resolve whether such breach has
been cured.
18.2 ARBITRATION.
18.2.1 ARBITRATION; RESOLUTION OF DISPUTES. Subject to SECTION
18.1, any and all disputes and controversies between Incumbent and PathNet
concerning the negotiation, interpretation, performance, breach or
termination of this Agreement (each a "DISPUTE") shall be subject to
resolution as set forth in this SECTION 18.
18.2.2 SETTLEMENT DISCUSSIONS. Subject to SECTION 18.1, any
Dispute shall be attempted to be resolved first through amicable settlement
discussions and each Party
35
<PAGE>
shall bear its own costs of such settlement discussions. Each Party hereby
agrees to use good faith efforts to reach a settlement through such
amicable settlement discussions.
18.2.3 REFERRAL TO BINDING ARBITRATION. In the event the Parties
fail to reach a settlement of the Dispute pursuant to settlement
discussions in accordance with SECTION 18.2.2, each Party shall have the
right, but not the obligation, to refer such Dispute for final resolution
by binding arbitration conducted in St. Louis, MO in accordance with the
rules and procedures of the American Arbitration Association. Either Party
may elect to require that the arbitration be administered by a panel of
three (3) arbitrators and/or that any such arbitrators have expertise in
the fields of telecommunications engineering or construction. Judgement
upon the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof. Cost of the arbitration, including,
reasonable attorney's fees of both Parties, shall be borne by the Party as
determined by such arbitrators.
18.2.4 BINDING EFFECT. The Parties acknowledge and agree that (i)
the award in any arbitration shall be final, conclusive and binding on the
Parties and (ii) any such arbitration award be a final resolution of the
Dispute between the Parties to the same extent as a final judgment of a
court of competent jurisdiction.
18.2.5 USE OF COURTS AND OTHER LEGAL REMEDIES. Each Party
covenants and agrees that it shall not resort to any court for legal
remedies concerning any Dispute other than to enforce a final decision by
the arbitrators or for preliminary, interim or provisional equitable relief
in aid of arbitration.
18.2.6 APPLICABLE LAW. The arbitrator shall determine the claims
of the Parties and render their final award in accordance with the
governing law of this Agreement as set forth in SECTION 19.5.
18.2.7 LIMITATION ON AWARDS. Arbitrators may not award (i)
incidental, consequential or punitive damages in the resolutions of any
Dispute and the Parties hereby waive all rights to and claims for monetary
awards other than compensatory damages, except as provided in Section
16.2(d) of this Agreement, (ii) the right to terminate this Agreement or
any of the rights and obligations hereunder except pursuant to SECTION 3.3,
or (iii) any other right or remedy that contravenes the terms and
conditions of this Agreement.
18.2.8 PERIOD OF LIMITATIONS. In the event the Party claiming a
Dispute does not institute binding arbitration within four (4) years after
the commencement of settlement discussions pursuant to SECTION 18.2.2, such
Party shall forever be barred from bringing a claim on the specific subject
matter of such Dispute.
SECTION 19. MISCELLANEOUS.
19.1 NOTICES All notices pertaining to disputes arising from this
Agreement shall be directed to a corporate entity or employee designated by the
signatories as having full rights and
36
<PAGE>
responsibilities to address such issues. Notices under this Agreement shall be
sufficient only if personally delivered by a commercial prepaid delivery or
courier service or mailed by certified or registered mail, return receipt
requested to a Party at its address set forth below or as amended by notice
pursuant to this SECTION 19.1. All notices shall be delivered as follows:
If to PathNet:
Michael A. Lubin, Esquire
Vice President and General Counsel
PathNet, Inc.
1015-31st Street. NW
Washington, DC 20007
Tel: (202) 625-7284
Fax: (202) 625-7369
If to Incumbent:
Ralph Shaw, General Manager
Northeast Missouri Electric Power
Cooperative
P.O. Box 191
Palmyra, MO 63461
Tel: (573) 769-2107
Fax: (573) 769-4358
19.2 BINDING NATURE; ENTIRE AGREEMENT PathNet and Incumbent acknowledge
that (i) each has read and understands the terms and conditions of this
Agreement and agrees to be bound by such terms and conditions, (ii) this
Agreement shall be binding on each of PathNet and Incumbent and their respective
successors and assigns, (iii) this Agreement is the complete and conclusive
statement of the agreement between the Parties, (iv) this Agreement supercedes
any and all prior agreements and arrangements between the Parties and all
understandings and agreements, oral and written, heretofore made between
Incumbent and PathNet are merged in this Agreement which alone, fully and
completely expresses their agreement on the subject matter of this Agreement and
(v) this Agreement sets forth the entire agreement on the subject matter hereof.
19.3 AMENDMENT No modifications of, additions to or waiver of this
Agreement shall be binding upon Incumbent or PathNet unless such modification,
addition or waiver is in writing and signed by an authorized representative of
each Party.
19.4 SEVERABILITY Contemporaneously herewith, the Parties have entered
into this Agreement (collectively, the "Other Agreement"). The Parties
acknowledge and agree that (i) the terms and provisions of this Agreement are
mutually interdependent, (ii) this Agreement and the Other Agreements are
mutually interdependent, (iii) the consideration for entering into each
provision of this Agreement and any or all of the foregoing agreements is
indivisible, (iv) neither of the Parties would have entered into any of the
foregoing agreements unless the other Party agreed to execute and deliver all of
the foregoing agreements, (v) it would be contrary to the intention and bargain
of the parties if, in the event of the bankruptcy of one of the Parties, such
Party sought to assume some but not all of the provisions of this Agreement or
some but not all of the foregoing agreements, (vi) it would be contrary to the
intention and bargain of the Parties if, in the event of the bankruptcy of one
of the Parties, such
37
<PAGE>
Party sought to reject some but not all of the provisions of the Agreement or
some but no all of the foregoing agreements, (vii) it would be contrary to the
intention and bargain of the Parties if a court for any reason were to enforce
some but not all of the provisions of this Agreement or were to hold some but
not all of the provisions of this Agreement or were to hold some but not all of
the provisions of this Agreement to be unenforceable, and (viii) it would be
contrary to the intention and bargain of the Parties if a court for any reason
were to enforce some but not all of the foregoing agreements or were to hold
some but not all of the foregoing agreements to be unenforceable.
19.5 GOVERNING LAW This Agreement, and the rights and obligations of the
Parties hereunder, shall be governed and interpreted in accordance with the laws
of the State of Missouri (other than the choice of law rules thereof).
19.6 SURVIVAL Any provision of this Agreement which contemplates
performance or observance subsequent to any termination or expiration of this
Agreement shall survive such termination or expiration and continue in full
force and effect.
19.7 ASSIGNMENT At any time and from time to time, PathNet shall have the
right to assign this Agreement or any of PathNet's rights and obligations under
this Agreement; provided, that in no event shall any such assignment relieve
PathNet of its obligations under this Agreement. Incumbent shall not have the
right to assign this Agreement or any of its rights and obligations hereunder
without the prior written consent of PathNet, which consent shall not be
unreasonably withheld; PROVIDED, HOWEVER, Incumbent may assign its rights and
obligations, in whole but not in part, under this Agreement without the approval
of PathNet, to any entity which acquires all or substantially all of the assets
of Incumbent or to any subsidiary, Affiliate or successor in a merger or
consolidation of Incumbent; provided, that in no event shall any such assignment
relieve Incumbent of its obligations under this Agreement.
19.8 WAIVER
. Failure or delay on the part of Incumbent or PathNet to exercise any right,
power or privilege under this Agreement shall not constitute a waiver of any
right power or privilege of this Agreement.
19.9 RECORDATION Each Party hereby acknowledges that this Agreement may be
subject to recordation and the costs, fees or expenses associated with any such
recordation shall be borne by the recording Party.
19.10 GOOD FAITH RENEGOTIATION Notwithstanding anything set forth
herein to the contrary, the Parties hereby agree that in the event a
Governmental Authority issues a decision, order, rule or other rulemaking of any
kind, which necessitates any modification or amendment to this Agreement, the
Parties shall negotiate in good faith to modify or amend this Agreement to
comply with such decision, order, rule or other rulemaking.
38
<PAGE>
19.11 CONFIDENTIAL TERMS AND CONDITIONS Incumbent shall not disclose,
except as required by law or as set forth in SECTION 19.9, the terms and
conditions of this Agreement to any third party.
19.12 INCUMBENT'S DESIGNATED REPRESENTATIVE Incumbent shall on the
Effective Date designate in writing a representative who shall have express
authority to bind Incumbent with respect to all matters requiring Incumbent's
approval or authorization in connection with this Agreement (the "INCUMBENT
REPRESENTATIVE"). Such Incumbent Representative shall have the authority to
make decisions and grant any and all consents required under this Agreement on
behalf of Incumbent and PathNet shall be entitled to rely on any such decision
or consent by the Incumbent Representative.
19.13 PATHNET'S DESIGNATED REPRESENTATIVE PathNet shall on the Effective
Date designate in writing a representative who shall have express authority to
bind PathNet with respect to all matters requiring PathNet's approval or
authorization in connection with this Agreement (the "PATHNET REPRESENTATIVE").
Such PathNet Representative shall have the authority to make decisions and grant
any and all consents required under this Agreement on behalf of PathNet and
Incumbent shall be entitled to rely on any such decision or consent by the
PathNet Representative.
19.14 OUTSOURCING In addition to, and not in place of, any rights of
PathNet under this Agreement, PathNet shall have the right to engage third party
Subcontractors to perform any or all of PathNet's rights and obligations under
this Agreement, provided that PathNet requires all subcontractors to provide
evidence of the same insurance coverages required herein of PathNet.
19.15 UNION AND LABOR RELATIONS Incumbent is a non-union employer and
with respect to any services performed by PathNet pursuant to this Agreement,
Incumbent will not require PathNet to comply with all applicable labor or
union-related agreements, regulations and ordinances and shall not require
PathNet to join any union or other labor organization as a condition to
performing services contemplated by this Agreement.
19.16 EXECUTION OF AN AMENDED SCHEDULE B In the event that both
Incumbent and PathNet elect to add additional Segments to the System, each of
Incumbent and PathNet shall execute and deliver an "AMENDED SCHEDULE B" setting
forth (i) the additional paths, sites and specific location information of the
additional Segment or Segments, (ii) the consideration PathNet shall pay to
Incumbent for such additional Segment (thereby amending SECTION 5.2 with respect
to such additional Segment; PROVIDED, HOWEVER, SECTION 5 shall remain in full
force and effect with respect to Segment 1 or any other existing Segment) and
(iii) the Incumbent Items, the amount of the Incumbent Estimated Costs and the
method of payment of the cost of the Incumbent Items with respect to such
additional Segment (thereby amending SECTION 4.1 and SECTION 1 of SCHEDULE C
with respect to such additional Segment; PROVIDED, HOWEVER, SECTION 4.1 and
SECTION 1 of SCHEDULE C shall in any event remain in full force and effect with
respect to Segment 1 or any other existing Segment.) PathNet's and Incumbent's
rights and obligations under this Agreement will commence with respect to such
additional Segment or Segments on the date of execution of such AMENDED SCHEDULE
B by both Parties which date shall be deemed
39
<PAGE>
the "EFFECTIVE DATE" with respect to such Segment for purposes of this Agreement
and each reference to SCHEDULE B in this Agreement shall be deemed to refer to
such AMENDED SCHEDULE B.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement, as of
the date first written above.
PATHNET, INC.
By: /s/ Dave Schaeffer
-------------------------------
Name: Dave Schaeffer
Title: Chairman
NORTHEAST MISSOURI ELECTRIC
POWER COOPERATIVE
By: /s/ Ralph E. Shaw
-------------------------------
Name: Ralph E. Shaw
Title: General Manager
40
<PAGE>
INDEX OF SCHEDULES AND EXHIBITS TO
FIXED POINT MICROWAVE SERVICES AGREEMENT
SCHEDULE A: Services and System Specifications
Exhibit A-1: System Equipment, Towers and Shelters
Exhibit A-2: Manufacturers Specifications for Radios
Exhibit A-3: Electricity and Power Specifications of the System
Exhibit A-4: Incumbent Multiplexing Requirements
Exhibit A-5: Equipment Shelters Specification and Design
Exhibit A-6: Grounding and Lightning Protection Guidelines and
Specifications for Communications Shelters
Exhibit A-7: Network Interconnections Schedule
Exhibit A-8: PathNet Spurs and Incumbent Spurs
Exhibit A-9: Form of Certificate of Acceptance
SCHEDULE B: Segment and Facilities
SCHEDULE C: Estimated and Operating Costs
Exhibit C-1: Incumbent Estimated Costs
Exhibit C-2: PathNet's Estimated Costs
SCHEDULE D: Form of Escrow Agreement
SCHEDULE E: Incumbent Security Procedures
SCHEDULE F: Incumbent Drug Testing Procedures
SCHEDULE G: Incumbent Substance Abuse Policy
SCHEDULE H: Incumbent Health and Safety Requirements
SCHEDULE I: Other Requirements of Incumbent
i
<PAGE>
SCHEDULE J: Incumbent Training
SCHEDULE K: Ownership of System Equipment, Assets and Materials
SCHEDULE L: Form of Quarterly Revenue Report
SCHEDULE M: Incumbent Payment Instructions
SCHEDULE N: Form of PathNet Sublicense Agreement
SCHEDULE 0: Form of Security Agreement
ii
<PAGE>
SCHEDULE A
SERVICES AND SYSTEM SPECIFICATIONS
This Schedule A describes certain services and specifications that PathNet
and Incumbent shall respectively perform. PathNet's and Incumbent's
responsibilities with respect to particular Services and Specifications
described in this Schedule A, if any, are specifically indicated where such
Services and Specifications are described. PathNet's and Incumbent's payment
responsibilities with respect to the Services and Specifications shall be as set
forth in Section 4 and Schedule C.
SECTION 1. PRELIMINARY ENGINEERING STUDIES AND EVALUATION OF EXISTING SYSTEM.
1.1 Preliminary Analysis. PathNet shall complete a detailed analysis of
the existing microwave system operated by Incumbent along each Segment set forth
in Schedule B and upon completion of such analysis shall deliver the results of
such analysis to Incumbent. Such analysis shall include:
(a) an inventory and survey of Incumbent's existing microwave sites
and supporting facilities (the "Existing System Inventory");
(b) microwave path studies and reliability analysis to provide
performance data to serve as the engineering basis for the design of the
System (the "Path Studies");
(c) a preliminary evaluation of the probability of successfully
coordinating frequencies on the System (the "Frequency Availability
Model");
(d) a determination of whether structural analysis of towers and
loading factors (for metal towers only) is required and, in the event such
structural analysis is required, the analysis of Incumbent's towers,
including, but not limited to, the wind loading and weight requirements
for the proposed antenna systems as well as any feedlines necessary to
support the such antenna systems (the "Tower Analysis");
(e) the design of the System (the "System Design") which System
Design conforms with the terms and conditions of Section 3 of this
Schedule A;
(f) a detailed line item budget for the System (the "System
Budget");
(g) a proposed T-1 plan for channelization of the System the
("Channel Plan"); and
(h) a preliminary construction management schedule for each
replacement Segment (the "Preliminary Construction Schedule").
A-1
<PAGE>
1.2 Cooperation of Incumbent with Preliminary Analysis. Incumbent shall
fully cooperate with PathNet in PathNet's performance of the preliminary
analysis set forth in Section 1.1 of this Schedule A, including, but not limited
to, providing to PathNet any requested information and documents relating to
Incumbent or Incumbent's existing system.
1.3 Project Drawings. Upon completion of the preliminary engineering
studies and analysis and documentation as set forth in Section 1.1 of this
Schedule A, PathNet shall deliver to Incumbent the following project drawings:
(i) a System layout drawing, (ii) the rack profiles, (iii) block drawings, and
(iv) equipment wiring drawings (collectively, the "Project Drawings.")
1.4 Deliveries by Incumbent. Within thirty (30) days of the Effective
Date, Incumbent shall deliver to PathNet (i) any existing tower drawings and
specifications, inventory lists and other documents relating to the sites set
forth on Schedule B necessary for PathNet to perform its obligations under this
Agreement, (ii) the results of any structural, mechanical, and electrical
inspections and reports relating to Incumbent's existing system facilities or
sites, which have been performed pursuant to the requirements of any applicable
Federal, state or local law or by Incumbent at its discretion and (iii) the
names, addresses and contact persons of any consultants or Subcontractors
engaged by Incumbent in connection with Incumbent's existing system, Facilities
or sites and copies of any reports or documents produced by such consultants or
Subcontractors.
SECTION 2. MODIFICATION TO EXISTING INFRASTRUCTURE
2.1 Documentation. Upon completion of the preliminary analysis as set
forth in Section 1.1 of this Schedule A, PathNet shall prepare and deliver to
Incumbent a project management schedule and scope of work (the "Modifications
SOW") setting forth a detailed plan to complete all required modifications of
Incumbent's existing sites and Facilities necessary for the installation and
operation of the new System in accordance with the terms and conditions of this
Agreement. Incumbent shall have ten (10) days to either (i) approve by written
notice to PathNet such Modifications SOW or (ii) deliver to PathNet a written
list of Incumbent's suggested modifications to the Modifications SOW; provided,
however, any such modifications to the Modifications SOW may not result in the
cost of the Services and Specifications set forth in the Modifications SOW
exceeding the cost of such Services and Specifications as set forth in Section 1
of Schedule C. PathNet shall review any such suggested modifications and
incorporate any or all of such suggested modifications into the Modifications
SOW. In the event Incumbent does not notify PathNet in writing within the
prescribed time period, PathNet shall assume that Incumbent has granted such
approval.
2.2 Modifications Required. PathNet shall perform all of the modifications
set forth in the Modifications SOW. Such modifications shall include the
following:
(a) any required modifications to the towers necessary to conform
the towers to the Specifications;
(b) any required modifications to the battery reserves necessary to
conform the battery reserves to the Specifications and the installation of
any required generators, in accordance with the Specifications;
A-2
<PAGE>
(c) any required modifications to the environmental control systems
of the existing shelters necessary to conform such environmental control
systems to the Specifications;
(d) the provision of all necessary D.C. and A.C. power cable
engineering for all racks, including, but not limited to, the installation
of all necessary conduits required to carry D.C. and A.C. power,
terminating cables and alarm cables and the installation of all necessary
A.C. distribution and A.C. wiring as required to meet the Specifications;
(e) the installation of all required new equipment shelters, or
modification of existing equipment shelters, to conform to the
Specifications;
(f) the installation of all required liquid petroleum, diesel or
natural gas lines from the existing liquid petroleum diesel or natural gas
tank or source, as the case may be, to the new shelter in accordance with
the Specifications;
(g) any required modifications to the foundation of any of the
towers, shelters or sites as set forth in the Tower Analysis;
(h) any upgrades required to conform the sites and Facilities to
local building code provisions and any other regulatory Requirements of
Law, including, but not limited to, those related to health and safety;
(i) the removal of any above or below ground obstructions or
materials such as trees and power lines which may affect the performance
of the System or other activities contemplated by this Agreement;
(j) all required fence extensions and replacements;
(k) any required modifications to the grounding and bonding Systems
at each site to conform to the Specifications;
(l) any required modifications to the pressurizing equipment to
conform to the Specifications, including the pressurizing equipment
manifolds and dehydrators; and
(m) any other miscellaneous site work necessary to prepare
Incumbent's sites for the installation and operation of the new System.
2.3 Cooperation by Incumbent. Incumbent shall fully cooperate with PathNet
and shall provide PathNet with all required assistance in completion of such
obligations in PathNet's performance of its obligations under this Section 2 of
this Schedule A.
2.4 Maintenance of Modifications. Incumbent shall ensure that all
modifications performed pursuant to this Section 2 of this Schedule A are
maintained in accordance with the Specifications, including, but not limited to,
the upgrade or replacement of any equipment and materials described in the
Modifications SOW.
A-3
<PAGE>
2.5 Choice of Equipment Vendors and Service Providers.
2.5.1 Engagement. In the event Incumbent proposes an equipment
vendor or service provider directly in accordance with this Section 2.5 of
Schedule A (i) PathNet shall have the right to approve any equipment
vendors or service providers, which approval shall not be unreasonably
withheld, (ii) all invoices, purchase orders or other bills relating to
such equipment or services shall be sent to both PathNet and Incumbent and
(iii) Incumbent shall not pay any such invoice, purchase order or bill
without the prior approval of PathNet, which approval shall not be
unreasonably withheld.
2.5.2 Approval. Incumbent shall have the right to reasonably approve
any Subcontractor engaged to perform the Services set forth in this
Section 2 of Schedule A.
SECTION 3. DESIGN OF NEW SYSTEM
3.1 Approval of System Design. Within ten (10) days after receipt by
Incumbent of the System Design from PathNet, Incumbent shall either (i) deliver
to PathNet written approval of such System Design or (ii) deliver to PathNet a
written list of Incumbent's suggested design modifications. PathNet shall review
any such suggested modifications and, in PathNet's sole discretion, incorporate
some, all or none of such suggested modifications into the System Design.
PathNet shall, within thirty (30) days of receipt of Incumbent's suggested
modifications, deliver a revised System Design to Incumbent. In the event
Incumbent fails to deliver to PathNet in writing its approval as set forth above
within the prescribed time period, PathNet shall assume that Incumbent has
approved such System Design.
3.2 Modification of System Design. At any time and from time to time,
PathNet shall have the right to modify the System Design upon written notice to
Incumbent of such modifications, as new versions of Equipment used in the System
may become available from manufacturers or software providers and as Technology
is improved.
3.3 System Technical Specifications. PathNet shall (i) design the System
in accordance with the minimum network performance standards set forth in
Section 3 of this Schedule A, (ii) in each instance where reasonably possible,
use the towers, antennas, waveguide, and other system components of Incumbent's
existing system in the System Design and (iii) design the System to meet the
following technical specifications:
(a) Radio System Design. The active radio components of the System
shall be designed to conform to the Specifications and the manufacturer
specifications set forth in Exhibit A-2 to this Schedule A.
(b) Radio Software Design. The software used to operate the radios
shall conform to the Specifications and the manufacturer specifications
set forth in Exhibit A-2 to this Schedule A.
(c) Antenna and Frequency Specifications. The radio communications
equipment shall transmit and receive on the frequencies as set forth in
the System Design. All antenna reflectors used in the System shall conform
to (i) Category A standards as
A-4
<PAGE>
defined by the FCC and (ii) the specifications set forth in any PCN
relating to the System, and each high performance antenna shall be fitted
with a radome. All antenna mounting hardware shall meet wind and loading
requirements for the applicable county and shall substantially conform to
EIA-222-F.
(d) Tower Specifications. All towers shall substantially conform to
(i) the EIA/TIA-222-F-1991, Structural Standards for Steel Antenna Towers
and Antenna Supporting Structures, 1996, (ii) EIA/222-F Specifications for
loading for the appropriate county, and (iii) any other required FCC and
FAA rules and regulations.
(e) Waveguide Specifications. Waveguide used in the System specified
for transmission line shall be of a premium grade to ensure minimum
return.
(f) D.C. Power Requirements. The radio components of the System
shall be powered by 48 volts DC with at least eight (8) to ten (10) hours
of battery capability (assuring less than twenty (20) amp loads for
Incumbent Equipment), and all necessary chargers, distribution systems and
transfer switches for generators as set forth in Exhibit A-3 to this
Schedule A.
(g) A.C. Power Requirements. A.C. electrical power required by the
System shall be consistent with local requirements and the usage at each
of the sites set forth in Schedule B and shall be 120/240 volt single
phase 200 amp service as set forth in Exhibit A-3 to this Schedule A.
(h) Bonding and Grounding Specifications. The System and all
associated electrical components shall be grounded and bonded to current
EIA and IEEE specifications and in accordance with the Specifications set
forth on Exhibit A-6 to this Schedule A.
(i) Order Wire Specification. Each equipment shelter shall be
equipped with an Order Wire and a handset, which will be used as a talk
circuit for System operation and maintenance purposes and which will be
carried by PathNet as part of the System payload.
(j) Diagnostic Circuit. Each equipment shelter shall be equipped
with a diagnostic circuit that will be used to connect each such shelter
and the Equipment housed in such shelter to the Network Management System.
(k) Multiplexing from OC-3 to DS-1 Level. The System Design shall
provide for any required multiplexing of the OC-3 to the DS-1 level at
each site using an OC-3 Multiplexer.
(l) Multiplexing from DS-1 to DS-0 Level. Within thirty (30) days
after the date hereof, Incumbent shall deliver to PathNet a Schedule
substantially in the form of Exhibit A-4 to this Schedule A setting forth
Incumbent's multiplexing requirements. Upon receipt of such Exhibit A-4 to
this Schedule A, PathNet will reflect in the System Design the requested
multiplexing of the DS-1 to the DS-0 level at each site using a 1/0
A-5
<PAGE>
Multiplexer subject to limitations in Drop and Insert Capacity between
each Switched Mod Section using available Wayside Channels.
(m) Wayside Channels. Incumbent or PathNet as reflected in the
System Design, as determined by PathNet in its sole discretion, shall use
the Wayside Channels.
(n) Spectral Loading Requirements. The System shall meet the then
current FCC requirements of spectrum efficiency outlined, 47 C.F.R. 101
and any successor rule or regulation.
(o) Capacity of System. The System shall be comprised of, at a
minimum, 3 DS-3 capability and will have a 1 x n protection switch
allowing for upward migration to a minimum of 1 x 7 protection. The
capacity of the System may be expanded to a 2 x 14 protection level, using
additional spectrum or crossband filters, provided, such Capacity
Expansion does not degrade the System below the performance standards set
forth in this Section 3 of this Schedule A.
(p) SONET Architecture. The digital microwave radios used in the
System shall operate under a SONET format.
(q) Shelters Design. A proposed building layout for the new shelters
to be constructed and shall be as set forth in Exhibit A-5 to this
Schedule A and shall comply with all applicable local laws, regulations
and ordinances. The building layout for existing shelters to be modified
shall be as set forth in the drawing as set forth in Exhibit A-6 to this
Schedule A.
(r) Channel Plan. The System shall be designed such that Incumbent
and PathNet shall be allocated capacity as set forth in the Channel Plan
and Section 7.2.2.
(s) Interconnections Limitations. The System shall have no more than
four (4) Interconnections per LATA. No more than two (2) of such
Interconnections shall be to other segments of the PathNet network created
from facilities of other Persons and no more than two (2) of such two
Interconnections shall be to the PSTN. At each Interconnection site, there
shall be no more than two (2) additional antennas used solely for such
Interconnection purposes. Interconnections may be by microwave or other
media. To the extent PathNet develops spurs, PathNet shall notify
Incumbent, in writing, of its intention to develop any such spur at least
thirty (30) days before the Commissioning of such spur. To the extent
Incumbent develops spurs for its own connectivity purposes, Incumbent
shall notify PathNet, in writing, of its intention to develop any such
spur at least thirty (30) days before the Commissioning of such spur.
(t) Protection Switching Requirement. Power, radio, and multiplexing
equipment shall be redundant with automatic protection switching to
minimize Outages as a result of equipment failure.
(u) Generator Requirements. Generators shall be required at all
sites with a history of power outages, all sites that are difficult to
access and any other sites as determined by the Parties.
A-6
<PAGE>
(v) System Integration. The System shall be integrated into the
total PathNet telecommunications network as set forth in the System
Design.
(w) Transmission Line Requirements. One (1) or more transmission
lines shall be connected to each antenna and such lines will be anchored
firmly to the tower in accordance with the manufacturer's recommendation.
(x) Equipment Rack Specifications. Each equipment rack shall be
firmly anchored to the floor, and the overhead channel iron or the
adjacent racks.
(y) Environmental Control of Shelters. Equipment shelters shall be
environmentally controlled to standards, between 55(degree) and 80(degree)
and shall be maintained within the desired humidity range, as set forth in
the manufacturer's specifications in Exhibit A-2 to this Schedule A and as
set forth in Exhibit A-5 to this Schedule A.
(z) Spurs. The System shall be designed to allow the build-out of
spurs set forth on Exhibit A-7 to this Schedule A from the backbone
network for PathNet's and Incumbent's own network and internal
communications purposes.
(aa) Network Management System. The System Design shall include the
Network Management System that complies with the specifications set forth
in Section 7.6 of this Schedule A.
(bb) Fuel Tanks and Lines. All liquid petroleum, diesel and natural
gas tanks and lines required shall meet all applicable environmental and
health and safety standards and Requirements of Law.
(cc) Pressurizing Equipment. The System Design shall include all
required pressurizing equipment, manifolds and dehydrators.
3.4 System Performance Criteria
3.4.1 Availability. The System shall be designed to meet or exceed
the long haul objective of 99.98% availability on an annual basis for a
4,000 mile system, which is equivalent to a one way system Outage of less
than 0.4 seconds, per mile, per year.
3.4.2 Circuit Acceptance Level. The System shall be designed such
that any continuous five hundred (500) mile segment of the System during
any consecutive twenty-four hour period shall have no more than one (1)
Errored Second, shall have 99.998% Error Free Seconds and shall have no
Severely Errored Seconds, measured at the DS-1 level.
SECTION 4. INSTALLATION AND CONSTRUCTION
4.1 Documentation.
A-7
<PAGE>
4.1.1 Project Management Plan, Project Schedule and Cutover Plan.
Upon approval of the System Design, PathNet shall deliver to Incumbent (i)
a plan of the respective responsibilities of each Party and other related
items relating to the construction and installation of the System (the
"Project Management Plan"), (ii) a schedule for the installation of the
System (the "Project Schedule"), and (iii) a schedule for the cutover of
the System (the "Cutover Plan"). Incumbent shall have ten (10) days to
either (i) approve by written notice to PathNet such Project Management
Plan, Project Schedule and Cutover Plan or (ii) deliver to PathNet a
written list of Incumbent's suggested modifications to such Project
Management Plan, Project Schedule and Cutover Plan, as the case may be.
PathNet shall review any such suggested modifications and incorporate any
or all of such suggested modifications into the Project Management Plan,
Project Schedule and Cutover Plan, respectively. In the event Incumbent
does not notify PathNet in writing of its approval or suggested
modifications of the Project Management Plan, Project Schedule and Cutover
Plan as set forth above within the prescribed time period, PathNet shall
assume that Incumbent has granted such approval.
4.1.2 Installation Reports. After installation has begun and
continuing until Commissioning, PathNet shall provide to Incumbent a
bi-weekly progress report (each a "Progress Report") setting forth, (i) a
description of the work performed during the immediately preceding period,
(ii) a list of any material deviations from the proposed schedule of work
and (iii) an analysis of such deviations with respect to their impact upon
the timely deployment of the System.
4.1.3 Changes to Drawings. In the event that during the process of
Installation any of the Project Drawings delivered pursuant to Section 1.3
of this Schedule A require any modifications, PathNet shall make any such
modifications to such Project Drawings, shall deliver the revised Project
Drawings to Incumbent, and shall place a copy of such revised Project
Drawings at each site.
4.1.4 As-Built Drawings. Upon completion of each phase of
installation as set forth in the Project Schedule, PathNet shall deliver
to Incumbent an as-built drawing of the System (each an "As-Built
Drawing") and shall incorporate the final As-Built Drawing into the
appropriate equipment manuals.
4.2 Installation by PathNet. PathNet shall construct and install the
System as set forth below and in accordance with this Schedule A and the
documents and schedules prepared and delivered pursuant to this Schedule A.
(a) Radios. PathNet shall furnish and install the digital radios
that meet the Specifications.
(b) Antennas and Frequencies. PathNet shall furnish and install (i)
the antennas that meet the Specifications and (ii) any required antenna
mounting hardware to secure such antennas to the towers in accordance with
the Specifications.
(c) Waveguide Bridge and Supports. PathNet shall furnish and install
(i) waveguides that meet the Specifications, (ii) new waveguide bridges on
two faces of the
A-8
<PAGE>
existing towers and (iii) all additional supports required of the
waveguide from the tower to termination inside the shelter.
(d) Bonding and Grounding. PathNet shall furnish and install all
required ground kits in accordance with the Specifications, including, but
not limited to, waveguide ground kits at the antenna, the bottom of the
tower and at the entry port of the shelter, tower anchor grounding kits,
and ground wire rings for the shelters.
(e) Moving Company. During installation of the System, PathNet, or a
full service moving and warehousing company hired by PathNet, shall handle
the pick up of necessary equipment for temporary warehousing in all
required areas at and near the installation sites.
(f) Order Wire. PathNet shall furnish and install an Order Wire at
each site in accordance with the Specifications and shall establish Order
Wire connectivity, including, but not limited to, connectivity to all
necessary external interfaces.
(g) OC-3 Multiplexers. PathNet shall furnish and install all
required OC-3 Multiplexers to the DS-1 level as set forth in Section 3 of
this Schedule A.
(h) Channel Plan. PathNet shall perform cross-connects of T-1 lines
in accordance with the Channel Plan and the Specifications.
(i) Interconnection Placement. PathNet shall furnish and install
connecting facilities from the System to the PSTN, including but not
limited to connections to POP's of purchasers of Excess Capacity and
PathNet shall furnish and install all cables required to interconnect
project equipment within the System.
(j) Transmission Lines. PathNet shall (i) furnish and install all
required transmission lines on the towers, (ii) route such transmission
lines to the equipment racks in the shelters, (iii) connect both ends of
such transmission lines and (iv) interface such transmission lines to the
radio equipment in accordance with the Specifications.
(k) Equipment Racks. PathNet shall furnish and install all equipment
racks necessary for the Equipment installed by PathNet in accordance with
the Specifications.
(l) Network Management System. PathNet shall furnish and install the
Network Management System, including, but not limited to, all required
alarms, panels, terminals, software and cables at all appropriate
demarkation points in accordance with the Specifications.
(m) Spurs. PathNet shall furnish and install all of the necessary
equipment to build-out PathNet's spurs and Incumbent's spurs (as requested
and paid for by Incumbent), each as set forth in Exhibit A-7 to this
Schedule A in accordance with the Specifications.
A-9
<PAGE>
(n) Deconstruction of Existing System. As required at each site,
PathNet shall move Incumbent's existing system to one side, providing
space for permanent installation of the new System.
(o) Pre-Commissioning System. PathNet shall install an "initial"
digital System in such a way that it can be operated and tested without
interfering with Incumbent's existing system performance.
(p) Parallel Systems. In order to minimize system downtime, PathNet
shall provide parallel operations to the Incumbent's existing analog
system with the digital equipment system using new frequencies and antenna
configurations.
4.3 Cooperation During Installation. During installation, Incumbent shall
provide all necessary cooperation to PathNet, including, but not limited to,
posting at each site any Permits or licenses for building or tower work related
to the construction at such site and providing reasonable access to its
Facilities as set forth in Section 5.
4.4 Installation by Incumbent. Incumbent shall furnish and install all
required equipment and materials at each point of demarkation to meet
Incumbent's internal communication needs, including, but not limited to,
furnishing and installing all 1/0 Multiplexers as set forth in Section 3 of this
Schedule A and all other interconnection equipment relating to Incumbent's spurs
set forth in Exhibit A-7 to this Schedule A.
SECTION 5. PRE-COMMISSIONING TESTING
5.1 Factory Acceptance Test.
5.1.1 Tests to be Performed. PathNet shall coordinate all factory
acceptance testing on the Equipment. Such factory acceptance testing shall
include (i) linking together of all racks in each Switched Mod Section to
simulate the System as it will be configured in the field, (ii) testing at
the panel terminal and System level for certification and compliance with
the Specifications, (iii) connecting the radio bays by coaxial cables
through attenuators to simulate "RSL" conditions as encountered in the
field, (iv) testing on a path basis to the applicable configuration of the
System, (v) testing of all miscellaneous Equipment such as supervisory
fault alarm and control and service channel units and (vi) testing the
equipment as a System to resolve all interface problems.
5.1.2 Observing Factory Testing. Incumbent shall have the right, at
its own expense, to witness in person the factory testing of the
Equipment.
5.2 Rack Test. PathNet shall perform a rack test once the radio cabinet
has been installed.
5.3 Path Test. PathNet shall perform a path test after each site has been
turned up.
5.4 End-To-End Test. PathNet shall perform an end-to-end test for each
Switched Mod Section on the System once all sites have been turned up.
A-10
<PAGE>
5.5 Field Test. Once the Equipment is installed and operational, PathNet
shall test each path pursuant to the following field tests to ensure performance
of the Equipment over the designated path in accordance with the criteria and
standards set forth in this Schedule A.
(a) Radio Hop Test: PathNet shall (i) align all digital microwave
paths, (ii) measure and record transmitter frequency, (iii) measure and
record transmitter power, (iv) calculate and record receiver fade margin,
(iv) perform Bit Error Rate checks and (v) record results of such Bit
Error Rate checks.
(b) Digital Multiplex Test: PathNet shall (i) perform standard
loop-back tests and (ii) verify the performance of all local alarm points
to the DS-1 level.
(c) System Test: PathNet shall (i) perform an end-to-end Bit Error
Rate test of the message one radio for a 24-hour period and an end-to-end
Bit Error Rate test of the protect radio for 1 hour, (ii) verify equipped
channel units through microwave system, (iii) verify performance of Order
Wires and Wayside Channels, and (iv) verify performance of the alarm
points function throughout the System.
5.6 Site Acceptance Testing. PathNet shall perform all site acceptance
tests as recommended by the manufacturers of the Equipment and PathNet shall
provide the results of any such site acceptance testing to Incumbent promptly
after completion of such testing.
5.7 Acceptance Procedure. After completion of site acceptance testing as
set forth in Section 5.6 of this Schedule A, PathNet shall implement the
following acceptance procedure:
(a) Incumbent shall promptly perform an installation inspection and
deliver to PathNet a written list of all material deficiencies from the
Specifications to be corrected by PathNet (the "Deficiency List").
(b) PathNet shall promptly correct such material deficiencies on the
Deficiency List and shall, upon completion, certify to Incumbent that such
items have been corrected.
(c) PathNet shall submit to Incumbent all of the test data collected
through the performance of the tests set forth in Section 5 of this
Schedule A for Incumbent's approval, which approval shall not be
unreasonably withheld.
(d) Incumbent shall deliver to PathNet a Certificate of Acceptance
substantially in the form of Exhibit A-8 to this Schedule A.
5.8 Equipment Required for Pre-Commissioning Testing. PathNet shall
furnish all Pre-Commissioning Test Equipment.
A-11
<PAGE>
SECTION 6. CUTOVER
6.1 Cutover.
6.1.1 PathNet Responsibilities. PathNet shall (i) manage the cutover
process for the System, (ii) perform such cutover in accordance with the
Cutover Plan and (iii) notify Incumbent of the circuit activity that will
occur upon Commissioning of each path or Segment and the impact that such
activity may have on the Incumbent's existing system. Promptly after each
site has been cutover, PathNet shall notify Incumbent of the completion of
such cutovers.
6.1.2 Incumbent Responsibilities. Incumbent shall (i) cooperate and
coordinate its cutover of its voice and data circuits with PathNet and the
Cutover Plan, (ii) complete its cutover of its voice and data circuits no
more than ninety (90) days after Commissioning of each path or Segment by
PathNet and (iii) no more than ninety (90) days after cutover by Incumbent
of its voice and data systems, remove all unused equipment from
Incumbent's sites in compliance with all applicable Requirements of Law.
6.2 Station Log Books. PathNet shall establish station logs books in
accordance with all FCC rules and regulations (each a "Station Log Book") and at
Commissioning shall deliver to Incumbent an original of each Station Log Book at
Commissioning.
SECTION 7. SYSTEM OPERATION
7.1 Increases in Capacity. At any time, and from time to time, PathNet
shall have the right, at its sole discretion, to increase the capacity of the
System beyond the capacity created in the initial build-out consistent with the
provisions of Section 3.3(q) of this Schedule A; provided, that PathNet fulfills
the following conditions before Commissioning any such proposed Capacity
Expansion:
(a) Capacity Expansion Schedule. At least fifteen (15) days prior to
any Capacity Expansion, PathNet shall provide to Incumbent a capacity
expansion schedule (each, a "Capacity Expansion Schedule") setting forth
the amount of capacity to be included in such Capacity Expansion, the
specific paths to be expanded, the expansion name (including each path
that is affected), and the expected Commissioning of such Capacity
Expansion.
(b) Performance of Capacity Expansion. Prior to the Commissioning of
any Capacity Expansion, (i) PathNet shall perform all required testing on
such Capacity Expansion to confirm that any such Capacity Expansion will
not degrade the System below the Specifications (ii) PathNet shall provide
the results of such testing upon receipt of such test results to Incumbent
for its review and approval and (iii) PathNet shall obtain from Incumbent
a Certificate of Acceptance substantially in the form attached hereto as
Exhibit A-8 to this Schedule A with respect to such Capacity Expansion.
A-12
<PAGE>
(c) Incumbent's Right to Contest Capacity Expansion. In the event,
after receipt of the test results as set forth above, Incumbent reasonably
determines that a proposed Capacity Expansion will degrade the System
below the Specifications, Incumbent shall have the right to withhold
delivery of any Certificate of Acceptance with respect to such Capacity
Expansion and shall hire an independent third party approved by PathNet
(which approval shall not be unreasonably withheld) to perform additional
testing on such Capacity Expansion. In the event such independent third
party reports that the proposed Capacity Expansion will not result in the
degradation of the System below the Specifications, Incumbent (i) shall
promptly deliver to PathNet a Certificate of Acceptance with respect to
such proposed Capacity Expansion and (ii) shall pay for the reasonable
costs of such independent third party evaluation. In the event that such
independent third party reports that the proposed Capacity Expansion will
result in the degradation of the System below the Specifications (i)
PathNet shall make all required modifications to the System and the
proposed Capacity Expansion such that, in the opinion of such independent
third party, the proposed Capacity Expansion shall not degrade the System
below the Specifications, (ii) upon verification by such independent third
party that the proposed Capacity Expansion, as modified by PathNet, shall
not degrade the System below the Specifications, Incumbent shall promptly
deliver to PathNet a Certificate of Acceptance substantially in the form
attached as Exhibit A-8 to this Schedule A with respect to such Capacity
Expansion and (iii) PathNet shall pay for the reasonable costs of such
independent third party evaluation.
7.2 Additional Transmission Lines and Antennas. After Commissioning, if
the System is expanded pursuant to any Capacity Expansion, PathNet shall have
the right to elect to install a second transmission feed line or a third antenna
to any tower. In such instance, PathNet shall (i) perform any tower analysis
that may be required before the installation of such transmission line or
antenna, (ii) furnish and install such additional transmission line and any
associated connectors and mounting hardware for securing such transmission line
to the towers, (iii) furnish and install such antenna and other devices and
equipment associated with such antenna and (iv) perform strengthening to the
tower required for such transmission line or third antenna.
7.3 Additional Order Wires and Diagnostic Circuits. At any time and from
time to time, PathNet shall have the right to install additional Order Wires and
diagnostic circuits at System sites, which Order Wires and diagnostic circuit
may or may not be carried as part of the System payload as determined to be
necessary or appropriate by PathNet in its sole discretion.
7.4 24-Hour Network Monitoring Center. Upon Commissioning and for the
period thereafter until the Expiration Date, PathNet shall operate a network
monitoring center (the "Network Monitoring Center") twenty-four (24) hours a
day, seven (7) days a week, which Network Monitoring Center shall, among other
things, handle all problems and trouble reports that may arise and monitor the
System as set forth in Section 7.5 of this Schedule A.
7.5 Network Management System. At all times after Commissioning until the
Expiration Date, PathNet shall provide a network management system to be
operated at the Network Monitoring Center (the "Network Management System")
which Network Management System will (i) manage all network elements within the
System (21 SMX or equivalent), (ii)
A-13
<PAGE>
monitor and control the facilities system, the radio system, and the OC-3/DS-1
multiplex system, (iii) collect performance data such as Errored Seconds,
Severely Errored Seconds, frame loss and Failed Seconds consistent with the
manufacturer's specifications set forth in Exhibit A-2 to this Schedule A, (iv)
monitor the shelter environments (including commercial power failure, door
alarms, charger failures, low waveguide pressure, air conditioner failure, tower
light alarms, generator runs (if any), waveguide dehydrator excessive runs,
smoke alarms, high temperature and low temperature), radio equipment,
multiplexing equipment, and Incumbent equipment (as reasonably requested by
Incumbent) and (v) provide Incumbent with the ability to monitor the System
separately from the overall PathNet network.
7.6 Alarm and Event Logging and Reports. Within thirty (30) days after the
end of each calendar quarter, PathNet shall provide to Incumbent a report (each
an "Alarm and Event Report") setting forth a log of all alarms and events
recorded by the Network Management System.
7.7 System Outages. Each Party shall use its best efforts to avoid
unscheduled System Outages in the performance of each Party's respective rights
and obligations under this Agreement.
7.8 Replacement of Radios. Beginning in the fifteenth (15th) year after
Commissioning, PathNet shall begin replacing the radios and radio software
relating to the System and shall replace such radios and radio software at an
average rate of ten percent (10%) a year for ten (10) years.
7.9 Network Loops. In the event in the construction of the PathNet network
a network loop is created relating to the System, PathNet shall facilitate
allowing Incumbent to benefit from the existence of such network loop in the
event of a System Outage.
SECTION 8. GENERAL
8.1 Access to Sites. In addition to any access rights relating to the
Leased Premises set forth in Section 5 of the Agreement, Incumbent shall provide
upon the reasonable request of PathNet, road access for all construction
vehicles, which access may involve the construction by Incumbent of additional
roads and paths.
8.2 Parking at Sites. At the request of PathNet, Incumbent shall provide
for vehicular parking at each site at no charge to PathNet for use during the
term of this Agreement; provided, however, in the event sites are located in
urban areas where vehicles are parked in privately operated lots or garages,
PathNet shall be responsible for any and all parking charges at such urban
sites.
8.3 Use of Telecommunications Devices. While visiting Incumbent's sites,
Incumbent shall allow PathNet to use existing telephone lines or Order Wires in
connection with PathNet's performance of its rights and obligations under this
Agreement.
8.4 Fuel Tanks. Incumbent shall ensure that all liquid petroleum, diesel
or natural gas tanks, as the case may be, are adequately supplied throughout the
term of this Agreement.
A-14
<PAGE>
8.5 Retaining of Records. All records and reports required pursuant to
this Schedule A, shall be retained by PathNet or Incumbent, as the case may be,
for at least five (5) years or any longer period as may be required by law.
8.6 Work Permits. Incumbent shall obtain all necessary local, state and
Federal construction and work permits as required to perform all of the services
set forth in this Agreement.
8.7 Transportation. PathNet shall provide transportation for all PathNet
personnel or Subcontractors to each of Incumbents sites and between such sites
in connection with the performance of the Services.
8.8 Storage. Incumbent shall provide at no charge to PathNet or any vendor
providing materials for use in the System, secure and appropriate storage for
all equipment and materials to be installed or used for the installation,
testing or operation of the System, which storage facilities shall also serve as
the drop-ship point for staging all installation equipment used in the System.
8.9 Unpacking and Trash Removal. PathNet shall (i) unpack all crates and
boxes, (ii) remove all trash created by such unpacking from Incumbent's sites
and (iii) verify all packing lists. Incumbent shall regularly remove all other
trash from its sites and Facilities.
8.10 Manufacturing and Ordering of Equipment. As the System is installed
or upgraded after Commissioning, PathNet shall order all required equipment and
materials, including, but not limited to, all required installation materials,
from the respective manufacturers in accordance with the timing set forth in the
Project Schedule.
8.11 Ship and Delivery Schedules. At least two (2) weeks prior to receipt
of any equipment or materials to be used in the modifications or installation
set forth in Section 2 and Section 4 to this Schedule A, respectively, PathNet
shall provide to Incumbent detailed ship and delivery schedules relating to such
equipment and materials.
8.12 Electricity. Incumbent shall provide all required electricity for the
design, modification, installation, operation and monitoring of the System in
accordance with the specifications set forth in Exhibit A-3 to this Schedule A.
A-15
<PAGE>
EXHIBIT A-1
SYSTEM EQUIPMENT, TOWERS AND SHELTERS
Type of Equipment Quantity
- ----------------- --------
New Towers: 7
New Building: 0
New Generators: 0
New DC Charger Systems: 6
New Battery Plants: 6
New Antennas: 43
New Waveguide: 8,888 Feet
New NEC 2000 Sonet Radios: 44 TR(R)'s
New NEC 2600 Digital Radios: 0 TR's
New OC-3 Multiplexers: 9 Shelves
A-16
<PAGE>
EXHIBIT A-2
MANUFACTURERS' SPECIFICATIONS FOR RADIOS
NEC OC-3 MULTIPLEXER SPECIFICATIONS
IMT-150
- --------------------------------------------------------------------------------
Power
Physical: Requirements: Interface: Features:
- --------------------------------------------------------------------------------
Mounts in a -48 volts DC High Speed: OC-3 Software
23-inch EIA rack Approximately Optical Provisioning
Height 11.4 inches 125 watts (ADM Low Speed: OC-1, Full Bandwidth Time
Width 21.4 inches configuraton) STS-1, DS3, or DS1 Slot Assignment
Depth 10 inches X.25 Gateway for OSS
DS1 PM Monitoring
Capability
- --------------------------------------------------------------------------------
NEC 2000 SERIES
Specifications:
Physical:
One cabinet (600 mm wide, 300 mm deep and 2.2 m high) for 4 radio channels
(Includes OC-3 interface per channel, space diversity receiver, order wire and
wayside DS1 interface, and 1:N switch).
Power Requirements:
- -24 or -48 volts DC
Approximately 200 watts per radio channel for a terminal configuration
Approximately 150 watts per radio channel direction (1 TRR) for a repeater
configuration
Interface:
OC-3
Operating Specifications:
Frequency Band: 5.945 to 6.425 GHz
Modulation: 128 QAM MLCM
Capacity: 155.52 Mb/s plus radio overhead (Wayside DS1, Order Wires, ATPC
signals, 1:N commands, monitoring)
Transmit Power at interface to transmit waveguide: +29.7 dBm
System Gain (Waveguide interface to waveguide interface - no ATPC): 101.1 dB
System Gain (Waveguide interface to waveguide interface - with ATPC): 103.1 dB
Dispersive Fade Margin (10^-3): 48 dB
A-17
<PAGE>
FCC Identifier: BSF6P155-S02A
Emission Designator: 30M0D7W
Nec 2600 Series Digital Microwave Radio Specifications
Models Available:
8 DS-1: 6G13MB
12 DS-1: 6G19MB
16 DS-1: 6G26MB
32 DS-1: 6G52MB
Physical:
One Hot-Standby with Space Diversity receiver (2 TRR) Subsystem is 482 mm (19")
Wide by 798.5 mm (31.5") High weighing 75 lbs. A total of two (2) HSB systems
for a repeater or a terminal 3:1 multi-line system (4 TRR) will fit in a
standard 19" by 7' 6" Rack.
Power Requirements:
- -24 or -48 volts DC
Approximately 130 watts per HSB radio system (2 TRR)
Approximately 150 watts per HSB radio system for 32 DS-1 model.
System Configuration Options:
The following system configurations are available for 8, 12, 16, or 32 DS-1
capacity systems:
HS/HS=Hot Standby Transmitter and Hot Standby Receiver (2 TR)
HS/SD=Hot Standby Transmitter and Space Diversity Receiver (2 TR)
1+0/SD=Single Transmitter with Space Diversity Receiver (1 TRR)
1+0=Single Transmitter and Single Receiver (1 TR)
Features:
Automatic Transmit Power Control (ATPC)
Can be site configured for a Terminal or Regenerative Repeater with any channel
drop and insert capabilities.
Forward Error Correction (FEC)
Decision Feedback Equalizer (DFE) for fading countermeasures.
In-Service capacity upgrades.
Two (2) VF Orderwire channels Per Radio
One (1) Data channel up to 9.6Kbs
Operating Specifications:
Frequency Band: 5.925 to 6.425 Ghz or 6.525 to 6.825 Ghz
Modulation: 128 QAM
Transmit Power at Interface to waveguide: + 30 dBm
A-18
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
8 DS-1 12 DS-1 16 DS-1 32 DS-1
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
System Gain: 106.0 dB 104.0 dB 103.0 dB 100.0 dB
- -----------------------------------------------------------------------------------------------
Receiver Threshold: -80.0 dBm -78.0 dBm -77.0 dBm -74.0 dBm
(BER 10^-6)
- -----------------------------------------------------------------------------------------------
Dispersive Fade 64.0 dB 63.0 dB 62.0 dB 59.0 dB
margin: (BER 10^-6)
- -----------------------------------------------------------------------------------------------
Emission Designator: 10MOD7W 50MOD7W 3M7507W 2M50D7W
- -----------------------------------------------------------------------------------------------
FCC Identifier: BSF89N6P52-SO1A BSF89N6P26-SO1A BSF89N6P19-SO1A BSF89N6P7-SO1A
- -----------------------------------------------------------------------------------------------
</TABLE>
A-19
<PAGE>
EXHIBIT A-3
ELECTRICITY AND POWER SPECIFICATIONS OF THE SYSTEM
DC POWER SPECIFICATIONS
<TABLE>
<CAPTION>
Site Configuration Radio Mux Chan bank Incumbent Site Total Site Total Battery Size
7:1(Watts) OC-3(Watts) (Watts) Equip(Watts) WATTS DC AMPS 10 Hour Reserve
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Terminal End 1:3 800 330 250 720 2,100 44 Amps 440 AH
Terminal End 1:7 1,600 770 250 720 3,340 70 Amps 700 AH
Repeater 1:3 1,200 None 250 720 2,170 45 Amps 530 AH
Repeater 1:7 2,400 None 250 720 3,370 70 Amps 700 AH
2 Way Junction 1:3 1,600 125 250 720 2,695 56 Amps 600 AH
2 Way Junction 1:7 3,200 125 250 720 4,295 90 Amps 900 AH
</TABLE>
AC POWER SPECIFICATIONS
<TABLE>
<CAPTION>
DC Heat & Air Total Total
Site Configuration Chargers Conditioning Lights Miscellaneous AC WattsAC Amps @ 220 VAC
<S> <C> <C> <C> <C> <C> <C>
Terminal End Nominal 3,696 3,000 300 1,500 8,496 39
Terminal End Maximum 8,712 6,000 1,600 2,800 19,112 87
Repeater Nominal 3,696 4,500 300 1,500 9,996 45
Repeater Maximum 8,712 9,000 1,600 2,800 22,112 101
2 Way Junction Nominal 4,752 6,000 500 1,800 13,052 59
2 Way Junction Maximum 8,712 12,000 2,000 3,200 2,512 118
</TABLE>
Note: All New Shelters are AC equipped for 200 Amps, single phase, 220VAC
Service
A-20
<PAGE>
EXHIBIT A-4
INCUMBENT MULTIPLEXING REQUIREMENTS
Site Name DS-1 Wired DS-1 Equipped
- --------- ---------- -------------
Sawyer [***]
Harrisburg [***]
Memphis [***]
Baring [***]
Lewistown [***]
Palmyra [***]
Hannibal [***]
Perry [***]
Belltown [***]
Lentner [***]
Cairo [***]
Thomas Hill [***]
A-21
<PAGE>
EXHIBIT A-5
EQUIPMENT SHELTERS, SPECIFICATIONS AND DESIGN
1. Summary
This "Equipment Shelter Specification" applies to concrete pre-cast,
pre-equipped, transportable equipment shelters for use in conjunction with
equipment installed by PathNet, Inc. and covers material and workmanship
standards. This document is designed to assist the user in defining your
specific equipment shelter requirements. The shelter must be designed for the
explicit purpose of housing electronic equipment, fiberoptics equipment,
measuring devices and other related components, within a controlled environment
required for the proper operating conditions for the equipment. The shelter
manufacturer must adhere to compliance with all national building codes. All
shelters will be assumed to be placed within ten (10) feet of the base of the
tower.
2. Foundation
The shelter shall be designed for any of the following foundation types:
o Pier & Beam
o Slab
o Perimeter Beam
3. Shelter Type
The shelter shall be constructed of pre-cast, pre-assembled Portland concrete
and shall be manufactured in a controlled environment.
4. Shelter Size
The shelter should conform to the following dimensions unless otherwise noted:
o One room shelter (no generator) - 12' X 20' OD
o Two room shelter (equipment room and generator room) - 12' X 28' OD
5. Operating Environment
5.1. Temperature
The optimum operating temperature of the equipment to be installed is 75
degrees F (24 degrees C) unless otherwise specified by PathNet.
5.2. HVAC
The heating and cooling requirements for a shelter are based upon the
outside maximum and minimum temperature expected for the shelter location
and the equipment heat output specified by PathNet. Typical heat load
values are 12,000 to 18,000 BTU/HR.
A-22
<PAGE>
Design heat loads for specific shelters will be provided by PathNet. Two
wall-mounted air conditioners are required. The units are to be sized so
that one unit will maintain an interior temperature of 75 degrees F with
the highest exterior temperature expected for shelter location.
6. Hardware
All external hardware will be galvanized or coated to protect against corrosion.
7. Structural
Structural design and manufacturing shall conform to ACI 318-89 requirements.
7.1. Floor
The floor section shall be constructed of 8" waffled structural pre-cast
concrete. The ribs shall be 2'-0" O.C. transverse and 4'-0" O.C
longitudinal. All surfaces shall be smooth. The interior surface shall be
covered with 1/8" X 12" X 12" square vinyl floor covering, bonded with a
waterproof contact adhesive.
7.2. Roof
The roof section shall be constructed of pre-cast concrete with 1/4" per
foot drainage slope. The ceiling insulation and finish shall be foamboard
insulation with 3/8" vinyl coated board. All joints will be covered by
plastic joint or corner trim. The roof section shall provide a 2" overhang
on all sides. The roof will be a hip type sloping in 4 directions. It
shall be constructed as a cap and should fit over the walls, leaving no
exposed roof-to-wall joint.
7.3. Wall
The wall section shall be constructed of 4" solid concrete, cast in one
piece to minimize joints, with an exposed aggregate exterior finish and
capable of withstanding gun fire from a 30.06 at 50 feet. The wall
insulation and finish shall be foamboard insulation with 1/2" vinyl coated
board. All joints will be covered by plastic joint or corner trim. All
floor/wall intersections will be finished with 4" vinyl baseboard. There
will be no exposed wall-to-floor joint.
8. Thermal
Standard wall and ceiling thickness shall be 1" foamboard insulation. The
calculated system value is R9.6 with 4" thick lightweight concrete walls/roof
sections, 1" foamboard insulation covered by 1/2" fiberglass reinforced plastic
surfaced board. (Thicker insulation and higher R-values must be specified
according to the locality.)
9. Concrete
All sections must be constructed of concrete with a compressive strength of 3000
PSI at 28 days.
A-23
<PAGE>
9.1. Cement Type
Cement used in concrete shall be standard Portland cement conforming to
the requirements of the "Standard Specifications for Portland Cement",
ASTM Designation C150.
9.2. Mix
The mix design shall be 114-118 lbs./cu. ft. structural lightweight
concrete using expanded shale or expanded clay aggregate and shall be
homogeneous. Seeding of aggregates for exposed aggregate finish is not
allowed.
Water will be free from injurious quantities of oil, alkali, vegetable
matter and salt. Non-potable water shall not be used in mixing concrete.
9.3. Concrete Standards
Concrete aggregates will conform to one of the following standards:
o Specifications for Concrete Aggregates (ASTM Designation: C33)
o Specifications for Lightweight Aggregates for Structural Concrete
o (ASTM Designation: C330)
9.4. Reinforcement
Reinforcement bars shall be deformed steel bars conforming to the
requirements of the "Specifications for Deformed and Plain Billet-Steel
Bars for Concrete Reinforcement", ASTM Designation: A615. Welded smooth
wire fabric shall be steel wire fabric conforming to the "Specifications
for Welded Steel Wire Fabric for Concrete Reinforcement", ASTM
Designation: A185.
10. Sealing
o The shelter shall be sealed to resist dust and water infiltration.
o All joints shall be sealed with a compressible resilient sealant.
o There shall be no exposed roof-to-wall or wall-to-floor joints.
o Exterior surfaces of walls and roof shall be sealed with two (2)
coats of Thoroglaze H Sealer, or acceptable equivalent unless
otherwise noted.
11. Door
11.1. Door Construction
The door shall be 3' X 7' X 3/4", 18 gauge galvanized steel, insulated
(minimum R12), primed, painted and installed flush with the door check,
door stop, weather stripping, mortise lockset and stainless steel ball
bearing hinges.
A-24
<PAGE>
11.2. Door Frame
The doorframe shall be of at least16 gauge galvanized steel, primed,
painted and cast into the wall panel.
11.3. Door Locks
All doors shall have a deadbolt locking mechanism with a minimum 1" throw
and an anti-pick lock guard.
12. Structural Loading
12.1. Floor
A minimum of 140 lbs. per sq. ft. as defined in "Uniform Distributed
Load", ASCE 7-88. The battery area should be reinforced to support 5000
lbs. per battery rack. The battery area will be shown on the floor plan.
12.2. Roof
A minimum of 50 lbs. per sq. ft. as defined in "Roof Snow Load
Specification", ASCE 7-88.
12.3. Wind
A minimum of 115 MPH as defined in "Basic Wind Speed Specifications", ASCE
7-88.
12.4. Earthquake
Shelters shall be designed for the most stringent earthquake rating
conditions as defined in ASCE 7-88, Zone 4.
13. Electrical System
Electrical installation and wiring shall conform to the latest edition of the
National Electrical Code (NEC) and shall consist of the following as a minimum:
13.1. Minimum Requirements
o 200 Amp, 220 VAC Single Phase Main
o 200 Amp Manual Transfer Switch
o 200 Amp Generator Interface
o Forty (40) Position Breaker Box (With 32 single pole, 20 Amp
breakers.)
o 120/240VAC 3-Wire Arrester With Alarms (65kVA Peak Capacity)
o Surface Mounted EMT Conduit
o Grounded Duplex Outlets (One every 4 ft. on 3 walls.)
o Four (4) Fluorescent Lights (2 bulb fixtures with inside switch
mounted by door.)
o Incandescent Porch Light (With 0-30 minute timer)
A-25
<PAGE>
13.2. Surge Arresters
An interior-mounted surge arrester is designed to protect against
transients caused by lightning or power switching surges. Primary
arresters protect the building's electrical components and are
automatically restored following activation due to a surge. It should be
installed across the main breaker on the line side unless otherwise
specified by PathNet. Secondary arresters protect individual branch
circuits. Visual inspection is required to determine whether the arrester
must be replaced following a surge.
14. Grounding
A halo ground system should consist of at least a #2 AWG green insulated
stranded copper wire mounted around the perimeter of the interior wall just
below the ceiling. A 1/4" X 4" X 24" copper ground bar should be located
externally just below each waveguide entry plate. A #2 AWG green insulated
copper jumper should be used to bond the ground bar to the exterior halo ring.
Bonding on either interior or exterior grounding systems will be clean of dirt
and corrosion and applied with non-oxidizing grease.
14.1. Interior Halo Grounding
All cable ladder, racks, lights, equipment and exterior ground are to be
bonded to an interior halo grounding system.
The following items are required for halo grounding:
o #2 Green Insulated Stranded Copper Halo
o One (1) Master Ground Bar 1/4" X 4" X 24"
o Four (4) #2 Tinned Solid Copper Drops with 10' Pigtails
o Eight (8) #2 Green Insulated Stranded Copper Equipment Ground Drops
14.2. External Ground System
An exterior halo ring is required and will be bonded to the interior halo
grounding system with 8' pigtails listed above.
14.3. Conduit Grounding
All conduit, conduit couplings, light fixtures, junction boxes and service
equipment shall be grounded with mechanical clamps to electrically bond the
conduit. The bonding wire will be a minimum #10 AWG green insulated copper wire
for all except light fixtures. The minimum for light fixtures is #12 AWG green
insulated copper wire.
15. Waveguide Entrance
The shelter will have two 8 port waveguide entry panels and two blank panels
located on opposite walls. Two waveguide entry panels will be installed on one
wall and two blank panels mounted on the opposite wall. PathNet will define the
location of the waveguide entry panels. Each waveguide port shall have a minimum
interior diameter of 4 inches.
A-26
<PAGE>
16. Alarms
The shelter will have general housekeeping alarms wired to a central location
associated with the following:
o Door Open
o Smoke Detection
o AC Electrical Fail (sense before manual or automatic transfer
switch)
o Surge Protector Fail
o Air-conditioning Fail
o High Temperature
o Low Temperature
o Charger Fail
o Breaker Alarm
o Fuse Alarm
o Low Waveguide pressure
o Dehydrator excess run alarm
o Generator Fail
o Generator Run
A-27
<PAGE>
NORTHEAST MISSOURI POWER SHELTER
AIR CONDITIONING REQUIREMENT
The initial PathNet installation will not require any additional Air
Conditioning for the Incumbent existing shelters. However, in the event that the
system grows beyond a 1x3 capacity, the PathNet provided equipment only
requirements will be as follows:
Sawyer: 25,000 BTU/Hr
Harrisburg: 30,200 BTU/Hr
Memphis: 23,300 BTU/Hr
Baring: 30,200 BTU/Hr
Lewistown: 23,300 BTU/Hr
Palmyra: 38,000 BTU/Hr
Hannibal: 30,200 BTU/Hr
Perry: 25,000 BTU/Hr
Belltown: 23,300 BTU/Hr
Lentner: 23,300 BTU/Hr
Cairo: 30,200 BTU/Hr
Thomas Hill: 25,000 BTU/Hr
A-28
<PAGE>
NORTHEAST MISSOURI POWER SHELTER
A/C REQUIREMENT
The initial PathNet installation will require that Incumbent provide a minimum
service to the building of 100Amps. Also to be provided is adequate breakers
and/or space for a minimum of two (2) 30 Amp breakers. However, in the event
that the system grows beyond a 1x3 capacity, the PathNet provided equipment only
requirements will be as follows:
Sawyer: 150 Amp service / space for two (2) additional 30 Amp breakers
Harrisburg: 150 Amp service / space for two (2) additional 30 Amp breakers
Memphis: 150 Amp service / space for two (2) additional 30 Amp breakers
Baring: 150 Amp service / space for two (2) additional 30 Amp breakers
Lewistown: 150 Amp service / space for two (2) additional 30 Amp breakers
Palmyra: 200 Amp service / space for two (2) additional 30 Amp breakers
Hannibal: 150 Amp service / space for two (2) additional 30 Amp breakers
Perry: 150 Amp service / space for two (2) additional 30 Amp breakers
Belltown: 150 Amp service / space for two (2) additional 30 Amp breakers
Lentner: 150 Amp service / space for two (2) additional 30 Amp breakers
Cairo: 150 Amp service / space for two (2) additional 30 Amp breakers
Thomas Hill: 150 Amp service / space for two (2) additional 30 Amp breakers
A-29
<PAGE>
NORTHEAST MISSOURI POWER SHELTER
DC REQUIREMENT
The initial PathNet installation will require that Incumbent's existing battery
plants, as well as those on standby at manufacturer, and DC rectifiers be
combined at several sites. However, in the event that the system grows beyond a
1x3 capacity, the PathNet provided equipment only requirement will be as
follows:
Sawyer: increase rectifier to 100A, redundant / increase to 630 AH
battery plant
Harrisburg: increase rectifier to 100A, redundant
Memphis: increase rectifier to 100A, redundant / increase to 720 AH
battery plant
Baring: increase rectifier to 100A, redundant
Lewistown: increase rectifier to 100A, redundant / increase to 720 AH
battery plant
Palmyra: increase rectifier to 150A, redundant / increase to 1250 AH
battery plant
Hannibal: increase rectifier to 100A, redundant
Perry: increase rectifier to 100A, redundant / increase to 630 AH
battery plant
Belltown: increase rectifier to 100A, redundant / increase to 720 AH
battery plant
Lentner: increase rectifier to 100A, redundant / increase to 720 AH
battery plant
Cairo: increase rectifier to 100A, redundant
Thomas Hill: increase rectifier to 100A, redundant / increase to 630 AH
battery plant
A-30
<PAGE>
EXHIBIT A-6
GROUNDING AND LIGHTNING PROTECTION GUIDELINES AND SPECIFICATIONS FOR
COMMUNICATIONS SHELTERS
Preface
An effective ground system for a communications equipment shelter is necessary
to ensure protection of personnel and equipment when a fault occurs. The ground
system limits excessive voltages from various electrical conditions such as
lightning and utility switching, and contributes to superior performance of the
electronic equipment by reducing noise induction.
1. Grounding Introduction
Communications equipment shelters are subject to electrical noise and
high-voltage surges. These transients occur predominantly in the common mode
(line to ground), and are typically caused by lightning or power switching.
1.1 Lightning
When lightning induced surges appear at the point of connection to a
building (the service entrance), a high common mode potential is generated
between the current carrying conductors and ground. This potential
produces a flow of current that seeks a path to earth to complete the
circuit.
Lightning can easily induce a 3000-ampere transient into a power line.
When this transient reaches a building, the building ground at the service
entrance can rise to 60,000 volts (assuming a building earth resistance of
20 ohms). The reference potential for ground in the rest of the building
would rise proportionately.
In order to protect the building against these high voltage surges, it is
important to establish a low resistance earth ground at the service
entrance. The National Electrical Code (Article 250, Part 4) specifies
that the grounding at a building's service entrance should have a
resistance to ground of 25 ohms or less. The IEEE Green Book (Recommended
Practice for Grounding, ANSI/IEEE Standard 142-1982) recommends that the
ground resistance be less than 5 ohms. If the building contains highly
sensitive electronic communications equipment, a ground resistance of 5
ohms or less is recommended if this value can be practically achieved with
the given site conditions.
1.2 Types of Grounding
There are two major types of grounding that should be considered when
designing an electrical system: power distribution system grounding and
telecommunications equipment grounding.
1.2.1. Power Distribution System Grounding
A-31
<PAGE>
The power distribution system pertains to the incoming AC service,
service entrance equipment, power panels, and electrical conductors
providing the power to various electrical/mechanical equipment.
Grounding of the power distribution system is essential to:
o protect occupants from exposure to dangerous shock voltage
o provide a path for ground fault current limit excessive
o voltages due to lightning or utility switching
Typical grounding components for the power distribution system
include:
o grounding electrode at the service entrance
o ground bus in the power panel
o ground lugs in the other service entrance equipment such as
the safety disconnect or transfer switch
o third wire grounding conductor for all the electrical
equipment
o lightning and surge arresters.
1.2.2. Telecommunications Equipment Grounding. Electronic equipment
such as radio systems, telephone switches, battery chargers and
rectifiers, uninterrupted power supply (UPS) equipment, and any
other equipment that encloses or is adjacent to energized conductors
require additional grounding. This sensitive electronic equipment
must be protected from the following:
o excessive transients caused by lightning or utility switching
o degraded performance due to electromagnetic noise
Equipment grounding frequently utilizes a ground ring encircling the
interior of the shelter (halo ground ring). Ground lugs attached to
the various equipment housings and racks are connected to the ground
ring. Ground bars at the waveguide entry and at each section of the
cable ladder are also tied to the ground ring. Multiple external
drops connect the internal ground ring to the exterior site ground
ring.
2. Grounding Practices
2.1. The Grounding Conductor
In order to reduce inductance and surge voltages in a power distribution
system, a ground path for protected devices should be provided. One method
is to rely upon the conduit system to carry these transient currents. This
is allowed by the National Electrical Code in Article 250-91 (b). The best
method, however, is to include an extra conductor in the same conduit or
raceway as the current carrying conductor. The grounding conductor should
extend to the ground connection in the service entrance equipment.
A-32
<PAGE>
2.2. Equipment Ground Wires
When lightning strikes, it takes the path of least impedance (resistance
and inductance). Cable bends increase inductance. Therefore, equipment
ground wires should be large, and run straight for minimum inductance and
voltage drop. The recommended bending radius is 6" when bends are
unavoidable. Equipment ground wires should be separated from all other
conductors, and should not be run through metal conduit unless the conduit
and ground wires are bonded at both ends.
2.3. Bonding
Even when the ground to earth connection's impedance of the service
entrance is minimized and grounding conductors are used in the feeder and
branch circuits, high transient voltages can still occur in the power
distribution system as a result of utility power switching. An effective
method of limiting this noise (especially common mode voltage
differentials) is to bond all the equipment ground wires to a halo ground
system that is connected to the site ground system and power distribution
system ground.
Bonding is the connection of all potential ground conductors (including
racks, frames, cable ladder, conduits, metal enclosures, and exposed
metallic members of the building structure) to each other. Bonding does
not eliminate voltage drops since transient currents will continue to take
the path of least inductance. However, the current is sufficiently
distributed throughout the bonded system to reduce the voltage gradients
in any area to levels that prevent personal injury or equipment damage.
Proper bonding procedures produce cross connections of all equipment and
structures. It provides many paths to ground from any one point. Since the
bonded ground network does not form a part of the normal electrical power
path, multiple inductive loops are not a concern. Only transient or fault
currents can flow in the ground network.
In addition to preventing the development of voltage gradients, cross
connection reduces the system's susceptibility to high frequency noise.
Since all conductors have some impedance, resonance will occur at some
frequencies. At those frequencies, the impedance of the grounding
conductor may be very high, and allow noise currents to develop increased
voltage drops. By bonding the ground network, however, there may be other
conductors nearby that are not resonating, and a low impedance path for
the noise signal can be maintained.
2.4. Faraday Cage
A Faraday cage provides an EMI shield to further reduce noise. The cage
usually consists of multiple conductors in a box like configuration. A
halo ground system with multiple down conductors can act as a quasi
Faraday cage, and give some low frequency shielding.
When lightning hits the tower, the tower will pass the current to ground
and radiate RF energy. A Faraday cage can reduce this energy by adding
distance (as seen by the magnetic field) between the tower and the
equipment shelter. The steel reinforcing in the
A-33
<PAGE>
concrete shelter walls can form a highly effective Faraday cage if bonded
to the grounding system. The amount of shielding depends on the size and
spacing of the welded wire fabric. Additionally, all rebar must be bonded
together.
2.5. Site Ground System
When a tower is struck by lightning, equipotential voltage rings form
around the tower until the energy is diffused into the surrounding ground
soil via the grounding system.
The tower ground ring will disperse the energy away from the tower base or
guy wires. The ground rods will transfer the energy deeper into more
conductive soil layers. This is important to keep lightning surges out of
the equipment shelter. Unless the energy is properly dispersed into the
soil, the voltage will build up in the tower, and attempt to go to
another, less desirable path.
The equipment shelter is protected by a perimeter ground system that forms
an equipotential plane. Also, ground rods should be driven into the soil
at the following points:
o each corner of the shelter
o the service entrance
o the waveguide entry port
o each external halo ground drop
o every 10' (or less) along the exterior ground ring
The shelter ground ring system should have a connection to the tower
ground system just below the coaxial cable runs. A second connection
between the two ground systems should be installed for redundancy. All
metal work (waveguide bridge and supporting posts) should be bonded to the
ring/radial ground system.
2.6. Grounding System Performance Check
Test the original installation periodically to determine whether
resistance is remaining constant or is increasing. An increase in
resistance can be caused by several factors.
In lower conductive soils, high electric fields can develop at the ends of
the ground rods, which can cause arcing in the soil. This arcing can cause
glassification around the rods, beginning at the tip, and working its way
upward. This glassification of the silica in the soil acts as an
insulator, severely impairing the grounding characteristics of the rod. If
resistance increases over time to an undesirable level, reduce the
resistance by adding electrodes or chemically treating the soil to
increase moisture content.
3. Computing Resistance to Ground
3.1. Resistance to Earth
The resistance of a grounding electrode is dependent on the:
A-34
<PAGE>
o resistance of the electrode,
o contact resistance between the electrode and the soil, and
o resistance of the soil from the electrode surface outward as
described by the geometry set up by the flow of current from the
electrode to infinite earth.
The first two resistances are negligible, and can be disregarded. The
third resistance is larger and must be considered.
Around a ground rod this resistance is the sum of the series resistances
of virtual shells of earth, located progressively outward from the rod.
The shell nearest the rod has the smallest circumferential area or cross
section, so it has the highest resistance. Each successive shell has
progressively larger areas, and thus, progressively lower resistances. For
an 8-foot ground rod, the incremental increase in resistance decreases to
nearly zero when the rods are spaced 16 feet apart. Therefore, when using
multiple ground rods, the optimal spacing between rods should be double
the length of the rod.
3.2. Resistance Calculations
When computing resistance to ground, treat the tower grounding and the
shelter grounding as two separate systems. Within each of these two
systems are two subsystems. The shelter has a grounding ring and the
grounding rods. The tower has a grounding ring, grounding rods, and
occasionally, grounding radials.
The IEEE Green Book provides several formulas for calculating the
resistance to ground for several different systems.
4. Typical Grounding Configurations
Several options are available when deciding on a ground system for a
communication shelter, depending upon the soil conditions and thunderstorm
activity of a particular site. The U.S. Weather Bureau publishes an isoplethic
map of the United States showing the average number of days each year on which
thunderstorms occur. Any area with an isoplethic level above 90 should be
considered a high-risk area, and serious consideration should be given to
providing a more stringent grounding system.
4.1. Ground Bar System
In shelters where very little lightning protection is needed, a simple
ground bar system can be used. A system of this type would consist of a
single copper ground bar located under the waveguide port, telephone
entry, or both, with an external drop to be connected to the external
ground system. Transmission lines should be grounded to this ground bar.
4.2. Halo Ground System
PathNet shelters will use a halo ground system. This system includes a #2
AWG copper wire completely encircling the equipment room. The halo is
located 3 to 6 inches below the ceiling. External drops are located at
each corner of the shelter. Wall penetrations should be angled at 45
degrees to minimize bending.
A-35
<PAGE>
4.3. External Ground System
The external ground system for all shelters consists of ground rods placed
at each corner of the shelter and 10' intervals along the ground ring,
below the waveguide entry, and at the AC service entrance. The rods should
be exothermically welded to a perimeter ground ring of #2 AWG solid tinned
copper wire. (Tinned copper is recommended to reduce corrosion of the
wire). The wire should be buried below the frost line (minimum 30", deep
per NEC Sec 250-8(d)), and at least 24", away (measured horizontally) from
the foundation. The ground ring should be bonded to the tower ground
system at two locations, to the externally mounted ground bars under the
waveguide ports and to the AC service ground as close as possible to the
service entrance.
5. General Specifications
This section covers grounding and lightning protection of pre-cast,
pre-equipped, and transportable equipment shelters. It establishes minimum
standards for grounding of all PathNet Equipment Shelters, and provides
standards for additional customer grounding options.
5.1. General Guidelines
5.1.1 Workmanship
Equipment grounding wire conductor runs will be as short and
straight as possible. All equipment and bonding grounding conductors
will have radii bends 6" or greater.
5.1.2. Design
Where possible, the AC service entrance, waveguide entry port, and
telephone line entry will all be located in close proximity to each
other, and their associated grounding systems will be bonded
together.
5.1.3. Connections
Unless specified otherwise, minimum connection requirements will be
of the mechanical type made with a crimp type connector. A one hole
copper ground lug will be used for equipment connections. An
oxidizing preventative compound will be applied to all mechanical
connections, and paint will be removed as necessary to insure
positive bonding of all grounded equipment.
All external, buried connections will be of the exothermically
welded type. These include, but are not limited to, halo drops to
ground rod, buried ground ring to ground rod, halo drops to ground
ring, service entrance ground to ground rod.
5.1.4. Wire
All equipment grounds will be #6 AWG. Circuit grounding conductors
will be no more than two wire sizes smaller than the current
carrying conductors of the same circuit (minimum #12 AWG). All
external ground wire, including but not limited
A-36
<PAGE>
to the external ground ring and external halo drops, will be #2 AWG
solid tinned copper.
5.2 Interior Grounding
5.2.1. Halo Ground
The halo ground will consist of a minimum #2 AWG wire located 3" to
12", below the finished ceiling, and will completely encircle the
equipment room. The wire will be green insulated stranded copper,
bare stranded copper, or bare tinned solid copper. Each corner of
the equipment room will have an omni-directional drop to the floor
of the same wire size and type as the halo ring. Connection of these
drops to the halo will be at least the defined minimum (see section
5.1.3). If solid tinned wire is used, the drop will be one
continuous wire that is long enough to extend 8 feet beyond the
exterior of the shelter. If insulated wire is used, the drop will
extend to the floor, and then be connected in the same manner as the
halo, to an 8 foot length of solid tinned wire of the same size. The
exterior penetrations will be at 45 degree angles (to minimize
ground drop bend radii) and approximately one (1) inch in diameter.
5.2.2. Waveguide Entry Ground Bar
There will be a 1/4" x 4" x 20" (minimum) copper ground bar located
outside the shelter approximately 6" below the waveguide entry plate
(NEC Sec 800-33). This bar will be connected to the exterior ground
ring exothermic weld. The grounding conductor will be of the same
size and type as the halo ring.
5.2.3. AC Service
The AC service ground conductor will be bonded to the ground rod
located at the service entrance. Ground lugs provided in all service
entrance equipment will be bonded to the service ground conductor.
The system ground and neutral will be bonded at one location, as
close as practicable to the service entrance. All service grounding
shall conform to Article 250 of the National Electrical Code.
5.2.4. Primary Surge Arrester
There will be a surge protective device applied at the first piece
of service equipment inside the equipment shelter. This device will
be considered the primary surge protector. Conductors connecting the
surge protective device will be as short as possible, and will
contain no sharp bends or loops.
The operating characteristics of the primary surge arrester will
coordinate with the equipment surge withstand voltage capabilities.
The surge arrester should be capable of suppressing up to 65kVA, be
self restoring after operation, and may be equipped with a failure
alarm over current protective device and visual status indicators.
A-37
<PAGE>
5.2.5. Cable Ladder
Cable ladder assemblies will be bonded to the halo ring with a #6
AWG or larger ground conductor. All cable ladder splices and
junctions will be bonded on at least one side with a #6 AWG or
larger conductor, and use grounding clips suitable for the purpose.
Paint will be removed as necessary for an electrically sound
connection.
5.2.6. Conduit Grounding
Each conduit discontinuity, including but not limited to conduit
couplings, junction boxes, light fixtures, and service equipment,
will be provided with ground clamps to electrically bond the
conduit. The bonding wire will be green insulated #6 AWG or larger.
5.2.7. Tower Light Controller Penetration
There will be a 1-1/2" penetration cast in place near the waveguide
entry port to allow for connection of the tower light controller.
The penetration will be lined with a 1" PVC running thread to
provide isolation between the interior and exterior conduit. The
running thread will be connected to interior and waterproof exterior
6" x 6" junction boxes.
5.3. Exterior Grounding
5.3.1. Ground Rods
There will be driven ground rods located at each corner of the
building, and at the AC service entrance and waveguide entry port.
These rods will be made of copper clad high strength steel with
minimum dimensions of 5/8" x 8'. The rods will be located at least
24" from the edge of the foundations, and driven such that the top
of the rod is below the frost line of the installation site. The
rods will be exothermically welded to the external halo drops.
5.3.2. Ground Ring
There will be a buried horizontal wire completely encircling the
equipment shelter. This wire will be solid tinned copper wire of #2
AWG or larger. The ground ring will not be closer than 24" from the
shelter foundations, and will be exothermically welded to each
ground rod. The ring will be buried 30" below grade or below the
frost line of the installation, whichever is greater.
The ground ring will be connected to the tower ground system from
the ground rod located at the waveguide port to the nearest ground
rod of the tower system. A second connection will be made from a rod
at a corner of the shelter to an alternate rod of the tower. These
connections will be made with a #2 AWG wire, or a wire of the same
size as the tower ground ring, whichever is larger.
A-38
<PAGE>
5.3.3. Testing
The external ground system will be tested after installation, and
its resistance to earth ground will be less than 10 ohms. It is
recommended that tests be performed twice a year to insure ground
system integrity.
Biddle Instruments Model DET2/2 Digital Ground Tester, or
equivalent, will be used for testing and all manufacturers'
instructions will be followed.
A-39
<PAGE>
EXHIBIT A-7
PATHNET SPURS AND INCUMBENT SPURS
PATHNET SPURS
The System shall contain the following PathNet spurs, which shall be
engineered, furnished, installed, tested and operated for PathNet's network
purposes:
FACILITY NAME LATITUDE LONGITUDE SPUR TO
- ------------- -------- --------- -------
Sawyer, IA. 40-41-44 91-20-30 (future) Burlington, IA.
Harrisburg, IA. 40-42-17 91-46-24 (future) Milton, IA.
Baring, MO. 40-15-49 92-08-04 (future) Kirksville, MO.
Palmyra, MO. 39-48-51 91-31-05 Belltown, MO.
(future) Quincy, IL.
Hannibal 39-40-13 91-29-28 (future/east)
Perry 39-26-44 91-38-07 (future/south)
Cairo 39-30-42 92-24-35 (future/south)
INCUMBENT SPURS
The System shall contain the following Incumbent spurs, which shall be
engineered, furnished, installed, and operated for Incumbent's internal
communications requirements:
FACILITY NAME LATITUDE LONGITUDE SPUR TO
- ------------- -------- --------- -------
Palmyra 39-48-51 91-31-05 Belltown
A-40
<PAGE>
EXHIBIT A-8
FORM OF CERTIFICATE OF ACCEPTANCE
The undersigned, ___________________, who is ______________________ of
Northeast Missouri Electric Power Cooperative ("Incumbent") hereby certifies
as follows:
1. Incumbent has received from PathNet, Inc., a Delaware corporation
("PathNet") the results of all acceptance testing performed pursuant to Section
5 of Schedule A of the Fixed Point Microwave Services Agreement between PathNet
and Incumbent (the "FPM Agreement").
2. Incumbent has reviewed the results of such acceptance testing and
hereby acknowledges that the System (as defined in the FPM Agreement), as tested
and to be maintained by Incumbent, performs in accordance the Specifications, as
set forth in the FPM Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Acceptance as of the ___ day of ______, 199__.
____________________________________
A-41
<PAGE>
SCHEDULE B
SEGMENT AND FACILITIES
Incumbent Segment 1 extends from Sawyer, Iowa (Service Center) to Thomas Hill,
Missouri with facilities at the sites listed below:
FACILITY NAME LATITUDE LONGITUDE PATH TO
- ------------- -------- --------- -------
Sawyer, IA. 40-41-44 91-20-30 Harrisburg, IA.
Harrisburg, IA. 40-42-17 91-46-24 Sawyer, IA.
Memphis, MO.
Memphis, MO. 40-27-13 92-05-23 Harrisburg, IA.
Baring, MO.
Baring, MO. 40-15-49 92-08-04 Memphis, MO.
Lewistown, MO.
Lewistown, MO. 40-05-36 91-47-41 Baring, MO.
Palmyra, MO.
Palmyra, MO. 39-48-51 91-31-05 Lewistown, MO.
Hannibal, MO.
Belltown, MO.
Hannibal, MO. 39-40-13 91-29-28 Palmyra, MO.
Perry, MO.
Perry, MO. 39-26-44 91-38-07 Hannibal, MO.
Belltown, MO. 39-46-22 91-48-39 Palmyra, MO.
Lentner, MO.
Lentner, MO. 39-40-40 92-08-51 Belltown, MO.
Cairo, MO.
Cairo, MO. 39-30-42 92-24-35 Lentner, MO.
Thomas Hill, MO.
Thomas Hill, MO. 39-33-14 92-38-26 Cairo, MO.
B-1
<PAGE>
SCHEDULE C
ESTIMATED AND OPERATING COSTS
SECTION 1. INCUMBENT ESTIMATED COSTS
The Incumbent Estimated Costs shall be allocated as follows and as set
forth in detail on Exhibit C-1.
INCUMBENT ESTIMATED COSTS
- --------------------------------------------------------------------------------
Approximate Allocation of Incumbent
Incumbent Items Estimated Costs
- --------------------------------------------------------------------------------
Site Survey [***]
- --------------------------------------------------------------------------------
Site Work [***]
- --------------------------------------------------------------------------------
Towers [***]
- --------------------------------------------------------------------------------
Buildings [***]
- --------------------------------------------------------------------------------
Generators [***]
- --------------------------------------------------------------------------------
D.C Plant [***]
- --------------------------------------------------------------------------------
Project Engineering [***]
- --------------------------------------------------------------------------------
Incumbent Estimated Costs [***]
- --------------------------------------------------------------------------------
SECTION 2. INCUMBENT OPERATING AND ADMINISTRATION COSTS
1. [***]
2. [***]
3. [***]
4. [***]
5. [***]
6. [***]
7. [***]
8. [***]
C-1
<PAGE>
9. [***]
10. [***]
11. [***]
12. [***]
13. [***]
14. [***]
15. [***]
16. [***]
17. [***]
18. [***]
19. [***]
20. [***]
21. [***]
22. [***]
23. [***]
C-2
<PAGE>
24. [***]
25. [***]
26. [***]
27. [***]
28. [***]
29. [***]
30. [***]
C-3
<PAGE>
SECTION 3. PATHNET ESTIMATED COSTS
The PathNet Estimated Costs shall be allocated as follows and as set
forth in detail on Exhibit C-2:
PATHNET ESTIMATED COSTS
- --------------------------------------------------------------------------------
Approximate Allocation of PathNet
PathNet Items Estimated Costs
- --------------------------------------------------------------------------------
PNC Coordination [***]
- --------------------------------------------------------------------------------
Antennas [***]
- --------------------------------------------------------------------------------
Waveguide [***]
- --------------------------------------------------------------------------------
Radios [***]
- --------------------------------------------------------------------------------
OC- Multiplex [***]
- --------------------------------------------------------------------------------
Misc Equip/Racks [***]
- --------------------------------------------------------------------------------
Network MGT [***]
- --------------------------------------------------------------------------------
Path Engineering [***]
- --------------------------------------------------------------------------------
FCC License Application [***]
- --------------------------------------------------------------------------------
System Engineering [***]
- --------------------------------------------------------------------------------
Total PathNet Costs [***]
- --------------------------------------------------------------------------------
C-4
<PAGE>
SECTION 4. PATHNET ADMINISTRATION AND OPERATING COSTS
1. [***]
2. [***]
3. [***]
4. [***]
5. [***]
6. [***]
7. [***]
8. [***]
9. [***]
10. [***]
11. [***]
12. [***]
13. [***]
14. [***]
15. [***]
16. [***]
C-5
<PAGE>
17. [***]
18. [***]
19. [***]
20. [***]
21. [***]
22. [***]
23. [***]
24. [***]
25. [***]
26. [***]
27. [***]
28. [***]
29. [***]
C-6
<PAGE>
30. [***]
31. [***]
32. [***]
33. [***]
34. [***]
35. [***]
36. [***]
37. [***]
38. [***]
C-7
<PAGE>
EXHIBIT C-1
INCUMBENT ESTIMATED COSTS
<TABLE>
<CAPTION>
SAWYER HARRISBURG MEMPHIS BARING LEWISTOWN PALMYRA
<S> <C> <C> <C> <C> <C> <C>
SITE SURVEY
Site Survey [***]
Taxes [***]
SITE SURVEY [***]
SITE WORK
Site Clearing /Level [***]
Soil Testing [***]
Fence & Gate Mods [***]
Road Const/Repair [***]
Taxes [***]
SITE WORK [***]
TOWERS
Tower/Building Analysis [***]
New Tower [***]
Tower Strength Material [***]
Tower Labor [***]
Waveguide Bridge [***]
Tower Ground [***]
Freight [***]
Taxes [***]
TOWERS [***]
BUILDINGS
Exist Bldg. Mods [***]
New Building [***]
New Bldg Delivery [***]
New Bldg Foundation [***]
Building Ground [***]
AC Power [***]
Freight [***]
Taxes [***]
BUILDINGS [***]
GENERATORS
25KW MOBILE [***]
35KW [***]
Transfer Panel [***]
Install & Test Labor [***]
Freight [***]
Taxes [***]
GENERATORS [***]
D.C. PLANT
Chargers [***]
Chargers Spares [***]
Batteries [***]
Power Board/Panel [***]
Install & Test Labor [***]
Freight [***]
Taxes [***]
D.C. PLANT [***]
PROJECT ENGINEERING [***]
INCUMBENT COSTS [***]
</TABLE>
C-8
<PAGE>
<TABLE>
<CAPTION>
HANNIBAL PERRY BELLTOWN LENTNER CAIRO THOMAS HILL
<S> <C> <C> <C> <C> <C> <C>
SITE SURVEY
Site Survey [***]
Taxes [***]
SITE SURVEY [***]
SITE WORK
Site Clearing /Level [***]
Soil Testing [***]
Fence & Gate Mods [***]
Road Const/Repair [***]
Taxes [***]
SITE WORK [***]
TOWERS
Tower/Building Analysis [***]
New Tower [***]
Tower Strength Material [***]
Tower Labor [***]
Waveguide Bridge [***]
Tower Ground [***]
Freight [***]
Taxes [***]
TOWERS [***]
BUILDINGS
Exist Bldg. Mods [***]
New Building [***]
New Bldg Delivery [***]
New Bldg Foundation [***]
Building Ground [***]
AC Power [***]
Freight [***]
Taxes [***]
BUILDINGS [***]
GENERATORS
25KW MOBILE [***]
35KW [***]
Transfer Panel [***]
Install & Test Labor [***]
Freight [***]
Taxes [***]
GENERATORS [***]
D.C. PLANT
Chargers [***]
Chargers Spares [***]
Batteries [***]
Power Board/Panel [***]
Install & Test Labor [***]
Freight [***]
Taxes [***]
D.C. PLANT [***]
PROJECT ENGINEERING [***]
INCUMBENT COSTS [***]
</TABLE>
C-9
<PAGE>
TOTAL
SITE SURVEY
Site Survey [***]
Taxes [***]
SITE SURVEY [***]
SITE WORK
Site Clearing /Level [***]
Soil Testing [***]
Fence & Gate Mods [***]
Road Const/Repair [***]
Taxes [***]
SITE WORK [***]
TOWERS
Tower/Building Analysis [***]
New Tower [***]
Tower Strength Material [***]
Tower Labor [***]
Waveguide Bridge [***]
Tower Ground [***]
Freight [***]
Taxes [***]
TOWERS [***]
BUILDINGS
Exist Bldg. Mods [***]
New Building [***]
New Bldg Delivery [***]
New Bldg Foundation [***]
Building Ground [***]
AC Power [***]
Freight [***]
Taxes [***]
BUILDINGS [***]
GENERATORS
25KW MOBILE [***]
35KW [***]
Transfer Panel [***]
Install & Test Labor [***]
Freight [***]
Taxes [***]
GENERATORS [***]
D.C. PLANT
Chargers [***]
Chargers Spares [***]
Batteries [***]
Power Board/Panel [***]
Install & Test Labor [***]
Freight [***]
Taxes [***]
D.C. PLANT [***]
PROJECT ENGINEERING [***]
INCUMBENT COSTS [***]
C-10
<PAGE>
EXHIBIT C-2
PATHNET ESTIMATED COSTS
<TABLE>
<CAPTION>
SAWYER HARRISBURG MEMPHIS BARING LEWISTOWN PALMYRA
<S> <C> <C> <C> <C> <C> <C>
PCN COORDINATION
PCN Coordination [***]
Taxes [***]
PCN COORDINATION [***]
ANTENNAS
Antenna Material [***]
Install & Align Labor [***]
Freight [***]
Taxes [***]
ANTENNAS [***]
WAVEGUIDE
Waveguide Material [***]
Install & Test Labor [***]
Freight [***]
Taxes [***]
WAVEGUIDE [***]
RADIOS
1:1 Terminal: 2 & 3 Way [***]
1:1 Repeater [***]
Add RF Channel (2:1) [***]
OAM&P Software/LT [***]
Maint Accessory Kit [***]
Basic Radio Spares [***]
Enhanced Radio Spares [***]
Install [***]
Test & Turnup [***]
Freight [***]
Taxes [***]
RADIOS [***]
OC-3 MULTIPLEX
OC-3 to 84 DS-1 [***]
OC-3 to 28 DS-1 [***]
ADM 4/8/12/28 DS-1 [***]
OC-3 Spares [***]
Install [***]
Test & Turnup [***]
Freight [***]
Taxes [***]
OC-3 MULTIPLEX [***]
MISC EQUIP/RACKS
Racks,Fuse Panel,Misc [***]
Install [***]
Test & Turnup [***]
Freight [***]
Taxes [***]
MISC EQUIP/RACKS [***]
NETWORK MANAGEMENT
Network Server [***]
Network Software [***]
Network Database [***]
Interface Equipment [***]
Install & Test [***]
Freight [***]
Taxes [***]
NETWORK MGT [***]
PATH ENGINEERING [***]
FCC LICENSE [***]
SYSTEM ENGINEERING [***]
PATHNET COSTS [***]
</TABLE>
C-11
<PAGE>
<TABLE>
<CAPTION>
HANNIBAL PERRY BELLTOWN LENTNER CAIRO THOMAS HILL
<S> <C> <C> <C> <C> <C> <C>
PCN COORDINATION
PCN Coordination [***]
Taxes [***]
PCN COORDINATION [***]
ANTENNAS
Antenna Material [***]
Install & Align Labor [***]
Freight [***]
Taxes [***]
ANTENNAS [***]
WAVEGUIDE
Waveguide Material [***]
Install & Test Labor [***]
Freight [***]
Taxes [***]
WAVEGUIDE [***]
RADIOS
1:1 Terminal: 2 & 3 [***]
Way
1:1 Repeater [***]
Add RF Channel (2:1) [***]
OAM&P Software/LT [***]
Maint Accessory Kit [***]
Basic Radio Spares [***]
Enhanced Radio Spares [***]
Install [***]
Test & Turnup [***]
Freight [***]
Taxes [***]
RADIOS [***]
OC-3 MULTIPLEX
OC-3 to 84 DS-1 [***]
OC-3 to 28 DS-1 [***]
ADM 4/8/12/28 DS-1 [***]
OC-3 Spares [***]
Install [***]
Test & Turnup [***]
Freight [***]
Taxes [***]
OC-3 MULTIPLEX [***]
MISC EQUIP/RACKS
Racks,Fuse Panel,Misc [***]
Install [***]
Test & Turnup [***]
Freight [***]
Taxes [***]
MISC EQUIP/RACKS [***]
NETWORK MANAGEMENT
Network Server [***]
Network Software [***]
Network Database [***]
Interface Equipment [***]
Install & Test [***]
Freight [***]
Taxes [***]
NETWORK MGT [***]
PATH ENGINEERING [***]
FCC LICENSE APPLICATION [***]
SYSTEM ENGINEERING [***]
PATHNET COSTS [***]
</TABLE>
C-12
<PAGE>
TOTAL
PCN COORDINATION
PCN Coordination [***]
Taxes [***]
PCN COORDINATION [***]
ANTENNAS
Antenna Material [***]
Install & Align Labor [***]
Freight [***]
Taxes [***]
ANTENNAS [***]
WAVEGUIDE
Waveguide Material [***]
Install & Test Labor [***]
Freight [***]
Taxes [***]
WAVEGUIDE [***]
RADIOS
1:1 Terminal: 2 & 3 Way [***]
1:1 Repeater [***]
Add RF Channel (2:1) [***]
OAM&P Software/LT [***]
Maint Accessory Kit [***]
Basic Radio Spares [***]
Enhanced Radio Spares [***]
Install [***]
Test & Turnup [***]
Freight [***]
Taxes [***]
RADIOS [***]
OC-3 MULTIPLEX
OC-3 to 84 DS-1 [***]
OC-3 to 28 DS-1 [***]
ADM 4/8/12/28 DS-1 [***]
OC-3 Spares [***]
Install [***]
Test & Turnup [***]
Freight [***]
Taxes [***]
OC-3 MULTIPLEX [***]
MISC EQUIP/RACKS
Racks,Fuse Panel,Misc [***]
Install [***]
Test & Turnup [***]
Freight [***]
Taxes [***]
MISC EQUIP/RACKS [***]
NETWORK MANAGEMENT
Network Server [***]
Network Software [***]
Network Database [***]
Interface Equipment [***]
Install & Test [***]
Freight [***]
Taxes [***]
NETWORK MGT [***]
PATH ENGINEERING [***]
FCC LICENSE [***]
SYSTEM ENGINEERING [***]
PATHNET COSTS [***]
C-13
<PAGE>
SCHEDULE D
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Escrow Agreement") is entered into as of
December 1, 1997, by and among PathNet, Inc., a Delaware corporation ("PathNet")
and Northeast Missouri Electric Power Cooperative ("Incumbent"), and Crestar
Bank (the "Escrow Agent");
WHEREAS, PathNet and Incumbent have entered into a Fixed Point Microwave
Services Agreement dated as of the date hereof (the "FPM Agreement"), pursuant
to which, among other things, Incumbent has engaged PathNet as, and PathNet has
agreed to act as, Incumbent's sole representative for the purpose of (i)
installing, managing and operating a high capacity digital microwave system
along Incumbent's current microwave paths and (ii) marketing and selling any
Excess Capacity created by such high capacity digital microwave system.
WHEREAS, all capitalized terms used herein and not defined herein shall
have the meanings ascribed to such terms in the FPM Agreement;
WHEREAS, pursuant to Section 4.3.4(b) of the FPM Agreement, PathNet
shall deliver to the Escrow Agent the amount equal to fifty percent (50%) of
[***]less the cost of any equipment provided by the vendors referred to in
the Vendor Credit Assurances (as defined in the FPM Agreement), (the "PathNet
Escrow Deposit") and pursuant to Section 4.1.5 of the FPM Agreement,
Incumbent shall deliver to the Escrow Agent the amount of [***] (the
"Incumbent Escrow Deposit"); and
WHEREAS, the Escrow Agent has agreed to act as escrow agent hereunder in
accordance with the terms and conditions hereinafter set forth;
NOW, THEREFORE, for and in consideration of the foregoing and of the
mutual covenants and agreements hereinafter set forth, the parties hereto hereby
agree as follows:
SECTION 1. Appointment of Escrow Agent. PathNet and Incumbent hereby
mutually appoint and designate the Escrow Agent to receive, hold and disburse
the PathNet Escrow Deposit and the Incumbent Escrow Deposit, in accordance with
the terms and conditions of this Escrow Agreement, and the Escrow Agent hereby
accepts such appointment and designation. Except as set forth in Section 3.2.3,
PathNet shall pay all reasonable fees and expenses of the Escrow Agent in
connection with this Escrow Agreement.
SECTION 2. Escrow.
2.1 Escrow of Funds by PathNet
1
<PAGE>
2.1.1 Delivery of Escrow Deposit. Within ninety (90) days after
delivery by PathNet to Incumbent of the System Design, PathNet shall
deposit the amount in cash equal to the PathNet Escrow Deposit in an
escrow account with the Escrow Agent to be held, drawn upon and returned
by the Escrow Agent in accordance with the terms and conditions
hereinafter set forth.
2.1.2 Term of Escrow Agreement. The Escrow Agent shall hold the
PathNet Escrow Deposit until Commissioning and upon Commissioning any
remaining funds, together with interest that has accrued and been paid
thereon, shall be paid by the Escrow Agent to PathNet or its designee.
2.1.3 Release of Funds to PathNet. Upon receipt by the Escrow Agent
of a written joint certification of PathNet and Incumbent substantially in
form attached hereto as Attachment A to the effect that PathNet is
entitled to receive a portion of or all of the PathNet Escrow Deposit in
accordance with Section 4.3.4(b) of the FPM Agreement, the Escrow Agent
shall promptly deliver to PathNet such portions of or all of the PathNet
Escrow Deposit.
2.1.4 Release of Funds to Incumbent. Upon receipt by the Escrow
Agent of a written joint certification of PathNet and Incumbent
substantially in the form attached hereto as Attachment A to the effect
that Incumbent is entitled to receive a portion of or all of the PathNet
Escrow Deposit in accordance with Section 4.3.4(b) of the FPM Agreement or
upon receipt by the Escrow Agent of a court order directing payment to
Incumbent of a portion of or all of the PathNet Escrow Deposit, the Escrow
Agent shall promptly deliver to Incumbent such portions of or all of the
PathNet Escrow Deposit.
2.1.5 Interest and Permitted Investments. PathNet shall be entitled
to receive at Commissioning, any and all interest accrued on the PathNet
Escrow Deposit during the term of the escrow as described in this
Agreement and the Escrow Agent shall invest the funds comprising the
PathNet Escrow Deposit as designated by PathNet.
2.2 Escrow of Funds by Incumbent
2.2.1 Delivery of Escrow Deposit. Simultaneous with the execution
and delivery of the FPM Agreement, Incumbent shall deposit an amount in
cash equal to the Incumbent Escrow Deposit in an escrow account with the
Escrow Agent to be held, drawn upon and returned by the Escrow Agent in
accordance with the terms and conditions hereinafter set forth.
2.2.2 Term of Escrow Agreement. The Escrow Agent shall hold the
Incumbent Escrow Deposit until Commissioning and upon Commissioning any
remaining funds, together with interest that has accrued and been paid
thereon, shall be paid by the Escrow Agent to Incumbent or its designee.
2
<PAGE>
2.2.3 Release of Funds to PathNet. Upon receipt by the Escrow Agent
of a written joint certification of PathNet and Incumbent substantially in
form attached hereto as Attachment B to the effect that PathNet is
entitled to receive a portion of or all of the Incumbent Escrow Deposit in
accordance with Section 4.1.5 of the FPM Agreement, or upon receipt by the
Escrow Agent of a court order directing payment to PathNet of a portion of
or all of the Incumbent Escrow Deposit, the Escrow Agent shall promptly
deliver to PathNet such portions of or all of the Incumbent Escrow
Deposit.
2.2.4 Release of Funds to Incumbent. Upon receipt by the Escrow
Agent of a written joint certification of PathNet and Incumbent
substantially in the form attached hereto as Attachment A to the effect
that Incumbent is entitled to receive a portion of or all of the PathNet
Escrow Deposit in accordance with Section 4.1.5 of the FPM Agreement or
upon receipt by the Escrow Agent of a court order directing payment to
Incumbent of a portion of or all of the PathNet Escrow Deposit, the Escrow
Agent shall promptly deliver to Incumbent such portions of or all of the
PathNet Escrow Deposit.
2.2.5 Interest and Permitted Investments. Incumbent shall be
entitled to receive at Commissioning, any and all interest accrued on the
Incumbent Escrow Deposit during the term of the escrow as described in
this Agreement and the Escrow Agent shall invest the funds comprising the
Incumbent Escrow Deposit as designated by PathNet.
SECTION 3. Concerning the Escrow Agent.
3.1 Duties. The Escrow Agent undertakes to perform all duties, which are
expressly set forth herein.
3.2 Indemnification.
3.2.1 The Escrow Agent may rely upon and shall be protected in
acting or refraining from acting upon any written notice, instruction,
certification, or request furnished to it hereunder and believed by it to
be genuine and to have been signed or presented by the proper parties or
party.
3.2.2 The Escrow Agent shall not be liable for any action taken by
it in good faith and without negligence, and believed by it to be
authorized or within the rights or powers conferred upon it by this Escrow
Agreement.
3.2.3 PathNet and Incumbent hereby agree to indemnify the Escrow
Agent for and to hold the Escrow Agent harmless against, any loss,
liability or reasonable expense incurred without negligence or bad faith
on the part of the Escrow Agent, arising out of or in connection with the
Escrow Agent entering into this Escrow Agreement and carrying out its
duties hereunder, including costs
3
<PAGE>
and expenses of successfully defending the Escrow Agent against any claim
of liability with respect thereto. PathNet shall pay one half of any
payment made pursuant to this Section 3.2.3 and Incumbent shall pay one
half.
3.3 Other Matters. The Escrow Agent (and any successor escrow agent)
reserves the right to resign as the Escrow Agent at any time upon thirty (30)
days prior written notice to each of PathNet and Incumbent. Upon mutual
agreement, PathNet and Incumbent reserve the right to remove the Escrow Agent at
any time.. In the event of any litigation or dispute by the parties hereunder
affecting its duties, the Escrow Agent shall take no action until such action is
agreed to in writing by the parties hereto, or until receipt of an order of a
court having jurisdiction directing the Escrow Agent with respect to the action
which is the subject of such litigation or dispute. The Escrow Agent neither
approves nor disapproves of the transactions contemplated by the FPM Agreement
or this Escrow Agreement, nor does it recommend for or against, or have an
opinion as to the legality or validity of, this transaction.
3.4 Statements of Account. Upon termination of the escrow as set forth in
this Agreement, the Escrow Agent shall deliver to each of PathNet and the
Incumbent a Statement of Account setting forth each disbursement from the
PathNet Escrow Deposit and the Incumbent Escrow Deposit and the respective
interest accrued on the PathNet Escrow Deposit and the Incumbent Escrow Deposit.
In addition, each of PathNet and Incumbent shall have the right at any time
during the term of this Agreement to request a current Statement of Account from
the Escrow Agent and the Escrow Agent shall deliver such Statement of Account to
PathNet or Incumbent, as the case may be, promptly after receipt of any such
request.
SECTION 4. Termination. This Escrow Agreement shall terminate (i)
automatically upon the return of both the PathNet Escrow Deposit and the
Incumbent Escrow Deposit pursuant to Section 2.1.2 and Section 2.2.2,
respectively, (ii) automatically upon the delivery of the entire PathNet Escrow
Deposit and the Incumbent Escrow Deposit made pursuant to Section 2.1.3 or
Section 2.1.4 and Section 2.2.3, respectively or (iii) upon written mutual
consent signed by PathNet and Incumbent.
SECTION 5. Additional Actions and Documents. Each of the parties hereto
agrees to take or cause to be taken such further actions, to execute, deliver
and file or cause to be executed, delivered and filed such further documents,
instruments and agreement, and will obtain such consents as may be necessary or
as may reasonably be requested in order to fully effectuate the purposes, terms
and conditions of this Escrow Agreement.
SECTION 6. Notice. All notices, demands, requests, or other communications
which may be or are required to be given, served or sent by any party pursuant
to this Escrow Agreement shall be in writing and shall be hand delivered, mailed
by first-class, registered or certified mail, return receipt requested, postage
prepaid, delivered by overnight air courier or transmitted by telegram or telex
addressed as follows:
4
<PAGE>
If to PathNet:
PathNet, Inc.
1015 31St Street, N.W.
Washington, D.C. 20007
Attention: Michael Lubin
Vice President and General Counsel
Tel: 202.625.7284
Fax: 202.625.7369
If to Incumbent:
Northeast Missouri Electric Power Cooperative
P.O. Box 191
Palmyra, MO 63461
Attention: Ralph Shaw
General Manager
Tel: 573.769.2107
Fax: 573.769.4358
If to Escrow Agent:
William F. Michie III
Corporate Trust Officer
Crestar Bank
919 East Main Street
10th Floor
Richmond, VA 23219
(804) 782-5581
(804)782-7855(Fax)
Or such other address as the addressee may indicate by written notice to the
other parties. Each notice, demand, request or communication which shall be
given or made in the manner described above shall be deemed sufficiently given
or made for all purposes at such time as it is delivered to the addressee (with
return receipt, the delivery receipt or the affidavit of messenger being deemed
conclusive but not exclusive evidence of such delivery) or at such time as
delivery is refused by the addressee upon presentation.
SECTION 7. Benefit and Assignment. This Escrow Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns as permitted hereunder. No person or entity other than
the parties hereto is or shall be entitled to bring any action to enforce any
provisions of this Escrow Agreement against any of the parties hereto or their
respective successors and assigns as permitted hereunder. At any time and from
time to time, PathNet shall have the right to
5
<PAGE>
assign this Agreement or any of PathNet's rights and obligations under this
Agreement; provided, that in no event shall any such assignment relieve PathNet
of its obligations under this Agreement. Incumbent may not or shall not have the
right to assign this Agreement or any of its rights and obligations hereunder
without the prior written consent of PathNet, which consent shall not be
unreasonably withheld; provided, however, Incumbent may assign its right and
obligations, in whole but not in part, under this Agreement without the approval
of PathNet, to any entity which acquires all or substantially all of the assets
of Incumbent or to any subsidiary, Affiliate or successor in a merger or
consolidation of Incumbent; provided, that in no event shall any such assignment
relieve Incumbent of its obligations under this Agreement.
SECTION 8. Entire Agreement; Amendment. This Escrow Agreement together
with the schedules, exhibits and attachments hereto contains the entire
agreement among the parties with respect to the subject matter hereof and
supercedes all prior oral or written agreements, commitments or understandings
with respect to such matters. PathNet and Incumbent shall furnish the Escrow
Agent with a copy (without Schedules and Exhibits) of the FPM Agreement. This
Escrow Agreement may not be changed orally, but only by an instrument in writing
signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought.
SECTION 9. Waiver. No delay or failure on the part of any party hereto in
exercising any right, power or privilege under this Escrow Agreement shall
impair any such right, power or privilege or be construed as a waiver of any
default or any acquiescence therein. No single or partial exercise of any such
right, power or privilege shall preclude the further exercise of such right
power or privilege or the exercise of any other right, power or privilege. No
waiver shall be valid against any party hereto unless made in writing and signed
by the party against whom enforcement of such waiver is sought and then only to
the extent expressly specified therein.
SECTION 10. Expenses. Subject to the provisions of Section 1 and Section
3.2.3 each party shall pay its own expenses incident to this Escrow Agreement
and the transactions contemplated hereunder, including all legal and accounting
fees and disbursements.
SECTION 11. Consent to Jurisdiction; Enforceability. This Escrow Agreement
and the duties and obligations of the parties hereunder shall be enforceable
against any of the parties in the courts of the United States of America sitting
in Missouri and the courts of the State of Missouri. For such purpose, each
party hereto hereby irrevocable submits to the non-exclusive jurisdiction of
such court or courts and agrees that all claims in respect of this Escrow
Agreement and such other agreements, documents and instruments may be heard and
determined in such courts. Each party hereby irrevocably agrees that a final
judgment of any of the courts specified above in any action or proceeding
relating to this Escrow Agreement or to any of the other agreements, documents
or instruments referred to herein or therein shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.
6
<PAGE>
SECTION 12. Severability. If any part of any provision of this Escrow
Agreement shall be invalid or unenforceable in any respect, such part shall be
ineffective to the extent of such invalidity or unenforceability only, without
in any way affecting the remaining parts of such provision or the remaining
provisions of this Escrow Agreement.
SECTION 13. Governing Law. This Escrow Agreement, the rights and
obligation of the parties hereto, and any claims or disputes relating thereto,
shall be governed by and construed in accordance with the laws of the State of
Missouri (excluding the choice of law rules thereof.)
SECTION 14. Limitation on Benefits. The covenants, undertaking and
agreements set forth in this Escrow Agreement shall be solely for the benefit
of, and shall be enforceable only by, the parties hereto, and their respective
successors, heirs, executors, administrators, legal representatives and
permitted assigns.
SECTION 15. Binding Effect. Subject to any provisions hereof restricting
assignment, this Escrow Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors, heirs, executors,
administrators, legal representatives and assigns.
SECTION 16. Headings. The headings of the sections and subsections
contained in this Escrow Agreement are inserted for convenience only and do not
form a part or affect the meaning, construction or scope thereof.
SECTION 17. Signature in Counterparts. This Escrow Agreement may be
executed in separate counterparts, none of which need contain the signatures of
all parties, each of which shall be deemed to be an original, and all of which
taken together constitute one and the same instrument. It shall not be necessary
in making proof of this Escrow Agreement to produce or account for more that the
number of counterparts containing the respective signatures of, or on behalf of,
all of the parties hereto.
7
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed or has
caused this Escrow Agreement to be executed on its behalf, all as of the date
first above written.
PATHNET, INC.
By: /s/ Dave Schaeffer
-------------------------
Name: Dave Schaeffer
-------------------------
Title: Chairman
-------------------------
NORTHEAST MISSOURI
ELECTRIC POWER COOPERATIVE
By: /s/ Ralph E. Shaw
-------------------------
Name: Ralph E. Shaw
-------------------------
Title: General Manager
-------------------------
CRESTAR BANK
By: /s/ W.F. Michie, III
-------------------------
Name: W.F. Michie, III
-------------------------
Title: Trust Officer
-------------------------
8
<PAGE>
ATTACHMENT A
JOINT CERTIFICATION
I, ______________, ____________________ of PathNet, Inc. ("PathNet") and
I, ___________, _________________ of Northeast Missouri Electric Power
Cooperative ("Incumbent"), hereby certify as follows:
1. PathNet and Incumbent entered into a Fixed Point Microwave Services
Agreement, dated as of ____________, 199__ (the "FPM Agreement") pursuant to
which among other things, Incumbent engaged PathNet as, and PathNet agreed to
act as, Incumbent's sole representative for the purpose of (i) installing,
managing and operating a high capacity digital microwave system along
Incumbent's current microwave paths and (ii) marketing and selling any excess
capacity created by such high capacity digital microwave system, all in
accordance with and subject to the terms and conditions set forth in the FPM
Agreement.
2. Pursuant to the FPM Agreement, PathNet, Incumbent and Crestar Bank (the
"Escrow Agent") entered into an Escrow Agreement, dated as of _______________,
199__ (the "Escrow Agreement"), in accordance with which PathNet delivered to
the Escrow Agent the sum of ____________________ ($________________) (the
"PathNet Escrow Deposit"), subject to the terms of the FPM Agreement and the
Escrow Agreement.
3. Attached to this Joint Certification is [an invoice or other such
purchase order or bill relating to a PathNet Item (as such term is defined in
the FPM Agreement) evidencing the performance of certain services by PathNet as
set forth in the FPM Agreement.] [An affidavit of Incumbent certifying that
PathNet has failed to timely meet its payment responsibilities with respect to
the PathNet Items (as such term is defined in the FPM Agreement) in accordance
with the terms and provisions of the FPM Agreement and setting forth in detail a
description of the facts and circumstances surrounding such failure.]
4. Pursuant to Section 4.3.4(b) of the FPM Agreement and [Section
2.1.3/Section 2.1.4] of the Escrow Agreement, [PathNet/Incumbent] is entitled to
receive, from the PathNet Escrow Deposit, the following sum: _____________
($_________).
5. The Escrow Agent is hereby directed promptly upon receipt of this
certification to release the portion of the Escrow Deposit as set forth in
Section 3, above to PathNet/Incumbent pursuant to [Section 2.1.3/Section 2.1.4]
of the Escrow Agreement.
Each of _______ and ________ on behalf of PathNet and Incumbent,
respectively, certify that the foregoing is true and correct.
9
<PAGE>
PATHNET, INC. NORTHEAST MISSOURI
ELECTRIC POWER COOPERATIVE
By: By:
----------------------- -----------------------
Name: Name:
----------------------- -----------------------
Title: Title:
----------------------- -----------------------
10
<PAGE>
ATTACHMENT B
JOINT CERTIFICATION
I, ______________, ____________________ of PathNet, Inc. ("PathNet") and
I, ___________, _________________ of Northeast Missouri Electric Power
Cooperative ("Incumbent"), hereby certify as follows:
1. PathNet and Incumbent entered into a Fixed Point Microwave Services
Agreement, dated as of ____________, 199__ (the "FPM Agreement") pursuant to
which among other things, Incumbent engaged PathNet as, and PathNet agreed to
act as, Incumbent's sole representative for the purpose of (i) installing,
managing and operating a high capacity digital microwave system along
Incumbent's current microwave paths and (ii) marketing and selling any excess
capacity created by such high capacity digital microwave system, all in
accordance with and subject to the terms and conditions set forth in the FPM
Agreement.
2. Pursuant to the FPM Agreement, PathNet, Incumbent and Crestar Bank (the
"Escrow Agent") entered into an Escrow Agreement, dated as of _______________,
199__ (the "Escrow Agreement"), in accordance with which Incumbent delivered to
the Escrow Agent the sum of ____________________ ($________________) (the
"Incumbent Escrow Deposit"), subject to the terms of the FPM Agreement and the
Escrow Agreement.
3. Attached to this Joint Certification is an invoice or other such
purchase order or bill relating to a PathNet Item (as such term is defined in
the FPM Agreement) evidencing the performance of certain services by PathNet as
set forth in the FPM Agreement.
4. Pursuant to Section 4.1.5 of the FPM Agreement and Section 2.2.3 of the
Escrow Agreement, PathNet is entitled to receive, from the Incumbent Escrow
Deposit, the following sum: _____________ ($_________).
5. The Escrow Agent is hereby directed promptly upon receipt of this
certification to release the portion of the Incumbent Escrow Deposit as set
forth in Section 3, above to PathNet pursuant to Section 2.2.3 of the Escrow
Agreement.
11
<PAGE>
Each of _______ and ________ on behalf of PathNet and Incumbent,
respectively, certify that the foregoing is true and correct.
PATHNET, INC. NORTHEAST MISSOURI
ELECTRIC POWER COOPERATIVE
By: By:
----------------------- -----------------------
Name: Name:
----------------------- -----------------------
Title: Title:
----------------------- -----------------------
12
<PAGE>
SCHEDULE E
INCUMBENT SECURITY PROCEDURES
None provided by Incumbent
E-1
<PAGE>
SCHEDULE F
INCUMBENT DRUG TESTING PROCEDURES
None provided by Incumbent
F-1
<PAGE>
SCHEDULE G
INCUMBENT SUBSTANCE ABUSE POLICY
None provided by Incumbent
G-1
<PAGE>
SCHEDULE H
INCUMBENT HEALTH AND SAFETY REQUIREMENTS
None provided by Incumbent
H-1
<PAGE>
SCHEDULE I
OTHER REQUIREMENTS OF INCUMBENT
None provided by Incumbent
I-1
<PAGE>
SCHEDULE J
INCUMBENT TRAINING
1. Pre-Commissioning Training. Prior to Commissioning of the System, PathNet
shall provide to Incumbent and Incumbent field technicians and other designees
shall be obligated to participate in adequate training courses, which training
shall include, among other things, the following:
(a) comprehensive instruction for trouble-free operation maintenance;
(b) hands-on experience with the operation of the equipment deployed in
the System;
(c) review of the similarities and differences of an analog versus a
digital system;
(d) review of the latest state-of-the-art Technology and applications
used in the System;
(e) review of procedures designed to eliminate equipment damage,
incorrect handling of equipment and System downtime;
(f) comprehensive instruction in the use of all required test equipment
used in connection with the System;
(g) the distribution of manuals and other course materials that include
descriptive information publications, alignment procedures,
maintenance procedures, technical information publications,
schematic drawings, wiring lists and system assembly drawings; and
(h) a certificate of completion for each student who successfully
completes the training course.
2. Certification of Incumbent's Field Technicians. Each of Incumbent's Field
Technicians (as defined in the Maintenance Services Agreement) must either
successfully complete the training course described in Section 1 of this
Schedule J, or must be otherwise certified by PathNet that such Field Technician
is qualified to perform services on the System.
3. Training for Upgrades. Upon any upgrade of the System, Incumbent may request
that PathNet provide additional training with respect to such upgrade and
PathNet shall provide such training to Incumbent as soon as practicable after
such request.
4. Training Locations. All such training shall be provided at PathNet's
Richardson, Texas office, Washington D.C. metropolitan area headquarters or at
such other location as determined by PathNet.
5. Travel and Lodging. Incumbent shall arrange and pay for all travel and
lodging of each of Incumbent's participants at such training.
J-1
<PAGE>
SCHEDULE K
OWNERSHIP OF SYSTEM EQUIPMENT, ASSETS AND MATERIALS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
System Component Owned By
- ---------------- --------
- -----------------------------------------------------------------------------------------
<S> <C>
Existing Shelters [***]
- -----------------------------------------------------------------------------------------
New Shelters for Initial System [***]
- -----------------------------------------------------------------------------------------
New Shelters for Capacity Expansion [***]
- -----------------------------------------------------------------------------------------
New Shelters at PathNet Spur sites [***]
- -----------------------------------------------------------------------------------------
New Shelters at Incumbent Spur sites [***]
- -----------------------------------------------------------------------------------------
Towers for System [***]
- -----------------------------------------------------------------------------------------
Towers for Incumbent Spurs [***]
- -----------------------------------------------------------------------------------------
Towers for PathNet Spurs [***]
- -----------------------------------------------------------------------------------------
A.C. and D.C. Power system as set forth on Schedule J [***]
- -----------------------------------------------------------------------------------------
Pressurizing Equipment for sites including manifolds and dehydrators [***]
- -----------------------------------------------------------------------------------------
1/0 Multiplexers [***]
- -----------------------------------------------------------------------------------------
Environmental Control Systems of Shelters for Capacity Expansion [***]
- -----------------------------------------------------------------------------------------
Environmental Control Systems of Shelters of Initial System [***]
- -----------------------------------------------------------------------------------------
Environmental Control Systems of Shelters of Incumbent Spurs [***]
- -----------------------------------------------------------------------------------------
Environmental Control Systems of Shelters of PathNet Spurs [***]
- -----------------------------------------------------------------------------------------
Common Equipment existing before Effective Date [***]
- -----------------------------------------------------------------------------------------
Common Equipment newly installed [***]
- -----------------------------------------------------------------------------------------
Equipment Racks for Initial System Radios [***]
- -----------------------------------------------------------------------------------------
Equipment Racks for Capacity Expansion Radios [***]
- -----------------------------------------------------------------------------------------
Antennas and Antenna Mounts relating to Initial System [***]
- -----------------------------------------------------------------------------------------
Antennas and Antenna Mounts relating to Capacity Expansion [***]
- -----------------------------------------------------------------------------------------
Antennas and Antenna Mounts relating to Incumbent Spurs [***]
- -----------------------------------------------------------------------------------------
Antennas and Antenna Mounts relating to PathNet Spurs [***]
- -----------------------------------------------------------------------------------------
Waveguide and Waveguide bridges relating to Initial System [***]
- -----------------------------------------------------------------------------------------
Waveguide and Waveguide bridges relating to Capacity Expansion [***]
- -----------------------------------------------------------------------------------------
Waveguide and Waveguide bridges relating to Incumbent Spurs [***]
- -----------------------------------------------------------------------------------------
Waveguide and Waveguide bridges relating to PathNet Spurs [***]
- -----------------------------------------------------------------------------------------
Radios relating to Initial System [***]
- -----------------------------------------------------------------------------------------
Radios relating to Capacity Expansion [***]
- -----------------------------------------------------------------------------------------
Radios relating to Incumbent Spurs [***]
- -----------------------------------------------------------------------------------------
Radios relating to PathNet Spurs [***]
- -----------------------------------------------------------------------------------------
OC-3 Multiplexers [***]
- -----------------------------------------------------------------------------------------
Radio Bays and Radio Bay Equipment relating to the Initial System [***]
- -----------------------------------------------------------------------------------------
Radio Bays and Radio Bay Equipment relating to Capacity Expansion [***]
- -----------------------------------------------------------------------------------------
Radio Bays and Radio Bay Equipment relating to Incumbent Spurs [***]
- -----------------------------------------------------------------------------------------
Radio Bays and Radio Bay Equipment relating to the PathNet Spurs [***]
- -----------------------------------------------------------------------------------------
Interconnection Equipment relating to PathNet Spurs and Interconnections [***]
- -----------------------------------------------------------------------------------------
Interconnection Equipment relating to Incumbent Spurs and Interconnections [***]
- -----------------------------------------------------------------------------------------
Results of the Preliminary Engineering Studies and Project Drawings [***]
- -----------------------------------------------------------------------------------------
</TABLE>
K-1
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
System Component Owned By
- ---------------- --------
<S> <C>
- -----------------------------------------------------------------------------------------
Upgraded equipment added to the System [***]
- -----------------------------------------------------------------------------------------
Microwave Radio System Licenses and other FCC, Federal, state and local
licenses and Permits relating to the Initial System [***]
- -----------------------------------------------------------------------------------------
Microwave Radio System Licenses and other FCC, Federal, state and local
licenses and permits relating to the Capacity Expansion [***]
- -----------------------------------------------------------------------------------------
Panels, terminals, Software, Source Codes and other Assets and Equipment
relating to the Network Management System [***]
- -----------------------------------------------------------------------------------------
</TABLE>
K-2
<PAGE>
SCHEDULE L
FORM OF QUARTERLY REVENUE REPORT
<TABLE>
<CAPTION>
PATH OR START END DATE NUMBER OF PRICE PER REVENUE REVENUE PATHNET INCUMBENT
SEGMENT DATE -------- DS-0'S SOLD CIRCUIT MILE COLLECTED OUTSTANDING REVENUE TO BE REVENUE
- ------- ---- ----------- ------------ --------- ----------- PAID TO BE PAID
---- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
L-1
<PAGE>
SCHEDULE M
INCUMBENT PAYMENT INSTRUCTIONS
None provided by Incumbent as of Effective Date.
M-1
<PAGE>
SCHEDULE N
FORM OF PATHNET SUBLICENSE AGREEMENT
This Sublicense Agreement (the "Agreement") is made on _____________, 1997
(the "Effective Date") by and between PathNet, Inc. ("PathNet") and Northeast
Missouri Electric Power Cooperative ("Incumbent") for the use of VERTEL
Corporation ("Licensor") programs.
WHEREAS, Incumbent desires to sublicense the programs as further defined
herein; and
WHEREAS, PathNet is willing to grant such sublicense under the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the Parties mutually agree as follows:
I. DEFINITIONS.
1.1 "Licensed Program" shall mean each program in software or firmware
form provided by PathNet to Incumbent pursuant to the Fixed Point Microwave
Services Agreement, dated the date hereof between Incumbent and PathNet (the
"FPM Agreement"), as such Licensed Program is licensed by PathNet from Licensor,
including future additions and updates to such Licensed Program. The term
"Licensed Program" shall specifically include documentation and related
materials pertinent to such program and any updated program or portion of a
program hereinafter furnished to Incumbent for use in connection with or
replacement of the Licensed Programs.
1.2 "Equipment" shall mean Intel compatible servers running Windows NT.
1.3 "Use" shall mean the copying or duplication of any portion of a
Licensed Program from storage units or media into the Equipment for processing
or the utilization of any Licensed Program in the course of the operation of the
Equipment.
II. LICENSE GRANT.
2.1 Use of Object/Binary Licensed Program with Designated Equipment.
PathNet hereby grants Incumbent a non-exclusive, non-transferable (except as
provided in Section 5.1), non-licensable, non-assignable license to Use in
machine readable form, the Licensed Program specified in Section 1.1 solely on
the Equipment specified in Section 1.2. No license is granted to Use any
Licensed Program on any configuration of equipment which is different from or
less than the configuration indicated in Section 1.2.
N-1
<PAGE>
III. PROPRIETARY RIGHTS.
3.1 Proprietary Rights. The Licensed Program is owned by Licensor and/or
others and is proprietary in nature. Incumbent shall respect such proprietary
rights and shall not use such Licensed Program except for the purposes for which
it is being made available as set forth in this Agreement and shall not
reproduce, print, sublicense, duplicate, reverse engineer, distribute, disclose,
or otherwise make the Licensed Program available to any third party, in whole or
in part, in whatever form.
3.2 Confidentiality. Incumbent shall take all actions required to maintain
control of the Licensed Program including securing written records, agreements,
and other reasonable measures with its employees and agents to satisfy its
obligations under this Agreement with respect to the use, copying, protection,
and security of the Licensed Program.
IV. LIMIT OF LIABILITY.
4.1 NO WARRANTY. LICENSOR GRANTS A WARRANTY IN THE LICENSED PROGRAM ONLY
TO PATHNET AND DOES NOT EXTEND ITS WARRANTY TO INCUMBENT OR ANY OTHER END USER.
WARRANTY OF THE LICENSED PROGRAM IS PROVIDED BY LICENSOR DIRECTLY TO PATHNET.
LICENSOR AND PATHNET MAKE NO EXPRESS OR IMPLIED WARRANTIES OF ANY KIND,
INCLUDING WITHOUT LIMITATION, MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE WITH REGARD TO ANY LICENSED PROGRAM AND/OR RELATED MATERIALS TO BE
FURNISHED BY VERTEL.
4.2 NO CONSEQUENTIAL DAMAGES. IN NO EVENT SHALL LICENSOR OR PATHNET BE
LIABLE FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH OR
ARISING OUT OF THE EXISTENCE, FURNISHING, FAILURE TO FURNISH, OR USE OF ANY
LICENSED PROGRAM AND/OR RELATED MATERIAL AND/OR DEVISE.
4.3 Licensor shall have no liability for any claim of copyright or patent
infringement based on (1) use of other than a current unaltered release of the
Licensed Program available from Licensor if such infringement would have been
avoided by the use of such current unaltered release of the Licensed Program or
(2) Use or combination of the Licensed Program with programs not supplied by
Licensor and which Use or combination results in the infringement of any patent
or copyright.
V. TRANSFER OF LICENSE.
5.1 Terms for Transfer of License. This license may only be transferred
upon written approval of PathNet and in connection with the transfer of all of
the Equipment; provided all copies of the Licensed Program are delivered to the
transferee and no copies or related materials are retained by Incumbent and
provided further that the transferee agrees to be bound by all the Terms and
Conditions of this Agreement.
N-2
<PAGE>
NOW THEREFORE, the Parties hereto have caused this Agreement to be
executed by their respective duly authorized representatives.
PATHNET, INC.
By:
-----------------------
Name:
-----------------------
Title:
-----------------------
NORTHEAST MISSOURI ELECTRIC
POWER COOPERATIVE
By:
-----------------------
Name:
-----------------------
Title:
-----------------------
N-3
<PAGE>
SUBLICENSE AGREEMENT
This Sublicense Agreement (the "Agreement") is made on December 1, 1997
(the "Effective Date") by and between PathNet, Inc. ("PathNet") and Northeast
Missouri Electric Power Cooperative ("Incumbent") for the use of VERTEL
Corporation ("Licensor") programs.
WHEREAS, Incumbent desires to sublicense the programs as further defined
herein; and
WHEREAS, PathNet is willing to grant such sublicense under the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the Parties mutually agree as follows:
I. DEFINITIONS.
1.1 "Licensed Program" shall mean each program in software or firmware
form provided by PathNet to Incumbent pursuant to the Fixed Point Microwave
Services Agreement, dated the date hereof between Incumbent and PathNet (the
"FPM Agreement"), as such Licensed Program is licensed by PathNet from Licensor,
including future additions and updates to such Licensed Program. The term
"Licensed Program" shall specifically include documentation and related
materials pertinent to such program and any updated program or portion of a
program hereinafter furnished to Incumbent for use in connection with or
replacement of the Licensed Programs.
1.2 "Equipment" shall mean Intel compatible servers running Windows NT.
1.3 "Use" shall mean the copying or duplication of any portion of a
Licensed Program from storage units or media into the Equipment for processing
or the utilization of any Licensed Program in the course of the operation of the
Equipment.
II. LICENSE GRANT.
2.1 Use of Object/Binary Licensed Program with Designated Equipment.
PathNet hereby grants Incumbent a non-exclusive, non-transferable (except as
provided in Section 5.1), non-licensable, non-assignable license to Use in
machine readable form, the Licensed Program specified in Section 1.1 solely on
the Equipment specified in Section 1.2. No license is granted to Use any
Licensed Program on any configuration of equipment which is different from or
less than the configuration indicated in Section 1.2.
1
<PAGE>
III. PROPRIETARY RIGHTS.
3.1 Proprietary Rights. The Licensed Program is owned by Licensor and/or
others and is proprietary in nature. Incumbent shall respect such proprietary
rights and shall not use such Licensed Program except for the purposes for which
it is being made available as set forth in this Agreement and shall not
reproduce, print, sublicense, duplicate, reverse engineer, distribute, disclose,
or otherwise make the Licensed Program available to any third party, in whole or
in part, in whatever form.
3.2 Confidentiality. Incumbent shall take all actions required to maintain
control of the Licensed Program including securing written records, agreements,
and other reasonable measures with its employees and agents to satisfy its
obligations under this Agreement with respect to the use, copying, protection,
and security of the Licensed Program.
IV. LIMIT OF LIABILITY.
4.1 NO WARRANTY. LICENSOR GRANTS A WARRANTY IN THE LICENSED PROGRAM ONLY
TO PATHNET AND DOES NOT EXTEND ITS WARRANTY TO INCUMBENT OR ANY OTHER END USER.
WARRANTY OF THE LICENSED PROGRAM IS PROVIDED BY LICENSOR DIRECTLY TO PATHNET.
LICENSOR AND PATHNET MAKE NO EXPRESS OR IMPLIED WARRANTIES OF ANY KIND,
INCLUDING WITHOUT LIMITATION, MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE WITH REGARD TO ANY LICENSED PROGRAM AND/OR RELATED MATERIALS TO BE
FURNISHED BY VERTEL.
4.2 NO CONSEQUENTIAL DAMAGES. IN NO EVENT SHALL LICENSOR OR PATHNET BE
LIABLE FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH OR
ARISING OUT OF THE EXISTENCE, FURNISHING, FAILURE TO FURNISH, OR USE OF ANY
LICENSED PROGRAM AND/OR RELATED MATERIAL AND/OR DEVISE.
4.3 Licensor shall have no liability for any claim of copyright or patent
infringement based on (1) use of other than a current unaltered release of the
Licensed Program available from Licensor if such infringement would have been
avoided by the use of such current unaltered release of the Licensed Program or
(2) Use or combination of the Licensed Program with programs not supplied by
Licensor and which Use or combination results in the infringement of any patent
or copyright.
V. TRANSFER OF LICENSE.
5.1 Terms for Transfer of License. This license may only be transferred
upon written approval of PathNet and in connection with the transfer of all of
the
2
<PAGE>
Equipment; provided all copies of the Licensed Program are delivered to the
transferee and no copies or related materials are retained by Incumbent and
provided further that the transferee agrees to be bound by all the Terms and
Conditions of this Agreement.
3
<PAGE>
NOW THEREFORE, the Parties hereto have caused this Agreement to be
executed by their respective duly authorized representatives.
PATHNET, INC.
By: /s/ Dave Schaeffer
-------------------------
Name: Dave Schaeffer
-------------------------
Title: Chairman
-------------------------
NORTHEAST MISSOURI
ELECTRIC POWER
COOPERATIVE
By: /s/ Ralph E. Shaw
-------------------------
Name: Ralph E. Shaw
-------------------------
Title: General Manager
-------------------------
4
<PAGE>
SCHEDULE O
FORM OF SECURITY AGREEMENT
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement"), dated as of ___________ ____,
1997, between PathNet, Inc. ("Pledgor") and Northeast Missouri Electric Power
Cooperative ("Pledgee").
RECITALS
WHEREAS, Pledgor and Pledgee have entered into a Fixed Point Microwave
Services Agreement, dated as of _____________, 1997 (the "FPM Agreement")
pursuant to which Pledgee has agreed, among other things, to engage Pledgor as,
and Pledgor has agreed to act as, Pledgee's sole representative for the purpose
of, (i) installing, managing and operating a high capacity digital microwave
system along Pledgee's current microwave paths (the "System"), and (ii)
marketing and selling any excess capacity created by such high capacity digital
microwave system; and
WHEREAS, Pledgor is the owner of those certain radios, radio software,
antenna, waveguide, multiplexers and other equipment necessary to operate the
Initial System (as such term is defined in the FPM Agreement) (collectively, the
"Assets"), all of which are identified more particularly on Exhibit A attached
hereto; and
WHEREAS, a condition to the execution, delivery and consummation of the
transactions contemplated by the FPM Agreement is the execution and delivery of
this Agreement.
WHEREAS, all capitalized terms used herein and not defined herein shall
have the meanings ascribed to such terms in the FPM Agreement;
NOW, THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
1. Grant of Security Interest in Assets. In order to induce Pledgee to
execute, deliver and perform the FPM Agreement and as security for Pledgor's or
Pledgee's successors' performance of Pledgor's obligations under the FPM
Agreement and in consideration for the Project fee, Pledgor hereby assigns,
conveys, mortgages, pledges, hypothecates, transfers and confirms to Pledgee,
its successors and assigns, and hereby grants to Pledgee a lien on and security
interest in, all of Pledgor's right, title, interest and powers in the Assets.
This Agreement constitutes a valid and continuing lien on and security interest
in the Assets in favor of Pledgee, prior to all other liens, encumbrances,
security interest and rights of others and is enforceable as such as against
creditors of and purchasers from the Pledgor. All such action necessary or
desirable to protect and perfect such security interest in each item of the
Assets will have been duly taken prior to the date the Assets are installed,
including but not limited to the
O-1
<PAGE>
Pledgor, at its expense, causing UCC-1 Financing Statements with respect to the
Assets to be filed and recorded in all places necessary to establish create and
perfect the lien intended to be created hereby.
2. Events of Default. The occurrence of any of the following events or
circumstances shall constitute an Event of Default under this Agreement:
(a) the liquidation or dissolution of Pledgor under Chapter 7 to the
Federal bankruptcy laws or otherwise under the Delaware general
corporation law, or
(b) the default by Pledgor under its financing arrangement with its
Vendor and Incumbent's receipt of written notice from such vendor stating
its intention to waive its right to operate the System for the purpose of
generating Revenue from the sale of Excess Capacity.
3. Remedies Upon Default. If an Event of Default shall have occurred, the
Pledgee may, in addition to any remedies it may have under the FPM Agreement,
(a) take possession or control of, store, lease, operate, manage, sell or
otherwise dispose of all or any part of the Assets, (b) notify all parties under
any account or contract forming all or any part of the Assets to make any
payments due to Pledgor directly to Pledgee, (c) in the name of Pledgor or in
the name of Pledgee, demand, collect, receive, sue for and give receipts and
releases for any and all amounts due under such account and contract rights, (d)
endorse as the agent of Pledgor any check, note, chattel paper, documents or
instruments forming all or any part of the Assets, (e) make formal application
for the transfer to Pledgee of all of Pledgor's Permits, licenses, approvals and
the like relating to the Assets and (f) take any action which Pledgee deems
necessary or desirable to protect and realize upon the security interest in the
Assets.
4. Termination of Security Interest. The security interest set forth in
Section 1 above shall terminate on the later of the date which is the
twenty-fifth anniversary of Commissioning and simultaneously with the expiration
of the FPM Agreement. Upon expiration, the Pledgee shall take possession of the
Assets.
5. Representations, Warranties and Covenants of the Pledgor. The Pledgor
hereby represents, warrants and covenants that:
(a) The Pledgor has full corporate power and authority to execute
and deliver and perform its obligations under this Agreement
and this Agreement is the Pledgor's valid and binding
obligation, enforceable in accordance with its terms, except
as such enforcement may be limited by (i) applicable
bankruptcy, reorganization, insolvency, moratorium or other
laws affecting creditors' rights generally, (ii) equitable
rules or principles affecting the enforcement of obligations
generally, whether at law or in equity, or (iii) the exercise
of the discretionary powers of any court before which may be
brought any proceeding seeking equitable remedies, including,
without limitation, specific performance and injunctive
relief.
O-2
<PAGE>
(b) Pledgor represents and warrants that it is or will be before
Commissioning (as such term is defined in the FPM Agreement)
the owner of the Assets and has good and marketable title to
the Assets, free and clear of all liens, security interests
and other encumbrances, except for those in favor of the
Pledgee.
(c) Pledgor will not sell, lease, transfer, exchange or otherwise
dispose of the Assets, or any part thereof, without the prior
written consent of Pledgee, and will not permit any lien,
security interest or other encumbrance to attach to the
Assets, or any part thereof, other than those in favor of the
Pledgee or those permitted by Pledgee in writing.
(d) No approval, consent or other action by the stockholders and
Pledgor or by any governmental authority, or by any other
person or entity, is or will be necessary to permit the valid
execution, delivery and performance by the Pledgor of this
Agreement or any other instruments or agreements executed in
connection herewith.
6. Waiver of Notice, Etc. Except as specifically provided for herein, the
Pledgor waives demand, notice, protest, notice of acceptance of this Agreement,
notice of any extensions granted, collateral received or delivered or any action
taken in reliance hereon; all demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of any obligation and
all other demands and notices of any description; and assents to any extension
or postponement of the time of payment of any of the obligations created
hereunder or any other indulgence.
7. Governing Law. This Agreement is to be governed by and construed in
accordance with the laws of the State of Missouri.
8. Succession. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, successors and assigns and shall also inure to the benefit of
the holders from time to time of the obligations.
9. Invalidity of Provisions. In the event that any one or more of the
provisions contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement, and
each term and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
10. Amendments. This Agreement may not be changed orally, but only by an
agreement in writing signed by the parties against whom enforcement of any
waiver, change, modification or discharge is sought.
11. Notices. All communications under or with respect to this Agreement
shall be in writing and shall be delivered to the parties in the manner
proscribed and addressed as designated in the FPM Agreement, subject to a change
thereof by written notice.
O-3
<PAGE>
12. Counterparts. This Agreement may be executed in two or more
counterparts, all of which together shall constitute one and the same
instrument.
13. Entire Agreement. This Agreement embodies the entire understanding of
the parties with respect to the subject matter of this Agreement and no oral
understandings exist among the parties hereto with respect to the subject matter
hereof except as herein expressly set forth.
14. Captions. The captions of this Agreement are for convenience only and
shall neither limit nor enlarge the provisions hereof.
15. FCC Consent. Notwithstanding anything to the contrary contained herein
or the FPM Agreement, the Pledgee will not take any action pursuant to this
Agreement or the FPM Agreement that would constitute or result in any assignment
of or a transfer of control of any FCC authorization(s) held by Pledgor if such
assignment or transfer of control would require under then existing law
(including the written rules and regulations promulgated by the FCC), the prior
approval of the FCC, without first obtaining such approval of the FCC. The
Pledgee specifically agrees that (a) the voting rights of the pledged assets
will remain with the Pledgor upon and following the occurrence of an Event of
Default unless any required prior approvals of the FCC to the transfer of such
voting rights to the Pledgee shall have been obtained; and (b) prior to the
exercise of voting rights by the purchaser at any such sale, the prior consent
of the FCC pursuant to 47 U.S.C. 310(d) will be obtained. The Pledgor agrees to
take any action which the Pledgee may reasonably request in order to obtain and
enjoy the full rights and benefits granted to the Pledgee by this Agreement
including specifically the use of the best efforts of the Pledgor to assist in
obtaining approval of the FCC for any action or transaction contemplated by this
Agreement which is then required by law, and specifically, without limitation,
upon request following the occurrence of an Event of Default, to prepare, sign
and file (or cause to be prepared, signed or filed) with the FCC any portion of
any application or applications for consent to the assignment of an
authorization or transfer of control required to be signed by the Pledgor and
necessary or appropriate under the FCC's rules and regulations for approval of
any sale or transfer of any of the capital stock or assets of the Pledgor or any
transfer of control of any FCC authorization.
O-4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the day and year first above written.
PATHNET, INC. NORTHEAST MISSOURI
ELECTRIC POWER COOPERATIVE
By: By:
----------------------- -----------------------
Name: Name:
----------------------- -----------------------
Title: Title:
----------------------- -----------------------
O-5
<PAGE>
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement"), dated as of December 1, 1997,
between PathNet, Inc. ("Pledgor") and Northeast Missouri Electric Power
Cooperative ("Pledgee").
RECITALS
WHEREAS, Pledgor and Pledgee have entered into a Fixed Point Microwave
Services Agreement, dated as of December 1, 1997 (the "FPM Agreement") pursuant
to which Pledgee has agreed, among other things, to engage Pledgor as, and
Pledgor has agreed to act as, Pledgee's sole representative for the purpose of,
(i) installing, managing and operating a high capacity digital microwave system
along Pledgee's current microwave paths (the "System"), and (ii) marketing and
selling any excess capacity created by such high capacity digital microwave
system; and
WHEREAS, Pledgor is the owner of those certain radios, radio software,
antenna, waveguide, multiplexers and other equipment necessary to operate the
Initial System (as such term is defined in the FPM Agreement) (collectively, the
"Assets"), all of which are identified more particularly on Exhibit A attached
hereto; and
WHEREAS, a condition to the execution, delivery and consummation of the
transactions contemplated by the FPM Agreement is the execution and delivery of
this Agreement.
WHEREAS, all capitalized terms used herein and not defined herein shall
have the meanings ascribed to such terms in the FPM Agreement;
NOW, THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
1. Grant of Security Interest in Assets. In order to induce Pledgee to
execute, deliver and perform the FPM Agreement and as security for Pledgor's or
Pledgee's successors' performance of Pledgor's obligations under the FPM
Agreement and in consideration for the Project fee, Pledgor hereby assigns,
conveys, mortgages, pledges, hypothecates, transfers and confirms to Pledgee,
its successors and assigns, and hereby grants to Pledgee a lien on and security
interest in, all of Pledgor's right, title, interest and powers in the Assets.
This Agreement constitutes a valid and continuing lien on and security interest
in the Assets in favor of Pledgee, prior to all other liens, encumbrances,
security interest and rights of others and is enforceable as such as against
creditors of and purchasers from the Pledgor. All such action necessary or
desirable to protect and perfect such security interest in each item of the
Assets will have been duly taken prior to the date the Assets are installed,
including but not limited to the Pledgor, at its expense, causing UCC-1
Financing Statements with respect to the Assets to be filed and recorded
1
<PAGE>
in all places necessary to establish create and perfect the lien intended to be
created hereby.
2. Events of Default. The occurrence of any of the following events or
circumstances shall constitute an Event of Default under this Agreement:
(a) the liquidation or dissolution of Pledgor under Chapter 7 to the
Federal bankruptcy laws or otherwise under the Delaware general
corporation law, or
(b) the default by Pledgor under its financing arrangement with its
Vendor and Incumbent's receipt of written notice from such vendor stating
its intention to waive its right to operate the System for the purpose of
generating Revenue from the sale of Excess Capacity.
3. Remedies Upon Default. If an Event of Default shall have occurred, the
Pledgee may, in addition to any remedies it may have under the FPM Agreement,
(a) take possession or control of, store, lease, operate, manage, sell or
otherwise dispose of all or any part of the Assets, (b) notify all parties under
any account or contract forming all or any part of the Assets to make any
payments due to Pledgor directly to Pledgee, (c) in the name of Pledgor or in
the name of Pledgee, demand, collect, receive, sue for and give receipts and
releases for any and all amounts due under such account and contract rights, (d)
endorse as the agent of Pledgor any check, note, chattel paper, documents or
instruments forming all or any part of the Assets, (e) make formal application
for the transfer to Pledgee of all of Pledgor's Permits, licenses, approvals and
the like relating to the Assets and (f) take any action which Pledgee deems
necessary or desirable to protect and realize upon the security interest in the
Assets.
4. Termination of Security Interest. The security interest set forth in
Section 1 above shall terminate on the later of the date which is the
twenty-fifth anniversary of Commissioning and simultaneously with the expiration
of the FPM Agreement. Upon expiration, the Pledgee shall take possession of the
Assets.
5. Representations, Warranties and Covenants of the Pledgor. The Pledgor
hereby represents, warrants and covenants that:
(a) The Pledgor has full corporate power and authority to execute
and deliver and perform its obligations under this Agreement
and this Agreement is the Pledgor's valid and binding
obligation, enforceable in accordance with its terms, except
as such enforcement may be limited by (i) applicable
bankruptcy, reorganization, insolvency, moratorium or other
laws affecting creditors' rights generally, (ii) equitable
rules or principles affecting the enforcement of obligations
generally, whether at law or in equity, or (iii) the exercise
of the discretionary powers of any court before which may be
brought any proceeding seeking
2
<PAGE>
equitable remedies, including, without limitation, specific
performance and injunctive relief.
(b) Pledgor represents and warrants that it is or will be before
Commissioning (as such term is defined in the FPM Agreement)
the owner of the Assets and has good and marketable title to
the Assets, free and clear of all liens, security interests
and other encumbrances, except for those in favor of the
Pledgee.
(c) Pledgor will not sell, lease, transfer, exchange or otherwise
dispose of the Assets, or any part thereof, without the prior
written consent of Pledgee, and will not permit any lien,
security interest or other encumbrance to attach to the
Assets, or any part thereof, other than those in favor of the
Pledgee or those permitted by Pledgee in writing.
(d) No approval, consent or other action by the stockholders and
Pledgor or by any governmental authority, or by any other
person or entity, is or will be necessary to permit the valid
execution, delivery and performance by the Pledgor of this
Agreement or any other instruments or agreements executed in
connection herewith.
6. Waiver of Notice, Etc. Except as specifically provided for herein, the
Pledgor waives demand, notice, protest, notice of acceptance of this Agreement,
notice of any extensions granted, collateral received or delivered or any action
taken in reliance hereon; all demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of any obligation and
all other demands and notices of any description; and assents to any extension
or postponement of the time of payment of any of the obligations created
hereunder or any other indulgence.
7. Governing Law. This Agreement is to be governed by and construed in
accordance with the laws of the State of Missouri.
8. Succession. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, successors and assigns and shall also inure to the benefit of
the holders from time to time of the obligations.
9. Invalidity of Provisions. In the event that any one or more of the
provisions contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement, and
each term and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
10. Amendments. This Agreement may not be changed orally, but only by an
agreement in writing signed by the parties against whom enforcement of any
waiver,
3
<PAGE>
change, modification or discharge is sought.
11. Notices. All communications under or with respect to this Agreement
shall be in writing and shall be delivered to the parties in the manner
proscribed and addressed as designated in the FPM Agreement, subject to a change
thereof by written notice.
12. Counterparts. This Agreement may be executed in two or more
counterparts, all of which together shall constitute one and the same
instrument.
13. Entire Agreement. This Agreement embodies the entire understanding of
the parties with respect to the subject matter of this Agreement and no oral
understandings exist among the parties hereto with respect to the subject matter
hereof except as herein expressly set forth.
14. Captions. The captions of this Agreement are for convenience only and
shall neither limit nor enlarge the provisions hereof.
15. FCC Consent. Notwithstanding anything to the contrary contained herein
or the FPM Agreement, the Pledgee will not take any action pursuant to this
Agreement or the FPM Agreement that would constitute or result in any assignment
of or a transfer of control of any FCC authorization(s) held by Pledgor if such
assignment or transfer of control would require under then existing law
(including the written rules and regulations promulgated by the FCC), the prior
approval of the FCC, without first obtaining such approval of the FCC. The
Pledgee specifically agrees that (a) the voting rights of the pledged assets
will remain with the Pledgor upon and following the occurrence of an Event of
Default unless any required prior approvals of the FCC to the transfer of such
voting rights to the Pledgee shall have been obtained; and (b) prior to the
exercise of voting rights by the purchaser at any such sale, the prior consent
of the FCC pursuant to 47 U.S.C. 310(d) will be obtained. The Pledgor agrees to
take any action which the Pledgee may reasonably request in order to obtain and
enjoy the full rights and benefits granted to the Pledgee by this Agreement
including specifically the use of the best efforts of the Pledgor to assist in
obtaining approval of the FCC for any action or transaction contemplated by this
Agreement which is then required by law, and specifically, without limitation,
upon request following the occurrence of an Event of Default, to prepare, sign
and file (or cause to be prepared, signed or filed) with the FCC any portion of
any application or applications for consent to the assignment of an
authorization or transfer of control required to be signed by the Pledgor and
necessary or appropriate under the FCC's rules and regulations for approval of
any sale or transfer of any of the capital stock or assets of the Pledgor or any
transfer of control of any FCC authorization.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the day and year first above written.
PATHNET, INC.
By: /s/ Dave Schaeffer
-------------------------
Name: Dave Schaeffer
Title: Chairman
NORTHEAST MISSOURI ELECTRIC COOPERATIVE
By: /s/ Ralph E. Shaw
-------------------------
Name: Ralph E. Shaw
Title: General Manager
5
<PAGE>
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. SUCH PORTIONS ARE DESIGNATED "[***]."
THIS FIXED POINT MICROWAVE SERVICES AGREEMENT is made and entered into as
of the 17th day of September, 1997 (the "EFFECTIVE DATE"), by and between
PathNet, Inc. ("PATHNET"), a Delaware corporation and KN Energy, Inc.
("INCUMBENT"), a Kansas corporation (collectively, the "PARTIES" and each, a
"PARTY".
W I T N E S S E T H:
WHEREAS, PathNet is engaged in the business of creating high capacity,
digital, microwave communications systems for purposes of marketing and selling
the excess long distance telecommunications capacity created by such systems;
WHEREAS, Incumbent is the owner and operator of an existing microwave
telecommunications system; and
WHEREAS, Incumbent desires to engage PathNet as, and PathNet desires to (i)
install, manage, and operate a high capacity digital microwave system along
Incumbent's current microwave paths and (ii) act as Incumbent's sole
representative for the purpose of marketing and selling any Excess Capacity
created by such high capacity digital microwave system.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the Parties agree as follows:
SECTION 1. DEFINITIONS.
1.1 DEFINITIONS: As used in this Agreement, the following terms shall
have the meanings indicated:
1.1.1 1/0 MULTIPLEXER: Any device that multiplexes capacity
between the DS-1 and the DS-0 levels.
1.1.2 1 X 1: A microwave radio configuration consisting of a
primary and a protect radio.
1.1.3 AFFILIATE: With respect to any Person, any other Person
that directly or indirectly controls, is controlled by, or is under common
control with such Person. For the purposes of this definition, "control"
(including the terms "controlled by" and "under common control with"), as
used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting
securities, by contract, or otherwise.
1.1.4 AGREEMENT: This Fixed Point Microwave Services Agreement,
including the Schedules and Exhibits attached hereto, as the same may be
amended, supplemented or modified in accordance with the terms hereof.
1.1.5 ALARM AND EVENT REPORT: As defined in SECTION 7.7 of
SCHEDULE A.
<PAGE>
1.1.6 AMENDED SCHEDULE B: As defined in SECTION 18.15.
1.1.7 ARBITRATION RULES: As defined in SECTION 17.2.2.
1.1.8 AS-BUILT DRAWING: As defined in SECTION 4.1.4 of
SCHEDULE A.
1.1.9 ASSOCIATION: As defined in SECTION 17.2.2.
1.1.10 ASSIGNMENT DOCUMENTS: As defined in SECTION 8.6.1.
1.1.11 AVAILABLE EXCESS CAPACITY: The total PathNet Excess
Capacity available (and not allocated) for use or sale on the System at any
given time from Commissioning through the Expiration Date.
1.1.12 AVERAGE SOLD EXCESS CAPACITY: The cumulative average of
[(PathNet Excess Capacity - Available Excess Capacity)/PathNet Excess
Capacity] taken as a percentage.
1.1.13 BIT ERROR RATE: The number of received bits in error
compared to the total number of bits received.
1.1.14 BREACHING PARTY: As defined in SECTION 17.1.2.
1.1.15 BUSINESS DAY: Any day other than a Saturday, a Sunday, or a
day on which the banking institutions in either New York, New York, or the
city and state in which the principal executive offices of PathNet within
the United States are located, are not open for business.
1.1.16 CAPACITY EXPANSION: An increase in telecommunication
channels a System is able to transmit, receive and transport above those
created by the installation of the Initial System, achieved by an addition
to or change in equipment.
1.1.17 CAPACITY EXPANSION SCHEDULE: As defined in SECTION 7.1 of
SCHEDULE A.
1.1.18 CERCLA: Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. Section 6901 ET SEQ., as amended.
1.1.19 CHANNEL PLAN: As defined in SECTION 1.1 of SCHEDULE A.
1.1.20 COMMISSIONING: With respect to each path or Segment, the
date on which the circuits of such path or Segment are available for
service after completion of all required site acceptance testing on the
Initial System or any Capacity Expansion.
1.1.21 CUSTOMER AGREEMENTS: As defined in SECTION 9.8.1.
2
<PAGE>
1.1.22 CUTOVER PLAN: As defined in SECTION 4.1.1 of SCHEDULE A.
1.1.23 DS-0: 64,000 bits per second; The world-wide standard speed
for digitizing one voice conversation using pulse code modulation, which is
approximately equivalent to a single voice or data channel.
1.1.24 DS-1: 24 DS-0's.
1.1.25 DS-3: 672 DS-0's or 28 DS-1's.
1.1.26 DEFICIENCY LIST: As defined in SECTION 5.7 of SCHEDULE A.
1.1.27 DISPUTE: As defined in SECTION 17.2.1.
1.1.28 DROP AND INSERT: That process wherein a part of the
information carried in a transmission system is demodulated (dropped) at an
intermediate point and different information is entered (inserted) for
subsequent transmission.
1.1.29 EFFECTIVE DATE: As defined in the introductory paragraph of
this Agreement or the date of any AMENDED SCHEDULE B, as the context
indicates.
1.1.30 ERROR FREE SECOND: Any one-second interval that does not
contain a measurable bit error.
1.1.31 ENCUMBRANCES: Any security interests, mortgages,
restrictions, liens, pledges, options, rights of first refusal and other
encumbrances, as applicable, whether or not relating to the extension of
credit or the borrowing of money. To "Encumber" shall mean to effect any
Encumbrance.
1.1.32 EQUIPMENT: Any and all digital microwave radios, radio
components, cards, antennas, waveguides, multiplexers, software and other
equipment or parts required for the operation of the System provided and
installed by PathNet as set forth on EXHIBIT A-1 to SCHEDULE A.
1.1.33 ERRORED SECONDS: Any one-second interval during which one
or more bit errors occur.
1.1.34 ESCROW AGREEMENT: As defined in SECTION 4.1.5.
1.1.35 EXCESS CAPACITY: The PathNet Excess Capacity and the
Incumbent Excess Capacity.
1.1.36 EXISTING SYSTEM INVENTORY: As defined in SECTION 1.1 of
SCHEDULE A.
3
<PAGE>
1.1.37 EXPIRATION DATE: The date on which this Agreement and the
rights and obligations hereunder are terminated or expire in accordance
with SECTION 3.
1.1.38 FAA: The Federal Aviation Administration, or any other
Federal agency at the time administering tower registration requirements
and regulations.
1.1.39 FAILED SECOND: Any one-second interval that has 1,544 bit
errors at a DS-1 rate.
1.1.40 FACILITIES: Incumbent's towers, shelters, sites and all
equipment owned by Incumbent relating to and used in association with such
towers, shelters and sites for the purpose of operating the System.
1.1.41 FCC: The Federal Communications Commission, or any other
Federal agency at the time administering the Communications Act of 1934, as
amended, the Telecommunications Act of 1996, as amended and the rules and
regulations promulgated thereunder.
1.1.42 FCC CODE: The Communications Act of 1934, as amended, the
Telecommunications Act of 1996, as amended and the rules and regulations
promulgated thereunder and related thereto.
1.1.43 FIRST EXTENSION PERIOD: As defined in SECTION 3.1.3.
1.1.44 FORCE MAJEURE EVENT: As defined in SECTION 16.3.
1.1.45 FORM 415: As defined in SECTION 10.1.1.
1.1.46 FREQUENCY AVAILABILITY MODEL: As defined in SECTION 1.1 of
SCHEDULE A.
1.1.47 FREQUENCY DIVERSITY: A method of protecting a radio signal
by providing a second radio signal on a different frequency, which will
assume the radio signal load when the regular channel fails.
1.1.48 GOVERNMENTAL AUTHORITY: Any nation or government, any state
or other political subdivision thereof and any court, panel, judge, board,
bureau, commission, agency or other entity, body or other person exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government.
1.1.49 HAZARDOUS MATERIAL: Any material amount of any substance,
matter or waste which is or becomes regulated by any Federal, state or
local law, ordinance, order, rule, regulation, code or any government
restrictions or requirement including, but not limited to, asbestos,
petroleum products and "Hazardous Substances" and "Hazardous Wastes" (as
such terms are defined in CERCLA and RCRA).
4
<PAGE>
1.1.50 INCUMBENT: As defined in the introductory paragraph.
1.1.51 INCUMBENT ESTIMATED COSTS: As defined in SECTION 4.1.2.
1.1.52 INCUMBENT ITEMS: As defined in SECTION 4.1.1.
1.1.53 INCUMBENT PAYMENT CAP: As defined in SECTION 4.1.3.
1.1.54 INCUMBENT DESIRED PATH: As defined in SECTION 9.3.
1.1.55 INCUMBENT EXCESS CAPACITY: As defined in SECTION 9.1.2.
1.1.56 INCUMBENT PROJECT FEE: The fee paid by Incumbent to PathNet
for project development and management, as defined in SECTION 4.3.
1.1.57 INCUMBENT REPRESENTATIVE: As defined in SECTION 18.12.
1.1.58 INITIAL SYSTEM: The initial system with a 1 x 1
configuration which is comprised of the first 84 DS-1's (which is
equivalent to 2,040 DS-0's) of the System and the System's 84 DS-1 protect
channels.
1.1.59 INITIAL PERIOD: As defined in SECTION 3.1.2.
1.1.60 INTERCONNECTION: The point at which a private network is
connected to (i) the PSTN, which can include IXC POPs, tandem access
points, the central office, internet service providers, or major industrial
customer points of presence or (ii) another private network.
1.1.61 INTERFERENCE: Any measurable impairment in the performance
of the System or the quality of the signals received or transmitted on the
System.
1.1.62 IXC: An inter-exchange carrier; a telephone company that
provides long-distance telephone service between LATA's but not within any
one LATA.
1.1.63 JUDGMENT: Any order, judgment, writ, decree, award or other
determination, decision or ruling of any court, judge, justice or
magistrate, any other Governmental Authority or any arbitrator.
1.1.64 LATA: Local Access and Transport Area; one of 161 local
geographic areas in the United States within which a local telephone
company may offer telecommunications services.
1.1.65 LEASED PREMISES: As defined in SECTION 5.1.
1.1.66 LEASED PREMISES ENCUMBRANCE: As defined in SECTION 5.10.
5
<PAGE>
1.1.67 LOSSES: Any and all losses, claims, fines, penalties,
causes of action, judgments, assessments, damages, liabilities, expenses
(including reasonable attorneys' and accountants' fees), assessments
sustained, suffered or incurred arising from any matter.
1.1.68 MAINTENANCE SERVICES AGREEMENT: The Maintenance Services
Agreement, by and between PathNet and Incumbent, as the same may be amended
from time to time in accordance with its terms.
1.1.69 MATERIAL ADVERSE EFFECT: Any event, fact, circumstance or
occurrence, which results or would result in a material adverse change in
or a material adverse effect on any of: (i) the condition (financial or
otherwise), business, performance, operations, properties, or prospects of
such Person; (ii) the legality, validity or enforceability of this
Agreement; or (iii) the ability of such Person to perform its material
obligations under this Agreement.
1.1.70 MODIFICATIONS SOW: As defined in SECTION 2.1 of SCHEDULE A.
1.1.71 NETWORK MONITORING CENTER: As defined in SECTION 7.5 of
SCHEDULE A.
1.1.72 NETWORK MANAGEMENT SYSTEM: As defined in SECTION 7.6 of
SCHEDULE A.
1.1.73 NON-BREACHING PARTY: As defined in SECTION 17.1.2.
1.1.74 OC-3 MULTIPLEXER: Any device that multiplexes capacity
between the OC-3 and the DS-1 levels.
1.1.75 ORDER WIRE: A service channel consisting of a 64,000 bit
per second circuit between sites.
1.1.76 OSHA: The Occupational Safety and Health Act, as amended.
1.1.77 OUTAGE: When the Bit Error Rate in each second is worse
than 10-3 for a period of ten (10) consecutive seconds.
1.1.78 PART 101: Part 101 of Title 47 of the Code of Federal
Regulations, as amended.
1.1.79 PARTY: As defined in the introductory paragraph.
1.1.80 PATH STUDIES: As defined in SECTION 1.1 of SCHEDULE A.
1.1.81 PATHNET: As defined in the introductory paragraph.
6
<PAGE>
1.1.82 PATHNET ESTIMATED COSTS: As defined in SECTION 4.4.2.
1.1.83 PATHNET EXCESS CAPACITY: At any given time, the
telecommunications channels or DS-0's that the System creates, transports
and receives, less the capacity allocated to Incumbent and to the protect
channels pursuant to the Channel Plan, as amended from time to time.
1.1.84 PATHNET ITEMS: As defined in SECTION 4.4.1.
1.1.85 PATHNET SOFTWARE: The software (including applications
software and systems software) owned or licensed from a third party by
PathNet or owned and developed by PathNet used to provide the services
covered in this Agreement.
1.1.86 PCN: A Prior Coordination Notice sent pursuant to Part 101.
1.1.87 PERMITS: Any and all authorizations, approvals, consents,
licenses, permits, easements, certificates and other rights and permissions
necessary to conduct such Person's business and to own, lease and operate
such Person's properties as currently conducted, owned, leased or operated.
1.1.88 PERSON: An individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock
company, or other entity of any kind or any Governmental Authority.
1.1.89 POP: Point Of Presence; The interconnection between any two
facilities based networks.
1.1.90 PROGRESS REPORT: As defined in SECTION 4.1.2 of SCHEDULE A.
1.1.91 PRE-COMMISSIONING TEST EQUIPMENT: All equipment required
for the testing required to be performed on the System pursuant to SECTION
5 of SCHEDULE A, including, but not limited to, all required digital volt
meters, optical power meters, oscilloscopes, RF signal generators, noise
figure meters, noise figure test sets, RF variable attenuators, DADE adjust
cables, receiver card extenders and extension cords.
1.1.92 PRELIMINARY CONSTRUCTION SCHEDULE: As defined in SECTION
1.1 of SCHEDULE A.
1.1.93 PROJECT DRAWINGS: As defined in SECTION 1.3 of SCHEDULE A.
1.1.94 PROJECT MANAGEMENT PLAN: As defined in SECTION 4.1.1 of
SCHEDULE A.
1.1.95 PROJECT SCHEDULE: As defined in SECTION 4.1.1 of
SCHEDULE A.
1.1.96 PROTECTION CONFIGURATION: An engineering plan under which
channel capacity is protected either on a fully redundant basis or on a 1 x
n protection basis.
7
<PAGE>
1.1.97 PSTN: Publicly Switched Telephone Network.
1.1.98 QUARTERLY REVENUE REPORT: As defined in SECTION 9.10.
1.1.99 RCRA: Resource Conservation and Recovery Act, 42 U.S.C.
Section 9601 ET SEQ., as amended.
1.1.100 REQUIREMENT OF LAW: With respect to any Person, all
Federal, state and local laws, rules, regulations, Judgments, injunctions,
standards, codes, limitations, restrictions, conditions, prohibitions,
notices, demands or other requirements or determinations of a court or
other Governmental Authority or an arbitrator, applicable to or binding
upon such Person, any of its property or any business conducted by it or to
which such Person, any of its assets or any business conducted by it is
subject.
1.1.101 REVENUE: As defined in SECTION 9.11.4.
1.1.102 SECOND EXTENSION PERIOD: As defined in SECTION 3.1.4.
1.1.103 SEGMENT: The portion of a microwave communications network
existing between two geographic points. For purposes of this Agreement,
Segment A is the portion of Incumbent's microwave communications network
between Casper, Wyoming and Minden, Nebraska, as set forth in SCHEDULE B.
Segment B is the portion of Incumbent's microwave communications network
between Lisco, Nebraska and Lakewood, Colorado. The additional Segments
added to the System pursuant to an AMENDED SCHEDULE B are identified as
Segment C, Segment D, and Segment E, etc.
1.1.104 SERVICES: As defined in SECTION 7.1.
1.1.105 SEVERELY ERRORED SECONDS: Any one second interval where the
Bit Error Rate is greater than or equal to 1 x 10-3 at a DS-1 rate
regardless of the cause of degradation affecting the channel error
performance including, but not limited to, unprotected equipment failures
and any other factors that contribute to poor performance.
1.1.106 SONET: Synchronous Optical Network; a family of fiber-optic
transmission rates from 51.84 Mbps to 13.22 Gbps, created to provide the
flexibility needed to transport many digital signals with different
capacities and to provide a standard to which manufacturers may design.
1.1.107 SPACE DIVERSITY: Protection of a radio signal by providing
a separate antenna on the same tower to assume the radio signal load when
the regular transmission path on the primary antenna fades, thereby
ensuring continuous transmission.
1.1.108 SPARE PARTS: The equipment and parts provided by PathNet to
Incumbent pursuant to the performance of Incumbent's obligations under the
Maintenance Services Agreement.
8
<PAGE>
1.1.109 SPECIFICATIONS: As defined in SECTION 7.2.
1.1.110 STATION LOG BOOK: As defined in SECTION 6.2 of SCHEDULE A.
1.1.111 SUBCONTRACTORS: Any firm, corporation, or person working
directly or indirectly for a company that furnishes or performs a portion
of the work, labor or material.
1.1.112 SWITCHED MOD SECTION: A section of network between two
adjacent back-to-back terminals.
1.1.113 SYSTEM: The high capacity digital SONET microwave radio
equipment, antenna, waveguide, Facilities, Network Management System, all
other equipment and materials related thereto, and FCC licenses and other
licenses and Permits related thereof, operated for the purpose of
transmitting, receiving and transporting telecommunications signals over
Incumbent's Segments set forth on SCHEDULE B.
1.1.114 SYSTEM BUDGET: As defined in SECTION 1.1 of SCHEDULE A.
1.1.115 SYSTEM DESIGN: As defined in SECTION 1.1 of SCHEDULE A.
1.1.116 TECHNOLOGY: Inventions, ideas, processes, formulas, and
know-how.
1.1.117 TOWER ANALYSIS: As defined in SECTION 1.1 of SCHEDULE A.
1.1.118 VENDOR CREDIT ASSURANCES: As defined in SECTION 4.4.4.
1.1.119 WAYSIDE CHANNELS: The additional DS-1 of telecommunications
capacity within each radio beyond the base OC-3 capacity.
1.2 TERMS GENERALLY. The definitions in SECTION 1.1 and elsewhere in this
Agreement shall apply equally to both the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "herein,"
"hereof," "hereto" and "hereunder" and words of similar import refer to this
Agreement (including the Schedules and Exhibits) in its entirety and not to any
part hereto unless the context shall otherwise require. All references herein
to Sections, Exhibits and Schedules shall be deemed references to Sections of,
and Exhibits and Schedules to, this Agreement unless the context shall otherwise
require. Unless otherwise expressly provided herein or unless the context shall
otherwise require, any references as of any time to the "Certificate of
Incorporation," "Articles of Incorporation," "charter," "organizational or
constituent documents" or "Bylaws" of any Entity, to any agreement (including
this Agreement) or other contract, instrument or document or to any agreement
statute or
9
<PAGE>
regulation are to it as amended and supplemented from time to time (and, in the
case of a statute or regulation to any corresponding provisions of successor
statutes or regulations). Any reference in this Agreement to a "day" or number
and "days" (without the explicit qualification of "Business") shall be
interpreted as a reference to a calendar day or number of calendar days. If any
action or notice is to be taken or given on or by a particular calendar day, and
such calendar day is not a Business Day, then such action or notice shall be
deferred until, or may be taken or given on, the next Business Day.
SECTION 2. RELATIONSHIP OF THE PARTIES.
2.1 LESSEE, CONTRACTOR, REPRESENTATIVE AND NETWORK MANAGER. Incumbent
shall appoint PathNet and PathNet shall serve in the following capacities during
the term of this Agreement:
(i) In the role of lessee, PathNet will lease space from Incumbent
at Incumbent's sites and Facilities on which to build and operate the
System. As consideration for such lease, PathNet will pay rent to
Incumbent as set forth in SECTION 5.
(ii) As an independent contractor, PathNet will perform analytical
pre-design and design services, and install, test and ensure the
performance of the System, as well as any upgrades to such System in
accordance with the terms and conditions set forth in SECTION 7 and in
SCHEDULE A.
(iii) As the exclusive representative for the marketing and sale of
Excess Capacity for Incumbent, PathNet will market and sell the Excess
Capacity created by System, as described in SECTION 9.
(iv) Also, as an independent contractor, in the role of a network
manager, PathNet will serve as the point of contact for any Outage or
trouble on the System and shall operate the Network Management System and
the Network Monitoring Center as described in SECTION 7.5 and SECTION 7.6
of SCHEDULE A.
2.2 NO JOINT VENTURE, ETC. The Parties expressly disclaim any intention
to create, and nothing herein shall be construed as creating, a partnership,
joint venture, agency or employment relationship between PathNet and Incumbent.
2.3 RESTRICTIONS ON ACTIONS OF INCUMBENT. For the term of this Agreement,
neither Incumbent, nor any Affiliate of Incumbent, shall operate from the
Facilities any parallel microwave telecommunications systems at those sites
listed in SCHEDULE B for the purpose of selling or otherwise providing any
capacity on such parallel facilities or systems.
2.4 RIGHT TO NOTIFICATION AND BID. If and to the extent Incumbent
requests proposals from third parties to develop fiber along Incumbent
right-of-ways, Incumbent shall provide PathNet notice of such fiber build and
grant to PathNet a right to bid on such fiber build on like terms.
10
<PAGE>
SECTION 3. TERM AND EXPIRATION.
3.1 TERM, EXTENSION PERIODS, AND RENEWAL.
3.1.1 TERM. This Agreement shall commence on the Effective Date
and shall be in full force and effect for the term as set forth in this
SECTION 3.
3.1.2 INITIAL PERIOD. The initial period (the "INITIAL PERIOD")
shall commence upon Commissioning and shall expire on the fifth (5th)
anniversary of the Commissioning.
3.1.3 FIRST EXTENSION PERIOD. In the event the Average Sold
Excess Capacity is at least ten percent (10%) or greater during the Initial
Period, the term of the Agreement shall be automatically extended for an
extension period (the "FIRST EXTENSION PERIOD") commencing on the day after
the expiration of the Initial Period and expiring on the tenth (10th)
anniversary thereafter.
3.1.4 SECOND EXTENSION PERIOD. In the event the Average Sold
Excess Capacity is at least ten percent (10%) or greater during the Initial
Period and the First Extension Period, the term of the Agreement shall be
automatically extended for a second extension period (the "SECOND EXTENSION
PERIOD") commencing on the day after the expiration of the First Extension
Period and expiring on the tenth (10th) anniversary thereafter.
3.1.5 RENEWAL. Upon expiration of the Initial Period or any
Extension Period thereof, this Agreement shall be automatically renewed for
a one-year term, and at the end of such one-year term for additional
one-year terms for each year thereafter, unless terminated by either Party
upon written notice to the other Party to that effect delivered within the
ninety (90) day period immediately before the end of the Second Extension
Period or any such one-year term.
3.2 NO UNILATERAL RIGHT TO TERMINATE. Neither Party shall have the right
to terminate this Agreement or any rights or obligations of either Party
pursuant to this Agreement.
SECTION 4. COSTS.
4.1 INCUMBENT COSTS.
4.1.1 INCUMBENT ITEMS. Incumbent shall pay for the services,
functions, materials and other items listed in SECTION 1 of SCHEDULE C
(collectively, the "INCUMBENT ITEMS") in the manner set forth in SECTION
4.1.5.
4.1.2 ESTIMATED COST OF INCUMBENT ITEMS. Subject to SECTION
4.1.3, , the total estimated cost of the Incumbent Items is [***] (the
11
<PAGE>
"INCUMBENT ESTIMATED COSTS") and Incumbent Project Fee is [***]
(the "Incumbent Project Fee"). Subject to the
Incumbent Payment Cap, the costs of such Incumbent Items and
such Incumbent Estimated Costs are estimates and may be subject
to increases or decreases.
4.1.3 INCUMBENT PAYMENT CAP. Subject to SECTION 4.6.2, Incumbent
shall pay an amount not to exceed [***] (the
"INCUMBENT PAYMENT CAP") for the performance and completion of the
Incumbent Items. The cost of Incumbent Items shall be accrued in
accordance with generally accepted accounting principles. PathNet shall
pay for all amounts incurred over the Incumbent Payment Cap in the
completion and performance of the Incumbent Items. As soon as Incumbent
is aware that Incumbent will pay an amount in excess of the Incumbent
Payment Cap, Incumbent shall notify PathNet to that effect.
4.1.4 DIVISION OF COSTS SAVINGS. In the event the costs of
completion of the Incumbent Items is less than the Incumbent Estimated
Costs, PathNet shall deliver to Incumbent an invoice setting forth the
differential between the total costs to complete and perform the Incumbent
Items and the Incumbent Estimated Costs. Within thirty (30) days of
receipt of such invoice from PathNet, Incumbent shall pay or disburse to
PathNet thirty percent (30%) of such differential.
4.1.5 PAYMENT OF INCUMBENT ITEMS.
(a) Incumbent shall promptly pay for the Incumbent Items upon receipt
of a purchase order, invoice or other bill from PathNet or from an
equipment vendor or service provider (pursuant to any PathNet requested
retention of payment of any invoice), provided PathNet has approved such
purchase order, invoice or bill before any payment is made by Incumbent.
(b) Pursuant to the Escrow Agreement by and between PathNet and
Incumbent substantially in the form attached hereto as SCHEDULE D (the
"Escrow Agreement") and on the Effective Date, Incumbent shall deposit in
an escrow account an amount equal to ten percent (10%) of the Incumbent
Estimated Costs which escrowed funds shall be either (i) provided to
PathNet upon Incumbent's failure to pay any purchase order, invoice or bill
under Section 4.1.5(a) or (ii) returned to Incumbent upon Commissioning of
the Initial System, whichever event occurs earlier.
4.2 INCUMBENT OPERATING AND ADMINISTRATION COSTS. Incumbent shall pay the
operating and administration costs set forth in SECTION 2 of SCHEDULE C as such
costs are actually incurred and become due and payable in the course of the
Incumbent's performance of its obligations under this Agreement.
4.3 INCUMBENT PROJECT FEE. Incumbent shall pay PathNet
[***] defined as the Project Fee. Such Project Fee shall be paid as
follows: [***] to be paid within thirty days of the Effective Date and
[***] to be paid no later than March 1, 1998.
12
<PAGE>
4.4 PATHNET COSTS.
4.4.1 PATHNET ITEMS. PathNet shall pay for services, functions,
materials and other items listed in SECTION 3 of SCHEDULE C (the "PATHNET
ITEMS").
4.4.2 ESTIMATED COST OF PATHNET ITEMS. On the Effective Date,
the total estimated cost of the PathNet Items is [***] (the "PATHNET
ESTIMATED COSTS").
4.4.3 NO CAP ON PATHNET ITEMS. PathNet shall pay for all amounts
incurred in completing the PathNet Items whether or not the cost of
completing such items is less than, equal to or exceeds the PathNet
Estimated Costs.
4.4.4 PAYMENT OF PATHNET ITEMS. To ensure payment of the PathNet
Estimated Costs, simultaneously with the execution and delivery of this
Agreement PathNet shall:
(a) deliver to Incumbent vendor credit assurances (the "VENDOR CREDIT
ASSURANCES"), which shall establish and confirm, among other things, that
PathNet has an adequate credit facility to acquire the Equipment and
Services provided by such vendor; or
(b) deliver to Incumbent the Escrow Agreement pursuant to which,
among other things, (i) PathNet shall place in escrow funds in an amount
equal to one hundred percent (100%) of the PathNet Estimated Costs less the
cost of any equipment provided by the vendors referred to in the Vendor
Credit Assurances (fifty percent (50%) of such costs to be delivered
within sixty (60) days of delivery by PathNet of the System Design and
fifty percent (50%) to be delivered within one hundred and twenty (120)
days of delivery of the first escrow payment), (ii) the escrow agent named
in such Escrow Agreement shall disburse to PathNet the funds necessary to
pay for the cost of the PathNet Items as such PathNet Items are completed
and as PathNet receives invoices relating to such PathNet Items, (iii) in
the event that PathNet fails to timely meet its payment responsibilities
with respect to the PathNet Items or fails to complete the System in
accordance with SECTION 13.2.1 (ix), the escrow agent named in such Escrow
Agreement shall disburse to Incumbent the funds necessary to cure such
failure to pay by PathNet and/or complete the work (iv) such Escrow
Agreement shall terminate upon Commissioning of the System and upon such
termination any funds remaining in escrow, including any interest accrued
on such funds shall be disbursed to PathNet.
4.5 PATHNET OPERATING AND ADMINISTRATION COSTS. PathNet shall pay for the
operating and administration costs set forth in SECTION 4 of SCHEDULE C as such
costs are actually incurred and become due and payable in the course of
PathNet's performance of its obligations under this Agreement.
13
<PAGE>
4.6 CHANGE ORDERS.
4.6.1 GENERAL. This Agreement anticipates (i) future issuance of
change orders for equipment and services beyond the scope of the Services
and this SECTION 4, and (ii) PathNet's provision of additional equipment
and services in accordance with such orders. To the extent mutually agreed
upon by the Parties, all such orders shall be deemed to be supplements to
and governed by the terms of this Agreement; provided PathNet and
Incumbent's Estimated Costs may be modified to reflect any agreed upon
change orders.
4.6.2 FACILITY CHANGE ORDERS. PathNet and Incumbent acknowledge
that certain Facilities may require alternate site locations in order to
frequency coordinate the System to a 1X7 configuration. If and to the
extent any Facility requires an alternative site, such alternative site
shall (i) be an amendment to Schedule B and Schedule C and (ii) the costs
associated with acquiring the land and the costs of placing a new
foundation on such land shall not apply to the Incumbent Payment Cap.
SECTION 5. LEASEHOLD INTEREST.
5.1 LEASE. Incumbent shall lease to PathNet and PathNet shall lease from
Incumbent space at each of Incumbent's sites and in the Facilities at such sites
set forth on SCHEDULE B as is necessary for the performance of PathNet's rights
and obligations under this Agreement (the "LEASED PREMISES").
5.2 RENT FOR LEASED PREMISES. PathNet shall pay to Incumbent, as
consideration for the Leased Premises, (i) commencing on Commissioning,
an allocation of up to [***] as set forth by the Parties in the Channel
Plan; PROVIDED, that Incumbent and Incumbent's Affiliates use such
allocation of DS-1's only for their own respective internal
communications needs, (ii) commencing on the [***] month after
Commissioning of the Initial System [***] and (iii) commencing
on the [***] month after Commissioning of a Capacity
Expansion, if any, [***]
5.3 TERM OF LEASE. The term of PathNet's lease and the Parties
obligations under this SECTION 5, including, but not limited to, PathNet's
obligation to pay rent as set forth in SECTION 5.2, shall commence on the
Effective Date and shall end on the Expiration Date.
14
<PAGE>
5.4 USE OF LEASED PREMISES.
5.4.1 PEACEFUL ENJOYMENT, USE AND ACCESS. Incumbent shall grant
to PathNet the right to the peaceful use, enjoyment and possession of the
Leased Premises during the term of this Agreement as required for the
performance of PathNet's rights and obligations under this Agreement, which
rights shall include, but not be limited to (i) the right to use
Incumbent's Facilities for the purposes set forth in this Agreement and
(ii) upon the reasonable request by PathNet, the right to full and free
access to Incumbent's sites, Facilities and related equipment; PROVIDED,
HOWEVER, any such access granted by Incumbent to PathNet shall be subject
to the security, health and safety and other regulatory, procedural and
policy requirements of Incumbent, as set forth in SECTION 5.6 and further
provided that PathNet shall have the right to access the sites to
supplement Incumbent's performance under the Maintenance Services
Agreement.
5.4.2 INTERFERENCE. During the term of this Agreement, Incumbent
shall not license or otherwise permit any Person to use its Facilities if
the use of such Facilities by such Person would cause any Interference on
the System. As of the Effective Date, Incumbent shall not knowingly permit
any Person to use its Facilities which use would in any way cause any
Interference on the System. Notwithstanding the foregoing in the event any
Person causes any Interference on the System, Incumbent shall use all best
efforts to compel such Person to immediately take any and all steps
necessary to correct and eliminate such Interference, including, without
limitation, enforcing provisions in any license or other agreement between
Incumbent and such Person and compelling such Person to cease operation of
such Person's system, to remove such Person's equipment or materials or to
modify such Person's equipment or materials. Incumbent acknowledges that
any Interference shall cause irreparable harm to PathNet and the prompt
cessation of Interference is material to PathNet's interest in the Leased
Premises and PathNet's performance under this Agreement and, as such,
PathNet shall be entitled to injunctive relief in the enforcement of this
SECTION 5.4.2.
5.5 VISITING AND EXITING FACILITIES. Upon exiting any Facility at the
Leased Premises, PathNet, on behalf of itself and its employees, agents and
Subcontractors, shall ensure that such Facility is returned to a condition,
which existed immediately prior to such visit.
5.6 SECURITY, DRUG TESTING, SUBSTANCE ABUSE AND HEALTH AND SAFETY.
5.6.1 SECURITY. PathNet shall require its employees, agents and
Subcontractors upon any site visit to comply with Incumbent's security
procedures in effect as of the Effective Date, which procedures are
attached hereto as SCHEDULE E. If and to the extent Incumbent requires
PathNet employees, agents or Subcontractors to be escorted to Incumbent
facilities, such requirements shall be explicitly set forth in SCHEDULE E.
Notwithstanding the foregoing, Incumbent shall allow PathNet employees,
agents or Subcontractors to bring any testing equipment, photographic
equipment or both video and audio recording equipment necessary for the
performance of PathNet's obligations under this Agreement.
15
<PAGE>
5.6.2 DRUG TESTING. PathNet shall require its employees, agents
and Subcontractors to submit to drug testing in accordance with Incumbent's
drug testing policies and procedures in effect as of the Effective Date,
which policies and procedures are attached hereto as SCHEDULE F.
5.6.3 SUBSTANCE ABUSE POLICY. PathNet shall require its
employees, agents or Subcontractors to comply with Incumbent's substance
abuse policies and procedures in effect as of the Effective Date, which
policies and procedures are attached hereto as SCHEDULE F.
5.6.4 HEALTH AND SAFETY. PathNet shall require its employees,
agents and Subcontractors to comply with Incumbent's rules and regulations
governing the health and safety of its employees in effect on the Effective
Date, which rules and regulations are attached hereto as SCHEDULE H.
5.6.5 CLEARANCES AND OTHER REQUIREMENTS. PathNet shall require
its employees, agents or Subcontractors to (i) apply to Incumbent for any
necessary clearances and (ii) comply with all other applicable
requirements, rules, regulations or ordinances regarding any Person's
ability to have access to Incumbent's sites and Facilities, including, but
not limited to, the Leased Premises, which requirements are set forth as
SCHEDULE I.
5.6.6 INCUMBENT RIGHT TO RESTRICT ACCESS. Notwithstanding
PathNet's right to visit the Facilities in connection with performance of
its duties under this Agreement, in the event the requirements, rules or
regulations pertaining to facility visitation set forth on SCHEDULE E,
SCHEDULE F, SCHEDULE G, SCHEDULE H and SCHEDULE I have been violated or
when the exercise of such right would pose a bona fide serious risk of
bodily harm or injury to any Person as determined by the Parties, Incumbent
reserves the right to reasonably restrict or deny PathNet or its
Subcontractors access to the sites. In the event in Incumbent's reasonable
judgment any Subcontractor should be denied access from Incumbent's
premises, Incumbent shall have the right to remove such person and deny
such person access to Incumbent's Facilities.
5.7 SUBLETTING. PathNet shall not sublet its interest in the Leased
Premises, in whole or in part, without the prior written consent of Incumbent;
PROVIDED, HOWEVER, PathNet shall have the right to transfer and assign its
rights or obligations under this Agreement to any successor or assign in
accordance with SECTION 18.7.
5.8 SURRENDER. Upon the expiration of the Agreement in accordance with
SECTION 3, PathNet shall peacefully and quietly surrender occupation of the
Leased Premises to Incumbent, or Incumbent's successors and assigns, without
delivery by Incumbent to PathNet of any notice to quit or demand for possession.
5.9 COLOCATION. Incumbent shall allow PathNet, at no additional charge,
to collocate at Incumbent's sites all equipment necessary to support the
Interconnections set forth on EXHIBIT A-7 to SCHEDULE A and, upon written
notice, any additional interconnections equipment that may
16
<PAGE>
be added by PathNet from time to time and at any time during the term of this
Agreement, subject to the limitations set forth in SECTION 3 of SCHEDULE A.
5.10 SUBORDINATION. PathNet shall subordinate its interest in the Leased
Premises to (i) all deeds of trust, deeds to secure debts, mortgages and other
security instruments now or hereafter Encumbering all or any portion of the real
property described on SCHEDULE B (each, a "LEASED PREMISES ENCUMBRANCE") and
(ii) any increases, renewals, modifications, consolidations, replacements and
extensions of any such Leased Premises Encumbrance. In connection with such
subordination of PathNet's interest in the Leased Premises to all Leased
Premises Encumbrances, PathNet shall, as requested by Incumbent, within sixty
(60) days after the Effective Date, execute and deliver a commercially
reasonable subordination, non-disturbance and attornment agreement with all
Persons secured by such Leased Premises Encumbrances. PathNet shall, as
requested by Incumbent, execute and deliver similar subordination,
non-disturbance and attornment agreements with each future Person secured by a
Leased Premises Encumbrance.
5.11 REMOVAL OF EQUIPMENT. PathNet shall, at Incumbent's request, remove
any or all Equipment from Incumbent's Facilities within sixty (60) days after
the Expiration Date. In the event PathNet fails to perform such requested
removal within such sixty (60) day period, as determined by Incumbent in its
sole discretion, Incumbent may restore each site to its condition as of
Commissioning, (reasonable wear and tear and damage from the elements excepted),
and PathNet shall promptly pay Incumbent all costs reasonably incurred by
Incumbent for such removal and restoration.
5.12 REMOVAL OF HAZARDOUS MATERIALS. PathNet shall expeditiously remove
from Incumbent's sites any and all Hazardous Materials, which were brought to
Incumbent's sites by PathNet during the term of this Agreement and shall be
legally responsible for the safe disposal of any hazardous materials.
5.13 SALE OF INITIAL SYSTEM. Within ten (10) days after the expiration of
the Second Extension Period, if any, PathNet shall, upon request by Incumbent,
sell to Incumbent the radios and radio software relating to the Initial System
for a purchase price of one dollar ($1.00).
SECTION 6. PROGRAM MANAGEMENT AND PROJECT MANAGEMENT.
6.1 PROGRAM MANAGER. In connection with the Services and other services
performed by PathNet under this Agreement, PathNet shall provide a Program
Manager whose duties shall include (i) supervising the project through design,
installation and operation, (ii) supervising the Project Manager, (iii)
overseeing the Field Manager and the other PathNet personnel, (iv) coordinating
the business operations of the System including the sale of Excess Capacity as
set forth in SECTION 9 and (v) ensuring the performance of PathNet's rights and
obligations under this Agreement.
6.2 PROJECT MANAGEMENT FOR MODIFICATIONS. In connection with the
modifications of the Facilities set forth in SECTION 2 of SCHEDULE A, PathNet
shall provide a Project Manager, a
17
<PAGE>
Field Manager, an Applications Engineer and a Project Engineer, each of whom
shall have the duties as set forth in SECTION 6.4 with respect to such
modifications of the Facilities.
6.3 PROJECT MANAGEMENT FOR INSTALLATION. In connection with the
installation of the System set forth in SECTION 4 of SCHEDULE A, PathNet shall
provide a Project Manager, a Field Manager, an Applications Engineer and a
Project Engineer, each of whom shall have the duties as set forth in SECTION 6.4
with respect to such installation of the System.
6.4 PATHNET PROJECT MANAGEMENT PERSONNEL. The Project Managers, Field
Managers, Applications Engineers and Project Engineers shall each have the
duties as set forth below:
(a) PROJECT MANAGER. PathNet shall provide a Project Manager whose
duties shall include ensuring the overall functional integrity of the
delivered System, the preparation, amendment and adherence to a
construction schedule, and compliance with PathNet's other obligations
under SCHEDULE A.
(b) FIELD MANAGER. PathNet shall provide a Field Manager whose
duties shall include the oversight and direction of all on-site activities,
the coordination of all Subcontractors and all required communication with
the Project Manager.
(c) APPLICATIONS ENGINEER. PathNet shall provide an Applications
Engineer, whose duties shall include the review and translation of the
System configuration into specific hardware requirements, precise interface
levels, intra and inter-rack cabling and all other necessary peripheral
equipment, rack profiles and required Interconnection data.
(d) PROJECT ENGINEER. PathNet shall provide a Project Engineer whose
duties shall include the performance of all planning and support activities
and a detailed site survey to gather data for development of the
installation plan and testing plan.
SECTION 7. SERVICES AND SYSTEMS SPECIFICATIONS.
7.1 SERVICES.
7.1.1 SYSTEM DESIGN, MODIFICATION, INSTALLATION, OPERATION AND
PERFORMANCE. PathNet and Incumbent shall perform their respective
functions with respect to the design, modification, installation, operation
and performance of the System as set forth on SCHEDULE A and in this
SECTION 7 (the "SERVICES").
7.1.2 UPGRADE OF SYSTEM. PathNet shall, upon written notice to
Incumbent, in its sole discretion, and at its own expense, and not as a
change order, upgrade the System and Equipment, and the System and
Equipment operation policies and procedures, including, but not limited to,
(i) replacing Equipment, (ii) adding newly available improved Equipment and
(iii) modifying policies, procedures and specifications relating to the
System, to conform such policies, procedures and specifications with new
Technology or industry standards.
18
<PAGE>
7.1.3 INCUMBENT TRAINING. PathNet shall provide to Incumbent the
training as set forth on SCHEDULE J.
7.1.4 PERFORMANCE OF THE SERVICES. PathNet shall have the right
to engage Subcontractors to perform any of the Services.
7.2 SPECIFICATIONS.
7.2.1 GENERAL. PathNet and Incumbent shall perform the Services
in accordance with any and all technical and operational specifications set
forth in SCHEDULE A (the "SPECIFICATIONS").
7.2.2 CHANNEL PLAN.
(a) ORIGINAL CHANNEL PLAN. On the Effective Date, Incumbent shall
deliver to PathNet a proposed T-1 channelization plan setting forth its
proposed capacity needs at each site listed on SCHEDULE B. Such capacity
shall in no event exceed the capacity granted to Incumbent by PathNet as
rent as set forth in SECTION 5.2 and shall be subject to Drop and Insert
capacity at each Switched Mod Section. PathNet shall incorporate
Incumbent's proposed channelization plan into the Channel Plan subject to
the limitations set forth in this SECTION 7.2.2.
(b) AMENDED CHANNEL PLAN. Incumbent shall have the right to modify,
its allocated capacity (as described in the Channel Plan) along the network
any time after Commissioning, provided that sufficient Drop and Insert
capacity exists between each Switched Mod Section using available Wayside
Channels to effect such modification, by providing written notice to
PathNet to such effect. Within ninety (90) days after receipt of any such
written notice from Incumbent, PathNet shall make such modification to the
configuration of the Channel Plan at no charge to Incumbent. Incumbent
shall not reconfigure the Channel Plan in any manner other than as set
forth in this SECTION 7.2.2. Any amended channel plans shall be attached
as an exhibit to this Agreement.
7.2.3 SPECIFICATIONS, STANDARDS AND INSPECTIONS. In connection
with the Services set forth in SECTION 2 and SECTION 4 of SCHEDULE A,
PathNet shall comply with the following requirements:
(a) REASONABLE EFFORTS. PathNet shall use all commercially
reasonable efforts to ensure that the modification of the System set forth
in SECTION 2 of SCHEDULE A and the installation of the System set forth in
SECTION 4 of SCHEDULE A occur as expeditiously as possible.
(b) INDUSTRY STANDARDS. All Services and materials supplied pursuant
to SCHEDULE A must meet or exceed the following standards: (i) EIA RS-195
(latest edition), (ii) EIA/TIA-222 (latest edition), (iii) American Society
of Testing Materials A 325 and A 572, (iv) the applicable sections of the
National Electric Code, (v) the
19
<PAGE>
American National Standards Institute, (vi) ACI 318-83, (vii) ACI-305,
(viii) ACI-306, (ix) OSHA 29 CFR 1910 and (x) all other applicable Federal,
state and local regulations of all Governmental Authorities with
jurisdiction; PROVIDED, HOWEVER, in the case of a conflicting requirement
of standards, the more stringent standard shall apply.
(c) SITE INSPECTIONS. During the performance of the Services,
Incumbent shall allow PathNet to perform Facilities inspections at any
hour, on any day subject to the access limitations set forth in SECTION
5.6.
SECTION 8. OWNERSHIP, DEPRECIATION AND ENCUMBRANCE OF SYSTEM.
8.1 OWNERSHIP OF EQUIPMENT AND ASSETS.
8.1.1 EQUIPMENT AND ASSETS OWNED BY INCUMBENT. Incumbent shall
own the equipment and assets relating to the System as set forth in
SCHEDULE K.
8.1.2 EQUIPMENT AND ASSETS OWNED BY PATHNET. PathNet shall own
the equipment and assets relating to the System as set forth in SCHEDULE K.
8.2 DEPRECIATION OF EQUIPMENT.
8.2.1 DEPRECIATION BY INCUMBENT. Incumbent shall have the right
to fully depreciate the equipment and assets currently owned or to be owned
by Incumbent as listed in SCHEDULE K.
8.2.2 DEPRECIATION BY PATHNET. PathNet shall have the right to
fully depreciate the equipment and assets currently owned or to be owned by
PathNet as listed in SCHEDULE K.
8.3 ENCUMBRANCE.
8.3.1 INITIAL SYSTEM. PathNet shall not Encumber the channels of
telecommunications capacity allocated to the Incumbent as rent in
accordance with SECTION 5.2 of this Agreement produced by such Equipment
and, the radios, radio software, antenna, waveguide, multiplexers or any
other Equipment required to operate the Initial System in accordance with
the Specifications.
8.3.2 OTHER EQUIPMENT, MATERIALS, AGREEMENTS AND ASSETS. PathNet
shall have the right to Encumber (i) the Equipment used in any Capacity
Expansion, (ii) PathNet's allocated portion of the Revenue generated from
the sale of Excess Capacity in accordance with SECTION 9, (iii) any
Customer Agreement relating to the System, (iv) this Agreement and any
related documents, instruments and agreements executed and delivered in
connection with this Agreement and any rights and obligations hereunder or
thereunder and (v) its leasehold interest in the leased space.
20
<PAGE>
8.3.3 VENDOR REMEDIES. Incumbent hereby acknowledges that
pursuant to the Encumbrances granted by PathNet to certain equipment
vendors or service providers in accordance with SECTION 8.3.2, such vendors
or providers shall have the right to assume and perform PathNet's rights
and obligations under this Agreement and the other documents, instruments
and agreements executed in connection hereto; provided that in no event
shall PathNet be relieved of its obligations under this Agreement
8.4 TAXES. The Parties' respective responsibilities for taxes arising
under or in connection with this Agreement shall be as follows: (i) each Party
shall be responsible for any personal or real property taxes on property it owns
or leases, for franchise and privilege taxes on its business and for taxes based
on its net income or gross revenue and (ii) PathNet shall be responsible for any
sales, use, excise, value-added services, consumption and other taxes and duties
payable by Incumbent on any goods and services used or consumed in providing the
services to be performed by PathNet under this Agreement, where the tax is
imposed on Incumbent's acquisition or use of such goods or services and the
amount of the tax is measured by Incumbent's costs in acquiring such goods or
services; PROVIDED, HOWEVER, that PathNet shall not be responsible for any
Federal, state or local income taxes of Incumbent or any franchise taxes of
Incumbent.
8.5 SECURITY INTEREST IN INITIAL SYSTEM. On the Effective Date and in
consideration for the Project Fee, Incumbent shall execute and deliver the
Security Agreement substantially in the form attached hereto as Schedule R,
pursuant to which, among other things, PathNet shall grant Incumbent a security
interest in the radio, radio software, antenna, waveguide, multiplexors and any
other Equipment required to operate the Initial System.
8.6 ESCROW OF MANUFACTURER'S WARRANTIES.
8.6.1 ESCROW OF ASSIGNMENT DOCUMENTS BY PATHNET. On the Effective
Date, PathNet shall complete, execute and place in escrow certain documents
(the "ASSIGNMENT DOCUMENTS") that shall provide Incumbent with the required
tools to unilaterally effect the assignment to Incumbent of all of the then
effective manufacturer's warranties relating to the Equipment on the
Initial System.
8.6.2 REMOVAL OF ASSIGNMENT DOCUMENTS BY INCUMBENT. Pursuant to
the escrow arrangement described in SECTION 8.6.1 above, Incumbent shall
have the right to remove the Assignment Documents from escrow upon the
first to occur of the following events: (i) in the event PathNet becomes
insolvent, is unable to pay its debts as they mature, makes assignment for
the benefit of its creditors and/or in the event any case or proceeding is
commenced by or against PathNet under Title 11 of the Unites States Code,
as amended, or under any other state or federal statute for the relief of
debtors, (ii) the Expiration Date or (iii) PathNet defaulting under its
financing arrangement with its vendor and receipt by Incumbent of written
notice from vendor stating its intention to waive its right to operate the
System for the purpose of generating Revenue from the sale of Excess
Capacity.
8.7 FCC LICENSES. PathNet shall relinquish the right to own and transfer
the FCC licenses required to operate the Initial System in the event of (i) the
liquidation or dissolution of
21
<PAGE>
PathNet under Chapter 7 of the Federal bankruptcy laws, (ii) the Expiration Date
or (iii) PathNet defaulting under its financing arrangement with its vendor and
receipt by Incumbent of written notice from vendor stating its intention to
waive its right to operate the System for the purpose of generating Revenue from
the sale of Excess Capacity.
SECTION 9. EXCESS CAPACITY MARKETING AND SALES.
9.1 EXCLUSIVE REPRESENTATIVE.
9.1.1 PATHNET EXCESS CAPACITY. PathNet shall have the exclusive
right to market and sell any and all PathNet Excess Capacity.
9.1.2 INCUMBENT EXCESS CAPACITY. At any time and from time to
time, Incumbent shall have the right to request in writing that PathNet
serve as Incumbent's exclusive representative for the marketing and sale of
all or any portion of the capacity allocated to Incumbent in accordance
with the Channel Plan (the "INCUMBENT EXCESS CAPACITY"). Such written
notice shall set forth, (i) that portion of the Incumbent Excess Capacity
to be marketed and sold by PathNet, (ii) the length of time that such
portion of the Incumbent Excess Capacity will be available to be marketed
and sold, and (iii) that Incumbent acknowledges that such Incumbent Excess
Capacity shall not be available for Incumbent's use during the time
specified in such written notice. Upon receipt of such written notice
PathNet shall serve as Incumbent's exclusive representative for the
marketing and sale of such Incumbent Excess Capacity; PROVIDED, HOWEVER,
that PathNet shall have the right, as determined by PathNet in its sole
discretion, to sell the PathNet Excess Capacity on any path or Segment
before selling the Incumbent Excess Capacity on such path or Segment.
9.1.3 MARKETING FEE FOR SALE OF INCUMBENT EXCESS CAPACITY. In the
event PathNet sells any Incumbent Excess Capacity, PathNet shall receive
a marketing fee in the amount [***] of the Revenue from the sale of such
Incumbent Excess Capacity (Incumbent shall receive the remaining [***]
of such Revenue).
9.1.4 MARKETING AND SALE BY INCUMBENT. Incumbent or any
Affiliates of Incumbent shall not market or sell any Incumbent Excess
Capacity or any capacity purchased by Incumbent pursuant to SECTION 9.3 to
any third party without the prior written consent of PathNet; PROVIDED,
HOWEVER, Incumbent may market and sell all or any portion of the Incumbent
Excess Capacity or any capacity purchased by Incumbent pursuant to SECTION
9.3, to Affiliates of Incumbent for and only for such Affiliates' internal
communications needs and not for resale to third parties. Notwithstanding
anything set forth herein to the contrary, Incumbent shall have the right
to provide, market or sell any Incumbent Excess Capacity to KN Field
Services, Inc. which may provide, market, sell or lease circuits to its
customers for the limited purpose of monitoring data from oil and/or gas
wells.
22
<PAGE>
9.2 REFERRALS.
9.2.1 REFERRALS OF CUSTOMERS BY INCUMBENT. Incumbent shall refer
any potential third party customer of Excess Capacity to PathNet.
9.2.2 REFERRAL FEES. If Incumbent is successful in locating a new
customer for the PathNet Excess Capacity created at Incumbent's Facilities,
provided that such customer is not an IXC, PathNet shall pay Incumbent a
[***] actually received from the sale of capacity to such customer
during the initial five (5) years of continuous sales to such customer
payable on a quarterly basis, with all other payments to Incumbent that
may be due and payable, as provided by SECTION 9.11.
9.3 PURCHASE OF AVAILABLE EXCESS CAPACITY BY INCUMBENT. Incumbent shall
have the right to purchase Available Excess Capacity on any path or Segment of
the System (each such path or Segment being referred to herein as an "INCUMBENT
DESIRED PATH"), at a price equal to either (i) the lowest price paid to PathNet
for like capacity and for a similar term by any purchaser during the one hundred
eighty (180) days immediately preceding the purchase by Incumbent of capacity on
such Incumbent Desired Path or (ii) if no PathNet Excess Capacity has been
purchased on such Incumbent Desired Path during such one hundred eighty (180)
day period, the last price paid for such Incumbent Desired Path; PROVIDED,
HOWEVER, Incumbent shall in no event under clause (i) or clause (ii) above
purchase more than twenty percent (20%) of the Available Excess Capacity on any
Segment or path within the System at any given time.
9.4 COMMERCIALLY REASONABLE EFFORTS. PathNet shall use all commercially
reasonable efforts to obtain the best available price and terms in the marketing
and sale of any Excess Capacity. PathNet shall not, now or in the future,
guarantee any Revenue disbursements nor does PathNet warrant as to its ability
to sell the Excess Capacity.
9.5 SELLING PRICES FOR EXCESS CAPACITY. Notwithstanding anything set
forth herein to the contrary, PathNet shall have the right to (i) sell Excess
Capacity at prices determined by PathNet to be appropriate on specific routes,
which prices may be below or above current competitive market pricing, (ii)
package the Excess Capacity in sales increments of DS-1's, DS-3's or OC-3's, or
any other increments and (iii) aggregate the paths sold in various combinations,
each as determined by PathNet in its sole discretion.
9.6 BARTER ARRANGEMENTS. Incumbent shall be permitted to barter Incumbent
Excess Capacity for telecommunications capacity of other incumbents engaged by
PathNet; PROVIDED, HOWEVER, PathNet shall have the right to approve any barter
arrangement relating to Incumbent Excess Capacity, which approval shall not be
unreasonably withheld. Neither PathNet nor Incumbent shall derive any fee from
facilitating any such barter arrangements.
9.7 ASSUMED NAME; TRADENAMES AND TRADEMARKS. PathNet shall have the right
to market Excess Capacity under its name or any other assumed name, tradename or
trademark which PathNet is authorized to use for such purpose; PROVIDED,
HOWEVER, PathNet shall not use
23
<PAGE>
any trademark or tradename of Incumbent or any Affiliate of Incumbent in written
material for purposes of marketing any Excess Capacity without the prior written
consent of Incumbent.
9.8 CUSTOMER AGREEMENTS.
9.8.1 AUTHORIZATION. PathNet shall negotiate, execute and deliver
all agreements and arrangements ("CUSTOMER AGREEMENTS") for customers of
Excess Capacity, which Customer Agreements shall contain, terms and
conditions determined by PathNet in its sole discretion.
9.8.2 APPROVAL AND CONSENT BY INCUMBENT. If the terms of any
Customer Agreement require the written approval or consent of Incumbent as
a condition to the execution, delivery or performance, Incumbent shall
promptly provide such written approval or consent.
9.8.3 MODIFICATIONS TO SYSTEM. In the event that any Customer
Agreement requires that the System be modified in any way, PathNet shall
ensure that any such modifications (i) shall not compromise the integrity
and performance of the System in accordance with the Specifications and
(ii) shall be made at no additional cost to Incumbent.
9.9 MAINTENANCE OF BOOKS AND RECORDS AND AUDIT PROCEDURES.
9.9.1 BOOKS AND RECORDS. PathNet shall maintain and keep detailed
and accurate books and records with regard to sales of Excess Capacity and
the Revenue from such sales.
9.9.2 INCUMBENT REVIEW AND AUDIT PROCEDURES. No more than once
during any consecutive twelve (12) month period, Incumbent shall be
entitled to review and audit PathNet's books and records relating to the
sale of Excess Capacity during business hours upon ten (10) days written
notice to PathNet. Incumbent shall not have the right pursuant to this
SECTION 9.9.2, to review or audit PathNet's corporate income statements,
balance sheets or other forms of general corporate reporting. Incumbent
shall not disclose, at any time before or after the Expiration Date, any
information related to PathNet or PathNet's business obtained by Incumbent
pursuant to a review or audit performed under this SECTION 9.9.2 unless
such information has previously come into the public domain (other than
through unauthorized disclosure) or except as required by law.
9.9.3 EXPENSES OF INCUMBENT REVIEWS AND AUDITS. Incumbent shall
pay the cost of any such review or audit performed pursuant to SECTION
9.9.2.
9.9.4. APPROVAL OF AUTHORIZED REPRESENTATIVE. In the event that
Incumbent hires an authorized representative of Incumbent to perform any
such review or audit pursuant to SECTION 9.9.2, PathNet shall have the
right to approve such authorized
24
<PAGE>
representative before any access is granted to such authorized
representative to PathNet's books and records, which approval shall not be
unreasonably withheld.
9.10 QUARTERLY REVENUE REPORTS. PathNet shall issue to Incumbent quarterly
revenue reports substantially in the form of SCHEDULE L (each a "QUARTERLY
REVENUE REPORT") within thirty (30) days after the end of each calendar quarter.
Each such Quarterly Revenue Report shall be an unaudited statement produced by
PathNet.
9.11 COLLECTION AND PAYMENT OF REVENUE.
9.11.1 COSTS OF COLLECTION. PathNet shall deduct any documented
costs reasonably incurred by PathNet in connection with the collection of
any and all revenue generated from the sale of Excess Capacity, including,
but not limited to, the cost of any legal actions, collection fees, court
proceedings, audits, or other enforcement actions. PathNet shall deduct
such costs from gross revenue collected prior to the disbursement of such
revenue to PathNet and Incumbent pursuant to SECTION 5.2 and SECTION 9 and
provide Incumbent with documentation evidencing any such deductions.
9.11.2 MAINTENANCE MONTHLY SERVICE CHARGES. The amount of any
Maintenance Monthly Service Charges (as such term is defined in the
Maintenance Services Agreement) paid by PathNet to Incumbent pursuant to
the Maintenance Services Agreement, shall be deducted from gross revenue
collected prior to disbursement of such revenue to PathNet and Incumbent
pursuant to SECTION 5.2 and SECTION 9.
9.11.3 TAXES ON GROSS REVENUES. The amount of any taxes on gross
revenue paid by PathNet on behalf of Incumbent shall be deducted from any
revenue to be disbursed to Incumbent prior to disbursement of such revenue
as set forth in this SECTION 9.11.
9.11.4 DEFINITION OF REVENUE. For purposes of this Agreement,
"REVENUE" shall mean the gross revenue generated from the sale of Excess
Capacity actually collected less any deductions set forth in SECTION
9.11.1, SECTION 9.11.2 and SECTION 9.11.3.
9.11.5 PAYMENTS TO INCUMBENT. PathNet shall pay Incumbent its
allocated portion of Revenue actually received from the sale of Excess
Capacity within thirty (30) days after the end of each calendar quarter in
accordance with the payment instructions set forth in SCHEDULE M.
9.11.6 INTEREST EARNED ON UNDISTRIBUTED REVENUE. PathNet shall
retain any and all interest earned by PathNet on any Revenue collected but
not yet distributed to Incumbent in accordance with SECTION 5.2 and SECTION
9.
9.11.7 INCUMBENT'S ASSIGNEES OF REVENUES. Incumbent shall have the
right to designate other entities to receive its disbursements by written
notice to PathNet to such effect; PROVIDED, HOWEVER, any such designation
by Incumbent shall not relieve Incumbent of any tax liability resulting
from its receipt of such disbursements pursuant to SECTION 5.2 and SECTION
9.
25
<PAGE>
SECTION 10. FCC LICENSES AND OTHER REGULATORY APPROVALS AND LICENSES.
10.1 FCC RULES AND REGULATIONS.
10.1.1 MICROWAVE RADIO STATION LICENSES.
(a) PREPARATION AND FILING OF FORMS 415. PathNet shall prepare and
timely file all required Form 415, Applications for Authorization in the
Microwave Services (each a "FORM 415"), or any successor forms, documents
or instruments to such Form 415 as the FCC may prescribe, including but not
limited to, the preparation or ordering of all frequency coordinations
required pursuant to Schedule B and Schedule C of Form 415, in order to
own, operate and sell the Excess Capacity of the System in accordance with
the terms and conditions of this Agreement.
(b) IDENTITY OF LICENSEE. All Microwave Radio Station Licenses
issued by the FCC relating to the System shall be licensed in the name of
PathNet or a wholly-owned subsidiary of PathNet. Incumbent shall be
permitted to continue to own and be licensed as a private microwave
operator at the stations licensed to PathNet relating to the System,
provided that (i) such private licenses are for different frequency pairs
than those assigned to the System (including, but not limited to, any
Capacity Expansion of the System) and (ii) such private licenses are
permitted under the FCC Code.
(c) MAINTENANCE OF LICENSE. PathNet shall maintain in good standing
each Microwave Radio Station License relating to the System, including, but
not limited to, preparing and filing any required amendments to the Forms
415 relating to the System and submitting and filing any supplementary
information as required by the FCC.
10.1.2 COMMON CARRIER REPORTING OBLIGATIONS. PathNet shall prepare
and file all forms, reports, instruments, documents and agreements required
by the FCC and FCC Code relating to PathNet's status as a "common carrier"
under the FCC Code.
10.1.3 TARIFF FILINGS. PathNet shall prepare and timely file all
tariff applications pursuant to 47 CFR 61, as amended, or any successor
statute, rule or regulation and shall request and file all necessary
waivers of such tariff requirements, as determined by PathNet in its sole
discretion.
10.1.4 FREQUENCY COORDINATION NOTICES. During the term of this
Agreement, PathNet shall prepare and send all required frequency
coordination notices required under 47 CFR 101.103, as amended, or any
successor statute, rule or regulation and shall respond as appropriate to
all PCNs received by PathNet or Incumbent relating to the System.
26
<PAGE>
10.1.5 DELIVERY OF COPIES. Upon Incumbent's request, PathNet shall
provide to Incumbent a copy of all filings and submissions with the FCC,
relating to the System within thirty (30) days of such request by
Incumbent.
10.1.6 ASSISTANCE IN PREPARATION OF LICENSE APPLICATIONS. Upon
request by PathNet and in a timely manner, Incumbent shall provide to
PathNet all information necessary for the completion of all required
filings and submissions with the FCC including, but not limited to
Incumbent's authorized signature on any filings or other submissions to the
FCC or any documents, instruments or agreements completed in connection
with such filings and submissions.
10.1.7 FUTURE CHANGES IN FCC REQUIREMENTS. If FCC requirements
relating to the Form 415, common carriers, frequency coordination or any
other matters relating to the System change or are modified, PathNet shall
be responsible for compliance with such new requirements including, but not
limited to, the payment of any costs or fees associated therewith and
Incumbent shall cooperate with PathNet with respect to such compliance;
PROVIDED, HOWEVER, if the FCC establishes user fees or other such fees
relating to the frequencies used in and the communications business
conducted over the System, the cost of such additional fees shall be
divided between PathNet and Incumbent, as determined by PathNet and
Incumbent at such time.
10.1.8 SPECTRAL LOADING REQUIREMENTS. PathNet shall (i) ensure
that the System, as licensed, shall comply with all spectral loading
requirements set forth in 47 CFR 101.141, or any successor statute, rule or
regulation or (ii) obtain a waiver of any or all of such requirements;
PROVIDED, HOWEVER, if the System does not meet such spectral loading
requirements and PathNet is unable to obtain a waiver of such requirements,
PathNet shall have the right to modify the System to a hot-standby
Protection Configuration until such time as the spectral loading
requirements can be met.
10.1.9 DEFAULT IN FCC LICENSE. In the event that the FCC
institutes a penalty against or fine imposed on PathNet, Incumbent, or the
System, due to non-compliance with any FCC requirements, PathNet shall
promptly pay such penalty or fine (in the case such penalty or fine is
instituted as the result of an act or omission on the part of PathNet) or
Incumbent shall promptly pay such penalty or fine (in the event such
penalty or fine is instituted as the result of an act or omission on the
part of Incumbent).
10.2 ZONING REQUIREMENTS. Incumbent shall be responsible for compliance
with all zoning requirements applicable to the System and its Facilities,
including, but not limited to, the Leased Premises. Incumbent shall advise
PathNet of zoning requirements, which, in the reasonable opinion of Incumbent,
differ from those generally applicable to microwave facilities. PathNet shall
provide to Incumbent all required information and shall cooperate with Incumbent
in connection with Incumbent's compliance with all zoning requirements pursuant
to this SECTION 10.2.
10.3 BUREAU OF LAND MANAGEMENT REQUIREMENTS. Incumbent shall be
responsible for compliance with all United States Department of Interior Bureau
of Land Management
27
<PAGE>
requirements applicable to the System and its Facilities, including, but not
limited to, the Leased Premises. PathNet shall provide Incumbent with all
requested information and shall cooperate with Incumbent in connection with
Incumbent's compliance with such United States Department of Interior Bureau of
Land Management requirements pursuant to this SECTION 10.3.
10.4 TOWER REGISTRATION. Incumbent shall ensure compliance with all FAA
and FCC tower registration requirements including, but not limited to, the
preparation of any filings with or the obtaining of any waivers or extensions
from the FAA or FCC. Incumbent shall promptly notify PathNet of any deficiency
on non-compliance with any such tower registration requirements, filings,
waivers or extensions.
SECTION 11. INSURANCE.
11.1 DELIVERY OF CERTIFICATES OF INSURANCE. Upon Incumbent's request and
prior to the commencement of any Services by PathNet, PathNet shall deliver to
Incumbent Certificates of Insurance relating to PathNet's Commercial General
Liability Insurance Policy, Workers Compensation Insurance Policy, Automobile
Liability Insurance and Excess Liability Insurance Policy. Incumbent shall be
named as an additional insured on all policies required under this contract.
All policies shall include a waiver of subrogation against Incumbent, its
Affiliates and its insurance carriers. Until Commissioning, PathNet Insurer's
shall provide Incumbent with thirty (30) days prior written notice of
cancellation or of any material change in PathNet's insurance during the term of
this Agreement. Any deductibles or SIR's on the policies of insurance required
under this Agreement are the sole responsibility of PathNet, and not Incumbent
its Affiliates, shareholders or employees.
11.2 PATHNET INSURANCE COVERAGE. During the term of this Agreement,
PathNet shall maintain the types of insurance at the coverage limits set forth
below:
(a) WORKER'S COMPENSATION INSURANCE. Workers Compensation Insurance
as required by laws and regulations applicable to and covering Persons
performing the Services in an amount of $500,000 for employer's liability
coverage;
(b) COMMERCIAL GENERAL LIABILITY INSURANCE. Commercial General
Liability Insurance with a limit of not less than $1,000,000 per occurrence
and $2,000,000 in the aggregate including products, completed operations,
and contractual liability;
(c) AUTOMOBILE LIABILITY INSURANCE. Automobile Liability Insurance,
which includes coverage for non-owned and hired vehicles with a limit of
not less than $1,000,000; and
(d) EXCESS LIABILITY INSURANCE. Excess Liability Insurance with a
limit of not less than $4,000,000.
11.3 INCUMBENT INSURANCE COVERAGE. Incumbent shall maintain insurance
coverage on properties and operations of Incumbent which coverage shall include
general liability and
28
<PAGE>
other forms of insurance covering such risks as are usually insured against by
prudent companies engaged in the business and activities in which the Incumbent
is engaged, in amounts which are adequate in relation to the business and
properties of Incumbent, and all premiums to date have been paid in full.
11.4 PROOF OF LICENSED SUBCONTRACTORS. Upon reasonable request of
Incumbent, PathNet shall provide to Incumbent proof of licensing and
certification of insurance for any Subcontractors engaged by PathNet to provide
Services, during the term of such engagement. Incumbent shall be added as an
additional insured on the policies of the Subcontractors.
SECTION 12. SOFTWARE AND PROPRIETARY RIGHTS.
12.1 PATHNET SOFTWARE. PathNet retains all right, title and interest in
and to PathNet Software. As of the Effective Date and pursuant to the PathNet
Sublicense Agreement attached hereto as SCHEDULE N, Incumbent is granted a
royalty free, non-transferable nonexclusive sublicense to use PathNet Software
subject to the terms of any PathNet licenses obtained from third party providers
for the sole purpose of receiving services pursuant to this Agreement. In the
event PathNet develops any PathNet Software, PathNet shall amend to this
Agreement a license agreement for such PathNet Software. PathNet Software will
be made available to Incumbent in such form and on such media as exists on the
Effective Date, together with existing documentation and any other related
materials. Incumbent shall not be permitted to use PathNet Software for the
benefit of any entities other than PathNet or Incumbent affiliates without the
prior written consent which may be withheld at PathNet's sole discretion.
Except as otherwise requested or approved by PathNet, Incumbent shall cease all
use of PathNet Software upon expiration of this Agreement.
12.2 PROPRIETARY RIGHTS. Incumbent acknowledges and agrees that all or
portions of the information and materials, including but not limited to the
PathNet Software and related documentation to be supplied by PathNet hereunder
are owned by PathNet and/or others and are proprietary in nature. Incumbent
also acknowledges and agrees that PathNet and/or its suppliers have and will
retain all proprietary rights in such information and materials. Incumbent (i)
shall respect such claim of proprietary right, (ii) shall protect such
information at least to the extent that it protects its own proprietary
information, (iii) shall not use such information except for the purposes for
which its is being made available as set forth in this Agreement and (iv) shall
not reproduce, print, disclose, or otherwise make said information available to
any third party, in whole or in part, in whatever form.
SECTION 13. REPRESENTATIONS AND WARRANTIES.
13.1 REPRESENTATIONS AND WARRANTIES OF EACH PARTY. Each Party hereby
represents and warrants the other Party as follows:
13.1.1 DUE INCORPORATION AND FORMATION; AUTHORIZATION OF
AGREEMENTS; BINDING EFFECT. Such Party is a corporation or partnership, as
the case may be, duly
29
<PAGE>
formed or organized, and validly existing under the laws of its state of
incorporation or organization, and has the corporate or partnership
authority to own its property and carry on its business as owned and
carried on as of the Effective Date. Such Party is duly licensed or
qualified to do business and is in good standing (if applicable) in each
jurisdiction in which the failure to be so licensed or qualified would have
a Material Adverse Effect on such Party. Such Party has the corporate or
partnership authority to execute and deliver this Agreement, to perform its
obligations hereunder, and to consummate the transactions contemplated
hereby. This Agreement has been duly authorized, executed and delivered by
such Party and this Agreement constitutes a legal, valid and binding
obligation of such Party enforceable in accordance with its terms, subject
as to enforceability to limits imposed by bankruptcy, insolvency or similar
laws affecting creditors rights generally and the availability of equitable
remedies. Attached hereto as SCHEDULE O are the (i) Articles and Bylaws of
PathNet and (ii) a copy of a certificate of good standing of PathNet.
13.1.2 NO CONFLICT; NO DEFAULT. Neither the execution or delivery
of this Agreement by such Party, nor (except as would not have a Material
Adverse Effect on such Party), the performance of this Agreement by such
Party or the consummation by such Party of the transactions contemplated
hereby in accordance with the terms and conditions hereof: (i) will
conflict with, violate, result in a breach of or constitute a default under
any of the terms, conditions or provisions of the certificate or articles
of incorporation or bylaws (or other governing documents) of such Party or
any material agreement or instrument to which such Party is a party or by
which such Party may be bound, (ii) will conflict with, violate or result
in a breach of, constitute a default under (whether with notice or lapse of
time or both), accelerate or permit the acceleration of the performance
required by, give to others any interests or rights or require any consent,
authorization or approval under any contract to which such Party is a party
or by which such Party is or may be bound or to which any equity interest
held by such Party or any of its material properties or assets is subject
or (iii) will result in the creation or imposition of any Encumbrance upon
any equity interest held by such Party or any of the other material
properties or assets of such Party.
13.1.3 NO CONSENT. No consent, approval, order or authorization
of, or registration, declaration or filing with any Governmental Authority,
domestic or foreign, is required to be obtained by such Party in connection
with the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby.
13.1.4 COMPLIANCE WITH LAWS AND REGULATIONS. That the performance
of such Party's obligations under this Agreement will not result in a
violation in any respect of (i) any applicable Federal, state, local or
foreign laws, ordinances, regulations, rulings and orders of government
agencies applicable to its business in any respect the violation of which
could have a Material Adverse Effect (including Requirements of Law
relating to pollution, protection of the environment, emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic, hazardous or regulated substances or
wastes into the environment or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage disposal, transport or
30
<PAGE>
handling of pollutants or other such hazardous or regulated substances or
wastes) or (ii) any applicable order, Judgment, injunction, award or decree
in any respect which could have a Material Adverse Effect on such Party.
13.1.5 PERMITS. Such Party has or will obtain all authorizations,
approvals, consents, licenses, Permits and certificates (including, but not
limited to all required approvals from the FCC) necessary to conduct their
respective businesses and to own, lease and operate its properties as
currently or anticipated to be conducted, owned, leased or operated, as the
case may be, for which the failure to possess would result in a Material
Adverse Effect. No violations are outstanding or uncured with respect to
any such Permits and no proceeding is pending to revoke or limit any
Permit.
13.1.6 TITLE TO ASSETS, PROPERTIES AND RIGHTS AND RELATED MATTERS.
Such Party has, and will continue to have for the term of this Agreement as
set forth in SECTION 3, good and marketable title to all the properties,
interests in properties and assets, real, personal or mixed, necessary for
the conduct of such Party's business and for the transactions contemplated
by this Agreement (including, but not limited to, any rights of way,
leasehold interests, easements, proofs of dedication and rights necessary
to perform the obligations hereunder) free and clear of all Encumbrances of
any kind or character, except (i) liens for current taxes not yet due and
payable, (ii) Encumbrances securing taxes, assessments, governmental
charges or levies or the Encumbrances of materialmen, carriers, landlords
and like persons, all of which are not yet due and payable and (iii) minor
Encumbrances of a character that do not substantially impair the assets or
properties of such Party or which will not have a Material Adverse Effect
on such Party.
13.1.7 LABOR MATTERS. Such Party has complied in all material
respects with all applicable Federal, state and local laws and ordinances
relating to the employment of labor, including the provisions thereof
relating to wages, hours, employee benefit plans and the payment of social
security taxes, and is not liable for any arrears of wages or any tax
related thereto (except for currently accrued and unpaid wages and except
for currently accrued withholding, payroll, unemployment and social
security taxes payment of which is not overdue) or penalties for failure to
comply with any of the foregoing, and neither has received a notice to the
contrary from any Governmental Authority. Such Party has not suffered any
strike, slowdown, picketing or work stoppage by any union or other group or
employees affecting the business of such Party, and no such event or action
is threatened.
13.1.8 NO DISCRIMINATION. Such Party warrants that it is an equal
opportunity employer and will not discriminate against any employee or
applicant for employment because of race, color, religion, sex, national
origin, handicap or status as Vietnam Era Veteran. Each Party shall comply
with Executive Orders 11,246 and 11,625, the Vietnam Era Veterans
Readjustment Assistance Act of 1974, the Rehabilitation Act of 1973, the
Americans with Disabilities Act of 1990, and all amendments, orders, rules
and regulations issued thereunder or in connection therewith. Such Party
certifies that is does not and will not maintain or provide for its
employees any facilities which are segregated by race, color, religion or
national origin or permit its employees to perform any services
31
<PAGE>
at any location, under its control, where segregated facilities are
maintained; and such Party will obtain a similar certification for all
non-exempt subcontracts in accordance with the provisions of 41 C.F.R.
Section60-1.8.
13.1.9 DISCLAIMER. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT,
NEITHER PATHNET NOR INCUMBENT MAKES ANY OTHER EXPRESS WARRANTY AND THERE
ARE NO IMPLIED WARRANTIES WITH RESPECT TO ANY TECHNOLOGY, GOODS, SERVICES,
RIGHTS OR OTHER SUBJECT MATTER OF THIS AGREEMENT. PATHNET AND INCUMBENT
HEREBY DISCLAIM THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
13.2 REPRESENTATIONS AND WARRANTIES OF PATHNET.
13.2.1 SERVICES. PathNet warrants (i) that the Services will be
performed in a safe, good and workmanlike manner; (ii) that all components,
supplies and materials incorporated in or consumed in the rendering of
PathNet Services shall be new (except those components, supplies and
materials designated to be upgraded or enhanced pursuant to the
modifications SOW) and shall conform in all material respects to the
requirements of this Agreement, provided that PathNet shall pursue all
applicable rights and remedies granted from third party vendor warranties;
(iii) that PathNet shall promptly correct without additional compensation
any portion of the PathNet Services that proves to be improper or defective
in workmanship or not in conformance with the standards and specifications
set forth in this Agreement; (iv) that it owns or has the legal right to
use all of the PathNet Software for all purposes intended hereunder; (v)
that on Effective Date, PathNet has no litigation or contingent liabilities
which could impact this Agreement; (vi) that all Equipment is in good
working order and condition; (vii) all Services shall be free from faults
or defects and improper workmanship; (viii) that any and all change orders
requested or issued under SECTION 4.6 shall reflect additional work to be
done by PathNet rather than corrections to the work already contemplated
hereunder; and (ix) that the System shall be fully operational without
Space Diversity within eighteen (18) months of the grant of any permit or
approval, listed in Exhibit A-10 and required for PathNet to install and
complete the System.
13.3 REPRESENTATIONS AND WARRANTIES OF INCUMBENT.
13.3.1 UNION AND LABOR RELATIONS. Incumbent represents and
warrants that with respect to any services performed pursuant to this
Agreement, Incumbent has complied with any applicable labor or
union-related agreements, regulations and ordinances.
SECTION 14. DELIVERIES.
14.1 DELIVERIES BY INCUMBENT. Incumbent shall provide to PathNet the items
as set forth in SCHEDULE P.
32
<PAGE>
14.2 DELIVERIES BY PATHNET. PathNet shall provide to Incumbent the items
as set forth in Schedule Q.
SECTION 15. INDEMNIFICATION.
15.1 INDEMNIFICATION BY PATHNET. To the maximum extent permitted by law,
PathNet shall release, protect, defend and hold harmless Incumbent and its
Affiliates and its and their respective officers, directors, employees and
agents from and against any and all Losses arising from (i) personal injury,
disease, death, property damage, pollution and environmental damage (including
clean-up and all fines and penalties of any nature) to the extent directly or
indirectly caused by or related to the negligence (whether simple or gross;
active or passive), strict or absolute liability or fault of PathNet, its
Affiliates or its or their officers, directors, employees, agents or
contractors; (ii) the breach of any representation or warranty set forth in this
Agreement by PathNet; and (iii) any claims of any violation of the antitrust
laws of the United States or of any state in which the System operates, based
upon terms of this Agreement.
15.2 INDEMNIFICATION BY INCUMBENT. To the maximum extent permitted by law,
Incumbent shall release, protect, defend and hold harmless PathNet and its
Affiliates and its and their respective officers, directors, employees and
agents from and against any and all Losses arising from (i) personal injury,
disease, death, property damage, pollution and environmental damage (including
clean-up and all fines and penalties of any nature) to the extent directly or
indirectly caused by or related to the negligence (whether simple or gross;
active or passive), strict or absolute liability or fault of Incumbent, its
Affiliates or its or their officers, directors, employees, agents or contractors
and (ii) the breach of any representation or warranty set forth in this
Agreement by Incumbent.
15.3 INTELLECTUAL PROPERTY INDEMNIFICATION - PATHNET. PathNet hereby
agrees to protect, defend, indemnify and hold harmless Incumbent, its
Affiliates, and its and their respective officers, directors, employees and
agents from and against all Losses relating to (i) an alleged infringement of
any third-party patent rights, patent or application for patent or any invention
covered hereby or any proprietary rights of any kind; and (ii) any alleged
infringement of copyright or trademark arising from PathNet's Services
hereunder. In the event that PathNet's Services or the use or sale of any
articles, materials or equipment to be furnished hereunder by PathNet are
enjoined, PathNet at its sole expense shall at Incumbent's election either
procure for Incumbent the right to continue to use or sell same or replace same
with non-infringing materials and/or services of a grade and quality to meet all
specifications for their required use.
15.4 INTELLECTUAL PROPERTY INDEMNIFICATION - INCUMBENT. Incumbent hereby
agrees to protect, defend, indemnify and hold harmless PathNet, its Affiliates,
and its and their respective officers, directors, employees and agents from and
against all Losses relating to (i) an alleged infringement of any third-party
patent rights, patent or application for patent or any invention covered hereby
or any proprietary rights of any kind; and (ii) any alleged infringement of
copyright or trademark arising from Incumbent's Services hereunder. In the
event that Incumbent's Services or the use or sale of any articles, materials or
equipment to be furnished hereunder by Incumbent are enjoined, Incumbent at its
sole expense shall at PathNet's election either procure for PathNet the right to
continue to use or sell same or replace same with non-
33
<PAGE>
infringing materials and/or services of a grade and quality to meet all
specifications for their required use.
SECTION 16. LIABILITY OF THE PARTIES TO EACH OTHER.
16.1 LIABILITY GENERALLY. Subject to the specific provisions of this
SECTION 16, it is the intent of the Parties that each Party shall be liable to
the other Party for damages incurred as a result of the breach of this Agreement
by the other Party and failure to cure such breach as set forth in SECTION
17.1.2.
16.2 LIABILITY RESTRICTIONS.
(a) SUBJECT TO SUBSECTION (b) BELOW, IN NO EVENT, WHETHER IN CONTRACT
OR IN TORT (INCLUDING BREACH OF WARRANTY, NEGLIGENCE AND STRICT LIABILITY
IN TORT), SHALL A PARTY BE LIABLE TO THE OTHER PARTY FOR INDIRECT OR
CONSEQUENTIAL, EXEMPLARY, PUNITIVE OR SPECIAL DAMAGES EVEN IF SUCH PARTY
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES IN ADVANCE.
(b) The limitations set forth in subsection shall not apply to the
indemnification obligations set forth in SECTION 15.3 and SECTION 15.4.
(c) Each Party shall have a duty to mitigate damages for which the
other Party is responsible.
(d) Each Party shall be liable to the other Party for any actual
damages as set forth in SECTION 16.1 only if, and to the extent that the
aggregate of all losses arising from or in connection with any such failure
to perform obligations in the manner required by this Agreement exceeds ten
thousand dollars ($10,000.00), except for claims of payment from
Subcontractors or vendors
16.3 FORCE MAJEURE. Neither party shall be liable to the other for any
delays or damages or failure to act, except for the obligation to make payment
when due, owing to, occasioned by or caused by reason of strikes, lockouts,
fire, flood, the elements, Acts of God, wars, blockades, insurrections, riots,
landslides, earthquakes, lightning, storms and civil disturbances beyond the
control of the Party affected thereby, and delays due to any of the above causes
shall not be deemed to be a breach or failure to perform under this Agreement (
collectively a "Force Majeure Event"); provided, however, that the Party delayed
by such event shall provide notice thereof to the other Party as soon as
reasonably possible specifying all facts relating thereto, the anticipated
consequences thereof, and any proposed actions to be taken in mitigation of
adverse consequences. Neither Party shall, however, be relieved of liability
for failure of performance due to a claimed Force Majeure Event hereunder if
such failure is due to causes arising out of its own negligence or to removable
causes that it fails to remove or remedy with reasonable dispatch.
34
<PAGE>
SECTION 17. INFORMAL DISPUTE RESOLUTION; ARBITRATION.
17.1 INFORMAL DISPUTE RESOLUTION.
17.1.1 ROLE OF PROGRAM MANAGER. In the event Incumbent has a
dispute, controversy or other complaint relating to PathNet's performance
of PathNet's rights and obligations under this Agreement, Incumbent shall
have the right to first contact the Program Manager to resolve such
dispute, controversy or other complaint. If Incumbent is not satisfied
with the resolution provided by the Program Manager, Incumbent may resort
to the arbitration procedures set forth in this SECTION 17.
17.1.2 NOTICE OF BREACH, CURE AND REMEDIES. In the event of a
material breach by either PathNet or Incumbent (the "BREACHING PARTY"), the
other Party (the "NON-BREACHING PARTY") shall send by certified mail a
written notice of such material breach to the Breaching Party setting forth
the specific allegations of such breach. Upon receipt of the notice of
breach, the Breaching Party shall have thirty (30) days to cure such
breach. In the event the Breaching Party fails to cure such breach, as
determined by the Non-Breaching Party in its sole discretion, and the
Breaching Party determines, in its sole discretion, that it has cured such
breach, either the Breaching Party or the Non-Breaching Party may invoke
the arbitration procedures set forth in SECTION 17.2 to resolve whether
such breach has been cured.
17.2 ARBITRATION.
17.2.1 ARBITRATION; RESOLUTION OF DISPUTES. Subject to SECTION
17.1, any and all disputes and controversies between Incumbent and PathNet
concerning this Agreement (each a "DISPUTE") shall be subject to
resolution as set forth in this SECTION 17.
17.2.2 REFERRAL TO BINDING ARBITRATION. Each Party shall have the
right, but not the obligation, to refer any Dispute for final resolution by
binding arbitration in accordance with the American Arbitration Association
(the "Association") Rules for Arbitration of business disputes (the
"ARBITRATION RULES").
17.2.3 BINDING EFFECT. The Parties acknowledge and agree that (i)
the award in any arbitration shall be final, conclusive and binding on the
Parties and (ii) any such arbitration award be a final resolution of the
Dispute between the Parties to the same extent as a final judgment of a
court of competent jurisdiction.
17.2.4 USE OF COURTS AND OTHER LEGAL REMEDIES. Each Party
covenants and agrees that it shall not resort to any court for legal
remedies concerning any Dispute other than to enforce a final decision by
the arbitrators or for preliminary, interim or provisional equitable relief
in aid of arbitration.
35
<PAGE>
17.2.5 ARBITRATION PROCESS.
(a) SITE AND ARBITRATION TRIBUNAL. Absent agreement to the contrary
by the Parties, the arbitration will be conducted in New York, New York, by
a panel of three (3) arbitrators with expertise in the fields of
telecommunications engineering and construction.
(b) LIMITATION ON AWARDS. Arbitrators may not award (i) the right to
terminate this Agreement or any of the rights and obligations hereunder, or
(ii) any other right or remedy that contravenes the terms and conditions of
this Agreement.
(c) PERIOD OF LIMITATIONS. In the event the Party claiming a Dispute
under SECTION 17.1.2 does not institute binding arbitration within four (4)
years after notice of breach, such Party shall forever be barred from
bringing a claim on the specific subject matter of such Dispute.
(d) ATTORNEYS' FEES. The arbitrator shall award the reasonable cost,
including attorneys' fees, to the prevailing Party.
SECTION 18. MISCELLANEOUS.
18.1 NOTICES. All notices pertaining to disputes arising from this
Agreement shall be directed to a corporate entity or employee designated by the
signatories as having full rights and responsibilities to address such issues.
Notices under this Agreement shall be sufficient only if personally delivered by
a commercial prepaid delivery or courier service or mailed by certified or
registered mail, return receipt requested to a Party at its address set forth
below or as amended by notice pursuant to this SECTION 18.1. If not received
sooner, notice by mail shall be deemed received five (5) Business Days after
deposit in the U.S. mail. All notices shall be delivered as follows:
If to PathNet:
Michael A. Lubin, Esquire
Vice President and General Counsel
PathNet, Inc.
1015-31st, N.W.
Washington, D.C. 20007
Tel: (202) 625-7284
Fax: (202) 625-7369
If to Incumbent:
Mr. Tom Bruscino
Director, Telecommunications
KN Energy
370 Van Gordon Street
Lakewood, CO 80228-8304
Tel: (303) 763-3299
Fax: (303) 763-3510
36
<PAGE>
18.2 BINDING NATURE; ENTIRE AGREEMENT. PathNet and Incumbent acknowledge
that (i) each has read and understands the terms and conditions of this
Agreement and agrees to be bound by such terms and conditions, (ii) this
Agreement shall be binding on each of PathNet and Incumbent and their respective
successors and assigns, (iii) this Agreement is the complete and conclusive
statement of the agreement between the Parties, (iv) this Agreement supercedes
any and all prior agreements and arrangements between the Parties and all
understandings and agreements, oral and written, heretofore made between
Incumbent and PathNet are merged in this Agreement which alone, fully and
completely expresses their agreement on the subject matter of this Agreement and
(v) this Agreement sets forth the entire agreement on the subject matter hereof.
18.3 AMENDMENT. No modifications of, additions to or waiver of this
Agreement shall be binding upon Incumbent or PathNet unless such modification,
addition or waiver is in writing and signed by an authorized representative of
each Party.
18.4 SEVERABILITY. If any term or provision of this Agreement shall to any
extent be held by a court or other tribunal to be invalid, void or
unenforceable, then such term or provision shall be inoperative and void insofar
as it is in conflict with the law, but the remaining terms and provisions of
this Agreement shall nevertheless continue in full force and effect and the
rights and obligations of the Parties shall be deemed to be restated to reflect
as nearly as possible the original intentions of the Parties in accordance with
applicable law.
18.5 GOVERNING LAW. This Agreement, and the rights and obligations of the
Parties hereunder, shall be governed and interpreted in accordance with the laws
of the State of New York (other than the choice of law rules thereof).
18.6 SURVIVAL. Any provision of this Agreement which completes performance
or observance subsequent to any termination or expiration of this Agreement
shall survive such termination of expiration and continue in full force and
effect.
18.7 ASSIGNMENT. At any time and from time to time, PathNet shall have the
right to assign this Agreement or any of PathNet's rights and obligations under
this Agreement; provided, that in no event shall any such assignment relieve
PathNet of its obligations under this Agreement. Incumbent may not or shall not
have the right to assign this Agreement or any of its rights and obligations
hereunder without the prior written consent of PathNet, which consent shall not
be unreasonably withheld; PROVIDED, HOWEVER, Incumbent may assign its right and
obligations, in whole but not in part, under this Agreement without the approval
of PathNet, to any entity which acquires all or substantially all of the assets
of Incumbent or to any subsidiary, Affiliate or successor in a merger or
consolidation of Incumbent; provided, that in no event shall any such assignment
relieve Incumbent of its obligations under this Agreement.
18.8 WAIVER. Failure or delay on the part of Incumbent or PathNet to
exercise any right, power or privilege under this Agreement shall not constitute
a waiver of any right power or privilege of this Agreement.
37
<PAGE>
18.9 RECORDATION. Each Party hereby acknowledges that this Agreement may
be subject to recordation and the costs, fees or expenses associated with any
such recordation shall be borne by the recording Party.
18.10 GOOD FAITH RENEGOTIATION. Notwithstanding anything set forth
herein to the contrary, the Parties hereby agree that in the event a
Governmental Authority issues a decision, order, rule or other rulemaking of any
kind, which necessitates any modification or amendment to this Agreement, the
Parties shall negotiate in good faith to modify or amend this Agreement to
comply with such decision, order, rule or other rulemaking.
18.11 CONFIDENTIAL TERMS AND CONDITIONS. Incumbent shall not disclose,
except as required by law or as set forth in SECTION 18.9, the terms and
conditions of this Agreement to any third party.
18.12 INCUMBENT'S DESIGNATED REPRESENTATIVE. Incumbent shall on the
Effective Date designate in writing a representative who shall have express
authority to bind Incumbent with respect to all matters requiring Incumbent's
approval or authorization in connection with this Agreement (the "INCUMBENT
REPRESENTATIVE"). Such Incumbent Representative shall have the authority to
make decisions and grant any and all consents required under this Agreement on
behalf of Incumbent and PathNet shall be entitled to rely on any such decision
or consent by the Incumbent Representative.
18.13 OUTSOURCING. In addition to, and not in place of, any rights of
PathNet under this Agreement, PathNet shall have the right to engage third party
Subcontractors to perform any or all of PathNet's rights and obligations under
this Agreement.
18.14 EMPLOYMENT SOLICITATION. During the term of this Agreement,
neither PathNet nor any PathNet Affiliate shall solicit employment from, offer
employment to or hire, in any manner whether as an employee or a Subcontractor,
any Incumbent employee; provided that PathNet may hire any former Incumbent
employee if such employee has not worked for Incumbent for a period of at least
eighteen (18) months.
18.15 EXECUTION OF AN AMENDED SCHEDULE B. In the event that both
Incumbent and PathNet elect to add additional Segments to the System, each of
Incumbent and PathNet shall execute and deliver an "AMENDED SCHEDULE B" setting
forth (i) the additional paths, sites and specific location information of the
additional Segment or Segments, (ii) the rent PathNet shall pay to Incumbent for
such additional Segment (thereby amending SECTION 5.2 with respect to such
additional Segment; PROVIDED, HOWEVER, SECTION 5.2 shall remain in full force
and effect with respect to Segment 1 or any other existing Segment) and (iii)
the Incumbent Items, the amount of the Incumbent Estimated Costs, the amount of
the Incumbent Payment Cap and the method of payment of the cost of the Incumbent
Items with respect to such additional Segment (thereby amending SECTION 4.1 and
SECTION 1 of SCHEDULE C with respect to such additional Segment; PROVIDED,
HOWEVER, SECTION 4.1 and SECTION 1 of SCHEDULE C shall in any event remain in
full force and effect with respect to Segment 1 or any other existing Segment.)
PathNet's and Incumbent's rights and obligations under this Agreement will
commence with respect to such additional Segment or Segments on the date of
execution of such AMENDED SCHEDULE B by both
38
<PAGE>
Parties which date shall be deemed the "EFFECTIVE DATE" with respect to such
Segment for purposes of this Agreement and each reference to SCHEDULE B in this
Agreement shall be deemed to refer to such AMENDED SCHEDULE B.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement, as of the
date first written above.
PATHNET, INC.
By: /s/ Dave Schaeffer
--------------------------------
Name: Dave Schaeffer
Title: President
KN ENERGY, INC.
By: /s/ Rickey Wells
--------------------------------
Name: Rickey Wells
Title: V.P. Operations
39
<PAGE>
INDEX OF SCHEDULES AND EXHIBITS TO
FIXED POINT MICROWAVE SERVICES AGREEMENT
SCHEDULE A: Services and System Specifications
Exhibit A-1: System Equipment, Towers and Shelters
Exhibit A-2: Manufacturers Specifications for Radios
Exhibit A-3: Electricity and Power Specifications of the System
Exhibit A-4: Incumbent Multiplexing Requirements
Exhibit A-5: Equipment Shelters, Specification and Design
Exhibit A-6: Grounding and Lightning Protection Guidelines and
Specifications for Communications Shelters
Exhibit A-7: Network Interconnections Schedule
Exhibit A-8: Pathnet Spurs and Incumbent Spurs
Exhibit A-9: Form of Certificate of Acceptance
Exhibit A-10: Required Permits and Approvals
SCHEDULE B: Segment and Facilities
SCHEDULE C: Estimated and Operating Costs
Exhibit C-1: Incumbent Estimated Costs
Exhibit C-2: Pathnet's Estimated Costs
SCHEDULE D: Form of Escrow Agreement
SCHEDULE E: Incumbent Security Procedures
SCHEDULE F: Incumbent Drug Testing Procedures and Substance Abuse Policy
SCHEDULE G: Intentionally Omitted
SCHEDULE H: Incumbent Health and Safety Requirements
SCHEDULE I: Other Requirements of Incumbent
i
<PAGE>
SCHEDULE J: Incumbent Training
SCHEDULE K: Ownership of System Equipment, Assets and Materials
SCHEDULE L:.Form of Quarterly Revenue Report
SCHEDULE M:.Incumbent Payment Instructions
SCHEDULE N:.Form of Pathnet Sublicense Agreement
SCHEDULE O: Pathnet Articles and Bylaws; Certificate of Good Standing
SCHEDULE P:.Deliverables of Incumbent
SCHEDULE Q:.Deliverables of Pathnet
SCHEDULE R:.Form of Security Agreement
ii
<PAGE>
SCHEDULE A
SERVICES AND SYSTEM SPECIFICATIONS
This Schedule A describes certain services and specifications that Pathnet
and Incumbent shall respectively perform. Pathnet's and Incumbent's
responsibilities with respect to particular Services and Specifications
described in this Schedule A, if any, are specifically indicated where such
Services and Specifications are described. Pathnet's and Incumbent's payment
responsibilities with respect to the Services and Specifications shall be as set
forth in Section 4 and Schedule C.
SECTION 1. PRELIMINARY ENGINEERING STUDIES AND EVALUATION OF EXISTING SYSTEM
1.1 Preliminary Analysis. Pathnet shall complete a detailed analysis of
the existing microwave system operated by Incumbent along each Segment set forth
in Schedule B and upon completion of such analysis shall deliver the results of
such analysis to Incumbent. Such analysis shall include:
(a) an inventory and survey of Incumbent's existing microwave sites
and supporting facilities (the "Existing System Inventory");
(b) microwave path studies and reliability analysis to provide
performance data to serve as the engineering basis for the design of the
System (the "Path Studies");
(c) a preliminary evaluation of the probability of successfully
coordinating frequencies on the System (the "Frequency Availability
Model");
(d) a determination of whether structural analysis of towers and
loading factors (for metal towers only) is required and, in the event such
structural analysis is required, the analysis of Incumbent's towers,
including, but not limited to, the wind loading and weight requirements
for the proposed antenna systems as well as any feedlines necessary to
support the such antenna systems (the "Tower Analysis");
(e) the design of the System (the "System Design") which System
Design conforms with the terms and conditions of Section 3 of this
Schedule A;
(f) a detailed line item budget for the System (the "System
Budget");
(g) a proposed T-1 plan for channelization of the System the
("Channel Plan"); and
(h) a preliminary construction management schedule for each
replacement Segment (the "Preliminary Construction Schedule").
A-1
<PAGE>
1.2 Cooperation of Incumbent with Preliminary Analysis. Incumbent shall
fully cooperate with Pathnet in Pathnet's performance of the preliminary
analysis set forth in Section 1.1 of this Schedule A, including, but not limited
to, providing to Pathnet any requested information and documents relating to
Incumbent or Incumbent's existing system.
1.3 Project Drawings. Upon completion of the preliminary engineering
studies and analysis and documentation as set forth in Section 1.1 of this
Schedule A, Pathnet shall deliver to Incumbent the following project drawings:
(i) a System layout drawing, (ii) the rack profiles, (iii) block drawings, and
(iv) equipment wiring drawings (collectively, the "Project Drawings.")
1.4 Deliveries by Incumbent. Within thirty (30) days of the Effective
Date, Incumbent shall deliver to Pathnet (i) any existing tower drawings and
specifications, inventory lists and other documents relating to the sites set
forth on Schedule B necessary for Pathnet to perform its obligations under this
Agreement, (ii) the results of any structural, mechanical, and electrical
inspections and reports relating to Incumbent's existing system facilities or
sites, which have been performed pursuant to the requirements of any applicable
Federal, state or local law or by Incumbent at its discretion and (iii) the
names, addresses and contact persons of any consultants or Subcontractors
engaged by Incumbent in connection with Incumbent's existing system, Facilities
or sites and copies of any reports or documents produced by such consultants or
Subcontractors.
SECTION 2. MODIFICATION TO EXISTING INFRASTRUCTURE
2.1 Documentation. Upon completion of the preliminary analysis as set
forth in Section 1.1 of this Schedule A, Pathnet shall prepare and deliver to
Incumbent a project management schedule and scope of work (the "Modifications
SOW") setting forth a detailed plan to complete all required modifications of
Incumbent's existing sites and Facilities necessary for the installation and
operation of the new System in accordance with the terms and conditions of this
Agreement. Incumbent shall have ten (10) days to either (i) approve by written
notice to Pathnet such Modifications SOW or (ii) deliver to Pathnet a written
list of Incumbent's suggested modifications to the Modifications SOW; provided,
however, any such modifications to the Modifications SOW may not result in the
cost of the Services and Specifications set forth in the Modifications SOW
exceeding the cost of such Services and Specifications as set forth in Section 1
of Schedule C. Pathnet shall review any such suggested modifications and, in its
sole discretion, incorporate some, all or none of such suggested modifications
into the Modifications SOW. In the event Incumbent does not notify Pathnet in
writing within the prescribed time period, Pathnet shall assume that Incumbent
has granted such approval.
2.2 Modifications Required. Pathnet shall perform all of the modifications
set forth in the Modifications SOW. Such modifications shall include the
following:
(a) any required modifications to the towers necessary to conform
the towers to the Specifications;
A-2
<PAGE>
(b) any required modifications to the battery reserves necessary to
conform the battery reserves to the Specifications and the installation of
any required generators, in accordance with the Specifications;
(c) any required modifications to the environmental control systems
of the existing shelters necessary to conform such environmental control
systems to the Specifications;
(d) the provision of all necessary D.C. and A.C. power cable
engineering for all racks, including, but not limited to, the installation
of all necessary conduits required to carry D.C. and A.C. power,
terminating cables and alarm cables and the installation of all necessary
A.C. distribution and A.C. wiring as required to meet the Specifications;
(e) the installation of all required new equipment shelters, or
modification of existing equipment shelters, to conform to the
Specifications;
(f) the installation of all required liquid petroleum, diesel or
natural gas lines from the existing liquid petroleum diesel or natural gas
tank or source, as the case may be, to the new shelter in accordance with
the Specifications;
(g) any required modifications to the foundation of any of the
towers, shelters or sites as set forth in the Tower Analysis;
(h) any upgrades required to conform the sites and Facilities to
local building code provisions and any other regulatory Requirements of
Law, including, but not limited to, those related to health and safety;
(i) the removal of any above or below ground obstructions or
materials such as trees and power lines which may affect the performance
of the System or other activities contemplated by this Agreement;
(j) all required fence extensions and replacements;
(k) any required modifications to the grounding and bonding Systems
at each site to conform to the Specifications;
(l) any required modifications to the pressurizing equipment to
conform to the Specifications, including the pressurizing equipment
manifolds and dehydrators; and
(m) any other miscellaneous site work necessary to prepare
Incumbent's sites for the installation and operation of the new System.
2.3 Cooperation by Incumbent. Incumbent shall fully cooperate with Pathnet
and shall provide Pathnet with all required assistance in completion of such
obligations in Pathnet's performance of its obligations under this Section 2 of
this Schedule A.
A-3
<PAGE>
2.4 Maintenance of Modifications. Incumbent shall ensure that all
modifications performed pursuant to this Section 2 of this Schedule A are
maintained in accordance with the Specifications, including, but not limited to,
the upgrade or replacement of any equipment and materials described in the
Modifications SOW.
2.5 Choice of Equipment Vendors and Service Providers.
2.5.1 Engagement. In the event Incumbent engages an equipment vendor
or service provider directly in accordance with this Section 2.5 of
Schedule A (i) Pathnet shall have the right to approve any equipment
vendors or service providers, which approval shall not be unreasonably
withheld, (ii) all invoices, purchase orders or other bills relating to
such equipment or services shall be sent to both Pathnet and Incumbent and
(iii) Incumbent shall not pay any such invoice, purchase order or bill
without the prior approval of Pathnet, which approval shall not be
unreasonably withheld.
2.5.2 Approval. Incumbent shall have the right to reasonably approve
any Subcontractor engaged to perform the Services set forth in this
Section 2 of Schedule A.
SECTION 3. DESIGN OF NEW SYSTEM
3.1 Approval of System Design. Within ten (10) days after receipt by
Incumbent of the System Design from Pathnet, Incumbent shall either (i) deliver
to Pathnet written approval of such System Design or (ii) deliver to Pathnet a
written list of Incumbent's suggested design modifications. Pathnet shall review
any such suggested modifications and, in Pathnet's sole discretion, incorporate
some, all or none of such suggested modifications into the System Design.
Pathnet shall, within thirty (30) days of receipt of Incumbent's suggested
modifications, deliver a revised System Design to Incumbent. In the event
Incumbent fails to deliver to Pathnet in writing its approval as set forth above
within the prescribed time period, Pathnet shall assume that Incumbent has
approved such System Design.
3.2 Modification of System Design. At any time and from time to time,
Pathnet shall have the right to modify the System Design upon written notice to
Incumbent of such modifications, as new versions of Equipment used in the System
may become available from manufacturers or software providers, as Technology is
improved and as determined by Pathnet in its sole discretion.
3.3 System Technical Specifications. Pathnet shall (i) design the System
in accordance with the minimum network performance standards set forth in
Section 3 of this Schedule A, (ii) in each instance where reasonably possible,
use the towers, antennas, waveguide, and other system components of Incumbent's
existing system in the System Design and (iii) design the System to meet the
following technical specifications:
(a) Radio System Design. The active radio components of the System
shall be designed to conform to the Specifications and the manufacturer
specifications set forth in Exhibit A-2 to this Schedule A.
A-4
<PAGE>
(b) Radio Software Design. The software used to operate the radios
shall conform to the Specifications and the manufacturer specifications
set forth in Exhibit A-2 to this Schedule A.
(c) Antenna and Frequency Specifications. The radio communications
equipment shall transmit and receive on the frequencies as set forth in
the System Design. All antenna reflectors used in the System shall conform
to (i) Category A standards as defined by the FCC and (ii) the
specifications set forth in any PCN relating to the System, and each high
performance antenna shall be fitted with a radome. All antenna mounting
hardware shall meet wind and loading requirements for the applicable
county and shall substantially conform to EIA-222-F.
(d) Tower Specifications. All towers shall substantially conform to
(i) the EIA/TIA-222-F-1991, Structural Standards for Steel Antenna Towers
and Antenna Supporting Structures, 1996, (ii) EIA/222-F Specifications for
loading for the appropriate county, and (iii) any other required FCC and
FAA rules and regulations.
(e) Waveguide Specifications. Waveguide used in the System specified
for transmission line shall be of a premium grade to ensure minimum
return.
(f) D.C. Power Requirements. The radio components of the System
shall be powered by 48 volts DC with at least eight (8) to ten (10) hours
of battery capability (assuring less than twenty (20) amp loads for
Incumbent Equipment), and all necessary chargers, distribution systems and
transfer switches for generators as set forth in Exhibit A-3 to this
Schedule A.
(g) A.C. Power Requirements. A.C. electrical power required by the
System shall be consistent with local requirements and the usage at each
of the sites set forth in Schedule B and shall be 120/240 volt single
phase 200 amp service as set forth in Exhibit A-3 to this Schedule A.
(h) Bonding and Grounding Specifications. The System and all
associated electrical components shall be grounded and bonded to current
EIA and IEEE specifications and in accordance with the Specifications set
forth on Exhibit A-6 to this Schedule A.
(i) Order Wire Specification. Each equipment shelter shall be
equipped with an Order Wire and a handset, which will be used as a talk
circuit for System operation and maintenance purposes and which will be
carried by Pathnet as part of the System payload.
(j) Diagnostic Circuit. Each equipment shelter shall be equipped
with a diagnostic circuit that will be used to connect each such shelter
and the Equipment housed in such shelter to the Network Management System.
A-5
<PAGE>
(k) Multiplexing from OC-3 to DS-1 Level. The System Design shall
provide for any required multiplexing of the OC-3 to the DS-1 level at
each site using an OC-3 Multiplexer.
(l) Multiplexing from DS-1 to DS-0 Level. Within thirty (30) days
after the date hereof, Incumbent shall deliver to Pathnet a Schedule
substantially in the form of Exhibit A-4 to this Schedule A setting forth
Incumbent's multiplexing requirements. Upon receipt of such Exhibit A-4 to
this Schedule A, Pathnet will reflect in the System Design the requested
multiplexing of the DS-1 to the DS-0 level at each site using a 1/0
Multiplexer subject to limitations in Drop and Insert Capacity between
each Switched Mod Section using available Wayside Channels.
(m) Wayside Channels. Incumbent or Pathnet as reflected in the
System Design, as determined by Pathnet in its sole discretion, shall use
the Wayside Channels.
(n) Spectral Loading Requirements. The System shall meet the then
current FCC requirements of spectrum efficiency outlined, 47 C.F.R. 101
and any successor rule or regulation.
(o) Capacity of System. The System shall be comprised of, at a
minimum, 3 DS-3 capability and will have a 1 x n protection switch
allowing for upward migration to a minimum of 1 x 7 protection. The
capacity of the System may be expanded to a 2 x 14 protection level, using
additional spectrum or crossband filters, provided, such Capacity
Expansion does not degrade the System below the performance standards set
forth in this Section 3 of this Schedule A.
(p) SONET Architecture. The digital microwave radios used in the
System shall operate under a SONET format.
(q) Shelters Design. A proposed building layout for the new shelters
to be constructed and the existing shelters to be modified shall be as set
forth in Exhibit A-5 to this Schedule A and shall comply with all
applicable local laws, regulations and ordinances.
(r) Channel Plan. The System shall be designed such that Incumbent
and Pathnet shall be allocated capacity as set forth in the Channel Plan
and Section 7.2.2.
(s) Interconnections Limitations. The System shall have no more than
four (4) Interconnections per LATA. No more than two (2) of such
Interconnections shall be to other segments of the Pathnet network created
from facilities of other Persons and no more than two (2) of such two
Interconnections shall be to the PSTN. At each Interconnection site, there
shall be no more than two (2) additional antennas used solely for such
Interconnection purposes. Interconnections may be by microwave or other
media. To the extent Pathnet develops spurs, Pathnet shall specify the
Interconnections at such spurs on Exhibit A-7 to this Schedule A. To the
extent Incumbent develops spurs
A-6
<PAGE>
for its own connectivity purposes, Incumbent shall specify the
Interconnections at such spurs on Exhibit A-7 to this Schedule A.
(t) Protection Switching Requirement. Power, radio, and multiplexing
equipment shall be redundant with automatic protection switching to
minimize Outages as a result of equipment failure.
(u) Generator Requirements. Generators shall be required at all
sites with a history of power outages and all sites that are difficult to
access and any other sites as determined by the Parties.
(v) System Integration. The System shall be integrated into the
total Pathnet telecommunications network as set forth in the System
Design.
(w) Transmission Line Requirements. One (1) or more transmission
lines shall be connected to each antenna and such lines will be anchored
firmly to the tower in accordance with the manufacturer's recommendation.
(x) Equipment Rack Specifications. Each equipment rack shall be
firmly anchored to the floor, and the overhead channel iron or the
adjacent racks.
(y) Environmental Control of Shelters. Equipment shelters shall be
environmentally controlled to standards, between 55(degree) and 80(degree)
and shall be maintained within the desired humidity range, as set forth in
the manufacturer's specifications in Exhibit A-2 to this Schedule A and as
set forth in Exhibit A-5 to this Schedule A.
(z) Spurs. The System shall be designed to allow the build-out of
spurs set forth on Exhibit A-8 to this Schedule A from the backbone
network for Pathnet's and Incumbent's own network and internal
communications purposes.
(aa) Network Management System. The System Design shall include the
Network Management System that complies with the specifications set forth
in Section 7.6 of this Schedule A.
(bb) Fuel Tanks and Lines. All liquid petroleum, diesel and natural
gas tanks and lines required shall meet all applicable environmental and
health and safety standards and Requirements of Law.
(cc) Pressurizing Equipment. The System Design shall include all
required pressurizing equipment, manifolds and dehydrators.
3.4 System Performance Criteria
3.4.1 Availability. The System shall be designed to meet or exceed
the long haul objective of 99.98% availability on an annual basis for a
4,000 mile system, which is equivalent to a one way system Outage of less
than 0.4 seconds, per mile, per year.
A-7
<PAGE>
3.4.2 Circuit Acceptance Level. The System shall be designed such
that any continuous five hundred (500) mile segment of the System during
any consecutive twenty-four hour period shall have no more than one (1)
Errored Second, shall have 99.998% Error Free Seconds and shall have no
Severely Errored Seconds, measured at the DS-1 level.
SECTION 4. INSTALLATION AND CONSTRUCTION
4.1 Documentation.
4.1.1 Project Management Plan, Project Schedule and Cutover Plan.
Upon approval of the System Design, Pathnet shall deliver to Incumbent (i)
a plan of the respective responsibilities of each Party and other related
items relating to the construction and installation of the System (the
"Project Management Plan"), (ii) a schedule for the installation of the
System (the "Project Schedule"), and (iii) a schedule for the cutover of
the System (the "Cutover Plan"). Incumbent shall have ten (10) days to
either (i) approve by written notice to Pathnet such Project Management
Plan, Project Schedule and Cutover Plan or (ii) deliver to Pathnet a
written list of Incumbent's suggested modifications to such Project
Management Plan, Project Schedule and Cutover Plan, as the case may be.
Pathnet shall review any such suggested modifications and, in Pathnet's
sole discretion, incorporate some, all or none of such suggested
modifications into the Project Management Plan, Project Schedule and
Cutover Plan, respectively. In the event Incumbent does not notify Pathnet
in writing of its approval or suggested modifications of the Project
Management Plan, Project Schedule and Cutover Plan as set forth above
within the prescribed time period, Pathnet shall assume that Incumbent has
granted such approval.
4.1.2 Installation Reports. After installation has begun and
continuing until Commissioning, Pathnet shall provide to Incumbent a
bi-weekly progress report (each a "Progress Report") setting forth, (i) a
description of the work performed during the immediately preceding period,
(ii) a list of any material deviations from the proposed schedule of work
and (iii) an analysis of such deviations with respect to their impact upon
the timely deployment of the System.
4.1.3 Changes to Drawings. In the event that during the process of
Installation any of the Project Drawings delivered pursuant to Section 1.3
of this Schedule A require any modifications, Pathnet shall make any such
modifications to such Project Drawings, shall deliver the revised Project
Drawings to Incumbent, and shall place a copy of such revised Project
Drawings at each site.
4.1.4 As-Built Drawings. Upon completion of each phase of
installation as set forth in the Project Schedule, Pathnet shall deliver
to Incumbent an as-built drawing of the System (each an "As-Built
Drawing") and shall incorporate the final As-Built Drawing into the
appropriate equipment manuals.
A-8
<PAGE>
4.2 Installation by Pathnet. Pathnet shall construct and install the
System as set forth below and in accordance with this Schedule A and the
documents and schedules prepared and delivered pursuant to this Schedule A.
(a) Radios. Pathnet shall furnish and install the digital radios
that meet the Specifications.
(b) Antennas and Frequencies. Pathnet shall furnish and install (i)
the antennas that meet the Specifications and (ii) any required antenna
mounting hardware to secure such antennas to the towers in accordance with
the Specifications.
(c) Waveguide Bridge and Supports. Pathnet shall furnish and install
(i) waveguides that meet the Specifications, (ii) new waveguide bridges on
two faces of the existing towers and (iii) all additional supports
required of the waveguide from the tower to termination inside the
shelter.
(d) Bonding and Grounding. Pathnet shall furnish and install all
required ground kits in accordance with the Specifications, including, but
not limited to, waveguide ground kits at the antenna, the bottom of the
tower and at the entry port of the shelter, tower anchor grounding kits,
and ground wire rings for the shelters.
(e) Moving Company. During installation of the System, Pathnet, or a
full service moving and warehousing company hired by Pathnet, shall handle
the pick up of necessary equipment for temporary warehousing in all
required areas at and near the installation sites.
(f) Order Wire. Pathnet shall furnish and install an Order Wire at
each site in accordance with the Specifications and shall establish Order
Wire connectivity, including, but not limited to, connectivity to all
necessary external interfaces.
(g) OC-3 Multiplexers. Pathnet shall furnish and install all
required OC-3 Multiplexers to the DS-1 level as set forth in Section 3 of
this Schedule A.
(h) Channel Plan. Pathnet shall perform cross-connects of T-1 lines
in accordance with the Channel Plan and the Specifications.
(i) Interconnection Placement. Pathnet shall furnish and install
connecting facilities from the System to the PSTN, including but not
limited to connections to POP's of purchasers of Excess Capacity and
Pathnet shall furnish and install all cables required to interconnect
project equipment within the System.
(j) Transmission Lines. Pathnet shall (i) furnish and install all
required transmission lines on the towers, (ii) route such transmission
lines to the equipment racks in the shelters, (iii) connect both ends of
such transmission lines and (iv) interface such transmission lines to the
radio equipment in accordance with the Specifications.
A-9
<PAGE>
(k) Equipment Racks. Pathnet shall furnish and install all equipment
racks necessary for the Equipment installed by Pathnet in accordance with
the Specifications.
(l) Network Management System. Pathnet shall furnish and install the
Network Management System, including, but not limited to, all required
alarms, panels, terminals, software and cables at all appropriate
demarkation points in accordance with the Specifications.
(m) Spurs. Pathnet shall furnish and install all of the necessary
equipment to build-out Pathnet's spurs and Incumbent's spurs (as requested
and paid for by Incumbent), each as set forth in Exhibit A-8 to this
Schedule A in accordance with the Specifications.
(n) Deconstruction of Existing System. As required at each site,
Pathnet shall move Incumbent's existing system to one side, providing
space for permanent installation of the new System.
(o) Pre-Commissioning System. Pathnet shall install an "initial"
digital System in such a way that it can be operated and tested without
interfering with Incumbent's existing system performance.
(p) Parallel Systems. In order to minimize system downtime, Pathnet
shall provide parallel operations to the Incumbent's existing analog
system with the digital equipment system using new frequencies and antenna
configurations.
4.3 Cooperation During Installation. During installation, Incumbent shall
provide all necessary cooperation to Pathnet, including, but not limited to,
posting at each site any Permits or licenses for building or tower work related
to the construction at such site and providing reasonable access to its
Facilities as set forth in Section 5.
4.4 Installation by Incumbent. Incumbent shall furnish and install all
required equipment and materials at each point of demarkation to meet
Incumbent's internal communication needs, including, but not limited to,
furnishing and installing all 1/0 Multiplexers as set forth in Section 3 of this
Schedule A and all other interconnection equipment relating to Incumbent's spurs
set forth in Exhibit A-8 to this Schedule A.
SECTION 5. PRE-COMMISSIONING TESTING
5.1 Factory Acceptance Test.
5.1.1 Tests to be Performed. Pathnet shall coordinate all factory
acceptance testing on the Equipment. Such factory acceptance testing shall
include (i) linking together of all racks in each Switched Mod Section to
simulate the System as it will be configured in the field, (ii) testing at
the panel terminal and System level for certification
A-10
<PAGE>
and compliance with the Specifications, (iii) connecting the radio bays by
coaxial cables through attenuators to simulate "RSL" conditions as
encountered in the field, (iv) testing on a path basis to the applicable
configuration of the System, (v) testing of all miscellaneous Equipment
such as supervisory fault alarm and control and service channel units and
(vi) testing the equipment as a System to resolve all interface problems.
5.1.2 Observing Factory Testing. Incumbent shall have the right, at
its own expense, to witness in person the factory testing of the
Equipment.
5.2 Rack Test. Pathnet shall perform a rack test once the radio cabinet
has been installed.
5.3 Path Test. Pathnet shall perform a path test after each site has been
turned up.
5.4 End-To-End Test. Pathnet shall perform an end-to-end test for each
Switched Mod Section on the System once all sites have been turned up.
5.5 Field Test. Once the Equipment is installed and operational, Pathnet
shall test each path pursuant to the following field tests to ensure performance
of the Equipment over the designated path in accordance with the criteria and
standards set forth in this Schedule A.
(a) Radio Hop Test: Pathnet shall (i) align all digital microwave
paths, (ii) measure and record transmitter frequency, (iii) measure and
record transmitter power, (iv) calculate and record receiver fade margin,
(iv) perform Bit Error Rate checks and (v) record results of such Bit
Error Rate checks.
(b) Digital Multiplex Test: Pathnet shall (i) perform standard
loop-back tests and (ii) verify the performance of all local alarm points
to the DS-1 level.
(c) System Test: Pathnet shall (i) perform an end-to-end Bit Error
Rate test of the message one radio for a 24-hour period and an end-to-end
Bit Error Rate test of the protect radio for 1 hour, (ii) verify equipped
channel units through microwave system, (iii) verify performance of Order
Wires and Wayside Channels, and (iv) verify performance of the alarm
points function throughout the System.
5.6 Site Acceptance Testing. Pathnet shall perform all site acceptance
tests as recommended by the manufacturers of the Equipment and Pathnet shall
provide the results of any such site acceptance testing to Incumbent promptly
after completion of such testing.
5.7 Acceptance Procedure. After completion of site acceptance testing as
set forth in Section 5.6 of this Schedule A, Pathnet shall implement the
following acceptance procedure:
(a) Incumbent shall promptly perform an installation inspection and
deliver to Pathnet a written list of all material deficiencies from the
Specifications to be corrected by Pathnet (the "Deficiency List").
A-11
<PAGE>
(b) Pathnet shall promptly correct such material deficiencies on the
Deficiency List and shall, upon completion, certify to Incumbent that such
items have been corrected.
(c) Pathnet shall submit to Incumbent all of the test data collected
through the performance of the tests set forth in Section 5 of this
Schedule A for Incumbent's approval, which approval shall not be
unreasonably withheld.
(d) Incumbent shall deliver to Pathnet a Certificate of Acceptance
substantially in the form of Exhibit A-9 to this Schedule A.
5.8 Equipment Required for Pre-Commissioning Testing. Pathnet shall
furnish all Pre-Commissioning Test Equipment.
SECTION 6. CUTOVER
6.1 Cutover.
6.1.1 Pathnet Responsibilities. Pathnet shall (i) manage the cutover
process for the System, (ii) perform such cutover in accordance with the
Cutover Plan and (iii) notify Incumbent of the circuit activity that will
occur upon Commissioning of each path or Segment and the impact that such
activity may have on the Incumbent's existing system. Promptly after each
site has been cutover, Pathnet shall notify Incumbent of the completion of
such cutovers.
6.1.2 Incumbent Responsibilities.. Incumbent shall (i) cooperate and
coordinate its cutover of its voice and data circuits with Pathnet and the
Cutover Plan, (ii) complete its cutover of its voice and data circuits no
more than ninety (90) days after Commissioning of each path or Segment by
Pathnet and (iii) no more than ninety (90) days after cutover by Incumbent
of its voice and data systems, remove all unused equipment from
Incumbent's sites in compliance with all applicable Requirements of Law.
6.2 Station Log Books. Pathnet shall establish station logs books in
accordance with all FCC rules and regulations (each a "Station Log Book") and at
Commissioning shall deliver to Incumbent an original of each Station Log Book at
Commissioning.
SECTION 7. SYSTEM OPERATION
7.1 Increases in Capacity. At any time, and from time to time, Pathnet
shall have the right, at its sole discretion, to increase the capacity of the
System beyond the capacity created in the initial build-out; provided, that
Pathnet fulfills the following conditions before Commissioning any such proposed
Capacity Expansion:
A-12
<PAGE>
(a) Capacity Expansion Schedule. At least fifteen (15) days prior to
any Capacity Expansion, Pathnet shall provide to Incumbent a capacity
expansion schedule (each, a "Capacity Expansion Schedule") setting forth
the amount of capacity to be included in such Capacity Expansion, the
specific paths to be expanded, the expansion name (including each path
that is affected), and the expected Commissioning of such Capacity
Expansion.
(b) Performance of Capacity Expansion. Prior to the Commissioning of
any Capacity Expansion, (i) Pathnet shall perform all required testing on
such Capacity Expansion to confirm that any such Capacity Expansion will
not degrade the System below the Specifications (ii) Pathnet shall provide
the results of such testing upon receipt of such test results to Incumbent
for its review and approval and (iii) Pathnet shall obtain from Incumbent
a Certificate of Acceptance substantially in the form attached hereto as
Exhibit A-9 to this Schedule A with respect to such Capacity Expansion.
(c) Incumbent's Right to Contest Capacity Expansion. In the event,
after receipt of the test results as set forth above, Incumbent reasonably
determines that a proposed Capacity Expansion will degrade the System
below the Specifications, Incumbent shall have the right to withhold
delivery of any Certificate of Acceptance with respect to such Capacity
Expansion and shall hire an independent third party approved by Pathnet
(which approval shall not be unreasonably withheld) to perform additional
testing on such Capacity Expansion. In the event such independent third
party reports that the proposed Capacity Expansion will not result in the
degradation of the System below the Specifications, Incumbent (i) shall
promptly deliver to Pathnet a Certificate of Acceptance with respect to
such proposed Capacity Expansion and (ii) shall pay for the reasonable
costs of such independent third party evaluation. In the event that such
independent third party reports that the proposed Capacity Expansion will
result in the degradation of the System below the Specifications (i)
Pathnet shall make all required modifications to the System and the
proposed Capacity Expansion such that, in the opinion of such independent
third party, the proposed Capacity Expansion shall not degrade the System
below the Specifications, (ii) upon verification by such independent third
party that the proposed Capacity Expansion, as modified by Pathnet, shall
not degrade the System below the Specifications, Incumbent shall promptly
deliver to Pathnet a Certificate of Acceptance substantially in the form
attached as Exhibit A-9 to this Schedule A with respect to such Capacity
Expansion and (iii) Pathnet shall pay for the reasonable costs of such
independent third party evaluation.
7.2 Maintenance of System. Within sixty (60) days after the Effective
Date, Pathnet and Incumbent shall execute and deliver the Maintenance Services
Agreement. Pathnet shall have the right to supplement at its own expense at any
time, and from time to time, any maintenance performed on the System, as
determined by Pathnet in its sole discretion.
7.3 Additional Transmission Lines and Antennas. After Commissioning, if
the System is expanded pursuant to any Capacity Expansion, Pathnet shall have
the right to elect to install a second transmission feed line or a third antenna
to any tower. In such instance, Pathnet shall (i) perform any tower analysis
that may be required before the installation of such
A-13
<PAGE>
transmission line or antenna, (ii) furnish and install such additional
transmission line and any associated connectors and mounting hardware for
securing such transmission line to the towers, (iii) furnish and install such
antenna and other devices and equipment associated with such antenna and (iv)
perform strengthening to the tower required for such transmission line or third
antenna.
7.4 Additional Order Wires and Diagnostic Circuits. At any time and from
time to time, Pathnet shall have the right to install additional Order Wires and
diagnostic circuits at System sites, which Order Wires and diagnostic circuit
may or may not be carried as part of the System payload as determined to be
necessary or appropriate by Pathnet in its sole discretion.
7.5 24-Hour Network Monitoring Center. Upon Commissioning and for the
period thereafter until the Expiration Date, Pathnet shall operate a network
monitoring center (the "Network Monitoring Center") twenty-four (24) hours a
day, seven (7) days a week, which Network Monitoring Center shall, among other
things, handle all problems and trouble reports that may arise and monitor the
System as set forth in Section 7.6 of this Schedule A.
7.6 Network Management System. At all times after Commissioning until the
Expiration Date, Pathnet shall provide a network management system to be
operated at the Network Monitoring Center (the "Network Management System")
which Network Management System will (i) manage all network elements within the
System (21 SMX or equivalent), (ii) monitor and control the facilities system,
the radio system, and the OC-3/DS-1 multiplex system, (iii) collect performance
data such as Errored Seconds, Severely Errored Seconds, frame loss and Failed
Seconds consistent with the manufacturer's specifications set forth in Exhibit
A-2 to this Schedule A, (iv) monitor the shelter environments (including
commercial power failure, door alarms, charger failures, low waveguide pressure,
air conditioner failure, tower light alarms, generator runs (if any), waveguide
dehydrator excessive runs, smoke alarms, high temperature and low temperature),
radio equipment, multiplexing equipment, and Incumbent equipment (as reasonably
requested by Incumbent) and (v) provide Incumbent with the ability to monitor
the System separately from the overall Pathnet network.
7.7 Alarm and Event Logging and Reports. Within thirty (30) days after the
end of each calendar quarter, Pathnet shall provide to Incumbent a report (each
an "Alarm and Event Report") setting forth a log of all alarms and events
recorded by the Network Management System.
7.8 System Outages. Each Party shall use its best efforts to avoid
unscheduled System Outages in the performance of each Party's respective rights
and obligations under this Agreement.
7.9 Replacement of Radios. Beginning in the fifteenth (15th) year after
Commissioning, Pathnet shall begin replacing the radios and radio software
relating to the System and shall replace such radios and radio software at an
average rate of ten percent (10%) a year for ten (10) years.
A-14
<PAGE>
7.10 Network Loops. In the event in the construction of the Pathnet
network a network loop is created relating to the System, Pathnet shall
facilitate allowing Incumbent to benefit from the existence of such network loop
in the event of a System Outage.
SECTION 8. GENERAL
8.1 Access to Sites. In addition to any access rights relating to the
Leased Premises set forth in Section 5 of the Agreement, Incumbent shall provide
upon the reasonable request of Pathnet, road access for all construction
vehicles, which access may involve the construction by Incumbent of additional
roads and paths.
8.2 Parking at Sites. At the request of Pathnet, Incumbent shall provide
for vehicular parking at each site at no charge to Pathnet for use during the
term of this Agreement; provided, however, in the event sites are located in
urban areas where vehicles are parked in privately operated lots or garages,
Pathnet shall be responsible for any and all parking charges at such urban
sites.
8.3 Use of Telecommunications Devices. While visiting Incumbent's sites,
Incumbent shall allow Pathnet to use existing telephone lines or Order Wires in
connection with Pathnet's performance of its rights and obligations under this
Agreement.
8.4 Fuel Tanks. Incumbent shall ensure that all liquid petroleum, diesel
or natural gas tanks, as the case may be, are adequately supplied throughout the
term of this Agreement.
8.5 Retaining of Records. All records and reports required pursuant to
this Schedule A, shall be retained by Pathnet or Incumbent, as the case may be,
for at least five (5) years or any longer period as may be required by law.
8.6 Work Permits. Incumbent shall obtain all necessary local, state and
Federal construction and work permits as required to perform all of the services
set forth in this Agreement.
8.7 Hazardous Material.
8.7.1 Existence of Hazardous Material. Without the consent of
Incumbent as described below, Pathnet shall not bring or cause or permit,
knowingly or unknowingly, any Hazardous Material to be brought or remain
upon, kept, used discharged, leaked or emitted on any of Incumbent's sites
or Facilities.
8.7.2 Compliance with Environmental Laws. In the event that
Incumbent allows Pathnet to bring Hazardous Materials to Incumbent's sites
as set forth in the Environmental Audit, Pathnet shall strictly obey and
adhere to any and all Federal, state or local laws, ordinances, orders,
rules, regulations, codes or any other government restrictions or
requirements (including, but not limited to, CERCLA and RCRA) which in
A-15
<PAGE>
any way regulates, governs, or impacts Pathnet's possession, use, storage,
treatment or disposal of such Hazardous Material.
8.8 Transportation. Pathnet shall provide transportation for all Pathnet
personnel or Subcontractors to each of Incumbents sites and between such sites
in connection with the performance of the Services.
8.9 Storage. Incumbent shall provide at no charge to Pathnet or any vendor
providing materials for use in the System, secure and appropriate storage for
all equipment and materials to be installed or used for the installation,
testing or operation of the System, which storage facilities shall also serve as
the drop-ship point for staging all installation equipment used in the System.
8.10 Unpacking and Trash Removal. Pathnet shall (i) unpack all crates and
boxes, (ii) remove all trash created by such unpacking from Incumbent's sites
and (iii) verify all packing lists. Incumbent shall regularly remove all other
trash from its sites and Facilities.
8.11 Manufacturing and Ordering of Equipment. As the System is installed
or upgraded after Commissioning, Pathnet shall order all required equipment and
materials, including, but not limited to, all required installation materials,
from the respective manufacturers in accordance with the timing set forth in the
Project Schedule.
8.12 Ship and Delivery Schedules. At least two (2) weeks prior to receipt
of any equipment or materials to be used in the modifications or installation
set forth in Section 2 and Section 4 to this Schedule A, respectively, Pathnet
shall provide to Incumbent detailed ship and delivery schedules relating to such
equipment and materials.
8.13 Electricity. Incumbent shall provide all required electricity for the
design, modification, installation, operation and monitoring of the System in
accordance with the specifications set forth in Exhibit A-3 to this Schedule A.
A-16
<PAGE>
EXHIBIT A-1
SYSTEM EQUIPMENT, TOWERS AND SHELTERS
<TABLE>
<CAPTION>
Equipment Quantity
- --------- --------
<S> <C>
New Towers: 2
New Buildings: 25
New Generators: 5 (4 mobile)
New DC Charger Systems: 26
New Battery Plants: 26
New Antennas: 100
New Waveguide: 19,265 Feet
New NEC 2000 Sonet Radios: 100 TRR's
New OC-3 Multiplexers: 12 Shelves
</TABLE>
A-17
<PAGE>
EXHIBIT A-2
MANUFACTURERS SPECIFICATIONS FOR RADIOS
NEC OC-3 MULTIPLEXER SPECIFICATIONS
IMT-150
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Physical: Power Requirements: Interface: Features:
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Mounts in a -48 volts DC High Speed: Software Provisioning
23-inch EIA rack Approximately 125 OC-3 Optical Full Bandwidth Time
Height 11.4 inches watts (ADM Low Speed: Slot Assignment
Width 21.4 configuration) OC-1, STS-1, X.25 Gateway for OSS
inches DS3, or DS1 DS1 PM Monitoring
Depth 10 inches Capability
- --------------------------------------------------------------------------------
</TABLE>
NEC 2000 SERIES
Specifications:
Physical:
One cabinet (600 mm wide, 300 mm deep and 2.2 m high) for 4 radio channels
(Includes OC-3 interface per channel, space diversity receiver, order wire and
wayside DS1 interface, and 1:N switch).
Power Requirements:
- -24 or -48 volts DC
Approximately 200 watts per radio channel for a terminal configuration
Approximately 150 watts per radio channel direction (1 TRR) for a repeater
configuration
Interface:
OC-3
Operating Specifications:
Frequency Band: 5.945 to 6.425 GHz
Modulation: 128 QAM MLCM
Capacity: 155.52 Mb/s plus radio overhead (Wayside DS1, Order Wires, ATPC
signals, 1:N commands, monitoring)
Transmit Power at interface to transmit waveguide: +29.7 dBm
System Gain (Waveguide interface to waveguide interface - no ATPC): 101.1 dB
System Gain (Waveguide interface to waveguide interface - with ATPC): 103.1
dB
Dispersive Fade Margin (10^-3): 48 dB
FCC Identifier: BSF6P155-S02A
Emission Designator: 30M0D7W
A-18
<PAGE>
EXHIBIT A-3
ELECTRICITY AND POWER SPECIFICATIONS OF THE SYSTEM
DC POWER SPECIFICATIONS
<TABLE>
<CAPTION>
Site Configuration Radio Mux Chan bank Incumbent Site Total Site Total Battery Size
7:1(Watts) OC-3(Watts) (Watts) Equip(Watts) WATTS DC AMPS 10 Hour Reserve
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Terminal End 1:3 800 330 250 720 2,100 44 Amps 440 AH
Terminal End 1:7 1,600 770 250 720 3,340 70 Amps 700 AH
Repeater 1:3 1,200 None 250 720 2,170 45 Amps 530 AH
Repeater 1:7 2,400 None 250 720 3,370 70 Amps 700 AH
2 Way Junction 1:3 1,600 125 250 720 2,695 56 Amps 600 AH
2 Way Junction 1:7 3,200 125 250 720 4,295 90 Amps 900 AH
</TABLE>
AC POWER SPECIFICATIONS
<TABLE>
<CAPTION>
DC Heat & Air Total Total
Site Configuration Chargers Conditioning Lights Miscellaneous AC WattsAC Amps @ 220 VAC
<S> <C> <C> <C> <C> <C> <C>
Terminal End Nominal 3,696 3,000 300 1,500 8,496 39
Terminal End Maximum 8,712 6,000 1,600 2,800 19,112 87
Repeater Nominal 3,696 4,500 300 1,500 9,996 45
Repeater Maximum 8,712 9,000 1,600 2,800 22,112 101
2 Way Junction Nominal 4,752 6,000 500 1,800 13,052 59
2 Way Junction Maximum 8,712 12,000 2,000 3,200 2,512 118
</TABLE>
Note: All New Shelters are AC equipped for 200 Amps, single phase, 220VAC
Service
A-19
<PAGE>
EXHIBIT A-4
INCUMBENT MULTIPLEXING REQUIREMENTS
Segment A
Casper, Wyoming to Minden, Nebraska
<TABLE>
<CAPTION>
Site Name DS-1 Wired DS-1 Equipped
- --------- ---------- -------------
<S> <C> <C>
Casper, Wy [***]
Glenrock, Wy [***]
Douglas, Wy [***]
Beacon Hill, Wy (To be replaced) [***]
Guernsey, Wy [***]
Torrington, Wy [***]
Scottsbluff, Ne [***]
Northport, Ne [***]
Lisco, Ne [***]
Chappell, Ne [***]
Big Springs, Ne [***]
Ogallala, Ne [***]
Sutherland, Ne [***]
North Platte, Ne [***]
Brady, Ne [***]
Cozad, Ne [***]
Johnson Lake, Ne [***]
Holdredge, Ne [***]
Minden, Ne [***]
</TABLE>
Segment B
Lisco, Nebraska to Lakewood, Colorado
<TABLE>
<CAPTION>
Site Name DS-1 Wired DS-1 Equipped
- --------- ---------- -------------
<S> <C> <C>
Lisco, Ne [***]
Sidney, Ne [***]
Peetz, Co [***]
Sterling, Co [***]
Fort Morgan, Co [***]
Wiggins, Co [***]
Dougan, Co [***]
Lakewood, Co [***]
</TABLE>
A-20
<PAGE>
EXHIBIT A-5
EQUIPMENT SHELTERS, SPECIFICATIONS AND DESIGN
1. Summary
This "Equipment Shelter Specification" applies to concrete pre-cast,
pre-equipped, transportable equipment shelters for use in conjunction with
equipment installed by Pathnet, Inc. and covers material and workmanship
standards. This document is designed to assist the user in defining your
specific equipment shelter requirements. The shelter must be designed for the
explicit purpose of housing electronic equipment, fiberoptics equipment,
measuring devices and other related components, within a controlled environment
required for the proper operating conditions for the equipment. The shelter
manufacturer must adhere to compliance with all national building codes. All
shelters will be assumed to be placed within ten (10) feet of the base of the
tower.
2. Foundation
The shelter shall be designed for any of the following foundation types:
- - Pier & Beam
- - Slab
- - Perimeter Beam
3. Shelter Type
The shelter shall be constructed of pre-cast, pre-assembled Portland concrete
and shall be manufactured in a controlled environment.
4. Shelter Size
The shelter should conform to the following dimensions unless otherwise noted:
- - One room shelter (no generator) - 12' X 20' OD
- - Two room shelter (equipment room and generator room) - 12' X 28' OD
5. Operating Environment
5.1. Temperature
The optimum operating temperature of the equipment to be installed is 75
degrees F (24 degrees C) unless otherwise specified by Pathnet.
5.2. HVAC
The heating and cooling requirements for a shelter are based upon the
outside maximum and minimum temperature expected for the shelter location
and the equipment heat
A-21
<PAGE>
output specified by Pathnet. Typical heat load values are 12,000 to 18,000
BTU/HR. Design heat loads for specific shelters will be provided by
Pathnet. Two wall-mounted air conditioners are required. The units are to
be sized so that one unit will maintain an interior temperature of 75
degrees F with the highest exterior temperature expected for shelter
location.
6. Hardware
All external hardware will be galvanized or coated to protect against corrosion.
7. Structurals. Structural design and manufacturing shall conform to ACI 318-89
requirements.
7.1. Floor
The floor section shall be constructed of 8" waffled structural pre-cast
concrete. The ribs shall be 2'-0" O.C. transverse and 4'-0" O.C
longitudinal. All surfaces shall be smooth. The interior surface shall be
covered with 1/8" X 12" X 12" square vinyl floor covering, bonded with a
waterproof contact adhesive.
7.2. Roof
The roof section shall be constructed of pre-cast concrete with 1/4" per
foot drainage slope. The ceiling insulation and finish shall be foamboard
insulation with 3/8" vinyl coated board. All joints will be covered by
plastic joint or corner trim. The roof section shall provide a 2" overhang
on all sides. The roof will be a hip type sloping in 4 directions. It
shall be constructed as a cap and should fit over the walls, leaving no
exposed roof-to-wall joint.
7.3. Wall
The wall section shall be constructed of 4" solid concrete, cast in one
piece to minimize joints, with an exposed aggregate exterior finish and
capable of withstanding gun fire from a 30.06 at 50 feet. The wall
insulation and finish shall be foamboard insulation with 1/2" vinyl coated
board. All joints will be covered by plastic joint or corner trim. All
floor/wall intersections will be finished with 4" vinyl baseboard. There
will be no exposed wall-to-floor joint.
8. Thermal
Standard wall and ceiling thickness shall be 1" foamboard insulation. The
calculated system value is R9.6 with 4" thick lightweight concrete walls/roof
sections, 1" foamboard insulation covered by 1/2" fiberglass reinforced plastic
surfaced board. (Thicker insulation and higher R-values must be specified
according to the locality.)
9. Concrete
All sections must be constructed of concrete with a compressive strength of 3000
PSI at 28 days.
A-22
<PAGE>
9.1. Cement Type
Cement used in concrete shall be standard Portland cement conforming to
the requirements of the "Standard Specifications for Portland Cement",
ASTM Designation C150.
9.2. Mix
The mix design shall be 114-118 lbs./cu. ft. structural lightweight
concrete using expanded shale or expanded clay aggregate and shall be
homogeneous. Seeding of aggregates for exposed aggregate finish is not
allowed.
Water will be free from injurious quantities of oil, alkali, vegetable
matter and salt. Non-potable water shall not be used in mixing concrete.
9.3. Concrete Standards
Concrete aggregates will conform to one of the following standards:
- Specifications for Concrete Aggregates (ASTM Designation: C33)
- Specifications for Lightweight Aggregates for Structural Concrete
- (ASTM Designation: C330)
9.4. Reinforcement
Reinforcement bars shall be deformed steel bars conforming to the
requirements of the "Specifications for Deformed and Plain Billet-Steel
Bars for Concrete Reinforcement", ASTM Designation: A615. Welded smooth
wire fabric shall be steel wire fabric conforming to the "Specifications
for Welded Steel Wire Fabric for Concrete Reinforcement", ASTM
Designation: A185.
10. Sealing
- - The shelter shall be sealed to resist dust and water infiltration.
- - All joints shall be sealed with a compressible resilient sealant.
- - There shall be no exposed roof-to-wall or wall-to-floor joints.
- - Exterior surfaces of walls and roof shall be sealed with two (2) coats of
Thoroglaze H Sealer, or acceptable equivalent unless otherwise noted.
11. Door
11.1. Door Construction
The door shall be 3' X 7' X 3/4", 18 gauge galvanized steel, insulated
(minimum R12), primed, painted and installed flush with the door check,
door stop, weather stripping, mortise lockset and stainless steel ball
bearing hinges.
A-23
<PAGE>
11.2. Door Frame
The door frame shall be of at least16 gauge galvanized steel, primed,
painted and cast into the wall panel.
11.3. Door Locks
All doors shall have a deadbolt locking mechanism with a minimum 1" throw
and an anti-pick lock guard.
12. Structural Loading
12.1. Floor
A minimum of 140 lbs. per sq. ft. as defined in "Uniform Distributed
Load", ASCE 7-88. The battery area should be reinforced to support 5000
lbs. per battery rack. The battery area will be shown on the floor plan.
12.2. Roof
A minimum of 50 lbs. per sq. ft. as defined in "Roof Snow Load
Specification", ASCE 7-88.
12.3. Wind
A minimum of 115 MPH as defined in "Basic Wind Speed Specifications", ASCE
7-88.
12.4. Earthquake
Shelters shall be designed for the most stringent earthquake rating
conditions as defined in ASCE 7-88, Zone 4.
13. Electrical System
Electrical installation and wiring shall conform to the latest edition of the
National Electrical Code (NEC) and shall consist of the following as a minimum:
13.1. Minimum Requirements
- 200 Amp, 220 VAC Single Phase Main
- 200 Amp Manual Transfer Switch
- 200 Amp Generator Interface
- Forty (40) Position Breaker Box (With 32 single pole, 20 Amp
breakers.)
- 120/240VAC 3-Wire Arrester With Alarms (65kVA Peak Capacity)
- Surface Mounted EMT Conduit
- Grounded Duplex Outlets (One every 4 ft. on 3 walls.)
- Four (4) Fluorescent Lights (2 bulb fixtures with inside switch
mounted by door.)
- Incandescent Porch Light (With 0-30 minute timer)
A-24
<PAGE>
13.2. Surge Arresters
An interior-mounted surge arrester is designed to protect against
transients caused by lightning or power switching surges. Primary
arresters protect the building's electrical components and are
automatically restored following activation due to a surge. It should be
installed across the main breaker on the line side unless otherwise
specified by Pathnet. Secondary arresters protect individual branch
circuits. Visual inspection is required to determine whether the arrester
must be replaced following a surge.
14. Grounding
A halo ground system should consist of at least a #2 AWG green insulated
stranded copper wire mounted around the perimeter of the interior wall just
below the ceiling. A 1/4" X 4" X 24" copper ground bar should be located
externally just below each waveguide entry plate. A #2 AWG green insulated
copper jumper should be used to bond the ground bar to the exterior halo ring.
Bonding on either interior or exterior grounding systems will be clean of dirt
and corrosion and applied with non-oxidizing grease.
14.1. Interior Halo Grounding
All cable ladder, racks, lights, equipment and exterior ground are to be
bonded to an interior halo grounding system.
The following items are required for halo grounding:
- #2 Green Insulated Stranded Copper Halo
- One (1) Master Ground Bar 1/4" X 4" X 24"
- Four (4) #2 Tinned Solid Copper Drops with 10' Pigtails
- Eight (8) #2 Green Insulated Stranded Copper Equipment Ground Drops
14.2. External Ground System
An exterior halo ring is required and will be bonded to the interior halo
grounding system with 8' pigtails listed above.
14.3. Conduit Grounding
All conduit, conduit couplings, light fixtures, junction boxes and service
equipment shall be grounded with mechanical clamps to electrically bond
the conduit. The bonding wire will be a minimum #10 AWG green insulated
copper wire for all except light fixtures. The minimum for light fixtures
is #12 AWG green insulated copper wire.
15. Waveguide Entrance
The shelter will have two 8 port waveguide entry panels and two blank panels
located on opposite walls. Two waveguide entry panels will be installed on one
wall and two blank panels mounted on the opposite wall. Pathnet will define the
location of the waveguide entry panels. Each waveguide port shall have a minimum
interior diameter of 4 inches.
A-25
<PAGE>
16. Alarms
The shelter will have general housekeeping alarms wired to a central location
associated with the following:
- - Door Open
- - Smoke Detection
- - AC Electrical Fail (sense before manual or automatic transfer switch)
- - Surge Protector Fail
- - Air-conditioning Fail
- - High Temperature
- - Low Temperature
- - Charger Fail
- - Breaker Alarm
- - Fuse Alarm
- - Low Waveguide pressure
- - Dehydrator excess run alarm
- - Generator Fail
- - Generator Run
A-26
<PAGE>
EXHIBIT A-6
GROUNDING AND LIGHTNING PROTECTION GUIDELINES AND SPECIFICATIONS FOR
COMMUNICATIONS SHELTERS
Preface
An effective ground system for a communications equipment shelter is necessary
to ensure protection of personnel and equipment when a fault occurs. The ground
system limits excessive voltages from various electrical conditions such as
lightning and utility switching, and contributes to superior performance of the
electronic equipment by reducing noise induction
1. Grounding Introduction
Communications equipment shelters are subject to electrical noise and
high-voltage surges. These transients occur predominantly in the common mode
(line to ground), and are typically caused by lightning or power switching.
1.1 Lightning
When lightning induced surges appear at the point of connection to a
building (the service entrance), a high common mode potential is generated
between the current carrying conductors and ground. This potential
produces a flow of current that seeks a path to earth to complete the
circuit.
Lightning can easily induce a 3000-ampere transient into a power line.
When this transient reaches a building, the building ground at the service
entrance can rise to 60,000 volts (assuming a building earth resistance of
20 ohms). The reference potential for ground in the rest of the building
would rise proportionately.
In order to protect the building against these high voltage surges, it is
important to establish a low resistance earth ground at the service
entrance. The National Electrical Code (Article 250, Part 4) specifies
that the grounding at a building's service entrance should have a
resistance to ground of 25 ohms or less. The IEEE Green Book (Recommended
Practice for Grounding, ANSI/IEEE Standard 142-1982) recommends that the
ground resistance be less than 5 ohms. If the building contains highly
sensitive electronic communications equipment, a ground resistance of 5
ohms or less is recommended if this value can be practically achieved with
the given site conditions.
1.2 Types of Grounding
There are two major types of grounding that should be considered when
designing an electrical system: power distribution system grounding and
telecommunications equipment grounding.
1.2.1. Power Distribution System Grounding
A-27
<PAGE>
The power distribution system pertains to the incoming AC service,
service entrance equipment, power panels, and electrical conductors
providing the power to various electrical/mechanical equipment.
Grounding of the power distribution system is essential to:
- protect occupants from exposure to dangerous shock voltage
- provide a path for ground fault current
- limit excessive voltages due to lightning or utility switching
Typical grounding components for the power distribution system
include:
- grounding electrode at the service entrance
- ground bus in the power panel
- ground lugs in the other service entrance equipment such as
the safety disconnect or transfer switch
- third wire grounding conductor for all the electrical
equipment
- lightning and surge arresters.
1.2.2. Telecommunications Equipment Grounding
Electronic equipment such as radio systems, telephone switches,
battery chargers and rectifiers, uninterrupted power supply (UPS)
equipment, and any other equipment that encloses or is adjacent to
energized conductors require additional grounding. This sensitive
electronic equipment must be protected from the following:
- excessive transients caused by lightning or utility switching
- degraded performance due to electromagnetic noise
Equipment grounding frequently utilizes a ground ring encircling the
interior of the shelter (halo ground ring). Ground lugs attached to
the various equipment housings and racks are connected to the ground
ring. Ground bars at the waveguide entry and at each section of the
cable ladder are also tied to the ground ring. Multiple external
drops connect the internal ground ring to the exterior site ground
ring.
2. Grounding Practices
2.1. The Grounding Conductor
In order to reduce inductance and surge voltages in a power distribution
system, a ground path for protected devices should be provided. One method
is to rely upon the conduit system to carry these transient currents. This
is allowed by the National Electrical Code in Article 250-91 (b). The best
method, however, is to include an extra conductor in the same conduit or
raceway as the current carrying conductor. The grounding conductor should
extend to the ground connection in the service entrance equipment.
A-28
<PAGE>
2.2. Equipment Ground Wires
When lightning strikes, it takes the path of least impedance (resistance
and inductance). Cable bends increase inductance. Therefore, equipment
ground wires should be large, and run straight for minimum inductance and
voltage drop. The recommended bending radius is 6" when bends are
unavoidable. Equipment ground wires should be separated from all other
conductors, and should not be run through metal conduit unless the conduit
and ground wires are bonded at both ends.
2.3. Bonding
Even when the ground to earth connection's impedance of the service
entrance is minimized and grounding conductors are used in the feeder and
branch circuits, high transient voltages can still occur in the power
distribution system as a result of utility power switching. An effective
method of limiting this noise (especially common mode voltage
differentials) is to bond all the equipment ground wires to a halo ground
system that is connected to the site ground system and power distribution
system ground.
Bonding is the connection of all potential ground conductors (including
racks, frames, cable ladder, conduits, metal enclosures, and exposed
metallic members of the building structure) to each other. Bonding does
not eliminate voltage drops since transient currents will continue to take
the path of least inductance. However, the current is sufficiently
distributed throughout the bonded system to reduce the voltage gradients
in any area to levels that prevent personal injury or equipment damage.
Proper bonding procedures produce cross connections of all equipment and
structures. It provides many paths to ground from any one point. Since the
bonded ground network does not form a part of the normal electrical power
path, multiple inductive loops are not a concern. Only transient or fault
currents can flow in the ground network.
In addition to preventing the development of voltage gradients, cross
connection reduces the system's susceptibility to high frequency noise.
Since all conductors have some impedance, resonance will occur at some
frequencies. At those frequencies, the impedance of the grounding
conductor may be very high, and allow noise currents to develop increased
voltage drops. By bonding the ground network, however, there may be other
conductors nearby that are not resonating, and a low impedance path for
the noise signal can be maintained.
2.4. Faraday Cage
A Faraday cage provides an EMI shield to further reduce noise. The cage
usually consists of multiple conductors in a box like configuration. A
halo ground system with multiple down conductors can act as a quasi
Faraday cage, and give some low frequency shielding.
When lightning hits the tower, the tower will pass the current to ground
and radiate RF energy. A Faraday cage can reduce this energy by adding
distance (as seen by the
A-29
<PAGE>
magnetic field) between the tower and the equipment shelter. The steel
reinforcing in the concrete shelter walls can form a highly effective
Faraday cage if bonded to the grounding system. The amount of shielding
depends on the size and spacing of the welded wire fabric. Additionally,
all rebar must be bonded together.
2.5. Site Ground System
When a tower is struck by lightning, equipotential voltage rings form
around the tower until the energy is diffused into the surrounding ground
soil via the grounding system.
The tower ground ring will disperse the energy away from the tower base or
guy wires. The ground rods will transfer the energy deeper into more
conductive soil layers. This is important to keep lightning surges out of
the equipment shelter. Unless the energy is properly dispersed into the
soil, the voltage will build up in the tower, and attempt to go to
another, less desirable path.
The equipment shelter is protected by a perimeter ground system that forms
an equipotential plane. Also, ground rods should be driven into the soil
at the following points:
- each corner of the shelter
- the service entrance
- the waveguide entry port
- each external halo ground drop
- every 10' (or less) along the exterior ground ring
The shelter ground ring system should have a connection to the tower
ground system just below the coaxial cable runs. A second connection
between the two ground systems should be installed for redundancy. All
metal work (waveguide bridge and supporting posts) should be bonded to the
ring/radial ground system.
2.6. Grounding System Performance Check
Test the original installation periodically to determine whether
resistance is remaining constant or is increasing. An increase in
resistance can be caused by several factors.
In lower conductive soils, high electric fields can develop at the ends of
the ground rods, which can cause arcing in the soil. This arcing can cause
glassification around the rods, beginning at the tip, and working its way
upward. This glassification of the silica in the soil acts as an
insulator, severely impairing the grounding characteristics of the rod. If
resistance increases over time to an undesirable level, reduce the
resistance by adding electrodes or chemically treating the soil to
increase moisture content.
3. Computing Resistance to Ground
A-30
<PAGE>
3.1. Resistance to Earth
The resistance of a grounding electrode is dependent on the:
- resistance of the electrode,
- contact resistance between the electrode and the soil, and
- resistance of the soil from the electrode surface outward as
described by the geometry set up by the flow of current from the
electrode to infinite earth.
The first two resistances are negligible, and can be disregarded. The
third resistance is larger and must be considered.
Around a ground rod this resistance is the sum of the series resistances
of virtual shells of earth, located progressively outward from the rod.
The shell nearest the rod has the smallest circumferential area or cross
section, so it has the highest resistance. Each successive shell has
progressively larger areas, and thus, progressively lower resistances. For
an 8-foot ground rod, the incremental increase in resistance decreases to
nearly zero when the rods are spaced 16 feet apart. Therefore, when using
multiple ground rods, the optimal spacing between rods should be double
the length of the rod.
3.2. Resistance Calculations
When computing resistance to ground, treat the tower grounding and the
shelter grounding as two separate systems. Within each of these two
systems are two subsystems. The shelter has a grounding ring and the
grounding rods. The tower has a grounding ring, grounding rods, and
occasionally, grounding radials.
The IEEE Green Book provides several formulas for calculating the
resistance to ground for several different systems.
4. Typical Grounding Configurations
Several options are available when deciding on a ground system for a
communication shelter, depending upon the soil conditions and thunderstorm
activity of a particular site. The U.S. Weather Bureau publishes an isoplethic
map of the United States showing the average number of days each year on which
thunderstorms occur. Any area with an isoplethic level above 90 should be
considered a high-risk area, and serious consideration should be given to
providing a more stringent grounding system.
4.1. Ground Bar System
In shelters where very little lightning protection is needed, a simple
ground bar system can be used. A system of this type would consist of a
single copper ground bar located under the waveguide port, telephone
entry, or both, with an external drop to be connected to the external
ground system. Transmission lines should be grounded to this ground bar.
A-31
<PAGE>
4.2. Halo Ground System
Pathnet shelters will use a halo ground system. This system includes a #2
AWG copper wire completely encircling the equipment room. The halo is
located 3 to 6 inches below the ceiling. External drops are located at
each corner of the shelter. Wall penetrations should be angled at 45
degrees to minimize bending.
4.3. External Ground System
The external ground system for all shelters consists of ground rods placed
at each corner of the shelter and 10' intervals along the ground ring,
below the waveguide entry, and at the AC service entrance. The rods should
be exothermically welded to a perimeter ground ring of #2 AWG solid tinned
copper wire. (Tinned copper is recommended to reduce corrosion of the
wire). The wire should be buried below the frost line (minimum 30", deep
per NEC Sec 250-8(d)), and at least 24", away (measured horizontally) from
the foundation. The ground ring should be bonded to the tower ground
system at two locations, to the externally mounted ground bars under the
waveguide ports and to the AC service ground as close as possible to the
service entrance.
5. General Specifications
This section covers grounding and lightning protection of pre-cast,
pre-equipped, and transportable equipment shelters. It establishes minimum
standards for grounding of all Pathnet Equipment Shelters, and provides
standards for additional customer grounding options.
5.1. General Guidelines
5.1.1 Workmanship
Equipment grounding wire conductor runs will be as short and
straight as possible. All equipment and bonding grounding conductors
will have radii bends 6" or greater.
5.1.2. Design
Where possible, the AC service entrance, waveguide entry port, and
telephone line entry will all be located in close proximity to each
other, and their associated grounding systems will be bonded
together.
5.1.3. Connections
Unless specified otherwise, minimum connection requirements will be
of the mechanical type made with a crimp type connector. A one hole
copper ground lug will be used for equipment connections. An
oxidizing preventative compound will be applied to all mechanical
connections, and paint will be removed as necessary to insure
positive bonding of all grounded equipment.
A-32
<PAGE>
All external, buried connections will be of the exothermically
welded type. These include, but are not limited to, halo drops to
ground rod, buried ground ring to ground rod, halo drops to ground
ring, service entrance ground to ground rod.
5.1.4. Wire
All equipment grounds will be #6 AWG. Circuit grounding conductors
will be no more than two wire sizes smaller than the current
carrying conductors of the same circuit (minimum #12 AWG). All
external ground wire, including but not limited to the external
ground ring and external halo drops, will be #2 AWG solid tinned
copper.
5.2 Interior Grounding
5.2.1. Halo Ground
The halo ground will consist of a minimum #2 AWG wire located 3" to
12", below the finished ceiling, and will completely encircle the
equipment room. The wire will be green insulated stranded copper,
bare stranded copper, or bare tinned solid copper. Each corner of
the equipment room will have an omni-directional drop to the floor
of the same wire size and type as the halo ring. Connection of these
drops to the halo will be at least the defined minimum (see section
5.1.3). If solid tinned wire is used, the drop will be one
continuous wire that is long enough to extend 8 feet beyond the
exterior of the shelter. If insulated wire is used, the drop will
extend to the floor, and then be connected in the same manner as the
halo, to an 8-foot length of solid tinned wire of the same size. The
exterior penetrations will be at 45 degree angles (to minimize
ground drop bend radii) and approximately one (1) inch in diameter.
5.2.2. Waveguide Entry Ground Bar
There will be a 1/4" x 4" x 20" (minimum) copper ground bar located
outside the shelter approximately 6" below the waveguide entry plate
(NEC Sec 800-33). This bar will be connected to the exterior ground
ring exothermic weld. The grounding conductor will be of the same
size and type as the halo ring.
5.2.3. AC Service
The AC service ground conductor will be bonded to the ground rod
located at the service entrance. Ground lugs provided in all service
entrance equipment will be bonded to the service ground conductor.
The system ground and neutral will be bonded at one location, as
close as practicable to the service entrance. All service grounding
shall conform to Article 250 of the National Electrical Code.
5.2.4. Primary Surge Arrester
A-33
<PAGE>
There will be a surge protective device applied at the first piece
of service equipment inside the equipment shelter. This device will
be considered the primary surge protector. Conductors connecting the
surge protective device will be as short as possible, and will
contain no sharp bends or loops.
The operating characteristics of the primary surge arrester will
coordinate with the equipment surge withstand voltage capabilities.
The surge arrester should be capable of suppressing up to 65kVA, be
self restoring after operation, and may be equipped with a failure
alarm over current protective device and visual status indicators.
5.2.5. Cable Ladder
Cable ladder assemblies will be bonded to the halo ring with a #6
AWG or larger ground conductor. All cable ladder splices and
junctions will be bonded on at least one side with a #6 AWG or
larger conductor, and use grounding clips suitable for the purpose.
Paint will be removed as necessary for an electrically sound
connection.
5.2.6. Conduit Grounding
Each conduit discontinuity, including but not limited to conduit
couplings, junction boxes, light fixtures, and service equipment,
will be provided with ground clamps to electrically bond the
conduit. The bonding wire will be green insulated #6 AWG or larger.
5.2.7. Tower Light Controller Penetration
There will be a 1-1/2" penetration cast in place near the waveguide
entry port to allow for connection of the tower light controller.
The penetration will be lined with a 1" PVC running thread to
provide isolation between the interior and exterior conduit. The
running thread will be connected to interior and waterproof exterior
6" x 6" junction boxes.
5.3. Exterior Grounding
5.3.1. Ground Rods
There will be driven ground rods located at each corner of the
building, and at the AC service entrance and waveguide entry port.
These rods will be made of copper clad high strength steel with
minimum dimensions of 5/8" x 8'. The rods will be located at least
24" from the edge of the foundations, and driven such that the top
of the rod is below the frost line of the installation site. The
rods will be exothermically welded to the external halo drops.
5.3.2. Ground Ring
A-34
<PAGE>
There will be a buried horizontal wire completely encircling the
equipment shelter. This wire will be solid tinned copper wire of #2
AWG or larger. The ground ring will not be closer than 24" from the
shelter foundations, and will be exothermically welded to each
ground rod. The ring will be buried 30" below grade or below the
frost line of the installation, whichever is greater.
The ground ring will be connected to the tower ground system from
the ground rod located at the waveguide port to the nearest ground
rod of the tower system. A second connection will be made from a rod
at a corner of the shelter to an alternate rod of the tower. These
connections will be made with a #2 AWG wire, or a wire of the same
size as the tower ground ring, whichever is larger.
5.3.3. Testing
The external ground system will be tested after installation, and
its resistance to earth ground will be less than 10 ohms. It is
recommended that tests be performed twice a year to insure ground
system integrity.
Biddle Instruments Model DET2/2 Digital Ground Tester, or
equivalent, will be used for testing and all manufacturers'
instructions will be followed.
A-35
<PAGE>
EXHIBIT A-7
NETWORK INTERCONNECTIONS SCHEDULE
<TABLE>
<CAPTION>
SYSTEM SITE CODE OTHER SYSTEM SITE CODE HEIGHT AZIMUTH
- ---------------- ---------------------- ------ -------
<S> <C> <C> <C>
</TABLE>
[TO BE INSERTED BY AMENDMENT]
A-36
<PAGE>
EXHIBIT A-8
PATHNET SPURS AND INCUMBENT SPURS
PATHNET SPURS
The System shall contain the following Pathnet spurs, which shall be
engineered, furnished, installed, tested and operated for Pathnet's network
purposes:
<TABLE>
<CAPTION>
FACILITY NAME LATITUDE LONGITUDE SPUR TO
------------- -------- --------- -------
<S> <C> <C> <C>
Casper, WY 42-51-21 W106-14-21 Casper, WY Terminal (Fut)
Scottsbluff, NE 41-50-33 W103-40-49 Salt Lake City, UT (UP Fut)
Dougan, CO 40-03-24 W104-44-30 Denver, CO (Fut IXC)
Minden, NE 40-21-28 W98-56-58 Kansas City, MO (UP Fut)
Omaha, NE (UP Fut)
</TABLE>
INCUMBENT SPURS
The System shall contain the following KN Energy spurs, which shall be
engineered, furnished, installed, and operated for KN Energy's internal
communications requirements:
<TABLE>
<CAPTION>
FACILITY NAME LATITUDE LONGITUDE SPUR TO
------------- -------- --------- -------
<S> <C> <C> <C>
Casper, WY 42-51-21 W106-14-21 New Site Casper, WO
Scottsbluff, NE 41-50-33 W103-40-49 Scottsbluff, NE
41-51-54/W103-39-37
Dougan, CO 40-03-24 W104-44-30 Brighton, CO
39-59-52/W104-48-52
Minden, NE 40-21-28 W98-56-58 Kearney, NE
40-40-43/W99-04-57
</TABLE>
A-37
<PAGE>
EXHIBIT A-9
FORM OF CERTIFICATE OF ACCEPTANCE
The undersigned, ___________________, who is ______________________ of KN
Energy, Inc., a Kansas corporation ("Incumbent") hereby certifies as follows:
1. Incumbent has received from Pathnet, Inc., a Delaware corporation
("Pathnet") the results of all acceptance testing performed pursuant to Section
5 of Schedule A of the Fixed Point Microwave Services Agreement between Pathnet
and Incumbent (the "FPM Agreement").
2. Incumbent has reviewed the results of such acceptance testing and
hereby acknowledges that the System (as defined in the FPM Agreement), as tested
and to be maintained by Incumbent, performs in accordance the Specifications, as
set forth in the FPM Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Acceptance as of the ___ day of ______, 199__.
------------------------------------
----------------
Date
A-38
<PAGE>
EXHIBIT A-10
REQUIRED PERMITS AND APPROVALS
1. Frequency Coordination for FCC licenses
2. FCC licenses and regulatory approvals
3. FAA licenses
4. Leasehold or ownership interests in the Facilities (including any
replacement facilities required to operate the System)
5. Zoning and other permits required to construct, install equipment and
operate at each of the Facilities proposed in Schedule B (including any
replacement facilities required to operate the System)
6. Any required subcontractor approvals
7. Approval of System Design
8. Approval of Incumbent Channel Plan
9. Approval of Modifications SOW
10. Approval of Project Management Plan, Project Schedule and Cutover Plan
11. Approval of factory acceptance test
A-39
<PAGE>
SCHEDULE B
SEGMENT AND FACILITIES
Incumbent Segment A extends from Casper, Wyoming to Minden, Nebraska, with
facilities at the sites listed below:
<TABLE>
<CAPTION>
FACILITY LATITUDE LONGITUDE
- -------- -------- ---------
<S> <C> <C>
Casper, Wy 42-51-21 W106-14-21
Glenrock, Wy 42-53-01 W105-50-44
Douglas, Wy 42-43-10 W105-17-24
Beacon Hill, Wy (To be Replaced) 42-20-45 W105-02-11
Guernsey, Wy 42-13-53 W104-41-12
Torrington, Wy 42-06-17 W104-09-57
Scottsbluff,Ne 41-50-33 W103-40-49
Northport, Ne 41-41-15 W103-05-15
Lisco, Ne 41-24-47 W102-41-17
Chappell, Ne 41-14-21 W102-26-45
Big Springs, Ne 41-05-32 W102-10-07
Ogallala, Ne 41-04-34 W101-38-33
Sutherland, Ne 41-06-57 W101-09-37
North Platte, Ne 41-10-24 W100-45-50
Brady, Ne 40-58-45 W100-25-42
Cozad, Ne 40-50-36 W99-57-18
Johnson Lake, Ne 40-40-08 W99-46-34
Holdrege, Ne 40-26-22 W99-23-46
Minden, Ne 40-21-28 W98-56-58
</TABLE>
Incumbent Segment B extends from Lisco, Nebraska to Lakewood, Colorado, with
facilities at the sites listed below:
<TABLE>
<CAPTION>
FACILITY LATITUDE LONGITUDE
- -------- -------- ---------
<S> <C> <C>
Lisco, Ne 41-24-47 W102-41-17
Sidney, Ne 41-09-40 W102-59-34
Peetz, Co 40-54-00 W103-12-37
Sterling, Co 40-41-45 W103-23-34
Fort Morgan, Co 40-25-14 W103-45-37
Wiggins, Co 40-13-42 W104-11-16
Dougan, Co 40-03-24 W104-44-30
Lakewood, Co 39-43-14 W105-08-01
</TABLE>
B-1
<PAGE>
SCHEDULE C
ESTIMATED AND OPERATING COSTS
SECTION 1. ESTIMATED COSTS TO BE PAID BY INCUMBENT
Casper , WY to Minden, NE;
Lakewood, CO to Lisco, NE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Approximate Allocation of Incumbent
Incumbent Items Estimated Costs
- --------------------------------------------------------------------------------
<S> <C>
Site Survey [***]
- --------------------------------------------------------------------------------
Site Work [***]
- --------------------------------------------------------------------------------
Towers [***]
- --------------------------------------------------------------------------------
Buildings [***]
- --------------------------------------------------------------------------------
Generators [***]
- --------------------------------------------------------------------------------
D.C. Plant [***]
- --------------------------------------------------------------------------------
Project Engineering [***]
- --------------------------------------------------------------------------------
Incumbent Estimated Costs [***]
- --------------------------------------------------------------------------------
</TABLE>
SECTION 2. OPERATING AND ADMINISRATION COSTS TO BE PAID BY INCUMBENT
1. [***]
2. [***]
3. [***]
4. [***]
5. [***]
6. [***]
7. [***]
8. [***]
C-1
<PAGE>
9. [***]
10. [***]
11. [***]
12. [***]
13. [***]
14. [***]
15. [***]
16. [***]
17. [***]
18. [***]
19. [***]
20. [***]
21. [***]
22. [***]
23. [***]
24. [***]
C-2
<PAGE>
25. [***]
26. [***]
27. [***]
28. [***]
29. [***]
30. [***]
SECTION 3. ESTIMATED COSTS TO BE PAID BY PATHNET
The Pathnet Estimated Costs shall be allocated as follows:
Casper, WY to Minden, NE;
Lakewood, CO to Lisco, NE
<TABLE>
<CAPTION>
----------------------------------------------------------------
Approximate Allocation of
Pathnet Items Pathnet Estimated Costs
----------------------------------------------------------------
<S> <C>
Preliminary Engineering [***]
----------------------------------------------------------------
Antennas [***]
----------------------------------------------------------------
Waveguide [***]
----------------------------------------------------------------
Radios [***]
----------------------------------------------------------------
OC-3 Multiplexing [***]
----------------------------------------------------------------
Misc. Equipment/Racks [***]
----------------------------------------------------------------
Path Engineering [***]
----------------------------------------------------------------
FCC Licensing Application [***]
----------------------------------------------------------------
</TABLE>
C-3
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
----------------------------------------------------------------
System Engineering [***]
----------------------------------------------------------------
Total Pathnet Costs [***]
----------------------------------------------------------------
----------------------------------------------------------------
</TABLE>
SECTION 4. ADMINISTRATION AND OPERATING COSTS TO BE PAID BY PATHNET
1. [***]
2. [***]
3. [***]
4. [***]
5. [***]
6. [***]
7. [***]
8. [***]
9. [***]
10. [***]
11. [***]
12. [***]
13. [***]
14. [***]
15. [***]
16. [***]
C-4
<PAGE>
17. [***]
18. [***]
19. [***]
20. [***]
21. [***]
22. [***]
23. [***]
24. [***]
25. [***]
26. [***]
27. [***]
28. [***]
29. [***]
30. [***]
C-5
<PAGE>
31. [***]
32. [***]
33. [***]
34. [***]
35. [***]
36. [***]
37. [***]
38. [***]
C-6
<PAGE>
EXHIBIT C-1
INCUMBENT ESTIMATED COSTS
ESTIMATED CAPITAL COSTS TO BE PAID BY KN ENERGY:
<TABLE>
<CAPTION>
SEGMENT I & II KN ENERGY KN ENERGY
TOTALS: SPUR TOTALS:* TOTALS:
-------------- ------------- ----------
<S> <C> <C> <C>
PRELIMINARY ENGINEERING [***]
SITE SURVEY [***]
SITE WORK [***]
TOWERS [***]
BUILDINGS [***]
GENERATORS [***]
DC PLANT [***]
PROJECT ENGINEERING [***]
RADIOS [***]
PATH ENGINEERING [***]
TOTAL KN ENERGY COST: [***]
</TABLE>
- ----------
* [***]
C-7
<PAGE>
<TABLE>
<CAPTION>
To be Replaced
CASPER GLENROCK DOUGLAS BEACON GUERNSEY TORRINGTON
HILL
<S> <C> <C> <C> <C> <C> <C>
SITE SURVEY:
Site Survey: [***]
TAXES: [***]
SITE SURVEY: [***]
SITE WORK:
Site Clearing /Level: [***]
Fence & Gate Mods: [***]
Road Const/Repair: [***]
TAXES: [***]
SITE WORK: [***]
TOWERS:
Tower/Building Analysis: [***]
New Tower: [***]
Tower Strength Material: [***]
Tower Labor: [***]
Waveguide Bridge: [***]
Tower Ground: [***]
FREIGHT: [***]
TAXES: [***]
TOWERS: [***]
BUILDINGS:
Exist Bldg. Mods: [***]
New Building: [***]
New Bldg Delivery: [***]
New Bldg Foundation: [***]
Building Ground: [***]
AC Power : [***]
FREIGHT: [***]
TAXES: [***]
BUILDINGS: [***]
GENERATORS:
25KW MOBILE [***]
35KW [***]
Transfer Panel: [***]
Install & Test Labor: [***]
FREIGHT: [***]
TAXES: [***]
GENERATORS: [***]
D.C. PLANT:
Chargers: [***]
Chargers Spares: [***]
Batteries: [***]
Power Board/Panel: [***]
Install & Test Labor: [***]
FREIGHT: [***]
TAXES: [***]
D.C. PLANT: [***]
PROJECT ENGINEERING [***]
KN ENERGY COSTS [***]
</TABLE>
C-8
<PAGE>
<TABLE>
<CAPTION>
SCOTTSBLUFF NORTHPORT LISCO SIDNEY PEETZ STERLING
<S> <C> <C> <C> <C> <C> <C>
SITE SURVEY:
Site Survey: [***]
TAXES: [***]
SITE SURVEY: [***]
SITE WORK:
Site Clearing /Level: [***]
Fence & Gate Mods: [***]
Road Const/Repair: [***]
TAXES: [***]
SITE WORK: [***]
TOWERS:
Tower/Building Analysis: [***]
New Tower: [***]
Tower Strength Material: [***]
Tower Labor: [***]
Waveguide Bridge: [***]
Tower Ground: [***]
FREIGHT: [***]
TAXES: [***]
TOWERS: [***]
BUILDINGS:
Exist Bldg. Mods: [***]
New Building: [***]
New Bldg Delivery: [***]
New Bldg Foundation: [***]
Building Ground: [***]
AC Power : [***]
FREIGHT: [***]
TAXES: [***]
BUILDINGS: [***]
GENERATORS:
25KW MOBILE [***]
35KW [***]
Transfer Panel: [***]
Install & Test Labor: [***]
FREIGHT: [***]
TAXES: [***]
GENERATORS: [***]
D.C. PLANT:
Chargers: [***]
Chargers Spares: [***]
Batteries: [***]
Power Board/Panel: [***]
Install & Test Labor: [***]
FREIGHT: [***]
TAXES: [***]
D.C. PLANT: [***]
PROJECT ENGINEERING [***]
KN ENERGY COSTS [***]
</TABLE>
C-9
<PAGE>
<TABLE>
<CAPTION>
FORT BIG
MORGAN WIGGINS DOUGAN LAKEWOOD CHAPPELL SPRINGS
<S> <C> <C> <C> <C> <C> <C>
SITE SURVEY:
Site Survey: [***]
TAXES: [***]
SITE SURVEY: [***]
SITE WORK:
Site Clearing /Level: [***]
Fence & Gate Mods: [***]
Road Const/Repair: [***]
TAXES: [***]
SITE WORK: [***]
TOWERS:
Tower/Building Analysis: [***]
New Tower: [***]
Tower Strength Material: [***]
Tower Labor: [***]
Waveguide Bridge: [***]
Tower Ground: [***]
FREIGHT: [***]
TAXES: [***]
TOWERS: [***]
BUILDINGS:
Exist Bldg. Mods: [***]
New Building: [***]
New Bldg Delivery: [***]
New Bldg Foundation: [***]
Building Ground: [***]
AC Power : [***]
FREIGHT: [***]
TAXES: [***]
BUILDINGS: [***]
GENERATORS:
25KW MOBILE [***]
35KW [***]
Transfer Panel: [***]
Install & Test Labor: [***]
FREIGHT: [***]
TAXES: [***]
GENERATORS: [***]
D.C. PLANT:
Chargers: [***]
Chargers Spares: [***]
Batteries: [***]
Power Board/Panel: [***]
Install & Test Labor: [***]
FREIGHT: [***]
TAXES: [***]
D.C. PLANT: [***]
PROJECT ENGINEERING [***]
KN ENERGY COSTS [***]
</TABLE>
C-10
<PAGE>
<TABLE>
<CAPTION>
NORTH JOHNSON
OGALLALA SUTHERLAND PLATTE BRADY COZAD LAKE
<S> <C> <C> <C> <C> <C> <C>
SITE SURVEY:
Site Survey: [***]
TAXES: [***]
SITE SURVEY: [***]
SITE WORK:
Site Clearing /Level: [***]
Fence & Gate Mods: [***]
Road Const/Repair: [***]
TAXES: [***]
SITE WORK: [***]
TOWERS:
Tower/Building Analysis: [***]
New Tower: [***]
Tower Strength Material: [***]
Tower Labor: [***]
Waveguide Bridge: [***]
Tower Ground: [***]
FREIGHT: [***]
TAXES: [***]
TOWERS: [***]
BUILDINGS:
Exist Bldg. Mods: [***]
New Building: [***]
New Bldg Delivery: [***]
New Bldg Foundation: [***]
Building Ground: [***]
AC Power : [***]
FREIGHT: [***]
TAXES: [***]
BUILDINGS: [***]
GENERATORS:
25KW MOBILE [***]
35KW [***]
Transfer Panel: [***]
Install & Test Labor: [***]
FREIGHT: [***]
TAXES: [***]
GENERATORS: [***]
D.C. PLANT:
Chargers: [***]
Chargers Spares: [***]
Batteries: [***]
Power Board/Panel: [***]
Install & Test Labor: [***]
FREIGHT: [***]
TAXES: [***]
D.C. PLANT: [***]
PROJECT ENGINEERING [***]
KN ENERGY COSTS [***]
</TABLE>
C-11
<PAGE>
<TABLE>
<CAPTION>
HOLDREGE MINDEN TOTALS:
<S> <C> <C> <C>
SITE SURVEY:
Site Survey: [***]
TAXES: [***]
SITE SURVEY: [***]
SITE WORK:
Site Clearing /Level: [***]
Fence & Gate Mods: [***]
Road Const/Repair: [***]
TAXES: [***]
SITE WORK: [***]
TOWERS:
Tower/Building
Analysis: [***]
New Tower: [***]
Tower Strength
Material: [***]
Tower Labor: [***]
Waveguide Bridge: [***]
Tower Ground: [***]
FREIGHT: [***]
TAXES: [***]
TOWERS: [***]
BUILDINGS:
Exist Bldg. Mods: [***]
New Building: [***]
New Bldg Delivery: [***]
New Bldg Foundation: [***]
Building Ground: [***]
AC Power : [***]
FREIGHT: [***]
TAXES: [***]
BUILDINGS: [***]
GENERATORS:
25KW MOBILE [***]
35KW [***]
Transfer Panel: [***]
Install & Test Labor: [***]
FREIGHT: [***]
TAXES: [***]
GENERATORS: [***]
D.C. PLANT:
Chargers: [***]
Chargers Spares: [***]
Batteries: [***]
Power Board/Panel: [***]
Install & Test Labor: [***]
FREIGHT: [***]
TAXES: [***]
D.C. PLANT: [***]
PROJECT ENGINEERING [***]
KN ENERGY COSTS [***]
</TABLE>
C-12
<PAGE>
EXHIBIT C-2
PATHNET'S ESTIMATED COSTS
ESTIMATED CAPITAL COSTS TO BE PAID BY PATHNET, INC.
<TABLE>
<CAPTION>
TOTALS:
----------
<S> <C>
PRELIMINARY ENGINEERING [***]
ANTENNAS [***]
WAVEGUIDE [***]
RADIOS [***]
MULTIPLEX [***]
MIS EQUIPMENT/RACKS [***]
PATH ENGINEERING [***]
FCC LICENSING APPLICATION [***]
SYSTEM ENGINEERING [***]
TOTAL PATHNET COST: [***]
</TABLE>
C-13
<PAGE>
<TABLE>
<CAPTION>
To be Replaced
CASPER GLENROCK DOUGLAS BEACON HILL GUERNSEY TORRINGTON
<S> <C> <C> <C> <C> <C> <C>
PRELIMINARY ENG:
PCN Coordination: [***]
TAXES: [***]
PLEM ENG: [***]
ANTENNAS:
Antenna Material: [***]
Install & Align Labor: [***]
FREIGHT: [***]
TAXES: [***]
ANTENNAS: [***]
WAVEGUIDE:
Waveguide Material: [***]
Install & Test Labor: [***]
FREIGHT: [***]
TAXES: [***]
WAVEGUIDE: [***]
RADIOS:
1:1 Terminal: 2 & 3
Way: [***]
1:1 Repeater: [***]
Add RF Channel (2:1) [***]
OAM&P Software/LT [***]
Maint Accessory Kit: [***]
Basic Radio
Spares: [***]
Enhanced Radio Spares: [***]
Install: [***]
Test & Turnup: [***]
FREIGHT: [***]
TAXES: [***]
RADIOS: [***]
OC-3 MULTIPLEX:
OC-3 to 84 DS-1: [***]
OC-3 to 28 DS-1: [***]
ADM 4/8/12/28 DS-1: [***]
OC-3 Spares: [***]
Install: [***]
Test & Turnup: [***]
FREIGHT: [***]
TAXES: [***]
OC-3 MULTIPLEX: [***]
MISC EQUIP/RACKS:
Racks, Fuse Panel, Misc: [***]
Install: [***]
Test & Turnup: [***]
FREIGHT: [***]
TAXES: [***]
MISC EQUIP/RACKS: [***]
PATH ENGINEERING [***]
FCC LICENSE APPLICATION [***]
SYSTEM ENGINEERING [***]
PATHNET COSTS [***]
</TABLE>
C-14
<PAGE>
<TABLE>
<CAPTION>
SCOTTSBLUFF NORTHPORT LISCO SIDNEY PEETZ STERLING
<S> <C> <C> <C> <C> <C> <C>
PRELIMINARY ENG:
PCN Coordination: [***]
TAXES: [***]
PLEM ENG: [***]
ANTENNAS:
Antenna Material: [***]
Install & Align Labor: [***]
FREIGHT: [***]
TAXES: [***]
ANTENNAS: [***]
WAVEGUIDE:
Waveguide Material: [***]
Install & Test Labor: [***]
FREIGHT: [***]
TAXES: [***]
WAVEGUIDE: [***]
RADIOS:
1:1 Terminal: 2 & 3
Way: [***]
1:1 Repeater: [***]
Add RF Channel (2:1) [***]
OAM&P Software/LT [***]
Maint Accessory Kit: [***]
Basic Radio
Spares: [***]
Enhanced Radio Spares: [***]
Install: [***]
Test & Turnup: [***]
FREIGHT: [***]
TAXES: [***]
RADIOS: [***]
OC-3 MULTIPLEX:
OC-3 to 84 DS-1: [***]
OC-3 to 28 DS-1: [***]
ADM 4/8/12/28 DS-1: [***]
OC-3 Spares: [***]
Install: [***]
Test & Turnup: [***]
FREIGHT: [***]
TAXES: [***]
OC-3 MULTIPLEX: [***]
MISC EQUIP/RACKS:
Racks, Fuse Panel, Misc: [***]
Install: [***]
Test & Turnup: [***]
FREIGHT: [***]
TAXES: [***]
MISC EQUIP/RACKS: [***]
PATH ENGINEERING [***]
FCC LICENSE APPLICATION [***]
SYSTEM ENGINEERING [***]
PATHNET COSTS [***]
</TABLE>
C-15
<PAGE>
<TABLE>
<CAPTION>
FORT
MORGAN WIGGINS DOUGAN LAKEWOOD CHAPPELL BIG SPRINGS
<S> <C> <C> <C> <C> <C> <C>
PRELIMINARY ENG:
PCN Coordination: [***]
TAXES: [***]
PLEM ENG: [***]
ANTENNAS:
Antenna Material: [***]
Install & Align Labor: [***]
FREIGHT: [***]
TAXES: [***]
ANTENNAS: [***]
WAVEGUIDE:
Waveguide Material: [***]
Install & Test Labor: [***]
FREIGHT: [***]
TAXES: [***]
WAVEGUIDE: [***]
RADIOS:
1:1 Terminal: 2 & 3
Way: [***]
1:1 Repeater: [***]
Add RF Channel (2:1) [***]
OAM&P Software/LT [***]
Maint Accessory Kit: [***]
Basic Radio
Spares: [***]
Enhanced Radio Spares: [***]
Install: [***]
Test & Turnup: [***]
FREIGHT: [***]
TAXES: [***]
RADIOS: [***]
OC-3 MULTIPLEX:
OC-3 to 84 DS-1: [***]
OC-3 to 28 DS-1: [***]
ADM 4/8/12/28 DS-1: [***]
OC-3 Spares: [***]
Install: [***]
Test & Turnup: [***]
FREIGHT: [***]
TAXES: [***]
OC-3 MULTIPLEX: [***]
MISC EQUIP/RACKS:
Racks, Fuse Panel, Misc: [***]
Install: [***]
Test & Turnup: [***]
FREIGHT: [***]
TAXES: [***]
MISC EQUIP/RACKS: [***]
PATH ENGINEERING [***]
FCC LICENSE APPLICATION [***]
SYSTEM ENGINEERING [***]
PATHNET COSTS [***]
</TABLE>
C-16
<PAGE>
<TABLE>
<CAPTION>
NORTH JOHNSON
OGALLALA SUTHERLAND PLATTE BRADY COZAD LAKE
<S> <C> <C> <C> <C> <C> <C>
PRELIMINARY ENG:
PCN Coordination: [***]
TAXES: [***]
PLEM ENG: [***]
ANTENNAS:
Antenna Material: [***]
Install & Align Labor: [***]
FREIGHT: [***]
TAXES: [***]
ANTENNAS: [***]
WAVEGUIDE:
Waveguide Material: [***]
Install & Test Labor: [***]
FREIGHT: [***]
TAXES: [***]
WAVEGUIDE: [***]
RADIOS:
1:1 Terminal: 2 & 3
Way: [***]
1:1 Repeater: [***]
Add RF Channel (2:1) [***]
OAM&P Software/LT [***]
Maint Accessory Kit: [***]
Basic Radio Spares: [***]
Enhanced Radio Spares: [***]
Install: [***]
Test & Turnup: [***]
FREIGHT: [***]
TAXES: [***]
RADIOS: [***]
OC-3 MULTIPLEX:
OC-3 to 84 DS-1: [***]
OC-3 to 28 DS-1: [***]
ADM 4/8/12/28 DS-1: [***]
OC-3 Spares: [***]
Install: [***]
Test & Turnup: [***]
FREIGHT: [***]
TAXES: [***]
OC-3 MULTIPLEX: [***]
MISC EQUIP/RACKS:
Racks, Fuse Panel, Misc: [***]
Install: [***]
Test & Turnup: [***]
FREIGHT: [***]
TAXES: [***]
MISC EQUIP/RACKS: [***]
PATH ENGINEERING [***]
FCC LICENSE APPLICATION [***]
SYSTEM ENGINEERING [***]
PATHNET COSTS [***]
</TABLE>
C-17
<PAGE>
<TABLE>
<CAPTION>
HOLDREGE MINDEN TOTALS:
<S> <C> <C> <C>
PRELIMINARY ENG:
PCN Coordination: [***]
TAXES: [***]
PLEM ENG: [***]
ANTENNAS:
Antenna Material: [***]
Install & Align Labor: [***]
FREIGHT: [***]
TAXES: [***]
ANTENNAS: [***]
WAVEGUIDE:
Waveguide Material: [***]
Install & Test Labor: [***]
FREIGHT: [***]
TAXES: [***]
WAVEGUIDE: [***]
RADIOS:
1:1 Terminal: 2 & 3 [***]
Way: [***]
1:1 Repeater: [***]
Add RF Channel (2:1) [***]
OAM&P Software/LT [***]
Maint Accessory Kit: [***]
Basic Radio Spares: [***]
Enhanced Radio Spares: [***]
Install: [***]
Test & Turnup: [***]
FREIGHT: [***]
TAXES: [***]
RADIOS: [***]
OC-3 MULTIPLEX:
OC-3 to 84 DS-1: [***]
OC-3 to 28 DS-1: [***]
ADM 4/8/12/28 DS-1: [***]
OC-3 Spares: [***]
Install: [***]
Test & Turnup: [***]
FREIGHT: [***]
TAXES: [***]
OC-3 MULTIPLEX: [***]
MISC EQUIP/RACKS:
Racks, Fuse Panel, Misc: [***]
Install: [***]
Test & Turnup: [***]
FREIGHT: [***]
TAXES: [***]
MISC EQUIP/RACKS: [***]
PATH ENGINEERING [***]
FCC LICENSE APPLICATION [***]
SYSTEM ENGINEERING [***]
PATHNET COSTS [***]
</TABLE>
C-18
<PAGE>
SCHEDULE D
FORM OF ESCROW AGREEMENT
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Escrow Agreement") is entered into as of
____________, 199_, by and among PathNet, Inc., a Delaware corporation
("PathNet") and KN Energy, Inc, a Kansas corporation ("Incumbent"), and Crestar
Bank as escrow agent (the "Escrow Agent");
WHEREAS, PathNet and Incumbent have entered into a Fixed Point Microwave
Services Agreement dated as of the date hereof (the "FPM Agreement"), pursuant
to which, among other things, Incumbent has engaged PathNet as, and PathNet has
agreed to act as, Incumbent's sole representative for the purpose of (i)
installing, managing and operating a high capacity digital microwave system
along Incumbent's current microwave paths and (ii) marketing and selling any
Excess Capacity created by such high capacity digital microwave system.
WHEREAS, all capitalized terms used herein and not defined herein shall
have the meanings ascribed to such terms in the FPM Agreement;
WHEREAS, pursuant to Section 4.4.4(b) of the FPM Agreement, PathNet
shall deliver to the Escrow Agent the amount of [***] the ("PathNet Escrow
Deposit") and pursuant to Section 4.1.5(b) of the FPM Agreement, Incumbent
shall deliver to the Escrow Agent the amount of [***] (the
"Incumbent Escrow Deposit"); and
WHEREAS, the Escrow Agent has agreed to act as escrow agent hereunder in
accordance with the terms and conditions hereinafter set forth;
NOW, THERFORE, for and in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, the parties hereto hereby agree
as follows:
SECTION 1. Appointment of Escrow Agent. PathNet and Incumbent hereby
mutually appoint and designate the Escrow Agent to receive, hold and disburse
the PathNet Escrow Deposit and the Incumbent Escrow Deposit, in accordance with
the terms and conditions of this Escrow Agreement, and the Escrow Agent hereby
accepts such appointment and designation.
SECTION 2. Escrow.
2.1 Escrow of Funds by PathNet
2.1.1 Delivery of Escrow Deposit
D-1
<PAGE>
(a) Within ninety (90) days after delivery by PathNet to Incumbent
of the System Design, PathNet shall deposit the amount in cash
equal to fifty percent (50%) of the PathNet Escrow Deposit in
an escrow account with the Escrow Agent to be held, drawn upon
and returned by the Escrow Agent in accordance with the terms
and conditions hereinafter set forth.
(b) Within one hundred and twenty (120) days after delivery by
PathNet of the first escrow payment set forth in Section 2.1.1
(a), PathNet shall deposit the amount in cash equal to fifty
percent (50%) of the PathNet Escrow Deposit in an escrow
account with the Escrow Agent to be held, drawn upon and
returned by the Escrow Agent in accordance with the terms and
conditions hereinafter set forth.
2.1.2 Term of Escrow Agreement. The Escrow Agent shall hold the
PathNet Escrow Deposit until Commissioning and upon Commissioning any
remaining funds, together with interest that has accrued and been paid
thereon, shall be paid by the Escrow Agent to PathNet or its designee.
2.1.3 Release of Funds to PathNet. Upon receipt by the Escrow Agent
of a written joint certification of PathNet and Incumbent substantially in
form attached hereto as Attachment A to the effect that PathNet is
entitled to receive a portion of or all of the PathNet Escrow Deposit in
accordance with Section 4.4.4(b) of the FPM Agreement, the Escrow Agent
shall promptly deliver to PathNet such portions of or all of the PathNet
Escrow Deposit.
2.1.4 Release of Funds to Incumbent. Upon receipt by the Escrow
Agent of a written joint certification of PathNet and Incumbent
substantially in the form attached hereto as Attachment A to the effect
that Incumbent is entitled to receive a portion of or all of the PathNet
Escrow Deposit in accordance with Section 4.4.4(b) of the FPM Agreement or
upon receipt by the Escrow Agent of a court order directing payment to
Incumbent of a portion of or all of the PathNet Escrow Deposit, the Escrow
Agent shall promptly deliver to Incumbent such portions of or all of the
PathNet Escrow Deposit.
2.2 Escrow of Funds by Incumbent
2.2.1 Delivery of Escrow Deposit. Simultaneous with the execution
and delivery of the FPM Agreement, Incumbent shall deposit an amount in
cash equal to the Incumbent Escrow Deposit in an escrow account with the
Escrow Agent to be held, drawn upon and returned by the Escrow Agent in
accordance with the terms and conditions hereinafter set forth.
2.2.2 Term of Escrow Agreement. The Escrow Agent shall hold the
Incumbent Escrow Deposit until Commissioning and upon Commissioning any
remaining funds, together with interest that has accrued and been paid
thereon, shall be paid by the Escrow Agent to Incumbent or its designee.
D-2
<PAGE>
2.2.3 Release of Funds to Incumbent. Upon receipt by the Escrow
Agent of a written joint certification of PathNet and Incumbent
substantially in form attached hereto as Attachment B to the effect that
Incumbent is entitled to receive a portion of or all of the Incumbent
Escrow Deposit in accordance with Section 4.1.5 of the FPM Agreement, the
Escrow Agent shall promptly deliver to Incumbent such portions of or all
of the Incumbent Escrow Deposit.
2.2.4 Release of Funds to PathNet. Upon receipt by the Escrow Agent
of a written joint certification of PathNet and Incumbent substantially in
form attached hereto as Attachment B to the effect that PathNet is
entitled to receive a portion of or all of the Incumbent Escrow Deposit in
accordance with Section 4.1.5 of the FPM Agreement, or upon receipt by the
Escrow Agent of a court order directing payment to PathNet of a portion of
or all of the Incumbent Escrow Deposit, the Escrow Agent shall promptly
deliver to PathNet such portions of or all of the Incumbent Escrow
Deposit.
SECTION 3. Concerning the Escrow Agent.
3.1 Duties. The Escrow Agent undertakes to perform all duties which are
expressly set forth herein.
3.2 Indemnification.
3.2.1 The Escrow Agent may rely upon and shall be protected in
acting or refraining from acting upon any written notice, instruction,
certification, or request furnished to it hereunder and believed by it to
be genuine and to have been signed or presented by the proper parties or
party.
3.2.2 The Escrow Agent shall not be liable for any action taken by
it in good faith and without negligence, and believed by it to be
authorized or within the rights or powers conferred upon it by this Escrow
Agreement.
3.2.3 PathNet and Incumbent hereby agree to indemnify the Escrow
Agent for and to hold the Escrow Agent harmless against, any loss,
liability or reasonable expense incurred without negligence or bad faith
on the part of the Escrow Agent, arising out of or in connection with the
Escrow Agent entering into this Escrow Agreement and carrying out its
duties hereunder, including costs and expenses of successfully defending
the Escrow Agent against any claim of liability with respect thereto.
PathNet shall pay one half of any payment made pursuant to this Section
3.2.3 and Incumbent shall pay one half.
3.3 Other Matters. The Escrow Agent (and any successor escrow agent)
reserves the right to resign as the Escrow Agent at any time upon thirty (30)
days prior written notice to each of PathNet and Incumbent. Upon mutual
agreement, PathNet and Incumbent reserve the right to remove the Escrow Agent at
any time upon thirty (30) days written notice to the Escrow Agent. In the event
of any litigation or dispute by the parties hereunder affecting its duties, the
Escrow Agent shall take no action until such action is agreed to in writing by
the parties hereto, or until receipt of an order of a court having jurisdiction
directing the Escrow Agent with respect to the action which is the subject of
such litigation or dispute. The Escrow Agent neither
D-3
<PAGE>
approves nor disapproves of the transactions contemplated by the FPM Agreement
or this Escrow Agreement, nor does it recommend for or against, or have an
opinion as to the legality or validity of, this transaction.
SECTION 4. Termination. This Escrow Agreement shall terminate (i)
automatically upon the return of both the PathNet Escrow Deposit and the
Incumbent Escrow Deposit pursuant to Section 2.1.2 and Section 2.2.2,
respectively (ii) automatically upon the delivery of the entire PathNet Escrow
Deposit and the Incumbent Escrow Deposit made pursuant to Section 2.1.3 or
Section 2.1.4 and Section 2.2.3, respectively or (iii) upon written mutual
consent signed by PathNet and Incumbent.
SECTION 5. Additional Actions and Documents. Each of the parties hereto
agrees to take or cause to be taken such further actions, to execute, deliver
and file or cause to be executed, delivered and filed such further documents,
instruments and agreement, and will obtain such consents as may be necessary or
as may reasonably be requested in order to fully effectuate the purposes, terms
and conditions of this Escrow Agreement.
SECTION 6. Notice. All notices, demands, requests, or other communications
which may be or are required to be given, served or sent by any party pursuant
to this Escrow Agreement shall be in writing and shall be hand delivered, mailed
by first-class, registered or certified mail, return receipt requested, postage
prepaid, delivered by overnight air courier or transmitted by telegram or telex
addressed as follows:
If to PathNet:
PathNet, Inc.
1015-31st Street, N.W.
Washington, D.C. 20007
Attention: Michael Lubin
Vice President and General Counsel
Tel: (202) 625-7284
Fax: (202) 625-7369
If to Incumbent:
KN Energy, Inc.
370 Van Gordon Street
P.O. Box 281304
Lakewood, CO 80228-8304
Tel: (303) 763-3510
D-4
<PAGE>
If to Escrow Agent:
William F. Michie III
Corporate Trust Officer
Crestar Bank
919 East Main Street
10th Floor
Richmond, VA 23219
(804) 782-5581
(804) 782-7855 (Fax)
Or such other address as the addressee may indicate by written notice to the
other parties. Each notice, demand, request or communication which shall be
given or made in the manner described above shall be deemed sufficiently given
or made for all purposes at such time as it is delivered to the addressee (with
return receipt, the delivery receipt or the affidavit of messenger being deemed
conclusive but not exclusive evidence of such delivery) or at such time as
delivery is refused by the addressee upon presentation.
SECTION 7. Benefit and Assignment. This Escrow Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns as permitted hereunder. No person or entity other than
the parties hereto is or shall be entitled to bring any action to enforce any
provisions of this Escrow Agreement against any of the parties hereto or their
respective successors and assigns as permitted hereunder. At any time and from
time to time, PathNet shall have the right to assign this Agreement or any of
PathNet's rights and obligations under this Agreement; provided, that in no
event shall any such assignment relieve PathNet of its obligations under this
Agreement. Incumbent may not or shall not have the right to assign this
Agreement or any of its rights and obligations hereunder without the prior
written consent of PathNet, which consent shall not be unreasonably withheld;
provided, however, Incumbent may assign its right and obligations, in whole but
not in part, under this Agreement without the approval of PathNet, to any entity
which acquires all or substantially all of the assets of Incumbent or to any
subsidiary, Affiliate or successor in a merger or consolidation of Incumbent;
provided, that in no event shall any such assignment relieve Incumbent of its
obligations under this Agreement.
SECTION 8. Entire Agreement; Amendment. This Escrow Agreement together
with the schedules, exhibits and attachments hereto contains the entire
agreement among the parties with respect to the subject matter hereof and
supercedes all prior oral or written agreements, commitments or understandings
with respect to such matters. PathNet and Incumbent shall furnish the Escrow
Agent with a copy (without Schedules and Exhibits) of the FPM Agreement. This
Escrow Agreement may not be changed orally, but only by an instrument in writing
signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought.
SECTION 9. Waiver. No delay or failure on the part of any party hereto in
exercising any right, power or privilege under this Escrow Agreement shall
impair any such right, power or privilege or be construed as a waiver of any
default or any acquiescence therein. No single or partial exercise of any such
right, power or privilege shall preclude the further exercise of such
D-5
<PAGE>
right power or privilege or the exercise of any other right power or privilege.
No waiver shall be valid against any party hereto unless made in writing and
signed by the party against whom enforcement of such waiver is sought and then
only to the extent expressly specified therein.
SECTION 10. Expenses. Subject to the provisions of Section 1 and Section
3.2.3 each party shall pay its own expenses incident to this Escrow Agreement
and the transactions contemplated hereunder, including all legal and accounting
fees and disbursements.
SECTION 11. Consent to Jurisdiction; Enforceability. This Escrow Agreement
and the duties and obligations of the parties hereunder shall be enforceable
against any of the parties in the courts of the Untied States of America and of
the State of Maryland. For such purpose, each party hereto hereby irrevocable
submits to the non-exclusive jurisdiction of such court or courts and agrees
that all claims in respect of this Escrow Agreement and such other agreements,
documents and instruments may be heard and determined in such courts. Each party
hereby irrevocably agrees that a final judgment of any of the courts specified
above in any action or proceeding relating to this Escrow Agreement or to any of
the other agreements, documents or instruments referred to herein or therein
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.
SECTION 12. Severability. If any part of any provision of this Escrow
Agreement shall be invalid or unenforceable in any respect, such part shall be
ineffective to the extent of such invalidity or unenforceability only, without
in any way affecting the remaining parts of such provision or the remaining
provisions of this Escrow Agreement.
SECTION 13. Governing Law. This Escrow Agreement, the rights and
obligation of the parties hereto, and any claims or disputes relating thereto,
shall be governed by and construed in accordance with the laws of the State of
Maryland (excluding the choice of law rules thereof.)
SECTION 14. Limitation on Benefits. The covenants, undertaking and
agreements set forth in this Escrow Agreement shall be solely for the benefit
of, and shall be enforceable only by, the parties hereto, and their respective
successors, heirs, executors, administrators, legal representatives and
permitted assigns.
SECTION 15. Binding Effect. Subject to any provisions hereof restricting
assignment, this Escrow Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors, heirs, executors,
administrators, legal representatives and assigns.
SECTION 16. Headings. The headings of the sections and subsections
contained in this Escrow Agreement are inserted for convenience only and do not
form a part or affect the meaning, construction or scope thereof.
SECTION 17. Signature in Counterparts. This Escrow Agreement may be
executed in separate counterparts, none of which need contain the signatures of
all parties, each of which shall be deemed to be an original, and all of which
taken together constitute one and the same instrument. It shall not be necessary
in making proof of this Escrow Agreement to produce or account for more that the
number of counterparts containing the respective signatures of, or on behalf of,
all of the parties hereto.
D-6
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed or has caused
this Escrow Agreement to be executed on its behalf, all as of the date first
above written.
PATHNET, INC.
By:
--------------------------
Name:
-----------------------
Title:
----------------------
KN ENERGY, INC.
By:
--------------------------
Name:
-----------------------
Title:
----------------------
CRESTAR BANK
By:
--------------------------
Name:
-----------------------
Title:
----------------------
D-7
<PAGE>
ATTACHMENT A
JOINT CERTIFICATION
I, ______________, _________________ of PathNet, Inc. ("PathNet") and I,
___________, _______________ of KN Energy, Inc. ("Incumbent"), hereby certify as
follows:
1. PathNet and Incumbent entered into a Fixed Point Microwave Services
Agreement, dated as of September___, 1997 (the "FPM Agreement") pursuant to
which among other things, Incumbent engaged PathNet as, and PathNet agreed to
act as, Incumbent's sole representative for the purpose of (i) installing,
managing and operating a high capacity digital microwave system along
Incumbent's current microwave paths and (ii) marketing and selling any excess
capacity created by such high capacity digital microwave system, all in
accordance with and subject to the terms and conditions set forth in the FPM
Agreement.
2. Pursuant to the FPM Agreement, PathNet, Incumbent and Crestar Bank (the
"Escrow Agent") entered into an Escrow Agreement, dated as of September___, 1997
(the "Escrow Agreement"), in accordance with which PathNet delivered to the
Escrow Agent the sum of five million two hundred and sixty-four thousand and six
hundred and twenty-five dollars ($5,264,625) (in two equal payments) (the
"PathNet Escrow Deposit"), subject to the terms of the FPM Agreement and the
Escrow Agreement.
3. Attached to this Joint Certification is [an invoice or other such
purchase order or bill relating to a PathNet Item (as such term is defined in
the FPM Agreement) evidencing the performance of certain services by PathNet as
set forth in the FPM Agreement.] [An affidavit of Incumbent certifying that
PathNet has failed to timely meet its payment responsibilities with respect to
the PathNet Items (as such term is defined in the FPM Agreement) or fails to
complete the System in accordance with Section 13.2.1 (ix) of the FPM Agreement
in accordance with the terms and provisions of the FPM Agreement and setting
forth in detail a description of the facts and circumstances surrounding such
failure.]
4. Pursuant to Section 4.4.4(b) of the FPM Agreement and [Section
2.1.3/Section 2.1.4] of the Escrow Agreement, [PathNet/Incumbent] is entitled to
receive, from the PathNet Escrow Deposit, the following sum: ____________
($_________).
5. The Escrow Agent is hereby directed promptly upon receipt of this
certification to release the portion of the Escrow Deposit as set forth in
Section 3, above to PathNet/Incumbent pursuant to [Section 2.1.3/Section 2.1.4]
of the Escrow Agreement.
D-8
<PAGE>
Each of _______ and ________ on behalf of PathNet and Incumbent,
respectively, certify that the foregoing is true and correct.
PATHNET, INC. KN ENERGY, INC.
By: By:
-------------------------- --------------------------
Name: Name:
----------------------- -----------------------
Title: Title:
---------------------- ----------------------
D-9
<PAGE>
ATTACHMENT B
JOINT CERTIFICATION
I, ______________, ____________________ of PathNet, Inc. ("PathNet") and
I, _________________ of KN Energy, Inc., a Kansas Corporation ("Incumbent"),
hereby certify as follows:
1. PathNet and Incumbent entered into a Fixed Point Microwave Services
Agreement, dated as of September _, 1997 (the "FPM Agreement") pursuant to which
among other things, Incumbent engaged PathNet as, and PathNet agreed to act as,
Incumbent's sole representative for the purpose of (i) installing, managing and
operating a high capacity digital microwave system along Incumbent's current
microwave paths and (ii) marketing and selling any excess capacity created by
such high capacity digital microwave system, all in accordance with and subject
to the terms and conditions set forth in the FPM Agreement.
2. Pursuant to the FPM Agreement, PathNet, Incumbent and Crestar Bank (the
"Escrow Agent") entered into an Escrow Agreement, dated as of _______________,
199__ (the "Escrow Agreement"), in accordance with which Incumbent delivered to
the Escrow Agent the sum of two hundred thousand dollars ($200,000) (the
"Incumbent Escrow Deposit"), subject to the terms of the FPM Agreement and the
Escrow Agreement.
3. Attached to this Joint Certification is an invoice or other such
purchase order or bill relating to a PathNet Item (as such term is defined in
the FPM Agreement) evidencing the performance of certain services by PathNet as
set forth in the FPM Agreement.
4. Pursuant to Section 4.1.5 of the FPM Agreement and [Section 2.2.3/
Section 2.2.4] of the Escrow Agreement, PathNet/Incumbent is entitled to
receive, from the Incumbent Escrow Deposit, the following sum: _____________
($__________).
5. The Escrow Agent is hereby directed promptly upon receipt of this
certification to release the portion of the Incumbent Escrow Deposit as set
forth in Section 3, above to PathNet pursuant to [Section 2.2.3/Section 2.2.4]
of the Escrow Agreement.
Each of _______ and ________ on behalf of PathNet and Incumbent,
respectively, certify that the foregoing is true and correct.
PATHNET, INC. KN ENERGY, INC.
By: By:
-------------------------- --------------------------
Name: Name:
----------------------- -----------------------
Title: Title:
---------------------- ----------------------
D-10
<PAGE>
SCHEDULE F
INCUMBENT DRUG TESTING PROCEDURES
AND SUBSTANCE ABUSE POLICY
Copy Attached
F-1
<PAGE>
Schedule F
Drug and Alcohol
Abuse Policy
K N ENERGY, INC.
January 1, 1996
[LOGO]
<PAGE>
- --------------------------------------------------------------------------------
DRUG AND ALCOHOL ABUSE POLICY
K N ENERGY, INC., AND AFFILIATES
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
Purpose ................................................................... 1
Definition of Terms ....................................................... 2
Drug-Free Awareness Program ............................................... 3
Treatment ................................................................. 4
Voluntarily Seeking Assistance and Treatment .............................. 4
Supervisory Training ...................................................... 4
Mandatory Referral for Alcohol or Drug Testing ............................ 5
Authorized Use of Prescribed Medicine ..................................... 5
Prohibitions .............................................................. 6
Testing Requirements ...................................................... 6
Confidentiality ........................................................... 7
Testing Methodology ....................................................... 8
Inspections ............................................................... 8
Safety Sensitive Employees ................................................ 8
Consequences for Policy Violation ........................................ 8
Condition of Employment ................................................... 9
Reservation of Company Rights ............................................. 9
TESTING PROCEDURES
Reasonable Cause Testing .................................................. 9
Post-Accident Testing ..................................................... 15
Random Testing ............................................................ 16
Pre-Employment and Periodic Testing ....................................... 17
Providers: ................................................................ 17
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
WHEREAS, K N Energy, Inc., and its employees acknowledge that substance abuse is
a serious and complex, but treatable condition that negatively affects the
productive, personal and family lives of employees and the stability of
companies; and
WHEREAS, K N Energy, Inc., and its employees are committed to addressing the
problems of substance time to ensure the safety of the working environment
personal and public safety, by providing employees access to necessary treatment
and rehabilitation assistance; and
WHEREAS, K N Energy, Inc., has provided a program of employee assistance and has
generally provided the availability of medical coverage allowing employees
requiring treatment and rehabilitation for substance abuse to receive the
services without undue financial hardship; and
WHEREAS, appropriate efforts will be made by K N Energy, Inc., to establish
employee understanding that the experience of a drug or alcohol problem is not,
of itself, grounds for adverse action. Employees will be strongly encouraged to
seek and receive the services of the Employee Assistance Program prior to such a
problem affecting job performance or resulting in an on-the-job incident;
NOW, THEREFORE, it is the policy of K N Energy, Inc., and its affiliates,
hereinafter collectively called the "Company," that no employee shall
manufacture, distribute, possess, use or have in their system, illegal drugs,
drug paraphernalia, alcohol or other unauthorized controlled substances while on
the job.
PURPOSE
The purpose and intent of this policy is:
- to provide a safe, healthy and productive working environment for
all employees
- to ensure the reputation and integrity of the Company and its
employees
- to reduce the incidence of accidental injury to persons or property
- to reduce absenteeism, tardiness and indifferent job performance
- to provide assistance toward rehabilitation for any employee seeking
help in overcoming dependence and addiction with alcohol or drugs
COOPERATION
The Company earnestly asks for the understanding and cooperation of all
employees in implementing the Alcohol and Drug Abuse Policy, and the Company
regrets any inconvenience that may be caused the many non-abusers of drugs and
alcohol. We believe, however, that benefits to be derived from the reduction in
number and severity of accidents, greater safety of all employees and of the
public and rehabilitation or termination of those who, became of alcohol or
drugs, are a burden upon all other employees, will more than make up for any
discomfort the rest may experience.
DRUG AND ALCOHOL ABUSE POLICY
1
<PAGE>
- --------------------------------------------------------------------------------
appropriate medical training to evaluate and interpret an individual's positive
test based upon his/her medical history and any other relevant biomedical
information.
NIDA
National Institute on Drug Abuse, an agency of the U.S. Department of
Health and Human Services (DHHS).
Prescribed medicine
Any substance prescribed by a licensed medical doctor specifically for the
individual consuming it.
Under the influence of alcohol
Any blood alcohol concentration (BAC) percentage of 0.02 or greater for
DOT safety sensitive positions, and 0.05 for all other company non-covered
positions. The alcohol concentration level can be determined by analysis
using an EBT, blood, saliva. urine or any other method of quantitative
analysis approved by the DOT.
Under the influence of an illegal drug or controlled substance
Testing positive at a DOT-specified ng/ml (nanograms per milliliter)
level.
Safety Sensitive Function
Any operation, maintenance, or emergency response function performed on a
pipeline or LNG facility, and the function is regulated by the DOT
regulation CFR49 Parts 192, 193, and 195.
Specimen
A sample of urine, saliva or breath to be used in analysis for the
presence of drugs or alcohol.
Substance Abuse Professional (SAP)
A licensed physician, or a licensed certified psychologist, social worker,
employee assistance professional, or addiction counselor (Certified by the
National Association of Alcoholism and Drug Abuse Counselors Certification
Commission), with knowledge of and clinical experience in diagnosis and
treatment of alcohol-related disorders.
DRUG-FREE AWARENESS PROGRAM
The Company is a Drug-Free Awareness program to assist employees and their
families in understanding and avoiding problems associated with drug and alcohol
abuse. The Company will use this program as an educational tool to and in the
prevention and elimination of drug and alcohol abuse that could affect the
workplace. The Drug-Free Awareness program will inform employees and their
families on the following:
- the dangers of alcohol and drug abuse
- the Company's Alcohol and Drug Abuse Policy
- the availability of treatment and counseling for those voluntarily
seeking assistance
- sanctions the Company will impose for violations of the Alcohol and
Drug Abuse Policy.
A copy of the Company's Alcohol and Drug Abuse Policy booklet will be issued to
all employees covered by the policy. This information will be periodically
updated to keep employees informed on any changes to the Alcohol and Drug Abuse
Policy and information associated with the EAP. The information will be
communicated to employees on bulletin boards, employee mailings and various
other forms available at the time.
TREATMENT FOR SUBSTANCE ABUSE
Successful treatment of substance abuse is, to a great degree, dependent upon
the desire of the abuser to overcome the disease and his/her willingness to seek
proper treatment. The Company encourages voluntary drug or alcohol abuse
treatment and will be supportive of employees and/or their dependents who seek
treatment of their own accord. Conversely, the Company will take strong action
against those employees who suffer from drug or alcohol abuse, but who refuse to
seek treatment for the problem.
3
<PAGE>
- --------------------------------------------------------------------------------
If an employee tests positive for drugs or alcohol after being referred for
mandatory testing because of declining job performance or erratic on-the-job
behavior, that employee is in violation of the Company's Alcohol and Drug Abuse
Policy.
Any employee who has reason to suspect another employee or supervisor may be
abusing drugs or alcohol is encouraged to contact the Company's program
administrator, who will evaluate the situation and determine what steps should
be taken. Employees can be assured they may take such action on a confidential
basis and without fear of reprisal.
AUTHORIZED USE OF PRESCRIBED MEDICINE
An employee who is receiving medical treatment with any prescribed medication
which may alter his/her on-the-job behavior, physical or mental ability shall
report this medication is being taken to their immediate supervisor, who shall
seek guidance in determining whether the Company should temporarily change the
employee's job assignment during the period of treatment.
OTHER MEDICAL CONDITIONS
Under no circumstances will this policy be utilized to test for pregnancy or
other health or medical conditions.
PROHIBITIONS
This policy prohibits the following:
- Use, consumption, possession, manufacture, distribution,
dispensation or sale of a controlled substance, illegal drug or drug
paraphernalia, at any time while on Company property or in a Company
vehicle.
- Unauthorized use, consumption, possession, manufacture,
distribution, dispensation, or sale of alcohol, at any time while on
Company property or in a Company vehicle.
- Possession, use, consumption, manufacture, distribution,
dispensation or sale of a controlled substance or illegal drug off
Company property.
- Being under the influence of an unauthorized controlled substance,
illegal drug or alcohol at any time while on Company property or in
a Company vehicle.
- Consumption of alcohol off Company property that could adversely
affect the employee's work performance, personal safety or the
safety of others while at work.
- A drug related conviction under any federal or state statute.
- Failure to notify the Company of any arrest or conviction under a
federal or state criminal drug or alcohol statute within five days
of the arrest or conviction.
- Refusing to submit to a Company-property inspection when requested
to do so by an authorized Company representative.
- Refusing to participate in the testing process, complete the
required forms, or provide a urine, saliva or breath specimen to be
tested for the presence of drugs or alcohol.
- Substituting, altering, or in any way contaminating a specimen
submitted for drug or alcohol testing.
- Testing positive for an illegal drug, controlled substance, or
alcohol.
- Failing to comply with the treatment or counseling requirements
specified by the Medical Review Officer (MRO) or Substance Abuse
Professional (SAP).
5
<PAGE>
- --------------------------------------------------------------------------------
All records and information regarding alcohol and drug testing, test results,
and treatment of employees for chemical dependency will be confidentially
maintained by the Company. Access to information will be on a need-to-know
basis. When requested in writing, individual employees will have the right to
request information from his/her file pertaining to specific test results and
other information regarding the testing laboratory's findings. Specific
information on the testing laboratory or collection sites will be obtained
through the Program Administrator in Lakewood.
Information regarding an individual's alcohol and/or drug testing results or
rehabilitation may be released only upon the written consent of that individual.
An exception to this rule would be if information is requested in writing from
the DOT Administrator or another regulatory having regulatory authority over the
Company. In this instance, the Company is obligated by law to release the
information requested, whether the employee grants permission or not.
The laboratory maintaining confidential employee test records must, upon request
disclose information related to a positive alcohol and/or drug test of an
employee to the employee or the decision-maker in a lawsuit complaint procedure
or other proceeding initiated on behalf of the employee arising from the
positive test.
TESTING METHODOLOGY
Alcohol and drug testing shall be conducted through methods with proven
reliability and in strict compliance with appropriate methodology allowed by DOT
regulations. All drug tests will be conducted using only U.S. Department of
Health and Human Services NIDA-certified labs. If an employee fails to pass the
initial drug screening test, the original test specimen will be further analyzed
using the gas chromatography/mass spectrometry method, and verified by a
Company-designated MRO before any Company action is taken. A positive alcohol
screening test will be followed by a confirming test in accordance with
conditions specified by DOT regulations.
INSPECTIONS
The Company has the right at any time, to conduct unannounced inspections for
unauthorized alcohol or illegal drugs in or on Company property and vehicles.
EMPLOYEES IN SAFETY-SENSITIVE POSITIONS
The Company's program administrator will maintain a list of sensitive safety-
related jobs and employees who hold such positions shall be notified. The list
of safety-sensitive functions will be posted throughout the Company regions as
general information for the employees. Employees holding safety-sensitive
positions will, in addition to this policy, be subject to the provisions of the
Anti-Drug Plan covered Section G1.50 and the Alcohol Abuse Prevention Plan
covered in Section G1.55 of the Company's Standard Practices manual. Both plans
conform to the specific requirements of DOT regulations.
CONSEQUENCES FOR VIOLATION OF DRUG AND ALCOHOL POLICY
Violation of the Company's Alcohol and Drug Abuse Policy may, at the Company's
sole discretion, result in severe disciplinary action up to and including
termination for a first offense. The employee who tests positive for alcohol or
drugs will be removed from the job until he/she has:
- communicated with the Company's EAP for assessment and counseling
- successfully completed the rehabilitation program recommended by the
MRO or SAP
- been approved by the MRO or SAP for return to duty after
rehabilitation
- passed a return-to-duty drug or alcohol test
7
<PAGE>
- --------------------------------------------------------------------------------
1. The requirement for this testing shall be implemented in accordance with
the following procedures:
(a) When a supervisor has established reasonable cause that at employee
may be under the influence of drugs or alcohol, based upon specific
individualized observations, the supervisor shall contact another
supervisor or management employee for the purpose of confirming the
reasonable cause. The second observation will be obtained whenever
possible, and does not a require the confirming supervisor to
personally observe the employee in question. Concurrence can be
given over the telephone.
Once reasonable cause has been established, the employee shall be
taken from the job to a collection site to provide a specimen to be
tested by the supervisor. Under no circumstance shall the employee
being tested be allowed to drive to the collection site. If the
testing results are positive, the employee will have the opportunity
to immediately self-refer to the Employee Assistance Program (EAP).
If the test is positive for alcohol, the employee will be referred
to the SAP for evaluation and/or treatment.
(b) Any employee who refuses to go to a collection facility to provide a
urine, saliva, or breath specimen for testing, or who does not
immediately self-refer to the EAP/SAP following a confirmed positive
test, shall be terminated.
If required, the employee must sign a consent form authorizing the
collection facility to collect a urine, saliva or breath specimen.
By signing the consent form, the employee does not waive any claim
or cause of action under the law. An employee's refusal to sign the
required consent form shall constitute a refusal to be tested under
the provisions of Section 1(c) below.
(c) Any employee who refuses to be tested will be encouraged to go to
the collection facility to provide a specimen with the understanding
that the urine specimen obtained will not be tested unless that
employee, within the following twenty-four (24) hours, authorizes
that the specimen be tested. If, at the end of the 24-hour period,
the employee still refuses to have the specimen tested, the employee
shall be terminated.
(d) The employee to be tested shall be taken to the collection facility
by a Company representative. The covered employee, if represented by
a bargaining unit, may request another bargaining unit employee be
present at the collection site during the specimen collection
process. The specimen collection shall not be unduly delayed while
awaiting the fellow employee's arrival. Any expense associated with
the presence of the fellow employee shall be the responsibility of
the union or the employee being tested.
(e) In an effort to protect individual privacy, employees will not be
subject to direct observation while rendering a urine specimen. If
the employee provides a specimen that contains confirmed evidence of
any form of alteration, tampering, or substitution, this act
constitutes a refusal to be tested and the employee shall be
terminated.
(f) All urine specimens will be collected using the "split-sample"
method. This applies to both RSPA and FHWA functions within the
company. Specimens that yield positive results will be retained by
the laboratory in properly secured long-term storage for a period
of up to as year. If the MRO determines there is no legitimate
medical explanation for the confirmed positive result other than the
unauthorized use of a prohibited drug, the original sample must be
re-tested if the employee makes a written request for re-testing
within 60 days of receipt of the final test result from the MRO. The
employee may specify re-testing by the original lab or by another
NIDA-certified laboratory. An employee requesting an independent
test is responsible for the costs of the second test, unless the
employee's second test results are negative.
In the case of re-testing an employee holding a CDL, the time
allowed for the notice requesting a second test is the following 72
hours under FHWA rules, instead of the 60 days allowed under RSPA
rules. Except for the abbreviated time allowed for notice, all other
aspects of the re-testing procedures shall be the same.
Since some analytes may deteriorate during storage, detected levels
of a drug below the detection limits established in the DOT
procedures, but equal to or greater than the established sensitivity
of the assay,
9
<PAGE>
- --------------------------------------------------------------------------------
collection room to receive containers, assure that the quantity of
the urine is sufficient for testing, check urine color and measure
and record urine temperature. Collection personnel shall fill in
specimen labels while in the presence of the employee and shall cap
and seal containers with evidence tape and secure the employee's
initials on the evidence tape.
- Proper chain-of-custody procedures governing specimen handing
throughout the testing process. Chain-of-custody procedures shall
assure that a urine specimen shall not leave the sight of the
employee until each specimen container has been sealed and initialed
by the employee giving the specimen.
- Authorized collection facility personnel shall seal specimen tubes
with evidence tape in the presence of the employee and the employee
shall then initial the evidence tape. The collector will complete a
chain-of-custody form and shall place the sealed and initialed
specimen tubes in the drug collection kit or box provided by the
laboratory, along with the chain-of-custody form. The collection kit
or box shall be sealed and initialed by the collector.
The collection facility shall assure that all specimens are
couriered or shipped to the testing laboratory as immediately as
possible. The collection facility shall assure that any specimens
held at the facility overnight will be placed in a secured
refrigerator until courier pickup.
- The testing laboratory shall assure that personnel authorized to
receive specimens immediately open the package, inspect the sealing
tape for initials and open the kit or box. Lab personnel shall
examine and inspect the chain-of-custody form, the specimen tubes
and kit or box to assure that it conforms to the requirements of DOT
Part 40 regulations. If these requirements are not met, the
laboratory personnel shall immediately notify the laboratory's
scientific director and shall document any and all inadequacies in
the chain-of-custody requirements. The laboratory's scientific
director shall immediately notify the collection facility and/or the
Company's program administrator of the inadequacies and shall retain
the specimens in a locked freezer pending disposition directions.
- If these requirements are met, authorized laboratory personnel shall
sign on the appropriate line of the chain-of-custody form and
deliver the specimen kit or box to authorized laboratory
technologists for testing.
- All positive samples shall be secured with evidence tape, signed and
dated by an authorized technologist. Upon completion of testing
procedures, testing reports shall be prepared and signed by the
technologist for the review, approval and signature of the
scientific director.
- Levels below which specimens are deemed negative shall correspond to
those established by DOT guidelines, as amended from time to time.
- Laboratory use of appropriate screening and confirmation procedures
and technology.
- The laboratory shall assure that each specimen will be screened by
an immunoassay method (i.e., EMIT, RIA or FPI) for each drug/drug
group.
- All specimens identified as positive shall be confirmed using gas
chromatography/mass spectrometry (GC/MS) techniques. The laboratory
shall report as negative all specimens which are negative on the
initial test or negative on the confirmatory test. Only specimens
confirmed positive on the initial test and also the confirmatory
test shall be reported as a positive test.
- Screening methods measure a group of drugs and/or their metabolites
simultaneously. Confirmatory methods, on the other hand, measure
single and specific drugs and/or their metabolites. Established
levels for confirmatory methods, therefore, may be lower than those
for initial screening.
- A specimen testing positive must be preserved in properly secured,
long-term frozen storage for a period of one year, or longer, if
requested by the employee or his representative, the Company, the
DOT Administrator or a representative of a state agency responsible
for ensuring Company compliance with DOT regulations.
11
<PAGE>
- --------------------------------------------------------------------------------
(a) If an employee is subject to discipline or termination under
existing practices other than as outlined herein, such employee
shall not utilize the Alcohol and Drug Abuse Policy to circumvent
any labor agreements, existing practices, or to avoid discipline or
termination.
(b) in the cases not covered in Section 4 (a) above, the employee will
have the opportunity for appropriate assistance, assessment,
referral, treatment and after-care as provided through the EAP and
as detailed in the employee's individual treatment plan. Failure to
seek and receive these services, or failure to abide by the terms of
the treatment plan, shall be grounds for termination.
(c) Any employee who seeks and receives assistance and who completes the
detailed treatment plan shall, upon return to work, be subject to
periodic testing for a period of up to 60 months. The schedule for
follow-up testing will be determined by the MRO.
(d) Any employee who tests positive on a follow-up test after
rehabilitation shall be terminated in accordance with this policy.
(e) Any employee who successfully completes an individual treatment plan
and who returns to work will be encouraged to contact and use the
EAP's services on a self-referral basis whenever there is need for
ongoing assistance and support.
(f) Any employee who relapses and for whom a test for reasonable cause
of drugs or alcohol is confirmed as positive a second time, shall be
terminated.
5. The Employee Assistance Program shall include the following components:
(a) Clinical evaluation and appropriate assessment followed by a
specific individual treatment plan and regimen for the receipt of
counseling, treatment, aftercare and related services, subject to
ongoing monitoring by the Company.
(b) Active encouragement and procedures for the voluntary self referral
of troubled employees to the EAP in cases in which reasonable cause
has not been established and in which testing procedures are not
invoked.
(c) Assurances and procedures to protect the confidentiality of
employees who voluntarily seek EAP services and procedures governing
the management of such employee records as medical information.
6. Any dispute arising with respect to drug testing shall be subject to the
Company's complaint resolution procedure for the non-represented
employees, or to the grievance procedure established in the current labor
agreement for the represented employees.
POST-ACCIDENT TESTING
Post-accident testing provisions require that the same collection procedures
generally detailed above for reasonable cause testing be used when an employee's
work performance may be linked to an accident or when work performance cannot be
completely discounted as a contributing factor to an accident.
1. The definition of an accident will be in accordance with the DOT CFR 49
Part 191 definition of a reportable incident. Specifically: an incident
that involves a release of gas from a pipeline or LNG facility, and
(a) a death, or personal injury necessitating in-patient
hospitalization; or
(b) estimated property damage, including cost of lost gas, of $50,000 or
more, unless superseded by lower state threshold limits.
2. An event that results in the emergency shutdown of an LNG facility.
13
<PAGE>
- --------------------------------------------------------------------------------
PRE-EMPLOYMENT AND PERIODIC TESTING
Pre-employment and Periodic Testing will also be a part of the Company's drug
and alcohol testing program. While the timing of such tests will be individually
specific to those involved, the same collection procedures generally described
above for reasonable cause testing will be used.
PROVIDERS:
Employee Assistance Network Program (EAP)
Mutual of Omaha
P.O. Box 34014
Seattle, WA 98124-1014
1-(800) 237-1439
Testing Laboratory
Lab Corp / MedExpress
P.O. Box 252110
Memphis, TN 38175-2110
1-(800) 340-1150
Medical Review Officer (MRO)
Henry F. Simmons, MD
P.O. Box 8520
Little Rock, AR 72215-8520
1-(800) 762-3623
K N Program Administrator
LeRoy Petersen
K N Energy, Inc.
P.O. Box 281304
Lakewood, CO 80228
(303) 763-3260
15
<PAGE>
SCHEDULE G
INTENTIONALLY OMITTED
G-1
<PAGE>
SCHEDULE H
INCUMBENT HEALTH AND SAFETY REQUIREMENTS
Copy Attached
H-1
<PAGE>
Schedule H
[LOGO]
K N Energy, Inc. and Affiliates
Safety and Environmental Affairs Policy Manual
Safety and Environmental Section: 01.01
Ethics Statement Issue Date: 5/30/96
Revision Date:
================================================================================
K N ENERGY INC.'S SAFETY AND ENVIRONMENTAL ETHICS STATEMENT
The commitment of K N Energy, Inc. and its affiliates (collectively "K N") to
excellence in the area of safety and environmental performance is consistent
with the goal of being acknowledged as a world-class provider of integrated
energy services and solutions. As such, K N is committed to the following
principles:
- - K N will provide its employees a safe work environment, free of recognized
and avoidable safety and health risks.
- - K N's policy is to comply with both the letter and spirit of safety,
health, and environmental laws and regulations. Safety, health and
environmental concerns will continue to play an integral part in corporate
decision-making and operations.
- - K N will use internal procedures and adopt best practices or other
operating guidelines toward the goal of protecting the safety and health
of its employees and the public as well as the environment.
- - K N will develop, maintain and review emissions and waste reduction
programs. These programs will address the source and nature of emissions
and waste generated and, to the extent technically and economically
feasible, methods to reduce the generation of these emissions and waste
streams.
- - K N, as a responsible corporate leader, will participate when necessary
with legislative and regulatory bodies in creating responsible laws,
regulations, and standards to safeguard the community, the workplace, and
the environment.
- - K N's policy is to promote among its employees an individual and
collective sense of responsibility, ethics and accountability for the
principles contained in this policy.
- - K N will communicate its safety, health, and environmental commitments and
achievements to the public by performance/achievements, and outreach, and
shall recognize and respond to community concerns.
- - K N will develop a means to measure and enhance both current and future
safety, health, and environmental performances in meeting these
principles.
- - K N employees should obtain a practical working knowledge of K N's
standards and policies applicable to his or her assigned duties.
May 30, 1996
/s/ Larry D. Hall
Larry D. Hall
Chairman, President and CEO
Safety & Environmental Affairs Policy Manual Safety and Environmental Ethics
Statement Page: 1 of 1
<PAGE>
[LOGO] RC:
------------
Date:
---------
SAFETY HAZARD REPORT
Exact Location:
-----------------------------------------------------------------
Description of Hazard:
----------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Suggestion for Correction:
------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Submitted By:
- --------------------------------------------------------------------------------
================================================================================
Was Condition Corrected? Yes |_| No |_|
Date Corrected:
-----------------------------------------------------------------
If Not, Why?
--------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Supervisor:
---------------------------------------------------------------------
Safety:
-------------------------------------------------------------------------
Return to Originator By: ________________ with Disposition _____________________
Original - Supervisor Copy - Regional Safety Copy - Employee
<PAGE>
[LOGO]
K N Energy, Inc. and Affiliates
Safety and Environmental Affairs Policy Manual
Employee On-The-Job Injury Section: 02.03
or Accident Report Issue Date: 7/24/96
Revision Date:
================================================================================
I. PURPOSE
- To ensure the injured employee receives prompt, appropriate medical
care and to facilitate that employee's return to work.
- To provide timely notification to our insurers.
- To maintain compliance with OSHA's reporting requirements, and those
requirement of other agencies.
- To develop sufficient information through investigation so that
corrective actions can be implemented.
II. POLICY
A. The Employee On-The-Job Injury or Accident Report (KN Form K760,
10/96) must be completed by the injured employee's immediate
supervisor. This form must be faxed within 24 hours of the accident
to the Manager of Workers' Compensation in Lakewood, as shown on the
form.
B. If the incident involves the death of an employee, or the in-patient
hospitalization of 3 or more employees, the supervisor must call one
of the Company management representatives shown in the "Incident,
Accident, Safety-Related Condition and Chemical Spill Reporting
Procedures Booklet." OSHA requires telephonic notification of deaths
or multiple hospitalizations within 8 hours of the incident. See
Section D of the above-mentioned Reporting Procedures Booklet for
additional details.
C. The Incident/Loss Report (KN Form K440) must be completed for every
on-the-job injury or fatality that is a result of an incident.
Follow the procedures described in section 02.04 covering
incidents/losses.
III. DISPOSITION OF FORM
This form, complete with investigation data, will be reviewed by the
Manager of Safety and Health and/or the Manager of Workers' Compensation.
The investigation data will be reviewed for any likelihood that the same
circumstances may exist at any other Company location. Preventative
measures may then be implemented at other Company locations as necessary.
Safety & Environmental Affairs Policy Manual Employee On-The-Job Injury or
Accident Report Page: 1 of 3
<PAGE>
[LOGO]
EMPLOYEE ON-THE-JOB INJURY OR ACCIDENT REPORT
BUSINESS UNIT: |_| Front Range |_| Heartland |_| Mountain |_| Northern Plains
|_| Southwest |_| Corporate
FAX WITHIN 24 HRS TO: Karen Rose, Lakewood - fax 303-763-3116 SEND COPY TO:
Supervisor of Injured Employee
1. EMPLOYEE INFORMATION:
Name of Injured Employee: ___________________________________________________
(First) (Middle) (Last)
Social Security#: ___________________________________________________________
Employee's
Home Address: ____________________________________________ Phone #: _________
(No. & Street) (City or Town) (State) (Zip)
Age: _______ Birth Date: ________ Male |_| Female |_| Single |_| Married |_|
Number of Dependents: ________ Number of Children under age 18 or
incapacitated: ______________________________________________________________
Name and address of principle dependent
or friend: __________________________________________________________________
(First) (Last) (No. & Street) (City or Town) (State) (Zip)
2. WORK INFORMATION:
Work Location: _________________________ Department: _______________________
RC #: ______________________________________________________________________
Job Description: ___________________________________________________________
Date of Hire: ___________ In same job description: _________(years/months)
Current Hourly Wage:________________________________________________________
3. ACCIDENT DESCRIPTION:
Exact Location of
Accident: __________________________________________________________________
(No. & Street) (City or Town) (County) (State) (Zip)
Date of Accident: ____________ Time: ________ a.m/p.m. Did the Accident
occur on Company property? Yes |_| No |_|
Working Shift: From __________ to ___________ a.m/p.m. How Many Hours Had
Employee Been on Job? ______________________________________________________
Date injury first reported to Company: _______________ Name of Person
Notified: __________________________________________________________________
Describe the injury/illness in detail and indicate the part of the body and
the side of the body affected: _____________________________________________
What was the employee doing when the accident occurred? ____________________
____________________________________________________________________________
How did the accident occur? (Describe all activity leading up to the
accident. Tell what material or tools were involved. Tell what happened just
before, at the time of, and just after the accident.) ______________________
____________________________________________________________________________
____________________________________________________________________________
What machine, tool, substance or object was most closely connected with the
accident? __________________________________________________________________
Did injury occur because of: Intoxication? |_| Yes |_| No
Failure to obey rules? |_| Yes |_| No
Unsafe condition? |_| Yes |_| No
Was Weather a factor? |_| Yes |_| No
Failure to use safety devices? |_| Yes |_| No
Unsafe act by injured or others? |_| Yes |_| No
Unsafe Personal Factors (attitude, etc.) |_| Yes |_| No
If yes, how? __________________________________________
What personal protective equipment is required for the job? ______________
Was it used? |_| Yes |_| No
What safety measures could the Company have taken to prevent the accident?
____________________________________________________________________________
____________________________________________________________________________
Names and addresses of witnesses: __________________________________________
____________________________________________________________________________
(Name) (No. & Street) (City or Town) (State) (Zip)
Page 1 of 2
<PAGE>
[LOGO]
KN Energy, Inc. and Affiliates
Safety and Environmental Affairs Policy Manual
Seatbelt Policy Section: 02.09
Issue Date: 8/30/96
Revision Date:
================================================================================
I. PURPOSE
To provide protection for the driver and passengers while riding in any
motor vehicle, except ATVs, snowmobiles and heavy equipment that is not
provided with roll protection.
II. POLICY
All Company employees, contractors and visitors riding in a Company owned,
rented or leased vehicle, including FAVR vehicles while on Company
business, will wear a seat belt while the vehicle is moving. Air bags are
not a substitute for a seat belt.
Safety & Environmental Affairs Policy Manual Seatbelt Policy Page: 1 of 1
<PAGE>
Form K439 - Front
VEHICLE ACCIDENT REPORT
Reporting Location Date of Report
---------------------- -----------------------
Company Date of Accident
--------------------------------- ---------------------
VEHICLES INVOLVED
If more than two vehicles are involved, use more than one report
Company Vehicle (#1) Other Vehicle
- --------------------------------------------------------------------------------
Unit No.
Year - Model - Make
- --------------------------------------------------------------------------------
Vehicle License No.
- --------------------------------------------------------------------------------
Driver's Name
- --------------------------------------------------------------------------------
Driver's License No.
- --------------------------------------------------------------------------------
Driver's Address
- --------------------------------------------------------------------------------
City, State, ZIP
- --------------------------------------------------------------------------------
Driver's Date of Birth and Sex
- --------------------------------------------------------------------------------
Owner's Name
- --------------------------------------------------------------------------------
Owner's Address
- --------------------------------------------------------------------------------
City, State, ZIP
- --------------------------------------------------------------------------------
Insured by - Company Name
- --------------------------------------------------------------------------------
Local Agent
- --------------------------------------------------------------------------------
Parts of Vehicle Damaged
- --------------------------------------------------------------------------------
Estimated Cost of Repairs
- --------------------------------------------------------------------------------
INJURED PERSON
- --------------------------------------------------------------------------------
Name Address Age Extent of Injury
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WITNESSES
- --------------------------------------------------------------------------------
Name Address Age Phone Number with
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Were Witnesses Passengers in either vehicle? |_| Yes |_| No
If yes, which one?
-------------------------------------------------------------
Investigating Officer - Name Department
---------------------- -----------------
Badge No.
-----------------
Description of Accident
--------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Safety & Environmental Affairs Policy Manual Vehicle Accident Reporting
Page: 3 of 4
<PAGE>
[LOGO]
K N Energy, Inc. and Affiliates
Safety and Environmental Affairs Policy Manual
Personal Protective Section: 02.08
Equipment Issue Date: 8/30/96
Revision Date:
================================================================================
***Company Policy***
The use of approved personal protective equipment is mandatory when the
performance of your job duties exposes you to a workplace hazard. This policy
covers all field and retail employees and any office employee who is exposed to
potential hazards.
The protective equipment furnished by the Company will be maintained in a safe
and sanitary condition and used according to the manufacturer's recommendations.
Employees shall conduct frequent inspections of personal protective equipment to
ensure that it is in good working condition. Any equipment found to be defective
or otherwise permanently altered will be taken out of service and repaired or
replaced.
OSHA Reference: 29 CFR 1910.132, 1910.133, 1910.134, 1910.135, 1910.136,
1910.l37 and 1910.138
I. EYE PROTECTION - Employees shall wear proper eye protection whenever
chipping, drilling, grinding, handling acids or caustics, welding, scaling
pipe and whenever flying objects or particulate matter may be present.
Proper eye protection must also be used in the presence of other types of
hazards, including fire, steam, compressed air, smoke, etc. and when
working on piping containing gas or liquid under, or potentially under
pressure. Eyeglasses with side shields are adequate for flying particles;
face shields or goggles are required for chemical or splash protection.
A. Prescription Safety Eyewear
i. The Company shall provide non-prescription and prescription
safety eyewear to all employees whose jobs involve potential
eye hazards. Employees are responsible for wearing safety
glasses whenever their jobs involve potential eye hazards.
ii. New prescription safety lenses, and if necessary, frames, will
be provided for eligible employees when an employee's
corrective vision prescription warrants the change.
iii. The Company will purchase safety eyewear through an approved
safety equipment supplier selected by the Company. Procedures
for the purchase of prescription safety glasses will be issued
by the Procurement Department
1. Each employee will be responsible for providing a
current prescription (no more than one year old) from
his or her optometrist or ophthalmologist at the time
the eyewear is ordered. The cost of eye examinations
will be paid by the employee.
2. Only prescription safety eyewear meeting ANSI
requirements for industrial safety glasses will be used.
Safety & Environmental Affairs Policy Manual Personal Protective Equipment
Page: 1 of 5
<PAGE>
Safety eye protection will be available for all
visitors, vendors and contractors entering eye
protection areas.
II. HEARING PROTECTION - The Company shall provide hearing protection for all
employees who may be exposed to excessive work-related noise levels.
Employees working in excessive noise environments are required to wear the
provided hearing protection (also see the HEARING CONSERVATION PROGRAM).
A. Determination of High Noise Areas
If the supervisor or employee has questions on whether particular
areas are subject to excessive noise levels and hearing protection
is needed, the Safety Process Owner will survey, or will arrange to
have surveyed, the suspect areas and advise if high noise levels
exist.
B. Warning Signs
The Company shall post warning signs in all high noise areas (areas
where noise levels are above 85 dB time-weighted average) and shall
supply either insert-type or muff-type hearing protectors for the
employee's protection.
C. Noise Reduction Requirements
The Noise Reduction Rating of the hearing protection provided by the
Company must be sufficient to reduce employee exposure to an 85 dB
time-weighted average. Guidance in the selection of hearing
protection equipment is located in the Occupational Safety and
Health Standards for General Industry CFR 29 1910.95, Appendix B.
III. HAND PROTECTION - The Company shall provide hand protection for all
employees who perform tasks that may expose their hands to harmful
substances, severe cuts or lacerations, severe abrasions, punctures,
chemical burns, thermal burns and harmful temperature extremes. Specialty
gloves, such as those used for chemical, electrical or thermal protection,
shall be approved for that particular type of hazard.
IV. FOOT PROTECTION - Steel-toed shoes or boots are recommended in all areas
and are required in areas where the Workplace Hazard Assessment has
identified a danger to the feet caused by falling or rolling objects,
piercing objects, chemical hazards, electrical exposure, etc. The Company
will pay 50% of the cost, up to $75.00 per exposed employee per year, for
one pair of steel-toed shoes or boots. If hazards that effect the top of
the foot exist, additional foot guards should be used. Canvas or synthetic
fiber cloth shoes are not appropriate footwear for employees working in
non-office environments and are not allowed.
V. HEAD PROTECTION - Company provided head protection shall be worn by all
employees and contractor employees when performing work at KN field
locations outside of the office, car or truck.
A. Bump caps are not acceptable head protection;
B. Safety helmets approved by the Department of Transportation or by
SNELL shall be worn by all operators of All Terrain Vehicles (ATV's)
and snow mobiles. The safety helmet shall be provided by the
Company.
VI. RESPIRATORY PROTECTION - (SEE RESPIRATORY PROTECTION SECTION)
VII. FIRE RESISTANT CLOTHING - The choice of clothing for employees in the
field is predicated on the
Safety & Environmental Affairs Policy Manual Personal Protective Equipment
Page: 3 of 5
<PAGE>
understanding of training and must be retrained as applicable.
A. The training provided must teach each affected employee the
following:
i. When PPE is necessary and what equipment must be worn;
ii. How to properly don, adjust, wear and remove PPE;
iii. PPE limitations; and
iv. The proper care, maintenance and useful life and disposal of
PPE.
B. Each employee must demonstrate his/her understanding of the training
and must be able to use the equipment properly.
C. Retraining must be performed when: a) there are changes in the
workplace that make previous training obsolete; 2) there are changes
in the types of PPE to be used; or 3) employees demonstrate a lack
of knowledge about PPE or fail to use the chosen PPE.
D. The Company must certify that the employee has received and
understood the training.
Exhibit #1
Workplace Hazard Assessment
Safety & Environmental Affairs Policy Manual Personal Protective Equipment
Page: 5 of 5
<PAGE>
SCHEDULE I
OTHER REQUIREMENTS OF INCUMBENT
Copy Attached
I-1
<PAGE>
Schedule I
[LOGO]
GAS OPERATIONS STANDARDS
Date: August 6, 1996
Index:: G1.05
Section: GENERAL POLICIES
Subject: CONSTRUCTION NEAR COMPANY FACILITIES
================================================================================
DAMAGE TO COMPANY COMPANY PIPELINES AND FACILITIES BEING STRUCK,
FACILITIES SEVERED OR DAMAGED HAVE RESULTED IN THE NEED FOR
WRITTEN GUIDELINES ON THIS SUBJECT. A COMMON TIME
FOR SUCH INCIDENTS TO OCCUR IS DURING THE
INSTALLATION OF OTHER UNDERGROUND UTILITIES,
DURING STREET WIDENING, PAVING ROAD CONSTRUCTION,
OR LAND LEVELING OPERATIONS, OR THE CONSTRUCTION
OF HABITABLE OR AUXILIARY BUILDINGS IN CLOSE
PROXIMITY TO COMPANY PIPELINES.
BASIC RIGHTS 1. The Company's basic rights in relation to its
pipelines are as follows:
- Private Property a. The gathering system, transmission system,
and distribution system are private property.
If the activities of a third party threaten
the safe operation of Company facilities, the
Company may enjoin such persons from further
action near Company property. If a pipeline
or other facility is struck, Company has the
right to be reimbursed for its damages.
- Specific Privileges b. Company has the right to fully enjoy the
privileges derived from any of its easements,
permits, or right-of-way grants. This
includes preventing any obstructions over or
near the pipeline which may interfere with
maintaining, operating, repairing, replacing,
or inspecting the pipe.
BASIC RESPONSIBILITIES 2. The Company's basic responsibilities in
relation to its pipelines are as follows:
- Noninterference a. The installation of any pipelines or
related facilities shall not interfere with
another utility's easement. The rules
regarding underground installation of other
utilities must be respected by the Company
just the same as the Company expects other
companies to follow its own rules.
Cooperation with other utility companies is
essential.
- Accurate Line Locating b. When Company pipelines are identified by
pipeline markers, stakes, or by telling a
third party where the line is located, such
indications must be accurate.
CONTINUING SURVEILLANCE 3. Every Company employee, whether on or off the
job, should be alert for forthcoming projects
which may endanger Company pipelines or other
facilities. Such projects, including the
construction of underground phone, electrical,
sewer, and water facilities, or street
construction projects, are often known to the
public long before work begins. Rural road
construction and land leveling are less
publicized; therefore, area contractors and road
crews should be informed of the location of
Company's lines and the rules regarding
construction activity. The public welfare and the
safe, uninterrupted operation of Company's
facilities depend upon the alertness of every
company employee
<PAGE>
- --------------------------------------------------------------------------------
Facility Horizontal Distance from Company Facilities
- --------------------------------------------------------------------------------
Buried Pipelines Buried pipelines constructed parallel to
Company pipelines shall be no closer than 10
feet horizontally
- --------------------------------------------------------------------------------
Buried Telephone Buried telephone cables installed parallel to
Company pipelines shall be no closer that 10
feet horizontally.
- --------------------------------------------------------------------------------
Overhead Telephone Cable Overhead telephone lines and all associated
structures installed parallel to Company
pipelines shall be no closer than 25 feet
horizontally.
- --------------------------------------------------------------------------------
Buried Electric Cables - 440 Buried electric power cables operating at 440
VAC or Less volts alternating current or less shall be
installed no closer than 10 feet horizontally
when paralleling Company pipelines.
- --------------------------------------------------------------------------------
Buried Electric Cables - 440 Buried electric power cables operating at 440
VAC to 37.5 KVAC VAC to 37.5 kilovolts alternating current shall
be installed no closer than 25 feet
horizontally when paralleling Company
pipelines.
- --------------------------------------------------------------------------------
Overhead Electric Lines - 37.5 Overhead electric lines operating at 37.5
KVAC or Less kilovolts alternating current or less and all
associated structures shall be installed no
closer than 25 feet horizontally when
paralleling Company pipelines.
- --------------------------------------------------------------------------------
Buried or Overhead Electric Parallel separation of an electric cable or
Lines - Facilities Over 37.5 KV line operating at more than 37.5 kilovolts, AC,
or any DC electric cable, will be established
only be agreement between the utility involved
and the Company engineering department.
- --------------------------------------------------------------------------------
Waiver of Minimum Clearances - Any horizontal clearance less than
that specified above shall be
established by agreement between the
Company and the owner of the
underground facility involved.
Shared Right-of-Way Permission from the Company shall be required
of all utilities or companies who wish to
construct any facility within 50 feet of a
Company pipeline or related facility.
- Minimum Vertical Clearance d. Minimum vertical clearances shall be as
-Transmission and Gathering shown on the following table when repair,
Pipelines installation, or construction of pipelines or
cables results in those facilities crossing a
Company transmission or gathering pipeline in
a rural area:
<PAGE>
REPORTING CONSTRUCTION 4. Any employee who observes construction activity
ACTIVITY that may in any way involve buried Company
pipelines or related facilities should immediately
inform the appropriate Business Center Leader or
the Construction/Maintenance Process Owner.
- In the event the appropriate Business
Center Leader cannot be reached notify
gas control.
INVESTIGATING 5. The Business Center Leader or delegate shall
CONSTRUCTION ACTIVITY immediately investigate any reported or observed
construction activity in the vicinity of Company
pipelines, and shall see that proper care and
procedures are carried out. If the investigation
must be delegated, it should only be to an
experienced employee who will give the situation
direct and immediate attention.
CONTROLLING CONSTRUCTION 6. The Business Center Leader, upon determining
ACTIVITY that a Company pipeline may be involved in any
construction activity, shall be responsible for
enforcing the following rules:
- Excavation work a. Excavation for any purpose should not
approach Company's Pipeline unless the line
has previously been exposed by:
- A responsible Company employee; or
- A contractor who has been authorized
to expose the line under the
supervision of a responsible Company
employee.
- Horizontal Clearance b. Minimum horizontal clearances must be
maintained between the Company's pipelines
and other pipelines and cables installed in
rural areas. The purposes of these guidelines
are:
- To allow adequate space for
maintenance and replacement of the
facilities involved.
- To prevent detrimental interference of
the cathodic protection facilities
involved.
- To prevent detrimental or hazardous
alternating current influence on Company
pipelines and related facilities.
- To prevent hazardous working
conditions for personnel in operating
and maintaining the pipelines.
- To prevent ignition of blowing natural
gas at blowdown and relief valve
locations.
- Minimum Horizontal c. Minimum horizontal clearances shall be as
Clearances-Transmission shown on the following table when new
and Gathering Pipelines construction of other underground facilities
parallels the Company's transmission or
gathering pipelines in rural areas.
<PAGE>
CONTACT CITY OFFICIALS 18. When the construction work is within any city
or corporate limits, or if work is part of a city
project, city officials should be contacted and
reminded of company's rules and policies. The
necessary provisions regarding Company
requirements can then be written into an ordinance
or into the contract under which the work is to be
done.
DEVIATION FROM RULES 19. Deviation from the rules in this section will
be permitted only with the approval of the
Business Center Leader. The Supervisor granting
the exception must send a written report to the
Vice President - Business Operations explaining
the deviation and why it is necessary.
Table of Contents
<PAGE>
- Determine Damage a. Determine extent of damage by exposing
most pipe if necessary.
- Coating Damage Only b. Repair the pipe coating in an approved
manner to insure cathodic protection if that
is the only damage incurred.
- Damaged Pipe c. Repair or replace any damaged suction of
pipe in accordance with rules outlined in
Pipeline Operation and Maintenance, Section
G4.0 of this manual. Damaged pipe includes
dents, scratched, gouges, grooves, bends,
etc. If there is any doubt about the
condition of existing pipe, replace it with
pretested pipe of equal or better grade and
specification.
- Loosened Connections d. A careful examination must be made of
piping in the immediate vicinity to make sure
that other pipes haven't been pulled loose.
For example, if a distribution main is struck
and bent, it's possible that one or more
nearby service stubs have been pulled loose
from the meter loop connections, or a service
line pulled loose from building connections.
- Backfilling Operations e. Backfilling operations may proceed only
after the necessary repairs have been
completed and the Company inspector gives his
approval for the line to be covered,
motorized vehicles shall not be driven over
the backfill as a means of compacting the
soil of a ditch or excavation containing-
- A threaded and coupled pipe
- A dresser coupled pipe
- A plastic natural gas line
CONSTRUCTION ACTIVITIES 16. Construction activities are summarized as
SUMMARY follows:
- Be Alert a. All Company employees should be alert for
construction activity which may endanger
company facilities and report such activity
immediately.
- Investigate b. Construction activities should be
investigated promptly, and the party or
parties involved must be made aware of
Company's requirements. Pertinent facts
regarding the project, such as names,
description of work to be done, starting and
completion dates, etc., should be obtained.
- Notify Supervisors c. When the work may involve exposing or
disturbing Company property, the above
information shall immediately be sent to the
department responsible for the facility. The
party responsible for the project should be
advised that they may be requested to enter
into a contract outlining the terms and
procedures to be followed before Company will
permit any work in the vicinity of its lines.
DETERMINE COMPANY 17. The exact nature of the proposed construction
INVOLVEMENT or work already in progress should be reviewed and
discussed with the legal department and any other
supervisors whose department might be affected so
that steps can be taken to protect Company's
property.
<PAGE>
ii. A written plan of blasting
activities is established and agreed to
in writing by the organization
responsible for the blasting. No
blasting will be permitted within 250
feet of a Company pipeline unless a
special written agreement is secured
from the blasting contractor (see Figure
1 at the end of this section). All
Aboveground appurtenances will be
protected from flying debris by being
shielded with a protective coating:
i.e., dirt, barrier, wood or metal
enclosure, etc. The Operations
Supervisor will confer with the blasting
personnel on their proposed work and
will establish with the engineering
department safety requirements to
protect Company facilities.
d. Pipelines located within 500 feet of the
blasting area will be leak-surveyed with a
backpack leak detector before and after the
blasting work is completed.
e. Additional blasting guidelines are shown
in Engineering and Construction Standards
ES-4311 and DS-4311.
BUILDINGS NEAR 11. For safety and convenience it is recommended
TRANSMISSION PIPELINES that buildings be 25 feet from any gathering or
transmission pipeline except by special written
permission from the engineering department.
INSPECTOR - DIGGING 12. A responsible Company employee or contract
OPERATIONS representative will be assigned as an inspector
during any digging operations which may endanger
or involve company pipelines or related
facilities. The inspector should be present as
necessary to prevent damage, and to detect any
possibility of the facilities being struck or
disturbed. Company will bear the cost of
furnishing the inspector for occasional
construction projects of short duration. For
larger projects, such as new utility systems or
extensive street improvement programs, Company
shall be reimbursed for the cost of furnishing an
inspection.
COVERING EXPOSED PIPELINES 13. Any Company underground pipelines which have
been exposed for any reason shall not be covered
up until a responsible Company employee or
contract representative has inspected the line and
given approval for backfilling operations to
proceed.
REPORTING DAMAGE TO 14. The cost of repairing a pipeline damaged
PIPELINES during outside third-party construction operations
shall be paid by the party striking the line. The
Company inspector must submit a written report on
the damage to the appropriate Business Center
Leader, who in turn shall submit a report to
either the general manager of pipelines or the
general superintendent of distribution, with a
copy to the general superintendent of engineering
services. This report must include:
- details of incident.
- extent of damage.
- corrective action taken.
INSPECTING, REPAIRING AND 15. Any Company pipelines or related facilities
BACKFILLING EXPOSED LINES which have been exposed due to surrounding
construction must be thoroughly inspected. No pipe
can be properly inspected from the top of a ditch;
the employee assigned to inspect the line must
check all exposed areas of the pipe closely, and
be alert for signs of damage even beyond the
exposed portion, such as excess movement of the
pipe from its installed position. If a pipe has
been struck:
<PAGE>
- Review by Engineering d. The Engineering Department will review the
Department information forwarded by the inspector and
determine what modifications are to be made
and what portion is to be paid by Company.
The Engineering Department will then provide
details of the modification required and the
costs involved, and will advise what
agreements, if any, will be necessary between
Company and the landowner before commencement
of the project.
- Attempt to Modify e. Company will attempt to begin the required
Within 45 Days modification of the pipeline facilities with
forty-five (45) days after the date of
notification. The exact time to complete the
work will, however, depend on the
availability of personnel, materials, and
weather.
LAND LEVELING OR 9. When land leveling or land improvement
IMPROVEMENT -COMPANY NOT operations commence without prior approval, and a
NOTIFIED Company pipeline or related facility is involved
in any way, the Business Center Leader should be
notified immediately. An inspection of the
premises should be made without delay and
necessary steps taken to correct or prevent any
unsafe conditions. The landowner will be liable
for the cost of lowering the line; he shall also
be liable for any payment for crops or premise
damage.
BLASTING 10. KN Energy does not advocate the use of
explosives near any above ground or below ground
pipeline facilities or any other facilities given
the inherent danger associated with blasting
activities.
a. KN Energy shall be indemnified and held
harmless from any loss, cost of liability for
personal injuries received, death caused or
property damage suffered or sustained by any
person resulting from any blasting operations
undertaken within 500 feet of its facilities.
The blasting contractor shall be liable for
any and all damages caused to KNs facilities
and related facilities as a result of
blasting activities whether or not KN
representatives are present.
b KN Energy, Inc. shall have a signed and
executed Blasting Indemnification Agreement,
Form K178, before authorized permission to
blast can be given.
c. No blasting shall be allowed within 200
feet of KN's facilities unless:
i. KN Energy's Engineering Department
reviews and analyzes the blasting
methods.
<PAGE>
RELOCATION FOR ROAD 7. Before street or road construction commences
CONSTRUCTION over any Company pipeline details shall be
obtained to determine to what extent the pipeline
will be affected. If the project involves a
transmission or gathering line, the engineering
department shall be furnished details of the work
to be done so that it can obtain a signed
agreement with the governmental agency or person
responsible for the project before the work
commences. This requirement applies whether the
existing pipeline is on a public road or private
right-of-way. The following shall also apply:
- Maintain 3' Cover a. If necessary, the line shall be moved to a
new location or lowered to maintain adequate
soil cover when construction is complete,
which is generally 36" for most transmission
lines and 24" for distribution mains.
- Cost of Relocating b. The cost of relocating or lowering lines
should be paid by the party benefited,
although Company will move or lower the line
at its own expense when:
- a rural pipeline on a public road
right-of-way must be moved because
of road construction; or
- a pipeline within a town must be
moved or lowered to permit
occasional street repairs or
improvement.
LAND LEVELING OR 8. When advance notice is given of proposed land
IMPROVEMENT-COMPANY leveling or land improvement, Company will modify
NOTIFIED existing pipeline facilities at its total or
partial expense if the leveling or improvement
cannot be accomplished without modification of
existing pipeline facilities.
- Inspect the Site a. Upon notification, a Company
representative shall visit the site as soon
as possible to determine to what extent the
Company pipeline may be affected.
- Investigate b. Evaluate the alternatives for sloping the
Alternatives land or making the improvements so as to
avoid relocation of the Company pipeline, or
to avoid removal of soil over a buried line.
If the landowner can achieve substantially
the desired results without jeopardizing or
disturbing the Company pipeline, this is what
he should do.
- Pipeline Relocation c. If the leveling or improvement cannot be
or Modification accomplished without relocation or
Required modification of the Company pipeline, the
Company representative shall gather pertinent
facts, including:
- The exact location and description
of the proposed leveling or
improvement.
- A description of the required
modification to Company pipeline
facilities.
- The Representatives opinion as to
possible alternatives which might
avoid disturbing the Company
pipeline.
<PAGE>
- --------------------------------------------------------------------------------
Facility Vertical Clearance
- --------------------------------------------------------------------------------
New Construction It is customary when installing underground utilities
to place the last line beneath all existing lines. This
practice must be adhered to unless it is impossible or
unreasonable to do so.
- --------------------------------------------------------------------------------
Buried Steel Buried steel pipelines shall have at least a 12"
Pipelines vertical earth separation from a Company pipeline at
the point of crossing.
- --------------------------------------------------------------------------------
Buried Nonsteel Buried nonsteel pipelines shall have at least a 12"
Pipelines vertical earth separation form a Company pipeline. If
special permission is granted for such a line to cross
above a Company pipeline, two timbers, each
approximately twelve inches wide by ten feet long and
at least three inches thick, shall be placed above the
nonsteel pipe. The two timbers are to be placed one on
each side of and parallel to the Company pipeline; each
timber should be approximately two feet from the center
line of the Company pipeline.
- --------------------------------------------------------------------------------
Buried Telephone Buried telephone cables or electric power cables
and Electric Cables operating at 440 volts alternating current or less
- - 440 VAC or Less shall have at least a 12" vertical earth separation
from a Company pipeline. If special permission granted
for such a line to cross above a Company pipeline, the
cable must have a nonconductive outer sheath extending
at least ten feet each direction form the Company
pipeline; two timbers, each approximately twelve inches
wide by ten feet long and at least three inches thick,
shall be placed above the cable one on each side of and
parallel to the Company pipeline; each timber should be
approximately two feet from the centerline of the
Company pipeline. If timbers are not used, the company
owning the cable must furnish the Company engineering
department a waiver of damages to such cable resulting
from Company pipeline operations and maintenance,
except for damage caused by carelessness or negligence.
- --------------------------------------------------------------------------------
Buried Electric Buried electric cables operating at more than 440 volts
Cables - 440 VAC alternating current shall have at least a 12 vertical
to 37.5 KVAC earth separation from a Company pipeline. The cable
shall have a nonconductive outer sheath extending at
least ten feet each direction from the Company
pipeline. The cable, whether crossing above or below
Company's pipelines, shall be protected with two
timbers each approximately twelve inches wide by ten
feet long and at least three inches thick. The timbers
are to be placed above the cable one on each side of
and parallel to the Company pipeline; each timber
should be approximately two feet from the center line
of the Company pipeline.
- --------------------------------------------------------------------------------
Facilities Over 37.5 Vertical separation of an electric cable or line
KV operating at more than 37.5 Kilovolts, A.C. or D.C.,
will be established by agreement between the utility
involved and the Company engineering department.
- --------------------------------------------------------------------------------
Deviation from Requirements - Any deviation from the preceding
vertical clearance requirements will
require specific approval from the
Company.
- Minimum Clearance-City, e. When buried cables or pipes or various
Town and Rural utilities must share the space under a street
Distribution Lines or alley within any city or urban area, the
minimum parallel clearance is 36"
horizontally and 12" vertically unless
approved in writing by Engineering and
Operations. The minimum intersecting
clearance is twelve inches.
- Electrical Bonding f. Electrical bonding or any conductive
Prohibited connection between a Company pipeline and any
other pipe, cable, or associated structure is
prohibited, except where specific approval is
given by the manager of corrosion to make
such a connection.
<PAGE>
SCHEDULE I
OTHER REQUIREMENTS OF INCUMBENT
Copy Attached
I-1
<PAGE>
[LOGO]
Schedule I
DATA SECURITY
K N Energy, Inc.
Information Security Policy
Employees and contractors must protect one of K N Energy Inc.'s (K N's) most
important assets - its information. Information must be secured from
unauthorized access, disclosure, modification and destruction. All information
generated by employees is proprietary and considered company property. It is
unacceptable for anyone to use information resources to violate any law or
company policy or perform unethical business acts.
- --------------------------------------------------------------------------------
Scope
The information security policy applies to all information systems,
communications networks and the information stored and processed on those
facilities. It also applies to any employee, agent, consultant or person whose
services are procured by a contract or through a temporary personnel agency.
- --------------------------------------------------------------------------------
Policy
The intent of this information security policy is to:
- Ensure the confidentiality, availability and integrity of data
- Reduce the risk of data loss by accidental or intentional
modification, disclosure or destruction of data
- Preserve the corporation's rights and remedies in the event of such
a loss
Each employee and contractor is responsible for understanding the policy and
complying with its terms.
K N has implemented the information security precautions in such a way as to:
- Hold individuals accountable for their use of data
- Authorize access to data on a need-to-know basis; access will be
granted to only the data necessary to accomplish authorized job
functions
- Ensure timely data recovery in the event of lost data or information
systems capabilities
Specific precautions and procedures shall be consistent with and conform to the
Data Security Guide.
- --------------------------------------------------------------------------------
Responsibilities
<PAGE>
All employees and contractors are responsible for adhering to all policies,
standards and procedures for securing data including the following:
- Maintaining data confidentiality
- Maintaining the password confidentiality
- Reporting to management any suspected security violations
- Executing a confidentiality or ownership agreement, if requested by
K N
ISD will be responsible for security authorization at the system level. Data
owners will be responsible for security authorization at the application or data
level. Data owners may be the process owner or someone designated by the process
owner to be responsible for the data. For example, access to the network is
ISD's responsibility; access to the General Ledger is the responsibility of the
G/L user champion in Service Transactions.
- --------------------------------------------------------------------------------
Personal Computers
All personal computer users are responsible for adhering to all policies,
standards and procedures for using information systems, including the following:
- Using only software purchased by the organization for organizational
purposes
- Implementing security practices necessary to protect data stored on
the personal computer
- Saving files to the network to ensure they are backed up daily by
ISD
- --------------------------------------------------------------------------------
Electronic Mail
Electronic mail is not a confidential means of personal communication. It is
company property and therefore subject to both company review and legal
discovery by outside parties. K N will establish appropriate e-mail
communication with customers, vendors and business partners based on need.
- --------------------------------------------------------------------------------
Intranet and Internet
The Intranet and Internet are business tools and should be used as such.
- --------------------------------------------------------------------------------
Violations
Violations of this policy may include, but are not limited to any act that:
- Exposes K N to actual or potential monetary loss by compromising
information security
- Uses unauthorized information concerning any aspect of the company
for personal benefit
- Involves the disclosure of customer or confidential information or
the unauthorized use of company information
- Involves the use of information for illegal purposes, which may
include violation of any law, regulation or reporting requirement of
any law enforcement or government body
Confidentiality of data includes proper identification, storage and security and
proper disposal or destruction of such
<PAGE>
material.
Any individual who has knowledge of a violation of this policy should report
that violation immediately to ISD or Internal Audit, and to his/her supervisor,
as appropriate.
- --------------------------------------------------------------------------------
Penalties for Noncompliance
Noncompliance with or violation of this information security policy will result
in action that may include, but may not be limited to, the following:
- Suspension
- Termination
- Civil and/or criminal prosecution
- Other disciplinary action, as appropriate
- --------------------------------------------------------------------------------
Last modified: 06/23/97 12:24:22
KNE CONFIDENTIAL-FOR INTERNAL USE ONLY
<PAGE>
SCHEDULE J
INCUMBENT TRAINING
1. Pre-Commissioning Training. Prior to Commissioning of the System, Pathnet
shall provide to Incumbent and Incumbent field technicians one training course
for Incumbent's employees and other designees of Incumbent, which training shall
include, among other things, the following:
(a) comprehensive instruction for trouble-free operation maintenance;
(b) hands-on experience with the operation of the equipment deployed in
the System;
(c) review of the similarities and differences of an analog versus a
digital system;
(d) review of the latest state-of-the-art Technology and applications
used in the System;
(e) review of procedures designed to eliminate equipment damage,
incorrect handling of equipment and System down time;
(f) comprehensive instruction in the use of all required test equipment
used in connection with the System;
(g) the distribution of manuals and other course materials that include
descriptive information publications, alignment procedures,
maintenance procedures, technical information publications,
schematic drawings, wiring lists and system assembly drawings; and
(h) a certificate of completion for each student who successfully
completes the training course.
2. Certification of Incumbent's Field Technicians. Each of Incumbent's Field
Technicians (as defined in the Maintenance Services Agreement) must either
successfully complete the training course described in Section 1 of this
Schedule J, or must be certified by Pathnet that such Field Technician is
qualified to perform services on the System.
3. Training for Upgrades. Upon any upgrade of the system, Incumbent may request
that Pathnet provide additional training with respect to such upgrade and
Pathnet shall provide such training to Incumbent as soon as practicable after
such request.
4. Training Locations. All such training shall be provided at Pathnet's
Richardson, Texas office, Washington D.C. metropolitan area headquarters or at
such other location as determined by Pathnet in its sole discretion.
5. Travel and Lodging. [***]
J-1
<PAGE>
SCHEDULE K
OWNERSHIP OF SYSTEM EQUIPMENT, ASSETS AND MATERIALS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
System Component Owned By
- ---------------- --------
- -------------------------------------------------------------------------------
<S> <C>
Existing Shelters [***]
- -------------------------------------------------------------------------------
New Shelters for Initial System [***]
- -------------------------------------------------------------------------------
New Shelters for Capacity Expansion [***]
- -------------------------------------------------------------------------------
New Shelters at Pathnet Spur sites [***]
- -------------------------------------------------------------------------------
New Shelters at Incumbent Spur sites [***]
- -------------------------------------------------------------------------------
Towers for System [***]
- -------------------------------------------------------------------------------
Towers for Incumbent Spurs [***]
- -------------------------------------------------------------------------------
Towers for Pathnet Spurs [***]
- -------------------------------------------------------------------------------
A.C. and D.C. Power system as set forth on Schedule J [***]
- -------------------------------------------------------------------------------
Pressurizing Equipment for sites including manifolds and
dehydrators [***]
- -------------------------------------------------------------------------------
1/0 Multiplexers [***]
- -------------------------------------------------------------------------------
Environmental Control Systems of Shelters for Capacity Expansion [***]
- -------------------------------------------------------------------------------
Environmental Control Systems of Shelters of Initial System [***]
- -------------------------------------------------------------------------------
Environmental Control Systems of Shelters of Incumbent Spurs [***]
- -------------------------------------------------------------------------------
Environmental Control Systems of Shelters of Pathnet Spurs [***]
- -------------------------------------------------------------------------------
Common Equipment existing before Effective Date [***]
- -------------------------------------------------------------------------------
Common Equipment newly installed [***]
- -------------------------------------------------------------------------------
Equipment Racks for Initial System Radios [***]
- -------------------------------------------------------------------------------
Equipment Racks for Capacity Expansion Radios [***]
- -------------------------------------------------------------------------------
Antennas and Antenna Mounts relating to Initial System [***]
- -------------------------------------------------------------------------------
Antennas and Antenna Mounts relating to Capacity Expansion [***]
- -------------------------------------------------------------------------------
Antennas and Antenna Mounts relating to Incumbent Spurs [***]
- -------------------------------------------------------------------------------
Antennas and Antenna Mounts relating to Pathnet Spurs [***]
- -------------------------------------------------------------------------------
Waveguide and Waveguide bridges relating to Initial System [***]
- -------------------------------------------------------------------------------
Waveguide and Waveguide bridges relating to Capacity Expansion [***]
- -------------------------------------------------------------------------------
Waveguide and Waveguide bridges relating to Incumbent Spurs [***]
- -------------------------------------------------------------------------------
Waveguide and Waveguide bridges relating to Pathnet Spurs [***]
- -------------------------------------------------------------------------------
Radios relating to Initial System [***]
- -------------------------------------------------------------------------------
Radios relating to Capacity Expansion [***]
- -------------------------------------------------------------------------------
Radios relating to Incumbent Spurs [***]
- -------------------------------------------------------------------------------
Radios relating to Pathnet Spurs [***]
- -------------------------------------------------------------------------------
OC-3 Multiplexers [***]
- -------------------------------------------------------------------------------
Radio Bays and Radio Bay Equipment relating to the Initial
System [***]
- -------------------------------------------------------------------------------
Radio Bays and Radio Bay Equipment relating to Capacity
Expansion [***]
- -------------------------------------------------------------------------------
Radio Bays and Radio Bay Equipment relating to Incumbent Spurs [***]
- -------------------------------------------------------------------------------
Radio Bays and Radio Bay Equipment relating to the Pathnet Spurs [***]
- -------------------------------------------------------------------------------
Interconnection Equipment relating to Pathnet Spurs and
Interconnections [***]
- -------------------------------------------------------------------------------
</TABLE>
K-1
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
System Component Owned By
- ---------------- --------
- -------------------------------------------------------------------------------
<S> <C>
Interconnection Equipment relating to Incumbent Spurs and
Interconnections [***]
- -------------------------------------------------------------------------------
Results of the Preliminary Engineering Studies and Project
Drawings [***]
- -------------------------------------------------------------------------------
Upgraded equipment added to the System [***]
- -------------------------------------------------------------------------------
Microwave Radio System Licenses and other FCC, Federal,
state and local licenses and Permits relating to the Initial
System [***]
- -------------------------------------------------------------------------------
Microwave Radio System Licenses and other FCC, Federal, state
and local licenses and permits relating to the Capacity
Expansion [***]
- -------------------------------------------------------------------------------
Panels, terminals, Software, Source Codes and other Assets and
Equipment relating to the Network Management System [***]
- -------------------------------------------------------------------------------
</TABLE>
K-2
<PAGE>
SCHEDULE L
FORM OF QUARTERLY REVENUE REPORT
<TABLE>
<CAPTION>
NUMBER PRICE PER PATHNET INCUMBENT
PATH OR START END OF DS-0'S CIRCUIT REVENUE REVENUE REVENUE REVENUE
SEGMENT DATE DATE SOLD MILE COLLECTED OUTSTANDING TO BE PAID TO BE PAID
- ------- ---- ---- ---- ---- --------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
L-1
<PAGE>
SCHEDULE M
INCUMBENT PAYMENT INSTRUCTIONS
M-1
<PAGE>
SCHEDULE N
FORM OF PATHNET SUBLICENSE AGREEMENT
This Sublicense Agreement (the "Agreement") is made on _____________, 1998
(the "Effective Date") by and between Pathnet, Inc. ("Pathnet") and KN
Telecommunications, Inc. ("Incumbent") for the use of VERTEL Corporation
("Licensor") programs.
WHEREAS, Incumbent desires to sublicense the programs as further defined
herein; and
WHEREAS, Pathnet is willing to grant such sublicense under the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the Parties mutually agree as follows:
I. DEFINITIONS
1.1 "Licensed Program" shall mean each program in software or firmware
form provided by Pathnet to Incumbent pursuant to the Fixed Point Microwave
Services Agreement, dated the date hereof between Incumbent and Pathnet (the
"FPM Agreement"), as such Licensed Program is licensed by Pathnet from Licensor,
including future additions and updates to such Licensed Program. The term
"Licensed Program" shall specifically include documentation and related
materials pertinent to such program and any updated program or portion of a
program hereinafter furnished to Incumbent for use in connection with or
replacement of the Licensed Programs.
1.2 "Equipment" shall mean Intel compatible servers running Windows NT.
1.3 "Use" shall mean the copying or duplication of any portion of a
Licensed Program from storage units or media into the Equipment for processing
or the utilization of any Licensed Program in the course of the operation of the
Equipment.
II. LICENSE GRANT
2.1 Use of Object/Binary Licensed Program with Designated Equipment.
Pathnet hereby grants Incumbent a non-exclusive, non-transferable (except as
provided in Section 5.1), non-licensable, non-assignable license to Use in
machine readable form, the Licensed Program specified in Section 1.1 solely on
the Equipment specified in Section 1.2. No license is granted to Use any
Licensed Program on any configuration of equipment which is different from or
less than the configuration indicated in Section 1.2.
N-1
<PAGE>
III. PROPRIETARY RIGHTS
3.1 Proprietary Rights. The Licensed Program is owned by Licensor and/or
others and is proprietary in nature. Incumbent shall respect such proprietary
rights and shall not use such Licensed Program except for the purposes for which
it is being made available as set forth in this Agreement and shall not
reproduce, print, sublicense, duplicate, reverse engineer, distribute, disclose,
or otherwise make the Licensed Program available to any third party, in whole or
in part, in whatever form.
3.2 Confidentiality. Incumbent shall take all actions required to maintain
control of the Licensed Program including securing written records, agreements,
and other reasonable measures with its employees and agents to satisfy its
obligations under this Agreement with respect to the use, copying, protection,
and security of the Licensed Program.
IV. LIMIT OF LIABILITY
4.1 NO WARRANTY. LICENSOR GRANTS A WARRANTY IN THE LICENSED PROGRAM ONLY
TO PATHNET AND DOES NOT EXTEND ITS WARRANTY TO INCUMBENT OR ANY OTHER END USER.
WARRANTY OF THE LICENSED PROGRAM IS PROVIDED BY LICENSOR DIRECTLY TO PATHNET.
LICENSOR AND PATHNET MAKE NO EXPRESS OR IMPLIED WARRANTIES OF ANY KIND,
INCLUDING WITHOUT LIMITATION, MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE WITH REGARD TO ANY LICENSED PROGRAM AND/OR RELATED MATERIALS TO BE
FURNISHED BY VERTEL.
4.2 NO CONSEQUENTIAL DAMAGES. IN NO EVENT SHALL LICENSOR OR PATHNET BE
LIABLE FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH OR
ARISING OUT OF THE EXISTENCE, FURNISHING, FAILURE TO FURNISH, OR USE OF ANY
LICENSED PROGRAM AND/OR RELATED MATERIAL AND/OR DEVISE.
4.3 Licensor shall have no liability for any claim of copyright or patent
infringement based on (1) use of other than a current unaltered release of the
Licensed Program available from Licensor if such infringement would have been
avoided by the use of such current unaltered release of the Licensed Program or
(2) Use or combination of the Licensed Program with programs not supplied by
Licensor and which Use or combination results in the infringement of any patent
or copyright.
V. TRANSFER OF LICENSE
5.1 Terms for Transfer of License. This license may only be transferred
upon written approval of Pathnet and in connection with the transfer of all of
the Equipment; provided all copies of the Licensed Program are delivered to the
transferee and no copies or related materials are retained by Incumbent and
provided further that the transferee agrees to be bound by all the Terms and
Conditions of this Agreement.
N-2
<PAGE>
NOW THEREFORE, the Parties hereto have caused this Agreement to be
executed by their respective duly authorized representatives.
PATHNET, INC.
By:
---------------------------
Title:
-------------------------
Date:
--------------------------
KN Energy, Inc.
By:
---------------------------
Title:
-------------------------
Date:
--------------------------
N-3
<PAGE>
SCHEDULE O
Pathnet Articles and Bylaws;
Certificate of Good Standing
Copies Attached
O-1
<PAGE>
PAGE 1
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE 0F THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED CERTIFICATE OF
"PATHNET, INC.," FILED IN THIS OFFICE ON THE TWENTY-THIRD DAY OF DECEMBER, A.D.
1996, AT 9 O'CLOCK A.M.
[SECRETARY'S OFFICE SEAL -- STATE OF DELAWARE]
/s/ Edward J. Freel
2533940 8100 -----------------------------------
971187175 Edward J. Freel, Secretary of State
AUTHENTICATION: 8502014
DATE: 06-09-97
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 12/23/1996
960381137 - 2533940
RESTATED
CERTIFICATE OF INCORPORATION
OF
PATHNET, INC.
PathNet, Inc. a corporation organized and existing under the laws of the
State of Delaware, hereby certifies as follows
1. The name under which the corporation was originally incorporated is
PathNet, Inc. and the original Certificate of Incorporation of the
corporation was filed with the Secretary of State of the State of
Delaware on August 25, 1995.
2. This Restated Certificate of Incorporation restates and integrates
and also further amends the Certificate of Incorporation of the
corporation.
3. This Restated Certificate of Incorporation and the amendments to the
Certificate of Incorporation contained herein were declared
advisable and adopted by the Board of Directors on December 20,
1996, were approved by the written consent of the holders of the
outstanding shares of each class of common stock and preferred stock
of the corporation, each such class of common stock and preferred
stock voting separately as a class, in accordance with Section 228
of the General Corporation Law of the State of Delaware (with
written notice being given by the corporation to each stockholder
who has not so consented in writing), and have been duly adopted in
accordance with the provisions of Sections 242(b) and 245 of the
General Corporation Law of the State of Delaware.
4. The text of the Certificate of Incorporation of the corporation is
hereby restated and integrated and further amended to read in its
entirety as follows:
ARTICLE I
NAME
The name of the corporation (which hereinafter is called the
"Corporation") is PathNet, Inc.
ARTICLE II
PURPOSES
The purposes for which the Corporation is organized are as follows.
A. The Corporation shall have the power to conduct or promote any
businesses or purposes for which corporations may be incorporated under the
Delaware General Corporation Law, including, but not limited to, engaging in the
business of owning, operating, leasing, managing and providing for
telecommunications systems for both long and short distance services.
<PAGE>
B. The Corporation shall have the power to do all and everything
necessary, suitable and proper for the accomplishment of any of the purposes or
attainment of any of the objects or the furtherance of any of the powers
hereinbefore mentioned, either alone or in association with or in partnership
with any other corporations. firms or individuals, and to do every other act or
acts, things or things, incidental or appurtenant to or growing out of or
connected with the aforesaid businesses or powers or any part of parts thereof,
provided the same be not inconsistent with the laws under which this Corporation
is organized.
ARTICLE III
AUTHORIZED CAPITAL
A. Common Stock
The Corporation shall have authority to issue Five Million (5,000,000)
shares of voting common stock, all of the same class and having a par value of
one cent ($0.01) per share. The term "Common Stock" as used herein means the
voting common stock as the same exists at the effective date of this Restated
Certificate of Incorporation or any other class of stock resulting from
successive changes or reclassifications of such voting common stock consisting
solely of chances in par value, or from par value to no par value, or from no
par value to par value.
B. Preferred Stock
Section 1 (a) The Corporation shall have authority to issue Two Million
Six Hundred Fifty One Thousand Forty Six (2,651,046) shares of preferred stock
having a par value of one cent ($0.01) per share, of which One Million
(1,000,000) shares shall be designated Series A Convertible Preferred Stock (the
"Series A Preferred Stock") and One Million Six Hundred Fifty One Thousand Forty
Six (1,651,046) shares shall be designated Series B Convertible Preferred Stock
(the "Series B Preferred Stock"). The Series A Preferred Stock and the Series B
Preferred Stock shall be referred to collectively herein as the "Series
Preferred Stock".
(b) Dividends, The holders of the Series Preferred Stock shall
be entitled to receive, out of funds legally available therefor, dividends
(other than dividends paid in additional shares of Common Stock) in preference
to and at the same rate as dividends are paid with respect to the Common Stock
(treating each share of Series Preferred Stock as being equal to the number of
shares of Common Stock into which each such share of Series Preferred Stock
could be converted pursuant to the provisions of Section 4 hereof, with such
number determined as of the record date for the determination of holders of
Common Stock entitled to receive such dividend).
Section 2 Liquidation Dissolution or Winding Up
(a) Distributions to Holders of Preferred Stock. In the event of
any liquidation, dissolution or winding up of the Corporation, whether voluntary
or involuntary, the Series A Preferred Stock and the Series B Preferred Stock
shall rank on a parity with each other and shall rank prior to the Common Stock
or any class of stock ranking junior to the Series
2
<PAGE>
Preferred Stock. Upon such liquidation, holders of each share of Series
Preferred Stock outstanding shall be entitled to be paid, out of the assets of
the Corporation available for distribution to stockholders and before any
payment shall be made to the holders of any class of Common Stock or of any
stock ranking on liquidation junior to the Series Preferred Stock, an amount in
cash equal to the original purchase price paid by such holder for each such
share of Series Preferred Stock held (appropriately adjusted for stock splits,
stock dividends and the like) plus any declared but unpaid dividends thereon. If
upon any liquidation, dissolution, or winding up of the Corporation, the assets
to be distributed to the holders of the Series Preferred Stock under the
foregoing sentence shall be insufficient to permit payment to such stockholders
of the full preferential amounts aforesaid, then all of the assets of the
Corporation available for distribution to such holders under such sentence shall
be distributed among the holders of Series Preferred Stock, pro rata in
accordance with the total amount of preference which would have been payable to
such holders if funds had been available to pay the full preference under the
previous sentence. After such payment shall have been made in full to such
holders of Series Preferred Stock, or funds necessary for such payment shall
have been set aside by the Corporation in trust for the account of such holders
so as to be available for such payment, the holders of the outstanding shares of
Common Stock shall share ratably in the distribution of the remaining assets and
funds of the Corporation available for distribution to shareholders.
(b) Deemed Liquidations. In the case of (i) a consolidation or
merger of the Corporation (other than a consolidation or merger upon
consummation of which the holders of voting securities of the Corporation
immediately prior to such transaction, continue to own directly or indirectly
not less than a majority of the voting power of the surviving corporation) or a
sale of all or substantially all of the assets of the Corporation or other
similar transaction and (ii) either receipt by the Corporation of consideration
less than the equivalent of $1.00 per share (appropriately adjusted for stock
splits, stock dividends and the like) of Series A Preferred Stock plus any
declared but unpaid dividends or receipt by the Corporation of consideration
less than the equivalent of $3.28 per share (appropriately adjusted for stock
splits, stock dividends and the like) of Series B Preferred Stock plus any
declared but unpaid dividends, such event shall be regarded, at the option of
the holders of a majority of the then outstanding shares of Series Preferred
Stock as a liquidation, dissolution or winding up of the affairs of the
Corporation within the meaning of this Section 2.
Notwithstanding the foregoing, each holder of Series Preferred Stock shall
have the right to elect the benefits of the provisions of Section 4(h) hereof in
lieu of receiving payment in liquidation, dissolution or winding up of the
Corporation pursuant to this Section 2(b). For purposes of this Section 2 and
Section 6 hereof, a sale of substantially all of the assets of the Corporation
shall mean (x) the sale or other disposition other than in the ordinary course
of business of more than 50% of such assets, as determined by reference to
either (A) the book value, or (B) the fair market value, of such assets, or (y)
any issuance of Common Stock by the Corporation or transfer of Common Stock by
the holder thereof to any person or persons acting in concert or a group of
affiliated persons, which issuance or transfer results in such person or persons
or group holding in the aggregate more than 50% of the issued and outstanding
Common Stock after giving effect to such issuance or transfer
3
<PAGE>
(c) Non-Cash Distributions. In the event of a liquidation,
dissolution or winding up of the Corporation resulting in the availability of
assets other than cash for distribution to the holders of the Series Preferred
Stock, the holders of the Series Preferred Stock shall be entitled to a
distribution of cash and/or assets equal in value to the liquidation preference
and other distribution rights stated in Sections 2(a) and 2(b) hereof. In the
event that such distribution to the holders of the Series Preferred Stock shall
include any assets other than cash, the following provisions shall govern. The
Board of Directors shall first determine the value of such assets for such
purpose, and shall notify all holders of shares of Series Preferred Stock of
such determination. The value of such assets for purposes of the distribution
under this Section 2(c) shall be the value as determined by the Board of
Directors in good faith and with due care, unless the holders of a majority of
the outstanding shares of Series Preferred Stock shall object thereto in writing
within 15 days after the date of such notice. In the event of such objection,
the valuation of such assets for purposes of such distribution shall be
determined by an arbitrator selected by the objecting stockholders and the Board
of Directors, or in the event a single arbitrator cannot be agreed upon within
10 days after the written objection sent by the objecting stockholders in
accordance with the previous sentence, the valuation of such assets shall be
determined by arbitration in which (i) the objecting stockholders shall name in
their notice of objection one arbitrator, (ii) the Board of Directors shall name
a second arbitrator within 15 days from the receipt of such notice, (iii) the
two arbitrators thus selected shall select a third arbitrator within 15 days
thereafter, and (iv) the three arbitrators thus selected shall determine the
valuation of such assets within 15 days thereafter for purposes of such
distribution by majority vote. The costs of such arbitration shall be borne by
the Corporation or by the holders of the Series Preferred Stock (on a pro rata
basis out of the assets otherwise distributable to them) as follows: (i) if the
valuation as determined by the arbitrators is greater than 95 % of the valuation
as determined by the Board of Directors, the holders of the Series Preferred
Stock shall pay the costs of the arbitration, and (ii) otherwise, the
Corporation shall bear the costs of the arbitration.
Section 3 Voting Rights
(a) General. Except as otherwise expressly provided herein or as
required by law, the holder of each share of the Series Preferred Stock shall be
entitled to vote on all matters. Each share of Series Preferred Stock shall
entitle the holder thereof to such number of votes per share as shall equal the
number of shares of Common Stock into which such share of Series Preferred Stock
is convertible in accordance with the terms of Section 4 hereof at the record
date for the determination of stockholders entitled to vote on such matter or,
if no record date is established, at the date such vote is taken or any written
consent of stockholders is solicited. Except as otherwise expressly provided
herein (including, without limitation, the provisions of Section 5 hereof) or as
required by law, the holders of shares of Series Preferred Stock and the Common
Stock shall vote together as a single class on all matters.
(b) Board of Directors. The holders of the Series A Preferred
Stock shall be entitled to vote as a class separately from all other classes of
stock of the Corporation in any vote for the election of directors of the
Corporation, and shall be entitled to elect by such class vote two directors
(the "Series A Investor Directors"), one of which Series A Investor Directors to
be designated by Spectrum Equity Investors, L.P. ("Spectrum") for so long as it
owns
4
<PAGE>
shares of Series A Preferred Stock and thereafter by the holders of a majority
of the issued and outstanding shares of Series A Preferred Stock, and the other
to be designated by New Enterprise Associates VI Limited Partnership or its
affiliates (collectively, "NEA VI") for so long as it owns shares of Series A
Preferred Stock and thereafter by the holders of a majority of the issued and
outstanding shares of Series A Preferred Stock. The holders of the Series B
Preferred Stock shall be entitled to vote as a class separately from all other
classes of stock of the Corporation in any vote for the election of directors of
the Corporation, and shall be entitled to elect by such class vote one director
(the "Series B Investor Director") to be designated by Grotech Capital Group IV,
LLC ("Grotech IV") for so long as it owns shares of Series B Preferred Stock and
thereafter by the holders of a majority of the issued and outstanding shares of
Series B Preferred Stock. Initially, the Series A Investor Directors shall be
Kevin J. Maroni, as the designee of Spectrum, and Peter Barris, as the designee
of NEA VI. The initial Series B Investor Director shall be Stuart D. Frankel.
The holders of Common Stock shall be entitled to vote as a class separately from
all other classes in any vote for the election of directors of the Corporation,
and shall be entitled to elect by such class vote two directors (the "Common
Stock Directors"). Initially, the Common Stock Directors shall be David
Schaeffer and Richard Prins. Richard Prins shall not, without the consent of a
majority of the Series A Investor Directors and Series B Investor Director,
voting together, be removed by the holders of Common Stock as a member of the
Board of Directors of the Corporation prior to December 23, 1998. One additional
individual with experience in the telecommunications industry or other industry
that might be relevant to the development and implementation of the
Corporation's business plan (the "Outside Director"), who is unaffiliated with
the Corporation and reasonably acceptable to a majority of the Board of
Directors. shall be elected to the Corporation's Board of Directors by the
holders of the Series Preferred Stock and the Common Stock voting together as a
single class. In addition, a Chief Executive Officer of the Corporation (and any
successor thereto) shall be selected and hired by the Corporation, at all times
prior to December 23, 2000, by the affirmative vote of at least four of the five
Common Stock Directors, Series A investor Directors and the Series B Investor
Director, voting together, provided however, that (i) on or after December 23,
2000 or (ii) if Richard Prins shall no longer serve as a member of the
Corporation's Board of Directors for any reason prior to December 23, 2000, a
majority of the Common Stock Directors, the Series A Investor Directors and the
Series B Investor Director, voting together, shall select and hire a Chief
Executive Officer (or any successor thereto) as such. The Chief Executive
Officer as so selected and hired (and any replacement or successor Chief
Executive Officer) shall be elected to the Corporation's Board of Directors by
the holders of the Series Preferred Stock and the Common Stock voting together
as single class (the "Officer Director"). David Schaeffer may serve as Chief
Executive Officer of the Corporation in the discretion of the Board of
Directors, but in no event shall David Schaeffer be elected as the Officer
Director.
(c) Special Voting Rights. The holders of the Series Preferred
Stock shall be entitled to the special voting rights set forth in Section 6
hereof.
Section 4 Conversion. The holders of the Series Preferred Stock shall
have the following conversion rights:
5
<PAGE>
(a) Right to Convert. Subject to and in compliance with the
provisions of this Section 4, any shares of the Series Preferred Stock may, at
any time or from time to time at the option of the holder, be convened into
fully-paid and non-assessable shares of Common Stock. The number of shares of
Common Stock to which a holder of the Series Preferred Stock shall be entitled
upon conversion shall be the product obtained by multiplying the Applicable
Conversion Rate (determined as provided in Section 4(c)) by the number of shares
of Series Preferred Stock being converted.
(b) Automatic Conversion.
(i) Each share of the Series Preferred Stock outstanding
shall automatically be converted into the number of shares of Common Stock into
which such shares are convertible upon application of the then effective
Applicable Conversion Rate (determined as provided in Section 4(c)) immediately
upon the closing of an underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, or under
such other applicable securities regulations covering the offer and sale of
capital stock of the Corporation (other than a registration relating solely to
Rule 145 under such Act (or any successor thereto) or to an employee benefit
plan of the Corporation) in which (i) the Corporation is valued on a pre-money
basis at greater than $50,000,000, (ii) the gross proceeds received by the
Corporation exceed $20,000,000 and (iii) the Corporation uses a nationally
recognized underwriter approved by holders of a majority in interest of the
Series Preferred Stock (a "Qualified Public Offering").
(ii) Upon the occurrence of an event specified in Section
(4)(b)(i), the outstanding shares of Series Preferred Stock shall be convened
automatically without any further action by the holders of such shares and
whether or not the certificates representing such shares are surrendered to the
Corporation or its transfer agent; provided, however, that the Corporation shall
not be obligated to issue certificates evidencing such shares of the Series
Preferred Stock unless certificates evidencing such shares of the Series
Preferred Stock being convened are either delivered to the Corporation or any
transfer agent, as hereinafter provided, or the holder notifies the Corporation
or any transfer agent, as hereinafter provided, that such certificates have been
lost, stolen or destroyed and executes an agreement satisfactory to the
Corporation to indemnify the Corporation from any loss incurred by it in
connection therewith.
Upon the occurrence of the automatic conversion of all of the outstanding
Series Preferred Stock, the holders of the Series Preferred Stock shall
surrender the certificates representing such shares at the office of the
Corporation or of any transfer agent for the Common Stock. Thereupon there shall
be issued and delivered to each such holder, promptly at such office and in his
name as shown on such surrendered certificate or certificates, a certificate or
certificates for the number of shares of Common Stock into which the shares of
the Series Preferred Stock surrendered were convertible on the date on which
such automatic conversion occurred and cash as provided in Section 4(k) below
in respect of any fraction of a share of Common Stock issuable upon such
automatic conversion.
6
<PAGE>
(c) Applicable Conversion Rate. The conversion rate in effect at
any time for the applicable series of Series Preferred Stock (the "Applicable
Conversion Rate") shall equal the quotient obtained by dividing $1.00 in the
case of Series A Preferred Stock, or $3.28 in the case of Series B Preferred
Stock by the Applicable Conversion Value, calculated as hereinafter provided.
(d) Applicable Conversion Value. The Applicable Conversion Value
in effect initially, and until first adjusted in accordance with Section 4(e) or
4(f) hereof, shall be $1.00 in the case of Series A Preferred Stock, or $3.28 in
the case of Series B Preferred Stock.
(e) Adjustment for Common Stock Dividends, Subdividends and
Combinations of Common Stock, Etc. Upon the happening of any of the following:
(i) the issuance of additional shares of Common Stock of any class as a dividend
or other distribution of outstanding Common Stock, (ii) the subdivision of
outstanding shares of Common Stock of any class into a greater number of shares
of Common Stock, or (iii) the combination of outstanding shares of Common Stock
of any class into a smaller number of shares of Common Stock (each an
"Extraordinary Common Stock Event"), the Applicable Conversion Value shall,
simultaneously with the happening of such Extraordinary Common Stock Event, be
adjusted by dividing the then effective Applicable Conversion Value by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding (excluding treasury stock) immediately after such Extraordinary
Common Stock Event and the denominator of which shall be the number of shares of
Common Stock outstanding (excluding treasury stock) immediately prior to such
Extraordinary Common Stock Event, and the quotient so obtained shall thereafter
be the Applicable Conversion Value. The Applicable Conversion Value, as so
adjusted, shall be readjusted in the same manner upon the happening of any
successive Extraordinary Common Stock Event or Events.
(f) Adjustments for Diluting Issues
(i) Except as provided in Section 4(e) above or for Excluded
Shares (as defined below), if the Corporation shall issue any additional shares
of Common Stock of any class for no consideration or at a price per share less
than the Applicable Conversion Value in effect for each applicable series of
Series Preferred Stock immediately prior to such issuance or sale, then in each
such case such Applicable Conversion Value shall be reduced to such lower price.
For purposes of this Section 4(f), "Excluded Shares" shall mean shares
issued or delivered from treasury or stock options granted by the Corporation,
with the approval of the Board of Directors to directors, officers, employees,
agents or consultants of the Corporation (other than David Schaeffer) for up to
an aggregate of 439,024 shares of the Common Stock (as adjusted for stock
splits, stock dividends and the like).
For purposes of this Section 4(f), if a part or all of the consideration
received by the Corporation in connection with the issuance of shares of the
Common Stock or the issuance of any of the securities described below in
paragraph (ii) of this Section 4(f) consists of property other than cash, such
consideration shall be deemed to have the same value as is determined by the
7
<PAGE>
Corporation's Board of Directors with respect to receipt of such property so
long as such determination was made reasonably and in good faith, and shall
otherwise be deemed to have a value equal to its fair market value.
(ii) For the purpose of this Section 4(f), the issuance of
any warrants, options or other subscription or purchase rights with respect to
shares of Common Stock of any class and the issuance of any securities
convertible into shares of Common Stock of any class (or the issuance of any
warrants, options or any rights with respect to such convertible securities)
shall be deemed an issuance at such time of such Common Stock if the Net
Consideration Per Share which may be received by the Corporation for such Common
Stock (as hereinafter determined) shall be less than the Applicable Conversion
Value at the time of such issuance and, except as hereinafter provided, an
adjustment in the Applicable Conversion Value shall be made upon each such
issuance in the manner provided in paragraph (i) of this Section 4(f) as if such
Common Stock were issued at such Net Consideration Per Share. No adjustment of
the Applicable Conversion Value shall be made under this Section 4(f) upon the
issuance of any additional shares of Common Stock which are issued pursuant to
the exercise of any warrants, options or other subscription or purchase rights
or pursuant to the exercise of any conversion or exchange rights in any
convertible securities if any adjustment shall previously have been made upon
the issuance of such warrants, options or other rights. Any adjustment of the
Applicable Conversion Value with respect to this paragraph (ii) of this Section
4(f) shall be disregarded if, as and when the rights to acquire shares of Common
Stock upon exercise or conversion of the warrants, options, rights or
convertible securities which gave rise to such adjustment expire or are canceled
without having been exercised, so that the Applicable Conversion Value effective
immediately upon such cancellation or expiration shall be equal to the
Applicable Conversion Value in effect immediately prior to the time of the
issuance of the expired or canceled warrants, options, rights or convertible
securities, with such additional adjustments as would have been made to that
Applicable Conversion Value had the expired or canceled warrants, options,
rights or convertible securities not been issued, provided, however, that no
such readjustment of the Applicable Conversion Value shall have the effect of
increasing the Applicable Conversion Value to an amount which exceeds the lower
of (I) the Applicable Conversion Value on the original adjustment date, or (II)
the Applicable Conversion Value that would have resulted from any issuance of
any additional shares of Common Stock pursuant to such warrants, options, rights
or convertible securities between the original adjustment date and such
readjustment date. In the event that the terms of any warrants, options, other
subscription or purchase rights or convertible securities previously issued by
the Corporation are changed (whether by their terms or for any other reason) so
as to change the Net Consideration Per Share payable with respect thereto
(whether or not the issuance of such warrants, options, rights or convertible
securities originally gave rise to an adjustment of the Applicable Conversion
Value), the Applicable Conversion Value shall be recomputed as of the date of
such change, so that the Applicable Conversion Value effective immediately upon
such change shall be equal to the Applicable Conversion Value in effect at the
time of the issuance of the warrants, options, rights or convertible securities
subject to such change, adjusted for the issuance thereof in accordance with the
terms thereof after giving effect to such change, and with such additional
adjustments as would have been made to that Applicable Conversion Value had the
warrants, options, rights or convertible securities been issued on such changed
terms. For purposes
8
<PAGE>
of this paragraph (ii), the Net Consideration Per Share which may be received by
the Corporation shall be determined as follows:
(A) The Net Consideration Per Share shall mean the
amount equal to the total amount of consideration, if any, received by the
Corporation for the issuance of such warrants, options, rights or convertible
securities, plus the minimum amount of consideration, if any, payable to the
Corporation upon exercise or conversion thereof, divided by the aggregate number
of shares of Common Stock that would be issued if all such warrants, options,
subscriptions, or other purchase rights or convertible securities were exercised
or converted at such net consideration per share.
(B) The Net Consideration Per Share which may be
received by the Corporation shall be determined in each instance as of the date
of issuance of warrants, options, rights or convertible securities without
giving effect to any possible future price adjustments or rate adjustments which
may be applicable with respect to such warrants, options, rights or convertible
securities and which are contingent upon future events, provided that in the
case of an adjustment to be made as a result of a change in terms of such
warrants, options, rights or convertible securities, the Net Consideration Per
Share shall be determined as of the date of such change.
(g) Adjustments for Reclassification. If the Common Stock
issuable upon the conversion of the Series Preferred Stock shall be changed into
the same or different number of shares of any class or classes of stock, whether
by reclassification or otherwise (other than an Extraordinary Common Stock
Event, or a reorganization, merger, consolidation or sale of assets provided for
elsewhere in this Section 4), then and in each such event the holder of each
share of Series Preferred Stock shall have the right thereafter to convert such
share into the kind and amount of shares of stock and other securities and
property receivable upon such reorganization, reclassification or other change
by holders of the number of shares of Common Stock into which such shares of
Series Preferred Stock might have been convened immediately prior to such
reorganization, reclassification or change, all subject to further adjustment as
provided herein. Without limiting the generality of the foregoing, the
Applicable Conversion Rate, as defined in this Section 4, in respect of such
other shares or securities so receivable upon conversion of shares of Series
Preferred Stock shall thereafter be adjusted, and shall be subject to further
adjustment from time to time, in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to Common Stock contained in this
Section 4, and the remaining provisions herein with respect to the Common Stock
shall apply on like or similar terms to any such other shares or securities.
(h) Adjustments for Reorganizations. If at any time or from
time to time there shall be a capital reorganization of the Common Stock (other
than a subdivision, combination, reclassification or exchange of shares provided
for elsewhere in this Section 4) or a merger or consolidation of the Corporation
with or into another corporation or the sale of all or substantially all of the
Corporation's properties and assets to any other person, then, as a part of and
as a condition to the effectiveness of such reorganization, merger,
consolidation or sale, lawful and adequate provision shall be made so that if
the Corporation is not the surviving
9
<PAGE>
corporation, the Series Preferred Stock shall be convened into preferred stock
of the surviving corporation having equivalent preferences, rights and
privileges except that in lieu of being able to convert into shares of Common
Stock of the Corporation or the successor corporation the holders of the Series
Preferred Stock (including any such preferred stock issued upon conversion of
the Series Preferred Stock) shall thereafter be entitled to receive upon
conversion of the Series Preferred Stock (including any such preferred stock
issued upon conversion of the Series Preferred Stock) the number of shares of
stock or other securities or property of the Corporation or of the successor
corporation resulting from such merger or consolidation or sale, to which a
holder of the number of shares of Common Stock deliverable upon conversion of
the Series Preferred Stock immediately prior to the capital reorganization,
merger, consolidation or sale would have been entitled on such capital
reorganization, merger, consolidation, or sale. In any such case, appropriate
provisions shall be made with respect to the rights of the holders of the Series
Preferred Stock (including any such preferred stock issued upon conversion of
the Series Preferred Stock) after the reorganization, merger, consolidation or
sale to the end that the provisions of this Section 4 (including, without
limitation, provisions for adjustment of the Applicable Conversion Value and the
number of shares purchasable upon conversion of the Series Preferred Stock or
such preferred stock) shall thereafter be applicable, as nearly as may be, with
respect to any shares of stock, securities or assets to be deliverable
thereafter upon the consideration of the Series Preferred Stock or such
preferred stock.
Each holder of Series Preferred Stock upon the occurrence of a capital
reorganization, merger or consolidation of the Corporation or the sale of all or
substantially all of its assets and properties as such events are more fully set
forth in the first paragraph of this Section 4(h), shall have the option of
electing treatment of his shares of Series Preferred Stock under either this
Section 4(h) or Section 2(b) hereof, and except as otherwise provided in said
Section 2(b), notice of which election shall be submitted in writing to the
Corporation at its principal offices no later than 10 days before the effective
date of such event, provided that any such notice shall be effective if given
not later than 15 days after the date of the Corporation's notice, pursuant to
Section 8, with respect to such event.
(i) Certificate as to Adjustments. In each case of an
adjustment or readjustment of the Applicable Conversion Rate, the Corporation
will promptly furnish each holder of Series Preferred Stock with a certificate,
prepared by the chief financial officer of the Corporation, showing such
adjustment or readjustment, and stating in detail the facts upon which such
adjustment or readjustment is based.
(j) Mechanics of Conversion. To exercise its conversion
privilege, a holder of Series Preferred Stock shall surrender the certificate or
certificates representing the shares being converted to the Corporation at its
principal office, and shall give written notice to the Corporation at that
office that such holder elects to convert such shares. Such notice shall also
state the name or names (with address or addresses) in which the certificate or
certificates for shares of Common Stock issuable upon such conversion shall be
issued. The certificate or certificates for shares of Series Preferred Stock
surrendered for conversion shall be accompanied by proper assignment thereof to
the Corporation or in blank. The date when such written notice is received by
the Corporation together with the certificate or certificates representing the
shares of
10
<PAGE>
Series Preferred Stock being converted, shall be the "Conversion Date". As
promptly as practicable after the Conversion Date, the Corporation shall issue
and shall deliver to the holder of the shares of Series Preferred Stock being
convened, a certificate or certificates in such denominations as it may request
in writing for the number of full shares of Common Stock issuable upon the
conversion of such shares of Series Preferred Stock in accordance with the
provisions of this Section 4 and cash as provided in Section 4(k) below in
respect of any fraction of a share of Common Stock issuable upon such
conversion. Such conversion shall be deemed to have been effected immediately
prior to the close of business on the Conversion Date, and at such time the
rights of the holder as holder of the converted shares of Series Preferred Stock
shall cease and the person or persons in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable upon such conversion
shall be deemed to have become the holder or holders of record of shares of
Common Stock represented thereby.
(k) Fractional Shares. No fractional shares of Common Stock or
scrip representing fractional shares shall be issued upon conversion of Series
Preferred Stock. Instead of any fractional shares of Common Stock that would
otherwise be issuable upon conversion of Series Preferred Stock, the Corporation
shall pay to the holder of the shares of Series Preferred Stock that were
converted a cash adjustment in respect of such fraction in an amount equal to
the same fraction of the market price per share of the Common Stock (as
determined in a manner prescribed in good faith by the Board of Directors) at
the close of business on the Conversion Date.
(l) Partial Conversion. In the event some but not all of the
shares of Series Preferred Stock represented by a certificate or certificates
surrendered by a holder are converted, the Corporation shall execute and deliver
to or on the order of the holder, at the expense of the Corporation, a new
certificate representing the number of shares of Series Preferred Stock which
were not converted.
(m) Reservation of Common Stock. The Corporation shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the shares
of the Series Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series Preferred Stack, and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of the Series Preferred
Stock, the Corporation shall take such corporate action as may, in the opinion
of its counsel, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purpose.
Section 5 Redemption
(a) Optional Redemption. In the event that there shall not have
occurred a dosing of a Qualified Public Offering (as defined in Section 4(b)
hereof) prior to December 23, 2000, at the election of each holder of the Series
Preferred Stock outstanding as of December 24, 2000, the Corporation shall
redeem all shares of the Series Preferred Stock then outstanding. Payment of the
applicable Redemption Price (as defined below) shall be made by the Corporation
on January 23, 2001, for a cash price equal to the original purchase price paid
by
11
<PAGE>
such holders for each share of Series Preferred Stock outstanding, adjusted for
any stock split, combined consolidation or stock distribution or stock dividends
with respect to such shares (the "Redemption Price"). On or prior to December
24, 2000, the Corporation shall give written notice by mail, postage prepaid, to
the holders of the then outstanding shares of the Series Preferred Stock at the
address of each such holder appearing on the books of the Corporation or given
by such holder to the Corporation for the purpose of notice. Such notice shall
set forth the Redemption Price as defined above) and shall further state that
any holder of the Series Preferred Stock who intends to request redemption of
its Series Preferred Stock pursuant to this Section 5(a) must give written
notice to the Corporation of its request for redemption on or before January 11,
2001. If the Corporation receives requests for redemption on or prior to January
11, 2001 from the holders of a majority of the Series Preferred Stock, it shall
give written notice by mail, postage prepaid, to the holders of Series Preferred
Stock that all shares of the Series Preferred Stock then outstanding will be
redeemed on January 23, 2001 (the "Redemption Date") for a per share cash price
equal to the Redemption Price. The notice shall further call upon such holders
to surrender to the Corporation on or before the Redemption Date at the place
designated in the notice such holder's certificate or certificates representing
the shares to be redeemed. On or after the Redemption Date, each holder of
shares of the Series Preferred Stock called for redemption shall surrender the
certificate evidencing such shares to the Corporation. In the case of any
certificate or certificates which have been lost, stolen or destroyed, the
holder of such certificate or certificate shall make and deliver an affidavit of
that fact to the Corporation without the necessity of giving the Corporation a
bond.
(b) Termination of Rights. From and after the Redemption Date,
unless there shall have been a default in payment or tender by the Corporation
of the Redemption Price, all rights of the holders with respect to such redeemed
shares of the Series Preferred Stock (except the right to receive the Redemption
Price upon surrender or their certificate) shall cease and such shares shall not
thereafter be transferred on the books of this Corporation or be deemed to be
outstanding for any purpose whatsoever.
(c) Insufficient Funds. If the funds of the Corporation legally
available for redemption of shares of the Series Preferred Stock on the
Redemption Date are insufficient to redeem the total number of shares of the
Series Preferred Stock on such Redemption Date, the Corporation will use its
best efforts to engage in a recapitalization or the sale of its business or
businesses to generate sufficient funds to redeem all of the shares of Series
Preferred Stock. The Corporation shall use those funds which are legally
available to redeem the maximum possible number of such shares ratably among the
holders of such shares to be redeemed. At any time thereafter when additional
funds of the Corporation are legally available for the redemption of shares of
the Series Preferred Stock, such funds will immediately be used to redeem the
balance of the shares which the Corporation has become obligated to redeem on
the Redemption Date but which it has not redeemed at the Redemption Price. If
any shares of the Series Preferred Stock are not redeemed for the foregoing
reason or because the Corporation otherwise failed to pay or tender to pay the
aggregate Redemption Price on all outstanding shares of Series Preferred Stock,
all shares which have not been redeemed shall remain outstanding and entitled to
all the rights and preferences provided herein, and the Corporation shall pay
interest on the Redemption Price for the unredeemed portion at an aggregate per
annum rate equal to the greater of (i) twelve percent
12
<PAGE>
(12%) or (ii) the Base Rate or any similar lending rate announced from time to
time by The First National Bank of Boston or any successor entity plus five
percent (5%), increased, in each case, by one percent (1%) at the end of each
calendar quarter thereafter. All provisions hereof are hereby expressly limited
so that in no contingency or event whatsoever shall the amount paid or agreed to
be paid to the holders of the Series Preferred Stock exceed the maximum amount
which the holder is permitted to receive under applicable law. If fulfillment of
any provision hereof shall involve exceeding such amount, then the obligation to
be fulfilled shall automatically be reduced to the limit of such maximum amount.
As used herein, the term "applicable law" shall mean the law in effect as of the
date hereof, provided, however, that in the event that there is a change in the
law, which results in a higher permissible rate of interest, then these
provisions shall be governed by such new law as of its effective date.
Section 6 Restrictions and Limitations. The Corporation shall not
without the affirmative vote or written consent of the holders of a majority of
the then outstanding shares of the Series Preferred Stock:
(i) Redeem, purchase or otherwise acquire for value (or pay into
or set aside for a sinking fund for such purpose), any share or shares of Series
Preferred Stock other than pursuant to Section 5 hereof;
(ii) Redeem, purchase or otherwise acquire for value (or pay
into or set aside for a sinking fund for such purpose) any of the Common Stock
of any class or any other capital stock of the Corporation other than the Series
Preferred Stock or any of the Corporation's options, warrants or convertible or
exchangeable securities, except that these provisions will not prohibit the
Corporation from repurchasing or redeeming any shares of capital stock from
individuals and entities who have entered into stockholder agreements under
which the Corporation has the option to repurchase such shares upon the
occurrence of certain events, including the termination of employment and
involuntary transfers by operation of law (and their permitted transferees)
provided that the aggregate amount of repurchases thereunder shall not exceed
$50,000;
(iii) Authorize or issue, or obligate itself to Issue, any other
debt or equity security, other than as provided in that certain Investment and
Stockholder's Agreement, by and among the Corporation and the Investors named
therein, dated as of December 23, 1996 (the "Investment Agreement");
(iv) Increase or decrease (other than by conversion as permitted
hereby) the total number of authorized shares of Series Preferred Stock;
(v) Pay or declare any dividend or distribution on any of its
capital stock;
(vi) Authorize any merger, consolidation of the Corporation with
or into any other company or entity, or authorize the reorganization or sale of
the Corporation or the sale of substantially all of the assets of the
Corporation;
13
<PAGE>
(vii) Amend the charter documents of the Corporation or amend
the bylaws of the Corporation in any manner that adversely affects the
preferences, powers, rights or privileges of the holders of Series Preferred
Stock;
(viii) Authorize any reclassification or recapitalization of the
outstanding capital stock of the Corporation;
(ix) Approve the annual operating budget of the Corporation;
(x) Change the composition or compensation of management, or
(xi) Incur, create, assume, become or be liable in any manner
with respect to, or permit to exist, any new or additional indebtedness or
liability in excess of $50,000, except as provided in the Investment Agreement.
Section 7 No Reissuance of Series Preferred Stock. No share or shares
of the Series Preferred Stock acquired by the Corporation by reason of
redemption, purchase, conversion or otherwise shall be reissued, and all such
shares shall be canceled, retired, and eliminated from the shares which the
Corporation shall be authorized to issue. The Corporation may from time to time
take such appropriate corporate action as may be necessary to reduce the
authorized number of shares of the Series Preferred Stock accordingly.
Section 8 Notices of Record Date. In the event (i) the Corporation
establishes a record date to determine the holders of any class of securities
who are entitled to receive any dividend or other distribution, or (ii) there
occurs any capital reorganization of the Corporation, any reclassification or
recapitalization of the capital stock of the Corporation, any merger or
consolidation of the Corporation, or any transfer of all or substantially all of
the assets of the Corporation to any other company, or any other entity or
person, or any voluntary or involuntary dissolution, liquidation or winding up
of the Corporation, the Corporation shall mail to each holder at Series
Preferred Stock at least 20 days prior to the record date specified therein, a
notice specifying (a) the date of such record date for the purpose of such
dividend or distribution and a description of such dividend or distribution, (b)
the date on which any such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or winding up is expected to
become effective, and (c) the time, if any, that is to be fixed, as to when the
holders of record or Common Stock (or other securities) shall be entitled to
exchange their shares of Common Stock (or other securities) for securities or
other property deliverable upon such reorganization, reclassification, transfer,
consolidation, merger. dissolution, liquidation or winding up.
Section 9 Other Rights. Except as otherwise provided in this Restated
Certificate of Incorporation shares of each series of the Series Preferred Stock
and shares of Common Stock shall be identical in all respects (each share of
Series Preferred Stock having equivalent rights to the number of shares of
Common Stock into which it is then convertible), shall have the same powers,
preferences and rights, without preference of any such class or share over any
other such class or share, and shall be treated as a single class of stock for
all purposes.
14
<PAGE>
Section 10 Ranking. The Series B Preferred Stock shall rank on a parity
with the Series A Preferred Stock as to the distribution of assets on
liquidation, dissolution and winding up of the Corporation. The Series Preferred
Stock shall rank senior to the Common Stock as to the distribution of assets on
liquidation, dissolution and winding up of the Corporation.
Section 11 Miscellaneous.
(a) All notices referred to herein shall be in writing, and all
notices hereunder shall be deemed to have been given upon the earlier of
delivery thereof by hand delivery, by courier, or by standard form of
telecommunication, addressed: (i) if to the Corporation, to its principal
executive office (Attention President) and to the transfer agent, if any, for
the Series Preferred Stock or other agent of the Corporation designated as
permitted hereby or (ii) if to any holder of the Series Preferred Stock or
Common Stock, as the case may be, to such holder at the address of such holder
as listed in the stock record books of the Corporation (which may include the
records of any transfer agent for the Series Preferred Stock or Common Stock, as
the case may be) or (iii) to such other address as the Corporation or any such
holder, as the case may be, shall have designated by notice similarly given.
(b) The Corporation shall pay any and all stock transfer and
documentary stamp taxes that may be payable in respect of any issuance or
delivery of shares of Series Preferred Stock or shares of Common Stock or other
securities issued on account of Series Preferred Stock pursuant hereto or
certificates representing such shares or securities. The Corporation shall not,
however, be required to pay any such tax which may be payable in respect of any
transfer involved in the issuance or delivery of shares of Series Preferred
Stock or Common Stock or other securities in a name other than that in which the
shares of Series Preferred Stock with respect to which such shares or other
securities are issued or delivered were registered, or in respect of any payment
to any person with respect to any such shares or securities other than a payment
to the registered holder thereof, and shall not be required to make any such
issuance, delivery or payment unless and until the person otherwise entitled to
such issuance, delivery or payment has paid to the Corporation the amount of any
such tax or has established, to the satisfaction of the Corporation, that such
tax has been paid or is not payable.
(c) The Corporation may appoint, and from time to time discharge
and change, a transfer agent of the Series Preferred Stock. Upon any such
appointment or discharge of a transfer agent, the Corporation shall send notice
thereof by hand delivery, by courier, by standard form of telecommunication or
by first class mail (postage prepaid), to each holder of record or the Series
Preferred Stock.
ARTICLE IV
THE BOARD OF DIRECTORS
The business of the Corporation shall be managed by a Board of Directors.
The Board of Directors shall have the power, unless and to the extent that the
Board may from time to time by resolution relinquish or modify the power,
without the assent or vote of the stockholders, to make, alter, amend, change,
add to, or repeal the Bylaws of the Corporation. From and after the
15
<PAGE>
first annual meeting of stockholders, the number of directors which shall
constitute the entire Board of Directors shall consist of seven (7) individuals.
ARTICLE V
COMPROMISE OR ARRANGEMENTS
Whenever a compromise or arrangement is proposed between this Corporation
and its creditors or any class of them and/or between this Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this Corporation under the provisions of
section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation under
the provisions of section 279 of Title 8 of the Delaware Code order a meeting of
the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on this Corporation. Nothing contained
herein shall affect or impair the Corporation's ability to avail itself of any
other state or federal law concerning insolvency and/or reorganization,
including but not limited to Title 11 of the U.S. Code.
ARTICLE VI
REGISTERED OFFICE AND REGISTERED AGENT
The address of the registered office of the Corporation in Delaware is
located at 1013 Centre Road, in the city of Wilmington, County of New Castle,
Delaware 19805 and its registered agent at that address is The Prentice-Hall
Corporation System, Inc.
ARTICLE VII
INDEMNIFICATION BY CORPORATION
The Corporation shall indemnify, and advance expenses to, its directors,
officers, employees and agents, and all persons who at any time served as
directors, officers, employees or agents of the Corporation, to the extent
permitted, and in the manner provided by, Section 145 of the Delaware General
Corporation Law, as amended, or any successor provisions, and shall have power
to make any other or further indemnity permitted under the laws of the State of
Delaware.
16
<PAGE>
ARTICLE VIII
ELIMINATION OF LIABILITY OF DIRECTORS
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director except (i) for any breach of the director's duty of loyalty
to the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived any improper personal benefit. If
the General Corporation Law of Delaware is amended after the effective date of
this Restated Certificate of Incorporation to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the General Corporation Law of Delaware, as so amended.
Any repeal or modification of this Article VIII by (i) the stockholders of
the Corporation or (ii) amendment to the General Corporation Law of Delaware
(unless such statutory amendment specifically provides to the contrary) shall
not adversely affect any right or protection, existing at the time of such
repeal or modification with respect to any acts or omissions occurring either
before or after such repeal or modification, of a person serving as a director
at the time of such repeal or modification.
ARTICLE IX
BYLAWS
The Board is expressly authorized to adopt, amend or repeal the Bylaws of
the Corporation.
ARTICLE X
DURATION OF CORPORATION
The duration of the Corporation is to be perpetual.
ARTICLE XI
PREEMPTIVE RIGHTS
Except as may by provided in any written contract or written agreement to
which the Corporation is a party from time to time, there shall be no preemptive
rights to acquire additional shares of the Corporation.
17
<PAGE>
IN WITNESS WHEREOF, this Restated Certificate of Incorporation, which
restates and integrates and also amends the provisions of the Certificate of
Incorporation of the Corporation and which has been duly adopted in accordance
with Sections 242 and 245 of the General Corporation Law, as the Corporation has
received payment for its capital stock, has been executed by its President and
Secretary this December 16, 1996.
PATHNET, INC.
By: /s/ David Schaeffer
------------------------------------
Name: David Schaeffer
Title: President
Attest:
By: /s/ Michael A. Lubin
------------------------------------
Name: Michael A. Lubin
Title: Secretary
- 18 -
<PAGE>
PAGE 1
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY "PATHNET, INC." IS DULY INCORPORATED UNDER THE LAWS OF THE STATE OF
DELAWARE AND IS IN GOOD STANDING AND HAS A LEGAL CORPORATE EXISTENCE SO FAR AS
THE RECORDS OF THIS OFFICE SHOW, AS OF THE TWENTY-SIXTH DAY OF AUGUST, A.D.
1997.
AND I DO HEREBY FURTHER CERTIFY THAT THE FRANCHISE TAXES HAVE BEEN PAID TO
DATE.
AND I DO HEREBY FURTHER CERTIFY THAT THE ANNUAL REPORTS HAVE BEEN FILED TO
DATE.
[SECRETARY'S OFFICE SEAL -- STATE OF DELAWARE]
/s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
2533940 8300 AUTHENTICATION: 8623583
971285426 DATE: 08-26-97
<PAGE>
SCHEDULE P
DELIVERABLES OF INCUMBENT
1. Within thirty (30) days of the Effective Date, any existing tower drawings
and specifications, inventory lists and other documents relating to the
sites set forth on Schedule B or any Amended Schedule B necessary for
PathNet to perform its obligations under this Agreement.
2. On or before the Effective Date, evidence of ownership by Incumbent of the
sites set forth on Schedule B or any Amended Schedule B or, in the event
Incumbent leases such sites, evidence of Incumbent's leasehold interest in
such sites.
3. On or before the Effective Date, copies of all environmental reports,
title reports, surveys, specified or legal access, and zoning Permits and
licenses relating to the sites set forth on Schedule B or any Amended
Schedule B.
4. On the Effective Date, evidence that Incumbent's existing system is in
compliance, as of the date hereof, with all applicable Federal, state and
local laws.
5. Within thirty (30) days of the Effective Date, the results of any
structural, mechanical, and electrical inspections and reports relating to
Incumbent's existing system facilities or sites, which have been performed
pursuant to the requirements of any applicable Federal, state or local law
or by Incumbent at its discretion.
6. Within thirty (30) days of the Effective Date, the names, addresses and
contact persons of any consultants or Subcontractors engaged by Incumbent
in connection with Incumbent's existing system, Facilities or sites and
copies of any reports or documents produced by such consultants or
Subcontractors.
7. Simultaneously with the execution and delivery of this Agreement, an
executed Escrow Agreement, as described in Section 4.
8. Upon the request of PathNet, any information requested by PathNet pursuant
to Section 1.2 of Schedule A.
9. Within thirty (30) days after receipt of the System Design, written
approval of the System Design or a list of suggested modifications to such
System Design, as described in Section 3.1 of Schedule A.
10. Within thirty (30) days after receipt of each of the Project Schedule, the
Cutover Plan and the Project Management Plan, written approval of such
Project Schedule, Cutover Plan and Project Management Plan, respectively,
or a list of suggested modifications to such Project Schedule, Cutover
Plan and Project Management Plan, as the case may be, as described in
Section 4.1.1 of Schedule A.
P-1
<PAGE>
11. Promptly after completion of the site acceptance testing, the Deficiency
List as set forth in Section 5.7 of Schedule A.
12. Promptly after approval of the site acceptance test data as set forth in
Section 5.7 of Schedule A, a Certificate of Acceptance substantially in
the form attached hereto as Exhibit A-8 to this Schedule A.
13. Upon acceptance of any Capacity Expansion in accordance with the procures
set forth in Section 7.1 of Schedule A, a Certificate of Acceptance
relating to such Capacity Expansion substantially in the form attached
hereto as Exhibit A-9 to this Schedule A.
P-2
<PAGE>
SCHEDULE Q
DELIVERABLES OF PATHNET
1. Within sixty (60) days of the Effective Date, the Vendor Credit Assurances
described in Section 4.
2. Simultaneously with the execution and delivery of this Agreement, an
executed Escrow Agreement, as described in Section 4.
3. Within sixty (60) days after the Effective Date, all required
subordination agreements as set forth in Section 5.11.
4. At the request of Incumbent, the proof of licensing, as described in
Section 11.4.
5. Upon completion of the preliminary analysis set forth in Section 1.1 of
Schedule A, the results of such analysis, including, but not limited to,
the Existing System Inventory, the Path Studies, the Frequency
Availability Model, the Tower Analysis, the Economic Model, the System
Design, the System Budget, the Channel Plan, and the Preliminary
Construction Schedule.
6. Upon completion of the preliminary analysis set forth in Section 1.1 of
Schedule A, the Project Drawings set forth in Section 1.3 of Schedule A.
7. Prior to the commencement of any services set forth in Schedule A, the
Certificates of Insurance described in Section 11.1.
8. Upon completion of the preliminary analysis set forth in Section 1.1 of
Schedule A, the Modifications SOW, as set forth in Section 2.1 of Schedule
A.
9. At any time, a copy of any revised System Design, as described in Section
3 of Schedule A.
10. Within thirty (30) days after approval by Incumbent of the System Design,
the Project Schedule, as set forth in Section 4.1.1 of Schedule A.
11. Within thirty (30) days after approval by Incumbent of the System Design,
the Cutover Plan, as set forth in Section 4.1.1 of Schedule A.
12. Within thirty (30) days after approval by Incumbent of the System Design,
the Project Management Plan, as set forth in Section 4.1.1 of Schedule A.
13. Promptly after receipt of a list of suggested modifications from
Incumbent, a revised Project Schedule, Cutover Plan or Project Management
Plan, as the case may be, as set forth in Section 4.1.1 of Schedule A.
Q-1
<PAGE>
14. After installation has begun and until Commissioning a bi-weekly Progress
Report, as set forth in Section 4.2.1 of Schedule A.
15. At any time, any revised Project Drawing, as described in Section 4.1.3 of
Schedule A.
16. Promptly after completion of the site acceptance testing set forth in
Section 5 of Schedule A, a copy of the results of such testing.
17. At Commissioning, the Station Log Books as set forth in Section 6.2 of
Schedule A.
18. At least fifteen (15) days prior to any Capacity Expansion, the Capacity
Expansion Schedule, as set forth in Section 7.1 of Schedule A.
19. Upon receipt of the result of the testing performed on any Capacity
Expansion, a copy of such results, as set forth in Section 7.1 of Schedule
A.
20. At least two (2) weeks prior to the receipt of any equipment or materials,
the ship and delivery schedules set forth in Section 8.12 of Schedule A.
Q-2
<PAGE>
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Escrow Agreement") is entered into as of
September ___, 1997, by and among PathNet, Inc., a Delaware corporation
("PathNet") and KN Energy, Inc., a Kansas corporation ("Incumbent"), and Crestar
Bank as escrow agent (the "Escrow Agent");
WHEREAS, PathNet and Incumbent have entered into a Fixed Point Microwave
Services Agreement dated as of the date hereof (the "FPM Agreement"), pursuant
to which, among other things, Incumbent has engaged PathNet as, and PathNet has
agreed to act as, Incumbent's sole representative for the purpose of (i)
installing, managing and operating a high capacity digital microwave system
along Incumbent's current microwave paths and (ii) marketing and selling any
Excess Capacity created by such high capacity digital microwave system.
WHEREAS, all capitalized terms used herein and not defined herein shall
have the meanings ascribed to such terms in the FPM Agreement;
WHEREAS, pursuant to Section 4.4.4(b) of the FPM Agreement, PathNet shall
deliver to the Escrow Agent the amount of [***] less the cost of any
equipment provided by the vendors referred to in the Vendor Credit Assurances
set forth in Section 4.4.4(a) of the FPM Agreement] (the "PathNet Escrow
Deposit") and, pursuant to Section 4.1.5(b) of the FPM Agreement, Incumbent
shall deliver to the Escrow Agent the amount of [***] (the "Incumbent Escrow
Deposit"); and
WHEREAS, the Escrow Agent has agreed to act as escrow agent hereunder in
accordance with the terms and conditions hereinafter set forth;
NOW, THEREFORE, for and in consideration of the foregoing and of the
mutual covenants and agreements hereinafter set forth, the parties hereto hereby
agree as follows:
SECTION 1. Appointment of Escrow Agent. PathNet and Incumbent hereby
mutually appoint and designate the Escrow Agent to receive, hold and disburse
the PathNet Escrow Deposit and the Incumbent Escrow Deposit, in accordance with
the terms and conditions of this Escrow Agreement, and the Escrow Agent hereby
accepts such appointment and designation. Except as set forth in Section 3.2.3,
PathNet shall pay all reasonable fees and expenses of the Escrow Agent in
connection with this Escrow Agreement.
SECTION 2. Escrow.
2.1 Escrow of Funds by PathNet
1
<PAGE>
2.1.1 Delivery of Escrow Deposit.
(a) Within ninety (90) days after delivery by PathNet to Incumbent
of the System Design, PathNet shall deposit the amount in cash
equal to fifty percent (50%) of the PathNet Escrow Deposit in
an escrow account with the Escrow Agent to be held, drawn upon
and returned by the Escrow Agent in accordance with the terms
and conditions hereinafter set forth.
(b) Within one hundred and twenty (120) days after delivery by
PathNet of the first escrow payment set forth in Section
2.1.1(a), PathNet shall deposit the amount in cash equal to
fifty percent (50%) of the PathNet Escrow Deposit in an escrow
account with the Escrow Agent to be held, drawn upon and
returned by the Escrow Agent in accordance with the terms and
conditions hereinafter set forth
2.1.2 Term of Escrow Agreement. The Escrow Agent shall hold the
PathNet Escrow Deposit until Commissioning and upon Commissioning any
remaining funds, together with interest that has accrued and been paid
thereon, shall be paid by the Escrow Agent to PathNet or its designee.
2.1.3 Release of Funds to PathNet. Upon receipt by the Escrow Agent
of a written joint certification of PathNet and Incumbent substantially in
form attached hereto as Attachment A to the effect that PathNet is
entitled to receive a portion of or all of the PathNet Escrow Deposit in
accordance with Section 4.4.4(b) of the FPM Agreement, the Escrow Agent
shall promptly deliver to PathNet such portions of or all of the PathNet
Escrow Deposit.
2.1.4 Release of Funds to Incumbent. Upon receipt by the Escrow
Agent of a written joint certification of PathNet and Incumbent
substantially in the form attached hereto as Attachment A to the effect
that Incumbent is entitled to receive a portion of or all of the PathNet
Escrow Deposit in accordance with Section 4.4.4(b) of the FPM Agreement or
upon receipt by the Escrow Agent of a court order directing payment to
Incumbent of a portion of or all of the PathNet Escrow Deposit, the Escrow
Agent shall promptly deliver to Incumbent such portions of or all of the
PathNet Escrow Deposit.
2.2 Escrow of Funds by Incumbent
2.2.1 Delivery of Escrow Deposit. Simultaneous with the execution
and delivery of the FPM Agreement, Incumbent shall deposit an amount in
cash equal to the Incumbent Escrow Deposit in an escrow account with the
Escrow Agent to be held, drawn upon and returned by the Escrow Agent in
accordance with the terms and conditions hereinafter set forth.
2
<PAGE>
2.2.2 Term of Escrow Agreement. The Escrow Agent shall hold the
Incumbent Escrow Deposit until Commissioning and upon Commissioning any
remaining funds, together with interest that has accrued and been paid
thereon, shall be paid by the Escrow Agent to Incumbent or its designee.
2.2.3 Release of Funds to Incumbent. Upon receipt by the Escrow
Agent of a written joint certification of PathNet and Incumbent
substantially in the form attached hereto as Attachment B to the effect
that Incumbent is entitled to receive a portion of or all of the PathNet
Escrow Deposit in accordance with Section 4.1.5 of the FPM Agreement, the
Escrow Agent shall promptly deliver to Incumbent such portions of or all
of the PathNet Escrow Deposit.
2.2.3 Release of Funds to PathNet. Upon receipt by the Escrow Agent
of a written joint certification of PathNet and Incumbent substantially in
form attached hereto as Attachment B to the effect that PathNet is
entitled to receive a portion of or all of the Incumbent Escrow Deposit in
accordance with Section 4.1.5 of the FPM Agreement, or upon receipt by the
Escrow Agent of a court order directing payment to PathNet of a portion of
or all of the Incumbent Escrow Deposit, the Escrow Agent shall promptly
deliver to PathNet such portions of or all of the Incumbent Escrow
Deposit.
SECTION 3. Concerning the Escrow Agent.
3.1 Duties. The Escrow Agent undertakes to perform all duties which are
expressly set forth herein.
3.2 Indemnification.
3.2.1 The Escrow Agent may rely upon and shall be protected in
acting or refraining from acting upon any written notice, instruction,
certification, or request furnished to it hereunder and believed by it to
be genuine and to have been signed or presented by the proper parties or
party.
3.2.2 The Escrow Agent shall not be liable for any action taken by
it in good faith and without negligence, and believed by it to be
authorized or within the rights or powers conferred upon it by this Escrow
Agreement.
3.2.3 PathNet and Incumbent hereby agree to indemnify the Escrow
Agent for and to hold the Escrow Agent harmless against, any loss,
liability or reasonable expense incurred without negligence or bad faith
on the part of the Escrow Agent, arising out of or in connection with the
Escrow Agent entering into this Escrow Agreement and carrying out its
duties hereunder, including costs and expenses of successfully defending
the Escrow Agent against any claim of liability with respect thereto.
PathNet shall pay one half of any payment made pursuant to this Section
3.2.3 and Incumbent shall pay one half.
3
<PAGE>
3.3 Other Matters. The Escrow Agent (and any successor escrow agent)
reserves the right to resign as the Escrow Agent at any time upon thirty (30)
days prior written notice to each of PathNet and Incumbent. Upon mutual
agreement, PathNet and Incumbent reserve the right to remove the Escrow Agent at
any time upon thirty (30) days written notice to the Escrow Agent. In the event
of any litigation or dispute by the parties hereunder affecting its duties, the
Escrow Agent shall take no action until such action is agreed to in writing by
the parties hereto, or until receipt of an order of a court having jurisdiction
directing the Escrow Agent with respect to the action which is the subject of
such litigation or dispute. The Escrow Agent neither approves nor disapproves of
the transactions contemplated by the FPM Agreement or this Escrow Agreement, nor
does it recommend for or against, or have an opinion as to the legality or
validity of, this transaction.
SECTION 4. Termination. This Escrow Agreement shall terminate (i)
automatically upon the return of both the PathNet Escrow Deposit and the
Incumbent Escrow Deposit pursuant to Section 2.1.2 and Section 2.2.2,
respectively (ii) automatically upon the delivery of the entire PathNet Escrow
Deposit and the Incumbent Escrow Deposit made pursuant to Section 2.1.3 or
Section 2.1.4 and Section 2.2.3, respectively or (iii) upon written mutual
consent signed by PathNet and Incumbent.
SECTION 5. Additional Actions and Documents. Each of the parties hereto
agrees to take or cause to be taken such further actions, to execute, deliver
and file or cause to be executed, delivered and filed such further documents,
instruments and agreement, and will obtain such consents as may be necessary or
as may reasonably be requested in order to fully effectuate the purposes, terms
and conditions of this Escrow Agreement.
SECTION 6. Notice. All notices, demands, requests, or other communications
which may be or are required to be given, served or sent by any party pursuant
to this Escrow Agreement shall be in writing and shall be hand delivered, mailed
by first-class, registered or certified mail, return receipt requested, postage
prepaid, delivered by overnight air courier or transmitted by telegram or telex
addressed as follows:
If to PathNet:
PathNet, Inc.
1015 31st Street, N.W.
Washington, D.C. 20007
Attention: Michael Lubin
Vice President and General Counsel
Tel: (301) 209-1020
Fax: (301) 209-1018
4
<PAGE>
If to Incumbent:
KN Energy, Inc.
370 Van Gordon Street
P.O. Box 281304
Lakewood, CO 80228-8304
Tel: (303) 763-3510
If to Escrow Agent:
William F. Michie III
Corporate Trust Officer
Crestar Bank
919 East Main Street
10th Floor
Richmond, VA 23219
(804) 782-5581
(804) 782-7855 (Fax)
Or such other address as the addressee may indicate by written notice to the
other parties. Each notice, demand, request or communication which shall be
given or made in the manner described above shall be deemed sufficiently given
or made for all purposes at such time as it is delivered to the addressee (with
return receipt, the delivery receipt or the affidavit of messenger being deemed
conclusive but not exclusive evidence of such delivery) or at such time as
delivery is refused by the addressee upon presentation.
SECTION 7. Benefit and Assignment. This Escrow Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns as permitted hereunder. No person or entity other than
the parties hereto is or shall be entitled to bring any action to enforce any
provisions of this Escrow Agreement against any of the parties hereto or their
respective successors and assigns as permitted hereunder. At any time and from
time to time, PathNet shall have the right to assign this Agreement or any of
PathNet's rights and obligations under this Agreement; provided, that in no
event shall any such assignment relieve PathNet of its obligations under this
Agreement. Incumbent may not or shall not have the right to assign this
Agreement or any of its rights and obligations hereunder without the prior
written consent of PathNet, which consent shall not be unreasonably withheld;
provided, however, Incumbent may assign its right and obligations, in whole but
not in part, under this Agreement without the approval of PathNet, to any entity
which acquires all or substantially all of the assets of Incumbent or to any
subsidiary, Affiliate or successor in a merger or consolidation of Incumbent;
provided, that in no event shall any such assignment relieve Incumbent of its
obligations under this Agreement.
SECTION 8. Entire Agreement; Amendment. This Escrow Agreement together
with the schedules, exhibits and attachments hereto contains the entire
agreement among the parties
5
<PAGE>
with respect to the subject matter hereof and supercedes all prior oral or
written agreements, commitments or understandings with respect to such matters.
PathNet and Incumbent shall furnish the Escrow Agent with a copy (without
Schedules and Exhibits) of the FPM Agreement. This Escrow Agreement may not be
changed orally, but only by an instrument in writing signed by the party against
whom enforcement of any waiver, change, modification, extension or discharge is
sought.
SECTION 9. Waiver. No delay or failure on the part of any party hereto in
exercising any right, power or privilege under this Escrow Agreement shall
impair any such right, power or privilege or be construed as a waiver of any
default or any acquiescence therein. No single or partial exercise of any such
right, power or privilege shall preclude the further exercise of such right
power or privilege or the exercise of any other right power or privilege. No
waiver shall be valid against any party hereto unless made in writing and signed
by the party against whom enforcement of such waiver is sought and then only to
the extent expressly specified therein.
SECTION 10. Expenses. Subject to the provisions of Section 1 and Section
3.2.3 each party shall pay its own expenses incident to this Escrow Agreement
and the transactions contemplated hereunder, including all legal and accounting
fees and disbursements.
SECTION 11. Consent to Jurisdiction; Enforceability. This Escrow Agreement
and the duties and obligations of the parties hereunder shall be enforceable
against any of the parties in the courts of the Untied States of America and of
the State of Maryland. For such purpose, each party hereto hereby irrevocable
submits to the non-exclusive jurisdiction of such court or courts and agrees
that all claims in respect of this Escrow Agreement and such other agreements,
documents and instruments may be heard and determined in such courts. Each party
hereby irrevocably agrees that a final judgment of any of the courts specified
above in any action or proceeding relating to this Escrow Agreement or to any of
the other agreements, documents or instruments referred to herein or therein
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.
SECTION 12. Severability. If any part of any provision of this Escrow
Agreement shall be invalid or unenforceable in any respect, such part shall be
ineffective to the extent of such invalidity or unenforceability only, without
in any way affecting the remaining parts of such provision or the remaining
provisions of this Escrow Agreement.
SECTION 13. Governing Law. This Escrow Agreement, the rights and
obligation of the parties hereto, and any claims or disputes relating thereto,
shall be governed by and construed in accordance with the laws of the State of
Maryland (excluding the choice of law rules thereof)
SECTION 14. Limitation on Benefits. The covenants, undertaking and
agreements set forth in this Escrow Agreement shall be solely for the benefit
of, and shall be enforceable only by, the parties hereto, and their respective
successors, heirs, executors, administrators, legal representatives and
permitted assigns.
SECTION 15. Binding Effect. Subject to any provisions hereof restricting
assignment, this Escrow Agreement shall be binding upon and shall inure to the
benefit of the parties hereto
6
<PAGE>
and their respective successors, heirs, executors, administrators, legal
representatives and assigns.
SECTION 16. Headings. The headings of the sections and subsections
contained in this Escrow Agreement are inserted for convenience only and do not
form a part or affect the meaning, construction or scope thereof.
SECTION 17. Signature in Counterparts. This Escrow Agreement may be
executed in separate counterparts, none of which need contain the signatures of
all parties, each of which shall be deemed to be an original, and all of which
taken together constitute one and the same instrument. It shall not be necessary
in making proof of this Escrow Agreement to produce or account for more that the
number of counterparts containing the respective signatures of, or on behalf of,
all of the parties hereto.
IN WITNESS WHEREOF, each of the parties hereto has executed or has caused
this Escrow Agreement to be executed on its behalf, all as of the date first
above written.
PATHNET, INC.
By: /s/ Dave Schaeffer
--------------------------------
Name: Dave Schaeffer
------------------------------
Title: Chairman
------------------------------
KN ENERGY, INC.
By: /s/ H. Rickey Wells
--------------------------------
Name: H. Rickey Wells
------------------------------
Title: VP Business Ops
------------------------------
CRESTAR BANK
By:
--------------------------------
Name:
------------------------------
Tile:
------------------------------
7
<PAGE>
ATTACHMENT A
JOINT CERTIFICATION
I, ___________________, ___________________, of PathNet, Inc. ("PathNet")
and I, __________________, ________________ of KN Energy, Inc. ("Incumbent"),
hereby certify as follows:
1. PathNet and Incumbent entered into a Fixed Point Microwave Services
Agreement, dated as of September ______, 1997 (the "FPM Agreement") pursuant to
which among other things, Incumbent engaged PathNet as, and PathNet agreed to
act as, Incumbent's sole representative for the purpose of (i) installing,
managing and operating a high capacity digital microwave system along
Incumbent's current microwave paths and (ii) marketing and selling any excess
capacity created by such high capacity digital microwave system, all in
accordance with and subject to the terms and conditions set forth in the FPM
Agreement.
2. Pursuant to the FPM Agreement, PathNet, Incumbent and Crestar Bank(the
"Escrow Agent") entered into an Escrow Agreement, dated as of September _____,
1997 (the "Escrow Agreement"), in accordance with which PathNet delivered to the
Escrow Agent the sum of [five million two hundred and sixty-four thousand and
six hundred and twenty-five dollars ($5,264,625) less the cost of any equipment
provided by the vendors referred to in the Vendor Credit Assurances set forth in
Section 4.4.4(a) of the FPM Agreement] (in two equal payments) (the "PathNet
Escrow Deposit"), subject to the terms of the FPM Agreement and the Escrow
Agreement.
3. Attached to this Joint Certification is [an invoice or other such
purchase order or bill relating to a PathNet Item (as such term is defined in
the FPM Agreement) evidencing the performance of certain services by PathNet as
set forth in the FPM Agreement.] [An affidavit of Incumbent certifying that
PathNet has failed to timely meet its payment responsibilities with respect to
the PathNet Items (as such term is defined in the FPM Agreement) or fails to
complete the System in accordance with Section 13.2.1 (ix) of the FPM Agreement
in accordance with the terms and provisions of the FPM Agreement and setting
forth in detail a description of the facts and circumstances surrounding such
failure.]
4. Pursuant to Section 4.4.4(b) of the FPM Agreement and [Section
2.1.3/Section 2.1.4] of the Escrow Agreement, [PathNet/Incumbent] is entitled to
receive, from the PathNet Escrow Deposit, the following sum: _____________
($_________).
5. The Escrow Agent is hereby directed promptly upon receipt of this
certification to release the portion of the Escrow Deposit as set forth in
Section 3, above to PathNet/Incumbent pursuant to [Section 2.1.3/Section 2.1.4]
of the Escrow Agreement.
8
<PAGE>
Each of_______ and ________ on behalf of PathNet and Incumbent,
respectively, certify that the foregoing is true and correct.
PATHNET, INC. KN ENERGY, INC.
By: By:
--------------------------------- ------------------------------
Name: Name:
------------------------------ ----------------------------
Title: Title:
-------------------------------- -----------------------------
9
<PAGE>
ATTACHMENT B
JOINT CERTIFICATION
I, ____________________, ____________________________ of PathNet, Inc.
("PathNet") and I, _________________ of KN Energy, Inc., a Kansas Corporation
("Incumbent"), hereby certify as follows:
1. PathNet and Incumbent entered into a Fixed Point Microwave Services
Agreement, dated as of September ______, 1997 (the "FPM Agreement") pursuant to
which among other things, Incumbent engaged PathNet as, and PathNet agreed to
act as, Incumbent's sole representative for the purpose of (i) installing,
managing and operating a high capacity digital microwave system along
Incumbent's current microwave paths and (ii) marketing and selling any excess
capacity created by such high capacity digital microwave system, all in
accordance with and subject to the terms and conditions set forth in the FPM
Agreement.
2. Pursuant to the FPM Agreement, PathNet, Incumbent and Crestar Bank (the
"Escrow Agent") entered into an Escrow Agreement, dated as of ________________
199__ (the "Escrow Agreement"), in accordance with which Incumbent delivered to
the Escrow Agent the sum of two hundred thousand dollars ($200,000) (the
"Incumbent Escrow Deposit"), subject to the terms of the FPM Agreement and the
Escrow Agreement.
3. Attached to this Joint Certification is an invoice or other such
purchase order or bill relating to a PathNet Item (as such term is defined in
the FPM Agreement) evidencing the performance of certain services by PathNet as
set forth in the FPM Agreement.
4. Pursuant to Section 4.1.5 of the FPM Agreement and [Section 2.2.3 /
Section 2.2.4] of the Escrow Agreement, PathNet/Incumbent is entitled to
receive, from the Incumbent Escrow Deposit, the following sum: _____________
($__________).
5. The Escrow Agent is hereby directed promptly upon receipt of this
certification to release the portion of the Incumbent Escrow Deposit as set
forth in Section 3, above to PathNet pursuant to [Section 2.2.3/Section 2.2.4]
of the Escrow Agreement.
Each of _______ and ________ on behalf of PathNet and Incumbent,
respectively, certify that the foregoing is true and correct.
PATHNET, INC. KN ENERGY, INC.
By: By:
--------------------------------- ------------------------------
Name: Name:
------------------------------ ----------------------------
Title: Title:
-------------------------------- -----------------------------
10
<PAGE>
SCHEDULE R
FORM OF SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement"), dated as of September ____,
1997, between PathNet, Inc., a Delaware corporation with its principal place of
business at the address set forth below ("Pledgor") and KN Energy, Inc., a
Kansas corporation with its principal place of business at the address set forth
below ("Pledgee").
RECITALS
WHEREAS, Pledgor and Pledgee have entered into a Fixed Point Microwave
Services Agreement, dated as of September ___, 1997 (the "FPM Agreement")
pursuant to which Pledgee has agreed, among other things, to engage Pledgor as,
and Pledgor has agreed to act as, Pledgee's sole representative for the purpose
of, (i) installing, managing and operating a high capacity digital microwave
system along Pledgee's current microwave paths (the "System"), and (ii)
marketing and selling any excess capacity created by such high capacity digital
microwave system; and
WHEREAS, Pledgor is the owner of those certain radios, radio software,
antenna, waveguide, multiplexers and other equipment necessary to operate the
Initial System (as such term is defined in the FPM Agreement) (collectively, the
"Assets"), all of which are identified more particularly on Exhibit A attached
hereto; and
WHEREAS, a condition to the execution, delivery and consummation of the
transactions contemplated by the FPM Agreement is the execution and delivery of
this Agreement;
WHEREAS, all capitalized terms used herein and not defined herein shall
have the meanings ascribed to such terms in the FPM Agreement;
NOW, THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
1. Grant of Security Interest in Assets. In order to induce Pledgee to
execute, deliver and perform the FPM Agreement and as security for Pledgor's or
Pledgee's successors' performance of Pledgor's obligations under the FPM
Agreement and in consideration for the Project fee, Pledgor hereby assigns,
conveys, mortgages, pledges, hypothecates, transfers and confirms to Pledgee,
its successors and assigns, and hereby grants to Pledgee a lien on and security
interest in, all of Pledgor's right, title, interest and powers in the Assets.
This Agreement constitutes a valid and continuing lien on and security interest
in the Assets in favor of Pledgee, prior to all other liens, encumbrances,
security interest and rights of others and is enforceable as such as against
creditors of and purchasers from the Pledgor. All such action necessary or
desirable to protect and perfect such security interest in each item of the
Assets will have been duly taken prior to the date the Assets are installed,
including but not limited to the
R-1
<PAGE>
Pledgor, at its expense, causing UCC-1 Financing Statements with respect to the
Assets to be filed and recorded in all places necessary to establish create and
perfect the lien intended to be created hereby.
2. Events of Default. The occurrence of any of the following events or
circumstances shall constitute an Event of Default under this Agreement:
(a) the liquidation or dissolution of Pledgor under Chapter 7 to the
Federal bankruptcy laws or otherwise under the Delaware general
corporation law, or
(b) the default by Pledgor under its financing arrangement with its
Vendor and Incumbent's receipt of written notice from such vendor stating
its intention to waive its right to operate the System for the purpose of
generating Revenue from the sale of Excess Capacity.
3. Remedies Upon Default. If an Event of Default shall have occurred, the
Pledgee may, in addition to any remedies it may have under the FPM Agreement,
(a) take possession or control of, store, lease, operate, manage, sell or
otherwise dispose of all or any part of the Assets, (b) notify all parties under
any account or contract forming all or any part of the Assets to make any
payments due to Pledgor directly to Pledgee, (c) in the name of Pledgor or in
the name of Pledgee, demand, collect, receive, sue for and give receipts and
releases for any and all amounts due under such account and contract rights, (d)
endorse as the agent of Pledgor any check, note, chattel paper, documents or
instruments forming all or any part of the Assets, (e) make formal application
for the transfer to Pledgee of all of Pledgor's Permits, licenses, approvals and
the like relating to the Assets and (f) take any action which Pledgee deems
necessary or desirable to protect and realize upon the security interest in the
Assets.
4. Termination of Security Interest. The security interest set forth in
Section 1 above shall terminate on the later of the date which is the
twenty-fifth anniversary of Commissioning and simultaneously with the expiration
of the FPM Agreement. Upon expiration, the Pledgee shall take possession of the
Assets.
5. Representations, Warranties and Covenants of the Pledgor. The Pledgor
hereby represents, warrants and covenants that:
(a) The Pledgor has full corporate power and authority to execute
and deliver and perform its obligations under this Agreement
and this Agreement is the Pledgor's valid and binding
obligation, enforceable in accordance with its terms, except
as such enforcement may be limited by (i) applicable
bankruptcy, reorganization, insolvency, moratorium or other
laws affecting creditors' rights generally, (ii) equitable
rules or principles affecting the enforcement of obligations
generally, whether at law or in equity, or (iii) the exercise
of the discretionary powers of any court before which may be
brought any proceeding seeking equitable remedies, including,
without limitation, specific performance and injunctive
relief.
R-2
<PAGE>
(b) Pledgor represents and warrants that it is or will be before
Commissioning (as such term is defined in the FPM Agreement)
the owner of the Assets and has good and marketable title to
the Assets, free and clear of all liens, security interests
and other encumbrances, except for those in favor of the
Pledgee.
(c) Pledgor will not sell, lease, transfer, exchange or otherwise
dispose of the Assets, or any part thereof, without the prior
written consent of Pledgee, and will not permit any lien,
security interest or other encumbrance to attach to the
Assets, or any part thereof, other than those in favor of the
Pledgee or those permitted by Pledgee in writing.
(d) No approval, consent or other action by the stockholders and
Pledgor or by any governmental authority, or by any other
person or entity, is or will be necessary to permit the valid
execution, delivery and performance by the Pledgor of this
Agreement or any other instruments or agreements executed in
connection herewith.
6. Waiver of Notice, Etc. Except as specifically provided for herein, the
Pledgor waives demand, notice, protest, notice of acceptance of this Agreement,
notice of any extensions granted, collateral received or delivered or any action
taken in reliance hereon; all demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of any obligation and
all other demands and notices of any description; and assents to any extension
or postponement of the time of payment of any of the obligations created
hereunder or any other indulgence.
7. Governing Law. This Agreement is to be governed by and construed in
accordance with the laws of the State of New York. The Pledgor agrees that any
action or proceeding brought by the Pledgee under this Agreement (a) will be
litigated under the laws of the State of New York and agrees to be subject to
the jurisdiction of the Courts of the State of New York or (in a case involving
diversity of citizenship) the United States District Court for New York, (b)
that service of process of any summons and complaint in any such action or
proceeding may be made by registered or certified mail directed to the Pledgor
at the address hereafter set forth, the Pledgor waiving personal service
thereof, and (c) within forty-five (45) days after summons and complaint, and
should the Pledgor so served fail to appear or answer within said forty-five
(45) day period, the Pledgor shall be deemed in default and judgment entered
against the Pledgor for the amount demarked in any summons and complaint so
served.
8. Succession. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, successors and assigns and shall also inure to the benefit of
the holders from time to time of the obligations.
9. Invalidity of Provisions. In the event that any one or more of the
provisions contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement, and
each term and provision of this Agreement shall be valid and enforceable to
R-3
<PAGE>
the fullest extent permitted by law.
10. Amendments. This Agreement may not be changed orally, but only by an
agreement in writing signed by the parties against whom enforcement of any
waiver, change, modification or discharge is sought.
11. Notices. All communications under or with respect to this Agreement
shall be in writing and shall be delivered to the parties in the manner
proscribed and addressed as designated in the FPM Agreement, subject to a change
thereof by written notice.
12. Counterparts. This Agreement may be executed in two or more
counterparts, all of which together shall constitute one and the same
instrument.
13. Entire Agreement. This Agreement embodies the entire understanding of
the parties with respect to the subject matter of this Agreement and no oral
understandings exist among the parties hereto with respect to the subject matter
hereof except as herein expressly set forth.
14. Captions. The captions of this Agreement are for convenience only and
shall neither limit nor enlarge the provisions hereof.
15. FCC Consent. Notwithstanding anything to the contrary contained herein
or the FPM Agreement, the Pledgee will not take any action pursuant to this
Agreement or the FPM Agreement that would constitute or result in any assignment
of or a transfer of control of any FCC authorization(s) held by Pledgor if such
assignment or transfer of control would require under then existing law
(including the written rules and regulations promulgated by the FCC), the prior
approval of the FCC, without first obtaining such approval of the FCC. The
Pledgee specifically agrees that (a) the voting rights of the pledged assets
will remain with the Pledgor upon and following the occurrence of an Event of
Default unless any required prior approvals of the FCC to the transfer of such
voting rights to the Pledgee shall have been obtained; and (b) prior to the
exercise of voting rights by the purchaser at any such sale, the prior consent
of the FCC pursuant to 47 U.S.C. 310(d) will be obtained. The Pledgor agrees to
take any action which the Pledgee may reasonably request in order to obtain and
enjoy the full rights and benefits granted to the Pledgee by this Agreement
including specifically the use of the best efforts of the Pledgor to assist in
obtaining approval of the FCC for any action or transaction contemplated by this
Agreement which is then required by law, and specifically, without limitation,
upon request following the occurrence of an Event of Default, to prepare, sign
and file (or cause to be prepared, signed or filed) with the FCC any portion of
any application or applications for consent to the assignment of an
authorization or transfer of control required to be signed by the Pledgor and
necessary or appropriate under the FCC's rules and regulations for approval of
any sale or transfer of any of the capital stock or assets of the Pledgor or any
transfer of control of any FCC authorization.
R-4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the day and year first above written.
PATHNET, INC. KN ENERGY, INC.
By: By:
--------------------------------- ------------------------------
Its: Its:
------------------------------ ----------------------------
Address: 1015 31st Street, N.W. 370 Van Gordon Street
Washington, D.C. 20007 P.O. Box 281304
Lakewood, CO 80228-8304
R-5
<PAGE>
Exhibit 10.5
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION. SUCH PORTIONS ARE DESIGNATED "[***]"
THIS FIXED POINT MICROWAVE SERVICES AGREEMENT is made and entered into as
of the 17th day of April, 1998 (the "Effective Date"), by and between Pathnet,
Inc. a Delaware corporation and Pathnet/Idaho Power Equipment, LLC ("LLC"), a
Delaware limited liability company (collectively, the "Parties" and each, a
"Party").
WITNESSETH:
WHEREAS, Pathnet is engaged in the business of creating high capacity,
digital, microwave communications systems for purposes of marketing and selling
the excess long distance telecommunications capacity created by such systems;
WHEREAS, the LLC owns a license to use certain towers, shelters, sites and
equipment owned or leased by Idaho Power Company, an Idaho corporation
("Incumbent") for the purpose of operating an analog microwave
telecommunications system of limited capacity;
WHEREAS, the LLC desires to upgrade such system in the near future to a
higher capacity digital microwave system; and
WHEREAS, the LLC desires to engage Pathnet as, and Pathnet desires to act
as, LLC's sole representative for the purpose of installing, managing, and
operating a high capacity digital microwave system along Incumbent's current
microwave paths.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the Parties agree as follows:
SECTION 1. DEFINITIONS.
1.1 Definitions: As used in this Agreement, the following terms shall have
the meanings indicated:
1.1.1 1/0 Multiplexer: Any device that multiplexes capacity between
the DS-l and the DS-O levels.
1.1.2 1 x 1: A microwave radio configuration consisting of a primary
and a protect radio.
1.1.3 Affiliate: With respect to any Person, any other Person that
directly or indirectly controls, is controlled by, or is under common
control with such Person. For the purposes of this definition, "control"
(including the terms "controlled by" and "under common control with"), as
used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of
voting securities, by contract, or otherwise.
1.1.4 Agreement: This Fixed Point Microwave Services Agreement,
including the Schedules and Exhibits attached hereto, as the same may be
amended, supplemented or modified in accordance with the terms hereof.
<PAGE>
1.1.5 Alarm and Event Report: As defined in Section 7.7 of Schedule
A.
1.1.6 As-Built Drawing: As defined in Section 4.1.4 of Schedule A.
1.1.7 Available Excess Capacity: The total Pathnet Excess Capacity
available (and not allocated) for use or sale on the System at any given
time from Commissioning through the Expiration Date.
1.1.8 Average Sold Excess Capacity: The cumulative average of the
quotient of (i) Pathnet Excess Capacity less Available Excess Capacity,
divided by (ii) Pathnet Excess Capacity, taken as a percentage.
1.1.9 Bit Error Rate: The number of received bits in error compared
to the total number of bits received.
1.1.10 Breaching Party: As defined in Section 17.1.1.
1.1.11 Business Day: Any day other than a Saturday, a Sunday, or a
day on which the banking institutions in either New York, New York, or the
city and state in which the principal executive offices of Pathnet within
the United States are located, are not open for business.
1.1.12 Capacity Expansion: An increase in telecommunication channels
a System is able to transmit, receive and transport above those created by
the installation of the Initial System, achieved by an addition to or
change in equipment.
1.1.13 Capacity Expansion Schedule: As defined in Section 7.1 of
Schedule A.
1.1.14 CERCLA: Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. Section 6901 et. seq., as amended.
1.1.15 Channel Plan: As defined in Section 1.1 of Schedule A.
1.1.16 Commissioning: With respect to each path or Segment, the date
on which the circuits of such path or Segment are available for service
after completion of all site acceptance testing on the Initial System or
any Capacity Expansion required hereunder.
1.1.17 Contingent Radio Revenue Agreement: That certain Contingent
Radio Revenue Agreement by and between Incumbent, LLC and Pathnet, dated
as of the date hereof.
1.1.18 Customer Agreements: As defined in Section 10.1.1.
1.1.19 Cutover Plan: As defined in Section 4.1.1 of Schedule A.
-2-
<PAGE>
1.1.20 DS-0: 64,000 bits per second; The world-wide standard speed
for digitizing one voice conversation using pulse code modulation, which
is approximately equivalent to a single voice or data channel.
1.1.21 DS-1: 24 DS-0's.
1.1.22 DS-3: 672 DS-0's or 28 DS-l's.
1.1.23 Deficiency List: As defined in Section 5.7 of Schedule A.
1.1.24 Dispute: As defined in Section 17.1.3.
1.1.25 Drop and Insert: That process wherein a part of the
information carried in a transmission system is demodulated (dropped) at
an intermediate point and different information is entered (inserted) for
subsequent transmission.
1.1.26 Effective Date: As defined in the introductory paragraph of
this Agreement, as the context indicates.
1.1.27 Error Free Second: Any one-second interval that does not
contain a measurable bit error.
1.1.28 Encumbrance. Any security interests, mortgages, liens,
pledges, charges, claims, easements, reservations, restrictions, clouds,
equities, rights of way, options, rights of first refusal and other
encumbrances whether or not relating to the extension of credit or the
borrowing of money. To "Encumber" shall mean to effect any Encumbrance.
1.1.29 Equipment: Any and all digital microwave radios, radio
components, cards, antennas, waveguides, multiplexers, software and other
equipment or parts required for the operation of the System provided and
installed by Pathnet as set forth on Exhibit A-1 to Schedule A.
1.1.30 Errored Second: Any one-second interval during which one or
more bit errors occur.
1.1.31 Excess Capacity: The Pathnet Excess Capacity and the
Incumbent Excess Capacity (as such term is defined in the Contingent Radio
Revenue Agreement).
1.1.32 Existing System Inventory: As defined in Section 1.1 of
Schedule A.
1.1.33 Expiration Date: The date on which this Agreement and the
rights and obligations hereunder are terminated or expire in accordance
with Section 3.
-3-
<PAGE>
1.1.34 FAA: The Federal Aviation Administration, or any other
Federal agency at the time administering tower registration requirements
and regulations.
1.1.35 Failed Second: Any one-second interval that has 1,544 bit
errors at a DS-l rate.
1.1.36 Facilities: Incumbent's and the LLC's towers shelters, sites
and all equipment used by Incumbent, the LLC or Pathnet relating to and
used in association with such towers, shelters and sites for the purpose
of operating the System. The Facilities are as set forth in Schedule B as
amended from time to time.
1.1.37 Facility Encumbrance: As defined in Section 6.9.
1.138 FCC: The Federal Communications Commission, or any other
Federal agency at the time administering the FCC Code.
1.1.39 FCC Code: The Communications Act of 1934, as amended, the
Telecommunications Act of 1996, as amended, and the rules and regulations
promulgated thereunder and related thereto.
1.1.40 First Extension Period: As defined in Section 3.1.3.
1.1.41 Force Majeure Event: As defined in Section 16.3.
1.1.42 Form 415: As defined in Section 11.1.1.
1.1.43 Frequency Availability Model: As defined in Section 1.1 of
Schedule A.
1.1.44 Frequency Diversity: A method of protecting a radio signal by
providing a second radio signal on a different frequency, which will
assume the radio signal load when the regular channel fails.
1.1.45 Governmental Authority: Any nation or government, any state
or other political subdivision thereof and any court, panel, judge, board,
bureau, commission, agency or other entity, body or other person
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
1.1.46 Hazardous Material: Any substance, material, matter or waste
which is or becomes regulated by any Federal, state or local law,
ordinance, order, rule, regulation, code or any government restrictions or
requirement including, but not limited to, asbestos, petroleum products
and "Hazardous Substances" and "Hazardous Wastes" (as such terms are
defined in CERCLA and RCRA.)
1.1.47 Incumbent: Idaho Power Company, an Idaho corporation.
-4-
<PAGE>
1.1.48 Incumbent Capacity: As defined in Section 8.2.2.
1.1.49 Incumbent IRU Agreement: The Indefeasible Right to Use
Agreement by and between the LLC and Incumbent dated as of the date
hereof, as it may be amended, extended or modified from time to time.
1.1.50 Initial System: The initial system with a 1 x 1 configuration
which is comprised of the first 84 DS-l channels (which is equivalent to
2,040 DS-0's) of the System (the "Non-Protect Radio") and the System's 84
DS-l protect channels (the "Protect Radio") and all radio components,
antennas, waveguides, multiplexers, software and other equipment and parts
necessary for the operation thereof.
1.1.51 Initial Term: As defined in Section 3.1.2.
1.1.52 Interconnection: The point at which a private network is
connected to (i) the PSTN, which can include IXC POPs, tandem access
points, the central office, Internet service providers, or major
industrial customer points of presence or (ii) a private network
1.1.53 Interference: Any measurable impairment in the performance of
the System or the quality of the signals received or transmitted on the
System.
1.1.54 IXC: An inter-exchange carrier; a telephone company that
provides long-distance telephone service between LATA's but not within any
one LATA.
1.1.55 Judgment: Any order, judgment, writ, decree, award or other
determination, decision or ruling of any court, judge, justice or
magistrate, any other Governmental Authority or any arbitrator.
1.1.56 LATA: Local Access and Transport Area; one of 161 local
geographic areas in the United States within which a local telephone
company may offer telecommunications services.
1.1.57 LLC: As defined in the introductory paragraph.
1.1.58 LLC Agreement: The Limited Liability Company Agreement of
Pathnet/Idaho Power Equipment, LLC dated as of the date hereof.
1.1.59 LLC Items: As defined in Section 5.1.1.
1.1.60 LLC Payment Cap: As defined in Section 5.1.3.
1.1.61 Losses: Any and all losses, claims, shortages, damages,
liabilities, expenses (including reasonable attorneys' and accountants'
fees), assessments, tax deficiencies and taxes (including interest and
penalties thereon) sustained, suffered or incurred by any party.
-5-
<PAGE>
1.1.62 Maintenance Services Agreement: The Maintenance and
Provisioning Services Agreement, by and between Pathnet, Incumbent and LLC
and to be executed within thirty (30) days hereof, as the same may be
amended from time to time in accordance with its terms.
1.1.63 Material Adverse Effect: Any event, fact, circumstance or
occurrence, which results or would with the passage of time result in a
material adverse change in or a material adverse effect on any of: (i) the
condition (financial or otherwise), business, performance, operations,
properties, or prospects of such Person; (ii) the legality, validity or
enforceability of this Agreement; or (iii) the ability of such Person to
perform its material obligations under this Agreement.
1.1.64 Modifications SOW: As defined in Section 2.1 of Schedule A.
1.1.65 Network Management System: As defined in Section 7.6 of
Schedule A.
1.1.66 Network Monitoring Center: As defined in Section 7.5 of
Schedule A.
1.1.67 Non-Breaching Party: As defined in Section 17.1.1.
1.1.68 Notice of Election: As defined in Section 15.3.
1.1.69 OC-3 Multiplexer: Any device that multiplexes capacity
between the OC-3 and the DS-l levels.
1.1.70 Order Wire: A service channel consisting of a 64,000 bit per
second circuit between sites.
1.1.71 OSHA: The Occupational Safety and Health Act, as amended.
1.1.72 Outage: When the Bit Error Rate in each second is worse than
l0^-3 for a period of ten (10) consecutive seconds.
1.1.73 Part 101: Part 101 of Title 47 of the Code of Federal
Regulations, as amended.
1.1.74 Party: As defined in the introductory paragraph.
1.1.75 Path Studies: As defined in 1.1 of Schedule A.
1.1.76 Pathnet: As defined in the introductory paragraph.
1.1.77 Pathnet Excess Capacity: At any given time, the
telecommunications channels or DS-0's that the System creates, transports
and receives which are granted to
-6-
<PAGE>
Pathnet under the Pathnet IRU Agreement and any capacity owned by Pathnet
and created pursuant to a Capacity Expansion.
1.1.78 Pathnet/ Idaho Power License LLC: As defined in Section 9.5.
1.1.79 Pathnet IRU Agreement: The Pathnet Indefeasible Right To Use
Agreement by and between the LLC and Pathnet, in the form attached
hereto as Schedule J, as it may be modified, amended or altered from
time to time.
1.1.80 Pathnet Software: The software (including applications
software and systems software) owned or licensed from a third party by
Pathnet used to provide the services covered in this Agreement.
1.1.81 PCN: A Prior Coordination Notice sent pursuant to Part 101.
1.1.82 Permits: Any and all authorizations, approvals, consents,
licenses, permits, easements, certificates and other rights and
permissions necessary to conduct such Person's business and to own, lease
and operate such Person's properties as currently conducted, owned, leased
or operated.
1.1.83 Person: An individual or a corporation, partnership, limited
liability corporation, trust, incorporated or unincorporated association,
joint venture, joint stock company, or other entity of any kind or any
Governmental Authority.
1.1.84 POP: Point Of Presence; the interconnection between any two
facilities based on networks.
1.1.85 Pre-Commissioning Test Equipment: All equipment required for
the testing required to be performed on the System pursuant to Section 5
of Schedule A, including, but not limited to, all required digital volt
meters, optical power meters, oscilloscopes, RF signal generators, RF
variable attenuators, DADE adjust cables, receiver card extenders and
extension cords.
1.1.86 Preliminary Construction Schedule: As defined in Section 1.1
of Schedule A.
1.1.87 Progress Report: As defined in Section 4.1.2 of Schedule A.
1.1.88 Project Drawings: As defined in Section 1.3 of Schedule A.
1.1.89 Project Management Plan: As defined in Section 4.1.1 of
Schedule A.
1.1.90 Project Schedule: As defined in Section 4.1.1 of Schedule A.
-7-
<PAGE>
1.1.91 Protection Configuration: An engineering plant under which
channel capacity is protected either on a fully redundant basis or on a 1
x n protection basis.
1.1.92 PSTN: Publicly Switched Telephone Network.
1.1.93 RCBA: Resource Conservation and Recovery Act, 42 U.S.C.
sections.9601 et seq., as amended.
1.1.94 Requirement of Law: With respect to any Person, all Federal,
state and local laws, rules, regulations, Judgments, injunctions,
standards, codes, limitations, restrictions, conditions, prohibitions,
notices, demands or other requirements or determinations of a court or
other Governmental Authority or an arbitrator, applicable to or binding
upon such Person, any of its property or any business conducted by it or
to which such Person, any of its assets or any business conducted by it is
subject.
1.1.95 Revenue: As defined in Section 6.3 of the Contingent Radio
Revenue Agreement.
1.1.96 Second Extension Period: As defined in Section 3.1.4.
1.1.97 Segment: The portion of a microwave communications network
existing between two geographic points. For purposes of this Agreement,
Segment A is the portion of the microwave communications network between
LaGrande, Oregon and Twin Falls, Idaho, including Hansen Butte, Idaho and
Boise, Idaho, as set forth in Schedule B. Segment B is the portion of the
microwave communications network between Hansen Butte, Idaho and
Pocatello, Idaho, as set forth in Schedule B.
1.1.98 Segment A LLC Estimated Costs: As defined in Section 5.1.2.
1.1.99 Segment A Pathnet Estimated Costs: As defined in Section
5.2.2.
1.1.100 Segment B LLC Estimated Costs: As defined in Section 5.1.2.
1.1.101 Segment B Pathnet Estimated Costs: As defined in Section
5.2.2.
1.1.102 Services: As defined in Section 8.1.
1.1.103 Severely Errored Seconds: Any one second interval where the
Bit Error Rate is greater than or equal to 1 x l0^-3 errors per second at
a DS-l rate regardless of the cause of degradation affecting the channel
error performance including, but not limited to, unprotected equipment
failures and any other factors that contribute to poor performance.
1.1.104 SONET: Synchronous Optical Network; a family of fiber-optic
(or microwave) transmission rates from 51.84 Mbps to 13.22 Gbps, created
to provide the
-8-
<PAGE>
flexibility needed to transport many digital signals with different
capacities and to provide a standard to which manufacturers may design.
1.1.105 Space Diversity: Protection of a radio signal by providing a
separate antenna on the same tower to assume the radio signal load when
the regular transmission path on the primary antenna fades, thereby
ensuring continuous transmission.
1.1.106 Spare Parts: The equipment and parts provided by Pathnet to
Incumbent in connection with the performance of Incumbent's obligations
under the Maintenance Services Agreement.
1.1.107 Specifications: As defined in Section 8.2.
1.1.108 Station Log Book: As defined in Section 6.2 of Schedule A.
1.1.109 Subcontractors: Any firm, corporation, or person working
directly or indirectly for a company that furnishes or performs a portion
of the work, labor or material.
1.1.110 Switched Mod Section: A section of network between two
adjacent back-to-back terminals.
1.1.111 System: The high capacity digital SONET Equipment,
Facilities, Network Management System, all other equipment and materials
related thereto, and FCC licenses and other licenses and Permits related
thereto, installed up to a maximum of a 1x7 configuration operated for the
purpose of transmitting, receiving and transporting telecommunications
signals over the Segments set forth on Schedule B and any Capacity
Expansions. As used in this Agreement, 1 x 7 shall mean one protect radio
and seven non-protect radios.
1.1.112 System Budget: As defined in Section 1.1 of Schedule A.
1.1.113 System Budget: As defined in Section 1.1 of Schedule A.
1.1.114 Technology: Inventions, ideas, processes, formulas, and
know-how.
1.1.115 Tower Analysis: As defined in Section 1.1 of Schedule A.
1.1.116 Wayside Channels: The additional DS-l of telecommunications
capacity within each radio beyond the base OC-3 capacity.
1.2 Terms Generally. The definitions in Section 1.1 and elsewhere in this
Agreement shall apply equally to both the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "herein",
"hereof", "hereto" and "hereunder" and words of similar import refer to this
Agreement (including the Schedules and Exhibits) in its entirety and not to any
part hereto unless the context shall otherwise require. All references herein to
Sections, Exhibits and Schedules shall
-9-
<PAGE>
be deemed references to Sections of, and Exhibits and Schedules to, this
Agreement unless the context shall otherwise require. Unless otherwise expressly
provided herein or unless the context shall otherwise require, any references as
of any time to the "Certificate of Incorporation," "Articles of Incorporation,"
"charter," "organizational or constituent documents" or "Bylaws" of any Entity,
to any agreement (including this Agreement) or other contract, instrument or
document or to any agreement statute or regulation are to it as amended and
supplemented from time to time (and, in the case of a statute or regulation to
any corresponding provisions of successor statutes or regulations). Any
reference in this Agreement to a "day" or number and "days" (without the
explicit qualification of "Business") shall be interpreted as a reference to a
calendar day or number of calendar days. If any action or notice is to be taken
or given on or by a particular calendar day, and such calendar day is not a
Business Day, then such action or notice shall be deferred until, or may be
taken or given on, the next Business Day.
SECTION 2. RELATIONSHIP OF THE PARTIES.
2.1 Independent Contractor and Network Manager. The LLC hereby appoints
Pathnet and Pathnet hereby agrees to serve in the following capacities during
the term of this Agreement:
(i) As an independent contractor, Pathnet will serve as the LLC's
sole and exclusive representative in performing analytical pre-design and
design services and installing, testing and ensuring the performance of
the System, as well as any upgrades to such System in accordance with the
terms and conditions set forth in Section 7 and in Schedule A.
(ii) In the role of a network manager, Pathnet will serve as the
point of contact for any Outage or trouble on the System and shall operate
the Network Management System and the Network Monitoring Center as
described in Section 7.6 and Section 7.7 of Schedule A.
(iii) In the role of licensee, Pathnet will license from the LLC a
right to use the Facilities on which to build and operate the system.
SECTION 3. TERM AND EXPIRATION.
3.1 Term. Extension Periods, and Renewal.
3.1.1 Term. This Agreement shall commence on the Effective Date and
shall be in full force and effect as to each Segment upon the commencement
of the Initial Term for such Segment and continuing until the expiration
of the term applicable to such Segment as set forth in this Section 3.
3.1.2 Initial Term. The initial term of a Segment (each an "Initial
Term") shall commence upon Commissioning of such Segment and shall expire
on the fifth (5th) anniversary of the Commissioning of any such Segment.
-10-
<PAGE>
3.1.3 First Extension Period. With respect to each Segment, in the
event the Average Sold Excess Capacity of such Segment is equal to or
greater than ten percent (10%) during the Initial Term, the term of the
Agreement shall be automatically extended as to such Segment for an
extension period (each a "First Extension Period") commencing on the day
after the expiration of the Initial Term and expiring on the tenth (l0th)
anniversary thereafter.
3.1.4 Second Extension Period. With respect to each Segment, in the
event the Average Sold Excess Capacity of such Segment is equal to or
greater than ten percent (10%) during the Initial Term and the First
Extension Period (calculated as a single measurement on a cumulative
basis), the term of the Agreement shall be automatically extended as to
such Segment for a second extension period (each a "Second Extension
Period") commencing on the day after the expiration of the First Extension
Period and expiring on the later of the tenth (l0th) anniversary
thereafter of the Second Extension Period of either Segment A or Segment
B.
3.1.5 Segment B. If (i) Incumbent and/or the LLC have not acquired
the sites for the Facilities as set forth in Schedule B, which sites shall
be approved in writing by the LLC and Pathnet for inclusion in the
development of Segment B, within twelve (12) months after the Effective
Date (such approval by Pathnet not to be unreasonably withheld, provided
that if the economic cost to Pathnet materially outweighs the economic
benefit to Pathnet as the result of the use of such site, such
circumstance shall be deemed a reasonable basis for withholding such
consent), or (ii) Incumbent, the LLC and/or Pathnet fall to obtain the
permits, approvals and licences (including frequency coordination)
necessary to begin construction on Segment B within fifteen (15) months
after the Effective Date, the Parties shall not develop Segment B pursuant
to this Agreement and all of the terms and conditions contained herein as
to Segment B shall be deemed terminated and of no further force or effect.
Termination of this Agreement as to Segment B pursuant to the terms of
this Section 3.1.5 shall have no effect as to Segment A, as to which this
Agreement shall remain in full force and effect unless otherwise
terminated pursuant to the terms hereof.
3.1.6 Renewal. Upon expiration as to each Segment of the Initial
Term or the First Extension Period, if not automatically extended pursuant
to Section 3.1.3 and 3.1.4 hereof, respectively, or upon the expiration of
the Second Extension Period as to each Segment, this Agreement shall be
automatically renewed as to such Segment for a one-year term, and at the
end of such one-year term for additional one-year terms for each year
thereafter, unless terminated by either Party upon written notice to the
other Party to that effect delivered no less than ninety (90) days prior
to the end of the Initial Term, the First Extension Period, the Second
Extension Period or any such one-year term, as applicable.
3.2 No Unilateral Right to Terminate.
3.2.1 General. Except as provided in Sections 3.1.5, 3.1.6, 3.2.2,
6.2.1, 11.2 and 11.3, neither Party shall have the right to terminate this
Agreement or any rights or obligations of either Party pursuant to this
Agreement as to any Segment.
-11-
<PAGE>
3.2.2 Non Performance. If Pathnet does not deliver any Segment of
the System in accordance with the Specifications within eighteen (18)
months after Incumbent and/or the LLC delivers (i) the requisite permits,
approvals and licenses required to develop the sites of the Facilities on
such Segment or (ii) sites of the Facilities in suitable form (including
delivering electric service to the sites) to construct the System for such
Segment, whichever is later, unless such failure of Pathnet to deliver any
Segment of the System in accordance with the Specifications results from
Incumbent unreasonably withholding any approvals required of Incumbent
with respect to installation of the System, then the LLC shall have the
right to terminate this Agreement only as to such Segment.
SECTION 4. CONSIDERATION
4.1 Consideration Paid to Pathnet. In consideration for the services to
be performed and the obligations assumed by Pathnet pursuant to this
Agreement, the LLC shall grant to Pathnet (i) the right to use the
Facilities, pursuant to Section 6, and the Equipment, and (ii) [***] as set
forth in the Channel Plan pursuant to the terms of the Pathnet IRU Agreement.
SECTION 5. ALLOCATION OF COSTS
5.1 LLC Costs.
5.1.1 LLC Items. Subject to the LLC Payment Cap set forth in Section
5.1.3, LLC shall pay for the services, functions, materials and other
items listed in Section 1 of Schedule C and Exhibit C-1 of Schedule C
(collectively, the "LLC Items") in the manner set forth in Section 5.1.5
and as set forth in the LLC Agreement.
5.1.2 Estimated Cost of LLC Items. On the Effective Date, the total
estimated cost of the LLC Items with respect to Segment A [***] (the
"Segment A LLC Estimated Costs") and with respect to Segment B is [***]
(the "Segment B LLC Estimated Costs"). Subject to the LLC Payment Cap,
the costs of such items and the LLC Estimated Costs are estimates and may
be subject to increases or decreases, provided that the cost of Pathnet
engineering and project management shall be no more than the estimated
cost for these items as shown in Schedule C.
5.1.3 LLC Payment Cap. Subject to Section 8.3, LLC shall pay an
amount not to exceed [***] (the "LLC Payment Cap") in the aggregate for
the performance and completion of the LLC Items on Segments A and B.
Payment of any LLC Item shall be approved by Pathnet prior to the payment
thereof if and to the extent such payment is subject to the LLC Payment
Cap. The cost of LLC Items shall be accrued in accordance with generally
accepted accounting principles. Pathnet shall pay for all amounts
incurred over the LLC Payment Cap in the completion and performance of the
LLC Items. As soon as LLC is aware that LLC will pay an amount in excess
of the LLC Payment Cap,
-12-
<PAGE>
LLC shall notify Pathnet to that effect. In the event the Parties elect
not to construct Segment B pursuant to Section 3.1.5, the LLC Payment Cap
shall be adjusted to be twenty percent (20%) over the Segment A LLC
Estimated Costs.
5.1.4 Division of Costs Savings. In the event the costs of
completion of the LLC Items for Segment A and Segment B are less than the
LLC Estimated Costs, Pathnet shall deliver to the LLC an invoice setting
forth the differential between the total costs to complete and perform the
LLC Items and the LLC Estimated Costs. Within thirty (30) days of receipt
of such invoice from Pathnet, the LLC shall pay or disburse to Pathnet
thirty-five percent (35%) of such differential. Pathnet shall be liable
for any invoices received after distribution of the costs savings is made
pursuant to this Section 5.1.4.
5.1.5 Payment by LLC. Subject to the LLC Payment Cap set forth in
Section 5.1.3, the LLC shall promptly pay, or the LLC shall cause
Incumbent to promptly pay pursuant to the LLC Agreement, for the LLC Items
for which it is liable upon receipt of a purchase order, invoice or other
bill from Pathnet or from an equipment vendor or service provider
(pursuant to any Pathnet requested retention), provided Pathnet has
approved (which approval shall not be unreasonably withheld) such purchase
order, invoice or bill before any payment is made by the LLC.
5.2 Pathnet Costs.
5.2.1 Pathnet Items. Pathnet shall pay for services, functions,
materials and other items listed in Section 2 of Schedule C, and Exhibit
C-2 of Schedule C (the "Pathnet Items").
5.2.2 Estimated Cost of Pathnet Items. On the Effective Date, the
total estimated cost of the Pathnet Items with respect to Segment A is
[***] (the "Segment A Pathnet Estimated Costs"), and with respect to
Segment B is [***] (the "Segment B Pathnet Estimated Costs").
5.2.3 No Cap on Pathnet Items. Subject to Section 3.1.5 regarding
Segment B, Pathnet shall pay for all amounts incurred in completing the
Pathnet Items whether or not the cost of completing such items is less
than, equal to or exceeds the Segment A and Segment B Pathnet Estimated
Costs.
SECTION 6. INDEFEASIBLE RIGHT TO USE.
6.1 Indefeasible Right to Use. The LLC hereby grants to Pathnet for the
term of this Agreement a non-exclusive and indefeasible right to use each of the
Facilities at such sites set forth on Schedule B, and Equipment, including,
without limitation, the Initial System, in each case to the extent necessary for
the performance of Pathnet's rights and obligations under this Agreement
including the right to create and sell capacity on the System including any
Capacity Expansion on the System.
-13-
<PAGE>
6.2 Use of Facilities.
6.2.1 Peaceful Enjoyment, Use and Access. Subject to the terms of
Incumbent's site leases Pathnet shall have the right to the non-exclusive
peaceful use and enjoyment of the Facilities during the term of this
Agreement as required for the performance of Pathnet's rights and
obligations under this Agreement, which rights shall include, but not be
limited to (i) the right to use the Facilities and Equipment and (ii) upon
the reasonable request by Pathnet, the right to full and free access to
the Facilities and related equipment; provided, however, any such access
granted by the LLC to Pathnet shall be subject to the reasonable security,
health and safety and other regulatory, procedural and policy requirements
implemented by Incumbent, and provided to Pathnet from time to time,
provided Pathnet shall have twenty (20) days after receipt of any such
policy or procedure to comply therewith. In the event the terms of
Incumbent's site leases materially and adversely affect Pathnet's ability
to perform its obligations under this Agreement, the LLC shall, or the LLC
shall cause Incumbent to, (x) use best efforts to amend any such lease or
otherwise renegotiate any limitations thereto or (y) use commercially
reasonable efforts to lease or acquire an alternative Facility location in
order that Pathnet may perform hereunder. If and to the extent the LLC is
not able, or the LLC is not able to cause Incumbent to (i) amend or
otherwise re-negotiate the site leases or (ii) provide an alternative
Facility available for the installation and operation of the System,
Pathnet shall have, as its sole and exclusive remedy, the unilateral right
but no obligation to terminate this Agreement as to any Segment without
any further recourse against LLC or Incumbent hereunder.
6.2.2 Interference. During the term of this Agreement and subject to
existing customer uses of the Facilities authorized and disclosed to
Pathnet in writing within thirty (30) days of the Effective Date, the LLC
shall not license or otherwise permit any Person to use the Facilities or
any Incumbent controlled facility if the use of such facilities by such
Person would cause any Interference on the System. As of the Effective
Date, the LLC shall not grant any Person a new or expanded right to use
the Facilities or any Incumbent controlled facility which use would in any
way cause Interference on the System. Notwithstanding the foregoing, in
the event another Person causes any Interference on the System through any
use of the Facilities or any Incumbent controlled facility which was not
authorized prior to the Effective Date, the LLC shall, or the LLC shall
cause Incumbent to, use best efforts to compel such Person using such
facilities to immediately take all steps necessary to correct and
eliminate such Interference, including, without limitation, enforcing
provisions in any license or other agreement between Incumbent and/or the
LLC and such Person using the facilities which allow Incumbent and/or the
LLC to compel such Person to cease operation of such Person's system, to
remove such Person's equipment or materials or to modify such Person's
equipment or materials. The LLC acknowledges that any Interference shall
cause irreparable harm to Pathnet and the prompt cessation of Interference
is material to Pathnet's interest in the Facilities and Pathnet's
performance under this Agreement and, as such, Pathnet shall be entitled
to injunctive relief in the enforcement of this Section 6.2.2.
-14-
<PAGE>
6.3 Visiting and Exiting Facilities. Upon exiting any Facility, Pathnet,
on behalf of itself and its employees, agents and Subcontractors, shall ensure
that such Facility is returned to a condition, which existed immediately prior
to such visit except for improvements made thereto and reasonable wear and tear.
6.4 Clearances and Other Requirements. At the reasonable request of the
LLC, Pathnet shall require its employees, agents or Subcontractors to (i) apply
to the LLC for any necessary reasonable clearances and (ii) comply with all
other reasonable and applicable requirements, rules, regulations or ordinances
regarding any Person's ability to have access to the Facilities.
6.5 Pathnet's Responsibility. Subject to LLC's payment obligations under
Section 5.1.5, Pathnet shall remain solely responsible for all actions of its
employees, agents, and Subcontractors in connection with the provision of
services to the LLC under this Agreement. Before allowing any Subcontractor to
commence work, Pathnet shall secure from such Subcontractor evidence of
insurance coverage covering such risks as are usually insured against by prudent
companies engaged in the business and activities in which such Subcontractor is
engaged.
6.6 Subletting. Pathnet shall not grant any interest in the Facilities, in
whole or in part, to any Person without the prior written consent of the LLC and
Incumbent; provided, however, Pathnet shall have the right to transfer and
assign its rights or obligations under this Agreement to any successor or assign
in accordance with Section 18.7.
6.7 Surrender. Upon the expiration of the Agreement in accordance with
Section 3, Pathnet shall peacefully and quietly surrender occupation of the
Facilities, without delivery by the LLC or Incumbent to Pathnet of any notice to
quit or demand for possession.
6.8 Colocation. Subject to space availability at the Facilities at the
time of a Pathnet request, including LLC's or Incumbent's reasonably foreseeable
future space needs on the Facilities, the LLC shall or shall cause Incumbent to
allow Pathnet, at no additional charge to colocate at the Facilities all
equipment necessary to support the interconnections set forth on Exhibit A-6 to
Schedule A and any additional interconnections equipment that may be added by
Pathnet from time to time and at any time during the term of this Agreement,
subject to the limitations set forth in Schedule 3 of Schedule A.
6.9 Subordination. Pathnet shall subordinate its interest in the
Facilities to (i) all deeds of trust, deeds to secure debts, mortgages and other
security instruments now or hereafter Encumbering all or any portion of the real
property relating to the Facilities described on Schedule G (each, a "Facility
Encumbrance") and (ii) any increases, renewals, modifications, consolidations,
replacements and extensions of any such Facility Encumbrance. In connection with
such subordination of Pathnet's interest in the Facility to all Facility
Encumbrances, Pathnet shall, as requested by the LLC, within fifteen (15) days
after any request by Incumbent, execute and deliver a commercially reasonable
subordination, non-disturbance and attornment agreement with all Persons secured
by such Facility Encumbrances. Pathnet shall, as requested by the LLC, execute
and
-15-
<PAGE>
deliver similar subordination, non-disturbance and attornment agreements with
each future Person secured by a Facility Encumbrance.
6.10 Removal of Equipment. Upon the Expiration Date, the LLC shall have
the option of purchasing any and all of the Pathnet owned Equipment located on
the Facilities at its then fair market value. Pathnet shall, at the LLC's
request and direction, remove any or all Pathnet owned Equipment not so
purchased by the LLC from the LLC's Facilities and restore each site to its
condition as of Commissioning (reasonable wear and tear, and damage from the
elements, excepted) within sixty (60) days after the Expiration Date and at
Pathnet's sole expense. In the event Pathnet fails to perform such requested
removal within such sixty (60) day period, as determined by the LLC in its sole
discretion, the LLC may remove such Equipment and restore each site to its
condition as of Commissioning, (reasonable wear and tear, and damage from the
elements, excepted), and Pathnet shall promptly pay the LLC all costs reasonably
incurred by the LLC for such removal and restoration. The LLC shall have no
liability to Pathnet in connection with any damage to the Pathnet owned
Equipment resulting from its removal by the LLC.
6.11 Removal of Hazardous Materials. Within ninety (90) days after the
written request of Incumbent, or in any event, within ninety (90) days after the
Expiration Date, Pathnet shall remove from the Facilities any and all Hazardous
Materials, that were brought to the Facilities by Pathnet during the term of
this Agreement in violation of Requirements of Law.
SECTION 7. PROGRAM MANAGEMENT AND PROJECT MANAGEMENT.
7.1 Program Manager. In connection with the Services and other services
performed by Pathnet under this Agreement, Pathnet shall provide a Program
Manager whose duties shall include (i) supervising the project through design,
installation and operation, (ii) supervising the Project Manager, (iii)
overseeing the Field Manager and the other Pathnet personnel, and (iv) ensuring
the performance of Pathnet's rights and obligations under this Agreement.
7.2 Project Management for Modifications. In connection with the
modifications of the Facilities set forth in Section 2 of Schedule A, Pathnet
shall provide a Project Manager, a Field Manager, an Applications Engineer and a
Project Engineer, each of whom shall have the duties as set forth in Section 7.4
with respect to such modifications of the Facilities.
7.3 Project Management for Installation. In connection with the
installation of the System set forth in Section 4 of Schedule A, Pathnet shall
provide a Project Manager, a Field Manager, an Applications Engineer and a
Project Engineer, each of whom shall have the duties as set forth in Section 7.4
with respect to such installation of the System.
7.4 Pathnet Project Management Personnel. The Project Managers, Field
Managers, Applications Engineers and Project Engineers shall each have the
duties as set forth below:
(a) Project Manager. Pathnet shall provide a Project Manager whose
duties shall include ensuring the overall functional integrity of the
System, the preparation, amendment
-16-
<PAGE>
and adherence to a construction schedule, and compliance with Pathnet's
other obligations under Schedule A.
(b) Field Manager. Pathnet shall provide a Field Manager whose
duties shall include the oversight and direction of all on-site
activities, the coordination of all Subcontractors and all required
communication with the Project Manager.
(c) Applications Engineer. Pathnet shall provide an Applications
Engineer, whose duties shall include the review and translation of the
System configuration into specific hardware requirements, precise
interface levels, intra and inter-rack cabling and all other necessary
peripheral equipment, rack profiles and required Interconnection data.
(d) Project Manager. Pathnet shall provide a Project Engineer whose
duties shall include the performance of all planning and support
activities and a detailed site survey to gather data for development of
the installation plan and testing plan.
SECTION 8. SERVICES AND SYSTEMS SPECIFICATIONS.
8.1 Services
8.1.1 System Design, Modification, Installation, Operation and
Performance. Pathnet and the LLC shall perform their respective functions
with respect to the design, modification, installation, operation and
performance of the System as set forth on Schedule A and in this Section 8
(the "Services"); provided, that in the event such performance requires
Incumbent's performance, the LLC shall cause Incumbent to so perform.
8.1.2 Upgrade of System. In accordance with its performance of the
Services, Pathnet shall have the right, at its own expense and with the
LLC's prior approval, which approval shall not be unreasonably withheld or
delayed, to upgrade the System and Equipment, and the System and Equipment
operation policies and procedures, including, but not limited to, (i)
replacing Equipment, (ii) adding newly available improved Equipment, and
(iii) modifying policies, procedures and specifications relating to the
System, to conform such policies, procedures and specifications with new
Technology or industry standards; provided, however, nothing contained in
this Section 8.1.2 shall limit Pathnet's rights to perform any Capacity
Expansion pursuant to this Agreement.
8.1.3 Incumbent Training. Pathnet shall provide to Incumbent the
training as set forth on Schedule D.
8.1.4 Maintenance. Pathnet shall enter into the Maintenance Services
Agreement with Incumbent and shall perform all of its obligations
thereunder, including the provision of Spare Parts. The LLC shall
cooperate with Incumbent and Pathnet to permit the performance of the
services or other activities called for or required under the Maintenance
Services Agreement.
-17-
<PAGE>
8.1.5 Performance of the Services. Pathnet shall have the right to
engage Subcontractors to perform any of the Services subject to the LLC's
prior approval, which approval shall not be unreasonably withheld or
delayed.
(A) Subcontractors. Nothing contained herein shall create or
imply privity of contract between the LLC and any Subcontractor,
notwithstanding the LLC's consent to any Subcontractor. Pathnet
acknowledges and agrees that the LLC shall have no obligation to (i)
supervise any Pathnet Subcontractor or its employees or (ii) pay any
Pathnet Subcontractor or its employees other than to the extent
required pursuant to Section 5 or as otherwise agreed in writing by
the Parties. No dealings of any kind between the LLC and any
Subcontractor shall be deemed a waiver of the foregoing by the LLC
unless the LLC (at the LLC's election) specifically agrees otherwise
in writing.
(B) Except for any liens arising from LLC's or Incumbent's
failure to pay for the LLC Items for which they are responsible
under Section 5.1.5, if any Subcontractor or any other Person
claiming to have been employed (directly or indirectly) by or
through Pathnet files a lien, Pathnet shall satisfy, remove or
discharge such lien at Pathnet's expense by bonding, payment or
otherwise within thirty (30) days after notice to Pathnet of the
filing thereof. If Pathnet fails to do so, the LLC may satisfy,
remove or discharge such lien, and Pathnet shall pay the same to the
LLC upon demand.
8.2 Specifications.
8.2.1 General. Pathnet and the LLC shall perform the Services in
accordance with any and all technical and operational specifications set
forth in Schedule A (the "Specifications"); provided that in the event
such performance requires Incumbent's performance, the LLC shall cause
Incumbent to so perform.
8.2.2 Channel Plan.
(A) Original Channel Plan. On the Effective Date, the LLC
shall deliver to Pathnet a proposed T-l channelization plan setting
forth the proposed capacity needs of Incumbent at each Facility (the
"Incumbent Capacity"). Such capacity shall be sold to Incumbent by
the LLC pursuant to Incumbent IRU Agreement. Such capacity (i) shall
in no event exceed [***] and (ii) shall be subject to Drop and
Insert capacity at each Switched Mod Section. Pathnet shall
incorporate the LLC's proposed channelization plan into the Channel
Plan subject to the limitations set forth in this Section 8.2.2.
-18-
<PAGE>
(B) Amended Channel Plan. Upon written notice to Pathnet and
subject to the capacity granted under the Incumbent IRU Agreement,
the LLC shall have the right to modify Incumbent Capacity (as
described in the Channel Plan) along the network any time after
Commissioning, provided that sufficient Drop and Insert capacity
exists at each Facility not designated as a repeater terminal
between each Switched Mod Section using available Wayside Channels
to effect such modification. Within ninety (90) days after receipt
of any such written notice from the LLC, Pathnet shall make such
modification to the configuration of the Channel Plan at no charge
to the LLC.
8.2.3 Specifications. Standards and Inspections. In connection with
the Services set forth in Section 2 and Section 4 of Schedule A, Pathnet
shall comply with the following requirements:
(A) Obligation to Construct. Pathnet shall use commercially
reasonable efforts to ensure that the modification of the System set
forth in Section 2 of Schedule A and the installation of the System
set forth in Section 4 of Schedule A occur as expeditiously as
possible and in no event later than the 18 month period set forth in
Section 3.2.2.
(B) Industry Standards. All Services and materials supplied
pursuant to Schedule A must meet or exceed all applicable
Specifications. Where Specifications are not stated, such work
performed and materials supplied will meet all applicable provisions
of the following standards: (i) EIA RS-l95 (latest edition), (ii)
EIA/TIA-222 (latest edition), (iii) American Society of Testing
Materials A 325 and A 572, (iv) the applicable sections of the
National Electric Code, (v) the American National Standards
Institute, (vi) ACI 318-83, (vii) ACI-305, (viii) ACI-306, (ix) OSHA
29 CFR 1910 and (x) all other applicable Federal, state and local
regulations of all Governmental Authorities with jurisdiction;
provided, however, in the case of a conflicting requirement of
standards, the more stringent standard shall apply.
(C) Site Inspections. During the performance of the Services,
Incumbent shall allow Pathnet to perform site inspections during
normal business hours, or in the case of an emergency, at any time,
subject to the access limitations set forth herein.
8.2.4 Plans, drawings, etc. All plans, specifications, drawings,
presentations, schedules, budgets, analyses, and other documents of any
kind prepared by Pathnet or any Subcontractor in connection with the
System (the "Project Documents"), and all rights therein, shall be and
remain the joint property of both Pathnet and the LLC. Submission or
description of any document described in the foregoing sentence to any
Person or Governmental Authority for purposes of, or in connection with,
the System shall not be construed as publication in derogation of the
LLC's rights under this Agreement. The term "Project Documents" shall not
include non-technical, non-drawing type documents, memos, analyses, and
other writings used solely for the internal purposes of Pathnet or any
Subcontractor.
-19-
<PAGE>
8.3 Change Orders. To the extent requested by the LLC and agreed to by
Pathnet, this Agreement shall incorporate (i) future issuance of change orders
for equipment and services beyond the scope of the Services and this Section 8
of the Agreement, and (ii) Pathnet's provision of additional equipment and
services in accordance with such orders. To the extent mutually agreed upon by
the Parties, all such orders shall be deemed to be supplements to and governed
by the terms of this Agreement. The Segment A and Segment B LLC Estimated Costs
and the LLC Payment Cap may be modified to reflect any agreed upon change
orders. In the event the LLC provides an alternative facility to the Facilities
set forth in Schedule B, pursuant to Sections 6.2.1, 11.2 and 11.3 for
installation of the System, Pathnet and the LLC shall adjust the Segment A and
Segment B LLC Estimated Costs, the Segment A and Segment B Pathnet Estimated
Costs and the LLC Payment Cap as applicable to incorporate the inclusion or
exclusion of any such facility.
SECTION 9. OWNERSHIP, DEPRECIATION AND ENCUMBRANCE OF SYSTEM.
9.1 Ownership of Equipment and Assets.
9.1.1 Equipment and Assets Owned by the LLC. The LLC shall own or
license the equipment and assets relating to the System as set forth in
Schedule E.
9.1.2 Equipment and Assets Owned by Pathnet. Pathnet shall own the
equipment and assets relating to the System as set forth in Schedule E.
9.2 Depreciation of Equipment.
9.2.1 Depreciation by the LLC. The LLC shall have the right to fully
depreciate the equipment and assets currently owned or to be owned by the
LLC as listed in Schedule E.
9.2.2 Depreciation by Pathnet. Pathnet shall have the right to fully
depreciate the equipment and assets currently owned or to be owned by
Pathnet as listed in Schedule E.
9.3 Encumbrance.
9.3.1 Initial System. Pathnet shall not Encumber the radios (other
than the protect radio), radio software, antenna, waveguide, multiplexers
or any other Equipment required to operate the Initial System in
accordance with Specifications hereunder.
9.3.2 Other Equipment, Materials, Agreements and Assets. Pathnet
shall have the right, unless it otherwise agrees in writing, to Encumber
(i) the Equipment used in any Capacity Expansion, (ii) the Revenue
generated from the sale of the Excess Capacity, (iii) any Customer
Agreement entered into by Pathnet with respect to the sale of Excess
Capacity, (iv) this Agreement and any related documents, instruments and
agreements executed and delivered in connection with this Agreement and
any rights and obligations hereunder, and (v) the Equipment relating to
the Initial System other than the radios, radio
-20-
<PAGE>
software, antenna, waveguide, multiplexers and any other
Equipment required to operate the Initial System in accordance with the
Specifications hereunder.
9.3.3 Vendor Remedies. The LLC hereby acknowledges that pursuant to
the Encumbrances granted by Pathnet to certain equipment vendors, service
providers or other lenders, in accordance with Section 9.3.2, such
vendors, providers or lenders shall have the right to assume and perform
Pathnet's rights and obligations under this Agreement and the other
documents, instruments and agreements executed in connection herewith and
will be bound by the terms hereof and thereof.
9.4 Taxes. The Parties' respective responsibilities for taxes arising
under or in connection with this Agreement shall be as follows: (i) each Party
shall be responsible for any personal or real property taxes on property it owns
or leases, for franchise and privilege taxes on its business and for taxes based
on its net income or gross revenue and (ii) Pathnet shall be responsible for any
sales, use, excise, value-added services, consumption and other taxes and duties
payable by the LLC or Incumbent on any goods and services used or consumed in
providing the services to be performed by Pathnet under this Agreement, where
the tax is imposed on the LLC's acquisition or use of such goods or services and
the amount of the tax is measured by the LLC's costs in acquiring such goods or
services; provided, however, that Pathnet shall not be responsible for any
Federal, state or local income taxes of Incumbent or the LLC or any franchise
taxes of Incumbent or the LLC.
9.5 Special Purpose Subsidiary Relating to Initial System Licenses.
(a) Pathnet shall contribute to Pathnet/Idaho Power License, LLC, a
Delaware limited liability company ("Pathnet/Idaho Power License LLC") and
cause Pathnet/Idaho Power License LLC to hold, the FCC licenses relating
to the Initial System.
(b) On the Effective Date, Pathnet and the LLC shall execute and
deliver the Pledge Agreement relating to the Pathnet/Idaho Power License
LLC substantially in the form attached hereto as Schedule H.
9.6 Security Interest in Initial System Protect Radio. On the Effective
Date, Pathnet and the LLC shall execute and deliver the Security Agreement
substantially in the form attached hereto as Schedule I, pursuant to which
Pathnet shall grant the LLC a security interest in the Initial System Protect
Radio.
9.7 Agreement Regarding Bankruptcy. Pathnet agrees and shall cause each
subsidiary of Pathnet contracting with the Pathnet/Idaho Power License LLC to
agree, that neither Pathnet, nor any such subsidiary of Pathnet shall take any
actions that would cause the involuntary bankruptcy of the Pathnet/Idaho Power
License LLC.
9.8 Spectrum License Agreement. On the Effective Date, the LLC and
Pathnet/Idaho Power License LLC shall execute a Spectrum License Agreement
substantially in the form set forth in Schedule K.
-21-
<PAGE>
SECTION 10. EXCESS CAPACITY MARKETING AND SALES.
10.1 Customer Agreements.
10.1.1 Authorization. Pathnet shall negotiate, execute and deliver
any and all agreements and arrangements ("Customer Agreements") for
customers of the Excess Capacity, which Customer Agreements shall contain
terms and conditions determined by Pathnet in its sole discretion.
10.1.2 Approval and Consent by the LLC. If the terms of any Customer
Agreement require the written approval or consent of the LLC as a
condition to the execution, delivery or performance, the LLC shall
promptly provide such written approval or consent, subject to the
indemnification rights set forth in Section 16.2(d); provided such
approval or consent shall not increase the LLC's liability or obligations
under this Agreement or otherwise.
10.1.3 Modifications to System. In the event that any Customer
Agreement requires that the System be modified in any way, Pathnet shall
ensure that any such modifications (i) shall not compromise the integrity
and performance of the System in accordance with the Specifications and
(ii) shall be made at no additional cost to the LLC.
SECTION 11. FCC LICENSES AND OTHER REGULATORY APPROVALS AND LICENSES.
11.1 FCC Rules and Regulations.
11.1.1 Microwave Radio Station Licenses.
(A) Preparation and Filing of Forms 415. Subject to Section
11.4, Pathnet shall be responsible for all regulatory filings
required to obtain FCC approvals to own and operate the System and
to sell telecommunications capacity to other common carriers,
including but not limited to the initial application(s) for licenses
and any amendments or modifications to the licenses. If necessary,
Pathnet shall be responsible for any filings relating to
cancellation of a license. Pathnet shall be solely responsible for
any expenses incurred with respect to these filings and Pathnet
shall be solely responsible for fees associated with such
applications, including the initial application fees. Pathnet shall
prepare and timely file all required Form 415, Applications for
Authorization in the Microwave Services (each a "Form 415"), or any
successor forms, documents or instruments to such Form 415 as the
FCC may prescribe, including but not limited to, the preparation or
ordering of all frequency coordinations required pursuant to
Schedule B and Schedule C of Form 415, in order to own, operate and
sell the Excess Capacity of the System in accordance with the terms
and conditions of this Agreement. To the extent reasonably
necessary, the LLC and Incumbent shall cooperate with Pathnet in
obtaining FCC approvals.
-22-
<PAGE>
(B) Identity of License. All Microwave Radio Station Licenses
issued by the FCC relating to the System shall be licensed in
Pathnet's or Pathnet/Idaho Power License LLC's name. To the extent
permitted by law, Pathnet shall remain licensed under the FCC Code
until such time as its licenses may be terminated. The LLC and
Incumbent shall be permitted to continue to own and be licensed as
private microwave operators at the stations licensed to Pathnet
relating to the system, provided that (i) that frequency assignments
of such private licenses do not interfere with the System
(including, but not limited to, any Capacity Expansion of the
System) and (ii) such private licenses are permitted under the FCC
Code.
(C) Maintenance of License. Pathnet shall maintain in good
standing each Microwave Radio Station License relating to the
System, including, but not limited to, fees, preparing and filing
any required amendments to the Forms 415 relating to the System and
submitting and filing any supplementary information as required by
the FCC.
11.1.2 Common Carrier Reporting Obligations. Pathnet shall prepare
and file all forms, reports, instruments, documents and agreements
required by the FCC and FCC Code relating to Pathnet's status as a "common
carrier" under the FCC Code.
11.1.3 Tariff Filings. Pathnet shall prepare and timely file all
tariff applications pursuant to 47 CFR 61, as amended, or any successor
statute, rule or regulation and shall request and file all necessary
waivers of such tariff requirements, as determined by Pathnet in its sole
discretion.
11.1.4 Frequency Coordination Notices. During the term of this
Agreement, Pathnet shall prepare and send all required frequency
coordination notices required under 47 CFR 101.103, as amended, or any
successor statute, rule or regulation and shall respond, as appropriate,
to all PCNs received by Pathnet, the LLC or Incumbent relating to the
System.
11.1.5 Delivery of Copies. Pathnet shall provide to the LLC a copy
of all filings and submissions with the FCC, relating to the System,
within (10) days after request by the LLC.
11.1.6 Assistance in Preparation of License Applications. Upon
request by Pathnet, and in a timely manner, the LLC shall provide to
Pathnet all information necessary for the completion of all required
filings and submissions with the FCC including, but not limited to the
LLC's authorized signature on any filings or other submissions to the FCC
or any documents, instruments or agreements completed in connection with
such filings and submissions.
11.1.7 Spectral Loading Requirements. Pathnet shall (i) ensure that
the System, as licensed, shall comply with all spectral loading
requirements set forth in 47 CFR 101.141, or any successor statute, rule
or regulation or (ii) obtain a waiver of any or all of such requirements;
provided, however, if the System does not meet such spectral loading
requirements and Pathnet is unable to obtain a waiver of such
requirements, Pathnet shall
-23-
<PAGE>
have the right, at its sole cost and expense, to modify the System to a
hot-standby Protection Configuration until such time as the spectral
loading requirements can be met; provided such configuration meets the
System's performance requirements.
11.1.8 Default in FCC License. In the event that the FCC institutes
a penalty against or fine imposed on Pathnet, the LLC, or the System, due
to non-compliance with any FCC requirements by Pathnet, Pathnet shall
promptly pay such penalty or fine (in the case such penalty or fine is
instituted as the result of an act or omission on the part of Pathnet) or
the LLC shall promptly pay such penalty or fine (in the event such penalty
or fine is instituted as the result of an act or omission on the part of
the LLC).
11.2 Zoning Requirements. The LLC shall be responsible for obtaining
appropriately zoned sites and maintaining zoning and land use compliance of the
Facilities throughout the term of the Agreement. Pathnet shall be responsible
for complying with all zoning requirements as provided by the LLC as applicable
to the installation and operation of the System and its Facilities. The LLC
shall advise Pathnet of zoning requirements, which, in the reasonable opinion of
the LLC, differ from those generally applicable to microwave facilities. The LLC
shall provide to Pathnet all required information and shall cooperate with
Pathnet in connection with Pathnet's compliance with all zoning requirements
pursuant to this Section 11.2. Notwithstanding the foregoing, the LLC and
Incumbent shall, or shall cause Incumbent to, implement either (i) best efforts
to obtain all necessary zoning and permits for each Facility or (ii) in the
event Incumbent and/or the LLC are unable to obtain such necessary zoning and
permits, commercially reasonable efforts to obtain an alternative facility
available for installation and operation of the System in order for Pathnet to
perform its obligations under this Agreement. If and to the extent the LLC
and/or Incumbent cannot obtain the required zoning and permits for any Segment,
Pathnet shall have, as its sole and exclusive remedy, the unilateral right but
not obligation to terminate this Agreement, as to any Segment, without any
further recourse against LLC or Incumbent hereunder.
11.3 Lessor Requirements. Where Incumbent leases sites for the location of
its Facilities, the LLC shall be responsible for obtaining all consents or
approvals of the site lessor necessary for construction and operation of the
System. Pathnet and the LLC shall comply with all site lessor requirements.
Pathnet and the LLC shall each cooperate with the other in connection with the
other's compliance with all site lessor approvals pursuant to this Section 11.3.
Notwithstanding the foregoing, the LLC shall, or shall cause Incumbent to,
implement (i) best efforts to obtain all necessary site lessor consents and
approvals for each Facility or (ii) commercially reasonable efforts to obtain an
alternative facility available for installation and operation of the System in
order for Pathnet to perform its obligations under this Agreement. If and to the
extent the LLC and/or Incumbent cannot obtain the required site lessor approval,
Pathnet shall have, as its sole exclusive remedy, the unilateral right but not
obligation to terminate this Agreement, as to any Segment, without any further
recourse against LLC or Incumbent hereunder.
11.4 Tower Registration. Incumbent and the LLC shall ensure timely
compliance with all FAA and FCC tower registration requirements including, but
not limited to, the preparation of any filings with or the obtaining of any
waivers or extensions from the FAA or FCC. The LLC
-24-
<PAGE>
and/or Incumbent shall promptly notify Pathnet of any deficiency or
non-compliance with any such tower registration requirements, filings, waivers
or extensions.
SECTION 12. INSURANCE.
12.1 Delivery of Certificates of Insurance. Upon the LLC's request and
prior to the commencement of any Services by Pathnet, Pathnet shall deliver to
the LLC Certificates of Insurance relating to Pathnet's Commercial General
Liability Insurance Policy, Workers Compensation Insurance Policy, Automobile
Liability Insurance, Excess Liability Insurance Policy and Professional
Liability Insurance.
12.2 Pathnet Insurance Coverage. During the term of this Agreement,
Pathnet shall maintain the types of insurance at the coverage limits set forth
below each naming Incumbent and the LLC as an additional insured and providing
for thirty (30) days' prior notification to the LLC and Incumbent and the right
of Incumbent and/or the LLC to cure any default prior to cancellation:
(a) Worker's Compensation Insurance. Workers Compensation Insurance
as required by laws and regulations applicable to and covering Persons
performing the Services;
(b) Commercial General Liability Insurance. Commercial General
Liability Insurance with a limit of not less than $1,000,000 per
occurrence and $ 1,000,000 in the aggregate;
(c) Automobile Liability Insurance. Automobile Liability Insurance,
which includes coverage for non-owned and hired vehicles with a limit of
not less than $1,000,000;
(d) Excess Liability Insurance. Excess Liability Insurance with a
limit of not less than $4,000,000; and
(e) Professional Liability Insurance. Professional Liability
Insurance with a limit of not less than $10,000,000.
12.3 LLC Insurance Coverage Incumbent or the LLC shall maintain insurance
coverage on the Facilities properties and operations of Incumbent and the LLC to
the extent necessary to permit Pathnet to operate the System and perform its
obligations in the event of any property or operations damages or losses which
coverage shall include general liability and other forms of insurance covering
such risks as are usually insured against by prudent companies engaged in the
business and activities in which the LLC is engaged, in amounts which are
adequate in relation to the business and properties of the LLC, and all premiums
to date have been and will continue to be paid in full.
12.4 Proof of Licensed Subcontractors. Upon request of the LLC, Pathnet
shall provide to the LLC proof of licensing and certification of insurance for
any Subcontractors engaged by Pathnet to provide Services, during the term of
such engagement.
-25-
<PAGE>
SECTION 13. SOFTWARE AND PROPRIETARY RIGHTS.
13.1 Pathnet Software. Pathnet retains all right, title and interest in
and to Pathnet Software. As of the Effective Date and pursuant to the Pathnet
Sublicense Agreement attached hereto as Schedule F, the LLC is granted a
nonexclusive sublicense to use Pathnet Software for the sole purpose of
receiving the services pursuant to this Agreement. Pathnet Software will be made
available to the LLC in such form and on such media as exists on the Effective
Date, together with existing documentation and any other related materials. The
LLC shall not be permitted to use Pathnet Software for the benefit of any
entities for any use other than performance of the LLC's rights under this
Agreement or any agreement executed in connection therewith, without the prior
written consent of Pathnet which may be withheld at Pathnet's sole discretion.
Except as otherwise requested or approved by Pathnet, the LLC shall cease all
use of Pathnet Software upon expiration of this Agreement. Notwithstanding the
foregoing, the LLC shall have the right to purchase or license the Pathnet
Software from Pathnet to the extent Pathnet owns or otherwise has the ability to
sell or license such software on terms that shall be agreed upon by the Parties
negotiating in good faith.
13.2 Proprietary Rights. The LLC acknowledges and agrees that all or
portions of the information and materials, including but not limited to the
Pathnet Software and related documentation to be supplied by Pathnet hereunder
are owned by Pathnet and/or others and are proprietary in nature. The LLC also
acknowledges and agrees that Pathnet and/or its suppliers have and will retain
all proprietary rights in such information and materials. The LLC (i) shall
respect such claim of proprietary right, (ii) shall protect such information at
least to the extent that it protects its own proprietary information, (iii)
shall not use such information except for the purposes for which its is being
made available as set forth in this Agreement and (iv) shall not reproduce,
print, disclose, or otherwise make said information available to any third
party, in whole or in part, in whatever form.
SECTION 14. REPRESENTATIONS AND WARRANTIES.
14.1 Representations and Warranties of Each Party. Each Party hereby
represents and warrants the other Party as follows:
14.1.1 Due Incorporation and Formation; Authorization of Agreements;
Binding Effect. Such Party is a corporation or limited liability company,
as the case may be, duly formed or organized, and validly existing under
the laws of its state of incorporation or organization, and has the
corporate or limited liability company authority to own its property and
carry on its business as owned and carried on as of the Effective Date.
Such Party is duly licensed or qualified to do business and is in good
standing (if applicable) in each jurisdiction in which the failure to be
so licensed or qualified would have a Material Adverse Effect on such
Party. Such Party has the corporate or limited liability company authority
to execute and deliver this Agreement, to perform its obligations
hereunder, and to consummate the transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by such Party
and this Agreement constitutes a legal, valid and binding obligation of
such Party enforceable in accordance with its terms, subject
-26-
<PAGE>
as to enforceability to limits imposed by bankruptcy, insolvency or
similar laws affecting creditors rights generally and the availability of
equitable remedies.
14.1.2 No Conflict; No Default. Neither the execution or delivery of
this Agreement by such Party, nor (except as would not have a Material
Adverse Effect on such Party), the performance of this Agreement by such
Party or the consummation by such Party of the transactions contemplated
hereby in accordance with the terms and conditions hereof: (i) will
conflict with, violate, result in a breach of or constitute a default
under any of the terms, conditions or provisions of the certificate or
articles of incorporation or bylaws or LLC operating agreement (or other
governing documents) of such Party or any material agreement or instrument
to which such Party is a party or by which such Party may be bound, (ii)
will conflict with, violate or result in a breach of, constitute a default
under (whether with notice or lapse of time or both), accelerate or permit
the acceleration of the performance required by, give to others any
interests or rights or require any consent, authorization or approval
under any contract to which such Party is a party or by which such Party
is or may be bound or to which any equity interest held by such Party or
any of its material properties or assets is subject or (iii) will result
in the creation or imposition of any Encumbrance upon any equity interest
held by such Party in the LLC or any of the other material properties or
assets of such Party, other than Facility Encumbrances.
14.1.3 No Consent. Other than consents and approvals contemplated by
Section 10.1, no consent, approval, order or authorization of, or
registration, declaration or filing with any Governmental Authority,
domestic or foreign, is required to be obtained by such Party in
connection with the execution, delivery and performance of this Agreement
or the consummation of the transactions contemplated hereby, except those
that have been obtained and are in full force and effect pursuant to
Section 14.1.5.
14.1.4 Compliance with Laws and Regulations. The performance of its
obligations under this Agreement will not result in a violation in any
respect of (i) any applicable Federal, state, local or foreign laws,
ordinances, regulations, rulings and orders of government agencies
applicable to its business in any respect the violation of which could
have a Material Adverse Effect (including Requirements of Law relating to
pollution, protection of the environment, emissions, discharges, releases
or threatened releases of pollutants, contaminants, chemicals, or
industrial, toxic, hazardous or regulated substances or wastes into the
environment or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage disposal, transport or handling of
pollutants or other such hazardous or regulated substances or wastes) or
(ii) any applicable order, Judgment, injunction, award or decree in any
respect which could have a Material Adverse Effect on such Party.
14.1.5 Permits. Such Party has or will obtain all authorizations,
approvals, consents, licenses, Permits and certificates (including, but
not limited to all required approvals from the FCC) necessary to perform
its respective obligations under this Agreement and to own, lease and
operate its properties as currently or anticipated to be conducted, owned,
leased or operated, as the case may be, for which the failure to possess
-27-
<PAGE>
would result in a Material Adverse Effect. No violations are outstanding or
uncured with respect to any such Permits and no proceeding is pending to revoke
or limit any Permit.
14.1.6 Title to Assets, Properties and Rights and Related Matters.
Except as set forth in Section 6.2.1, 11.2 and 11.3 and on Schedule G,
such Party has and will continue to have for the term of this Agreement
good and marketable title to all the properties, interests in properties
and assets, real, personal or mixed, necessary for the conduct of such
Party's business and for the transactions contemplated by this Agreement
(including, but not limited to, any rights of way, leasehold interests,
easements, proofs of dedication and rights necessary to ensure vehicular
and pedestrian ingress and egress to and from any such properties or
assets), free and clear of all Encumbrances of any kind or character,
except (i) liens for current taxes not yet due and payable, (ii)
Encumbrances securing taxes, assessments, governmental charges or levies
or the Encumbrances of materialmen, carriers, landlords and like persons,
all of which are not yet due and payable and (iii) minor Encumbrances of a
character that do not substantially impair the assets or properties of
such Party or which will not have a Material Adverse Effect on such Party.
The LLC will cause Incumbent to use best efforts to keep in full force and
effect any leases of or affecting the Facilities and will cause Incumbent
to use best efforts to renew or enter into new leases for the Facilities
as necessary to ensure that Incumbent has sufficient right, title and
interest in and to the Facilities throughout the term of this Agreement
and to permit the LLC and Pathnet to perform their respective obligations
and rights hereunder.
14.1.7 Labor Matters. Such Party has complied in all material
respects with all applicable Federal, state and local laws and ordinances
relating to the employment of labor, including the provisions thereof
relating to wages, hours, employee benefit plans and the payment of social
security taxes, and is not liable for any arrears of wages or any tax
related thereto (except for currently accrued and unpaid wages and except
for currently accrued withholding, payroll, unemployment and social
security taxes payment of which is not overdue) or penalties for failure
to comply with any of the foregoing, and neither has received a notice to
the contrary from any Governmental Authority. Such Party has not suffered
any strike, slowdown, picketing or work stoppage by any union or other
group or employees affecting the business of such Party, and no such event
or action is threatened.
14.1.8 Contract or Restriction. Such Party is not a Party to or
bound by any contract or agreement nor is subject to any corporate
restrictions that could materially and adversely affect the business,
properties or condition, financial or otherwise, of such Party (other than
adverse effects resulting from vendor creditors exercising their rights
against collateral pledged by such Party pursuant to applicable vendor
credit documents) or adversely affect or call into question the power or
authority of such Party to enter into or perform this Agreement or any of
the agreements or instruments executed by such Party in connection
herewith, or that otherwise adversely affect or call into question the
validity or enforceability of this Agreement or any of the agreements or
instruments executed by such Party in connection herewith.
-28-
<PAGE>
14.1.9 Litigation. There are no pending or, to the best of each
Party's knowledge, threatened actions or proceedings before any court,
arbitrator or governmental or administrative body or agency that could in
any way adversely affect or call into question the power or authority of
such Party to enter into or perform this Agreement or any of the
agreements or instruments executed in connection herewith, or that in any
way adversely affect or call into question the validity or enforceability
of this Agreement or any of the agreements or instruments executed in
connection herewith.
14.1.10 Disclaimer. EXCEPT AS EXPRESSLY PROVIDED HEREIN, NEITHER
PATHNET NOR THE LLC MAKES ANY OTHER EXPRESS WARRANTY AND THERE ARE NO
IMPLIED WARRANTIES WITH RESPECT TO ANY TECHNOLOGY, GOODS, SERVICES, RIGHTS
OR OTHER SUBJECT MATTER OF THIS AGREEMENT. PATHNET AND THE LLC HEREBY
DISCLAIM THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE WITH RESPECT TO ANY AND ALL OF THE FOREGOING.
14.2 Representations and Warranties of Pathnet.
14.2.1 Hazardous Materials. Pathnet represents and warrants that (i)
Pathnet is and shall remain in compliance with any and all Federal, state
or local permits in regard to Hazardous Materials, (ii) Pathnet shall
report to applicable Governmental Authorities any release of reportable
quantities of Hazardous Materials as mandated by Section 103 (a) of CERCLA
and (iii) Pathnet will, within five (5) Business Days of receipt, send to
the LLC a copy of any notice, order, inspection report or other document
issued by any government authorities relating to Pathnet's status with
environmental or health and safety laws.
14.2.2 Services. Pathnet warrants (i) that the Services will be
performed in a workmanlike manner and (ii) that it has or will obtain
agreements or arrangements with its employees, agents and Subcontractors
sufficient to allow it to provide the LLC with the Services.
SECTION 15. INDEMNIFICATION AS A RESULT OF THIRD PARTY CLAIMS.
15.1 Indemnification by the LLC. The LLC agrees to indemnify, defend and
hold harmless Pathnet and its Affiliates and their respective officers,
directors, employees, agents, successors and assigns from and against any and
all Losses and threatened Losses arising from, in connection with, or based on
allegations of, any of the following:
(a) any claims of infringement of any patent, trade secret,
copyright or other proprietary rights alleged to have occurred in
connection with systems or other resources provided by Pathnet to the LLC
and arising out of the actions of the LLC, its employees, officers or
agents.
(b) any claims arising out of the untruth, inaccuracy or breach of
any representation or warranty of the LLC set forth in this Agreement.
-29-
<PAGE>
(c) subject to Section 16.2 (d) below, the liability of Pathnet for
(i) any personal injury, disease or death of any person, (ii) damage to or
loss of any property, money damages or specific performance owed to any
third party (by contract or operation of law) or (iii) any fines,
penalties, taxes, claims, demands, charges, actions, causes of action,
assessments, environmental response costs, environmental penalties,
injunctive obligations any of which items (i), (ii) or (iii) are caused
by, arise out of, or are in any way incidental to, or are connected with,
actions or omissions of the LLC, its employees, officers or agents.
15.2 Indemnification by Pathnet. Pathnet agrees to indemnify, defend and
hold harmless the LLC and its Affiliates and their respective officers,
directors, employees, agents, successors and assigns from and against any and
all Losses and threatened Losses arising from, in connection with, or based on
allegations of, any of the following:
(a) any claims of infringement of any patent, trade secret,
copyright or other proprietary rights alleged to have occurred in
connection with systems or other resources provided by Pathnet to the LLC
either as a contribution to the LLC, pursuant to this Agreement or the
Pathnet Sublicense Agreement, dated as of the date hereof, or otherwise
and arising out of the actions of Pathnet.
(b) any claims arising out of the untruth, inaccuracy or breach of
any representation or warranty of Pathnet set forth in this Agreement.
(c) the liability of the LLC for (i) any personal injury, disease or
death of any person, (ii) damage to or loss of any property, money damages
or specific performance owed to any third party (by contract or operation
of law) or (iii) any fines, penalties, taxes, assessments, environmental
response costs, environmental penalties or injunctive obligations any of
which items (i), (ii) or (iii) are caused by, arise out of, or are in any
way incidental to, or are connected with, actions or omissions of Pathnet,
its employees, officers, directors or agents.
(d) the liability of the LLC to Pathnet's customers arising out of
any or all obligations to or contracts with customers or Pathnet to
purchase Pathnet Excess Capacity for alleged loss of profits or revenue by
said customers (or the customers of said customers) resulting from a loss
of service over the System.
15.3 Indemnification Procedures. With respect to any third party claims,
the following procedures shall apply:
(a) Notice. Promptly after receipt by an entity entitled to
indemnification under Section 15.1 or Section 15.2 of notice of the
commencement or threatened commencement of any civil, criminal,
administrative or investigative action or proceeding involving a claim in
respect of which the indemnitee will seek indemnification pursuant to any
such section, the indemnitee shall notify the indemnitor of such claim in
writing. No failure to so notify an indemnitor shall relieve it of its
obligations under this Agreement except to the extent that it can
demonstrate damages attributable to such failure. Within fifteen (15) days
following
-30-
<PAGE>
receipt of written notice from the indemnitee relating to any claim, bill
no later than ten (10) days before the date on which any response to a
complaint or summons is due, the indenmitor shall notify the indemnitee in
writing if the indenmitor elects to assume control of the defense and
settlement of that claim (a "Notice of Election").
(b) Procedure Following Notice of Election. If the indemnitor
delivers a Notice of Election relating to any claim within the required
notice period, the indemnitor shall be entitled to have sole control over
the defense and settlement of such claim; provided that, (i) the
indemnitee shall be entitled to participate in the defense of such claim
and to employ counsel at its own expense to assist in the handling of such
claim, and (ii) the indemnitor shall provide prior written notice to the
indemnitee before entering into any settlement of such claim or ceasing to
defend against such claim. After the indemnitor has delivered a Notice of
Election relating to any claim in accordance with the subsection (a)
above, the indemnitor shall not be liable to the indemnitee for any legal
expenses incurred by the indemnitee in connection with the defense of that
claim. In addition, the indemnitor shall not be required to indemnify the
indemnitee for any amount paid or payable by the indemnitee in the
settlement of any claim for which the indemnitor has delivered a timely
Notice of Election, if such amount was agreed to without the written
consent of the indemnitor.
(c) Procedure Where No Notice of Election Is Delivered. If the
indemnitor does not deliver a Notice of Election relating to any claim
within the required notice period, the indemnitee shall have the right to
defend or settle the claim in such manner as it may deem appropriate, at
the cost and expense of the indemnitor. The indemnitor shall promptly
reimburse the indemnitee for all such costs and expenses.
15.4 Subrogation. In the event that an indemnitor shall be obligated to
indemnify an indemnitee pursuant to Section 15.1 or Section 15.2, the indemnitor
shall, upon payment of such indemnity in full, be subrogated to all rights of
the indemnitee with respect to the claims to which such indemnification relates.
SECTION 16. LIABILITY OF THE PARTIES TO EACH OTHER.
16.1 Liability Generally. Subject to the specific provisions of this
Section 16, it is the intent of the Parties that each Party shall be liable to
the other Party for any actual damages incurred by the Non-Breaching Party as a
result of the Breaching Party's failure to perform its obligations in the manner
required by this Agreement and failure to cure such nonperformance as set forth
in Section 17.1.1.
-31-
<PAGE>
16.2 Liability Restrictions.
(a) SUBJECT TO SUBSECTION (b) BELOW, IN NO EVENT, WHETHER IN
CONTRACT OR IN TORT (INCLUDING BREACH OF WARRANTY, NEGLIGENCE AND STRICT
LIABILITY IN TORT), SHALL A PARTY BE LIABLE TO THE OTHER PARTY FOR
INDIRECT OR CONSEQUENTIAL, EXEMPLARY, PUNITIVE OR SPECIAL DAMAGES EVEN IF
SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES IN ADVANCE.
(b) The limitations set forth in subsection 16.2 shall not apply
with respect to damages occasioned by a violation of Section 13 of this
Agreement.
(c) Each Party shall have a duty to mitigate damages for which the
other Party is responsible.
(d) Each Party shall be liable to the other Party for any actual
damages as set forth in Section 16.1 only if, and to the extent that the
aggregate of all losses arising from or in connection with any failure to
perform obligations in the manner required by this Agreement exceeds ten
thousand dollars ($10,000.00), except with respect to any payment
obligations set forth in Section 5.
16.3 Force Majeure. No Party shall be liable for any breach, default or
delay in the performance of its obligations under this Agreement (i) if and to
the extent such default or delay is caused, directly or indirectly, by: fire,
flood, earthquake, elements of nature or acts of God, riots, civil disorders,
rebellions or revolutions in any country, changes in Requirements of Law
relating to the System or to the sale of Excess Capacity, or any other cause
beyond the reasonable control of such Party (a "Force Majeure Event"), (ii)
provided the non-performing Party is without fault in causing such breach,
default or delay, and such breach, default or delay could not have been
prevented by reasonable precautions and cannot reasonably be circumvented by the
non-performing Party through the use of alternate sources, work around plans or
other means.
SECTION 17. INFORMAL DISPUTE RESOLUTION; ARBITRATION.
17.1 Informal Dispute Resolution.
17.1.1 Notice of Breach, Cure and Remedies. In the event of a
material breach by either Pathnet or the LLC (the "Breaching Party") the
other Party (the "Non-Breaching Party") shall send by certified mail a
written notice of such material breach to the Breaching Party setting
forth the specific allegations of such breach. Upon receipt of the notice
of breach, the Breaching Party shall have thirty (30) days to cure such
breach. In the event the Breaching Party fails to cure such breach, as
determined by the Non-Breaching Party in its sole discretion, or the
Breaching Party determines, in its sole discretion, that it has cured such
breach, either the Breaching Party or the Non-Breaching Party may invoke
the settlement procedures set forth in Section 17 to resolve whether such
breach has been cured.
-32-
<PAGE>
17.1.2 Role of Program Manager. In the event the LLC has a dispute,
controversy or other complaint relating to Pathnet's performance of
Pathnet's rights and obligations under this Agreement, the LLC shall have
the right to first contact the Program Manager to resolve such dispute,
controversy or other complaint. If the LLC is not satisfied with the
resolution provided by the Program Manager, the LLC may resort to the
arbitration procedures set forth in this Section 17.
17.1.3 Resolution of Disputes. Any and all disputes and
controversies between the LLC and Pathnet concerning the negotiation,
interpretation, performance, breach or termination of this Agreement (each
a "Dispute") shall be subject to resolution as set forth in this Section
17.
17.1.4 Settlement Discussions. Any Dispute shall be attempted to be
resolved first through amicable settlement discussions and each Party
shall bear its own costs and attorney's fees of such settlement
discussions. Each Party hereby agrees to use good faith efforts to reach a
settlement through such amicable settlement discussions, provided,
however, that, nothing herein shall prevent a Non-Breaching Party from
immediately exercising any and all rights such Party may have, other than
submission of such Dispute to arbitration or institution of legal
proceedings, either of which remedies may only be invoked pursuant to the
terms hereof and after failure of the settlement discussions required
hereby.
17.1.5 Referral to Binding Arbitration or Litigation. In the event
the Parties fail to reach a settlement of the Dispute pursuant to
settlement discussions in accordance with Section 17.1.4, each Party (the
"Complaining Party") shall have the right, to file suit in a court of
competent jurisdiction in a neutral forum or upon mutual consent of the
parties, to refer such Dispute for final resolution by binding arbitration
in accordance with the rules of the American Association of Arbitration
(the "AAA"); provided, however, that the non-Complaining Party shall only
have the right to institute suit regarding the Dispute in a court of
competent jurisdiction prior to the commencement of the initial
arbitration hearing, and upon filing such suit, the arbitration
proceedings shall be deemed terminated.
17.1.6 Binding Effect. The Parties acknowledge and agree that (i)
the award in any arbitration shall be final, conclusive and binding on the
Parties and (ii) any such arbitration award be a final resolution of the
Dispute between the Parties to the same extent as a final judgment of a
court of competent jurisdiction.
17.1.7 Arbitration Process.
(A) Notice. To commence the arbitration process, the
Complaining Party shall deliver to the other Party a written notice
in accordance with the AAA rules.
(B) Site and Arbitration Tribunal. Absent agreement to the
contrary by the Parties, the arbitration will be conducted in
Washington, D.C., by a panel of three (3) arbitrators with expertise
in the fields of telecommunications engineering and construction,
provided, however, in the case of particular witnesses not subject
to
-33-
<PAGE>
subpoena at the designated hearing site, hearings may be held at any
place designated by the arbitrators where such witnesses can be
compelled to attend, and, with the consent of the Parties, before a
single member of the arbitration tribunal. Within thirty (30) days
after the deliverance of the notice of arbitration, each Party must
select one (1) arbitrator and a third arbitrator will be selected by
agreement of the two (2) arbitrators selected by the Parties. If
either Party fails to select an arbitrator or there is no agreement
on the selection of the third arbitrator, AAA will select such
arbitrators.
(C) Transcripts and Evidence. Both Parties shall cause a
written transcript of all proceedings and testimony to be kept and
the cost of such transcript shall be borne equally by the Parties
pending the final award. All documents that either Party proposes to
offer in evidence, except for those objected to by the other Party,
shall be deemed to be self-authenticating.
(D) Applicable Law. The arbitrators shall determine the claims
and defenses of the Parties and render their final award in
accordance with the governing law of this Agreement as set forth in
Section 18.5. Notwithstanding anything set forth in the Arbitration
Rules to the contrary, the provisions of this Section 17 shall
govern any arbitration proceeding brought in relation to this
Agreement or the transactions contemplated thereby.
(E) Sanctions. The Parties acknowledge that, in addition to
any other remedy allowed or specified in or under the AAA rules, the
failure of a Party to comply with any interim, partial or
interlocutory order, after due notice and opportunity to cure such
non-compliance, may be treated by the arbitrators as a default and
all or some of the claims or defenses of the defaulting Party may be
stricken and partial or final award entered against such Party, as
determined by the arbitrators in their sole discretion.
(F) Limitation on Awards. Arbitrators may not award (i)
incidental, consequential or punitive damages in the resolutions of
any Dispute and the Parties hereby waive all rights to and claims
for monetary awards other than compensatory damages, (ii) any other
right or remedy that contravenes the terms and conditions of this
Agreement, or (iii) except as provided in Section 3.2, termination
of this Agreement.
(G) Period of Limitations. In the event the Party claiming a
Dispute does not either file suit or institute binding arbitration
within four (4) years after the commencement of settlement
discussions pursuant to Section 17.1.4, such Party shall forever be
barred from bringing a claim on the specific subject matter of such
Dispute.
-34-
<PAGE>
(H) Arbitration Award. Any arbitration award must be in
writing and must contain findings of fact and conclusions of law
upon which the arbitrators relied in making the decision relating to
such award.
(I) Attorney's Fees. The arbitrators shall award the
reasonable cost, including attorneys' fees, to the prevailing Party.
SECTION 18. MISCELLANEOUS.
18.1 Notices. All notices pertaining to disputes arising from this
Agreement shall be directed to a corporate entity or employee designated by the
signatories as having full rights and responsibilities to address such issues.
Notices under this Agreement shall be sufficient only if personally delivered by
a commercial prepaid delivery or courier service or mailed by Certified or
registered mail, return receipt requested to a Party at its address set forth
below or as amended by notice pursuant to this Section 18.1 If not received
sooner, notice by mail shall be deemed received five (5) Business Days after
deposit in the U.S. mail. All notices shall be delivered as follows:
If to Pathnet:
Michael A. Lubin, Esquire
Vice President and General Counsel
Pathnet, Inc.
1015 3lst Street, NW
Washington, D.C. 20007
Tel:202.625.7284
Fax:202.625.7369
If to the LLC:
Dave Angell
Pathnet/Idaho Power Equipment, LLC
c/o Idaho Power Company
1221 West Idaho Street
P.O. Box 70
Boise, ID 83702-5627
Tel:208.388.2701
Fax:208.388.6902
18.2 Binding Nature: Entire Agreement. Pathnet and the LLC acknowledge
that (i) each has read and understands the terms and conditions of this
Agreement and agrees to be bound by such terms and conditions, (ii) this
Agreement shall be binding on each of Pathnet and the LLC and their respective
successors and assigns, (iii) this Agreement together with any agreements or
documents executed in connection and contemporaneously herewith is the complete
and conclusive statement of the agreement between the Parties, (iv) this
Agreement together with any agreements or documents executed in connection and
contemporaneously herewith supersedes any and all prior agreements and
arrangements between the Parties and all understandings and agreements, oral and
written, heretofore made between the LLC and Pathnet are merged in this
Agreement which together
-35-
<PAGE>
with any agreements or documents executed in connection and contemporaneously
herewith, fully and completely expresses their agreement on the subject matter
of this Agreement and (v) this Agreement together with any agreements or
documents executed in connection and contemporaneously herewith sets forth the
entire agreement on the subject matter hereof.
18.3 Amendment. No modifications of, additions to or waiver of this
Agreement shall be binding upon the LLC or Pathnet unless such modification,
addition or waiver is in writing and signed by an authorized representative of
each Party.
18.4 Severability. If any provision, sentence, phrase or word of this
Agreement or the application thereof to any Person or circumstance shall be held
invalid, the remainder of this Agreement, or the application of such provision,
sentence, phrase or word to Persons or circumstances other than those as to
which it is held invalid, shall not be affected thereby.
18.5 Governing Law. This Agreement, and the rights and obligations of the
Parties hereunder, shall be governed and interpreted in accordance with the laws
of the State of Idaho (other than the choice of law rules thereof).
18.6 Survival. Any provision of this Agreement which contemplates
performance or observance subsequent to any termination or expiration of this
Agreement shall survive such termination or expiration and continue in full
force and effect.
18.7 Assignment. At any time and from time to time, Pathnet shall have the
right to assign this Agreement or any of Pathnet's rights and obligations under
this Agreement to an assignee, which assignee shall be bound by the terms and
conditions of this Agreement; provided, that in no event shall any such
assignment relieve Pathnet of its obligations under this Agreement. The LLC may
not or shall not have the right to assign this Agreement or any of its rights
and obligations hereunder without the prior written consent of Pathnet, which
consent shall not be unreasonably withheld; provided, however, the LLC may
assign its right and obligations, in whole but not in part, under this Agreement
without the approval of Pathnet, to any entity which acquires all or
substantially all of the assets of the LLC or to any subsidiary, Affiliate or
successor in a merger or consolidation of the LLC; provided, that in no event
shall any such assignment relieve the LLC of its obligations under this
Agreement.
18.8 Waiver. Failure or delay on the part of the LLC or Pathnet to
exercise any right, power or privilege under this Agreement shall not constitute
a waiver of any right power or privilege of this Agreement.
18.9 Recordation. Each Party hereby acknowledges that this Agreement may
be subject to recordation and the costs, fees or expenses associated with any
such recordation shall be borne by the recording Party.
18.10 Good Faith Renegotiation. Notwithstanding anything set forth herein
to the contrary, the Parties hereby agree that in the event a Governmental
Authority issues a decision, order, rule or other rulemaking of any kind, which
necessitates any modification or amendment to this
-36-
<PAGE>
Agreement, the Parties shall negotiate in good faith to modify or amend this
Agreement to comply with such decision, order, rule or other rulemaking.
18.11 Confidential Terms and Conditions. The LLC shall not disclose,
except as required by law or as set forth in Section 18.9, the terms and
conditions of this Agreement to any third party.
18.12 LLC's Designated Representative. The LLC shall on the Effective Date
designate in writing a representative who shall have express authority to bind
the LLC with respect to all matters requiring the LLC's approval or
authorization in connection with this Agreement (the "LLC Representative"). Such
LLC Representative shall have the authority to make decisions and grant any and
all consents required under this Agreement on behalf of the LLC and Pathnet
shall be entitled to rely on any such decision or consent by the LLC
Representative.
18.13 Outsourcing. In addition to, and not in place of, any rights of
Pathnet under this Agreement, Pathnet shall have the right to engage third party
Subcontractors to perform any or all of Pathnet's rights and obligations under
this Agreement, subject to the LLC's prior approval, which approval shall not be
unreasonably withheld; provided that such approval shall not be required for
third-party operation of the Network Monitoring Center.
18.14 Schedule B. In the event the Parties mutually agree to include any
additional or alternative sites in the development of the System, as set forth
herein, such additional or alternative sites shall be amended on Schedule B and
shall be deemed included in Schedule B for all purposes herein.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement, as of
the date first written above.
PATHNET, INC.
By: /s/ Dave Schaeffer
-------------------------
Name: Dave Schaeffer
-------------------------
Title: Chairman
-------------------------
PATHNET/IDAHO POWER EQUIPMENT, LLC
By: /s/ Kip W. Runyan
-------------------------
Name: Kip W. Runyan
-------------------------
Title: President
-------------------------
-37-
<PAGE>
FIXED POINT MICROWAVE SERVICES AGREEMENT
SCHEDULES
<PAGE>
INDEX OF SCHEDULES AND EXHIBITS TO
FIXED POINT MICROWAVE SERVICES AGREEMENT
SCHEDULE A: Services and System Specifications
Exhibit A-1: System Equipment and Scope of Work
Exhibit A-2: Manufacturers Specifications for Radios
Exhibit A-3: Electricity and Power Specifications of the System
Exhibit A-4: Initial DS-1 Requirements
Exhibit A-5: Equipment Shelters Specification and Design
Exhibit A-6: Grounding and Lightning Protection Guidelines and
Specifications for Communications Shelters
Exhibit A-7: Network Interconnections Schedule
Exhibit A-8: Pathnet Spurs and LLC Spurs
Exhibit A-9: Form of Certificate of Acceptance
Exhibit A-10: Scope of Work
SCHEDULE B: The System
SCHEDULE C: Estimated and Operating Costs
Exhibit C-1: LLC Estimated Costs Detail
Exhibit C-2: Pathnet Estimated Costs Detail
SCHEDULE D: Incumbent Training
SCHEDULE E: Ownership of System Equipment Assets and Materials
SCHEDULE F: Form of Pathnet Sublicense Agreement
SCHEDULE G: Facility Encumbrances
SCHEDULE H: Form of Pledge Agreement Pledge Agreement
SCHEDULE I: Form of Incumbent Security Agreement
<PAGE>
SCHEDULE J: Form of Pathnet IRU Agreement
SCHEDULE K: Form of Spectrum License Agreement
SCHEDULE L: Form of Maintenance and Provisioning Services Agreement
<PAGE>
SCHEDULE A
SERVICES AND SYSTEM SPECIFICATIONS
This Schedule A describes certain services and specifications that Pathnet
and LLC shall perform. Pathnet's and LLC's responsibilities with respect to
particular services and specifications described in this Schedule A, if any, are
specifically indicated where such services and specifications are described.
Pathnet and LLC's payment responsibilities with respect to the Services and
Specifications shall be as set forth in Section 5 of the FPM Agreement and
Schedule C.
SECTION 1. PRELIMINARY ENGINEERING STUDIES AND EVALUATION OF EXISTING SYSTEM.
1.1 Preliminary Analysis. Pathnet shall complete a detailed analysis of
the existing microwave system operated by Incumbent along each Segment set forth
in Schedule B and each Amended Schedule B and upon completion of such analysis
shall deliver the results of such analysis to Incumbent and LLC. Such analysis
shall include, but not be limited to:
(a) an inventory and survey of Incumbent's existing microwave sites
and supporting facilities (the "Existing System Inventory");
(b) microwave path studies and reliability analysis to provide
performance data to serve as the engineering basis for the design of the
System (the "Path Studies");
(c) a preliminary evaluation of the probability of successfully
coordinating frequencies on the System (the "Frequency Availability
Model");
(d) a determination of whether structural analysis of towers and
loading factors (for metal towers only) is required and, in the event such
structural analysis is required, the analysis of Incumbent's towers,
including, but not limited to, the wind loading and weight requirements
for the proposed antenna systems as well as any feedlines necessary to
support the such antenna systems (the "Tower Analysis");
(e) the design of the System (the "System Design") which System
Design conforms with the terms and conditions of Section 3 of this
Schedule A;
(f) a detailed line item budget for the System (the "System
Budget");
(g) a proposed T-1 plan for channelization of the System the
("Channel Plan"); and
(h) a preliminary construction management schedule for each
replacement
A-2
<PAGE>
Segment (the "Preliminary Construction Schedule").
1.2 Cooperation of LLC with Preliminary Analysis. LLC shall or shall cause
Incumbent to cooperate with Pathnet in Pathnet's performance of the preliminary
analysis set forth in Section 1.1 of this Schedule A, including, but not limited
to, providing to Pathnet any requested information and documents relating to
Incumbent, LLC or Incumbent's existing system.
1.3 Project Drawings. Upon completion of the preliminary engineering
studies and analysis and documentation as set forth in Section 1.1 of this
Schedule A, Pathnet shall deliver to LLC the following project drawings: (i) a
System layout drawing, (ii) the rack profiles, (iii) block drawings, and (iv)
equipment wiring drawings (collectively, the "Project Drawings.")
SECTION 2. MODIFICATION TO EXISTING INFRASTRUCTURE.
2.1 Documentation. Upon completion of the preliminary analysis as set
forth in Section 1.1 of this Schedule A, Pathnet shall prepare and deliver to
LLC a project management schedule and scope of work (the "Modifications SOW")
setting forth a detailed plan to complete all required modifications of
Incumbent's existing sites and Facilities necessary for the installation and
operation of the new System in accordance with the terms and conditions of this
Agreement. LLC shall have thirty (30) days to either (i) approve by written
notice to Pathnet such Modifications SOW or (ii) deliver to Pathnet a written
list of LLC's suggested modifications to the Modifications SOW. In the event LLC
delivers to Pathnet its suggested modifications to the Modifications SOW,
Pathnet shall review such suggested modifications and, as mutually agreed with
LLC, incorporate some, all or none of such suggested modifications into the
Modifications SOW, respectively, and shall within thirty (30) days of receipt of
LLC's suggested modifications, deliver a Modifications SOW to LLC. In the event
LLC fails to notify Pathnet in writing of its approval or suggested
modifications of the Modifications SOW within the time period prescribed above,
Pathnet shall assume that LLC has granted such approval and Pathnet shall have
the right to rely upon such approval.
2.2 Modifications Required. Pathnet shall perform all of the modifications
set forth in the Modifications SOW. Such modifications shall include, but not be
limited to, the following:
(a) any required modifications to the towers necessary to conform
the towers to the Specifications;
(b) any required modifications to the battery reserves necessary to
conform the battery reserves to the Specifications and the installation of
any required generators, in accordance with the Specifications;
(c) any required modifications to the environmental control systems
of the existing shelters necessary to conform such environmental control
systems to the
A-3
<PAGE>
Specifications;
(d) the provision of all necessary D.C. and A.C. power cable
engineering for all racks, including, but not limited to, the installation
of all necessary conduits required to carry D.C. and A.C. power,
terminating cables and alarm cables and the installation of all necessary
A.C. distribution and A.C. wiring as required to meet the Specifications;
(e) the installation of all required new equipment shelters, or
modification of existing equipment shelters, to conform to the
Specifications;
(f) the installation of all required liquid petroleum, diesel or
natural gas lines from the existing liquid petroleum diesel or natural gas
tank or source, as the case may be, to the new shelter in accordance with
the Specifications;
(g) any required modifications to the foundation of any of the
towers, shelters or sites as set forth in the Tower Analysis;
(h) any upgrades required to conform the sites and Facilities to
local building code provisions and any other regulatory Requirements of
Law, including, but not limited to, those related to health and safety;
(i) the removal of any above or below ground obstructions or
materials such as trees and power lines which may affect the performance
of the System or other activities contemplated by this Agreement;
(j) all required fence extensions and replacements;
(k) any required modifications to the grounding and bonding Systems
at each site to conform to the Specifications;
(l) any required modifications to the pressurizing equipment to
conform to the Specifications, including, but not limited to, the
pressurizing equipment manifolds and dehydrators.
(m) any other miscellaneous site work necessary to prepare
Incumbent's sites for the installation and operation of the new System.
2.3 Cooperation by LLC. LLC shall cooperate with Pathnet and shall provide
Pathnet with all required assistance in completion of such obligations in
Pathnet's performance of its obligations under this Section 2 of this Schedule
A.
2.4 Maintenance of Modifications. LLC shall or shall cause Incumbent to
ensure that all modifications performed pursuant to this Section 2 of this
Schedule A are maintained in accordance with the Specifications, including, but
not limited to, the upgrade or replacement of any equipment and materials
described in the Modifications SOW.
A-4
<PAGE>
2.5 Choice of Equipment Vendors and Service Providers.
2.5.1 Engagement. In the event LLC proposes equipment, equipment
vendors or service providers other than as specified in this Schedule A,
(i) Pathnet shall have the right to approve any such equipment, vendors or
service providers, which approval shall not be unreasonably withheld, (ii)
all invoices, purchase orders or other bills relating to such equipment or
services shall be sent to both Pathnet and LLC and (iii) LLC shall not pay
any such invoice, purchase order or bill without the prior approval of
Pathnet, which approval shall not be unreasonably withheld.
2.5.2 Approval. LLC shall have the right to approve any
Subcontractor engaged to perform the Services set forth in this Section 2
of Schedule A.
SECTION 3. DESIGN OF NEW SYSTEM.
3.1 Approval of System Design. Within thirty (30) days after receipt by
LLC of the System Design from Pathnet, LLC shall either (i) deliver to Pathnet
written approval of such System Design or (ii) deliver to Pathnet a written list
of LLC's suggested design modifications. In the event LLC delivers to Pathnet
its suggested design modifications, Pathnet shall review such suggested
modifications and, as mutually agreed upon by the Parties, incorporate some, all
or none of such suggested modifications into the System Design. Pathnet shall,
within thirty (30) days of receipt of LLC's suggested modifications, deliver a
revised System Design to LLC. In the event LLC fails to deliver to Pathnet in
writing its approval or suggested modifications of the System Design, Pathnet
shall assume that LLC has approved such System Design and shall have the right
to rely on such approval. Pathnet shall design the System in a manner that will
allow the unimpaired, continuous operation of LLC's low capacity, 6 GHz/10 MHz
system until all operational circuits are cutover. The Parties acknowledge that
Idaho Power Company may operate the existing low-capacity 6 GHz/10 MHz system
for a period of several years after commissioning the Initial System, provided
such low capacity system shall not adversely impact the operation of the System
in accordance with the Specifications.
3.2 Modification of System Design. At any time and from time to time,
Pathnet, with LLC's approval, shall have the right to modify the System Design
upon written notice to LLC of such modifications, as new versions of equipment
used in the System may become available from manufacturers or software
providers, and as Technology is improved, provided LLC's approval shall not be
required in the event the prior version or generation of Equipment is not
available and new Equipment is required to operate the System in accordance with
the Specifications.
3.3 System Technical Specifications. Pathnet shall (i) design the System
in accordance with the minimum network performance standards set forth in
Section 3 of this Schedule A, (ii) in each instance where reasonably possible,
use the towers, antennas, waveguide, and other system components of LLC's
existing system in the System Design, and
A-5
<PAGE>
(iii) design the System to meet the following technical specifications:
(a) Radio System Design. The active radio components of the System
shall be designed to conform to the Specifications and the manufacturer
specifications set forth in Exhibit A-2 to this Schedule A.
(b) Radio Software Design. The software used to operate the radios
shall conform to the Specifications and the manufacturer specifications
set forth in Exhibit A-2 to this Schedule A.
(c) Antenna and Frequency Specifications. The radio communications
equipment shall transmit and receive on the frequencies as set forth in
the System Design. All antenna reflectors used in the System shall conform
to (i) Category A standards as defined by the FCC and (ii) the
specifications set forth in any PCN relating to the System, and each high
performance antenna shall be fitted with a radome. All antenna mounting
hardware shall meet wind and loading requirements for the applicable
county and shall conform to EIA-222-F.
(d) Tower Specifications. All towers shall conform to (i) the
EIA/TIA-222-F-1991, Structural Standards for Steel Antenna Towers and
Antenna Supporting Structures, 1996, (ii) EIA/222-F Specifications for
loading for the appropriate county, and (iii) all applicable FCC and FAA
requirements.
(e) Waveguide Specifications. Waveguide used in the System specified
for transmission line shall be of a premium grade to ensure minimum return
loss and shall be an Andrew part EWP-52, EWP-63, or EWP-90 or equivalent
waveguide.
(f) D.C. Power Requirements. The radio components of the System
shall be powered by 48 volts DC with at least eight (8) hours of battery
capability, and all necessary chargers, distribution systems and transfer
switches for generators as set forth in Exhibit A-3 to this Schedule A.
(g) A.C. Power Requirements. A.C. electrical power required by the
System shall be consistent with local requirements and the usage at each
of the sites set forth in Schedule B or any Amended Schedule B and shall
by 120/240 volt single phase 200 amp service as set forth in Exhibit A-3
to this Schedule A.
(h) Bonding and Grounding Specifications. The System and all
associated electrical components shall be grounded and bonded to current
EIA and IEEE specifications.
(i) Order Wire Specification. Each equipment shelter will be
equipped with an Order Wire and a handset, which shall be used as a talk
circuit for System operation and maintenance purposes and which shall be
carried by Pathnet as part of the System payload.
A-6
<PAGE>
(j) Diagnostic Circuit. Each equipment shelter will be equipped with
a diagnostic circuit that will be used to connect each such shelter and
the Equipment housed in such shelter to the Network Management System.
(k) Multiplexing from OC-3 to DS-1 Level. The System Design shall
provide for any required multiplexing of the OC-3 to the DS-1 level at
each site that is equipped with an OC-3 Multiplexer.
(l) Multiplexing from DS-1 to DS-0 Level. Within thirty (30) days
after the date hereof, LLC shall deliver to Pathnet a Schedule
substantially in the form of Exhibit A-4 to this Schedule A setting forth
LLC's multiplexing requirements. Upon receipt of such Exhibit A-4 to this
Schedule A, Pathnet will reflect in the System Design the requested
multiplexing of the DS-1 to the DS-0 level at each site using a 1/0
Multiplexer subject to limitations in Drop and Insert Capacity between
each Switched Mod Section using available Wayside Channels.
(m) Wayside Channels. LLC or Pathnet, as reflected in the System
Design, shall use the Wayside Channels.
(n) Spectral Loading Requirements. The System shall meet the then
current FCC requirements of spectrum efficiency outlined, 47 C.F.R. 101
and any successor rule or regulation.
(o) Capacity of System. System shall be comprised of, at a minimum,
3 DS-3 capability and will have a 1 x n protection switch allowing for
upward migration to a maximum of 1 x 7 protection. The capacity of the
System may be expanded by LLC or by Pathnet, upon LLC's request, to a 2 x
14 protection level, using additional spectrum or crossband filters,
provided, such Capacity Expansion does not degrade the System below the
performance standards or Specifications set forth in this Section 3 of
this Schedule A.
(p) SONET Architecture. The digital microwave radios used in the
System shall operate under a SONET format.
(q) Shelters Design. The building layout for each new shelter to be
constructed and the modifications required to the existing shelters, to
the extent applicable and technically feasible at such existing shelters,
shall be as set forth in Exhibit A-5 to this Schedule A and shall comply
with all applicable local laws, regulations and ordinances.
(r) Channel Plan. The System shall be designed such that LLC shall
be allocated capacity as set forth in the Channel Plan and Section 8.2.2.
(s) Interconnections Limitations. The System shall have no more than
four (4) Interconnections per LATA. No more than two (2) of such
Interconnections shall be
A-7
<PAGE>
to other segments of the Pathnet network created from facilities of other
Persons and no more than two (2) of such two (2) Interconnections shall be
to the PSTN. At each Interconnection site, there shall be no more than two
(2) additional antennas used solely for such Interconnection purposes.
Interconnections may be by microwave or other media. To the extent Pathnet
develops spurs, Pathnet shall specify the Interconnections at such spurs
on Exhibit A-7 to this Schedule A, as such exhibit shall be amended from
time to time. To the extent LLC or Incumbent develops spurs for its own
connectivity purposes, LLC or Incumbent shall specify the Interconnections
at such spurs on Exhibit A-7 to this Schedule A. For PSTN interconnects at
Boise, Pocatello and Twin Falls, if any, LLC or Incumbent shall provide
Pathnet a route in conduit and/or on distribution poles for the
installation of a fiber optic interconnect. As mutually agreed, Pathnet
and Incumbent shall be responsible for any make-ready charges on the fiber
route and shall pay for the cost of the fiber and associated installation.
Pathnet and Incumbent shall design the fiber optic interconnect routes to
meet the reasonable requirements of each party.
(t) Protection Switching Requirement. Power, radio, and multiplexing
equipment shall be redundant with automatic protection switching to
minimize Outages as a result of equipment failure.
(u) Battery Reserve Specifications. All Equipment at each site shall
have a minimum battery reserve (assuming a 1 x 7 Protection Configuration)
as set forth in Exhibit A-3 to this Schedule A.
(v) Generator Requirements. Generators shall be required at all
sites with a history of power outages and all sites that are difficult to
access as determined by the Parties.
(w) System Integration. The System shall be integrated into the
total Pathnet telecommunications network as set forth in the System
Design.
(x) Transmission Line Requirements. One (1) or more transmission
lines shall be connected to each antenna and such lines will be anchored
firmly to the tower in accordance with the manufacturer's recommendation.
(y) Equipment Rack Specifications. Each equipment rack shall be
firmly anchored to the floor, and the overhead channel iron or the
adjacent racks.
(z) Environmental Control of Shelters. Equipment shelters shall be
environmentally controlled to standards, between 55 degrees Fahrenheit and
80 degrees Fahrenheit and shall be maintained within the desired humidity
range, as set forth in the manufacturer's specifications in Exhibit A-2 to
this Schedule A.
(aa) Spurs. The System shall be designed to allow the build-out of
spurs set forth on Exhibit A-8 to this Schedule A and Incumbent's existing
spurs as provided prior
A-8
<PAGE>
to completion of System Design from the backbone network for Pathnet's and
LLC's own network and internal communications purposes.
(bb) Network Management System. The System Design shall include the
Network Management System that complies with the specifications set forth
in Section 7.6 of this Schedule A.
(cc) Fuel Tanks and Lines. All liquid petroleum, diesel and natural
gas tanks and lines required shall meet all applicable environmental and
health and safety standards and Requirements of Law.
(dd) Pressurizing Equipment. The System Design shall include all
required pressurizing equipment, manifolds, dehydrators or nitrogen tanks.
(ee) Availability. The System shall be designed to meet or exceed
the long haul objective of 99.98% availability on an annual basis for a
4,000 mile system, which is equivalent to a one way system Outage of less
than 0.4 seconds, per mile, per year.
(ff) Circuit Acceptance Level. The System shall be designed such
that any continuous five hundred (500) mile segment of the System during
any consecutive twenty-four hour period shall have no more than one (1)
Errored Second, shall have at least 99.9988% Error Free Seconds and shall
have no Severely Errored Seconds, measured at the DS-1 level.
SECTION 4. INSTALLATION AND CONSTRUCTION.
4.1 Documentation.
4.1.1 Project Management Plan, Project Schedule and Commissioning
Plan. Within thirty (30) days after approval by LLC of the System Design
pursuant to Section 3.1 of this Schedule A. Pathnet shall deliver to LLC
(i) a detailed plan of the respective responsibilities of each Party and
other related items relating to the construction and installation of the
System (the "Project Management Plan"), (ii) a detailed schedule for the
installation of the System (the "Project Schedule"), and (iii) a detailed
schedule for the cutover of the System (the "Cutover Plan"). LLC shall
have fifteen (15) days to either (i) approve by written notice to Pathnet
such Project Management Plan, Project Schedule and Commissioning Plan or
(ii) deliver to Pathnet a written list of LLC's suggested modifications to
such Project Management Plan, Project Schedule and Commissioning Plan, as
the case may be. In the event LLC delivers to Pathnet its suggested
modifications to the Project Management Plan, Project Schedule or
Commissioning Plan, Pathnet shall review such suggested modifications and,
as mutually agreed, incorporate any of such suggested modifications into
the Project Management Plan, Project Schedule and Commissioning Plan,
respectively, and shall within fifteen (15) days of receipt of LLC's
suggested modifications, deliver a revised Project
A-9
<PAGE>
Management Plan, Project Schedule or Commissioning Plan, as the case may
be, to LLC. In the event LLC fails to notify Pathnet in writing of its
approval or suggested modifications of the Project Management Plan,
Project Schedule and Commissioning Plan within the time period prescribed
above, Pathnet shall assume that LLC has granted such approval and Pathnet
shall have the right to rely upon such approval.
4.1.2 Installation Reports. After installation has begun and
continuing until Commissioning, Pathnet shall provide to LLC a bi-weekly
progress report (each a "Progress Report") setting forth, (i) a
description of the work performed during the immediately preceding period,
(ii) a list of any material deviations from the proposed schedule of work,
and (iii) an analysis of such deviations with respect to their impact upon
the timely deployment of the System.
4.1.3 Changes to Drawings. In the event that during the process of
Installation any of the Project Drawings delivered pursuant to Section 1.3
of this Schedule A require any modifications, Pathnet shall make any such
modifications to such Project Drawings shall deliver the revised Project
Drawings to LLC, and shall place a copy of such revised Project Drawings
at each site.
4.1.4 As-Built Drawings. Upon completion of each phase of
installation as set forth in the Project Schedule, Pathnet shall deliver
to LLC, in hard copy and (if available) soft copy) an as-built drawing of
the System (each an "As-Built Drawing") and shall incorporate the final
As-Built Drawing into the appropriate equipment manuals.
4.2 Installation by Pathnet. Pathnet shall construct and install the
System as set forth below and in accordance with this Schedule A and the
documents and schedules prepared and delivered pursuant to this Schedule A.
(a) Radios. Pathnet shall furnish and install the digital radios
that meet the Specifications.
(b) Antennas and Frequencies. Pathnet shall furnish and install (i)
the antennas that meet the Specifications and (ii) any required antenna
mounting hardware to secure such antennas to the towers in accordance with
the Specifications.
(c) Waveguide Bridge and Supports. Pathnet shall furnish and install
(i) waveguides that meet the Specifications, (ii) new waveguide bridges on
two faces of the existing towers and (iii) all additional supports
required of the waveguide from the tower to termination inside the
shelter.
(d) Bonding and Grounding. Pathnet shall furnish and install all
required ground kits in accordance with the Specifications, including, but
not limited to, waveguide ground kits at the antenna, the bottom of the
tower and at the entry port of the shelter, tower anchor grounding kits,
and ground wire rings for the shelters.
A-10
<PAGE>
(e) Moving Company. During installation of the System, Pathnet, or a
full service moving and warehousing company hired by Pathnet, shall handle
the pick up of necessary equipment for temporary warehousing in all
required areas at and near the installation sites.
(f) Order Wire. Pathnet shall furnish and install an Order Wire at
each site in accordance with the Specifications and shall establish Order
Wire connectivity, including, but not limited to, connectivity to all
necessary external interfaces.
(g) OC-3 Multiplexers. Pathnet shall furnish and install all
required OC-3 Multiplexers to the DS-1 level as set forth in Section 3 of
this Schedule A.
(h) Channel Plan. Pathnet shall perform cross-connects of T-1 lines
in accordance with the Channel Plan and the Specifications.
(i) Interconnection Placement Pathnet shall furnish and install
connecting facilities from the System to the PSTN, including but not
limited to connections to POP's of purchasers of Excess Capacity and
Pathnet shall furnish and install all cables required to interconnect
project equipment within the System.
(j) Transmission Lines. Pathnet shall (i) furnish and install all
required transmission lines on the towers, (ii) route such transmission
lines to the equipment racks in the shelters, (iii) connect both ends of
such transmission lines, and (iv) interface such transmission lines to the
radio equipment in accordance with the Specifications.
(k) Equipment Racks. Pathnet shall furnish and install all equipment
racks necessary for the Equipment installed by Pathnet in accordance with
the Specifications.
(l) Network Management System. Pathnet shall furnish and install the
Network Management System, including, but not limited to, all required
alarms, panels, terminals, software and cables at all appropriate
demarcation points in accordance with the Specifications.
(m) Spurs. Pathnet shall furnish and install all of the necessary
equipment to build-out Pathnet's spurs and, at LLC's expense and upon
reasonable request, LLC's spurs, each as set forth in Exhibit A-8 to this
Schedule A in accordance with the Specifications.
(n) Deconstruction of Existing System. As required at each site,
Pathnet shall move LLC's existing system to one side, as agreed upon by
LLC, providing space for permanent installation of the new System;
provided Incumbent or LLC shall decommission any tower not used at any
Facility.
(o) Pre-Commissioning System. Pathnet shall install an "initial"
digital System in such a way that it can be operated and tested without
interfering with LLC's
A-11
<PAGE>
existing system performance.
(p) Parallel Systems. In order to minimize system downtime, Pathnet
shall parallel the Incumbent's existing analog system with the digital
equipment using new frequencies and antenna configurations.
4.3 Cooperation During Installation. During installation, LLC shall and
shall cause Incumbent to provide all necessary cooperation to Pathnet,
including, but not limited to, posting at each site any Permits or licenses for
building or tower work related to the construction at such site and providing
reasonable access to its Facilities as set forth in Section 5.
4.4 Installation by LLC. LLC shall furnish and install all required
equipment and materials at each point of demarkation to meet LLC's or
Incumbent's internal communication needs, including, but not limited to,
furnishing and installing all 1/0 Multiplexers as set forth in Section 3 of this
Schedule A and all other interconnection equipment relating to LLC's spurs set
forth in Exhibit A-8 to this Schedule A.
SECTION 5. PRE-COMMISSIONING TESTING.
5.1 Factory Acceptance Test.
5.1.1 Tests to be Performed. Pathnet shall coordinate all factory
acceptance testing on the Equipment. Such factory acceptance testing shall
include, but not be limited to, (i) linking together of all racks in each
Switched Mod Section to simulate the System as it will be configured in
the field, (ii) testing at the panel terminal and System level for
certification and compliance with the Specifications, (iii) connecting the
radio bays by coaxial cables through attenuators to simulate "RSL"
conditions as encountered in the field, (iv) testing on a path basis to
the applicable configuration of the System, (v) testing of all
miscellaneous Equipment such as supervisory fault alarm and control and
service channel units, and (vi) testing the equipment as a System to
resolve all interface problems.
5.1.2 Observing Factory Testing. The members of LLC shall have the
right, at their own expense, to witness in person the factory testing of
the Equipment.
5.2 Rack Test. Pathnet shall perform a rack test once the radio cabinet
has been installed.
5.3 Path Test. Pathnet shall perform a path test after each site has been
turned up.
5.4 End-To-End Test. Pathnet shall perform an end-to-end test for each
Switched Mod Section on the System once all sites have been turned up.
5.5 Field Test. Once the Equipment is installed and operational, Pathnet
shall test
A-12
<PAGE>
each path pursuant to the following field tests to ensure performance of the
tile Equipment over the designated path in accordance with the criteria and
standards set forth in this Schedule A.
(a) Radio Hop Test: Pathnet shall (i) align all digital microwave
paths, (ii) measure and record transmitter frequency, (iii) measure and
record transmitter power, (iv) measure and record receiver fade margin,
(iv) perform Bit Error Rate checks and (v) record results of such Bit
Error Rate checks.
(b) Digital Multiplex Test: Pathnet shall (i) perform standard
loop-back tests and (ii) verify the performance of all local alarm points
to the DS-1 level.
(c) System Test: Pathnet shall (i) perform an end-to-end Bit Error
Rate test of the Non-Protect Radio for a 24-hour period and an end-to-end
Bit Error Rate test of the Protect Radio for a 24-hour period, (ii) verify
equipped channel units through microwave system, (iii) verify performance
of Order Wires and Wayside Channels, and (iv) verify performance of the
alarm points function throughout the System.
5.6 Site Acceptance Testing. Pathnet, with LLC's assistance, shall perform
all site acceptance tests as recommended by the manufacturers of the Equipment
and Pathnet shall provide the results of any such site acceptance testing to LLC
promptly after completion of such testing.
5.7 Acceptance Procedure. After completion of site acceptance testing as
set forth in Section 5.6 of this Schedule A, Pathnet shall implement the
following acceptance procedure:
(a) LLC shall promptly perform an installation inspection and
deliver to Pathnet a written list of all material deficiencies from the
Specifications to be corrected by Pathnet (the "Deficiency List").
(b) Pathnet shall promptly correct such material deficiencies on the
Deficiency List and shall, upon completion, certify to LLC that such items
have been corrected.
(c) Pathnet shall submit to LLC all of the test data collected
through the performance of the tests set forth in Section 5 of this
Schedule A for LLC's approval, which approval shall not be unreasonably
withheld.
(d) LLC shall deliver to Pathnet a Certificate of Acceptance
substantially in the form of Exhibit A-9 to this Schedule A.
5.8 Equipment Required for Pre-Commissioning Testing. Pathnet shall
furnish all Pre-Commissioning Test Equipment.
SECTION 6. COMMISSIONING.
A-13
<PAGE>
6.1 Commissioning
6.1.1 LLC Responsibilities. LLC, with Pathnet's coordination, shall
(i) manage the cutover process for its allocated channels onto the System
and (ii) perform such cutover in accordance with commercially reasonable
practices and avoid any adverse impact to the operation of the System in
accordance with the performance standards and Specifications hereunder.
6.1.2 LLC Responsibilities. LLC shall cooperate and coordinate its
cutover of its voice and data circuits with Pathnet.
6.2 Station Log Books. Pathnet shall establish station logs books in
accordance with all FCC rules and regulations (each a "Station Log Book") and at
Commissioning shall deliver to LLC an original of each Station Log Book at
Commissioning.
SECTION 7. SYSTEM OPERATION.
7.1 Increases in Capacity. At any time, and from time to time, Pathnet
shall have the right, at its sole discretion, to increase the capacity of the
System beyond the capacity created in the initial build-out up to a 1 x 7
system; provided that Pathnet fulfills the following conditions before
Commissioning any such proposed Capacity Expansion:
(a) Capacity Expansion Schedule. At least forty-five (45) days prior
to any Capacity Expansion, Pathnet shall provide to LLC a capacity
expansion schedule (each, a "Capacity Expansion Schedule") setting forth
the amount of capacity to be included in such Capacity Expansion, the
specific paths to be expanded, the expansion name (including each path
that is affected), and the expected Commissioning of such Capacity
Expansion.
(b) Performance of Capacity Expansion. Prior to the Commissioning of
any Capacity Expansion, (i) Pathnet shall perform all required testing on
such Capacity Expansion to confirm that any such Capacity Expansion will
not degrade the System below the Specifications, (ii) Pathnet shall
provide the results of such testing upon receipt of such test results to
LLC for its review and approval, and (iii) Pathnet shall obtain from LLC a
Certificate of Acceptance substantially in the form attached hereto as
Exhibit A-9 to this Schedule A with respect to such Capacity Expansion.
(c) LLC's Right to Contest Capacity Expansion. In the event, after
receipt of the test results as set forth above, LLC reasonably determines
that a proposed Capacity Expansion will degrade the System below the
Specifications, LLC shall have the right to withhold delivery of any
Certificate of Acceptance with respect to such Capacity Expansion and
shall hire an independent third party approved by Pathnet (which approval
shall not be unreasonably withheld) to perform additional testing on such
Capacity
A-14
<PAGE>
Expansion. In the event such independent third party reports that the
proposed Capacity Expansion will not result in the degradation of the
System below the Specifications, LLC shall promptly deliver to Pathnet a
Certificate of Acceptance with respect to such proposed Capacity Expansion
and shall pay for the reasonable costs of such independent third party
evaluation. In the event that such independent third party reports that
the proposed Capacity Expansion will result in the degradation of the
System below the Specifications (i) Pathnet shall make all required
modifications to the System and the proposed Capacity Expansion such that,
in the opinion of such independent third party, the proposed Capacity
Expansion shall not degrade the system below the Specifications, (ii) upon
verification by such independent third party that the proposed Capacity
Expansion, as modified by Pathnet, shall not degrade the System below the
Specifications, LLC shall promptly deliver to Pathnet a Certificate of
Acceptance substantially in the form attached as Exhibit A-8 to this
Schedule A with respect to such Capacity Expansion and (iii) Pathnet shall
pay for the reasonable costs of such independent third party evaluation.
7.2 Maintenance of System. Within thirty (30) days after the Effective
Date, Pathnet, Incumbent and LLC shall execute and deliver the Maintenance
Services Agreement, a form of which is attached in Schedule L. Pathnet shall
have the right to supplement at its own expense at any time, and from time to
time, any maintenance performed on the System including any Capacity Expansion,
as determined by Pathnet in its sole discretion.
7.3 Additional Transmission Lines and Antennas. After Commissioning, if
the System is expanded pursuant to any Capacity Expansion, Pathnet shall have
the right to elect to install a second transmission feed line or a third antenna
to any tower. In such instance, Pathnet shall (i) perform any tower analysis
that may be required before the installation of such transmission line or
antenna, (ii) furnish and install such additional transmission line and any
associated connectors and mounting hardware for securing such transmission line
to the towers, (iii) furnish and install such antenna and other devices and
equipment associated with such antenna, and (iv) perform strengthening to the
tower required for such transmission line or third antenna.
7.4 Additional Order Wires and Diagnostic Circuits. At any time and from
time to time, Pathnet shall have the right to install additional Order Wires and
diagnostic circuits at System sites, which Order Wires and diagnostic circuit
may or may not be carried as part of the System payload as determined to be
necessary or appropriate by Pathnet in its sole discretion.
7.5 24-Hour Network Monitoring Center. Upon Commissioning and for the
period thereafter until the Expiration Date, Pathnet shall operate a network
monitoring center (the "Network Monitoring Center") twenty-four (24) hours a
day, seven (7) days a week, which Network Monitoring Center shall, among other
things, handle all problems and trouble reports that may arise and monitor the
System as set forth in Section 7.6 of this Schedule A.
7.6 Network Management System. At all times after Commissioning until the
Expiration Date, Pathnet shall provide a network management system to be
operated at the
A-15
<PAGE>
Network Monitoring Center (the "Network Management System") which Network
Management System will, among other things, (i) manage all network elements
within the System (21 SMX or equivalent), (ii) monitor and control the
facilities system, the radio system, and the OC-3/DS-1 multiplex system, (iii)
collect performance data such as Errored Seconds, Severely Errored Seconds,
frame loss and Failed Seconds consistent with the manufacturer's specifications
set forth in Exhibit A-2 to this Schedule A, (iv) monitor the shelter
environments (including commercial power failure, door alarms, charger failures,
low waveguide pressure, air conditioner failure, tower light alarms, generator
runs (if any), waveguide dehydrator excessive runs, smoke alarms, high
temperature and low temperature), radio equipment, multiplexing equipment, and
LLC equipment (as reasonably requested by LLC) and (v) provide LLC with the
ability to monitor the System separately from the overall Pathnet network.
7.7 Alarm and Event Logging and Reports. Within thirty (30) days after the
end of each calendar quarter, Pathnet shall provide to LLC a report (each an
"Alarm and Event Report") setting forth a log of all alarms and events recorded
by the Network Management System during the prior calendar quarter.
7.8 System Outages. Each Party shall use its best efforts to avoid
unscheduled System Outages in the performance of each Party's respective rights
and obligations under this Agreement.
7.9 Replacement of Radios. Beginning in the fifteenth (15th) year after
Commissioning, Pathnet shall begin replacing the radios and radio software
relating to the System and shall replace such radios and radio software at a
minimum rate often percent (10%) a year for ten (10) years.
7.10 Network Loops. In the event in the construction of the Pathnet
network a network loop is created relating to the System, Pathnet shall
facilitate allowing LLC, at LLC's request, to benefit from the existence of such
network loop in the event of a System Outage.
SECTION 8. GENERAL.
8.1 Access to Sites. In addition to any access rights relating to the
Leased Premises set forth in Section 5 of the Agreement, LLC shall or shall
cause Incumbent to provide upon the reasonable request of Pathnet, road access
for all construction vehicles to the Leased Premises.
8.2 Parking at Sites. At the request of Pathnet and where reasonably
available, LLC shall provide for vehicular parking at each site at no charge to
Pathnet for use during the term of this Agreement; provided, however in the
event sites are located in urban areas where vehicles are parked in privately
operated lots or garages, Pathnet shall be responsible for any and all parking
charges it incurs in connection with the performance of its obligations under
this Agreement with respect to such urban sites.
8.3 Use of Telecommunications Devices. While visiting the sites, LLC shall
allow
A-16
<PAGE>
Pathnet to use existing telephone lines or Order Wires in connection with
Pathnet's performance of its rights and obligations under this Agreement.
8.4 Fuel Tanks. LLC shall or shall cause Incumbent to ensure that all
liquid petroleum, diesel or natural gas tanks, as the case may be, are
adequately supplied throughout the term of this Agreement
8.5 Retaining of Records. All records and reports required pursuant to
this Schedule A shall be retained by Pathnet or LLC, as the case may be, for at
least five (5) years or any longer period as may be required by law.
8.6 Work Permits. LLC shall or shall cause Incumbent to obtain all
necessary local, state and Federal construction and work permits as required to
perform all of the services set forth in this Agreement
8.7 Hazardous Material.
8.7.1 Existence of Hazardous Material. Without the consent of LLC as
described below, Pathnet shall not bring or cause or permit, knowingly or
unknowingly, any Hazardous Material in violation of Requirements of Law to
be brought or remain upon, kept, used discharged, leaked or emitted on any
of LLC's sites or Facilities.
8.7.2 Compliance with Environmental Laws. In the event that LLC
allows Pathnet to bring Hazardous Materials to LLC's sites as set forth in
the environmental audit, Pathnet shall strictly obey and adhere to any and
all Federal, state or local laws, ordinances, orders, rules, regulations,
codes or any other government restrictions or requirements (including, but
not limited to, CERCLA and RCRA) which in any way regulates, governs, or
impacts Pathnet's possession, use, storage, treatment or disposal of such
Hazardous Material.
8.8 Transportation. Pathnet shall provide transportation for all Pathnet
personnel or Subcontractors to each of LLC's sites and between such sites in
connection with the performance of the Services.
8.9 Storage. Where reasonably requested by Pathnet, LLC shall or shall
cause Incumbent to provide at no charge to Pathnet or any vendor providing
materials for use in the System, secure appropriate storage, to the extent such
storage is reasonably available, for all equipment and materials to be installed
or used for the installation, testing or operation of the System, which storage
facilities shall also serve as the drop-ship point for staging all installation
equipment used in the System. Pathnet and its Subcontractors will provide
adequate insurance for any Equipment stored at such Facilities and will bear any
risk of loss for such Equipment.
8.10 Unpacking and Trash Removal. Pathnet shall (i) unpack all crates and
boxes, (ii) remove all trash created by such unpacking or other installation
activities from LLC's sites, and (iii) shall verify all packing lists. LLC shall
regularly remove all other trash from its sites
A-17
<PAGE>
and Facilities.
8.11 Manufacturing and Ordering of Equipment. As the System is installed
on a Segment-by-Segment basis or upgraded after Commissioning, Pathnet shall
order all required equipment and materials, including, but not limited to, all
required installation materials, from the respective manufacturers in accordance
with the timing set forth in the Project Schedule.
8.12 Ship and Delivery Schedules. At least two (2) weeks prior to receipt
of any equipment or materials to be used in the modifications or installation
set forth in Section 2 and Section 4 to this Schedule A respectively, Pathnet
shall provide to LLC detailed ship and delivery schedules relating to such
equipment and materials.
8.13 Electricity. LLC shall provide all required electricity for the
design, modification, installation, operation and monitoring of the System in
accordance with the specifications set forth in Exhibit A-3 to this Schedule A.
A-18
<PAGE>
EXHIBIT A-1
SYSTEM EQUIPMENT
SEGMENT A
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Equipment Hansen Twin Lower Mountain Bonneville Squaw
Butte Falls Salmon Home Point Boise HQ Butte
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Generators: 0 0 1 0 0 0 1
DC Charger
Systems: 1 1 1 1 1 1 1
Battery
Plants: 1 1 1 1 1 1 1
Antennas: 3 1 4 4 5 1 4
Waveguide: 190' 100' 300' 280' 510' 172' 420'
NEC 2000 2 1 2 2 3 1 2
Sonet
Radios:
OC-3
Multiplexers: 1 1 0 0 2 1 1
Towers 1 0 1 1 1 0 1
Shelters 1 0 1 1 1 0 1
- ----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Equipment
Payette Lime Baker Legrande Relay Lagrande
- --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Generators: 0 1 1 1 0
DC Charger
Systems: 1 1 1 1 1
Battery
Plants: 1 1 1 1 1
Antennas: 4 4 4 3 1
Waveguide: 460' 260' 260' 275' 55'
NEC 2000 2 2 2 2 1
Sonet
Radios:
OC-3
Multiplexers 1 0 0 1 1
Towers 1 1 1 1 1
Shelters 1 1 1 1 1
- --------------------------------------------------------------------
</TABLE>
A-19
<PAGE>
A. Segment B
LLC Segment B extends from Hanson Butte, Idaho to Pocatello, with
Facilities at the sites listed below.
SEGMENT B
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Equipment Pocatello Pocatello P.R. Kinport American Falls Cotteral Mtn. Hanson Butte
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Generators: 0 0 0 0 1 0
DC Charger
Systems: 1 0 1 1 1 0
Battery
Plants: 1 0 1 1 1 0
Antennas: 2 0 4 4 4 2
Waveguide: 142' 0 275' 280' 280' 380'
NEC 2000
Sonet
Radios: 1 0 2 2 2 1
OC-3
Multiplexers: 1 0 1 1 0 1
Towers 0 0 1 1 1 0
Shelters 0 0 1 1 1 0
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
A-20
<PAGE>
EXHIBIT A-2
MANUFACTURERS SPECIFICATIONS FOR RADIOS
NEC OC-3 MULTIPLEXER SPECIFICATIONS
IMT-15O
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Power
Physical: Requirements: Interface: Features:
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Mounts in a 23-inch -48 volts DC High Speed: OC-3 Software Provisioning
EIA rack Approximately 125 Optical Full Bandwidth Time
Height 11.4 inches watts (ADM Low Speed: OC-1, Slot Assignment
Width 21.4 inches configuration) STS-1, D53, or DS1 X.25 Gateway for OSS
Depth 10 inches DS 1 PM Monitoring
Capability
- ------------------------------------------------------------------------------------------------
</TABLE>
NEC 2000 SERIES
Specifications:
Physical:
One cabinet (600 mm wide, 300 mm deep and 2.2 m high) for 4 radio channels
(Includes OC-3 interface per channel, space diversity receiver, order wire and
wayside DS1 interface, and 1:N switch).
Power Requirements:
- -24 or -48 volts DC
Approximately 200 watts per radio channel for a terminal configuration
Approximately 150 watts per radio channel direction (1 TRR) for a repeater
configuration
Interface:
OC-3
Operating Specifications:
Frequency Band: 5.945 to 6.425 GHz
Modulation: 128 QAM MLCM
Capacity: 155.52 Mb/s plus radio overhead (Wayside DS1, Order Wires, ATPC
signals, 1:N
A-21
<PAGE>
commands, monitoring)
Transmit Power at interface to transmit waveguide: +29.7 dBm
System Gain (Waveguide interface to waveguide interface - no ATPC): 101.1 dB
System Gain (Waveguide interface to waveguide interface - with ATPC): 103.1 dB
Dispersive Fade Margin (l0^-3): 48 dB
FCC Identifier: BSF6P155-S02A
Emission Designator: 30M0D7W
NEC 2600 SERIES DIGITAL MICROWAVE RADIO SPECIFICATIONS
Models Available:
8 DS-1: 6G13MB
12 DS-1: 6G19MB
16 DS-1: 6G26MB
32 DS-1: 6G52MB
Physical:
One Hot-Standby with Space Diversity receiver (2 TRR) Subsystem is 482 mm (19")
Wide by 798.5 mm (31.5") High weighing 75 lbs. A total of two (2) HSB systems
for a repeater or a terminal 3:1 multiline system (4 TRR) will fit in a standard
19" by 7'6" Rack.
Power Requirements:
- -24 or -48 volts DC
Approximately 130 watts per HSB radio system. (2TRR)
Approximately 150 watts per HSB radio system for 32 DS-1 model.
System Configuration Options:
The following system configurations are available for 8, 12, 16, or 32 DS-1
capacity systems:
HS/HS=Hot Standby Transmitter and Hot Standby Receiver (2 TR)
HS/SD= Hot Standby Transmitter and Space Diversity Receiver (2 TR)
1+0/SD= Single Transmitter with Space Diversity Receiver (1 TRR)
1+0= Single Transmitter and Single Receiver (1 TR)
Features:
Automatic Transmit Power Control (ATPC)
Can be site configured for a Terminal or Regenerative Repeater with any channel
drop and insert capabilities.
Forward Error Correction (FEC)
Decision Feedback Equalizer (DEE) for fading countermeasures.
In-Service capacity upgrades.
Two (2) VF Orderwire channels Per Radio
One (1) Data channel up to 9.6Kbs
A-22
<PAGE>
Operating Specifications:
Frequency Band: 5.925 to 6.425 Ghz or 6.525 to 6.825 Ghz
Modulation: 128 QAM
Transmit Power at Interface to waveguide: +30 dBm
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
DS-1 2 DS-1 6 DS-1 2 DS-1
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
System Gain: 06.0 dB 04.0 dB 03.0 dB 00.0 dB
- -------------------------------------------------------------------------------------------------------
Receiver Threshold: -80.0 dBm -78.0 dBm -77.0 dBm -74.0 dBm
(BER 10^-6)
- -------------------------------------------------------------------------------------------------------
Dispersive Fade margin: 64.0 dB 63.0 dB 62.0 dB 59.0 dB
(BER 10^-6)
- -------------------------------------------------------------------------------------------------------
Emission Designator: 10MOD7W 50MOD7W 3M7507W 2M50D7W
- -------------------------------------------------------------------------------------------------------
FCC Identifier: BSF89N6P52-SO1A BSF89N6P26-SO1A BSF89N6P19-SO1A BSF89N6P7-SO1A
- -------------------------------------------------------------------------------------------------------
</TABLE>
A-23
<PAGE>
EXHIBIT A-3
ELECTRICITY AND POWER SPECIFICATIONS OF THE SYSTEM
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
DC POWER SPECIFICATIONS
- --------------------------------------------------------------------------------------------
Site Radio Mux Channel Incum. Site Site Total Battery Size
Config 7:1 OC-3 bank Equip Total DC 10 Hour
(Watts) (Watts) (Watts) (Watts) WATTS AMPS Reserve
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Terminal 1:3 800 330 250 720 2,100 44 Amps 440 AH
End
- --------------------------------------------------------------------------------------------
Terminal 1:7 1,600 770 250 720 3,340 70 Amps 700 AH
End
- --------------------------------------------------------------------------------------------
Repeater 1:3 1,200 None 250 720 2,170 45 Amps 530 AH
- --------------------------------------------------------------------------------------------
Repeater 1:7 2,400 None 250 720 3,370 70 Amps 700 AH
- --------------------------------------------------------------------------------------------
2 Way 1:3 1,600 125 250 720 2,695 56 Amps 600 AH
Junction
- --------------------------------------------------------------------------------------------
2 Way 1:7 3,200 125 250 720 4,295 90 Amps 900 AH
Junction
- --------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
AC POWER SPECIFICATIONS
- --------------------------------------------------------------------------------------
DC Heat & Total AC Total Amps
Site Configuration Chargers Air Cond. Lights Misc. Watts AC @ 220 VAC
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Terminal End 3,696 3,000 300 1,500 8,496 39
Nominal
- --------------------------------------------------------------------------------------
Terminal End 8,712 6,000 1,600 2,800 19,112 87
Maximum
- --------------------------------------------------------------------------------------
Repeater 3,696 4,500 300 1,500 9,996 45
Nominal
- --------------------------------------------------------------------------------------
Repeater 8,712 9,000 1,600 2,800 22,112 101
Maximum
- --------------------------------------------------------------------------------------
2 Way Junction 4,752 6,000 500 1,800 13,052 59
Nominal
- --------------------------------------------------------------------------------------
2 Way Junction 8,712 12,000 2,000 3,200 2,512 118
Maximum
- --------------------------------------------------------------------------------------
</TABLE>
Note: All New Shelters are AC equipped for 200 Amps, single phase, 220 VAC
Service
A-24
<PAGE>
EXHIBIT A-4
-----------
INITIAL DS-1 REQUIREMENTS
-------------------------
<TABLE>
<CAPTION>
Site Name DS-1's Wired DS-1's Equipped
- --------- ------------ ---------------
<S> <C> <C>
Segment A
Hansen Butte [***]
Twin Falls [***]
Lower Salmon [***]
[***]
Mountain Home [***]
Bonneville Point [***]
Boise HQ [***]
Squaw Butte [***]
Payette [***]
Lime [***]
Baker [***]
LaGrande Relay [***]
LaGrande [***]
Segment B
Pocatello [***]
Pocatello P.R [***]
Kinport [***]
</TABLE>
A-25
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
American Falls [***]
Cotterel Mtn. [***]
Hansen Butte [***]
</TABLE>
A-26
<PAGE>
EXHIBIT A-5
EQUIPMENT SHELTERS SPECIFICATIONS AND DESIGN
1. Summary
This "Equipment Shelter Specification" applies to concrete pre-cast,
pre-equipped, transportable equipment shelters for use in conjunction with
equipment installed by Pathnet, Inc. and covers material and workmanship
standards. This document is designed to assist the user in defining your
specific equipment shelter requirements. The shelter must be designed for the
explicit purpose of housing electronic equipment, fiberoptics equipment,
measuring devices and other related components, within a controlled environment
required for the proper operating conditions for the equipment. The shelter
manufacturer must adhere to compliance with all national building codes. All
shelters will be assumed to be placed within ten (10) feet of the base of the
tower.
2. Foundation
The shelter shall be designed for any of the following foundation types:
-- Pier & Beam
-- Slab
-- Perimeter Beam
3. Shelter Type
The shelter shall be constructed of pre-cast, pre-assembled Portland concrete
and shall be manufactured in a controlled environment.
4. Shelter Size
The shelter should conform to the following dimensions unless otherwise noted:
-- One room shelter (no generator) - 12' X 20' OD
-- Two room shelter (equipment room and generator room) - 12' X 28' OD
5. Operating Environment
5.1. Temperature
The optimum operating temperature of the equipment to be installed is 75
degrees F (24 degrees C) unless otherwise specified by Pathnet.
A-27
<PAGE>
5 5.2. HVAC
The heating and cooling requirements for a shelter are based upon the
outside maximum and minimum temperature expected for the shelter location
and the equipment heat output specified by Pathnet. Typical heat load
values are 12,000 to 18,000 BTU/HR. Design heat loads for specific
shelters will be provided by Pathnet. Two wall-mounted air conditioners
are required. The units are to be sized so that one unit will maintain an
interior temperature of 75 degrees F with the highest exterior temperature
expected for shelter location.
6. Hardware
All external hardware will be galvanized or coated to protect against corrosion.
7. Structural
Structural design and manufacturing shall conform to ACI 318-89 requirements.
7.1. floor
The floor section shall be constructed of 8" waffled structural pre-cast
concrete. The ribs shall be 2'-0" O.C. transverse and 4'-0" O.C
longitudinal. All surfaces shall be smooth. The interior surface shall be
covered with 1/8" X 12" X 12" square vinyl floor covering, bonded with a
waterproof contact adhesive.
7.2. Roof
The roof section shall be constructed of pre-cast concrete with 1/4" per
foot drainage slope. The ceiling insulation and finish shall be foamboard
insulation with 3/8" vinyl coated board. All joints will be covered by
plastic joint or corner trim. The roof section shall provide a 2" overhang
on all sides. The roof will be a hip type sloping in 4 directions. It
shall be constructed as a cap and should fit over the walls, leaving no
exposed roof-to-wall joint.
7.3. Wall
The wall section shall be constructed of 4" solid concrete, cast in one
piece to minimize joints, with an exposed aggregate exterior finish and
capable of withstanding gun fire from a 30.06 at 50 feet. The wall
insulation and finish shall be foamboard insulation with 1/2" vinyl coated
board. All joints will be covered by plastic joint or corner trim. All
floor/wall intersections will be finished with 4" vinyl baseboard. There
will be no exposed wall-to-floor joint.
8. Thermal
Standard wall and ceiling thickness shall be 1" foamboard insulation. The
calculated system value is R9.6 with 4" thick lightweight concrete walls/roof
sections, 1" foamboard insulation covered by 1/2" fiberglass reinforced plastic
surfaced board. (Thicker insulation and higher R-
A-28
<PAGE>
values must be specified according to the locality.)
9. Concrete
All sections must be constructed of concrete with a compressive strength of 3000
PSI at 28 days.
9.1. Cement Type
Cement used in concrete shall be standard Portland cement conforming to
the requirements of the "Standard Specifications for Portland Cement",
ASTM Designation C150.
9.2. Mix
The mix design shall be 114-118 lbs./cu. ft. structural lightweight
concrete using expanded shale or expanded clay aggregate and shall be
homogeneous. Seeding of aggregates for exposed aggregate finish is not
allowed.
Water will be free from injurious quantities of oil, alkali, vegetable
matter and salt. Non-potable water shall not be used in mixing concrete.
9.3. Concrete Standards
Concrete aggregates will conform to one of the following standards:
-- Specifications for Concrete Aggregates (ASTM Designation: C33)
-- Specifications for Lightweight Aggregates for Structural Concrete
-- (ASTM Designation: C330)
9.4. Reinforcement
Reinforcement bars shall be deformed steel bars conforming to the
requirements of the "Specifications for Deformed and Plain Billet-Steel
Bars for Concrete Reinforcement", ASTM Designation: A615. Welded smooth
wire fabric shall be steel wire fabric conforming to the "Specifications
for Welded Steel Wire Fabric for Concrete Reinforcement", ASTM
Designation: A185.
10. Sealing
-- The shelter shall be sealed to resist dust and water infiltration.
-- All joints shall be sealed with a compressible resilient sealant.
-- There shall be no exposed roof-to-wall or wall-to-floor joints.
-- Exterior surfaces of walls and roof shall be sealed with two (2) coats
of Thoroglaze H Sealer, or acceptable equivalent unless otherwise
noted.
A-29
<PAGE>
10. Door
11.1. Door Construction
The door shall be 3' X 7' X 3/4", 18 gauge galvanized steel, insulated
(minimum R12), primed, painted and installed flush with the door check,
door stop, weather stripping, mortise lockset and stainless steel ball
bearing hinges.
11.2. Door Frame
The doorframe shall be of at least 16 gauge galvanized steel, primed,
painted and cast into the wall panel.
11.3. Door Locks
All doors shall have a deadbolt locking mechanism with a minimum 1" throw
and an anti-pick lock guard.
11. Structural Loading
12.1. Floor
A minimum of 140 lbs. per sq. ft. as defined in "Uniform Distributed
Load", ASCE 7-88. The battery area should be reinforced to support 5000
lbs. per battery rack. The battery area will be shown on the floor plan.
12.2. Roof
A minimum of 50 lbs. per sq. ft. as defined in "Roof Snow Load
Specification", ASCE 7-88.
12.3. Wind
A minimum of 115 MPH as defined in "Basic Wind Speed Specifications", ASCE
7-88.
12.4. Earthquake
Shelters shall be designed for the most stringent earthquake rating
conditions as defined in ASCE 7-88, Zone 4.
13. Electrical System
Electrical installation and wiring shall conform to the latest edition of the
National Electrical Code (NEC) and shall consist of the following as a minimum:
A-30
<PAGE>
13.1. Minimum Requirements
-- 200 Amp, 220 VAC Single Phase Main
-- 200 Amp Manual Transfer Switch
-- 200 Amp Generator Interface
-- Forty (40) Position Breaker Box (With 32 single pole, 20 Amp
breakers.)
-- 120/24OVAC 3-Wire Arrester With Alarms (65kVA Peak Capacity)
-- Surface Mounted EMT Conduit
-- Grounded Duplex Outlets (One every 4 ft. on 3 walls.)
-- Four (4) Fluorescent Lights (2 bulb fixtures with inside switch
mounted by door.)
-- Incandescent Porch Light (With 0-30 minute timer)
13.2. Surge Arresters
An interior-mounted surge arrester is designed to protect against
transients caused by lightning or power switching surges. Primary
arresters protect the building's electrical components and are
automatically restored following activation due to a surge. It should be
installed across the main breaker on the line side unless otherwise
specified by Pathnet. Secondary arresters protect individual branch
circuits. Visual inspection is required to determine whether the arrester
must be replaced following a surge.
14. Grounding
A halo ground system should consist of at least a #2 AWG green insulated
stranded copper wire mounted around the perimeter of the interior wall just
below the ceiling. A 1/4" X 4" X 24" copper ground bar should be located
externally just below each waveguide entry plate. A #2 AWG green insulated
copper jumper should be used to bond the ground bar to the exterior halo ring.
Bonding on either interior or exterior grounding systems will be clean of dirt
and corrosion and applied with non-oxidizing grease.
14.1. Interior Halo Grounding
All cable ladder, racks, lights, equipment and exterior ground are to be
bonded to an interior halo grounding system.
The following items are required for halo grounding:
-- #2 Green Insulated Stranded Copper Halo
-- One (1) Master Ground Bar 1/4" X 4" X 24"
-- Four (4) #2 Tinned Solid Copper Drops with 10' Pigtails
-- Eight (8) #2 Green Insulated Stranded Copper Equipment Ground Drops
14.2. External Ground System
An exterior halo ring is required and will be bonded to the interior halo
grounding system with 8' pigtails listed above.
A-31
<PAGE>
14.3. Conduit Grounding
All conduit, conduit couplings, light fixtures, junction boxes and service
equipment shall be grounded with mechanical clamps to electrically bond the
conduit. The bonding wire will be a minimum #10 AWG green insulated copper wire
for all except light fixtures. The minimum for light fixtures is #12 AWG green
insulated copper wire.
15. Waveguide Entrance
The shelter will have two 8 port waveguide entry panels and two blank panels
located on opposite walls. Two waveguide entry panels will be installed on one
wall and two blank panels mounted on the opposite wall. Pathnet will define the
location of the waveguide entry panels. Each waveguide port shall have a minimum
interior diameter of 4 inches.
16. Alarms
The shelter will have general housekeeping alarms wired to a central location
associated with the following:
-- Door Open
-- Smoke Detection
-- AC Electrical Fail (sense before manual or automatic transfer switch)
-- Surge Protector Fail
-- Air-conditioning Fail
-- High Temperature
-- Low Temperature
-- Charger Fail
-- Breaker Alarm
-- Fuse Alarm
-- Low Waveguide pressure
-- Dehydrator excess run alarm
-- Generator Fail
-- Generator Run
A-32
<PAGE>
EXHIBIT A-6
GROUNDING AND LIGHTING PROTECTION GUIDELINES AND SPECIFICATIONS
FOR COMMUNICATIONS SHELTERS
Preface
An effective ground system for a communications equipment shelter is necessary
to ensure protection of personnel and equipment when a fault occurs. The ground
system limits excessive voltages from various electrical conditions such as
lightning and utility switching, and contributes to superior performance of the
electronic equipment by reducing noise induction
1. Grounding Introduction
Communications equipment shelters are subject to electrical noise and
high-voltage surges. These transients occur predominantly in the common mode
(line to ground), and are typically caused by lightning or power switching.
1.1 Lightning
When lightning induced surges appear at the point of connection to a
building (the service entrance), a high common mode potential is generated
between the current carrying conductors and ground. This potential
produces a flow of current that seeks a path to earth to complete the
circuit.
Lightning can easily induce a 3000-ampere transient into a power line.
When this transient reaches a building, the building ground at the service
entrance can rise to 60,000 volts (assuming a building earth resistance of
20 ohms). The reference potential for ground in the rest of the building
would rise proportionately.
In order to protect the building against these high voltage surges, it is
important to establish a low resistance earth ground at the service
entrance. The National Electrical Code (Article 250, Part 4) specifies
that the grounding at a building's service entrance should have a
resistance to ground of 25 ohms or less. The IEEE Green Book (Recommended
Practice for Grounding, ANSI/IEEE Standard 142-1982) recommends that the
ground resistance be less than 5 ohms. If the building contains highly
sensitive electronic communications equipment, a ground resistance of 5
ohms or less is recommended if this value can be practically achieved with
the given site conditions.
1.2 Types of Grounding
There are two major types of grounding that should be considered when
designing an electrical system: power distribution system grounding and
telecommunications
A-33
<PAGE>
equipment grounding.
1.2.1. Power Distribution System Grounding
The power distribution system pertains to the incoming AC service,
service entrance equipment, power panels, and electrical conductors
providing the power to various electrical/mechanical equipment.
Grounding of the power distribution system is essential to:
-- protect occupants from exposure to dangerous shock voltage
-- provide a path for ground fault current
-- limit excessive voltages due to lightning or utility switching
Typical grounding components for the power distribution system
include:
-- grounding electrode at the service entrance
-- ground bus in the power panel
-- ground lugs in the other service entrance equipment such as
the safety disconnect or transfer switch
-- third wire grounding conductor for all the electrical equipment
-- lightning and surge arresters.
1.2.2. Telecommunications Equipment Grounding
Electronic equipment such as radio systems, telephone switches,
battery chargers and rectifiers, uninterrupted power supply (UPS)
equipment, and any other equipment that encloses or is adjacent to
energized conductors require additional grounding. This sensitive
electronic equipment must be protected from the following:
-- excessive transients caused by lightning or utility switching
-- degraded performance due to electromagnetic noise
Equipment grounding frequently utilizes a ground ring encircling the
interior of the shelter (halo ground ring). Ground lugs attached to
the various equipment housings and racks are connected to the ground
ring. Ground bars at the waveguide entry and at each section of the
cable ladder are also tied to the ground ring. Multiple external
drops connect the internal ground ring to the exterior site pound
ring.
2. Grounding Practices
2.1. The Grounding Conductor
In order to reduce inductance and surge voltages in a power distribution
system, a ground path for protected devices should be provided. One method
is to rely upon the conduit
A-34
<PAGE>
system to carry these transient currents. This is allowed by the National
Electrical Code in Article 250-91 (b). The best method, however, is to
include an extra conductor in the same conduit or raceway as the current
carrying conductor. The grounding conductor should extend to the ground
connection in the service entrance equipment.
2.2. Equipment Ground Wires
When lightning strikes, it takes the path of least impedance (resistance
and inductance). Cable bends increase inductance. Therefore, equipment
ground wires should be large, and run straight for minimum inductance and
voltage drop. The recommended bending radius is 6" when bends are
unavoidable. Equipment ground wires should be separated from all other
conductors, and should not be run through metal conduit unless the conduit
and ground wires are bonded at both ends.
2.3. Bonding
Even when the ground to earth connection's impedance of the service
entrance is minimized and grounding conductors are used in the feeder and
branch circuits, high transient voltages can still occur in the power
distribution system as a result of utility power switching. An effective
method of limiting this noise (especially common mode voltage
differentials) is to bond all the equipment ground wires to a halo ground
system that is connected to the site ground system and power distribution
system ground.
Bonding is the connection of all potential ground conductors (including
racks, frames, cable ladder, conduits, metal enclosures, and exposed
metallic members of the building structure) to each other. Bonding does
not eliminate voltage drops since transient currents will continue to take
the path of least inductance. However, the current is sufficiently
distributed throughout the bonded system to reduce the voltage gradients
in any area to levels that prevent personal injury or equipment damage.
Proper bonding procedures produce cross connections of all equipment and
structures. It provides many paths to ground from any one point. Since the
bonded ground network does not form a part of the normal electrical power
path, multiple inductive loops are not a concern. Only transient or fault
currents can flow in the ground network.
In addition to preventing the development of voltage gradients, cross
connection reduces the system's susceptibility to high frequency noise.
Since all conductors have some impedance, resonance will occur at some
frequencies. At those frequencies, the impedance of the grounding
conductor may be very high, and allow noise currents to develop increased
voltage drops. By bonding the ground network, however, there may be other
conductors nearby that are not resonating, and a low impedance path for
the noise signal can be maintained.
A-35
<PAGE>
2.4. Faraday Cage
A Faraday cage provides an EMI shield to further reduce noise. The cage
usually consists of multiple conductors in a box like configuration. A
halo ground system with multiple down conductors can act as a quasi
Faraday cage, and give some low frequency shielding.
When lightning hits the tower, the tower will pass the current to ground
and radiate RF energy. A Faraday cage can reduce this energy by adding
distance (as seen by the magnetic field) between the tower and the
equipment shelter. The steel reinforcing in the concrete shelter walls can
form a highly effective Faraday cage if bonded to the grounding system.
The amount of shielding depends on the size and spacing of the welded
wire fabric. Additionally, all rebar must be bonded together.
2.5. Site Ground System
When a tower is struck by lightning, equipotential voltage rings form
around the tower until the energy is diffused into the surrounding ground
soil via the grounding system.
The tower ground ring will disperse the energy away from the tower base or
guy wires. The ground rods will transfer the energy deeper into more
conductive soil layers. This is important to keep lightning surges out of
the equipment shelter. Unless the energy is properly dispersed into the
soil, the voltage will build up in the tower, and attempt to go to
another, less desirable path.
The equipment shelter is protected by a perimeter ground system that forms
an equipotential plane. Also, ground rods should be driven into the soil
at the following points:
-- each corner of the shelter
-- the service entrance
-- the waveguide entry port
-- each external halo ground drop
-- every 10' (or less) along the exterior ground ring
The shelter ground ring system should have a connection to the tower
ground system just below the coaxial cable runs. A second connection
between the two ground systems should be installed for redundancy. All
metal work (waveguide bridge and supporting posts) should be bonded to the
ring/radial ground system.
2.6. Grounding System Performance Check
Test the original installation periodically to determine whether
resistance is remaining constant or is increasing. An increase in
resistance can be caused by several factors.
A-36
<PAGE>
In lower conductive soils, high electric fields can develop at the ends of
the ground rods, which can cause arcing in the soil. This arcing can cause
glassification around the rods, beginning at the tip, and working its way
upward. This glassification of the silica in the soil acts as an
insulator, severely impairing the grounding characteristics of the rod. If
resistance increases over time to an undesirable level, reduce the
resistance by adding electrodes or chemically treating the soil to
increase moisture content.
2. Computing Resistance to Ground
3.1. Resistance to Earth
The resistance of a grounding electrode is dependent on the:
-- resistance of the electrode,
-- contact resistance between the electrode and the soil, and
-- resistance of the soil from the electrode surface outward as
described by the geometry set up by the flow of current from the
electrode to infinite earth.
The first two resistances are negligible, and can be disregarded. The
third resistance is larger and must be considered.
Around a ground rod this resistance is the sum of the series resistances
of virtual shells of earth, located progressively outward from the rod.
The shell nearest the rod has the smallest circumferential area or cross
section, so it has the highest resistance. Each successive shell has
progressively larger areas, and thus, progressively lower resistances. For
an 8-foot ground rod, the incremental increase in resistance decreases to
nearly zero when the rods are spaced 16 feet apart. Therefore, when using
multiple ground rods, the optimal spacing between rods should be double
the length of the rod.
3.2. Resistance Calculations
When computing resistance to ground, treat the tower grounding and the
shelter grounding as two separate systems. Within each of these two
systems are two subsystems. The shelter has a grounding ring and the
grounding rods. The tower has a grounding ring, grounding rods, and
occasionally, grounding radials.
The IEEE Green Book provides several formulas for calculating the
resistance to ground for several different systems.
4. Typical Grounding Configurations
Several options are available when deciding on a ground system for a
communication shelter, depending upon the soil conditions and thunderstorm
activity of a particular site. The U.S. Weather Bureau publishes an isoplethic
map of the United States showing the average number of days each year on which
thunderstorms occur. Any area with an isoplethic level above 90 should be
considered a high-risk area, and serious consideration should be given to
providing a more
A-37
<PAGE>
stringent grounding system.
4.1. Ground Bar System
In shelters where very little lightning protection is needed, a simple
ground bar system can be used. A system of this type would consist of a
single copper ground bar located under the waveguide port, telephone
entry, or both, with an external drop to be connected to the external
ground system. Transmission lines should be grounded to this ground bar.
4.2. Halo Ground System
Pathnet shelters will use a halo ground system. This system includes a #2
AWG copper wire completely encircling the equipment room. The halo is
located 3 to 6 inches below the ceiling. External drops are located at
each corner of the shelter. Wall penetrations should be angled at 45
degrees to minimize bending.
4.3. External Ground System
The external ground system for all shelters consists of ground rods placed
at each corner of the shelter and 10' intervals along the ground ring,
below the waveguide entry, and at the AC service entrance. The rods should
be exothermically welded to a perimeter ground ring of #2 AWG solid tinned
copper wire. (Tinned copper is recommended to reduce corrosion of the
wire). The wire should be buried below the frost line (minimum 30", deep
per NEC Sec 250-8(d)), and at least 24", away (measured horizontally) from
the foundation. The ground ring should be bonded to the tower ground
system at two locations, to the externally mounted ground bars under the
waveguide ports and to the AC service ground as close as possible to the
service entrance.
5. General Specifications
This section covers grounding and lightning protection of pre-cast,
pre-equipped, and transportable equipment shelters. It establishes minimum
standards for grounding of all Pathnet Equipment Shelters, and provides
standards for additional customer grounding options.
5.1. General Guidelines
5.1.1 Workmanship
Equipment grounding wire conductor runs will be as short and
straight as possible. All equipment and bonding grounding conductors
will have radii bends 6" or greater.
5.1.2. Design
Where possible, the AC service entrance, waveguide entry port, and
telephone line entry will all be located in close proximity to each
other, and their associated
A-38
<PAGE>
grounding systems will be bonded together.
5.1.3. Connections
Unless specified otherwise, minimum connection requirements will be
of the mechanical type made with a crimp type connector. A one hole
copper ground lug will be used for equipment connections. An
oxidizing preventative compound will be applied to all mechanical
connections, and paint will be removed as necessary to insure
positive bonding of all grounded equipment.
All external, buried connections will be of the exothermically
welded type. These include, but are not limited to, halo drops to
ground rod, buried ground ring to ground rod, halo drops to ground
ring, service entrance ground to ground rod.
5.1.4. Wire
All equipment grounds will be #6 AWG. Circuit grounding conductors
will be no more than two wire sizes smaller than the current
carrying conductors of the same circuit (minimum #12 AWG). All
external ground wire, including but not limited to the external
ground ring and external halo drops, will be #2 AWG solid tinned
copper.
5.2 Interior Grounding
5.2.1. Halo Ground
The halo ground will consist of a minimum #2 AWG wire located 3" to
12", below the finished ceiling, and will completely encircle the
equipment room. The wire will be green insulated stranded copper,
bare stranded copper, or bare tinned solid copper. Each corner of
the equipment room will have an omni-directional drop to the floor
of the same wire size and type as the halo ring. Connection of these
drops to the halo will be at least the defined minimum (see section
5.1.3). If solid tinned wire is used, the drop will be one
continuous wire that is long enough to extend 8 feet beyond the
exterior of the shelter. If insulated wire is used, the drop will
extend to the floor, and then be connected in the same manner as the
halo, to an 8 foot length of solid tinned wire of the same size. The
exterior penetrations will be at 45 degree angles (to minimize
ground drop bend radii) and approximately one (1) inch in diameter.
5.2.2. Waveguide Entry Ground Bar
There will be a 1/4" x 4" x 20" (minimum) copper ground bar located
outside the shelter approximately 6" below the waveguide entry plate
(NEC Sec 800-33). This bar will be connected to the exterior ground
ring exothermic weld. The grounding conductor will be of the same
size and type as the halo ring.
A-39
<PAGE>
5.2.3. AC Service
The AC service ground conductor will be bonded to the ground rod
located at the service entrance. Ground lugs provided in all service
entrance equipment will be bonded to the service ground conductor.
The system ground and neutral will be bonded at one location, as
close as practicable to the service entrance. All service grounding
shall conform to Article 250 of the National Electrical Code.
5.2.4. Primary Surge Arrester
There will be a surge protective device applied at the first piece
of service equipment inside the equipment shelter. This device will
be considered the primary surge protector. Conductors connecting the
surge protective device will be as short as possible, and will
contain no sharp bends or loops.
The operating characteristics of the primary surge arrester will
coordinate with the equipment surge withstand voltage capabilities.
The surge arrester should be capable of suppressing up to 65kVA, be
self restoring after operation, and may be equipped with a failure
alarm over current protective device and visual status indicators.
5.2.5. Cable Ladder
Cable ladder assemblies will be bonded to the halo ring with a #6
AWG or larger ground conductor. All cable ladder splices and
junctions will be bonded on at least one side with a #6 AWG or
larger conductor, and use grounding clips suitable for the purpose.
Paint will be removed as necessary for an electrically sound
connection.
5.2.6. Conduit Grounding
Each conduit discontinuity, including but not limited to conduit
couplings, junction boxes, light fixtures, and service equipment,
will be provided with ground clamps to electrically bond the
conduit. The bonding wire will be green insulated #6 AWG or larger.
5.2.7. Tower Light Controller Penetration
There will be a 1-1/2" penetration cast in place near the waveguide
entry port to allow for connection of the tower light controller.
The penetration will be lined with a 1" PVC running thread to
provide isolation between the interior and exterior conduit. The
running thread will be connected to interior and waterproof exterior
6" x 6" junction boxes.
A-40
<PAGE>
5.3. Exterior Grounding
5.3.1. Ground Rods
There will be driven ground rods located at each corner of the
building, and at the AC service entrance and waveguide entry port.
These rods will be made of copper clad high strength steel with
minimum dimensions of 5/8" x 8'. The rods will be located at least
24" from the edge of the foundations, and driven such that the top
of the rod is below the frost line of the installation site. The
rods will be exothermically welded to the external halo drops.
5.3.2. Ground Ring
There will be a buried horizontal wire completely encircling the
equipment shelter. This wire will be solid tinned copper wire of #2
AWG or larger. The ground ring will not be closer than 24" from the
shelter foundations, and will be exothermically welded to each
ground rod. The ring will be buried 30" below grade or below the
frost line of the installation, whichever is greater.
The ground ring will be connected to the tower ground system from
the ground rod located at the waveguide port to the nearest ground
rod of the tower system. A second connection will be made from a rod
at a corner of the shelter to an alternate rod of the tower. These
connections will be made with a #2 AWG wire, or a wire of the same
size as the tower ground ring, whichever is larger.
5.3.3. Testing
The external ground system will be tested after installation, and
its resistance to earth ground will be less than 10 ohms. It is
recommended that tests be performed twice a year to insure ground
system integrity.
Biddle Instruments Model DET2/2 Digital Ground Tester, or
equivalent, will be used for testing and all manufacturers'
instructions will be followed.
A-41
<PAGE>
EXHIBIT A-7
NETWORK INTERCONNECTIONS SCHEDULE
<TABLE>
<CAPTION>
SYSTEM SITE CODE OTHER SYSTEM SITE CODE HEIGHT AZIMUTH
- ---------------- ---------------------- ------ -------
<S> <C> <C> <C>
</TABLE>
[TO BE AMENDED BY THE PARTIES]
A-42
<PAGE>
EXHIBIT A-8
SYSTEM SPURS
PATHNET SPURS
The System shall contain the following spurs as amended from
time-to-time, which shall be installed and operated for Pathnet's network
purposes:
<TABLE>
<CAPTION>
Facility Name Latitude Longitude Spur to:
- ------------- -------- --------- --------
<S> <C> <C> <C>
Segment A
Hansen Butte 42-29-35 114-13-47 Future
Bonneville Point 43-29-17 116-01-45 Future
LaGrande Relay 45-13-03 118-00-00 Future
Segment B
Kinport 42-53-36 112-33-31 Future
</TABLE>
LLC SPURS
The System shall contain the following spurs as amended from
time-to-time, which shall be installed and operated for LLC's internal
communications needs:
<TABLE>
<CAPTION>
Facility Name Latitude Longitude Spur to:
- ------------- -------- --------- --------
<S> <C> <C> <C>
</TABLE>
A-43
<PAGE>
EXHIBIT A-9
CERTIFICATE OF ACCEPTANCE
The undersigned, _____________________, who is ___________________ of
Pathnet/Idaho Power Equipment LLC, an Idaho limited liability corporation
("LLC") hereby certifies as follows:
1. LLC has received from Pathnet, Inc., a Delaware corporation ("Pathnet")
the results of all acceptance testing performed pursuant to Section 5 of
Schedule A of the Fixed Point Microwave Services Agreement between Pathnet and
LLC (the "FPM Agreement").
2. LLC has reviewed the results of such acceptance testing and hereby
acknowledges that the System (as defined in the FPM Agreement), as tested,
performs in accordance the Specifications, as set forth in the FPM Agreement.
3. If and to the extent within one (1) year after Commissioning acceptance
testing pursuant to Section 5 of Schedule A, the results from the Network
Monitoring Center indicate operations below Specifications, which deficiencies
in operations are, in the reasonable opinion of an independent third party, the
results of design deficiencies, LLC shall have the right to request performance
of additional design review, the scope of which review will be agreed to by the
Parties.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Acceptance as of the ___ of ___, 199__.
-----------------------------
A-44
<PAGE>
EXHIBIT A-10
STATEMENT OF WORK
A. GENERAL
1) SITE ACQUISITION
Incumbent is responsible for obtaining usage permits/permission for all
property that is required to implement all new construction. The
assumption has been made that Incumbent will obtain the necessary land for
the proposed new towers and shelters. The sites that are of particular
concern are: Mountain Home, Squaw Butte, Payette, LaGrande, and Cotterel
Mtn. In cases where existing structures are to be re-used Incumbent will
obtain necessary building permits for the work effort required. The sites
in question are Pocatello, Kinport, Twin Falls, Boise HQ and Payette.
A-45
<PAGE>
SEGMENT A
B. HANSEN BUTTE
1) SITE WORK
Site work (grading/leveling) required to prepare site for installation of new
tower and shelter with foundations. Existing fencing will need to be removed and
extended to include new construction area.
2) TOWERS
Installing a new 130' self-supporting tower/foundation and appropriate waveguide
bridge. Installation based on normal soil.
3) BUILDINGS
Installing new shelter/foundation. LLC or Incumbent to provide 200A power to
within 50' of new shelter location.
4) GENERATORS
No generator required at this time.
5) DC PLANT
New DC Power bay (dual 50A) and 700AH battery plant is to be provided at this
location.
6) ANTENNAS
One 8' UHX antenna (Twin Falls), two 10' UHX antennas (Cotterel Mtn.) and two
10' UHX antennas (Lower Salmon) are being provided.
7) WAVEGUIDE
570' of waveguide with accessories provided.
8) RADIO
Non Space-Diversity Terminal (Twin Falls) and Space-Diversity repeater (Cotterel
Mtn. & Lower Salmon).
9) MULTIPLEX
New OC-3 Terminal. 28 DSI (28 wired. 12 equipped).
New OC-3 ADM, 28 DSI (28 wired, 12 equipped).
10) MISCELLANEOUS EQUIPMENT
Orderwire, Alarm, Interconnect, Fuse Panel.
A-46
<PAGE>
C. TWIN FALLS
1) SITE WORK
No site work is required. Location inside of a downtown Dispatch yard belonging
to Incumbent.
2) TOWERS
Project Scope to use existing tower if analysis proves it is adequate.
3) BUILDINGS
Project Scope to locate new equipment in existing building. Incumbent or LLC to
provide space in radio room with computer flooring. Incumbent will also provide
space in basement for DC plant installation and DC breaker in the radio room.
4) GENERATORS
No generator required at this time.
5) DC PLANT
New DC Power bay (dual 50A) and 700AH battery plant is to be provided at this
location.
6) ANTENNAS
One 8' UHX antenna (Hansen Butte) is provided.
7) WAVEGUIDE
100' of waveguide with accessories provided.
8) RADIO
Non Space-diversity Terminal (Hansen Butte).
9) MULTIPLEX
New OC-3 Terminal, 28 DS1 (28 wired, 12 equipped)
10) MISCELLANEOUS EQUIPMENT
Orderwire, Alarm, Interconnect, Fuse Panel.
A-47
<PAGE>
D. LOWER SALMON
1) SITE WORK
Site work (grading/leveling) required to prepare site for installation of new
tower and shelter with foundations. Access to site is over dirt road thru
farmland and needs to be graded prior to commencement of work efforts.
2) TOWERS
Installing a new 80' self-supporting tower/foundation and appropriate waveguide
bridge. Installation based on normal soil.
3) BUILDINGS
Installing new shelter/foundation. Incumbent or LLC to provide 200A power to
within 50' of new shelter location.
4) GENERATORS
Providing and installing a 35KW generator and associated Transfer Panel. Budget
pricing only includes materials and efforts to install the generator in the
shelter and stub the piping to just outside the shelter at a provided second
stage regulator. The cost for the propane tank, necessary piping, first stage
regulator and all associated installation and testing is not included.
5) DC PLANT
New DC Power bay (dual 50A) and 700AH battery plant is to be provided at this
location.
6) ANTENNAS
Two 10' UHX antennas (Hansen Butte) and two 10' UHX antennas (Mountain Home) are
being provided.
7) WAVEGUIDE
300' of waveguide with accessories provided.
8) RADIO
Space-Diversity Repeater (Hansen Butte & Mountain Home).
9) MULTIPLEX
N/A
10) MISCELLANEOUS EQUIPMENT
Orderwire, Alarm, Interconnect, Fuse Panel.
A-48
<PAGE>
E. MOUNTAIN HOME
I) SITE WORK
Site work required to prepare site for installation of new tower and shelter.
Incumbent or LLC to acquire property (BLM) to the immediate west of existing
shelter/tower needed thru lease. Change in location will effect the site work
pricing exhibit.
2) TOWERS
Installing a new 60' self-supporting tower/foundation and appropriate waveguide
bridge. Installation based on normal soil.
3) BUILDINGS
Installing new shelter/foundation. Incumbent or LLC to provide 200A power to
within 50' of new shelter location.
4) GENERATORS
No generator required at this time.
5) DC PLANT
New DC Power bay (dual 50A) and 700AH battery plant is to be provided at this
location.
6) ANTENNAS
Two 8' UHX antennas (Lower Salmon) and two 8' UHX antennas (Bonneville Point)
are being provided.
7) WAVEGUIDE
280' of waveguide with accessories provided.
8) RADIO
Space-Diversity Repeater (Lower Salmon & Bonneville Point).
9) MULTIPLEX
N/A
10) MISCELLANEOUS EQUIPMENT
Orderwire, Alarm, Interconnect, Fuse Panel.
A-49
<PAGE>
F. BONNEVILLE POINT
1) SITE WORK
Site work required to prepare site for installation of new tower and shelter.
Incumbent or LLC to acquire property.
2) TOWERS
Installing a new 80' self-supporting tower/foundation and appropriate waveguide
bridge. Installation based on normal soil.
3) BUILDINGS
Installing new shelter/foundation. Incumbent or LLC to provide 200A power to
within 50' of new shelter location.
4) GENERATORS
No generator required at this time.
5) DC PLANT
New DC Power bay (dual 50A) and 700AH battery plant is to be provided at this
location.
6) ANTENNAS
Two 8' UHX antenna (Squaw Butte), two 8' UHX antennas (Mountain Home), one 8'
11GHz (CHQB) are being provided.
7) WAVEGUIDE
430' of waveguide with accessories provided.
8) RADIO
Space-Diversity, 6GHz Terminals (Mountain Home & Squaw Butte), Non Space-
diversity 11GHz Terminal (CHQB).
9) MULTIPLEX
New OC-3 Terminal, 28 DS1 (28 wired, 12 equipped).
New OC-3 ADM, 28 DS1 (28 wired, 12 equipped).
10) MISCELLANEOUS EQUIPMENT
Orderwire, Alarm, Interconnect, Fuse Panel.
A-50
<PAGE>
G. BOISE HQ
1) SITE WORK
No site work is required. Location at a downtown Office building belonging to
Incumbent.
2) TOWERS
Project Scope to wall mount antenna on penthouse on roof.
3) BUILDINGS
Project Scope to locate new equipment in existing building. Incumbent or LLC to
provide space in radio room with computer flooring.
4) GENERATORS
No generator required at this time.
5) DC PLANT
New DC Power bay (dual 50A) and 700AH battery plant is to be provided at this
location.
6) ANTENNAS
One 8' UHX, 11GHz antenna (Bonneville Point) is provided.
7) WAVEGUIDE
172' of waveguide with accessories provided. Waveguide run to be stripped of
jacketing for run thru plenum areas within building.
8) RADIO
Non Space-diversity Terminal (Bonneville Point).
9) MULTIPLEX
New OC-3 Master Terminal, 28 DS1 (28 wired, 12 equipped).
10) MISCELLANEOUS EQUIPMENT
Orderwire, Alarm, Interconnect, Fuse Panel.
A-51
<PAGE>
H. SQUAW BUTTE
1) SITE WORK
Site work required to prepare site for installation of new tower and shelter.
Extensive grading and leveling required. Access is up a winding narrow road.
Incumbent or LLC to acquire property (BLM) to the immediate northwest of
existing shelter/tower needed thru lease. Change in location will significantly
effect the site work pricing exhibit. Approval from adjacent fire lookout
station will be necessary for planned construction.
2) TOWERS
Installing a new 100' self-supporting tower/foundation and appropriate waveguide
bridge. Installation based on normal soil and location is sensitive.
3) BUILDINGS
Installing new shelter/foundation (it is possible that a new structure may need
to be built on-site). Incumbent or LLC to provide 200A power to within 50' of
new shelter location. Installation location is sensitive.
4) GENERATORS
Providing and installing a 35KW generator and associated Transfer Panel. Budget
pricing only includes materials and efforts to install the generator in the
shelter and stub the piping to just outside the shelter at a provided second
stage regulator. The cost for the propane tank, necessary piping, first stage
regulator and all associated installation and
testing is not included.
5) DC PLANT
New DC Power bay (dual 50A) and 700AH battery plant is to be provided at this
location.
6) ANTENNAS
Two 8' UHX antennas (Bonneville Point) and two 8' UHX antennas (Payette) are
being provided.
7) WAVEGUIDE
420' of waveguide with accessories provided.
8) RADIO
Space-Diversity Repeater (Bonneville Point & Payette).
9) MULTIPLEX
New OC-3 ADM, 28 DSI (28 wired, 12 equipped).
10) MISCELLANEOUS EQUIPMENT
Orderwire, Alarm, Interconnect, Fuse Panel.
A-52
<PAGE>
I. PAYETTE
1) SITE WORK
Site work required to prepare site for installation of new tower and shelter.
Incumbent or LLC to provide space for construction in vehicle repair bay at the
rear of parking area. Tower to be located to the northwest of garage area. Area
of construction is inside Dispatch yard. Change in location will significantly
effect the site work pricing exhibit.
2) TOWERS
Installing a new 120' self-supporting tower/foundation and appropriate waveguide
bridge. Installation based on normal soil and location is sensitive due to
apparent obstruction from Clay Peak. The 120' height is an estimate, path study
is required to determine actual required height.
3) BUILDINGS
Installing new equipment room in garage bay. Incumbent or LLC to provide 200A
power to new location. Installation location is sensitive and does not account
for any major construction to adapt to existing heating and air conditioning
duct work.
4) GENERATORS
No generator required at this time.
5) DC PLANT
New DC Power bay (dual 50A) and 700AH battery plant is to be provided at this
location.
6) ANTENNAS
Two 8' UHX antennas (Squaw Butte) and two 8' UHX antennas (Lime) are being
provided.
7) WAVEGUIDE
420' of waveguide with accessories provided.
8) RADIO
Space-Diversity Repeater (Squaw Butte & Lime).
9) MULTIPLEX
New OC-3 ADM, 28 DS1 (28 wired, 12 equipped).
10) MISCELLANEOUS EQUIPMENT
Orderwire, Alarm, Interconnect, Fuse Panel.
A-53
<PAGE>
J. LIME
1) SITE WORK
Site work (grading/leveling) required to prepare site for installation of new
tower and shelter with foundations. Access to site is over gravel and dirt
roads. The road is winding and steep at various locations and needs to be graded
prior to commencement of work efforts.
2) TOWERS
Installing a new 60' self-supporting tower/foundation and appropriate waveguide
bridge. Installation based on normal soil.
3) BUILDINGS
Access prohibits the delivery of a pre-fabricated shelter so a new shelter will
need to be built on-site. Incumbent or LLC to provide 200A power to within 50'
of new shelter location.
4) GENERATORS
Providing and installing a 35KW generator and associated Transfer Panel. Budget
pricing only includes materials and efforts to install the generator in the
shelter and stub the piping to just outside the shelter at a provided second
stage regulator. The cost for the propane tank, necessary piping, first stage
regulator and all associated installation and testing is not included.
5) DC PLANT
New DC Power bay (dual 50A) and 700 AH battery plant is to be provided at this
location.
6) ANTENNAS
Two 8' UHX antennas (Payette) and two 8' UHX antennas (Baker) are being
provided.
7) WAVEGUIDE
260' of waveguide with accessories provided.
8) RADIO
Space-Diversity Repeater (Payette & Baker).
9) MULTIPLEX
N/A
10) MISCELLANEOUS EQUIPMENT
Orderwire, Alarm, Interconnect, Fuse Panel.
A-54
<PAGE>
K. BAKER
1) SITE WORK
Site work (grading/leveling) required to prepare site for installation of new
tower and shelter with foundations. Access to site is over gravel and dirt
roads. The road is winding and steep at various locations and needs to be graded
prior to commencement of work efforts. Also, access is hampered by a long (160')
narrow underpass (12'w x 13'- 6"h) that will not allow large vehicles to get to
the site.
2) TOWERS
Installing a new 60' self-supporting tower/foundation and appropriate waveguide
bridge. Installation based on normal soil.
3) BUILDINGS
Access prohibits the delivery of a pre-fabricated shelter so a new shelter will
need to be built on-site. Incumbent or LLC to provide 200A power to within 50'
of new shelter location.
4) GENERATORS
Providing and installing a 35KW generator and associated Transfer Panel. Budget
pricing only includes materials and efforts to install the generator in the
shelter and stub the piping to just outside the shelter at a provided second
stage regulator. The cost for the propane tank, necessary piping, first stage
regulator and all associated installation and testing is not included.
5) DC PLANT
New DC Power bay (dual 50A) and 700AH battery plant is to be provided at this
location.
6) ANTENNAS
Two 8' UHX antennas (Lime) and two 8' UHX antennas (LaGrande Relay) are being
provided.
7) WAVEGUIDE
360' of waveguide with accessories provided.
8) RADIO
Space-Diversity Repeater (Lime & LaGrande Relay).
9) MULTIPLEX
N/A
10) MISCELLANEOUS EQUIPMENT
Orderwire, Alarm, Interconnect, Fuse Panel.
A-55
<PAGE>
L. LaGRANDE RELAY
1) SITE WORK
Site work (grading/leveling) required to prepare site for installation of new
tower and shelter with foundations. Access to site is over very rocky and dirt
roads thru pasture land. The road is winding and steep at various locations and
needs to be graded prior to commencement of work efforts. Also, access is
hampered by narrow fence gates that will need to be removed/replaced to allow
large vehicles to get to the site.
2) TOWERS
Installing a new 60' self-supporting tower/foundation and appropriate waveguide
bridge. Installation based on normal soil.
3) BUILDINGS
Access prohibits the delivery of a pre-fabricated shelter so a new shelter will
need to be built on-site. Incumbent or LLC to provide 200A power to within 50'
of new shelter location.
4) GENERATORS
Providing and installing a 35KW generator and associated Transfer Panel. Budget
pricing only includes materials and efforts to install the generator in the
shelter and stub the piping to just outside the shelter at a provided second
stage regulator. The cost for the propane tank, necessary piping, first stage
regulator and all associated installation and testing is not included.
5) DC PLANT
New DC Power bay (dual 50A) and 700AH battery plant is to be provided at this
location.
6) ANTENNAS
Two 8' UHX antennas (Baker) and one 8' UHX antenna (LaGrande) are being
provided.
7) WAVEGUIDE
265' of waveguide with accessories provided.
8) RADIO
Non Space-Diversity Terminal (LaGrande) and Space-Diversity Terminal (Baker).
9) MULTIPLEX
New OC-3 ADM, 28 DS1 (28 wired, 12 equipped).
10) MISCELLANEOUS EQUIPMENT
Orderwire, Alarm, Interconnect, Fuse Panel.
A-56
<PAGE>
M. LaGRANDE
1) SITE WORK
No site work is required. Location inside of a substation yard belonging to
Incumbent.
2) TOWERS
Installing a new 25' monopole/foundation.
3) BUILDINGS
Installing new shelter/foundation. Incumbent or LLC to provide 200A power to
within 50' of new shelter location.
4) GENERATORS
No generator required at this time.
5) DC PLANT
New DC Power bay (dual 50A) and 700AH battery plant is to be provided at this
location.
6) ANTENNAS
One 8' UHX antenna (LaGrande Relay) is provided.
7) WAVEGUIDE
55' of waveguide with accessories provided.
8) RADIO
Non Space-diversity Terminal (LaGrande Relay).
9) MULTIPLEX
New OC-3 Terminal, 28 DS1 (28 wired, 12 equipped).
10) MISCELLANEOUS EQUIPMENT
Orderwire, Alarm, Interconnect, Fuse Panel.
A-57
<PAGE>
SEGMENT B
A. POCATELLO
1) SITE WORK
No site work is required. Location inside of a downtown Dispatch yard belonging
to Incumbent or LLC. No access issues.
2) TOWERS
Project Scope to use existing tower if analysis proves it is adequate.
3) BUILDINGS
Planning to locate new equipment in existing building. Incumbent or LLC to clear
out current storage area for use and provide adequate power. Area provided will
require new overhead cable tray and electrical work for AC power to DC plant
and necessary lighting/outlets. Additional Air Conditioning is not planned at
this time.
4) GENERATORS
No generator required at this time.
5) DC PLANT
New DC Power bay (dual 50A) and 700AH battery plant is to be provided at this
location.
6) ANTENNAS
One 8' UHX antenna (Kinport thru passive repeater) is provided.
7) WAVEGUIDE
142' of waveguide with accessories provided.
8) RADIO
Non Space-diversity Terminal to Kinport thru passive repeater.
9) MULTIPLEX
New OC-3 Terminal, 28 DS1 (28 wired, 12 equipped).
10) MISCELLANEOUS EQUIPMENT
Orderwire, Alarm, Interconnect, Fuse Panel.
A-58
<PAGE>
B. POCATELLO PASSIVE REPEATER
1) SITE WORK
N/A
2) TOWERS
N/A
3) BUILDINGS
N/A
4) GENERATORS
N/A
5) DC PLANT
N/A
6) ANTENNAS
Utilizing the existing 30' x 48' Passive Reflector. Only minor adjustment, if
any, should be required.
7) WAVEGUIDE
N/A
8) RADIO
N/A
9) MULTIPLEX
N/A
10) MISCELLANEOUS EQUIPMENT
N/A
A-59
<PAGE>
C. KINPORT
1) SITE WORK
Site work (grading/leveling) required to prepare site for installation of new
tower/foundation to the north of the existing tower. Any underground cabling
concerns must be addressed prior to commencing activities. Also, overhead power
lines may provide some interference, as well as safety concerns, with tower
erection
2) TOWERS
Installing a new 120' self-supporting tower and appropriate waveguide bridge.
Installation based on normal soil.
3) BUILDINGS
Planning to locate new equipment in existing building. Incumbent or LLC to clear
out current radio room to accommodate new equipment. Customer will also clear
basement storage area for use as a DC plant location and provide DC breaker in
radio room. Radio room will not require any additional air conditioning as the
new equipment will be installed in place of existing equipment to be removed.
4) GENERATORS
No generator required at this time.
5) DC PLANT
New DC Power bay (dual 50A) and 700AH battery plant is to be provided at this
location.
6) ANTENNAS
One 8' UHX antenna (Pocatello thru passive) and two 8' UHX antennas (American
Falls) are being provided.
7) WAVEGUIDE
365' of waveguide with accessories provided.
8) RADIO
Non Space-Diversity Terminal 6GHz (Pocatello thru passive) and Space-Diversity
Terminal 11GHz (American Falls).
9) MULTIPLEX
New 0C-3 ADM, 28 DS1 (28 wired, 12 equipped).
10) MISCELLANEOUS EQUIPMENT
Orderwire, Alarm, Interconnect, Fuse Panel.
A-60
<PAGE>
D. AMERICAN FALLS RELAY
1) SITE WORK
Site work (grading/leveling) required to prepare site for installation of new
tower and shelter with foundations.
2) TOWERS
Installing a new 60' self-supporting tower/foundation and appropriate waveguide
bridge. Installation based on normal soil.
3) BUILDINGS
Installing new shelter/foundation. Incumbent or LLC to provide 200A power to
within 50' of new shelter location.
4) GENERATORS
No generator required at this time.
5) DC PLANT
New DC Power bay (dual 50A) and 700AH battery plant is to be provided at this
location.
6) ANTENNAS
Two 8' 11GHz UHX antennas (Kinport) and two 8' 6GHz UHX antennas (Cotterel Mtn.)
are being provided.
7) WAVEGUIDE
280' of waveguide with accessories provided.
8) RADIO
Space-Diversity Terminals (Kinport, 11GHz & Cotterel Mtn., 6GHz).
9) MULTIPLEX
New OC-3 ADM, 28 DS1 (28 wired, 12 equipped).
10) MISCELLANEOUS EQUIPMENT
Orderwire, Alarm, Interconnect, Fuse Panel.
A-61
<PAGE>
E. COTTEREL MTN.
1) SITE WORK
Site work (grading/leveling) required to prepare site for installation of new
tower and shelter with foundations. No power and access to the sites is provided
by Incumbent at this time.
2) TOWERS
Installing a new 60' self-supporting tower/foundation and appropriate waveguide
bridge. Installation based on normal soil.
3) BUILDINGS
Installing new shelter/foundation. Incumbent or LLC to provide 200A power to
within 50' of new shelter location.
4) GENERATORS
Providing and installing a 35KW generator and associated Transfer Panel. Budget
pricing only includes materials and efforts to install the generator in the
shelter and stub the piping to just outside the shelter at a provided second
stage regulator. The cost for the propane tank, necessary piping, first stage
regulator and all associated installation and testing is not included.
5) DC PLANT
New DC Power bay (dual 50A) and 700AH battery plant is to be provided at this
location.
6) ANTENNAS
Two 8' UHX antennas (Kinport) and two 8' UHX antennas (Hansen Butte) are being
provided.
7) WAVEGUIDE
280' of waveguide with accessories provided.
8) RADIO
Space-Diversity Repeater (Kinport & Hansen Butte).
9) MULTIPLEX
N/A
10) MISCELLANEOUS EQUIPMENT
Orderwire, Alarm, Interconnect, Fuse Panel.
A-62
<PAGE>
SCHEDULE B
THE SYSTEM
Segment A
Segment A extends from LaGrande, Oregon to Twin Falls, Idaho, with
Facilities at the sites listed below.
SEGMENT A
<TABLE>
<CAPTION>
Facility Name Latitude Longitude Path to:
- ------------- -------- --------- --------
<S> <C> <C> <C>
Hansen Butte 42-29-35 114-13-47 Lower Salmon
Twin Falls
Twin Falls 42-32-43 114-27-32 Hansen Butte
Lower Salmon 42-51-05 114-54-47 Hansen Butte
Mountain Home
Mountain Home 43-12-18 115-33-49 Lower Salmon
Bonneville Point
Bonneville Point 43-29-17 116-01-45 Squaw Butte
Boise HQ
Mountain Home
Boise HQ 43-37-08 116-12-25 Bonneville Point
Squaw Butte 44-00-13 116-24-38 Bonneville Point
Payette
Payette 44-03-25 116-55-32 Squaw Butte
Lime
Lime 44-25-54 117-14-54 Payette
Baker
Baker 44-44-19 117-44-45 Lime
LaGrande Relay
LaGrande Relay 45-13-03 118-00-00 Baker LaGrande
</TABLE>
B-1
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
LaGrande 45-18-46 118-04-13 LaGrande Relay
</TABLE>
Segment B
LLC Segment B extends from Hanson Butte, Idaho to Pocatello, Idaho, with
Facilities at the sites listed below. Such Facilities are subject to change
pursuant to Section 3.1.5 of the Agreement.
SEGMENT B
<TABLE>
<CAPTION>
Facility Name Latitude Longitude Path to:
- ------------- -------- --------- --------
<S> <C> <C> <C>
Pocatello 42-51-38 112-26-26 Pocatello P.R.
Pocatello P.R. 42-55-14 112-20-44 Pocatello
Kinport
Kinport 42-53-36 112-33-31 Pocatello P.R.
American Falls
American Falls 42-45-25 112-48-38 Kinport
Cotteral Mtn.
Cotteral Mtn. 42-23-55 113-27-54 American Falls
Hansen Butte
Hansen Butte 42-29-35 114-13-47 Cotteral Mtn.
</TABLE>
B-2
<PAGE>
SCHEDULE C
ESTIMATED COSTS
SECTION 1. LLC ESTIMATED COSTS FOR LLC ITEMS
The LLC Estimated Costs shall be allocated as follows, as detailed in
Exhibit C-1:
Segment A
<TABLE>
<CAPTION>
Item Estimated Cost
- ---- --------------
<S> <C>
SITE SURVEY [***]
SITE WORK [***]
TOWERS [***]
BUILDINGS [***]
GENERATORS [***]
D.C. PLANT [***]
PROJECT ENGINEERING [***]
LLC ESTIMATED COSTS [***]
</TABLE>
Segment B
<TABLE>
<CAPTION>
Item Estimated Cost
- ---- --------------
<S> <C>
SITE SURVEY [***]
SITE WORK [***]
TOWERS [***]
BUILDINGS [***]
GENERATORS [***]
D.C. PLANT [***]
PROJECT ENGINEERING [***]
LLC ESTIMATED COSTS [***]
LLC TOTAL ESTIMATED COSTS [***]
</TABLE>
C-1
<PAGE>
SECTION 2. PATHNET ESTIMATED COSTS FOR PATHNET ITEMS
The Pathnet Estimated Costs shall be allocated as follows as defined in
Exhibit C-2:
Segment A
<TABLE>
<CAPTION>
Item Estimated Cost
- ---- --------------
<S> <C>
PCN COORDINATION [***]
PROTECT RADIOS [***]
PATH ENGINEERING [***]
FCC LICENSE APPLICATION [***]
SYSTEM ENGINEERING [***]
PATHNET ESTIMATED COSTS [***]
</TABLE>
Segment B
<TABLE>
<CAPTION>
Item Estimated Cost
- ---- --------------
<S> <C>
PCN COORDINATION [***]
PROTECT RADIOS [***]
PATH ENGINEERING [***]
FCC LICENSE APPLICATION [***]
SYSTEM ENGINEERING [***]
PATHNET ESTIMATED COSTS [***]
PATHNET TOTAL ESTIMATED [***]
COSTS
</TABLE>
C-2
<PAGE>
EXHIBIT C-1
LLC ESTIMATED COSTS DETAIL
SEGMENT A
<TABLE>
<CAPTION>
HANSEN TWIN FALLS LWR. MTN. HOME BONNEVILLE CHQB
BUTTE SALMON
<S> <C> <C> <C> <C> <C> <C>
SITE SURVEY
Site Survey [***]
Taxes [***]
SITE SURVEY [***]
SITE WORK
Soil Reports [***]
Site Clearing/Level [***]
Fence & Gate Mods [***]
Road Const/Repair [***]
Taxes [***]
SITE WORK [***]
TOWERS
Tower/Building [***]
Analysis [***]
New Tower [***]
Tower Strength Material [***]
Tower Labor [***]
Waveguide Bridge [***]
Tower Ground [***]
Freight [***]
Taxes [***]
TOWERS [***]
BUILDINGS
Exist Bldg. Mods [***]
New Building [***]
New Bldg Delivery [***]
New Bldg Foundation [***]
Building Ground [***]
AC Power [***]
Freight (incl. in Bldg [***]
Delivery)
Taxes [***]
BUILDINGS [***]
GENERATORS
25KW MOBILE [***]
35KW [***]
Transfer Panel [***]
Install & Test Labor [***]
Freight [***]
Taxes [***]
GENERATORS [***]
D.C. PLANT
Chargers [***]
Chargers Spares [***]
Batteries [***]
Power Board/Panel [***]
Install & Test Labor [***]
Freight [***]
Taxes [***]
D.C. PLANT [***]
PROJECT ENGINEERING [***]
</TABLE>
C-3
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
LLC ESTIMATED COSTS [***]
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
SQUAW PAYETTE LIME BAKER LA GRANDE LA GRANDE TOTAL
BUTTE RLY
<S> <C> <C> <C> <C> <C> <C> <C>
SITE SURVEY
Site Survey [***]
Taxes [***]
SITE SURVEY [***]
SITE WORK
Soil Reports [***]
Site Clearing/Level [***]
Fence & Gate Mods [***]
Road Const/Repair [***]
Taxes [***]
SITE WORK [***]
TOWERS
Tower/Building [***]
Analysis [***]
New Tower [***]
Tower Strength [***]
Material [***]
Tower Labor [***]
Waveguide Bridge [***]
Tower Ground [***]
Freight [***]
Taxes [***]
TOWERS [***]
BUILDINGS
Exist Bldg. Mods [***]
New Building [***]
New Bldg Delivery [***]
New Bldg Foundation [***]
Building Ground [***]
AC Power [***]
Freight (incl. in Bldg [***]
Delivery) [***]
Taxes [***]
BUILDINGS [***]
GENERATORS
25KW MOBILE [***]
35KW [***]
Transfer Panel [***]
Install & Test Labor [***]
Freight [***]
Taxes [***]
GENERATORS [***]
D.C. PLANT
Chargers [***]
Chargers Spares [***]
Batteries [***]
Power Board/Panel [***]
Install & Test Labor [***]
Freight [***]
Taxes [***]
D.C. PLANT [***]
PROJECT ENGINEERING [***]
LLC ESTIMATED COSTS [***]
</TABLE>
C-5
<PAGE>
SEGMENT B
<TABLE>
<CAPTION>
POCATELLO POCATELLO KINPORT AMER. FALLS COTTEREL
PR MTN.
<S> <C> <C> <C> <C> <C>
SITE SURVEY
Site Survey [***]
SITE SURVEY [***]
SITE WORK
Soil Reports [***]
Site Clearing/Level [***]
Fence & Gate Mods [***]
Road Const/Repair [***]
SITE WORK [***]
TOWERS
Tower/Building [***]
Analysis [***]
New Tower [***]
Tower Strength Material [***]
Tower Labor [***]
Waveguide Bridge [***]
Tower Ground [***]
Freight [***]
TOWERS [***]
BUILDINGS
Exist Bldg. Mods [***]
New Building [***]
New Bldg Delivery [***]
New Bldg Foundation [***]
Building Ground [***]
AC Power [***]
Freight (incl. in Bldg [***]
Delivery) [***]
BUILDINGS [***]
GENERATORS
25KW MOBILE [***]
35KW [***]
Transfer Panel [***]
Install & Test Labor [***]
Freight [***]
GENERATORS [***]
D.C. PLANT
Chargers [***]
Chargers Spares [***]
Batteries [***]
Power Board/Panel [***]
Install & Test Labor [***]
Freight [***]
D.C. PLANT [***]
PROJECT ENGINEERING [***]
LLC ESTIMATED COSTS [***]
</TABLE>
C-6
<PAGE>
<TABLE>
<CAPTION>
HANSEN TOTAL
BUTTE
<S> <C> <C>
SITE SURVEY
Site Survey [***]
SITE SURVEY [***]
SITE WORK
Soil Reports [***]
Site Clearing/Level [***]
Fence & Gate Mods [***]
Road Const/Repair [***]
SITE WORK [***]
TOWERS
Tower/Building [***]
Analysis
New Tower [***]
Tower Strength [***]
Material
Tower Labor [***]
Waveguide Bridge [***]
Tower Ground [***]
Freight [***]
TOWERS [***]
BUILDINGS
Exist Bldg. Mods [***]
New Building [***]
New Bldg Delivery [***]
New Bldg Foundation [***]
Building Ground [***]
AC Power [***]
Freight (incl. in Bldg [***]
Delivery)
BUILDINGS [***]
GENERATORS
25KW MOBILE [***]
35KW [***]
Transfer Panel [***]
Install & Test Labor [***]
Freight [***]
GENERATORS [***]
D.C. PLANT
Chargers [***]
Chargers Spares [***]
Batteries [***]
Tower Board/Panel [***]
Install & Test Labor [***]
Freight [***]
D.C. PLANT [***]
PROJECT ENGINEERING [***]
LLC ESTIMATED COSTS [***]
</TABLE>
C-7
<PAGE>
EXHIBIT C-2
PATHNET ESTIMATED COSTS DETAIL
SEGMENT A
<TABLE>
<CAPTION>
HANSEN TWIN FALLS LWR. MTN. HOME BONNEVILLE CHQB
BUTTE SALMON
<S> <C> <C> <C> <C> <C> <C>
PCN COORDINATION
PCN Coordination [***]
PCN COORDINATION [***]
RADIOS (PROTECT)
1:1 Terminal: 2 & 3 Way [***]
1:1 Repeater [***]
Add RF Channel (2:1) [***]
OAM&P Software/LT [***]
Maint Accessory Kit [***]
Basic Radio Spares [***]
Enhanced Radio Spares [***]
Install [***]
Test & Turnup [***]
Freight [***]
RADIOS [***]
PATH ENGINEERING [***]
FCC LICENSE APPLICATION [***]
SYSTEM ENGINEERING [***]
PATHNET ESTIMATED COSTS [***]
</TABLE>
C-8
<PAGE>
<TABLE>
<CAPTION>
SQUAW PAYETTE LIME BAKER LA GRANDE LA GRANDE TOTAL
BUTTE RLY
<S> <C> <C> <C> <C> <C> <C> <C>
PCN COORDINATION
PCN Coordination [***]
PCN COORDINATION [***]
RADIOS (PROTECT)
1:1 Terminal: 2 & 3 Way [***]
1:1 Repeater [***]
Add RF Channel (2:1) [***]
OAM&P Software/LT [***]
Maint Accessory Kit [***]
Basin Radio Spares [***]
Enhanced Radio Spares [***]
Install [***]
Test & Turnup [***]
Freight [***]
RADIOS [***]
PATH ENGINEERING [***]
FCC LICENSE APPLICATION [***]
SYSTEM ENGINEERING [***]
PATHNET COSTS [***]
</TABLE>
C-9
<PAGE>
SEGMENT B
<TABLE>
<CAPTION>
POCATELLO POCATELLO KINPORT AMER. FALLS COTTEREL
PR MTN.
<S> <C> <C> <C> <C> <C>
PCN COORDINATION
PCN Coordination [***]
PCN COORDINATION [***]
RADIOS (PROTECT)
1:1 Terminal: 2 & 3 Way [***]
1:1 Repeater [***]
Add RF Channel (2:l) [***]
OAM&P Software/LT [***]
Maint Accessory Kit [***]
Basic Radio Spares [***]
Enhanced Radio Spares [***]
Install [***]
Test & Turnup [***]
Freight [***]
RADIOS [***]
PATH ENGINEERING [***]
FCC LICENSE APPLICATION [***]
SYSTEM ENGINEERING [***]
PATHNET COSTS [***]
</TABLE>
C-10
<PAGE>
<TABLE>
<CAPTION>
HANSEN TOTAL
BUTTE
<S> <C> <C>
PCN COORDINATION
PCN Coordination [***]
PCN COORDINATION [***]
RADIOS (PROTECT)
1:1 Terminal: 2 & 3 Way [***]
1:1 Repeater [***]
Add RF Channel (2:1) [***]
OAM&P Software/LT [***]
Maint Accessory Kit [***]
Basic Radio Spares [***]
Enhanced Radio Spares [***]
Install [***]
Test & Turnup [***]
Freight [***]
RADIOS [***]
PATH ENGINEERING [***]
FCC LICENSE APPLICATION [***]
SYSTEM ENGINEERING [***]
PATHNET COSTS [***]
</TABLE>
C-11
<PAGE>
SCHEDULE D
INCUMBENT TRAINING
1. Pre-Commissioning Training. Prior to Commissioning of the System or at the
Incumbent's reasonable request (for certifying new employees), Pathnet shall
provide to Incumbent Field Technicians or other designees of Incumbent for
purposes of maintaining the LLC's Facilities, and Incumbent Field Technicians or
such designees shall be obligated to participate in, adequate training courses,
which training shall include, among other things, the following:
(a) comprehensive instruction for trouble-free operation maintenance;
(b) hands-on experience with the operation of the equipment deployed in
the System;
(c) review of the similarities and differences of an analog versus a
digital system;
(d) review of the latest state-of-the-art Technology and applications
used in the System;
(e) review of procedures designed to eliminate equipment damage,
incorrect handling of equipment and System downtime;
(f) comprehensive instruction in the use of all required test equipment
used in connection with the System;
(g) the distribution of manuals and other course materials that include
descriptive information publications, alignment procedures,
maintenance procedures, technical information publications,
schematic drawings, wiring lists and system assembly drawings; and
(h) a certificate of completion for each student who successfully
completes the training course.
2. Certification of Incumbent's Field Technicians. Each of Incumbent's Field
Technicians (as defined in the Maintenance Services Agreement) must either
successfully complete the training course described in Section 1 of this
Schedule D, or must be otherwise certified by Pathnet that such Field Technician
is qualified to perform services on the System.
3. Training for Upgrades. Upon any upgrade of the System, Incumbent may request
that Pathnet provide additional training with respect to such upgrade and
Pathnet shall provide such training to Incumbent as soon as practicable after
such request.
4. Training Locations. All such training shall be provided at Pathnet's
Richardson, Texas office, Washington D.C. metropolitan area headquarters or at
such other location as determined by
D-1
<PAGE>
Pathnet.
5. Travel and Lodging. [***]
D-2
<PAGE>
SCHEDULE E
OWNERSHIP OF SYSTEM EQUIPMENT ASSETS AND MATERIALS
NOTE: "LLC" means Pathnet/Idaho Power Equipment LLC
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
System Component Owned or
Licensed
By
- -------------------------------------------------------------------------------------
<S> <C>
Existing Shelters [***]
- -------------------------------------------------------------------------------------
New Shelters for System [***]
- -------------------------------------------------------------------------------------
New Shelters at Pathnet Spur sites [***]
- -------------------------------------------------------------------------------------
New Shelters at LLC Spur sites [***]
- -------------------------------------------------------------------------------------
Towers for System [***]
- -------------------------------------------------------------------------------------
Towers for LLC Spurs [***]
- -------------------------------------------------------------------------------------
Towers for Pathnet Spurs [***]
- -------------------------------------------------------------------------------------
A.C. and D.C. Power system as set forth on Schedule J [***]
- -------------------------------------------------------------------------------------
Pressurizing Equipment for sites including manifolds and dehydrators. [***]
- -------------------------------------------------------------------------------------
1/0 Multiplexers [***]
- -------------------------------------------------------------------------------------
Environmental Control Systems of Shelters of System [***]
- -------------------------------------------------------------------------------------
Environmental Control Systems of Shelters of LLC Spurs [***]
- -------------------------------------------------------------------------------------
Environmental Control Systems of Shelters of Pathnet Spurs [***]
- -------------------------------------------------------------------------------------
Common Equipment existing Before Effective Date [***]
- -------------------------------------------------------------------------------------
Common Equipment newly installed [***]
- -------------------------------------------------------------------------------------
Equipment Racks for System Radios [***]
- -------------------------------------------------------------------------------------
Antennas and Antenna Mounts relating to Initial System [***]
- -------------------------------------------------------------------------------------
Antennas and Antenna Mounts relating to LLC Spurs [***]
- -------------------------------------------------------------------------------------
Antennas and Antenna Mounts relating to Pathnet Spurs [***]
- -------------------------------------------------------------------------------------
Waveguide and Waveguide bridges relating to Initial System [***]
- -------------------------------------------------------------------------------------
Waveguide and Waveguide bridges relating to LLC Spurs [***]
- -------------------------------------------------------------------------------------
Waveguide and Waveguide bridges relating to Pathnet Spurs [***]
- -------------------------------------------------------------------------------------
Non-Protect Radios relating to Initial System [***]
- -------------------------------------------------------------------------------------
Protect Radios Relating to Initial System [***]
- -------------------------------------------------------------------------------------
Radios relating to any Capacity Expansion [***]
- -------------------------------------------------------------------------------------
Radios relating to LLC Spurs [***]
- -------------------------------------------------------------------------------------
Radios relating to Pathnet Spurs [***]
- -------------------------------------------------------------------------------------
OC-3 Multiplexers [***]
- -------------------------------------------------------------------------------------
Radio Bays and Radio Bay Equipment relating to the Initial System [***]
- -------------------------------------------------------------------------------------
Radio Bays and Radio Bay Equipment relating to LLC Spurs [***]
- -------------------------------------------------------------------------------------
Radio Bays and Radio Bay Equipment relating to the Pathnet Spurs [***]
- -------------------------------------------------------------------------------------
Interconnection Equipment relating to Pathnet Spurs and Interconnections [***]
- -------------------------------------------------------------------------------------
</TABLE>
E-1
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
<S> <C>
Interconnection Equipment relating to LLC Spurs and Interconnections [***]
- -------------------------------------------------------------------------------------
Results of the Preliminary Engineering Studies and Project Drawings
set forth in Section 6.2 [***]
- -------------------------------------------------------------------------------------
Upgraded equipment added to the System [***]
- -------------------------------------------------------------------------------------
Microwave Radio System Licenses [***]
- -------------------------------------------------------------------------------------
Panels, terminals, Software, Source Codes and other Assets and Equipment
relating to the Network Management System [***]
- -------------------------------------------------------------------------------------
Equipment required for Capacity Expansion [***]
- -------------------------------------------------------------------------------------
</TABLE>
E-2
<PAGE>
SCHEDULE F
FORM OF PATHNET SUBLICENSE AGREEMENT
F-1
<PAGE>
PATHNET SUBLICENSE AGREEMENT
This Sublicense Agreement (the "Agreement") is made on _______________,
1998 (the "Effective Date") by and between Pathnet, Inc. ("Pathnet") and
Pathnet/Idaho Power Equipment, LLC ("LLC") for the use of VERTEL Corporation
("Licensor") programs.
WHEREAS, LLC desires to sublicense the programs as further defined herein;
and
WHEREAS, Pathnet is willing to grant such sublicense under the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the Parties mutually agree as follows:
I. DEFINITIONS
1.1 "Licensed Program" shall mean each program in software or firmware
form provided by Pathnet to LLC pursuant to the Fixed Point Microwave Services
Agreement, dated the date hereof between LLC and Pathnet (the "FPM Agreement"),
as such Licensed Program is licensed by Pathnet from Licensor, including future
additions and updates to such Licensed Program. The term "Licensed Program"
shall specifically include documentation and related materials pertinent to such
program and any updated program or portion of a program hereinafter furnished to
LLC for use in connection with or replacement of the Licensed Programs.
1.2 "Equipment" shall mean Intel compatible servers running Windows NT.
1.3 "Use" shall mean the copying or duplication of any portion of a
Licensed Program from storage units or media into the Equipment for processing
or the utilization of any Licensed Program in the course of the operation of the
Equipment.
II. LICENSE GRANT
2.1 Use of Object/Binary Licensed Program with Designated Equipment.
Pathnet hereby grants LLC a non-exclusive, non-transferable (except as provided
in Section 5.1), non-licensable, non-assignable license to Use in machine
readable form, the Licensed Program specified in Section 1.1 solely on the
Equipment specified in Section 1.2. No license is granted to Use any Licensed
Program on any configuration of equipment which is different from or less than
the configuration indicated in Section 1.2.
III. PROPRIETARY RIGHTS
3.1 Proprietary Rights. The Licensed Program is owned by Licensor and/or
others
F-2
<PAGE>
and is proprietary in nature. LLC shall respect such proprietary rights and
shall not use such Licensed Program except for the purposes for which it is
being made available as set forth in this Agreement and shall not reproduce,
print, sublicense, duplicate, reverse engineer, distribute, disclose, or
otherwise make the Licensed Program available to any third party, in whole or in
part, in whatever form.
3.2 Confidentiality. LLC shall take all actions required to maintain
control of the Licensed Program including securing written records, agreements,
and other reasonable measures with its employees and agents to satisfy its
obligations under this Agreement with respect to the use, copying, protection,
and security of the Licensed Program.
IV. LIMIT OF LIABILITY
4.1 NO WARRANTY. LICENSOR GRANTS A WARRANTY IN THE LICENSED PROGRAM ONLY
TO PATHNET AND DOES NOT EXTEND ITS WARRANTY TO LLC OR ANY OTHER END USER.
WARRANTY OF THE LICENSED PROGRAM IS PROVIDED BY LICENSOR DIRECTLY TO PATHNET.
LICENSOR AND PATHNET MAKE NO EXPRESS OR IMPLIED WARRANTIES OF ANY KIND,
INCLUDING WITHOUT LIMITATION, MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE WITH REGARD TO ANY LICENSED PROGRAM AND/OR RELATED MATERIALS TO BE
FURNISHED BY VERTEL.
4.2 NO CONSEQUENTIAL DAMAGES. IN NO EVENT SHALL LICENSOR OR PATHNET BE
LIABLE FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH OR
ARISING OUT OF THE EXISTENCE, FURNISHING, FAILURE TO FURNISH, OR USE OF ANY
LICENSED PROGRAM AND/OR RELATED MATERIAL AND/OR DEVISE.
4.3 Licensor shall have no liability for any claim of copyright or patent
infringement based on (1) use of other than a current unaltered release of the
Licensed Program available from Licensor if such infringement would have been
avoided by the use of such current unaltered release of the Licensed Program or
(2) Use or combination of the Licensed Program with programs not supplied by
Licensor and which Use or combination results in the infringement of any patent
or copyright.
V. TRANSFER OF LICENSE
5.1 Terms for Transfer of License. This license may only be transferred
upon written approval of Pathnet and in connection with the transfer of all of
the Equipment; provided all copies of the Licensed Program are delivered to the
transferee and no copies or related materials are retained by LLC and provided
further that the transferee agrees to be bound by all the Terms and Conditions
of this Agreement.
F-3
<PAGE>
NOW THEREFORE, the Parties hereto have caused this Agreement to be
executed by their respective duly authorized representatives.
PATHNET, INC.
By:
---------------------------
Title:
------------------------
Date:
-------------------------
PATHNET/IDAHO POWER
EQUIPMENT, LLC
By:
---------------------------
Title:
------------------------
Date:
-------------------------
F-4
<PAGE>
SCHEDULE G
FACILITY ENCUMBRANCES
A. Facility Encumbrances
1. Certain Indenture of Mortgage and Deed of Trust, dated as of October
1, 1937 between Idaho Power Company and Banker's Trust Company and
R.G. Page (Stanley Burg, successor trustee), as trustee.
2. Certain encumbrances relating to Pathnet vendor creditor and lender
encumbrances, excluding any encumbrances on the Initial System.
G-1
<PAGE>
SCHEDULE H
FORM OF PLEDGE AGREEMENT
H-1
<PAGE>
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Agreement"), dated as of _________, 1998,
between Pathnet, Inc., a Delaware corporation ("Pathnet") and Pathnet/Idaho
Power Equipment LLC, a Delaware limited liability company with its principal
place of business at the address set forth below ("LLC").
RECITALS
WHEREAS, Pathnet is the owner, beneficially and of record, of all of the
issued and outstanding interests in Pathnet/Idaho Power License LLC, a Delaware
limited liability company ("License LLC");
WHEREAS, such interests in License LLC (the "Pledged Securities") are
evidenced by the certificates and other instruments, if any, identified on
Exhibit A attached hereto (the "Certificates");
WHEREAS, Pathnet and Incumbent have entered into a limited liability
company agreement relating to License LLC (the "LLC Agreement") pursuant to
which, among other things, Pathnet shall hold the FCC Licenses required to
operate the Initial System.
WHEREAS, Pathnet and Pathnet/Idaho Power Equipment LLC ("Equipment LLC")
have entered into a Fixed Point Microwave Services Agreement and Pathnet,
Incumbent and Equipment LLC have entered into a Contingent Radio Revenue
Agreement, dated as of the date hereof ("the FPM Agreement" and "Revenue
Agreement", respectively) pursuant to which LLC and Incumbent have agreed, among
other things, to engage Pathnet as, and Pathnet has agreed to act as, Incumbent
and LLC's sole representative for the purpose of, (i) installing, managing and
operating a high capacity digital microwave system along LLC's current microwave
paths (the "System"), and (ii) marketing and selling any excess capacity created
by such high capacity digital microwave system;
WHEREAS, following the installation of the high-capacity, digital
communications system described in the FPM Agreement, Incumbent and LLC will be
granted capacity on channels from the Initial System (as defined in the FPM
Agreement) for the necessary expansion and enhancement of LLC's internal
communications and operational needs;
WHEREAS, given the critical nature of the operational communications
contemplated to be conducted by LLC Through the high capacity digital microwave
system to be installed by Pathnet, the parties recognize that any interruption
in LLC's communications service, other than as may be provided by the terms
hereof, would be materially adverse to the public interest and could involve
adverse public safety consequences;
WHEREAS, the intentions of the parties hereto are to provide Incumbent and
LLC with a
H-2
<PAGE>
reliable long-term communications capability and, in this regard, a condition to
the execution, delivery and the consummation of the transactions contemplated by
the FPM Agreement is the execution and delivery of this Agreement; and
WHEREAS, all capitalized terms used herein and not defined herein shall
have the meanings ascribed to such terms in the FPM Agreement;
NOW, THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
1. Pledge. In order to induce LLC and Incumbent, as the case may be, to
execute, deliver and perform the FPM Agreement and Revenue Agreement and as
security for Pathnet's or Pathnet's successors' performance of Pathnet's
obligations under the FPM Agreement, Revenue Agreement and the LLC Agreement,
Pathnet hereby pledges, hypothecates, mortgages, assigns, transfers, delivers,
deposits, sets over and grants a security interest in the Pledged Securities
unto LLC and its successors and assigns, and except as otherwise provided
hereunder, all cash and other property or securities at any time and from time
to time receivable or otherwise distributed in respect of or in exchange for any
or all of the Pledged Securities, TO HAVE AND HOLD the Pledged Securities,
together with all rights, title, interests, powers and privileges appertaining
or incidental thereto, unto LLC, and its successors and assigns forever, subject
to the terms, covenants and conditions hereinafter set forth.
2. LLC Appointed Attorney-in-Fact. Upon the occurrence of an Event of
Default (as hereinafter defined), Pathnet hereby authorizes and appoints LLC as
its attorney-in-fact to transfer the Pledged Securities to LLC and to take any
action and to execute any instrument which LLC may deem necessary or advisable
to accomplish the purposes hereof, which appointment is irrevocable and coupled
with an interest. Without limiting the generality of the foregoing, upon the
occurrence of an Event of Default, LLC shall have the right and power to
receive, endorse, and collect all checks and other orders for the payment of
money made payable to Pathnet, or any assignee of, or successor to, Pathnet
representing any payment or other distribution in respect of the Pledged
Securities, or any part thereof, and to give full discharge therefor.
3. Voting Rights: Dividends: etc. Unless and until an Event of Default
shall have occurred:
(a) Pathnet shall be entitled to exercise any and all voting and/or
consensual rights and powers accruing to an owner of the Pledged
Securities or any part thereof for any purpose not inconsistent with the
terms hereof.
(b) Any cash dividends paid in respect of the Pledged Securities
shall be paid to Pathnet. Any additional shares issued as a result of a
stock split or stock dividend or other such reclassification shall be and
become part of the Pledged Securities pledged hereunder and shall
forthwith be delivered to LLC to be held subject to the terms of this
Agreement.
H-3
<PAGE>
4. Events of Default. The occurrence of any of the following events or
circumstances shall constitute an Event of Default under this Agreement:
(a) License LLC filing a voluntary petition in bankruptcy.
(b) License LLC consenting to an involuntary bankruptcy petition.
(c) License LLC consenting to a petition seeking liquidation,
reorganization or other relief under any applicable law of any
jurisdiction relating to bankruptcy, insolvency,
reorganization or relief of debtors.
(d) License LLC consenting to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or other similar
official) of License LLC for a substantial part of its
property.
e) License LLC making any assignment for the benefit of creditors
or permitting or suffering to exist any lien, pledge, equity.
charge, security interest, or encumbrance against any of the
Pledged Securities, except the pledge to LLC, each as provided
in this Agreement.
(f) License LLC consenting to any merger, consolidation or other
business combination involving the License LLC.
(g) License LLC entering into or becoming bound by any
understanding or arrangement to do any of the foregoing.
(h) The liquidation or dissolution of Pathnet under the Delaware
general corporation law, or
(i) The default by Pathnet under its financing arrangement with
its vendor and the vendor's syndicate of lenders and LLC's
receipt of written notice from such vendor or such vendor's
syndicate of lenders stating its or their intention to waive
its or their right to operate the System for the purpose of
generating Revenue from the sale of Excess Capacity.
5. Remedies Upon Default. If an Event of Default shall have occurred, LLC
may foreclose upon and take possession of the Certificates by providing written
certification to Pathnet that an event of Default has occurred and transferring
the Pledged Securities to LLC, free and clear of all claims or encumbrances, and
exercise all of the rights, title and interest in Pathnet as represented by the
Certificates.
6. Securities Act. etc. LLC understands that compliance with applicable
securities laws may very strictly limit the course of conduct of LLC if LLC were
to attempt to dispose of
H-4
<PAGE>
all or any part of the Pledged Securities, and may also limit the extent to
which or the manner in which any subsequent transferee of any Pledged Securities
may dispose of the same. Similarly, LLC acknowledges and understands that there
may be other legal restrictions or limitations affecting LLC in any attempt to
dispose of all or any part of the Pledged Securities under applicable Blue Sky
or other state securities laws or similar laws analogous in purpose or effect.
7. Termination of Pledge. The pledge set forth in Section 2 above shall
terminate upon the expiration of the FPM Agreement. Upon expiration, LLC shall
take possession of the Pledged Securities free and clear of all claims or
encumbrances, and exercise all of the rights, title and interest of Pathnet as
represented by the Certificates, including the right to vote the shares
represented by Certificates.
8. Representations. Warranties and Covenants of Pathnet. Pathnet hereby
represents, warrants and covenants that:
(a) Pathnet is the owner, beneficially and of record, of the Pledged
Securities, free and clear of all liens, pledges, equities, charges,
security interests, and encumbrances whatsoever except those arising
under this Agreement;
(b) Pathnet has full corporate power and authority to execute and
deliver and perform its obligations under this Agreement and this
Agreement is Pathnet's valid and binding obligation, enforceable in
accordance with its terms, except as such enforcement may be limited
by (i) applicable bankruptcy, reorganization, insolvency, moratorium
or other laws affecting creditors' rights generally, (ii) equitable
rules or principles affecting the enforcement of obligations
generally, whether at law or in equity, or (iii) the exercise of the
discretionary powers of any court before which may be brought any
proceeding seeking equitable remedies, including, without
limitation, specific performance and injunctive relief. This
Agreement does not violate any of Pathnet's stock restrictions
shareholder agreements or similar restrictions presently existing;
(c) The authorized interest stock of License LLC is as set forth on
Exhibit A. All of the interest of Licensee LLC that are issued and
outstanding are owned of record and beneficially owned by Pathnet
are as set forth on Exhibit A. All of the Pledged Securities are
duly authorized for issuance, validly issued, fully paid and
nonassessable; and
(d) Pathnet shall not, without the prior written consent of LLC take any
of the following actions: (i) permit or suffer to exist any lien,
pledge, equity, charge, security interest, or encumbrance whatsoever
against any of the Pledged Securities, except the pledge to LLC,
each as provided in this Agreement; (ii) redeem or retire, directly
or indirectly, or make any change in the capital structure of
License LLC; (iii) cause License LLC to create, incur,
H-5
<PAGE>
assume or suffer to exist any indebtedness, whether direct or
indirect or through a guaranty, which is unrelated to License LLC's
business purpose as stated in the LLC Agreement; (iv) cause License
LLC to consolidate with or merge into any other person or entity or
permit any other person or entity to merge into it; or (v) cause
License LLC to advance funds (whether by way of loan, stock
purchase, capital contribution or otherwise) to any other person or
entity.
9. Waiver of Notice. etc. Except as specifically provided for herein,
Pathnet waives demand, notice, protest, notice of acceptance of this Agreement,
notice of any extensions granted, collateral received or delivered or any action
taken in reliance hereon; all demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of any obligation and
all other demands and notices of any description; and assents to any extension
or postponement of the time of payment of any of the obligations created
hereunder or any other indulgence.
10. Governing Law. This Agreement is to be governed by and construed in
accordance with the laws of the State of Delaware. The Parties agree that any
action or proceeding brought by LLC under this Agreement (a) will be litigated
under the laws of the State of Delaware and agree to be subject to the
jurisdiction of the Courts of the State of Delaware or (in a case involving
diversity of citizenship) the United States District Court for Delaware, (b)
that service of process of any summons and complaint in any such action or
proceeding may be made by registered or certified mail directed to Pathnet at
the address hereafter set forth, Pathnet waiving personal service thereof, and
(c) within forty-five (45) days after summons and complaint, and should the
Parties so served fail to appear or answer within said forty-five (45) day
period, Pathnet shall be deemed in default and judgment entered against Pathnet
for the amount demarked in any summons and complaint so served.
11. Succession. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, successors and assigns and shall also inure to the benefit of
the holders from time to time of the obligations.
12. Invalidity of Provisions, In the event that any one or more of the
provisions contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement, and
each term and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
13. Amendments. This Agreement may not be changed orally, but only by an
agreement in writing signed by the parties against whom enforcement of any
waiver, change, modification or discharge is sought.
14. Notices. All communications under or with respect to this
H-6
<PAGE>
Agreement shall be in writing and shall be delivered to the parties in the
manner prescribed and addressed as designated in the FPM Agreement, subject to a
change thereof by written notice.
15. Counterparts. This Agreement may be executed in two or more
counterparts, all of which together shall constitute one and the same
instrument.
16. Entire Agreement. This Agreement embodies the entire understanding of
the parties with respect to the subject matter of this Agreement and no oral
understandings exist among the parties hereto with respect to the subject matter
hereof except as herein expressly set forth.
17. Captions. The captions of this Agreement are for convenience only and
shall neither limit nor enlarge the provisions hereof.
18. FCC Consent. Notwithstanding anything to the contrary contained herein
or in the FPM Agreement, LLC will not take any action pursuant to this Agreement
or the FPM Agreement that would constitute or result in any assignment of or a
transfer of control of any FCC authorization(s) held by Pathnet if such
assignment or transfer of control would require under then existing law
(including the written rules and regulations promulgated by the FCC), the prior
approval of the FCC, without first obtaining such approval of the FCC. LLC
specifically agrees that (a) the voting rights of the Pledged Securities will
remain with Pathnet upon and following the occurrence of an Event of Default
unless and until any required prior approvals of the FCC to the transfer of such
voting rights to LLC shall have been obtained; and (b) prior to the exercise of
voting rights by the LLC, the prior consent of the FCC pursuant to, and as and
to the extent required by, 47 U.S.C. 310(d) will be obtained. Pathnet agrees to
take any action which LLC may reasonably request in order to obtain and enjoy
the full rights and benefits granted to LLC by this Agreement including
specifically the use of the best efforts of Pathnet to assist in obtaining
approval of the FCC for any action or transaction contemplated by this Agreement
which is then required by law, and specifically, without limitation, upon
request following the occurrence of an Event of Default, to prepare, sign and
file (or cause to be prepared, signed or filed) with the FCC any portion of any
application or applications for consent to the assignment of an authorization or
transfer of control required to be signed by Pathnet and necessary or
appropriate under the FCC's rules and regulations for approval of any sale or
transfer of any of the capital stock or assets of Pathnet or any transfer of
control of any FCC authorization.
PATHNET, NC. PATHNET/IDAHO POWER
EQUIPMENT LLC
By: By:
--------------------------------- -----------------------------
Name: Name:
------------------------------- ---------------------------
Title: Title:
----------------------------- --------------------------
H-7
<PAGE>
EXHIBIT A
CERTIFICATES
[NONE ATTACHED]
H-8
<PAGE>
SCHEDULE I
FORM OF SECURITY AGREEMENT
I-1
<PAGE>
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement"), dated as of ____, 1998,
between Pathnet, Inc., a Delaware corporation with its principal place of
business at the address set forth below ("Pathnet") and Pathnet/Idaho Power
Equipment LLC, a Delaware limited liability company with its principal place of
business at the address set forth below ("LLC").
RECITALS
WHEREAS, Pathnet and LLC have entered into a Fixed Point Microwave
Services Agreement and Pathnet, LLC and Incumbent have entered into a Contingent
Radio Revenue Agreement, each dated as of date hereof ("the FPM Agreement" and
"Revenue Agreement", respectively) pursuant to which LLC and Incumbent has
agreed, among other things, to engage Pathnet as, and Pathnet has agreed to act
as, Incumbent and LLC's sole representative for the purpose of, (i) installing,
managing and operating a high capacity digital microwave system along LLC's
current microwave paths (the "System"), and (ii) marketing and selling any
excess capacity created by such high capacity digital microwave system;
WHEREAS, following the installation of the high-capacity, digital
communications system described in the FPM Agreement, LLC will be allocated
capacity on channels from the Initial System (as defined in the FPM Agreement)
for the necessary expansion and enhancement of LLC's internal communications and
operational needs;
WHEREAS, given the critical nature of the operational communications
contemplated to be conducted by LLC through the high capacity digital microwave
system to be installed by Pathnet, the parties recognize that any interruption
in LLC's communications service, other than as may be provided by the terms
hereof, would be materially adverse to the public interest and could involve
adverse public safety consequences;
WHEREAS, the intentions of the parties hereto are to provide LLC with a
reliable long-term communications capability and, in this regard, a condition to
the execution, delivery and the consummation of the transactions contemplated by
the FPM Agreement is the execution and delivery of this Agreement; and
WHEREAS, Pathnet is the owner of the Initial System's eighty-four (84)
DS-1 protect channel radios necessary to operate the Initial System in a
protected format (collectively, the "Assets"); and
WHEREAS, a condition to the execution, delivery and consummation of the
transactions contemplated by the FPM Agreement and Revenue Agreement is the
execution and delivery of this Agreement.
WHEREAS, all capitalized terms used herein and not defined herein shall
have the meanings ascribed to such terms in the FPM Agreement;
I-2
<PAGE>
NOW, THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
1. Grant of Security Interest in Assets. In order to induce LLC to
execute, deliver and perform the FPM Agreement and as security for Pathnet's or
LLC's successors' performance of Pathnet's obligations under the FPM Agreement,
Pathnet hereby assigns, conveys, mortgages, pledges, hypothecates, transfers and
confirms to LLC, its successors and assigns, and hereby grants to LLC a lien on
and security interest in all of Pathnet's right, title, interest and powers in
the Assets. This Agreement constitutes a valid and continuing lien on and
security interests in the Assets in favor of LLC, prior to all other liens,
encumbrances, security interest and rights of others and is enforceable as such
as against creditors of and purchasers from the Pathnet. All such action
necessary or desirable to protect and perfect such security interest in each
item of the Assets will have been duly taken prior to the date the Assets are
installed, including but not limited to Pathnet, at its expense, causing UCC-1
Financing Statements with respect to the Assets to be filed and recorded in all
places necessary to establish create and perfect the lien intended to be created
hereby.
2. Events of Default. The occurrence of any of the following events or
circumstances shall constitute an Event of Default under this Agreement:
(a) the liquidation or dissolution of Pathnet under the
Delaware general corporation law,
(b) the default by Pathnet under its financing arrangement
with its vendor and LLC's receipt of written notice from such vendor
stating its intention to waive its right to operate the System for
the purpose of generating Revenue from the sale of Excess Capacity;
or
(c) the physical removal of the Assets from the Facilities by
Pathnet or the granting or suffering of a lien by Pathnet against
the Assets, except as approved by Incumbent
3. Remedies Upon Default. If an Event of Default shall have occurred, the
LLC may, in addition to any remedies it may have under the FPM Agreement, (a)
take possession or control of, store, lease, operate, manage, sell or otherwise
dispose of all or any part of the Assets, (b) notify all parties under any
account or contract forming all or any part of the Assets to make any payments
due to Pathnet directly to LLC, (c) in the name of Pathnet or in the name of
LLC, demand, collect, receive, sue for and give receipts and releases for any
and all amounts due under such account and contract rights, (d) endorse as the
agent of Pathnet any check, note, chattel paper, documents or instruments
forming all or any part of the Assets, (e) make formal application for the
transfer to LLC of all of Pathnet's Permits, licenses, approvals and the like
relating to the Assets and (f) take any action which LLC deems necessary or
desirable to protect and realize upon the security interest in the Assets.
4. Termination of Security Interest. The security interest set forth in
Section 1 above
I-3
<PAGE>
shall terminate simultaneously with the expiration of the FPM Agreement
5. Representations, Warranties and Covenants of the Pathnet. Pathnet
hereby represents, warrants and covenants that:
(a) The Pathnet has full corporate power and authority to execute
and deliver and perform its obligations under this Agreement
and this Agreement is the Pathnet's valid and binding
obligation, enforceable in accordance with its terms, except
as such enforcement may be limited by (i) applicable
bankruptcy, reorganization, insolvency, moratorium or other
laws affecting creditors' rights generally, (ii) equitable
rules or principles affecting the enforcement of obligations
generally, whether at law or in equity, or (iii) the exercise
of the discretionary powers of any court before which may be
brought any proceeding seeking equitable remedies, including,
without limitation, specific performance and injunctive
relief.
(b) It is or will be before Commissioning (as such term is defined
in the FPM Agreement) the owner of the Assets and has good and
marketable title to the Assets, free and clear of all liens,
security interests and other encumbrances, except for those in
favor of the LLC.
(c) It will not sell, lease, transfer, exchange or otherwise
dispose of the Assets, or any part thereof, without the prior
written consent of LLC, and will not permit any lien, security
interest or other encumbrance to attach to the Assets, or any
part thereof, other than those in favor of the LLC or those
permitted by LLC in writing.
(d) No approval, consent or other action by the stockholders and
Pathnet or by any governmental authority, or by any other
person or entity, is or will be necessary to permit the valid
execution, delivery and performance by the Pathnet of this
Agreement or any other instruments or agreements executed in
connection herewith.
6. Waiver of Notice, Etc. Except as specifically provided for herein,
Pathnet waives demand, notice, protest, notice of acceptance of this Agreement,
notice of any extensions granted, collateral received or delivered or any action
taken in reliance hereon; all demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of any obligation and
all other demands and notices of any description; and assents to any extension
or postponement of the time of payment of any of the obligations created
hereunder or any other indulgence.
7. Governing Law. This Agreement is to be governed by and construed in
accordance with the laws of the State of Delaware. Pathnet agrees that any
action or proceeding brought by the LLC under this Agreement (a) will be
litigated under the laws of the State of
I-4
<PAGE>
Delaware and agrees to be subject to the jurisdiction of the Courts of the State
of Delaware or (in a case involving diversity of citizenship) the United States
District Court for Delaware, (b) that service of process of any summons and
complaint in any such action or proceeding may be made by registered or
certified mail directed to Pathnet at the address hereafter set forth, Pathnet
waiving personal service thereof, and (c) within forty-five (45) days after
summons and complaint, and should Pathnet so served fail to appear or answer
within said forty-five (45) day period, Pathnet shall be deemed in default and
judgment entered against Pathnet for the amount demarked in any summons and
complaint so served.
8. Succession. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, successors and assigns and shall also inure to the benefit of
the holders from time to time of the obligations.
9. Invalidity of Provisions, In the event that any one or more of the
provisions contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement, and
each term and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
10. Amendments. This Agreement may not be changed orally, but only by an
agreement in writing signed by the parties against whom enforcement of any
waiver, change, modification or discharge is sought.
11. Notices. All communications under or with respect to this Agreement
shall be in writing and shall be delivered to the parties in the manner
proscribed and addressed as designated in the FPM Agreement, subject to a change
thereof by written notice.
12. Counterparts. This Agreement may be executed in two or more
counterparts, all of which together shall constitute one and the same
instrument.
13. Entire Agreement. This Agreement embodies the entire understanding of
the parties with respect to the subject matter of this Agreement and no oral
understandings exist among the parties hereto with respect to the subject matter
hereof except as herein expressly set forth.
14. Captions. The captions of this Agreement are for convenience only and
shall neither limit nor enlarge the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the day and year first above written.
PATHNET, INC. PATHNET/IDAHO POWER
EQUIPMENT LLC
I-5
<PAGE>
By: By:
----------------------------- --------------------------
Name: Name:
----------------------------- --------------------------
Title: Title:
----------------------------- --------------------------
I-6
<PAGE>
SCHEDULE J
FORM OF PATHNET IRU AGREEMENT
J-1
<PAGE>
PATHNET
INDEFEASIBLE RIGHT TO USE AGREEMENT
THIS INDEFEASIBLE RIGHT TO USE AGREEMENT (this "Agreement") is made and
entered into as of the _____ day of ________________, 1998 (the "Effective
Date"), by and between Pathnet/Idaho Power Equipment LLC, a Delaware limited
liability company (the "LLC"), and Pathnet, Inc., a Delaware corporation
("Pathnet").
WITNESSETH:
WHEREAS, the LLC owns certain equipment used for the purpose of creating
high capacity, digital, microwave communications;
WHEREAS, Pathnet is engaged in the business of creating high capacity,
digital, microwave communications systems for purposes of marketing and selling
the excess long distance telecommunications capacity created by such systems.
WHEREAS, the LLC has agreed to provide certain digital microwave capacity
to Pathnet in exchange for certain services and other consideration to be
performed and delivered by Pathnet pursuant to the Fixed Point Microwave
Services Agreement by and between Pathnet and the LLC dated as of the date
hereof (the "FPM Agreement").
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the Parties agree as follows:
SECTION 1. DEFINITIONS
1.1 Affiliate: With respect to any Person, any other Person that directly
or indirectly controls, is controlled by, or is under common control with such
Person. For the purposes of this definition, "control" (including the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract, or otherwise.
1.2 Channel Plan: The T-1 plan for channelization of the microwave
communications system owned by the LLC.
1.3 Commissioning Date: With respect to each path or Segment, the date on
which the circuits of such path or Segment are available for service after
completion of all required site acceptance testing on the system.
1.4 DS-0: 64,000 bits per second; the world-wide standard speed for
digitizing one voice conversation using pulse code modulation, which is
approximately equivalent to a single voice or data channel.
1.5 DS-1: 24 DS-0's
<PAGE>
1.6 Person: An individual, corporation, partnership, limited liability
corporation, trust, incorporated or unincorporated association, joint venture,
joint stock company, or other entity of any kind or any governmental authority.
1.7 Segment: The portion of the microwave communications network existing
between two geographic points.
1.8 Segment A: The portion of the microwave communications network between
LaGrande, Oregon and Twin Falls, Idaho, including Hansen Butte, Idaho and Boise,
Idaho, as set forth in Schedule A.
1.9 Segment B: The portion of the microwave communications network between
Hansen Butte, Idaho and Pocatello, Idaho, as set forth in Schedule A.
SECTION 2. INDEFEASIBLE RIGHT TO USE
The LLC hereby grants to Pathnet and Pathnet hereby purchases from the LLC
an indefeasible right of use ("IRU") as to forty-eight (48) DS-1's (the
equivalent of 1,152 DS-O's) of digital capacity from the non-protect radio owned
by the LLC along Segment A and, if developed by the Parties, along Segment B, as
set forth and contemplated in the Channel Plan. The IRU shall commence on the
Commissioning Date and continue until the Expiration Date of this Agreement.
SECTION 3. TERM
This Agreement shall commence on the Effective Date and shall be in full
force and effect with respect to each Segment until the termination of the FPM
Agreement, as to each such Segment ("Expiration Date").
SECTION 4. MISCELLANEOUS
4.1 Tax Treatment: LLC and Pathnet agree that this Agreement shall not be
treated as the sale or exchange of property for Federal income tax purposes.
4.2 Notices: All notices and other communications required or permitted
hereunder shall be in writing and shall be deemed given when delivered to, or on
the fifth day after being deposited in the United States mail, certified mail,
return receipt requested, postage prepaid, to the person at the address first
listed above or to such other person and/or address as may be designated from
time to time in writing.
4.3 Amendment: No provision of this Agreement may be amended, modified or
waived unless such amendment, modification or waiver shall be agreed to in
writing and signed by a person duly authorized by each party. Any waiver by
either party of any breach of any of the terms of this Agreement shall not be
considered a waiver of any subsequent breach.
2
<PAGE>
4.4 Severability: In the event that any provision of this Agreement shall
be held invalid or unenforceable for any reason whatsoever, such provision shall
be deleted and the remainder of the Agreement shall not be affected and shall be
valid and enforceable to the fullest extent permitted by law without the deleted
provision or provisions.
4.5 Entire Agreement: This Agreement constitutes the entire understanding
between the parties with respect to the subject matter hereof.
4.6 Binding Nature; Assignment: Pathnet and the LLC acknowledge that (i)
each has read and understands the terms and conditions of this Agreement and
agrees to be bound by such terms and conditions, (ii) this Agreement shall be
binding on each of Pathnet and the LLC and their respective successors and
assigns, (iii) this Agreement together with any agreements or documents executed
in connection and contemporaneously herewith is the complete and conclusive
statement of the agreement between the Parties, (iv) this Agreement together
with any agreements or documents executed in connection and contemporaneously
herewith supersedes any and all prior agreements and arrangements between the
Parties and all understandings and agreements, oral and written, heretofore made
between the LLC and Pathnet are merged in this Agreement which together with any
agreements or documents executed in connection and contemporaneously herewith,
fully and completely expresses their agreement on the subject matter of this
Agreement.
At any time and from time to time, Pathnet shall have the right to assign
this Agreement or any of Pathnet's rights and obligations under this Agreement
to an assignee, which assignee shall be bound by the terms and conditions of
this Agreement; provided, that in no event shall any such assignment relieve
Pathnet of its obligations under this Agreement. The LLC may not assign this
Agreement or any of its rights and obligations hereunder without the prior
written consent of Pathnet, which consent shall not be unreasonably withheld;
provided, however, the LLC may assign its rights and obligations, in whole but
not in part, under this Agreement without the approval of Pathnet, to any entity
which acquires all or substantially all of the assets of the LLC or to any
subsidiary, Affiliate or successor in a merger or consolidation of the LLC;
provided, that in no event shall any such assignment relieve the LLC of its
obligations under this Agreement.
4.7 Governing Law: This Agreement shall be construed in accordance with
and governed for all purposes by the laws of the State of Idaho (other than the
choice of law rules thereof).
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
PATHNET/IDAHO POWER EQUIPMENT LLC PATHNET, INC.
BY BY
--------------------------------- --------------------------
NAME: NAME:
TITLE: TITLE:
3
<PAGE>
SCHEDULE A
THE SYSTEM
A. Segment A
LLC Segment A extends from LaGrande, Oregon to Twin Falls, Idaho, with
Facilities at the sites listed below, as such Facilities may be amended.
SEGMENT A
<TABLE>
<CAPTION>
Facility Latitude Longitude Path To
- -------- -------- --------- -------
<S> <C> <C> <C>
Hansen Butte 42-29-35 114-13-47 Cotteral Mtn.
Lower Salmon
Twin Falls
Twin Falls 42-32-43 114-27-32 Hansen Butte
Lower Salmon 42-51-05 114-54-47 Hansen Butte
Mountain Home
Mountain Home 43-12-18 115-33-49 Lower Salmon
Bonneville Point
Bonneville Point 43-29-17 116-01-45 Squaw Butte
Boise HQ
Mountain Home
Boise HQ 43-37-08 116-12-25 Bonneville Point
Squaw Butte 44-00-13 116-24-38 Bonneville Point
Payette
Payette 44-03-25 116-55-32 Squaw Butte
Lime
Lime 44-25-54 117-14-54 Payette
Baker
Baker 44-44-19 117-44-45 Lime
LaGrande Relay
LaGrande Relay 45-13-03 118-00-00 Baker
LaGrande
LaGrande 45-18-46 118-04-13 LaGrande Relay
</TABLE>
A-1
<PAGE>
B. Segment B
LLC Segment B extends from Hanson Butte, Idaho to Pocatello, Idaho with
Facilities at the sites listed below, as such Facilities may be amended.
SEGMENT B
<TABLE>
<CAPTION>
Facility Name Latitude Longitude Path to:
- ------------- -------- --------- --------
<S> <C> <C> <C>
Pocatello 42-51-38 112-26-26 Pocatello P.R.
Pocatello P.R. 42-55-14 112-20-44 Pocatello
Kinport
Kinport 42-53-36 112-33-31 Pocatello P.R.
American Falls
American Falls 42-45-25 112-48-38 Kinport
Cotteral Mtn.
Cotteral Mtn. 42-23-55 113-27-54 American Falls
Hansen Butte
Hansen Butte 42-29-35 114-13-47 Cotteral Mtn.
</TABLE>
A-2
<PAGE>
SCHEDULE K
FORM OF SPECTRUM LICENSE AGREEMENT
K-1
<PAGE>
SPECTRUM LICENSE AGREEMENT
THIS SPECTRUM LICENSE AGREEMENT (this "Agreement") executed as of
the ___ day of ______, 1998, by and between Pathnet/Idaho Power License LLC, a
Delaware limited liability company ("Carrier") and Pathnet/Idaho Power Equipment
LLC, a Delaware limited liability company ("Customer"),
W I T N E S S E T H:
WHEREAS, Carrier is the holder of those certain licenses (the
"Licenses") issued by the Federal Communications Commission (the "FCC") for the
operation of certain specified microwave channels (the "Channels"), which
stations operates from a transmitters at the Latitudes and Longitudes set forth
on Exhibit A attached hereto (the "Stations"); and
WHEREAS, Customer desires to have the use of substantially all of
the Carrier's channel capacity on the Channels and Carrier is willing to lease
such channel capacity to Customer upon the terms and conditions contained herein
and consistent with the rules and policies of the FCC and Carrier's FCC licensee
responsibilities;
NOW, THEREFORE, in consideration of the recitals and the mutual
promises set forth below, the parties agrees as follows:
1. Term. This Agreement shall be effective as of the date of
execution hereof. The term of this Agreement shall commence on the date of
Commissioning of Segment A of the Initial System (as such term is defined in the
Fixed Point Microwave Services Agreement, dated as of the date hereof) and shall
continue for a period of one hundred eighty (180) months, unless sooner
terminated in accordance with the terms of Section 13 hereof. This Agreement
shall automatically renew for a single term of one hundred twenty (120) months
under the same terms and conditions as contained herein, unless all the Members
of the Pathnet/Idaho Power Equipment LLC deliver to Carrier a notice of its
intention to not renew no later than one (1) month prior to the end of the
initial term. Any renewal shall be conditioned upon Carrier's continued
authorization from the FCC to operate the Channels.
2. Lease of the Channels. Commencing on the first day of the term of
this Agreement, Carrier hereby leases to Customer all transmission time on the
Channels, including all subcarriers and blanking intervals, twenty-four hours a
day, seven days a week, every week. Customer or its permitted assigns or
sublessees shall have the right to utilize the Channels for the provision of
long distance telecommunications service and uses ancillary thereto (the
"Service"). Upon FCC authorization to use any or all capacity on the Channels
for the provision of communications services other than the Service, Customer
shall have the right to lease from Carrier for the use by Customer or its
permitted assigns or sublessees any or all of the capacity on the Channels for
the provision of such additional or alternative communication services.
3. Control of Facilities. Notwithstanding anything in this Agreement
to the
K-2
<PAGE>
contrary, Carrier, as the FCC licensee of the Channels, shall be responsible for
compliance with all applicable FCC rules and policies. Carrier shall have
control, in accordance with FCC rules and policies, of the construction,
operation, management and maintenance of the equipment and facilities owned or
leased by Customer and used to transmit on the Channels (the "Transmission
Facilities") to the extent necessary to comply with such rules and policies.
4. Consideration. In consideration of Carrier's agreement to lease
the Channels to Customer, Customer agrees to pay to Carrier the fee of one
hundred dollars ($100) on the date hereof.
5. Operation and Maintenance. Subject to the provisions of Section 3
Customer shall, at its sole cost and expense, operate and maintain the Stations
in good operating condition and repair. All persons performing maintenance,
repairs or other duties at the Stations shall be technically qualified to
perform such duties and shall work under Customer's direct and continuing
supervision in accordance with good engineering practices consistent with good
industry standards. Customer, at its own expense, may make alterations or
install attachments to the Stations as may be reasonably required by the
exigencies of its business from time to time, provided that (a) such alterations
and attachments do not violate any FCC rules or regulations, (b) that Carrier
has been notified of such proposed alterations and has consented to them or, if
such prior notice is impossible due to an emergency, that Carrier has been
notified as expeditiously as possible of such alterations and has consented to
them, and (c) that prior FCC authorization, if required, has been obtained by
Carrier.
6. FCC Compliance. Customer and Carrier shall each use their
reasonable efforts to cooperate with any written request by FCC to Customer or
Carrier to inspect the facilities, equipment and records of the Station for
compliance with the rules and regulations promulgated by the FCC, and the
parties further agree to (a) take all necessary actions to comply with the
results of such inspection by the FCC, and (b) comply with in all material
respects all laws, regulations, orders, judgments, or decrees of any court,
governmental authority or agency application to the Channels, the Station or the
obligations assumed by Customer pursuant to this Agreement.
7. Supplemental Information. The parties agree to cooperate in
promptly responding to any request by the FCC or any other state or federal
regulatory agency having jurisdiction over the Channels or the parties to this
Agreement for information concerning the operations of the Channels or the
financial condition of the entity operating the Channels under Carrier's
ultimate supervision and control. If requested by either party hereto, the other
party agrees to cooperate in either (a) opposing the disclosure of any
information determined by the requesting party to be confidential, proprietary
or business or trade secret and not subject to disclosure under applicable law;
or (b) if the disclosure of such information is required by law, requesting the
confidential treatment thereof by the state or federal regulatory agency. The
costs and expenses of such opposition or request for confidential treatment
shall be borne by the party from whom the information is sought.
8. Notices. All notices, requests, consents or other communications
K-3
<PAGE>
hereunder shall be in writing, and shall be effective upon receipt, in each case
addressed:
If to Carrier, to:
Pathnet/Idaho Power License, LLC
1015 - 31st Street, N.W.
Washington, D.C. 20007
Attn: Michael A. Lubin
If to Customer, to:
Pathnet/Idaho Power Equipment, LLC
1221 West Idaho Street
P.O. Box 70
Boise, ID 83702-5627
provided, however, that if any party shall have designated a different address
by notice to the others, then to the last address so designated.
9. Waivers. Any waiver by any party of any breach of or failure to
comply with any provision of this Agreement by the other party shall not be
construed as, or constitute, a continuing waiver of such provision, of this
Agreement.
10. Complete Agreement. This Agreement sets forth the entire
understanding of the parties hereto with respect to the lease of the Channels
and supersedes all prior agreements, covenants, arrangements, communications,
representations or warranties, whether oral or written, by any party (or any
officer, employee or representative of any party) relating thereto.
11. Governing Law; Construction. This Agreement shall be construed
and enforced in accordance with and governed by the internal substantive laws of
the State of Delaware. The heading of the Sections of this Agreement are
inserted for convenience of reference only and shall not be deemed to constitute
a part hereof. Unless otherwise stated, references in this Agreement to sections
refer to the Sections of this Agreement.
12. Amendment. This Agreement may be amended only by an instrument
in writing duly executed by the parties.
13. Termination of FCC authorization. Customer may terminate this
Agreement without further liability upon thirty (30) days prior written notice
to Carrier only in the event that Carrier's authorization to operate the
Channels as contemplated by this Agreement is revoked, forfeited or surrendered
by FCC Final Action. Carrier may terminate the Agreement without further
liability upon thirty (30) days prior written notice to Customer in the event
that the FCC determines that Customer is not authorized to provide Service or
otherwise carry out its obligations as contemplated by this Agreement. If
termination shall occur pursuant to this
K-4
<PAGE>
Section 13, such termination shall extinguish and cancel this Agreement without
further liability on the party of either party to the other, except for claims
or causes of action arising prior to termination. For purposes of this
Agreement, "Final Action" shall mean an action of the FCC that has not been
reversed, stayed, enjoined, set aside, annulled, or suspended, with respect to
which no timely petition for reconsideration or administrative or judicial
appeal or sua sponte action of the FCC with comparable effect is pending, and as
to which the time for filing any such petition or appeal (administrative or
judicial) or for the taking of any such sua sponte action of the FCC has
expired.
14. Force Majeure. Notwithstanding anything contained in this
Agreement to the contrary, neither party shall be liable to the other for
failure to perform any obligation under this Agreement (nor shall any charges or
payments be made or required in respect of the period during which such failure
has occurred and is continuing) if such failure is the result of fires, civil
unrest, rationing or other orders or requirements, acts of civil or military
authorities, acts of God, or other contingencies beyond the reasonable control
of the nonperforming party which would permit the cessation of operations or
transmission by a licensee under the applicable FCC rules, regulations, and
policies; provided, however that the party so prevented from complying herewith
shall not have procured such event of Force Majeure, shall have used reasonable
diligence to avoid such event of Force Majeure and ameliorate its effects, and
shall continue to take all actions within its power to comply as full as
possible with the terms of this Agreement. All requirements as to notice and
other performance required hereunder within a specified period shall be
automatically extended by a period equal in length to the period during which
such contingency has interfered with or prevented performance hereunder.
15. Specific Performance. The parties acknowledge and agree that the
rights reserved to each of them hereunder are of a special, unique, unusual and
extraordinary character, which gives them a particular value, the loss of which
cannot be adequately or reasonably compensated for in damages in an action at
law, and that the breach by either of the parties of any of the provisions
hereof will cause the other party irreparable injury and damage. In the event of
a default by any of the parties hereunder, the non-defaulting party shall be
entitled, as a matter of right, without further notice, to require of the
defaulting party specific performance of all of the acts, services and
undertakings required hereunder including the obtaining of all requisite
authorizations to execute or perform this Agreement and injunctive and other
equitable relief, without the posting of a bond, in any competent court to
prevent the violation of any of the provisions hereof. Neither this provision
nor any exercise by any party of rights to equitable relief or specific
performance herein granted shall constitute a waiver of any other rights which
it may have to damages or otherwise.
16. Counterparts. More than one counterpart of this Agreement may be
executed by the parties hereto, and each fully executed counterpart shall be
deemed one and the same original.
17. Dealings with Third Parties. Neither party is, nor shall either
party hold itself out to be, vested with any power or right to contractually
bind, act on behalf of the other as its contracting broker, agent or otherwise
for committing, selling, conveying or transferring any
K-5
<PAGE>
of the other party's assets, or property, contracting for or in the name of the
other party, or making any contractually binding representations as to the other
party which shall be deemed representations contractually binding upon such
party.
18. Severability. If any provision of this Agreement is declared
void by any court of competent jurisdiction, the validity of any other provision
of this Agreement shall not be affected.
19. Survival. This Agreement shall be binding upon and inure to the
benefit of the parties hereto, and their respective assigns, successors and
legal representatives. Carrier may not assign its rights and obligations
hereunder without Customer's prior written consent, which may be withheld in
Customer's sole discretion. Customer may assign its rights and obligations
hereunder to any person which agrees in writing to be bound hereby. Any
obligations that have arisen prior to the expiration or termination of this
Agreement and the obligations of the parties under Section 6 and Section 7 shall
survive expiration or termination of this Agreement.
20. No Third Party Beneficiaries. It is not the intent of either
Carrier or Customer that there be any third party beneficiary to this contract,
and this contract is exclusively for the benefit of Customer or Carrier or their
respective assigns.
21. Independent Relationships. Nothing in this contract shall be
construed as creating an employer-employee relationship by and between Carrier
and Customer, and Carrier shall not be held or responsible for the acts or
omissions of the Customer.
K-6
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
PATHNET/IDAHO POWER LICENSE, LLC
By:
------------------------------
Name:
-------------------------
Title:
------------------------
PATHNET/IDAHO POWER EQUIPMENT, LLC
By:
------------------------------
Name:
-------------------------
Title:
------------------------
K-7
<PAGE>
EXHIBIT A
STATIONS
<TABLE>
<CAPTION>
Facilities Latitude Longitude
- ---------- -------- ---------
<S> <C> <C>
Segment A
Hansen Butte 42-29-35 114-13-47
Twin Falls 42-32-43 114-27-32
Lower Salmon 42-51-05 114-54-47
Mountain Home 43-12-18 115-33-49
Bonneville Point 43-29-17 116-01-45
Boise HQ 43-37-08 116-12-25
Squaw Butte 44-00-13 116-24-38
Payette 44-03-25 116-55-32
Lime 44-25-54 117-14-54
Baker 44-44-19 117-44-45
LaGrande Relay 45-13-03 118-00-00
LaGrande 45-18-46 118-04-13
Segment B (if any)
Pocatello 42-51-38 112-26-26
Pocatello P.R. 42-55-14 112-20-44
Kinport 42-53-36 112-33-31
American Falls 42-45-25 112-48-38
Cotteral Mtn. 42-23-55 113-27-54
</TABLE>
K-8
<PAGE>
SCHEDULE L
FORM OF MAINTENANCE AND PROVISIONING SERVICES AGREEMENT
K-9
<PAGE>
MAINTENANCE AND PROVISIONING SERVICES AGREEMENT
This MAINTENANCE AND PROVISIONING SERVICES AGREEMENT (the "Maintenance
Agreement" or "Agreement") is made and entered into as of the ____ day of
_____________, 1998 (the "Effective Date"), by and between PATHNET, INC.
(hereinafter "Pathnet"), a Delaware corporation, having its principal place of
business at 1015 31st Street, NW, Washington, D.C., 20007, PATHNET/IDAHO POWER
EQUIPMENT, LLC (hereinafter "LLC"), a limited liability company having its
principal place of business at, and IDAHO POWER COMPANY (hereinafter,
"Incumbent"), an Idaho having its principal place of business
at____________________ (collectively, the "Parties" and each, a "Party").
WITNESSETH:
WHEREAS, Pathnet is engaged in the business of creating high-capacity,
digital microwave communications systems for purposes of marketing the long
distance telecommunications capacity created by such systems;
WHEREAS, LLC and Pathnet have entered into a Fixed Point Microwave
Services Agreement pursuant to which, among other things, Pathnet has agreed to
construct and install a high-capacity digital microwave system utilizing
Incumbent's microwave telecommunications assets;
WHEREAS, Incumbent, LLC and Pathnet have entered into a Contingent Radio
Revenue Agreement, dated as of the date hereof to which, among other things,
Pathnet has agreed to operate and install Capacity Expansion Radios for the
purpose of deriving and selling capacity on the System
WHEREAS, Pathnet wishes to engage the services of Incumbent to provide
routine and corrective maintenance and provisioning services on Incumbent's
Equipment and System and to maintain Incumbent's Segment of the Pathnet network
at a minimal level of acceptability to ensure overall effective operations;
WHEREAS, Incumbent wishes to perform Maintenance and Circuit Provisioning
for such System for Pathnet,
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties agree as follows:
1. DEFINITIONS:
1.1 Certain Definitions
1
<PAGE>
1.1.1 "Build-Out Period" shall mean the period of time commencing on
the Effective Date and expiring on the date on which the Initial
System is Commissioned.
1.1.2 "Circuit Provisioning" shall mean the process of adding
additional circuits to the System, and shall include installation of
wiring, circuit pack placement and coordinated testing to ensure
that such additional circuitry meets all technical operating
services standards.
1.1.3 "Commissioning" shall be as defined in the FPM Agreement.
1.1.4 "Critical Service Levels" shall mean the service levels and
standards of operations set forth in Schedule B that are essential
for Pathnet to provide reliable, error free traffic to IXCs or other
customers for capacity.
1.1.5 "Dispatch Charge" shall mean the dispatch fee for Circuit
Provisioning paid by Pathnet to Incumbent upon successful completion
of a Circuit Provisioning dispatch, as more particularly described
in Schedule C attached hereto.
1.1.6 "Equipment" shall mean the equipment described in Schedule D
attached hereto.
1.1.7 "Facilities" shall mean the facilities described in Schedule F
attached hereto.
1.1.8 "Field Technician" shall mean Incumbent's employees, agents or
subcontractors certified by Pathnet to provide Services pursuant to
the procedures described in Schedule G attached hereto, as such
standards may be modified from time to time.
1.1.9 "Force Majeure" shall mean an event as defined in Section 14.3
of this Maintenance Agreement.
1.1.10 "FPM Agreement" shall mean the Fixed Point Microwave Services
Agreement by and between Pathnet and Incumbent, dated as of the date
hereof.
1.1.11 Maintenance" shall mean the ongoing and scheduled
inspections, ongoing and scheduled repair, ongoing and scheduled
prevention of repair, and unscheduled, on-call corrective action of
any and all Equipment necessary for the System to operate in
accordance with the Performance Standards as set forth in this
Maintenance Agreement and its Schedules.
2
<PAGE>
1.1.12 "Maintenance and Provisioning Test Equipment" shall mean all
equipment used or owned (including methods and tools) in connection
with the testing and maintenance of the Equipment and System in
accordance with the Performance Standards of this Maintenance
Agreement and its Schedules.
1.1.13 "Monthly Services Charge" shall be as set forth in Section 5
of this Maintenance Agreement and Schedule C, attached hereto.
1.1.14 "Network Operating Center" shall mean the center established
by Pathnet to monitor Incumbent's System and other Systems
comprising the Pathnet network.
1.1.15 "Non-Incumbent Site" shall mean Sites not owned or leased by
Incumbent and not located at Incumbent's Facilities.
1.1.16 "Outage" shall mean an unscheduled interruption in
telecommunications services on the System, including any period of
ten (10) consecutive Severely Errored Seconds (as defined in
Schedule B attached hereto).
1.1.17 "Pass-Through Expenses" shall mean Incumbent's reasonable and
actual out-of-pocket expenses that are required to be reimbursed by
Pathnet hereunder, and that are incurred by Incumbent for Services
required to operate the System but are not accounted for in the
payments to Incumbent pursuant to this Agreement.
1.1.18 "Path" shall mean the physical spatial separation
representing a portion of the System between two contiguous Sites.
1.1.19 "Performance Standards" shall mean individually and
collectively the quantitative and qualitative performance standards
and commitments for the services contained in this Maintenance
Agreement, including, but not limited to, the Critical Service
Levels.
1.1.20 "Preventive Maintenance" shall mean the ongoing and scheduled
Maintenance required for the normal operations of the Equipment and
System, as more fully described in Schedule A.
1.1.21 "Remedial Maintenance" shall mean unscheduled, on-call
Maintenance (i) to correct an Outage, (ii) to restore operations to
above Critical Service Levels, or (iii) to restore the Equipment and
the System to good operating condition, all as more fully described
in Schedule A.
1.1.22 "Services" shall be as defined in Section 3 of this
Maintenance Agreement and Schedule A attached hereto.
3
<PAGE>
1.1.23 "Site" shall mean a physical location on which a tower or
other structure is located which houses the Equipment.
1.1.24 "Stocking Depot" shall mean an enclosed and reasonably
protected storage facility required for housing the Spare Parts
inventory, or set forth in Schedule E-1, attached hereto.
1.1.25 "System" shall mean the high-capacity digital SONET microwave
radio equipment (6 Hz/30 MHz) antenna, waveguides, components,
Facilities and FCC licenses, installed and assembled capable of
transmitting, receiving and transporting telecommunications signals,
as set forth in Schedule F, attached hereto, as more particularly
described in the FPM Agreement.
1.1.26 "Trouble Ticket" shall mean a tracking ticket generated by
the Network Operating Center describing a System event that requires
Service.
1.1.27 "Work Order" shall mean an order for Circuit Provisioning
sent electronically or by facsimile by Pathnet to Incumbent.
1.2 Other Terms
Capitalized terms used in this Maintenance Agreement but not defined
herein shall have the definitions set forth in the FPM Agreement unless
the context dictates otherwise. References herein to Schedules are to the
Schedules attached to this Maintenance Agreement unless otherwise
specified. Other Terms used in this Maintenance Agreement are defined in
the context in which they are used and shall have the meaning, there
indicated.
2. TERM
2.1 Term
The term of this Maintenance Agreement shall commence on the Effective
Date and shall expire on the second anniversary of the Effective Date (the
"Term"). Subject to the terms of Section 3.1.3 below, Incumbent's
obligation to provide Services, and Pathnet's obligation to pay Monthly
Service Charges shall commence as to each Segment upon the Commissioning
of such Segment. The Commissioning shall occur as agreed upon by Pathnet
and Incumbent pursuant to the acceptance procedures of the FPM Agreement,
as set forth in Schedule H, attached hereto.
2.2 Extension
4
<PAGE>
Upon expiration of the Term, this Maintenance Agreement shall renew
automatically for successive, one-year renewal terms unless and until
Incumbent elects not to renew this Agreement as provided in Section 9.2
hereof. This Maintenance Agreement may be terminated (i) by Pathnet for
cause pursuant to Section 7.2 hereof; or (ii) by either Party for cause
pursuant to Section 9.1 hereof. Notwithstanding the foregoing, this
Maintenance Agreement shall automatically terminate upon expiration or
termination of the FPM Agreement.
3. SERVICES
3.1 Provision of Services
3.1.1 General. Upon Commissioning of the Initial System, Incumbent
shall provide the following Maintenance and Circuit Provisioning
services, functions and responsibilities on the Equipment and at the
Facilities, as such Facilities and Equipment may evolve or be
supplemented, enhanced, modified or replaced during the Term (the
"Services"):
(a) the services, functions and responsibilities described
in this Maintenance Agreement and its Schedules; and
(b) the services, functions and responsibilities performed
during the twelve (12) months preceding the Effective
Date, by or on behalf of Incumbent, on those portions of
Incumbent's existing microwave network that are or will
be included in the System, even if such service,
function or responsibility is not specifically described
in this Maintenance Agreement.
3.1.2 Implied Services. If any services, functions or
responsibilities not specifically described in this Maintenance
Agreement are required for the proper performance and provision of
the Services, they shall be deemed to be implied by and included
within the scope of the Services to the same extent and in the same
manner as if specifically described in this Agreement. Except as
otherwise expressly provided in this Maintenance Agreement,
Incumbent shall be responsible for providing the facilities,
personnel and other resources required to perform the Services.
3.1.3 Services during Build-Out Period. Notwithstanding anything to
the contrary contained herein or in the FPM Agreement, during the
Build-out Period Incumbent shall continue to perform the maintenance
duties and other services that were performed on the Facilities by
or on behalf of Incumbent during the twelve (12) month period
preceding the Effective Date.
5
<PAGE>
3.2 Services Requirements
3.2.1 Timing of Service.
(a) General. Incumbent shall perform all Services in at
least the intervals and time periods set forth in
Section 3 of Schedule A.
(b) Circuit Provisioning. Upon receipt of a Work Order,
Incumbent shall dispatch a Field Technician to perform
the work function designated in the Work Order, and
shall complete such function by the date designated in
the Work Order.
3.2.2 Dispatch and Notification.
(a) Dispatch. Incumbent shall make Field Technicians
available to provide Maintenance and Circuit
Provisioning between the hours of ___ to ___, Monday
through Friday and at other times upon the reasonable
request of Pathnet. Incumbent shall make Field
Technicians available to provide Remedial Maintenance
twenty-four (24) hours a day, seven (7) days a week.
Pathnet shall provide System monitoring from the Network
Operating Center twenty-four (24) hours a day, seven (7)
days a week for reporting of System failures. Incumbent
shall include in Exhibit A-1 to Schedule A, a list of
procedures and personnel involved in providing Services,
including an escalation list of individuals who will be
available and who will be responsible for repairing the
System to normal operations. Dispatch procedures
affecting Remedial Maintenance shall be subject to the
prior approval of Pathnet, not to be unreasonably
withheld.
(b) Notification. Notification of a Trouble Ticket shall be
deemed to be received by Incumbent (i) in the event that
Pathnet initiates the Trouble Ticket, upon electronic or
facsimile receipt by Incumbent; and (ii) in the event
that Incumbent notifies Pathnet of a situation requiring
Remedial Maintenance hereunder and a Trouble Ticket is
thereafter generated in connection with such situation,
upon notification of such situation by Incumbent to
Pathnet. The Network Operating Center shall initiate or
monitor (in the case Incumbent advises Pathnet of a
situation requiring initiation of a Trouble Ticket) a
6
<PAGE>
Trouble Ticket pursuant to the procedures set forth in
Section 3.2.6 of Schedule A.
3.3 Services Exclusions
3.3.1 Towers and Shelters. Except as provided in Section 2 of
Schedule A, this Maintenance Agreement does not include maintenance
obligations for any portion of the Facilities, including any tower,
tower lighting, FCC or FAA tower regulatory requirement or equipment
shelter, each of which Incumbent shall maintain outside the scope of
the Services as required to support the continuous and reliable
operation of the System without material degradation to either the
Facilities, the Equipment or the System.
3.3.2 Other Exclusions. In the event that telephone lines, equipment
or interconnections provided by or required by third parties are
used in conjunction with the Equipment, such equipment shall, upon
request by Pathnet, be incorporated into the Equipment and Incumbent
shall provide Services as to such equipment, provided that Pathnet
shall adjust the Monthly Service Charge pursuant to Section 5.4 of
this Maintenance Agreement to reflect such additional Services.
4. EQUIPMENT; FACILITIES
4.1 Equipment
The Equipment that Incumbent shall be responsible for performing
Maintenance and Circuit Provisioning in the performance of the Services is
set forth in Schedule D, and Schedule D may be amended from time to time
as such Equipment may change or may be replaced, modified, or enhanced
over time; provided that Pathnet shall provide written notice to Incumbent
of any such amendment. In the event of a Capacity Expansion under the FPM
Agreement, Pathnet shall supplement and modify Schedule D to include any
additional Equipment required for such Capacity Expansion.
4.2 Spare Parts; Replacement Equipment
4.2.1 Snare Parts. Pathnet shall provide and Incumbent shall store
Spare Parts for the Equipment at the Stocking Depot in the type and
quantity as set forth in Schedule E, attached hereto; provided that
Incumbent may supplement the Spare Parts beyond Incumbent's
designated allocation of Spare Parts at its sole discretion.
Incumbent shall store such Spare Parts at appropriate Stocking
Depots to allow for a response within the time parameters set forth
in Section 3.2 of this Maintenance Agreement and Schedule A,
attached hereto. Pathnet, through the Network Operating Center,
shall assist Incumbent in identifying modules or Spare Parts
necessary to expedite any required repairs. Incumbent shall utilize
the
7
<PAGE>
modular exchange program that Pathnet has established in order to
maintain an adequate inventory of Spare Parts. Incumbent shall be
responsible for notifying Pathnet promptly of any shortages in type
or quantities of Spare Parts required to meet Incumbent's
obligations under this Maintenance Agreement. Upon such
notification, Pathnet shall ship any required Spare Parts in
accordance with the Spare Parts shipping procedures set forth in
Schedule G, attached hereto.
4.2.2 Replacement Equipment. At its sole discretion, Pathnet may
replace any Equipment, provided that such replacement Equipment does
not materially degrade the performance of the Initial System. Upon
reasonable notice to Incumbent that any such Equipment requires
replacing, Incumbent shall be responsible for providing the labor
and other associated costs of installing any such Equipment, in
which event Monthly Services Charges shall, if necessary, be
adjusted as set forth in Section 5.4 of this Maintenance Agreement.
4.3 Facilities
Incumbent shall be responsible for performing the Services at the
Facilities as set forth in Schedule F, and Schedule F may be amended from
time to time as such Facilities are added to the System. In the event of a
Capacity Expansion under the FPM Agreement, Pathnet shall supplement and
modify Schedule F to include any additional Facilities required for such
Capacity Expansion. Pursuant to the FPM Agreement, the Facilities shall be
maintained at the environmental conditions necessary to support the
Equipment, in accordance with the manufacturers' specifications, as set
forth in the FPM Agreement.
5. CHARGES
5.1 General
All Monthly Services Charges to be paid by Pathnet to Incumbent pursuant
to this Maintenance Agreement are set forth in this Section 5 or in
Section 2.1 of Schedule C, attached hereto. Pathnet shall not be required
to pay Incumbent any amounts for the Services in addition to those payable
to Incumbent under this Section 5 or Schedule C, except as provided for in
Section 2.2 of Schedule C.
5.2 Pass-Through Expenses
Upon presentment to Pathnet of an original invoice showing Pass-Through
Expenses incurred, Pathnet shall pay such Pass-Through Expenses directly
to the payee or shall reimburse Incumbent for Pass-Through Expenses paid
by Incumbent.
5.3 Taxes
8
<PAGE>
Each Party shall be responsible for any personal or real property taxes on
property it owns, for franchise and privilege taxes on its business, and
for taxes based on its net income or gross receipts. As to leased
property, the party with the superior leasehold interest shall be
responsible for all taxes owing in connection with such leased property.
5.4 New Services
Pathnet shall pay Incumbent for the performance of any services requested
by Pathnet and agreed to by Incumbent that are not included in the
Services. Pathnet shall pay for such new services as agreed upon by the
Parties based on the procedures set forth in Section 2.4 of Schedule C,
and thereafter, the Services shall include such new services. Such new
Services may include, without limitation: (i) performance of maintenance
services at the interconnection facilities between Pathnet's network and
the System, and (ii) any other services not included in the Services as
defined in this Maintenance Agreement.
6. INVOICING AND PAYMENT
Promptly after the expiration of each calendar quarter, Incumbent shall send
Pathnet an invoice covering the Dispatch Charges, Monthly Service Charges,
Pass-Through Expenses and fees for new Services for the prior three months'
Services. Subject to Section 7.2.1, Pathnet shall pay the amount of each
quarterly invoice within thirty (30) days after receipt by Pathnet. Any and all
disputes with regard to charges payable under this Maintenance Agreement shall
be settled in accordance with Section 15 of this Agreement.
7. PERFORMANCE STANDARDS
7.1 General
Incumbent shall perform the Services at a level of accuracy, quality,
completeness, timeliness, responsiveness and efficiency sufficient to
prevent degradation of the operation of the System. At all times,
Incumbent's level of performance shall be sufficient to attain the
Performance Standards as identified in this Maintenance Agreement and its
Schedules and shall otherwise be consistent with industry standards.
7.2 Failure to Perform
7.2.1 Incumbent recognizes that its failure (i) to maintain the System
such that the System, at all times, operates at or above all Critical
Service Levels, (ii) correct any Outage within the time required
hereunder, (iii) remedy any other problem that threatens to adversely
impact the operation of the System or (iv) perform Circuit Provisioning in
a timely manner, may have a material adverse impact on the business and
operations of Pathnet. Accordingly, in the event that
9
<PAGE>
Incumbent repeatedly fails (i) to meet any Critical Service Level, (ii)
correct any Outage, (iii) remedy any other problem that threatens to
adversely impact the operation of the System or (iv) perform Circuit
Provisioning in a timely manner for reasons other than circumstances that
constitute Force Majeure under this Maintenance Agreement, Pathnet, at its
sole discretion, may elect (i) to not renew this Maintenance Agreement,
(ii) to supplement the provision of Services as provided by Incumbent by
appointing a new Maintenance provider, and/or (iii) to suspend payment of
the Monthly Services Charges.
7.2.2 In the event of any problem affecting the operation of the System
(including, without limitation, the events listed in Section 7.2.1),
Incumbent shall (i) investigate and report to Pathnet the causes of such
problem; (ii) advise Pathnet of the status of remedial efforts being
undertaken with respect to such problems; (iii) correct the problem as
soon as practical and restore the System's operation to the Critical
Service Levels; and (iv) take appropriate preventive measures so that the
problem does not recur.
7.2.3 Pathnet and its designees shall have the right to free, full and
immediate access to any and all affected Facilities to repair, replace,
update, or otherwise modify the Equipment or System and to supplement the
Services (including provisioning or other Services required to operate the
Pathnet network); provided such supplemental Maintenance will not
materially degrade the operation of the Initial System. Upon Pathnet's
prior notification, Incumbent shall reasonably cooperate with Pathnet or
its designee, including providing any escorts necessary for Pathnet to
supplement the Services.
7.2.4 In the event (i) this Agreement is terminated by either party, or
either party elects not to renew this Agreement, or (ii) Pathnet
supplements the Services with another Maintenance Provider. Incumbent
shall have the right to continue to maintain the Initial System at
Incumbent's sole expense, so long as such maintenance shall not degrade
the operation of the System or impact Pathnet's ability to maintain the
System.
8. PERIODIC REVIEWS; AUDIT RIGHTS; SAVINGS CLAUSE
8.1 Reviews
8.1.1 Annual Review. As part of the annual renewal of this
Maintenance Agreement, Pathnet and Incumbent may review the Critical
Service Levels and the Monthly Service Charges paid to Incumbent.
Pathnet and Incumbent shall mutually agree to make adjustments to
the Critical Service Levels, as appropriate, to reflect (i) improved
performance capabilities associated with advances in technology and
methods to perform the Services and (ii) modifications in the
performance requirements of Pathnet's customer. The Parties expect
and
10
<PAGE>
understand that the Critical Service Levels may be made more
demanding over time. Pathnet and Incumbent shall mutually agree to
make adjustments pursuant to Schedule C to the Monthly Service
Charges to reflect the material changes in the performance of the
Services in accordance with any such revised Critical Service
Levels.
8.1.2 Maintenance and Provisioning Test Equipment. Incumbent shall
obtain and utilize the necessary measurement and monitoring tools
and procedures, including, but not limited to, the Maintenance and
Provisioning Test Equipment as set forth in Exhibit E-2 to Schedule
E and other equipment necessary to measure and to report operational
performance of the System against the applicable Critical Service
Levels. Such measurement and monitoring tools and equipment shall
permit reporting at a level of detail sufficient to verify
compliance with Critical Service Levels and shall be subject to
Pathnet's reasonable approval. Upon request by Pathnet, Incumbent
shall provide Pathnet with information and access to such tools and
procedures for purposes of verification.
8.2 Audit and Inspection Rights
8.2.1 Incumbent shall maintain accurate logs and dispatch reports,
recording the date and description of Services performed, the
occurrence of any Outages or operations below Critical Service
Levels, and the appropriate actions taken to restore service.
Pathnet shall have the right to audit any and all reports maintained
by Incumbent. These reports shall be available to Pathnet for its
inspection at Incumbent's Facilities and a copy of the compilation
of these reports is to be forwarded to Pathnet on a quarterly basis.
8.2.2 Pathnet shall have the right to inspect the Facilities,
Equipment and Circuit Provisioning at any time upon reasonable
notice to Incumbent and to supplement the Services during Pathnet's
inspection, provided Pathnet complies with any and all Incumbent
security procedures.
8.3 Savings Clause
Notwithstanding anything to the contrary contained herein, Pathnet's
failure to perform any of its responsibilities set forth in this Agreement
(other than as provided in Section 9.1.2) shall not be deemed to be
grounds for non-performance by Incumbent; provided, however, that
Incumbent's non-performance of its obligations under this Agreement shall
be excused if, and to the extent, (i) Incumbent is unable to perform
Services, despite commercially reasonable efforts to perform, directly as
a result of Pathnet's failure to perform its obligations hereunder, and
(ii) Incumbent provides Pathnet with reasonable notice of any failure by
Pathnet that prevents, or may prevent, Incumbent from performing Services.
11
<PAGE>
9. TERMINATION
9.1 Termination for Cause
9.1.1 In the event that Incumbent: (i) commits a material breach of
this Maintenance Agreement, which breach is not cured within thirty
(30) days after notice of breach from Pathnet to Incumbent or (ii)
commits multiple breaches of its duties or obligations which, in the
commercially reasonable judgment of Pathnet, collectively constitute
a material breach of this Maintenance Agreement, Pathnet may, by
giving reasonable written notice to Incumbent, terminate this
Maintenance Agreement as of the date specified in the notice of
termination.
9.1.2 In the event that Pathnet fails: (i) to pay Incumbent any
undisputed charge due under this Agreement totaling at least Five
Thousand ($5,000) Dollars and fails to make such payment within
forty-five (45) days of notice from Incumbent of Pathnet's failure
to make such payment or (ii) to fulfill any other obligation of
Pathnet hereunder, and such failure continues for a period of thirty
(30) days after written notice from Incumbent to Pathnet of such
failure, Incumbent may, by giving written reasonable notice to
Pathnet, terminate this Maintenance Agreement as of the date
specified in the notice of termination.
9.2 Election Not to Renew
Incumbent may elect not to renew this Maintenance Agreement for any reason
by giving Pathnet at least one-hundred and twenty (120) days prior written
notice before the end of the Term of this Maintenance Agreement indicating
that Incumbent will not renew this Maintenance Agreement. In such event,
Pathnet or its designees may elect to supplement or perform the Services,
or such additional Services as may be necessary to maintain and operate
the System as provided hereunder.
9.3 Termination or Expiration Assistance
In the event that (i) either party elects not to renew this Maintenance
Agreement, or (ii) this Maintenance Agreement expires, Pathnet shall
propose and Incumbent shall approve, which approval shall not be
unreasonably withheld, a third-party, independent Maintenance and Circuit
Provisioning provider, at least forty-five (45) days before termination or
expiration of this Agreement to provide the Services at Incumbent's
Facilities. Such independent Maintenance and Circuit Provisioning provider
shall provide the services and assume the obligations of Incumbent
hereunder for any successive terms coterminous with the remaining term of
the FPM Agreement, unless such provider is replaced by Pathnet before the
expiration of the term of this Maintenance Agreement or any extension
thereof. In the event either Party terminates this Agreement
12
<PAGE>
for cause as provided in Section 9.1 hereof, Pathnet shall provide a
third-party Maintenance and Circuit Provisioning provider to perform the
Services, and Incumbent shall reasonably cooperate with such provider.
Upon termination for any reason or expiration of this Maintenance
Agreement, Pathnet shall have the right to full and free access to all
Facilities to supplement or perform the Services as required hereunder.
10. RELATIONSHIP OF THE PARTIES
Nothing in this Maintenance Agreement will imply a joint venture, partnership,
or principal-agent relationship between the Parties. Neither Party will have any
right, power or authority to act or create any obligation, express or implied,
on behalf of the other Party, pursuant to this Maintenance Agreement.
11. PROPRIETARY RIGHTS AND COPYRIGHTS
11.1 Maintenance software, training materials, manuals or other
proprietary information furnished by Pathnet ("Maintenance Aids") for
Incumbent's use are either Pathnet's property or property of third parties
and, in either case, are proprietary and confidential. Incumbent agrees to
keep such Maintenance Aids confidential and to use its best efforts to
prevent the unauthorized disclosure and use of such Maintenance Aids.
11.2 Incumbent agrees to use its best efforts not to allow copies of any
Maintenance Aids furnished by Pathnet to be made without the prior written
consent of Pathnet. Notwithstanding the foregoing, Incumbent may make
copies of Maintenance Aids to the extent necessary to enable Incumbent to
perform the Services, provided that Incumbent uses its best efforts to
prevent the unauthorized disclosure and use of such Maintenance Aids.
12. REPRESENTATIONS AND WARRANTIES
12.1 Warranties of Incumbent
Incumbent represents and warrants that:
(a) the Services shall be rendered with promptness and diligence
and shall be executed in a workmanlike manner, in accordance
with the practices and high professional standards used in
well-managed commercial telecommunications operations
performing services similar to the Services. Incumbent
represents and warrants that it shall use adequate numbers of
qualified individuals with suitable training, education,
experience, and skill to perform the Services.
13
<PAGE>
(b) it shall perform Maintenance and Circuit Provisioning on the
Equipment so that it operates in accordance with all
applicable specifications, including (i) maintaining equipment
in good operating condition, subject to normal wear and tear
(ii) undertaking repairs and preventive maintenance on
Equipment, and (iii) performing Circuit Provisioning Services
in accordance with the applicable Equipment manufacturers'
recommendations.
(c) it shall use its best efforts to use efficiently the resources
or services necessary to provide the Services. Incumbent shall
use its best efforts to perform the Services in the most
cost-effective manner consistent with the required level of
quality and performance as set forth in this Agreement.
12.2 Warranties of Each Party
Each Party represents and warrants to the other that:
(a) it has the requisite corporate or partnership power and
authority to enter into this Maintenance Agreement and to
carry out the transactions contemplated by this Maintenance
Agreement; and
(b) the execution, delivery and performance of this Maintenance
Agreement and the consummation of the transactions
contemplated by this Maintenance Agreement have been duly
authorized by the requisite corporate or partnership action on
the part of such Party.
12.3 Insurance
Incumbent warrants and represents that during the Term of this Maintenance
Agreement and any extension or renewal thereof, Incumbent shall maintain
at Incumbent's expense all of the necessary insurance for all Incumbent's
employees, agents or affiliates required to perform the Services,
including, but not limited to, Worker's Compensation, disability, and
unemployment insurance, and to provide Pathnet with certification thereof
upon request.
12.4 Security and Safety Procedures
In the event Pathnet is required to supplement the Services, Pathnet shall
comply with all reasonable Incumbent security and safety procedures as
provided by the Incumbent in fulfilling its obligations.
12.5 Disclaimer
EXCEPT AS PROVIDED IN THIS MAINTENANCE AGREEMENT, THERE ARE
14
<PAGE>
NO OTHER EXPRESS WARRANTIES AND THERE ARE NO IMPLIED WARRANTIES, INCLUDING
THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE ON THE PART OF EITHER PARTY.
13. INDEMNITIES
13.1 Indemnification by Incumbent
Incumbent agrees to indemnify, defend and hold harmless Pathnet and its
Affiliates and their respective officers, directors, employees, agents,
successors and assigns from and against any and all Losses and threatened
Losses arising from, in connection with, or based on allegations of, any
of the following:
(a) any claims of infringement of any patent, trade secret,
copyright or other proprietary rights alleged to have occurred
because of systems or other resources provided to Incumbent by
Pathnet.
(b) the untruth, inaccuracy or breach of any representation or
warranty of Incumbent set forth in this Agreement.
(c) the liability of Pathnet for (i) any personal injury, disease
or death of any person, (ii) damage to or loss of any
property, money damages or specific performance owed to any
third party (by contract or operation of law), or (iii) any
fines, penalties, taxes, claims, demands, charges, actions,
causes of action, assessments, environmental response costs,
environmental penalties, injunctive obligations caused by,
arising out of, or in any way incidental to, or in connection
with, actions or omissions of Incumbent, its employees,
Subcontractors or agents.
13.2 Indemnification by Pathnet
Pathnet agrees to indemnify, defend and hold harmless Incumbent and its
Affiliates and their respective officers, directors, employees, agents,
successors and assigns from and against any and all Losses and threatened
Losses arising from, in connection with, or based on allegations of, any
of the following:
(a) any claims of infringement of any patent, trade secret,
copyright or other proprietary rights alleged to have occurred
because of systems or other resources provided to Pathnet by
Incumbent.
(b) the untruth, inaccuracy or breach of any representation or
warranty of Pathnet set forth in this Agreement.
15
<PAGE>
(c) the liability of Incumbent for any (i) personal injury,
disease or death of any person, (ii) damage to or loss of any
property, money damages or specific performance owed to any
third party (by contract or operation of law), or (iii) any
fines, penalties, taxes, assessments, environmental response
costs, environmental penalties or injunctive obligations
caused by, arising out of, or in any way incidental to, or in
connection with, actions or omissions of Pathnet, its
employees, Subcontractors or agents.
(d) the liability of Incumbent arising out of any or all
obligations to or contracts between Pathnet and its customers
concerning the purchase of Excess Capacity.
13.3 Indemnification Procedures
Any third party claims for indemnification, shall follow the
indemnification procedures of Section 16.3 of the FPM Agreement which are
hereby incorporated by reference:
13.4 Subrogation
In the event that an indemnitor shall be obligated to indemnify an
indemnitee pursuant to Section 13.1 or Section 13.2, the indemnitor shall,
upon payment of such indemnity in full, be subrogated to all rights of the
indemnitee with respect to the claims to which such indemnification
relates.
14. LIABILITY
14.1 General Intent
Subject to the specific provisions of this Article 14, it is the intent of
the Parties that each Party shall be liable to the other Party for any
actual damages incurred by the non-breaching Party as a result of the
breaching Party's failure to perform its obligations in the manner
required by this Maintenance Agreement.
14.2 Liability Restrictions
14.2.1 SUBJECT TO SECTION 14.2.2 BELOW, IN NO EVENT, WHETHER IN
CONTRACT OR IN TORT (INCLUDING BREACH OF WARRANTY, NEGLIGENCE AND
STRICT LIABILITY IN TORT), SHALL A PARTY BE LIABLE TO THE OTHER
PARTY FOR INDIRECT OR CONSEQUENTIAL, EXEMPLARY, PUNITIVE OR SPECIAL
DAMAGES, ARISING OUT OF OR IN CONJUNCTION WITH THIS MAINTENANCE
AGREEMENT.
16
<PAGE>
14.2.2 The limitations set forth in Section 14.2.1 shall not apply
with respect to (i) damages occasioned by willful misconduct or
gross negligence of a Party or (ii) damages occasioned by a breach
of Section 16.7.
14.3 Force Majeure
14.3.1 No Party shall be liable for any default or delay in the
performance of its obligations under this Maintenance Agreement if
and to the extent such default or delay is caused, directly or
indirectly, by: fire, flood, earthquake, elements of nature or acts
of God, riots, civil disorders, rebellions or revolutions in any
country; or any other cause beyond the reasonable control of such
Party (a "Force Majeure" event), provided the non-performing Party
is without fault in causing such default or delay, and such default
or delay could not have been prevented by reasonable precautions and
can not or could not reasonably be circumvented by the
non-performing Party through the use of alternate sources,
workaround plans or other means.
14.3.2 In such event, the non-performing Party shall be excused from
further performance or observance of the obligation(s) so affected
for as long as such circumstances prevail and such Party continues
to use its best efforts to recommence performance or observance
whenever and to whatever extent possible without delay. Any Party so
delayed in its performance shall immediately notify the Party to
whom performance is due by telephone (to be confirmed in writing
within two (2) days of the inception of such delay) and describe at
a reasonable level of detail the circumstances causing such delay.
15. DISPUTE RESOLUTION
15.1 Arbitration; Resolution of Disputes
Any and all disputes and controversies between Incumbent and Pathnet
concerning the negotiation, interpretation, performance, breach or
termination of this Agreement (each a "Dispute") shall be subject to
resolution by Section 17.2 of the FPM Agreement which is hereby
incorporated by reference.
16. MISCELLANEOUS
16.1 Notice Provision
Notice shall be served and deemed received in accordance with the
provisions of Section 18.1 of the FPM Agreement which is hereby
incorporated by reference.
16.2 Binding Nature; Entire Agreement
17
<PAGE>
Pathnet and Incumbent acknowledge (i) that each has read and understands
the terms and conditions of this Maintenance Agreement and agrees to be
bound by such terms and conditions, (ii) that this Maintenance Agreement
is the complete and conclusive statement of the agreement between the
Parties, and (iii) that this Maintenance Agreement sets forth the entire
agreement and understanding between the Parties relating to the subject
matter hereof. All understandings and agreements, oral and written,
heretofore made between Incumbent and Pathnet relating to the subject
matter hereof are merged in this Maintenance Agreement which alone, fully
and completely expresses their agreement on the subject matter of
maintenance service to be provided by Incumbent. The provisions of this
Maintenance Agreement are separate and apart from the provisions of the
FPM Agreement and may not in any way affect either Party's obligations
with regard to the FPM Agreement.
16.3 Amendment
No modification of, additions to or waiver of this Maintenance Agreement
shall be binding upon Incumbent and Pathnet unless such modification is in
writing and signed by an authorized representative of each Party.
16.4 Severability
If any term or provision of this Maintenance Agreement shall to any extent
be held by a court or other tribunal to be invalid, void or unenforceable,
then that term or provision shall be inoperative and void insofar as it is
in conflict with law, but the remaining terms and provisions of this
Maintenance Agreement shall nevertheless continue in full force and effect
and the rights and obligations of the Parties shall be deemed to be
restated to reflect newly as possible the original intentions of the
Parties in accordance with applicable law.
16.5 Headings
Section and paragraph headings used in this Maintenance Agreement are for
reference and convenience only and are not to be deemed or construed to be
part of this Maintenance Agreement.
16.6 Consents and Approval
Except where expressly provided as being in the sole discretion of a
Party, where agreement, approval, acceptance, consent or similar action by
either Party is required under this Maintenance Agreement, such action
shall not be unreasonably delayed or withheld. An approval or consent
given by a Party under this Maintenance Agreement shall not relieve the
other Party from responsibility for complying with the requirements of
this Maintenance Agreement, nor shall it be construed as a waiver of any
rights under
18
<PAGE>
this Maintenance Agreement, except as and to the extent otherwise
expressly provided in such approval or consent.
16.7 Compliance with Laws and Regulations
Each Party shall perform its obligations in a manner that complies with
the applicable Federal, state and local laws, regulations, ordinances and
codes (including identifying and procuring required permits, certificates,
approvals and inspections). If a charge of noncompliance by either Party
with any such laws, regulations, ordinances or codes occurs, the Party
charged with such non-compliance shall promptly notify the other Party of
such charges in writing.
16.8 Governing Law
This Maintenance Agreement and the rights and duties of the Parties shall
be governed and interpreted in accordance with the laws of the State of
_________, other than the choice of law rules thereof.
16.9 Binding Nature and Assignment
This Maintenance Agreement shall be binding on the Parties hereto and
their respective successors and assigns. Neither Party may or shall have
the power to assign this Maintenance Agreement without the prior written
consent of the other, except that either Party may assign its rights and
obligations under this Maintenance Agreement without the approval of the
other Party to an entity which acquires all or substantially all of the
assets of that Party to any subsidiary or Affiliate or successor in a
merger or acquisition of that Party; provided that in no event shall any
such assignment relieve that Party of its obligations under this
Maintenance Agreement.
16.10 Waiver
Failure or delay on the part of Incumbent or Pathnet to exercise any
right, power or privilege under this Maintenance Agreement shall not
constitute a waiver of any right power or privilege of this Maintenance
Agreement.
16.11 Time To Sue
No action shall be brought for any breach of this Maintenance Agreement
more than two (2) years after the accrual of such cause of action, except
where applicable law provides for a shorter limitation period, in which
event that period should apply.
16.12 Survival
19
<PAGE>
Any provision of this Maintenance Agreement which contemplates performance
or observance subsequent to any termination or expiration of this
Maintenance Agreement shall survive any termination or expiration of this
Maintenance Agreement and continue in full force and effect.
16.13 Covenant of Good Faith
Each Party agrees that in its respective dealings with the other Party
under or in connection with this Maintenance Agreement, it shall act in
good faith.
IN WITNESS WHEREOF, the Parties hereto have executed this Maintenance
Service Agreement, or caused it to be executed by a duly authorized officer, as
of the date first written above.
PATHNET, INC. IDAHO POWER COMPANY
By: By:
------------------------------- -------------------------------
Name: Name:
----------------------------- -----------------------------
Title: Title:
---------------------------- ----------------------------
Date: Date:
----------------------------- -----------------------------
PATHNET/IDAHO POWER EQUIPMENT, LLC
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Date:
-----------------------------
20
<PAGE>
SCHEDULE A
MAINTENANCE AND CIRCUIT PROVISIONING SERVICES
1. INTRODUCTION
This Services Schedule describes certain services and functions that Incumbent
shall perform. Performance Standards relating to certain of the services and
functions described herein are set forth in Schedule B. Pathnet's
responsibilities with respect to particular services and functions described in
this Services Schedule, if any, are specifically indicated where such services
and functions are described.
The services and functions described in this Services Schedule are intended to
be comprehensive, but not necessarily all-inclusive. During the term, the
Parties may agree on different or additional services and amend this Services
Schedule in writing accordingly.
This Services Schedule is organized into three Sections: Preventive Maintenance,
Remedial Maintenance and Field Technicians Requirements.
2. PREVENTIVE MAINTENANCE
During the Term of this Maintenance Agreement, Incumbent shall perform
Preventive Maintenance (including (i) inspections and (ii) any and all
corrective action, if and where necessary) in accordance with the procedures set
forth below. Incumbent shall maintain at its premises a log recording any and
all Preventive Maintenance performed pursuant to Section 8.2 of the Maintenance
Agreement.
2.1 Antenna/Waveguide Maintenance
Incumbent shall perform the following inspections and any and all
corrective actions, if required:
2.1.1 Monthly Inspection.
At least once a month, Incumbent shall perform the following
inspections from the ground:
a. Visually check the general appearance of the antenna and
waveguide for ice, wind and projectile damage.
b. Visually check the waveguide on the tower and waveguide
bridge for loose or broken waveguide hangers (i.e.
attach/replace as required).
A-1
<PAGE>
c. Visually check the antenna canvas (TEGLAR) radomes for
holes, tears and excessive wear. Replace if severely
torn to preempt feedhorn damage.
d. Check inside building waveguide pressure gages for 5-8
lbs/in(^2) per antenna (10 lbs/in(^2) maximum).
2.1.2 Quarterly Inspection.
At least once a quarter, Incumbent shall perform the following
inspections to supplement the monthly inspection:
a. Visually inspect waveguide grounds at the bend from the
tower and building entry buss bars. Inspect for
excessive corrosion and firm connectivity.
b. Visually inspect the waveguide port seals into the
building for excessive deterioration and insect/bird
infestation. Clean, replace and re-seal if required.
c. Check functional operation of the dehydrator and local
and remote alarms. Create a pressure leak so dehydrator
consistently runs for at least 10 minutes.
d. Visually check dehydrator air dryer/desiccant for
excessive moisture (i.e., desiccant color change).
e. Check functional operation of the dehydrator
low-pressure alarm, both local and remote indications.
Use dehydrator regulator valve to create alarms. (Low
alarm less than .5lb/iN2).
2.1.3 Annual Inspection.
At least once a year, Incumbent shall perform the following
inspections:
a. Physically inspect antenna stiff arms (struts) for
indications of antenna movement, i.e., gouges in metal
around lock down bolts.
b. Physically inspect each antenna feedhorn guy wires by
spring tension at back of antenna. Broken feedhorn guy
lines will pull out from back of dish.
c. Check for loose, broken or missing waveguide hangers.
Repair or replace such waveguide hangers as required.
A-2
<PAGE>
d. Visually inspect waveguide grounds near antennas.
2.2 Battery Maintenance (Valve Regulated Batteries)
Incumbent shall perform the following inspections and any and all
corrective actions, if required:
2.2.1 Monthly Inspection.
At least once a month, Incumbent shall perform the following
inspections:
a. Visually check the general appearance and cleanliness of
the batteries, the battery rack and the battery room.
Clean and dust as required.
b. Inspect for cracks in the cells or electrolyte leakage.
Notify Pathnet's monitoring center if corrective action
is required.
c. Inspect the load post plates and inter-cell post
connector plates for corrosion. Clean and apply NO-OX-ID
"A" grease, as required.
2.2.2 Quarterly Inspection.
At least once a quarter, Incumbent shall perform the following
inspections, to supplement the monthly inspection:
a. Check and record the voltage of each of the 24 cells.
b. Check battery plant float voltage at load plates (-53.52
to -54.48 VDC). Adjust charger float voltage to within
range.
c. Check pilot cell voltage. Range is 2.23-2.27 VDC.
Minimum is 2.20 VDC. Maximum is 2.35 VDC. Pilot cell is
lowest per cell voltage of the 24 cells. If below
minimum, equalize batteries for 12-24 hours. If above
2.27 VDC, decrease charger float voltage.
2.2.3 Annual Inspection.
At least once a year, Incumbent shall perform the following
inspections:
A-3
<PAGE>
a. Ensure load plate post bolts are torqued to 95-100 in
lbs.
b. Measure and record inter-cell connection resistance.
c. Check all alarm points for proper functionality.
2.3 Building Maintenance
Incumbent shall perform the following inspections and any and all
corrective actions, if required:
2.3.1 Monthly Inspection.
At least once a month, Incumbent shall perform the following
inspections:
a. Visually check the general appearance and cleanliness of
the building.
b. Check the building's exterior walls and roof for damage
due to ice or projectile damage. Repair and seal holes
as required.
c. Check inside the building for evidence of water leaks or
seepage. Re-seal as required.
d. Verify operation of building exterior entry light and
any other perimeter lights. Replace bulbs as required.
e. Verify ambient room temperature is >60(degrees)F and
less than 80(degrees)F. Verify and adjust thermostat
high and low settings.
2.3.2 Quarterly Inspection.
At least once a quarter, Incumbent shall perform the following
inspection, to supplement the monthly inspection:
a. Inspect building ground wires for excessive corrosion
and firm connectivity. Clean and tighten as required.
b. Verify operation of each air conditioner unit. Air
discharge should be a minimum of 10(degrees) cooler than
outside building temperature.
c. Clean or change each air conditioner's filter.
2.3.3 Annual Inspection.
A-4
<PAGE>
At least once a year, Incumbent shall perform the following
inspections:
a. Verify functional operation of the building high
temperature alarms both local and remote.
b. Inspect the building floor tile for bubbles, cracks and
tears. Repair and replace as required.
c. Check all alarm points for proper functionality.
d. Ensure all AC connections are tight and at the specified
torque.
e. Measure and record voltages at the building distribution
panel to verify that the input AC voltages are within
specifications.
f. Visual inspection for foundation erosion.
2.4 Charger/Rectifier Maintenance (Valve Regulated Batteries)
Incumbent shall perform the following inspections and any and all
corrective actions, if required:
2.4.1 Monthly Inspection.
At least once a month, Incumbent shall perform the following
inspections:
a. Dust or wipe down top of rectifier shelf as required.
Remove dust from rear fan exhaust rings on each
rectifier unit.
b. Verify DC output amps of each rectifier unit is within
5% of each other. Adjust load sharing setting on
rectifiers to balance output load.
c. Visually inspect DC output cables for significant
insulation indentations and deterioration along cable
rack and other metal surfaces.
2.4.2 Quarterly Inspection.
At least once a quarter, Incumbent shall perform the following
inspections to supplement the monthly inspection:
A-5
<PAGE>
a. Verify that float output voltage of each rectifier (at
battery plant) is -53.52 to DC. Adjust each rectifier to
within .1 VDC of each other.
b. Verify equalize voltage is -55.2VDC to -56.4VDC for
each rectifier. Adjust each rectifier to within .1 VDC
of each other.
c. Verify current limit setting and operation of each
rectifier.
d. Verify operation of forced paralleling. Adjust as
required.
e. Verify operation and accuracy of DC volts and amps
output monitor meters. Adjust meter monitor calibration
as required.
2.4.3 Annual Inspection.
At least once a year, Incumbent shall perform the following
inspections:
a. Verify that AC and DC local and remote alarms are
functional for each rectifier.
b. Verify that local and remote high and low DC output
alarms are functional.
c. Visually inspect AC and DC power connections for
corrosion and firm connectivity. Clean and tighten as
required.
d. Use an oscilloscope and check AC ripple/noise on the DC
output terminals. Check charger grounds for spikes over
1 volt P/P.
e. Check all alarm points for proper functionality.
2.5 Generator Maintenance
Incumbent shall perform the following inspections and any and all
corrective actions, if required:
2.5.1 Monthly Inspection.
At least once a month, Incumbent shall perform the following
inspections:
A-6
<PAGE>
a. On indoor units visually check the general appearance
and cleanliness of the generator room. Sweep and wipe
down as required.
b. On outdoor weatherproof housing units, verify that
access panels close properly and are latched. Clean
inside of housing and oil panel hinges as required.
c. Check engine oil and coolant levels. Fill as required.
d. Check fuel level. (Should not be below 40% of total fuel
capacity.) Refill as required.
e. Check 12VDC/24VDC starting battery's electrolyte level.
Fill with distilled water as required.
f. Check engine drip pan for indications of excessive oil
or coolant leakage.
2.5.2 Quarterly Inspection.
At least once a quarter, Incumbent shall perform the following
inspections to supplement the monthly inspection:
a. Visually check fan belts for fraying and cracks. Replace
as required.
b. Inspect starting battery terminals for corrosion and
firm connections. Clean and grease battery posts as
required.
c. Remotely start generator and transfer load. Run site on
generator for minimum of 30 minutes.
d. Ensure starring battery charger is operational.
2.5.3 Annual Inspection.
At least once a year, Incumbent shall perform the following
inspections:
a. Once a year or every 250 hours of operation change the
engine oil, oil filter, fuel filter and coolant filter
(if equipped). Note changes in site log.
b. Inspect engine air filter cleaner. Clean or replace as
required.
A-7
<PAGE>
c. If equipped, inspect and clean the generator building
intake and exhaust filters. Replace if required.
d. Simulate an AC power failure and load test the site for
at least one (1) hour. Record AC volts, AC amps,
frequency, engine RPM, oil pressure, and coolant
temperature. Compare readings with manufacturer's
tolerances.
e. Check all alarm points for proper functionality.
2.6 Multiplexer Maintenance
Incumbent shall perform the following inspections and any and all
corrective actions, if required:
2.6.1 Monthly Inspection.
At least once a month, Incumbent shall perform the following
inspections:
a. Wipe off or dust top of multiplexer shelves as required.
b. Push LED TST button and verify all red, yellow and green
indicators are lit. Replace any module unit that has an
un-lit indicator. (LED)
2.62 Annual Inspection.
At least once a year, Incumbent shall perform the following
inspections:
a. Measure main and standby power supply unit's DC output
voltages. Verify measurements are within manufacturer's
tolerances.
b. If test points are available measure and record the main
and protection, optical TX laser bias current. Verify
measurements are within manufacturer's tolerances.
c. Check functional operation of the local and remote major
and minor alarms.
d. Check all alarm points for proper functionality.
2.7 Radio Maintenance
A-8
<PAGE>
Incumbent shall perform the following inspections and any and all
corrective actions, if required:
2.7.1 Monthly Inspection.
At least once a month, Incumbent shall perform the following
inspections:
a. Wipe off or dust the top shelves in the radio equipment
racks as required.
b. Push LED TST switch on each TX/RX logic control and
verify all red, yellow and green indicators are lit.
Replace any module that has an un-lit indicator.
c. Check and record all TX/RX meter readings for TX power,
AFC correction, RX in level, If level etc. Verify
readings are within manufacturer's tolerances.
2.7.2 Quarterly Inspection.
At least once each quarter, Incumbent shall perform the following to
supplement the monthly inspection:
a. Measure and record the DC-DC power converter and TX FET
power supply DC output voltages for each TX/RX unit.
Verify that measured voltages are within manufacturer's
tolerances.
b. Measure and record the RF output power of each
transmitter at the TX monitor connector. (This may
require disabling of automatic power level control).
Level should be within 1.0 dB of nominal.
c. Measure and record the TX RF frequency on each
transmitter at the TX monitor connector. Measured should
be within +/-.005% of assigned value.
d. Measure and record the receiver AGC voltage. Correlate
AGC voltage to receive signal level. Verify actual RSL
is within 3 dB of calculated.
2.7.3 Annual Inspection.
At least once a year, Incumbent shall perform the following
inspections:
a. Measure and record each TX local oscillator frequency.
Measured value should be within +/- .001% of assigned
value.
A-9
<PAGE>
b. Measure and record each RX local oscillator frequency.
Measured value should be within +/-.001% of assigned
value.
c. Perform "Transmit Fade Margin Test" to verify receiver
fade margin on the path. The measured value should be
within +/-2 dB of calculated.
d. Check all alarm points for proper functionality.
2.8 Site Maintenance
Incumbent shall perform the following inspections and any and all
corrective actions, if required:
2.8.1 Monthly Inspection.
At least once a month, Incumbent shall perform the following
inspections:
a. Visually check the general appearance and cleanliness of
the site area.
b. Check gates for sagging and ground clearance. Lubricate
gate hinges as required.
c. Check gate and site locks for binding or sticking.
Lubricate as required.
d. Ensure perimeter fence is upright (vertical) and
unopened.
e. Inspect building, tower and guy anchor foundations for
excessive erosion.
2.8.2 Quarterly Inspection.
At least once a quarter, Incumbent shall perform the following to
supplement the monthly inspection:
a. Cut excessive grass and weed growth within site
perimeter fence.
b. If required spread vegetation killer chemicals within 10
feet of building area.
2.8.3 Annual Inspection.
A-10
<PAGE>
At least once a year, Incumbent shall perform the following
inspections:
a. Ensure large tree growth near AC power lines, guy wires
and buildings is cut or removed.
b. Inspect road condition, perimeter fence and gate
condition and foundation.
2.9 Tower Maintenance
Incumbent shall perform the following inspections and any and all
corrective actions, if required:
2.9.1 Monthly Inspection.
At least once a month, Incumbent shall perform the following
inspections to ensure compliance with current EIA requirements:
a. Visually check the general appearance of the tower and
waveguide bridge for loose or bent cross braces due to
ice or wind.
b. If a guyed tower is in use, visually check the guy
cables for fraying and ensure a linear slope (i.e., no
sag).
c. Cover photocell until tower lights come on. Visually
check to ensure all tower lights are operational. Notify
status center of burned out tower lights.
2.9.2 Quarterly Inspection.
At least once a quarter, Incumbent shall perform the following:
a. Visually inspect the tower base and guy anchor ground
wires for excessive corrosion and firm connectivity.
Clean and tighten as required.
2.9.3 Annual Inspection.
At least once a year, Incumbent shall perform the following
inspections:
a. Visually inspect the tower base and guy anchor
foundations for indications of movement and excessive
erosion (i.e., large gaps between concrete and earth).
b. Provide a detailed report on the tower paint condition
and any excessive metal corrosion.
A-11
<PAGE>
2.9.4 Annual Inspection.
No less frequently than every two years, Incumbent shall perform the
following inspection:
a. Physically climb the tower and check for loose or
missing bolts and bent tower members. Replace all
regular incandescent tower light bulbs.
b. If a guyed tower is in use, check tower plumb and guy
tension.
2.10 Preventive Maintenance Reference Guide
In performing the Preventative Maintenance, Incumbent shall be subject to
the following parameters:
2.10.1 Parts.
Incumbent shall use Original Equipment Manufacturer's ("OEM") parts
or parts of equal quality.
2.10.2 Manuals.
Incumbent shall service Equipment at levels set forth in OEM's
product manuals provided that Incumbent has approval or permission
to use such manuals.
2.10.3 Modifications.
Pathnet may modify Preventive Maintenance procedures for the
Equipment from time to time as a result of modifications in OEM
procedures for such Equipment, provided that Incumbent has approved
such procedures. Incumbent shall not unreasonably withhold such
approval.
3. REMEDIAL MAINTENANCE
In addition to Preventive Maintenance, Incumbent shall perform Remedial
Maintenance in the event of an escalated problem that requires one-time,
unscheduled repair or corrective action upon notification and initiation
of a Trouble Ticket, as set forth below. Incumbent shall manage all
Remedial Maintenance and restore all Equipment and System functionality so
that the System operates in accordance with the Performance Standards.
Incumbent shall maintain at its premises a record log recording any and
all Remedial Maintenance performed pursuant to Section 8.2 of the
Maintenance Agreement. Such Remedial Maintenance shall supplement and be
in addition to Preventive Maintenance.
A-12
<PAGE>
3.1 Network Monitoring
3.1.1 Network Monitoring Center.
a. Pathnet shall operate a Network Monitoring Center
twenty-four (24) hours a day, seven (7) days a week to
handle all problem and trouble reports and to monitor
the Equipment and System. Pathnet shall monitor both
alarm and operations information to identify and to
correct degradation or interruption of the System. Upon
receipt of knowledge of any degradation of interruption,
Pathnet will initiate Remedial Maintenance as set forth
in Section 3.2 below.
b. Pathnet's Network Monitoring Center will collect
performance data (Errored Seconds, Severely Errored
Seconds, frame loss, Failed Seconds, etc.) consistent
with manufacturer's specifications and issue periodic
reports, as set forth in the FPM Agreement.
c. Pathnet's Network Monitoring Center will coordinate and
support Remedial Maintenance efforts by Incumbent's
Field Technicians provided that Incumbent has final
responsibility for such Remedial Maintenance. As
reasonably requested by Incumbent, Pathnet shall assist
Incumbent, to the extent within Pathnet's reasonable
control, in restoring operations including locating
Spare Parts or other supplies.
3.1.2 Performance Data.
a. Pathnet shall monitor performance data that will provide
information regarding the performance transport system
and will localize any trouble or degradation of service.
b. Performance data will be collected as follows:
(i) Current performance data will provide values for
performance data collected for the current time
presented in 15-minute increments of sites of
data; and
(ii) Historic performance data will provide a minimum
of sixteen (16) l5-minute and seven (7) 24-hour
sets of data.
c. Through the Network Monitoring Center, Pathnet shall
establish a network management system (the "Network
Management System"). Such Network Management System
shall collect, monitor and manage:
A-13
<PAGE>
(i) all network elements within the System;
(ii) performance data such as Errored Seconds, Severely
Errored Seconds, frame loss and Failed Seconds
consistent with the manufacturer's specifications,
and
(iii) the shelter environments (including commercial power
failure, door alarms, charger failures, low
waveguide pressure, air conditioner failure, tower
light alarms, generator runs (if any), waveguide
dehydrator excessive runs, smoke alarms, high
temperature and low temperature) for radio equipment
and multiplexing equipment.
d. The Network Monitoring System shall provide Incumbent with
the ability to monitor the System separately from the
overall Pathnet network.
3.1.3 Alarm/Event Logging and Reports.
Pathnet shall promptly forward all alarms, event logs, and related
reports to Incumbent upon compilation of such reports by Pathnet as
set forth in the FPM Agreement.
3.2 Dispatch and Restoration
In the event of (i) any Outage or (ii) operations of the System below any
Performance Standard (including, without limitation, Critical Service
Levels), Incumbent shall perform Remedial Maintenance upon notification of
such Outage or degraded operations. The Parties responsibilities in
identifying and managing any and all Remedial Maintenance shall be as set
forth below:
3.2.1 General.
In the event of (i) any Outage, (ii) degradation below Pathnet's
Critical Service Levels or (iii) any identified malfunctioning of the
Equipment or System, Incumbent shall dispatch an Incumbent Field
Technician as directed by the Network Monitoring Center.
A-14
<PAGE>
3.2.2 Outage.
Without limiting the foregoing, Incumbent Field Technicians shall be
on site as promptly as possible to restore operations after receipt of
a Trouble Ticket identifying such Outage and shall restore operations,
with a cumulative mean time to repair operations of two (2) hours from
receipt of the Trouble Ticket.
3.2.3 Critical Service Levels.
Without limiting the foregoing, Incumbent Field Technicians shall be
on site within as promptly as possible after receipt of a Trouble
Ticket identifying a System degradation below Critical Service Levels
and will restore operations with a cumulative mean time to repair
operations of two (2) hours from receipt of the Trouble Ticket.
3.2.4 Adverse Impacts to the System.
Without limiting the foregoing, Incumbent Field Technicians shall be
on site within as promptly as possible after receipt of a Trouble
Ticket identifying any problem that threatens to adversely impact the
System or the integrity of the System and will restore operations with
a cumulative mean time to repair operations of two (2) hours from
receipt of such Trouble Ticket Examples of such System failures that
threaten to degrade operations below Critical Service Levels include,
without limitation: (i) any failure in a radio that caused traffic to
be switched to the protection radio channel, (ii) any failure in the
protection radio channel that makes it unavailable for traffic, (iii)
failure of any one for one protected modules in radio or multiplex
equipment that could result in a system outage in a Segment, (iv) any
other problem that in connection with a second problem will cause an
Outage or operations below Critical Service Levels.
3.2.5 Other Failures.
For other problems or failures that may not impact Critical Service
Levels, Pathnet or Incumbent shall dispatch Incumbent Field
Technicians the next working day. Examples of other failures include,
without limitation: (i) failure of one of the two battery chargers or
(ii) failure of one of the air conditioners.
4. CIRCUIT PROVISIONING
During the term of this Maintenance Agreement, Incumbent shall perform Circuit
Provisioning in accordance with the procedures set forth below.
A-15
<PAGE>
4.1 Dispatch Performance
Incumbent shall dispatch Field Technicians to perform the following
functions associated with the Circuit Provisioning for both Incumbent
and Pathnet.
a. Upon receipt of a Work Order, Incumbent shall schedule and
coordinate a Field Technician to perform the work function by the
required date designated in the Work Order.
b. Such work functions shall include the completion of the following
site related functions: (i) placement of circuit packs; (ii)
placement of all cross wiring and cabling between radio,
multiplexer and site circuit termination points designated by
Pathnet; (iii) placement of new circuit termination interfaces
such as cross connect blocks, DSX terminations and any associated
cabling; (iv) labeling of cross connect points with the circuit
identification numbers shown on the work order; (v) verbal
notification of Pathnet from the site to confirm completion of
Circuit Provisioning; and (vi) conduct joint circuit level
acceptance testing with Pathnet and customer contacts. Specific
DS-1, DS-3 and OC-3 acceptance tests and parameters are set forth
in Schedule B.
4.2 Provisioning at Non-Incumbent Sites
4.2.1. Non-Incumbent Sites
In the event Pathnet elects to connect the Incumbent System through
the addition of spurs and paths to Pathnet's backbone network or to a
customer POP, Pathnet shall request that Incumbent perform Circuit
Provisioning, as set forth in this Maintenance Agreement, at the
Non-Incumbent Site locations and points of interconnections listed or
amended to Schedule F. Within fifteen (15) days of such proposal,
Incumbent shall respond regarding its intent to perform the Circuit
Provisioning. Pathnet shall reserve the right to contract with and
direct additional third parties to perform certain provisioning
functions based upon the nature of the interconnection agreements
associated with specific sales. In such case, Incumbent may or may not
be the sole provider of provisioning services at any Non-Incumbent
Site.
4.2.2 Provisioning Equipment
In the event Circuit Provisioning functions to be performed by
Incumbent require the use of equipment configurations other than these
which Incumbent Field Technicians are familiar, Pathnet shall arrange
for training at the Incumbent's expense for Field Technicians
responsible for each of those specific sites.
A-16
<PAGE>
4.3 Provisioning interfaces
Upon Commissioning, both Incumbent and Pathnet shall operate the
System wing a manual provisioning interface arrangement. Pathnet shall
develop operations support systems to automate the work order
transmission, work force management and completion reporting in order
to enhance the efficiency of the process. Incumbent shall perform the
following interface functions:
4.3.1 Manual Provisioning Interface
a. Provide manual dial up facsimile points for distribution of
work related documents by Pathnet.
b. Provide for redistribution and coordination of scheduled
site work with Field Technicians.
c. Provide Pathnet with a point of contact for verbal contact
between the Incumbent and Pathnet for the purpose of:
1. Daily pre- and post-Work Order status and verification;
2. Circuit escalations;
3. Service date negotiation for expedited service
requests; and
4. Provisioning coordination (both pre- and post-circuit
turnup including coordination of acceptance testing).
4.3.2 Automated Provisioning Interfaces
a. Specific interface arrangements will be negotiated prior to
system implementation.
b. Incumbent shall be responsible to provide PC access
capabilities to its Field Technician in order to:
1. Identify and retrieve work lists;
2. Retrieve site related work documents; and
3. Report work completion information.
4.3.3 Incumbent Capacity Expansion
A-17
<PAGE>
Incumbent shall contact Pathnet for the provisioning of any DS-1 or
DS-3 capacity addition, disconnection or grooming for their internal
network. The provisioning process will follow the standard work steps
outlined in Section 4 of this Agreement.
4.3.4 Network Element Software Changes
Incumbent shall not program or reprogram any software changes into any
network element on the system unless it is coordinated and directed by
the Network Monitoring Center.
4.4 Circuit Pack Administration
Pathnet shall be responsible for providing provisioning related
circuit packs to Incumbent's designated Storage Depots prior to the
required Field Technician dispatch date. Incumbent shall notify
Pathnet, either electronically or by facsimile, of receipt of circuit
packs. In the event that circuit packs are not received on time,
Incumbent shall notify Pathnet to correct the problem. A decision will
be made as to the use of available Spare Parts in which case Pathnet
shall be responsible to immediately replenish the maintenance spare
inventory.
4.5 Circuit Disconnects
Incumbent shall perform the following site work related to circuit
disconnect orders in order to maintain a high quality and cost
effective site environment and network:
a. Pathnet shall perform the physical termination of service
through the remote provisioning capabilities of Network
Monitoring Center.
b. Pathnet shall forward disconnect Work Orders to Incumbent
that provide seven (7) day interval for Incumbent to perform
any required disconnect work functions.
c. Incumbent shall be responsible for the scheduling of a Field
Technician site visit and coordinating the site visit with
other scheduled visits to the site or adjacent sites in
order to minimize duplicative travel time.
d. Incumbent shall perform the following disconnect functions:
A-18
<PAGE>
i. The Field Technician will call the Network Monitoring
Center to revalidate the disconnect request prior to
performing any physical removal work.
ii. Removal of all circuit related cross wire.
iii. Removal of all circuit identification markings from
cross connect points.
iv. Removal of circuit packs as designated on the
disconnect work order.
v. Proper handling and shipping of circuit packs using ESD
(Electro Static Discharge) protection.
vi. Packaging and shipping of circuit pack cards to either
the local Incumbent Storage Depot or to Pathnet central
stock location as designated on the Work Order.
vii. Complete proper circuit pack shipping notice.
4.6 Circuit Rearrangements/Grooming
Incumbent and Pathnet shall perform grooming or re-arranging of
circuits within particular systems pursuant to the requirements of
Section 4 of this Agreement. Scheduling of such work shall be as
arranged by Pathnet or its customers and may require such work to be
performed out of normal business hours. Incumbent shall coordinate the
scheduling of Field Technicians to support these requirements. Pathnet
shall coordinate the specific scheduling arrangements with Incumbent
in an effort to minimize the impact from such schedules.
5. DISPATCH RESPONSIBILITY
5.1 Maintenance Dispatch Responsibility.
a. Incumbent shall be responsible for dispatching Incumbent
Field Technicians from the hours of ___ to ___ and days of
the week of ___ to ___.
b. Pathnet shall be responsible for dispatching Incumbent Field
Technicians from the hours of ___ to ___ and
A-19
<PAGE>
days of ___ to ___.
c. The procedures for dispatching a Field Technician shall be
as agreed upon by the Parties and set forth in Exhibit A-1
to this Schedule A, provided such procedures shall include
an up-to-date escalation list of personnel (as such
personnel may change over time) responsible for Maintenance
of the System.
5.2 Trouble Tickets.
a. Response times shall be measured from the time that Pathnet
or Incumbent (in the event Incumbent notifies Pathnet of a
trouble ticket event) initiates a tracking ticket ("Trouble
Ticket") and such ticket is electronically or by facsimile
received by Incumbent.
b. Pathnet shall initiate a Trouble Ticket upon knowledge,
(whether received from Pathnet, Incumbent or another third
party) of: (i) an Outage, (ii) System degradation below
Critical Service Levels, or (iii) any other problem that
threatens to adversely impact the System or the integrity of
the System.
c. Incumbent shall be deemed to have successfully restored
operation upon correcting an Outage or when the System
regains Critical Service Levels. Pathnet will close any
Trouble Ticket upon satisfactory confirmation that Incumbent
has restored operations to the System in accordance with all
applicable Performance Standards.
5.3 Circuit provisioning Dispatch Responsibility.
5.3.1 On-Hour Provisioning
Pathnet shall normally schedule circuit provisioning work within
normal business hours of Monday to Friday, 8:00 AM to 5:00 PM. Pathnet
shall provide Incumbent with the Work Order request at least one (1)
day prior to the scheduled work completion date.
5.3.2 Off-Hour Provisioning
In the event Pathnet customer demands, and the need for expedited
service, require less than one (1) day work notification and require
off-hours or weekend Circuit Provisioning, the Parties shall comply
with the following procedures:
a. Pathnet shall verbally notify Incumbent when the customer
request is received to allow for as much scheduling lead
time as possible.
A-20
<PAGE>
b. Incumbent shall provide a positive verbal response stating
within one (1) hour time of its ability to meet the Work
Order request.
c. Incumbent shall work with Pathnet to schedule an appropriate
dispatch that will meet the requirements for on time
service.
6. FIELD TECHNICIAN REQUIREMENTS
6.1 Certification
Incumbent shall ensure that each Incumbent Field Technician providing
Services under this Agreement is certified pursuant to the Training
Procedures set forth in Section 2 of Schedule G.
6.2 Equipment
Incumbent shall, at its expense, equip each Field Technician to be
dispatched with the necessary Maintenance Test Equipment. Such equipment
shall include, at a minimum, a laptop personal computer (with internet
access), a digital T-1 or T-3 test set, and proper tools as set forth in
Exhibit E-2 to Schedule E.
6.3 Personnel
Incumbent shall utilize adequate numbers of qualified personnel with
suitable training (as, in part, provided by Pathnet), education,
experience and skill mix to perform the Services.
6.4 Location
Incumbent Field Technicians shall be assigned and located at adequate
distances to meet the requirements for dispatch and restoration set forth
in Section 3.2 of this Schedule A.
6.5 Rights To Operate The Network
The Parties acknowledge that from time to time, Incumbent Field Technicians
may not be available to meet Circuit Provisioning or Maintenance
obligations or service demands. In these instances, Incumbent shall use
reasonable efforts to locate replacement employees to perform critical work
functions. Priority of work functions shall be as follows:
a. Remedial Maintenance
b. Circuit Provisioning
A-21
<PAGE>
c. Grooming
d. Preventative Maintenance
e. Circuit Disconnects
Pathnet may supplement the Incumbents replacement employees with qualified
Pathnet employees in the event of a prolonged force unavailability.
A-22
<PAGE>
EXHIBIT A-1
INCUMBENT DISPATCH PROCEDURES
[To be Provided]
1. Remedial Maintenance
2. Circuit Provisioning
A-23
<PAGE>
SCHEDULE B
CRITICAL SERVICE LEVELS
1. INTRODUCTION
1.1 General
1.1.1 This Schedule B provides the Critical Service Levels to which
Incumbent shall maintain the dedicated DS-1 and DS-3 circuits
in order to provide capacity to IXCs and other customers. These
Critical Service Levels are derived from and as required by
IXCs or other customers for capacity and may be amended from
time to time as such requirements may change pursuant to
Section 2.3.1 of Schedule C.
1.1.2 The Critical Service Levels are defined by the following
parameters: Errored Seconds ("ES"), Severely Errored Seconds
("SES"), and Error Free Seconds ("EFS"). The ES, SES, and the
EFS are the only criteria for determining operations above or
below Critical Service Levels.
1.1.3 All Systems will be designed for optimum performance based on
the equipment manufacturers stated specifications and good
system design practices. The Critical Service Levels within
this document are subject to change as network design
enhancements are implemented and as equipment improvements
become available. These Critical Service Levels are based on
International Telecommunications Union-Telecommunications
("ITU-T") Services Sector and Bellcore technical
specifications. Actual performance data has been analyzed and
statistically compared to ITU-T and Bellcore information to
arrive at these expected objectives. In the event these
specifications are changed, Pathnet shall notify Incumbent and
amend such modified Critical Service Levels to this Schedule B.
Such revised levels shall be deemed to be changed when
Equipment improvements have actually been made at the
Facilities.
2. PARAMETER DEFINITIONS
2.1 Certain Definitions
The following performance definitions are derived from the DS-1 and DS-3
generic requirements as established by the Industry Standards Compliance
list in Section 5:
2.1.1 "Availability" shall mean the time in which the circuit is
available and that it is not experiencing an outage. (Usually
this term is expressed as percent
B-1
<PAGE>
availability by taking the ratio of the available time during a
given interval to the total interval and multiplying it by
100.)
2.1.2 "Bit Error Rate" ("BER") shall mean the percentage of received
bits compared to the total number of bits received.
2.1.3 "Circuit Acceptance Limit" ("AL") shall mean the value used to
define the limits at which facilities and/or circuits are
placed in service, initially. Upon the acceptance, the
facilities and/or circuits are transferred to a performance
measuring state to track and insure their continued proper
operation.
2.1.4 "Errored Seconds" ("ES") shall mean any one-second interval
during which one or more bit errors occurs. (For example, at
the DS-1 rate, an ES will contain 1 to 1,544,000 bit errors.)
2.1.5 "Error Free Seconds" ("EFS") shall mean any one-second time
interval which does not contain a measurable bit error. (This
term may be expressed as a percent EFS by taking the ratio of
non-errored to total seconds and multiplying by 100.)
2.1.6 "Failed Seconds" shall mean a one-second interval that has
1,544 bit errors at DS-1 rate.
2.1.7 "In-Service" shall mean the period when IXC service is
operating or is revenue bearing.
2.1.8 "Maintenance Limit" ("ML") shall mean the threshold at which
the performance of the facility and/or circuit is characterized
by degraded performance.
2.1.9 "Outage" shall mean an outage, usually measured in "Outage
Seconds", is declared after the BER in each second is worse
than 10^-3 for a period of 10 consecutive seconds. These 10
seconds are considered to be unavailable. The unavailable time
is counted from when the first of 10 Severely Errored Seconds
(SESs) occurs, and ends when the first of 10 consecutive
non-SESs occurs second in the sequence.
2.10 "Severely Errored Seconds" ("SES") shall mean (i) at the DS-1
rate, any one-second interval during which the BER is greater
than or equal to 1 x 10E^-3. At the DS-1 rate, this equates to
1,544 or more bit errors occurring within one second, and (ii)
at the DS-3 rate, any one-second interval during which the BER
is equal to or worse than 1 x 10E^-6.
B-2
<PAGE>
3. DS-1 CRITICAL SERVICE LEVELS
3.1 General
Incumbent shall perform the Services in accordance with the Critical
Service Levels set forth below. The DS-1 interface shall meet the IXC
generic DS-1 requirements that are customary in the industry as set
forth in the Industry Standards Compliance List in Section 5 of this
Schedule B.
3.2 DS-1 Electrical Interface Specifications
Incumbent shall perform the services so that the DS-1 signal at the
cross-connect (DSX1) meets each of the following Critical Service Levels:
3.2.1 Line Rate: 1.544 Mb/s.
3.2.2 Tolerance: Source timing for self-timed DS-1 bit streams shall
not exceed plus or minus 32 ppm with respect to the basic rate.
DS-1 sinks should be capable of accepting a rate deviation of
plus or minus 130 ppm.
3.2.3 Line Code:
a. Bipolar with at least 12.5 percent average ones density
and no more than 15 consecutive zeros.
b. Bipolar with Eight Zero Substitution (B8ZS).
3.2.4 Format: ESF with AT&T 54016 & ANSI T1.403 messages,
concurrently.
3.2.5 Test Load: A pure resistive termination of 100 ohms plus or
minus 5% shall be used for evaluation of pulse shape and
electrical parameters.
3.2.6 Pulse Shape: The pulse amplitude shall be between 2.4V and 3.6V
measured at the center of the pulse, and may be scaled by a
constant factor to fit the template. The source of the above
information is ANSI T1.102.
3.2.7 Power Level:
a. For Equipment added by Pathnet, for an all-ones
transmitted pattern, the power in a band that is no wider
than 3 KHz centered at 772 KHz shall be between 12.6 and
17.9 dBm.
b. For equipment existing at the sites purchased by Incumbent
before the System is modified by Pathnet, the power in a
band no wider than 3 KHz centered at 772 KHz shall be
between 12.4 and 18.0 dBm.
B-3
<PAGE>
c. The power in a band no wider than 3 KHz centered at 1544 KHz
shall be at least 29 db below that at 772 KHz.
3.3 Jitter Requirements
Incumbent shall meet each of the Critical Service Levels at the DS-1
interface for Jitter Tolerance, Jitter Transfer, Jitter Generation, and
Jitter Enhancement as set forth in Section 3.3 below. The jitter
requirements are set by industry standards as referenced in the Industry
Standards Compliance List.
3.3.1 Jitter Tolerance.
Jitter Tolerance is the maximum input jitter that any equipment can
tolerate without causing errors. It is specified in terms of the
amount of sinusoidal jitter (peak-to-peak) versus the frequency of
that jitter. IXC generic requirements describe the mask as well as the
lower limit of the jitter tolerance at each standard interface level.
To meet the jitter tolerance specifications, the actual tolerance of
the equipment shall be above the mask and the difference between this
and the lower limit represents the safety margin of the equipment.
3.3.2 Jitter Transfer.
Jitter Transfer is the jitter gain measurement which is the
relationship between the applied input jitter and resulting output
jitter as a function of frequency.
3.3.3 Jitter Generation.
a. Jitter Generation is defined as the process whereby jitter
appears at the output port of an individual unit of digital
equipment in the absence of applied input jitter.
b. When looped back at the high speed rate, the Equipment
shall produce less than 0.3 Unit Interval (UI) of rms
timing jitter and less than 1.0 UI of peak-to-peak timing
jitter at the output of the terminal receiver. The
measurement interval must include all frequencies between
F1 and F4 of the Network Jitter Interface requirements, as
shown in the Table below. This requirement shall apply over
the entire range of permissible input bit-rate offsets.
3.3.4 Jitter Enhancement.
The requirement for jitter enhancement is that a system of up to 250
miles in length shall add less than 1.0 UI of peak-to-peak jitter to a
DS-3 input signal
B-4
<PAGE>
having 4.0 UI of sinusoidally modulated peak-to-peak jitter for all
frequencies up to 2300 Hz.
B-5
<PAGE>
Maximum Permissible Network Output Jitter at any Hierarchical Interface
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Network Limit Measurement Filter Bandwidth (Hz)
Peak-to-Peak UI Bandpass filter having a low Cut-off
Bit Rate Mb/s (Note 1) Frequency F1 or F3 and Minimum Upper
Cut-off Frequency F4
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
B1 B2 F1 F3 F4
(F1-F4) (F3-F4) (Note 2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1.544 5 0.1 10Hz 8KHz 40KHz
- --------------------------------------------------------------------------------
3.152 5 0.1 10Hz 1.5KHz 40KHz
- --------------------------------------------------------------------------------
6.312 3 0.1 10Hz 3KHz 60KHz
- --------------------------------------------------------------------------------
44.736 5 0.1 10Hz 30KHz 400KHz
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
Notes:
1. UI = Unit Interval
For 1.544 Mb/s:1 UI 648 ns
For 3.152 Mb/s:1 UI 317 ns
For 6.312 Mb/s:1 UI 158 ns
For 44.736 Mb/s:1 UI = 22.35 ns
2. F3: F3, the lower cut-off frequency of one of the bandpass filters,
represents the jitter half-bandwidth of the timing extraction circuits. The
frequency F3 is determined from: F3 = Fo /2Q where F and Q represent the
digital signal rate and the Q-factor of the timing recovery circuit,
respectively.
3.4 DS-1 Access Performance and Availability Objectives
3.4.1 General.
DS-1 performance and availability objectives for IXC digital transport
facilities are based on mileage bands. All performances data (ES, SES,
etc.) is the same throughout the given mileage band. The performance
objective values are based on a 24-hour period with the exception of
Availability, which is an annual objective.
3.4.2 Service Objectives.
a. Incumbent shall perform the Services to meet the Critical
Service Levels defined as Availability of 99.98% per year per
4,000 mile System.
B-6
<PAGE>
b. The data set forth below in Tables 1, 2, 3 and 4 is based on a
24-hour period.
Table 1. DS-1, Nx64 kb/s, & Kx56 kb/s IOC Circuit Acceptance Levels
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Route Mileage ES % EFS SES
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
0-500 1 99.998 0
- --------------------------------------------------------------------------------
501-1500 1 99.998 0
- --------------------------------------------------------------------------------
1501-4000 2 99.998 0
- --------------------------------------------------------------------------------
Mileage used is based on actual one-way route mileage. 0 outage seconds are
allowed for test
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
Table 2. E-1 IOC Circuit Acceptance Levels
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Route Mileage ES % EFS SES
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
0-500 1 99.998 0
- --------------------------------------------------------------------------------
501-1500 1 99.998 0
- --------------------------------------------------------------------------------
1500-4000 2 99.998 0
- --------------------------------------------------------------------------------
Mileage used is based on actual one-way route mileage.
0 outage seconds are allowed for test.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
Table 3. DS-1, Nx64kb/s, & Nx56 kb/s IOC Maintenance Limit Performance Levels
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Route Mileage ES % EFS SES
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
0-500 5 99.99 2
- --------------------------------------------------------------------------------
501-1500 10 99.98 4
- --------------------------------------------------------------------------------
1500-4000 15 99.98 6
- --------------------------------------------------------------------------------
Mileage used is based on actual one-way route mileage.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
B-7
<PAGE>
Table 4. E-1 IOC Maintenance Limit Performance Levels
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Route Mileage ES % EFS SES
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
0-500 5 99.99 2
- --------------------------------------------------------------------------------
501-1500 10 99.98 4
- --------------------------------------------------------------------------------
1500-4000 15 99.98 6
- --------------------------------------------------------------------------------
Mileage used is based on actual one-way route mileage
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
4. DS-3 CRITICAL SERVICE LEVELS
4.1 General
Incumbent shall perform the Services in accordance with the Critical
Service Levels set forth below. Such Critical Service Levels for DS-3
interface shall meet the generic DS-3 requirements that are customary in
the industry, as set forth in the Industry Standards Compliance List in
Section 6 of this Exhibit B.
4.2 DS-3 Electrical Interface Specifications
Incumbent shall perform the Service so that the DS-3 signal at the
cross-connect shall meet each of the following Critical Service Levels:
4.2.1 Line Rate: 44.736 Mb/s plus or minus 20 ppm.
4.2.2 Line Code: Bipolar with 3 Zero Substitution (B3ZS).
4.2.3 Test Load: A pure resistive termination of 75 ohms plus or
minus 5% shall be used at the interface for evaluation of pulse
shape and electrical parameters.
4.2.4 Pulse Shave: The pulse amplitude shall be between 0.36V and
0.85V peak measured at the center of the pulse, and may be
scaled by a constant factor to fit the template.
4.2.5 Power Level: For an all ones transmitted pattern, the power in
a band no wider than 3 KHz centered at 22.368 MHZ shall be -1.8
to +5.7 Dbm. The power in a band no wider than 3 KHz centered
at 44.736 MHZ shall be at least 20 Db below that at 22.368 MHZ.
B-8
<PAGE>
4.3 Jitter Requirements
Incumbent shall perform Service to meet the Jitter requirements set forth
in Section 3.3 of this Schedule B for the following parameters: Jitter
Tolerance, Jitter Transfer, Jitter Connection, and Jitter Enhancement.
4.4 DS-3 Access Performance and Availability Levels
4.4.1 General.
DS-3 performance and availability objectives for IXC digital transport
facilities are based on mileage. All performance data (ES, SES, etc.)
is the same throughout the given mileage band. The performance
objective values are based on a 24-hour period with the exception of
availability, which is an annual objective
4.4.2 Service Objectives.
a. Incumbent shall perform the services to meet the Critical
Service Levels defined as Availability of 99.98% per year
for 4,000 mile system.
b. The data set forth below in Tables 5 and 6 is based on a
24-hour period.
Table 5. DS-3 IOC Circuit Acceptance Levels
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Route Mileage ES % EFS SES
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
0-500 3 99.99 0
- --------------------------------------------------------------------------------
501-1500 4 99.99 0
- --------------------------------------------------------------------------------
1500-4000 6 99.99 0
- --------------------------------------------------------------------------------
Mileage used is based on actual one-way route mileage. 0 outage seconds
are allowed for test.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
Table 6. DS-3 IOC Maintenance Limits Performance Levels
B-9
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Route Mileage ES % EFS SES
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
0-500 20 99.97 2
- --------------------------------------------------------------------------------
501-1500 30 99.96 4
- --------------------------------------------------------------------------------
1500-4000 50 99.94 6
- --------------------------------------------------------------------------------
Mileage used is based on actual one-way route mileage.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
5. SYSTEM AVAILABILITY
At all times, the Services shall be performed in order that the System meets the
following Critical Service Level:
5.1 System Availability
The system shall operate at 99.98% Availability on an annual basis for a
4,000 mile system.
5.2 System Outage
The system shall operate to the level of a one-way System outage of less
than 0.39 seconds/mile/year.
6. CIRCUIT PROVISIONING PERFORMANCE
6.1 Reports
Pathnet shall provide monthly reports to Incumbent to measure:
1. Percentage site Circuit Provisioning performed on time.
2. Percentage end-to-end Circuit Provisioning turn ups performed on
time.
3. Percentage multiple dispatches to perform site specific Circuit
Provisioning.
4. Percentage Circuit Provisioning with reported trouble within
seven (7) days of turnup.
6.2 Service Levels
Incumbent shall perform Circuit Provisioning to the following objectives
and Critical Service Levels:
B-10
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CRITICAL
FUNCTIONALITY OBJECTIVE SERVICE LEVEL
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1 Percentage Site Provisioning on Time 99% 96%
- --------------------------------------------------------------------------------
2 Percentage Circuit Prov. On Time 99% 96%
- --------------------------------------------------------------------------------
3 Percentage Multiple Site Dispatches 5% 7%
- --------------------------------------------------------------------------------
4 Percentage Failed In 7 Days 1% 2%
- --------------------------------------------------------------------------------
5 Percentage Disconnect Work Orders On Time 98% 95%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
6.3 Corrective Action
Both Parties acknowledge that the Critical Service Levels will be used as a
benchmark for minimum acceptable performance. For monthly performance below
Critical Service Level, Incumbent shall provide to Pathnet by the tenth
(10th) day of the subsequent month, a corrective action plan to include
root cause analysis, action steps and time frames.
7. INDUSTRY STANDARDS COMPLIANCE LIST
7.1 General
In general, Incumbent shall perform the services in compliance with
most current version of the following standards as a whole or as
applied to the IXC's:
a. American National Standards Institute T1.503-1996
b. American National Standards Institute T1.403
c. American National Standards Institute T1.404A-1996
d. American National Standards Institute T1.102
e. AT&T Technical Reference, TR-62415, June 1989
f. AT&T Technical Reference, 54016, 17, 19 and 19A
g. Bellcore Technical Reference, TR-TSY-000499
h. Bell Technical Reference, TR-NPL-000335 (or 353)
i. Bell Technical Reference, TA-TSY-000083, 77, 55
and 57
j. FCC Regulations, part 15 & 68
2.
B-11
<PAGE>
SCHEDULE C
CHARGES
1. INTRODUCTION
The Monthly Services Charges and Dispatch Charges, as adjusted by the
cost-of-living adjustment ("COLA") set forth in Section 2.2.1, when aggregated
with charges for New Services and Pass-Through Expenses as well as other
consideration by and between Pathnet and Incumbent provided in the FPM
Agreement, shall fully compensate Incumbent for all of the resources used in
providing the Services.
2. CHARGES
2.1 Monthly Services Charge
Upon Commissioning of each Segment, Pathnet shall pay to Incumbent two
hundred fifty hundred dollars ($250) per site per month, payable in equal
quarterly installments for providing the Services in accordance With the
Performance Standards set forth in Schedule B of this Agreement
[LLC consideration to Incumbent for maintenance to be negotiated and
derived from LLC receipt of Revenue under the Contingent Radio Revenue
Agreement. Such consideration to be entered in this form of agreement]
2.2 Dispatch Charge
Pathnet shall pay Incumbent _______ per each Circuit Provisioning dispatch;
provided, however Incumbent shall not be compensated for any second
dispatch to a site as required by poor Incumbent quality or coordination.
(For instance, Field Technician fails to transport required Equipment to
perform Circuit Provisioning or a circuit fails to operate in accordance
with the Specifications as set forth in Schedule B.)
2.3 Adjustments
2.3.1 Cost of Living Adjustments.
a. General. Pathnet agrees to apply a cost of living adjustment
("COLA") to the Monthly Service Charge beginning twenty-four
(24) months after the Effective Date.
b. Index. The Parties agree to use the Historical Consumer
Price Index published as final by the Bureau of Labor
Statistics, U.S. Department of Labor for all urban
C-1
<PAGE>
consumers, U.S. City Average, All Items, Annual Average
1982-84 = 100 ("CPI-U") for purposes of calculating actual
inflation. In the event the Bureau of Labor Statistics stops
publishing the CPI-U or substantially changes content and
format, the Parties will substitute another comparable index
published at least annually by a mutually-agreeable source.
If the Bureau of Labor Statistics merely redefines the base
year for the CPI-U from 1982-84 to another year, the Parties
will continue to use the CPI-U, but will convert the
protection index to the new base year by using an
appropriate conversion formula.
c. Calculation of COLA. The COLA will be calculated using the
COLA factor specified below. The COLA is payable on a
prospective basis (i.e., the Monthly Services Charge by
Pathnet for the subsequent renewable contract year will be
surcharged by the factor as determined below, if such factor
is in excess of zero). The COLA factor will be determined as
soon as practicable after the end of each contract year,
starting with the third renewable contract year. The COLA
factor is:
Actual Inflation x COLA Percentage,
where Actual Inflation = CPI-U for the calendar year just
ended. COLA Percentage = seventy-five (75%) percent.
2.4 Additional Charges
2.4.1 New Services.
In the event that Pathnet requests Incumbent to perform functions that
are materially different from and in addition to the Services ("New
Services"), the Parties' obligations with respect to such functions
shall be as follows:
a. To the extent that such functions may be performed with
existing resources and existing allocation of personnel time
under this Maintenance Agreement, the additional functions
shall then be considered "Services" and shall be subject to
the provisions of this Agreement.
b. To the extent that such functions require additional
resources or may not be performed with the existing
allocation of personnel time under this Agreement, then
prior to performing such additional functions. Incumbent
shall quote to Pathnet:
(i) a charge for such additional functions that is
reasonable within the industry.
C-2
<PAGE>
(ii) the reasonable number of hours to perform such
additional functions and such additional functions
shall be performed at the rates set forth in Exhibit
C-1 to this Schedule C.
(iii) in the case of Maintenance requested for an
interconnection site, the additional charge shall be
fifty (50%) percent of the current Monthly Service
Charge for such site.
c. Pathnet, upon receipt of such quote, may elect to have Incumbent
perform the additional functions and the charges under this
Agreement shall be adjusted if appropriate to reflect such
functions. If Pathnet so elects, such service shall then be
deemed "Services" and shall be subject to the provision of this
Maintenance Agreement.
a. Pathnet may elect to solicit and receive bids from third parties
to perform such additional functions. If Pathnet elects to
contract for such third-party services, Incumbent shall cooperate
with those third parties with respect to the provision of such
service.
b. The Parties anticipate that the Services will evolve and be
supplemented, modified, enhanced or replaced over time to keep
pace with technological advancements and improvements in the
methods of delivering services, and the Parties acknowledge that
these will not be deemed to result in functions materially
different from and in addition to the Services.
c. If Pathnet's request for additional functions, pursuant to this
Section 3.1.1, includes a request for Incumbent to
correspondingly reduce or eliminate Services it is providing,
then such additional functions will be considered "Replacement
Service". In such event, the Parties shall determine the
resources and expenses required to provide the Replacement
Services, including implementation and ongoing support, and the
reduction in resources and expenses related to the Services being
replaced. The net increase or decrease in resources and expenses
will be the basis on which Incumbent shall quote a price for
Replacement Services pursuant to subsection (b).
2.4.2 Pass-Through Expenses.
Pass-Through Expenses are charges to be paid directly by Pathnet,
unless the Parties mutually agree that particular Pass-Through
Expenses are to be paid by Incumbent, followed by reimbursement from
Pathnet. Pass-Through Expenses in excess of five hundred ($500)
dollars may not be added to the Monthly Services
C-3
<PAGE>
Charge without Pathnet's prior written consent, which Pathnet may
withhold in its sole discretion. Pass-Through Expenses shall be
calculated as Incumbent's reasonable out-of-pocket expenses (as
incurred and paid for by Incumbent). Incumbent shall promptly provide
Pathnet with the original third-party invoice for such expenses,
together with a statement that Incumbent has reviewed the invoiced
charges and made a determination of which charges are proper and valid
and shall be paid by Pathnet. Pass-Through Expenses shall continue to
be booked to the Pathnet office. It shall be Incumbent's
responsibility to manage the invoicing of Pass-Through Expenses to
Pathnet such that late charges are not incurred.
C-4
<PAGE>
EXHIBIT C-1
INCUMBENT PRESUMPTIVE LABOR RATES
(Incumbent to Provide]
C-5
<PAGE>
SCHEDULE D
MAINTAINED EQUIPMENT
[Pathnet to Provide]
D-1
<PAGE>
SCHEDULE E
SPARE PARTS AND MAINTENANCE TEST EQUIPMENT
1. SPARES
1.1 General
Pathnet shall provide to Incumbent a full set of Spare Parts with
quantities reflective of (i) the number of units in service and (ii)
manufacturers' recommendations adjusted for actual field experience.
Incumbent shall store such Spare Parts at the Stocking Depot at locations
reasonably situated to perform the Services, but in no case more than two
hundred (200) miles from any Incumbent Facility, within the required time
frames as set forth in Schedule A to this Maintenance Agreement Incumbent
shall be responsible for notifying Pathnet if the Spare Parts inventory
falls below the recommended inventory levels set forth in this Schedule E.
Incumbent, upon replacing a degraded part or module with a Spare Part,
shall send such degraded part or module to Pathnet as soon as possible for
a replacement Spare Part. Pathnet shall be responsible for promptly
providing a replacement for any such Spare Part sent from Incumbent to
Pathnet or identified by Incumbent as requiring replacement. Pathnet shall
not be responsible for replacing any Spare Part damaged or harmed as a
result of Incumbent's negligence.
1.2 Spare Equipment Inventory
1.2.1 General.
For each system, Spare Parts shall be provided at a ratio of about 1 to 40,
or for every quantity of 40 units in service, at least one spare unit.
1.2.2 Inventory.
The Spare Parts provided by Pathnet shall be as set forth in Exhibit
E-1 to this Schedule E.
2. MAINTENANCE TEST EQUIPMENT
2.1 General
Incumbent shall be responsible for providing and maintaining at the
Stocking Depot the Maintenance Test Equipment listed by Pathnet in
Exhibit E-2 to this Schedule E. Pathnet will recommend quantities and
configurations of Maintenance Test Equipment appropriate for field
alignment and maintenance of the proposed digital radios. Pathnet
E-1
<PAGE>
has established vendor discounts with Maintenance Test Equipment
manufacturers and shall pass on such discounts to Incumbent.
E-2
<PAGE>
EXHIBIT E-1
SPARE PARTS
Ouantity Type
[Pathnet to Provide]
E-3
<PAGE>
EXHIBIT E-2
MAINTENANCE AND PROVISIONING TEST equipment
1. Required Equipment
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Test Equipment Test Type Quantity
- --------------------------------------------------------------------------------
<S> <C> <C>
Wrist Strap Module Handling
- --------------------------------------------------------------------------------
Digital Volt Meter Voltage/Continuity Check
- --------------------------------------------------------------------------------
Power Meter/Freq Counter RE TX Power/TX Frequency
- --------------------------------------------------------------------------------
Optical Power Meter Optical Continuity
1200-1600 Nm
- --------------------------------------------------------------------------------
Optical Source Optical Continuity
1200-1600 Nm
- --------------------------------------------------------------------------------
DS-1/DS-3 BER/SES/ES
- --------------------------------------------------------------------------------
Oscilloscope DADE/Phase Lock
- --------------------------------------------------------------------------------
NEC 2000S Extension Card TX Test & Alignment
- --------------------------------------------------------------------------------
Card Extender Receiver ATCP Card Adjustment
NEC-2000S
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
2. Recommended Equipment
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Test Equipment Test Type Quantity
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C>
Digital Radio Test System Spectrum Analyzer; DADE; Freq
Counter; Power Meter; IF and Multipath
- --------------------------------------------------------------------------------
RE Signal Generator Rcvr RE/AGC; Rcvr IF
- --------------------------------------------------------------------------------
DADE Adjustment Cable DADE Adjustment
- --------------------------------------------------------------------------------
RE Variable Attenuator RX/Squelch
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
E-4
<PAGE>
SCHEDULE F
INCUMBENT FACILITIES AND SYSTEM
[Pathnet to Provide]
PATHNET FACILITIES AND SYSTEM
F-1
<PAGE>
SCHEDULE G
CUSTOMER SERVICE AND TRAINING
1. EQUIPMENT REPAIR ASSISTANCE
To assist Incumbent in performing the Services, Pathnet shall provide the
following Equipment repair assistance and customer service:
1.1 Manufacturer's Warranties
1.1.1 In those cases where Pathnet's vendors offer warranties and
factory service for certain Equipment included in the System.
Pathnet shall pass the benefit of any and all warranties and
factory services on to Incumbent, to the extent Pathnet is
entitled to such warranties or factory service. In those cases,
where temporary replacement units may be available to Incumbent
while Equipment is being repaired, Pathnet will use reasonable
efforts to facilitate the use of such temporary replacement
units. Incumbent may contact Pathnet's customer service
department for advice on whether field repair, factory repair or
replacement is advisable for a specific unit.
1.1.2 Incumbent shall contact Pathnet and receive prior approval
before sending any Equipment to the manufacturer's factory for
repair, to obtain a return material authorization number.
Equipment under warranty will be repaired at no charge.
1.1.3 The standard repair turnaround time for most equipment is thirty
(30) working days from receipt at the manufacturer's facilities
to shipment back to Incumbent. Emergency repair can be requested
for a two-working day (plus shipping time) turnaround. To ensure
prompt service when returning equipment, Incumbent shall fill
out a repair order form, as provided by the appropriate
manufacturer.
1.2 Module Exchange
1.2.1 B. Module Exchange. Module Exchange Incumbent may also request a
replacement unit from Pathnet in order to remove and replace a
faulty unit in one field visit. Pathnet's Equipment suppliers
maintain a inventory of refurbished modules for this purpose.
Based on availability of such replacement units, Pathnet shall
use reasonable effort to provide Incumbent with a replacement
unit.
1.2.2 Under normal circumstances, the standard exchange turnaround
time is ten (10) working days from Incumbent's request to
shipment.
G-1
<PAGE>
1.2.3 A defective unit is expected to be returned to Incumbent within
thirty (30) days. Incumbent shall include any special packing
slip that the manufacturer provides with the replacement unit.
1.3 Technical and Field Service
C. Technical & Field Service. Technical & Field Service
1.3.1 Pathnet shall provide technical information, troubleshooting
assistance, and, in extreme cases, field repair, as determined
by Pathnet in its sole discretion. These services can be
obtained by letter, telephone or FAX as described.
1.3.2 After normal working hours, emergency calls will be referred to
Pathnet's on-duty engineer for troubleshooting and field repair
assistance. Pathnet will maintain a Network Monitoring Center
that will handle any emergency calls any time of day, as set
forth in the FPM Agreement.
1.4 Troubleshooting & Consultation
Pathnet shall maintain a staff of experienced engineers who shall assist
Incumbents in troubleshooting via the telephone at no additional charge to
Incumbent
1.5 Warranty and Product
Pathnet shall provide warranty and product support information to Incumbent
promptly after Pathnet's purchase of equipment with the sales invoice and
other sales documents. Incumbent shall read the warranty information for
the equipment or assembly before contacting Pathnet or the manufacturers
customer service.
2. TRAINING AND CERTIFICATION PROCEDURES
Pathnet shall provide and Incumbent Field Technician shall be required to
participate in a training class to train and certify Incumbent Field Technicians
in performing the Services pursuant to this Agreement. Such training shall be
performed at Pathnet or its vendor's Washington, D.C. or Texas office and shall
comprise approximately forty (40) hours. Pathnet shall provide all course
training materials to Incumbent. Incumbent shall pay the out-of-pocket expense
of attending such training classes. Pathnet shall provide materials to support
the training sessions.
G-2
<PAGE>
SCHEDULE H
VERIFICATION OF COMMISSIONING
[To be attached from Fixed Point Microwave Services Agreement upon
Commissioning]
H-1
<PAGE>
TABLE OF CONTENTS
PAGE
----
SCHEDULE A.- SERVICES A1
1. INTRODUCTION ...........................................................1
2. PREVENTIVE MAINTENANCE .................................................1
2.1 ANTENNA/WAVEGUIDE MAINTENANCE .......................................1
2.1.1 Monthly Inspection ............................................1
2.1.2 Quarterly Inspection ..........................................2
2.1.3 Annual Inspection .............................................2
2.2 BATTERY MAINTENANCE (VALVE REGULATED BATTERIES) ......................3
2.2.1 Monthly Inspection ............................................3
2.2.2 Quarterly Inspection ..........................................3
2.2.3 Annual Inspection .............................................3
2.3 BUILDING MAINTENANCE .................................................4
2.3.1 Monthly Inspection ............................................4
2.3.2 Quarterly Inspection ..........................................4
2.3.3 Annual Inspection .............................................4
2.4 CHARGER/RECTIFIER (VALVE REGULATED BATTERIES) ........................5
2.4.1 Monthly Inspection ............................................5
2.4.2 Quarterly Inspection ..........................................5
2.4.3 Annual Inspection .............................................6
2.5 GENERATOR MAINTENANCE ................................................6
2.5.1 Monthly Inspection ............................................6
2.5.2 Quarterly Inspection ..........................................7
2.5.3 Annual Inspection .............................................7
2.6 MULTIPLEXER MAINTENANCE ..............................................8
2.6.1 Monthly Inspection ............................................9
2.6.2 Annual Inspection .............................................9
2.7 RADIO MAINTENANCE ....................................................8
2.7.1 Monthly Inspection ............................................9
2.7.2 Quarterly Inspection ..........................................9
2.7.3 Annual Inspection .............................................9
2.8.1 Monthly Inspection ...........................................10
2.8.2 Quarterly Inspection .........................................10
2.9 TOWER MAINTENANCE ...................................................11
2.9.1 Monthly Inspection ...........................................11
2.9.2 Quarterly Inspection .........................................11
2.9.3 Annual Inspection ............................................11
2.9.4 Bi-Annual Inspection .........................................12
2.10 PREVENTIVE MAINTENANCE REFERENCE GUIDE .............................12
2.10.1 Parts.........................................................12
2.10.2 Manuals ......................................................12
2.10.3 Modifications ................................................12
3. REMEDIAL MAINTENANCE ..................................................12
i
<PAGE>
Exhibit 10.6
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. SUCH PORTIONS ARE DESIGNATED "[* * *]."
THIS AGREEMENT ("Agreement") is made and entered into as of the ____ day of
____________, 1997 by and between PATHNET, INC. (hereinafter "PathNet"), a
Delaware corporation, having its principal place of business at 6715 Kenilworth
Avenue, Suite 200, Riverdale, Maryland, 20737, and TEXACO PIPELINE INC.
(hereinafter "Texaco"), a Delaware corporation, of 1670 Broadway, Denver,
Colorado, 80202.
W I T N E S S E T H:
WHEREAS, PathNet is engaged in the business of creating high-capacity,
digital, microwave communications systems for purposes of marketing the long
distance telecommunications capacity created by such systems;
WHEREAS, PathNet currently seeks microwave tower locations in Louisiana and
Texas to implement its microwave communications network;
WHEREAS, Texaco owns and operates the Texana Microwave System which is
currently in need of modernization, capacity additions, and upgrading for which
Texaco has committed certain funds;
WHEREAS, Texaco, owner and operator of the existing Texana Microwave
System, desires to engage PathNet for the purpose of designing, installing and
enhancing its microwave communications system;
WHEREAS, if the Texana Microwave System were suitably modernized and
upgraded, it would extend PathNet's Texas - Louisiana microwave communications
network; and
WHEREAS, PathNet desires to lease Texaco's microwave Facilities for the
purpose of installing digital radios and related equipment and exclusively
marketing the long distance telecommunications Excess Capacity created by the
enhanced system it will install and operate;
<PAGE>
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties agree as follows:
1. RELATIONSHIP, ROLES AND RESPONSIBILITIES
1.1 DEFINITIONS
The attached SCHEDULE A -- GLOSSARY, contains selected definitions of terms
used in this Agreement. These defined terms are capitalized throughout this
Agreement.
1.2 RELATIONSHIP OF THE PARTIES
1.2.1 APPOINTMENT OF PATHNET. Texaco hereby appoints PathNet for the
term of this Agreement, and PathNet hereby agrees to act for Texaco as Texaco's
sole and exclusive representative for the purpose of providing digital 6 GHz
microwave equipment at Texaco's Facilities, further identified on SCHEDULE B --
THE TEXACO SYSTEM, and creating and managing a high-capacity, digital, microwave
communications system. PathNet's radio communications equipment shall operate
on transmit and receive frequencies as set forth in SCHEDULE K -- ANTENNA
SPECIFICATIONS, POSITIONS AND FREQUENCIES, attached hereto, which describes each
path and the frequencies to be used on each path. PathNet shall use such
equipment and market the telecommunications "Excess Capacity" created by such
system at Texaco's Facilities, subject to all of the terms and conditions of
this Agreement. PathNet shall be Texaco's only representative authorized to
create a 6 GHz system on towers or at Facilities identified in Schedule B of
this Agreement.
1.2.2 INDEPENDENT CONTRACTOR/LESSOR/LESSEE. PathNet's relationship to
Texaco is, at various times, that of an independent contractor and lessee. As
an independent contractor, PathNet, among other services, will perform
analytical pre-design and design services and be responsible for the
installation and testing of the replacement microwave radio system, as well as
2
<PAGE>
any upgrades to that system. In the role of Lessee, PathNet will be leasing the
space at the Facilities from Texaco on which to build and operate a
high-capacity, digital microwave system as set forth in Section 2 of this
Agreement. The relationship of PathNet to Texaco is that of an independent
contractor and lessee, and does not represent a partnership or joint venture
with Texaco or any other relationship. PathNet will have exclusive marketing
rights for any and all capacity created on the proposed microwave system in
excess of the capacity allocated to Texaco under this Agreement.
1.3 PROJECT RESPONSIBILITIES
1.3.1 GOALS AND PROJECT ASPECTS. PathNet shall analyze the existing
Facilities, design and install a replacement digital microwave network which
will enable Texaco to operate its existing analog microwave network until such
time as Texaco transfers its circuits to the digital network. Texaco and
PathNet will develop a detailed cutover plan to be set forth in SCHEDULE F --
PROJECT MANAGEMENT PLAN AND PRELIMINARY SCHEDULES, to this Agreement, attached
hereto, to be approved by PathNet and Texaco. PathNet shall actively create at
Texaco's Facilities a 6 GHz/30 MHz digital microwave telecommunications system.
The system will be configured initially in a 1 x 1 protection format. The
system may be expanded during the term, pursuant to the provisions of
PARAGRAPHS 1.3.7 and 2.1.2 of this Agreement, by adding and/or replacing the
radio components (hereinafter referred to as the "Capacity Expansion").
1.1.2 EXISTING SYSTEM EVALUATION. PathNet will complete a detailed
analysis of the existing analog microwave system operated by Texaco on the
Segment. The analysis shall include:
a. an inventory and survey of Texaco's existing microwave sites and
supporting Facilities;
3
<PAGE>
b. microwave path studies and reliability analysis to provide performance
data to serve as the engineering basis for the design of a replacement
system;
c. a frequency availability model;
d. a determination of whether structural analysis of towers and loading
factors, for metal towers only, is required;
e. a business case model for the deployment of each high-capacity,
digital system;
f. a design for the new system;
g. a detailed line item budget for the new system;
h. a T-1 plan for channelization; and
i. a preliminary construction management schedule for each replacement
system.
In performing these tasks, PathNet will require the cooperation of Texaco.
PathNet will complete a detailed system evaluation and survey of the existing
analog microwave system operated by Texaco along the Segment attached hereto,
based on information and documents provided by Texaco. The results of this
analysis will be made available to PathNet and Texaco jointly.
1.3.3 SYSTEM DESIGN. PathNet has in conjunction with Texaco specified
a system design that will result in a comprehensive 6 GHz/30 MHz digital system
meeting capacity requirements as well as geographic requirements for points of
transmission on a segment by segment basis. This digital system will have Drop
and Insert capabilities as defined in SCHEDULE D -- T-1 CHANNEL PLAN, and
SCHEDULE G -- MULTIPLEXING CONCEPT, attached hereto. Completion of the system
design shall follow execution of this Agreement. Texaco shall approve all
aspects of system design and such approval(s) shall be reflected in writing.
4
<PAGE>
1.3.4 SYSTEM INTEGRATION. PathNet will provide for the integration of
the resulting 6 GHz/30 MHz digital telecommunications system into the total
PathNet telecommunications network with prior coordination with Texaco.
1.3.5 CAPACITY. The system to be installed by PathNet shall have the
initial capacity of 6 DS-3 and two DS-1 Wayside Channels, or approximately 4,080
DS-0's, of which 2,040 DS-0's shall be available for service and the remaining
2,040 DS-0's will be utilized for protection. This capacity shall be delivered
in DS-1 increments with appropriate Drop and Insert characteristics as defined
under the T-1 channelization plan which has been prepared as part of PathNet's
initial evaluation of Texaco's system, and is appended hereto as Schedule D.
Texaco has the ability to move, add or change, its capacity as required along
the network provided sufficient circuit Drop and Insert capacity exists at each
Facility. There will be no fee for Texaco's reconfiguration of its network to
meet its changing capacity requirements. The capacity created by PathNet at the
Facilities by the 6 GHz/30 MHz digital microwave system will be relicensed in a
form capable of being marketed under Part 21/101 of the FCC regulations. This
Excess Capacity then will be aggregated into PathNet's network, which is
expected to have enhanced value.
1.3.6 MAINTENANCE FOR SYSTEMS. Texaco shall be responsible for the
maintenance of the 6 GHz/30 MHz system pursuant to the terms of a separate
written agreement to be entered into by the parties. The separate maintenance
agreement shall provide for ongoing maintenance of PathNet's microwave
facilities for a period of up to twenty-five (25) years. Upon execution of the
Maintenance Agreement, Texaco and PathNet will be required to perform routine
site maintenance on the System, in accordance with the list of routine
maintenance items set forth on SCHEDULE T -- ROUTINE SITE MAINTENANCE
REQUIREMENTS, attached hereto, consistent with their
5
<PAGE>
respective ownership interests, as set forth on Schedule E. Texaco's approval
shall be required in advance of any routine maintenance procedures performed by
PathNet at the Facilities, and shall not be unreasonably withheld.
1.3.7 INCREASES IN CAPACITY. PathNet has the authority to periodically
increase the capacity beyond the Initial System. However, each increase in
capacity must meet the upgrade threshold in PARA 2.1.2. PathNet will fund these
increases, which will occur in OC-3 increments. PathNet will own all licenses
and equipment associated with the increases in capacity. If it is technically
possible to increase the capacity beyond the 1 x 7 system specifications,
PathNet shall have the right to do so, provided the increase in capacity does
not: (1) impair system performance by the reduction in system gain, (2)
increase the utilization of power, (3) increase space requirements, (4) increase
tower loading beyond those specifications which are established in the initial
design, or (5) result in a material reduction in Texaco's system performance.
PathNet agrees to provide Texaco with reasonable notice of its intent to
increase the spectral efficiency at its Facilities. PathNet shall have the
right to install additional microwave dishes or devices on towers, as approved
by Texaco. In the event that additional antennas will exceed tower wind loading
requirements, PathNet shall pay for any tower analysis and strengthening that
might be required before such antennas and/or other devices are installed.
1.3.8 TEXACO'S CAPITAL INVESTMENT. As an inducement to PathNet to
enter into a lease arrangement for space at the Facilities, Texaco agrees to
invest capital necessary to upgrade the Facilities to make them suitable for
the installation of PathNet's leasehold improvements. The Facilities'
upgrades are presently estimated to cost approximately [* * *]. This capital
to be invested by Texaco shall pay for leasehold improvements including
pressurizing equipment, tower strengthening, battery plants, equipment
shelters,
6
<PAGE>
shelter freight costs and miscellaneous site work to prepare the Facilities
for installation of PathNet's radio equipment. A description of Texaco's
proposed upgrades and an estimate of its costs are set forth in detail on
SCHEDULE C --VALUATION SCHEDULE OF CAPITAL INVESTMENT TO BE MADE BY TEXACO,
attached hereto. Any capital spent by Texaco for Facility improvements shall
be disbursed directly to vendors of Texaco's choice, provided that the
equipment meets the System specifications and design documentation necessary
to prepare the Facilities for PathNet's leasehold improvements, as set forth
on Schedule E, attached hereto. PathNet will provide the system design
documentation to Texaco and/or maintenance contractor at Commissioning. If
additional capital investment is required by Texaco for the above-described
equipment and services because of unforeseen, pre-existing Facility
conditions unknown to PathNet or Texaco, Texaco shall be required to increase
its capital investment to meet the demands of the Facility upgrades and
preparation for the installation of the digital microwave system, but
Texaco's costs for these assets or services to accommodate installation of
the high-capacity digital equipment [* * *], as set forth on Schedule C,
attached hereto. The [* * *] difference between [* * *] and the Texaco
Budgeted Funds shall be known as the "Texaco Contingency Funds."
1.3.9 TEXACO'S PROJECT MANAGEMENT RESPONSIBILITIES. Texaco shall serve
as project manager for the required improved infrastructure associated with the
Initial Build-Out, including installation of battery plants, towers,
pressurizing equipment and other equipment and property which it will provide.
In order to be certain the Facilities will be suitable for PathNet's leasehold
improvements, Texaco shall schedule all work to be performed in connection with
the Initial Build-Out, subject to the written approval of PathNet, which shall
not be unreasonably withheld. All contractors shall be hired by Texaco for the
Initial Build-Out, and all equipment approved for
7
<PAGE>
purchase by both PathNet and Texaco shall be ordered by Texaco. Copies of all
purchase orders issued by Texaco or PathNet shall be transmitted to PathNet
within five (5) business days of issuance.
1.3.10 PATHNET'S CAPITAL INVESTMENT. PathNet shall commit the capital
required to install its leasehold improvements at the Facilities and to complete
the System in accordance with Texaco's approval of the initial design criteria.
However, PathNet shall not be responsible for capital investments required for
the Facilities' preparation or upgrading, as set forth in Schedule B, attached
hereto, (i.e., the building of roads, modifications of towers or construction of
sheds) unless the costs exceed Texaco's capital investment of [* * *], as set
forth in Schedule C. PathNet shall be responsible for paying for leasehold
Facility improvements along Segment spurs which PathNet wishes to build-out for
its own network purposes and for any such sites which are separately identified
in SCHEDULE S -- NETWORK INTERCONNECTIONS SCHEDULE, attached hereto.
1.3.11 COSTS OF COMPLIANCE WITH LAWS. Any upgrades required to conform
to local building code provisions and any site costs (including fees) incurred
in connection with compliance with regulatory laws, particularly those related
to health and safety, will be borne solely by Texaco. Texaco shall register and
pay F.C.C. registration fees for the Facilities. If a cost differential shall
exist between the site fees Texaco incurs because of PathNet's status as a
common carrier and the site fees Texaco would have incurred as a private
microwave licensee operating its own microwave system along those same paths,
PathNet shall pay such differential. PathNet shall be responsible for payment
of all existing and future regulatory fees, fees for telecom relay services, pay
telephone assessments, access surcharges, universal service changes, and fees
incurred in the event of unusual occurrences and site registration fees.
8
<PAGE>
1.3.12 ENCUMBERING EQUIPMENT AND REVENUES. PathNet shall have the right
to encumber the equipment acquired to create Capacity Expansion and PathNet's
portion of the revenues to be received pursuant to the terms of this Agreement.
PathNet shall have no right to encumber the equipment for the Initial System.
However, any revenues PathNet may be due from the marketing of channels created
by the 1 x 1 Initial System may be encumbered by PathNet. This Agreement and
the rights contained herein may serve as collateral for vendors or others who
may provide financing for the equipment of services PathNet shall provide during
the System Build-Out Period. In addition, for financing purposes, PathNet may
encumber and use its portion of the revenues that may be due under the terms of
this Agreement to cross-collateralize the financing of other build-outs of
systems that will be linked to PathNet's network. Any encumbrances placed on
equipment are subject to the review and approval by Texaco, and such approval
shall not be unreasonably withheld. However, any security interest given in the
equipment used for creation of the Initial System shall reflect that the
lienholder is prohibited from removing the equipment from, or disabling,
modifying or adjusting the equipment at the Facilities. In addition, all
encumbrances or security agreements shall reflect that, in the event of default
by PathNet, lienholder's only remedy to recover monies is to proceed against
PathNet's portion of revenues which it may receive and to bring in the services
of a third party to manage and administer the marketable Excess Capacity.
PathNet shall include in its financing agreements a provision that would grant
to Texaco a right of first refusal to purchase the equipment in the event of
PathNet's default under such Financing Agreements.
1.3.13 INFORMATION AND SERVICES. To enable PathNet to make the
leasehold improvements at the Facilities, Texaco shall provide to PathNet, in a
timely manner, relevant existing tower drawings and specifications, inventory
lists, and other documents regarding its
9
<PAGE>
relevant paths, equipment, and Facility conditions within thirty (30) days of
execution of this Agreement. Texaco will provide to PathNet evidence of
ownership of the affected sites. For those sites which Texaco leases from
others, Texaco will provide PathNet with copies of such leases. Pursuant to the
terms of this Agreement, PathNet shall provide and pay for radio terminals,
space diversity repeaters, network management systems, antennas, replacement
feedhorns, waveguide, muxing from the DS-3 to DS-1 level, installation and
performance testing, path installation, spare radios, training and such
miscellaneous items required in support of providing the above-listed equipment
and services. Texaco (from the Texaco Budgeted Funds and, if necessary, from
the Texaco Contingency Funds) shall provide and pay for shelter pressurizing
equipment, shelters, shelter freight costs, structural tower analyses, tower
strengthening, tower replacement, miscellaneous site work and battery plants,
pursuant to the terms of this Agreement. Costs for the equipment and services
in excess of Texaco's Budgeted and Contingency Funds shall be borne by PathNet.
1.3.14 STRUCTURAL AND ENVIRONMENTAL TESTS, SURVEYS AND REPORTS. Texaco
shall provide PathNet with all existing current tower drawings and
specifications, if they are in Texaco's possession, custody or control. These
drawings shall include structural details, civil conditions, foundation
drawings, bonding and grounding plans, inventory of all equipment located on the
tower structure, all cabling and feedline locations and placement of all
auxiliary structures within the Facilities. Texaco agrees to provide any and
all of the following documentary information, if such information exists, and is
required to be completed by statute or, if necessary, for completion of the
project:
10
<PAGE>
a.reports, surveys, drawings and tests concerning the conditions and
microwave facilities at the Facility, and conformity of the existing system and
Facility conditions with federal, state and local law; and,
b.structural, mechanical, electrical inspections and reports which
have been required by law;
c.such additional documents which may include consultant reports that
contain descriptions of existing equipment and determinations of capabilities,
interference, evaluations of hazardous materials, tower conditions, including
necessary operations for anticipating existing conditions and appropriate
professional recommendations, when such information is reasonably related to the
scope of the Project and is requested by PathNet.
1.3.15 PHYSICAL STRUCTURES. Pursuant to the terms of this Agreement,
Texaco is to provide the appropriate physical structures necessary for PathNet
to deploy a high-capacity, digital microwave network capable of, at minimum,
16,700 DS-0's along the Segment. This infrastructure shall include real estate,
towers, shelters, power systems and miscellaneous items essential to support the
proposed system as further defined in SCHEDULE E -- OWNERSHIP OF RADIOS,
SHELTERS, SYSTEM COMPONENTS AND RELATED EQUIPMENT, attached hereto.
1.3.16 TEXACO'S DESIGNATED REPRESENTATIVE Texaco's Designated
Representative. Texaco shall designate in writing a representative who shall
have express authority to bind Texaco with respect to all matters requiring
Texaco's approval or authorization in connection with this Agreement. This
representative shall have the authority to make decisions on behalf of Texaco
concerning estimates and schedules, engineering capabilities, construction
concerns, and changes in the work, and shall render such decisions promptly and
furnish information expeditiously so as to avoid unreasonable delay in the
services or work of PathNet and/or its subcontractors.
11
<PAGE>
1.3.17 TEXACO'S RESPONSIBILITIES - FACILITY USE AND CONDITIONS Texaco's
Responsibilities - Facility Use and Conditions. Texaco hereby warrants and
represents to PathNet that the PathNet program goals as further identified
and set forth in PARA 1.2.1 of this Agreement are consistent with Texaco's
use of all owned or leased Facilities. PathNet will be provided access to all
sites set forth on Schedule B. Texaco, in conjunction with PathNet, will
determine which, if any, Facilities require structural analysis for the
placement of new antenna systems. For those structures identified as
requiring such analysis, Texaco, working closely with PathNet, will engage
and pay for a structural engineer licensed in the state in which the affected
tower resides. Texaco shall pay for the structural analysis from the Texaco
Budgeted Funds. The results of these analyses will be made available to
PathNet.
1.3.18 PATHNET'S RESPONSIBILITIES - FACILITY CONDITIONS
PathNet's Responsibilities - Facility Conditions. PathNet will analyze the
data provided by Texaco and construct a preliminary electronic inventory of
the existing Facility conditions at the time of execution of this Agreement.
PathNet will provide the requirements and specifications for the proposed
digital microwave systems site requirements at each Facility. PathNet will
inspect each Facility which does not have sufficient information provided by
Texaco to complete this analysis. PathNet will provide Texaco with detailed
antenna system requirements, which will include appropriate antenna sizes,
site elevations and azimuths. PathNet will additionally provide Texaco with
the vendor data specifying the wind loading and weight requirements for the
proposed antenna systems, as well as any associated feedlines necessary to
support the proposed system.
1.3.19 LEGAL REQUIREMENTS
Legal Requirements. Texaco shall determine and advise PathNet of any
special regulatory or zoning requirements known to it relating specifically
to the Initial System in the locality of the Facilities which differ from
those generally applicable to microwave facilities.
12
<PAGE>
PathNet shall fulfill such legal requirements, in connection with the services
it is to provide under this Agreement.
1.3.20 MAINTENANCE OF TOWERS AND FACILITIES
Maintenance of Towers and Facilities. Texaco shall be responsible for
providing Facility access towers, tower restoration, equipment access,
electricity, compliance with environmental requirements, painting,
lighting, payment of real estate taxes, compliance with FAA requirements,
maintenance of the Facility's building(s), the power systems and common
elements necessary for the continued operation of the telecommunications
asset throughout the duration of this Agreement. Texaco shall also be
responsible for FCC registration and payment of registration fees related
to the Facilities.
1.3.21 USE OF TEXACO'S TOWERS AND OTHER EQUIPMENT
Use of Texaco's Towers and Other Equipment. Texaco shall permit PathNet
to use its towers, antenna, waveguides and equipment shelters at the Facilities.
In order to expand system capacity, if necessary, PathNet shall have the right,
at its own expense, to make leasehold improvements to Facilities beyond the
Initial System. PathNet's leasehold improvements may be removed at PathNet's
expense and option, providing that no structural damage to Texaco's Facility
will result from such removal. All proposed modifications or additions to
Texaco's towers, waveguides, antennas and equipment shelters set forth on
Schedule E, shall be reviewed and approved or disapproved by Texaco within
thirty (30) business days of its submission to Texaco, and such approval shall
not be unreasonably withheld. In the event Texaco does not grant approval, the
parties shall make commercially reasonable efforts to resolve the situation.
PathNet shall pay for capacity expansion and shall not pay for Facility
improvements, except as provided for in PARA 1.3.10 of this Agreement, or unless
agreed to in writing signed by the parties hereto.
13
<PAGE>
1.3.22 TOWER APPROVALS AND STRUCTURAL CHANGES. Texaco shall fully
evaluate the tower structures and, if necessary, provide additional
stiffening or strengthening to existing structures. For all towers, Texaco
will obtain all necessary local zoning approvals, FCC approvals, site
licenses and FAA approvals (except FCC licenses provided for in PARA 3.2)
before work related to the project, or any part thereof, is commenced. Any
federal, state or local governmental or regulatory fees associated with
obtaining such tower approvals shall be paid by Texaco. Modifications to
tower structures shall be in full compliance with then current EIA/222F
specifications for loading. All costs associated with tower modifications or
requirements to support the interconnections to PSTN or the other elements of
the PathNet network shall be borne by PathNet. Any costs associated with the
interconnection to other parts of Texaco's network, which are not part of
PathNet's network, shall be paid for by Texaco. Any deficiencies or notices
of violations shall be fully disclosed to PathNet. Any tower or system
modifications that affect the tower lighting or tower alarm monitoring are
subject to the prior written approval of Texaco and shall be paid for by
PathNet.
1.3.23 PARKING AT THE FACILITIES. If required, Texaco will provide
for vehicular parking at each of the affected Facilities at no charge to
PathNet or its agents for use during the term of this Agreement. In the
event affected Facilities are in urban areas where vehicles are parked in
privately operated lots or garages, PathNet shall be responsible for any and all
parking charges it or its agents and employees may incur.
1.1.24 EXITING FACILITIES. Upon leaving Facilities, PathNet, its
employees, agents and contractors shall ensure that the Facility is returned
to a condition which existed immediately prior to their visit with the
exception of any installation, construction, maintenance or other work performed
during such visit.
14
<PAGE>
1.3.25 SECURITY SEARCHES. Any PathNet employee or agent, if required,
will be subject to a complete security search prior to entering any Texaco
facility where this may be required. PathNet employees or agents will be
allowed to bring necessary testing equipment, photographic equipment and both
video and audio recording equipment to any Facility where general security
requirements permit, subject to the prior written approval of Texaco, which
shall not be unreasonably withheld. PathNet will maintain a diary or log of its
site visits and a copy of such log will be available to Texaco during normal
business hours, provided a minimum of seventy-two (72) hours advance notice is
given to PathNet by Texaco.
1.3.26 USE OF TELECOMMUNICATIONS DEVICES. If necessary, while visiting
the Texaco Facilities, PathNet's employees or agents shall be allowed to
utilize existing telephone lines, or Order Wire to facilitate their
evaluation.
1.3.27 REAL ESTATE AND OTHER PROPERTY TAXES. For all state and local,
real and personal property taxes on equipment installed at Texaco Facilities, as
listed on Schedule E, and real estate supporting the operation of digital
microwave communications system at those sites, each party shall be responsible
for the payment of taxes for property which they separately own, as reflected in
Schedule E, attached hereto.
1.1.28 PATHNET'S OTHER RESPONSIBILITIES. PathNet will design the radio
network to be installed and specify the equipment to be used at the Texaco
Facilities. The design and specifications are subject to the written approval
of Texaco, which shall not be unreasonably withheld. PathNet shall hire any and
all subcontractors for the installation of the radio equipment and shall
coordinate system cutover and testing with Texaco. PathNet shall stage and
schedule delivery of radio, antenna and waveguide equipment and manage the
installation and cutover of the initial 1 x 1 communications system on the
microwave paths comprising the
15
<PAGE>
Texaco System, as further described in Schedule B, attached hereto. PathNet
shall also be responsible for the marketing and sale of Excess Capacity created
in accordance with the terms of this Agreement.
2. LEASEHOLD INTEREST
2.1 PREMISES; EQUIPMENT; LOCATION
2.1.1 LEASE OF FACILITIES. Texaco hereby agrees to lease to PathNet
space on Texaco's towers and space in Texaco's equipment buildings at each site
for the purpose of housing the equipment for the installation and operation of
the PathNet communications equipment set forth on Schedule E, at the Facilities,
subject to the terms and conditions set forth in this Agreement. From time to
time, Schedule B may be amended to include additional Facilities of Texaco by
the preparation of an "Amended Schedule B" to the Agreement, dated and signed by
both parties, reflecting additional paths and Facilities and specific location
information. The building layout to be used at each leased Facility is to be
set forth in the mutually agreed upon design drawings. Texaco grants PathNet,
unless PathNet defaults hereunder, the non-exclusive peaceful use, enjoyment and
possession of the Facilities during the term, as herein contemplated.
2.1.2 TERM, RENEWAL AND OPTION PERIODS. The term of the business and
leasehold relationship between Texaco and PathNet shall be up to twenty-six (26)
years for the Segment. This Agreement will become effective on the date of its
execution. The Initial Term includes the Buildout Period and extends for Five
(5) years after the Commissioning of the Initial System. The Build-out Period
of up to one year for design and installation shall commence immediately
following execution of this Agreement and shall end upon Commissioning. An
automatic option accrues to PathNet to extend the Initial Term of this agreement
for an additional ten (10) years, if
16
<PAGE>
PathNet sells at least 10% of the Excess Capacity on the Initial System. A
second automatic option period of ten (10) years accrues with the sale of at
least 20% of the Excess Capacity on the Segment during the first option period.
To exercise either of these options, PathNet must notify Texaco in writing at
least 180 days prior to the end of the preceding term. Upon expiration of the
Initial Term and any optional terms PathNet has exercised, the term of the
Agreement shall continue year to year, cancelable by either party upon ninety
(90) days' written notice to the other party. If either PathNet or Texaco
elects to not extend the Agreement after expiration of the Initial Term, or any
option period, PathNet shall sell the Initial System to Texaco for the total sum
of $1.00 and PathNet shall promptly file whatever forms may be necessary to
facilitate the transfer of the license for the initial 1 x 1 system from PathNet
to Texaco. Upon the expiration of this Agreement, PathNet shall, at Texaco's
request, also remove all of its owned equipment within sixty (60) days from
Texaco's Facilities. Should PathNet fail to perform such requested removal
within a timely manner, Texaco may restore the leased premises to its condition
as of the date the System is commissioned, reasonable wear and tear and damage
from the elements excepted, and PathNet shall promptly pay Texaco all costs
reasonably incurred for such removal.
2.1.3 ANTENNAS. PathNet shall furnish all antennas and antenna
mounting hardware for securing the antennas to the towers. The antennas will be
installed on the towers by PathNet and PathNet has the right to install the
antennas with space diversity. PathNet's antennas are to be mounted at
positions on Texaco-owned towers to be noted in the agreed-upon system design
documents. The antenna positions, loading and frequencies are set forth on
Schedule K.
2.1.4 TRANSMISSION LINES. One (1) transmission line will be connected
to each antenna initially. All line(s) will be anchored firmly to the tower in
accordance with the manufacturer's recommendation and as directed by Texaco. If
the System is expanded beyond the 1 x 1 Initial
17
<PAGE>
System, PathNet may elect to install a second transmission feed line. PathNet
shall furnish all transmission line(s), connectors and mounting hardware for
securing and grounding to the towers. PathNet, or its contractor, shall install
the transmission line(s) on the tower and route said transmission line(s) to its
equipment rack in Texaco's buildings, connecting both ends of the transmission
line(s). PathNet shall interface the transmission line(s) to its radio
equipment.
2.1.5 EQUIPMENT BUILDINGS. PathNet shall place its equipment inside
the Texaco buildings. Texaco shall allow PathNet access to PathNet's equipment
inside buildings at the Facilities, provided that Texaco shall have the right to
escort PathNet personnel. PathNet shall firmly anchor its equipment racks to
the floor, using a method and location mutually agreed upon by PathNet and
Texaco.
2.2 WARRANTIES REGARDING THE LEASEHOLD INTEREST
2.2.1 TEXACO'S AUTHORITY TO LEASE. Texaco represents and warrants that
it: (i) solely owns (or controls by lease or easement) the Facilities, set
forth in Schedule B, unencumbered by any liens, restrictions, mortgages,
covenants, conditions, easements, agreements, proffers, commitments, agreements
of record, or not of record, which would adversely affect Tenant's use and
enjoyment of the leased premises under this Agreement; (ii) is duly
organized/formed, validly existing and in good standing, and has all rights,
power and authority to make this agreement and bind itself thereto through the
party set forth as signatory as set forth below; (iii) has not dealt with, nor
is any brokerage commission due to any broker in connection with this Agreement;
and, (iv) the Property and its uses and operations, the making of this
Agreement, and Texaco's performance of this Agreement, to the best of Texaco's
knowledge, complies and will comply with all laws and not violate the provision
of any agreement or encumbrance of any
18
<PAGE>
kind under which Texaco is a party or is bound or which restricts in any way the
dispositions or use of the Property.
2.2.2 PATHNET'S AUTHORITY TO LEASE.'S AUTHORITY TO LEASE PathNet
represents and warrants that it (i) is authorized to lease the Facilities set
forth in Schedule B, unencumbered by any liens, restrictions, mortgages,
covenants, conditions, easements, agreements, proffers, commitments, agreements
of record, or not of record, which would adversely affect PathNet's use and
enjoyment of the leased premises for the purposes contemplated under this
Agreement; (ii) is duly organized/formed, validly existing and in good standing,
and has all rights, power and authority to make this Agreement and bind itself
thereto through the party set forth as signatory, as set forth below; and,
(iii) has not dealt with, nor is any brokerage commission due to any broker in
connection with this Agreement.
2.3 RENT AND OTHER LEASEHOLD PAYMENT RESPONSIBILITIES
2.3.1 RENT TO TEXACORENT TO TEXACO. PathNet covenants and agrees to
pay to Texaco as rent for the use of the Facilities during each year of the
Initial Term, following the Build-out Period, an allocation of [* * *].
PathNet will provide [* * *] to Texaco with a maximum cross sectional density
of [* * *], with Drop and Insert capability at the DS-1 level, at the
appropriate Facilities, as represented by the agreed upon channel plan set
forth in Schedule D for Texaco's own internal use and/or sale. The
performance of these DS-1's will meet or exceed the standards set forth in
Schedule O. Commencing in the [* * *] after Commissioning, PathNet shall pay
to Texaco, as additional rent, [* * *] of the revenue resulting from the sale
of the Excess Capacity installed at the Facilities, consistent with the
- -------------------------
(1) [* * *].
19
<PAGE>
provisions and terms of Section 2.3.2 of this Agreement. Texaco shall have
access on interconnections as set forth on Schedule S, attached hereto, with a
maximum cross section density of [* * *] channels.
2.3.2 SALE OF EXCESS CAPACITY. PathNet shall market all Excess
Capacity created. Texaco shall receive additional rent from PathNet based on
PathNet's sales of Excess Capacity according to the following terms:
a. INITIAL SYSTEM. For the four (4) years following
Commissioning of the Initial System, PathNet shall receive and retain all
revenue from the sale of Excess Capacity created by the Initial System for
the purpose of paying for the Initial System equipment and components. After
the [* * *] following Commissioning, PathNet shall begin to receive [* * *]
of the gross revenue and Texaco shall begin to receive, as additional rent,
[* * *] of the gross revenue on the sale of Excess Capacity created from the
Initial System.
b. SYSTEM CAPACITY EXPANSION. For a period of [* * *]
immediately following Commissioning of a Capacity Expansion beyond the
Initial System, the entire revenue stream shall be dedicated to servicing the
incurred debt on the cost of the radio and related equipment associated with
such Capacity Expansion. Each Capacity Expansion shall have its [* * *].
Each Capacity Expansion will be assigned an "Expansion" name (i.e., Expansion
1, Expansion Phase 1...). PathNet will provide Texaco a schedule that will
set forth: (1) the amount of capacity to be included in the expansion; (2)
specific paths to be expanded; (3) the expansion name (including each Path
that is affected); (4) commissioning date; (5) [* * *]; and (6) the date
Texaco will begin to receive additional rent from the gross revenues derived
from the expansion. Increases in capacity will be paid for solely by PathNet
and may come from the additional revenue stream which is generated
20
<PAGE>
from the sale of this additional capacity. If payments for radio and related
equipment associated with capacity upgrades or to service debt on such
equipment are needed, PathNet shall advance and make such payments. The
determination to increase telecommunications capacity along any segment of
the digital network will be made solely by PathNet. However, the
precondition to any increase in capacity is that at least [* * *] of the
existing capacity shall have been already sold to PathNet customers for at
least one quarterly period. After the [* * *], PathNet shall receive [* * *]
of the revenues produced by the Capacity Expansion and Texaco shall receive,
as additional rent, [* * *] of such gross revenues. For PathNet's sale of
Excess Capacity, as set forth on SCHEDULE J -- EXCESS TELECOMMUNICATIONS
CAPACITY SOLD AND PAID FOR, attached hereto, which includes facilities
controlled by several participants, the revenue to be received by Texaco will
be based upon the ratio of the number of miles Texaco's network contributes
to the Marketable Route, times the price per circuit mile on the Marketable
Route, [* * *].
2.3.3 OPTION TO PURCHASE ADDITIONAL CAPACITY. Texaco may purchase
additional capacity from PathNet at a 25% discount to the prevailing lowest
rates as sold to IXC's at the time by PathNet. Texaco shall have the right to
purchase up to 20% of the Excess Capacity available at any time. This
specifically includes the option to purchase, as part of this capacity, any
wayside channels resulting from the addition of radios to create Capacity
Expansion. Texaco may only purchase capacity for its own use in connection with
its core business needs and not for purposes of resale.
2.3.4 TEXACO'S LABOR TO PERFORM SERVICES. PathNet agrees to compensate
Texaco for special services provided by Texaco's employees at the hourly rate of
$60.00 for regular working hours on a business day; $80.00 for a non-business
day; and $100.00 for a Texaco holiday. This
21
<PAGE>
requirement to use and pay for Texaco's services (at the indicated rates) shall
apply to the removal of PathNet's equipment or antennas, should PathNet fail to
remove them in accordance with the terms of this Agreement, and to any other
special services agreed upon by the parties and confirmed in writing by PathNet
before such costs are incurred. Alternatively, Texaco may elect for PathNet to
engage and pay for the services of an independent, third-party contractor, to be
selected by PathNet and approved by Texaco, to remove such equipment or perform
other special services. PathNet agrees to reimburse Texaco for any
consequential expenditures, for the benefit of PathNet for the services
described above, at Texaco's cost, plus twenty percent (20%) to cover
administrative handling. PathNet may elect for Texaco to engage and pay for the
services of an independent, third-party contractor, to be selected by Texaco and
approved by PathNet, to remove such equipment. In addition, PathNet agrees to
separately compensate Texaco for maintenance services to be provided by Texaco's
employees, pursuant to the terms of a separate maintenance services agreement
that will be executed by the parties.
2.4 INSTALLATION AND OPERATION
2.4.1 INSTALLATION AND LOCATION. PathNet shall install, operate,
repair and remove its radio equipment in accordance with the terms of the
Agreement as defined in Schedule B. PathNet or PathNet's contractor shall
install PathNet's electronic equipment in PathNet's equipment racks at the
Facilities. PathNet shall not at any time change the location of the equipment
racks or of the antennas on Texaco's microwave tower or install additional
equipment without the written permission of Texaco. PathNet shall not make any
changes in the use of its equipment without written permission of Texaco, which
permission shall not be unreasonably withheld. PathNet may make changes which
increase tower loading at its sole cost.
22
<PAGE>
2.5 INTERFERENCE
2.5.1 DETERMINATION OF INTERFERENCE. For purposes of this Agreement,
interference will be deemed to exist if there is a measurable material
impairment in the quality of the frequency or signals received and/or
transmitted which results in harmful interference, as defined by the Federal
Communications Commission.
2.5.2 INTERFERENCE ASSUMPTIONS. At all times during the term of this
Agreement and any extension thereof, PathNet and Texaco agree to use equipment
that is FCC type accepted, FCC licensed or approved, installed, operated and
maintained in accordance with FCC and Vendor specifications. Interference
problems due to improper installation, design and/or maintenance shall not be
sufficient cause for termination of this Agreement. PathNet shall provide
assistance to Texaco while trying to isolate and eliminate interference problems
which involve equipment owned and/or operated by a tenant of Texaco. PathNet
agrees to make no changes in or to its equipment or frequency without the prior
approval of Texaco, which approval will not be withheld or delayed, so long as
such changes do not cause interference to a then present Texaco tenant on the
Facilities.
2.5.3 EXISTING TENANT INTERFERENCE COORDINATION. Before entering into
this Agreement, PathNet and Texaco have performed a preliminary frequency
analysis to determine if any obvious harmful interference would result from
Texaco's present tenants and the deployment of the System along the Segment.
Texaco has provided PathNet with an existing frequency inventory for each
Facility. After the Agreement has been approved, a more detailed frequency
analysis will be completed as a part of the formal design process. Design
approval by Texaco and PathNet will imply that the design calculations reveal no
obvious interference between existing tenants and planned Facility
modifications.
23
<PAGE>
2.5.4 NEW TENANT INTERFERENCE COORDINATION. During the term of this
Agreement, Texaco shall not license or permit other persons or entities to use
its Facilities if PathNet's then-in-use signal or frequency or physical location
of equipment would cause interference with such new tenant. Texaco and PathNet
agree that PathNet's signal has a paramount priority with respect to any other
communications signals or facilities installed on the leased premises subsequent
to Texaco's cutover. Texaco further agrees that during the term of this
Agreement, it will not license or permit other persons or entities to use its
communications facilities on the Premises if such persons or entities will cause
interference with PathNet's then-in-use frequency or signal, or with equipment
or antennas. Texaco, upon receiving notice from PathNet of such interference,
shall take all steps necessary to correct and eliminate such interference,
including, without limitation, enforcing provisions in any license or other
agreement between Texaco and the persons or entities causing such interference,
pursuant to which Texaco may compel such persons or entities to cease operation,
modify their equipment and/or antennas, or remove their equipment and/or
antennas from any facilities or towers owned by Texaco. If PathNet or Texaco
breach their obligations under this Section 2.5, the party receiving notice of
such breach from the other will take all steps necessary to correct and
eliminate such interference. If such interference cannot be eliminated within a
reasonable length of time, but not to exceed thirty (30) days after notice
thereof, Texaco or PathNet, as the case may be, shall cause the interference to
cease, except for brief tests necessary for the elimination of the interference.
Texaco acknowledges that: (i) PathNet will operate under a federal license,
(ii) continuing interference with PathNet's operation may cause irreparable harm
to PathNet, (iii) the prompt cessation of interference is material to PathNet's
leasehold interest, and (iv) therefore, PathNet shall have, as one of its
rights,
24
<PAGE>
the power to enjoin such interference, as reflected in SCHEDULE L-- DISPUTE
RESOLUTION/ARBITRATION PROVISIONS.
2.6 OTHER PROVISIONS
2.6.1 SUBLETTING. PathNet shall not sublet the Premises, in whole or
in part, without the written consent of Texaco. However, PathNet shall have the
right to transfer and assign its rights under this Agreement to a successor or
assign, pursuant to Section 5.1.4 of this Agreement.
2.6.2 SURRENDER. Upon the expiration or termination of the Agreement
or abandonment of the Premises by PathNet, PathNet shall peacefully and quietly
surrender occupation of the Premises to Texaco, or Texaco's successors and
assigns, without Texaco giving any notice to quit or demand for possession.
PathNet's non-use of the Premises, for the purposes described in this Agreement,
continuing for one (1) year shall be sufficient and conclusive evidence of such
abandonment, unless PathNet shall have notified Texaco in writing of its reasons
for such non-use, and shall continue to provide the [* * *] to Texaco.
2.6.3 SITE EXCAVATION. PathNet, its employees, agents and contractors
shall perform no site excavation at the Facilities without the prior written
approval of Texaco. PathNet shall have the right to conduct soil borings upon
notification to and approval by Texaco. All Texaco approvals of site excavation
requests shall not be unreasonably delayed or withheld.
2.6.4 SUBORDINATION. PathNet agrees to subordinate its rights under
this Agreement to all deeds of trust, deeds to secure debts, mortgages and other
security instruments (a "Mortgage") now or hereafter encumbering all or any
portion of the real property described on Schedule B to this Agreement (as such
schedule may be amended by PathNet and Texaco from time to time), and to any
increases, renewals, modifications, consolidations, replacements and extensions
thereof, provided that PathNet has received a commercially reasonable
subordination, non-
25
<PAGE>
disturbance and attornment agreement from the party(ies) secured by such
Mortgage(s). Any subordination shall not impair, jeopardize or disturb
PathNet's ability to operate its network or operate as a common carrier at the
Facilities.
2.6.5 HAZARDOUS MATERIALS. The parties agree to follow the Hazardous
Materials policy provisions set forth on SCHEDULE M -- HAZARDOUS MATERIALS
PROVISIONS, attached hereto.
2.6.6 ACCESS TO FACILITIES. Access to the Facilities for
installation, evaluation and testing of the replacement telecommunications
system shall not be unreasonably withheld from PathNet or its agents. Any
employee, agent or contractor of PathNet who is granted access to Texaco
Facilities shall provide proof of insurance to Texaco sufficient to
satisfy its minimum corporate requirements, but not to be less than $5 million
in general liability coverage, as set forth more completely in SCHEDULE N --
INSURANCE, attached hereto. If Texaco requires any security clearances, safety
training or drug testing for any non-Texaco personnel, PathNet will require that
its employees, agents or contractors apply to Texaco for such necessary
clearances, obtain the required safety training and submit to the required drug
testing. If required, Facility visits will be escorted by Texaco. PathNet
shall not be responsible for payment of any costs to Texaco associated with
Facility visits required during the installation, design and cutover period, or
for regularly scheduled visits thereafter. In the event of any special services
or emergency visits when Texaco is required to deploy personnel to a Facility,
Texaco shall invoice PathNet and PathNet shall pay the costs of such services at
the rates set forth in Section 2.3.3 of this Agreement. Texaco shall maintain
access to all Facilities in a reasonable manner in accordance with regulations
in their local jurisdictions.
26
<PAGE>
3. DESIGN, INSTALLATION, ACCEPTANCE AND OWNERSHIP
3.1 DESIGN, INSTALLATION AND CUTOVER
3.1.1 PATHNET'S DESIGN OBLIGATIONSPathNet's Design Obligations.
PathNet shall design the high-capacity, 6 GHz/30 MHz system in a manner that
will allow the unimpaired, continuous operation of Texaco's low-capacity, 6
GHz/10 MHz system until cutover of all operational circuits and testing of the
System has occurred. After cutover, the System operation standards shall be
controlled by the Minimum Network Performance Standards as set forth in SCHEDULE
O -- MINIMUM NETWORK PERFORMANCE STANDARDS, attached hereto and made a part of
this Agreement. PathNet shall, in installing the System, utilize towers,
antennas, waveguides, and the system components of the existing system wherever
possible. PathNet shall submit all systems and site designs to Texaco for its
review, analysis and approval, which shall not be unreasonably withheld, and
which approval (or disapproval) shall be rendered within (30) thirty days of
submission. Any design modifications shall be discussed and agreed upon in
writing by both Texaco's and PathNet's engineers.
3.1.2 RADIO SYSTEM. The active radio components of the System will be
digital. The specified System will be approved by Texaco and will be engineered
to availability specifications set forth in Schedule O. The System will comply
with the performance criteria set forth in Schedule O. The typical engineering
availability criteria which will be established for the Initial System and the
Capacity Expansion will be for a digital microwave Segment (defined in Schedule
B) which has less than two (2) minutes per annum of outage time, coupled with a
continuous bit error rate not to exceed 10-13.
27
<PAGE>
3.1.3 ANTENNASANTENNAS. In any selected frequency range, PathNet shall
ensure that all newly installed antenna reflectors will conform to Category A
standards as defined by the FCC and the antennas must meet the specifications
issued on any prior coordination notices (PCN).
3.1.4 WAVEGUIDE. Any waveguide specified for transmission line shall
be of a premium grade ensuring minimum transmission loss and Andrew part EWP-63
or equivalent.
3.1.5 D.C. POWER REQUIREMENTS. PathNet shall ensure that the active
radio components: (a) will operate in accordance with the manufacturer
specifications set forth in Schedule D, attached hereto; and (b) will be powered
by an uninterruptable power supply operating at 48 volts DC, with at least eight
hours of back-up capability. Texaco shall also ensure that the equipment
shelters are environmentally controlled to mutually agreed upon standards.
3.1.6 DIAGNOSTIC CIRCUITDIAGNOSTIC CIRCUIT. PathNet shall equip each
Facility with a single telephone line for System diagnostic purposes. PathNet
shall carry this circuit, order wire, or DS-0, as part of the System payload,
and it will be PathNet's responsibility to provide this circuit from the
circuits set aside for PathNet or through the order wire. PathNet shall have
the right to install additional order wires at the Facilities.
3.1.7 GROUNDING AND STANDARDS. Texaco shall be responsible for the
costs of delivering the Facilities in compliance with grounding and bonding
standards. The System and all associated electrical components will be grounded
and bonded to current IEEE standards, and shall be approved in writing by
PathNet, which approvals shall not be unreasonably withheld.
3.1.8 MULTIPLEXING FROM OC-3 TO DS-1 LEVEL. PathNet shall provide, at
its cost, the multiplexing of the OC-3 to the DS-1 level at each affected
Facility using OC-3 multiplexing, according to the design specifications set
forth in Schedules D and G. PathNet shall have the right to use Wayside
Channels that are not set forth in Schedules D and G, attached hereto, that
28
<PAGE>
result from Capacity Expansion. PathNet's use of the Wayside Channels that are
part of the Initial System must be coordinated with and approved by Texaco.
3.1.9 MULTIPLEXING FROM DS-1 TO DS-0 LEVEL. The multiplexing of the
DS-1 to the DS-0 level at each affected Facility will be Texaco's sole
responsibility. Texaco and PathNet shall jointly determine how Texaco's needs
will be met, as set forth in Schedules D and G, attached hereto.
3.1.10 AC ELECTRICAL POWER. With Texaco Budgeted Funds, Texaco shall
provide AC electrical power consistent with local requirements and the usage at
each of the affected Facilities. If power currently exists at the Facilities
but is inadequate to handle the Expanded Capacity, the cost of such power
enhancements will be borne by Texaco, which shall make payment to the
appropriate utility companies.
3.1.11 MINIMUM SYSTEM DESIGN REQUIREMENTS. PathNet shall ensure that
the proposed System, upon completion, will meet the then current FCC
requirements of spectrum efficiency outlined in the FCC regulations, 47 C.F.R.
Section 21.122. The System will be comprised of, at a minimum, 3 DS-3
capability and will have a 1 x n protection switch allowing for upward migration
to a minimum of 1 x 7 protection, unless Texaco approves in writing of expansion
to a 1 x 15 protection level, utilizing additional spectrum or the use of
crossband filters.
3.1.12 SONET RADIOSONET RADIO. The digital microwave radios will
operate under a SONET format.
3.1.13 PRIOR COORDINATION NOTICES. PathNet will monitor and protest any
proposed PCN which may affect the System by interference, either real or
potential. PathNet will issue
29
<PAGE>
any PCN's required or necessary for the construction of the 1 x 1 Initial System
or the Capacity Expansion.
3.1.14 DESIGN DOCUMENTATION. PathNet will propose specific equipment
for each component of the System at each Facility, as well as for the services
involved in System implementation. This proposal will be fully set forth in
writing prior to the parties' design approval or disapproval. PathNet shall
transmit to Texaco the approval specifications for all proposed equipment and
any related FCC-type compliance certificates or waivers.
3.1.15 COMPLIANCE WITH GOVERNMENT REQUIREMENTS. If FCC requirements
change between the design and final construction of the Initial System at the
Facilities, PathNet will be solely responsible for such costs of compliance.
PathNet will also install the System in full compliance with any state and local
regulations in effect at the time of installation which will affect the given
service areas.
3.1.16 FACTORY ACCEPTANCE TESTING. Equipment shall be assembled in
system configuration for factory acceptance testing. Rack, simulated Path,
Switch Section placement and testing shall be performed to verify that the
equipment exceeds the published manufacturer's specification. PathNet shall
provide the manufacturer's published testing procedures to Texaco at least two
(2) weeks before the scheduled factory acceptance testing is to occur. Texaco
shall have the right to review these testing procedures and request procedural
modifications if the procedures deviate from industry standards. The results of
the factory acceptance tests shall be provided to Texaco.
3.1.17 PRE-COMMISSIONING. PathNet shall install an Initial System in
such a way that it can be operated and tested without interfering with Texaco's
existing system performance. PathNet shall have all equipment in place to allow
for a cutover by Texaco of its existing
30
<PAGE>
channels. Texaco and PathNet shall mutually agree upon a pre-commission plan
and approve it in writing. This System is deemed Pre-Commissioned when fully
operational.
3.1.18 FACILITY ACCEPTANCE TESTING. After the equipment is delivered
and installed at the Facilities, retesting of Rack and Path and testing shall be
performed to verify proper operation of the equipment. Texaco and PathNet each
shall have the right to observe all site acceptance tests. The procedures to be
utilized in these tests are to be mutually agreed upon between PathNet and
Texaco. The results of the site acceptance tests shall be provided to PathNet
and Texaco. PathNet shall select the contractor that will perform all site
acceptance testing. All site acceptance tests shall be conducted in compliance
with manufacturers' specifications listed in Schedule O, attached hereto.
3.1.19 CUTOVER. A cutover coordination plan will be developed as part
of the joint design and approval process. At the time of design stage approval,
PathNet shall provide a detailed cutover schedule to Texaco. Testing shall
occur in a manner and on dates acceptable to Texaco. Texaco shall participate
in and manage the cutover process for its allocated channels. PathNet shall
allow Texaco a ninety (90) day cutover period during which both the existing
analog and new digital systems will be fully functional. The channel cutover
period shall end either ninety (90) days after it is commenced or upon written
notice from Texaco, whichever may occur first.
3.1.20 COMMISSIONING, INSTALLATION AND COMPLETION. Following the
channel cutover period, PathNet shall modify the System into its final
operational configuration. The completion of the installation shall be marked
by the satisfactory completion of the necessary performance tests, which shall
be paid for by PathNet. Satisfactory testing and evaluation of the System shall
occur immediately following the completion of cutover. Upon completion of the
performance
31
<PAGE>
testing by an independent third-party in accordance with the performance testing
specifications set forth in Schedule O, the installation shall be complete.
After successful completion of these tests, PathNet and Texaco will declare in
writing that the Initial System has been Commissioned. This same process shall
be used for each Capacity Expansion.
3.2 FCC LICENSING FCC LICENSING
3.2.1 COMMON CARRIER LICENSE FILING. PathNet shall be the operator of
all System licenses held in its name. PathNet will be responsible for all
filings with regard to common carrier status both at the federal and local
levels. PathNet shall maintain any and all licenses issued by the FCC in good
standing. The FCC licenses issued in connection with the System shall be issued
in the name of PathNet and the licenses and radio equipment shall be owned and
operated by PathNet. PathNet shall prepare and submit all necessary frequency
coordination, licensing and/or relicensing applications and other related
filings on its behalf, as a Part 21 Common Carrier, seeking that it be able to
sell its telecommunications capacity created from the System to other common
carriers. The System designed and installed by PathNet will meet FCC loading
requirements and have capacity which can be resold to common carriers. Copies
of all filings with the FCC, including PathNet's licensing as a common carrier,
shall be provided to Texaco, and Texaco shall not unreasonably withhold its
signature required for such filings. Texaco shall provide assistance to PathNet
in supplying any and all available documentation, as may be required by
regulating agencies. Any expenses incurred with regard to these filings will be
the sole responsibility of PathNet.
3.2.2 IDENTITY OF LICENSEES. The System will be licensed in the name
of the PathNet, under Parts 21 /101 of the FCC Code. Texaco will remain
licensed for the operation of the existing 6 GHz/10 MHz system under Part 94 of
the FCC Code, until such time as its licenses
32
<PAGE>
may be terminated. While the responsibility to complete the licensing forms for
filing with the FCC will be PathNet's, upon request and in a timely manner,
Texaco shall provide to PathNet all information necessary for the completion of
these forms which is not proprietary and is readily available to Texaco.
3.2.3 FORMS AND FEES. Licensing forms completed by PathNet, like all
other licensee applications, will become a matter of public record. Currently,
the proposed frequencies to be utilized for creation of microwave facilities
have initial application fees, and such fees will be borne by PathNet. However,
in the future, the FCC may establish user fees for this spectrum. If common
carrier system user fees exceed those of a comparable private microwave system,
PathNet and Texaco shall be responsible for sharing payment of such additional
fees in the same proportion as the revenue split between PathNet and Texaco.
3.2.4 DEPRECIATION OF EQUIPMENT. Texaco will have the right to fully
depreciate any remaining asset value of the pre-existing equipment as well as
for any equipment which it owns. PathNet shall have the right to depreciate the
equipment it pays for on the appropriate depreciation schedules in proportion to
its respective ownership, as permitted by the United States Internal Revenue
Service.
3.2.5 ACCESS TO LOGS AND REPORTS. Texaco and PathNet shall make
available to each other, to its maintenance vendor(s) and/or to the equipment
manufacturers of the affected component(s), all compiled reports, logs,
registers and diaries prepared during installation, cutover and System operation
related to System operation and performance.
3.2.6 FCC LOADING REQUIREMENTSFCC LOADING REQUIREMENTS. The
configuration of the typical microwave replacement path which PathNet will
integrate into its network will be in the form of a 1 x n protection scheme.
The mandated FCC loading requirement for spectral efficiency and traffic
33
<PAGE>
volume will be the responsibility of PathNet. Any waivers or extensions
requested by PathNet of the FCC will be initiated and handled by PathNet or its
agents. PathNet will comply with applicable FCC requirements for spectral
efficiency and channel loading. PathNet reserves the right to modify the System
to a hot standby system ensuring for adequate redundancy while meeting the FCC's
criteria for spectral efficiency, if PathNet is unable to secure sufficient
telecommunications and is also unable to have the FCC grant a waiver or
extension to Texaco. The costs of any such reconfiguration, if necessary, will
be borne solely by PathNet. Such a reconfiguration will cause no interruption
to the telecommunications service.
3.3 RESPONSIBILITIES DURING SYSTEM CREATION AND INSTALLATION
3.3.1 REASONABLE EFFORTS AND TIMINGREASONABLE EFFORTS AND TIMING.
PathNet shall utilize commercially reasonable efforts to ensure that System
creation through final acceptance occurs as expeditiously as possible. It is
PathNet's goal that the construction of the System shall occur within eighteen
(18) months of the time all permits and approvals have been secured.
3.3.2 PROJECT MANAGEMENTPROJECT MANAGEMENT. Project Management shall
be the responsibility of Texaco for physical sites and PathNet for the radio
installation. Each party shall issue preliminary project schedules to frame
construction and start-up expectations in connection with their respective
responsibilities. The details of the preliminary schedules and any preliminary
project management plan will be agreed upon by PathNet and Texaco before
contract signing. A final schedule and project management plan shall be agreed
upon by PathNet and Texaco within forty-five (45) days of execution of this
Agreement, and shall be attached hereto as Schedule F.
3.3.3 INSTALLATION REPORTSINSTALLATION REPORTS. After installation has
begun and through final acceptance, Texaco and PathNet shall provide to each
other a bi-weekly progress report relating to the progress of the construction.
This report will be in writing and delivered to PathNet and Texaco
34
<PAGE>
the 1st and 15th day of each month until project completion. Each progress
report shall include a description of the work performed during the immediately
preceding period, and the relationship of the work completed to the entire scope
of work necessary for the implementation of the System. This report shall also
include any deviations from the proposed schedule of work and an analysis of
such deviations with respect to their impact upon the timely deployment of the
System.
3.3.4 COOPERATION DURING INSTALLATION. During installation, Texaco
shall continually post at the Facilities any permits or licenses for building or
tower work related to the construction. Texaco agrees to not impede
construction by denying access to its Facilities or failing to perform other
duties or contract requirements. During the period of construction, it may
become necessary for PathNet or various vendors to store equipment and materials
at the Facilities. Texaco shall assist by storing and staging materials, and it
may not impose any fees related to such storage. PathNet shall provide detailed
ship and delivery schedules at least two (2) weeks prior to receipt of equipment
and materials.
3.3.5 SECURITY. PathNet and Texaco shall be responsible for security
during the construction period. The standards for security shall be those that
Texaco regularly employs at its Facilities.
3.3.6 SITE INSPECTORS AND DELAY. During System installation, PathNet,
its employees, agents and vendors, may perform site inspection services at any
hour on any day, with reasonable assistance to be provided by Texaco to gain
access. If installation becomes disrupted due to labor unrest or strike,
PathNet reserves the right to replace its contractor and employees.
3.3.7 PROOF OF LICENSED CONTRACTORS. During installation, PathNet or
Texaco may require, from time to time, proof of licensing and certification of
insurance and compliance with
35
<PAGE>
federal, state or local health and safety requirements for contractors
performing construction related services, as set forth on SCHEDULE N --
INSURANCE, SCHEDULE P -- EQUAL EMPLOYMENT OPPORTUNITY POLICY, SCHEDULE Q --
PATHNET SAFETY MANAGEMENT, and SCHEDULE R -- SUBSTANCE ABUSE POLICY, attached
hereto.
3.3.8 SYSTEM OUTAGES. The parties agree to make their best
efforts to avoid unscheduled outages.
3.4 OWNERSHIP OF REPLACEMENT MICROWAVE FACILITIES
3.4.1 RADIO EQUIPMENT AND OTHER ITEMS. Ownership of radios, shelters,
components and related equipment shall be as in accordance with Schedule E,
which separately lists the microwave assets of Texaco and PathNet. All the
related equipment previously owned and/or paid for by Texaco for use in the
System shall be owned by Texaco. All radio equipment and antennas to be
purchased and installed by PathNet shall initially be owned by PathNet and later
transferred to Texaco, in accordance with the terms of this Agreement. With
respect to the System to be installed, PathNet shall pay for and own all newly
purchased radio equipment and multiplexing equipment to the DS-1 level,
antennas, waveguides and other System components. Once equipment necessary to
create and/or increase the System has been installed, this equipment will be
titled to and owned by PathNet. For maintenance and ownership purposes, a list
of equipment at each Facility in the form set forth in Schedule E, attached
hereto, shall be maintained by PathNet and by Texaco, with one copy maintained
at the Facility. The Schedule shall be counter-signed by both parties to this
Agreement and periodically updated as new equipment is added. PathNet will take
title to all upgraded equipment added to the System. All existing common
equipment shall remain the property of Texaco. All newly installed common
equipment paid for by PathNet, such as waveguides and antennas, initially shall
be owned by
36
<PAGE>
PathNet, until such time as the antennas and waveguides are fully depreciated in
accordance with generally accepted principles of accounting. Once installed and
cutover, the Initial System shall be transferred to Texaco at its election,
after a period of five (5) years for a sum not to exceed one dollar.
3.4.2 CAPACITY AGGREGATION. During the construction of PathNet's
network, it will be necessary to aggregate the Excess Capacity of each party
into a network. PathNet shall own all equipment necessary for the aggregation
and/or integration of Texaco's capacity to (a) PathNet's network comprised of
telecommunications Excess Capacity supplied by other participants in the PathNet
program, and (b) to the PSTN.
3.4.3 ADDITIONAL EQUIPMENT INSTALLATION, APPROVAL AND NETWORK LINKING.
Any proposed modification and/or installation of additional telecommunications
equipment not appearing on Schedule E shall be subject to the prior approval of
Texaco, which shall not be unreasonably withheld. The direct and indirect costs
of installing any additional equipment shall be borne solely by PathNet.
PathNet shall retain ownership of the linking facilities.
3.4.4 INTERCONNECTIONS. PathNet may create up to four (4)
interconnections per LATA. Two of such interconnections shall be to other
segments of the PathNet network created from facilities of other parties. The
two additional interconnections shall be to publicly switched telephone networks
(PSTN). At each interconnection Facility, PathNet may place up to two (2)
additional antennas at PathNet's cost, but solely for such interconnection
purposes. Those interconnections may be by microwave or other media. PathNet's
interconnection rights shall not be construed as a grant of rights-of-way to
PathNet along any pipeline and PathNet must obtain its own rights-of-way to
reach any Facility. PathNet has the right to co-locate the equipment necessary
to support such interconnections, pursuant to Schedule E, attached hereto.
37
<PAGE>
If spurs are developed by PathNet, the interconnections at such spurs shall be
specified on Schedule S, approved by Texaco, and paid for by PathNet.
Conversely, if spurs are to be developed by Texaco at its own costs for its own
connectivity purposes, interconnections at such spurs shall be specified on
Schedule S, and paid for by Texaco. Coordination with PathNet will be as
specified in Section 1.3.9.
3.4.5 INTERCONNECTION PLACEMENT AND REVENUE. PathNet shall determine
the placement of and install connecting facilities from the System to the
existing PSTN at locations to be determined by PathNet's potential customers.
PathNet will connect the System to existing POP's to be determined by PathNet's
potential carrier customers or by PathNet. PathNet or its customers will be
responsible for the facilities necessary to connect the designated POP's to the
network. The ownership of these other facilities and the revenues they may
generate will be the sole property of PathNet or its customers. PathNet will
provide Texaco up to [* * *] at such Facilities without charge to
Texaco and those channels, which include DS-1 level access, will be allowed to
pass along PathNet's section of the network. PathNet may transfer its authority
to construct additional facilities for links between its system created at the
Facilities and POP's to PathNet's customers. Any fees or charges related to the
interconnection of the PathNet network or capacity created on the System to the
PSTN shall be the sole responsibility of PathNet or its customers. PathNet may
charge its customers fees, tariffs or costs for the connection to the PSTN.
Texaco shall not be responsible for payments of any fees or costs related to the
interconnection to the PSTN.
3.4.6 SELLING PRICES FOR EXCESS CAPACITY. In establishing its selling
price for Excess Capacity, PathNet's goal shall be to maximize revenue on
PathNet's entire network, not to maximize revenue merely on a specific microwave
segment or path. Accordingly, PathNet
38
<PAGE>
reserves the exclusive right to sell Excess Capacity at prices it shall
determine appropriate on specific routes for sale to its customers, which prices
may be below or above current competitive market pricing. Selling prices
proposed as part of this aggregation, if required, will be submitted and filed
by PathNet with the appropriate regulatory authority. The price for Excess
Capacity that is charged on Texaco's portion of the sold route will be identical
to that of other participants who are sharing in the proceeds from the
particular sale of a marketable route. Texaco agrees to participate in the path
aggregations for which PathNet has determined, in its sole discretion, the per
circuit mile selling price. PathNet reserves the right to package the Excess
Capacity in sales increments of DS-1's, DS-3's or OC-3's. The price schedule
for various capacities that PathNet will charge its IXC customers from the
Segment will be fully disclosed to Texaco. PathNet will reserve the right to
modify its offerings as far as bandwidth allocation and channelization, if
market conditions indicate that different segmentation will result in higher
aggregate revenues for Excess Capacity on the PathNet network.
3.4.7 SALES TO OTHER TEXACO ENTITIES AND END USERS. Texaco may market
excess digital telecommunications capacity, from its allocated channels on the
Initial System installed by PathNet to other Texaco affiliated companies,
divisions, pipelines and operating units and other oil and gas or energy related
service companies for their own use. Texaco shall not operate parallel
microwave telecommunications facilities to those set forth in Schedule B,
attached hereto, for the purpose of selling digital circuits. PathNet shall
exclusively market all other capacity to entities unaffiliated with Texaco. Any
contact between a prospective PathNet customer and Texaco shall be promptly
referred by Texaco to PathNet's marketing department. If Texaco is successful
in locating such a new customer for PathNet's portion of the Excess Capacity
created at Texaco Facilities, and PathNet concludes a sale to that buyer, Texaco
shall
39
<PAGE>
receive [* * *] to be negotiated by PathNet and Texaco, which shall not
exceed [* * *] of the revenue received from the sale of this capacity, in
addition to the other revenues outlined in this Agreement. PathNet or Texaco
may also facilitate the barter of Excess Capacity between parties
participating in the PathNet program. In addition, PathNet may facilitate
the creation of network loops or rings to enhance network reliability.
PathNet will not charge Texaco for providing any such network arrangements.
PathNet will not and cannot require any Participant in its program to enter
into any barter arrangement for its internally allocated telecommunications
capacity. Barter agreements will be entered into only if agreeable to
Texaco. PathNet and/or Texaco shall derive no fee from facilitating such
barter arrangements.
3.4.8 INTEGRITY AND SEGREGATION OF CAPACITY. PathNet shall ensure that
PathNet's and Texaco's telecommunications capacities shall be segregated from
the common carrier traffic that will pass through PathNet's network. PathNet
shall provide security for data or voice transmissions via TDMA standard
multiplexing and shall maintain Stratum One Clocking via signals provided by the
PSTN or shall maintain internal Stratum Three Clocking VIA oscillator standards
provided internally by the System or GPS signal. PathNet, at any time, will
have the right to perform frame slippage studies on its entire microwave network
to ensure data and voice integrity. The data and voice transmissions which
PathNet and Texaco will send through the new microwave facilities shall comply
with all FCC regulations and will not jeopardize the ability to continue to
operate as a Part 21 Common Carrier.
3.4.9 INTERCONNECTION TO NETWORK. PathNet shall provide the
interconnection capacity for the System to various networks no more than
twenty-four (24) months after completion of the installation of the System on
paths that have marketable value. These interconnections shall be
40
<PAGE>
owned and funded by PathNet. PathNet will be responsible for all filings,
licenses, fees and taxes related to these interconnections.
3.4.10 RECOMMENDED EQUIPMENT. Subject to consultation with Texaco and
its approval, which shall not be unreasonably withheld, PathNet, at its own
cost, or its agents shall be permitted to modify its equipment from time to time
as new versions may become available from manufacturers or software providers.
4. NETWORK MANAGEMENT AND ADMINISTRATION
4.1 NETWORK MANAGEMENT NETWORK MANAGEMENT
4.1.1 NETWORK MANAGEMENT RESPONSIBILITIES. PathNet shall have the sole
responsibility for performing total network management. PathNet shall provide
at its expense, for Texaco's use, a regional network management system. PathNet
shall maintain a national network management center. Notwithstanding what
network management strategies shall be employed, PathNet shall provide the tools
(i.e., remote units and computers) to enable Texaco to collect data and observe
its operating network. PathNet shall provide the people and procedures to
identify any network or System problems and direct maintenance activities to
promptly correct network or System problems. The minimal level of network
management acceptable to and provided by PathNet and Texaco, in connection with
their respective networks, is set forth on SCHEDULE U -- MINIMAL LEVEL OF
ACCEPTABLE NETWORK MANAGEMENT, attached hereto.
4.1.2 CONTRACTING FOR NETWORK MANAGEMENT. PathNet reserves the right
to out-source or contract its network management duties to an independent
third-party contractor. PathNet reserves the right to allow its customers to
contract independently for network management services over the portions of
PathNet's network which these customers have under contract. Texaco may not
unreasonably withhold the consent for PathNet or its agents to access
41
<PAGE>
PathNet's and Texaco's equipment for purposes of operating or maintaining the
PathNet network. Texaco may not charge additional site fees or rentals for any
network monitoring equipment that PathNet deems necessary. The adequacy of the
network management systems shall be measured in relation to the minimum network
performance standards as set forth on Schedule O. PathNet shall ensure that
these systems, at a minimum, comply with the published equipment vendors'
specifications. PathNet's network monitoring capabilities shall provide the
ability for Texaco to: 1) monitor its own portion of the network separately
from the overall PathNet Network, and 2) maintain tower lights, Facility power,
environmental conditions and other network connected devices.
4.1.3 NETWORK MANAGEMENT DEVICES. For the purposes of network
management, PathNet retains the right to add to Texaco's existing facilities,
software or mechanisms that it deems necessary to allow it to perform network
management services. The network management system shall provide for site alarm
monitoring for a maximum number of external inputs and controls, as defined in
Schedule U. These devices will be defined during the design phase and provided
to Texaco in writing. At all times, such devices, with the exception of the
common network interface card, shall remain the exclusive property of PathNet.
4.1.4 COMPLIANCE WITH LAWS. PathNet's network monitoring will comply
with all state, local and federal regulations concerning network security.
4.2 MARKETING
4.2.1 MARKETING RIGHTS AND ASSIGNABLE CONTRACT RESPONSIBILITIES. In
its marketing efforts, PathNet reserves the right to market under its name, or
any other trade name which it owns, except as set forth in Section 4.2.2,
herein. The assignment of its rights of exclusive marketing of excess
long-distance capacity shall be allowed under this Agreement and shall only be
42
<PAGE>
prohibited if the transference of these rights violates FCC or other Federal or
state laws and regulations. If PathNet transfers or assigns its right(s) to
sell Excess Capacity, all other terms and conditions stated in this contract
shall remain binding on PathNet, its successors and assigns. In the
establishment of its sales effort, PathNet reserves its rights to market and
advertise its services in any and all media it deems fit. The choice of
publications in which to advertise shall solely be that of PathNet.
4.2.2 MARKETING AND ADVERTISING RESTRICTIONS. PathNet shall not use
any trademark or trade name of Texaco, its parents, affiliates or subsidiaries
for purposes of marketing the Excess Capacity created.
4.2.3 CUSTOMER AGREEMENTS. The terms of the agreements between PathNet
and its various customers shall be disclosed by PathNet to Texaco as they relate
to traffic on the System. The term of these agreements will inevitably vary and
will have no fixed minimum time commitments. If the agreements with PathNet's
customers require modifications to PathNet's network or specific installation
requirements, at PathNet's sole discretion, these costs may be passed on to the
customers and will be made at no cost to Texaco. The reimbursement for these
fixed one-time costs shall be direct, and any revenues, other than compensation
for direct and indirect costs related to these network modifications,
installation requirements or connection fees, shall be the property of PathNet.
All costs involved in marketing bandwidth shall be borne by PathNet.
4.2.4 IXC AND CUSTOMER SALES AGREEMENTS. The sales agreements between
PathNet and its interexchange carrier and other customers will clearly identify
the paths or the segments of the affected participants along which the capacity
being sold travels. If IXC and customer
43
<PAGE>
sales agreements and supporting documents require the written approval of Texaco
as a condition of sale, Texaco's approval shall not be unreasonably withheld.
4.2.5 METERING AND LIABILITY TO IXC'SMETERING AND LIABILITY TO IXC'S.
PathNet's long-distance communications sales contracts shall be based on flat
monthly rates and shall not be usage sensitive. Any usage-sensitive agreement
which PathNet enters into shall require the inter-exchange carrier to provide
for the necessary metering and a mechanism to ensure that this metering is both
fair and accurate. Any costs related to the verification of metered readings
will be incurred by PathNet and transferred to the affected inter-exchange
customer. Performance criteria related to network design shall be integrated
into PathNet's marketing efforts and contractual relationships with
inter-exchange customers.
4.2.6 REASONABLE EFFORTS - MARKETING. PathNet will use commercially
reasonable efforts to produce, market and sell any excess long-distance capacity
created under the PathNet program. PathNet shall seek the sale of aggregated
long-distance capacity under the best terms commercially obtainable at the time.
As part of such efforts, but without limitation, PathNet will dedicate its
resources and perform the promotional and marketing tasks necessary to obtain
the best available price at the time for the sale of such long-distance capacity
consistent with the goals of PathNet and Texaco, as set forth in this Agreement.
4.3 REVENUE COLLECTION AND DISBURSEMENT
4.3.1 BOOKS AND RECORDS. PathNet shall maintain and keep detailed and
accurate books and records with regard to sales and revenues and the calculation
thereof. Texaco, or its representatives (who shall be reasonably acceptable to
PathNet), shall be entitled to review and audit such books and records, from
time to time, during normal business hours, upon reasonable notice to PathNet,
and at Texaco's expense, provided that PathNet will bear any such expense if
44
<PAGE>
the review or audit reveals an underpayment of more than five percent (5%) for
the applicable period has occurred.
4.3.2 QUARTERLY STATEMENTS OF ACCOUNT. PathNet shall issue quarterly
Statements of Account to Texaco within thirty (30) days of the end of each
calendar quarter. The reports shall set forth the revenues computed pursuant to
SCHEDULE H - PAYMENT SCHEDULE and the method of allocating revenues to Texaco
during that quarter.
4.3.3 STATEMENT OF ACCOUNT. PathNet shall make payments due and
payable thirty (30) days from the date PathNet's Statement of Account is issued
to Texaco. The Quarterly Statement of Account, which shall accompany
disbursements, is an unaudited statement produced by PathNet. It shall reflect
the number of path miles of the System built out by PathNet and the excess
long-distance capacity marketed and sold in the aggregate resale market during
each quarterly period, for which payment has been received by PathNet, as
calculated based upon the number of path miles furnished by Texaco in
relationship to the total PathNet network.
4.3.4 PAYMENTS TO TEXACO. PathNet will invoice each of its IXC
customers prior to the commencement of their lease periods for
telecommunications facilities on the PathNet network. These agreements may
typically be monthly, but under certain conditions, may either be quarterly,
semi-annual, annual, or for multi-year periods. PathNet shall make payment to
Texaco for its portion of revenue actually received from the sale of PathNet's
long-distance capacity along paths that use the System. Payments shall be made
in accordance with the other terms of this Agreement and shall be based upon
rates charged for the path miles of the Segment, divided by the network path
miles assembled by PathNet. PathNet's disbursements to Texaco will be
transmitted electronically or by wire transfer, as to be determined and
specified in writing by Texaco, with all account information necessary to
complete payment, as set forth in SCHEDULE V --
45
<PAGE>
TEXACO PAYMENT INSTRUCTIONS, attached hereto, which may, from time to time, be
freely amended by Texaco without the approval of PathNet. Upon receipt of
payment from an inter-exchange carrier, PathNet shall disburse revenues no later
than fifteen (15) days following the close of business of the month in which
these revenues were received. Interest, if earned on collected but
undistributed revenues, will be the property of Texaco, and shall be distributed
to Texaco at the time of the next payment. Distribution of revenues for the
portion of PathNet's network that is owned entirely by PathNet shall occur at
the same time that PathNet distributes revenue to Texaco.
4.3.5 ANNUAL AUDIT. All billings and revenue collections will be
subject to an annual certified audit by an independent, nationally recognized
accounting firm selected by PathNet, admitted to practice in all fifty states.
This audit shall be conducted in accordance with generally accepted auditing
standards. The results of this audit will be made available to Texaco no later
than 30 days from the conclusion of the audit findings. PathNet shall not be
responsible for any material breaches or misrepresentations that may occur
through the negligence of outside auditors. PathNet will make its own records
available at its principal business office for inspection by Texaco, upon
written request, received at least after ten (10) business days before such
planned inspection, provided the inspection of these records does not violate
any agreements of confidentiality between PathNet and other participants.
4.3.6 PATHNET'S CORPORATE STATEMENTS.
PathNet's corporate income statements, balance sheets and other forms of general
corporate reporting shall be the sole property of PathNet and shall not be
subject to examination by Texaco. Texaco shall have the right to examine during
an annual audit all other documents which contain information related to the
revenue due to Texaco under the terms of this Agreement. Any disclosure of
PathNet's revenue
46
<PAGE>
collections and its disbursements to Texaco shall be strictly confidential and
subject to the terms of the Non-Disclosure Agreement attached hereto as SCHEDULE
W -- NON-DISCLOSURE AGREEMENT.
4.3.7 TEXACO'S ASSIGNEES OF REVENUES. Texaco will have the right to
designate other entities to receive its disbursements. The disbursements issued
by PathNet shall not relieve Texaco of any tax liability resulting from its
receipt of these revenues.
4.3.8 REVENUE NOT GUARANTEED. PathNet does not guarantee any revenue
disbursements. PathNet does not promise or warrant its ability to sell
telecommunications capacity. In the event a dispute arises between PathNet and
Texaco, any disbursements affected by this dispute will be placed in escrow in a
segregated, interest-bearing bank account to be held by PathNet and Texaco. The
signatures of an authorized representative of Texaco and PathNet shall both be
required for disbursement of the escrow monies until such time as the dispute is
resolved pursuant to the terms of Schedule L of this Agreement. Upon resolution
of dispute, the escrow amounts shall promptly be disbursed.
4.3.9 PATHNET COSTS. Any costs PathNet incurs as a result of this
Agreement shall be the sole responsibility of PathNet. It shall not be implied
that Texaco is responsible for such costs.
5. MISCELLANEOUS PROVISIONS
5.1 GENERAL PROVISIONS
5.1.1 RESOLUTION OF DISPUTES. Any dispute arising under this Agreement
pertaining to revenue collection and/or disbursement, shall be subject to
resolution under Schedule L.
47
<PAGE>
5.1.2 NO RIGHT TO TERMINATE. Disputes arising under this article of
the Agreement do not give either party the right to terminate this Agreement.
This Agreement is fully binding upon the parties, their heirs and assigns for
the duration of this Agreement as set forth herein.
5.1.3 RECORDATION. This Agreement may be subject to recordation in any
of the affected localities by either party. The costs, fees or expenses
associated with this recordation shall be the sole expense of the recording
party and recordation does not obligate the other party to this Agreement to pay
a portion of recordation of such expenses.
5.1.4 SUCCESSORS AND ASSIGNSSUCCESSORS AND ASSIGNS. Texaco and PathNet
respectively bind themselves, their partners, successors, assigns and legal
representatives to the other party hereto and to partners, successors, assigns
and legal representatives of such other party in respect to covenants,
agreements and obligations contained in this Agreement and attachments thereto.
Neither party to this Agreement shall assign the Agreement in whole or in part
(except as set forth below) without written consent of the other, which shall
not be unreasonably withheld. If either party attempts to make such an
assignment without such consent, that party shall nevertheless remain legally
responsible for all obligations under this Agreement. The rights and
obligations of the parties under this Agreement may not be assigned or
transferred except: (i) the right to payment of money may be assigned, (ii)
PathNet or Texaco may subcontract work, and (iii) this Agreement and the rights
and obligations hereunder may be assigned to an acquirer of all or substantially
all the assets, business or stock of a party. If PathNet sells or assigns the
radio equipment that it has assembled into a network which it owns, the proceeds
from such sale or assignment shall be the sole property of PathNet and Texaco
shall have no claim to a portion of the proceeds. If Texaco sells or in any way
assigns the asset(s) owned by Texaco, the proceeds from such sale or assignment
shall be the sole property of Texaco and PathNet shall have no
48
<PAGE>
claim to a portion of such proceeds. If Texaco sells, leases, or assigns the
underlying Texaco asset(s) which support the microwave paths that are a basis of
this Agreement, this Agreement shall survive such transfer or assignment.
5.1.5 FINANCING AGREEMENTS. PathNet shall ensure that the provision
set forth in Section 1.3.12 will be included in the financing agreement and
credit term sheet for the Initial System. Texaco shall have review rights and
receive a copy of each credit term sheet and financing agreement entered into
between PathNet and any other entity as it relates to the financing of the
1 x 1 Initial System, as set forth in Schedule E, attached hereto. A copy of
any vendor credit term sheets shall be submitted to Texaco within sixty (60)
days after execution of this Agreement. A copy of any vendor financing
agreement shall be provided to Texaco within ten (10) days of its execution.
5.2 ASSURANCES OF PATHNET'S PERFORMANCE
5.2.1 ASSURANCES AND ESCROW. Pursuant to the terms of this Agreement,
PathNet, during the Build-Out Period, has responsibility for the payment of
certain equipment and services. Specifically, PathNet shall pay for the
equipment, (OC-3 multiplexing, the digital high-capacity radios, the antennas
and waveguide, ancillary miscellaneous equipment and material), and for the
installation to be performed at the Facilities. To assure performance of
PathNet's payment responsibilities, within sixty (60) days of execution of this
Agreement, PathNet shall provide a combination of vendor credit assurances, an
escrow agreement acceptable to Texaco, to be executed by Texaco and PathNet, and
at PathNet's sole option, a letter of credit. The assurances, escrow agreement,
and/or letter of credit shall establish and confirm that:
a. For radios, multiplexing equipment, antennas, waveguide and
miscellaneous equipment to be provided pursuant to the terms of this Agreement,
this equipment shall be
49
<PAGE>
delivered free and clear of liens and encumbrances to the Texaco Facilities and
shall remain free and clear of all liens and encumbrances for the life of this
Agreement. PathNet may secure payment to the manufacturer for the radios from
revenues PathNet may receive pursuant to the terms of this Agreement. This
Agreement itself will become the radio manufacturer's collateral. In the event
any cash deposits are required for equipment to be ordered, PathNet shall either
furnish proof of payment of such deposit or, pursuant to the terms of the escrow
agreement, place in an interest bearing escrow account the amount of any deposit
required by a manufacturer as a precondition to the manufacturer's acceptance of
a purchase order from PathNet. In accordance with the terms of the escrow
agreement and in the absence of default by PathNet of its payment
responsibilities, any interest earned on funds placed in an escrow account shall
be PathNet's property.
b. To assure performance of the installation services to be provided
by PathNet, pursuant to the terms of an escrow agreement to be entered into
between Texaco and PathNet, PathNet shall deposit funds in an interest-bearing
escrow account within sixty (60) days of execution of this Agreement. The
amount deposited shall be equal to the cost of design and installation work, as
estimated by PathNet and agreed to by Texaco.
5.2.2 DEFAULT BY PATHNET. In the event that PathNet defaults on or
fails to timely meet its payment responsibilities in connection with the
equipment or installation of the Initial System within sixty (60) days of such
default event, the assurances, escrow agreement, and/or letter of credit shall
provide that Texaco would be disbursed funds in appropriate amounts, and any
interest earned on such funds.
5.2.3 TERMINATION OF ASSURANCES. The requirement for the assurances,
escrow, and/or letter of credit shall end with the formal commissioning of the
Initial System.
50
<PAGE>
5.2.4 INSURANCE. During all phases of the Project, PathNet shall
purchase and maintain adequate insurance against loss or theft during the
installation period and PathNet shall bear the risk of such loss or theft and
such other insurance, as set forth on Schedule N.
5.2.5 INSURANCE REQUIRED OF TEXACO. Texaco hereby represents that it
is self-insured and does not currently purchase and maintain liability insurance
and property insurance, except for stop-loss coverage.
5.2.6 PAYMENT SCHEDULE. The payment schedule for all radio and other
equipment to be purchased in connection with the Initial Build-Out or for any
and all Capacity Expansion is set forth on SCHEDULE H -- PAYMENT SCHEDULE,
attached hereto. This schedule includes commercial terms for payment of net
thirty (30) days and interest at 1% per month on outstanding balances. Any
departures from the payment schedule made by either party must be promptly
brought to the attention of the other party.
5.3 JOINT AND MUTUAL CONFIDENTIALITY PROVISION
PathNet and Texaco have entered into a Non-Disclosure Agreement, attached
hereto as Schedule W, which permits for joint and mutual confidentiality, in
connection with the program and project to be undertaken. This Non-Disclosure
Agreement, which shall govern the responsibilities of the parties to each other
in connection with the disclosure of information, is made a part of this
Agreement. Texaco shall be permitted to distribute the results of any
performance tests to other Texaco units. PathNet, in its sole discretion, may
elect to distribute these results to other companies who allow PathNet to use
their microwave infrastructure to create and market Expansion Capacity from
their systems and the System at Texaco's Facilities. The results of any
performance tests may be made available by PathNet to its customers.
51
<PAGE>
5.4 REMEDIES FOR BREACH
5.4.1 NOTICE OF BREACH. All events of breach or disputes by either
PathNet or Texaco shall necessitate a written notice of breach to be delivered
by certified mail to the principal office of the other party. Each notice of
breach shall include specific allegations of breach.
5.4.2 CURE OF BREACH BY PATHNET OR TEXACO. The party receiving a
notice of breach shall have thirty (30) days to cure the breach. In the event
the breach is not cured, the dispute resolution procedures of this Agreement may
be invoked.
5.4.3 NO TERMINATION RIGHTS. Neither Texaco nor PathNet unilaterally
has the right to terminate this Agreement or otherwise alter the relationship of
the parties hereto, except as noted in Section 2.1.2. The only remedies
available to a party for breach are those set forth in Schedule L of this
Agreement.
5.4.4 SURVIVAL. All representations, warranties, covenants, conditions
and agreements contained herein which either are expressed as surviving the
expiration or termination of this contract or, by their nature, are to be
performed or observed, in whole or in part, after the termination or expiration
of this contract, including (without limitation) the warranty and indemnity
provisions, shall survive the termination or expiration of this contract. Any
accrued rights to payment and any remedies for breach of this Agreement shall
survive termination.
5.5 USAGE
The usage herein of singular terms shall include the plural and use of the
masculine, feminine or neuter genders shall include all others.
52
<PAGE>
5.6 WAIVER
PathNet or Texaco's failure to object to any statement, invoice, billing or
distribution by any party within a period of four (4) years after receipt
thereof shall constitute that party's acquiescence with respect thereto and
shall render such statement, invoice, billing or distribution and deemed
accepted. Any other waivers to any term or condition of this Agreement must be
executed by the parties in writing.
5.7 FORCE MAJEURE EVENT
Neither party hereto shall be responsible for any failure to perform its
obligations (other than an obligation to pay money) under this Agreement if such
failure is caused by acts of God, war, strikes, revolutions, lack or failure of
transportation facilities, laws or governmental regulations or other causes
which are beyond the reasonable control of such party ("Force Majeure Event").
Obligations hereunder, however, shall in no event be excused, but shall be
suspended only until the cessation of any cause of such Force Majeure Event. If
such Force Majeure Event should obstruct performance of this Agreement for more
than six (6) months, the parties hereto shall consult with each other to
determine whether this Agreement should be modified. The party facing a Force
Majeure Event shall use its best endeavors in order to remedy that situation, as
well as to minimize its effects. A party suspending performance due to a Force
Majeure event shall notify the other party in writing within five (5) days after
such suspension commences. If either party hereto shall be delayed or hindered
in, or prevented from the performance of any act required hereunder by Force
Majeure Event, then the period for the performance of any such act shall be
extended for a period equivalent to the period of such delay.
53
<PAGE>
5.8 EXTENT AND MODIFICATION OF AGREEMENT EXTENT AND MODIFICATION OF AGREEMENT
This Agreement, the Schedules A through X and other documents incorporated
herein by reference, represent the entire agreement between Texaco and PathNet
and supersede all prior negotiations, representations or agreements, either
written or oral. This Agreement may be amended only by written instrument
signed by both Texaco and PathNet. Unless otherwise specified, any
inconsistency between the contents of a document incorporated by reference and
made a part of this Agreement and the terms of this Agreement shall be resolved
in favor of the terms of this Agreement.
5.9 INDEPENDENT INVESTIGATION
The parties acknowledge that they have independently investigated the
potential for the success of PathNet's ability to create, aggregate and sell
Excess Capacity and have not relied upon any inducements or representations of
the other party or its agents, other than those contained in this Agreement.
5.10 NO DISCRIMINATION
It is intended that both parties intend to subscribe or offer to all
customers, employees, licensees, and invitees the opportunity to obtain all the
goods, services, accommodations, advantages, facilities and privileges without
discrimination because of race, creed, color, sex, age, national origin or
ancestry, in accordance with the EEO Statement attached hereto as Schedule P,
and all federal, state, and local laws.
5.11 NOTICES
All notices pertaining to disputes arising from this Agreement shall be
directed to a corporate entity or employee designated by the signators as having
full rights and responsibilities to address such issues. Notices under this
Agreement shall be sufficient only if personally
54
<PAGE>
delivered by a commercial prepaid delivery or courier service, or mailed by
certified or registered mail, return receipt requested, to a party at its
address set forth in the signature block below, or as amended by notice,
pursuant to this subsection. If not received sooner, notice by mail shall be
deemed received five (5) days after deposit with the courier or in the U.S.
mail. All notices shall be delivered as follows:
If to PathNet:
Michael A. Lubin, Esquire
Vice President and General Counsel
PathNet, Inc.
6715 Kenilworth Avenue, Suite 200
Riverdale, Maryland 20737
If to Texaco:
Mr. H. Dave Hunt
Manager of Telecommunications
Texaco Pipeline Inc.
1670 Broadway
Denver, Colorado 80202-4899
5.12 UNENFORCEABILITY
In the event that any provision of this Agreement shall be determined to be
illegal or unenforceable, that provision will be limited or eliminated to the
minimum extent necessary so that this Agreement shall otherwise remain in full
force and effect and enforceable.
5.13 COST AND FEES
In any action or proceeding to enforce rights under this Agreement, the
prevailing party shall be entitled to recover reasonable costs and reasonable
attorney's fees.
55
<PAGE>
5.14 HEADINGS
Headings herein are for convenience or reference only and shall in no way
affect interpretation of the Agreement.
5.15 INCIDENTAL AND CONSEQUENTIAL DAMAGES
NEITHER PARTY WILL BE LIABLE UNDER ANY CONTRACT, NEGLIGENCE, STRICT
LIABILITY OR OTHER THEORY FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES WITH
RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT.
5.16 WARRANTY AND DISCLAIMER
PathNet warrants: (i) that the work under this Agreement will be performed
in a workmanlike manner, and (ii) that it has and will obtain agreements with
and promptly pay its employees and contractors sufficiently to allow it to
provide Texaco with the services contemplated by this Agreement. OTHERWISE,
EXCEPT AS EXPRESSLY PROVIDED HEREIN, PATHNET AND TEXACO MAKE NO WARRANTY WITH
RESPECT TO ANY TECHNOLOGY, GOODS, SERVICES, RIGHTS OR OTHER SUBJECT MATTER OF
THIS AGREEMENT AND HEREBY DISCLAIMS WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE WITH RESPECT TO ANY AND ALL OF THE FOREGOING.
5.17 INDEMNITY AND LIMITATIONS OF OBLIGATIONS AND LIABILITY
The parties agree to limit their respective obligations and
liabilities as set forth in SCHEDULE X -- INDEMNITY AND LIMITATIONS OF
OBLIGATIONS AND LIABILITY, which like any other Schedule attached hereto is an
integral part of this Agreement.
56
<PAGE>
5.18 AMENDMENT AND WAIVER
Except as otherwise expressly provided herein, any provision of this
Agreement may be waived (either generally or in any particular instance, and
either retroactively or prospectively) only with the written consent of the
parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
caused this Agreement to be executed by a duly authorized officer, as of the
date first written above.
WITNESS: PATHNET, INC.
/s/ Richard A. Jalkut 6/2/97 By: /s/ Dave Schaeffer
- ----------------------------- -----------------------------
Name: Dave Schaeffer
Title: President
WITNESS: TEXACO PIPELINE INC.
/s/ H D Hunt 5/21/97 By: A. A. Nicoletti
- ------------------------------ -----------------------------
Name:_______________________
Title: President
/s/ H D Hunt
FORM APPROVED
BLM
--------------
57
<PAGE>
SCHEDULE A
GLOSSARY
1 x 1 A microwave radio configuration consisting of a primary
and a standby radio.
6 GHz Licenses: 6 GHz licenses may be obtained either under FCC Part 21
or Part 94 regulations. The 6 GHz license may be
obtained in either 10 MHz spectrum bandwidth or 30 MHz
spectrum band width.
Affiliate: An entity directly or indirectly controlling, controlled
by or under common control with that party; provided
that such entity shall be considered an Affiliate only
for the time during which such control exists.
Agreement: The Agreement to create and manage a high capacity
telecommunications system, to which this Schedule A
is attached.
Arbitration: Arbitration as described in Article 16.
Build-Out Period The period of time during which the System is installed
between final design approval and final testing and
acceptance.
Capacity Expansion The increase in telecommunication channels a System is
able to transmit, receive and transport above those
created by the installation of the Initial System,
achieved by an addition to or change in equipment.
Commissioning/ The date on which the proposed System is fully
Commissioned: operational, has undergone site acceptance testing and
circuits are available for service.
Company: Participants agent, designated by participant. Company
coordinates the activities of the consultants,
contractors, subcontractors, engineers, and all aspects
of the transition management project which is the
subject of this Agreement.
1
<PAGE>
Contractor: PathNet, Inc., a Delaware corporation, which is
responsible for the execution of the work described
in this Agreement and contracted by participant.
Disclosing Party: A party hereto that discloses its Proprietary
Information to the other party.
DS-0: A 64-Kilobyte per second channel equivalent to a
single voice or data channel.
DS-1: 24 DS-0's.
DS-3: 672 DS-0's.
Drop and Insert: The characteristic and ability of telephone circuits
to be readily added at intermediate points along a
network.
Engineer: The person, firm, or corporation that may prepare any
and all drawings and specifications.
Excess Capacity: The telecommunications channels that a System is able to
create, transport and receive, less those allocated by
PathNet as a lease payment to Texaco.
ET: Emerging technologies including new uses of spectrum
between 1850 MHz - 2200 MHz.
FAA: Federal Aviation Administration.
Facilities: Texaco's towers, buildings and sites used for the
purpose of operating a microwave communications system
listed on Schedule B to this Agreement.
FCC: Federal Communications Commission.
FCC Auction: The process under which the FCC is going to allocate
broad band PCS licenses in a given market.
FCC Part 94: Private carrier regulations for fixed point-to-point
microwave transmissions. These transmissions may not be
resold on a common carrier basis.
FCC Part 21/101: Common carrier regulations for fixed point-to-point
microwave transmissions allowing for the sale of
capacity to other common carriers or allowing for the
sale of capacity to other common carriers or end users.
2
<PAGE>
Frequency Diversity: A method of ensuring continuous transmission services
by using multiple frequencies to protect against any
degradation of signal in a given path.
GPS: Global positioning satellite.
Initial Build-Out The period of time during which the installation of a
1 x 1 or larger System is first installed and put into
operation, before an Expansion of Capacity occurs.
Initial System: A System with a 1 x 1 configuration that is installed
at the Facilities.
Initial Term: The first five (5) years of the relationship of
Texaco and PathNet following commissioning.
Interconnection: The point at which a private network is connected to the
publicly switched telephone network (PSTN). It can
include IXC points of presence (POPs), tandem access
points, the central office, internet service providers
or major industrial customer points of presence.
Interconnection can be microwave or other media.
IXC: An Inter-exchange carrier. An IXC is an FCC licensed
common carrier which purchases telephone capacity and
resells that capacity to an end-user. (AT&T, MCI,
Sprint, LCI and Frontier are examples of leading
IXC's).
LATA: A geographic area defined by the FCC as a Local
Access and Transport Area.
Maintenance: The ongoing repair and prevention of repair of all
equipment necessary for the system to operate including
towers, antenna, radio, waveguides, combiners, and any
other software or hardware necessary for the intended
equipment to operate at its rated performance level.
Marketable Route: The route between two geographic points on a
telecommunications network for which PathNet agrees
to provide capacity to a third party.
3
<PAGE>
New Customer: A Customer to whom PathNet has not previously sold
telecommunications capacity who is purchasing or has
agreed to purchase Excess Capacity derived from a
System.
Net Sales: Revenues actually received, obtained, or retained from
the sale of long-distance telecommunications excess
capacity, use or other disposition of such capacity for
participant on a per path mile basis, less sales, use
and excise taxes and reasonable costs incurred in
earning revenues.
Order Wire: A service channel consisting of a 64 kb/sec circuit
between sites.
Participant: A licensee currently operating a 2 GHz and/or 6 GHz,
point-to-point, microwave system with a primary license
from the FCC and authorized to operate in the affected
bands before January 6, 1992. This would include Texaco
Pipeline Inc.
Path: The physical spatial separation between point-to-point
towers, housing and microwave antenna.
PathNet PathNet, Inc.
PCN: Prior Coordination Notice.
POP: Point of presence. A physical location where two
disjoint networks connect.
Pre-Commissioned: The date on which an Initial digital System is fully
operational and awaiting cutover of Texaco's existing
channels.
Protection An engineering plan under which channel capacity is
Configuration: protected either on a fully redundant basis or a 1 by n
protection basis in which frequency diverse licenses
will be used to protect n number of other licenses.
PSTN: Publicly Switched Telephone Network.
Rack: The vertical enclosure placed in equipment shelters
that houses electronic equipment. A rack is
approximately 23 inches in width, seven and a half
feet in length and two feet in depth.
4
<PAGE>
Receiving Party: A party hereto that receives Proprietary Information
of the other party.
Segment: The portion of a microwave communications network
existing between two geographic points. For purposes
of this Agreement, Segment I is the portion of
Texaco's microwave communications network between
Houston and New Orleans, set forth in Schedule B of
this Agreement. If additional segments are developed,
they will be sequentially numbered and added as an
amendment to Schedule B.
Site: A physical location on which a tower or other structure
is located which houses both microwave antenna, radios
and combing equipment.
SONET: Synchronous Optical Network
Spatial Diversity: The use of multiple antennas to ensure a continuous
transmission path.
Subcontractor: Without limitation, any firm, corporation, or person
working directly or indirectly for the company that
furnishes or performs a portion of the work, labor or
material, according to the transition plan, drawings
and/or specifications.
Switch Section: A System configuration consisting of two back to back
radio terminals and all intermediate repeater sites.
System: High capacity digital SONET microwave radio equipment (6
Hz/30 MHz antenna, waveguide, components, Facilities and
FCC licenses, installed and assembled capable of
transmitting, receiving and transporting
telecommunications signals over the Segment.
TDMA: Time Division Multiplexed Access. A method of
partitioning digital transmissions into unique time
coded frames.
Technology: Inventions (whether or not patentable), ideas,
processes, formulas and know-how executed or utilized by
Transition Manager and/or participant, used by it as of
the date of this Agreement, or hereafter during such
5
<PAGE>
portion of the term of this Agreement as Transition
Manager is required to provide services related to
Technology to participant.
Texaco: Texaco Pipeline Inc.
Texaco Budgeted Funds: Texaco's commitment of its capital equal to $1,076,000
from which Texaco shall pay for site and tower upgrades,
related equipment and services to prepare its sites for
receipt of radio.
Texaco Contingency An additional $234,000 budgeted by Texaco as a cap on
Funds: the costs it shall incur to prepare the sites for the
receipt of the equipment that PathNet shall provide
pursuant to the terms of this Agreement. In the event
that the Texaco Budgeted Funds are insufficient to
prepare the sites for the receipt of the supplied radio
equipment and services for installation of the System,
Texaco shall use the Texaco Contingency Fund of
$234,000, as needed, to meet its obligations under this
Agreement.
Transition Phase: The state of transition management for participant
microwave licensees migrating from 2 GHz to 6 GHz or
alternative media that sequentially follows the
system evaluation in the pretransition state. This
phase includes the negotiations, removal and
replacement of existing equipment, construction and
engineering through cutover at all participant
facilities to that point in time when the new
replacement system is substantially complete and
operational.
Wayside Channel(s) Additional telecommunications capacity beyond the OC-3
allocation and SONET overhead bitstream.
6
<PAGE>
SCHEDULE B
THE TEXACO SYSTEM
Texaco Segment I extends from T. Heritage Plaza, Texas, to New Orleans,
Louisiana with Facilities at the locations listed below.
TEXACO SEGMENT I
HOUSTON - NEW ORLEANS
FACILITY NAME LATITUDE LONGITUDE
*T. Heritage Plaza 29 45 30 95 22 14
Humble 30 0 29 95 12 46
Liberty 30 2 38 94 47 37
Sour Lake 30 8 58 94 24 47
Vidor 30 6 4 94 0 15
Toomey 30 8 19 93 38 40
Sulphur Station 30 7 24 93 24 10
Holmwood 30 7 13 93 4 14
Lake Arthur 30 4 18 92 43 39
Kaplan 30 2 0 92 20 43
Erath 29 53 52 92 4 21
New Iberia 30 1 19 91 49 17
Julien 29 50 48 91 39 5
Horseshoe Bayou 29 33 33 91 31 30
Morgan City 29 41 19 91 10 22
Thibodaux 29 52 5 90 50 10
Paradis 29 51 27 90 27 9
Harvey 29 53 44 90 4 49
*New Orleans (Poydras Building) 29 56 53 90 4 5
*The two end point sites, Houston and Poydras may change as existing
leases with options may or may not be consistent with the term of this
Agreement. In the event that the lease on an end point terminates before the
term of this Agreement, the parties would mutually agree upon a new end point
location.
1
<PAGE>
SCHEDULE C
VALUATION SCHEDULE OF CAPITAL
INVESTMENTS TO BE MADE BY TEXACO
[***] in the form of Facilities' upgrades, including tower analyses and
strengthening where applicable, also known as Texaco Budgeted Funds. If an
additional capital investment is required to conform to the
EIA/TIA-222-F-1991, Structural Standards for Steel Antenna Towers and Antenna
Supporting Structures, 1996, tower specifications, tower repair and other
unforeseen site upgrade costs for installation of the radio system, Texaco
shall invest up to [***] of additional capital for such purposes, also known
as Texaco Contingency Funds. Texaco's maximum capital expenditures for site
improvements is limited to [***]. Any costs for required site improvements,
that would cause Texaco's site improvement budget to exceed [***], shall be
borne and paid for by PathNet.
1
<PAGE>
Texaco Schedule D : DS-1 Channel Plan
[CHART DEPICTING CHANNEL PLAN]
[* * *]
Page 1 of 4
<PAGE>
Texaco Schedule D : DS-1 Channel Plan
[CHART DEPICTING CHANNEL PLAN]
[* * *]
Page 2 of 4
<PAGE>
Texaco Schedule D : DS-1 Channel Plan
[CHART DEPICTING CHANNEL PLAN]
[* * *]
Page 3 of 4
<PAGE>
Texaco Schedule D : DS-1 Channel Plan
[CHART DEPICTING CHANNEL PLAN]
[* * *]
Page 4 of 4
<PAGE>
SCHEDULE E
OWNERSHIP OF RADIOS, SHELTERS,
SYSTEM COMPONENTS AND RELATED EQUIPMENT
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Owned Maintained Date
Subsystem Vendor P.O. # Project # Description By By Installed
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Shelter [***]
- -----------------------------------------------------------------------------------------------
Tower [***]
- -----------------------------------------------------------------------------------------------
D.C. Power System [***]
- -----------------------------------------------------------------------------------------------
Generators [***]
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
M/W Antennas [***]
- -----------------------------------------------------------------------------------------------
Waveguide [***]
- -----------------------------------------------------------------------------------------------
Radio Equipment [***]
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Mux Bay Misc. [***]
Equipment
- -----------------------------------------------------------------------------------------------
0C3 Multiplex [***]
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
1/O DXC Multiplex [***]
- -----------------------------------------------------------------------------------------------
D/I Multiplex [***]
- -----------------------------------------------------------------------------------------------
Other Multiplex [***]
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Misc. Bay [***]
- -----------------------------------------------------------------------------------------------
Misc. Bay [***]
Equipment
- -----------------------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
SCHEDULE F
PROJECT MANAGEMENT PLAN
AND PRELIMINARY SCHEDULES
[Attached]
1
<PAGE>
Texaco - SCHEDULE F
[GANTT CHART OF SCHEDULE]
<PAGE>
[GANTT CHART OF SCHEDULE]
<PAGE>
[GANTT CHART OF SCHEDULE]
<PAGE>
[GANTT CHART OF SCHEDULE]
<PAGE>
[GANTT CHART OF SCHEDULE]
<PAGE>
[GANTT CHART OF SCHEDULE]
<PAGE>
[GANTT CHART OF SCHEDULE]
<PAGE>
[GANTT CHART OF SCHEDULE]
<PAGE>
[GANTT CHART OF SCHEDULE]
<PAGE>
[GANTT CHART OF SCHEDULE]
<PAGE>
SCHEDULE G
MULTIPLEXING CONCEPTS
Texaco and PathNet shall jointly determine how Texaco's multiplexing needs
will be met, which shall be set forth below.
OC-3 MULTIPLEX EQUIPMENT
Site Name OC-3 Multiplex DS-1's Wired DS-1's Equipped
T. Heritage Plaza IMT-150 Terminal [***]
Humble IMT150 ADM [***]
Liberty
Sour Lake
Vidor IMT150 ADM [***]
Toomey
Sulphur Station
Holmwood IMT150 ADM [***]
Lake Arthur
Kaplan
Erath IMT150 ADM [***]
New Iberia IMT150 ADM [***]
Julien
1
<PAGE>
OC-3 MULTIPLEX EQUIPMENT (Con'd)
Site Name OC-3 Multiplex DS-1's Wired DS-1's Equipped
Horseshoe Bayou IMT150 ADM [***]
Morgan City IMT150 ADM [***]
Thibodaux IMT150 ADM [***]
Paradis IMT150 ADM [***]
Harvey IMT150 ADM [***]
New Orleans IMT150 Terminal [***]
2
<PAGE>
SCHEDULE H
PAYMENT SCHEDULE
GROSS NUMBER TOTAL DOLLARS PATHNET TEXACO
OF DS-0's RECEIVED REVENUES REVENUES
- ------------ ------------- -------- --------
1
<PAGE>
SCHEDULE I
[PURPOSELY LEFT BLANK]
1
<PAGE>
SCHEDULE J
EXCESS TELECOMMUNICATIONS CAPACITY SOLD AND PAID FOR
NUMBER
OF DS-O
PATH START DATE END DATE PRICE UNITS TOTAL
- ---- ---------- -------- ----- ------- -----
1
<PAGE>
SCHEDULE K
ANTENNA SPECIFICATIONS AND FREQUENCIES
Every high performance antenna will be fitted with a radome.
Antenna Type/Size Fa Max Fs Max Mt Max
lb lb lb-ft
PL8(w/Radome) 1736 1068 3714
PL8 (No Radome) 3456 943 3945
UHX8 2537 1257 3615
PL10 (w/Radome) 2712 1669 6883
PL10 (No Radome) 5400 1474 7084
UHX10 3964 1964 6365
PL12(w/Radome) 3905 2403 11581
PL12(No Radome) 7775 2122 11728
UHX12 5708 2827 10423
Loads listed are for 125 mph winds at the most critical angle.
Fa Load parallel to antenna axis
Fs Load perpendicular to antenna axis
Mt Moment about pipe mount
Reference: Page 99 of Andrew Catalog 36
1
<PAGE>
TEXACO
ANTENNA SUMMARY
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Site Name West East Future PN
Spur
- ------------------------------------------------------------------------------------------------------------------------------------
Qty Model Elev. Az. Frequencies Qty Model Elev. Az. Frequencies Qty Model
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
T. Heritage 2 UHX8-59H 742 742 28.8 6256.54H 1 UHX6-59J
P1aza --------
6315.84H
- ------------------------------------------------------------------------------------------------------------------------------------
Humb1e 2 UHX8-59H 180 110 208.9 5945.20V 2 UHX10-59J 236 196 84.3 5945.20V 2 UHX8-59H
-------- --------
6004.50V 6004.50V
- ------------------------------------------------------------------------------------------------------------------------------------
Liberty 2 UHX10-59J 356 316 264.5 6226.89V 2 UHX10-59J 356 316 72.2 6197.24H
-------- --------
6286.19V 6256.54H
- ------------------------------------------------------------------------------------------------------------------------------------
Sour Lake 2 UHX10-59J 306 266 252.4 5945.20H 2 UHX10-59J 306 266 97.6 5945.20H 2 UHX6-59J
-------- --------
6004.50H 6004.50H
- ------------------------------------------------------------------------------------------------------------------------------------
Vidor 2 UHX10-59J 236 196 277.8 6197.24H 2 UHX10-59J 237 197 83.1 5974.85V 1 UHX6-59J
-------- --------
6256.54H 6034.15V
- ------------------------------------------------------------------------------------------------------------------------------------
Toomey 2 UHX8-59H 236 196 263.3 6226.89V 2 UHX8-59H 237 197 94.1 6197.24V
-------- --------
6286.19V 6256.54V
- ------------------------------------------------------------------------------------------------------------------------------------
Sulphur Station 2 UHX8-59H 177 137 274.2 5945.20H 2 UHX8-59H 176 136 90.5 5945.20V
-------- --------
6004.50H 6004.50V
- ------------------------------------------------------------------------------------------------------------------------------------
Holmwood 2 UHX8-59H 257 217 270.7 6197.24H 2 UHX8-59H 257 217 99.2 6226.89V 1 UHX6-59J
-------- --------
6256.54H 6286.19V
- ------------------------------------------------------------------------------------------------------------------------------------
Lake Arthur 2 UHX10-59J 186 146 279.3 5974.85H 2 UHX10-59J 186 146 96.5 5974.85V
-------- --------
6034.15H 6034.15V
- ------------------------------------------------------------------------------------------------------------------------------------
Kaplan 2 UHX10-59J 286 246 276.7 6226.89H 2 UHX10-59J 287 247 119.6 6197.24V
-------- --------
6286.19H 6256.54V
- ------------------------------------------------------------------------------------------------------------------------------------
Erath 2 UHX8-59H 207 167 299.8 5945.20V 2 UHX8-59H 207 167 60.3 5974.85V
-------- --------
6004.50V 6034.15V
- ------------------------------------------------------------------------------------------------------------------------------------
New Iberia 2 UHX8-59H 230 190 240.5 6226.89V 2 UHX8-59H 230 190 139.8 6197.24V 1 UHX6-59J
-------- --------
6286.19V 6256.54V
- ------------------------------------------------------------------------------------------------------------------------------------
Julien 2 UHX8-59H 167 127 319.9 5945.20V 2 UHX8-59H 167 127 159.0 5974.85H
-------- --------
6004.50V 6034.15H
- ------------------------------------------------------------------------------------------------------------------------------------
Horseshoe Bayou 2 UHX10-59J 317 277 339.0 6226.89H 2 UHX10-59J 317 277 67.1 6197.24V
-------- --------
6286.19H 6256.54V
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan City 2 UHX10-59J 186 146 247.3 5945.20V 2 UHX10-59J 5974.85V
-------- --------
6004.50V 6034.15V
- ------------------------------------------------------------------------------------------------------------------------------------
Thibodaux 2 UHX10-59J 6226.89V 2 UHX10-59J 6226.89V 2 UHX10-59J
-------- --------
6286.19V 6286.19V
- ------------------------------------------------------------------------------------------------------------------------------------
Paradis 2 UHX10-59J 5974.85V 2 UHX10-59J 295 255 83.2 5945.20V
-------- --------
6034.15V 6004.50V
- ------------------------------------------------------------------------------------------------------------------------------------
Harvey 2 UHX10-59J 176 136 263.4 6197.24V 1 6' 11 GHz 1 6 11 GHz
-------- (TBD) (TBD)
6256.54V
- ------------------------------------------------------------------------------------------------------------------------------------
New Orleans 1 6' 11 GHz
(TBD)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
SCHEDULE L
DISPUTE RESOLUTION/ARBITRATION PROVISIONS
I. SCOPE
Any and all disputes and controversies between Texaco and PathNet
concerning the negotiation, interpretation, performance, breach or
termination of this Agreement shall be attempted to be resolved first
through amicable settlement discussions. Each party shall bear its own
costs for settlement discussions. Failing resolution of the dispute or
controversy within thirty (30) days after a letter from a party to this
Agreement requests initiation of settlement discussions, either party may
refer the matter for final resolution by binding arbitration in accordance
with the Center for Public Resources' Rules for Non-Administered
Arbitration of Business Disputes (the "Center") which are hereby adopted
and hereinafter referred to as the "Rules." The arbitration process shall
be binding on the parties and the arbitration is intended to be a final
resolution of the dispute(s) between the parties to the same extent as a
final judgment of a court of competent jurisdiction. Judgment upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. All parties covenant that they shall not resort to
any court for legal remedies concerning any matter which is subject to
arbitration hereunder, except to enforce a final decision by the
arbitrators or for preliminary, interim or provisional equitable relief.
The arbitration clause is not intended to preclude a party from seeking or
obtaining injunctive relief which would be available in the absence of the
arbitration provision.
II. ARBITRATION PROCESS
A. Notice. If the parties cannot resolve a dispute to their mutual
satisfaction, any party to the dispute may deliver to the other party or
parties to the dispute a written notice in accordance with the Rules;
provided, however, the appointment of arbitrators shall be governed by
Section IIB hereof and it shall not be necessary for a claimant to appoint
an arbitrator in its Notice of Arbitration or for a respondent to name an
arbitrator in its Notice of Defense.
B. Site and Arbitration Tribunal. Absent agreement to the contrary of the
parties, the arbitration will be conducted in Washington, D.C., by a panel
of three (3) arbitrators knowledgeable of microwave relocation and
engineering issues. Within thirty (30) days after the filing of the demand
for arbitration, each party must select one (1) arbitrator and the third
(3rd) arbitrator will be selected by agreement of the two (2) arbitrators
selected by the parties. If either party fails to select an arbitrator or
there is no agreement on the selection of the third arbitrator, the Center
will select the arbitrator(s).
1
<PAGE>
C. Transcripts and Evidence. A written transcript of all proceedings and
testimony shall be kept and its costs shall be borne equally by the
parties pending the final award. All documents that a party proposes to
offer in evidence, except for those objected to by an opposing party,
shall be deemed to be self-authenticating.
D. Applicable Law. The arbitrator shall determine the claims of the parties
and render their final award in accordance with the substantive law of the
state of Texas. In the case of particular witnesses not subject to
subpoena at the designated hearing site, hearings may be held at any place
designated by the arbitrators where such witnesses can be compelled to
attend, and, with the consent of all parties, before a single member of
the arbitration tribunal.
E. Sanctions. In addition to any other remedy allowed or specified in or
under the Rules, the failure of a party to comply with any interim,
partial or interlocutory order, after due notice and opportunity to cure
such non-compliance, may be treated by the arbitrators as a default and
all or some of the claims or defenses of the defaulting party may be
stricken and partial or final award entered against such party, or the
arbitrators may impose such lesser sanctions as they deem appropriate.
F. Limitation on Awards. Anything to the contrary notwithstanding,
arbitrators may not award incidental, consequential or punitive damages.
G. Period of Limitations. Should the party claiming a dispute or controversy
not institute binding arbitration within four (4) years after the written
request for settlement discussions to resolve the dispute or controversy,
it shall forever be barred from bringing a claim on the specific subject
matter of the dispute or controversy.
H. Nature of Award. Any arbitration award must be in writing and must contain
findings of fact and conclusions of law upon which the arbitrators relied
in making the decision. The arbitrators shall have the authority to award
only compensatory damages and shall not have authority to award indirect,
consequential, special, exemplary or punitive damages of any nature
whatsoever, the parties hereby waive all rights to and claims for monetary
awards other than compensatory damages. The arbitrators do not have the
authority to order termination of the Agreement. Nothing contained herein
or in the Rules shall be deemed to grant the arbitrators any authority,
power, or right to alter, modify or amend any of the provisions of the
Agreement or this Schedule L.
I. Finality of Award. The award of any arbitration shall be final, conclusive
and binding on the parties. Judgment on an arbitration award may be
entered in a court of competent jurisdiction. The arbitrator shall award
the reasonable cost, including attorneys' fees, to the prevailing party.
III. MISCELLANEOUS PROVISIONS
2
<PAGE>
A. Conflict. In the event of a conflict between this Schedule and (1) the
Agreement or (2) the Rules, the terms of the Agreement shall prevail.
B. Survivability. The provisions of this Schedule shall survive the
termination or expiration of the Agreement.
3
<PAGE>
SCHEDULE M
HAZARDOUS MATERIALS PROVISION
(1) Hazardous Materials. PathNet shall not bring to Texaco facilities,
without the prior written consent of Texaco, or cause or permit, knowingly, or
unknowingly, any Hazardous Material to be brought or remain upon, kept, used,
discharged, leaked or emitted. "Hazardous Material" shall mean any radioactive
substance, material, matter or waste which is or becomes regulated by any
federal, state or local law, ordinance, order, rule, regulation, code or any
other governmental restriction or requirement, and shall include asbestos,
petroleum products as the terms "Hazardous Substance" and "Hazardous Waste" as
defined in the Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA"), as amended 42 U.S.C. Section 9601 et seq., the Resource
Conservation and Recovery Act ("RCRA"), as amended, 42 U.S.C. Section 6901 et
seq. To obtain Texaco's consent, PathNet shall prepare an "Environmental Audit"
for Texaco review. Such Environment Audit shall list: (1) the name(s) of each
Hazardous Material and a Material Safety Data Sheet ("MSDS") as required by the
Occupational Safety and Health Act ("OSHA"); (2) the volume proposed to be used,
stored and/or treated at the Premises (monthly); (3) the purpose of such
Hazardous Material; (4) the proposed on-premises storage location(s); (5) the
name(s) of the proposed off-premises disposal entity; and (6) an emergency
preparedness plan in the event of a release. Additionally, the Environmental
audit shall include copies of all federal, state, and local permits concerning
or related to the proposed use, storage, or treatment of Hazardous Materials at
the Premise. PathNet shall submit a new Environmental Audit whenever it proposes
to use, store, or treat a new Hazardous Material at the Premises or when the
volume of existing Hazardous Materials to be used, stored or treated at the
Premises expands by ten percent (10%) during any thirty (30) day period. If
Texaco in its reasonable judgment find the Environmental Audit acceptable,
Texaco shall deliver to PathNet Texaco's written consent. Notwithstanding such
consent, Texaco may revoke its consent upon: (1) PathNet's failure to remain in
full compliance with applicable environment permits and/or any other
requirements under any federal, state or local law, ordinance, order, rule,
regulation, code or any other government restriction or requirement
1
<PAGE>
(including but not limited to CERCLA, as amended 42 U.S.C. Section 9601 et seq.,
RCRA, as amended, 42 U.S.C. Section 6901 et seq., related to environmental
safety, human health, or employee safety; (2) PathNet's or Texaco's business
operations pose or potentially pose a human health risk to others; or (3)
PathNet expands its use, storage, or treatment of Hazardous Material in a
manner inconsistent with the safe operation of the site. Should Texaco consent
in writing to PathNet bringing, using, storing, or treating any Hazardous
Material in or upon the Premises, PathNet shall strictly obey and adhere to any
and all federal, state or local laws, ordinances, orders, rules, regulations,
codes or any other government restrictions or requirements (including but not
limited to CERCLA, as amended 42 U.S.C. Section 9601 et seq, RCRA, as amended,
42 U.S.C. Section 6901 et seq., which in any way regulates, governs, or impacts
PathNet's possession, use, storage, treatment or disposal of said Hazardous
Material. In addition, PathNet represents and warranties to Texaco that (1)
PathNet shall apply for and remain in compliance with any and all federal,
state, or local permits in regard to Hazardous Materials; (2) PathNet shall
report to applicable governmental authorities any release of reportable
quantities of a hazardous substance(s) as mandated by Section 103(a) of CERCLA;
(3) PathNet, within five (5) days of receipt, shall send to Texaco a copy of any
notice, order, inspection report or other document issued by any government
authorities relevant to PathNet's compliance status with environmental or health
and safety laws; and (4) PathNet shall remove from the Premises all Hazardous
Materials upon termination of this contract.
(2) Disclosure of Environmental Audit. PathNet and Texaco agree to
disclose to each other any documents related to an Environmental Audit or change
order, modification or subsequent study issued in response thereto.
2
<PAGE>
SCHEDULE N
INSURANCE
A. PathNet shall maintain at its sole cost, and shall require any contractors
it may engage to maintain at all times while performing its duties or
services under this Agreement, the insurance coverage set forth below with
companies satisfactory to Texaco with full policy limits applying, but not
less than as stated.
1. Workers' Compensation Insurance as required by laws and regulations
applicable to and covering employees of PathNet engaged in the
performance of the services;
2. Employers' Liability Insurance protecting PathNet against common law
liability in the absence of statutory liability, for employee bodily
injury arising out of the master-servant relationship with a limit
of not less than $1,000,000.
3. Commercial General Liability Insurance including products and
completed operations with limits of not less than $1,000,000 per
occurrence and in the aggregate;
4. Automobile Liability Insurance including non-owned and hired vehicle
coverage with limits of liability of not less than $1,000,000; and
5. Excess Liability Insurance over Automobile Liability, Commercial
General Liability, and Employers' Liability coverages afforded by
the primary policies described above with minimum limits of
$4,000,000 in excess of specified limits.
B. In addition to all other risks for which coverage is provided in Sections
A.1-5, supra, and, the Commercial General Liability Insurance and Excess
Liability Insurance in those sections shall cover the contractual
liability assumed under the provisions set forth in this Agreement.
C. Prior to commencement of the services, a certificate evidencing the
required coverages of this Agreement shall be delivered to Texaco, naming
Texaco and APPLICABLE PARENTS, SUBSIDIARIES, AND AFFILIATES, as additional
insureds under the Commercial General Liability and Excess Liability
Insurance Policies. This certificate shall provide that any change
restricting or reducing coverage or the cancellation of any policies under
which certificates are issued shall not be valid as respects Texaco's
interest therein until Company has received thirty (30) days written
notice of such change or cancellation. Further, the certificate shall
state that the insurance is primary coverage and not concurrent or excess
over other valid insurance which may be available to Texaco. Each Workers'
Compensation policy shall be endorsed to provide waiver of subrogation
1
<PAGE>
rights in favor of Texaco and ALL APPLICABLE PARENTS, SUBSIDIARIES AND
AFFILIATES.
D. Pathnet agrees to comply with all terms of the insurance contracts
referenced in this Schedule I. Failure of Pathnet to keep the required
insurance policies in full force and effect during the term of this
Agreement and during any extensions shall constitute a breach of this
Agreement. Nothing contained in these provisions relating to coverage and
amounts set out herein shall operate as a limitation of PathNet's
liability in tort or contract under the terms of this Agreement. Should
coverage be provided on a claims-made basis, the policy shall include at
least a two (2) year extended reporting period endorsement, and shall not
contain a "prior acts" exclusion.
E. PathNet retains the right to purchase business interruption insurance for
any outage which may occur on its aggregated telecommunications network.
Business interruption insurance is not required of PathNet by Texaco. The
issuance of an insurance policy is not an indication of PathNet's
responsibilities to Texaco during periods of outage.
F. IT IS THE INTENTION OF THE PARTIES THAT THE INSURANCE COVERAGES PROVIDED
BY PATHNET IN FULFILLMENT OF THESE OBLIGATIONS BE AS BROAD AS POSSIBLE. IN
NO EVENT WILL PATHNET ACCEPT ANY POLICY WHICH PROPOSES TO EXCLUDE COVERAGE
SOLELY BECAUSE (1) A CLAIM IS MADE ALLEGING (A) PERSONAL INJURY, DEATH OR
PROPERTY DAMAGE OF PATHNET OR PATHNET EMPLOYEES, SUBCONTRACTORS OR AGENTS,
(B) PERSONAL INJURY, DEATH OR PROPERTY DAMAGE RESULTING FROM THE
NEGLIGENCE OR GROSS NEGLIGENCE OF COMPANY, (C) PERSONAL INJURY, DEATH OR
PROPERTY DAMAGE RESULTING FROM THE SUDDEN OR ACCIDENTAL RELEASE, DISCHARGE
OR DISPERSAL OR CHEMICALS, LIQUIDS, GASSES, WASTE MATERIALS OR POLLUTANTS,
OR (2) THE INDEMNITY PROVISIONS OF THIS AGREEMENT ARE INAPPLICABLE OR
OTHERWISE UNENFORCEABLE.
G. NOTHING CONTAINED IN THESE PROVISIONS RELATING TO COVERAGE AND AMOUNTS
SHALL OPERATE AS A LIMITATION OF PATHNET'S LIABILITY UNDER THE TERMS OF
THIS AGREEMENT.
H. PATHNET SHALL PROVIDE A COPY OF THIS SECTION OF THE AGREEMENT, SECTION
5.17 INDEMNITY AND SCHEDULE X, ATTACHED HERETO, REFERENCING TO AND
CONTAINING THE INDEMNITY PROVISION, TO ITS CARRIER AND REQUIRE THE CARRIER
TO PROVIDE INSURANCE COVERAGE THAT COMPLIES WITH BOTH SECTIONS.
2
<PAGE>
SCHEDULE O
TEXACO MINIMUM NETWORK PERFORMANCE STANDARDS
1. Summary
The purpose of this document is to provide performance specifications for
dedicated DS-1 transmission requirements.
The performance objectives are defined as Errored Seconds (ES), Severely Errored
Seconds (SES), and Error Free Seconds (EFS). Because of the bursty nature of
errors, BER should not be used as a testing criterion. The ES, SES, and the EFS
are the sole criteria for determining system acceptance.
The objectives in this document are not meant as transmission system design
criteria. All systems will be designed for optimum performance based on the
equipment manufacturers stated specifications and good system design practices.
This document is meant as a reference for expected performance and contains
limited testing procedures. These performance objectives are based on CCITT and
Bellcore technical specifications. Actual performance objectives will be
analyzed and statistically compared to CCITT and Bellcore information to verify
expected objectives.
Parameters not mentioned in this document are Frame Loss (OOF), and Sync Loss
event values. The primary rationale is that once they occur, they cause ES/SES
to be recorded. Therefore ES, SES, and LOS are the essential parameters.
Secondly, there are discrepancies between how different devices calculate
certain parameters and what they call them. Since it is possible to have
multiple OOF events in a SES, it becomes difficult to set a value for that
parameter.
2. Availability
The system is designed to meet or exceed the long haul objective of 99.98%
availability on an annual basis for a 4,000 mile system. This results in a one
way system outage of less than 0.39 seconds/mile/year for each and every DS-1.
3. DS-1 Specifications / Performance Measurements
DS-1 Electrical Interface Specifications:
The DS-1 signal at the cross-connect (DSX-1) shall meet the standard DSX-1
cross-connect requirements as specified in section 3.1.
1
<PAGE>
3.1 DSX-1 Interconnection Specifications
Line Rate: 1.544 Mb/s
Tolerance: Source timing for self-timed DS-1 bit streams shall not exceed
plus or minus 32 ppm with respect to the basic rate. DS-l
synch should be capable of accepting a rate deviation of plus
or minus 130 ppm.
Line Code: 1) Bipolar with at least 12.5 percent average ones density and
no more than 15 consecutive zeros.
2) Bipolar with Eight Zero Substitution (B8ZS).
Format: ESF with AT&T 54016 & ANSI T1.403 messages, concurrently.
Test Load: A pure resistive termination of 100 ohms plus or minus 5%
shall be used for evaluation of pulse shape and electrical
parameters.
Pulse Shape: The pulse amplitude shall be between 2.4V and 3.6V measured at
the center of the pulse, and may be scaled by a constant
factor to fit the template. Source of the above information is
ANSI T1.102.
Power Level: For new equipment with an all-ones transmitted pattern, the
power in a band no wider than 3 Khz centered at 772 Khz shall
be between 12.6 and 17.9 dBm.
For older equipment, the power in a band no wider than 3 Khz
centered at 772 Khz may be between 12.4 and 18.0 Dbm.
The power in a band no wider than 3 Khz centered at 1544 Khz
shall be at least 29 db below that at 772 Khz.
3.2 Jitter DS-I & DS-3
The jitter requirements which shall be met at the DS-1 & DS-3 interfaces are
jitter tolerance, jitter transfer, jitter generation, and jitter enhancement.
3.2.1 Jitter Tolerance
Jitter Tolerance is the maximum input jitter that equipment can tolerate without
causing errors. It is specified in terms of the amount of sinusoidal jitter
(peak-to-peak) versus the frequency of that jitter. PathNet DS-3 Requirements
provides the mask as well as the lower limit of the jitter tolerance at each
standard interface level. To meet the jitter tolerance specifications, the
actual tolerance of the equipment must be above the mask and the difference
between this and the lower limit represents the safety margin of the equipment.
3.2.2 Jitter Transfer
2
<PAGE>
Jitter Transfer is the jitter gain measurement, which is the relationship
between the applied input jitter and resulting output jitter as a function of
frequency.
3.2.3 Jitter Generation
Jitter Generation is defined as the process whereby jitter appears at the output
port of an individual unit of digital equipment in the absence of applied input
jitter.
When looped back at the high speed rate, equipment must produce less than 0.3
Unit Interval (UI) of rms timing jitter and less than 1.0 UI of peak-to-peak
timing jitter at the output of the terminal receiver. The measurement interval
must include all frequencies between F1 and F4 of the Network Interface Jitter
Requirement shown in section 3.2.4. This requirement shall apply over the entire
range of permissible input bit-rate offsets.
3.2.4 Jitter Enhancement
The requirement for jitter enhancement is that a system of up to 250 miles in
length adds less than 1.0 UI of peak-to-peak jitter to a DS-3 input signal
having 4.0 UI of sinusoidally modulated peak-to-peak jitter for all frequencies
up to 2300 Hz.
Maximum Permissible Network Output Jitter at any Hierarchical Interface:
- --------------------------------------------------------------------------------
Measurement Filter Bandwidth (Hz)
Network Limit Bandpass filter having a low cut-off
Peak-To-Peak UI frequency F1 or F3 &
Bit Rate Mb/s (Note 1) minimum upper cut-off frequency of F4
- -------------------------------------------------------------------------------
B1 B2
(F1-F4) (F3-F4) F1 F3 F4
- -------------------------------------------------------------------------------
1.544 5 0.1 10Hz 8Khz 40Khz
- -------------------------------------------------------------------------------
3.152 5 0.1 10Hz 1.5Khz 40Khz
- -------------------------------------------------------------------------------
6.312 3 0.1 10Hz 3Khz 60Khz
- -------------------------------------------------------------------------------
44.736 5 0.1 10Hz 30Khz 400Khz
- -------------------------------------------------------------------------------
Notes:
UI = Unit Interval
For 1.544 Mb/s: 1 UI = 648 ns
For 3.152 Mb/s: 1 UI = 317 ns
For 44.736 Mb/s: 1 UI = 22.35 ns
F3; P3, the lower cut-off frequency of one of the bandpass filters, represents
the jitter half-bandwidth of the timing extraction circuits. The frequency F3 is
determined from:
F3 = Fo / 2Q, where F and Q represent the digital signal rate and the Q-factor
of the timing recovery circuit respectively.
3
<PAGE>
3.3 DS-1 Access Performance and Availability Objectives
DS-1 performance and availability objectives for IXC digital transport
facilities are based on mileage bands. All performance data (ES, SES, EFS, etc.)
are the same throughout the given mileage band. The performance objective values
are based on a 24-hour period with the exception of availability, which is an
annual objective. The availability objective is set universally to be 99.99% per
year.
The following data is based on a 24 hour period and measured at DS1:
(ES/86400) x 100 = ES Per Day
Circuit Acceptance Level
================================================================
Route Mileage ES %EFS SES
- ----------------------------------------------------------------
0-500 1 99.9988 0
- ----------------------------------------------------------------
501-1500 1 99.9988 0
- ----------------------------------------------------------------
1501-4000 2 99.9977 0
================================================================
Maintenance Limit
================================================================
Route Mileage ES %EFS SES
- ----------------------------------------------------------------
0-500 5 99.9942 2
- ----------------------------------------------------------------
501-1500 10 99.9884 4
- ----------------------------------------------------------------
1501-4000 15 99.9826 6
================================================================
The DS1 performance objectives are defined by the following parameters:
-> Errored Seconds (ES)
-> Severely Errored Seconds (SES)
4
<PAGE>
4. Testing & Commissioning
Recommended Acceptance Tests for the IMT-150 are divided into local (Rack) and
End-To-End tests.
NEC Recommended Acceptance Tests for the IMT-150:
- -----------------------------------------------------------------
Test Local Test End-To-End Test
- -----------------------------------------------------------------
Output power Voltage X
- -----------------------------------------------------------------
Optical Output Level X
- -----------------------------------------------------------------
Optical Input Level X
- -----------------------------------------------------------------
Optical RX Sensitivity X
- -----------------------------------------------------------------
Bit Error Rate X
- -----------------------------------------------------------------
Automatic Switching X
- -----------------------------------------------------------------
Lockout of Protection X
- -----------------------------------------------------------------
Forced Switching X
- -----------------------------------------------------------------
Manual Switching X
- -----------------------------------------------------------------
Alarm Test X
- -----------------------------------------------------------------
Remote Loopback X
- -----------------------------------------------------------------
4.1 Factory Acceptance Test -- NEC 2000 Digital Radio Equipment
Factory Acceptance Testing will be performed on the system prior to shipment
from Japan. The following table reflects the tests involved during factory
acceptance testing:
- --------------------------------------------------------------------------------
Equipment Test Items Test Equipment
- --------------------------------------------------------------------------------
TX Output Power Power Meter; High Power Sensor
- --------------------------------------------------------------------------------
TX Output Frequency Frequency Counter
- --------------------------------------------------------------------------------
Alarm Reporting Test LCT-2000
- --------------------------------------------------------------------------------
Meter Readings Digital Volt Meter
- --------------------------------------------------------------------------------
ATPC Function (If Equipped) LCT-2000; RF or IF Attenuator
- --------------------------------------------------------------------------------
IF In/Out Level Signal Generator; RF Attenuator; Power
(AGC Dynamic Range) Meter; Power Sensor
- --------------------------------------------------------------------------------
IF Frequency Signal Generator; RF Attenuator;
Frequency Counter
- --------------------------------------------------------------------------------
Noise Figure Noise Meter; Noise Source
- --------------------------------------------------------------------------------
IF Delay Characteristics Microwave Link Analyzer
- --------------------------------------------------------------------------------
XPIC Improvement LCT-2000; SONET or SDH Analyzer;
(If Equipped) Noise Adder; RF Attenuator
- --------------------------------------------------------------------------------
RX Threshold Level (BER Performance) SONET or SDH Analyzer; Noise Adder
- --------------------------------------------------------------------------------
Optical Power Measurement Optical Power Meter; SONET or SDH
Analyzer
- --------------------------------------------------------------------------------
RX Local Oscillator Frequency Frequency Counter
- --------------------------------------------------------------------------------
Signature Curve SONET or SDH Analyzer; Fading
Simulator; RF Attenuator
- --------------------------------------------------------------------------------
IF Amplitude Characteristics Microwave Link Analyzer
- --------------------------------------------------------------------------------
Equipment Test Items Test Equipment
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
IM3 4-Tone Signal Generator; Sprectrum
Analyzer
- --------------------------------------------------------------------------------
Branching Circuit Loss Network Analyzer
- --------------------------------------------------------------------------------
Radio Systems Tests
- --------------------------------------------------------------------------------
BER Measurement (24 Hour Test) SONET or SDH Analyzer; RF Attenuator
4.2 Rack Test
A Rack Test will be performed once the radio cabinet has been installed. The
test results will be kept in the site commissioning book for future reference.
Please refer to the NEC 2000 Series Synchronous Digital Microwave Radio Field
Test Procedure for further details.
4.3 Path Test
A Path Test will be performed after each site has been turned up. The test
results will be kept in the site commissioning book for future reference. Please
refer to the NEC 2000 Series Synchronous Digital Microwave Radio Field Test
Procedure for further details.
4.4 End-To-End Test
An end-to-end test will be performed once all sites have been tuned up. The test
results will be kept in the site commissioning book for future reference. .
Please refer to the NEC 2000 Series Synchronous Digital Microwave Radio Field
Test Procedure and Section 3 of this document for further details.
5. Definitions
The referenced documents have been used as the standard for the following
definitions. Any changes to these parameters will be reflected by changes in the
referenced documents.
Bit Error Rate (BER): BER is the number of bit errors divided by the total
number of bits during the observation period.
Error Free Seconds (EFS): An EFS is any one-second interval which does not
contain a bit error. Usually this term is expressed as percent EFS by taking the
ratio of non-errored to total seconds and multiplying by 100.
Errored Seconds: An ES is any one-second interval during which one or more
bit errors occur.
Burst Seconds: A burst second is any errored second containing at least 100
errors.
Severely Errored Seconds: A SES is any one-second interval during which the Bit
Error Rate is greater than or equal to 1x10(to the power of negative 3) at a
DS-1 rate. This definition applies to all causes of degradation affecting the
channel error performance, including (unprotected) equipment failures and other
factors that contribute to poor performance. (Carrier Group Alarms occur after a
2-second loss of synchronization at the DS-1 level. Affected channels then
remain out of service for approximately 10 seconds.)
Outage: An outage, measured in "Outage Seconds", is declared after the BER in
each second is worse than 10(to the power of negative 3) for a period of 10
consecutive seconds. These 10 seconds are considered to be
6
<PAGE>
unavailable. The unavailable time starts after the first of 10 Severely Errored
Seconds (SESs) occurs, and ends when the first of 10 consecutive non-SESs
occurs.
Availability: Availability refers to that time which the circuit is available,
that it is not experiencing an outage.
Circuit Acceptance Limit: The AL is a value used to define the limits at which
facilities are initially placed in-service. Upon acceptance, the facilities are
transferred to a performance measuring state.
Maintenance Limit: The ML is the threshold at which the performance of the DS-1
circuits dictates that appropriate action be taken to analyze and repair the
degradation source.
6. Reference
American National Standard, T1 .403
American National Standard, T1 .404
American National Standard, T1 .102
AT&T Technical Reference, TR 62415, June 1989
AT&T Technical Reference, 54016, 17, 19, & 19A
Bellcore Technical Reference, TR-TSY-000499
Bellcore Technical Reference, TR-NPL-000335
Bellcore Technical Reference, TA-TSY-000083, 77, 55, & 57
FCC Part 15 & 68
7
<PAGE>
SCHEDULE P
EQUAL EMPLOYMENT OPPORTUNITY POLICY
P.1 Equal Employment Opportunity
PathNet and Texaco agree to comply with the Equal Employment Opportunity
Clause of 41 CFR 60-1.4(b), which is incorporated into this
Agreement by reference.
P.2 Non-Segregated Facilities
a. PathNet and Texaco certify to each other that neither maintains nor
provides for its employees any segregated facilities at any of their
establishments, and that neither permits its employees to perform
their services at any location so maintained. PathNet and Texaco are
not aware of and understand that any breach of the foregoing is a
violation of the Equal Opportunity Clause of Executive Order 11246.
As used in this certification, the term "segregated facilities"
means any waiting rooms, work areas, rest rooms and washrooms,
restaurants and other eating areas, time clocks, locker rooms and
other storage or dressing areas, parking lots, drinking fountains,
recreation or entertainment areas, transportation and housing
facilities provided for employees which are segregated by explicit
directive or are in fact segregated on the basis of race, creed,
color or national origin because of habit, local custom or
otherwise.
b. Each further agrees that (except where it has obtained identical
certifications from proposed subcontractors for specific time
periods) it will obtain identical certifications from proposed
subcontractors prior to the award of subcontracts exceeding $10,000
which are not exempt from the provisions of the Equal Opportunity
Clause, and that it will retain such certifications in its files;
and that it will forward the following notice to such proposed
subcontractors (except where the proposed subcontractors have
submitted identical certifications for specific time periods):
NOTICE TO PROSPECTIVE SUBCONTRACTORS OF REQUIREMENTS FOR
CERTIFICATIONS OF NONSEGREGATED FACILITIES. A Certification of
Nonsegregated Facilities as required by the May 9, 1967, Order
on Elimination of Segregated Facilities, by the Secretary of
Labor (32 Fed. Reg. 7439, May 19, 1967), must be submitted
prior to the award of a subcontract exceeding $10,000 which is
not exempt from the provisions of the Equal Opportunity
Clause. The certification may be submitted either for each
subcontract or for all subcontracts during a period i.e.,
quarterly, semi-annually or
1
<PAGE>
annually). (Note: The penalty for making false statements in
offers is prescribed in 18 U.S.C. 1001.)
P.3 Affirmative Action
a. Compliance Program
PathNet and Texaco certify to each other that each has developed and
is maintaining a written affirmative action compliance program for
each of its establishments in accordance with regulations of the
Secretary of Labor promulgated under Executive Order 11246, as
amended.
b. Veterans
PathNet and Texaco agree to comply with the affirmative action
clause at 41 CFR 60-250.4 and the regulations of 4l CFR 60-250, all
of which are incorporated into this Agreement by reference.
c. Handicapped Workers
PathNet and Texaco agree to comply with the affirmative action
clause at 41 CFR 60-741.4 and the regulations of 4l CFR 60-741, all
of which are incorporated into this Agreement by reference.
P.4 E.O. 11625 - Minority Business Enterprises
a. It is a policy of the government that minority business enterprises
shall have the maximum practicable opportunity to participate in the
performance of government contracts. Thus, PathNet agrees to use its
best efforts to carry out this policy in the award of its
subcontracts to the fullest extent consistent with the efficient
performance of this Agreement. As used in this Agreement, the term
minority business enterprise" means a business, at least 50 percent
of which is owned by minority group members or, in case of publicly
owned businesses, at least 51 percent of the stock of which is owned
by minority group members. For the purposes of this definition,
minority group members are Black Americans, Hispanic Americans,
Native Americans, Asian Pacific Americans, and Asian Indian
Americans. PathNet may rely on written representations by
subcontractors regarding their status as minority business
enterprises in lieu of an independent investigation.
b. PathNet agrees to establish and conduct a program which will enable
minority business enterprises (as defined in the clause entitled
"Utilization of Minority Business Enterprises") to be considered
fairly as subcontracts and suppliers under this Agreement. In this
connection, PathNet shall:
2
<PAGE>
(i) Designate a liaison officer who will administer PathNet's
minority business enterprises program.
(ii) Provide adequate and timely consideration of the
potentialities of known minority business enterprises in all
"make-or-buy" decisions.
(iii) Assure that known minority business enterprises will have an
equitable opportunity to compete for subcontracts,
particularly by arranging solicitations, time for the
preparation of bids, quantities, specifications and delivery
schedules so as to facilitate the participation of minority
business enterprises.
(iv) Maintain records showing (1) procedures which have been
adopted to comply with the policies set forth in this clause,
including the establishment of a source list of minority
business enterprises, (2) awards to minority business
enterprises on the source list and (3) specific efforts to
identify and award contracts to minority business enterprises.
(v) Include the Utilization of Minority Business Enterprises
clause in subcontracts which offer substantial minority
business enterprises subcontracting opportunities.
(vi) Cooperate with the contracting officer in any studies and
surveys of PathNet's minority business enterprises procedures
and practices that the contracting officer may from time to
time conduct.
(vii) Submit periodic reports of subcontracting to known minority
business enterprises with respect to the records referred to
in subsection (iv) above, in such form and manner and at such
time (not more often than quarterly) as the contracting
officer may prescribe.
c. PathNet further agrees to insert, in any subcontract hereunder which
may exceed $500,000, provisions that shall conform substantially to
the language of this clause, and to notify the contracting officer
of the names of such contractors.
P.5 Railroad Revitalization and Regulatory Reform Act of 1976
PathNet and Texaco agree to comply with the requirements of 49 CFR 265
regarding nondiscrimination in Federally Assisted Railroad Programs." 49
CFR 265 is incorporated into this Agreement by reference.
3
<PAGE>
P.6 Small Business and Small Socially and Economically Disadvantaged
Businesses
a. PathNet and Texaco agree to each use its best efforts to provide
small business concerns and small business concerns owned and
controlled by socially and economically disadvantaged individuals,
as defined in 45 FR 35809, with the maximum practical opportunity to
participate in the performance of subcontracts in accordance with
the regulations promulgated by the Office of Federal Procurement
Policy (OFPP) 45 FR 35809, May 28, 1980, which are incorporated into
this Agreement by reference.
b. PathNet and Texaco agree to comply with the small business and small
socially and economically disadvantaged business subcontracting plan
as set forth in 45 FR 35910, dated May 28, 1980, which are
incorporated into this Agreement by reference.
P.7 Women's Business Enterprise Program
a. PathNet and Texaco agree to each use its best efforts to provide
women-owned businesses, as defined at 45 FR 35815, with the maximum
practical opportunity to participate in the performance of
subcontracts in accordance with the regulations of the Office of
Federal Procurement Policy (OFPP), 45 FR 35814, May 28, 1980, which
are incorporated into this Agreement by reference.
b. PathNet and Texaco agree to comply with the regulations promulgated
by the Office of Federal Procurement Policy (OFPP), 45 FR 35815, May
28, 1980, which are incorporated into this Agreement by reference.
4
<PAGE>
SCHEDULE Q
PATHNET SAFETY MANAGEMENT
Q.1 PathNet acknowledges that it is performing work hereunder solely as an
independent contractor and not as an agent, servant or employee of Texaco.
Subject only to the provisions of this agreement and any facility rules of
conduct applicable to persons on the premises, it is the responsibility of
PathNet to determine the personnel to perform the work hereunder as well
as how and when it should be performed.
Q.2 PathNet shall be responsible for providing its employees with a safe and
healthful workplace and unless otherwise expressly required by law, Texaco
shall not assume responsibility for fulfilling any of PathNet's
obligations to its employees. Without limitation, PathNet shall be
responsible for (1) the safety and health of its employees,
representatives and agents; (2) abatement of conditions or practices which
pose any actual or potential safety or health risk to any of its
employees, representatives or agents; and (3) making decisions concerning
the safety or health of same. Texaco and PathNet agree that PathNet
reserves the right to and will safely discontinue work, at any time,
should it or its employees determine that they are exposed to any safety
or health risk. Such action on the part of PathNet will not constitute a
breach of this agreement.
Q.3 PathNet agrees that it will conduct a survey in order to identify safety
and health hazards, work practices and conditions present at the
location(s) where it intends to perform any services pursuant to this
Agreement. All such surveys will be completed and precautionary steps
taken prior to the commencement of such work.
PathNet certifies that it will communicate these hazards to its employees
and that all employees who may be exposed to these hazards have been
trained to take all necessary measures to assure their safety and health.
PathNet further acknowledges that such hazards could lead to the serious
injury or death of a worker. Because of the nature of these risks, PathNet
agrees that it will use special precautions in limiting or eliminating the
above risks.
PathNet agrees that it may be subject to sanctions imposed by Texaco for
not undertaking all steps necessary to limit or eliminate all risks
occurring during the course and scope of the contracted for work. Such
special sanctions include, but are not limited to, termination of this
Agreement and the reporting of PathNet's practices to its workers'
compensation carrier and to proper legal authorities.
1
<PAGE>
Q.4 PathNet shall work under conditions and pursuant to rules that are at
least as protective of their safety and health as those governing Texaco
employees. Prior to commencing the Services, PathNet shall obtain from
Texaco a copy of such rules in effect at the time and place such Services
are to be performed.
Q.5 PathNet shall be responsible for the safety education of its employees.
Training shall comply with all laws and shall be documented. As a minimum,
the following items shall be included in PathNet training when applicable
to performance of the Services:
a. Supervisor safety training to assure that PathNet management
understands that safety is their first responsibility;
b. Orientation for PathNet employees in contractor safety policies,
safety manuals, first aid, CPR, accident reporting procedures,
safety meeting participation, personal protective equipment,
enforcement procedures, and a review of legal requirements for
training;
c. Emergency procedures training as outlined in 29 CFR 1910,120, as
modified, amended or superseded (HAZWOPER). Training by qualified
instructors is required;
d. Safety meetings and accident prevention programs;
e. Hazard communications training in accordance with 29 CFR 1910.1200,
as modified, amended or superseded, for general industry;
f. Permit systems training to include applications to hot work and
confined space;
g. Lockout/tagout training in accordance with 29 CFR 1910.147, as
modified, amended or superseded;
h. Vehicle safety training;
i. Personal protective equipment training;
j. Training for specific hazards of performance of the Services;
k. Bloodborne pathogens training;
l. Lead hazard training; and
m. Permit required confined spaces training.
2
<PAGE>
Q.6 PathNet shall be responsible for the routine monitoring of its employees,
agents and subcontractors to ensure safe work practices are being
followed.
Q.7 PathNet shall report to Texaco as follows:
a. PathNet shall provide the Texaco site supervisor with an immediate,
verbal report of any accident, injury or OSHA recordable injury or
illness occurring on Texaco premises;
b. By the end of the next business day following the occurrence,
PathNet shall provide Texaco with a copy of PathNet's Employer's
First Report of Occupational Injury or Illness, or a comparable
state form for the reporting of injuries and illnesses occurring at
the work site;
c. PathNet shall provide a written report of any near misses or
incidents that could have resulted in property damage or serious
injury to persons; and
d. PathNet shall provide a written recommendation when a work practice
is identified that may result in property damage or injury to
persons unless a procedural change is made to correct the work
practice.
Q.8 Prior to commencing any Services, PathNet shall obtain from Texaco a copy
of the emergency response plan appropriate to the area to which PathNet's
employees may be assigned and appropriately reflect such plan in PathNet's
health and safety and work plans.
Q.9 PathNet shall submit to Texaco a quarterly PathNet Incident and Work Hours
Report. PathNet shall maintain a record of new PathNet employees, and
documentation of training, occupational injuries, illnesses, and lost work
days versus hours worked, and the number of safety meetings. conducted,
the percentage of PathNet's employees in attendance at such meetings, OSHA
200 Forms and First Aid log. Further, PathNet shall maintain inspection
and certification records regarding certain equipment and machines such
as, but not limited to, fork lifts, cranes, hoists, welding, cutting
machines and man lifts. These records shall also include a summary of
medical or unexcused absences of more than five days (by employee name,
reason for and length of absence). These documents shall be retained for
at least five (5) years and shall be made available for auditing by Texaco
in accordance with the terms and provisions of this Agreement.
Q.10 PathNet shall provide and inspect all personal protective equipment for
its employees. Where PathNet's employees are performing work similar to
Texaco's employees, PathNet's employees shall wear at least equivalently
protective equipment.
3
<PAGE>
SCHEDULE R
SUBSTANCE ABUSE POLICY
R.1 General. PathNet, as a condition of having access to Texaco's premises,
and subject to applicable law, agrees that:
a. PathNet's employees shall be subject to the same rules of employee
conduct relating to substance abuse which are applicable to
employees of Texaco, namely, the following rules which prohibit:
(i) the manufacture, sale, purchase, transfer, use or possession
of illegal drugs, narcotics or other unlawful substances or
materials on Texaco's premises, or while conducting business
for Texaco;
(ii) the manufacture, sale, purchases transfer, use or possession
on Texaco's premises of substances or materials not authorized
by Texaco (such as firearms, weapons, intoxicating beverages,
drug paraphernalia, or medically authorized drugs used
improperly or unsafely); and
(iii) reporting to work or working on Texaco's premises under the
influence of illegal drugs, narcotics, other unlawful
substances, or intoxicating beverages.
b. Any employee of PathNet who has violated any of the rules of
employee conduct in "a." above, shall be removed from Texaco's
premises and shall not be allowed to re-enter such premises without
Texaco's permission.
c. PathNet's employees shall be subject to searches of their persons
and personal effects when entering Texaco's premises, while on
Texaco's premises, and when leaving Texaco's premises. Such searches
shall be conducted by Texaco or by a third party, at Texaco's
direction, without prior announcement and at such times and
locations as Texaco in its sole discretion may determine.
d. Texaco reserves the right to conduct or have conducted unannounced
substance abuse testing of employees of PathNet while they are
performing work on Texaco's premises, to the extent permitted by
applicable law.
e. In addition to any other remedies, Texaco reserves the right to
terminate this Agreement in the event of non-compliance with any of
the provisions as stated in this Exhibit.
1
<PAGE>
f. PathNet shall be responsible for including in any subcontract for
work to be performed on Texaco's premises the requirements and
conditions described in this Schedule so that such requirements and
conditions will be binding upon each of PathNet's subcontractors.
g. PathNet shall be responsible for advising and discussing with any
unions representing PathNet's employees the application to such
employees of the conditions described in this Schedule.
R.2 DOT/RSPA. In addition to the terms and conditions of Section R.1, if
PathNet retained by Texaco to perform services that are regulated by the
U. S. Department of Transportation, Research and Special Programs
Administration ("DOT/RSPA"), PathNet agrees to the following terms and
conditions:
a. PathNet will submit to Texaco a copy of its anti-drug program and
its alcohol misuse prevention program. Texaco will review the plans
and advise PathNet as to whether or not the plans are acceptable or
in need of further additions, deletions, revisions or clarifying
language. The review of the plans will be completed utilizing the
criteria established in the DOT/RSPA inspection forms. Addendums
made to PathNet's plan shall be attached to the previously submitted
plans. Upon approval of the addendum, a letter of acceptance will be
sent by Texaco to PathNet.
b. PathNet is required to provide an anti-drug plan and alcohol misuse
prevention program testing statistical information on a quarterly
basis to Texaco.
R.3 DOT/FHA. In addition to the terms and conditions of Section R.1, if
PathNet is retained by Texaco to perform services that are regulated by
the U. S. Department of Transportation, Federal Highway Administration
("DOT/FHA"), PathNet agrees to the following terms and conditions:
a. PathNet has developed and implemented or has contracted with an
organization that has developed and implemented substance abuse
policies and drug testing procedures in compliance with DOT/FHA
regulations as set forth in 49 CFR Part 382 and 49 CFR Part 40.
b. That upon 48 hours notice, PathNet shall deliver to Texaco a copy of
PathNet's anti-drug plan and alcohol misuse prevention plan and
testing statistical information.
R.4 Safety Sensitive. In addition to the terms and conditions of Section R.1,
if PathNet is retained by Texaco to perform safety sensitive duties while
on Texaco premises, PathNet shall have in effect a comprehensive substance
abuse testing program ("Program") for its employees before commencing
work. In essence, a safety sensitive duty is one that is directly related
to the safe operation or security of a facility or piece of equipment and
2
<PAGE>
which, if not performed properly, could result in a serious safety risk or
environmental hazard to employees, a facility, or the general public. This
Program shall, as a minimum, conform to the Texaco Substance Abuse Program
or to the U. S. Department of Transportation ("DOT") regulations in Title
49, CFR Parts 40, 199 and 382. This Program shall be in accordance with
all applicable laws. The Program must include the following:
a. PathNet will test any employee of PathNet, if in the judgment of
PathNet, there is reasonable suspicion that the employee is using
illegal drugs, unauthorized substances or abusing alcohol.
b. PathNet will test any employee of PathNet, if, in the judgment of
PathNet, there is reasonable suspicion that substance or alcohol
abuse may have been a contributing factor to a job-related injury or
accident or an injury or accident on Texaco's premises.
c. PathNet will test, on an unscheduled and unannounced basis,
employees of PathNet for illegal or unauthorized drugs as long as
such employees have access to Texaco's premises. The frequency of
such testing shall occur at a rate no less than the rate at which
Texaco's employees are tested under the Texaco Substance Abuse
Program (i.e., 12% annually for drugs).
d. PathNet shall, in testing its employees under the circumstances
described in a., b. and c., test for the presence of the following
substances and use the following substances and use the following
screening/confirmation levels:
Cocaine 300/150
Opiates 300/300
Phencyclidine 25/25
Marijuana 50/15
Amphetamines 1000/500
Methadone 300/300
Benzodiazepines 300/300
Barbiturates 300/300
Methaqualone 300/300
e. Texaco management may, in its sole discretion, waive the
requirements and conditions in this Section R.4, if the job duration
is no more than thirty (30) days or if the circumstances so require.
However, the conditions in Section R.1. shall apply regardless of
the duration of the job.
f. If PathNet is subject to DOT regulations and has implemented a drug
testing program consistent with the DOT regulations, or is not
subject to the DOT regulations but has adopted and implemented a
drug testing program which is equivalent to or more stringent than
the DOT testing program, then Texaco may,
3
<PAGE>
in its sole discretion, waive the requirements of Section R.4,
subject to the agreement that PathNet's employees who are assigned
to work on Texaco's premises shall be subject to PathNet's drug and
alcohol testing program.
g. In the event Texaco maintains a smoke-free workplace and does not
permit smoking or the use of any type of smoking material in any of
its facilities or vehicles, PathNet shall abide by these no smoking
rules. PathNet shall also inform its employees, agents and
contractors of such rules.
4
<PAGE>
SCHEDULE S
NETWORK INTERCONNECTIONS SCHEDULE
===================================================
SEGMENT FACILITIES
===================================================
ANT. ANT. ANT.
CODE NAME MODEL HEIGHT AZIM.
- ---------------------------------------------------
HUMBLE MHP6596 237 196.2
- ---------------------------------------------------
HUMBLE MHP6596 197 196.2
- ---------------------------------------------------
VIDOR P8-65C 234 169.8
- ---------------------------------------------------
VIDOR P8-65C 194 169.8
- ---------------------------------------------------
HORSESHOE P6F-21C 325 288.3
BAYOU
- ---------------------------------------------------
THIBODAUX MHP6596 317 152.6
- ---------------------------------------------------
THIBODAUX MHP6596 277 152.6
- ---------------------------------------------------
THIBODAUX MHP6596 300 347.6
- ---------------------------------------------------
THIBODAUX MHP6596 260 347.6
- ---------------------------------------------------
PARADIS GP8F-21A 270 48.9
- ---------------------------------------------------
HARVEY P-21A96G 174 177.2
===================================================
===================================================
SPUR FACILITIES
===================================================
CODE NAME LATITUDE LONGITUDE
- ---------------------------------------------------
E. HOUSTON 29-47-52 95-16-59
- ---------------------------------------------------
E. HOUSTON 29-47-52 95-16-59
- ---------------------------------------------------
PT. ARTHUR 29-52-46 93-57-30
- ---------------------------------------------------
PT. ARTHUR 29-52-46 93-57-30
- ---------------------------------------------------
VERMILLION 29-40-15 91-54-51
BAY
- ---------------------------------------------------
HOUMA 29-37-18 90-41-25
- ---------------------------------------------------
HOUMA 29-37-18 90-41-25
- ---------------------------------------------------
CONVENT 30-06-21 90-53-47
- ---------------------------------------------------
CONVENT 30-06-21 90-53-47
- ---------------------------------------------------
ST. ROSE 29-56-30 90-20-30
- ---------------------------------------------------
LAFITTE 29-34-58 90-03-48
===================================================
1
<PAGE>
SCHEDULE T
ROUTINE SITE MAINTENANCE REQUIREMENTS
TABLE OF CONTENTS
1. ANTENNA/WAVEGUIDE MAINTENANCE ..........................................3
1. 1.1. Monthly Inspection ................................................3
2. 1.2. Quarterly and Semi-Annual Inspection ..............................3
3. 1.3. Annual Inspection .................................................3
2. BATTERY MAINTENANCE ....................................................4
4. 2.1. Monthly Inspection ................................................4
5. 2.2. Quarterly and Semi-Annual Inspection ..............................4
6. 2.3. Annual Inspection .................................................4
3. BUILDING MAINTENANCE ...................................................5
7. 3.1. Monthly Inspection ................................................5
8. 3.2. Quarterly and Semi-Annual Inspection ..............................5
9. 3.3. Annual Inspection .................................................5
4. CHARGER/RECTIFIER MAINTENANCE ..........................................6
10. 4.1. Monthly Inspection ...............................................6
11. 4.2. Quarterly and Semi-Annual Inspection .............................6
12. 4.3. Annual Inspection ................................................6
5. GENERATOR MAINTENANCE ..................................................7
13. 5.1. Monthly Inspection ...............................................7
14. 5.2. Quarterly and Semi-Annual Inspection .............................7
15. 5.3. Annual Inspection ................................................7
6. MULTIPLEXER MAINTENANCE ................................................8
16. 6.1. Monthly Inspection ...............................................8
17. 6.2. Annual Inspection ................................................8
7. RADIO MAINTENANCE ......................................................9
18. 7.1. Monthly Inspection ...............................................9
1
<PAGE>
19. 7.2. Quarterly and Semi-Annual Inspection .............................9
20. 7.3. Annual Inspection ................................................9
8. SITE MAINTENANCE ......................................................10
21. 8.1. Monthly Inspection ..............................................10
22. 8.2. Quarterly and Semi-Annual Inspection ............................10
23. 8.3. Annual Inspection ...............................................10
9. TOWER MAINTENANCE .....................................................11
24. 9.1. Monthly Inspection ..............................................11
25. 9.2. Quarterly and Semi-Annual Inspection ............................11
26. 9.3. Annual Inspection ...............................................11
27. 9.4. Bi-Annual Inspection ............................................11
2
<PAGE>
1. ANTENNA/WAVEGUIDE MAINTENANCE
1.1. Monthly Inspection
Once each month, perform the following inspections from the ground:
o Visually check the general appearance of the antenna and waveguide
for ice, wind and bullet hole damage.
o Visually check the waveguide on the tower and waveguide bridge for
loose or broken waveguide hangers (i.e. attach/replace as required).
o Visually check the antenna canvas (TEGLAR) radomes for holes, tears
and excessive wear. Replace if severely torn to preempt feedhorn
damage.
o Check inside building waveguide pressure gages for 5-8 lbs/in
^2 per antenna (10 lbs/in ^2 maximum).
1.2. Quarterly and Semi-Annual Inspection
At least once a quarter the monthly inspection should be augmented as follows:
o Visually inspect waveguide grounds at the bend from the tower and
building entry buss bars. Inspect for excessive corrosion and firm
connectivity.
o Visually inspect the waveguide port seals into the building for
excessive deterioration and insect/bird infestation. Clean, replace
and re-seal if required.
o Check functional operation of the dehydrator excessive run local and
remote alarms.
o Visually check dehydrator air dryer/desiccant for excessive moisture
(i.e. desiccant color change).
1.3. Annual Inspection
At least once a year climb the tower and:
o Physically inspect antenna stiff arms (struts) for indications of
antenna movement, i.e. gouges in metal around lock down bolts.
o Physically inspect antenna feedhorn guy wires (3 ea.) by spring
tension at back of antenna. Broken feedhorn guys will pull out from
back of dish.
o Check for loose, broken or missing W/G hangers. Repair/replace as
required.
o Visually inspect W/G grounds near antennas.
3
<PAGE>
2. BATTERY MAINTENANCE
(Valve Regulated Batteries)
2.1. Monthly Inspection
Once each month perform the following inspections:
o Visually check the general appearance and cleanliness of the
batteries, the battery rack and the battery room. Clean and dust as
required.
o Inspect for cracks in the cells or electrolyte leakage. Notify
status center if corrective action is required.
o Inspect the load post plates and inter-cell post connector plates
for corrosion. Clean and apply NO-OX-ID "A" grease as required.
2.2. Quarterly and Semi-Annual Inspection
At least once a quarter the monthly inspection should be augmented as follows:
o Check and record the voltage of each of the 24 cells.
o Check battery plant float voltage at load plates (-53.52 to -54.48
VDC). Adjust charger float voltage to within range.
o Check pilot cell voltage. Range is 2.23-2.27 VDC. Minimum is 2.20
VDC. Maximum is 2.35 VDC. Pilot cell is lowest per cell voltage of
the 24 cells. If below minimum, equalize batteries for 12-24 hours.
If above 2.27 VDC, decrease charger float voltage.
2.3. Annual Inspection
At least once a year the quarterly inspection should be augmented as follows:
o Ensure load plate post bolts are torqued to 95-100 in lbs.
o Caution: Use only insulated tools.
o Measure and record inter-cell connection resistance.
o Check all alarm points for proper functionality.
4
<PAGE>
3. BUILDING MAINTENANCE
3.1. Monthly Inspection
Once each month, perform the following inspections:
o Visually check the general appearance and cleanliness of the
building. Remove trash and sweep/mop floors as required.
o Check the building's exterior walls and roof for damage due to ice
or bullet holes. Repair and seal holes as required.
o Check inside the building for evidence of water leaks or seepage.
Re-seal as required.
o Verify operation of building exterior entry light and any other
perimeter lights. Replace bulbs as required.
o Verify ambient room temperature is > 60 (degrees) F and < 80
(degrees) F. Verify and adjust thermostat high and low settings.
3.2. Quarterly and Semi-Annual Inspection
At least once a quarter the monthly inspection should be augmented as follows:
o Inspect building ground wires for excessive corrosion and firm
connectivity. Clean and tighten as required.
o Verify operation of each air conditioner unit. Air discharge should
be a minimum of 10 (degrees) cooler than outside building
temperature.
o Clean or change each air conditioner's filter.
3.3. Annual Inspection
At least once a year the quarterly inspection should be augmented as follows:
o Verify functional operation of the building high temperature alarms
both local and remote.
o Inspect the building floor tile for bubbles, cracks and tears.
Repair and replace as required.
o Check all alarm points for proper functionality.
o Ensure all AC connections are tight and at the specified torque.
o Measure and record voltages at the building distribution panel to
verify that the input AC voltages are within specifications.
5
<PAGE>
4. CHARGER/RECTIFIER MAINTENANCE
(Valve Regulated Batteries)
4.1. Monthly Inspection
Once each month perform the following inspections:
o Dust or wipe down top of rectifier shelf as required. Remove dust
from rear fan exhaust rings on each rectifier unit.
o Verify DC output amps of each rectifier unit is within 5% of each
other. Adjust load sharing setting on rectifiers to balance output
load.
o Visually inspect DC output cables for significant insulation
indentations and deterioration along cable rack and other metal
surfaces.
4.2. Quarterly and Semi-Annual Inspection
At least once a quarter the monthly inspection should be augmented as follows:
o Verify float output voltage of each rectifier (at battery plant) is
-53.52 to 54.48 VDC. Adjust each rectifier to within .1 VDC of each
other.
o Verify equalize voltage is -55.2 VDC to -56.4 VDC for each
rectifier. Adjust each rectifier to within .1 VDC of each other.
Verify at battery plant.
o Verify current limit setting and operation of each rectifier.
o Verify operation of forced paralleling. Adjust as required.
o Verify operation and accuracy of DC volts and amps output monitor
meters. Adjust meter monitor calibration as required.
4.3. Annual Inspection
At least once a year the quarterly inspection should be augmented as follows:
o Verify AC and DC local and remote alarms are functional for each
rectifier.
o Verify local and remote high and low DC output alarms are
functional.
o Visually inspect AC and DC power connections for corrosion and firm
connectivity. Clean and tighten as required.
o Use an oscilloscope and check AC ripple/noise on the DC output
terminals. Check charger grounds for spikes over I volt P/P.
o Check all alarm points for proper functionality.
6
<PAGE>
5. GENERATOR MAINTENANCE
5.1. Monthly Inspection
Once each month perform the following inspections:
o On indoor units visually check the general appearance and cleanness
of the generator room. Sweep and wipe down as required.
o On outdoor weatherproof housing units verify access panels close
properly and are latched. Clean inside of housing and oil panel
hinges as required.
o Check engine oil and coolant levels. Fill as required.
o Check fuel level. Should not be below 40% of total fuel capacity.
Refill as required.
o Check 12VDC/24VDC starting battery's electrolyte level. Fill with
distilled water as required.
o Check engine drip pan for indications of excessive oil or coolant
leakage.
5.2. Quarterly and Semi-Annual Inspection
At least once a quarter the monthly inspection should be augmented as follows:
o Visually check fan belts for fraying and cracks. Replace as
required.
o Inspect starting battery terminals for corrosion and firm
connections. Clean and grease battery posts as required.
o Remotely start generator and transfer load. Run site on generator
for minimum of 30 minutes.
o Ensure starting battery charger is operational.
5.3. Annual Inspection
At least once a year the quarterly inspection should be augmented as follows:
o Once a year or every 250 hours of operation change the engine oil,
oil filter, fuel filter and coolant filter (if equipped). Note
changes in site log.
o Inspect engine air filter cleaner. Clean or replace as required.
o If equipped, inspect and clean the generator building intake and
exhaust filters. Replace if required.
o Simulate an AC power failure and load test the site for at least one
(1) hour. Record AC volts, AC amps, frequency, engine RPM, oil
pressure, and coolant temperature. Compare readings with
manufacturer's tolerances.
o Check all alarm points for proper functionality.
7
<PAGE>
6. MULTIPLEXER MAINTENANCE
6.1. Monthly Inspection
Once each month perform the following inspections:
o Wipe off or dust top of multiplexer shelves as required.
o Push LED TST button and verify all red, yellow and green indicators
are lit. Replace any module unit that has an un-lit indicator. (LED)
6.2. Annual Inspection
At least once a year the Monthly inspection should be augmented as follows:
o Measure main and standby power supply unit's DC output voltages.
Verify measurements are within manufacturer's tolerances.
o If test points are available measure and record the main and
protection
o Optical TX laser bias current. Verify measurements are within
manufacturer's tolerances.
o Check functional operation of the local and remote major and minor
alarms.
o Check all alarm points for proper functionality.
8
<PAGE>
7. RADIO MAINTENANCE
7.1. Monthly Inspection
Each month the following preventative maintenance procedures should be
performed:
o Wipe off or dust the top shelves in the radio equipment racks as
required.
o Push LED TST switch on each TX/RX logic control and verify all red,
yellow and green indicators are lit. Replace any module that has an
un-lit indicator.
o Check and record all TX/RX meter readings for TX power, AFC
correction, RX in level, If level etc. Verify readings are within
manufacturer's tolerances.
7.2. Quarterly and Semi-Annual Inspection
At least once each quarter the monthly procedure should be augmented as follows:
o Measure and record the DC-DC power converter and TX FET power supply
DC output voltages for each TX/RX unit. Verify measured voltages are
within manufacturer's tolerances.
o Measure and record the RF output power of each transmitter at the TX
monitor connector. (This may require disabling of automatic power
level control). Level should be within 1,0 dB of nominal.
o Measure and record the TX RF frequency on each transmitter at the TX
monitor connector. Measured should be within +/- .OO5% of assigned.
o Measure and record the receiver AGC voltage. Correlate AGC voltage
to receive signal level. Verify actual RSL is within 3 dB of
calculated.
7.3. Annual Inspection
At least once a year the semi-annual inspection should be augmented as follows:
o Measure and record each TX local oscillator frequency. Measured
should be within +/- .001% of assigned.
o Measure and record each RX local oscillator frequency. Measured
should be within +/- .001% of assigned.
o Perform "Transmit Fade Margin Test" to verify receiver fade margin
on the path. The measured value should be within +/- 2 dB of
calculated.
o Check all alarm points for proper functionality.
9
<PAGE>
8. SITE MAINTENANCE
8.1. Monthly Inspection
Once each month perform the following inspections:
o Visually check the general appearance and cleanliness of the site
area. Remove trash from ground and fence areas and dispose off-site.
o Check gates for sagging and ground clearance. Lubricate gate hinges
as required.
o Check gate and site locks for binding or sticking. Lubricate as
required.
o Ensure perimeter fence is upright (vertical) and unopened.
o Inspect building, tower and guy anchor foundations for excessive
erosion.
8.2. Quarterly and Semi-Annual Inspection
At least once a quarter the monthly inspection should be augmented as follows:
o Cut excessive grass and weed growth within site perimeter fence.
o If required spread vegetation killer chemicals within 10 feet of
building area.
8.3. Annual Inspection
At least once a year the quarterly inspection should be augmented as follows:
o Cut and remove large tree growth near AC power lines, guy wires and
buildings.
o Road condition, perimeter fence and gate condition and foundation
erosion concerns.
10
<PAGE>
9. TOWER MAINTENANCE
9.1. Monthly Inspection
Once each month perform the following inspections:
o Visually check the general appearance of the tower and waveguide
bridge for loose or bent cross braces due to ice or wind.
o If a guyed tower, visually check the guy cables for fraying and
ensure a linear slope (i.e. no sag).
o Cover photocell until tower lights come on. Visually check to ensure
all tower lights are operational. Notify status center of burned out
tower lights.
9.2. Quarterly and Semi-Annual Inspection
At least once a quarter the monthly inspection should be augmented as follows:
o Visually inspect the tower base and guy anchor ground wires for
excessive corrosion and firm connectivity. Clean and tighten as
required.
9.3. Annual Inspection
At least once a year the quarterly inspection should be augmented as follows:
o Visually inspect the tower base and guy anchor foundations for
indications of movement and excessive erosion (i.e. large gaps
between concrete and earth).
o Provide a detailed report on the tower paint condition and any
excessive metal corrosion.
9.4. Bi-Annual Inspection
Every two years the following inspection should be completed.
o Physically climb the tower and check for loose or missing bolts and
bent tower members. Replace all regular incandescent tower light
bulbs.
o If a guyed tower, check tower plumb and guy tension.
11
<PAGE>
SCHEDULE U
MINIMAL LEVEL OF ACCEPTABLE NETWORK MANAGEMENT
1. Network Management Operations, Staffing and Dispatch
1.1 PathNet will operate a network monitoring center that will be
staffed 24 hours a day, 7 days a week to handle all problem and
trouble reports and to monitor the system. Both alarm and
performance information shall be monitored and logged. In many
cases, equipment degradation can be detected and corrected before
causing any operational problems for customer circuits. Under most
circumstances, system problems or degradation will be noted and
corrective action started before Texaco or the customer calls with
problems.
1.2 PathNet's network monitoring system will collect performance data
(errored seconds, severely errored seconds, frame loss, failed
seconds, etc.) consistent with the manufacturer's specifications and
issue periodic reports. Corrective action is required any time
system performance degrades to or below maintenance limits described
in Schedule O.
1.3 PathNet's network monitoring personnel will also coordinate
corrective maintenance efforts by PathNet's field personnel. In the
event of a system outage, PathNet shall dispatch personnel as soon
as practical, with the proper tools and spare equipment, to restore
service. PathNet will supply all resources within its control to
support service restoration. The maintenance contractor's field
technicians and supervisors will correct system problems with
PathNet's technical support if required.
1.4 In the event of system jeopardy. PathNet shall dispatch field
personnel as soon as the problem is diagnosed. System jeopardy is
defined as any failure that could result in an Outage of a DS-l.
Examples are any failure in a radio that caused traffic to be
switched to the protection radio channel, any failure in the
protection radio channel that makes it unavailable for traffic,
failure of any 1 x N protected modules in radio or multiplex
equipment.
1.5 For other problems or failures that do not place the system in
jeopardy, PathNet will notify Texaco field personnel as defined in
this schedule.
1
<PAGE>
2. Network Management Subsystems
The network management system will have the ability to manage all Network
Elements at the Q3, TL-1 and TBOS levels within the network (21 SMX or
equivalent).
The subsystems requiring network management monitoring and control are:
o Facilities Subsystem
o Radio Subsystem
o OC-3 / DS-1 Multiplex Subsystem
The network management architecture is set forth in Figure 1 of this schedule.
2.1. Facilities and Radio Network Management Subsystem
PathNet will provide a network management system for those Facilities set forth
in Schedules B and S. The master will be located at PathNet Network Management
Control Center and extended by PathNet to Texaco Heritage Plaza. The master will
be accessible to authorized Texaco and PathNet personnel via dial-in remote
access. Inasmuch as the specific network management system has not been defined
at this time, a minimum set of requirements have been set forth. The proposed
system will provide the following minimum digital input and output requirements:
2.1.1. Texaco Facility Alarms and Status
- --------------------------------------------------------------------------------
Alarm Type Alarm Points PathNet Action
- --------------------------------------------------------------------------------
Commercial Power Fail 1 B
- --------------------------------------------------------------------------------
Door Security 1 A
- --------------------------------------------------------------------------------
DC Charger Fail 3 D
- --------------------------------------------------------------------------------
Waveguide Pressure 6 C
- --------------------------------------------------------------------------------
Waveguide Dehydrator
Excessive Run 1 C
- --------------------------------------------------------------------------------
Air-conditioner Fail 2 D
- --------------------------------------------------------------------------------
High Temperature 1 A
- --------------------------------------------------------------------------------
Spare 1
- --------------------------------------------------------------------------------
Smoke Detector 1 A
- --------------------------------------------------------------------------------
High Water 1 A
- --------------------------------------------------------------------------------
Tower Lights 4 C
- --------------------------------------------------------------------------------
Auxiliary Generator 4 E
- --------------------------------------------------------------------------------
Multiplex: DS1-DSO Major 3 A
- --------------------------------------------------------------------------------
Multiplex: DS1-DSO Minor 3 C
- --------------------------------------------------------------------------------
Key: A - Provide immediate notification (Page) of Texaco's designated
maintenance technician.
B - Monitor for one (1) hour after receiving alarm. If alarm is not
cleared, provide immediate notification (Page) of Texaco's designated
maintenance technician.
2
<PAGE>
C - Provide notification the following day before 9 A.M. to Texaco's
designated maintenance technician.
D - Provide immediate notification, if primary, and if backup is in alarm.
Otherwise provide notification the following day before 9 A.M. to Texaco's
designated maintenance technician.
E - Call-out instructions will be provided by Texaco.
2.1.2. Facility Controls
- --------------------------------------------------------------------------------
Control Type Number of Control Points
- --------------------------------------------------------------------------------
Auxiliary Generator Start & Stop 2
- --------------------------------------------------------------------------------
Commercial Power breaker Reset 2
- --------------------------------------------------------------------------------
Spare 1
- --------------------------------------------------------------------------------
Manual Commercial / Auxiliary Power Transfer 1
- --------------------------------------------------------------------------------
2.1.3. Radio Alarms and Status
The network management system will have the ability to poll and control the NEC
2000. The following tables reflect a minimum level of alarms, status' and
controls:
- --------------------------------------------------------------------------------
EVENT DEFINITION
- --------------------------------------------------------------------------------
LOS Loss of Signal
- --------------------------------------------------------------------------------
LOF Loss of Frame
- --------------------------------------------------------------------------------
E BER (RX) BER degraded > preset value (10 to the power of negative 3).
- --------------------------------------------------------------------------------
SD (RX) Signal degraded > preset value (BER 10 to the power of negative
5 and 10 to the power of negative 9).
- --------------------------------------------------------------------------------
LOP Loss of Pointer
- --------------------------------------------------------------------------------
TR DIST Communication loss between TR DIST and OAM&P.
- --------------------------------------------------------------------------------
MUX CLK Loss of D/I clock from MUX.
- --------------------------------------------------------------------------------
DMR CLK Loss of D/I clock from DMR.
- --------------------------------------------------------------------------------
CLK LOSS Output clock loss.
- --------------------------------------------------------------------------------
MAINT MAINT SW on the ACL module set to MAINT status.
- --------------------------------------------------------------------------------
MOD IF output signal level decrease.
- --------------------------------------------------------------------------------
DEM Carrier synchronization lost.
- --------------------------------------------------------------------------------
TX PWR TX power below normal.
- --------------------------------------------------------------------------------
TX APC TX local oscillator becomes unlocked.
- --------------------------------------------------------------------------------
RX IN LEV RX RF input level decrease.
- --------------------------------------------------------------------------------
RX APC RX local oscillator becomes unlocked.
- --------------------------------------------------------------------------------
MAIN IN LEV Main RX IF level decrease.
- --------------------------------------------------------------------------------
SD IN LEV SD RX IF level decrease.
- --------------------------------------------------------------------------------
PHASE IF signal between MAIN and SD is out of phase.
- --------------------------------------------------------------------------------
3
<PAGE>
2.1.4. Radio Controls
- --------------------------------------------------------------------------------
Control Definition
- --------------------------------------------------------------------------------
ALSC Automatic Laser Shutdown Control
- --------------------------------------------------------------------------------
RCCC Reference Clock Changeover Control
- --------------------------------------------------------------------------------
RPSC Radio Protection Switchover Control
- --------------------------------------------------------------------------------
ATPC Automatic Transmitter Power
- --------------------------------------------------------------------------------
2.1.5 Metered Controls
- --------------------------------------------------------------------------------
Control Definition
- --------------------------------------------------------------------------------
TX PWR Transmitter Output Power
- --------------------------------------------------------------------------------
RX IN LEV Receive Signal Level
- --------------------------------------------------------------------------------
MAIN IN LEV Receive MAIN Signal Level
- --------------------------------------------------------------------------------
SD IN LEV Receive SD Signal Level
- --------------------------------------------------------------------------------
TX APC V Transmitter LO OSC Voltage
- --------------------------------------------------------------------------------
RX APC V Receive LO OSC Voltage
- --------------------------------------------------------------------------------
FET V Output voltage of FET PS.
- --------------------------------------------------------------------------------
PS V Output voltage of DC-DC converter.
- --------------------------------------------------------------------------------
2.1.6 Performance Data
Performance data provides the ability to access the performance transport
systems and localize any trouble or degradation of service.
Performance data is defined as CURRENT Performance Data and HISTORIC Performance
Data. Current Performance Data provides values for performance data collected
for the current time slice in l5-minute increments. The system will provide a
minimum of sixteen (16) 15-minute and seven (7) 24-hour sets of historical data.
2.2. OC-3 to DS-1 Multiplex Network Management Subsystem
The network management system will have the ability to poll, control and modify
the configuration of the IMT 150.
The IMT-150 has one (1) TBOS port through which alarms and status scan displays
and remote control (Command Displays) are accessed. The following tables refer
to TBOS alarms:
4
<PAGE>
2.2.1. Multiplex Alarms and Status (TBOS)
- --------------------------------------------------------------------------------
BIT Alarm Type
- --------------------------------------------------------------------------------
1 Reserved
- --------------------------------------------------------------------------------
2 Alarm Control Unit Fail Alarm
- --------------------------------------------------------------------------------
3 Switch Control Unit Fail Alarm
- --------------------------------------------------------------------------------
4 Telemetry Unit Fail Alarm
- --------------------------------------------------------------------------------
5 Overhead Terminating Unit Fail Alarm
- --------------------------------------------------------------------------------
6 Through Unit Fail Alarm
- --------------------------------------------------------------------------------
7 Reserved
- --------------------------------------------------------------------------------
8 Reserved
- --------------------------------------------------------------------------------
9 LS Group1 Unit Fail NSA Alarm
- --------------------------------------------------------------------------------
10 LS Group1 Unit Fail SA Alarm
- --------------------------------------------------------------------------------
11 LS Group2 Unit Fail NSA Alarm
- --------------------------------------------------------------------------------
12 LS Group2 Unit Fail SA Alarm
- --------------------------------------------------------------------------------
13 LS Group3 Unit Fail NSA Alarm
- --------------------------------------------------------------------------------
14 LS Group3 Unit Fail SA Alarm
- --------------------------------------------------------------------------------
15 HS Group1 Unit Fail NSA Alarm
- --------------------------------------------------------------------------------
16 HS Group1 Unit Fail SA Alarm
- --------------------------------------------------------------------------------
17 MS Group1 Unit Fail NSA Alarm
- --------------------------------------------------------------------------------
18 MS Group1 Unit Fail SA Alarm
- --------------------------------------------------------------------------------
19 MS Group2 Unit Fail NSA Alarm
- --------------------------------------------------------------------------------
20 MS Group2 Unit Fail SA Alarm
- --------------------------------------------------------------------------------
21 MS Group3 Unit Fail NSA Alarm
- --------------------------------------------------------------------------------
22 MS Group3 Unit Fail SA Alarm
- --------------------------------------------------------------------------------
23 HS Group2 Unit Fail NSA Alarm
- --------------------------------------------------------------------------------
24 HS Group2 Unit Fail SA Alarm
- --------------------------------------------------------------------------------
25 Housekeeping Alarm 0 Activated Alarm
- --------------------------------------------------------------------------------
26 Housekeeping Alarm 1 Activated Alarm
- --------------------------------------------------------------------------------
27 Housekeeping Alarm 2 Activated Alarm
- --------------------------------------------------------------------------------
28 Housekeeping Alarm 3 Activated Alarm
- --------------------------------------------------------------------------------
29 Housekeeping Alarm 4 Activated Alarm
- --------------------------------------------------------------------------------
30 Housekeeping Alarm 5 Activated Alarm
- --------------------------------------------------------------------------------
31 Power Unit1 Fail Alarm
- --------------------------------------------------------------------------------
32 Power Unit2 Fail Alarm
- --------------------------------------------------------------------------------
33 Clock Unit Fail NSA Alarm
- --------------------------------------------------------------------------------
34 Clock Unit Fail SA Alarm
- --------------------------------------------------------------------------------
35 Switch Unit X1 Fail Alarm
- --------------------------------------------------------------------------------
36 Switch Unit X2 Fail Alarm
- --------------------------------------------------------------------------------
37 Switch Unit X3 Fail Alarm
- --------------------------------------------------------------------------------
38 Switch Unit R1 Fail Alarm
- --------------------------------------------------------------------------------
39 Switch Unit R2 Fail Alarm
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
BIT Alarm Type
- --------------------------------------------------------------------------------
40 Switch Unit R3 Fail Alarm
- --------------------------------------------------------------------------------
41 Protocol Fail of Section DCC 1 (OC-3) Alarm
- --------------------------------------------------------------------------------
42 Protocol Fail of Section DCC 2 (OC-3) Alarm
- --------------------------------------------------------------------------------
43 Protocol Fail of Section DCC 3 (OC-1) Alarm
- --------------------------------------------------------------------------------
44 Protocol Fail of Section DCC 4 (OC-1) Alarm
- --------------------------------------------------------------------------------
45 Protocol Fail of Section DCC 5 (OC-1) Alarm
- --------------------------------------------------------------------------------
46 Time Slot Interchange Unit Fail NSA Alarm
- --------------------------------------------------------------------------------
47 Time Slot Interchange Unit Fail SA Alarm
- --------------------------------------------------------------------------------
48 Built-in Order Wire Fail NSA Alarm
- --------------------------------------------------------------------------------
49 OC-3 Signal Fail Alarm
- --------------------------------------------------------------------------------
50 OC-1 Signal Fail Alarm
- --------------------------------------------------------------------------------
51 STS-1 Path Signal Fail Alarm
- --------------------------------------------------------------------------------
52 DS3 Signal Fail Alarm
- --------------------------------------------------------------------------------
53 VT Signal Fail Alarm
- --------------------------------------------------------------------------------
54 DS1 Signal Fail Alarm
- --------------------------------------------------------------------------------
55 EC-1 Signal Fail Alarm
- --------------------------------------------------------------------------------
56 Reserved
- --------------------------------------------------------------------------------
57 Housekeeping Control Status 0 Status
- --------------------------------------------------------------------------------
58 Housekeeping Control Status 1 Status
- --------------------------------------------------------------------------------
59 Line AIS Received Status
- --------------------------------------------------------------------------------
60 STS-1 Path AIS Received Status
- --------------------------------------------------------------------------------
61 VT1.5 Path AIS Received Status
- --------------------------------------------------------------------------------
62 DS3 Line AIS Received Status
- --------------------------------------------------------------------------------
63 Abnormal LED Status Status
- --------------------------------------------------------------------------------
64 Reserved
- --------------------------------------------------------------------------------
NSA: Non Service Affecting
- --------------------------------------------------------------------------------
SA: Service Affecting
- --------------------------------------------------------------------------------
2.2.2. TL-1 Performance Alarms
TL-1 commands are listed in detail in the NEC IMT-150 Multiplexer Add-Drop
System ADM/TRM/RING, Volume 3, Command List. The following table lists the most
common performance TL-1 alarms at the DS1 level:
- --------------------------------------------------------------------------------
Condition Type Description
- --------------------------------------------------------------------------------
BPVERR Exceeding of bipolar violation threshold on DS1 channel.
- --------------------------------------------------------------------------------
LOS Loss of signal on DS1 channel.
- --------------------------------------------------------------------------------
RLBDET Detection of request for remote loopback.
- --------------------------------------------------------------------------------
RLBSET Execution of remote loopback by OPR-LPBK-T1.
- --------------------------------------------------------------------------------
T-CVL Threshold crossing alert of DS1 line coding violation counts.
- --------------------------------------------------------------------------------
T-ESL Threshold crossing alert of DS1 line errored seconds.
- --------------------------------------------------------------------------------
T-SESL Threshold crossing alert of DS1 line severely errored seconds.
- --------------------------------------------------------------------------------
6
<PAGE>
2.2.3. Multiplex Controls (TBOS)
- --------------------------------------------------------------------------------
Number Remote Command Remote Control Function
- --------------------------------------------------------------------------------
1-7 Unassigned
- --------------------------------------------------------------------------------
8 ACO Alarm Cutoff
- --------------------------------------------------------------------------------
9-32 Unassigned
- --------------------------------------------------------------------------------
33 HKC0 Housekeeping Control 0
- --------------------------------------------------------------------------------
34 HKC1 Housekeeping Control 1
- --------------------------------------------------------------------------------
35-63 Unassigned
- --------------------------------------------------------------------------------
2.2.4. Multiplex Provisioning
The IMT-150 requires both physical and programming provisioning. Traffic
Provisioning tasks are performed via the Ring 1-CID (Intelligent CID). Multiplex
provisioning will be performed via the NEC ICD 300 Provisioning interface.
2.2.5. Alarm / Event Logging and Reports
All alarms and event logging will be passed through to Texaco from PathNet.
2.3 Network Performance Monitoring / Monitor Parameters
Monitoring parameters are based on a 24 hour period and measured at DS1 as
referred to in Schedule O.
2.3.1. Alarm / Event Logging and Reports
All monitored parameters, alarms and event logging will be passed through
to Texaco from PathNet. Monthly, quarterly and annual reports are required
for system availability, system performance and trouble ticket summaries.
2.4. Hardware / Software Configuration
The network management system hardware/software will be provided by
PathNet, with the exception of the Craft Interface PC hardware, and
configured as follows
Master: (Or Equivalent)
o Sun Sparc 20 Dual Processor (Or Equivalent)
o 224 MB RAM
o 4 GB Hard Drive Space
o 20" SVGA Monitor
o 4mm DAT Drive
o CDROM
o Modem
o NEC ICD-300 Provisioning Software
o Network Management Software as required
7
<PAGE>
Workstation:
o CPU
o 128 MB RAM (Minimum)
o 2 GB Hard Drive Space
o CDROM
o 20" SVGA Monitor
o 4mm DAT Drive
o Modem
o NEC ICD-300 Provisioning SW
o Network Management SW as required
o All Equipment Craft Interface SW
o Remote Dial-in Software
Remote / Craft Interface PC: (For Each FE)
o Pentium Laptop
o 32 MB RAM (Minimum)
o 1 GB Hard Drive Space
o SVGA Capable
o CDROM
o Modem
o Windows `95 Operating System
o NEC ICD-300 Provisioning SW
o Network Management SW as required
o All Equipment Craft Interface SW
o Remote Dial-in SW
2.5 Network Management System Factory Acceptance Test
During the System Factory acceptance Test, the testing will include the network
management system, craft interface and remote dial-in functionality in
accordance with NEC FAT specifications.
2.6 Site Acceptance Test
Please refer to the network management system documentation.
8
<PAGE>
Figure 1: Network Management Conceptual Diagram
-------------------------------------
Texaco Microwave System
Network Management Conceptual Diagram
-------------------------------------
[FLOW CHART DEPICTING NETWORK MANAGEMENT SYSTEM]
9
<PAGE>
SCHEDULE V
TEXACO PAYMENT INSTRUCTIONS
10
<PAGE>
SCHEDULE W
NON-DISCLOSURE AGREEMENT
THIS AGREEMENT is made and entered into effective _______________, 1997,
by and between PathNet, Inc., ("PathNet") with offices located at 6715
Kenilworth Avenue, Suite 200, Riverdale, Maryland 20737 and Texaco Pipeline,
Inc. ("Texaco"), located at __________________________________________________.
WHEREAS, PathNet possesses confidential and/or proprietary information
related to its own business plans and goals and Texaco possesses confidential
and/or proprietary information related to its microwave system and its intended
uses for the infrastructure supporting use of such system, collectively referred
to as the "Information"; and
WHEREAS, each such party in possession of Information (the "Disclosing
Party") desires to disclose some of its Information to the other party (the
"Receiving Party") subject to the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the receipt of certain Information and
the mutual promises made herein, the parties agree as follows:
1. Permitted Use. The Receiving Party shall (a) hold all Information
received from the Disclosing Party in confidence, (b) use such Information only
for the purpose of evaluating the possibility of forming a joint business
relationship or other commercial arrangement between the parties concerning such
Information, (c) reproduce such Information only to the extent necessary for
such purpose, (d) restrict disclosure of such Information to its employees,
consultants and contractors with a need to know (and advise) such employees,
consultants, and contractors of the obligation assume herein), and (e) not
disclose such Information to any third party without the prior written approval
of the Disclosing Party.
The restrictions on the Receiving Party's use and disclosure of
Information as set forth above shall not apply to any Information which the
Receiving Party can demonstrate:
i. Is wholly and independently developed by the
Receiving Party without the use of Information of the Disclosing
Party;
ii. Is or has become generally available to the public
without breach of this Agreement by the Receiving Party;
iii. At the time of disclosure to the Receiving Party,
was known to such Receiving Party free of restriction and evidenced
by documentation in the Receiving Party's possession'
1
<PAGE>
iv. Is approved for release by written authorization of
the Disclosing Party, but only to the extent and subject to such
conditions as may be imposed in such written authorization; or
v. Is disclosed in response to a valid order of a court
or other governmental body in the United States or any political
subdivision thereof, but only to the extent of and for the purposes
of such order; provided, however, that the Receiving Party shall
first notify the Disclosing Party in writing of the order and permit
the Disclosing Party to seek an appropriate protective order.
2. Designation. Information shall be subject to the restrictions of
paragraph 1 if it is in writing or other tangible form and clearly marked as
proprietary or confidential when disclosed to the Receiving Party or is
summarized in a writing marked to indicate its proprietary or confidential
nature and delivered to the Receiving Party within thirty (30) days of such
disclosure.
3. No License or Representations. No license to a party of any trademark,
patent, copyright or any other intellectual property rights is either granted or
implied by this Agreement or any disclosure hereunder, including, but not
limited to, any license to make, use or sell any product embodying any
Information. No representation, warranty or assurances is made by either party
with respect to the non-infringement of trademarks, patents, copyrights, mask
protection rights or any other intellectual property rights or other rights of
third persons.
4. No Obligation. Neither this Agreement nor the disclosure or receipt of
Information shall be construed as creating any obligation of a party to furnish
information to the other party or to enter into any agreement or relationship
with the other party with respect to mutual business.
5. Return of Information. All Information shall remain the sole property
of the Disclosing party which originally disclosed such Information, and all
materials shall be returned to the Disclosing Party upon written request, upon
termination or expiration of this Agreement, or upon the Receiving Party's
determination that it no longer has a need for such Information. Alternatively,
the Receiving Party at its option may destroy the Information. Upon request of
the Disclosing Party, the Receiving Party shall certify in writing that all
materials containing such Information (including all copies thereof) have been
returned to the Disclosing Party or destroyed.
6. Term and Termination. This Agreement shall become effective on the date
first set forth above and shall continue in effect for a period of 3 years
thereafter. During this three year period, a Receiving Party is bound by the
terms of this Agreement and shall maintain the confidentiality of the
Information received.
2
<PAGE>
7. Injunctive Relief. The parties agree that any unauthorized use of any
of the Information in violation of this Agreement disclosed by a Disclosing
Party will cause such Disclosing Party irreparable injury for which it would
have no adequate remedy at law. Accordingly, the Disclosing Party shall be
entitled to immediate injunctive relief prohibiting any violation of this
Agreement, in addition to any other rights and remedies available to such
Disclosing Party.
8. Governing Law. This Agreement shall be governed by the law of the State
of Delaware.
9. Miscellaneous. This Agreement constitutes the entire understanding
between the parties hereto as to the Information and supersedes all prior
discussions between them relating thereto. No amendment or modification of this
Agreement shall be valid or binding on the parties unless made in writing and
signed on behalf of each of the parties by its authorized officer or
representative. Neither party may assign or transfer, in whole or in part, any
of its rights, obligations or duties under this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
PATHNET, INC. TEXACO PIPELINE, INC.
By: By: /s/ H.D. Hunt
------------------------------- ---------------------------------
Name: Name: H.D. Hunt
----------------------------- ------------------------------
Title: Title: Manager of Telecommunications
--------------------------- ------------------------------
3
<PAGE>
SCHEDULE X
INDEMNITY AND LIMITATIONS OF OBLIGATIONS AND LIABILITY
X.1 PATHNET, TO THE MAXIMUM EXTENT PERMITTED BY LAW, SHALL INDEMNIFY AND
HOLD HARMLESS TEXACO, AND DIRECTLY OR INDIRECTLY, ITS PARENT, AFFILIATE AND
SUBSIDIARY COMPANIES, AND THEIR RESPECTIVE DIRECTORS, EMPLOYEES AND AGENTS
("TEXACO INDEMNIFIED PARTIES"), AGAINST ALL CLAIMS, DEMANDS OR CAUSES OF ACTION,
SUITS, DAMAGES, LIABILITIES, JUDGMENTS, LOSSES AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, ATTORNEYS' FEES AND COSTS OF ARBITRATION AND LITIGATION, WHETHER
INCURRED FOR A TEXACO INDEMNIFIED PARTY'S PRIMARY DEFENSE OR FOR ENFORCEMENT OF
ITS INDEMNIFICATION RIGHTS) WHICH MAY BE INCURRED BY A TEXACO INDEMNIFIED PARTY
OR ASSERTED BY PATHNET (INCLUDING, WITHOUT LIMITATION, PATHNET'S EMPLOYEES,
CONTRACTORS AND AGENTS) ON ACCOUNT OF:
(I) ANY PERSONAL INJURY, DISEASE OR DEATH OF ANY PERSON(S), DAMAGE, TO OR LOSS
OF ANY PROPERTY, OR MONEY DAMAGES OR SPECIFIC PERFORMANCE OWED TO ANY
THIRD PARTY (BY CONTRACT OR OPERATION OF LAW), AND ANY FINES, PENALTIES,
TAXES, ASSESSMENTS, ENVIRONMENTAL RESPONSE COSTS OR INJUNCTIVE OBLIGATIONS
CAUSED BY, ARISING OUT OF, OR IN ANY WAY INCIDENTAL TO OR IN CONNECTION
WITH, ACTIONS OR OMISSIONS OF PATHNET (INCLUDING,
1
<PAGE>
WITHOUT LIMITATION, PATHNET'S EMPLOYEES, CONTRACTORS AND AGENTS)
INCLUDING, WITHOUT LIMITATION,
(1) THE NEGLIGENCE, FAULT OR STRICT LIABILITY OF PATHNET AND
(2) THE CONCURRENT NEGLIGENCE, FAULT OR STRICT LIABILITY OF ANY
COMBINATION OF PATHNET, ITS EMPLOYEES, CONTRACTORS AND AGENTS AND
(II) ANY BREACH OF ANY REPRESENTATION, WARRANTY OR COVENANT OF PATHNET
CONTAINED IN THIS AGREEMENT.
X.2 TEXACO, TO THE MAXIMUM EXTENT PERMITTED BY LAW, SHALL INDEMNIFY AND
HOLD HARMLESS PATHNET, AND DIRECTLY OR INDIRECTLY, ITS PARENT, AFFILIATE AND
SUBSIDIARY COMPANIES, AND THEIR RESPECTIVE DIRECTORS, EMPLOYEES AND AGENTS
("PATHNET INDEMNIFIED PARTIES"), AGAINST ALL CLAIMS, DEMANDS OR CAUSES OF
ACTION, SUITS, DAMAGES, LIABILITIES, JUDGMENTS, LOSSES AND EXPENSES (INCLUDING,
WITHOUT LIMITATION, ATTORNEYS' FEES AND COSTS OF ARBITRATION AND LITIGATION,
WHETHER INCURRED FOR A PATHNET INDEMNIFIED PARTY'S PRIMARY DEFENSE OR FOR
ENFORCEMENT OF ITS INDEMNIFICATION RIGHTS) WHICH MAY BE INCURRED BY A PATHNET
INDEMNIFIED PARTY OR ASSERTED BY TEXACO (INCLUDING, WITHOUT LIMITATION, ITS
EMPLOYEES, CONTRACTORS [OTHER THAN PATHNET], AND AGENTS) ON ACCOUNT OF:
(I) ANY PERSONAL INJURY, DISEASE OR DEATH OF ANY PERSON(S), DAMAGE TO OR LOSS
OF ANY PROPERTY, OR MONEY DAMAGES OR SPECIFIC PERFORMANCE OWED TO ANY
THIRD-PARTY (BY CONTRACT OR OPERATION OF LAW), AND ANY FINES, PENALTIES,
TAXES, ASSESSMENTS,
2
<PAGE>
ENVIRONMENTAL RESPONSE COSTS OR INACTIVE OBLIGATIONS CAUSED BY, ARISING
OUT OF, OR IN ANY WAY INCIDENTAL TO OR IN CONNECTION WITH, ACTIONS OR
OMISSIONS OF TEXACO (INCLUDING, WITHOUT LIMITATION, ITS EMPLOYEES,
CONTRACTORS [OTHER THAN PATHNET], AND AGENTS) INCLUDING, WITHOUT
LIMITATION,
(1) THE NEGLIGENCE, FAULT OR STRICT LIABILITY OF TEXACO, AND
(2) THE CONCURRENT NEGLIGENCE, FAULT OR STRICT LIABILITY OF ANY
COMBINATION OF TEXACO, ITS EMPLOYEES, CONTRACTORS [OTHER THAN
PATHNET], AND AGENTS), AND
(II) ANY BREACH OF ANY REPRESENTATION, WARRANTY OR COVENANT OF TEXACO CONTAINED
IN THIS AGREEMENT.
X.3 IF AFTER EITHER TEXACO OR PATHNET HAVE DEFENDED A SUIT AND PAID ANY
RESULTING JUDGMENT OR AWARD AND IT IS DETERMINED BY A FINAL, NONAPPEALABLE
DECISION THAT THE MATTER WAS A RESULT OF THE NEGLIGENCE, FAULT, OR STRICT
LIABILITY OF THE OTHER PARTY, IT IS AGREED THAT THE DEFENDING PARTY SHALL BE
REIMBURSED FOR THE JUDGMENT OR AWARD AGAINST IT AND ITS PORTION OF REASONABLE
ATTORNEY'S FEES, LITIGATION EXPENSES, AND COURT COSTS INCURRED AS A RESULT OF
THE DETERMINED LIABILITY OF THE OTHER PARTY.
X.4 BOTH PATHNET'S AND TEXACO'S OBLIGATIONS UNDER THIS INDEMNITY SECTION
SHALL SURVIVE THE TERMINATION OR EXPIRATION OF THIS AGREEMENT.
3
<PAGE>
Exhibit 10.7.1
LICENSE AGREEMENT
THIS AGREEMENT, effective as of the 1st day of August, 1 1998, by and
between AMERICAN TOWER CORPORATION or its subsidiary thereof as defined as the
party designated on the signature page hereto as the LICENSOR or the Company (As
the case may be), whose business address is 3411 Richmond Ave., Suite 400,
Houston, TX 77046-3401, (hereinafter referred to as the "LICENSOR" or the
"Company") and Pathnet, Inc. whose business address is 1015 31st Street,N.W.,
Washington, D.C. 20007(hereinafter referred to as the "LICENSEE").
1. SUBJECT OF LICENSE
LICENSOR hereby grants permission to LICENSEE to install and operate
the radio communications equipment described below and in EXHIBIT A
("Equipment") on the towers located at the locations identified in EXHIBIT A:
A. Radio communications equipment consisting of a
transmitter/receiver, and accessories to be installed in LICENSOR's equipment
house near the base of the tower ("equipment house") or the equipment house of
the LICENSEE, if any ("LICENSEE's equipment house").
B. LICENSEE agrees that all of the Equipment to be installed upon
LICENSOR's tower and within equipment shelters (if applicable) and upon
LICENSOR's ground space will be in accordance with that specified within this
Agreement and any attachments, exhibits, amendments, or addenda thereof. Any
material deviation from the aforementioned which deviation continues for more
than ten (10) days after written notice to Licensee shall result in a default
with respect to the Agreement.
No outside storage of any kind is permitted by this Agreement without
prior written consent of LICENSOR.
2. TERM
This Agreement shall commence on the date first written above, or upon
installation of LICENSEE's equipment, but no later than November 1, 1998 and
shall be in full force or effect for twenty-five (25) years hereafter ("Initial
Term") with additional automatic one (1) year renewal periods commencing on
successive
<PAGE>
anniversaries of the day following the termination date(s) of the Initial Term.
Said renewal periods shall commence automatically without further action on the
part of LICENSOR or LICENSEE provided, however, that either party may terminate
this Agreement effective at the expiration of the Initial Term or each of the
renewal periods, as the case may be, by giving the other party not less than
ninety (90) days written notice of its intention to terminate this Agreement as
of such date.
3. REMUNERATION
(a) LICENSEE shall pay to LICENSOR a fee of (i)commencing on
November 1, 1998 and terminating at such time as the Pathnet system becomes
operational and available for commercial traffic, as mutually determined by
the Parties, the amount of [***] per month per tower listed on Exhibit A and
(ii) commencing [***]of gross revenues collected by Pathnet from the sale of
capacity created by the Pathnet system constructed on the towers set forth on
Exhibit A (Pathnet to receive [***] of the gross revenue collected from such
system) (collectively the "Base Fee") during the Initial Term of this
Agreement which shall be payable thirty (30) days after the end of each
calendar quarter.
(b) LICENSOR shall have the right to increase the quarterly rental due
hereunder at the end of the Initial Term hereof and at the end of each renewal
period thereafter for the full term of this License Agreement and any extension
thereof. In the event LICENSOR shall exercise its right to impose an increase
as herein provided, LICENSEE shall have the right to terminate this Agreement
upon thirty (30) days written notice from the date of receipt of such notice of
rental increase. Payment of any increased rate by LICENSEE shall constitute
LICENSEE's acceptance of the rental modification to this Agreement.
(c) All rental payments are due and payable in the office of LICENSOR
thirty (30) days after the end of each calendar quarter. Any payment received
by LICENSOR beyond ten (10) days from the original due date thereof shall
require the payment by LICENSEE of an additional sum of $25.00 per month as a
late charge.
(d) In the event that any tower site listed on Exhibit A does not
accomodate LICENSEE's requirements to develop a system available to commercial
traffic due to site, tower or equipment house limitations or the unavailability
of frequencies, LICENSEE shall have the right (i) to suspend payment of the Base
Fee as to such tower site, as listed on Exhibit A, until such time as LICENSEE
can identify a reasonable solution to install and operate the commercial system
at such tower site or (ii) cancel the Base Fee as to
2
<PAGE>
such tower site, as listed on Exhibit A, in the event LICENSEE acquires an
alternate site or tower to install and operate the commercial system and does
not install equipment on such tower site.
4. OPERATION
(a) LICENSEE shall operate its equipment during the term hereof in
compliance with all present and future rules and regulations imposed by any
local, state or federal authority having jurisdiction over transmissions and
operations involved in the operation of the radio communications systems and
equipment. Prior to installation of its equipment, LICENSEE's equipment house,
if any, or any modifications or changes (other than replacements of identical
items at the same location) to the equipment, equipment house or LICENSEE's
equipment house, if any, LICENSEE shall comply with the following:
(i) LICENSEE shall submit all plans for LICENSOR's approval not
to be unreasonably withheld, conditioned or delayed.
(ii) Prior to commencement of any work, LICENSEE shall obtain
LICENSOR's written approval not to be unreasonably withheld, conditioned or
delayed and required approvals of relevant federal, state and local agencies.
LICENSEE shall promptly deliver to LICENSOR written proof of compliance with all
applicable federal, state and local laws and regulations in connection with any
installations or modifications.
(iii) All of the modifications, installations or changes shall
conform with LICENSEE's design and specifications, including weight and wind
load requirements and shall not interfere with radio communications systems and
equipment of other licensees located on LICENSOR's tower and facility as of the
date of such installation, and shall be in compliance with all applicable local,
state and federal governmental requirements, including but not limited to
zoning, FAA and FCC specifications.
(iv) All of LICENSEE's equipment shall be clearly marked to show
LICENSEE's name, call sign, frequency and location (AGL) on the tower. The
coaxial cable shall be identified in the same manner at the bottom and top of
the line. Failure of LICENSEE to comply with the labeling of its equipment
could result in a default of this Agreement as outline in paragraph (9).
3
<PAGE>
(b) LICENSEE agrees that in all matters where LICENSOR's approval is
required and LICENSOR determines in its sole discretion that a possibility of a
threat of interference or other disruption with the business of LICENSOR or
other existing licensees exists, LICENSOR shall have the absolute right to
withhold consent.
5. INSTALLATION AND OPERATION
(a) The installation and operation of LICENSEE's equipment shall not
interfere electrically, or in any other manner whatsoever, with LICENSOR or with
any other party operating and maintaining radio communications systems and
equipment at the tower, and with LICENSOR's lighting system all as existing and
operating as of the date hereof. Any provision in this Agreement to the
contrary notwithstanding, it is expressly understood and agreed that if the
installation or operation of LICENSEE's equipment shall interfere with other
radio communications systems and equipment all as existing and operating as of
the date hereof, LICENSEE shall upon request (verbal or otherwise) within (48)
hours suspend its operations and do whatever is necessary to eliminate or remedy
such interference in a reasonable length of time which shall not exceed (10)
days. LICENSEE will be allowed short periods of operation required for
identification and elimination of the interference. If LICENSEE fails to
eliminate or remedy such interference, LICENSOR may at its option with 48 hours
written notice, eliminate or remedy such interference at LICENSEE's cost and
expense or terminate the Agreement and disconnect LICENSEE's equipment.
(b) The installation and operation of LICENSOR's or future licensees'
equipment shall not interfere electrically, or in any other manner whatsoever,
with LICENSEE operating and maintaining radio communications systems and
equipment at the tower, and with LICENSOR's lighting system all as existing and
operating as of the date hereof. Any provision in this Agreement to the
contrary notwithstanding, it is expressly understood and agreed that if the
installation or operation of LICENSOR's or other licensees' equipment shall
interfere with LICENSEE'S radio communications systems and equipment, LICENSOR
shall upon request (verbal or otherwise) within (48) hours suspend its
operations and do whatever is necessary to eliminate or remedy such interference
in a reasonable length of time which shall not exceed (10) days. LICENSOR will
be allowed short periods of operation required for identification and
elimination of the interference. If LICENSOR fails to eliminate or remedy such
interference, LICENSEE may at
4
<PAGE>
its option with 48 hours written notice, eliminate or remedy such interference
at LICENSOR's cost and expense.
(c) In the event that the installation of LICENSEE's equipment in or
upon LICENSOR's shelter or tower requires removal of certain existing,
non-operational equipment, LICENSEE shall, at its own expense, have the right to
remove and dispose of such equipment as required for Pathnet to install the
system.
6. OPERATIONAL RESPONSIBILITIES
(a) LICENSEE at its own cost and expense shall be responsible for
maintenance of its equipment and improvements, if any, in accordance with all
applicable laws and regulations. All maintenance work shall be performed by
certified steeplejacks or contractors, whose certificates of insurance are on
file with LICENSOR and previously approved in writing when requested by
LICENSOR. In the event LICENSOR in its sole opinion, determines that any
structural modifications or repairs are needed to be made to its tower or
surrounding premises due to the presence of LICENSEE's equipment or other
improvements, LICENSOR shall give notice of such fact to LICENSEE, and LICENSEE
shall have the right to (i) terminate this Agreement by giving ten (10) days
written notice to LICENSOR, or (ii) LICENSEE may make this needed modifications
and repairs, except as otherwise agreed upon by the parties at its sole cost and
expense, in accordance with provisions of Paragraph (4) (a) hereto.
(b) LICENSOR agrees that LICENSEE shall have free access to the tower
and associated equipment shelters for the purpose of installing LICENSEE's radio
equipment, and that during the continuation of this Agreement, LICENSEE shall
have free ingress and egress to the said tower and associated equipment shelters
for the purpose of maintaining and repairing LICENSEE's equipment. LICENSEE
agrees that only authorized engineers of LICENSEE, or persons under their direct
supervision (including subcontractors), will be permitted to enter said property
for any purpose as permitted herein. Additionally, LICENSEE agrees that its
coaxial cable must be permanently identified at the top and bottom and that all
equipment(radio cabinets) inside LICENSOR's equipment building shall be
identified with labels provided by LICENSOR. LICENSEE understands and agrees
that other licensees and their authorized representatives shall similarly have
access, ingress and egress to the tower for similar purposes.
(c) LICENSOR at all times during the term of this License Agreement
will maintain, at its expense (including the costs of any utilities), the tower
and the tower sites and will
5
<PAGE>
maintain, at its expense, all associated tower marking and lighting in
compliance with all applicable federal, state and local laws, rules and
regulations relating to tower marking or lighting, including without limitation,
Part 17 of the rules and regulations of the Federal Communications Commission
(the "FCC"). In the event LICENSEE receives notice or otherwise obtains
knowledge that the tower marking or lighting is not in compliance with any
applicable law, rule or regulation, LICENSEE will immediately so notify LICENSOR
(by fax or by telephone confirmed in writing) and will cooperate with LICENSOR
in curing any such noncompliance provided LICENSEE shall not be required to
incur any expense in connection with such cooperation.
(d) Provided that LICENSEE is not in default in the performance of
its obligations hereunder beyond any applicable notice and cure periods, at the
expiration of this Agreement or earlier termination hereof, LICENSEE shall
remove its equipment and/or LICENSEE's equipment house, if any, provided that
such removal is done by a certified steeplejack or contractor previously
approved in writing by LICENSOR, as provided for in paragraph 6a., and in
accordance with a previously approved removal plan, in a workmanlike manner,
without any interference, damage or destruction to any other equipment,
structures or operations of the tower, and without injury or damage to the
tower. Any and all interference or damage caused to the tower or operations of
the tower by such removal shall be immediately repaired or eliminated by
LICENSEE. If LICENSEE fails to make such repairs within three (3) days after
occurrence of such damage, injury or interference, LICENSOR may perform all the
necessary repairs at LICENSEE's cost and expense and such sum shall be
immediately due upon the rendering of an invoice as an additional fee hereunder.
7. INDEMNIFICATION
(a) It is the express intention of the parties that LICENSEE agrees
to indemnify and hold LICENSOR and other present licensee's harmless, and no
action shall lie, from any and all claims or suits arising out of injury to, or
death of, any person, or loss or damage done to LICENSOR's or other licensee's
facilities or equipment, whether on, above or below ground, that occur as a
result of the installation, operation or maintenance of LICENSEE's equipment,
LICENSEE's equipment house, if any, or other improvements of LICENSEE,
including, without limitation, the joint or concurrent, sole or gross
negligence, or willful misconduct of the LICENSEE, or its agents, employees,
representatives, or contractors.
6
<PAGE>
(b) It is the express intention of the parties that LICENSOR agrees
to indemnify and hold LICENSEE harmless, and no action shall lie, from any and
all claims or suits arising out of injury to, or death of, any person, or loss
or damage done to LICENSEE's facilities or equipment, whether on, above or below
ground, that occur as a result of the installation, operation or maintenance of
LICENSOR's or other licensees' facilities or equipment, LICENSOR's equipment
house, if any, or other improvements of LICENSOR or other licensees, resulting
from, the joint or concurrent, sole or gross negligence, or willful misconduct
of the LICENSOR, or its agents, employees, representatives, or contractors.
(c) It is further the express intention of the parties that each
party's foregoing indemnity obligation shall include litigation expenses, court
costs, reasonable attorneys' fees, investigation costs, and all other reasonable
costs and expenses incurred by the indemnified party from the first written
demand notice that any claim or demand has been made or may be made, and shall
not be limited in any way by any limitation on the amount or type of damages,
compensation, or benefits payable under applicable workers' compensation acts,
disability benefit acts, or other employee benefit acts. The provisions of this
article shall survive the termination of this License Agreement with respect to
any damage, injury or death occurring before such termination.
8. CASUALTY
In the event the tower or any part thereof is damaged or destroyed by
any cause, LICENSOR shall repair, rebuild, or restore the tower to the same
condition as it was immediately prior to such casualty. In such event, the
payments required herein shall cease as of the date of such casualty until the
tower, in LICENSOR's opinion, is restored to a useable condition for LICENSEE's
operation. If LICENSOR fails to repair, rebuild or restore such tower, LICENSEE
may at its option with 48 hours written notice, repair, rebuild or restore such
tower at LICENSOR's cost and expense.
9. DEFAULT
(a) In the event of LICENSEE's default hereunder, including but not
limited to (i) the failure to make payment of fees, additional fees or other
payments set forth herein which failure continues for more than ten (10) days
after written notice to LICENSEE of such failure, (ii) abandonment of the
premises without LICENSOR'S prior written notice, (iii) the breach of any
provision hereof which breach continues for more than ten (10) days after
written notice to LICENSEE of such breach, or such
7
<PAGE>
longer period as may be reasonably necessary to cure such breach provided
LICENSEE commences cure within such ten (10) day period and continues diligently
to completion, or (iv) the filing by LICENSEE of any case, proceeding or other
action under any existing or future law of any jurisdiction, domestic or foreign
relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking
to have an order for relief entered with respect to LICENSEE, or seeking
reorganization, arrangement, adjustment, winding up, liquidation, dissolution,
composition or other relief with respect to it or its debts, or the making by
LICENSEE of any assignment or any other arrangement for the general benefit of
creditors under any statute, in addition to other legal or equitable remedies
available, LICENSOR shall be entitled upon providing LICENSEE notice and a
reasonable cure period, at LICENSOR's option to terminate this Agreement and
remove all of LICENSEE's equipment, improvements or personal property located on
the premises at LICENSEE's cost and expense. In the event that LICENSOR incurs
any cost or expenses on behalf of LICENSEE or in connection with LICENSEE's
obligations hereunder, such sums shall be immediately due to LICENSOR upon
rendering of an invoice to LICENSEE as an additional fee hereunder.
(b) In the event of any such default by LICENSEE hereunder, LICENSOR
agrees to use its best efforts to notify not only LICENSEE, but any lender or
mortgagee of LICENSEE holding the applicable license for any of LICENSEE's
equipment at such license location as collateral for any indebtedness of
LICENSEE to such lender or mortgagee, which lender or mortgagee and its address
LICENSEE has made known to LICENSOR in writing, of such default. LICENSOR agrees
that any lender or mortgagee or any parent or affiliate of LICENSEE may cure
such default and cause all of LICENSEE's obligations hereunder to be timely
performed, in which event Licenser shall not declare said LICENSEE in default.
(c) In the event of LICENSOR's default hereunder, including but not
limited to (i) abandonment of the premises without LICENSEE'S prior written
notice, (ii) the breach of any provision hereof which breach continues for more
than ten (10) days after written notice to LICENSOR of such breach, or such
longer Period as may be reasonably necessary to cure such breach provided
LICENSEE commences cure within such ten (10) day period and continues diligently
to completion, or (iii) the filing by LICENSOR of any case, proceeding or other
action under any existing or future law of any jurisdiction, domestic or foreign
relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking
to have an order for relief entered with respect to LICENSOR, or seeking
reorganization, arrangement, adjustment, winding up, liquidation, dissolution,
composition or other relief with respect to it or its debts, or the making by
LICENSOR of any
8
<PAGE>
assignment or any other arrangement for the general benefit of creditors under
any statute, in addition to other legal or equitable remedies available,
LICENSEE shall be entitled upon providing LICENSOR notice and a reasonable cure
period, at LICENSEE's option to terminate this Agreement. In the event that
LICENSEE incurs any cost or expenses on behalf of LICENSOR or any actual damages
in connection with LICENSOR's obligations hereunder, such sums shall be payable
to LICENSEE.
10. NOTICES
All notices required to be given hereunder by LICENSOR or LICENSEE
shall be given in writing either by telecopier, overnight, other facsimile
transmission, certified or registered mail at the address of the recipient.
LICENSOR: AMERICAN TOWER CORPORATION
OR ITS SUBSIDIARY
3411 RICHMOND AVE., SUITE 400
HOUSTON, TX 77046-3401
Telephone #(713) 693-0000
REMITTANCE TO: AMERICAN TOWER CORPORATION
OR ITS SUBIDIARY
P. O. BOX 22209
HOUSTON, TX 77227-2209
LICENSEE: PATHNET, INC.
1015 31st STREET, N.W.
WASHINGTON, D.C. 20007
Telephone #(202)625-7284
11. INSURANCE
(a) LICENSOR shall maintain in full force during the term of this
Agreement the following insurance:
(i) Worker's Compensation and Employers' Liability Insurance as
prescribed by applicable law, including insurance covering liability under the
Longshoremen's and Harbor Workers' Act and the Jones Act, if applicable;
(ii) Comprehensive General Liability Insurance (Bodily Injury
and Property Damage), the limits of liability of which shall not be less than
$1,000,000 per occurrence. All such
9
<PAGE>
insurance policies shall contain a waiver of subrogation by the insurer in favor
of LICENSEE.
The above insurance shall provide that LICENSEE will receive not less
than 30 days written notice prior to any cancellation of, or material change in
coverage. The insurance specified in Item (ii) shall contain a waiver of
subrogation against LICENSEE and shall name LICENSOR as additional insured
provided that the insurance is primary coverage with respect to all insured, and
contain a standard cross-liability endorsement.
(b) LICENSEE shall keep in full force and effect during the term of
this Agreement a comprehensive general liability insurance policy, including
blanket contractual and completed operations coverage, with limits of liability
of at least $1,000,000 in respect of bodily injury, including death, arising
from any one occurrence, and $1,000,000 in respect of damage to property arising
from any one occurrence. Said insurance policy shall be endorsed to include
LICENSOR as an additional insured and shall provide that LICENSOR will receive
at least thirty (30) days prior written notice of any cancellation or material
change in such insurance policy. LICENSEE shall furnish to LICENSOR a
certificate of insurance confirming that the insurance coverage as specified
herein is in full force and effect. Such policy shall contain a waiver of
subrogation against LICENSOR.
(c) Notwithstanding the foregoing insurance requirements, the
insolvency, bankruptcy, or failure of any insurance company carrying insurance
for LICENSEE or LICENSOR, or failure of any such insurance company to pay claims
accruing, shall not be held to waive any of the provisions of this Agreement or
relieve LICENSEE or LICENSOR from any obligations under this Agreement.
12. ASSIGNMENT
(a)LICENSOR reserves the right to assign, transfer, mortgage or
otherwise encumber its interest in the property on which the tower is located
and/or its interest in the Agreement. LICENSEE agrees upon demand to execute and
deliver to LICENSOR such further instruments subordinating this Agreement in
connection with any debt of LICENSOR as may be required by LICENSOR, in
connection with LICENSOR's contemplated transaction provided the holder of such
superior lien agrees to recognize this Agreement and LICENSEE's rights
hereunder, and agrees not to disturb LICENSEE in the exercise of its rights
hereunder. LICENSEE further agrees to execute and deliver to any Lender of
LICENSOR an
10
<PAGE>
Estoppel Certificate containing such information as may be reasonably requested
by such Lender.
(b) LICENSEE reserves the right to assign, transfer, mortgage or
otherwise encumber its license in any tower hereunder and/or its interest in the
Agreement. LICENSOR further agrees to execute and deliver to any Lender of
LICENSEE any certificate containing such information as may be reasonably
requested by such Lender.
13. REGULATIONS
This Agreement is made subject to all local, state and federal laws
and regulations now or hereafter in force, and shall not be modified, extended
or terminated except by an instrument duly signed by LICENSOR and LICENSEE.
Waiver of a breach of any provision hereof under any circumstances will not
constitute a waiver of any subsequent breach of such provision, or of a breach
of any subsequent breach of such provision, or of a breach of any other
provision of this Agreement. This Agreement or any rights hereunder may not be
assigned, transferred or otherwise encumbered by LICENSEE without prior written
consent of LICENSOR, which shall not be unreasonably withheld.
14. BROKERAGE FEES
LICENSOR and LICENSEE represent and warrant to each other that no
broker was involved in connection with this transaction and each party agrees to
indemnify and hold the other harmless from and against the claims of any broker
made in connection with this transaction.
15. AGREEMENT
Except for as agreed upon in the Binding Term Sheet by and between
LICENSOR and LICENSEE, dated February 17, 1998, as amended, this Agreement
contains the entire agreement of the parties hereto, and there are no oral
representations or agreements by either party hereto which conflict with, modify
or otherwise change or affect any provisions herein contained. This Agreement
shall be governed by the laws of the State of Texas.
16. DISPUTE
Any dispute shall be attempted to be resolved through amicable settlement
discussions. Each party hereby agrees to use good faith efforts to reach
settlement through amicable settlement
11
<PAGE>
discussions. Any and all disputes, controversies or claims between the parties
arising under, out of, or in any way relating to this agreement shall be finally
settled by arbitration to be held in Washington, D.C. according to the
commercial arbitration rules of the American Arbitration Association, by one
arbitrator, appointed and acting in accordance with said rules and this section,
and the fees and expenses of said arbitrator to be equally borne by the parties
unless otherwise directed by the arbitrator. It is expressly understood and
agreed by the parties that the findings of said arbitrator shall be conclusive
on them, their successors and permitted assigns and may be entered as a judgment
in a court of record. Notwithstanding the foregoing, each party shall have the
right to apply to a court of competent jurisdiction for such equitable relief as
is necessary to preserve and enforce its rights under this agreement.
12
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
EXECUTED AT HOUSTON, TEXAS, THIS THE 23RD DAY OF JULY, 1998.
LICENSOR: ATC TOWER CORP.
BY: /s/ Dudley G. Norman
-------------------------------------
Dudley G. Norman
Vice President
LICENSEE: PATHNET, INC.
BY: /s/ Dave Schaeffer
-------------------------------------
PRINTED NAME: Dave Schaeffer
----------------------------
TITLE: Chairman
-----------------------------------
13
<PAGE>
EXHIBIT A
14
<PAGE>
DETROIT, MICHIGAN
TO
PITTSBURGH, PENNSYLVANIA
<PAGE>
EXHIBIT A
SITE NAME: OAKVILLE, MI
LT: 42-04-30 LG: 83-34-37.
A. 4 antennas at the 325', 290', 240' and 220' AGL of the tower.
B. 1155' flexible coaxial transmission line between antenna and
radio equipment anchored to the tower.
C. Radio communications equipment consisting of a
transmitter/receiver operating on a frequency of ______TX ______RX using call
letters ______ assigned by the FCC.
<PAGE>
EXHIBIT A
SITE NAME: SAMARIA, MI
LT: 41-49-40 LG: 83-31-56.
A. 4 antennas at the 135', 135', 105' and 105' AGL of the tower.
B. 560' flexible coaxial transmission line between antenna and radio
equipment anchored to the tower.
C. Radio communications equipment consisting of a
transmitter/receiver operating on a frequency of ______TX ______RX using call
letters ______ assigned by the FCC.
<PAGE>
EXHIBIT A
SITE NAME: TOLEDO, OH
LT: 41-40-14 LG: 83-29-03.
A. 4 antennas at the 205', 170', 130' and 105' AGL of the tower.
B 690' flexible coaxial transmission line between antenna and radio
equipment anchored to the tower.
C. Radio communications equipment consisting of a
transmitter/receiver operating on a frequency of ______TX ______RX using call
letters ______ assigned by the FCC.
<PAGE>
EXHIBIT A
SITE NAME: WOODVILLE, OH
LT: 41-25-41 LG: 83-20-28.
A. 4 antennas at the 195', 195', 165' and 165' AGL of the tower.
B. 800' flexible coaxial transmission line between antenna and radio
equipment anchored to the tower.
C. Radio communications equipment consisting of a
transmitter/receiver operating on a frequency of ______TX ______RX using call
letters ______ assigned by the FCC.
<PAGE>
EXHIBIT A
SITE NAME: CLYDE, OH
LT: 41-15-23 LG: 82-57-30.
A. 4 antennas at the 195', 195', 165' and 165' AGL of the tower.
B. 800' flexible coaxial transmission line between antenna and radio
equipment anchored to the tower.
C. Radio communications equipment consisting of a
transmitter/receiver operating on a frequency of ______TX ______RX using call
letters ______ assigned by the FCC.
<PAGE>
EXHIBIT A
SITE NAME: WILLARD, OH
LT: 41-03-33 LG: 82-43-44.
A. 4 antennas at the 265', 265', 225' and 225' AGL of the tower.
B. 1060' flexible coaxial transmission line between antenna and
radio equipment anchored to the tower.
C. Radio communications equipment consisting of a
transmitter/receiver operating on a frequency of ______TX ______RX using call
letters ______ assigned by the FCC.
<PAGE>
EXHIBIT A
SITE NAME: NOVA, OH
LT: 40-59-35 LG: 82-19-57.
A. 4 antennas at the 255', 255', 220' and 220' AGL of the tower.
B. 1030' flexible coaxial transmission line between antenna and
radio equipment anchored to the tower.
C. Radio communications equipment consisting of a
transmitter/receiver operating on a frequency of ______TX ______RX using call
letters ______ assigned by the FCC.
<PAGE>
EXHIBIT A
SITE NAME: SEVILLE, OH
LT: 41-04-49 LG: 81-51-47.
A. 4 antennas at the 145', 145', 100' and 100' AGL of the tower.
B. 570' flexible coaxial transmission line between antenna and radio
equipment anchored to the tower.
C. Radio communications equipment consisting of a
transmitter/receiver operating on a frequency of ______TX ______RX using call
letters ______ assigned by the FCC.
<PAGE>
EXHIBIT A
SITE NAME: TALLMADGE, OH
LT: 41-05-47 LG: 81-28-27.
A. 4 antennas at the 195', 195', 170' and 160' AGL of the tower.
B. 800' flexible coaxial transmission line between antenna and radio
equipment anchored to the tower.
C. Radio communications equipment consisting of a
transmitter/receiver operating on a frequency of ______TX ______RX using call
letters ______ assigned by the FCC.
<PAGE>
EXHIBIT A
SITE NAME: RAVENNA, OH
LT: 41-09-48 LG: 81-11-14.
A. 4 antennas at the 145', 145', 128' and 115' AGL of the tower.
B. 613' flexible coaxial transmission line between antenna and radio
equipment anchored to the tower.
C. Radio communications equipment consisting of a
transmitter/receiver operating on a frequency of ______TX ______RX using call
letters ______ assigned by the FCC.
<PAGE>
EXHIBIT A
SITE NAME: AUSTINTOWN, OH
LT: 41-06-48 LG: 80-46-13.
A. 4 antennas at the 145', 145', 115' and 115' AGL of the tower.
B. 600' flexible coaxial transmission line between antenna and radio
equipment anchored to the tower.
C. Radio communications equipment consisting of a transmitter/receiver
operating on a frequency of ______TX ______RX using call letters ______ assigned
by the FCC.
<PAGE>
EXHIBIT A
SITE NAME: MOUNT JACKSON, PA
LT: 40-55-30 LG: 80-26-14.
A. 4 antennas at the 215', 215', 185' and 185' AGL of the tower.
B. 880' flexible coaxial transmission line between antenna and radio
equipment anchored to the tower.
C. Radio communications equipment consisting of a transmitter/receiver
operating on a frequency of ______TX ______RX using call letters ______ assigned
by the FCC.
<PAGE>
EXHIBIT A
SITE NAME: GLEN EDEN, PA
LT: 40-43-45 LG: 80-06-20.
A. 4 antennas at the 175', 150', 120' and 80' AGL of the tower.
B. 605' flexible coaxial transmission line between antenna and radio
equipment anchored to the tower.
C. Radio communications equipment consisting of a transmitter/receiver
operating on a frequency of ______TX ______RX using call letters ______ assigned
by the FCC.
<PAGE>
Exhibit 10.27
Portions of this exhibit have been omitted and filed separately with the
Securities and Exchange Commission. Such portions are designated "[***]."
FIXED POINT MICROWAVE SERVICES AGREEMENT
By and Between
PATHNET, INC.
And
KN TELECOMMUNICATIONS, INC.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
<S> <C>
SECTION 1. DEFINITIONS......................................................1
1.1 Definitions............................................................1
1.2 Terms Generally.......................................................11
SECTION 2. RELATIONSHIP OF THE PARTIES.....................................11
2.1 Lessee, Independent Contractor, Representative and Network Manager....12
2.2 No Joint Venture, etc.................................................12
2.3 Restrictions on Actions of Incumbent..................................12
2.4 Right to Notification and Bid.........................................12
SECTION 3. TERM AND EXPIRATION.............................................12
3.1 Term, Extension Periods, and Renewal..................................12
3.1.1 Term...........................................................12
3.1.2 Initial Period.................................................12
3.1.3 First Extension Period.........................................12
3.1.4 Second Extension Period........................................12
3.1.5 Renewal........................................................13
3.2 No Unilateral Right to Terminate......................................13
SECTION 4. COSTS...........................................................13
4.1 Incumbent Costs.......................................................13
4.1.1 Incumbent Items................................................13
4.1.2 Estimated Cost of Incumbent Items..............................13
4.1.3 Incumbent Payment Cap..........................................13
4.1.4 Payment of Incumbent Items.....................................14
4.2 Incumbent Operating and Administration Costs..........................14
4.3 Pathnet Costs.........................................................14
4.3.1 Pathnet Items..................................................14
4.3.2 Estimated Cost of Pathnet Items................................14
4.3.3 No Cap on Pathnet Items........................................15
4.3.4 Payment of Pathnet Items.......................................15
4.3.5 Pathnet Costs Savings..........................................15
4.4 Pathnet Operating and Administration Costs............................15
i
</TABLE>
<PAGE>
<TABLE>
<S> <C>
4.5 Change Orders.........................................................16
4.5.1 General........................................................16
4.5.2 Facility Change Order..........................................16
4.5.3 System Interconnect............................................16
SECTION 5. LEASEHOLD INTEREST..............................................16
5.1 Lease.................................................................16
5.2 Rent for Leased Premises..............................................16
5.3 Term of Lease.........................................................17
5.4 Use of Leased Premises................................................17
5.4.1 Peaceful Enjoyment, Use and Access.............................17
5.4.2 Interference...................................................17
5.5 Visiting and Exiting Facilities.......................................18
5.6 Security, Drug Testing, Substance Abuse and Health and Safety.........18
5.6.1 Security.......................................................18
5.6.2 Drug Testing...................................................18
5.6.3 Substance Abuse Policy.........................................18
5.6.4 Health and Safety..............................................18
5.6.5 Clearances and Other Requirements..............................18
5.6.6 Incumbent Right to Restrict Access.............................19
5.7 Subletting............................................................19
5.8 Surrender.............................................................19
5.9 Colocation............................................................19
5.10 Subordination.........................................................19
5.11 Removal of Equipment..................................................20
5.12 Removal of Hazardous Materials........................................20
5.13 Sale of Initial System................................................20
SECTION 6. PROGRAM MANAGEMENT AND PROJECT MANAGEMENT.......................20
6.1 Program Manager.......................................................20
6.2 Project Management for Modifications..................................20
6.3 Project Management for Installation...................................20
6.4 Pathnet Project Management Personnel..................................20
SECTION 7. SERVICES AND SYSTEM SPECIFICATIONS .............................21
7.1 Services..............................................................21
7.1.1 System Design, Modification, Installation, Operation
and Performance................................................21
7.1.2 Upgrade of System..............................................21
ii
</TABLE>
<PAGE>
<TABLE>
<S> <C>
7.1.3 Incumbent Training.............................................21
7.1.4 Performance of Services........................................21
7.2 Specifications........................................................21
7.2.1 General........................................................21
7.2.2 Channel Plan...................................................22
7.2.3 Specifications, Standards and Inspections......................22
SECTION 8. OWNERSHIP, DEPRECIATION AND ENCUMBRANCE OF SYSTEM...............23
8.1 Ownership of Equipment and Assets.....................................23
8.1.1 Equipment and Assets Owned by Incumbent........................23
8.1.2 Equipment and Assets Owned by Pathnet..........................23
8.2 Depreciation of Equipment.............................................23
8.2.1 Depreciation by Incumbent......................................23
8.2.2 Depreciation by Pathnet........................................23
8.3 Encumbrance...........................................................23
8.3.1 Initial System.................................................23
8.3.2 Other Equipment, Materials, Agreements and Assets..............23
8.3.3 Vendor Remedies................................................23
8.4 Taxes.................................................................23
8.5 Security Interest in Initial System...................................24
8.6 Escrow of Manufacturer's Warranties...................................24
8.6.1 Escrow of Assignment Documents by Pathnet......................24
8.6.2 Removal of Assignment Documents by Incumbent...................24
8.7 FCC Licenses..........................................................25
SECTION 9. EXCESS CAPACITY MARKETING AND SALES.............................25
9.1 Exclusive Representative..............................................25
9.1.1 Pathnet Excess Capacity........................................25
9.1.2 Incumbent Excess Capacity......................................25
9.1.3 Marketing Fee for Sale of Incumbent Excess Capacity............25
9.1.4 Marketing and Sale by Incumbent................................25
9.2 Referrals.............................................................25
iii
</TABLE>
<PAGE>
<TABLE>
<S> <C>
9.2.1 Referrals of Customers by Incumbent............................25
9.2.2 Referrals Fees.................................................26
9.3 Purchase of Available Excess Capacity by Incumbent....................26
9.4 Commercially Reasonable Efforts.......................................26
9.5 Selling Prices for Excess Capacity....................................26
9.6 Barter Arrangements...................................................26
9.7 Assumed Name; Tradenames and Trademarks...............................26
9.8 Customer Agreements...................................................27
9.8.1 Authorization..................................................27
9.8.2 Approval and Consent by Incumbent..............................27
9.8.3 Modifications to System........................................27
9.9 Maintenance of Books and Records and Audit Procedures.................27
9.9.1 Books and Records..............................................27
9.9.2 Incumbent Review and Audit Procedures..........................27
9.9.3 Expenses of Incumbent Reviews and Audits.......................27
9.9.4 Approval of Authorized Representative..........................27
9.10 Quarterly Revenue Reports.............................................28
9.11 Collection and Payment of Revenue.....................................28
9.11.1 Costs of Collection...........................................28
9.11.2 Maintenance Monthly Service Charges...........................28
9.11.3 Taxes on Gross Revenues.......................................28
9.11.4 Definition of Revenue.........................................28
9.11.5 Payments to Incumbent.........................................28
9.11.6 Interest Earned on Undistributed Revenue......................28
9.11.7 Incumbent's Assignees of Revenue..............................28
SECTION 10. FCC LICENSES AND OTHER REGULATORY APROVALS AND LICENSES........29
10.1 FCC Rules and Regulations.............................................29
10.1.1 Microwave Radio Station License...............................29
10.1.2 Common Carrier Reporting Obligations..........................29
10.1.3 Tariff Filings................................................29
10.1.4 Frequency Coordination Notices................................29
10.1.5 Delivery of Copies............................................30
10.1.6 Assistance in Preparation of License Applications.............30
10.1.7 Future Changes in FCC Requirements............................30
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
10.1.8 Spectral Loading Requirements.................................30
10.1.9 Default in FCC License........................................30
10.2 Zoning Requirements...................................................30
10.3 Bureau of Land Management Requirements................................30
10.4 Tower Registration....................................................31
SECTION 11. INSURANCE......................................................31
11.1 Delivery of Certificates of Insurance.................................31
11.2 Pathnet Insurance Coverage............................................31
11.3 Incumbent Insurance Coverage..........................................31
11.4 Proof of Licensed Subcontractors......................................32
SECTION 12. SOFTWARE AND PROPRIETARY RIGHTS................................32
12.1 Pathnet Software......................................................32
12.2 Proprietary Rights....................................................32
SECTION 13. REPRESENTATIONS AND WARRANTIES.................................33
13.1 Representations and Warranties of Each Party..........................33
13.1.1 Due Incorporation and Formation; Authorization of
Agreements; Binding Effect.....................................33
13.1.2 No Conflict; No Default........................................33
13.1.3 No Consent.....................................................33
13.1.4 Compliance With Laws and Regulations...........................33
13.1.5 Permits........................................................34
13.1.6 Title to Assets, Properties and Rights and Related Matters.....34
13.1.7 Labor Matters..................................................34
13.1.8 No Discrimination..............................................35
13.1.9 Disclaimer.....................................................35
13.2 Representations and Warranties of Pathnet.............................35
13.2.1 Services.......................................................35
13.3 Representations and Warranties of Incumbent...........................36
13.3.1 Union and Labor Relations......................................36
SECTION 14. DELIVERIES.....................................................36
14.1 Deliveries by Incumbent...............................................36
14.2 Deliveries by Pathnet.................................................36
</TABLE>
v
<PAGE>
<TABLE>
<S> <C>
SECTION 15. INDEMNIFICATION AS A RESULT OF THIRD PARTY CLAIMS..............36
15.1 Indemnification by Pathnet............................................36
15.2 Indemnification by Incumbent..........................................36
15.3 Intellectual Property Indemnification - Pathnet.......................36
15.4 Intellectual Property Indemnification - Incumbent.....................37
SECTION 16. LIABILITY OF THE PARTIES TO EACH OTHER.........................37
16.1 Liability Generally...................................................37
16.2 Liability Restrictions................................................37
16.3 Force Majeure.........................................................38
SECTION 17. INFORMAL DISPUTE RESOLUTION; ARBITRATION.......................38
17.1 Informal Dispute Resolution...........................................38
17.1.1 Role of Program Manager.......................................38
17.1.2 Notice of Breach, Cure and Remedies...........................38
17.2 Arbitration...........................................................38
17.2.1 Arbitration; Resolution of Disputes...........................38
17.2.2 Referral to Binding Arbitration................................38
17.2.3 Binding Effect.................................................39
17.2.4 Use of Courts and Other Legal Remedies........................39
17.2.5 Arbitration Process...........................................39
SECTION 18. MISCELLANEOUS..................................................39
18.1 Notices...............................................................39
18.2 Binding Nature; Entire Agreement......................................40
18.3 Amendment.............................................................40
18.4 Severability..........................................................40
18.5 Governing Law.........................................................40
18.6 Survival..............................................................40
18.7 Assignment............................................................41
18.8 Waiver................................................................41
18.9 Recordation...........................................................41
18.10 Good Faith Renegotiation.............................................41
18.11 Confidential Terms and Conditions....................................41
18.12 Incumbent's Designated Representative................................41
18.13 Outsourcing..........................................................41
18.14 Employment Solicitation..............................................41
18.15 Execution of an Amended Schedule B...................................42
</TABLE>
vi
<PAGE>
THIS FIXED POINT MICROWAVE SERVICES AGREEMENT is made and entered into as of
the 2nd day of June, 1998 (the "Effective Date"), by and between Pathnet, Inc.
("Pathnet"), a Delaware corporation and KN Telecommunications, Inc.
("Incumbent"), a Colorado corporation (collectively, the "Parties" and each, a
"Party".
W I T N E S S E T H:
WHEREAS, Pathnet is engaged in the business of creating high capacity,
digital, microwave communications systems for purposes of marketing and selling
the excess long distance telecommunications capacity created by such systems;
WHEREAS, Incumbent is the owner and operator of an existing microwave
telecommunications system; and
WHEREAS, Incumbent desires to engage Pathnet as, and Pathnet desires to (i)
install, manage, and operate a high capacity digital microwave system along
Incumbent's current microwave paths and (ii) act as Incumbent's sole
representative for the purpose of marketing and selling any Excess Capacity
created by such high capacity digital microwave system.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the Parties agree as follows:
SECTION 1. DEFINITIONS.
1.1 Definitions: As used in this Agreement, the following terms shall have
the meanings indicated:
1.1.1 1/0 Multiplexer: Any device that multiplexes capacity between the
DS-1 and the DS-0 levels.
1.1.2 1 x 1: A microwave radio configuration consisting of a primary
and a protect radio.
1.1.3 Affiliate: With respect to any Person, any other Person that
directly or indirectly controls, is controlled by, or is under common
control with such Person. For the purposes of this definition, "control"
(including the terms "controlled by" and "under common control with"), as
used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting
securities, by contract, or otherwise.
1.1.4 Agreement: This Fixed Point Microwave Services Agreement,
including the Schedules and Exhibits attached hereto, as the same may be
amended, supplemented or modified in accordance with the terms hereof.
1.1.5 Alarm and Event Report: As defined in Section 7.7 of Schedule A.
2
<PAGE>
1.1.6 Amended Schedule B: As defined in Section 18.15.
1.1.7 Arbitration Rules: As defined in Section 17.2.2.
1.1.8 As-Built Drawing: As defined in Section 4.1.4 of Schedule A.
1.1.9 Association: As defined in Section 17.2.2.
1.1.10 Assignment Documents: As defined in Section 8.6.1.
1.1.11 Available Excess Capacity: The total Pathnet Excess Capacity
available (and not allocated) for use or sale on the System at any given
time from Commissioning through the Expiration Date. Capacity that is the
subject of an agreement between Pathnet and a third-party concerning the use
of such capacity by that third-party is "not available for use or sale".
1.1.12 Average Sold Excess Capacity: The cumulative average of
[(Pathnet Excess Capacity Available Excess Capacity)/Pathnet Excess
Capacity] taken as a percentage.
1.1.13 Bit Error Rate: The number of received bits in error compared to
the total number of bits received.
1.1.14 Breaching Party: As defined in Section 17.1.2.
1.1.15 Business Day: Any day other than a Saturday, a Sunday, or a day
on which the banking institutions in either New York, New York, or the city
and state in which the principal executive offices of Pathnet within the
United States are located, are not open for business.
1.1.16 Capacity Expansion: An increase in telecommunication channels a
System is able to transmit, receive and transport above those created by the
installation of the Initial System, achieved by an addition to or change in
equipment, including, without limitation, the addition of radios.
1.1.17 Capacity Expansion Schedule: As defined in Section 7.1 of
Schedule A.
1.1.18 CERCLA: Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Section 6901 et seq., as amended.
1.1.19 Channel Plan: As defined in Section 1.1 of Schedule A.
3
<PAGE>
1.1.20 Commissioning: With respect to each path or Segment, the date on
which the circuits of such path or Segment are available for service after
completion of all required site acceptance testing on the Initial System or
any Capacity Expansion.
1.1.21 Customer Agreements: As defined in Section 9.8.1.
1.1.22 Cutover Plan: As defined in Section 4.1.1 of Schedule A.
1.1.23 DS-0: 64,000 bits per second; The world-wide standard speed for
digitizing one voice conversation using pulse code modulation, which is
approximately equivalent to a single voice or data channel.
1.1.24 DS-1: 24 DS-0's.
1.1.25 DS-3: 672 DS-0's or 28 DS-1's.
1.1.26 Deficiency List: As defined in Section 5.7 of Schedule A.
1.1.27 Dispute: As defined in Section 17.2.1.
1.1.28 Drop and Insert: That process wherein a part of the information
carried in a transmission system is demodulated (dropped) at an intermediate
point and different information is entered (inserted) for subsequent
transmission.
1.1.29 Effective Date: As defined in the introductory paragraph of this
Agreement or the date of any Amended Schedule B, as the context indicates.
1.1.30 Error Free Second: Any one-second interval that does not contain
a measurable bit error.
1.1.31 Encumbrances: Any security interests, mortgages, restrictions,
liens, pledges, options, rights of first refusal and other encumbrances, as
applicable, whether or not relating to the extension of credit or the
borrowing of money. To "Encumber" shall mean to effect any Encumbrance.
1.1.32 Equipment: Any and all digital microwave radios, radio
components, cards, antennas, waveguides, multiplexers, software and other
equipment or parts required for the operation of the System provided and
installed by Pathnet as set forth on Exhibit A-1 to Schedule A.
1.1.33 Errored Seconds: Any one-second interval during which one or
more bit errors occur.
1.1.34 Escrow Agreement: As defined in Section 4.1.4.
4
<PAGE>
1.1.35 Excess Capacity: The Pathnet Excess Capacity and the Incumbent
Excess Capacity.
1.1.36 Existing System Inventory: As defined in Section 1.1 of Schedule
A.
1.1.37 Expiration Date: The date on which this Agreement and the rights
and obligations hereunder are terminated or expire in accordance with
Section 3.
1.1.38 FAA: The Federal Aviation Administration, or any other Federal
agency at the time administering tower registration requirements and
regulations.
1.1.39 Failed Second: Any one-second interval that has 1,544 bit errors
at a DS-1 rate.
1.1.40 Facilities: Incumbent's towers, shelters, sites and all
equipment owned by Incumbent relating to and used in association with such
towers, shelters and sites for the purpose of operating the System. The
Facilities are listed in Schedule B, as such schedule may be amended from
time to time by mutual agreement of the Parties.
1.1.41 FCC: The Federal Communications Commission, or any other Federal
agency at the time administering the Communications Act of 1934, as amended,
the Telecommunications Act of 1996, as amended and the rules and regulations
promulgated thereunder.
1.1.42 FCC Code: The Communications Act of 1934, as amended, the
Telecommunications Act of 1996, as amended and the rules, regulations and
policies promulgated thereunder and related thereto.
1.1.43 First Extension Period: As defined in Section 3.1.3.
1.1.44 Force Majeure Event: As defined in Section 16.3.
1.1.45 Form 415: As defined in Section 10.1.1.
1.1.46 Frequency Availability Model: As defined in Section 1.1 of
Schedule A.
1.1.47 Frequency Diversity: A method of protecting a radio signal by
providing a second radio signal on a different frequency, which will assume
the radio signal load when the regular channel fails.
1.1.48 Governmental Authority: Any nation or government, any state or
other political subdivision thereof and any court, panel, judge, board,
bureau, commission, agency or other entity, body or other person exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government.
5
<PAGE>
1.1.49 Hazardous Material: Any material amount of any substance, matter
or waste which is or becomes regulated by any Federal, state or local law,
ordinance, order, rule, regulation, code or any government restrictions or
requirement including, but not limited to, asbestos, petroleum products and
"Hazardous Substances" and "Hazardous Wastes" (as such terms are defined in
CERCLA and RCRA).
1.1.50 Incumbent: As defined in the introductory paragraph.
1.1.51 Incumbent Estimated Costs: As defined in Section 4.1.2. Such
costs shall be appended to Schedule C upon completion of Pathnet's due
diligence and by mutual agreement of the Parties.
1.1.52 Incumbent Items: As defined in Section 4.1.1.
1.1.53 Incumbent Payment Cap: As defined in Section 4.1.3.
1.1.54 Incumbent Desired Path: As defined in Section 9.3.
1.1.55 Incumbent Excess Capacity: As defined in Section 9.1.2.
1.1.56 Incumbent Representative: As defined in Section 18.12.
1.1.57 Initial System: The initial system with a 1 x 1 configuration
which is comprised of the first 84 DS-1's (which is equivalent to 2,040
DS-0's) of the System and the System's 84 DS-1 protect channels.
1.1.58 Initial Period: As defined in Section 3.1.2.
1.1.59 Interconnection: The point at which a private network is
connected to (i) the PSTN, which can include IXC POPs, tandem access points,
the central office, internet service providers, or major industrial customer
points of presence or (ii) another private network.
1.1.60 Interference: Any measurable impairment in the performance of
the System or the quality of the signals received or transmitted on the
System.
1.1.61 IXC: An inter-exchange carrier; a telephone company that
provides long-distance telephone service between LATA's but not within any
one LATA.
1.1.62 Judgment: Any order, judgment, writ, decree, award or other
determination, decision or ruling of any court, judge, justice or
magistrate, any other Governmental Authority or any arbitrator.
6
<PAGE>
1.1.63 LATA: Local Access and Transport Area; one of 161 local
geographic areas in the United States within which a local telephone company
may offer telecommunications services.
1.1.64 Leased Premises: As defined in Section 5.1.
1.1.65 Leased Premises Encumbrance: As defined in Section 5.10.
1.1.66 Losses: Any and all losses, claims, fines, penalties, causes of
action, judgments, assessments, damages, liabilities, expenses (including
reasonable attorneys' and accountants' fees), assessments sustained,
suffered or incurred arising from any matter.
1.1.67 Maintenance Services Agreement: The Maintenance and Provisioning
Services Agreement, by and between Pathnet and Incumbent to be dated and
executed by the Parties, as the same may be amended from time to time in
accordance with its terms.
1.1.68 Material Adverse Effect: Any event, fact, circumstance or
occurrence, which results or would result in a material adverse change in or
a material adverse effect on any of: (i) the condition (financial or
otherwise), business, performance, operations, properties, or prospects of
such Person; (ii) the legality, validity or enforceability of this
Agreement; or (iii) the ability of such Person to perform its material
obligations under this Agreement.
1.1.69 Modifications SOW: As defined in Section 2.1 of Schedule A.
1.1.70 Network Operating Center: As defined in Section 7.5 of Schedule
A.
1.1.71 Network Management System: As defined in Section 7.6 of Schedule
A.
1.1.72 Non-Breaching Party: As defined in Section 17.1.2.
1.1.73 OC-3 Multiplexer: Any device that multiplexes capacity between
the OC-3 and the DS-1 levels.
1.1.74 Order Wire: A service channel consisting of a 64,000 bit per
second circuit between sites.
1.1.75 OSHA: The Occupational Safety and Health Act, as amended.
1.1.76 Outage: When the Bit Error Rate in each second is worse than
10-3 for a period of ten (10) consecutive seconds.
1.1.77 Part 101: Part 101 of Title 47 of the Code of Federal
Regulations, as amended.
7
<PAGE>
1.1.78 Party: As defined in the introductory paragraph.
1.1.79 Path Studies: As defined in Section 1.1 of Schedule A.
1.1.80 Pathnet: As defined in the introductory paragraph.
1.1.81 Pathnet Estimated Costs: As defined in Section 4.3.2.
1.1.82 Pathnet Excess Capacity: At any given time, the
telecommunications channels or DS-0's that the System creates, transports
and receives, less the capacity allocated to Incumbent and to the protect
channels pursuant to the Channel Plan, as amended from time to time.
1.1.83 Pathnet Items: As defined in Section 4.3.1.
1.1.84 Pathnet Software: The software (including applications software
and systems software) owned or licensed from a third party by Pathnet or
owned and developed by Pathnet used to provide the services covered in this
Agreement.
1.1.85 PCN: A Prior Coordination Notice sent pursuant to Part 101.
1.1.86 Permits: Any and all authorizations, approvals, consents,
licenses, permits, easements, certificates and other rights and permissions
necessary to conduct such Person's business or perform such Person's
obligations and to own, lease and operate such Person's properties as
currently or as anticipated to be conducted, owned, leased or operated.
1.1.87 Person: An individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock
company, or other entity of any kind or any Governmental Authority.
1.1.88 POP: Point Of Presence; The interconnection between any two
facilities based networks.
1.1.89 Progress Report: As defined in Section 4.1.2 of Schedule A.
1.1.90 Pre-Commissioning Test Equipment: All equipment required for the
testing required to be performed on the System pursuant to Section 5 of
Schedule A, including, but not limited to, all required digital volt meters,
optical power meters, oscilloscopes, RF signal generators, noise figure
meters, noise figure test sets, RF variable attenuators, DADE adjust cables,
receiver card extenders and extension cords.
1.1.91 Preliminary Construction Schedule: As defined in Section 1.1 of
Schedule A.
8
<PAGE>
1.1.92 Project Drawings: As defined in Section 1.3 of Schedule A.
1.1.93 Project Management Plan and Schedule: As defined in Section
4.1.1 of Schedule A.
1.1.94 Protection Configuration: An engineering plan under which
channel capacity is protected either on a fully redundant basis or on a 1 x
n protection basis.
1.1.94 PSTN: Publicly Switched Telephone Network.
1.1.96 Quarterly Revenue Report: As defined in Section 9.10.
1.1.97 RCRA: Resource Conservation and Recovery Act, 42 U.S.C. Section
9601 et seq., as amended.
1.1.98 Requirement of Law: With respect to any Person, all Federal,
state and local laws, rules, regulations, ordinances Judgments, injunctions,
standards, codes, limitations, restrictions, conditions, prohibitions,
notices, demands or other requirements or determinations of a court or other
Governmental Authority or an arbitrator, applicable to or binding upon such
Person, any of its property or any business conducted by it or to which such
Person, any of its assets or any business conducted by it is subject.
1.1.99 Revenue: As defined in Section 9.11.4.
1.1.100 Second Extension Period: As defined in Section 3.1.4.
1.1.101 Segment: The portion of a microwave communications network
existing between two specified geographic points. For purposes of this
Agreement, Segment A is the portion of Incumbent's microwave communication
network between Joliet Meter, Illinois and Pickrell, Nebraska, as set forth
in Schedule B, as such schedule may be amended from time to time. For
purposes of this Agreement, Segment B is the portion of Incumbent's
microwave communication network between Herscher, Illinois and Melvern,
Arkansas, as set forth in Schedule B as such schedule may be amended from
time to time. For purposes of this Agreement, Segment C is the portion of
Incumbent's microwave communication network between Diller, Nebraska and
Milnerand, New Mexico, as set forth in Schedule B as such schedule may be
amended from time to time. For purposes of this Agreement, Segment D is the
portion of Incumbent's microwave communication network between Okolona,
Arkansas and N. Houston, Texas, as set forth in Schedule B as such schedule
may be amended from time to time. For purposes of this Agreement, Segment E
is the portion of Incumbent's microwave communication network between
Rosston, Oklahoma and Chico, Texas, as set forth in Schedule B as such
schedule may be amended from time to time. The additional Segments added to
the System pursuant to an Amended Schedule B are identified as Segment F,
Segment G, etc.
1.1.102 Services: As defined in Section 7.1.
9
<PAGE>
1.1.103 Severely Errored Seconds: Any one second interval where the Bit
Error Rate is greater than or equal to 1 x 10-3 errors per second at a DS-1
rate regardless of the cause of degradation affecting the channel error
performance including, but not limited to, unprotected equipment failures
and any other factors that contribute to poor performance.
1.1.104 SONET: Synchronous Optical Network; a family of fiber-optic
transmission rates from 51.84 Mbps to 13.22 Gbps, created to provide the
flexibility needed to transport many digital signals with different
capacities and to provide a standard to which manufacturers may design.
1.1.105 Space Diversity: Protection of a radio signal by providing a
separate antenna on the same tower to assume the radio signal load when the
regular transmission path on the primary antenna fades, thereby ensuring
continuous transmission.
1.1.106 Spare Parts: The equipment and parts provided by Pathnet to
Incumbent pursuant to the performance of Incumbent's obligations under the
Maintenance Services Agreement.
1.1.107 Specifications: As defined in Section 7.2.
1.1.108 Statement of Work: As defined in Exhibit A-11 to Schedule A.
1.1.109 Station Log Book: As defined in Section 6.2 of Schedule A.
1.1.110 Subcontractors: Any firm, corporation, or person working
directly or indirectly for a company that furnishes or performs a portion of
the work, labor or material.
1.1.111 Switched Mod Section: A section of network between two adjacent
back-to-back terminals.
1.1.112 System: The high capacity digital SONET microwave radio
equipment, antenna, waveguide, Facilities, Equipment, Network Management
System, all other equipment and materials related thereto, and FCC licenses
and other licenses and Permits related thereof, operated for the purpose of
transmitting, receiving and transporting telecommunications signals over
Incumbent's Segments set forth on Schedule B and any Capacity Expansion that
may be constructed. For purposes herein, the System shall comprise the 1X1
Initial System and any subsequent addition of Capacity Expansion radios,
each referred to as the 1X2 System, 1X3 System, etc.
1.1.113 System Budget: As defined in Section 1.1 of Schedule A.
1.1.114 System Design: As defined in Section 1.1 of Schedule A.
10
<PAGE>
1.1.115 Technology: Inventions, ideas, processes, formulas, and
know-how.
1.1.116 Term: As defined in Section 3.1.1.
1.1.117 Tower Analysis: As defined in Section 1.1 of Schedule A.
1.1.118 Vendor Credit Assurances: As defined in Section 4.3.4.
1.1.119 Wayside Channels: The additional DS-1 of telecommunications
capacity within each radio beyond the base OC-3 capacity.
1.2 Terms Generally. The definitions in Section 1.1 and elsewhere in this
Agreement shall apply equally to both the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "herein,"
"hereof," "hereto" and "hereunder" and words of similar import refer to this
Agreement (including the Schedules and Exhibits) in its entirety and not to any
part hereto unless the context shall otherwise require. All references herein to
Sections, Exhibits and Schedules shall be deemed references to Sections of, and
Exhibits and Schedules to, this Agreement unless the context shall otherwise
require. Any reference in this Agreement to a "day" or number and "days"
(without the explicit qualification of "Business") shall be interpreted as a
reference to a calendar day or number of calendar days. If any action or notice
is to be taken or given on or by a particular calendar day, and such calendar
day is not a Business Day, then such action or notice shall be deferred until,
or may be taken or given on, the next Business Day.
SECTION 2. RELATIONSHIP OF THE PARTIES.
2.1 Lessee, Contractor, Representative and Network Manager. Incumbent shall
appoint Pathnet and Pathnet shall serve in the following capacities during the
Term of this Agreement:
(i) In the role of lessee, Pathnet will lease space from Incumbent at
Incumbent's sites and Facilities on which to build and operate the System.
As consideration for such lease, Pathnet will pay rent to Incumbent as set
forth in Section 5.
(ii) As an independent contractor, Pathnet will perform analytical
pre-design and design services, and install, test and ensure the performance
of the System, as well as any upgrades to such System in accordance with the
terms and conditions set forth in Section 7 and in Schedule A.
(iii) As the exclusive representative for the marketing and sale of
Excess Capacity for Incumbent, Pathnet will market and sell the Excess
Capacity created by System, as described in Section 9.
11
<PAGE>
(iv) Also, as an independent contractor, in the role of a network
manager, Pathnet will serve as the point of contact for any Outage or
trouble on the System and shall operate the Network Management System and
the Network Monitoring Center as described in Section 7.5 and Section 7.6 of
Schedule A.
2.2 No Joint Venture, etc. The Parties expressly disclaim any intention to
create, and nothing herein shall be construed as creating, a partnership, joint
venture, agency or employment relationship between Pathnet and Incumbent.
2.3 Restrictions on Actions of Incumbent. For the Term of this Agreement,
neither Incumbent, nor any Affiliate of Incumbent, shall operate from the
Facilities any parallel microwave telecommunications systems at those sites
listed in Schedule B for the purpose of selling or otherwise providing any
capacity on such parallel facilities or systems; provided, however, Incumbent
may (i) operate the PCS, cellular or other communication services from such
Facilities, so long as such services do not Interfere with the System or (ii)
provide a singular microwave telecommunication path for the limited purposes of
interconnectivity from such Facilities.
2.4 Right to Notification and Bid. If and to the extent Incumbent requests
proposals from third parties to develop fiber along Incumbent right-of-ways,
Incumbent shall provide Pathnet notice of such fiber build and grant to Pathnet
a right to bid on such fiber build on like terms.
SECTION 3. TERM AND EXPIRATION.
3.1 Term, Extension Periods, and Renewal.
3.1.1 Term. This Agreement shall commence on the Effective Date and
shall be in full force and effect until the latest date of expiration of any
Segment on the System ("Expiration Date") as set forth in Section 3.1.2,
Section 3.1.3, Section 3.1.4, or Section 3.1.5 (whichever date shall be
later) (collectively the "Term").
3.1.2 Initial Period. As to each Segment, the initial period (the
"Initial Period") shall commence upon Commissioning of such Segment and
shall expire on the fifth (5th) anniversary of the Commissioning of such
Segment.
3.1.3 First Extension Period. In the event the Average Sold Excess
Capacity on a Segment is greater than or equal to ten percent (10%) during
the Initial Period of such Segment, the Term of the Agreement shall be
automatically extended as to such Segment for an extension period (the
"First Extension Period") commencing on the day after the expiration of the
Initial Period as to such Segment and expiring on the tenth (10th)
anniversary thereafter.
3.1.4 Second Extension Period. In the event the Average Sold Excess
Capacity on a Segment is greater than or equal to ten percent (10%) during
the Initial
12
<PAGE>
Period and the First Extension Period of such Segment, the Term of the
Agreement shall be automatically extended as to such Segment for a second
extension period (the "Second Extension Period") commencing on the day after
the expiration of the First Extension Period as to such Segment and expiring
on the tenth (10th) anniversary thereafter.
3.1.5 Renewal. Upon expiration of the Initial Period or any Extension
Period as to any Segment, this Agreement shall be automatically renewed as
to such Segment for a one-year Term, and at the end of such one-year Term
for additional one-year terms for each year thereafter, unless terminated by
either Party upon written notice to the other Party to that effect delivered
within the ninety (90) day period immediately before the Expiration Date or
any such one-year Term.
3.2 No Unilateral Right to Terminate. Neither Party shall have the right to
terminate this Agreement or any rights or obligations of either Party pursuant
to this Agreement.
SECTION 4. COSTS.
4.1 Incumbent Costs.
4.1.1 Incumbent Items. Incumbent shall pay for the services, functions,
materials and other items listed in Section 1 of Schedule C and Exhibit C-1
to Schedule C (collectively, the "Incumbent Items") in the manner set forth
in Section 4.1.5.
4.1.2 Estimated Cost of Incumbent Items. As of the Effective Date and
subject to Section 4.1.3, the total estimated cost of the Incumbent Items
for each Segment are set forth in Section 1 and Exhibit C-1 to Schedule C,
as such costs shall, upon mutual agreement of the Parties, be appended to
Schedule C after completion of Pathnet's due diligence as to each of
Segments B, C, D, and E (the "Incumbent Estimated Costs"). Subject to the
Incumbent Payment Cap, the costs of such Incumbent Items and such Incumbent
Estimated Costs are estimates and may be subject to increases or decreases.
4.1.3 Incumbent Payment Cap. Subject to Section 4.5, Incumbent shall
pay an amount not to exceed [***] per each Facility, as defined in
Schedule B, as amended from time to time (the "Incumbent Payment Cap")
for the performance and completion of the Incumbent Items at such
Facility; provided the Incumbent Items to be specified in Segments B, C,
D and E shall be (i) substantially equivalent to those specified in
Schedule C and Exhibit C-1 for Segment A and (ii) reasonably required for
the operation of the System. The cost of Incumbent Items shall be accrued
in accordance with generally accepted accounting principles. Payment by
Incumbent of any Incumbent Item shall be approved by Pathnet prior to the
payment thereof, if and to the extent such payment is subject to the
Incumbent Payment Cap. Pathnet shall pay for all amounts incurred over
the Incumbent Payment Cap in the completion and performance of the
Incumbent Items. As soon as Incumbent is aware that Incumbent will pay an
amount in excess of the Incumbent Payment Cap, Incumbent shall notify
Pathnet to that effect.
13
<PAGE>
4.1.4 Payment of Incumbent Items.
(a) Incumbent shall promptly pay for the Incumbent Items upon receipt
of a purchase order, invoice or other bill from Pathnet or from an equipment
vendor or service provider (pursuant to any Pathnet requested retention of
payment of any invoice), provided Pathnet has approved such purchase order,
invoice or bill before any payment is made by Incumbent.
(b) Pursuant to the Escrow Agreement by and between Pathnet and
Incumbent substantially in the form attached hereto as Schedule D (the
"Escrow Agreement") and to be executed within thirty (30) days after the
Effective Date, Incumbent shall deposit in an escrow account an amount equal
to ten percent (10%) of the Incumbent Estimated Costs of each Segment upon
mutual agreement of the budget for such Segment which escrowed funds
(including any interest accrued while in escrow) shall be either (i)
provided to Pathnet upon Incumbent's failure to pay any purchase order,
invoice or bill under Section 4.1.4(a) or (ii) returned to Incumbent upon
Commissioning of the Initial System or upon Incumbent payment of at least
eighty (80%) percent of Incumbent Estimated Costs, whichever event occurs
earlier.
(c) At Incumbent's option, Pathnet shall pay any or all Incumbent
Estimated Costs accrued for the purchase of Incumbent Items in fiscal year
1998; provided that (i) Incumbent represents and warrants that it shall pay
back to Pathnet such costs plus any interest accrued after the date of
Commissioning (such interest to be accrued at an annual rate equal to five
(5) percent) and (ii) Pathnet shall in no event be required to pay Incumbent
any Revenue due and payable under the terms of this Agreement until and
unless such Incumbent Item costs as paid by Pathnet are paid back in full to
Pathnet plus any interest due. Such payment by Pathnet for the Incumbent
Items and repayment owed to Pathnet may, at Pathnet's discretion, be subject
to a separate loan agreement.
4.2 Incumbent Operating and Administration Costs. Incumbent shall pay the
operating and administration costs set forth in Section 2 of Schedule C as such
costs are actually incurred and become due and payable in the course of the
Incumbent's performance of its obligations under this Agreement.
4.3 Pathnet Costs.
4.3.1 Pathnet Items. Pathnet shall pay for services, functions,
materials and other items listed in Section 3 of Schedule C (the "Pathnet
Items").
4.3.2 Estimated Cost of Pathnet Items. On the Effective Date, the total
estimated cost of the Pathnet Items for each Segment is set forth in Section
3 and Exhibit C-2 to Schedule C, as such cost shall, upon mutual agreement
of the Parties, be appended to Schedule C after completion of Pathnet's due
diligence as to each of Segments B, C, D, and E (the "Pathnet Estimated
Costs").
14
<PAGE>
4.3.3 No Cap on Pathnet Items. Pathnet shall pay for all amounts
incurred in completing the Pathnet Items whether or not the cost of
completing such items is less than, equal to or exceeds the Pathnet
Estimated Costs.
4.3.4 Payment of Pathnet Items. To ensure payment of the Pathnet
Estimated Costs and within thirty (30) days after the Effective Date,
Pathnet shall:
(a) deliver to Incumbent vendor credit assurances (the "Vendor Credit
Assurances"), which shall establish and confirm, among other things, that
Pathnet has an adequate credit facility to acquire the Equipment and
Services provided by such vendor; or
(b) deliver to Incumbent the Escrow Agreement pursuant to which, among
other things, (i) Pathnet shall place in escrow funds in an amount equal to
one hundred percent (100%) of the Pathnet Estimated Costs of each Segment
upon mutual agreement of the budget for such Segment less the cost of any
equipment provided by the vendors referred to in the Vendor Credit
Assurances, (ii) the escrow agent named in such Escrow Agreement shall
disburse to Pathnet the funds necessary to pay for the cost of the Pathnet
Items as such Pathnet Items are completed and as Pathnet receives invoices
relating to such Pathnet Items, (iii) in the event that Pathnet fails to
timely meet its payment responsibilities with respect to the Pathnet Items
or fails to complete the System in accordance with Section 13.2.1 (ix), the
escrow agent named in such Escrow Agreement shall disburse to Incumbent the
funds necessary to cure such failure to pay by Pathnet and/or complete the
work and (iv) such Escrow Agreement shall terminate upon Commissioning of
the System and upon such termination any funds remaining in escrow,
including any interest accrued on such funds shall be disbursed to Pathnet.
4.3.5 Pathnet Cost Saving. If and to the extent Pathnet, at Pathnet's
sole discretion, determines that any equipment that is part of Incumbent's
existing system, including, without limitation, any antennas or waveguide,
may be re-usable by Pathnet to install, construct and operate the System,
Pathnet and Incumbent shall share equally any out-of-pocket cost savings to
Pathnet, if and only if Pathnet would otherwise be required to pay for such
equipment and such equipment is fully functional and compatible with the
System.
4.4 Pathnet Operating and Administration Costs. Pathnet shall pay for the
operating and administration costs set forth in Section 4 of Schedule C as such
costs are actually incurred and become due and payable in the course of
Pathnet's performance of its obligations under this Agreement.
4.5 Change Orders.
4.5.1 General. This Agreement anticipates (i) future issuance of change
orders for equipment and services beyond the scope of the Services and this
Section 4, and (ii) Pathnet's provision of additional equipment and services
in accordance with such orders (each a "Change Order"). To the extent
mutually agreed upon by the Parties, all such
15
<PAGE>
Change Orders shall be deemed to be supplements to and governed by the terms
of this Agreement and shall be paid for by the Party responsible for such
equipment or services pursuant to the terms hereof; provided Pathnet and
Incumbent Estimated Costs and the Incumbent Payment Cap may be adjusted
accordingly to reflect any agreed upon change orders.
4.5.2 Facility Change Orders. Pathnet and Incumbent acknowledge that
certain Facilities may require alternate site locations in order to
frequency coordinate the System to a 1X7 configuration. If and to the extent
any Facility requires an alternative site due to unforeseen circumstances
(such as a material change to a condition at a site or Facility resulting
from an unforeseen circumstance at such site or Facility), such alternative
site shall be an amendment to Schedule B and Schedule C.
4.5.3 System Interconnection. Upon written notice to Pathnet,
Incumbent shall have the right to interconnect the System to the
Incumbent system developed pursuant to the Fixed Point Microwave Services
Agreement, dated September 17, 1997, under the terms and conditions of
this Agreement; provided that (i) Incumbent shall pay the costs, which
costs shall not apply to the Incumbent Payment Cap, of [***], and (ii)
Pathnet shall pay the costs of [***] pursuant to a budget to be agreed
upon by the Parties.
SECTION 5. LEASEHOLD INTEREST.
5.1 Lease. Incumbent hereby leases to Pathnet and Pathnet hereby leases from
Incumbent space at each of Incumbent's sites and in the Facilities at such sites
set forth on Schedule B as is necessary for the performance of Pathnet's
obligations and exercise of Pathnet's rights under this Agreement (the "Leased
Premises"), together with a non-exclusive right of access to such Facilities.
5.2 Consideration; Rent for Leased Premises.
5.2.1 Capacity. Pathnet shall pay to Incumbent, as consideration for
the Leased Premises: (i) commencing on Commissioning, an allocation of up
to [***] DS-1's (the equivalent of [***] DS-0's), with a maximum cross
sectional density of up to [***] DS-1's of digital capacity, as set forth
by the Parties in the Channel Plan; provided, that Incumbent and
Incumbent's Affiliates use such allocation of DS-1's only for their own
respective internal communications needs.
5.2.2 Revenue. Pathnet shall pay to the Incumbent, as consideration for
the Leased Premises: (i) commencing [***] of the Revenue, if any,
16
<PAGE>
from the sale of Pathnet Excess Capacity relating to a Segment of the
Initial System (Pathnet shall retain the remaining [***] of such Revenue
except as required as a referral fee to be paid to Incumbent pursuant to
Section 9.2.2) on a Segment-by-Segment basis, (ii) [***] of
the Revenue, if any, from the sale of Pathnet Excess Capacity relating to
a Segment of the Initial System (Pathnet shall retain the remaining [***]
of such Revenue except as required as a referral fee to be paid to
Incumbent pursuant to Section 9.2.2) on a Segment-by-Segment basis and
(iii) commencing [***] of the Revenue, if any, from the sale of Pathnet
Excess Capacity relating to a Segment of the Capacity Expansion (Pathnet
shall retain the remaining [***] of such Revenue except as required as a
referral fee to be paid to Incumbent pursuant to Section 9.2.2) on a
Segment-by-Segment basis.
5.3 Term of Lease. As to each Segment, the term of Pathnet's lease and the
Parties obligations under this Section 5, including, but not limited to,
Pathnet's obligation to pay rent as set forth in Section 5.2, shall commence on
the Effective Date and shall end on the Expiration Date.
5.4 Use of Leased Premises.
5.4.1 Peaceful Enjoyment, Use and Access. Incumbent hereby grants to
Pathnet the right to the peaceful use, enjoyment and possession of the
Leased Premises during the Term of this Agreement as required for the
performance of Pathnet's rights and obligations under this Agreement, which
rights shall include, but not be limited to (i) the right to use Incumbent's
Facilities for the purposes set forth in this Agreement and (ii) upon the
reasonable request by Pathnet, the right to full and free access to
Incumbent's sites, Facilities and related equipment; provided, however, any
such access granted by Incumbent to Pathnet shall be subject to the
security, health and safety and other regulatory, procedural and policy
requirements of Incumbent, as set forth in Section 5.6 and further provided
that Pathnet shall have the right to access the sites to supplement
Incumbent's performance under the Maintenance Services Agreement.
5.4.2 Interference. During the Term of this Agreement, Incumbent shall
not license or otherwise permit any Person to use its Facilities if the use
of such Facilities by such Person would cause any Interference on the System
or with Pathnet's ability to maintain, operate, expand or extend the System.
As of the Effective Date, Incumbent shall not knowingly permit any Person to
use its Facilities or any Incumbent controlled facilities which use would in
any way cause any Interference on the System or with Pathnet's ability to
maintain, operate, expand or extend the System. Notwithstanding the
foregoing in the event any Person causes any such Interference, Incumbent
shall use all best efforts to compel such Person to immediately take any and
all steps necessary to correct and eliminate such Interference, including,
without limitation, enforcing provisions in any lease, license or other
agreement between Incumbent and such Person and compelling such Person to
cease operation of such Person's system, to remove such
17
<PAGE>
Person's equipment or materials or to modify such Person's equipment or
materials. Incumbent acknowledges that any such Interference shall cause
irreparable harm to Pathnet and the prompt cessation of Interference is
material to Pathnet's interest in the Leased Premises and Pathnet's
performance under this Agreement and, as such, Pathnet shall be entitled to
injunctive relief in the enforcement of this Section 5.4.2.
5.5 Visiting and Exiting Facilities. Upon exiting any Facility at the Leased
Premises, Pathnet, on behalf of itself and its employees, agents and
Subcontractors, shall ensure that such Facility is returned to a condition,
which existed immediately prior to such visit subject to reasonable wear and
tear.
5.6 Security, Drug Testing, Substance Abuse and Health and Safety.
5.6.1 Security. Pathnet shall require its employees, agents and
Subcontractors upon any site visit to comply with Incumbent's security
procedures in effect as of the Effective Date, which procedures are attached
hereto as Schedule E. If and to the extent Incumbent requires Pathnet
employees, agents or Subcontractors to be escorted to Incumbent facilities,
such requirements shall be explicitly set forth in Schedule E.
Notwithstanding the foregoing, Incumbent shall allow Pathnet employees,
agents or Subcontractors to bring any testing equipment, photographic
equipment or both video and audio recording equipment necessary for the
performance of Pathnet's obligations under this Agreement.
5.6.2 Drug Testing. Pathnet shall require its employees, agents and
Subcontractors to submit to drug testing in accordance with Incumbent's drug
testing policies and procedures in effect as of the Effective Date, which
policies and procedures are attached hereto as Schedule F.
5.6.3 Substance Abuse Policy. Pathnet shall require its employees,
agents or Subcontractors to comply with Incumbent's substance abuse policies
and procedures in effect as of the Effective Date, which policies and
procedures are attached hereto as Schedule F.
5.6.4 Health and Safety. Pathnet shall require its employees, agents
and Subcontractors to comply with Incumbent's rules and regulations
governing the health and safety of its employees in effect on the Effective
Date, which rules and regulations are attached hereto as Schedule H.
5.6.5 Clearances and Other Requirements. Pathnet shall require its
employees, agents or Subcontractors to (i) apply to Incumbent for any
necessary clearances and (ii) comply with all other applicable requirements,
rules, regulations or ordinances regarding any Person's ability to have
access to Incumbent's sites and Facilities, including, but not limited to,
the Leased Premises, which requirements are set forth as Schedule I.
5.6.6 Incumbent Right to Restrict Access. Notwithstanding Pathnet's
right to visit the Facilities in connection with performance of its duties
under this Agreement, in
18
<PAGE>
the event the requirements, rules or regulations pertaining to facility
visitation set forth on Schedule E, Schedule F, Schedule G, Schedule H and
Schedule I have been violated or when the exercise of such right would pose
a bona fide serious risk of bodily harm or injury to any Person as
determined by the Parties, Incumbent reserves the right to reasonably
restrict or deny Pathnet or its Subcontractors access to the sites. In the
event in Incumbent's reasonable judgment any Subcontractor should be denied
access from Incumbent's premises, Incumbent shall have the right to remove
such person and deny such person access to Incumbent's Facilities.
5.7 Subletting. Pathnet shall not sublet its interest in the Leased
Premises, in whole or in part, without the prior written consent of Incumbent;
provided, however, Pathnet shall have the right to transfer and assign its
rights or obligations under this Agreement to any successor or assign in
accordance with Section 18.7.
5.8 Surrender. Upon the expiration of the Agreement in accordance with
Section 3, Pathnet shall peacefully and quietly surrender occupation of the
Leased Premises to Incumbent, or Incumbent's successors and assigns, without
delivery by Incumbent to Pathnet of any notice to quit or demand for possession.
5.9 Colocation. Incumbent shall allow Pathnet, at no additional charge, to
collocate at Incumbent's sites all equipment necessary to support the System and
Interconnections set forth on Exhibit A-7 to Schedule A and, upon written
notice, any additional interconnections equipment that may be added by Pathnet
from time to time and at any time during the Term of this Agreement, subject to
the limitations set forth in Section 3 of Schedule A.
5.10 Subordination. Subject to its rights hereunder, Pathnet shall
subordinate its interest in the Leased Premises to (i) all deeds of trust, deeds
to secure debts, mortgages and other security instruments now or hereafter
Encumbering all or any portion of the real property described on Schedule B
(each, a "Leased Premises Encumbrance") and (ii) any increases, renewals,
modifications, consolidations, replacements and extensions of any such Leased
Premises Encumbrance provided that, in each case, the holder(s) of such Leased
Premises Encumbrances recognizes and honors this Agreement and agrees not to
disturb Pathnet in the exercise of its rights hereunder. In connection with such
subordination of Pathnet's interest in the Leased Premises to all Leased
Premises Encumbrances, Pathnet shall, as requested by Incumbent, within sixty
(60) days after the Effective Date, execute and deliver a commercially
reasonable subordination, non-disturbance and attornment agreement with all
Persons secured by such Leased Premises Encumbrances. Pathnet shall, as
requested by Incumbent, execute and deliver similar subordination,
non-disturbance and attornment agreements with each future Person secured by a
Leased Premises Encumbrance.
5.11 Removal of Equipment. Pathnet shall, at Incumbent's request, remove any
or all Equipment from Incumbent's Facilities within sixty (60) days after the
Expiration Date. In the event Pathnet fails to perform such requested removal
within such sixty (60) day period, as determined by Incumbent in its sole
discretion, Incumbent may restore each site to its condition as of
Commissioning, (reasonable wear and tear and damage from the elements excepted),
and
19
<PAGE>
Pathnet shall promptly pay Incumbent all costs reasonably incurred by Incumbent
for such removal and restoration.
5.12 Removal of Hazardous Materials. Pathnet shall expeditiously remove from
Incumbent's sites any and all Hazardous Materials, which were brought to
Incumbent's sites by Pathnet during the Term of this Agreement and shall be
legally responsible for the safe disposal of any hazardous materials.
5.13 Sale of Initial System. Within ten (10) days after the later of the
expiration of the Second Extension Period or the expiration of any renewal
period thereafter, if any, Pathnet shall, upon request by Incumbent, sell to
Incumbent the radios and radio software relating to the Initial System for a
purchase price of one dollar ($1.00).
SECTION 6. PROGRAM MANAGEMENT AND PROJECT MANAGEMENT.
6.1 Program Manager. In connection with the Services and other services
performed by Pathnet under this Agreement, Pathnet shall provide a Program
Manager whose duties shall include (i) supervising the project through design,
installation and operation, (ii) supervising the Project Manager, (iii)
overseeing the Field Manager and the other Pathnet personnel, (iv) coordinating
the business operations of the System including the sale of Excess Capacity as
set forth in Section 9 and (v) ensuring the performance of Pathnet's rights and
obligations under this Agreement.
6.2 Project Management for Modifications. In connection with the
modifications of the Facilities set forth in Section 2 of Schedule A, Pathnet
shall provide a Project Manager, a Field Manager, an Applications Engineer and a
Project Engineer, each of whom shall have the duties as set forth in Section 6.4
with respect to such modifications of the Facilities.
6.3 Project Management for Installation. In connection with the installation
of the System set forth in Section 4 of Schedule A, Pathnet shall provide a
Project Manager, a Field Manager, an Applications Engineer and a Project
Engineer, each of whom shall have the duties as set forth in Section 6.4 with
respect to such installation of the System.
6.4 Pathnet Project Management Personnel. The Project Managers, Field
Managers, Applications Engineers and Project Engineers shall each have the
duties as set forth below:
(a) Project Manager. Pathnet shall provide a Project Manager whose
duties shall include ensuring the overall functional integrity of the
delivered System, the preparation, amendment and adherence to a construction
schedule, ordering and coordination all purchases and orders, and
compliance with Pathnet's other obligations under Schedule A.
(b) Field Manager. Pathnet shall provide a Field Manager whose duties
shall include the oversight and direction of all on-site activities, the
coordination of all Subcontractors and all required communication with the
Project Manager.
20
<PAGE>
(c) Applications Engineer. Pathnet shall provide an Applications
Engineer, whose duties shall include the review and translation of the
System configuration into specific hardware requirements, precise interface
levels, intra and inter-rack cabling and all other necessary peripheral
equipment, rack profiles and required Interconnection data.
(d) Project Engineer. Pathnet shall provide a Project Engineer whose
duties shall include the performance of all planning and support activities
and a detailed site survey to gather data for development of the
installation plan and testing plan.
SECTION 7. SERVICES AND SYSTEMS SPECIFICATIONS.
7.1 Services.
7.1.1 System Design, Modification, Installation, Operation and
Performance. Pathnet and Incumbent shall perform their respective functions
with respect to the design, modification, installation, operation and
performance of the System as set forth on Schedule A and in this Section 7
(the "Services") and as set forth in the Statement of Work.
7.1.2 Upgrade of System. Pathnet shall, upon written notice to
Incumbent, in its sole discretion, and at its own expense, and not as a
change order, upgrade the System and Equipment, and the System and Equipment
operation policies and procedures, including, but not limited to, (i)
replacing Equipment, (ii) adding newly available improved Equipment, (iii)
modifying policies, procedures and specifications relating to the System, to
conform such policies, procedures and specifications with new Technology or
industry standards and subject to the conditions set forth in Schedule A,
install and operate any Capacity Expansion on all of or any part of the
System.
7.1.3 Incumbent Training. Pathnet shall provide to Incumbent the
training as set forth on Schedule J.
7.1.4 Performance of the Services. Pathnet shall have the right to
engage Subcontractors to perform any of the Services.
7.2 Specifications.
7.2.1 General. Pathnet and Incumbent shall perform the Services in
accordance with any and all technical and operational specifications set
forth in Schedule A (the "Specifications").
7.2.2 Channel Plan.
(a) Original Channel Plan. On the Effective Date, Incumbent shall
deliver to Pathnet a proposed T-1 channelization plan setting forth its
proposed capacity needs at each site listed on Schedule B. Such capacity
shall in no event exceed the capacity
21
<PAGE>
granted to Incumbent by Pathnet as rent and consideration as set forth in
Section 5.2 and shall be subject to Drop and Insert capacity at each
Switched Mod Section. Pathnet shall incorporate Incumbent's proposed
channelization plan into the Channel Plan subject to the limitations set
forth in this Section 7.2.2.
(b) Amended Channel Plan. Subject to the limit of capacity allocated to
Incumbent as consideration hereunder, Incumbent shall have the right to
request modification to its allocated capacity (as described in the Channel
Plan) along the network any time after Commissioning, provided that
sufficient Drop and Insert capacity exists between each Switched Mod Section
using available Wayside Channels to effect such modification, by providing
written notice to Pathnet to such effect. Within ninety (90) days after
receipt of any such written notice from Incumbent, Pathnet shall make such
modification to the configuration of the Channel Plan at no charge to
Incumbent. Incumbent shall not be entitled to modifications to the Channel
Plan in any manner other than as set forth in this Section 7.2.2. Any
amended channel plans shall be attached as an exhibit to this Agreement.
7.2.3 Specifications, Standards and Inspections. In connection with the
Services set forth in Section 2 and Section 4 of Schedule A, Pathnet shall
comply with the following requirements:
(a) Reasonable Efforts. Pathnet shall use all commercially reasonable
efforts to ensure that the modification of the System set forth in Section 2
of Schedule A and the installation of the System set forth in Section 4 of
Schedule A occur as expeditiously as possible.
(b) Industry Standards. All Services and materials supplied pursuant to
Schedule A must meet or exceed the following standards: (i) EIA RS-195
(latest edition), (ii) EIA/TIA-222 (latest edition), (iii) American Society
of Testing Materials A 325 and A 572, (iv) the applicable sections of the
National Electric Code, (v) the American National Standards Institute, (vi)
ACI 318-83, (vii) ACI-305, (viii) ACI-306, (ix) OSHA 29 CFR 1910 and (x) all
other applicable Federal, state and local regulations of all Governmental
Authorities with jurisdiction; provided, however, in the case of a
conflicting requirement of standards, the more stringent standard shall
apply.
(c) Site Inspections. During the performance of the Services, Incumbent
shall allow Pathnet to perform Facilities inspections at any hour, on any
day subject to the access limitations set forth in Section 5.6.
SECTION 8. OWNERSHIP, DEPRECIATION AND ENCUMBRANCE OF SYSTEM.
8.1 Ownership of Equipment and Assets.
8.1.1 Equipment and Assets Owned by Incumbent. Incumbent shall own the
equipment and assets relating to the System as set forth in Schedule K.
22
<PAGE>
8.1.2 Equipment and Assets Owned by Pathnet. Pathnet shall own the
equipment and assets relating to the System as set forth in Schedule K.
8.2 Depreciation of Equipment.
8.2.1 Depreciation by Incumbent. Incumbent shall have the right to
fully depreciate the equipment and assets currently owned or to be owned by
Incumbent as listed in Schedule K.
8.2.2 Depreciation by Pathnet. Pathnet shall have the right to fully
depreciate the equipment and assets currently owned or to be owned by
Pathnet as listed in Schedule K.
8.3 Encumbrance.
8.3.1 Initial System. Pathnet shall not Encumber the channels of
telecommunications capacity allocated to the Incumbent as rent in accordance
with Section 5.2 of this Agreement produced by such Equipment and, the
radios, radio software, antenna, waveguide, multiplexers or any other
Equipment required to operate the Initial System in accordance with the
Specifications.
8.3.2 Other Equipment, Materials, Agreements and Assets. Pathnet shall
have the right to Encumber (i) the Equipment used in any Capacity Expansion,
(ii) Pathnet's allocated portion of the Revenue generated from the sale of
Excess Capacity in accordance with Section 9, (iii) any Customer Agreement
relating to the System, (iv) this Agreement and any related documents,
instruments and agreements executed and delivered in connection with this
Agreement and any rights and obligations hereunder or thereunder and (v) its
leasehold interest in the leased space.
8.3.3 Vendor Remedies. Incumbent hereby acknowledges that pursuant to
the Encumbrances granted by Pathnet to certain equipment vendors or service
providers in accordance with Section 8.3.2, such vendors or providers shall
have the right to assume and perform Pathnet's rights and obligations under
this Agreement and the other documents, instruments and agreements executed
in connection hereto; provided that in no event shall Pathnet be relieved of
its obligations under this Agreement.
8.4 Taxes. The Parties' respective responsibilities for taxes arising under
or in connection with this Agreement shall be as follows: (i) each Party shall
be responsible for any personal or real property taxes on property it owns, for
franchise and privilege taxes on its business and for taxes based on its net
income or gross revenue and (ii) Pathnet shall be responsible for any sales,
use, excise, value-added services, consumption and other taxes and duties
payable by Incumbent on any goods and services used or consumed in providing the
services to be performed by Pathnet under this Agreement, where the tax is
imposed on Incumbent's acquisition or use of such goods or services and the
amount of the tax is measured by Incumbent's costs in acquiring such goods or
services; provided, however, that Pathnet shall not be responsible for any
Federal, state or local income taxes of Incumbent or any franchise taxes of
Incumbent.
23
<PAGE>
8.5 Security Interest in Initial System. On the Effective Date, Incumbent
shall execute and deliver the Security Agreement substantially in the form
attached hereto as Schedule R, pursuant to which, among other things, Pathnet
shall grant Incumbent a security interest in the radio, radio software, antenna,
waveguide, multiplexors and any other Equipment required to operate the Initial
System.
8.6 Escrow of Manufacturer's Warranties.
8.6.1 Escrow of Assignment Documents by Pathnet. On the Effective Date,
Pathnet shall complete, execute and place in escrow certain documents (the
"Assignment Documents") that shall provide Incumbent with the required tools
to unilaterally effect the assignment to Incumbent of all of the then
effective manufacturer's warranties relating to the Equipment on the Initial
System.
8.6.2 Removal of Assignment Documents by Incumbent. Pursuant to the
escrow arrangement described in Section 8.6.1 above, Incumbent shall have
the right to remove the Assignment Documents from escrow upon the first to
occur of the following events: (i) in the event Pathnet becomes insolvent,
is unable to pay its debts as they mature, makes assignment for the benefit
of its creditors and/or in the event any case or proceeding is commenced by
or against Pathnet under Title 11 of the Unites States Code, as amended, or
under any other state or federal statute for the relief of debtors, (ii) the
Expiration Date or (iii) Pathnet defaulting under its financing arrangement
with its vendor and receipt by Incumbent of written notice from vendor
stating its intention to waive its right to operate the System for the
purpose of generating Revenue from the sale of Excess Capacity.
8.7 FCC Licenses. Pathnet shall relinquish the right to own and transfer the
FCC licenses required to operate the Initial System in the event of (i) the
liquidation or dissolution of Pathnet under Chapter 7 of the Federal bankruptcy
laws, (ii) the Expiration Date or (iii) Pathnet defaulting under its financing
arrangement with its vendor and receipt by Incumbent of written notice from
vendor stating its intention to waive its right to operate the System for the
purpose of generating Revenue from the sale of Excess Capacity.
SECTION 9. EXCESS CAPACITY MARKETING AND SALES.
9.1 Exclusive Representative.
9.1.1 Pathnet Excess Capacity. Pathnet shall have the exclusive right
to market and sell any and all Pathnet Excess Capacity.
9.1.2 Incumbent Excess Capacity. At any time and from time to time,
Incumbent shall have the right to request in writing that Pathnet serve as
Incumbent's exclusive representative for the marketing and sale of all or
any portion of the capacity allocated to Incumbent in accordance with the
Channel Plan (the "Incumbent Excess Capacity"). Such written notice shall
set forth, (i) that portion of the Incumbent Excess Capacity to be marketed
and sold by Pathnet, (ii) the length of time that such portion of
24
<PAGE>
the Incumbent Excess Capacity will be available to be marketed and sold, and
(iii) that Incumbent acknowledges that such Incumbent Excess Capacity shall
not be available for Incumbent's use during the time specified in such
written notice. Upon receipt of such written notice Pathnet shall serve as
Incumbent's exclusive representative for the marketing and sale of such
Incumbent Excess Capacity; provided, however, that Pathnet shall have the
right, as determined by Pathnet in its sole discretion, to sell the Pathnet
Excess Capacity on any path or Segment before selling the Incumbent Excess
Capacity on such path or Segment.
9.1.3 Marketing Fee for Sale of Incumbent Excess Capacity. In the
event Pathnet sells any Incumbent Excess Capacity, Pathnet shall receive
a marketing fee in the amount of [***] of the Revenue from the sale of
such Incumbent Excess Capacity (Incumbent shall receive the remaining
[***] of such Revenue except as required as a referral fee to be paid to
Incumbent pursuant to Section 9.2.2).
9.1.4 Marketing and Sale by Incumbent. Incumbent or any Affiliates of
Incumbent shall not market or sell any Incumbent Excess Capacity or any
capacity purchased by Incumbent pursuant to Section 9.3 to any third party
without the prior written consent of Pathnet; provided, however, Incumbent
may market and sell all or any portion of the Incumbent Excess Capacity or
any capacity purchased by Incumbent pursuant to Section 9.3, to Affiliates
of Incumbent for and only for such Affiliates' internal communications needs
and not for resale to third parties. Notwithstanding anything set forth
herein to the contrary, Incumbent shall have the right to provide, market or
sell any Incumbent Excess Capacity to KN Field Services, Inc. or any other
KN Energy, Inc. subsidiary for the purpose of providing voice or data
services to such subsidiary or customers of such subsidiary; provided such
customers shall in no event purchase greater than one (1) DS-1 of capacity.
9.2 Referrals.
9.2.1 Referrals of Customers by Incumbent. Incumbent shall refer any
potential third party customer of Excess Capacity to Pathnet.
9.2.2 Referral Fees. If Incumbent is successful in locating a new
customer for the Pathnet Excess Capacity created at Incumbent's
Facilities, provided that such customer is not an IXC, Pathnet shall pay
Incumbent a marketing fee of [***] of the Revenue actually received from
the sale of capacity to such customer during the initial five (5) years
of continuous sales to such customer payable on a quarterly basis, in
addition to all other payments to Incumbent that may be due and payable,
as provided by Section 9.11.
9.3 Purchase of Available Excess Capacity by Incumbent. Incumbent shall have
the right to purchase Available Excess Capacity on any path or Segment of the
System (each such path or Segment being referred to herein as an "Incumbent
Desired Path"), at a price equal to either (i) the lowest price paid to Pathnet
for like capacity and for a similar term by any purchaser during the one hundred
eighty (180) days immediately preceding the purchase by
25
<PAGE>
Incumbent of capacity on such Incumbent Desired Path or (ii) if no Pathnet
Excess Capacity has been purchased on such Incumbent Desired Path during such
one hundred eighty (180) day period, the last price paid for such Incumbent
Desired Path; provided, however, Incumbent shall in no event under clause (i) or
clause (ii) above purchase or have rights in more than twenty percent (20%) in
the aggregate of the Available Excess Capacity on any Segment or path within the
System at any given time. If and to the extent Incumbent purchases Available
Excess Capacity, Incumbent shall receive its share of the Revenue pursuant to
Section 5.2; provided, however, Incumbent shall not receive any Revenue pursuant
to Section 9.2.2.
9.4 Commercially Reasonable Efforts. Pathnet shall use all commercially
reasonable efforts to obtain the best available price and terms in the marketing
and sale of any Excess Capacity. Pathnet shall not, now or in the future,
guarantee any Revenue disbursements nor does Pathnet warrant as to its ability
to sell the Excess Capacity.
9.5 Selling Prices for Excess Capacity. Notwithstanding anything set forth
herein to the contrary, Pathnet shall have the right to (i) sell Excess Capacity
at prices determined by Pathnet to be appropriate on specific routes, which
prices may be below or above current competitive market pricing, (ii) package
the Excess Capacity in sales increments of DS-1's, DS-3's or OC-3's, or any
other increments and (iii) aggregate the paths sold in various combinations,
each as determined by Pathnet in its sole discretion.
9.6 Barter Arrangements. Incumbent shall be permitted to barter Incumbent
Excess Capacity for telecommunications capacity of other incumbents engaged by
Pathnet; provided, however, Pathnet shall have the right to approve any barter
arrangement relating to Incumbent Excess Capacity, which approval shall not be
unreasonably withheld. Neither Pathnet nor Incumbent shall derive any fee from
facilitating any such barter arrangements.
9.7 Assumed Name; Tradenames and Trademarks. Pathnet shall have the right to
market Excess Capacity under its name or any other assumed name, tradename or
trademark which Pathnet is authorized to use for such purpose; provided,
however, Pathnet shall not use any trademark or tradename of Incumbent or any
Affiliate of Incumbent in written material for purposes of marketing any Excess
Capacity without the prior written consent of Incumbent.
9.8 Customer Agreements.
9.8.1 Authorization. Pathnet shall negotiate, execute and deliver all
agreements and arrangements ("Customer Agreements") for customers of Excess
Capacity, which Customer Agreements shall contain, terms and conditions
determined by Pathnet in its sole discretion.
9.8.2 Approval and Consent by Incumbent. If the terms of any Customer
Agreement require the written approval or consent of Incumbent as a
condition to the execution, delivery or performance, Incumbent shall
promptly provide such written approval or consent.
26
<PAGE>
9.8.3 Modifications to System. In the event that any Customer Agreement
requires that the System be modified in any way, Pathnet shall ensure that
any such modifications (i) shall not compromise the integrity and
performance of the System in accordance with the Specifications and (ii)
shall be made at no additional cost to Incumbent.
9.9 Maintenance of Books and Records and Audit Procedures.
9.9.1 Books and Records. Pathnet shall maintain and keep detailed and
accurate books and records with regard to sales of Excess Capacity and the
Revenue from such sales.
9.9.2 Incumbent Review and Audit Procedures. No more than once during
any consecutive twelve (12) month period, Incumbent shall be entitled to
review and audit Pathnet's books and records relating to the sale of Excess
Capacity during business hours upon ten (10) days written notice to Pathnet.
Incumbent shall not have the right pursuant to this Section 9.9.2, to review
or audit Pathnet's corporate income statements, balance sheets or other
forms of general corporate reporting. Incumbent shall not disclose, at any
time before or after the Expiration Date, any information related to Pathnet
or Pathnet's business obtained by Incumbent pursuant to a review or audit
performed under this Section 9.9.2 unless such information has previously
come into the public domain (other than through unauthorized disclosure) or
except as required by law.
9.9.3 Expenses of Incumbent Reviews and Audits. Incumbent shall pay the
cost of any such review or audit performed pursuant to Section 9.9.2.
9.9.4 Approval of Authorized Representative. In the event that
Incumbent hires an authorized representative of Incumbent to perform any
such review or audit pursuant to Section 9.9.2, Pathnet shall have the right
to approve such authorized representative before any access is granted to
such authorized representative to Pathnet's books and records, which
approval shall not be unreasonably withheld.
9.10 Quarterly Revenue Reports. Pathnet shall issue to Incumbent quarterly
revenue reports substantially in the form of Schedule L (each a "Quarterly
Revenue Report") within thirty (30) days after the end of each calendar quarter.
Each such Quarterly Revenue Report shall be an unaudited statement produced by
Pathnet.
9.11 Collection and Payment of Revenue.
9.11.1 Costs of Collection. Pathnet shall deduct any documented costs
reasonably incurred by Pathnet in connection with the collection of any and
all past-due revenue generated from the sale of Excess Capacity, including,
but not limited to, the cost of any legal actions, collection fees, court
proceedings, audits, or other enforcement actions. Pathnet shall deduct such
costs from gross revenue collected prior to the disbursement of such revenue
to Pathnet and Incumbent pursuant to Section 5.2 and Section 9 and provide
Incumbent with documentation evidencing any such deductions.
27
<PAGE>
9.11.2 Maintenance Monthly Service Charges. The amount of any
Maintenance Monthly Service Charges (as such term is defined in the
Maintenance Services Agreement) paid by Pathnet to Incumbent pursuant to the
Maintenance Services Agreement, shall be deducted from gross revenue
collected prior to disbursement of such revenue to Pathnet and Incumbent
pursuant to Section 5.2 and Section 9.
9.11.3 Taxes on Gross Revenues. The amount of any taxes on gross
revenue paid by Pathnet on behalf of Incumbent shall be deducted from any
revenue to be disbursed to Incumbent prior to disbursement of such revenue
as set forth in this Section 9.11.
9.11.4 Definition of Revenue. For purposes of this Agreement, "Revenue"
shall mean the gross revenue generated from the sale of Excess Capacity
actually collected less any deductions set forth in Section 9.11.1, Section
9.11.2 and Section 9.11.3.
9.11.5 Payments to Incumbent. Pathnet shall pay Incumbent its allocated
portion of Revenue actually received from the sale of Excess Capacity within
thirty (30) days after the end of each calendar quarter in accordance with
the payment instructions set forth in Schedule M.
9.11.6 Interest Earned on Undistributed Revenue. Pathnet shall retain
any and all interest earned by Pathnet on any Revenue collected but not yet
distributed to Incumbent in accordance with Section 5.2 and Section 9.
9.11.7 Incumbent's Assignees of Revenues. Incumbent shall have the
right to designate other entities to receive its disbursements by written
notice to Pathnet to such effect; provided, however, any such designation by
Incumbent shall not relieve Incumbent of any tax liability resulting from
its receipt of such disbursements pursuant to Section 5.2 and Section 9.
SECTION 10. FCC LICENSES AND OTHER REGULATORY APPROVALS AND LICENSES.
10.1 FCC Rules and Regulations.
10.1.1 Microwave Radio Station Licenses.
(a) Preparation and Filing of Forms 415. Pathnet shall prepare and
timely file all required Form 415, Applications for Authorization in the
Microwave Services (each a "Form 415"), or any successor forms, documents or
instruments to such Form 415 as the FCC may prescribe, including but not
limited to, the preparation or ordering of all frequency coordinations, in
order to own, operate and sell the Excess Capacity of the System in
accordance with the terms and conditions of this Agreement. Incumbent shall
cooperate with Pathnet in preparing and filing such forms and will provide
such
28
<PAGE>
information as reasonably requested by Pathnet in connection with the
filing of such forms.
(b) Identity of Licensee. All Microwave Radio Station Licenses issued
by the FCC relating to the System shall be licensed in the name of Pathnet
or a wholly-owned subsidiary of Pathnet. Incumbent shall be permitted to
continue to own and be licensed as a private microwave operator at the
stations licensed to Pathnet relating to the System, provided that (i) such
private licenses are for different frequency pairs than those assigned to
the System (including, but not limited to, any Capacity Expansion of the
System) and (ii) such private licenses are permitted under the FCC Code.
(c) Maintenance of License. Pathnet shall maintain in good standing
each Microwave Radio Station License relating to the System, including, but
not limited to, preparing and filing any required amendments to the Forms
415 relating to the System and submitting and filing any supplementary
information as required by the FCC.
10.1.2 Common Carrier Reporting Obligations. Pathnet shall prepare and
file all forms, reports, instruments, documents and agreements required by
the FCC and FCC Code relating to Pathnet's status as a "common carrier"
under the FCC Code.
10.1.3 Tariff Filings. Pathnet shall prepare and timely file all tariff
applications pursuant to 47 CFR 61, as amended, or any successor statute,
rule or regulation and shall request and file all necessary waivers of such
tariff requirements, as determined by Pathnet in its sole discretion.
10.1.4 Frequency Coordination Notices. During the Term of this
Agreement, Pathnet shall prepare and send all required frequency
coordination notices required under 47 CFR 101.103, as amended, or any
successor statute, rule or regulation and shall respond as appropriate to
all PCNs received by Pathnet or Incumbent relating to the System.
10.1.5 Delivery of Copies. Upon Incumbent's request, Pathnet shall
provide to Incumbent a copy of all filings and submissions with the FCC,
relating to the System within thirty (30) days of such request by Incumbent.
10.1.6 Assistance in Preparation of License Applications. Upon request
by Pathnet and in a timely manner, Incumbent shall provide to Pathnet all
information necessary for the completion of all required filings and
submissions with the FCC including, but not limited to Incumbent's
authorized signature on any filings or other submissions to the FCC or any
documents, instruments or agreements completed in connection with such
filings and submissions.
10.1.7 Future Changes in FCC Requirements. If FCC requirements relating
to the Form 415, common carriers, frequency coordination or any other
matters relating to the System change or are modified, Pathnet shall be
responsible for compliance with such new requirements including, but not
limited to, the payment of any costs or fees
29
<PAGE>
associated therewith and Incumbent shall cooperate with Pathnet with respect
to such compliance; provided, however, if the FCC establishes user fees or
other such fees relating to the frequencies used in and the communications
business conducted over the System, the cost of such additional fees shall
be divided between Pathnet and Incumbent, as determined by Pathnet and
Incumbent at such time.
10.1.8 Spectral Loading Requirements. Pathnet shall (i) ensure that the
System, as licensed, shall comply with all spectral loading requirements set
forth in 47 CFR 101.141, or any successor statute, rule or regulation or
(ii) obtain a waiver of any or all of such requirements; provided, however,
if the System does not meet such spectral loading requirements and Pathnet
is unable to obtain a waiver of such requirements, Pathnet shall have the
right to modify the System to a hot-standby Protection Configuration until
such time as the spectral loading requirements can be met.
10.1.9 Default in FCC License. In the event that the FCC institutes a
penalty against or fine imposed on Pathnet, Incumbent, or the System, due to
non-compliance with any FCC requirements, Pathnet shall promptly pay such
penalty or fine (in the case such penalty or fine is instituted as the
result of an act or omission on the part of Pathnet) or Incumbent shall
promptly pay such penalty or fine (in the event such penalty or fine is
instituted as the result of an act or omission on the part of Incumbent).
10.2 Zoning and Land Use Requirements. Incumbent shall be responsible for
compliance with all zoning and land use requirements applicable to the System
and its Facilities, including, but not limited to, the Leased Premises.
Incumbent shall advise Pathnet of zoning or other requirements, which, in the
reasonable opinion of Incumbent, differ from those generally applicable to
microwave facilities. Pathnet shall provide to Incumbent all required
information and shall cooperate with Incumbent in connection with Incumbent's
compliance with all zoning and land use requirements pursuant to this Section
10.2.
10.3 Lessor Requirements. Incumbent shall be responsible for compliance with
all requirements imposed by lessors, of any of the Facilities or sites,
including the United States Department of Interior Bureau of Land Management
requirements applicable to the System and its Facilities, including, but not
limited to, the Leased Premises. Pathnet shall provide Incumbent with all
requested information and shall cooperate with Incumbent in connection with
Incumbent's compliance with such requirements pursuant to this Section 10.3.
10.4 Tower Registration. Incumbent shall be responsible for timely
compliance with all FAA and FCC tower registration requirements including, but
not limited to, the preparation of any filings with or the obtaining of any
waivers or extensions from the FAA or FCC. Incumbent shall promptly notify
Pathnet of any deficiency or non-compliance with any such tower registration
requirements, filings, waivers or extensions.
SECTION 11. INSURANCE.
30
<PAGE>
11.1 Delivery of Certificates of Insurance. Upon Incumbent's request and
prior to the commencement of any Services by Pathnet, Pathnet shall deliver to
Incumbent Certificates of Insurance relating to Pathnet's Commercial General
Liability Insurance Policy, Workers Compensation Insurance Policy, Automobile
Liability Insurance and Excess Liability Insurance Policy. Incumbent shall be
named as an additional insured on all policies required under this contract. All
policies shall include a waiver of subrogation against Incumbent, its Affiliates
and its insurance carriers. Until Commissioning, Pathnet Insurer's shall provide
Incumbent with thirty (30) days prior written notice of cancellation or of any
material change in Pathnet's insurance during the Term of this Agreement. Any
deductibles or SIR's on the policies of insurance required under this Agreement
are the sole responsibility of Pathnet, and not Incumbent its Affiliates,
shareholders or employees.
11.2 Pathnet Insurance Coverage. During the Term of this Agreement, Pathnet
shall maintain the types of insurance at the coverage limits set forth below:
(a) Worker's Compensation Insurance. Workers Compensation Insurance as
required by laws and regulations applicable to and covering Persons
performing the Services in an amount of $500,000 for employer's liability
coverage;
(b) Commercial General Liability Insurance. Commercial General
Liability Insurance with a limit of not less than $1,000,000 per occurrence
and $2,000,000 in the aggregate including products, completed operations,
and contractual liability;
(c) Automobile Liability Insurance. Automobile Liability Insurance,
which includes coverage for non-owned and hired vehicles with a limit of not
less than $1,000,000; and
(d) Excess Liability Insurance. Excess Liability Insurance with a limit
of not less than $4,000,000.
11.3 Incumbent Insurance Coverage. Incumbents represents and warrants that
Incumbent retains self insured reserves. Incumbent shall maintain insurance
coverage on properties and operations of Incumbent which coverage shall include
general liability and other forms of insurance covering such risks as are
usually insured against by prudent companies engaged in the business and
activities in which the Incumbent is engaged, in amounts which are adequate in
relation to the business and properties of Incumbent, and all premiums owing to
date have been paid in full. Incumbent shall promptly repair and replace any
damaged property to the extent reasonably necessary to permit Pathnet to operate
the System and exercise its rights and obligations hereunder.
11.4 Proof of Licensed Subcontractors. Upon reasonable request of Incumbent,
Pathnet shall provide to Incumbent proof of licensing and certification of
insurance for any Subcontractors engaged by Pathnet to provide Services, during
the Term of such engagement. Incumbent shall be added as an additional insured
on the policies of the Subcontractors.
31
<PAGE>
SECTION 12. SOFTWARE AND PROPRIETARY RIGHTS.
12.1 Pathnet Software. Pathnet retains all right, title and interest in and
to Pathnet Software. As of the Effective Date and pursuant to the Pathnet
Sublicense Agreement attached hereto as Schedule N, Incumbent is granted a
royalty free, non-transferable nonexclusive sublicense to use Pathnet Software
subject to the terms of any Pathnet licenses obtained from third party providers
for the sole purpose of receiving services pursuant to this Agreement. In the
event Pathnet develops any Pathnet Software, Pathnet shall amend to this
Agreement a license agreement for such Pathnet Software. Pathnet Software will
be made available to Incumbent in such form and on such media as exists on the
Effective Date, together with existing documentation and any other related
materials. Incumbent shall not be permitted to use Pathnet Software for the
benefit of any entities other than Pathnet or Incumbent affiliates without the
prior written consent which may be withheld at Pathnet's sole discretion. Except
as otherwise requested or approved by Pathnet, Incumbent shall cease all use of
Pathnet Software upon expiration of this Agreement.
12.2 Proprietary Rights. Incumbent acknowledges and agrees that all or
portions of the information and materials, including but not limited to the
Pathnet Software and related documentation to be supplied by Pathnet hereunder
are owned by Pathnet and/or others and are proprietary in nature. Incumbent also
acknowledges and agrees that Pathnet and/or its suppliers have and will retain
all proprietary rights in such information and materials. Incumbent (i) shall
respect such claim of proprietary right, (ii) shall protect such information at
least to the extent that it protects its own proprietary information, (iii)
shall not use such information except for the purposes for which its is being
made available as set forth in this Agreement and (iv) shall not reproduce,
print, disclose, or otherwise make said information available to any third
party, in whole or in part, in whatever form.
SECTION 13. REPRESENTATIONS AND WARRANTIES.
13.1 Representations and Warranties of Each Party. Each Party hereby
represents and warrants the other Party as follows:
13.1.1 Due Incorporation and Formation; Authorization of Agreements;
Binding Effect. Such Party is a corporation or partnership, as the case may
be, duly formed or organized, and validly existing under the laws of its
state of incorporation or organization, and has the corporate or partnership
authority to own its property and carry on its business as owned and carried
on as of the Effective Date. Such Party is duly licensed or qualified to do
business and is in good standing (if applicable) in each jurisdiction in
which the failure to be so licensed or qualified would have a Material
Adverse Effect on such Party. Such Party has the corporate or partnership
authority to execute and deliver this Agreement, to perform its obligations
hereunder, and to consummate the transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by such Party and
this Agreement constitutes a legal, valid and binding obligation of such
Party enforceable in accordance with its terms,
32
<PAGE>
subject as to enforceability to limits imposed by bankruptcy, insolvency or
similar laws affecting creditors rights generally and the availability of
equitable remedies.
13.1.2 No Conflict; No Default. Neither the execution or delivery of
this Agreement by such Party, nor (except as would not have a Material
Adverse Effect on such Party), the performance of this Agreement by such
Party or the consummation by such Party of the transactions contemplated
hereby in accordance with the terms and conditions hereof: (i) will conflict
with, violate, result in a breach of or constitute a default under any of
the terms, conditions or provisions of the certificate or articles of
incorporation or bylaws (or other governing documents) of such Party or any
material agreement or instrument to which such Party is a party or by which
such Party may be bound, (ii) will conflict with, violate or result in a
breach of, constitute a default under (whether with notice or lapse of time
or both), accelerate or permit the acceleration of the performance required
by, give to others any interests or rights or require any consent,
authorization or approval under any contract to which such Party is a party
or by which such Party is or may be bound or to which any equity interest
held by such Party or any of its material properties or assets is subject or
(iii) will result in the creation or imposition of any Encumbrance upon any
equity interest held by such Party or any of the other material properties
or assets of such Party.
13.1.3 No Consent. No consent, approval, order or authorization of, or
registration, declaration or filing with any Person or Governmental
Authority, domestic or foreign, is required to be obtained by such Party in
connection with the execution, delivery and performance of this Agreement or
the consummation of the transactions contemplated hereby.
13.1.4 Compliance with Laws and Regulations. That the performance of
such Party's obligations under this Agreement will not result in a violation
in any respect of (i) any applicable Federal, state, local or foreign laws,
ordinances, regulations, rulings and orders of government agencies
applicable to its business in any respect the violation of which could have
a Material Adverse Effect (including Requirements of Law relating to
pollution, protection of the environment, emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals, or industrial,
toxic, hazardous or regulated substances or wastes into the environment or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage disposal, transport or handling of pollutants or other
such hazardous or regulated substances or wastes) or (ii) any applicable
order, Judgment, injunction, award or decree in any respect which could have
a Material Adverse Effect on such Party.
13.1.5 Permits. Such Party has or will obtain all authorizations,
approvals, consents, licenses, Permits and certificates (including, but not
limited to all required approvals from the FCC) necessary to conduct their
respective businesses and to own, lease and operate its properties as
currently or anticipated to be conducted, owned, leased or operated, as the
case may be, for which the failure to possess would result in a Material
Adverse Effect. No violations are outstanding or uncured with respect to any
such Permits and no proceeding is pending to revoke or limit any Permit.
33
<PAGE>
13.1.6 Title to Assets, Properties and Rights and Related Matters. Such
Party has, and will continue to have for the Term of this Agreement as set
forth in Section 3, good and marketable fee simple or leasehold title to all
the properties, interests in properties and assets, real, personal or mixed,
necessary for the conduct of such Party's business and for the transactions
contemplated by this Agreement (including, but not limited to, any rights of
way, leasehold interests, easements, proofs of dedication and rights
necessary to perform the obligations hereunder without interference) free
and clear of all Encumbrances of any kind or character, except (i) liens for
current taxes not yet due and payable, (ii) Encumbrances securing taxes,
assessments, governmental charges or levies or the Encumbrances of
materialmen, carriers, landlords and like persons, all of which are not yet
due and payable and (iii) minor Encumbrances of a character that do not
substantially impair the assets or properties of such Party or which will
not have a Material Adverse Effect on such Party. Each Party shall take all
necessary steps to keep in full force and effect any leases, licenses or
other conditional use agreements pertaining to the Facilities, site,
Equipment or System such that for the Term of this Agreement, Pathnet and
Incumbent shall have all rights reasonably necessary or appropriate to
enable them to perform their respective obligations and exercise their
respective rights hereunder.
13.1.7 Labor Matters. Such Party has complied in all material respects
with all applicable Federal, state and local laws and ordinances relating to
the employment of labor, including the provisions thereof relating to wages,
hours, employee benefit plans and the payment of social security taxes, and
is not liable for any arrears of wages or any tax related thereto (except
for currently accrued and unpaid wages and except for currently accrued
withholding, payroll, unemployment and social security taxes payment of
which is not overdue) or penalties for failure to comply with any of the
foregoing, and neither has received a notice to the contrary from any
Governmental Authority. Such Party has not suffered any strike, slowdown,
picketing or work stoppage by any union or other group or employees
affecting the business of such Party, and no such event or action is
threatened.
13.1.8 No Discrimination. Such Party warrants that it is an equal
opportunity employer and will not discriminate against any employee or
applicant for employment because of race, color, religion, sex, national
origin, handicap or status as Vietnam Era Veteran. Each Party shall comply
with Executive Orders 11,246 and 11,625, the Vietnam Era Veterans
Readjustment Assistance Act of 1974, the Rehabilitation Act of 1973, the
Americans with Disabilities Act of 1990, and all amendments, orders, rules
and regulations issued thereunder or in connection therewith. Such Party
certifies that is does not and will not maintain or provide for its
employees any facilities which are segregated by race, color, religion or
national origin or permit its employees to perform any services at any
location, under its control, where segregated facilities are maintained; and
such Party will obtain a similar certification for all non-exempt
subcontracts in accordance with the provisions of 41 C.F.R. Section 60-1.8.
13.1.9 Disclaimer. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT,
NEITHER PATHNET NOR INCUMBENT MAKES ANY OTHER
34
<PAGE>
EXPRESS WARRANTY AND THERE ARE NO IMPLIED WARRANTIES WITH RESPECT TO ANY
TECHNOLOGY, GOODS, SERVICES, RIGHTS OR OTHER SUBJECT MATTER OF THIS
AGREEMENT. PATHNET AND INCUMBENT HEREBY DISCLAIM THE WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
13.2 Representations and Warranties of Pathnet.
13.2.1 Services. Pathnet warrants (i) that the Services will be
performed in a safe, good and workmanlike manner; (ii) that all components,
supplies and materials incorporated in or consumed in the rendering of
Pathnet Services shall be new (except those components, supplies and
materials designated to be upgraded or enhanced pursuant to the
modifications SOW or as otherwise agreed to by the Parties) and shall
conform in all material respects to the requirements of this Agreement,
provided that Pathnet shall pursue all applicable rights and remedies
granted from third party vendor warranties; (iii) that Pathnet shall
promptly correct without additional compensation any portion of the Pathnet
Services that proves to be improper or defective in workmanship or not in
conformance with the standards and specifications set forth in this
Agreement; (iv) that it owns or has the legal right to use all of the
Pathnet Software for all purposes intended hereunder; (v) that on Effective
Date, Pathnet has no litigation or contingent liabilities which could
materially impact this Agreement; (vi) that all Equipment is in good working
order and condition; (vii) all Services shall be free from faults or defects
and improper workmanship; (viii) that any and all change orders requested or
issued under Section 4.6 shall reflect additional work to be done by Pathnet
rather than corrections to the work already contemplated hereunder; and (ix)
that the System shall be fully operational without Space Diversity within
eighteen (18) months of the grant of any permit or approval, listed in
Exhibit A-10 and required for Pathnet to install and complete the System.
13.3 Representations and Warranties of Incumbent.
13.3.1 Union and Labor Relations. Incumbent represents and warrants
that with respect to any services performed pursuant to this Agreement,
Incumbent has complied with any applicable labor or union-related
agreements, regulations and ordinances.
SECTION 14. DELIVERIES.
14.1 Deliveries by Incumbent. Incumbent shall provide to Pathnet the items
as set forth in Schedule P.
14.2 Deliveries by Pathnet. Pathnet shall provide to Incumbent the items as
set forth in Schedule Q.
35
<PAGE>
SECTION 15. INDEMNIFICATION.
15.1 Indemnification by Pathnet. To the maximum extent permitted by law,
Pathnet shall release, protect, defend and hold harmless Incumbent and its
Affiliates and its and their respective officers, directors, employees and
agents from and against any and all Losses arising from (i) personal injury,
disease, death, property damage, pollution and environmental damage (including
clean-up and all fines and penalties of any nature) to the extent directly or
indirectly caused by or related to the negligence (whether simple or gross;
active or passive), strict or absolute liability or fault of Pathnet, its
Affiliates or its or their officers, directors, employees, agents or
contractors; (ii) the breach of any representation or warranty set forth in this
Agreement by Pathnet; and (iii) any claims of any violation of the antitrust
laws of the United States or of any state in which the System operates, based
upon terms of this Agreement.
15.2 Indemnification by Incumbent. To the maximum extent permitted by law,
Incumbent shall release, protect, defend and hold harmless Pathnet and its
Affiliates and its and their respective officers, directors, employees and
agents from and against any and all Losses arising from (i) personal injury,
disease, death, property damage, pollution and environmental damage (including
clean-up and all fines and penalties of any nature) to the extent directly or
indirectly caused by or related to the negligence (whether simple or gross;
active or passive), strict or absolute liability or fault of Incumbent, its
Affiliates or its or their officers, directors, employees, agents or contractors
and (ii) the breach of any representation or warranty set forth in this
Agreement by Incumbent.
15.3 Intellectual Property Indemnification - Pathnet. Pathnet hereby agrees
to protect, defend, indemnify and hold harmless Incumbent, its Affiliates, and
its and their respective officers, directors, employees and agents from and
against all Losses relating to (i) an alleged infringement of any third-party
patent rights, patent or application for patent or any invention covered hereby
or any proprietary rights of any kind; and (ii) any alleged infringement of
copyright or trademark arising from Pathnet's Services hereunder. In the event
that Pathnet's Services or the use or sale of any articles, materials or
equipment to be furnished hereunder by Pathnet are enjoined, Pathnet at its sole
expense shall at Incumbent's election either procure for Incumbent the right to
continue to use or sell same or replace same with non-infringing materials
and/or services of a grade and quality to meet all specifications for their
required use.
15.4 Intellectual Property Indemnification - Incumbent. Incumbent hereby
agrees to protect, defend, indemnify and hold harmless Pathnet, its Affiliates,
and its and their respective officers, directors, employees and agents from and
against all Losses relating to (i) an alleged infringement of any third-party
patent rights, patent or application for patent or any invention covered hereby
or any proprietary rights of any kind; and (ii) any alleged infringement of
copyright or trademark arising from Incumbent's Services hereunder. In the event
that Incumbent's Services or the use or sale of any articles, materials or
equipment to be furnished hereunder by Incumbent are enjoined, Incumbent at its
sole expense shall at Pathnet's election either procure for Pathnet the right to
continue to use or sell same or replace same with non-infringing materials
and/or services of a grade and quality to meet all specifications for their
required use.
36
<PAGE>
SECTION 16. LIABILITY OF THE PARTIES TO EACH OTHER.
16.1 Liability Generally. Subject to the specific provisions of this Section
16, it is the intent of the Parties that each Party shall be liable to the other
Party for damages incurred as a result of the breach of this Agreement by the
other Party and failure to cure such breach as set forth in Section 17.1.2.
16.2 Liability Restrictions.
(a) SUBJECT TO SUBSECTION (b) BELOW, IN NO EVENT, WHETHER IN CONTRACT
OR IN TORT (INCLUDING BREACH OF WARRANTY, NEGLIGENCE AND STRICT LIABILITY IN
TORT), SHALL A PARTY BE LIABLE TO THE OTHER PARTY FOR INDIRECT OR
CONSEQUENTIAL, EXEMPLARY, PUNITIVE OR SPECIAL DAMAGES EVEN IF SUCH PARTY HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES IN ADVANCE.
(b) The limitations set forth in subsection shall not apply to the
indemnification obligations set forth in Section 15.3 and Section 15.4.
(c) Each Party shall have a duty to mitigate damages for which the
other Party is responsible.
(d) Each Party shall be liable to the other Party for any actual
damages as set forth in Section 16.1 only if, and to the extent that the
aggregate of all losses arising from or in connection with any such failure
to perform obligations in the manner required by this Agreement exceeds ten
thousand dollars ($10,000.00), except for claims of payment from
Subcontractors or vendors
16.3 Force Majeure. Neither party shall be liable to the other for any
delays or damages or failure to act, except for the obligation to make
payment when due, owing to, occasioned by or caused by reason of strikes,
lockouts, fire, flood, the elements, Acts of God, wars, blockades,
insurrections, riots, landslides, earthquakes, lightning, storms and civil
disturbances beyond the control of the Party affected thereby, and delays due
to any of the above causes shall not be deemed to be a breach or failure to
perform under this Agreement (collectively a "Force Majeure Event");
provided, however, that the Party delayed by such event shall provide notice
thereof to the other Party as soon as reasonably possible specifying all
facts relating thereto, the anticipated consequences thereof, and any
proposed actions to be taken in mitigation of adverse consequences. Neither
Party shall, however, be relieved of liability for failure of performance due
to a claimed Force Majeure Event hereunder if such failure is due to causes
arising out of its own negligence or to removable causes that it fails to
remove or remedy with reasonable dispatch.
SECTION 17. INFORMAL DISPUTE RESOLUTION; ARBITRATION.
17.1 Informal Dispute Resolution.
37
<PAGE>
17.1.1 Role of Program Manager. In the event Incumbent has a dispute,
controversy or other complaint relating to Pathnet's performance of
Pathnet's rights and obligations under this Agreement, Incumbent shall have
the right to first contact the Program Manager to resolve such dispute,
controversy or other complaint. If Incumbent is not satisfied with the
resolution provided by the Program Manager, Incumbent may resort to the
arbitration procedures set forth in this Section 17.
17.1.2 Notice of Breach, Cure and Remedies. In the event of a material
breach by either Pathnet or Incumbent (the "Breaching Party"), the other
Party (the "Non-Breaching Party") shall send by certified mail a written
notice of such material breach to the Breaching Party setting forth the
specific allegations of such breach. Upon receipt of the notice of breach,
the Breaching Party shall have thirty (30) days to cure such breach. In the
event the Breaching Party fails to cure such breach, as determined by the
Non-Breaching Party in its sole discretion, and the Breaching Party
determines, in its sole discretion, that it has cured such breach, either
the Breaching Party or the Non-Breaching Party may invoke the arbitration
procedures set forth in Section 17.2 to resolve whether such breach has been
cured.
17.2 Arbitration.
17.2.1 Arbitration; Resolution of Disputes. Subject to Section 17.1,
any and all disputes and controversies between Incumbent and Pathnet
concerning this Agreement (each a "Dispute") shall be subject to resolution
as set forth in this Section 17.
17.2.2 Referral to Binding Arbitration. Each Party shall have the
right, but not the obligation, to refer any Dispute for final resolution by
binding arbitration in accordance with the American Arbitration Association
(the "Association") Rules for Arbitration of business disputes (the
"Arbitration Rules").
17.2.3 Binding Effect. The Parties acknowledge and agree that (i) the
award in any arbitration shall be final, conclusive and binding on the
Parties and (ii) any such arbitration award be a final resolution of the
Dispute between the Parties to the same extent as a final judgment of a
court of competent jurisdiction.
17.2.4 Use of Courts and Other Legal Remedies. Each Party covenants and
agrees that it shall not resort to any court for legal remedies concerning
any Dispute other than to enforce a final decision by the arbitrators or for
preliminary, interim or provisional equitable relief in aid of arbitration.
17.2.5 Arbitration Process.
(a) Site and Arbitration Tribunal. Absent agreement to the contrary by
the Parties, the arbitration will be conducted in New York, New York, by a
panel of three (3) arbitrators with expertise in the fields of
telecommunications engineering and construction.
38
<PAGE>
(b) Limitation on Awards. Arbitrators may not award (i) the right to
terminate this Agreement or any of the rights and obligations hereunder, or
(ii) any other right or remedy that contravenes the terms and conditions of
this Agreement.
(c) Period of Limitations. In the event the Party claiming a Dispute
under Section 17.1.2 does not institute binding arbitration within four (4)
years after notice of breach, such Party shall forever be barred from
bringing a claim on the specific subject matter of such Dispute.
(d) Attorneys' Fees. The arbitrator shall award the reasonable cost,
including attorneys' fees, to the prevailing Party.
SECTION 18. MISCELLANEOUS.
18.1 Notices. All notices pertaining to disputes arising from this Agreement
shall be directed to a corporate entity or employee designated by the
signatories as having full rights and responsibilities to address such issues.
Notices under this Agreement shall be sufficient only if personally delivered by
a commercial prepaid delivery or courier service or mailed by certified or
registered mail, return receipt requested to a Party at its address set forth
below or as amended by notice pursuant to this Section 18.1. If not received
sooner, notice by mail shall be deemed received five (5) Business Days after
deposit in the U.S. mail. All notices shall be delivered as follows:
If to Pathnet:
Michael A. Lubin, Esquire
Vice President and General Counsel
Pathnet, Inc.
1015-31st, N.W.
Washington, D.C. 20007
Tel: (202) 625-7284
Fax: (202) 625-7369
If to Incumbent:
Mr. Tom Bruscino
General Manager
KN Telecommunications, Inc.
370 Van Gordon Street
Lakewood, CO 80228-8304
Tel: (303) 763-3299
Fax: (303) 763-2920
18.2 Binding Nature; Entire Agreement. Pathnet and Incumbent acknowledge
that (i) each has read and understands the terms and conditions of this
Agreement and agrees to be bound by such terms and conditions, (ii) this
Agreement shall be binding on each of Pathnet and
39
<PAGE>
Incumbent and their respective successors and assigns, (iii) this Agreement is
the complete and conclusive statement of the agreement between the Parties, (iv)
this Agreement supercedes any and all prior agreements and arrangements between
the Parties and all understandings and agreements, oral and written, heretofore
made between Incumbent and Pathnet are merged in this Agreement which alone,
fully and completely expresses their agreement on the subject matter of this
Agreement and (v) this Agreement sets forth the entire agreement on the subject
matter hereof.
18.3 Amendment. No modifications of, additions to or waiver of this
Agreement shall be binding upon Incumbent or Pathnet unless such modification,
addition or waiver is in writing and signed by an authorized representative of
each Party.
18.4 Severability. If any term or provision of this Agreement shall to any
extent be held by a court or other tribunal to be invalid, void or
unenforceable, then such term or provision shall be inoperative and void insofar
as it is in conflict with the law, but the remaining terms and provisions of
this Agreement shall nevertheless continue in full force and effect and the
rights and obligations of the Parties shall be deemed to be restated to reflect
as nearly as possible the original intentions of the Parties in accordance with
applicable law.
18.5 Governing Law. This Agreement, and the rights and obligations of the
Parties hereunder, shall be governed and interpreted in accordance with the laws
of the State of New York (other than the choice of law rules thereof).
18.6 Survival. Any provision of this Agreement which completes performance
or observance subsequent to any termination or expiration of this Agreement
shall survive such termination of expiration and continue in full force and
effect.
18.7 Assignment. At any time and from time to time, Pathnet shall have the
right to assign this Agreement or any of Pathnet's rights and obligations under
this Agreement; provided, that in no event shall any such assignment relieve
Pathnet of its obligations under this Agreement. Incumbent may not or shall not
have the right to assign this Agreement or any of its rights and obligations
hereunder without the prior written consent of Pathnet, which consent shall not
be unreasonably withheld; provided, however, Incumbent may assign its right and
obligations, in whole but not in part, under this Agreement without the approval
of Pathnet, to any entity which acquires all or substantially all of the assets
of Incumbent or to any subsidiary, Affiliate or successor in a merger or
consolidation of Incumbent; provided, that in no event shall any such assignment
relieve Incumbent of its obligations under this Agreement.
18.8 Waiver. Failure or delay on the part of Incumbent or Pathnet to
exercise any right, power or privilege under this Agreement shall not constitute
a waiver of any right power or privilege of this Agreement.
18.9 Recordation. Each Party hereby acknowledges that this Agreement may be
subject to recordation and the costs, fees or expenses associated with any such
recordation shall be borne by the recording Party.
40
<PAGE>
18.10 Good Faith Renegotiation. Notwithstanding anything set forth herein to
the contrary, the Parties hereby agree that in the event a Governmental
Authority issues a decision, order, rule or other rulemaking of any kind, which
necessitates any modification or amendment to this Agreement, the Parties shall
negotiate in good faith to modify or amend this Agreement to comply with such
decision, order, rule or other rulemaking.
18.11 Confidential Terms and Conditions. Incumbent shall not disclose,
except as required by law or as set forth in Section 18.9, the terms and
conditions of this Agreement to any third party.
18.12 Incumbent's Designated Representative. Incumbent shall on the
Effective Date designate in writing a representative who shall have express
authority to bind Incumbent with respect to all matters requiring Incumbent's
approval or authorization in connection with this Agreement (the "Incumbent
Representative"). Such Incumbent Representative shall have the authority to make
decisions and grant any and all consents required under this Agreement on behalf
of Incumbent and Pathnet shall be entitled to rely on any such decision or
consent by the Incumbent Representative.
18.13 Outsourcing. In addition to, and not in place of, any rights of
Pathnet under this Agreement, Pathnet shall have the right to engage third party
Subcontractors to perform any or all of Pathnet's rights and obligations under
this Agreement.
18.14 Employment Solicitation. During the Term of this Agreement, neither
Pathnet nor any Pathnet Affiliate shall solicit employment from, offer
employment to or hire, in any manner whether as an employee or a Subcontractor,
any Incumbent employee; provided that Pathnet may hire any former Incumbent
employee if such employee has not worked for Incumbent for a period of at least
six (6) months.
18.15 Execution of an Amended Schedule B. In the event that both Incumbent
and Pathnet elect to add additional Segments to the System, each of Incumbent
and Pathnet shall execute and deliver an "Amended Schedule B" setting forth (i)
the additional paths, sites and specific location information of the additional
Segment or Segments, (ii) the rent Pathnet shall pay to Incumbent for such
additional Segment (thereby amending Section 5.2 with respect to such additional
Segment; provided, however, Section 5.2 shall remain in full force and effect
with respect to Segment 1 or any other existing Segment) and (iii) the Incumbent
Items, the amount of the Incumbent Estimated Costs, the amount of the Incumbent
Payment Cap and the method of payment of the cost of the Incumbent Items with
respect to such additional Segment (thereby amending Section 4.1 and Section 1
of Schedule C with respect to such additional Segment; provided, however,
Section 4.1 and Section 1 of Schedule C shall in any event remain in full force
and effect with respect to Segment 1 or any other existing Segment.) Pathnet's
and Incumbent's rights and obligations under this Agreement will commence with
respect to such additional Segment or Segments on the date of execution of such
Amended Schedule B by both Parties which date shall be deemed the "Effective
Date" with respect to such Segment for purposes of this Agreement and each
reference to Schedule B in this Agreement shall be deemed to refer to such
Amended Schedule B.
41
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement, as of
the date first written above.
PATHNET, INC.
By: /s/ Richard A. Jalkut
-----------------------------------
Name: Richard A. Jalkut
---------------------------------
Title: President and CEO
---------------------------------
KN TELECOMMUNICATIONS, INC.
By: /s/ Morton Aaronson
--------------------------------------
Name: Morton C. Aaronson
------------------------------------
Title: President, Chief Operating Officer
------------------------------------
42
<PAGE>
INDEX OF SCHEDULES AND EXHIBITS TO
FIXED POINT MICROWAVE SERVICES AGREEMENT
SCHEDULE A: Services and System Specifications
Exhibit A-1: System Equipment, Towers and Shelters
Exhibit A-2: Manufacturers Specifications for Radios
Exhibit A-3: Electricity and Power Specifications of the
System
Exhibit A-4: Incumbent Multiplexing Requirements
Exhibit A-5: Equipment Shelters, Specification and Design
Exhibit A-6: Grounding and Lightning Protection Guidelines
and Specifications for Communications Shelters
Exhibit A-7: Network Interconnections Schedule
Exhibit A-8: PathNet Spurs and Incumbent Spurs
Exhibit A-9: Form of Certificate of Acceptance
Exhibit A-10: Required Permits and Approvals
SCHEDULE B: Segment and Facilities
SCHEDULE C: Estimated and Operating Costs
Exhibit C-1: Incumbent Estimated Costs
Exhibit C-2: PathNet's Estimated Costs
SCHEDULE D: Form of Escrow Agreement
SCHEDULE E: Incumbent Security Procedures
SCHEDULE F: Incumbent Drug Testing Procedures and Substance Abuse Policy
SCHEDULE G: Intentionally Omitted
SCHEDULE H: Incumbent Health and Safety Requirements
SCHEDULE I: Other Requirements of Incumbent
i
<PAGE>
SCHEDULE J: Incumbent Training
SCHEDULE K: Ownership of System Equipment, Assets and Materials
SCHEDULE L: Form of Quarterly Revenue Report
SCHEDULE M: Incumbent Payment Instructions
SCHEDULE N: Form of PathNet Sublicense Agreement
SCHEDULE O: PathNet Articles and Bylaws; Certificate of Good Standing
SCHEDULE P: Deliverables of Incumbent
SCHEDULE Q: Deliverables of PathNet
SCHEDULE R: Form of Security Agreement
ii
<PAGE>
SCHEDULE A
SERVICES AND SYSTEM SPECIFICATIONS
This Schedule A describes certain services and specifications that Pathnet
and Incumbent shall respectively perform. Pathnet's and Incumbent's
responsibilities with respect to particular Services and Specifications
described in this Schedule A, if any, are specifically indicated where such
Services and Specifications are described. Pathnet's and Incumbent's payment
responsibilities with respect to the Services and Specifications shall be as set
forth in Section 4 and Schedule C.
SECTION 1. PRELIMINARY ENGINEERING STUDIES AND EVALUATION OF EXISTING SYSTEM
1.1 Preliminary Analysis. Pathnet shall complete a detailed analysis of
the existing microwave system operated by Incumbent along each Segment set forth
in Schedule B and upon completion of such analysis shall deliver the results of
such analysis to Incumbent. Such analysis shall include:
(a) an inventory and survey of Incumbent's existing microwave sites
and supporting facilities (the "Existing System Inventory");
(b) microwave path studies and reliability analysis to provide
performance data to serve as the engineering basis for the design of the
System (the "Path Studies");
(c) a preliminary evaluation of the probability of successfully
coordinating frequencies on the System (the "Frequency Availability
Model");
(d) a determination of whether structural analysis of towers and
loading factors (for metal towers only) is required and, in the event such
structural analysis is required, the analysis of Incumbent's towers,
including, but not limited to, the wind loading and weight requirements
for the proposed antenna systems as well as any feedlines necessary to
support the such antenna systems (the "Tower Analysis");
(e) the design of the System (the "System Design") which System
Design conforms with the terms and conditions of Section 3 of this
Schedule A;
(f) a detailed line item budget for the System (the "System
Budget");
(g) a proposed T-1 plan for channelization of the System the
("Channel Plan"); and
(h) a preliminary construction management schedule for each
replacement Segment (the "Preliminary Construction Schedule").
A-1
<PAGE>
1.2 Cooperation of Incumbent with Preliminary Analysis. Incumbent shall
fully cooperate with Pathnet in Pathnet's performance of the preliminary
analysis set forth in Section 1.1 of this Schedule A, including, but not limited
to, providing to Pathnet any requested information and documents relating to
Incumbent or Incumbent's existing system.
1.3 Project Drawings. Upon completion of the preliminary engineering
studies and analysis and documentation as set forth in Section 1.1 of this
Schedule A, Pathnet shall deliver to Incumbent the following project drawings:
(i) a System layout drawing, (ii) the rack profiles, (iii) block drawings, and
(iv) equipment wiring drawings (collectively, the "Project Drawings.")
1.4 Deliveries by Incumbent. Within thirty (30) days of the Effective
Date, Incumbent shall deliver to Pathnet (i) any existing tower drawings and
specifications, inventory lists and other documents relating to the sites set
forth on Schedule B necessary for Pathnet to perform its obligations under this
Agreement, (ii) the results of any structural, mechanical, and electrical
inspections and reports relating to Incumbent's existing system facilities or
sites, which have been performed pursuant to the requirements of any applicable
Federal, state or local law or by Incumbent at its discretion and (iii) the
names, addresses and contact persons of any consultants or Subcontractors
engaged by Incumbent in connection with Incumbent's existing system, Facilities
or sites and copies of any reports or documents produced by such consultants or
Subcontractors.
SECTION 2. MODIFICATION TO EXISTING INFRASTRUCTURE
2.1 Documentation. Upon completion of the preliminary analysis as set
forth in Section 1.1 of this Schedule A, Pathnet shall prepare and deliver to
Incumbent a project management schedule and scope of work (the "Modifications
SOW") setting forth a detailed plan to complete all required modifications of
Incumbent's existing sites and Facilities necessary for the installation and
operation of the new System in accordance with the terms and conditions of this
Agreement. Incumbent shall have ten (10) days to either (i) approve by written
notice to Pathnet such Modifications SOW or (ii) deliver to Pathnet a written
list of Incumbent's suggested modifications to the Modifications SOW; provided,
however, any such modifications to the Modifications SOW may not result in the
cost of the Services and Specifications set forth in the Modifications SOW
exceeding the cost of such Services and Specifications as set forth in Section 1
of Schedule C. Pathnet shall review any such suggested modifications and, in its
sole discretion, incorporate some, all or none of such suggested modifications
into the Modifications SOW. In the event the changes to the Modification SOW
requires a change in the Statement of Work, the Parties shall submit a Change
Order pursuant to Section 4.5 of the Agreement.
2.2 Modifications Required. Pathnet shall perform all of the modifications
set forth in the Modifications SOW. Such modifications shall include the
following:
(a) any required modifications to the towers necessary to conform
the towers to the Specifications;
A-2
<PAGE>
(b) any required modifications to the battery reserves necessary to
conform the battery reserves to the Specifications and the installation of
any required generators, in accordance with the Specifications;
(c) any required modifications to the environmental control systems
of the existing shelters necessary to conform such environmental control
systems to the Specifications;
(d) the provision of all necessary D.C. and A.C. power cable
engineering for all racks, including, but not limited to, the installation
of all necessary conduits required to carry D.C. and A.C. power,
terminating cables and alarm cables and the installation of all necessary
A.C. distribution and A.C. wiring as required to meet the Specifications;
(e) the installation of all required new equipment shelters, or
modification of existing equipment shelters, to conform to the
Specifications;
(f) the installation of all required liquid petroleum, diesel or
natural gas lines from the existing liquid petroleum diesel or natural gas
tank or source, as the case may be, to the new shelter in accordance with
the Specifications;
(g) any required modifications to the foundation of any of the
towers, shelters or sites as set forth in the Tower Analysis;
(h) any upgrades required to conform the sites and Facilities to
local building code provisions and any other regulatory Requirements of
Law, including, but not limited to, those related to health and safety;
(i) the removal of any above or below ground obstructions or
materials such as trees and power lines which may affect the performance
of the System or other activities contemplated by this Agreement;
(j) all required fence extensions and replacements;
(k) any required modifications to the grounding and bonding Systems
at each site to conform to the Specifications;
(l) any required modifications to the pressurizing equipment to
conform to the Specifications, including the pressurizing equipment
manifolds and dehydrators; and
(m) any other miscellaneous site work necessary to prepare
Incumbent's sites for the installation and operation of the new System.
2.3 Cooperation by Incumbent. Incumbent shall fully cooperate with Pathnet
and shall provide Pathnet with all required assistance in completion of such
obligations in Pathnet's performance of its obligations under this Section 2 of
this Schedule A.
A-3
<PAGE>
2.4 Maintenance of Modifications. Incumbent shall ensure that all
modifications performed pursuant to this Section 2 of this Schedule A are
maintained in accordance with the Specifications, including, but not limited to,
the upgrade or replacement of any equipment and materials described in the
Modifications SOW.
2.5 Choice of Equipment Vendors and Service Providers.
2.5.1 Engagement. In the event Incumbent proposes an equipment
vendor or service provider directly in accordance with this Section 2.5 of
Schedule A (i) Pathnet shall have the right to approve any equipment
vendors or service providers, which approval shall not be unreasonably
withheld, (ii) all invoices, purchase orders or other bills relating to
such equipment or services shall be sent to both Pathnet and Incumbent and
(iii) Incumbent shall not pay any such invoice, purchase order or bill
without the prior approval of Pathnet, which approval shall not be
unreasonably withheld.
2.5.2 Approval. Incumbent shall have the right to reasonably approve
any Subcontractor engaged to perform the Services set forth in this
Section 2 of Schedule A.
SECTION 3. DESIGN OF NEW SYSTEM
3.1 Approval of System Design. Within ten (10) days after receipt by
Incumbent of the System Design from Pathnet, Incumbent shall either (i) deliver
to Pathnet written approval of such System Design or (ii) deliver to Pathnet a
written list of Incumbent's suggested design modifications. Pathnet shall review
any such suggested modifications and, in Pathnet's sole discretion, incorporate
some, all or none of such suggested modifications into the System Design.
Pathnet shall, within thirty (30) days of receipt of Incumbent's suggested
modifications, deliver a revised System Design to Incumbent. In the event
Incumbent fails to deliver to Pathnet in writing its approval as set forth above
within the prescribed time period, Pathnet shall assume that Incumbent has
approved such System Design. In the event changes to the System Design requires
a change to the Statement of Work, the Parties shall submit a Change Order
pursuant to Section 4.5 of this Agreement.
3.2 Modification of System Design. At any time and from time to time,
Pathnet shall have the right to modify the System Design upon written notice to
Incumbent of such modifications, as new versions of Equipment used in the System
may become available from manufacturers or software providers, as Technology is
improved and as determined by Pathnet in its sole discretion.
3.3 System Technical Specifications. Pathnet shall (i) design the System
in accordance with the minimum network performance standards set forth in
Section 3 of this Schedule A, (ii) in each instance where reasonably possible,
use the towers, antennas, waveguide, and other system components of Incumbent's
existing system in the System Design and (iii) design the System to meet the
following technical specifications:
A-4
<PAGE>
(a) Radio System Design. The active radio components of the System
shall be designed to conform to the Specifications and the manufacturer
specifications set forth in Exhibit A-2 to this Schedule A.
(b) Radio Software Design. The software used to operate the radios
shall conform to the Specifications and the manufacturer specifications
set forth in Exhibit A-2 to this Schedule A.
(c) Antenna and Frequency Specifications. The radio communications
equipment shall transmit and receive on the frequencies as set forth in
the System Design. All antenna reflectors used in the System shall conform
to (i) Category A standards as defined by the FCC and (ii) the
specifications set forth in any PCN relating to the System, and each high
performance antenna shall be fitted with a radome. All antenna mounting
hardware shall meet wind and loading requirements for the applicable
county and shall substantially conform to EIA-222-F.
(d) Tower Specifications. All towers shall substantially conform to
(i) the EIA/TIA-222-F-1991, Structural Standards for Steel Antenna Towers
and Antenna Supporting Structures, 1996, (ii) EIA/222-F Specifications for
loading for the appropriate county, and (iii) any other required FCC and
FAA rules and regulations.
(e) Waveguide Specifications. Waveguide used in the System specified
for transmission line shall be of a premium grade to ensure minimum
return.
(f) D.C. Power Requirements. The radio components of the System
shall be powered by 48 volts DC with at least eight (8) to ten (10) hours
of battery capability (assuring less than twenty (20) amp loads for
Incumbent Equipment), and all necessary chargers, distribution systems and
transfer switches for generators as set forth in Exhibit A-3 to this
Schedule A.
(g) A.C. Power Requirements. A.C. electrical power required by the
System shall be consistent with local requirements and the usage at each
of the sites set forth in Schedule B and shall be 120/240 volt single
phase 200 amp service as set forth in Exhibit A-3 to this Schedule A.
(h) Bonding and Grounding Specifications. The System and all
associated electrical components shall be grounded and bonded to current
EIA and IEEE specifications and in accordance with the Specifications set
forth on Exhibit A-6 to this Schedule A.
(i) Order Wire Specification. Each equipment shelter shall be
equipped with an Order Wire and a handset, which will be used as a talk
circuit for System operation and maintenance purposes and which will be
carried by Pathnet as part of the System payload.
A-5
<PAGE>
(j) Diagnostic Circuit. Each equipment shelter shall be equipped
with a diagnostic circuit that will be used to connect each such shelter
and the Equipment housed in such shelter to the Network Management System.
(k) Multiplexing from OC-3 to DS-1 Level. The System Design shall
provide for any required multiplexing of the OC-3 to the DS-1 level at
each site using an OC-3 Multiplexer.
(l) Multiplexing from DS-1 to DS-0 Level. Within thirty (30) days
after the date hereof, Incumbent shall deliver to Pathnet a Schedule
substantially in the form of Exhibit A-4 to this Schedule A setting forth
Incumbent's multiplexing requirements, as such exhibit may be appended to
these Schedules from time to time as to each Segment. Upon receipt of such
Exhibit A-4 to this Schedule A, Pathnet will reflect in the System Design
the requested multiplexing of the DS-1 to the DS-0 level at each site
using a 1/0 Multiplexer subject to limitations in Drop and Insert Capacity
between each Switched Mod Section using available Wayside Channels.
(m) Wayside Channels. Incumbent or Pathnet as reflected in the
System Design, as determined by Pathnet in its sole discretion, shall use
the Wayside Channels.
(n) Spectral Loading Requirements. The System shall meet the then
current FCC requirements of spectrum efficiency outlined, 47 C.F.R. 101
and any successor rule or regulation.
(o) Capacity of System. The System shall be comprised of, at a
minimum, 3 DS-3 capability and will have a 1 x n protection switch
allowing for upward migration to a minimum of 1 x 7 protection. The
capacity of the System may be expanded to a 2 x 14 protection level, using
additional spectrum or crossband filters, provided, such Capacity
Expansion does not degrade the System below the performance standards set
forth in this Section 3 of this Schedule A.
(p) SONET Architecture. The digital microwave radios used in the
System shall operate under a SONET format.
(q) Shelters Design. A proposed building layout for the new shelters
to be constructed and the existing shelters to be modified shall be as set
forth in Exhibit A-5 to this Schedule A and shall comply with all
applicable local laws, regulations and ordinances.
(r) Channel Plan. The System shall be designed such that Incumbent
and Pathnet shall be allocated capacity as set forth in the Channel Plan
and Section 7.2.2.
(s) Interconnections Limitations. The System shall have no more than
four (4) Interconnections per LATA. No more than two (2) of such
Interconnections shall be to other segments of the Pathnet network created
from facilities of other Persons and no more than two (2) of such two
Interconnections shall be to the PSTN. At each Interconnection site, there
shall be no more than two (2) additional antennas used solely
A-6
<PAGE>
for such Interconnection purposes. Interconnections may be by microwave or
other media. (t) Protection Switching Requirement. Power, radio, and
multiplexing equipment shall be redundant with automatic protection
switching to minimize Outages as a result of equipment failure.
(u) Generator Requirements. Generators shall be required at all
sites with a history of power outages and all sites that are difficult to
access and any other sites as determined by the Parties.
(v) System Integration. The System shall be integrated into the
total Pathnet telecommunications network as set forth in the System
Design.
(w) Transmission Line Requirements. One (1) or more transmission
lines shall be connected to each antenna and such lines will be anchored
firmly to the tower in accordance with the manufacturer's recommendation.
(x) Equipment Rack Specifications. Each equipment rack shall be
firmly anchored to the floor, and the overhead channel iron or the
adjacent racks.
(y) Environmental Control of Shelters. Equipment shelters shall be
environmentally controlled to standards, between 55(degree) and 80(degree)
and shall be maintained within the desired humidity range, as set forth in
the manufacturer's specifications in Exhibit A-2 to this Schedule A and as
set forth in Exhibit A-5 to this Schedule A.
(z) Spurs. The System shall be designed to allow the build-out of
spurs set forth on Exhibit A-8 to this Schedule A from the backbone
network for Pathnet's and Incumbent's own network and internal
communications purposes.
(aa) Network Management System. The System Design shall include the
Network Management System that complies with the specifications set forth
in Section 7.6 of this Schedule A.
(bb) Fuel Tanks and Lines. All liquid petroleum, diesel and natural
gas tanks and lines required shall meet all applicable environmental and
health and safety standards and Requirements of Law.
(cc) Pressurizing Equipment. The System Design shall include all
required pressurizing equipment, manifolds and dehydrators.
3.4 System Performance Criteria
3.4.1 Availability. The System shall be designed to meet or exceed
the long haul objective of 99.98% availability on an annual basis for a
4,000 mile system, which is equivalent to a one way system Outage of less
than 0.4 seconds, per mile, per year.
3.4.2 Circuit Acceptance Level. The System shall be designed such
that any continuous five hundred (500) mile segment of the System during
any consecutive
A-7
<PAGE>
twenty-four hour period shall have no more than one (1) Errored Second,
shall have 99.998% Error Free Seconds and shall have no Severely Errored
Seconds, measured at the DS-1 level.
SECTION 4. INSTALLATION AND CONSTRUCTION
4.1 Documentation.
4.1.1 Project Management Plan, Project Schedule and Cutover Plan.
Upon approval of the System Design, Pathnet shall deliver to Incumbent (i)
a plan of the respective responsibilities of each Party and other related
items relating to the construction and installation of the System and a
schedule for the installation of the System (the "Project Management Plan
and Schedule"), and (ii) a schedule for the cutover of the System (the
"Cutover Plan"). Incumbent shall have ten (10) days to either (i) approve
by written notice to Pathnet such Project Management Plan, Project
Schedule and Cutover Plan or (ii) deliver to Pathnet a written list of
Incumbent's suggested modifications to such Project Management Plan,
Project Schedule and Cutover Plan, as the case may be. Pathnet shall
review any such suggested modifications and, in Pathnet's sole discretion,
incorporate some, all or none of such suggested modifications into the
Project Management Plan, Project Schedule and Cutover Plan, respectively.
In the event Incumbent does not notify Pathnet in writing of its approval
or suggested modifications of the Project Management Plan, Project
Schedule and Cutover Plan as set forth above within the prescribed time
period, Pathnet shall assume that Incumbent has granted such approval.
4.1.2 Installation Reports. After installation has begun and
continuing until Commissioning, Pathnet shall provide to Incumbent a
bi-weekly progress report (each a "Progress Report") setting forth, (i) a
description of the work performed during the immediately preceding period,
(ii) a list of any material deviations from the proposed schedule of work
and (iii) an analysis of such deviations with respect to their impact upon
the timely deployment of the System.
4.1.3 Changes to Drawings. In the event that during the process of
Installation any of the Project Drawings delivered pursuant to Section 1.3
of this Schedule A require any modifications, Pathnet shall make any such
modifications to such Project Drawings, shall deliver the revised Project
Drawings to Incumbent, and shall place a copy of such revised Project
Drawings at each site.
4.1.4 As-Built Drawings. Upon completion of each phase of
installation as set forth in the Project Schedule, Pathnet shall deliver
to Incumbent an as-built drawing of the System (each an "As-Built
Drawing") and shall incorporate the final As-Built Drawing into the
appropriate equipment manuals.
4.2 Installation by Pathnet. Pathnet shall construct and install the
System as set forth below and in accordance with this Schedule A and the
documents and schedules prepared and delivered pursuant to this Schedule A.
A-8
<PAGE>
(a) Radios. Pathnet shall furnish and install the digital radios
that meet the Specifications.
(b) Antennas and Frequencies. Pathnet shall furnish and install (i)
the antennas that meet the Specifications and (ii) any required antenna
mounting hardware to secure such antennas to the towers in accordance with
the Specifications.
(c) Waveguide Bridge and Supports. Pathnet shall furnish and install
(i) waveguides that meet the Specifications, (ii) new waveguide bridges on
two faces of the existing towers and (iii) all additional supports
required of the waveguide from the tower to termination inside the
shelter.
(d) Bonding and Grounding. Pathnet shall furnish and install all
required ground kits in accordance with the Specifications, including, but
not limited to, waveguide ground kits at the antenna, the bottom of the
tower and at the entry port of the shelter, tower anchor grounding kits,
and ground wire rings for the shelters.
(e) Moving Company. During installation of the System, Pathnet, or a
full service moving and warehousing company hired by Pathnet, shall handle
the pick up of necessary equipment for temporary warehousing in all
required areas at and near the installation sites.
(f) Order Wire. Pathnet shall furnish and install an Order Wire at
each site in accordance with the Specifications and shall establish Order
Wire connectivity, including, but not limited to, connectivity to all
necessary external interfaces.
(g) OC-3 Multiplexers. Pathnet shall furnish and install all
required OC-3 Multiplexers to the DS-1 level as set forth in Section 3 of
this Schedule A.
(h) Channel Plan. Pathnet shall perform cross-connects of T-1 lines
in accordance with the Channel Plan and the Specifications.
(i) Interconnection Placement. Pathnet shall furnish and install
connecting facilities from the System to the PSTN, including but not
limited to connections to POP's of purchasers of Excess Capacity and
Pathnet shall furnish and install all cables required to interconnect
project equipment within the System.
(j) Transmission Lines. Pathnet shall (i) furnish and install all
required transmission lines on the towers, (ii) route such transmission
lines to the equipment racks in the shelters, (iii) connect both ends of
such transmission lines and (iv) interface such transmission lines to the
radio equipment in accordance with the Specifications.
(k) Equipment Racks. Pathnet shall furnish and install all equipment
racks necessary for the Equipment installed by Pathnet in accordance with
the Specifications.
A-9
<PAGE>
(l) Network Management System. Pathnet shall furnish and install the
Network Management System, including, but not limited to, all required
alarms, panels, terminals, software and cables at all appropriate
demarkation points in accordance with the Specifications.
(m) Spurs. Pathnet shall furnish and install all of the necessary
equipment to build-out Pathnet's spurs and Incumbent's spurs (as requested
and paid for by Incumbent), each as set forth in Exhibit A-8 to this
Schedule A in accordance with the Specifications.
(n) Deconstruction of Existing System. As required at each site,
Pathnet shall move Incumbent's existing system to one side, providing
space for permanent installation of the new System.
(o) Pre-Commissioning System. Pathnet shall install an "initial"
digital System in such a way that it can be operated and tested without
interfering with Incumbent's existing system performance.
(p) Parallel Systems. In order to minimize system downtime, Pathnet
shall provide parallel operations to the Incumbent's existing analog
system with the digital equipment system using new frequencies and antenna
configurations.
4.3 Cooperation During Installation. During installation, Incumbent shall
provide all necessary cooperation to Pathnet, including, but not limited to,
posting at each site any Permits or licenses for building or tower work related
to the construction at such site and providing reasonable access to its
Facilities as set forth in Section 5.
4.4 Installation by Incumbent. Incumbent shall furnish and install all
required equipment and materials at each point of demarkation to meet
Incumbent's internal communication needs, including, but not limited to,
furnishing and installing all 1/0 Multiplexers as set forth in Section 3 of this
Schedule A and all other interconnection equipment relating to Incumbent's spurs
set forth in Exhibit A-8 to this Schedule A.
SECTION 5. PRE-COMMISSIONING TESTING
5.1 Factory Acceptance Test.
5.1.1 Tests to be Performed. Pathnet shall coordinate all factory
acceptance testing on the Equipment. Such factory acceptance testing shall
include (i) linking together of all racks in each Switched Mod Section to
simulate the System as it will be configured in the field, (ii) testing at
the panel terminal and System level for certification and compliance with
the Specifications, (iii) connecting the radio bays by coaxial cables
through attenuators to simulate "RSL" conditions as encountered in the
field, (iv) testing on a path basis to the applicable configuration of the
System, (v) testing of all miscellaneous Equipment such as supervisory
fault alarm and control and service channel units and (vi) testing the
equipment as a System to resolve all interface problems.
A-10
<PAGE>
5.1.2 Observing Factory Testing. Incumbent shall have the right, at
its own expense, to witness in person the factory testing of the
Equipment.
5.2 Rack Test. Pathnet shall perform a rack test once the radio cabinet
has been installed.
5.3 Path Test. Pathnet shall perform a path test after each site has been
turned up.
5.4 End-To-End Test. Pathnet shall perform an end-to-end test for each
Switched Mod Section on the System once all sites have been turned up.
5.5 Field Test. Once the Equipment is installed and operational, Pathnet
shall test each path pursuant to the following field tests to ensure performance
of the Equipment over the designated path in accordance with the criteria and
standards set forth in this Schedule A.
(a) Radio Hop Test: Pathnet shall (i) align all digital microwave
paths, (ii) measure and record transmitter frequency, (iii) measure and
record transmitter power, (iv) calculate and record receiver fade margin,
(iv) perform Bit Error Rate checks and (v) record results of such Bit
Error Rate checks.
(b) Digital Multiplex Test: Pathnet shall (i) perform standard
loop-back tests and (ii) verify the performance of all local alarm points
to the DS-1 level.
(c) System Test: Pathnet shall (i) perform an end-to-end Bit Error
Rate test of the message one radio for a 24-hour period and an end-to-end
Bit Error Rate test of the protect radio for 1 hour, (ii) verify equipped
channel units through microwave system, (iii) verify performance of Order
Wires and Wayside Channels, and (iv) verify performance of the alarm
points function throughout the System.
5.6 Site Acceptance Testing. Pathnet shall perform all site acceptance
tests as recommended by the manufacturers of the Equipment and Pathnet shall
provide the results of any such site acceptance testing to Incumbent promptly
after completion of such testing.
5.7 Acceptance Procedure. After completion of site acceptance testing as
set forth in Section 5.6 of this Schedule A, Pathnet shall implement the
following acceptance procedure:
(a) Incumbent shall promptly perform an installation inspection and
deliver to Pathnet a written list of all material deficiencies from the
Specifications to be corrected by Pathnet (the "Deficiency List").
(b) Pathnet shall promptly correct such material deficiencies on the
Deficiency List and shall, upon completion, certify to Incumbent that such
items have been corrected.
A-11
<PAGE>
(c) Pathnet shall submit to Incumbent all of the test data collected
through the performance of the tests set forth in Section 5 of this
Schedule A for Incumbent's approval, which approval shall not be
unreasonably withheld.
(d) Incumbent shall deliver to Pathnet a Certificate of Acceptance
substantially in the form of Exhibit A-9 to this Schedule A.
5.8 Equipment Required for Pre-Commissioning Testing. Pathnet shall
furnish all Pre-Commissioning Test Equipment.
SECTION 6. CUTOVER
6.1 Cutover.
6.1.1 Pathnet Responsibilities. Pathnet shall (i) manage the cutover
process for the System, (ii) perform such cutover in accordance with the
Cutover Plan and (iii) notify Incumbent of the circuit activity that will
occur upon Commissioning of each path or Segment and the impact that such
activity may have on the Incumbent's existing system. Promptly after each
site has been cutover, Pathnet shall notify Incumbent of the completion of
such cutovers.
6.1.2 Incumbent Responsibilities.. Incumbent shall (i) cooperate and
coordinate its cutover of its voice and data circuits with Pathnet and the
Cutover Plan, (ii) complete its cutover of its voice and data circuits no
more than ninety (90) days after Commissioning of each path or Segment by
Pathnet and (iii) no more than ninety (90) days after cutover by Incumbent
of its voice and data systems, remove all unused equipment from
Incumbent's sites in compliance with all applicable Requirements of Law.
6.2 Station Log Books. Pathnet shall establish station logs books in
accordance with all FCC rules and regulations (each a "Station Log Book") and at
Commissioning shall deliver to Incumbent an original of each Station Log Book at
Commissioning.
SECTION 7. SYSTEM OPERATION
7.1 Increases in Capacity. At any time, and from time to time, Pathnet
shall have the right, at its sole discretion, to increase the capacity of the
System beyond the capacity created in the initial build-out; provided, that
Pathnet fulfills the following conditions before Commissioning any such proposed
Capacity Expansion:
(a) Capacity Expansion Schedule. At least fifteen (15) days prior to
any Capacity Expansion, Pathnet shall provide to Incumbent a capacity
expansion schedule (each, a "Capacity Expansion Schedule") setting forth
the amount of capacity to be included in such Capacity Expansion, the
specific paths to be expanded, the expansion
A-12
<PAGE>
name (including each path that is affected), and the expected
Commissioning of such Capacity Expansion.
(b) Performance of Capacity Expansion. Prior to the Commissioning of
any Capacity Expansion, (i) Pathnet shall perform all required testing on
such Capacity Expansion to confirm that any such Capacity Expansion will
not degrade the System below the Specifications (ii) Pathnet shall provide
the results of such testing upon receipt of such test results to Incumbent
for its review and approval and (iii) Pathnet shall obtain from Incumbent
a Certificate of Acceptance substantially in the form attached hereto as
Exhibit A-9 to this Schedule A with respect to such Capacity Expansion.
(c) Incumbent's Right to Contest Capacity Expansion. In the event,
after receipt of the test results as set forth above, Incumbent reasonably
determines that a proposed Capacity Expansion will degrade the System
below the Specifications, Incumbent shall have the right to withhold
delivery of any Certificate of Acceptance with respect to such Capacity
Expansion and shall hire an independent third party approved by Pathnet
(which approval shall not be unreasonably withheld) to perform additional
testing on such Capacity Expansion. In the event such independent third
party reports that the proposed Capacity Expansion will not result in the
degradation of the System below the Specifications, Incumbent (i) shall
promptly deliver to Pathnet a Certificate of Acceptance with respect to
such proposed Capacity Expansion and (ii) shall pay for the reasonable
costs of such independent third party evaluation. In the event that such
independent third party reports that the proposed Capacity Expansion will
result in the degradation of the System below the Specifications (i)
Pathnet shall make all required modifications to the System and the
proposed Capacity Expansion such that, in the opinion of such independent
third party, the proposed Capacity Expansion shall not degrade the System
below the Specifications, (ii) upon verification by such independent third
party that the proposed Capacity Expansion, as modified by Pathnet, shall
not degrade the System below the Specifications, Incumbent shall promptly
deliver to Pathnet a Certificate of Acceptance substantially in the form
attached as Exhibit A-9 to this Schedule A with respect to such Capacity
Expansion and (iii) Pathnet shall pay for the reasonable costs of such
independent third party evaluation.
7.2 Maintenance of System. Within sixty (60) days after the Effective
Date, Pathnet and Incumbent shall execute and deliver the Maintenance Services
Agreement. Pathnet shall have the right to supplement at its own expense at any
time, and from time to time, any maintenance performed on the System, as
determined by Pathnet in its sole discretion.
7.3 Additional Transmission Lines and Antennas. After Commissioning, if
the System is expanded pursuant to any Capacity Expansion, Pathnet shall have
the right to elect to install a second transmission feed line or a third antenna
to any tower. In such instance, Pathnet shall (i) perform any tower analysis
that may be required before the installation of such transmission line or
antenna, (ii) furnish and install such additional transmission line and any
associated connectors and mounting hardware for securing such transmission line
to the towers, (iii) furnish and install such antenna and other devices and
equipment associated with such antenna and (iv) perform strengthening to the
tower required for such transmission line or third antenna.
A-13
<PAGE>
7.4 Additional Order Wires and Diagnostic Circuits. At any time and from
time to time, Pathnet shall have the right to install additional Order Wires and
diagnostic circuits at System sites, which Order Wires and diagnostic circuit
may or may not be carried as part of the System payload as determined to be
necessary or appropriate by Pathnet in its sole discretion.
7.5 24-Hour Network Monitoring Center. Upon Commissioning and for the
period thereafter until the Expiration Date, Pathnet shall operate a network
monitoring center (the "Network Monitoring Center") twenty-four (24) hours a
day, seven (7) days a week, which Network Monitoring Center shall, among other
things, handle all problems and trouble reports that may arise and monitor the
System as set forth in Section 7.6 of this Schedule A.
7.6 Network Management System. At all times after Commissioning until the
Expiration Date, Pathnet shall provide a network management system to be
operated at the Network Monitoring Center (the "Network Management System")
which Network Management System will (i) manage all network elements within the
System (21 SMX or equivalent), (ii) monitor and control the facilities system,
the radio system, and the OC-3/DS-1 multiplex system, (iii) collect performance
data such as Errored Seconds, Severely Errored Seconds, frame loss and Failed
Seconds consistent with the manufacturer's specifications set forth in Exhibit
A-2 to this Schedule A, (iv) monitor the shelter environments (including
commercial power failure, door alarms, charger failures, low waveguide pressure,
air conditioner failure, tower light alarms, generator runs (if any), waveguide
dehydrator excessive runs, smoke alarms, high temperature and low temperature),
radio equipment, multiplexing equipment, and Incumbent equipment (as reasonably
requested by Incumbent) and (v) provide Incumbent with the ability to monitor
the System separately from the overall Pathnet network.
7.7 Alarm and Event Logging and Reports. Within thirty (30) days after the
end of each calendar quarter, Pathnet shall provide to Incumbent a report (each
an "Alarm and Event Report") setting forth a log of all alarms and events
recorded by the Network Management System.
7.8 System Outages. Each Party shall use its best efforts to avoid
unscheduled System Outages in the performance of each Party's respective rights
and obligations under this Agreement.
7.9 Replacement of Radios. Beginning in the fifteenth (15th) year after
Commissioning, Pathnet shall begin replacing the radios and radio software
relating to the System and shall replace such radios and radio software at an
average rate of ten percent (10%) a year for ten (10) years.
7.10 Network Loops. In the event in the construction of the Pathnet
network a network loop is created relating to the System, Pathnet shall
facilitate allowing Incumbent to benefit from the existence of such network loop
in the event of a System Outage.
SECTION 8. GENERAL
A-14
<PAGE>
8.1 Access to Sites. In addition to any access rights relating to the
Leased Premises set forth in Section 5 of the Agreement, Incumbent shall provide
upon the reasonable request of Pathnet, road access for all construction
vehicles, which access may involve the construction by Incumbent of additional
roads and paths.
8.2 Parking at Sites. At the request of Pathnet, Incumbent shall provide
for vehicular parking at each site at no charge to Pathnet for use during the
term of this Agreement; provided, however, in the event sites are located in
urban areas where vehicles are parked in privately operated lots or garages,
Pathnet shall be responsible for any and all parking charges at such urban
sites.
8.3 Use of Telecommunications Devices. While visiting Incumbent's sites,
Incumbent shall allow Pathnet to use existing telephone lines or Order Wires in
connection with Pathnet's performance of its rights and obligations under this
Agreement.
8.4 Fuel Tanks. Incumbent shall ensure that all liquid petroleum, diesel
or natural gas tanks, as the case may be, are adequately supplied throughout the
term of this Agreement.
8.5 Retaining of Records. All records and reports required pursuant to
this Schedule A, shall be retained by Pathnet or Incumbent, as the case may be,
for at least five (5) years or any longer period as may be required by law.
8.6 Work Permits. Incumbent shall obtain all necessary local, state and
Federal construction and work permits as required to perform all of the services
set forth in this Agreement.
8.7 Hazardous Material.
8.7.1 Existence of Hazardous Material. Without the consent of
Incumbent as described below, Pathnet shall not bring or cause or permit,
knowingly or unknowingly, any Hazardous Material to be brought or remain
upon, kept, used discharged, leaked or emitted on any of Incumbent's sites
or Facilities.
8.7.2 Compliance with Environmental Laws. In the event that
Incumbent allows Pathnet to bring Hazardous Materials to Incumbent's sites
as set forth in the Environmental Audit, Pathnet shall strictly obey and
adhere to any and all Federal, state or local laws, ordinances, orders,
rules, regulations, codes or any other government restrictions or
requirements (including, but not limited to, CERCLA and RCRA) which in any
way regulates, governs, or impacts Pathnet's possession, use, storage,
treatment or disposal of such Hazardous Material.
8.8 Transportation. Pathnet shall provide transportation for all Pathnet
personnel or Subcontractors to each of Incumbents sites and between such sites
in connection with the performance of the Services.
8.9 Storage. Incumbent shall provide at no charge to Pathnet or any vendor
providing materials for use in the System, secure and appropriate storage for
all equipment and
A-15
<PAGE>
materials to be installed or used for the installation, testing or operation of
the System, which storage facilities shall also serve as the drop-ship point for
staging all installation equipment used in the System.
8.10 Unpacking and Trash Removal. Pathnet shall (i) unpack all crates and
boxes, (ii) remove all trash created by such unpacking from Incumbent's sites
and (iii) verify all packing lists. Incumbent shall regularly remove all other
trash from its sites and Facilities.
8.11 Manufacturing and Ordering of Equipment. As the System is installed
or upgraded after Commissioning, Pathnet shall order all required equipment and
materials, including, but not limited to, all required installation materials,
from the respective manufacturers in accordance with the timing set forth in the
Project Schedule.
8.12 Ship and Delivery Schedules. At least two (2) weeks prior to receipt
of any equipment or materials to be used in the modifications or installation
set forth in Section 2 and Section 4 to this Schedule A, respectively, Pathnet
shall provide to Incumbent detailed ship and delivery schedules relating to such
equipment and materials.
8.13 Electricity. Incumbent shall provide all required electricity for the
design, modification, installation, operation and monitoring of the System in
accordance with the specifications set forth in Exhibit A-3 to this Schedule A.
A-16
<PAGE>
EXHIBIT A-1
SYSTEM EQUIPMENT, TOWERS AND SHELTERS
Subject to completion of Pathnet's due diligence as to each Segment of the
System and upon the prior approval of each Party, the Parties shall append to
this Exhibit A-1 the System Equipment Towers and Shelters related to such
Segment.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Equipment Joliet 110B 110A 110 109B 199 109A
Meter Norway, Ohio, Geneseo, Hamlet, Letts, Wyman,
Joliet, IL IL IL IL IL IA IA
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Generators 0 25 KW 25 KW 35 KW 25 KW 35 KW 25 KW
- ---------------------------------------------------------------------------------------------------------
DC Charger
Systems 1 1 1 1 1 1 1
- ---------------------------------------------------------------------------------------------------------
Battery
Plants 0 700 AH 700 AH 900 AH 700 AH 900 AH 900 AH
- ---------------------------------------------------------------------------------------------------------
Antennas 2 ea. 10' 2 ea. 10' 4 ea. 12' 2 ea. 10' 2 ea. 8' 4 ea. 8' 2 ea. 8'
2 ea. 12' 2 ea. 12' 2 ea. 10' 2 ea. 10'
- ---------------------------------------------------------------------------------------------------------
Waveguide 590' 1020' 1216' 1140' 1340' 420' 1180'
- ---------------------------------------------------------------------------------------------------------
NEC 2000 Terminal Repeater Repeater Terminal Repeater Terminal Terminal
Sonet 2 TRR 4 TRR 4 TRR 4 TRR 4 TRR 4 TRR 4 TRR
Radios
- ---------------------------------------------------------------------------------------------------------
OC-3
Multiplexers 1 0 0 1 0 1 1
- ---------------------------------------------------------------------------------------------------------
Network
Servers 1 0 0 0 0 0 0
- ---------------------------------------------------------------------------------------------------------
New 0 11' 6" x 11' 6" x 11' 6" x 11' 6" x 11' 6" x 11' 6" x
Shelters 28' 28' 34' 28' 34' 28'
- ---------------------------------------------------------------------------------------------------------
New Towers 0 0 0 0 0 0 0
- ---------------------------------------------------------------------------------------------------------
</TABLE>
A-17
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Equipment 109 108B 108A 108 107B 107A 107
Harper, Wright, Knoxville, Truro, Creston, Grant, Hastings,
IA IA IA IA IA IA IA
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Generators 25 KW 25 KW 25 KW 35 KW 25 KW 25 KW 35 KW
- ---------------------------------------------------------------------------------------------------------
DC Charger
Systems 1 1 1 1 1 1 1
- ---------------------------------------------------------------------------------------------------------
Battery
Plants 900 AH 700 AH 700 AH 900 AH 700 AH 700 AH 900 AH
- ---------------------------------------------------------------------------------------------------------
Antennas 2 ea. 10' 4 ea. 10' 2 ea. 10' 4 ea. 12' 2 ea. 8' 2 ea. 8' 2 ea. 8'
2 ea. 12' 2 ea. 12' 2 ea. 10' 2 ea. 10' 2 ea. 12'
- ---------------------------------------------------------------------------------------------------------
Waveguide 1496' 740' 1168' 1460' 1172' 1060' 1456'
- ---------------------------------------------------------------------------------------------------------
NEC 2000 Terminal Repeater Repeater Terminal Repeater Repeater Terminal
Sonet 4 TRR 4 TRR 4 TRR 4 TRR 4 TRR 4 TRR 4 TRR
Radios
- ---------------------------------------------------------------------------------------------------------
OC-3
Multiplexers 1 0 0 1 0 0 1
- ---------------------------------------------------------------------------------------------------------
Network
Servers 0 0 0 0 0 0 0
- ---------------------------------------------------------------------------------------------------------
New 11' 6" x 11' 6" x 11' 6" x 11' 6" x 11' 6" x 11' 6" x 11' 6" x
Shelters 28' 28' 28' 34' 28' 28' 28'
- ---------------------------------------------------------------------------------------------------------
New Towers 0 0 0 0 0 0 0
- ---------------------------------------------------------------------------------------------------------
</TABLE>
A-18
<PAGE>
- ----------------------------------------------------
Equipment 106C 106B 106A
Sidney, Cook, Pickrell,
IA NE NE
- ----------------------------------------------------
Generators 25 KW 25 KW 35 KW
- ----------------------------------------------------
DC Charger
Systems 1 1 1
- ----------------------------------------------------
Battery
Plants 700 AH 900 AH 900 AH
- ----------------------------------------------------
Antennas 2 ea. 8' 2 ea. 8' 2 ea. 10'
2 ea. 10' 2 ea. 10'
- ----------------------------------------------------
Waveguide 1020' 1420' 470'
- ----------------------------------------------------
NEC 2000 Repeater Terminal Terminal
Sonet 4 TRR 4 TRR 2 TRR
Radios
- ----------------------------------------------------
OC-3
Multiplexers 0 0 1
- ----------------------------------------------------
Network
Servers 0 0 0
- ----------------------------------------------------
New 11' 6" x 11' 6" x 11' 6" x
Shelters 28' 28' 34'
- ----------------------------------------------------
New Towers 0 0 0
- ----------------------------------------------------
A-19
<PAGE>
EXHIBIT A-2
MANUFACTURERS SPECIFICATIONS FOR RADIOS
NEC OC-3 MULTIPLEXER SPECIFICATIONS
<TABLE>
<CAPTION>
IMT-150
- ---------------------------------------------------------------------------------------
Physical: Power Requirements: Interface: Features:
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Mounts in a 23-inch -48 volts DC High Speed: OC-3 Software Provisioning
EIA rack Approximately 125 Optical Full Bandwidth Time
Height 11.4 inches watts (ADM Low Speed: OC-1, Slot Assignment
Width 21.4 inches configuration) STS-1, DS3, or DS1 X.25 Gateway for OSS
Depth 10 inches DS1 PM Monitoring
Capability
- ---------------------------------------------------------------------------------------
</TABLE>
NEC 2000 SERIES
Specifications:
Physical:
One cabinet (600 mm wide, 300 mm deep and 2.2 m high) for 4 radio channels
(Includes OC-3 interface per channel, space diversity receiver, order wire and
wayside DS1 interface, and 1:N switch).
Power Requirements:
- -24 or -48 volts DC
Approximately 200 watts per radio channel for a terminal configuration
Approximately 150 watts per radio channel direction (1 TRR) for a repeater
configuration
Interface:
OC-3
Operating Specifications:
Frequency Band: 5.945 to 6.425 GHz
Modulation: 128 QAM MLCM
Capacity: 155.52 Mb/s plus radio overhead (Wayside DS1, Order Wires, ATPC
signals, 1:N commands, monitoring)
Transmit Power at interface to transmit waveguide: +29.7 dBm
System Gain (Waveguide interface to waveguide interface - no ATPC): 101.1 dB
System Gain (Waveguide interface to waveguide interface - with ATPC): 103.1 dB
Dispersive Fade Margin (10^-3): 48 dB
FCC Identifier: BSF6P155-S02A
Emission Designator: 30M0D7W
A-20
<PAGE>
EXHIBIT A-3
ELECTRICITY AND POWER SPECIFICATIONS OF THE SYSTEM
DC POWER SPECIFICATIONS
<TABLE>
<CAPTION>
Site Configuration Radio Mux Chan bank Incumbent Site Total Site Total Battery Size
7:1(Watts) OC-3(Watts) (Watts) Equip(Watts) WATTS DC AMPS 10 Hour Reserve
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Terminal End 1:3 800 330 250 720 2,100 44 Amps 440 AH
Terminal End 1:7 1,600 770 250 720 3,340 70 Amps 700 AH
Repeater 1:3 1,200 None 250 720 2,170 45 Amps 530 AH
Repeater 1:7 2,400 None 250 720 3,370 70 Amps 700 AH
2 Way Junction 1:3 1,600 125 250 720 2,695 56 Amps 600 AH
2 Way Junction 1:7 3,200 125 250 720 4,295 90 Amps 900 AH
</TABLE>
AC POWER SPECIFICATIONS
<TABLE>
<CAPTION>
DC Heat & Air Total Total
Site Configuration Chargers Conditioning Lights Miscellaneous AC WattsAC Amps @ 220 VAC
<S> <C> <C> <C> <C> <C> <C>
Terminal End Nominal 3,696 3,000 300 1,500 8,496 39
Terminal End Maximum 8,712 6,000 1,600 2,800 19,112 87
Repeater Nominal 3,696 4,500 300 1,500 9,996 45
Repeater Maximum 8,712 9,000 1,600 2,800 22,112 101
2 Way Junction Nominal 4,752 6,000 500 1,800 13,052 59
2 Way Junction Maximum 8,712 12,000 2,000 3,200 2,512 118
</TABLE>
Note: All New Shelters are AC equipped for 200 Amps, single phase, 220VAC
Service
A-21
<PAGE>
EXHIBIT A-4
INCUMBENT MULTIPLEXING REQUIREMENTS
Subject to completion of Pathnet's due diligence as to each Segment of the
System and upon the prior approval of each Party, the Parties shall append to
this Exhibit A-4 the Incumbent Multiplexing Requirements of such Segment.
Segment A
Joliet, Illinois to Pickrell, Nebraska
Site Name DS-1 Wired DS-1 Equipped
- --------- ---------- -------------
Joliet Meter [***]
(Joliet, IL)
110 [***]
(Geneseo, IL)
199 [***]
(Letts, IA)
109A [***]
(Wyman, IA)
109 [***]
(Harper, IA)
108 [***]
(Truro, IA)
107 [***]
(Hastings, IA)
106A [***]
(Pickrell, NE)
A-22
<PAGE>
EXHIBIT A-5
EQUIPMENT SHELTERS, SPECIFICATIONS AND DESIGN
1. Summary
This "Equipment Shelter Specification" applies to concrete pre-cast,
pre-equipped, transportable equipment shelters for use in conjunction with
equipment installed by Pathnet, Inc. and covers material and workmanship
standards. This document is designed to assist the user in defining your
specific equipment shelter requirements. The shelter must be designed for the
explicit purpose of housing electronic equipment, fiberoptics equipment,
measuring devices and other related components, within a controlled environment
required for the proper operating conditions for the equipment. The shelter
manufacturer must adhere to compliance with all national building codes. All
shelters will be assumed to be placed within ten (10) feet of the base of the
tower.
2. Foundation
The shelter shall be designed for any of the following foundation types:
o Pier & Beam
o Slab
o Perimeter Beam
3. Shelter Type
The shelter shall be constructed of pre-cast, pre-assembled Portland concrete
and shall be manufactured in a controlled environment.
4. Shelter Size
The shelter should conform to the following dimensions unless otherwise noted:
o One room shelter (no generator) - 12' X 20' OD
o Two room shelter (equipment room and generator room) - 12' X 28' OD
5. Operating Environment
5.1. Temperature
The optimum operating temperature of the equipment to be installed is 75
degrees F (24 degrees C) unless otherwise specified by Pathnet.
5.2. HVAC
The heating and cooling requirements for a shelter are based upon the
outside maximum and minimum temperature expected for the shelter location
and the equipment heat output specified by Pathnet. Typical heat load
values are 12,000 to 18,000 BTU/HR.
A-23
<PAGE>
Design heat loads for specific shelters will be provided by Pathnet. Two
wall-mounted air conditioners are required. The units are to be sized so
that one unit will maintain an interior temperature of 75 degrees F with
the highest exterior temperature expected for shelter location.
6. Hardware
All external hardware will be galvanized or coated to protect against corrosion.
7. Structural
Structural design and manufacturing shall conform to ACI 318-89 requirements.
7.1. Floor
The floor section shall be constructed of 8" waffled structural pre-cast
concrete. The ribs shall be 2'-0" O.C. transverse and 4'-0" O.C
longitudinal. All surfaces shall be smooth. The interior surface shall be
covered with 1/8" X 12" X 12" square vinyl floor covering, bonded with a
waterproof contact adhesive.
7.2. Roof
The roof section shall be constructed of pre-cast concrete with 1/4" per
foot drainage slope. The ceiling insulation and finish shall be foamboard
insulation with 3/8" vinyl coated board. All joints will be covered by
plastic joint or corner trim. The roof section shall provide a 2" overhang
on all sides. The roof will be a hip type sloping in 4 directions. It
shall be constructed as a cap and should fit over the walls, leaving no
exposed roof-to-wall joint.
7.3. Wall
The wall section shall be constructed of 4" solid concrete, cast in one
piece to minimize joints, with an exposed aggregate exterior finish and
capable of withstanding gun fire from a 30.06 at 50 feet. The wall
insulation and finish shall be foamboard insulation with 1/2" vinyl coated
board. All joints will be covered by plastic joint or corner trim. All
floor/wall intersections will be finished with 4" vinyl baseboard. There
will be no exposed wall-to-floor joint.
8. Thermal
Standard wall and ceiling thickness shall be 1" foamboard insulation. The
calculated system value is R9.6 with 4" thick lightweight concrete walls/roof
sections, 1" foamboard insulation covered by 1/2" fiberglass reinforced plastic
surfaced board. (Thicker insulation and higher R-values must be specified
according to the locality.)
9. Concrete
All sections must be constructed of concrete with a compressive strength of 3000
PSI at 28 days.
A-24
<PAGE>
9.1. Cement Type
Cement used in concrete shall be standard Portland cement conforming to
the requirements of the "Standard Specifications for Portland Cement",
ASTM Designation C150.
9.2. Mix
The mix design shall be 114-118 lbs./cu. ft. structural lightweight
concrete using expanded shale or expanded clay aggregate and shall be
homogeneous. Seeding of aggregates for exposed aggregate finish is not
allowed.
Water will be free from injurious quantities of oil, alkali, vegetable
matter and salt. Non-potable water shall not be used in mixing concrete.
9.3. Concrete Standards
Concrete aggregates will conform to one of the following standards:
o Specifications for Concrete Aggregates (ASTM Designation: C33)
o Specifications for Lightweight Aggregates for Structural Concrete
o (ASTM Designation: C330)
9.4. Reinforcement
Reinforcement bars shall be deformed steel bars conforming to the
requirements of the "Specifications for Deformed and Plain Billet-Steel
Bars for Concrete Reinforcement", ASTM Designation: A615. Welded smooth
wire fabric shall be steel wire fabric conforming to the "Specifications
for Welded Steel Wire Fabric for Concrete Reinforcement", ASTM
Designation: A185.
10. Sealing
o The shelter shall be sealed to resist dust and water infiltration.
o All joints shall be sealed with a compressible resilient sealant.
o There shall be no exposed roof-to-wall or wall-to-floor joints.
o Exterior surfaces of walls and roof shall be sealed with two (2) coats of
Thoroglaze H Sealer, or acceptable equivalent unless otherwise noted.
11. Door
11.1. Door Construction
The door shall be 3' X 7' X 3/4", 18 gauge galvanized steel, insulated
(minimum R12), primed, painted and installed flush with the door check,
door stop, weather stripping, mortise lockset and stainless steel ball
bearing hinges.
A-25
<PAGE>
11.2. Door Frame
The door frame shall be of at least 16 gauge galvanized steel, primed,
painted and cast into the wall panel.
11.3. Door Locks
All doors shall have a deadbolt locking mechanism with a minimum 1" throw
and an anti-pick lock guard.
12. Structural Loading
12.1. Floor
A minimum of 140 lbs. per sq. ft. as defined in "Uniform Distributed
Load", ASCE 7-88. The battery area should be reinforced to support 5000
lbs. per battery rack. The battery area will be shown on the floor plan.
12.2. Roof
A minimum of 50 lbs. per sq. ft. as defined in "Roof Snow Load
Specification", ASCE 7-88.
12.3. Wind
A minimum of 115 MPH as defined in "Basic Wind Speed Specifications", ASCE
7-88.
12.4. Earthquake
Shelters shall be designed for the most stringent earthquake rating
conditions as defined in ASCE 7-88, Zone 4.
13. Electrical System
Electrical installation and wiring shall conform to the latest edition of the
National Electrical Code (NEC) and shall consist of the following as a minimum:
13.1. Minimum Requirements
o 200 Amp, 220 VAC Single Phase Main
o 200 Amp Manual Transfer Switch
o 200 Amp Generator Interface
o Forty (40) Position Breaker Box (With 32 single pole, 20 Amp
breakers.)
o 120/240VAC 3-Wire Arrester With Alarms (65kVA Peak Capacity)
o Surface Mounted EMT Conduit
o Grounded Duplex Outlets (One every 4 ft. on 3 walls.)
o Four (4) Fluorescent Lights (2 bulb fixtures with inside switch
mounted by door.)
o Incandescent Porch Light (With 0-30 minute timer)
A-26
<PAGE>
13.2. Surge Arresters
An interior-mounted surge arrester is designed to protect against
transients caused by lightning or power switching surges. Primary
arresters protect the building's electrical components and are
automatically restored following activation due to a surge. It should be
installed across the main breaker on the line side unless otherwise
specified by Pathnet. Secondary arresters protect individual branch
circuits. Visual inspection is required to determine whether the arrester
must be replaced following a surge.
14. Grounding
A halo ground system should consist of at least a #2 AWG green insulated
stranded copper wire mounted around the perimeter of the interior wall just
below the ceiling. A 1/4" X 4" X 24" copper ground bar should be located
externally just below each waveguide entry plate. A #2 AWG green insulated
copper jumper should be used to bond the ground bar to the exterior halo ring.
Bonding on either interior or exterior grounding systems will be clean of dirt
and corrosion and applied with non-oxidizing grease.
14.1. Interior Halo Grounding
All cable ladder, racks, lights, equipment and exterior ground are to be
bonded to an interior halo grounding system.
The following items are required for halo grounding:
o #2 Green Insulated Stranded Copper Halo
o One (1) Master Ground Bar 1/4" X 4" X 24"
o Four (4) #2 Tinned Solid Copper Drops with 10' Pigtails
o Eight (8) #2 Green Insulated Stranded Copper Equipment Ground Drops
14.2. External Ground System
An exterior halo ring is required and will be bonded to the interior halo
grounding system with 8' pigtails listed above.
14.3. Conduit Grounding
All conduit, conduit couplings, light fixtures, junction boxes and service
equipment shall be grounded with mechanical clamps to electrically bond
the conduit. The bonding wire will be a minimum #10 AWG green insulated
copper wire for all except light fixtures. The minimum for light fixtures
is #12 AWG green insulated copper wire.
15. Waveguide Entrance
The shelter will have two 8 port waveguide entry panels and two blank panels
located on opposite walls. Two waveguide entry panels will be installed on one
wall and two blank panels mounted on the opposite wall. Pathnet will define the
location of the waveguide entry panels. Each waveguide port shall have a minimum
interior diameter of 4 inches.
A-27
<PAGE>
16. Alarms
The shelter will have general housekeeping alarms wired to a central location
associated with the following:
o Door Open
o Smoke Detection AC Electrical Fail (sense before manual or automatic
transfer switch)
o Surge Protector Fail
o Air-conditioning Fail
o High Temperature
o Low Temperature
o Charger Fail
o Breaker Alarm
o Fuse Alarm
o Low Waveguide pressure
o Dehydrator excess run alarm
o Generator Fail
o Generator Run
A-28
<PAGE>
EXHIBIT A-6
GROUNDING AND LIGHTNING PROTECTION GUIDELINES AND SPECIFICATIONS FOR
COMMUNICATIONS SHELTERS
Preface
An effective ground system for a communications equipment shelter is necessary
to ensure protection of personnel and equipment when a fault occurs. The ground
system limits excessive voltages from various electrical conditions such as
lightning and utility switching, and contributes to superior performance of the
electronic equipment by reducing noise induction.
1. Grounding Introduction
Communications equipment shelters are subject to electrical noise and
high-voltage surges. These transients occur predominantly in the common mode
(line to ground), and are typically caused by lightning or power switching.
1.1 Lightning
When lightning induced surges appear at the point of connection to a
building (the service entrance), a high common mode potential is generated
between the current carrying conductors and ground. This potential
produces a flow of current that seeks a path to earth to complete the
circuit.
Lightning can easily induce a 3000-ampere transient into a power line.
When this transient reaches a building, the building ground at the service
entrance can rise to 60,000 volts (assuming a building earth resistance of
20 ohms). The reference potential for ground in the rest of the building
would rise proportionately.
In order to protect the building against these high voltage surges, it is
important to establish a low resistance earth ground at the service
entrance. The National Electrical Code (Article 250, Part 4) specifies
that the grounding at a building's service entrance should have a
resistance to ground of 25 ohms or less. The IEEE Green Book (Recommended
Practice for Grounding, ANSI/IEEE Standard 142-1982) recommends that the
ground resistance be less than 5 ohms. If the building contains highly
sensitive electronic communications equipment, a ground resistance of 5
ohms or less is recommended if this value can be practically achieved with
the given site conditions.
1.2 Types of Grounding
There are two major types of grounding that should be considered when
designing an electrical system: power distribution system grounding and
telecommunications equipment grounding.
1.2.1. Power Distribution System Grounding
A-29
<PAGE>
The power distribution system pertains to the incoming AC service,
service entrance equipment, power panels, and electrical conductors
providing the power to various electrical/mechanical equipment.
Grounding of the power distribution system is essential to:
o protect occupants from exposure to dangerous shock voltage
o provide a path for ground fault current
o limit excessive voltages due to lightning or utility switching
Typical grounding components for the power distribution system
include:
o grounding electrode at the service entrance
o ground bus in the power panel
o ground lugs in the other service entrance equipment such as
the safety disconnect or transfer switch
o third wire grounding conductor for all the electrical
equipment
o lightning and surge arresters.
1.2.2. Telecommunications Equipment
Grounding Electronic equipment such as radio systems, telephone
switches, battery chargers and rectifiers, uninterrupted power
supply (UPS) equipment, and any other equipment that encloses or is
adjacent to energized conductors require additional grounding. This
sensitive electronic equipment must be protected from the following:
o excessive transients caused by lightning or utility switching
o degraded performance due to electromagnetic noise
Equipment grounding frequently utilizes a ground ring encircling the
interior of the shelter (halo ground ring). Ground lugs attached to
the various equipment housings and racks are connected to the ground
ring. Ground bars at the waveguide entry and at each section of the
cable ladder are also tied to the ground ring. Multiple external
drops connect the internal ground ring to the exterior site ground
ring.
2. Grounding Practices
2.1. The Grounding Conductor
In order to reduce inductance and surge voltages in a power distribution
system, a ground path for protected devices should be provided. One method
is to rely upon the conduit system to carry these transient currents. This
is allowed by the National Electrical Code in Article 250-91 (b). The best
method, however, is to include an extra conductor in the same conduit or
raceway as the current carrying conductor. The grounding conductor should
extend to the ground connection in the service entrance equipment.
A-30
<PAGE>
2.2. Equipment Ground Wires
When lightning strikes, it takes the path of least impedance (resistance
and inductance). Cable bends increase inductance. Therefore, equipment
ground wires should be large, and run straight for minimum inductance and
voltage drop. The recommended bending radius is 6" when bends are
unavoidable. Equipment ground wires should be separated from all other
conductors, and should not be run through metal conduit unless the conduit
and ground wires are bonded at both ends.
2.3. Bonding
Even when the ground to earth connection's impedance of the service
entrance is minimized and grounding conductors are used in the feeder and
branch circuits, high transient voltages can still occur in the power
distribution system as a result of utility power switching. An effective
method of limiting this noise (especially common mode voltage
differentials) is to bond all the equipment ground wires to a halo ground
system that is connected to the site ground system and power distribution
system ground.
Bonding is the connection of all potential ground conductors (including
racks, frames, cable ladder, conduits, metal enclosures, and exposed
metallic members of the building structure) to each other. Bonding does
not eliminate voltage drops since transient currents will continue to take
the path of least inductance. However, the current is sufficiently
distributed throughout the bonded system to reduce the voltage gradients
in any area to levels that prevent personal injury or equipment damage.
Proper bonding procedures produce cross connections of all equipment and
structures. It provides many paths to ground from any one point. Since the
bonded ground network does not form a part of the normal electrical power
path, multiple inductive loops are not a concern. Only transient or fault
currents can flow in the ground network.
In addition to preventing the development of voltage gradients, cross
connection reduces the system's susceptibility to high frequency noise.
Since all conductors have some impedance, resonance will occur at some
frequencies. At those frequencies, the impedance of the grounding
conductor may be very high, and allow noise currents to develop increased
voltage drops. By bonding the ground network, however, there may be other
conductors nearby that are not resonating, and a low impedance path for
the noise signal can be maintained.
2.4. Faraday Cage
A Faraday cage provides an EMI shield to further reduce noise. The cage
usually consists of multiple conductors in a box like configuration. A
halo ground system with multiple down conductors can act as a quasi
Faraday cage, and give some low frequency shielding.
When lightning hits the tower, the tower will pass the current to ground
and radiate RF energy. A Faraday cage can reduce this energy by adding
distance (as seen by the
A-31
<PAGE>
magnetic field) between the tower and the equipment shelter. The steel
reinforcing in the concrete shelter walls can form a highly effective
Faraday cage if bonded to the grounding system. The amount of shielding
depends on the size and spacing of the welded wire fabric. Additionally,
all rebar must be bonded together.
2.5. Site Ground System
When a tower is struck by lightning, equipotential voltage rings form
around the tower until the energy is diffused into the surrounding ground
soil via the grounding system.
The tower ground ring will disperse the energy away from the tower base or
guy wires. The ground rods will transfer the energy deeper into more
conductive soil layers. This is important to keep lightning surges out of
the equipment shelter. Unless the energy is properly dispersed into the
soil, the voltage will build up in the tower, and attempt to go to
another, less desirable path.
The equipment shelter is protected by a perimeter ground system that forms
an equipotential plane. Also, ground rods should be driven into the soil
at the following points:
o each corner of the shelter
o the service entrance
o the waveguide entry port
o each external halo ground drop
o every 10' (or less) along the exterior ground ring
The shelter ground ring system should have a connection to the tower
ground system just below the coaxial cable runs. A second connection
between the two ground systems should be installed for redundancy. All
metal work (waveguide bridge and supporting posts) should be bonded to the
ring/radial ground system.
2.6. Grounding System Performance Check
Test the original installation periodically to determine whether
resistance is remaining constant or is increasing. An increase in
resistance can be caused by several factors.
In lower conductive soils, high electric fields can develop at the ends of
the ground rods, which can cause arcing in the soil. This arcing can cause
glassification around the rods, beginning at the tip, and working its way
upward. This glassification of the silica in the soil acts as an
insulator, severely impairing the grounding characteristics of the rod. If
resistance increases over time to an undesirable level, reduce the
resistance by adding electrodes or chemically treating the soil to
increase moisture content.
3. Computing Resistance to Ground
A-32
<PAGE>
3.1. Resistance to Earth
The resistance of a grounding electrode is dependent on the:
o resistance of the electrode,
o contact resistance between the electrode and the soil, and
o resistance of the soil from the electrode surface outward as
described by the geometry set up by the flow of current from the
electrode to infinite earth.
The first two resistances are negligible, and can be disregarded. The
third resistance is larger and must be considered.
Around a ground rod this resistance is the sum of the series resistances
of virtual shells of earth, located progressively outward from the rod.
The shell nearest the rod has the smallest circumferential area or cross
section, so it has the highest resistance. Each successive shell has
progressively larger areas, and thus, progressively lower resistances. For
an 8-foot ground rod, the incremental increase in resistance decreases to
nearly zero when the rods are spaced 16 feet apart. Therefore, when using
multiple ground rods, the optimal spacing between rods should be double
the length of the rod.
3.2. Resistance Calculations
When computing resistance to ground, treat the tower grounding and the
shelter grounding as two separate systems. Within each of these two
systems are two subsystems. The shelter has a grounding ring and the
grounding rods. The tower has a grounding ring, grounding rods, and
occasionally, grounding radials.
The IEEE Green Book provides several formulas for calculating the
resistance to ground for several different systems.
4. Typical Grounding Configurations
Several options are available when deciding on a ground system for a
communication shelter, depending upon the soil conditions and thunderstorm
activity of a particular site. The U.S. Weather Bureau publishes an isoplethic
map of the United States showing the average number of days each year on which
thunderstorms occur. Any area with an isoplethic level above 90 should be
considered a high-risk area, and serious consideration should be given to
providing a more stringent grounding system.
4.1. Ground Bar System
In shelters where very little lightning protection is needed, a simple
ground bar system can be used. A system of this type would consist of a
single copper ground bar located under the waveguide port, telephone
entry, or both, with an external drop to be connected to the external
ground system. Transmission lines should be grounded to this ground bar.
A-33
<PAGE>
4.2. Halo Ground System
Pathnet shelters will use a halo ground system. This system includes a #2
AWG copper wire completely encircling the equipment room. The halo is
located 3 to 6 inches below the ceiling. External drops are located at
each corner of the shelter. Wall penetrations should be angled at 45
degrees to minimize bending.
4.3. External Ground System
The external ground system for all shelters consists of ground rods placed
at each corner of the shelter and 10' intervals along the ground ring,
below the waveguide entry, and at the AC service entrance. The rods should
be exothermically welded to a perimeter ground ring of #2 AWG solid tinned
copper wire. (Tinned copper is recommended to reduce corrosion of the
wire). The wire should be buried below the frost line (minimum 30", deep
per NEC Sec 250-8(d)), and at least 24", away (measured horizontally) from
the foundation. The ground ring should be bonded to the tower ground
system at two locations, to the externally mounted ground bars under the
waveguide ports and to the AC service ground as close as possible to the
service entrance.
5. General Specifications
This section covers grounding and lightning protection of pre-cast,
pre-equipped, and transportable equipment shelters. It establishes minimum
standards for grounding of all Pathnet Equipment Shelters, and provides
standards for additional customer grounding options.
5.1. General Guidelines
5.1.1 Workmanship
Equipment grounding wire conductor runs will be as short and
straight as possible. All equipment and bonding grounding conductors
will have radii bends 6" or greater.
5.1.2. Design
Where possible, the AC service entrance, waveguide entry port, and
telephone line entry will all be located in close proximity to each
other, and their associated grounding systems will be bonded
together.
5.1.3. Connections
Unless specified otherwise, minimum connection requirements will be
of the mechanical type made with a crimp type connector. A one hole
copper ground lug will be used for equipment connections. An
oxidizing preventative compound will be applied to all mechanical
connections, and paint will be removed as necessary to insure
positive bonding of all grounded equipment.
A-34
<PAGE>
All external, buried connections will be of the exothermically
welded type. These include, but are not limited to, halo drops to
ground rod, buried ground ring to ground rod, halo drops to ground
ring, service entrance ground to ground rod.
5.1.4. Wire
All equipment grounds will be #6 AWG. Circuit grounding conductors
will be no more than two wire sizes smaller than the current
carrying conductors of the same circuit (minimum #12 AWG). All
external ground wire, including but not limited to the external
ground ring and external halo drops, will be #2 AWG solid tinned
copper.
5.2 Interior Grounding
5.2.1. Halo Ground
The halo ground will consist of a minimum #2 AWG wire located 3" to
12", below the finished ceiling, and will completely encircle the
equipment room. The wire will be green insulated stranded copper,
bare stranded copper, or bare tinned solid copper. Each corner of
the equipment room will have an omni-directional drop to the floor
of the same wire size and type as the halo ring. Connection of these
drops to the halo will be at least the defined minimum (see section
5.1.3). If solid tinned wire is used, the drop will be one
continuous wire that is long enough to extend 8 feet beyond the
exterior of the shelter. If insulated wire is used, the drop will
extend to the floor, and then be connected in the same manner as the
halo, to an 8-foot length of solid tinned wire of the same size. The
exterior penetrations will be at 45 degree angles (to minimize
ground drop bend radii) and approximately one (1) inch in diameter.
5.2.2. Waveguide Entry Ground Bar
There will be a 1/4" x 4" x 20" (minimum) copper ground bar located
outside the shelter approximately 6" below the waveguide entry plate
(NEC Sec 800-33). This bar will be connected to the exterior ground
ring exothermic weld. The grounding conductor will be of the same
size and type as the halo ring.
5.2.3. AC Service
The AC service ground conductor will be bonded to the ground rod
located at the service entrance. Ground lugs provided in all service
entrance equipment will be bonded to the service ground conductor.
The system ground and neutral will be bonded at one location, as
close as practicable to the service entrance. All service grounding
shall conform to Article 250 of the National Electrical Code.
5.2.4. Primary Surge Arrester
A-35
<PAGE>
There will be a surge protective device applied at the first piece
of service equipment inside the equipment shelter. This device will
be considered the primary surge protector. Conductors connecting the
surge protective device will be as short as possible, and will
contain no sharp bends or loops.
The operating characteristics of the primary surge arrester will
coordinate with the equipment surge withstand voltage capabilities.
The surge arrester should be capable of suppressing up to 65kVA, be
self restoring after operation, and may be equipped with a failure
alarm over current protective device and visual status indicators.
5.2.5. Cable Ladder
Cable ladder assemblies will be bonded to the halo ring with a #6
AWG or larger ground conductor. All cable ladder splices and
junctions will be bonded on at least one side with a #6 AWG or
larger conductor, and use grounding clips suitable for the purpose.
Paint will be removed as necessary for an electrically sound
connection.
5.2.6. Conduit Grounding
Each conduit discontinuity, including but not limited to conduit
couplings, junction boxes, light fixtures, and service equipment,
will be provided with ground clamps to electrically bond the
conduit. The bonding wire will be green insulated #6 AWG or larger.
5.2.7. Tower Light Controller Penetration
There will be a 1-1/2" penetration cast in place near the waveguide
entry port to allow for connection of the tower light controller.
The penetration will be lined with a 1" PVC running thread to
provide isolation between the interior and exterior conduit. The
running thread will be connected to interior and waterproof exterior
6" x 6" junction boxes.
5.3. Exterior Grounding
5.3.1. Ground Rods
There will be driven ground rods located at each corner of the
building, and at the AC service entrance and waveguide entry port.
These rods will be made of copper clad high strength steel with
minimum dimensions of 5/8" x 8'. The rods will be located at least
24" from the edge of the foundations, and driven such that the top
of the rod is below the frost line of the installation site. The
rods will be exothermically welded to the external halo drops.
5.3.2. Ground Ring
A-36
<PAGE>
There will be a buried horizontal wire completely encircling the
equipment shelter. This wire will be solid tinned copper wire of #2
AWG or larger. The ground ring will not be closer than 24" from the
shelter foundations, and will be exothermically welded to each
ground rod. The ring will be buried 30" below grade or below the
frost line of the installation, whichever is greater.
The ground ring will be connected to the tower ground system from
the ground rod located at the waveguide port to the nearest ground
rod of the tower system. A second connection will be made from a rod
at a corner of the shelter to an alternate rod of the tower. These
connections will be made with a #2 AWG wire, or a wire of the same
size as the tower ground ring, whichever is larger.
5.3.3. Testing
The external ground system will be tested after installation, and
its resistance to earth ground will be less than 10 ohms. It is
recommended that tests be performed twice a year to insure ground
system integrity.
Biddle Instruments Model DET2/2 Digital Ground Tester, or
equivalent, will be used for testing and all manufacturers'
instructions will be followed.
A-37
<PAGE>
EXHIBIT A-7
INTENTIONALLY LEFT BLANK
A-38
<PAGE>
EXHIBIT A-8
PATHNET SPURS AND INCUMBENT SPURS
Subject to completion of Pathnet's due diligence as to each Segment of the
System and upon the prior approval of each Party, the Parties shall append to
this Exhibit A-8 the Network Interconnection Schedule related to such Segment.
PATHNET SPURS
The System shall contain the following Pathnet spurs, which shall be
engineered, furnished, installed, tested and operated for Pathnet's network
purposes:
FACILITY NAME LATITUDE LONGITUDE SPUR TO
- ------------- -------- --------- -------
110 41-23-31 90-09-56 Quad Cities
(Geneseo, IL)
199 41-22-51 91-11-34 Northern Border
(Letts, IA) Pipeline site CS-16
108 41-13-30 93-46-50 Des Moines
(Truro, IA)
108 41-13-30 93-46-50 Burlington Northern
(Truro, IA) Railroad at Osceola
107 41-03-38 95-26-55 Omaha, NE
(Hastings, IA)
106B 40-32-12 96-11-57 Lincoln, NE
(Cook, NE)
INCUMBENT SPURS
The System shall contain the following KN Energy spurs, which shall be
engineered, furnished, installed, and operated for KN Energy's internal
communications requirements:
FACILITY NAME LATITUDE LONGITUDE SPUR TO
- ------------- -------- --------- -------
[TO BE APPENDED BY THE PARTIES]
A-39
<PAGE>
EXHIBIT A-9
FORM OF CERTIFICATE OF ACCEPTANCE
The undersigned, ___________________, who is ______________________ of KN
Energy, Inc., a Kansas corporation ("Incumbent") hereby certifies as follows:
1. Incumbent has received from Pathnet, Inc., a Delaware corporation
("Pathnet") the results of all acceptance testing performed pursuant to Section
5 of Schedule A of the Fixed Point Microwave Services Agreement between Pathnet
and Incumbent (the "FPM Agreement").
2. Incumbent has reviewed the results of such acceptance testing and
hereby acknowledges that the System (as defined in the FPM Agreement), as tested
and to be maintained by Incumbent, performs in accordance the Specifications, as
set forth in the FPM Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Acceptance as of the ___ day of ______, 199__.
------------------------------------
----------------
Date
A-40
<PAGE>
EXHIBIT A-10
REQUIRED PERMITS AND APPROVALS
1. Frequency Coordination for FCC licenses
2. FCC licenses and regulatory approvals
3. FAA licenses
4. Leasehold or ownership interests in the Facilities (including any
replacement facilities required to operate the System)
5. Zoning and other permits required to construct, install equipment and
operate at each of the Facilities proposed in Schedule B (including any
replacement facilities required to operate the System)
6. Any required subcontractor approvals
7. Approval of System Design
8. Approval of Incumbent Channel Plan
9. Approval of Modifications SOW
10. Approval of Project Management Plan, Project Schedule and Cutover Plan
11. Approval of factory acceptance test
A-41
<PAGE>
EXHIBIT A-11
STATEMENT OF WORK
Subject to completion of Pathnet's due diligence as to each Segment of the
System and upon the prior approval of each Party, the Parties shall append to
this Exhibit A-11, the Statement of Work related to such Segment.
SEGMENT A
Joliet Meter (Joliet, IL)
Terminal
1) SITE WORK
o The existing building is to be used.
o Soil reports are required for tower foundation analysis.
o No fence work is required.
o No access road improvements are required.
o Funds for site clean up are included.
2) TOWERS
o Furnish and install safety climb device.
o Upgrade tower anchor grounding.
o Tower analysis/strengthening requirements are moderate.
o Upgrade existing waveguide bridges on two towers, two entrances.
3) BUILDINGS
o New equipment to be located in the existing building.
o Replace carpet in the communications room.
o Furnish and install new building ground.
o HVAC is adequate.
4) AC POWER
o Replace existing AC panel with new 225 amp load panel.
o Add surge suppressor unit.
5) GENERATORS
o A new generator is not required. There is a 35 KW, Katolite
generator on site with 170 hours of service.
6) DC PLANT
o Add one PCP power board rack equipped with four each -48 VDC 50 A
rectifier units and three each 22 position DC breaker panels to
replace the existing aged PCP rectifier units.
o Existing -48 VDC 840 amp acid filled batteries to be used.
7) ANTENNAS
o Furnish, install and test two 10' UHX antennas facing west to site
110B (Norway, IL).
8) TRANSMISSION LINES
o Furnish and install approximately 590' of EWP-52 waveguide.
o Two each wall feed-through ports are required.
o The waveguide is to be run in the closed ceiling.
9) RADIOS
A-42
<PAGE>
o Furnish, install, and test one NEC SONET Terminal radio rack with
ATPC and space-diversity to site 110B (Norway, IL).
10) MULTIPLEX
o Furnish and install a new OC-3, 28 DS-1, Terminal multiplex in one
7' 6" x 23" rack with one each DSX-1.
11) MISCELLANEOUS EQUIPMENT
o Furnish and install orderwire, alarm, interconnect, and fuse panel
in one 7' 6" x 23" rack.
A-43
<PAGE>
110B (Norway, IL)
Repeater
1) SITE WORK
o There are no access issues.
o Fence expansion is required for the new building.
o No site clearing or leveling is anticipated.
2) TOWERS
o Furnish and install safety climb device.
o Upgrade tower grounding.
o Tower analysis/strengthening requirements are moderate.
o Furnish and install a waveguide bridge, two entrances.
3) BUILDINGS
o A new 11' 6" x 28' two room concrete shelter will be used.
o Add new site ring ground.
4) AC POWER
o A 200 amp service upgrade is required to the existing 60 amp
service. The transformer service pole is 236' away from the existing
shelter.
5) GENERATORS
o The new shelter will be equipped with a 25 KW Generac propane
generator. The existing Kohler generator is 10 KW with 768 hours of
service.
o The existing 250 gallon propane tank will be used, with new gas
lines coming off of the existing line.
o Cap off the gas lines to the existing generator after cut-over to
the new equipment.
6) DC PLANT
o Add one PCP power board rack equipped with two each -48 VDC 50 A
rectifier units and one each 22 position DC breaker panel.
o Add one set 700 AH -48 VDC GNB absolute battery system.
7) ANTENNAS
o Furnish, install and test two 10' UHX antennas facing east to Joliet
Meter (Joliet, IL), and two 12' UHX antennas facing west to site
110A (Ohio, IL).
8) TRANSMISSION LINES
o Furnish and install approximately 1020' of EWP-52 waveguide.
o The existing waveguide is EW-59.
9) RADIOS
o Furnish, install and test two each NEC SONET Repeater radio racks
with ATPC and space-diversity to Joliet Meter (Joliet, IL) and site
110A (Ohio, IL).
o Existing two-way radio (space leased to Ram Mobile) is to remain in
the existing building.
10) MULTIPLEX
o No OC-3 Mux is required.
o No DS-0s are required.
11) MISCELLANEOUS EQUIPMENT
o Furnish and install orderwire, alarm, interconnect, and fuse panel
in one 7' 6" x 23" rack.
12) CHANNEL BANK RACK
o Furnish and install one each 7' 6" x 23" rack with fuse panel for
channel bank equipment.
A-44
<PAGE>
110A (Ohio, IL)
Repeater
1) SITE WORK
o There are no access issues.
o Fence expansion required for new building.
o No site clearing or leveling is anticipated.
2) TOWERS
o Furnish and install safety climb device.
o Upgrade tower grounding.
o Tower analysis/strengthening requirements are moderate.
o Furnish and install a waveguide bridge, two entrances.
3) BUILDINGS
o A new 11' 6" x 28' two room concrete shelter will be used.
o Add new site ring ground.
4) AC POWER
o A 200 amp service upgrade is required to the existing 60 amp
service. The transformer service pole is 150' away from the existing
shelter.
5) GENERATORS
o The new shelter will be equipped with a 25 KW Generac propane
generator. The existing Kohler generator is 10 KW with 903 hours of
service.
o The existing 250 gallon propane tank will be used, with new gas
lines coming off of the existing line.
o Cap off the gas lines to the existing generator after cut-over to
the new equipment.
6) DC PLANT
o Add one PCP power board rack equipped with two each -48 VDC 50 A
rectifier units and two each 22 position DC breaker panel.
o Add one set 700 AH -48 VDC GNB absolute battery system.
7) ANTENNAS
o Furnish, install and test two 12' UHX antennas facing east to site
110B (Norway, IL), and two 12' UHX antennas facing west to site 110
(Geneseo, IL).
8) TRANSMISSION LINES
o Furnish and install approximately 1216' of EWP-52 waveguide.
9) RADIOS
o Furnish, install and test two each NEC SONET Repeater radio racks
with ATPC and space-diversity to sites 110B (Norway, IL) and 110
(Geneseo, IL).
o Relocate existing two-way bay station radio to the new building.
10) MULTIPLEX
o No OC-3 Mux is required.
o Two DS-0s are required.
11) MISCELLANEOUS EQUIPMENT
o Furnish and install orderwire, alarm, interconnect, and fuse panel
in one 7' 6" x 23" rack.
12) CHANNEL BANK RACK
o Furnish and install one each 7' 6" x 23" rack with fuse panel for
channel bank equipment.
A-45
<PAGE>
110 (Geneseo, IL)
Two-way Junction (bucking site; compressor site; future interconnect to Quad
Cities, 25 miles distance)
NOTE: Fiber access is within 800' of the existing shelter.
1) SITE WORK
o There are no access issues.
o Fence expansion required for new building.
o No site clearing or leveling is anticipated.
2) TOWERS
o Furnish and install safety climb device.
o Upgrade tower grounding.
o Tower analysis/strengthening requirements are moderate.
o Furnish and install a waveguide bridge, two entrances.
3) BUILDINGS
o A new 11' 6" x 34' two room concrete shelter will be used.
o Add new site ring ground.
4) AC POWER
o A 200 amp service upgrade is required to the existing service.
o New commercial AC will be brought into the site. The transformer
service pole is 770' away from the existing shelter.
5) GENERATORS
o The new shelter will be equipped with a 35 KW Generac natural gas
generator.
6) DC PLANT
o Add one PCP power board rack equipped with two each -48 VDC 50 A
rectifier units and two each 22 position DC breaker panel.
o Add one set 900 AH -48 VDC GNB absolute battery system.
7) ANTENNAS
o Furnish, install and test two 12' UHX antennas facing east to site
110A (Ohio, IL), and two 10' UHX antennas facing west to site 109B
(Hamlet, IL).
8) TRANSMISSION LINES
o Furnish and install approximately 1140' of EWP-52 waveguide.
9) RADIOS
o Furnish, install and test two each NEC SONET Terminal radio racks
with ATPC and space-diversity to sites 110A(Ohio, IL) and 109B
(Hamlet, IL).
o Relocate existing two-way bay station radio to the new building.
10) MULTIPLEX
o Furnish and install a new OC-3 8DS-1 ADM multiplex in one 7' 6" x
23" rack.
o 15 DS-0s are required.
11) MISCELLANEOUS EQUIPMENT
o Furnish and install orderwire, alarm, interconnect, and fuse panel
in one 7' 6" x 23" rack.
12) CHANNEL BANK RACK
o Furnish and install one each 7' 6" x 23" rack with fuse panel for
channel bank equipment.
A-46
<PAGE>
109B (Hamlet, IL)
Repeater
1) SITE WORK
o There are no access issues.
o Fence expansion required for new building.
o No site clearing or leveling is anticipated.
2) TOWERS
o Furnish and install safety climb device.
o Upgrade tower grounding.
o Tower analysis/strengthening requirements are moderate.
o Furnish and install a waveguide bridge, two entrances.
3) BUILDINGS
o A new 11' 6" x 28' two room concrete shelter will be used.
o Add new site ring ground.
4) AC POWER
o No upgrade to the service is required; 200 amp service is available
at this site.
o Connect 200 amp service to the new building.
5) GENERATORS
o The new shelter will be equipped with a 25 KW Generac propane
generator. The existing Kohler generator is 10 KW with 817 hours of
service and it burns oil.
o The existing 250 gallon propane tank will be used, with new gas
lines coming off of the existing line.
o Cap off the gas lines to the existing generator after cut-over to
the new equipment.
6) DC PLANT
o Add one PCP power board rack equipped with two each -48 VDC 50 A
rectifier units and one each 22 position DC breaker panel.
o Add one set 700 AH -48 VDC GNB absolute battery system.
7) ANTENNAS
o Furnish, install and test two 10' UHX antennas facing east to site
110 (Geneseo, IL), and two 8' UHX antennas facing west to site 199
(Letts, IA).
8) TRANSMISSION LINES
o Furnish and install approximately 1340' of EWP-52 waveguide.
9) RADIOS
o Furnish, install and test two each NEC SONET Repeater radio racks
with ATPC and space-diversity to sites 110 (Geneseo, IL) and 199
(Letts, IA).
10) MULTIPLEX
o No OC-3 Mux is required.
o No DS-0s are required.
11) MISCELLANEOUS EQUIPMENT
o Furnish and install orderwire, alarm, interconnect, and fuse panel
in one 7' 6" x 23" rack.
12) CHANNEL BANK RACK
o Furnish and install one each 7' 6" x 23" rack with fuse panel for
channel bank equipment.
A-47
<PAGE>
199 (Letts, IA)
Two-way Junction (compressor site, although KN does not need video capacity
here; future interconnect to Northern Border Pipeline site CS-16, 17 miles
distance)
1) SITE WORK
o There are no access issues.
o No fence work is required.
o No site clearing or leveling is anticipated.
o Funds for site clean up and gravel are included.
2) TOWERS
o Furnish and install safety climb device.
o Upgrade tower grounding.
o Tower analysis/strengthening requirements are moderate.
o Furnish and install a waveguide bridge, two entrances.
3) BUILDINGS
o A new 11' 6" x 34' two room concrete shelter will be used.
o Add new site ring ground.
4) AC POWER
o A 200 amp service upgrade is required to the existing service.
o New commercial AC will be brought into the site. The transformer
service pole is 216' away from the existing shelter.
5) GENERATORS
o The new shelter will be equipped with a 35 KW Generac natural gas
generator.
6) DC PLANT
o Add one PCP power board rack equipped with two each -48 VDC 50 A
rectifier units and two each 22 position DC breaker panel.
o Add one set 900 AH -48 VDC GNB absolute battery system.
7) ANTENNAS
o Furnish, install and test two 8' UHX antennas facing east to site
109B (Hamlet, IL), and two 8' UHX antennas facing west to site 109A
(Wyman, IA).
8) TRANSMISSION LINES
o Furnish and install approximately 420' of EWP-52 waveguide.
9) RADIOS
o Furnish, install and test two each NEC SONET Terminal radio racks
with ATPC and space-diversity to sites 109B (Hamlet, IL) and 109A
(Wyman, IL).
o Relocate existing two-way bay station radio to the new building.
10) MULTIPLEX
o Furnish and install a new OC-3 8DS-1 ADM multiplex in one 7' 6" x
23" rack.
o Seven DS-0s are required.
11) MISCELLANEOUS EQUIPMENT
o Furnish and install orderwire, alarm, interconnect, and fuse panel
in one 7' 6" x 23" rack.
12) CHANNEL BANK RACK
o Furnish and install one each 7' 6" x 23" rack with fuse panel for
channel bank equipment.
A-48
<PAGE>
109A (Wyman, IA)
Two-way Junction (stub to compressor site 204)
1) SITE WORK
o There are no access issues.
o Fence expansion required for new building.
o No site clearing or leveling
is anticipated.
2) TOWERS
o Furnish and install safety climb device.
o Upgrade tower grounding.
o Tower analysis/strengthening requirements are moderate.
o Furnish and install a waveguide bridge, two entrances.
3) BUILDINGS
o A new 11' 6" x 28' two room concrete shelter will be used.
o Add new site ring ground.
4) AC POWER
o A 200 amp service upgrade is required to the existing 60 amp
service. The transformer service pole is 18' away from the existing
shelter.
5) GENERATORS
o The new shelter will be equipped with a 25 KW Generac propane
generator. The existing Kohler generator is 10 KW.
o The existing 250 gallon propane tank will be used, with new gas
lines coming off of the existing line.
o Cap off the gas lines to the existing generator after cut-over to
the new equipment.
6) DC PLANT
o Add one PCP power board rack equipped with two each -48 VDC 50 A
rectifier units and two each 22 position DC breaker panel.
o Add one set 900 AH -48 VDC GNB absolute battery system.
7) ANTENNAS
o Furnish, install and test two 8' UHX antennas facing east to site
199 (Letts, IA), and two 10' UHX antennas facing west to site 109
(Harper, IA).
8) TRANSMISSION LINES
o Furnish and install approximately 1180' of EWP-52 waveguide.
9) RADIOS
o Furnish, install and test two each NEC SONET Terminal radio racks
with ATPC and space-diversity to sites 199 (Letts, IA) and 109
(Harper, IA).
o Relocate the existing stub radio to the new building.
10) MULTIPLEX
o Furnish and install a new OC-3 8DS-1 ADM multiplex in one 7' 6" x
23" rack.
o Twenty DS-0s are required.
11) MISCELLANEOUS EQUIPMENT
o Furnish and install orderwire, alarm, interconnect, and fuse panel
in one 7' 6" x 23" rack.
12) CHANNEL BANK RACK
o Furnish and install one each 7' 6" x 23" rack with fuse panel for
channel bank equipment.
A-49
<PAGE>
109 (Harper, IA)
Two-way Junction (compressor site; stubs to site 205 and Kalona Meter)
1) SITE WORK
o There are no access issues.
o Fence expansion required for new building.
o No site clearing or leveling is anticipated.
2) TOWERS
o Furnish and install safety climb device.
o Upgrade tower grounding.
o Tower analysis/strengthening requirements are moderate.
o Furnish and install a waveguide bridge, two entrances.
3) BUILDINGS
o A new 11' 6" x 28' two room concrete shelter will be used.
o Add new site ring ground.
4) AC POWER
o A 200 amp service upgrade is required to the existing service.
o New commercial AC will be brought into the site. The distance from
the site's generator building to the existing shelter is 516'.
5) GENERATORS
o The new shelter will be equipped with a 25 KW Generac natural gas
generator.
6) DC PLANT
o Add one PCP power board rack equipped with two each -48 VDC 50 A
rectifier units and two each 22 position DC breaker panel.
o Add one set 900 AH -48 VDC GNB absolute battery system.
7) ANTENNAS
o Furnish, install and test two 12' UHX antennas facing east to site
109A (Wyman, IA), and two 10' UHX antennas facing west to site 108B
(Wright, IA).
8) TRANSMISSION LINES
o Furnish and install approximately 1496' of EWP-52 waveguide.
9) RADIOS
o Furnish, install and test two each NEC SONET Terminal radio racks
with ATPC and space-diversity to sites 109A (Wyman, IA) and 108B
(Wright, IA).
o Relocate the existing stub radios, the two-way bay station radio,
and the MDS2000 to the new building.
10) MULTIPLEX
o Furnish and install a new OC-3 8DS-1 ADM multiplex in one 7' 6" x
23" rack.
o Fourteen DS-0s are required.
11) MISCELLANEOUS EQUIPMENT
o Furnish and install orderwire, alarm, interconnect, and fuse panel
in one 7' 6" x 23" rack.
12) CHANNEL BANK RACK
o Furnish and install one each 7' 6" x 23" rack with fuse panel for
channel bank equipment.
A-50
<PAGE>
108B (Wright, IA)
Repeater
1) SITE WORK
o There are no access issues.
o Fence expansion required for new building.
o No site clearing or leveling is anticipated.
2) TOWERS
o Furnish and install safety climb device.
o Upgrade tower grounding.
o Tower analysis/strengthening requirements are moderate.
o Furnish and install a waveguide bridge, two entrances.
3) BUILDINGS
o A new 11' 6" x 28' two room concrete shelter will be used.
o Add new site ring ground.
4) AC POWER
o A 200 amp service upgrade is required to the existing 80 amp
service. The transformer service pole is 37' away from the existing
shelter.
5) GENERATORS
o The new shelter will be equipped with a 25 KW Generac propane
generator. The existing Kohler generator is 10 KW.
o The existing 250 gallon propane tank will be used, with new gas
lines coming off of the existing line.
o Cap off the gas lines to the existing generator after cut-over to
the new equipment.
6) DC PLANT
o Add one PCP power board rack equipped with two each -48 VDC 50 A
rectifier units and one each 22 position DC breaker panel.
o Add one set 700 AH -48 VDC GNB absolute battery system.
7) ANTENNAS
o Furnish, install and test two 10' UHX antennas facing east to site
109 (Harper, IA), and two 10' UHX antennas facing west to site 108A
(Knoxville, IA).
8) TRANSMISSION LINES
o Furnish and install approximately 740' of EWP-52 waveguide.
9) RADIOS
o Furnish, install and test two each NEC SONET Repeater radio racks
with ATPC and space-diversity to sites 109 (Harper, IA) and 108A
(Knoxville, IA).
10) MULTIPLEX
o No OC-3 Mux is required.
o No DS-0s are required.
11) MISCELLANEOUS EQUIPMENT
o Furnish and install orderwire, alarm, interconnect, and fuse panel
in one 7' 6" x 23" rack.
12) CHANNEL BANK RACK
o Furnish and install one each 7' 6" x 23" rack with fuse panel for
channel bank equipment.
A-51
<PAGE>
108A (Knoxville, IA)
Repeater
1) SITE WORK
o There are no access issues.
o Fence expansion required for new building.
o No site clearing or leveling is anticipated.
2) TOWERS
o Furnish and install safety climb device.
o Upgrade tower grounding.
o Tower analysis/strengthening requirements are moderate.
o Furnish and install a waveguide bridge, two entrances.
3) BUILDINGS
o A new 11' 6" x 28' two room concrete shelter will be used.
o Add new site ring ground.
4) AC POWER
o A 200 amp service upgrade is required to the existing 60 amp
service. The transformer service pole is 23' away from the existing
shelter.
5) GENERATORS
o The new shelter will be equipped with a 25 KW Generac propane
generator.
o The existing 500 gallon propane tank will be used, with new gas
lines coming off of the existing line.
o Cap off the gas lines to the existing generator after cut-over to
the new equipment.
6) DC PLANT
o Add one PCP power board rack equipped with two each -48 VDC 50 A
rectifier units and two each 22 position DC breaker panel.
o Add one set 700 AH -48 VDC GNB absolute battery system.
7) ANTENNAS
o Furnish, install and test two 10' UHX antennas facing east to site
108B (Wright, IA), and two 10' UHX antennas facing west to site 108
(Truro, IA).
8) TRANSMISSION LINES
o Furnish and install approximately 1168' of EWP-52 waveguide.
9) RADIOS
o Furnish, install and test two each NEC SONET Repeater radio racks
with ATPC and space-diversity to sites 108B (Wright, IA) and 108
(Truro, IA).
o Relocate the existing stub radio to the new building.
10) MULTIPLEX
o No OC-3 Mux is required.
o Five DS-0s are required.
o Relocate the existing Mux equipment to the new building.
11) MISCELLANEOUS EQUIPMENT
o Furnish and install orderwire, alarm, interconnect, and fuse panel
in one 7' 6" x 23" rack.
12) CHANNEL BANK RACK
o Furnish and install one each 7' 6" x 23" rack with fuse panel for
channel bank equipment.
A-52
<PAGE>
108 (Truro, IA)
Two-way Junction (compressor site; future interconnect to Des Moines, IA, 27
miles distance; future interconnect to Burlington Northern Railroad at Osceola,
7 miles distance)
1) SITE WORK
o There are no access issues.
o Fence expansion required for new building.
o No site clearing or leveling is anticipated.
o Fill rock to replace eroded area will be required.
2) TOWERS
o Furnish and install safety climb device.
o Upgrade tower grounding.
o Tower analysis/strengthening requirements are moderate.
o Furnish and install a waveguide bridge, two entrances.
3) BUILDINGS
o A new 11' 6" x 34' two room concrete shelter will be used.
o Add new site ring ground.
4) AC POWER
o A 200 amp service upgrade is required to the existing 60 amp
service.
o New commercial AC will be brought into the site. The transformer
service pole is 1000' away from the existing shelter.
5) GENERATORS
o The new shelter will be equipped with a 35 KW Generac natural gas
generator.
6) DC PLANT
o Add one PCP power board rack equipped with two each -48 VDC 50 A
rectifier units and two each 22 position DC breaker panel.
o Add one set 900 AH -48 VDC GNB absolute battery system.
7) ANTENNAS
o Furnish, install and test two 12' UHX antennas facing east to site
108A (Knoxville, IA), and two 10' UHX antennas facing west to site
107B (Creston, IA).
o Move the Glenayre antenna from the diversity pylon to the main
antenna.
8) TRANSMISSION LINES
o Furnish and install approximately 1460' of EWP-52 waveguide.
9) RADIOS
o Furnish, install and test two each NEC SONET Terminal radio racks
with ATPC and space-diversity to sites 108A (Knoxville, IA) and 107B
(Creston, IA).
o Relocate the two-way bay station radio to the new building.
o Glenayre equipment is to remain in the existing building.
10) MULTIPLEX
o Furnish and install a new OC-3 8DS-1 ADM multiplex in one 7' 6" x
23" rack.
o Fourteen DS-0s are required.
o Relocate the existing Mux to the new building.
11) MISCELLANEOUS EQUIPMENT
o Furnish and install orderwire, alarm, interconnect, and fuse panel
in one 7' 6" x 23" rack.
A-53
<PAGE>
108 (Truro, IA) (cont.)
12) CHANNEL BANK RACK
o Furnish and install one each 7' 6" x 23" rack with fuse panel for
channel bank equipment.
A-54
<PAGE>
107B (Creston, IA)
Repeater
1) SITE WORK
o There are no access issues.
o Fence expansion required for new building.
o No site clearing or leveling is anticipated.
2) TOWERS
o Furnish and install safety climb device.
o Upgrade tower grounding.
o Tower analysis/strengthening requirements are moderate.
o Furnish and install a waveguide bridge, two entrances.
3) BUILDINGS
o A new 11' 6" x 28' two room concrete shelter will be used.
o Add new site ring ground.
4) AC POWER
o A 200 amp service upgrade is required to the existing 60 amp
service. The transformer service pole is 108' away from the existing
shelter.
5) GENERATORS
o The new shelter will be equipped with a 25 KW Generac natural gas
generator. The existing Kohler generator is 10 KW with 970 hours of
service.
6) DC PLANT
o Add one PCP power board rack equipped with two each -48 VDC 50 A
rectifier units and one each 22 position DC breaker panel.
o Add one set 700 AH -48 VDC GNB absolute battery system.
7) ANTENNAS
o Furnish, install and test two 12' UHX antennas facing east to site
108 (Truro, IA), and two 8' UHX antennas facing west to site 107A
(Grant, IA).
8) TRANSMISSION LINES
o Furnish and install approximately 1172' of EWP-52 waveguide.
9) RADIOS
o Furnish, install and test two each NEC SONET Repeater radio racks
with ATPC and space-diversity to sites 108 (Truro, IA) and 107A
(Grant, IA).
10) MULTIPLEX
o No OC-3 Mux is required.
o No DS-0s are required.
11) MISCELLANEOUS EQUIPMENT
o Furnish and install orderwire, alarm, interconnect, and fuse panel
in one 7' 6" x 23" rack.
12) CHANNEL BANK RACK
o Furnish and install one each 7' 6" x 23" rack with fuse panel for
channel bank equipment.
A-55
<PAGE>
107A (Grant, IA)
Repeater
1) SITE WORK
o There are no access issues.
o Fence expansion required for new building.
o No site clearing or leveling is anticipated.
2) TOWERS
o Furnish and install safety climb device.
o Upgrade tower grounding.
o Tower analysis/strengthening requirements are moderate.
o Furnish and install a waveguide bridge, two entrances.
3) BUILDINGS
o A new 11' 6" x 28' two room concrete shelter will be used.
o Add new site ring ground.
4) AC POWER
o A 200 amp service upgrade is required to the existing 60 amp
service. The transformer service pole is 21' away from the existing
shelter.
5) GENERATORS
o The new shelter will be equipped with a 25 KW Generac propane
generator. The existing Kohler generator is 10 KW with 836 hours of
service.
o The existing 250 gallon propane tank will be used, with new gas
lines coming off of the existing line.
o Cap off the gas lines to the existing generator after cut-over to
the new equipment.
6) DC PLANT
o Add one PCP power board rack equipped with two each -48 VDC 50 A
rectifier units and one each 22 position DC breaker panel.
o Add one set 700 AH -48 VDC GNB absolute battery system.
7) ANTENNAS
o Furnish, install and test two 10' UHX antennas facing east to site
107B (Creston, IA), and two 8' UHX antennas facing west to site 107
(Hastings, IA).
o As part of the project, remove the unused antenna facing an old
stub.
8) TRANSMISSION LINES
o Furnish and install approximately 1060' of EWP-52 waveguide.
9) RADIOS
o Furnish, install and test two each NEC SONET Repeater radio racks
with ATPC and space-diversity to sites 107B (Creston, IA) and 107
(Hastings, IA).
10) MULTIPLEX
o No OC-3 Mux is required.
o No DS-0s are required.
11) MISCELLANEOUS EQUIPMENT
o Furnish and install orderwire, alarm, interconnect, and fuse panel
in one 7' 6" x 23" rack.
12) CHANNEL BANK RACK
o Furnish and install one each 7' 6" x 23" rack with fuse panel for
channel bank equipment.
A-56
<PAGE>
107 (Hastings, IA)
Two-way Junction (compressor station; bucking station; future interconnect to
Omaha, NE, 30 miles distance)
1) SITE WORK
o There are no access issues.
o Fence work is required to set up the new building.
o No site clearing or leveling is anticipated.
2) TOWERS
o Furnish and install safety climb device.
o Upgrade tower grounding.
o Tower analysis/strengthening requirements are moderate.
o Furnish and install a waveguide bridge, two entrances.
3) BUILDINGS
o A new 11' 6" x 34' two room concrete shelter will be used.
o Add new site ring ground.
4) AC POWER
o A 200 amp service upgrade is required to the existing 60 amp
service.
o New commercial AC will be brought into the site. The transformer
service pole is 250' away from the existing shelter.
5) GENERATORS
o The new shelter will be equipped with a 35 KW Generac natural gas
generator.
6) DC PLANT
o Add one PCP power board rack equipped with two each -48 VDC 50 A
rectifier units and two each 22 position DC breaker panel.
o Add one set 900 AH -48 VDC GNB absolute battery system.
7) ANTENNAS
o Furnish, install and test two 12' UHX antennas facing east to site
107A (Grant, IA), and two 8' UHX antennas facing west to site 106C
(Sidney, IA).
8) TRANSMISSION LINES
o Furnish and install approximately 1456' of EWP-52 waveguide.
9) RADIOS
o Furnish, install and test two each NEC SONET Terminal radio racks
with ATPC and space-diversity to sites 107A (Grant, IA) and 106C
(Sidney, IA).
o Relocate the two-way bay station radio and the data concentrator
equipment to the new building.
o Motorola equipment belonging to the fire department is to remain in
the existing building.
10) MULTIPLEX
o Furnish and install a new OC-3 8DS-1 ADM multiplex in one 7' 6" x
23" rack.
o Eleven DS-0s are required.
o Relocate the existing Mux to the new building.
11) MISCELLANEOUS EQUIPMENT
o Furnish and install orderwire, alarm, interconnect, and fuse panel
in one 7' 6" x 23" rack.
12) CHANNEL BANK RACK
o Furnish and install one each 7' 6" x 23" rack with fuse panel for
channel bank equipment.
A-57
<PAGE>
106C (Sidney, IA)
Repeater
1) SITE WORK
o There are no access issues.
o Fence expansion required for new building.
o No site clearing or leveling is anticipated.
2) TOWERS
o Furnish and install safety climb device.
o Upgrade tower grounding.
o Tower analysis/strengthening requirements are moderate.
o Furnish and install a waveguide bridge, two entrances.
3) BUILDINGS
o A new 11' 6" x 28' two room concrete shelter will be used.
o Add new site ring ground.
4) AC POWER
o A 200 amp service upgrade is required to the existing 60 amp
service. The transformer service pole is 28' away from the existing
shelter.
5) GENERATORS
o The new shelter will be equipped with a 25 KW Generac propane
generator. The existing Kohler generator is 10 KW with 942 hours of
service.
o The existing 250 gallon propane tank will be used, with new gas
lines coming off of the existing line.
o Cap off the gas lines to the existing generator after cut-over to
the new equipment.
6) DC PLANT
o Add one PCP power board rack equipped with two each -48 VDC 50 A
rectifier units and one each 22 position DC breaker panel.
o Add one set 700 AH -48 VDC GNB absolute battery system.
7) ANTENNAS
o Furnish, install and test two 8' UHX antennas facing east to site
107 (Hastings, IA), and two 10' UHX antennas facing west to site
106B (Cook, NE).
8) TRANSMISSION LINES
o Furnish and install approximately 1020' of EWP-52 waveguide.
9) RADIOS
o Furnish, install and test two each NEC SONET Repeater radio racks
with ATPC and space-diversity to sites 107 (Hastings, IA) and 106B
(Cook, NE).
10) MULTIPLEX
o No OC-3 Mux is required.
o No DS-0s are required.
11) MISCELLANEOUS EQUIPMENT
o Furnish and install orderwire, alarm, interconnect, and fuse panel
in one 7' 6" x 23" rack.
12) CHANNEL BANK RACK
o Furnish and install one each 7' 6" x 23" rack with fuse panel for
channel bank equipment.
A-58
<PAGE>
106B (Cook, NE)
Two-way Junction (stub to site 196; future interconnect to Lincoln, NE, 32 miles
distance)
1) SITE WORK
o There are no access issues.
o Fence expansion required for new building.
o No site clearing or leveling is anticipated.
2) TOWERS
o Furnish and install safety climb device.
o Upgrade tower grounding.
o Tower analysis/strengthening requirements are moderate.
o Furnish and install a waveguide bridge, two entrances.
3) BUILDINGS
o A new 11' 6" x 28' two room concrete shelter will be used.
o Add new site ring ground.
4) AC POWER
o A 200 amp service upgrade is required to the existing 60 amp
service. The transformer service pole is 200' away from the existing
shelter.
5) GENERATORS
o The new shelter will be equipped with a 25 KW Generac propane
generator. The existing Kohler generator is 10 KW with 766 hours of
service.
o The existing 250 gallon propane tank will be used, with new gas
lines coming off of the existing line.
o Cap off the gas lines to the existing generator after cut-over to
the new equipment.
6) DC PLANT
o Add one PCP power board rack equipped with two each -48 VDC 50 A
rectifier units and one each 22 position DC breaker panel.
o Add one set 900 AH -48 VDC GNB absolute battery system.
7) ANTENNAS
o Furnish, install and test two 10' UHX antennas facing east to site
106C (Sidney, IA), and two 8' UHX antennas facing west to site 106A
(Pickrell, NE).
8) TRANSMISSION LINES
o Furnish and install approximately 1420' of EWP-52 waveguide.
9) RADIOS
o Furnish, install and test two each NEC SONET Terminal radio racks
with ATPC and space-diversity to sites 106C (Sidney, IA) and 106A
(Pickrell, NE).
o Relocate the existing stub radio to the new building.
10) MULTIPLEX
o No OC-3 Mux is required.
o Four DS-0s are required.
11) MISCELLANEOUS EQUIPMENT
o Furnish and install orderwire, alarm, interconnect, and fuse panel
in one 7' 6" x 23" rack.
12) CHANNEL BANK RACK
o Furnish and install one each 7' 6" x 23" rack with fuse panel for
channel bank equipment.
A-59
<PAGE>
106A (Pickrell, NE)
Terminal (stub to Beatrice, NE)
1) SITE WORK
o There are no access issues.
o Fence expansion required for new building.
o No site clearing or leveling is anticipated.
o Re-grade 180' access road.
2) TOWERS
o Furnish and install safety climb device.
o Upgrade tower grounding.
o Tower analysis/strengthening requirements are heavy; new path to
Diller, NE will require two additional antennas.
o Furnish and install a waveguide bridge, two entrances.
3) BUILDINGS
o A new 11' 6" x 34' two room concrete shelter will be used.
o Add new site ring ground.
4) AC POWER
o A 200 amp service upgrade is required to the existing 60 amp
service. The transformer service pole is 22' away from the existing
shelter.
5) GENERATORS
o The new shelter will be equipped with a 35 KW Generac propane
generator. The existing Kohler generator is 12.5 KW with 2484 hours
of service.
o The existing 250 gallon propane tank will be used, with new gas
lines coming off of the existing line.
o Cap off the gas lines to the existing generator after cut-over to
the new equipment.
6) DC PLANT
o Add one PCP power board rack equipped with two each -48 VDC 50 A
rectifier units and two each 22 position DC breaker panel.
o Add one set 900 AH -48 VDC GNB absolute battery system.
7) ANTENNAS
o Furnish, install and test two 10' UHX antennas facing east to site
106B (Cook, NE).
8) TRANSMISSION LINES
o Furnish and install approximately 470' of EWP-52 waveguide.
9) RADIOS
o Furnish, install and test one NEC SONET Terminal radio rack with
ATPC and space-diversity to site 106B (Cook, NE).
o Relocate the two-way bay station radio to the new building.
10) MULTIPLEX
o Furnish and install a new OC-3 16DS-1 ADM multiplex in one 7' 6" x
23" rack.
11) MISCELLANEOUS EQUIPMENT
o Furnish and install orderwire, alarm, interconnect, and fuse panel
in one 7' 6" x 23" rack.
12) CHANNEL BANK RACK
o Furnish and install one each 7' 6" x 23" rack with fuse panel for
channel bank equipment.
A-60
<PAGE>
SCHEDULE B
SEGMENT AND FACILITIES
Subject the completion of Pathnet's due diligence as to each Segment of the
System and upon the prior approval of each Party, the Parties shall amend to
this Schedule B the Segments and Facilities required for each Segment.
Incumbent Segment A extends from Joliet, Illinois to Pickrell, Nebraska, with
facilities at the sites listed below:
FACILITY LATITUDE LONGITUDE PATH TO
- -------- -------- --------- -------
Joliet Meter 41-30-32 88-08-20 110B (Norway, IL)
(Joliet, IL)
110B 41-24-18 88-41-25 Joliet Meter (Joliet, IL)
(Norway, IL) 110A (Ohio, IL)
110A 41-35-03 89-25-16 110B (Norway, IL)
(Ohio, IL) 110 (Geneseo, IL)
110 41-23-31 90-09-56 110A (Ohio, IL)
(Geneseo, IL) 109B (Hamlet, IL)
109B 41-18-40 90-44-02 110 (Geneseo, IL)
(Hamlet, IL) 199 (Letts, IA)
199 41-22-51 91-11-34 109B (Hamlet, IL)
(Letts, IA) 109A (Wyman, IA)
109A 41-11-32 91-28-09 199 (Letts, IA)
(Wyman, IA) 109 (Harper, IA)
109 41-21-22 92-03-28 109A (Wyman, IA)
(Harper, IA) 108B (Wright, IA)
108B 41-15-52 92-33-49 109 (Harper, IA)
(Wright, IA) 108A (Knoxville, IA)
108A 41-15-19 93-07-30 108B (Wright, IA)
(Knoxville, IA) 108 (Truro, IA)
108 41-13-30 93-46-50 108A (Knoxville, IA)
(Truro, IA) 107B (Creston, IA)
107B 41-06-47 94-21-00 108 (Truro, IA)
B-1
<PAGE>
(Creston, IA) 107A (Grant, IA)
107A 41-05-15 94-52-12 107B (Creston, IA)
(Grant, IA) 107 (Hastings, IA)
107 41-03-38 95-26-55 107A (Grant, IA)
(Hastings, IA) 106C (Sidney, IA)
106C 40-46-18 95-41-16 107 (Hastings, IA)
(Sidney, IA) 106B (Cook, NE)
106B 40-32-12 96-11-57 106C (Sidney, IA)
(Cook, NE) 106A (Pickrell, NE)
106A 40-21-47 96-38-55 106B (Cook, NE)
(Pickrell, NE)
B-2
<PAGE>
Incumbent Segment B extends from Joliet Meter, with facilities at the sites
listed below:
FACILITY LATITUDE LONGITUDE PATH TO
- -------- -------- --------- -------
201 41-01-57 88-05-25 Joliet Meter (Joliet, IL)
(Herscher, IL) 311B (Sibley, IL)
311B 40-33-29 88-21-21 201 (Herscher, IL)
(Sibley, IL) 311A (Mahomet, IL)
311A 40-11-13 88-19-02 311B (Sibley, IL)
(Mahomet, IL) 311 (Hammond, IL)
311 39-47-35 88-38-03 311A (Mahomet, IL)
(Hammond, IL) 310B (Tower Hill, IL)
310B 39-26-03 88-58-54 311 (Hammond, IL)
(Tower Hill, IL) 310A (Vandalia, IL)
310A 38-56-43 89-06-10 310B (Tower Hill, IL)
(Vandalia, IL) 310 (Hoffman, IL)
310 38-31-57 89-16-04 310A (Vandalia, IL)
(Hoffman, IL) 309B (Nashville, IL)
309B 38-15-12 89-24-59 310 (Hoffman, IL)
(Nashville, IL) 309A (Ava, IL)
309A 37-49-10 89-33-30 309B (Nashville, IL)
(Ava, IL) 309 (Marble Hill, MO)
309 37-21-30 89-52-19 309A (Ava, IL)
(Marble Hill, MO) 308C (Zalma, MO)
308C 37-09-18 90-01-55 309 (Marble Hill, MO)
(Zalma, MO) 308B (Poplar Bluff, MO)
308B 36-50-49 90-18-51 308C (Zalma, MO)
(Poplar Bluff, MO) 308A (Harviell, MO)
308A 36-42-13 90-32-11 308B (Poplar Bluff, MO)
(Harviell, MO) 308 (Biggers, AR)
308 36-17-57 90-50-10 308A (Harviell, MO)
(Biggers, AR) 307C (Powhatan, AR)
B-3
<PAGE>
307C 36-05-18 91-07-52 308 (Biggers, AR)
(Powhatan, AR) 307B (Campbell, AR)
307B 35-40-04 91-14-57 307C (Powhatan, AR)
(Campbell, AR) 307A (Tupelo, AR)
307A 35-23-23 91-16-37 307B (Campbell, AR)
(Tupelo, AR) 307 (Searcy, AR)
307 35-12-27 91-46-21 307A (Tupelo, AR)
(Searcy, AR) 306B (Parnell, AR)
306B 34-52-43 91-59-19 307 (Searcy, AR)
(Parnell, AR) 306A (Alexander, AR)
306A 34-37-14 92-26-15 306B (Parnell, AR)
(Alexander, AR) 306 (Malvern, AR)
306 34-16-16 92-48-58 306A (Alexander, AR)
(Malvern, AR)
B-4
<PAGE>
Incumbent Segment C extends from Pickrell, NE, with facilities at the sites
listed below:
FACILITY LATITUDE LONGITUDE PATH TO
- -------- -------- --------- -------
105C 40-03-24 96-56-09 106A (Pickrell, NE)
(Diller, NE) 105B (Cuba, KS)
105B 39-48-51 97-22-05 105C (Diller, NE)
(Cuba, KS) 105A (Concordia, KS)
105A 39-27-59 97-47-48 105B (Cuba, KS)
(Concordia, KS) 105 (Glasco, KS)
105 39-22-06 97-47-53 105A (Concordia, KS)
(Glasco, KS) 104C (Delphos, KS)
104C 39-15-49 97-52-43 105 (Glasco, KS)
(Delphos, KS) 104B (Ellsworth, KS)
104B 38-50-28 98-11-50 104C (Delphos, KS)
(Ellsworth, KS) 104A (Hitchmann, KS)
104A 38-37-23 98-32-03 104B (Ellsworth, KS)
(Hitchmann, KS) 104 (Great Bend, KS)
104 38-25-14 98-55-38 104A (Hitchmann, KS)
(Great Bend, KS) 103B (Garfield, KS)
103B 38-03-30 99-22-09 104 (Great Bend, KS)
(Garfield, KS) 193 (Kinsley, KS)
193 37-55-49 99-30-16 103B (Garfield, KS)
(Kinsley, KS) 103A (Spearville, KS)
103A 37-50-28 99-44-04 193 (Kinsley, KS)
(Spearville, KS) 103 (Minneola, KS)
103 37-31-26 99-57-41 103A (Spearville, KS)
(Minneola, KS) 102B (Meade, KS)
102B 37-12-51 100-19-37 103 (Minneola, KS)
(Meade, KS) 102A (Floris, OK)
102A 36-54-25 100-41-34 102B (Meade, KS)
(Floris, OK) 102 (Gray, OK)
B-5
<PAGE>
102 36-33-21 100-53-06 102A (Floris, OK)
(Gray, OK) 111B (Spearman, TX)
111B 36-15-23 101-07-45 102 (Gray, OK)
(Spearman, TX) 111A (Pringle, TX)
111A 35-57-04 101-27-42 111B (Spearman, TX)
(Pringle, TX) 111 (Fritch, TX)
111 35-39-02 101-35-10 111A (Pringle, TX)
(Fritch, TX) Amarillo A (Masterson, TX)
Amarillo A 35-24-40 101-36-46 111 (Fritch, TX)
(Masterson, TX) Amarillo (Amarillo, TX)
Amarillo 35-12-16 101-50-15 Amarillo A (Masterson, TX)
(Amarillo, TX) 169A (Umbarger, TX)
169A 34-57-56 102-04-40 Amarillo (Amarillo, TX)
(Umbarger, TX) 169 (Hereford, TX)
169 34-45-00 102-22-54 169A (Umbarger, TX)
(Hereford, TX) 168B (Hub, TX)
168B 34-26-15 102-43-43 169 (Hereford, TX)
(Hub, TX) 168A (Muleshoe, TX)
168A 34-08-00 102-50-05 168B (Hub, TX)
(Muleshoe, TX) 168 (Goodland, TX)
168 33-52-50 103-00-30 168A (Muleshoe, TX)
(Goodland, TX) 167B (Milnesand, NM)
167B 33-39-13 103-20-26 168 (Goodland, TX)
(Milnesand, NM)
B-6
<PAGE>
Incumbent Segment D extends from Malvern, AR, with facilities at the sites
listed below:
FACILITY LATITUDE LONGITUDE PATH TO
- -------- -------- --------- -------
305B 33-59-25 93-18-21 306 (Malvern, AR)
(Okolona, AR) 305A (Hope, AR)
305A 33-40-06 93-31-30 305B (Okolona, AR)
(Hope, AR) 305 (Texarkana, AR)
305 33-28-18 93-56-43 305A (Hope, AR)
(Texarkana, AR) 304B (Douglassville, TX)
304B 33-10-23 94-28-02 305 (Texarkana, AR)
(Douglassville, TX) 304A (Marshall, TX)
304A 32-33-44 94-28-40 304B (Douglassville, TX)
(Marshall, TX) 304 (Marshall, TX)
304 32-24-30 94-25-44 304A (Marshall, TX)
(Marshall, TX) 303B (Pine Hill, TX)
303B 32-06-21 94-38-34 304 (Marshall, TX)
(Pine Hill, TX) 303A (Cushing, TX)
303A 31-45-57 94-48-41 303B (Pine Hill, TX)
(Cushing, TX) 303 (Lufkin, TX)
303 31-14-25 94-42-04 303A (Cushing, TX)
(Lufkin, TX) 302B (Moscow, TX)
302B 30-54-11 94-47-42 303 (Lufkin, TX)
(Moscow, TX) 302A (Cold Springs, TX)
302A 30-34-13 95-06-27 302B (Moscow, TX)
(Cold Springs, TX) 302 (New Caney, TX)
302 30-11-56 95-15-10 302A (Cold Springs, TX)
(New Caney, TX) 301B (N. Houston, TX)
301B 29-57-43 95-29-58 302 (New Caney, TX)
(N. Houston, TX)
B-7
<PAGE>
Incumbent Segment E extends from Mead, KA, with facilities at the sites listed
below:
FACILITY LATITUDE LONGITUDE PATH TO
- -------- -------- --------- -------
159A 36-52-57 99-53-28 102B (Meade, KS)
(Rosston, OK) 159 (Woodward, OK)
159 36-32-56 99-20-54 159A (Rosston, OK)
(Woodward, OK) 156C (Vici, OK)
156C 36-08-37 99-16-32 159 (Woodward, OK)
(Vici, OK) 158 (Lenora, OK)
158 35-59-03 99-03-20 156C (Vici, OK)
(Lenora, OK) 156B (Putnum, OK)
156B 35-49-35 98-58-45 158 (Lenora, OK)
(Putnum, OK) 156A (Clinton, OK)
156A 35-31-30 98-52-09 156B (Putnum, OK)
(Clinton, OK) 156 (Mountain View, OK)
156 35-04-27 98-43-41 156A (Clinton, OK)
(Mountian View, OK) 157B (Apache, OK)
157B 34-53-53 98-18-14 156 (Mountian View, OK)
(Apache, OK) 157A (Rush Springs, OK)
157A 34-49-39 97-58-37 157B (Apache, OK)
(Rush Springs, OK) 157 (Marlow, OK)
157 34-36-29 97-38-38 157A (Rush Springs, OK)
(Marlow, OK) 155C (Comanche, OK)
155C 34-23-29 97-59-37 157 (Marlow, OK)
(Comanche, OK) 155B (Ryan, OK)
155B 33-56-23 97-54-19 155C (Comanche, OK)
(Ryan, OK) 155A (Bowie, TX)
155A 33-36-05 97-50-39 155B (Ryan, OK)
(Bowie, TX) 155 (Chico, TX)
155 33-17-39 97-44-14 155A (Bowie, TX)
(Chico, TX)
B-8
<PAGE>
SCHEDULE C
ESTIMATED AND OPERATING COSTS
Subject to completion of Pathnet's due diligence as to each Segment of the
System and upon the prior approval of each Party, the Parties shall append to
this Schedule C the Incumbent Estimated Costs and Pathnet Estimated Cost related
to such Segment.
SECTION 1. ESTIMATED COSTS TO BE PAID BY INCUMBENT
Joliet, Illinois to Pickrell, NE;
Items Estimated Costs:
- ----- ----------------
SITE SURVEY [***]
SITE WORK [***]
TOWERS [***]
BUILDINGS [***]
GENERATORS [***]
D.C. PLANT [***]
CHANNEL BANKS [***]
PROJECT ENGINEERING [***]
Total Estimated Costs: [***]
SECTION 2. OPERATING AND ADMINISRATION COSTS TO BE PAID BY INCUMBENT
1. [***]
2. [***]
3. [***]
4. [***]
5. [***]
C-1
<PAGE>
6. [***]
7. [***]
8. [***]
9. [***]
10. [***]
11. [***]
12. [***]
13. [***]
14. [***]
15. [***]
16. [***]
17. [***]
18. [***]
19. [***]
20. [***]
21. [***]
C-2
<PAGE>
22. [***]
23. [***]
24. [***]
25. [***]
26. [***]
27. [***]
28. [***]
29. [***]
30. [***]
C-3
<PAGE>
SECTION 3. ESTIMATED COSTS TO BE PAID BY PATHNET
The Pathnet Estimated Costs shall be allocated as follows:
Joliet, IL to Pickrell, NE;
Item Estimated Cost
---- --------------
PCN Coordination [***]
Antennas [***]
Waveguide [***]
Radios [***]
OC-3 Multiplex [***]
Misc. Equip/racks [***]
Network Management [***]
Path Engineering [***]
FCC License Application [***]
Total Estimated Costs: [***]
SECTION 4. ADMINISTRATION AND OPERATING COSTS TO BE PAID BY PATHNET
1. [***]
2. [***]
3. [***]
4. [***]
5. [***]
6. [***]
7. [***]
8. [***]
9. [***]
C-4
<PAGE>
10. [***]
11. [***]
12. [***]
13. [***]
14. [***]
15. [***]
16. [***]
17. [***]
18. [***]
19. [***]
20. [***]
21. [***]
22. [***]
23. [***]
24. [***]
C-5
<PAGE>
25. [***]
26. [***]
27. [***]
28. [***]
29. [***]
30. [***]
31. [***]
32. [***]
33. [***]
34. [***]
35. [***]
36. [***]
37. [***]
38. [***]
C-6
<PAGE>
EXHIBIT C-1
INCUMBENT ESTIMATED COSTS
<TABLE>
<CAPTION>
Joliet Meter 110B 110A 110 109B 199
<S> <C> <C> <C> <C> <C> <C>
SITE SURVEY
Site Survey [***]
Taxes [***]
SITE SURVEY [***]
SITE WORK
Soil Reports [***]
Site Clearing /Level [***]
Fence & Gate Mods [***]
Road Const/Repair [***]
Taxes [***]
SITE WORK [***]
TOWERS
Tower/Building Analysis [***]
New Tower [***]
Tower Strength Material [***]
Tower Labor [***]
Waveguide Bridge [***]
Tower Ground [***]
Freight [***]
Taxes [***]
TOWERS [***]
BUILDINGS
Exist Bldg. Mods [***]
New Building [***]
New Bldg Delivery [***]
New Bldg Foundation [***]
Building Ground [***]
AC Power [***]
Freight (incl. in Bldg Delivery) [***]
Taxes [***]
BUILDINGS [***]
GENERATORS
25 KW [***]
35 KW [***]
Transfer Panel [***]
Install & Test Labor [***]
Freight [***]
Taxes [***]
GENERATORS [***]
D.C. PLANT
Chargers [***]
Chargers Spares [***]
Batteries [***]
Power Board/Panel [***]
Install & Test Labor [***]
Freight [***]
Taxes [***]
D.C. PLANT [***]
CHANNEL BANKS/DAX1/0
Channel Banks/DAX1/0 [***]
Install [***]
Test & Turnup [***]
Freight [***]
Taxes [***]
CHANNEL BANKS/DAX1/0 [***]
PROJECT ENGINEERING [***]
KN (AMARILLO) COSTS [***]
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
109A 109 108B 108A 108 107B
<S> <C> <C> <C> <C> <C> <C>
SITE SURVEY
Site Survey [***]
Taxes [***]
SITE SURVEY [***]
SITE WORK
Soil Reports [***]
Site Clearing /Level [***]
Fence & Gate Mods [***]
Road Const/Repair [***]
Taxes [***]
SITE WORK [***]
TOWERS
Tower/Building Analysis [***]
New Tower [***]
Tower Strength Material [***]
Tower Labor [***]
Waveguide Bridge [***]
Tower Ground [***]
Freight [***]
Taxes [***]
TOWERS [***]
BUILDINGS
Exist Bldg. Mods [***]
New Building [***]
New Bldg Delivery [***]
New Bldg Foundation [***]
Building Ground [***]
AC Power [***]
Freight (incl. in Bldg Delivery) [***]
Taxes [***]
BUILDINGS [***]
GENERATORS
25 KW [***]
35 KW [***]
Transfer Panel [***]
Install & Test Labor [***]
Freight [***]
Taxes [***]
GENERATORS [***]
D.C. PLANT
Chargers [***]
Chargers Spares [***]
Batteries [***]
Power Board/Panel [***]
Install & Test Labor [***]
Freight [***]
Taxes [***]
D.C. PLANT [***]
CHANNEL BANKS/DAX1/0
Channel Banks/DAX1/0 [***]
Install [***]
Test & Turnup [***]
Freight [***]
Taxes [***]
CHANNEL BANKS/DAX1/0 [***]
PROJECT ENGINEERING [***]
KN (AMARILLO) COSTS [***]
</TABLE>
C-8
<PAGE>
<TABLE>
<CAPTION>
107A 107 106C 106B 106A TOTAL
<S> <C> <C> <C> <C> <C> <C>
SITE SURVEY
Site Survey [***]
Taxes [***]
SITE SURVEY [***]
SITE WORK
Soil Reports [***]
Site Clearing/Level [***]
Fence & Gate Mods [***]
Road Const/Repair [***]
Taxes [***]
SITE WORK [***]
TOWERS
Tower/Building Analysis [***]
New Tower [***]
Tower Strength Material [***]
Tower Labor [***]
Waveguide Bridge [***]
Tower Ground [***]
Freight [***]
Taxes [***]
TOWERS [***]
BUILDINGS
Exist Bldg. Mods [***]
New Building [***]
New Bldg Delivery [***]
New Bldg Foundation [***]
Building Ground [***]
AC Power [***]
Freight (incl. in Bldg Delivery) [***]
Taxes [***]
BUILDINGS [***]
GENERATORS
25 KW [***]
35 KW [***]
Transfer Panel [***]
Install & Test Labor [***]
Freight [***]
Taxes [***]
GENERATORS [***]
D.C. PLANT
Chargers [***]
Chargers Spares [***]
Batteries [***]
Power Board/Panel [***]
Install & Test Labor [***]
Freight [***]
Taxes [***]
D.C. PLANT [***]
CHANNEL BANKS/DAX1/0
Channel Banks/DAX1/0 [***]
Install [***]
Test & Turnup [***]
Freight [***]
Taxes [***]
CHANNEL BANKS/DAX1/0 [***]
PROJECT ENGINEERING [***]
KN (AMARILLO) COSTS [***]
</TABLE>
C-9
<PAGE>
EXHIBIT C-2
PATHNET ESTIMATED COSTS
<TABLE>
<CAPTION>
Joliet Meter 110B 110A $110 109B 199
<S> <C> <C> <C> <C> <C> <C>
PCN COORDINATION
PCN Coordination [***]
Taxes [***]
PCN COORDINATION [***]
ANTENNAS
Antenna Material [***]
Install & Align Labor [***]
Freight [***]
Taxes [***]
ANTENNAS [***]
WAVEGUIDE
Waveguide Material [***]
Install & Test Labor [***]
Freight [***]
Taxes [***]
WAVEGUIDE [***]
RADIOS
1:1 Terminal: 2 & 3 Way [***]
1:1 Repeater [***]
Add RF Channel (2:1) [***]
OAM&P Software/LT [***]
Maint Accessory Kit [***]
Basic Radio Spares [***]
Enhanced Radio Spares [***]
Install [***]
Test & Turnup [***]
Freight [***]
Taxes [***]
RADIOS [***]
OC-3 MULTIPLEX
OC-3 to 84 DS-1 [***]
OC-3 to 83 DS-1 [***]
ADM 4/8/12/28 DS-1 [***]
OC-3 Spares [***]
Install [***]
Test & Turnup [***]
Freight [***]
Taxes [***]
OC-3 MULTIPLEX [***]
MISC EQUIP/RACKS
Racks, Fuse Panel, Misc [***]
Install [***]
Test & Turnup [***]
Freight [***]
Taxes [***]
MISC EQUIP/RACKS [***]
NETWORK MANAGEMENT
Network Server [***]
Network Software [***]
Network Database [***]
Interface Equipment [***]
Install & Test [***]
Freight [***]
Taxes [***]
NETWORK MGT [***]
PATH ENGINEERING [***]
FCC LICENSE APPLICATION [***]
SYSTEM ENGINEERING [***]
PATHNET COSTS [***]
</TABLE>
C-10
<PAGE>
<TABLE>
<CAPTION>
109A $109 108B 108A $108 107B
<S> <C> <C> <C> <C> <C> <C>
PCN COORDINATION
PCN Coordination [***]
Taxes [***]
PCN COORDINATION [***]
ANTENNAS
Antenna Material [***]
Install & Align Labor [***]
Freight [***]
Taxes [***]
ANTENNAS [***]
WAVEGUIDE
Waveguide Material [***]
Install & Test Labor [***]
Freight [***]
Taxes [***]
WAVEGUIDE [***]
RADIOS
1:1 Terminal: 2 & 3 Way [***]
1:1 Repeater [***]
Add RF Channel (2:1) [***]
OAM&P Software/LT [***]
Maint Accessory Kit [***]
Basic Radio Spares [***]
Enhanced Radio Spares [***]
Install [***]
Test & Turnup [***]
Freight [***]
Taxes [***]
RADIOS [***]
OC-3 MULTIPLEX
OC-3 to 84 DS-1 [***]
OC-3 to 28 DS-1 [***]
ADM 4/8/12/28 DS-1 [***]
OC-3 Spares [***]
Install [***]
Test & Turnup [***]
Freight [***]
Taxes [***]
OC-3 MULTIPLEX [***]
MISC EQUIP/RACKS
Racks, Fuse Panel, Misc [***]
Install [***]
Test & Turnup [***]
Freight [***]
Taxes [***]
MISC EQUIP/RACKS [***]
NETWORK MANAGEMENT
Network Server [***]
Network Software [***]
Network Database [***]
Interface Equipment [***]
Install & Test [***]
Freight [***]
Taxes [***]
NETWORK MGT [***]
PATH ENGINEERING [***]
FCC LICENSE APPLICATION [***]
SYSTEM ENGINEERING [***]
PATHNET COSTS [***]
</TABLE>
C-11
<PAGE>
<TABLE>
<CAPTION>
107A $107 106C 106B 106A TOTAL
<S> <C> <C> <C> <C> <C> <C>
PCN COORDINATION
PCN Coordination [***]
Taxes [***]
PCN COORDINATION [***]
ANTENNAS
Antenna Material [***]
Install & Align Labor [***]
Freight [***]
Taxes [***]
ANTENNAS [***]
WAVEGUIDE
Waveguide Material [***]
Install & Test Labor [***]
Freight [***]
Taxes [***]
WAVEGUIDE [***]
RADIOS
1:1 Terminal: 2 & 3 Way [***]
1:1 Repeater [***]
Add RF Channel (2:1) [***]
OAM&P Software/LT [***]
Maint Accessory Kit [***]
Basic Radio Spares [***]
Enhanced Radio Spares [***]
Install [***]
Test & Turnup [***]
Freight [***]
Taxes [***]
RADIOS [***]
OC-3 MULTIPLEX
OC-3 to 84 DS-1 [***]
OC-3 to 28 DS-1 [***]
ADM 4/8/12/28 DS-1 [***]
OC-3 Spares [***]
Install [***]
Test & Turnup [***]
Freight [***]
Taxes [***]
OC-3 MULTIPLEX [***]
MISC EQUIP/RACKS
Racks, Fuse Panel, Misc [***]
Install [***]
Test & Turnup [***]
Freight [***]
Taxes [***]
MISC EQUIP/RACKS [***]
NETWORK MANAGEMENT
Network Server [***]
Network Software [***]
Network Database [***]
Interface Equipment [***]
Install & Test [***]
Freight [***]
Taxes [***]
NETWORK MGT [***]
PATH ENGINEERING [***]
FCC LICENSE APPLICATION [***]
SYSTEM ENGINEERING [***]
PATHNET COSTS [***]
</TABLE>
C-12
<PAGE>
SCHEDULE D
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Escrow Agreement") is entered into as of
__________________ ___, 1998, by and among Pathnet, Inc., a Delaware corporation
("Pathnet") and KN Telecommunications, Inc. a Colorado corporation
("Incumbent"), and Crestar Bank as escrow agent (the "Escrow Agent");
WHEREAS, Pathnet and Incumbent have entered into a Fixed Point Microwave
Services Agreement dated as of the date hereof (the "FPM Agreement"), pursuant
to which, among other things, Incumbent has engaged Pathnet as, and Pathnet has
agreed to act as, Incumbent's sole representative for the purpose of (i)
installing, managing and operating a high capacity digital microwave system
along Incumbent's current microwave paths and (ii) marketing and selling any
Excess Capacity created by such high capacity digital microwave system.
WHEREAS, all capitalized terms used herein and not defined herein shall
have the meanings ascribed to such terms in the FPM Agreement;
WHEREAS, pursuant to Section 4.3.4(b) of the FPM Agreement, Pathnet shall
deliver to the Escrow Agent the amount of less the cost of any equipment
provided by the vendors referred to in the Vendor Credit Assurances set forth in
Section 4.3.4(a) of the FPM Agreement] (the "Pathnet Escrow Deposit") and
pursuant to Section 4.1.4 of the FPM Agreement, Incumbent shall deliver to the
Escrow Agent the amount of (the "Incumbent Escrow Deposit"); and
WHEREAS, the Escrow Agent has agreed to act as escrow agent hereunder in
accordance with the terms and conditions hereinafter set forth;
NOW, THERFORE, for and in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, the parties hereto hereby agree
as follows:
SECTION 1. Appointment of Escrow Agent. Pathnet and Incumbent hereby
mutually appoint and designate the Escrow Agent to receive, hold and disburse
the Pathnet Escrow Deposit and the Incumbent Escrow Deposit, in accordance with
the terms and conditions of this Escrow Agreement, and the Escrow Agent hereby
accepts such appointment and designation. Except as set forth in Section 3.2.3,
Pathnet shall pay all reasonable fees and expenses of the Escrow Agent in
connection with this Escrow Agreement.
SECTION 2. Escrow.
2.1 Escrow of Funds by Pathnet
2.1.1 Delivery of Escrow Deposit.
(a) Within ninety (90) days after delivery by Pathnet to Incumbent
of the System Design as to each Segment, Pathnet shall deposit
the amount in cash equal to fifty percent (50%) of the Pathnet
Escrow Deposit in an escrow account with
D-1
<PAGE>
the Escrow Agent to be held, drawn upon and returned by the
Escrow Agent in accordance with the terms and conditions
hereinafter set forth.
2.1.2 Term of Escrow Agreement. The Escrow Agent shall hold the
Pathnet Escrow Deposit until Commissioning and upon Commissioning any
remaining funds, together with interest that has accrued and been paid
thereon, shall be paid by the Escrow Agent to Pathnet or its designee.
2.1.3 Release of Funds to Pathnet. Upon receipt by the Escrow Agent
of a written joint certification of Pathnet and Incumbent substantially in
form attached hereto as Attachment A to the effect that Pathnet is
entitled to receive a portion of or all of the Pathnet Escrow Deposit in
accordance with Section 4.3.4(b) of the FPM Agreement, the Escrow Agent
shall promptly deliver to Pathnet such portions of or all of the Pathnet
Escrow Deposit.
2.1.4 Release of Funds to Incumbent. Upon receipt by the Escrow
Agent of a written joint certification of Pathnet and Incumbent
substantially in the form attached hereto as Attachment A to the effect
that Incumbent is entitled to receive a portion of or all of the Pathnet
Escrow Deposit in accordance with Section 4.3.4(b) of the FPM Agreement or
upon receipt by the Escrow Agent of a court order directing payment to
Incumbent of a portion of or all of the Pathnet Escrow Deposit, the Escrow
Agent shall promptly deliver to Incumbent such portions of or all of the
Pathnet Escrow Deposit.
2.1.5 Interest and Permitted Investment. Pathnet shall be entitled
to receive at Commissioning of any Segment, any and all interest accrued
on the Pathnet Escrow Deposit during the term of the escrow as described
in this Agreement and the Escrow Agent shall invest the funds comprising
the Pathnet Escrow Deposit as designated by Pathnet.
2.2 Escrow of Funds by Incumbent
2.2.1 Delivery of Escrow Deposit. Simultaneous with the execution
and delivery of the FPM Agreement as to each Segment, Incumbent shall
deposit an amount in cash equal to the Incumbent Escrow Deposit in an
escrow account with the Escrow Agent to be held, drawn upon and returned
by the Escrow Agent in accordance with the terms and conditions
hereinafter set forth.
2.2.2 Term of Escrow Agreement. The Escrow Agent shall hold the
Incumbent Escrow Deposit until Commissioning and upon Commissioning any
remaining funds, together with interest that has accrued and been paid
thereon, shall be paid by the Escrow Agent to Incumbent or its designee.
2.2.3 Release of Funds to Pathnet. Upon receipt by the Escrow Agent
of a written joint certification of Pathnet and Incumbent substantially in
form attached hereto as Attachment B to the effect that Pathnet is
entitled to receive a portion of or all of the Incumbent Escrow Deposit in
accordance with Section 4.1.4 of the FPM Agreement, or upon receipt by the
Escrow Agent of a court order directing payment to Pathnet of a
D-2
<PAGE>
portion of or all of the Incumbent Escrow Deposit, the Escrow Agent shall
promptly deliver to Pathnet such portions of or all of the Incumbent
Escrow Deposit.
2.2.4 Interest and Permitted Investment. Incumbent shall be entitled
to receive at Commissioning of any Segment, any and all interest accrued
on the Incumbent Escrow Deposit during the term of the escrow as described
in this Agreement and the Escrow Agent shall invest the funds comprising
the Incumbent Escrow Deposit as designated by Pathnet.
SECTION 3. Concerning the Escrow Agent.
3.1 Duties. The Escrow Agent undertakes to perform all duties which are
expressly set forth herein.
3.2 Indemnification.
3.2.1 The Escrow Agent may rely upon and shall be protected in
acting or refraining from acting upon any written notice, instruction,
certification, or request furnished to it hereunder and believed by it to
be genuine and to have been signed or presented by the proper parties or
party.
3.2.2 The Escrow Agent shall not be liable for any action taken by
it in good faith and without negligence, and believed by it to be
authorized or within the rights or powers conferred upon it by this Escrow
Agreement.
3.2.3 Pathnet and Incumbent hereby agree to indemnify the Escrow
Agent for and to hold the Escrow Agent harmless against, any loss,
liability or reasonable expense incurred without negligence or bad faith
on the part of the Escrow Agent, arising out of or in connection with the
Escrow Agent entering into this Escrow Agreement and carrying out its
duties hereunder, including costs and expenses of successfully defending
the Escrow Agent against any claim of liability with respect thereto.
Pathnet shall pay one half of any payment made pursuant to this Section
3.2.3 and Incumbent shall pay one half.
3.3 Other Matters. The Escrow Agent (and any successor escrow agent)
reserves the right to resign as the Escrow Agent at any time upon thirty (30)
days prior written notice to each of Pathnet and Incumbent. Upon mutual
agreement, Pathnet and Incumbent reserve the right to remove the Escrow Agent at
any time upon thirty (30) days written notice to the Escrow Agent. In the event
of any litigation or dispute by the parties hereunder affecting its duties, the
Escrow Agent shall take no action until such action is agreed to in writing by
the parties hereto, or until receipt of an order of a court having jurisdiction
directing the Escrow Agent with respect to the action which is the subject of
such litigation or dispute. The Escrow Agent neither approves nor disapproves of
the transactions contemplated by the FPM Agreement or this Escrow Agreement, nor
does it recommend for or against, or have an opinion as to the legality or
validity of, this transaction.
SECTION 4. Termination. This Escrow Agreement shall terminate (i)
automatically upon the return of both the Pathnet Escrow Deposit and the
Incumbent Escrow Deposit pursuant
D-3
<PAGE>
to Section 2.1.2 and Section 2.2.2, respectively (ii) automatically upon the
delivery of the entire Pathnet Escrow Deposit and the Incumbent Escrow Deposit
made pursuant to Section 2.1.3 or Section 2.1.4 and Section 2.2.3, respectively
or (iii) upon written mutual consent signed by Pathnet and Incumbent.
SECTION 5. Additional Actions and Documents. Each of the parties hereto
agrees to take or cause to be taken such further actions, to execute, deliver
and file or cause to be executed, delivered and filed such further documents,
instruments and agreement, and will obtain such consents as may be necessary or
as may reasonably be requested in order to fully effectuate the purposes, terms
and conditions of this Escrow Agreement.
SECTION 6. Notice. All notices, demands, requests, or other communications
which may be or are required to be given, served or sent by any party pursuant
to this Escrow Agreement shall be in writing and shall be hand delivered, mailed
by first-class, registered or certified mail, return receipt requested, postage
prepaid, delivered by overnight air courier or transmitted by telegram or telex
addressed as follows:
If to Pathnet:
Pathnet, Inc.
1015 31st Street, NW
Washington, DC 20007
Attention: Michael Lubin
Vice President and General Counsel
Tel: (202 625-7284
Fax: (202) 625-7369
If to Incumbent:
KNTelecommunications, Inc.
370 Van Gordon Street
P.O. Box 281304
Lakewood, CO 80228-8304
Tel: (303) 763-3510
If to Escrow Agent:
William F. Michie III
Corporate Trust Officer
Crestar Bank
919 East Main Street
10th Floor
Richmond, VA 23219
(804) 782-5581
(804) 782-7855 (Fax)
D-4
<PAGE>
Or such other address as the addressee may indicate by written notice to the
other parties. Each notice, demand, request or communication which shall be
given or made in the manner described above shall be deemed sufficiently given
or made for all purposes at such time as it is delivered to the addressee (with
return receipt, the delivery receipt or the affidavit of messenger being deemed
conclusive but not exclusive evidence of such delivery) or at such time as
delivery is refused by the addressee upon presentation.
SECTION 7. Benefit and Assignment. This Escrow Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns as permitted hereunder. No person or entity other than
the parties hereto is or shall be entitled to bring any action to enforce any
provisions of this Escrow Agreement against any of the parties hereto or their
respective successors and assigns as permitted hereunder. At any time and from
time to time, Pathnet shall have the right to assign this Agreement or any of
Pathnet's rights and obligations under this Agreement; provided, that in no
event shall any such assignment relieve Pathnet of its obligations under this
Agreement. Incumbent may not or shall not have the right to assign this
Agreement or any of its rights and obligations hereunder without the prior
written consent of Pathnet, which consent shall not be unreasonably withheld;
provided, however, Incumbent may assign its right and obligations, in whole but
not in part, under this Agreement without the approval of Pathnet, to any entity
which acquires all or substantially all of the assets of Incumbent or to any
subsidiary, Affiliate or successor in a merger or consolidation of Incumbent;
provided, that in no event shall any such assignment relieve Incumbent of its
obligations under this Agreement.
SECTION 8. Entire Agreement; Amendment. This Escrow Agreement together
with the schedules, exhibits and attachments hereto contains the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all prior oral or written agreements, commitments or understandings
with respect to such matters. Pathnet and Incumbent shall furnish the Escrow
Agent with a copy (without Schedules and Exhibits) of the FPM Agreement. This
Escrow Agreement may not be changed orally, but only by an instrument in writing
signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought.
SECTION 9. Waiver. No delay or failure on the part of any party hereto in
exercising any right, power or privilege under this Escrow Agreement shall
impair any such right, power or privilege or be construed as a waiver of any
default or any acquiescence therein. No single or partial exercise of any such
right, power or privilege shall preclude the further exercise of such right
power or privilege or the exercise of any other right power or privilege. No
waiver shall be valid against any party hereto unless made in writing and signed
by the party against whom enforcement of such waiver is sought and then only to
the extent expressly specified therein.
SECTION 10. Expenses. Subject to the provisions of Section 1 and Section
3.2.3 each party shall pay its own expenses incident to this Escrow Agreement
and the transactions contemplated hereunder, including all legal and accounting
fees and disbursements.
SECTION 11. Consent to Jurisdiction; Enforceability. This Escrow Agreement
and the duties and obligations of the parties hereunder shall be enforceable
against any of the parties in the courts of the Untied States of America and of
the State of Maryland. For such purpose, each party hereto hereby irrevocable
submits to the non-exclusive jurisdiction of such court or
D-5
<PAGE>
courts and agrees that all claims in respect of this Escrow Agreement and such
other agreements, documents and instruments may be heard and determined in such
courts. Each party hereby irrevocably agrees that a final judgment of any of the
courts specified above in any action or proceeding relating to this Escrow
Agreement or to any of the other agreements, documents or instruments referred
to herein or therein shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
SECTION 12. Severability. If any part of any provision of this Escrow
Agreement shall be invalid or unenforceable in any respect, such part shall be
ineffective to the extent of such invalidity or unenforceability only, without
in any way affecting the remaining parts of such provision or the remaining
provisions of this Escrow Agreement.
SECTION 13. Governing Law. This Escrow Agreement, the rights and
obligation of the parties hereto, and any claims or disputes relating thereto,
shall be governed by and construed in accordance with the laws of the State of
Maryland (excluding the choice of law rules thereof.)
SECTION 14. Limitation on Benefits. The covenants, undertaking and
agreements set forth in this Escrow Agreement shall be solely for the benefit
of, and shall be enforceable only by, the parties hereto, and their respective
successors, heirs, executors, administrators, legal representatives and
permitted assigns.
SECTION 15. Binding Effect. Subject to any provisions hereof restricting
assignment, this Escrow Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors, heirs, executors,
administrators, legal representatives and assigns.
SECTION 16. Headings. The headings of the sections and subsections
contained in this Escrow Agreement are inserted for convenience only and do not
form a part or affect the meaning, construction or scope thereof.
SECTION 17. Signature in Counterparts. This Escrow Agreement may be
executed in separate counterparts, none of which need contain the signatures of
all parties, each of which shall be deemed to be an original, and all of which
taken together constitute one and the same instrument. It shall not be necessary
in making proof of this Escrow Agreement to produce or account for more that the
number of counterparts containing the respective signatures of, or on behalf of,
all of the parties hereto.
IN WITNESS WHEREOF, each of the parties hereto has executed or has caused
this Escrow Agreement to be executed on its behalf, all as of the date first
above written.
PATHNET, INC.
By:_______________________________
Name:_____________________________
Title:____________________________
D-6
<PAGE>
KN TELECOMMUNICATIONS, INC.
By:_______________________________
Name:_____________________________
Title:____________________________
CRESTAR BANK
By:_______________________________
Name:_____________________________
Title:____________________________
D-7
<PAGE>
ATTACHMENT A
JOINT CERTIFICATION
I, ______________, _________________ of Pathnet, Inc. ("Pathnet") and I,
___________, _______________ of KNTelecommunications, Inc. ("Incumbent"), hereby
certify as follows:
1. Pathnet and Incumbent entered into a Fixed Point Microwave Services
Agreement, dated as of ___________, 1998 (the "FPM Agreement") pursuant to which
among other things, Incumbent engaged Pathnet as, and Pathnet agreed to act as,
Incumbent's sole representative for the purpose of (i) installing, managing and
operating a high capacity digital microwave system along Incumbent's current
microwave paths and (ii) marketing and selling any excess capacity created by
such high capacity digital microwave system, all in accordance with and subject
to the terms and conditions set forth in the FPM Agreement.
2. Pursuant to the FPM Agreement, Pathnet, Incumbent and Crestar Bank(the
"Escrow Agent") entered into an Escrow Agreement, dated as of _____________,
1998 (the "Escrow Agreement"), in accordance with which Pathnet delivered to the
Escrow Agent the sum of [_______________________less the cost of any equipment
provided by the vendors referred to in the Vendor Credit Assurances set forth in
Section 4.3.4(a) of the FPM Agreement] (in two equal payments) (the "Pathnet
Escrow Deposit"), subject to the terms of the FPM Agreement and the Escrow
Agreement.
3. Attached to this Joint Certification is [an invoice or other such
purchase order or bill relating to a Pathnet Item (as such term is defined in
the FPM Agreement) evidencing the performance of certain services by Pathnet as
set forth in the FPM Agreement.] [An affidavit of Incumbent certifying that
Pathnet has failed to timely meet its payment responsibilities with respect to
the Pathnet Items (as such term is defined in the FPM Agreement) or fails to
complete the System in accordance with Section 13.2.1 (ix) of the FPM Agreement
in accordance with the terms and provisions of the FPM Agreement and setting
forth in detail a description of the facts and circumstances surrounding such
failure.]
4. Pursuant to Section 4.3.4(b) of the FPM Agreement and [Section
2.1.3/Section 2.1.4] of the Escrow Agreement, [Pathnet/Incumbent] is entitled to
receive, from the Pathnet Escrow Deposit, the following sum: _____________
($_________).
5. The Escrow Agent is hereby directed promptly upon receipt of this
certification to release the portion of the Escrow Deposit as set forth in
Section 3, above to Pathnet/Incumbent pursuant to [Section 2.1.3/Section 2.1.4]
of the Escrow Agreement.
D-8
<PAGE>
Each of _______ and ________ on behalf of Pathnet and Incumbent,
respectively, certify that the foregoing is true and correct.
PATHNET, INC. KN TELECOMMUNICATIONS, INC.
By:____________________________ By:_____________________________
Name:__________________________ Name:___________________________
Title:_________________________ Title:__________________________
D-9
<PAGE>
ATTACHMENT B
JOINT CERTIFICATION
I, ______________, ____________________ of Pathnet, Inc. ("Pathnet") and
I, _________________ of KN Telecommunications, Inc., a Colorado Corporation
("Incumbent"), hereby certify as follows:
1. Pathnet and Incumbent entered into a Fixed Point Microwave Services
Agreement, dated as of _____________ _, 19987 (the "FPM Agreement") pursuant to
which among other things, Incumbent engaged Pathnet as, and Pathnet agreed to
act as, Incumbent's sole representative for the purpose of (i) installing,
managing and operating a high capacity digital microwave system along
Incumbent's current microwave paths and (ii) marketing and selling any excess
capacity created by such high capacity digital microwave system, all in
accordance with and subject to the terms and conditions set forth in the FPM
Agreement.
2. Pursuant to the FPM Agreement, Pathnet, Incumbent and Crestar Bank (the
"Escrow Agent") entered into an Escrow Agreement, dated as of _______________,
199__ (the "Escrow Agreement"), in accordance with which Incumbent delivered to
the Escrow Agent the sum of ___________________________ (the "Incumbent Escrow
Deposit"), subject to the terms of the FPM Agreement and the Escrow Agreement.
3. Attached to this Joint Certification is an invoice or other such
purchase order or bill relating to a Pathnet Item (as such term is defined in
the FPM Agreement) evidencing the performance of certain services by Pathnet as
set forth in the FPM Agreement.
4. Pursuant to Section 4.1.4 of the FPM Agreement and [Section 2.2.3 /
Section 2.2.4] of the Escrow Agreement, Pathnet/Incumbent is entitled to
receive, from the Incumbent Escrow Deposit, the following sum: _____________
($_________).
5. The Escrow Agent is hereby directed promptly upon receipt of this
certification to release the portion of the Incumbent Escrow Deposit as set
forth in Section 3, above to Pathnet pursuant to [Section 2.2.3/ Section 2.2.4]
of the Escrow Agreement.
Each of _______ and ________ on behalf of Pathnet and Incumbent,
respectively, certify that the foregoing is true and correct.
PATHNET, INC. KN TELECOMMUNICATIONS, INC.
By:____________________________ By:_____________________________
Name:__________________________ Name:___________________________
Title:_________________________ Title:__________________________
D-10
<PAGE>
SCHEDULE E
INCUMBENT SECURITY PROCEDURES
Copy Attached
E-1
<PAGE>
Schedule E
[KN ENERGY LOGO]
K N Energy, Inc. and Affiliates
Safety and Environmental Affairs
Issue Date: 8/20/97
Contractor Safety Manual Revision Date:
CONTRACTOR GENERAL INFORMATION
The purpose of this Contractor Safety Handbook is to ensure that contractors
working for KN Energy, Inc. or one of it's affiliated companies (the "Company"),
understand the Company's safety policies as they apply to their particular
project. The safety requirements placed on Contractors follow the policies
contained in the KN Energy Safety and Environmental Affairs Policy Manual.
Deviation from an established Company policy shall not be allowed without the
prior written approval of the Company.
1 COMPLIANCE WITH GOVERNMENT REGULATIONS
1.1 Contractors are expected to comply with applicable safety, health and
environmental regulations of agencies having jurisdiction at the locations where
the services are being performed including, but not limited to the following:
o Laws and regulations regarding the environment, including but not
limited to, the Federal Clean Air Act, Clean Water Act, Resource
Conservation and Recovery Act, Toxic Substance Contract Act, and the
State Drinking Water Act;
o Applicable OSHA regulations in 29 CFR Parts 1910 and 1926; and
o DOT regulations in 49 CFR, Parts 191, 192, 195 and 199.
2 DRUG TESTING REQUIREMENTS
2.1 Unless express contractual arrangements have been made prior to the start of
work, the Company shall require contractors and their subcontractors to maintain
acceptable Anti-drug and Alcohol Misuse Programs. Acceptable means that the
programs are conducted (in the Company's opinion) in accordance with the
requirements of 49 CFR Parts 4[ILLEGIBLE] and 199. Such programs shall be
reviewed and approved before the contractor or subcontractor is allowed to
perform "Safety Sensitive" work.
2.2 Contractor drug and alcohol testing requirements apply to all contractors
performing the following types of work:
o Contractors who perform or may in the future perform construction,
maintenance or emergency response activity on new or existing
pipeline facilities; and
o Contractors who perform work in a gas processing plant or facility
that falls under the jurisdiction of OSHA regulations in 29 CFR
1910.119, Process Safety Management.
2.3 Positions that the Company classifies as Safety Sensitive under 49 CFR Parts
40 and 199 and that therefore must be included in an approved Anti-drug Plan and
an Alcohol Misuse Plan include, but are not limited to:
o Welders and welder helpers;
o Operators of excavation equipment;
o Anyone who applies or repairs coating or coating products or
installs cathodic protection devices;
o Painters, if the painting is being done to prevent atmospheric
corrosion;
o Non-destructive testing technicians;
o Electricians
o Inspectors;
Anyone who performs maintenance on regulators, relief valves and
emergency valves;
<PAGE>
o Anyone who performs leak surveys or patrols;
o Anyone who monitors cathodic protection levels;
o Anyone who locates pipelines in response to one-call system notices
2.4 Each workday, contractors subject to drug testing shall complete and provide
to the Company representative a Daily Contractor Attendance Report (or
equivalent) shown on Attachment "A". The names on these reports will be verified
against the contractor's random testing pool information. Employees whose names
do not appear on the contractor's random test list will not be allowed to
perform safety-sensitive functions until his or her DOT status can be verified.
3 PROCESS SAFETY MANAGEMENT
3.1 Contractors who perform work in a gas processing plant or facility that
falls under the jurisdiction of OSHA 29 CFR 1910.119, Process Safety Management,
shall comply with all applicable requirements of 1910.119 in addition to the
general requirements of this manual.
3.2 Contractors performing work in a PSM facility shall complete and submit to
the Company job Representative a Contractor Safety Questionnaire Form, the OSHA
200 form, and the Contractor Acknowledgment form. To verify compliance, the
Contractor may be subject to a detailed safety audit at anytime during the term
of the agreement with the Company.
4 PROJECT ORIENTATION AND SAFETY MEETINGS
4.1 The Company job representative(s) shall conduct a project orientation
meeting before the start of work to familiarize the Contractor with the
requirements of the Contractor Safety Program. The meeting will serve to
identify and discuss the known hazards that could be encountered during the
project. This meeting will be documented on the Project Orientation Meeting Form
shown on Attachment "B".
4.2 The Contractor shall conduct an initial orientation meeting with its
employees to ensure that each employee understands the scope of the work and the
associated hazards. The content of the orientation will be documented on the
Contractor Employee Certification form shown on Attachment "C". Each employee
must sign this form to indicate he or she fully understands the topics covered.
The completed form must be given to the Company job representative.
4.3 The Contractor shall conduct daily (or more frequent, if necessary)
"tailgate" safety meetings to advise the contractor employees of changes that
could effect the safety of their job. A copy of the meeting contents and who
attended the meeting will be provided to the Company job representative after
each meeting. The Company job representative shall ensure that the Contractor is
advised of changes that could effect the project.
5 GENERAL SAFETY POLICIES
5.1 The Company requires all Contractor personnel to be fully trained and
knowledgeable of their assigned duties. This includes all applicable
requirements for safety, health and environmental protection associated with the
full scope of the Contractor's work.
5.2 Safety devices, such as relief valves, shutdowns, alarms, fire suppression
systems and vibration devices, etc., shall not be removed, bypassed or
disconnected.
5.3 Smoking is prohibited on Company property.
5.4 Intoxicants, narcotics or illicit drugs shall not be consumed or possessed
while working on a Company job site. A Contractor employee under the influence
or using while at work, will be removed from the work location immediately.
5.5 Firearms of any kind are prohibited on Company property, including the
possession of a firearm in a vehicle or other equipment.
<PAGE>
5.6 It shall be the Contractors responsibility to practice good housekeeping
methods to the extent possible. This shall include the disposal of trash,
keeping materials and supplies orderly and stored safely, and keeping equipment
and material from obstructing roads and walkways.
5.7 Contractor personnel shall operate vehicles in a responsible and safe manner
on the job site and anytime they are on Company property.
5.8 The Contractor shall be responsible for the proper conduct of all Contractor
employees. Horseplay or conduct that may be termed as disruptive or unsafe will
not be permitted on Company property.
6 PERSONAL PROTECTION EQUIPMENT
6.1 Contractors and their subcontractors are required to provide and wear
personal protective equipment consistent with the requirements of the KN Energy
Safety and Environmental Affairs Policy Manual and with any site specific
Company personal protective equipment policies.
6.2 The Contractor shall be responsible for assessing the hazards present before
any work begins, requiring its employees to use appropriate personal protective
equipment, and strictly enforcing its use.
6.3 In addition to specific project related safety equipment, most Company
projects will require at least the following general safety equipment items:
o Hard hats
o Safety glasses with sideshields, goggles and face shields
o Hearing protection
o Gloves
o Footwear that is appropriate for the tasks being done. If protective
footwear is required, it shall comply with ANSI standard Z41-91.
o Monitoring meters for combustible gases and oxygen deficiency (job
specific)
o Respirators/SCBA (job specific)
o Flame resistant clothing (job specific)
o Lockout/Tagout equipment (job specific)
6.4 Contract personnel shall dress appropriately for the intended work. This
includes wearing full length pants and full length shirts with sleeves. Loose
fitting or baggy clothing shall not be worn in areas where it could be caught in
moving equipment. Wearing no shirts, sleeveless shirts, tank tops, or shorts
will not be allowed.
6.5 The Contractor shall provide flame resistant clothing to all contractor
employees who may be exposed to conditions that could produce a flash fire or
ignition of a flammable material. The Contractor will be responsible for
assuring flame resistant clothing is worn anytime there is potential for injury
to a worker from a flash fire.
6.6 The Contractor shall ensure all contractor employees are thoroughly familiar
with the provided safety equipment and with its limitations, use and inspection.
The Contractor will be responsible for making sure that all protective equipment
is inspected, well maintained and in working condition at all times.
7 H2S SAFETY POLICY
7.1 All Contractor personnel working in an H(2)S environment shall have
certificates to verify they have been properly H(2)S trained and are proficient
in the use of emergency air packs. All Contractor personnel working in an H(2)S
environment will be required to be clean shaven in a manner consistent with
accepted practices governing SCBA use with H(2)S gas. Documentation to verify
the employee's ability to pass a fit test shall be submitted upon request. See
Figure 1 acceptable facial hair is attached for reference.
<PAGE>
8 CONFINED SPACE ENTRY
8.1 Confined space is defined as an area which has limited openings for entry
and any space that is not designated as suitable for continuous worker
occupancy, may be oxygen deficient, or contains or may have contained flammable
toxic gasses, liquids or vapors.
8.2 A Confined Space Entry Permit must be issued by the Company to the
Contractor before entry into a confined space. The Contractor will be
responsible for obtaining the permit from the Company job representative before
entering a confined space situation.
Figure 1 - Guidelines for Facial Hair
UNACCEPTABLE
<TABLE>
<CAPTION>
<S> <C> <C>
[DRAWING OF MAN DEPICTING [DRAWING OF MAN DEPICTING [DRAWING OF MAN DEPICTING
FACIAL HAIR] FACIAL HAIR] FACIAL HAIR]
Full Beard Goatee and Narrow Goatee and Wide
Mustache Mustache
[DRAWING OF MAN DEPICTING [DRAWING OF MAN DEPICTING
FACIAL HAIR] FACIAL HAIR]
Extended Sideburns Long Fu Manchu
Mustache
</TABLE>
ACCEPTABLE
<TABLE>
<CAPTION>
<S> <C> <C> <C>
[DRAWING OF MAN DEPICTING [DRAWING OF MAN DEPICTING [DRAWING OF MAN DEPICTING [DRAWING OF MAN DEPICTING
FACIAL HAIR] FACIAL HAIR] FACIAL HAIR] FACIAL HAIR]
Clean Shaven Narrow Mustache Short Fu Manchu Wide Mustache
Mustache
</TABLE>
8.3 All Contractors involved in confined space entry activities must be able to
supply certification of training to ensure that each employee understands and
has the skills necessary for safe performance of their assigned duties.
8.4 Unless express contractual arrangements have been made prior to the start of
work, contractors involve in confined space entry shall provide all PPE and
retrieval equipment necessary for the type of entry being performed.
8.5 Contractors shall provide, maintain, and demonstrate the use of combustible
gas and oxygen deficiency meters for confined space entries.
9 HOT WORK PERMIT
The Contractor must obtain a Hot Work Permit from the Company job representative
before any hot work is performed. The Contractor will be responsible for working
with the Company job representative to assure all necessary precautions are
taken prior to any hot work being performed.
<PAGE>
10 FIRE PROTECTION
10.1 A firewatch must be established in accordance with the KN Welding Manual,
Chapter 4, anytime welding is performed on a pressurized vessel or segment of
pipe. Specific details of the Company requirements can be obtained from the
Company job representative.
10.2 Contractors performing welding, cutting, or using tools with spark
producing capabilities must furnish fire extinguishers of adequate size for the
job being performed. The Contractor will also be responsible for assuring their
personnel on site who are trained in the use of the supplied fire extinguishers.
The fire extinguishers must have tags or some other form of documentation
showing the extinguisher inspections are current.
11 LOCKOUT/TAGOUT
11.1 Contractors involved in work which requires isolation of energy sources
shall have a written lockout/tagout program which conforms to OSHA 29 CFR
1910.147 regulations. A written copy of the program shall be furnished to the
Company job representative upon request. The Contractor will be responsible for
providing documentation assuring that all personnel who will be involved with
the lockout/tagout process are properly trained in the specifics of the
lockout/tagout procedure.
11.2 Any lockout/tagout activity must also conform, and be consistent with, the
Company Lockout/Tagout procedure. It will be the Contractors responsibility to
coordinate any lockout/tagout procedure with the Company job representative. The
Company job representative will be responsible for ensuring the proposed
lockout/tagout will not interfere with operations of the plant or facility.
11.3 The Company job representative will determine if the Contractor is to use
Company supplied tags or Contractor supplied tags for the lockout procedure. The
Contractor shall provide, and have available, their own lockout equipment,
including locks, hasps, chains, and tags that may be necessary during the
lockout procedure.
11.4 Lockout/Tagout devices are never to be bypassed, ignored or otherwise
defeated.
12 EXCAVATIONS
12.1 The contractor shall locate "foreign pipelines" or other buried utilities
that may cross the proposed excavation using the state "One-Call" system(s)
before the start of any excavation.
12.2 Determine the exact location of buried facilities by hand digging the final
18" or other safe method when excavation approaches the estimated location of a
buried structure. Ensure that exposed underground facilities are properly
supported and protected.
12.3 OSHA sloping or shoring rules shall be strictly followed.
12.4 Provide ladders or sloped walkways for safe entrance and exit for personnel
working in trenches or excavations four (4) feet or more in depth. Provide
emergency exits within 25 feet laterally from any point where employees are
working in a trench.
12.5 Employees working in a public road right-of-way or otherwise exposed to
vehicular traffic will be provided with and instructed to wear warning vests
marked with or made of reflective or highly visible material.
12.6 Barricades, cones, flashers and warning signs shall be placed at strategic
locations when working on or near road and other areas where vehicular traffic
may be a hazard. Signing and flashers must meet the requirements of applicable
local and state traffic authorities.
<PAGE>
12.7 No person will be permitted to work in excavations while excavation and
heavy equipment is being operated nearby.
12.8 All materials and equipment must be kept at least two (2) feet from the
excavation to protect employees from hazard of material and/or equipment falling
or rolling into the excavation.
12.9 The Contractor shall ensure that a Competent Person is on site whenever
work is occurring in an excavation.
12.10 The Competent person shall inspect excavations, the adjacent areas and
protective systems for evidence of possible cave-ins, failures, hazardous
atmospheres or other hazardous conditions. Employees exposed to a hazardous
condition shall be removed from the area until necessary precautions have been
taken.
12.11 Inspections must be conducted by the Competent Person:
o Each day, prior to the start of work;
o As needed throughout the shift; and
o After a change in weather conditions (i.e., rainstorm, snow, etc.)
or other possible hazard causing event.
13 HAZARD COMMUNICATION
13.1 The Contractor shall be responsible for the hazardous chemical training of
all Contractor employees as specified in 29 CFR 1910.1200, and must provide
training documentation upon request.
13.2 Before commencing work the Contractor shall provide the Company job
representative a list of hazardous chemicals with MSDS sheets for all
Contractor-owned hazardous chemicals on site.
13.3 Before the project begins, the Company job representative shall provide the
Contractor with copies of MSDS sheets for all Company-owned hazardous chemicals
on site to which the Contractor's employees may be exposed. At all manned
locations, such as plants, the Company representative may choose to allow the
contractor to access the MSDS files already in place. In that case, the Company
representative must inform the contractor of the chemicals his employees may be
exposed to and the location of the MSDS files.
13.4 It is the Contractor's responsibility to communicate chemical hazard
information to his employees and to provide the appropriate PPE for the job. It
is the Contractor's responsibility to ensure that all recommended and
appropriate precautions are taken when working with hazardous chemicals.
14 WORKING IN ELEVATED WORK AREAS
14.1 The Contractor shall be responsible for ensuring that all Contract
personnel are properly trained in the hazards of working in elevated positions
in excess of 6 feet in height. The Contractor will be responsible for ensuring
that full body harnesses with lanyards are available, and for the proper use of
such equipment by employees who must work at heights where safe work platforms
are not available.
14.2 Ladders shall be maintained and used in compliance with OSHA standards and
approved for the type of work being performed.
15 ACCIDENTS AND FIRST AID
15.1 The Contractor shall be responsible for providing approved first-aid
supplies and first-aid trained personnel on the job. Trained personnel and
supplies must be sufficient and suitable for the job.
15.2 The Contractor shall promptly report to the Company job representative all
accidents and occupational injuries or illnesses involving Contractor employees.
Following an occupational injury or illness, the Contractor shall furnish to the
Company copies of all applicable workers' compensation first report of injury
forms and their revised OSHA 200 log.
<PAGE>
15.3 The contractor shall investigate all accidents involving contractor
employees that result in an OSHA record injury or damage to Company or
third-party property. The investigation will be documented and a copy will be
forwarded to Director - Safety and Environmental Affairs within 24 hours of the
accident.
15.4 Post accident drug and alcohol tests shall be completed for all accidents
or injuries that result in the following:
15.4.1 A release of gas and:
15.4.1.1 The death or in-patient hospitalization of any third-party
or Company, contractor or sub-contractor employee, or;
15.4.1.2 Property damage, to the contractor, Company or others of
$50,000 or more (including the cost of gas lost).
15.4.2 Determination by the Company that the event was significant, even
though it may not meet the criteria shown above.
15.5 Post accident drug and alcohol tests shall be completed for each surviving
employee if that employee's performance contributed to the accident or cannot be
completely discounted as a contributing factor to the accident.
16 EVACUATION
16.1 The Contractor shall be responsible for establishing the emergency
evacuation plan with the Company job representative prior to starting the
project. This will include fully understanding any emergency alarm, what each
alarm means, and what the most appropriate response will be to that particular
alarm.
17 REPORTING UNSAFE CONDITIONS
17.1 All employees associated with the project, Contract or Company, shall
promptly report to the Company job representative, any unsafe condition or work
practice. Anytime an unsafe condition or work practice is reported immediate
steps will be taken to correct the situation. The Contractor and Company job
representative will be responsible for assuring the reported condition or unsafe
work practice is corrected immediately.
17.2 Contractor and Company employees share the responsibility to make sure safe
work conditions are maintained at the work site at all times.
CONTRACTOR CERTIFICATION
I have read the contents of this document, and certify that I fully understand
the requirements contained herein. I further certify that I have all of the
items specified, and am compliant with all said requirements.
Contractor Name (Please Print) _________________________________________________
Signature_________________________________________________ Date ________________
Name____________________________________________________________________________
Title___________________________________________________________________________
================================================================================
<PAGE>
================================================================================
NAME (Please Print) Signature
================================================================================
================================================================================
================================================================================
================================================================================
================================================================================
================================================================================
================================================================================
================================================================================
================================================================================
================================================================================
================================================================================
================================================================================
================================================================================
================================================================================
================================================================================
================================================================================
================================================================================
================================================================================
================================================================================
================================================================================
================================================================================
================================================================================
================================================================================
================================================================================
================================================================================
<PAGE>
SCHEDULE F
INCUMBENT DRUG TESTING PROCEDURES
AND SUBSTANCE ABUSE POLICY
Copy Attached
F-1
<PAGE>
SCHEDULE F
INCUMBENT DRUG TESTING PROCEDURES
AND SUBSTANCE ABUSE POLICY
Copy Attached
F-1
<PAGE>
Schedule F
Drug and Alcohol
Abuse Policy
K N ENERGY, INC.
January 1, 1996
[LOGO]
<PAGE>
- --------------------------------------------------------------------------------
DRUG AND ALCOHOL ABUSE POLICY
K N ENERGY, INC., AND AFFILIATES
Table of Contents
Purpose ................................................................... 1
Definition of Terms ....................................................... 2
Drug-Free Awareness Program ............................................... 3
Treatment ................................................................. 4
Voluntarily Seeking Assistance and Treatment .............................. 4
Supervisory Training ...................................................... 4
Mandatory Referral for Alcohol or Drug Testing ............................ 5
Authorized Use of Prescribed Medicine ..................................... 5
Prohibitions .............................................................. 6
Testing Requirements ...................................................... 6
Confidentiality ........................................................... 7
Testing Methodology ....................................................... 8
Inspections ............................................................... 8
Safety Sensitive Employees ................................................ 8
Consequences for Policy Violation ........................................ 8
Condition of Employment ................................................... 9
Reservation of Company Rights ............................................. 9
TESTING PROCEDURES
Reasonable Cause Testing .................................................. 9
Post-Accident Testing ..................................................... 15
Random Testing ............................................................ 16
Pre-Employment and Periodic Testing ....................................... 17
Providers: ................................................................ 17
<PAGE>
- --------------------------------------------------------------------------------
WHEREAS, K N Energy, Inc., and its employees acknowledge that substance abuse is
a serious and complex, but treatable condition that negatively affects the
productive, personal and family lives of employees and the stability of
companies; and
WHEREAS, K N Energy, Inc., and its employees are committed to addressing the
problems of substance time to ensure the safety of the working environment
personal and public safety, by providing employees access to necessary treatment
and rehabilitation assistance; and
WHEREAS, K N Energy, Inc., has provided a program of employee assistance and has
generally provided the availability of medical coverage allowing employees
requiring treatment and rehabilitation for substance abuse to receive the
services without undue financial hardship; and
WHEREAS, appropriate efforts will be made by K N Energy, Inc., to establish
employee understanding that the experience of a drug or alcohol problem is not,
of itself, grounds for adverse action. Employees will be strongly encouraged to
seek and receive the services of the Employee Assistance Program prior to such a
problem affecting job performance or resulting in an on-the-job incident;
NOW, THEREFORE, it is the policy of K N Energy, Inc., and its affiliates,
hereinafter collectively called the "Company," that no employee shall
manufacture, distribute, possess, use or have in their system, illegal drugs,
drug paraphernalia, alcohol or other unauthorized controlled substances while on
the job.
PURPOSE
The purpose and intent of this policy is:
o to provide a safe, healthy and productive working environment for
all employees
o to ensure the reputation and integrity of the Company and its
employees
o to reduce the incidence of accidental injury to persons or property
o to reduce absenteeism, tardiness and indifferent job performance
o to provide assistance toward rehabilitation for any employee seeking
help in overcoming dependence and addiction with alcohol or drugs
COOPERATION
The Company earnestly asks for the understanding and cooperation of all
employees in implementing the Alcohol and Drug Abuse Policy, and the Company
regrets any inconvenience that may be caused the many non-abusers of drugs and
alcohol. We believe, however, that benefits to be derived from the reduction in
number and severity of accidents, greater safety of all employees and of the
public and rehabilitation or termination of those who, became of alcohol or
drugs, are a burden upon all other employees, will more than make up for any
discomfort the rest may experience.
DRUG AND ALCOHOL ABUSE POLICY
1
<PAGE>
- --------------------------------------------------------------------------------
appropriate medical training to evaluate and interpret an individual's positive
test based upon his/her medical history and any other relevant biomedical
information.
NIDA
National Institute on Drug Abuse, an agency of the U.S. Department of
Health and Human Services (DHHS).
Prescribed medicine
Any substance prescribed by a licensed medical doctor specifically for the
individual consuming it.
Under the influence of alcohol
Any blood alcohol concentration (BAC) percentage of 0.02 or greater for
DOT safety sensitive positions, and 0.05 for all other company non-covered
positions. The alcohol concentration level can be determined by analysis
using an EBT, blood, saliva. urine or any other method of quantitative
analysis approved by the DOT.
Under the influence of an illegal drug or controlled substance
Testing positive at a DOT-specified ng/ml (nanograms per milliliter)
level.
Safety Sensitive Function
Any operation, maintenance, or emergency response function performed on a
pipeline or LNG facility, and the function is regulated by the DOT
regulation CFR49 Parts 192, 193, and 195.
Specimen
A sample of urine, saliva or breath to be used in analysis for the
presence of drugs or alcohol.
Substance Abuse Professional (SAP)
A licensed physician, or a licensed certified psychologist, social worker,
employee assistance professional, or addiction counselor (Certified by the
National Association of Alcoholism and Drug Abuse Counselors Certification
Commission), with knowledge of and clinical experience in diagnosis and
treatment of alcohol-related disorders.
DRUG-FREE AWARENESS PROGRAM
The Company is a Drug-Free Awareness program to assist employees and their
families in understanding and avoiding problems associated with drug and alcohol
abuse. The Company will use this program as an educational tool to and in the
prevention and elimination of drug and alcohol abuse that could affect the
workplace. The Drug-Free Awareness program will inform employees and their
families on the following:
o the dangers of alcohol and drug abuse
o the Company's Alcohol and Drug Abuse Policy
o the availability of treatment and counseling for those voluntarily
seeking assistance
o sanctions the Company will impose for violations of the Alcohol and
Drug Abuse Policy.
A copy of the Company's Alcohol and Drug Abuse Policy booklet will be issued to
all employees covered by the policy. This information will be periodically
updated to keep employees informed on any changes to the Alcohol and Drug Abuse
Policy and information associated with the EAP. The information will be
communicated to employees on bulletin boards, employee mailings and various
other forms available at the time.
TREATMENT FOR SUBSTANCE ABUSE
Successful treatment of substance abuse is, to a great degree, dependent upon
the desire of the abuser to overcome the disease and his/her willingness to seek
proper treatment. The Company encourages voluntary drug or alcohol abuse
treatment and will be supportive of employees and/or their dependents who seek
treatment of their own accord. Conversely, the Company will take strong action
against those employees who suffer from drug or alcohol abuse, but who refuse to
seek treatment for the problem.
3
<PAGE>
- --------------------------------------------------------------------------------
If an employee tests positive for drugs or alcohol after being referred for
mandatory testing because of declining job performance or erratic on-the-job
behavior, that employee is in violation of the Company's Alcohol and Drug Abuse
Policy.
Any employee who has reason to suspect another employee or supervisor may be
abusing drugs or alcohol is encouraged to contact the Company's program
administrator, who will evaluate the situation and determine what steps should
be taken. Employees can be assured they may take such action on a confidential
basis and without fear of reprisal.
AUTHORIZED USE OF PRESCRIBED MEDICINE
An employee who is receiving medical treatment with any prescribed medication
which may alter his/her on-the-job behavior, physical or mental ability shall
report this medication is being taken to their immediate supervisor, who shall
seek guidance in determining whether the Company should temporarily change the
employee's job assignment during the period of treatment.
OTHER MEDICAL CONDITIONS
Under no circumstances will this policy be utilized to test for pregnancy or
other health or medical conditions.
PROHIBITIONS
This policy prohibits the following:
o Use, consumption, possession, manufacture, distribution,
dispensation or sale of a controlled substance, illegal drug or drug
paraphernalia, at any time while on Company property or in a Company
vehicle.
o Unauthorized use, consumption, possession, manufacture,
distribution, dispensation, or sale of alcohol, at any time while on
Company property or in a Company vehicle.
o Possession, use, consumption, manufacture, distribution,
dispensation or sale of a controlled substance or illegal drug off
Company property.
o Being under the influence of an unauthorized controlled substance,
illegal drug or alcohol at any time while on Company property or in
a Company vehicle.
o Consumption of alcohol off Company property that could adversely
affect the employee's work performance, personal safety or the
safety of others while at work.
o A drug related conviction under any federal or state statute.
o Failure to notify the Company of any arrest or conviction under a
federal or state criminal drug or alcohol statute within five days
of the arrest or conviction.
o Refusing to submit to a Company-property inspection when requested
to do so by an authorized Company representative.
o Refusing to participate in the testing process, complete the
required forms, or provide a urine, saliva or breath specimen to be
tested for the presence of drugs or alcohol.
o Substituting, altering, or in any way contaminating a specimen
submitted for drug or alcohol testing.
o Testing positive for an illegal drug, controlled substance, or
alcohol.
o Failing to comply with the treatment or counseling requirements
specified by the Medical Review Officer (MRO) or Substance Abuse
Professional (SAP).
5
<PAGE>
- --------------------------------------------------------------------------------
All records and information regarding alcohol and drug testing, test results,
and treatment of employees for chemical dependency will be confidentially
maintained by the Company. Access to information will be on a need-to-know
basis. When requested in writing, individual employees will have the right to
request information from his/her file pertaining to specific test results and
other information regarding the testing laboratory's findings. Specific
information on the testing laboratory or collection sites will be obtained
through the Program Administrator in Lakewood.
Information regarding an individual's alcohol and/or drug testing results or
rehabilitation may be released only upon the written consent of that individual.
An exception to this rule would be if information is requested in writing from
the DOT Administrator or another regulatory having regulatory authority over the
Company. In this instance, the Company is obligated by law to release the
information requested, whether the employee grants permission or not.
The laboratory maintaining confidential employee test records must, upon request
disclose information related to a positive alcohol and/or drug test of an
employee to the employee or the decision-maker in a lawsuit complaint procedure
or other proceeding initiated on behalf of the employee arising from the
positive test.
TESTING METHODOLOGY
Alcohol and drug testing shall be conducted through methods with proven
reliability and in strict compliance with appropriate methodology allowed by DOT
regulations. All drug tests will be conducted using only U.S. Department of
Health and Human Services NIDA-certified labs. If an employee fails to pass the
initial drug screening test, the original test specimen will be further analyzed
using the gas chromatography/mass spectrometry method, and verified by a
Company-designated MRO before any Company action is taken. A positive alcohol
screening test will be followed by a confirming test in accordance with
conditions specified by DOT regulations.
INSPECTIONS
The Company has the right at any time, to conduct unannounced inspections for
unauthorized alcohol or illegal drugs in or on Company property and vehicles.
EMPLOYEES IN SAFETY-SENSITIVE POSITIONS
The Company's program administrator will maintain a list of sensitive safety-
related jobs and employees who hold such positions shall be notified. The list
of safety-sensitive functions will be posted throughout the Company regions as
general information for the employees. Employees holding safety-sensitive
positions will, in addition to this policy, be subject to the provisions of the
Anti-Drug Plan covered Section G1.50 and the Alcohol Abuse Prevention Plan
covered in Section G1.55 of the Company's Standard Practices manual. Both plans
conform to the specific requirements of DOT regulations.
CONSEQUENCES FOR VIOLATION OF DRUG AND ALCOHOL POLICY
Violation of the Company's Alcohol and Drug Abuse Policy may, at the Company's
sole discretion, result in severe disciplinary action up to and including
termination for a first offense. The employee who tests positive for alcohol or
drugs will be removed from the job until he/she has:
o communicated with the Company's EAP for assessment and counseling
o successfully completed the rehabilitation program recommended by the
MRO or SAP
o been approved by the MRO or SAP for return to duty after
rehabilitation
o passed a return-to-duty drug or alcohol test
7
<PAGE>
- --------------------------------------------------------------------------------
1. The requirement for this testing shall be implemented in accordance with
the following procedures:
(a) When a supervisor has established reasonable cause that at employee
may be under the influence of drugs or alcohol, based upon specific
individualized observations, the supervisor shall contact another
supervisor or management employee for the purpose of confirming the
reasonable cause. The second observation will be obtained whenever
possible, and does not a require the confirming supervisor to
personally observe the employee in question. Concurrence can be
given over the telephone.
Once reasonable cause has been established, the employee shall be
taken from the job to a collection site to provide a specimen to be
tested by the supervisor. Under no circumstance shall the employee
being tested be allowed to drive to the collection site. If the
testing results are positive, the employee will have the opportunity
to immediately self-refer to the Employee Assistance Program (EAP).
If the test is positive for alcohol, the employee will be referred
to the SAP for evaluation and/or treatment.
(b) Any employee who refuses to go to a collection facility to provide a
urine, saliva, or breath specimen for testing, or who does not
immediately self-refer to the EAP/SAP following a confirmed positive
test, shall be terminated.
If required, the employee must sign a consent form authorizing the
collection facility to collect a urine, saliva or breath specimen.
By signing the consent form, the employee does not waive any claim
or cause of action under the law. An employee's refusal to sign the
required consent form shall constitute a refusal to be tested under
the provisions of Section 1(c) below.
(c) Any employee who refuses to be tested will be encouraged to go to
the collection facility to provide a specimen with the understanding
that the urine specimen obtained will not be tested unless that
employee, within the following twenty-four (24) hours, authorizes
that the specimen be tested. If, at the end of the 24-hour period,
the employee still refuses to have the specimen tested, the employee
shall be terminated.
(d) The employee to be tested shall be taken to the collection facility
by a Company representative. The covered employee, if represented by
a bargaining unit, may request another bargaining unit employee be
present at the collection site during the specimen collection
process. The specimen collection shall not be unduly delayed while
awaiting the fellow employee's arrival. Any expense associated with
the presence of the fellow employee shall be the responsibility of
the union or the employee being tested.
(e) In an effort to protect individual privacy, employees will not be
subject to direct observation while rendering a urine specimen. If
the employee provides a specimen that contains confirmed evidence of
any form of alteration, tampering, or substitution, this act
constitutes a refusal to be tested and the employee shall be
terminated.
(f) All urine specimens will be collected using the "split-sample"
method. This applies to both RSPA and FHWA functions within the
company. Specimens that yield positive results will be retained by
the laboratory in properly secured long-term storage for a period
of up to as year. If the MRO determines there is no legitimate
medical explanation for the confirmed positive result other than the
unauthorized use of a prohibited drug, the original sample must be
re-tested if the employee makes a written request for re-testing
within 60 days of receipt of the final test result from the MRO. The
employee may specify re-testing by the original lab or by another
NIDA-certified laboratory. An employee requesting an independent
test is responsible for the costs of the second test, unless the
employee's second test results are negative.
In the case of re-testing an employee holding a CDL, the time
allowed for the notice requesting a second test is the following 72
hours under FHWA rules, instead of the 60 days allowed under RSPA
rules. Except for the abbreviated time allowed for notice, all other
aspects of the re-testing procedures shall be the same.
Since some analytes may deteriorate during storage, detected levels
of a drug below the detection limits established in the DOT
procedures, but equal to or greater than the established sensitivity
of the assay,
9
<PAGE>
- --------------------------------------------------------------------------------
collection room to receive containers, assure that the quantity of
the urine is sufficient for testing, check urine color and measure
and record urine temperature. Collection personnel shall fill in
specimen labels while in the presence of the employee and shall cap
and seal containers with evidence tape and secure the employee's
initials on the evidence tape.
o Proper chain-of-custody procedures governing specimen handing
throughout the testing process. Chain-of-custody procedures shall
assure that a urine specimen shall not leave the sight of the
employee until each specimen container has been sealed and initialed
by the employee giving the specimen.
o Authorized collection facility personnel shall seal specimen tubes
with evidence tape in the presence of the employee and the employee
shall then initial the evidence tape. The collector will complete a
chain-of-custody form and shall place the sealed and initialed
specimen tubes in the drug collection kit or box provided by the
laboratory, along with the chain-of-custody form. The collection kit
or box shall be sealed and initialed by the collector.
The collection facility shall assure that all specimens are
couriered or shipped to the testing laboratory as immediately as
possible. The collection facility shall assure that any specimens
held at the facility overnight will be placed in a secured
refrigerator until courier pickup.
o The testing laboratory shall assure that personnel authorized to
receive specimens immediately open the package, inspect the sealing
tape for initials and open the kit or box. Lab personnel shall
examine and inspect the chain-of-custody form, the specimen tubes
and kit or box to assure that it conforms to the requirements of DOT
Part 40 regulations. If these requirements are not met, the
laboratory personnel shall immediately notify the laboratory's
scientific director and shall document any and all inadequacies in
the chain-of-custody requirements. The laboratory's scientific
director shall immediately notify the collection facility and/or the
Company's program administrator of the inadequacies and shall retain
the specimens in a locked freezer pending disposition directions.
o If these requirements are met, authorized laboratory personnel shall
sign on the appropriate line of the chain-of-custody form and
deliver the specimen kit or box to authorized laboratory
technologists for testing.
o All positive samples shall be secured with evidence tape, signed and
dated by an authorized technologist. Upon completion of testing
procedures, testing reports shall be prepared and signed by the
technologist for the review, approval and signature of the
scientific director.
o Levels below which specimens are deemed negative shall correspond to
those established by DOT guidelines, as amended from time to time.
o Laboratory use of appropriate screening and confirmation procedures
and technology.
o The laboratory shall assure that each specimen will be screened by
an immunoassay method (i.e., EMIT, RIA or FPI) for each drug/drug
group.
o All specimens identified as positive shall be confirmed using gas
chromatography/mass spectrometry (GC/MS) techniques. The laboratory
shall report as negative all specimens which are negative on the
initial test or negative on the confirmatory test. Only specimens
confirmed positive on the initial test and also the confirmatory
test shall be reported as a positive test.
o Screening methods measure a group of drugs and/or their metabolites
simultaneously. Confirmatory methods, on the other hand, measure
single and specific drugs and/or their metabolites. Established
levels for confirmatory methods, therefore, may be lower than those
for initial screening.
o A specimen testing positive must be preserved in properly secured,
long-term frozen storage for a period of one year, or longer, if
requested by the employee or his representative, the Company, the
DOT Administrator or a representative of a state agency responsible
for ensuring Company compliance with DOT regulations.
11
<PAGE>
- --------------------------------------------------------------------------------
(a) If an employee is subject to discipline or termination under
existing practices other than as outlined herein, such employee
shall not utilize the Alcohol and Drug Abuse Policy to circumvent
any labor agreements, existing practices, or to avoid discipline or
termination.
(b) in the cases not covered in Section 4 (a) above, the employee will
have the opportunity for appropriate assistance, assessment,
referral, treatment and after-care as provided through the EAP and
as detailed in the employee's individual treatment plan. Failure to
seek and receive these services, or failure to abide by the terms of
the treatment plan, shall be grounds for termination.
(c) Any employee who seeks and receives assistance and who completes the
detailed treatment plan shall, upon return to work, be subject to
periodic testing for a period of up to 60 months. The schedule for
follow-up testing will be determined by the MRO.
(d) Any employee who tests positive on a follow-up test after
rehabilitation shall be terminated in accordance with this policy.
(e) Any employee who successfully completes an individual treatment plan
and who returns to work will be encouraged to contact and use the
EAP's services on a self-referral basis whenever there is need for
ongoing assistance and support.
(f) Any employee who relapses and for whom a test for reasonable cause
of drugs or alcohol is confirmed as positive a second time, shall be
terminated.
5. The Employee Assistance Program shall include the following components:
(a) Clinical evaluation and appropriate assessment followed by a
specific individual treatment plan and regimen for the receipt of
counseling, treatment, aftercare and related services, subject to
ongoing monitoring by the Company.
(b) Active encouragement and procedures for the voluntary self referral
of troubled employees to the EAP in cases in which reasonable cause
has not been established and in which testing procedures are not
invoked.
(c) Assurances and procedures to protect the confidentiality of
employees who voluntarily seek EAP services and procedures governing
the management of such employee records as medical information.
6. Any dispute arising with respect to drug testing shall be subject to the
Company's complaint resolution procedure for the non-represented
employees, or to the grievance procedure established in the current labor
agreement for the represented employees.
POST-ACCIDENT TESTING
Post-accident testing provisions require that the same collection procedures
generally detailed above for reasonable cause testing be used when an employee's
work performance may be linked to an accident or when work performance cannot be
completely discounted as a contributing factor to an accident.
1. The definition of an accident will be in accordance with the DOT CFR 49
Part 191 definition of a reportable incident. Specifically: an incident
that involves a release of gas from a pipeline or LNG facility, and
(a) a death, or personal injury necessitating in-patient
hospitalization; or
(b) estimated property damage, including cost of lost gas, of $50,000 or
more, unless superseded by lower state threshold limits.
2. An event that results in the emergency shutdown of an LNG facility.
13
<PAGE>
- --------------------------------------------------------------------------------
PRE-EMPLOYMENT AND PERIODIC TESTING
Pre-employment and Periodic Testing will also be a part of the Company's drug
and alcohol testing program. While the timing of such tests will be individually
specific to those involved, the same collection procedures generally described
above for reasonable cause testing will be used.
PROVIDERS:
Employee Assistance Network Program (EAP)
Mutual of Omaha
P.O. Box 34014
Seattle, WA 98124-1014
1-(800) 237-1439
Testing Laboratory
Lab Corp / MedExpress
P.O. Box 252110
Memphis, TN 38175-2110
1-(800) 340-1150
Medical Review Officer (MRO)
Henry F. Simmons, MD
P.O. Box 8520
Little Rock, AR 72215-8520
1-(800) 762-3623
K N Program Administrator
LeRoy Petersen
K N Energy, Inc.
P.O. Box 281304
Lakewood, CO 80228
(303) 763-3260
15
<PAGE>
SCHEDULE G
INTENTIONALLY OMITTED
G-1
<PAGE>
SCHEDULE H
INCUMBENT HEALTH AND SAFETY REQUIREMENTS
Copy Attached
H-1
<PAGE>
Schedule H
[LOGO]
K N Energy, Inc. and Affiliates
Safety and Environmental Affairs Policy Manual
Safety and Environmental Section: 01.01
Ethics Statement Issue Date: 5/30/96
Revision Date:
================================================================================
K N ENERGY INC.'S SAFETY AND ENVIRONMENTAL ETHICS STATEMENT
The commitment of K N Energy, Inc. and its affiliates (collectively "K N") to
excellence in the area of safety and environmental performance is consistent
with the goal of being acknowledged as a world-class provider of integrated
energy services and solutions. As such, K N is committed to the following
principles:
o K N will provide its employees a safe work environment, free of recognized
and avoidable safety and health risks.
o K N's policy is to comply with both the letter and spirit of safety,
health, and environmental laws and regulations. Safety, health and
environmental concerns will continue to play an integral part in corporate
decision-making and operations.
o K N will use internal procedures and adopt best practices or other
operating guidelines toward the goal of protecting the safety and health
of its employees and the public as well as the environment.
o K N will develop, maintain and review emissions and waste reduction
programs. These programs will address the source and nature of emissions
and waste generated and, to the extent technically and economically
feasible, methods to reduce the generation of these emissions and waste
streams.
o K N, as a responsible corporate leader, will participate when necessary
with legislative and regulatory bodies in creating responsible laws,
regulations, and standards to safeguard the community, the workplace, and
the environment.
o K N's policy is to promote among its employees an individual and
collective sense of responsibility, ethics and accountability for the
principles contained in this policy.
o K N will communicate its safety, health, and environmental commitments and
achievements to the public by performance/achievements, and outreach, and
shall recognize and respond to community concerns.
o K N will develop a means to measure and enhance both current and future
safety, health, and environmental performances in meeting these
principles.
o K N employees should obtain a practical working knowledge of K N's
standards and policies applicable to his or her assigned duties.
May 30, 1996
/s/ Larry D. Hall
Larry D. Hall
Chairman, President and CEO
Safety & Environmental Affairs Policy Manual Safety and Environmental Ethics
Statement Page: 1 of 1
<PAGE>
[LOGO] RC:____________
Date: _________
SAFETY HAZARD REPORT
Exact Location:
-----------------------------------------------------------------
Description of Hazard:
----------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Suggestion for Correction:
------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Submitted By:
- --------------------------------------------------------------------------------
================================================================================
Was Condition Corrected? Yes |_| No |_|
Date Corrected:
-----------------------------------------------------------------
If Not, Why?
--------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Supervisor:
---------------------------------------------------------------------
Safety:
-------------------------------------------------------------------------
Return to Originator By: ________________ with Disposition _____________________
Original - Supervisor Copy - Regional Safety Copy - Employee
<PAGE>
[LOGO]
K N Energy, Inc. and Affiliates
Safety and Environmental Affairs Policy Manual
Employee On-The-Job Injury Section: 02.03
or Accident Report Issue Date: 7/24/96
Revision Date:
================================================================================
I. PURPOSE
o To ensure the injured employee receives prompt, appropriate medical
care and to facilitate that employee's return to work.
o To provide timely notification to our insurers.
o To maintain compliance with OSHA's reporting requirements, and those
requirement of other agencies.
o To develop sufficient information through investigation so that
corrective actions can be implemented.
II. POLICY
A. The Employee On-The-Job Injury or Accident Report (KN Form K760,
10/96) must be completed by the injured employee's immediate
supervisor. This form must be faxed within 24 hours of the accident
to the Manager of Workers' Compensation in Lakewood, as shown on the
form.
B. If the incident involves the death of an employee, or the in-patient
hospitalization of 3 or more employees, the supervisor must call one
of the Company management representatives shown in the "Incident,
Accident, Safety-Related Condition and Chemical Spill Reporting
Procedures Booklet." OSHA requires telephonic notification of deaths
or multiple hospitalizations within 8 hours of the incident. See
Section D of the above-mentioned Reporting Procedures Booklet for
additional details.
C. The Incident/Loss Report (KN Form K440) must be completed for every
on-the-job injury or fatality that is a result of an incident.
Follow the procedures described in section 02.04 covering
incidents/losses.
III. DISPOSITION OF FORM
This form, complete with investigation data, will be reviewed by the
Manager of Safety and Health and/or the Manager of Workers' Compensation.
The investigation data will be reviewed for any likelihood that the same
circumstances may exist at any other Company location. Preventative
measures may then be implemented at other Company locations as necessary.
Safety & Environmental Affairs Policy Manual Employee On-The-Job Injury or
Accident Report Page: 1 of 3
<PAGE>
[LOGO]
EMPLOYEE ON-THE-JOB INJURY OR ACCIDENT REPORT
BUSINESS UNIT: |_| Front Range |_| Heartland |_| Mountain |_| Northern Plains
|_| Southwest |_| Corporate
FAX WITHIN 24 HRS TO: Karen Rose, Lakewood - fax 303-763-3116 SEND COPY TO:
Supervisor of Injured Employee
1. EMPLOYEE INFORMATION:
Name of Injured Employee: ___________________________________________________
(First) (Middle) (Last)
Social Security#: ___________________________________________________________
Employee's
Home Address: ____________________________________________ Phone #: _________
(No. & Street) (City or Town) (State) (Zip)
Age: _______ Birth Date: ________ Male |_| Female |_| Single |_| Married |_|
Number of Dependents: ________ Number of Children under age 18 or
incapacitated: ______________________________________________________________
Name and address of principle dependent
or friend: __________________________________________________________________
(First) (Last) (No. & Street) (City or Town) (State) (Zip)
2. WORK INFORMATION:
Work Location: _________________________ Department: _______________________
RC #: ______________________________________________________________________
Job Description: ___________________________________________________________
Date of Hire: ___________ In same job description: _________(years/months)
Current Hourly Wage:________________________________________________________
3. ACCIDENT DESCRIPTION:
Exact Location of
Accident: __________________________________________________________________
(No. & Street) (City or Town) (County) (State) (Zip)
Date of Accident: ____________ Time: ________ a.m/p.m. Did the Accident
occur on Company property? Yes |_| No |_|
Working Shift: From __________ to ___________ a.m/p.m. How Many Hours Had
Employee Been on Job? ______________________________________________________
Date injury first reported to Company: _______________ Name of Person
Notified: __________________________________________________________________
Describe the injury/illness in detail and indicate the part of the body and
the side of the body affected: _____________________________________________
What was the employee doing when the accident occurred? ____________________
____________________________________________________________________________
How did the accident occur? (Describe all activity leading up to the
accident. Tell what material or tools were involved. Tell what happened just
before, at the time of, and just after the accident.) ______________________
____________________________________________________________________________
____________________________________________________________________________
What machine, tool, substance or object was most closely connected with the
accident? __________________________________________________________________
Did injury occur because of: Intoxication? |_| Yes |_| No
Failure to obey rules? |_| Yes |_| No
Unsafe condition? |_| Yes |_| No
Was Weather a factor? |_| Yes |_| No
Failure to use safety devices? |_| Yes |_| No
Unsafe act by injured or others? |_| Yes |_| No
Unsafe Personal Factors (attitude, etc.) |_| Yes |_| No
If yes, how? __________________________________________
What personal protective equipment is required for the job? ______________
Was it used? |_| Yes |_| No
What safety measures could the Company have taken to prevent the accident?
____________________________________________________________________________
____________________________________________________________________________
Names and addresses of witnesses: __________________________________________
____________________________________________________________________________
(Name) (No. & Street) (City or Town) (State) (Zip)
Page 1 of 2
<PAGE>
[LOGO]
KN Energy, Inc. and Affiliates
Safety and Environmental Affairs Policy Manual
Seatbelt Policy Section: 02.09
Issue Date: 8/30/96
Revision Date:
================================================================================
I. PURPOSE
To provide protection for the driver and passengers while riding in any
motor vehicle, except ATVs, snowmobiles and heavy equipment that is not
provided with roll protection.
II. POLICY
All Company employees, contractors and visitors riding in a Company owned,
rented or leased vehicle, including FAVR vehicles while on Company
business, will wear a seat belt while the vehicle is moving. Air bags are
not a substitute for a seat belt.
Safety & Environmental Affairs Policy Manual Seatbelt Policy Page: 1 of 1
<PAGE>
Form K439 - Front
VEHICLE ACCIDENT REPORT
Reporting Location Date of Report
---------------------- -----------------------
Company Date of Accident
--------------------------------- ---------------------
VEHICLES INVOLVED
If more than two vehicles are involved, use more than one report
Company Vehicle (#1) Other Vehicle
- --------------------------------------------------------------------------------
Unit No.
Year - Model - Make
- --------------------------------------------------------------------------------
Vehicle License No.
- --------------------------------------------------------------------------------
Driver's Name
- --------------------------------------------------------------------------------
Driver's License No.
- --------------------------------------------------------------------------------
Driver's Address
- --------------------------------------------------------------------------------
City, State, ZIP
- --------------------------------------------------------------------------------
Driver's Date of Birth and Sex
- --------------------------------------------------------------------------------
Owner's Name
- --------------------------------------------------------------------------------
Owner's Address
- --------------------------------------------------------------------------------
City, State, ZIP
- --------------------------------------------------------------------------------
Insured by - Company Name
- --------------------------------------------------------------------------------
Local Agent
- --------------------------------------------------------------------------------
Parts of Vehicle Damaged
- --------------------------------------------------------------------------------
Estimated Cost of Repairs
- --------------------------------------------------------------------------------
INJURED PERSON
- --------------------------------------------------------------------------------
Name Address Age Extent of Injury
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WITNESSES
- --------------------------------------------------------------------------------
Name Address Age Phone Number with
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Were Witnesses Passengers in either vehicle? |_| Yes |_| No
If yes, which one?
-------------------------------------------------------------
Investigating Officer - Name Department
---------------------- -----------------
Badge No.
-----------------
Description of Accident
--------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Safety & Environmental Affairs Policy Manual Vehicle Accident Reporting
Page: 3 of 4
<PAGE>
[LOGO]
K N Energy, Inc. and Affiliates
Safety and Environmental Affairs Policy Manual
Personal Protective Section: 02.08
Equipment Issue Date: 8/30/96
Revision Date:
================================================================================
***Company Policy***
The use of approved personal protective equipment is mandatory when the
performance of your job duties exposes you to a workplace hazard. This policy
covers all field and retail employees and any office employee who is exposed to
potential hazards.
The protective equipment furnished by the Company will be maintained in a safe
and sanitary condition and used according to the manufacturer's recommendations.
Employees shall conduct frequent inspections of personal protective equipment to
ensure that it is in good working condition. Any equipment found to be defective
or otherwise permanently altered will be taken out of service and repaired or
replaced.
OSHA Reference: 29 CFR 1910.132, 1910.133, 1910.134, 1910.135, 1910.136,
1910.l37 and 1910.138
I. EYE PROTECTION - Employees shall wear proper eye protection whenever
chipping, drilling, grinding, handling acids or caustics, welding, scaling
pipe and whenever flying objects or particulate matter may be present.
Proper eye protection must also be used in the presence of other types of
hazards, including fire, steam, compressed air, smoke, etc. and when
working on piping containing gas or liquid under, or potentially under
pressure. Eyeglasses with side shields are adequate for flying particles;
face shields or goggles are required for chemical or splash protection.
A. Prescription Safety Eyewear
i. The Company shall provide non-prescription and prescription
safety eyewear to all employees whose jobs involve potential
eye hazards. Employees are responsible for wearing safety
glasses whenever their jobs involve potential eye hazards.
ii. New prescription safety lenses, and if necessary, frames, will
be provided for eligible employees when an employee's
corrective vision prescription warrants the change.
iii. The Company will purchase safety eyewear through an approved
safety equipment supplier selected by the Company. Procedures
for the purchase of prescription safety glasses will be issued
by the Procurement Department
1. Each employee will be responsible for providing a
current prescription (no more than one year old) from
his or her optometrist or ophthalmologist at the time
the eyewear is ordered. The cost of eye examinations
will be paid by the employee.
2. Only prescription safety eyewear meeting ANSI
requirements for industrial safety glasses will be used.
Safety & Environmental Affairs Policy Manual Personal Protective Equipment
Page: 1 of 5
<PAGE>
Safety eye protection will be available for all
visitors, vendors and contractors entering eye
protection areas.
II. HEARING PROTECTION - The Company shall provide hearing protection for all
employees who may be exposed to excessive work-related noise levels.
Employees working in excessive noise environments are required to wear the
provided hearing protection (also see the HEARING CONSERVATION PROGRAM).
A. Determination of High Noise Areas
If the supervisor or employee has questions on whether particular
areas are subject to excessive noise levels and hearing protection
is needed, the Safety Process Owner will survey, or will arrange to
have surveyed, the suspect areas and advise if high noise levels
exist.
B. Warning Signs
The Company shall post warning signs in all high noise areas (areas
where noise levels are above 85 dB time-weighted average) and shall
supply either insert-type or muff-type hearing protectors for the
employee's protection.
C. Noise Reduction Requirements
The Noise Reduction Rating of the hearing protection provided by the
Company must be sufficient to reduce employee exposure to an 85 dB
time-weighted average. Guidance in the selection of hearing
protection equipment is located in the Occupational Safety and
Health Standards for General Industry CFR 29 1910.95, Appendix B.
III. HAND PROTECTION - The Company shall provide hand protection for all
employees who perform tasks that may expose their hands to harmful
substances, severe cuts or lacerations, severe abrasions, punctures,
chemical burns, thermal burns and harmful temperature extremes. Specialty
gloves, such as those used for chemical, electrical or thermal protection,
shall be approved for that particular type of hazard.
IV. FOOT PROTECTION - Steel-toed shoes or boots are recommended in all areas
and are required in areas where the Workplace Hazard Assessment has
identified a danger to the feet caused by falling or rolling objects,
piercing objects, chemical hazards, electrical exposure, etc. The Company
will pay 50% of the cost, up to $75.00 per exposed employee per year, for
one pair of steel-toed shoes or boots. If hazards that effect the top of
the foot exist, additional foot guards should be used. Canvas or synthetic
fiber cloth shoes are not appropriate footwear for employees working in
non-office environments and are not allowed.
V. HEAD PROTECTION - Company provided head protection shall be worn by all
employees and contractor employees when performing work at KN field
locations outside of the office, car or truck.
A. Bump caps are not acceptable head protection;
B. Safety helmets approved by the Department of Transportation or by
SNELL shall be worn by all operators of All Terrain Vehicles (ATV's)
and snow mobiles. The safety helmet shall be provided by the
Company.
VI. RESPIRATORY PROTECTION - (SEE RESPIRATORY PROTECTION SECTION)
VII. FIRE RESISTANT CLOTHING - The choice of clothing for employees in the
field is predicated on the
Safety & Environmental Affairs Policy Manual Personal Protective Equipment
Page: 3 of 5
<PAGE>
understanding of training and must be retrained as applicable.
A. The training provided must teach each affected employee the
following:
i. When PPE is necessary and what equipment must be worn;
ii. How to properly don, adjust, wear and remove PPE;
iii. PPE limitations; and
iv. The proper care, maintenance and useful life and disposal of
PPE.
B. Each employee must demonstrate his/her understanding of the training
and must be able to use the equipment properly.
C. Retraining must be performed when: a) there are changes in the
workplace that make previous training obsolete; 2) there are changes
in the types of PPE to be used; or 3) employees demonstrate a lack
of knowledge about PPE or fail to use the chosen PPE.
D. The Company must certify that the employee has received and
understood the training.
Exhibit #1
Workplace Hazard Assessment
Safety & Environmental Affairs Policy Manual Personal Protective Equipment
Page: 5 of 5
<PAGE>
SCHEDULE I
OTHER REQUIREMENTS OF INCUMBENT
Copy Attached
I-1
<PAGE>
Schedule I
[LOGO]
GAS OPERATIONS STANDARDS
Date: August 6, 1996
Index:: G1.05
Section: GENERAL POLICIES
Subject: CONSTRUCTION NEAR COMPANY FACILITIES
================================================================================
DAMAGE TO COMPANY COMPANY PIPELINES AND FACILITIES BEING STRUCK,
FACILITIES SEVERED OR DAMAGED HAVE RESULTED IN THE NEED FOR
WRITTEN GUIDELINES ON THIS SUBJECT. A COMMON TIME
FOR SUCH INCIDENTS TO OCCUR IS DURING THE
INSTALLATION OF OTHER UNDERGROUND UTILITIES,
DURING STREET WIDENING, PAVING ROAD CONSTRUCTION,
OR LAND LEVELING OPERATIONS, OR THE CONSTRUCTION
OF HABITABLE OR AUXILIARY BUILDINGS IN CLOSE
PROXIMITY TO COMPANY PIPELINES.
BASIC RIGHTS 1. The Company's basic rights in relation to its
pipelines are as follows:
o Private Property a. The gathering system, transmission system,
and distribution system are private property.
If the activities of a third party threaten
the safe operation of Company facilities, the
Company may enjoin such persons from further
action near Company property. If a pipeline
or other facility is struck, Company has the
right to be reimbursed for its damages.
o Specific Privileges b. Company has the right to fully enjoy the
privileges derived from any of its easements,
permits, or right-of-way grants. This
includes preventing any obstructions over or
near the pipeline which may interfere with
maintaining, operating, repairing, replacing,
or inspecting the pipe.
BASIC RESPONSIBILITIES 2. The Company's basic responsibilities in
relation to its pipelines are as follows:
o Noninterference a. The installation of any pipelines or
related facilities shall not interfere with
another utility's easement. The rules
regarding underground installation of other
utilities must be respected by the Company
just the same as the Company expects other
companies to follow its own rules.
Cooperation with other utility companies is
essential.
o Accurate Line Locating b. When Company pipelines are identified by
pipeline markers, stakes, or by telling a
third party where the line is located, such
indications must be accurate.
CONTINUING SURVEILLANCE 3. Every Company employee, whether on or off the
job, should be alert for forthcoming projects
which may endanger Company pipelines or other
facilities. Such projects, including the
construction of underground phone, electrical,
sewer, and water facilities, or street
construction projects, are often known to the
public long before work begins. Rural road
construction and land leveling are less
publicized; therefore, area contractors and road
crews should be informed of the location of
Company's lines and the rules regarding
construction activity. The public welfare and the
safe, uninterrupted operation of Company's
facilities depend upon the alertness of every
company employee
<PAGE>
- --------------------------------------------------------------------------------
Facility Horizontal Distance from Company Facilities
- --------------------------------------------------------------------------------
Buried Pipelines Buried pipelines constructed parallel to
Company pipelines shall be no closer than 10
feet horizontally
- --------------------------------------------------------------------------------
Buried Telephone Buried telephone cables installed parallel to
Company pipelines shall be no closer that 10
feet horizontally.
- --------------------------------------------------------------------------------
Overhead Telephone Cable Overhead telephone lines and all associated
structures installed parallel to Company
pipelines shall be no closer than 25 feet
horizontally.
- --------------------------------------------------------------------------------
Buried Electric Cables - 440 Buried electric power cables operating at 440
VAC or Less volts alternating current or less shall be
installed no closer than 10 feet horizontally
when paralleling Company pipelines.
- --------------------------------------------------------------------------------
Buried Electric Cables - 440 Buried electric power cables operating at 440
VAC to 37.5 KVAC VAC to 37.5 kilovolts alternating current shall
be installed no closer than 25 feet
horizontally when paralleling Company
pipelines.
- --------------------------------------------------------------------------------
Overhead Electric Lines - 37.5 Overhead electric lines operating at 37.5
KVAC or Less kilovolts alternating current or less and all
associated structures shall be installed no
closer than 25 feet horizontally when
paralleling Company pipelines.
- --------------------------------------------------------------------------------
Buried or Overhead Electric Parallel separation of an electric cable or
Lines - Facilities Over 37.5 KV line operating at more than 37.5 kilovolts, AC,
or any DC electric cable, will be established
only be agreement between the utility involved
and the Company engineering department.
- --------------------------------------------------------------------------------
Waiver of Minimum Clearances o Any horizontal clearance less than
that specified above shall be
established by agreement between the
Company and the owner of the
underground facility involved.
Shared Right-of-Way Permission from the Company shall be required
of all utilities or companies who wish to
construct any facility within 50 feet of a
Company pipeline or related facility.
o Minimum Vertical Clearance d. Minimum vertical clearances shall be as
-Transmission and Gathering shown on the following table when repair,
Pipelines installation, or construction of pipelines or
cables results in those facilities crossing a
Company transmission or gathering pipeline in
a rural area:
<PAGE>
REPORTING CONSTRUCTION 4. Any employee who observes construction activity
ACTIVITY that may in any way involve buried Company
pipelines or related facilities should immediately
inform the appropriate Business Center Leader or
the Construction/Maintenance Process Owner.
o In the event the appropriate Business
Center Leader cannot be reached notify
gas control.
INVESTIGATING 5. The Business Center Leader or delegate shall
CONSTRUCTION ACTIVITY immediately investigate any reported or observed
construction activity in the vicinity of Company
pipelines, and shall see that proper care and
procedures are carried out. If the investigation
must be delegated, it should only be to an
experienced employee who will give the situation
direct and immediate attention.
CONTROLLING CONSTRUCTION 6. The Business Center Leader, upon determining
ACTIVITY that a Company pipeline may be involved in any
construction activity, shall be responsible for
enforcing the following rules:
o Excavation work a. Excavation for any purpose should not
approach Company's Pipeline unless the line
has previously been exposed by:
o A responsible Company employee; or
o A contractor who has been authorized
to expose the line under the
supervision of a responsible Company
employee.
o Horizontal Clearance b. Minimum horizontal clearances must be
maintained between the Company's pipelines
and other pipelines and cables installed in
rural areas. The purposes of these guidelines
are:
o To allow adequate space for
maintenance and replacement of the
facilities involved.
o To prevent detrimental interference of
the cathodic protection facilities
involved.
o To prevent detrimental or hazardous
alternating current influence on Company
pipelines and related facilities.
o To prevent hazardous working
conditions for personnel in operating
and maintaining the pipelines.
o To prevent ignition of blowing natural
gas at blowdown and relief valve
locations.
o Minimum Horizontal c. Minimum horizontal clearances shall be as
Clearances-Transmission shown on the following table when new
and Gathering Pipelines construction of other underground facilities
parallels the Company's transmission or
gathering pipelines in rural areas.
<PAGE>
CONTACT CITY OFFICIALS 18. When the construction work is within any city
or corporate limits, or if work is part of a city
project, city officials should be contacted and
reminded of company's rules and policies. The
necessary provisions regarding Company
requirements can then be written into an ordinance
or into the contract under which the work is to be
done.
DEVIATION FROM RULES 19. Deviation from the rules in this section will
be permitted only with the approval of the
Business Center Leader. The Supervisor granting
the exception must send a written report to the
Vice President - Business Operations explaining
the deviation and why it is necessary.
Table of Contents
<PAGE>
o Determine Damage a. Determine extent of damage by exposing
most pipe if necessary.
o Coating Damage Only b. Repair the pipe coating in an approved
manner to insure cathodic protection if that
is the only damage incurred.
o Damaged Pipe c. Repair or replace any damaged suction of
pipe in accordance with rules outlined in
Pipeline Operation and Maintenance, Section
G4.0 of this manual. Damaged pipe includes
dents, scratched, gouges, grooves, bends,
etc. If there is any doubt about the
condition of existing pipe, replace it with
pretested pipe of equal or better grade and
specification.
o Loosened Connections d. A careful examination must be made of
piping in the immediate vicinity to make sure
that other pipes haven't been pulled loose.
For example, if a distribution main is struck
and bent, it's possible that one or more
nearby service stubs have been pulled loose
from the meter loop connections, or a service
line pulled loose from building connections.
o Backfilling Operations e. Backfilling operations may proceed only
after the necessary repairs have been
completed and the Company inspector gives his
approval for the line to be covered,
motorized vehicles shall not be driven over
the backfill as a means of compacting the
soil of a ditch or excavation containing-
o A threaded and coupled pipe
o A dresser coupled pipe
o A plastic natural gas line
CONSTRUCTION ACTIVITIES 16. Construction activities are summarized as
SUMMARY follows:
o Be Alert a. All Company employees should be alert for
construction activity which may endanger
company facilities and report such activity
immediately.
o Investigate b. Construction activities should be
investigated promptly, and the party or
parties involved must be made aware of
Company's requirements. Pertinent facts
regarding the project, such as names,
description of work to be done, starting and
completion dates, etc., should be obtained.
o Notify Supervisors c. When the work may involve exposing or
disturbing Company property, the above
information shall immediately be sent to the
department responsible for the facility. The
party responsible for the project should be
advised that they may be requested to enter
into a contract outlining the terms and
procedures to be followed before Company will
permit any work in the vicinity of its lines.
DETERMINE COMPANY 17. The exact nature of the proposed construction
INVOLVEMENT or work already in progress should be reviewed and
discussed with the legal department and any other
supervisors whose department might be affected so
that steps can be taken to protect Company's
property.
<PAGE>
ii. A written plan of blasting
activities is established and agreed to
in writing by the organization
responsible for the blasting. No
blasting will be permitted within 250
feet of a Company pipeline unless a
special written agreement is secured
from the blasting contractor (see Figure
1 at the end of this section). All
Aboveground appurtenances will be
protected from flying debris by being
shielded with a protective coating:
i.e., dirt, barrier, wood or metal
enclosure, etc. The Operations
Supervisor will confer with the blasting
personnel on their proposed work and
will establish with the engineering
department safety requirements to
protect Company facilities.
d. Pipelines located within 500 feet of the
blasting area will be leak-surveyed with a
backpack leak detector before and after the
blasting work is completed.
e. Additional blasting guidelines are shown
in Engineering and Construction Standards
ES-4311 and DS-4311.
BUILDINGS NEAR 11. For safety and convenience it is recommended
TRANSMISSION PIPELINES that buildings be 25 feet from any gathering or
transmission pipeline except by special written
permission from the engineering department.
INSPECTOR - DIGGING 12. A responsible Company employee or contract
OPERATIONS representative will be assigned as an inspector
during any digging operations which may endanger
or involve company pipelines or related
facilities. The inspector should be present as
necessary to prevent damage, and to detect any
possibility of the facilities being struck or
disturbed. Company will bear the cost of
furnishing the inspector for occasional
construction projects of short duration. For
larger projects, such as new utility systems or
extensive street improvement programs, Company
shall be reimbursed for the cost of furnishing an
inspection.
COVERING EXPOSED PIPELINES 13. Any Company underground pipelines which have
been exposed for any reason shall not be covered
up until a responsible Company employee or
contract representative has inspected the line and
given approval for backfilling operations to
proceed.
REPORTING DAMAGE TO 14. The cost of repairing a pipeline damaged
PIPELINES during outside third-party construction operations
shall be paid by the party striking the line. The
Company inspector must submit a written report on
the damage to the appropriate Business Center
Leader, who in turn shall submit a report to
either the general manager of pipelines or the
general superintendent of distribution, with a
copy to the general superintendent of engineering
services. This report must include:
o details of incident.
o extent of damage.
o corrective action taken.
INSPECTING, REPAIRING AND 15. Any Company pipelines or related facilities
BACKFILLING EXPOSED LINES which have been exposed due to surrounding
construction must be thoroughly inspected. No pipe
can be properly inspected from the top of a ditch;
the employee assigned to inspect the line must
check all exposed areas of the pipe closely, and
be alert for signs of damage even beyond the
exposed portion, such as excess movement of the
pipe from its installed position. If a pipe has
been struck:
<PAGE>
o Review by Engineering d. The Engineering Department will review the
Department information forwarded by the inspector and
determine what modifications are to be made
and what portion is to be paid by Company.
The Engineering Department will then provide
details of the modification required and the
costs involved, and will advise what
agreements, if any, will be necessary between
Company and the landowner before commencement
of the project.
o Attempt to Modify e. Company will attempt to begin the required
Within 45 Days modification of the pipeline facilities with
forty-five (45) days after the date of
notification. The exact time to complete the
work will, however, depend on the
availability of personnel, materials, and
weather.
LAND LEVELING OR 9. When land leveling or land improvement
IMPROVEMENT -COMPANY NOT operations commence without prior approval, and a
NOTIFIED Company pipeline or related facility is involved
in any way, the Business Center Leader should be
notified immediately. An inspection of the
premises should be made without delay and
necessary steps taken to correct or prevent any
unsafe conditions. The landowner will be liable
for the cost of lowering the line; he shall also
be liable for any payment for crops or premise
damage.
BLASTING 10. KN Energy does not advocate the use of
explosives near any above ground or below ground
pipeline facilities or any other facilities given
the inherent danger associated with blasting
activities.
a. KN Energy shall be indemnified and held
harmless from any loss, cost of liability for
personal injuries received, death caused or
property damage suffered or sustained by any
person resulting from any blasting operations
undertaken within 500 feet of its facilities.
The blasting contractor shall be liable for
any and all damages caused to KNs facilities
and related facilities as a result of
blasting activities whether or not KN
representatives are present.
b KN Energy, Inc. shall have a signed and
executed Blasting Indemnification Agreement,
Form K178, before authorized permission to
blast can be given.
c. No blasting shall be allowed within 200
feet of KN's facilities unless:
i. KN Energy's Engineering Department
reviews and analyzes the blasting
methods.
<PAGE>
RELOCATION FOR ROAD 7. Before street or road construction commences
CONSTRUCTION over any Company pipeline details shall be
obtained to determine to what extent the pipeline
will be affected. If the project involves a
transmission or gathering line, the engineering
department shall be furnished details of the work
to be done so that it can obtain a signed
agreement with the governmental agency or person
responsible for the project before the work
commences. This requirement applies whether the
existing pipeline is on a public road or private
right-of-way. The following shall also apply:
o Maintain 3' Cover a. If necessary, the line shall be moved to a
new location or lowered to maintain adequate
soil cover when construction is complete,
which is generally 36" for most transmission
lines and 24" for distribution mains.
o Cost of Relocating b. The cost of relocating or lowering lines
should be paid by the party benefited,
although Company will move or lower the line
at its own expense when:
o a rural pipeline on a public road
right-of-way must be moved because
of road construction; or
o a pipeline within a town must be
moved or lowered to permit
occasional street repairs or
improvement.
LAND LEVELING OR 8. When advance notice is given of proposed land
IMPROVEMENT-COMPANY leveling or land improvement, Company will modify
NOTIFIED existing pipeline facilities at its total or
partial expense if the leveling or improvement
cannot be accomplished without modification of
existing pipeline facilities.
o Inspect the Site a. Upon notification, a Company
representative shall visit the site as soon
as possible to determine to what extent the
Company pipeline may be affected.
o Investigate b. Evaluate the alternatives for sloping the
Alternatives land or making the improvements so as to
avoid relocation of the Company pipeline, or
to avoid removal of soil over a buried line.
If the landowner can achieve substantially
the desired results without jeopardizing or
disturbing the Company pipeline, this is what
he should do.
o Pipeline Relocation c. If the leveling or improvement cannot be
or Modification accomplished without relocation or
Required modification of the Company pipeline, the
Company representative shall gather pertinent
facts, including:
o The exact location and description
of the proposed leveling or
improvement.
o A description of the required
modification to Company pipeline
facilities.
o The Representatives opinion as to
possible alternatives which might
avoid disturbing the Company
pipeline.
<PAGE>
- --------------------------------------------------------------------------------
Facility Vertical Clearance
- --------------------------------------------------------------------------------
New Construction It is customary when installing underground utilities
to place the last line beneath all existing lines. This
practice must be adhered to unless it is impossible or
unreasonable to do so.
- --------------------------------------------------------------------------------
Buried Steel Buried steel pipelines shall have at least a 12"
Pipelines vertical earth separation from a Company pipeline at
the point of crossing.
- --------------------------------------------------------------------------------
Buried Nonsteel Buried nonsteel pipelines shall have at least a 12"
Pipelines vertical earth separation form a Company pipeline. If
special permission is granted for such a line to cross
above a Company pipeline, two timbers, each
approximately twelve inches wide by ten feet long and
at least three inches thick, shall be placed above the
nonsteel pipe. The two timbers are to be placed one on
each side of and parallel to the Company pipeline; each
timber should be approximately two feet from the center
line of the Company pipeline.
- --------------------------------------------------------------------------------
Buried Telephone Buried telephone cables or electric power cables
and Electric Cables operating at 440 volts alternating current or less
- - 440 VAC or Less shall have at least a 12" vertical earth separation
from a Company pipeline. If special permission granted
for such a line to cross above a Company pipeline, the
cable must have a nonconductive outer sheath extending
at least ten feet each direction form the Company
pipeline; two timbers, each approximately twelve inches
wide by ten feet long and at least three inches thick,
shall be placed above the cable one on each side of and
parallel to the Company pipeline; each timber should be
approximately two feet from the centerline of the
Company pipeline. If timbers are not used, the company
owning the cable must furnish the Company engineering
department a waiver of damages to such cable resulting
from Company pipeline operations and maintenance,
except for damage caused by carelessness or negligence.
- --------------------------------------------------------------------------------
Buried Electric Buried electric cables operating at more than 440 volts
Cables - 440 VAC alternating current shall have at least a 12 vertical
to 37.5 KVAC earth separation from a Company pipeline. The cable
shall have a nonconductive outer sheath extending at
least ten feet each direction from the Company
pipeline. The cable, whether crossing above or below
Company's pipelines, shall be protected with two
timbers each approximately twelve inches wide by ten
feet long and at least three inches thick. The timbers
are to be placed above the cable one on each side of
and parallel to the Company pipeline; each timber
should be approximately two feet from the center line
of the Company pipeline.
- --------------------------------------------------------------------------------
Facilities Over 37.5 Vertical separation of an electric cable or line
KV operating at more than 37.5 Kilovolts, A.C. or D.C.,
will be established by agreement between the utility
involved and the Company engineering department.
- --------------------------------------------------------------------------------
Deviation from Requirements o Any deviation from the preceding
vertical clearance requirements will
require specific approval from the
Company.
o Minimum Clearance-City, e. When buried cables or pipes or various
Town and Rural utilities must share the space under a street
Distribution Lines or alley within any city or urban area, the
minimum parallel clearance is 36"
horizontally and 12" vertically unless
approved in writing by Engineering and
Operations. The minimum intersecting
clearance is twelve inches.
o Electrical Bonding f. Electrical bonding or any conductive
Prohibited connection between a Company pipeline and any
other pipe, cable, or associated structure is
prohibited, except where specific approval is
given by the manager of corrosion to make
such a connection.
<PAGE>
SCHEDULE I
OTHER REQUIREMENTS OF INCUMBENT
Copy Attached
I-1
<PAGE>
[LOGO]
Schedule I
DATA SECURITY
K N Energy, Inc.
Information Security Policy
Employees and contractors must protect one of K N Energy Inc.'s (K N's) most
important assets - its information. Information must be secured from
unauthorized access, disclosure, modification and destruction. All information
generated by employees is proprietary and considered company property. It is
unacceptable for anyone to use information resources to violate any law or
company policy or perform unethical business acts.
- --------------------------------------------------------------------------------
Scope
The information security policy applies to all information systems,
communications networks and the information stored and processed on those
facilities. It also applies to any employee, agent, consultant or person whose
services are procured by a contract or through a temporary personnel agency.
- --------------------------------------------------------------------------------
Policy
The intent of this information security policy is to:
o Ensure the confidentiality, availability and integrity of data
o Reduce the risk of data loss by accidental or intentional
modification, disclosure or destruction of data
o Preserve the corporation's rights and remedies in the event of such
a loss
Each employee and contractor is responsible for understanding the policy and
complying with its terms.
K N has implemented the information security precautions in such a way as to:
o Hold individuals accountable for their use of data
o Authorize access to data on a need-to-know basis; access will be
granted to only the data necessary to accomplish authorized job
functions
o Ensure timely data recovery in the event of lost data or information
systems capabilities
Specific precautions and procedures shall be consistent with and conform to the
Data Security Guide.
- --------------------------------------------------------------------------------
Responsibilities
<PAGE>
All employees and contractors are responsible for adhering to all policies,
standards and procedures for securing data including the following:
o Maintaining data confidentiality
o Maintaining the password confidentiality
o Reporting to management any suspected security violations
o Executing a confidentiality or ownership agreement, if requested by
K N
ISD will be responsible for security authorization at the system level. Data
owners will be responsible for security authorization at the application or data
level. Data owners may be the process owner or someone designated by the process
owner to be responsible for the data. For example, access to the network is
ISD's responsibility; access to the General Ledger is the responsibility of the
G/L user champion in Service Transactions.
- --------------------------------------------------------------------------------
Personal Computers
All personal computer users are responsible for adhering to all policies,
standards and procedures for using information systems, including the following:
o Using only software purchased by the organization for organizational
purposes
o Implementing security practices necessary to protect data stored on
the personal computer
o Saving files to the network to ensure they are backed up daily by
ISD
- --------------------------------------------------------------------------------
Electronic Mail
Electronic mail is not a confidential means of personal communication. It is
company property and therefore subject to both company review and legal
discovery by outside parties. K N will establish appropriate e-mail
communication with customers, vendors and business partners based on need.
- --------------------------------------------------------------------------------
Intranet and Internet
The Intranet and Internet are business tools and should be used as such.
- --------------------------------------------------------------------------------
Violations
Violations of this policy may include, but are not limited to any act that:
o Exposes K N to actual or potential monetary loss by compromising
information security
o Uses unauthorized information concerning any aspect of the company
for personal benefit
o Involves the disclosure of customer or confidential information or
the unauthorized use of company information
o Involves the use of information for illegal purposes, which may
include violation of any law, regulation or reporting requirement of
any law enforcement or government body
Confidentiality of data includes proper identification, storage and security and
proper disposal or destruction of such
<PAGE>
material.
Any individual who has knowledge of a violation of this policy should report
that violation immediately to ISD or Internal Audit, and to his/her supervisor,
as appropriate.
- --------------------------------------------------------------------------------
Penalties for Noncompliance
Noncompliance with or violation of this information security policy will result
in action that may include, but may not be limited to, the following:
o Suspension
o Termination
o Civil and/or criminal prosecution
o Other disciplinary action, as appropriate
- --------------------------------------------------------------------------------
Last modified: 06/23/97 12:24:22
KNE CONFIDENTIAL-FOR INTERNAL USE ONLY
<PAGE>
SCHEDULE J
INCUMBENT TRAINING
1. Pre-Commissioning Training. Prior to Commissioning of the System, Pathnet
shall provide to Incumbent and Incumbent field technicians one training course
for Incumbent's employees and other designees of Incumbent, which training shall
include, among other things, the following:
(a) comprehensive instruction for trouble-free operation maintenance;
(b) hands-on experience with the operation of the equipment deployed in
the System;
(c) review of the similarities and differences of an analog versus a
digital system;
(d) review of the latest state-of-the-art Technology and applications
used in the System;
(e) review of procedures designed to eliminate equipment damage,
incorrect handling of equipment and System down time;
(f) comprehensive instruction in the use of all required test equipment
used in connection with the System;
(g) the distribution of manuals and other course materials that include
descriptive information publications, alignment procedures,
maintenance procedures, technical information publications,
schematic drawings, wiring lists and system assembly drawings; and
(h) a certificate of completion for each student who successfully
completes the training course.
2. Certification of Incumbent's Field Technicians. Each of Incumbent's Field
Technicians (as defined in the Maintenance Services Agreement) must either
successfully complete the training course described in Section 1 of this
Schedule J, or must be certified by Pathnet that such Field Technician is
qualified to perform services on the System.
3. Training for Upgrades. Upon any upgrade of the system, Incumbent may request
that Pathnet provide additional training with respect to such upgrade and
Pathnet shall provide such training to Incumbent as soon as practicable after
such request.
4. Training Locations. All such training shall be provided at Pathnet's
Richardson, Texas office, Washington D.C. metropolitan area headquarters or at
such other location as determined by Pathnet in its sole discretion.
5. Travel and Lodging. [***]
J-1
<PAGE>
SCHEDULE K
OWNERSHIP OF SYSTEM EQUIPMENT, ASSETS AND MATERIALS
- -------------------------------------------------------------------------------
System Component Owned By
- ---------------- --------
- -------------------------------------------------------------------------------
Existing Shelters [***]
- -------------------------------------------------------------------------------
New Shelters for Initial System [***]
- -------------------------------------------------------------------------------
New Shelters for Capacity Expansion [***]
- -------------------------------------------------------------------------------
New Shelters at Pathnet Spur sites [***]
- -------------------------------------------------------------------------------
New Shelters at Incumbent Spur sites [***]
- -------------------------------------------------------------------------------
Towers for System [***]
- -------------------------------------------------------------------------------
Towers for Incumbent Spurs [***]
- -------------------------------------------------------------------------------
Towers for Pathnet Spurs [***]
- -------------------------------------------------------------------------------
A.C. and D.C. Power system as set forth on Schedule J [***]
- -------------------------------------------------------------------------------
Pressurizing Equipment for sites including manifolds and
dehydrators [***]
- -------------------------------------------------------------------------------
1/0 Multiplexers [***]
- -------------------------------------------------------------------------------
Environmental Control Systems of Shelters for Capacity Expansion [***]
- -------------------------------------------------------------------------------
Environmental Control Systems of Shelters of Initial System [***]
- -------------------------------------------------------------------------------
Environmental Control Systems of Shelters of Incumbent Spurs [***]
- -------------------------------------------------------------------------------
Environmental Control Systems of Shelters of Pathnet Spurs [***]
- -------------------------------------------------------------------------------
Common Equipment existing before Effective Date [***]
- -------------------------------------------------------------------------------
Common Equipment newly installed [***]
- -------------------------------------------------------------------------------
Equipment Racks for Initial System Radios [***]
- -------------------------------------------------------------------------------
Equipment Racks for Capacity Expansion Radios [***]
- -------------------------------------------------------------------------------
Antennas and Antenna Mounts relating to Initial System [***]
- -------------------------------------------------------------------------------
Antennas and Antenna Mounts relating to Capacity Expansion [***]
- -------------------------------------------------------------------------------
Antennas and Antenna Mounts relating to Incumbent Spurs [***]
- -------------------------------------------------------------------------------
Antennas and Antenna Mounts relating to Pathnet Spurs [***]
- -------------------------------------------------------------------------------
Waveguide and Waveguide bridges relating to Initial System [***]
- -------------------------------------------------------------------------------
Waveguide and Waveguide bridges relating to Capacity Expansion [***]
- -------------------------------------------------------------------------------
Waveguide and Waveguide bridges relating to Incumbent Spurs [***]
- -------------------------------------------------------------------------------
Waveguide and Waveguide bridges relating to Pathnet Spurs [***]
- -------------------------------------------------------------------------------
Radios relating to Initial System [***]
- -------------------------------------------------------------------------------
Radios relating to Capacity Expansion [***]
- -------------------------------------------------------------------------------
Radios relating to Incumbent Spurs [***]
- -------------------------------------------------------------------------------
Radios relating to Pathnet Spurs [***]
- -------------------------------------------------------------------------------
OC-3 Multiplexers [***]
- -------------------------------------------------------------------------------
Radio Bays and Radio Bay Equipment relating to the Initial
System [***]
- -------------------------------------------------------------------------------
Radio Bays and Radio Bay Equipment relating to Capacity
Expansion [***]
- -------------------------------------------------------------------------------
Radio Bays and Radio Bay Equipment relating to Incumbent Spurs [***]
- -------------------------------------------------------------------------------
Radio Bays and Radio Bay Equipment relating to the Pathnet Spurs [***]
- -------------------------------------------------------------------------------
Interconnection Equipment relating to Pathnet Spurs and
Interconnections [***]
- -------------------------------------------------------------------------------
K-1
<PAGE>
- -------------------------------------------------------------------------------
System Component Owned By
- ---------------- --------
- -------------------------------------------------------------------------------
Interconnection Equipment relating to Incumbent Spurs and
Interconnections [***]
- -------------------------------------------------------------------------------
Results of the Preliminary Engineering Studies and Project
Drawings [***]
- -------------------------------------------------------------------------------
Upgraded equipment added to the System [***]
- -------------------------------------------------------------------------------
Microwave Radio System Licenses and other FCC, Federal,
state and local licenses and Permits relating to the Initial
System [***]
- -------------------------------------------------------------------------------
Microwave Radio System Licenses and other FCC, Federal, state
and local licenses and permits relating to the Capacity
Expansion [***]
- -------------------------------------------------------------------------------
Panels, terminals, Software, Source Codes and other Assets and
Equipment relating to the Network Management System [***]
- -------------------------------------------------------------------------------
K-2
<PAGE>
SCHEDULE L
FORM OF QUARTERLY REVENUE REPORT
<TABLE>
<CAPTION>
NUMBER PRICE PER PATHNET INCUMBENT
PATH OR START END OF DS-0'S CIRCUIT REVENUE REVENUE REVENUE REVENUE
SEGMENT DATE DATE SOLD MILE COLLECTED OUTSTANDING TO BE PAID TO BE PAID
- ------- ---- ---- ---- ---- --------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
L-1
<PAGE>
SCHEDULE M
INCUMBENT PAYMENT INSTRUCTIONS
M-1
<PAGE>
SCHEDULE N
FORM OF PATHNET SUBLICENSE AGREEMENT
This Sublicense Agreement (the "Agreement") is made on _____________, 1998
(the "Effective Date") by and between Pathnet, Inc. ("Pathnet") and KN
Telecommunications, Inc. ("Incumbent") for the use of VERTEL Corporation
("Licensor") programs.
WHEREAS, Incumbent desires to sublicense the programs as further defined
herein; and
WHEREAS, Pathnet is willing to grant such sublicense under the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the Parties mutually agree as follows:
I. DEFINITIONS
1.1 "Licensed Program" shall mean each program in software or firmware
form provided by Pathnet to Incumbent pursuant to the Fixed Point Microwave
Services Agreement, dated the date hereof between Incumbent and Pathnet (the
"FPM Agreement"), as such Licensed Program is licensed by Pathnet from Licensor,
including future additions and updates to such Licensed Program. The term
"Licensed Program" shall specifically include documentation and related
materials pertinent to such program and any updated program or portion of a
program hereinafter furnished to Incumbent for use in connection with or
replacement of the Licensed Programs.
1.2 "Equipment" shall mean Intel compatible servers running Windows NT.
1.3 "Use" shall mean the copying or duplication of any portion of a
Licensed Program from storage units or media into the Equipment for processing
or the utilization of any Licensed Program in the course of the operation of the
Equipment.
II. LICENSE GRANT
2.1 Use of Object/Binary Licensed Program with Designated Equipment.
Pathnet hereby grants Incumbent a non-exclusive, non-transferable (except as
provided in Section 5.1), non-licensable, non-assignable license to Use in
machine readable form, the Licensed Program specified in Section 1.1 solely on
the Equipment specified in Section 1.2. No license is granted to Use any
Licensed Program on any configuration of equipment which is different from or
less than the configuration indicated in Section 1.2.
N-1
<PAGE>
III. PROPRIETARY RIGHTS
3.1 Proprietary Rights. The Licensed Program is owned by Licensor and/or
others and is proprietary in nature. Incumbent shall respect such proprietary
rights and shall not use such Licensed Program except for the purposes for which
it is being made available as set forth in this Agreement and shall not
reproduce, print, sublicense, duplicate, reverse engineer, distribute, disclose,
or otherwise make the Licensed Program available to any third party, in whole or
in part, in whatever form.
3.2 Confidentiality. Incumbent shall take all actions required to maintain
control of the Licensed Program including securing written records, agreements,
and other reasonable measures with its employees and agents to satisfy its
obligations under this Agreement with respect to the use, copying, protection,
and security of the Licensed Program.
IV. LIMIT OF LIABILITY
4.1 NO WARRANTY. LICENSOR GRANTS A WARRANTY IN THE LICENSED PROGRAM ONLY
TO PATHNET AND DOES NOT EXTEND ITS WARRANTY TO INCUMBENT OR ANY OTHER END USER.
WARRANTY OF THE LICENSED PROGRAM IS PROVIDED BY LICENSOR DIRECTLY TO PATHNET.
LICENSOR AND PATHNET MAKE NO EXPRESS OR IMPLIED WARRANTIES OF ANY KIND,
INCLUDING WITHOUT LIMITATION, MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE WITH REGARD TO ANY LICENSED PROGRAM AND/OR RELATED MATERIALS TO BE
FURNISHED BY VERTEL.
4.2 NO CONSEQUENTIAL DAMAGES. IN NO EVENT SHALL LICENSOR OR PATHNET BE
LIABLE FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH OR
ARISING OUT OF THE EXISTENCE, FURNISHING, FAILURE TO FURNISH, OR USE OF ANY
LICENSED PROGRAM AND/OR RELATED MATERIAL AND/OR DEVISE.
4.3 Licensor shall have no liability for any claim of copyright or patent
infringement based on (1) use of other than a current unaltered release of the
Licensed Program available from Licensor if such infringement would have been
avoided by the use of such current unaltered release of the Licensed Program or
(2) Use or combination of the Licensed Program with programs not supplied by
Licensor and which Use or combination results in the infringement of any patent
or copyright.
V. TRANSFER OF LICENSE
5.1 Terms for Transfer of License. This license may only be transferred
upon written approval of Pathnet and in connection with the transfer of all of
the Equipment; provided all copies of the Licensed Program are delivered to the
transferee and no copies or related materials are retained by Incumbent and
provided further that the transferee agrees to be bound by all the Terms and
Conditions of this Agreement.
N-2
<PAGE>
NOW THEREFORE, the Parties hereto have caused this Agreement to be
executed by their respective duly authorized representatives.
PATHNET, INC.
By:
---------------------------
Title:
-------------------------
Date:
--------------------------
KN Energy, Inc.
By:
---------------------------
Title:
-------------------------
Date:
--------------------------
N-3
<PAGE>
SCHEDULE O
Pathnet Articles and Bylaws;
Certificate of Good Standing
Copies Attached
O-1
<PAGE>
PAGE 1
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE 0F THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED CERTIFICATE OF
"PATHNET, INC.," FILED IN THIS OFFICE ON THE TWENTY-THIRD DAY OF DECEMBER, A.D.
1996, AT 9 O'CLOCK A.M.
[SECRETARY'S OFFICE SEAL -- STATE OF DELAWARE]
/s/ Edward J. Freel
2533940 8100 -----------------------------------
971187175 Edward J. Freel, Secretary of State
AUTHENTICATION: 8502014
DATE: 06-09-97
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 12/23/1996
960381137 - 2533940
RESTATED
CERTIFICATE OF INCORPORATION
OF
PATHNET, INC.
PathNet, Inc. a corporation organized and existing under the laws of the
State of Delaware, hereby certifies as follows
1. The name under which the corporation was originally incorporated is
PathNet, Inc. and the original Certificate of Incorporation of the
corporation was filed with the Secretary of State of the State of
Delaware on August 25, 1995.
2. This Restated Certificate of Incorporation restates and integrates
and also further amends the Certificate of Incorporation of the
corporation.
3. This Restated Certificate of Incorporation and the amendments to the
Certificate of Incorporation contained herein were declared
advisable and adopted by the Board of Directors on December 20,
1996, were approved by the written consent of the holders of the
outstanding shares of each class of common stock and preferred stock
of the corporation, each such class of common stock and preferred
stock voting separately as a class, in accordance with Section 228
of the General Corporation Law of the State of Delaware (with
written notice being given by the corporation to each stockholder
who has not so consented in writing), and have been duly adopted in
accordance with the provisions of Sections 242(b) and 245 of the
General Corporation Law of the State of Delaware.
4. The text of the Certificate of Incorporation of the corporation is
hereby restated and integrated and further amended to read in its
entirety as follows:
ARTICLE I
NAME
The name of the corporation (which hereinafter is called the
"Corporation") is PathNet, Inc.
ARTICLE II
PURPOSES
The purposes for which the Corporation is organized are as follows.
A. The Corporation shall have the power to conduct or promote any
businesses or purposes for which corporations may be incorporated under the
Delaware General Corporation Law, including, but not limited to, engaging in the
business of owning, operating, leasing, managing and providing for
telecommunications systems for both long and short distance services.
<PAGE>
B. The Corporation shall have the power to do all and everything
necessary, suitable and proper for the accomplishment of any of the purposes or
attainment of any of the objects or the furtherance of any of the powers
hereinbefore mentioned, either alone or in association with or in partnership
with any other corporations. firms or individuals, and to do every other act or
acts, things or things, incidental or appurtenant to or growing out of or
connected with the aforesaid businesses or powers or any part of parts thereof,
provided the same be not inconsistent with the laws under which this Corporation
is organized.
ARTICLE III
AUTHORIZED CAPITAL
A. Common Stock
The Corporation shall have authority to issue Five Million (5,000,000)
shares of voting common stock, all of the same class and having a par value of
one cent ($0.01) per share. The term "Common Stock" as used herein means the
voting common stock as the same exists at the effective date of this Restated
Certificate of Incorporation or any other class of stock resulting from
successive changes or reclassifications of such voting common stock consisting
solely of chances in par value, or from par value to no par value, or from no
par value to par value.
B. Preferred Stock
Section 1 (a) The Corporation shall have authority to issue Two Million
Six Hundred Fifty One Thousand Forty Six (2,651,046) shares of preferred stock
having a par value of one cent ($0.01) per share, of which One Million
(1,000,000) shares shall be designated Series A Convertible Preferred Stock (the
"Series A Preferred Stock") and One Million Six Hundred Fifty One Thousand Forty
Six (1,651,046) shares shall be designated Series B Convertible Preferred Stock
(the "Series B Preferred Stock"). The Series A Preferred Stock and the Series B
Preferred Stock shall be referred to collectively herein as the "Series
Preferred Stock".
(b) Dividends, The holders of the Series Preferred Stock shall
be entitled to receive, out of funds legally available therefor, dividends
(other than dividends paid in additional shares of Common Stock) in preference
to and at the same rate as dividends are paid with respect to the Common Stock
(treating each share of Series Preferred Stock as being equal to the number of
shares of Common Stock into which each such share of Series Preferred Stock
could be converted pursuant to the provisions of Section 4 hereof, with such
number determined as of the record date for the determination of holders of
Common Stock entitled to receive such dividend).
Section 2 Liquidation Dissolution or Winding Up
(a) Distributions to Holders of Preferred Stock. In the event of
any liquidation, dissolution or winding up of the Corporation, whether voluntary
or involuntary, the Series A Preferred Stock and the Series B Preferred Stock
shall rank on a parity with each other and shall rank prior to the Common Stock
or any class of stock ranking junior to the Series
2
<PAGE>
Preferred Stock. Upon such liquidation, holders of each share of Series
Preferred Stock outstanding shall be entitled to be paid, out of the assets of
the Corporation available for distribution to stockholders and before any
payment shall be made to the holders of any class of Common Stock or of any
stock ranking on liquidation junior to the Series Preferred Stock, an amount in
cash equal to the original purchase price paid by such holder for each such
share of Series Preferred Stock held (appropriately adjusted for stock splits,
stock dividends and the like) plus any declared but unpaid dividends thereon. If
upon any liquidation, dissolution, or winding up of the Corporation, the assets
to be distributed to the holders of the Series Preferred Stock under the
foregoing sentence shall be insufficient to permit payment to such stockholders
of the full preferential amounts aforesaid, then all of the assets of the
Corporation available for distribution to such holders under such sentence shall
be distributed among the holders of Series Preferred Stock, pro rata in
accordance with the total amount of preference which would have been payable to
such holders if funds had been available to pay the full preference under the
previous sentence. After such payment shall have been made in full to such
holders of Series Preferred Stock, or funds necessary for such payment shall
have been set aside by the Corporation in trust for the account of such holders
so as to be available for such payment, the holders of the outstanding shares of
Common Stock shall share ratably in the distribution of the remaining assets and
funds of the Corporation available for distribution to shareholders.
(b) Deemed Liquidations. In the case of (i) a consolidation or
merger of the Corporation (other than a consolidation or merger upon
consummation of which the holders of voting securities of the Corporation
immediately prior to such transaction, continue to own directly or indirectly
not less than a majority of the voting power of the surviving corporation) or a
sale of all or substantially all of the assets of the Corporation or other
similar transaction and (ii) either receipt by the Corporation of consideration
less than the equivalent of $1.00 per share (appropriately adjusted for stock
splits, stock dividends and the like) of Series A Preferred Stock plus any
declared but unpaid dividends or receipt by the Corporation of consideration
less than the equivalent of $3.28 per share (appropriately adjusted for stock
splits, stock dividends and the like) of Series B Preferred Stock plus any
declared but unpaid dividends, such event shall be regarded, at the option of
the holders of a majority of the then outstanding shares of Series Preferred
Stock as a liquidation, dissolution or winding up of the affairs of the
Corporation within the meaning of this Section 2.
Notwithstanding the foregoing, each holder of Series Preferred Stock shall
have the right to elect the benefits of the provisions of Section 4(h) hereof in
lieu of receiving payment in liquidation, dissolution or winding up of the
Corporation pursuant to this Section 2(b). For purposes of this Section 2 and
Section 6 hereof, a sale of substantially all of the assets of the Corporation
shall mean (x) the sale or other disposition other than in the ordinary course
of business of more than 50% of such assets, as determined by reference to
either (A) the book value, or (B) the fair market value, of such assets, or (y)
any issuance of Common Stock by the Corporation or transfer of Common Stock by
the holder thereof to any person or persons acting in concert or a group of
affiliated persons, which issuance or transfer results in such person or persons
or group holding in the aggregate more than 50% of the issued and outstanding
Common Stock after giving effect to such issuance or transfer
3
<PAGE>
(c) Non-Cash Distributions. In the event of a liquidation,
dissolution or winding up of the Corporation resulting in the availability of
assets other than cash for distribution to the holders of the Series Preferred
Stock, the holders of the Series Preferred Stock shall be entitled to a
distribution of cash and/or assets equal in value to the liquidation preference
and other distribution rights stated in Sections 2(a) and 2(b) hereof. In the
event that such distribution to the holders of the Series Preferred Stock shall
include any assets other than cash, the following provisions shall govern. The
Board of Directors shall first determine the value of such assets for such
purpose, and shall notify all holders of shares of Series Preferred Stock of
such determination. The value of such assets for purposes of the distribution
under this Section 2(c) shall be the value as determined by the Board of
Directors in good faith and with due care, unless the holders of a majority of
the outstanding shares of Series Preferred Stock shall object thereto in writing
within 15 days after the date of such notice. In the event of such objection,
the valuation of such assets for purposes of such distribution shall be
determined by an arbitrator selected by the objecting stockholders and the Board
of Directors, or in the event a single arbitrator cannot be agreed upon within
10 days after the written objection sent by the objecting stockholders in
accordance with the previous sentence, the valuation of such assets shall be
determined by arbitration in which (i) the objecting stockholders shall name in
their notice of objection one arbitrator, (ii) the Board of Directors shall name
a second arbitrator within 15 days from the receipt of such notice, (iii) the
two arbitrators thus selected shall select a third arbitrator within 15 days
thereafter, and (iv) the three arbitrators thus selected shall determine the
valuation of such assets within 15 days thereafter for purposes of such
distribution by majority vote. The costs of such arbitration shall be borne by
the Corporation or by the holders of the Series Preferred Stock (on a pro rata
basis out of the assets otherwise distributable to them) as follows: (i) if the
valuation as determined by the arbitrators is greater than 95 % of the valuation
as determined by the Board of Directors, the holders of the Series Preferred
Stock shall pay the costs of the arbitration, and (ii) otherwise, the
Corporation shall bear the costs of the arbitration.
Section 3 Voting Rights
(a) General. Except as otherwise expressly provided herein or as
required by law, the holder of each share of the Series Preferred Stock shall be
entitled to vote on all matters. Each share of Series Preferred Stock shall
entitle the holder thereof to such number of votes per share as shall equal the
number of shares of Common Stock into which such share of Series Preferred Stock
is convertible in accordance with the terms of Section 4 hereof at the record
date for the determination of stockholders entitled to vote on such matter or,
if no record date is established, at the date such vote is taken or any written
consent of stockholders is solicited. Except as otherwise expressly provided
herein (including, without limitation, the provisions of Section 5 hereof) or as
required by law, the holders of shares of Series Preferred Stock and the Common
Stock shall vote together as a single class on all matters.
(b) Board of Directors. The holders of the Series A Preferred
Stock shall be entitled to vote as a class separately from all other classes of
stock of the Corporation in any vote for the election of directors of the
Corporation, and shall be entitled to elect by such class vote two directors
(the "Series A Investor Directors"), one of which Series A Investor Directors to
be designated by Spectrum Equity Investors, L.P. ("Spectrum") for so long as it
owns
4
<PAGE>
shares of Series A Preferred Stock and thereafter by the holders of a majority
of the issued and outstanding shares of Series A Preferred Stock, and the other
to be designated by New Enterprise Associates VI Limited Partnership or its
affiliates (collectively, "NEA VI") for so long as it owns shares of Series A
Preferred Stock and thereafter by the holders of a majority of the issued and
outstanding shares of Series A Preferred Stock. The holders of the Series B
Preferred Stock shall be entitled to vote as a class separately from all other
classes of stock of the Corporation in any vote for the election of directors of
the Corporation, and shall be entitled to elect by such class vote one director
(the "Series B Investor Director") to be designated by Grotech Capital Group IV,
LLC ("Grotech IV") for so long as it owns shares of Series B Preferred Stock and
thereafter by the holders of a majority of the issued and outstanding shares of
Series B Preferred Stock. Initially, the Series A Investor Directors shall be
Kevin J. Maroni, as the designee of Spectrum, and Peter Barris, as the designee
of NEA VI. The initial Series B Investor Director shall be Stuart D. Frankel.
The holders of Common Stock shall be entitled to vote as a class separately from
all other classes in any vote for the election of directors of the Corporation,
and shall be entitled to elect by such class vote two directors (the "Common
Stock Directors"). Initially, the Common Stock Directors shall be David
Schaeffer and Richard Prins. Richard Prins shall not, without the consent of a
majority of the Series A Investor Directors and Series B Investor Director,
voting together, be removed by the holders of Common Stock as a member of the
Board of Directors of the Corporation prior to December 23, 1998. One additional
individual with experience in the telecommunications industry or other industry
that might be relevant to the development and implementation of the
Corporation's business plan (the "Outside Director"), who is unaffiliated with
the Corporation and reasonably acceptable to a majority of the Board of
Directors. shall be elected to the Corporation's Board of Directors by the
holders of the Series Preferred Stock and the Common Stock voting together as a
single class. In addition, a Chief Executive Officer of the Corporation (and any
successor thereto) shall be selected and hired by the Corporation, at all times
prior to December 23, 2000, by the affirmative vote of at least four of the five
Common Stock Directors, Series A investor Directors and the Series B Investor
Director, voting together, provided however, that (i) on or after December 23,
2000 or (ii) if Richard Prins shall no longer serve as a member of the
Corporation's Board of Directors for any reason prior to December 23, 2000, a
majority of the Common Stock Directors, the Series A Investor Directors and the
Series B Investor Director, voting together, shall select and hire a Chief
Executive Officer (or any successor thereto) as such. The Chief Executive
Officer as so selected and hired (and any replacement or successor Chief
Executive Officer) shall be elected to the Corporation's Board of Directors by
the holders of the Series Preferred Stock and the Common Stock voting together
as single class (the "Officer Director"). David Schaeffer may serve as Chief
Executive Officer of the Corporation in the discretion of the Board of
Directors, but in no event shall David Schaeffer be elected as the Officer
Director.
(c) Special Voting Rights. The holders of the Series Preferred
Stock shall be entitled to the special voting rights set forth in Section 6
hereof.
Section 4 Conversion. The holders of the Series Preferred Stock shall
have the following conversion rights:
5
<PAGE>
(a) Right to Convert. Subject to and in compliance with the
provisions of this Section 4, any shares of the Series Preferred Stock may, at
any time or from time to time at the option of the holder, be convened into
fully-paid and non-assessable shares of Common Stock. The number of shares of
Common Stock to which a holder of the Series Preferred Stock shall be entitled
upon conversion shall be the product obtained by multiplying the Applicable
Conversion Rate (determined as provided in Section 4(c)) by the number of shares
of Series Preferred Stock being converted.
(b) Automatic Conversion.
(i) Each share of the Series Preferred Stock outstanding
shall automatically be converted into the number of shares of Common Stock into
which such shares are convertible upon application of the then effective
Applicable Conversion Rate (determined as provided in Section 4(c)) immediately
upon the closing of an underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, or under
such other applicable securities regulations covering the offer and sale of
capital stock of the Corporation (other than a registration relating solely to
Rule 145 under such Act (or any successor thereto) or to an employee benefit
plan of the Corporation) in which (i) the Corporation is valued on a pre-money
basis at greater than $50,000,000, (ii) the gross proceeds received by the
Corporation exceed $20,000,000 and (iii) the Corporation uses a nationally
recognized underwriter approved by holders of a majority in interest of the
Series Preferred Stock (a "Qualified Public Offering").
(ii) Upon the occurrence of an event specified in Section
(4)(b)(i), the outstanding shares of Series Preferred Stock shall be convened
automatically without any further action by the holders of such shares and
whether or not the certificates representing such shares are surrendered to the
Corporation or its transfer agent; provided, however, that the Corporation shall
not be obligated to issue certificates evidencing such shares of the Series
Preferred Stock unless certificates evidencing such shares of the Series
Preferred Stock being convened are either delivered to the Corporation or any
transfer agent, as hereinafter provided, or the holder notifies the Corporation
or any transfer agent, as hereinafter provided, that such certificates have been
lost, stolen or destroyed and executes an agreement satisfactory to the
Corporation to indemnify the Corporation from any loss incurred by it in
connection therewith.
Upon the occurrence of the automatic conversion of all of the outstanding
Series Preferred Stock, the holders of the Series Preferred Stock shall
surrender the certificates representing such shares at the office of the
Corporation or of any transfer agent for the Common Stock. Thereupon there shall
be issued and delivered to each such holder, promptly at such office and in his
name as shown on such surrendered certificate or certificates, a certificate or
certificates for the number of shares of Common Stock into which the shares of
the Series Preferred Stock surrendered were convertible on the date on which
such automatic conversion occurred and cash as provided in Section 4(k) below
in respect of any fraction of a share of Common Stock issuable upon such
automatic conversion.
6
<PAGE>
(c) Applicable Conversion Rate. The conversion rate in effect at
any time for the applicable series of Series Preferred Stock (the "Applicable
Conversion Rate") shall equal the quotient obtained by dividing $1.00 in the
case of Series A Preferred Stock, or $3.28 in the case of Series B Preferred
Stock by the Applicable Conversion Value, calculated as hereinafter provided.
(d) Applicable Conversion Value. The Applicable Conversion Value
in effect initially, and until first adjusted in accordance with Section 4(e) or
4(f) hereof, shall be $1.00 in the case of Series A Preferred Stock, or $3.28 in
the case of Series B Preferred Stock.
(e) Adjustment for Common Stock Dividends, Subdividends and
Combinations of Common Stock, Etc. Upon the happening of any of the following:
(i) the issuance of additional shares of Common Stock of any class as a dividend
or other distribution of outstanding Common Stock, (ii) the subdivision of
outstanding shares of Common Stock of any class into a greater number of shares
of Common Stock, or (iii) the combination of outstanding shares of Common Stock
of any class into a smaller number of shares of Common Stock (each an
"Extraordinary Common Stock Event"), the Applicable Conversion Value shall,
simultaneously with the happening of such Extraordinary Common Stock Event, be
adjusted by dividing the then effective Applicable Conversion Value by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding (excluding treasury stock) immediately after such Extraordinary
Common Stock Event and the denominator of which shall be the number of shares of
Common Stock outstanding (excluding treasury stock) immediately prior to such
Extraordinary Common Stock Event, and the quotient so obtained shall thereafter
be the Applicable Conversion Value. The Applicable Conversion Value, as so
adjusted, shall be readjusted in the same manner upon the happening of any
successive Extraordinary Common Stock Event or Events.
(f) Adjustments for Diluting Issues
(i) Except as provided in Section 4(e) above or for Excluded
Shares (as defined below), if the Corporation shall issue any additional shares
of Common Stock of any class for no consideration or at a price per share less
than the Applicable Conversion Value in effect for each applicable series of
Series Preferred Stock immediately prior to such issuance or sale, then in each
such case such Applicable Conversion Value shall be reduced to such lower price.
For purposes of this Section 4(f), "Excluded Shares" shall mean shares
issued or delivered from treasury or stock options granted by the Corporation,
with the approval of the Board of Directors to directors, officers, employees,
agents or consultants of the Corporation (other than David Schaeffer) for up to
an aggregate of 439,024 shares of the Common Stock (as adjusted for stock
splits, stock dividends and the like).
For purposes of this Section 4(f), if a part or all of the consideration
received by the Corporation in connection with the issuance of shares of the
Common Stock or the issuance of any of the securities described below in
paragraph (ii) of this Section 4(f) consists of property other than cash, such
consideration shall be deemed to have the same value as is determined by the
7
<PAGE>
Corporation's Board of Directors with respect to receipt of such property so
long as such determination was made reasonably and in good faith, and shall
otherwise be deemed to have a value equal to its fair market value.
(ii) For the purpose of this Section 4(f), the issuance of
any warrants, options or other subscription or purchase rights with respect to
shares of Common Stock of any class and the issuance of any securities
convertible into shares of Common Stock of any class (or the issuance of any
warrants, options or any rights with respect to such convertible securities)
shall be deemed an issuance at such time of such Common Stock if the Net
Consideration Per Share which may be received by the Corporation for such Common
Stock (as hereinafter determined) shall be less than the Applicable Conversion
Value at the time of such issuance and, except as hereinafter provided, an
adjustment in the Applicable Conversion Value shall be made upon each such
issuance in the manner provided in paragraph (i) of this Section 4(f) as if such
Common Stock were issued at such Net Consideration Per Share. No adjustment of
the Applicable Conversion Value shall be made under this Section 4(f) upon the
issuance of any additional shares of Common Stock which are issued pursuant to
the exercise of any warrants, options or other subscription or purchase rights
or pursuant to the exercise of any conversion or exchange rights in any
convertible securities if any adjustment shall previously have been made upon
the issuance of such warrants, options or other rights. Any adjustment of the
Applicable Conversion Value with respect to this paragraph (ii) of this Section
4(f) shall be disregarded if, as and when the rights to acquire shares of Common
Stock upon exercise or conversion of the warrants, options, rights or
convertible securities which gave rise to such adjustment expire or are canceled
without having been exercised, so that the Applicable Conversion Value effective
immediately upon such cancellation or expiration shall be equal to the
Applicable Conversion Value in effect immediately prior to the time of the
issuance of the expired or canceled warrants, options, rights or convertible
securities, with such additional adjustments as would have been made to that
Applicable Conversion Value had the expired or canceled warrants, options,
rights or convertible securities not been issued, provided, however, that no
such readjustment of the Applicable Conversion Value shall have the effect of
increasing the Applicable Conversion Value to an amount which exceeds the lower
of (I) the Applicable Conversion Value on the original adjustment date, or (II)
the Applicable Conversion Value that would have resulted from any issuance of
any additional shares of Common Stock pursuant to such warrants, options, rights
or convertible securities between the original adjustment date and such
readjustment date. In the event that the terms of any warrants, options, other
subscription or purchase rights or convertible securities previously issued by
the Corporation are changed (whether by their terms or for any other reason) so
as to change the Net Consideration Per Share payable with respect thereto
(whether or not the issuance of such warrants, options, rights or convertible
securities originally gave rise to an adjustment of the Applicable Conversion
Value), the Applicable Conversion Value shall be recomputed as of the date of
such change, so that the Applicable Conversion Value effective immediately upon
such change shall be equal to the Applicable Conversion Value in effect at the
time of the issuance of the warrants, options, rights or convertible securities
subject to such change, adjusted for the issuance thereof in accordance with the
terms thereof after giving effect to such change, and with such additional
adjustments as would have been made to that Applicable Conversion Value had the
warrants, options, rights or convertible securities been issued on such changed
terms. For purposes
8
<PAGE>
of this paragraph (ii), the Net Consideration Per Share which may be received by
the Corporation shall be determined as follows:
(A) The Net Consideration Per Share shall mean the
amount equal to the total amount of consideration, if any, received by the
Corporation for the issuance of such warrants, options, rights or convertible
securities, plus the minimum amount of consideration, if any, payable to the
Corporation upon exercise or conversion thereof, divided by the aggregate number
of shares of Common Stock that would be issued if all such warrants, options,
subscriptions, or other purchase rights or convertible securities were exercised
or converted at such net consideration per share.
(B) The Net Consideration Per Share which may be
received by the Corporation shall be determined in each instance as of the date
of issuance of warrants, options, rights or convertible securities without
giving effect to any possible future price adjustments or rate adjustments which
may be applicable with respect to such warrants, options, rights or convertible
securities and which are contingent upon future events, provided that in the
case of an adjustment to be made as a result of a change in terms of such
warrants, options, rights or convertible securities, the Net Consideration Per
Share shall be determined as of the date of such change.
(g) Adjustments for Reclassification. If the Common Stock
issuable upon the conversion of the Series Preferred Stock shall be changed into
the same or different number of shares of any class or classes of stock, whether
by reclassification or otherwise (other than an Extraordinary Common Stock
Event, or a reorganization, merger, consolidation or sale of assets provided for
elsewhere in this Section 4), then and in each such event the holder of each
share of Series Preferred Stock shall have the right thereafter to convert such
share into the kind and amount of shares of stock and other securities and
property receivable upon such reorganization, reclassification or other change
by holders of the number of shares of Common Stock into which such shares of
Series Preferred Stock might have been convened immediately prior to such
reorganization, reclassification or change, all subject to further adjustment as
provided herein. Without limiting the generality of the foregoing, the
Applicable Conversion Rate, as defined in this Section 4, in respect of such
other shares or securities so receivable upon conversion of shares of Series
Preferred Stock shall thereafter be adjusted, and shall be subject to further
adjustment from time to time, in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to Common Stock contained in this
Section 4, and the remaining provisions herein with respect to the Common Stock
shall apply on like or similar terms to any such other shares or securities.
(h) Adjustments for Reorganizations. If at any time or from
time to time there shall be a capital reorganization of the Common Stock (other
than a subdivision, combination, reclassification or exchange of shares provided
for elsewhere in this Section 4) or a merger or consolidation of the Corporation
with or into another corporation or the sale of all or substantially all of the
Corporation's properties and assets to any other person, then, as a part of and
as a condition to the effectiveness of such reorganization, merger,
consolidation or sale, lawful and adequate provision shall be made so that if
the Corporation is not the surviving
9
<PAGE>
corporation, the Series Preferred Stock shall be convened into preferred stock
of the surviving corporation having equivalent preferences, rights and
privileges except that in lieu of being able to convert into shares of Common
Stock of the Corporation or the successor corporation the holders of the Series
Preferred Stock (including any such preferred stock issued upon conversion of
the Series Preferred Stock) shall thereafter be entitled to receive upon
conversion of the Series Preferred Stock (including any such preferred stock
issued upon conversion of the Series Preferred Stock) the number of shares of
stock or other securities or property of the Corporation or of the successor
corporation resulting from such merger or consolidation or sale, to which a
holder of the number of shares of Common Stock deliverable upon conversion of
the Series Preferred Stock immediately prior to the capital reorganization,
merger, consolidation or sale would have been entitled on such capital
reorganization, merger, consolidation, or sale. In any such case, appropriate
provisions shall be made with respect to the rights of the holders of the Series
Preferred Stock (including any such preferred stock issued upon conversion of
the Series Preferred Stock) after the reorganization, merger, consolidation or
sale to the end that the provisions of this Section 4 (including, without
limitation, provisions for adjustment of the Applicable Conversion Value and the
number of shares purchasable upon conversion of the Series Preferred Stock or
such preferred stock) shall thereafter be applicable, as nearly as may be, with
respect to any shares of stock, securities or assets to be deliverable
thereafter upon the consideration of the Series Preferred Stock or such
preferred stock.
Each holder of Series Preferred Stock upon the occurrence of a capital
reorganization, merger or consolidation of the Corporation or the sale of all or
substantially all of its assets and properties as such events are more fully set
forth in the first paragraph of this Section 4(h), shall have the option of
electing treatment of his shares of Series Preferred Stock under either this
Section 4(h) or Section 2(b) hereof, and except as otherwise provided in said
Section 2(b), notice of which election shall be submitted in writing to the
Corporation at its principal offices no later than 10 days before the effective
date of such event, provided that any such notice shall be effective if given
not later than 15 days after the date of the Corporation's notice, pursuant to
Section 8, with respect to such event.
(i) Certificate as to Adjustments. In each case of an
adjustment or readjustment of the Applicable Conversion Rate, the Corporation
will promptly furnish each holder of Series Preferred Stock with a certificate,
prepared by the chief financial officer of the Corporation, showing such
adjustment or readjustment, and stating in detail the facts upon which such
adjustment or readjustment is based.
(j) Mechanics of Conversion. To exercise its conversion
privilege, a holder of Series Preferred Stock shall surrender the certificate or
certificates representing the shares being converted to the Corporation at its
principal office, and shall give written notice to the Corporation at that
office that such holder elects to convert such shares. Such notice shall also
state the name or names (with address or addresses) in which the certificate or
certificates for shares of Common Stock issuable upon such conversion shall be
issued. The certificate or certificates for shares of Series Preferred Stock
surrendered for conversion shall be accompanied by proper assignment thereof to
the Corporation or in blank. The date when such written notice is received by
the Corporation together with the certificate or certificates representing the
shares of
10
<PAGE>
Series Preferred Stock being converted, shall be the "Conversion Date". As
promptly as practicable after the Conversion Date, the Corporation shall issue
and shall deliver to the holder of the shares of Series Preferred Stock being
convened, a certificate or certificates in such denominations as it may request
in writing for the number of full shares of Common Stock issuable upon the
conversion of such shares of Series Preferred Stock in accordance with the
provisions of this Section 4 and cash as provided in Section 4(k) below in
respect of any fraction of a share of Common Stock issuable upon such
conversion. Such conversion shall be deemed to have been effected immediately
prior to the close of business on the Conversion Date, and at such time the
rights of the holder as holder of the converted shares of Series Preferred Stock
shall cease and the person or persons in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable upon such conversion
shall be deemed to have become the holder or holders of record of shares of
Common Stock represented thereby.
(k) Fractional Shares. No fractional shares of Common Stock or
scrip representing fractional shares shall be issued upon conversion of Series
Preferred Stock. Instead of any fractional shares of Common Stock that would
otherwise be issuable upon conversion of Series Preferred Stock, the Corporation
shall pay to the holder of the shares of Series Preferred Stock that were
converted a cash adjustment in respect of such fraction in an amount equal to
the same fraction of the market price per share of the Common Stock (as
determined in a manner prescribed in good faith by the Board of Directors) at
the close of business on the Conversion Date.
(l) Partial Conversion. In the event some but not all of the
shares of Series Preferred Stock represented by a certificate or certificates
surrendered by a holder are converted, the Corporation shall execute and deliver
to or on the order of the holder, at the expense of the Corporation, a new
certificate representing the number of shares of Series Preferred Stock which
were not converted.
(m) Reservation of Common Stock. The Corporation shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the shares
of the Series Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series Preferred Stack, and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of the Series Preferred
Stock, the Corporation shall take such corporate action as may, in the opinion
of its counsel, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purpose.
Section 5 Redemption
(a) Optional Redemption. In the event that there shall not have
occurred a dosing of a Qualified Public Offering (as defined in Section 4(b)
hereof) prior to December 23, 2000, at the election of each holder of the Series
Preferred Stock outstanding as of December 24, 2000, the Corporation shall
redeem all shares of the Series Preferred Stock then outstanding. Payment of the
applicable Redemption Price (as defined below) shall be made by the Corporation
on January 23, 2001, for a cash price equal to the original purchase price paid
by
11
<PAGE>
such holders for each share of Series Preferred Stock outstanding, adjusted for
any stock split, combined consolidation or stock distribution or stock dividends
with respect to such shares (the "Redemption Price"). On or prior to December
24, 2000, the Corporation shall give written notice by mail, postage prepaid, to
the holders of the then outstanding shares of the Series Preferred Stock at the
address of each such holder appearing on the books of the Corporation or given
by such holder to the Corporation for the purpose of notice. Such notice shall
set forth the Redemption Price as defined above) and shall further state that
any holder of the Series Preferred Stock who intends to request redemption of
its Series Preferred Stock pursuant to this Section 5(a) must give written
notice to the Corporation of its request for redemption on or before January 11,
2001. If the Corporation receives requests for redemption on or prior to January
11, 2001 from the holders of a majority of the Series Preferred Stock, it shall
give written notice by mail, postage prepaid, to the holders of Series Preferred
Stock that all shares of the Series Preferred Stock then outstanding will be
redeemed on January 23, 2001 (the "Redemption Date") for a per share cash price
equal to the Redemption Price. The notice shall further call upon such holders
to surrender to the Corporation on or before the Redemption Date at the place
designated in the notice such holder's certificate or certificates representing
the shares to be redeemed. On or after the Redemption Date, each holder of
shares of the Series Preferred Stock called for redemption shall surrender the
certificate evidencing such shares to the Corporation. In the case of any
certificate or certificates which have been lost, stolen or destroyed, the
holder of such certificate or certificate shall make and deliver an affidavit of
that fact to the Corporation without the necessity of giving the Corporation a
bond.
(b) Termination of Rights. From and after the Redemption Date,
unless there shall have been a default in payment or tender by the Corporation
of the Redemption Price, all rights of the holders with respect to such redeemed
shares of the Series Preferred Stock (except the right to receive the Redemption
Price upon surrender or their certificate) shall cease and such shares shall not
thereafter be transferred on the books of this Corporation or be deemed to be
outstanding for any purpose whatsoever.
(c) Insufficient Funds. If the funds of the Corporation legally
available for redemption of shares of the Series Preferred Stock on the
Redemption Date are insufficient to redeem the total number of shares of the
Series Preferred Stock on such Redemption Date, the Corporation will use its
best efforts to engage in a recapitalization or the sale of its business or
businesses to generate sufficient funds to redeem all of the shares of Series
Preferred Stock. The Corporation shall use those funds which are legally
available to redeem the maximum possible number of such shares ratably among the
holders of such shares to be redeemed. At any time thereafter when additional
funds of the Corporation are legally available for the redemption of shares of
the Series Preferred Stock, such funds will immediately be used to redeem the
balance of the shares which the Corporation has become obligated to redeem on
the Redemption Date but which it has not redeemed at the Redemption Price. If
any shares of the Series Preferred Stock are not redeemed for the foregoing
reason or because the Corporation otherwise failed to pay or tender to pay the
aggregate Redemption Price on all outstanding shares of Series Preferred Stock,
all shares which have not been redeemed shall remain outstanding and entitled to
all the rights and preferences provided herein, and the Corporation shall pay
interest on the Redemption Price for the unredeemed portion at an aggregate per
annum rate equal to the greater of (i) twelve percent
12
<PAGE>
(12%) or (ii) the Base Rate or any similar lending rate announced from time to
time by The First National Bank of Boston or any successor entity plus five
percent (5%), increased, in each case, by one percent (1%) at the end of each
calendar quarter thereafter. All provisions hereof are hereby expressly limited
so that in no contingency or event whatsoever shall the amount paid or agreed to
be paid to the holders of the Series Preferred Stock exceed the maximum amount
which the holder is permitted to receive under applicable law. If fulfillment of
any provision hereof shall involve exceeding such amount, then the obligation to
be fulfilled shall automatically be reduced to the limit of such maximum amount.
As used herein, the term "applicable law" shall mean the law in effect as of the
date hereof, provided, however, that in the event that there is a change in the
law, which results in a higher permissible rate of interest, then these
provisions shall be governed by such new law as of its effective date.
Section 6 Restrictions and Limitations. The Corporation shall not
without the affirmative vote or written consent of the holders of a majority of
the then outstanding shares of the Series Preferred Stock:
(i) Redeem, purchase or otherwise acquire for value (or pay into
or set aside for a sinking fund for such purpose), any share or shares of Series
Preferred Stock other than pursuant to Section 5 hereof;
(ii) Redeem, purchase or otherwise acquire for value (or pay
into or set aside for a sinking fund for such purpose) any of the Common Stock
of any class or any other capital stock of the Corporation other than the Series
Preferred Stock or any of the Corporation's options, warrants or convertible or
exchangeable securities, except that these provisions will not prohibit the
Corporation from repurchasing or redeeming any shares of capital stock from
individuals and entities who have entered into stockholder agreements under
which the Corporation has the option to repurchase such shares upon the
occurrence of certain events, including the termination of employment and
involuntary transfers by operation of law (and their permitted transferees)
provided that the aggregate amount of repurchases thereunder shall not exceed
$50,000;
(iii) Authorize or issue, or obligate itself to Issue, any other
debt or equity security, other than as provided in that certain Investment and
Stockholder's Agreement, by and among the Corporation and the Investors named
therein, dated as of December 23, 1996 (the "Investment Agreement");
(iv) Increase or decrease (other than by conversion as permitted
hereby) the total number of authorized shares of Series Preferred Stock;
(v) Pay or declare any dividend or distribution on any of its
capital stock;
(vi) Authorize any merger, consolidation of the Corporation with
or into any other company or entity, or authorize the reorganization or sale of
the Corporation or the sale of substantially all of the assets of the
Corporation;
13
<PAGE>
(vii) Amend the charter documents of the Corporation or amend
the bylaws of the Corporation in any manner that adversely affects the
preferences, powers, rights or privileges of the holders of Series Preferred
Stock;
(viii) Authorize any reclassification or recapitalization of the
outstanding capital stock of the Corporation;
(ix) Approve the annual operating budget of the Corporation;
(x) Change the composition or compensation of management, or
(xi) Incur, create, assume, become or be liable in any manner
with respect to, or permit to exist, any new or additional indebtedness or
liability in excess of $50,000, except as provided in the Investment Agreement.
Section 7 No Reissuance of Series Preferred Stock. No share or shares
of the Series Preferred Stock acquired by the Corporation by reason of
redemption, purchase, conversion or otherwise shall be reissued, and all such
shares shall be canceled, retired, and eliminated from the shares which the
Corporation shall be authorized to issue. The Corporation may from time to time
take such appropriate corporate action as may be necessary to reduce the
authorized number of shares of the Series Preferred Stock accordingly.
Section 8 Notices of Record Date. In the event (i) the Corporation
establishes a record date to determine the holders of any class of securities
who are entitled to receive any dividend or other distribution, or (ii) there
occurs any capital reorganization of the Corporation, any reclassification or
recapitalization of the capital stock of the Corporation, any merger or
consolidation of the Corporation, or any transfer of all or substantially all of
the assets of the Corporation to any other company, or any other entity or
person, or any voluntary or involuntary dissolution, liquidation or winding up
of the Corporation, the Corporation shall mail to each holder at Series
Preferred Stock at least 20 days prior to the record date specified therein, a
notice specifying (a) the date of such record date for the purpose of such
dividend or distribution and a description of such dividend or distribution, (b)
the date on which any such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or winding up is expected to
become effective, and (c) the time, if any, that is to be fixed, as to when the
holders of record or Common Stock (or other securities) shall be entitled to
exchange their shares of Common Stock (or other securities) for securities or
other property deliverable upon such reorganization, reclassification, transfer,
consolidation, merger. dissolution, liquidation or winding up.
Section 9 Other Rights. Except as otherwise provided in this Restated
Certificate of Incorporation shares of each series of the Series Preferred Stock
and shares of Common Stock shall be identical in all respects (each share of
Series Preferred Stock having equivalent rights to the number of shares of
Common Stock into which it is then convertible), shall have the same powers,
preferences and rights, without preference of any such class or share over any
other such class or share, and shall be treated as a single class of stock for
all purposes.
14
<PAGE>
Section 10 Ranking. The Series B Preferred Stock shall rank on a parity
with the Series A Preferred Stock as to the distribution of assets on
liquidation, dissolution and winding up of the Corporation. The Series Preferred
Stock shall rank senior to the Common Stock as to the distribution of assets on
liquidation, dissolution and winding up of the Corporation.
Section 11 Miscellaneous.
(a) All notices referred to herein shall be in writing, and all
notices hereunder shall be deemed to have been given upon the earlier of
delivery thereof by hand delivery, by courier, or by standard form of
telecommunication, addressed: (i) if to the Corporation, to its principal
executive office (Attention President) and to the transfer agent, if any, for
the Series Preferred Stock or other agent of the Corporation designated as
permitted hereby or (ii) if to any holder of the Series Preferred Stock or
Common Stock, as the case may be, to such holder at the address of such holder
as listed in the stock record books of the Corporation (which may include the
records of any transfer agent for the Series Preferred Stock or Common Stock, as
the case may be) or (iii) to such other address as the Corporation or any such
holder, as the case may be, shall have designated by notice similarly given.
(b) The Corporation shall pay any and all stock transfer and
documentary stamp taxes that may be payable in respect of any issuance or
delivery of shares of Series Preferred Stock or shares of Common Stock or other
securities issued on account of Series Preferred Stock pursuant hereto or
certificates representing such shares or securities. The Corporation shall not,
however, be required to pay any such tax which may be payable in respect of any
transfer involved in the issuance or delivery of shares of Series Preferred
Stock or Common Stock or other securities in a name other than that in which the
shares of Series Preferred Stock with respect to which such shares or other
securities are issued or delivered were registered, or in respect of any payment
to any person with respect to any such shares or securities other than a payment
to the registered holder thereof, and shall not be required to make any such
issuance, delivery or payment unless and until the person otherwise entitled to
such issuance, delivery or payment has paid to the Corporation the amount of any
such tax or has established, to the satisfaction of the Corporation, that such
tax has been paid or is not payable.
(c) The Corporation may appoint, and from time to time discharge
and change, a transfer agent of the Series Preferred Stock. Upon any such
appointment or discharge of a transfer agent, the Corporation shall send notice
thereof by hand delivery, by courier, by standard form of telecommunication or
by first class mail (postage prepaid), to each holder of record or the Series
Preferred Stock.
ARTICLE IV
THE BOARD OF DIRECTORS
The business of the Corporation shall be managed by a Board of Directors.
The Board of Directors shall have the power, unless and to the extent that the
Board may from time to time by resolution relinquish or modify the power,
without the assent or vote of the stockholders, to make, alter, amend, change,
add to, or repeal the Bylaws of the Corporation. From and after the
15
<PAGE>
first annual meeting of stockholders, the number of directors which shall
constitute the entire Board of Directors shall consist of seven (7) individuals.
ARTICLE V
COMPROMISE OR ARRANGEMENTS
Whenever a compromise or arrangement is proposed between this Corporation
and its creditors or any class of them and/or between this Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this Corporation under the provisions of
section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation under
the provisions of section 279 of Title 8 of the Delaware Code order a meeting of
the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on this Corporation. Nothing contained
herein shall affect or impair the Corporation's ability to avail itself of any
other state or federal law concerning insolvency and/or reorganization,
including but not limited to Title 11 of the U.S. Code.
ARTICLE VI
REGISTERED OFFICE AND REGISTERED AGENT
The address of the registered office of the Corporation in Delaware is
located at 1013 Centre Road, in the city of Wilmington, County of New Castle,
Delaware 19805 and its registered agent at that address is The Prentice-Hall
Corporation System, Inc.
ARTICLE VII
INDEMNIFICATION BY CORPORATION
The Corporation shall indemnify, and advance expenses to, its directors,
officers, employees and agents, and all persons who at any time served as
directors, officers, employees or agents of the Corporation, to the extent
permitted, and in the manner provided by, Section 145 of the Delaware General
Corporation Law, as amended, or any successor provisions, and shall have power
to make any other or further indemnity permitted under the laws of the State of
Delaware.
16
<PAGE>
ARTICLE VIII
ELIMINATION OF LIABILITY OF DIRECTORS
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director except (i) for any breach of the director's duty of loyalty
to the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived any improper personal benefit. If
the General Corporation Law of Delaware is amended after the effective date of
this Restated Certificate of Incorporation to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the General Corporation Law of Delaware, as so amended.
Any repeal or modification of this Article VIII by (i) the stockholders of
the Corporation or (ii) amendment to the General Corporation Law of Delaware
(unless such statutory amendment specifically provides to the contrary) shall
not adversely affect any right or protection, existing at the time of such
repeal or modification with respect to any acts or omissions occurring either
before or after such repeal or modification, of a person serving as a director
at the time of such repeal or modification.
ARTICLE IX
BYLAWS
The Board is expressly authorized to adopt, amend or repeal the Bylaws of
the Corporation.
ARTICLE X
DURATION OF CORPORATION
The duration of the Corporation is to be perpetual.
ARTICLE XI
PREEMPTIVE RIGHTS
Except as may by provided in any written contract or written agreement to
which the Corporation is a party from time to time, there shall be no preemptive
rights to acquire additional shares of the Corporation.
17
<PAGE>
IN WITNESS WHEREOF, this Restated Certificate of Incorporation, which
restates and integrates and also amends the provisions of the Certificate of
Incorporation of the Corporation and which has been duly adopted in accordance
with Sections 242 and 245 of the General Corporation Law, as the Corporation has
received payment for its capital stock, has been executed by its President and
Secretary this December 16, 1996.
PATHNET, INC.
By: /s/ David Schaeffer
------------------------------------
Name: David Schaeffer
Title: President
Attest:
By: /s/ Michael A. Lubin
------------------------------------
Name: Michael A. Lubin
Title: Secretary
- 18 -
<PAGE>
PAGE 1
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY "PATHNET, INC." IS DULY INCORPORATED UNDER THE LAWS OF THE STATE OF
DELAWARE AND IS IN GOOD STANDING AND HAS A LEGAL CORPORATE EXISTENCE SO FAR AS
THE RECORDS OF THIS OFFICE SHOW, AS OF THE TWENTY-SIXTH DAY OF AUGUST, A.D.
1997.
AND I DO HEREBY FURTHER CERTIFY THAT THE FRANCHISE TAXES HAVE BEEN PAID TO
DATE.
AND I DO HEREBY FURTHER CERTIFY THAT THE ANNUAL REPORTS HAVE BEEN FILED TO
DATE.
[SECRETARY'S OFFICE SEAL -- STATE OF DELAWARE]
/s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
2533940 8300 AUTHENTICATION: 8623583
971285426 DATE: 08-26-97
<PAGE>
SCHEDULE P
DELIVERABLES OF INCUMBENT
1. Within thirty (30) days of the Effective Date, any existing tower drawings
and specifications, inventory lists and other documents relating to the
sites set forth on Schedule B or any Amended Schedule B necessary for
PathNet to perform its obligations under this Agreement.
2. On or before the Effective Date, evidence of ownership by Incumbent of the
sites set forth on Schedule B or any Amended Schedule B or, in the event
Incumbent leases such sites, evidence of Incumbent's leasehold interest in
such sites.
3. On or before the Effective Date, copies of all environmental reports,
title reports, surveys, specified or legal access, and zoning Permits and
licenses relating to the sites set forth on Schedule B or any Amended
Schedule B.
4. On the Effective Date, evidence that Incumbent's existing system is in
compliance, as of the date hereof, with all applicable Federal, state and
local laws.
5. Within thirty (30) days of the Effective Date, the results of any
structural, mechanical, and electrical inspections and reports relating to
Incumbent's existing system facilities or sites, which have been performed
pursuant to the requirements of any applicable Federal, state or local law
or by Incumbent at its discretion.
6. Within thirty (30) days of the Effective Date, the names, addresses and
contact persons of any consultants or Subcontractors engaged by Incumbent
in connection with Incumbent's existing system, Facilities or sites and
copies of any reports or documents produced by such consultants or
Subcontractors.
7. Simultaneously with the execution and delivery of this Agreement, an
executed Escrow Agreement, as described in Section 4.
8. Upon the request of PathNet, any information requested by PathNet pursuant
to Section 1.2 of Schedule A.
9. Within thirty (30) days after receipt of the System Design, written
approval of the System Design or a list of suggested modifications to such
System Design, as described in Section 3.1 of Schedule A.
10. Within thirty (30) days after receipt of each of the Project Schedule, the
Cutover Plan and the Project Management Plan, written approval of such
Project Schedule, Cutover Plan and Project Management Plan, respectively,
or a list of suggested modifications to such Project Schedule, Cutover
Plan and Project Management Plan, as the case may be, as described in
Section 4.1.1 of Schedule A.
P-1
<PAGE>
11. Promptly after completion of the site acceptance testing, the Deficiency
List as set forth in Section 5.7 of Schedule A.
12. Promptly after approval of the site acceptance test data as set forth in
Section 5.7 of Schedule A, a Certificate of Acceptance substantially in
the form attached hereto as Exhibit A-8 to this Schedule A.
13. Upon acceptance of any Capacity Expansion in accordance with the procures
set forth in Section 7.1 of Schedule A, a Certificate of Acceptance
relating to such Capacity Expansion substantially in the form attached
hereto as Exhibit A-9 to this Schedule A.
P-2
<PAGE>
SCHEDULE Q
DELIVERABLES OF PATHNET
1. Within sixty (60) days of the Effective Date, the Vendor Credit Assurances
described in Section 4.
2. Simultaneously with the execution and delivery of this Agreement, an
executed Escrow Agreement, as described in Section 4.
3. Within sixty (60) days after the Effective Date, all required
subordination agreements as set forth in Section 5.11.
4. At the request of Incumbent, the proof of licensing, as described in
Section 11.4.
5. Upon completion of the preliminary analysis set forth in Section 1.1 of
Schedule A, the results of such analysis, including, but not limited to,
the Existing System Inventory, the Path Studies, the Frequency
Availability Model, the Tower Analysis, the Economic Model, the System
Design, the System Budget, the Channel Plan, and the Preliminary
Construction Schedule.
6. Upon completion of the preliminary analysis set forth in Section 1.1 of
Schedule A, the Project Drawings set forth in Section 1.3 of Schedule A.
7. Prior to the commencement of any services set forth in Schedule A, the
Certificates of Insurance described in Section 11.1.
8. Upon completion of the preliminary analysis set forth in Section 1.1 of
Schedule A, the Modifications SOW, as set forth in Section 2.1 of Schedule
A.
9. At any time, a copy of any revised System Design, as described in Section
3 of Schedule A.
10. Within thirty (30) days after approval by Incumbent of the System Design,
the Project Schedule, as set forth in Section 4.1.1 of Schedule A.
11. Within thirty (30) days after approval by Incumbent of the System Design,
the Cutover Plan, as set forth in Section 4.1.1 of Schedule A.
12. Within thirty (30) days after approval by Incumbent of the System Design,
the Project Management Plan, as set forth in Section 4.1.1 of Schedule A.
13. Promptly after receipt of a list of suggested modifications from
Incumbent, a revised Project Schedule, Cutover Plan or Project Management
Plan, as the case may be, as set forth in Section 4.1.1 of Schedule A.
Q-1
<PAGE>
14. After installation has begun and until Commissioning a bi-weekly Progress
Report, as set forth in Section 4.2.1 of Schedule A.
15. At any time, any revised Project Drawing, as described in Section 4.1.3 of
Schedule A.
16. Promptly after completion of the site acceptance testing set forth in
Section 5 of Schedule A, a copy of the results of such testing.
17. At Commissioning, the Station Log Books as set forth in Section 6.2 of
Schedule A.
18. At least fifteen (15) days prior to any Capacity Expansion, the Capacity
Expansion Schedule, as set forth in Section 7.1 of Schedule A.
19. Upon receipt of the result of the testing performed on any Capacity
Expansion, a copy of such results, as set forth in Section 7.1 of Schedule
A.
20. At least two (2) weeks prior to the receipt of any equipment or materials,
the ship and delivery schedules set forth in Section 8.12 of Schedule A.
Q-2
<PAGE>
SCHEDULE R
FORM OF SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement"), dated as of September ____,
1997, between PathNet, Inc., a Delaware corporation with its principal place of
business at the address set forth below ("Pledgor") and KN Energy, Inc., a
Kansas corporation with its principal place of business at the address set forth
below ("Pledgee").
RECITALS
WHEREAS, Pledgor and Pledgee have entered into a Fixed Point Microwave
Services Agreement, dated as of September ___, 1997 (the "FPM Agreement")
pursuant to which Pledgee has agreed, among other things, to engage Pledgor as,
and Pledgor has agreed to act as, Pledgee's sole representative for the purpose
of, (i) installing, managing and operating a high capacity digital microwave
system along Pledgee's current microwave paths (the "System"), and (ii)
marketing and selling any excess capacity created by such high capacity digital
microwave system; and
WHEREAS, Pledgor is the owner of those certain radios, radio software,
antenna, waveguide, multiplexers and other equipment necessary to operate the
Initial System (as such term is defined in the FPM Agreement) (collectively, the
"Assets"), all of which are identified more particularly on Exhibit A attached
hereto; and
WHEREAS, a condition to the execution, delivery and consummation of the
transactions contemplated by the FPM Agreement is the execution and delivery of
this Agreement;
WHEREAS, all capitalized terms used herein and not defined herein shall
have the meanings ascribed to such terms in the FPM Agreement;
NOW, THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
1. Grant of Security Interest in Assets. In order to induce Pledgee to
execute, deliver and perform the FPM Agreement and as security for Pledgor's or
Pledgee's successors' performance of Pledgor's obligations under the FPM
Agreement and in consideration for the Project fee, Pledgor hereby assigns,
conveys, mortgages, pledges, hypothecates, transfers and confirms to Pledgee,
its successors and assigns, and hereby grants to Pledgee a lien on and security
interest in, all of Pledgor's right, title, interest and powers in the Assets.
This Agreement constitutes a valid and continuing lien on and security interest
in the Assets in favor of Pledgee, prior to all other liens, encumbrances,
security interest and rights of others and is enforceable as such as against
creditors of and purchasers from the Pledgor. All such action necessary or
desirable to protect and perfect such security interest in each item of the
Assets will have been duly taken prior to the date the Assets are installed,
including but not limited to the
R-1
<PAGE>
Pledgor, at its expense, causing UCC-1 Financing Statements with respect to the
Assets to be filed and recorded in all places necessary to establish create and
perfect the lien intended to be created hereby.
2. Events of Default. The occurrence of any of the following events or
circumstances shall constitute an Event of Default under this Agreement:
(a) the liquidation or dissolution of Pledgor under Chapter 7 to the
Federal bankruptcy laws or otherwise under the Delaware general
corporation law, or
(b) the default by Pledgor under its financing arrangement with its
Vendor and Incumbent's receipt of written notice from such vendor stating
its intention to waive its right to operate the System for the purpose of
generating Revenue from the sale of Excess Capacity.
3. Remedies Upon Default. If an Event of Default shall have occurred, the
Pledgee may, in addition to any remedies it may have under the FPM Agreement,
(a) take possession or control of, store, lease, operate, manage, sell or
otherwise dispose of all or any part of the Assets, (b) notify all parties under
any account or contract forming all or any part of the Assets to make any
payments due to Pledgor directly to Pledgee, (c) in the name of Pledgor or in
the name of Pledgee, demand, collect, receive, sue for and give receipts and
releases for any and all amounts due under such account and contract rights, (d)
endorse as the agent of Pledgor any check, note, chattel paper, documents or
instruments forming all or any part of the Assets, (e) make formal application
for the transfer to Pledgee of all of Pledgor's Permits, licenses, approvals and
the like relating to the Assets and (f) take any action which Pledgee deems
necessary or desirable to protect and realize upon the security interest in the
Assets.
4. Termination of Security Interest. The security interest set forth in
Section 1 above shall terminate on the later of the date which is the
twenty-fifth anniversary of Commissioning and simultaneously with the expiration
of the FPM Agreement. Upon expiration, the Pledgee shall take possession of the
Assets.
5. Representations, Warranties and Covenants of the Pledgor. The Pledgor
hereby represents, warrants and covenants that:
(a) The Pledgor has full corporate power and authority to execute
and deliver and perform its obligations under this Agreement
and this Agreement is the Pledgor's valid and binding
obligation, enforceable in accordance with its terms, except
as such enforcement may be limited by (i) applicable
bankruptcy, reorganization, insolvency, moratorium or other
laws affecting creditors' rights generally, (ii) equitable
rules or principles affecting the enforcement of obligations
generally, whether at law or in equity, or (iii) the exercise
of the discretionary powers of any court before which may be
brought any proceeding seeking equitable remedies, including,
without limitation, specific performance and injunctive
relief.
R-2
<PAGE>
(b) Pledgor represents and warrants that it is or will be before
Commissioning (as such term is defined in the FPM Agreement)
the owner of the Assets and has good and marketable title to
the Assets, free and clear of all liens, security interests
and other encumbrances, except for those in favor of the
Pledgee.
(c) Pledgor will not sell, lease, transfer, exchange or otherwise
dispose of the Assets, or any part thereof, without the prior
written consent of Pledgee, and will not permit any lien,
security interest or other encumbrance to attach to the
Assets, or any part thereof, other than those in favor of the
Pledgee or those permitted by Pledgee in writing.
(d) No approval, consent or other action by the stockholders and
Pledgor or by any governmental authority, or by any other
person or entity, is or will be necessary to permit the valid
execution, delivery and performance by the Pledgor of this
Agreement or any other instruments or agreements executed in
connection herewith.
6. Waiver of Notice, Etc. Except as specifically provided for herein, the
Pledgor waives demand, notice, protest, notice of acceptance of this Agreement,
notice of any extensions granted, collateral received or delivered or any action
taken in reliance hereon; all demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of any obligation and
all other demands and notices of any description; and assents to any extension
or postponement of the time of payment of any of the obligations created
hereunder or any other indulgence.
7. Governing Law. This Agreement is to be governed by and construed in
accordance with the laws of the State of New York. The Pledgor agrees that any
action or proceeding brought by the Pledgee under this Agreement (a) will be
litigated under the laws of the State of New York and agrees to be subject to
the jurisdiction of the Courts of the State of New York or (in a case involving
diversity of citizenship) the United States District Court for New York, (b)
that service of process of any summons and complaint in any such action or
proceeding may be made by registered or certified mail directed to the Pledgor
at the address hereafter set forth, the Pledgor waiving personal service
thereof, and (c) within forty-five (45) days after summons and complaint, and
should the Pledgor so served fail to appear or answer within said forty-five
(45) day period, the Pledgor shall be deemed in default and judgment entered
against the Pledgor for the amount demarked in any summons and complaint so
served.
8. Succession. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, successors and assigns and shall also inure to the benefit of
the holders from time to time of the obligations.
9. Invalidity of Provisions. In the event that any one or more of the
provisions contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement, and
each term and provision of this Agreement shall be valid and enforceable to
R-3
<PAGE>
the fullest extent permitted by law.
10. Amendments. This Agreement may not be changed orally, but only by an
agreement in writing signed by the parties against whom enforcement of any
waiver, change, modification or discharge is sought.
11. Notices. All communications under or with respect to this Agreement
shall be in writing and shall be delivered to the parties in the manner
proscribed and addressed as designated in the FPM Agreement, subject to a change
thereof by written notice.
12. Counterparts. This Agreement may be executed in two or more
counterparts, all of which together shall constitute one and the same
instrument.
13. Entire Agreement. This Agreement embodies the entire understanding of
the parties with respect to the subject matter of this Agreement and no oral
understandings exist among the parties hereto with respect to the subject matter
hereof except as herein expressly set forth.
14. Captions. The captions of this Agreement are for convenience only and
shall neither limit nor enlarge the provisions hereof.
15. FCC Consent. Notwithstanding anything to the contrary contained herein
or the FPM Agreement, the Pledgee will not take any action pursuant to this
Agreement or the FPM Agreement that would constitute or result in any assignment
of or a transfer of control of any FCC authorization(s) held by Pledgor if such
assignment or transfer of control would require under then existing law
(including the written rules and regulations promulgated by the FCC), the prior
approval of the FCC, without first obtaining such approval of the FCC. The
Pledgee specifically agrees that (a) the voting rights of the pledged assets
will remain with the Pledgor upon and following the occurrence of an Event of
Default unless any required prior approvals of the FCC to the transfer of such
voting rights to the Pledgee shall have been obtained; and (b) prior to the
exercise of voting rights by the purchaser at any such sale, the prior consent
of the FCC pursuant to 47 U.S.C. 310(d) will be obtained. The Pledgor agrees to
take any action which the Pledgee may reasonably request in order to obtain and
enjoy the full rights and benefits granted to the Pledgee by this Agreement
including specifically the use of the best efforts of the Pledgor to assist in
obtaining approval of the FCC for any action or transaction contemplated by this
Agreement which is then required by law, and specifically, without limitation,
upon request following the occurrence of an Event of Default, to prepare, sign
and file (or cause to be prepared, signed or filed) with the FCC any portion of
any application or applications for consent to the assignment of an
authorization or transfer of control required to be signed by the Pledgor and
necessary or appropriate under the FCC's rules and regulations for approval of
any sale or transfer of any of the capital stock or assets of the Pledgor or any
transfer of control of any FCC authorization.
R-4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the day and year first above written.
PATHNET, INC. KN ENERGY, INC.
By: __________________________________ By: _________________________________
Its __________________________________ Its _________________________________
Address: 1015 31st Street, N.W. 370 Van Gordon Street
Washington, D.C. 20007 P.O. Box 281304
Lakewood, CO 80228-8304
R-5
<PAGE>
Exhibit 10.28
MAINTENANCE AND PROVISIONING SERVICES AGREEMENT
This MAINTENANCE AND PROVISIONING SERVICES AGREEMENT (the "Maintenance
Agreement" or "Agreement") is made and entered into as of the 26th day of
June, 1998 (the "Effective Date"), by and between PATHNET, INC. (hereinafter
"Pathnet"), a Delaware corporation, having its principal place of business at
1015 31st Street, NW, Washington, D.C., 20007, and TEXACO PIPELINE, INC.
(hereinafter, "Texaco"), a Delaware corporation having a place of business at
1670 Broadway, Denver, Colorado 80202 (collectively, the "Parties" and each, a
"Party").
W I T N E S S E T H:
WHEREAS, Pathnet is engaged in the business of creating high-capacity,
digital microwave communications systems for purposes of marketing the long
distance telecommunications capacity created by such systems;
WHEREAS, Texaco and Pathnet have entered into a Fixed Point Microwave
Services Agreement pursuant to which, among other things, Pathnet has agreed to
construct and install a high-capacity digital microwave system utilizing
Texaco's microwave telecommunications facilities;
WHEREAS, Pathnet wishes to engage the services of Texaco to provide
preventative and remedial maintenance and provisioning services on the Equipment
and System and to maintain the System at a minimal level of acceptability to
ensure overall effective operations;
WHEREAS, Texaco wishes to perform Maintenance and Circuit Provisioning for
such System for Pathnet;
WHEREAS, Pathnet wishes to perform network management, dispatch and
maintenance support functions for the System;
NOW, THEREFORE, in consideration of the mutual promises contained herein, the
parties agree as follows:
1. DEFINITIONS:
1.1 CERTAIN DEFINITIONS
1.1.1 "AFFILIATE" shall be as defined in the FPM Agreement.
1.1.2 "BUILD-OUT PERIOD" shall be as defined in the FPM Agreement.
1.1.3 "CIRCUIT PROVISIONING" shall mean the process of adding
additional circuits to the System, and shall include installation of
wiring, circuit pack placement and coordinated testing to ensure that
such additional circuitry meets all technical operating services
standards.
<PAGE>
1.1.4 "COMMISSIONING" shall be as defined in the FPM Agreement.
1.1.5 "CRITICAL SERVICE LEVELS" shall mean the service levels and
standards of operations set forth in Schedule B attached hereto and
incorporated herein.
1.1.6 "DISPATCH CHARGE" shall mean the dispatch fee for Circuit
Provisioning paid by Pathnet to Texaco upon successful completion of a
Circuit Provisioning dispatch, as more particularly described in
Schedule C attached hereto and incorporated herein.
1.1.7 "EQUIPMENT" shall mean the equipment described in Schedule D
attached hereto and incorporated herein, as amended from time-to-time.
1.1.8 "FACILITIES" shall be as defined in the FPM Agreement.
1.1.9 "FIELD TECHNICIAN" shall mean Texaco's employees, agents or
subcontractors certified by Pathnet to provide Services pursuant to
the procedures described in Schedule G attached hereto and
incorporated herein, as such standards may be modified from time to
time.
1.1.10 "FORCE MAJEURE" shall mean an event defined in Section 14.3
of this Maintenance Agreement.
1.1.11 "FPM AGREEMENT" shall mean the Agreement to Create and
Manage a High Capacity Telecommunications System by and between
Pathnet and Texaco executed by Texaco on May 21, 1997.
1.1.12 "IXC" shall mean a telephone company that is permitted to
provide long distance telephone service between local access transport
areas.
1.1.13 "LOSSES" shall mean all losses, liabilities, damages and
claims, and all related costs and expenses, including reasonable legal
fees and disbursements and costs of investigation, litigation,
settlement, judgment, interest and penalties.
1.1.14 "MAINTENANCE" shall mean the ongoing and scheduled
inspections, ongoing and scheduled repair, ongoing and scheduled
prevention of repair, and unscheduled, on-call corrective action of
any and all Equipment necessary for the System to operate in
accordance with this Maintenance Agreement and its Schedules.
1.1.15 "MAINTENANCE AND PROVISIONING TEST EQUIPMENT" shall mean all
equipment used or owned (including methods and tools) in connection
with the testing and maintenance of the Equipment and System in
accordance with the Performance Standards of this Maintenance
Agreement and its Schedules.
1.1.16 "MONTHLY SERVICE CHARGES" shall mean the charges to be paid
by Pathnet to Texaco hereunder, including any charges for Preventive
Maintenance,
2
<PAGE>
Remedial Maintenance and Circuit Provisioning, as more fully described
in Section 5 of this Maintenance Agreement and Schedule C, attached
hereto.
1.1.17 "NETWORK OPERATING CENTER" shall mean the center established
by Pathnet to monitor Texaco's System and other Systems comprising the
Pathnet network.
1.1.18 "NON-TEXACO SITE" shall mean Sites not owned or leased by
Texaco and not located at Texaco's Facilities.
1.1.19 "OUTAGE" shall mean an unscheduled interruption in
telecommunications services on the System, including any period of ten
(10) consecutive Severely Errored Seconds (as defined in Schedule B
attached hereto).
1.1.20 "PASS-THROUGH EXPENSES" shall mean Texaco's reasonable and
actual out-of-pocket expenses that are required to be reimbursed by
Pathnet hereunder and that are incurred by Texaco for Services
required to operate the System but are not accounted for in the
payments to Texaco pursuant to this Agreement. Pass-Through Expenses
shall not include late fees and interest on payments.
1.1.21 "PATH" shall be as defined in the FPM Agreement.
1.1.22 "PERFORMANCE STANDARDS" shall mean individually and
collectively the quantitative and qualitative performance standards
and commitments for the services contained in this Maintenance
Agreement, including, but not limited to, the Critical Service Levels.
1.1.23 "PERSON" shall mean an individual or a corporation,
partnership, limited liability company, trust, incorporated or
unincorporated association, joint venture, joint stock company, or
other entity of any kind or any governmental authority.
1.1.24 "PREVENTIVE MAINTENANCE" shall mean the ongoing and
scheduled Maintenance required for the normal operations of the
Equipment and System, as more fully described in Schedule A attached
hereto and incorporated herein.
1.1.25 "REMEDIAL MAINTENANCE" shall mean the unscheduled, on-call
Maintenance required to correct a situation adversely affecting the
System.
1.1.26 "REMEDIAL MAINTENANCE SITUATION" or "RMS" shall mean a
situation requiring Remedial Maintenance. Remedial Maintenance
Situations are generally divided into Tier One, Tier Two and Tier
Three, based upon the severity and priority of the situation.
1.1.27 "RESPONSE TIME SCHEDULE" shall mean the schedule describing
Remedial Maintenance Response Time attached as Schedule A-2 to
Schedule A and incorporated herein.
3
<PAGE>
1.1.28 "SEGMENT" shall be as defined in the FPM Agreement.
1.1.29 "SERVICES" shall be as defined in Section 3 of this
Maintenance Agreement and Schedule A attached hereto.
1.1.30 "SITE" shall be as defined in the FPM Agreement.
1.1.31 "STOCKING DEPOT" shall mean an enclosed and reasonably
protected storage facility or mobile vehicle required for housing the
Spare Parts inventory, including the facilities described in Schedule
E-1, attached hereto.
1.1.32 "SYSTEM" shall be as defined in the FPM Agreement.
1.1.33 "TIER ONE RMS" shall include (i) an Outage; (ii) repeated or
continuous performance of the System below Critical Service Levels;
and (iii) a situation that, if not corrected within the Tier One time
frames set forth in the Response Schedule, would likely lead to an
Outage or repeated or continuous performance of the System below
Critical Service Levels.
1.1.34 "TIER TWO RMS" shall include (i) a situation that causes or
could cause transmission traffic to be switched to the protection
radio channel; (ii) a situation that results or could result in a
failure in the protection radio channel that makes it unavailable for
traffic; (iii) isolated or non-continuous performance of the System
below Critical Service Levels; and (iv) a situation that, if not
corrected within the Tier Two time frames set forth in the Response
Time Schedule, would likely lead to an Outage or repeated or
continuous performance of the System below Critical Service Levels.
1.1.35 "TIER THREE RMS" shall include situations that have no
immediate adverse affect on the System, and are not likely to
adversely affect the System within the near future, but should be
corrected as soon as commercially practical.
1.1.36 "TROUBLE TICKET" shall mean a tracking ticket generated by
the Network Operating Center describing a System event that requires
Service, including a Remedial Maintenance Situation. A Trouble Ticket
is deemed "Dispatched" upon delivery to Texaco by e-mail, telecopier,
hand delivery or, if none of the foregoing is feasible, by verbal
communication followed by delivery by one of the foregoing methods.
1.1.37 "WORK ORDER" shall mean an order for Circuit Provisioning
sent by e-mail or by facsimile by Pathnet to Texaco.
4
<PAGE>
1.2 OTHER TERMS
Capitalized terms used in this Maintenance Agreement but not defined herein
shall have the definitions set forth in the FPM Agreement unless the
context dictates otherwise. References herein to Schedules are to the
Schedules attached to this Maintenance Agreement unless otherwise
specified. Other Terms used in this Maintenance Agreement not explicitly
defined are defined by the context in which they are used.
2. TERM
2.1 TERM
The term of this Maintenance Agreement shall commence upon Commissioning,
shall continue for one (1) year thereafter (the "Term"), and, subject to
the provisions of Section 7.2 and Article 9 hereof, shall automatically
renew for successive one (1) year Terms, provided that either party may
terminate this Agreement effective upon any anniversary of Commissioning by
delivering written notice to the other at least one hundred twenty (120)
days prior to such anniversary. and shall expire on the first anniversary
of such date (the "Term"). Notwithstanding the foregoing, this Maintenance
Agreement shall automatically terminate upon expiration or termination of
the FPM Agreement. Subject to the terms of Section 3.1.3 below, Texaco's
obligation to provide Services, and Pathnet's obligation to pay Monthly
Service Charges and to provide the services required hereunder shall
commence as to each Segment upon the Commissioning of such Segment. The
Commissioning shall occur as agreed upon by Pathnet and Texaco pursuant to
the acceptance procedures of the FPM Agreement, as set forth in Schedule H,
attached hereto.
3. SERVICES
3.1 PROVISION OF SERVICES
3.1.1 GENERAL. Texaco shall provide the following Maintenance and
Circuit Provisioning services, functions and responsibilities on the
Equipment and at the Facilities, as such Facilities and Equipment may
evolve or be supplemented, enhanced, modified or replaced during the
Term (the "Services"):
(a) Preventive Maintenance as described in Schedule A hereto;
(b) Remedial Maintenance as described herein;
(c) Circuit Provisioning as described in Schedule A hereto;
(d) the services, functions and responsibilities performed
during the twelve (12) months preceding the Effective Date, by or
on behalf of Texaco, on those portions of Texaco's existing
microwave network that are or will be included in the
5
<PAGE>
System, even if such service, function or responsibility is not
specifically described in this Maintenance Agreement.
3.1.2 IMPLIED SERVICES. If any services, functions or
responsibilities not specifically described in this Maintenance
Agreement are required for the proper performance and provision of the
Services, they shall be deemed to be implied by and included within
the scope of the Services to be provided by Pathnet and/or Texaco, as
applicable to the same extent and in the same manner as if
specifically described in this Agreement. Except as otherwise
expressly provided in this Maintenance Agreement, Texaco shall be
responsible for providing the facilities, personnel and other
resources required to perform the Services.
3.2 TIMING OF SERVICES
3.2.1 PREVENTIVE MAINTENANCE. Texaco shall perform Preventive
Maintenance on the schedule set forth in Schedule A.
3.2.2 REMEDIAL MAINTENANCE. Texaco shall commence Remedial
Maintenance upon Dispatch of a Trouble Ticket (provided that Texaco
shall also perform Remedial Maintenance promptly upon its knowledge of
a Remedial Maintenance Situation), and shall complete such Remedial
Maintenance as promptly as practical, and in any event, within the
time periods set forth in the Response Time Schedule. Texaco shall be
deemed to have successfully completed a task of Remedial Maintenance,
and Pathnet will close any Trouble Ticket, upon Pathnet's receipt of
satisfactory confirmation that Texaco has restored operations to the
System in accordance with all applicable Performance Standards and/or
has corrected the Remedial Maintenance Situation. Attached as Exhibit
A-1 to Schedule A is a list of Texaco's personnel who will be
performing Remedial Maintenance.
3.2.3 CIRCUIT PROVISIONING. Texaco shall commence Circuit
Provisioning as scheduled by a Work Order, and shall complete such
Circuit Provisioning as promptly as practical. Pathnet shall endeavor
to issue Work Orders only between 8:00 a.m. and 5:00 p.m., Monday
through Friday, excluding federal holidays, provided, however, Texaco
acknowledges that, due to the specific requirements of Pathnet's
customers, Work Orders may be issued, and Circuit Provisioning may be
required, at other times.
3.2.4 LIMITATION. Notwithstanding the foregoing, Texaco shall not
be responsible for failure of the System to meet Performance Standards
or Critical Service Levels to the extent due to the inadequacy of the
System design or the fact that such Standards and Levels exceed the
manufacturer's design specifications for the Equipment.
3.3 SERVICES EXCLUSIONS
6
<PAGE>
3.3.1 TOWERS AND SHELTERS. This Maintenance Agreement does not
specify maintenance obligations for the Facilities themselves,
including any towers, tower lighting, or the satisfaction of any FCC
or FAA tower regulatory requirement or equipment shelter, each of
which Texaco shall maintain or satisfy outside the scope of the
Services as provided in the FPM Agreement.
3.3.2 OTHER EXCLUSIONS. In the event that telephone lines,
equipment or interconnections provided by or required by third parties
are used in conjunction with the Equipment, such equipment shall, upon
request by Pathnet, be incorporated into the Equipment and Texaco
shall provide Services as to such equipment, provided that Pathnet
shall adjust the Monthly Service Charge pursuant to Section 5.4 of
this Maintenance Agreement to reflect such additional Services.
4. EQUIPMENT; SPARE PARTS; FACILITIES
4.1 EQUIPMENT
The Equipment on which Texaco shall perform the Services is set forth in
Schedule D, and Schedule D may be amended from time to time as such
Equipment may change or may be replaced, modified, or enhanced over time;
provided that Pathnet shall provide written notice to Texaco of any such
amendment. In the event of a Capacity Expansion under the FPM Agreement,
Pathnet shall supplement and modify Schedule D to include any additional
Equipment required for such Capacity Expansion.
4.2 SPARE PARTS; REPLACEMENT EQUIPMENT
4.2.1 SPARE PARTS. Pathnet shall provide and Texaco shall store
Spare Parts for the Equipment at Stocking Depots in the type and
quantity as set forth in Schedule E, attached hereto and incorporated
herein, provided that Texaco may supplement the Spare Parts beyond
Texaco's designated allocation of Spare Parts at its sole discretion.
Texaco shall store such Spare Parts at appropriate Stocking Depots to
allow for a response within the time parameters set forth in the
Response Time Schedule and Schedule A. Pathnet, through the Network
Operating Center, and Texaco, shall identify Texaco modules or Spare
Parts necessary to expedite any required repairs. Texaco shall
utilize the modular exchange program that Pathnet has established in
order to maintain an adequate inventory of Spare Parts. Texaco shall
be responsible for notifying Pathnet promptly of any shortages in type
or quantities of Spare Parts required to meet Texaco's obligations
under this Maintenance Agreement. Spare Parts shall be shipped in
accordance with the Spare Parts shipping procedures set forth in
Schedule G, attached hereto.
4.2.2 REPLACEMENT EQUIPMENT. At its sole discretion, Pathnet may
replace any existing Equipment, provided that such replacement
Equipment does not degrade the performance of the Initial System.
Upon reasonable notice to Texaco that any such Equipment requires
replacing, Texaco shall be responsible for providing the labor and
other associated costs of installing any such Equipment, in which
event
8
<PAGE>
Monthly Services Charges shall, if necessary, be adjusted as set forth
in Section 5.4 of this Maintenance Agreement.
4.3 FACILITIES
Texaco shall be responsible for performing the Services at the Facilities
described in Schedule B to the FPM Agreement, , and such Schedule B may be
amended from time to time as such Facilities are added to the System. In
the event of a Capacity Expansion under the FPM Agreement, Pathnet shall
supplement and modify Schedule B of the FPM Agreement to include any
additional Facilities required for such Capacity Expansion.
5. CHARGES
5.1 GENERAL
All Monthly Services Charges to be paid by Pathnet to Texaco pursuant to
this Maintenance Agreement are set forth in this Section 5 or in Section
2.1 of Schedule C, attached hereto. Pathnet shall not be required to pay
Texaco any amounts for the Services in addition to those payable to Texaco
under this Section 5 or Schedule C, except as provided for in Section 2.2
of Schedule C.
5.2 PASS-THROUGH EXPENSES
Upon presentment to Pathnet of an original invoice showing Pass-Through
Expenses incurred, Pathnet shall pay such Pass-Through Expenses directly to
the payee or shall reimburse Texaco for Pass-Through Expenses paid by
Texaco.
5.3 TAXES
Each Party shall be responsible for any personal or real property taxes on
property it owns, for franchise and privilege taxes on its business, and
for taxes based on its net income or gross receipts. As to leased
property, the party with the superior leasehold interest shall be
responsible for all taxes owing in connection with such leased property.
5.4 NEW SERVICES
Pathnet shall pay Texaco for the performance of any services requested by
Pathnet and agreed to by Texaco that are not included in the Services.
Pathnet shall pay for such new services as agreed upon by the Parties based
on the procedures set forth in Section 2.4 of Schedule C, and thereafter,
the Services shall include such new services. Such new Services may
include, without limitation: (i) performance of maintenance services at
the interconnection facilities between Pathnet's network and the System,
and (ii) any other services not included in the Services as defined in this
Maintenance Agreement.
6. INVOICING AND PAYMENT
8
<PAGE>
Promptly after the expiration of each calendar quarter, Texaco shall send
Pathnet an invoice covering the Dispatch Charges, Monthly Service Charges,
Pass-Through Expenses and fees for new Services for the prior three months'
Services. Subject to Section 7.2.1, Pathnet shall pay the amount of each
quarterly invoice within thirty (30) days after receipt by Pathnet. Any and all
disputes with regard to charges payable under this Maintenance Agreement shall
be settled in accordance with Section 15 of this Agreement.
7. PERFORMANCE STANDARDS
7.1 GENERAL
Texaco shall perform the Services at a level of accuracy, quality,
completeness, timeliness, responsiveness and efficiency sufficient to
attain the Performance Standards identified in this Maintenance Agreement
and its Schedules and otherwise as consistent with industry standards.
7.2 FAILURE TO PERFORM
7.2.1 Texaco recognizes that its failure to (i) conduct
Preventative Maintenance such that the System, at all times, operates
at or above all Critical Service Levels, (ii) timely respond to a
Remedial Maintenance Situation, or (iii) perform Circuit Provisioning
as scheduled in any Work Order, may have a material adverse impact on
the business and operations of Pathnet. Accordingly, in the event
that Texaco repeatedly fails to timely perform any of the foregoing as
required hereunder for reasons other than circumstances that
constitute Force Majeure under this Maintenance Agreement, Pathnet, at
its sole discretion, may elect (i) to not renew this Maintenance
Agreement, (ii) to supplement the provision of Services as provided by
Texaco by appointing a new Maintenance provider, and/or (iii) to
suspend payment of the Monthly Services Charges.
7.2.2 In the event of any situation affecting the operation of the
System (including, without limitation, a Remedial Maintenance
Situation), Texaco shall (i) investigate and report to Pathnet the
causes of such situation; (ii) advise Pathnet of the status of
remedial efforts being undertaken with respect to such problems; (iii)
correct the problem as soon as practical and restore the System's
operation to the Critical Service Levels; and (iv) take appropriate
preventive measures after consultation with Pathnet so that the
problem does not recur.
7.2.3 Pathnet and its designees shall have the right to free, full
and immediate access to any and all affected Facilities to repair,
replace, update, or otherwise modify the Equipment or System and to
supplement the Services (including provisioning or other Services
required to operate the Pathnet network); provided such supplemental
Maintenance will not degrade the operation of the Initial System below
Critical Service Levels. Upon Pathnet's prior notification, Texaco
shall reasonably cooperate with Pathnet or its designee, including
providing any escorts necessary for Pathnet to supplement the
Services.
9
<PAGE>
7.2.4 In the event (i) this Agreement is terminated by either
party, or either party elects not to renew this Agreement, or (ii)
Pathnet supplements the Services with another Maintenance Provider,
Texaco shall have the right to continue to maintain the Initial System
at Texaco's sole expense, so long as such maintenance shall not
degrade the operation of the System or impact Pathnet's ability to
maintain the System.
8. PERIODIC REVIEWS; AUDIT RIGHTS; SAVINGS CLAUSE
8.1 REVIEWS
8.1.1 ANNUAL REVIEW. As part of the annual renewal of this
Maintenance Agreement, Pathnet and Texaco may review the Critical
Service Levels and the Monthly Service Charges paid to Texaco.
Pathnet and Texaco shall mutually agree to make adjustments to the
Critical Service Levels, as appropriate, to reflect (i) improved
performance capabilities associated with advances in technology and
methods to perform the Services and (ii) modifications in the
performance requirements of Pathnet's customer. The Parties expect
and understand that the Critical Service Levels may be made more
demanding over time provided that Texaco shall not be responsible for
failure of the System to meet Performance Standards or Critical
Service Levels to the extent due to the inadequacy of the System
design or the fact that such Standards and Levels exceed the
manufacturer's design specifications for the Equipment. Pathnet and
Texaco shall mutually agree to make adjustments pursuant to Schedule C
to the Monthly Service Charges to reflect the material changes in the
performance of the Services in accordance with any such revised
Critical Service Levels.
8.1.2 MAINTENANCE AND PROVISIONING TEST EQUIPMENT. Texaco shall
obtain and utilize the necessary measurement and monitoring tools and
procedures, including, but not limited to, the Maintenance and
Provisioning Test Equipment as set forth in Exhibit E-2 to Schedule E
and other equipment necessary to measure and to report operational
performance of the System against the applicable Critical Service
Levels. Such measurement and monitoring tools and equipment shall
permit reporting at a level of detail sufficient to verify compliance
with Critical Service Levels and shall be subject to Pathnet's
reasonable approval. Upon request by Pathnet, Texaco shall provide
Pathnet with information and access to such tools and procedures for
purposes of verification.
8.2 AUDIT AND INSPECTION RIGHTS
8.2.1 Texaco shall complete the information required by the
Trouble Ticket process, recording the date and description of Services
performed, the occurrence of any Remedial Maintenance Situations, and
the appropriate actions taken to restore service.
8.2.2 Pathnet shall have the right to inspect the Facilities,
Equipment and Circuit Provisioning at any time upon reasonable notice
to Texaco and to supplement the Services during Pathnet's inspection,
provided Pathnet complies with any and all
10
<PAGE>
Texaco safety and security procedures.
8.3 SAVINGS CLAUSE
Notwithstanding anything to the contrary contained herein, neither Party's
failure to perform any of its responsibilities set forth in this Agreement
(other than as provided in Section 9.1.2) shall not be deemed to be grounds
for non-performance by the other; provided, however, that either Party's
non-performance of its obligations under this Agreement shall be excused
if, and to the extent, (i) such Party is unable to perform Services,
despite commercially reasonable efforts to perform, directly as a result of
the other Party's failure to perform its obligations hereunder, and (ii)
the Party unable to perform provides the other Party with reasonable
notice of any such inability .
9. TERMINATION
9.1 TERMINATION FOR CAUSE
9.1.1 In the event that Texaco: (i) commits a material breach of
this Maintenance Agreement, which breach is not cured within thirty
(30) days after notice of breach from Pathnet to Texaco or (ii)
commits multiple breaches of its duties or obligations which, in the
commercially reasonable judgment of Pathnet, collectively constitute a
material breach of this Maintenance Agreement, Pathnet may, by giving
reasonable written notice to Texaco, terminate this Maintenance
Agreement as of the date specified in the notice of termination.
9.1.2 In the event that Pathnet fails: (i) to pay Texaco any
undisputed charge due under this Agreement totaling at least Five
Thousand ($5,000) Dollars and fails to make such payment within
forty-five (45) days of notice from Texaco of Pathnet's failure to
make such payment or (ii) to fulfill any other obligation of Pathnet
hereunder, and such failure continues for a period of thirty (30) days
after written notice from Texaco to Pathnet of such failure, Texaco
may, by giving written reasonable notice to Pathnet, terminate this
Maintenance Agreement as of the date specified in the notice of
termination.
9.2 ELECTION NOT TO RENEW
Texaco may elect not to renew this Maintenance Agreement for any reason by
giving Pathnet at least one-hundred and twenty (120) days prior written
notice before the end of the Term of this Maintenance Agreement indicating
that Texaco will not renew this Maintenance Agreement. In such event,
Pathnet or its designees may elect to supplement or perform the Services,
or such additional Services as may be necessary to maintain and operate the
System as provided hereunder.
9.3 TERMINATION OR EXPIRATION ASSISTANCE
In the event that (i) either party terminates or elects not to renew this
Maintenance Agreement, or (ii) this Maintenance Agreement expires, Pathnet
shall propose and
11
<PAGE>
Texaco shall approve, which approval shall not be unreasonably withheld, a
third-party, independent Maintenance and Circuit Provisioning provider, at
least forty-five (45) days before termination or expiration of this
Agreement to provide the Services at Texaco's Facilities. Such independent
Maintenance and Circuit Provisioning provider shall provide the services
and assume the obligations of Texaco hereunder for any successive terms
coterminous with the remaining term of the FPM Agreement, unless such
provider is replaced by Pathnet before the expiration of the term of this
Maintenance Agreement or any extension thereof. Texaco will cooperate with
such provider to enable it to perform its duties, providing such Site
access, documentation and information as may be reasonably necessary. Upon
termination for any reason or expiration or non-renewal of this Maintenance
Agreement, Pathnet and its designees shall have the right to full and free
access to all Facilities to supplement or perform the Services as required
hereunder.
10. RELATIONSHIP OF THE PARTIES
Nothing in this Maintenance Agreement will imply a joint venture, partnership,
or principal-agent relationship between the Parties. Neither Party will have
any right, power or authority to act or create any obligation, express or
implied, on behalf of the other Party, pursuant to this Maintenance Agreement.
11. PROPRIETARY RIGHTS AND COPYRIGHTS
11.1 Maintenance software, training materials, manuals or other proprietary
information furnished by Pathnet ("Maintenance Aids") for Texaco's use are
either Pathnet's property or property of third parties. Texaco shall
respect such proprietary rights and shall not use such Maintenance Aids
except for the purposes for which such Aids are being made available as set
forth in this Agreement and shall not reproduce, print, sublicense,
duplicate, reverse engineer, distribute, disclose, or otherwise make the
Maintenance Aids available to any third party, in whole or in part, in
whatever form.
11.2 Texaco agrees to use its best efforts not to allow copies of any
Maintenance Aids furnished by Pathnet to be made without the prior written
consent of Pathnet. Notwithstanding the foregoing, Texaco may make copies
of Maintenance Aids to the extent necessary to enable Texaco to perform the
Services, provided that Texaco uses its best efforts to prevent the
unauthorized disclosure and use of such Maintenance Aids to and by third
Parties.
12. REPRESENTATIONS AND WARRANTIES
12.1 WARRANTIES OF TEXACO
Texaco represents and warrants that:
(a) the Services shall be rendered in accordance with this Agreement
and shall be executed in a workmanlike manner, in accordance with
the practices
12
<PAGE>
and high professional standards used in well-managed commercial
telecommunications operations performing services similar to the
Services. Texaco represents and warrants that it shall use
adequate numbers of qualified individuals with suitable training,
education, experience, and skill to perform the Services.
(b) it shall perform Maintenance and Circuit Provisioning on the
Equipment so that it operates in accordance with all Critical
Service Levels or manufacturer specifications, including (i)
maintaining equipment in good operating condition, subject to
normal wear and tear (ii) undertaking repairs and preventive
maintenance on Equipment, and (iii) performing Circuit
Provisioning Services in accordance with the applicable Equipment
manufacturers' recommendations.
(c) it shall use its best efforts to use efficiently the resources or
services necessary to provide the Services. Texaco shall use its
best efforts to perform the Services in the most cost-effective
manner consistent with the required level of quality and
performance as set forth in this Agreement.
12.2 WARRANTIES OF PATHNET.
Pathnet represents and warrants that it will perform the services set
forth in Section 3.1 of Schedule A hereto.
12.3 WARRANTIES OF EACH PARTY
Each Party represents and warrants to the other that:
(a) it has the requisite corporate or partnership power and authority
to enter into this Maintenance Agreement and to carry out the
transactions contemplated by this Maintenance Agreement;
(b) the execution, delivery and performance of this Maintenance
Agreement and the consummation of the transactions contemplated
by this Maintenance Agreement have been duly authorized by the
requisite corporate or partnership action on the part of such
Party; and
(c) no consent, approval, order or authorization of, or registration,
declaration or filing with any private entity or governmental
authority is required for the execution, delivery and performance
of this Agreement, except those that have been obtained and are
in full force and effect.
12.4 INSURANCE
Texaco hereby represents that it is self-insured and does not currently
purchase and maintain liability insurance and property insurance, except
for stop-loss coverage. Texaco warrants and represents that if, during the
Term of this Maintenance Agreement
13
<PAGE>
and any extension or renewal thereof, Texaco ceases such policy of
self-insurance, Texaco shall thereafter maintain at Texaco's expense all of
the necessary insurance for all Texaco's employees, agents or affiliates
required to perform the Services, including, but not limited to, Worker's
Compensation, disability, and unemployment insurance, and will provide
Pathnet with certification thereof upon request.
12.5 SECURITY AND SAFETY PROCEDURES
In the event Pathnet is required to supplement the Services, Pathnet shall
comply with all Texaco security and safety procedures set forth in Schedule
Q of the FPM Agreement.
12.6 DISCLAIMER
EXCEPT AS PROVIDED IN THIS MAINTENANCE AGREEMENT, THERE ARE NO OTHER
EXPRESS WARRANTIES AND THERE ARE NO IMPLIED WARRANTIES, INCLUDING THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE
ON THE PART OF EITHER PARTY.
13. INDEMNITIES
13.1 INDEMNIFICATION BY TEXACO
Texaco agrees to indemnify, defend and hold harmless Pathnet and its
Affiliates and their respective officers, directors, employees, agents,
successors and assigns from and against any and all Losses and threatened
Losses arising from, in connection with, or based on allegations of, any of
the following:
(a) any claims of infringement of any patent, trade secret, copyright
or other proprietary rights alleged to have occurred because of
systems or other resources provided to Texaco by Pathnet and due
to the act or omission of Texaco, its officers or employees.
(b) the untruth, inaccuracy or breach of any representation or
warranty of Texaco set forth in this Agreement.
(c) the liability of Pathnet for (i) any personal injury, disease or
death of any person, (ii) damage to or loss of any property,
money damages or specific performance owed to any third party (by
contract or operation of law), or (iii) any fines, penalties,
taxes, claims, demands, charges, actions, causes of action,
assessments, environmental response costs, environmental
penalties, injunctive obligations caused by, arising out of, or
in any way incidental to, or in connection with, actions or
omissions of Texaco, its employees, Subcontractors or agents.
13.2 INDEMNIFICATION BY PATHNET
14
<PAGE>
Pathnet agrees to indemnify, defend and hold harmless Texaco and its
Affiliates and their respective officers, directors, employees, agents,
successors and assigns from and against any and all Losses and threatened
Losses arising from, in connection with, or based on allegations of, any of
the following:
(a) any claims of infringement of any patent, trade secret, copyright
or other proprietary rights alleged to have occurred because of
systems or other resources provided to Texaco by Pathnet and due
to the act or omission of Pathnet, its officers or employees.
(b) the untruth, inaccuracy or breach of any representation or
warranty of Pathnet set forth in this Agreement.
(c) the liability of Texaco for any (i) personal injury, disease or
death of any person, (ii) damage to or loss of any property,
money damages or specific performance owed to any third party (by
contract or operation of law), or (iii) any fines, penalties,
taxes, assessments, environmental response costs, environmental
penalties or injunctive obligations caused by, arising out of, or
in any way incidental to, or in connection with, actions or
omissions of Pathnet, its employees, Subcontractors or agents.
(d) the liability of Texaco arising out of any or all obligations to
or contracts between Pathnet and its customers concerning the
purchase of Excess Capacity and due to the act or omission of
Pathnet, its officers or employees.
13.3 INDEMNIFICATION PROCEDURES
Any third party claims for indemnification, shall follow the
indemnification procedures of Section 16.3 of the FPM Agreement which are
hereby incorporated by reference:
13.4 SUBROGATION
In the event that an indemnitor shall be obligated to indemnify an
indemnitee pursuant to Section 13.1 or Section 13.2, the indemnitor shall,
upon payment of such indemnity in full, be subrogated to all rights of the
indemnitee with respect to the claims to which such indemnification
relates.
14. LIABILITY
14.1 GENERAL INTENT
Subject to the specific provisions of Article 13 above, the liability of
each Party shall be limited as provided in the FPM Agreement.
14.2 INTENTIONALLY OMITTED.
15
<PAGE>
14.2.1 SUBJECT TO SECTION 14.2.2 BELOW, IN NO EVENT, WHETHER IN
CONTRACT OR IN TORT (INCLUDING BREACH OF WARRANTY, NEGLIGENCE AND
STRICT LIABILITY IN TORT), SHALL A PARTY BE LIABLE TO THE OTHER PARTY
FOR INDIRECT OR CONSEQUENTIAL, EXEMPLARY, PUNITIVE OR SPECIAL DAMAGES,
ARISING OUT OF OR IN CONJUNCTION WITH THIS MAINTENANCE AGREEMENT.
14.2.2 The limitations set forth in Section 14.2.1 shall not apply
with respect to (i) damages occasioned by willful misconduct or gross
negligence of a Party or (ii) damages occasioned by a breach of
Section 16.7.
14.3 FORCE MAJEURE
14.3.1 No Party shall be liable for any default or delay in the
performance of its obligations under this Maintenance Agreement if and
to the extent such default or delay is caused, directly or indirectly,
by: fire, flood, earthquake, elements of nature or acts of God,
riots, civil disorders, rebellions or revolutions in any country; or
any other cause beyond the reasonable control of such Party (a "Force
Majeure" event), provided the non-performing Party is without fault in
causing such default or delay, and such default or delay could not
have been prevented by reasonable precautions and can not or could not
reasonably be circumvented by the non-performing Party through the use
of alternate sources, workaround plans or other means.
14.3.2 In such event, the non-performing Party shall be excused
from further performance or observance of the obligation(s) so
affected for as long as such circumstances prevail and such Party
continues to use its best efforts to recommence performance or
observance whenever and to whatever extent possible without delay.
Any Party so delayed in its performance shall immediately notify the
Party to whom performance is due by telephone (to be confirmed in
writing within two (2) days of the inception of such delay) and
describe at a reasonable level of detail the circumstances causing
such delay.
15. DISPUTE RESOLUTION
15.1 ARBITRATION; RESOLUTION OF DISPUTES
Any and all disputes and controversies between Texaco and Pathnet
concerning the negotiation, interpretation, performance, breach or
termination of this Agreement (each a "Dispute") shall be subject to
resolution by Schedule L of the FPM Agreement which is hereby incorporated
by reference.
16. MISCELLANEOUS
16.1 NOTICE PROVISION
16
<PAGE>
Notice shall be served and deemed received in accordance with the
provisions of Section 5.13 of the FPM Agreement which is hereby
incorporated by reference.
16.2 BINDING NATURE; ENTIRE AGREEMENT
Pathnet and Texaco acknowledge (i) that each has read and understands the
terms and conditions of this Maintenance Agreement and agrees to be bound
by such terms and conditions, (ii) that this Maintenance Agreement is the
complete and conclusive statement of the agreement between the Parties, and
(iii) that this Maintenance Agreement sets forth the entire agreement and
understanding between the Parties relating to the subject matter hereof.
All understandings and agreements, oral and written, heretofore made
between Texaco and Pathnet relating to the subject matter hereof are merged
in this Maintenance Agreement which alone, fully and completely expresses
their agreement on the subject matter of maintenance service to be provided
by Texaco. The provisions of this Maintenance Agreement are separate and
apart from the provisions of the FPM Agreement and may not in any way
affect either Party's obligations with regard to the FPM Agreement.
16.3 AMENDMENT
No modification of, additions to or waiver of this Maintenance Agreement
shall be binding upon Texaco and Pathnet unless such modification is in
writing and signed by an authorized representative of each Party.
16.4 SEVERABILITY
If any term or provision of this Maintenance Agreement shall to any extent
be held by a court or other tribunal to be invalid, void or unenforceable,
then that term or provision shall be inoperative and void insofar as it is
in conflict with law, but the remaining terms and provisions of this
Maintenance Agreement shall nevertheless continue in full force and effect
and the rights and obligations of the Parties shall be deemed to be
restated to reflect newly as possible the original intentions of the
Parties in accordance with applicable law.
16.5 HEADINGS
Section and paragraph headings used in this Maintenance Agreement are for
reference and convenience only and are not to be deemed or construed to be
part of this Maintenance Agreement.
16.6 CONSENTS AND APPROVAL
Except where expressly provided as being in the sole discretion of a Party,
where agreement, approval, acceptance, consent, or similar action by either
Party is required under this Maintenance Agreement, such action shall not
be unreasonably delayed or withheld. An approval or consent given by a
Party under this Maintenance Agreement shall not relieve the other Party
from responsibility for complying with the requirements of this Maintenance
Agreement, nor shall it be construed as a waiver of any rights under
17
<PAGE>
this Maintenance Agreement, except as and to the extent otherwise expressly
provided in such approval or consent.
16.7 COMPLIANCE WITH LAWS AND REGULATIONS
Each Party shall perform its obligations in a manner that complies with the
applicable Federal, state and local laws, regulations, ordinances and codes
(including identifying and procuring required permits, certificates,
approvals and inspections). If a charge of non-compliance by either Party
with any such laws, regulations, ordinances or codes occurs, the Party
charged with such non-compliance shall promptly notify the other Party of
such charges in writing.
16.8 GOVERNING LAW
This Maintenance Agreement and the rights and duties of the Parties shall
be governed and interpreted in accordance with the laws of the State of
Texas, other than the choice of law rules thereof.
16.9 BINDING NATURE AND ASSIGNMENT
This Maintenance Agreement shall be binding on the Parties hereto and their
respective successors and assigns. Neither Party may or shall have the
power to assign this Maintenance Agreement without the prior written
consent of the other, except that either Party may assign its rights and
obligations under this Maintenance Agreement without the approval of the
other Party to an entity which acquires all or substantially all of the
assets of that Party to any subsidiary or Affiliate or successor by merger,
acquisition or creation of a Jjoint Vventure in a merger or acquisition of
that Party; provided that in no event shall any such assignment relieve
that Party of its obligations under this Maintenance Agreement.
16.10 WAIVER
Failure or delay on the part of Texaco or Pathnet to exercise any right,
power or privilege under this Maintenance Agreement shall not constitute a
waiver of any right power or privilege of this Maintenance Agreement.
16.11 TIME TO SUE
No action shall be brought for any breach of this Maintenance Agreement
more than two (2) years after the accrual of such cause of action, except
where applicable law provides for a shorter limitation period, in which
event that period should apply.
16.12 SURVIVAL
Any provision of this Maintenance Agreement which contemplates performance
or observance subsequent to any termination or expiration of this
Maintenance Agreement shall survive any termination or expiration of this
Maintenance Agreement and continue in full force and effect.
18
<PAGE>
16.13 COVENANT OF GOOD FAITH
Each Party agrees that in its respective dealings with the other Party
under or in connection with this Maintenance Agreement, it shall act in
good faith.
IN WITNESS WHEREOF, the Parties hereto have executed this Maintenance
Service Agreement, or caused it to be executed by a duly authorized officer, as
of the date first written above.
PATHNET, INC. TEXACO
By: /s/ Dave Schaeffer By: /s/ H.D. Hunt
------------------------------ ------------------------------
Name: Dave Schaeffer Name: H.D. Hunt
---------------------------- ----------------------------
Title: Chairman Title: MGR - Telecommunications
--------------------------- ---------------------------
Date: 7/6/98 Date: 6/26/98
---------------------------- ----------------------------
19
<PAGE>
SCHEDULE A
MAINTENANCE AND CIRCUIT PROVISIONING SERVICES
1. INTRODUCTION
This Services Schedule describes certain services and functions that Texaco
shall perform. Performance Standards relating to certain of the services and
functions described herein are set forth in Schedule B. Pathnet's
responsibilities with respect to particular services and functions described in
this Services Schedule, if any, are specifically indicated where such services
and functions are described.
The services and functions described in this Services Schedule are intended to
be comprehensive, but not necessarily all-inclusive. During the term, the
Parties may agree on different or additional services and amend this Services
Schedule in writing accordingly.
This Services Schedule is organized into three Sections: Preventive
Maintenance, Remedial Maintenance and Field Technician Requirements.
2. PREVENTIVE MAINTENANCE
During the Term of this Maintenance Agreement, Texaco shall perform Preventive
Maintenance (including (i) inspections and (ii) any and all corrective action,
if and where necessary) in accordance with the procedures set forth below.
Texaco shall maintain at its premises a log recording any and all Preventive
Maintenance performed pursuant to Section 8.2 of the Maintenance Agreement.
2.1 ANTENNA/WAVEGUIDE MAINTENANCE
Texaco shall perform the following inspections and, in consultation
with Pathnet, perform any and all corrective actions, to the extent
authorized:
2.1.1 MONTHLY INSPECTION.
At least once a month, Texaco shall perform the following inspections
from the ground:
a. Visually check the general appearance of the antenna
and waveguide for ice, wind and projectile damage.
b. Visually check the waveguide on the tower and waveguide
bridge for loose or broken waveguide hangers (i.e.
attach/replace as required).
A-1
<PAGE>
c. Visually check the antenna canvas (TEGLAR) radomes for
holes, tears and excessive wear. Report any damage to
Pathnet and replace at Pathnet's expense if requested by
Pathnet.
d. Confirm inside building waveguide pressure gauges read
5-8 lbs/in2 per antenna (10 lbs/in2 maximum).
2.1.2 QUARTERLY INSPECTION.
At least once a quarter, Texaco shall perform the following
inspections to supplement the monthly inspection:
a. Visually inspect waveguide grounds at the bend from the
tower and building entry buss bars. Inspect for excessive
corrosion and firm connectivity.
b. Visually inspect the waveguide port seals into the
building for excessive deterioration and insect/bird
infestation. Clean, replace and re-seal if required.
c. Check functional operation of the dehydrator and local
and remote alarms. Create a pressure leak so dehydrator
consistently runs for at least 10 minutes.
d. Visually check dehydrator air dryer/desiccant for
excessive moisture (i.e. desiccant color change).
e. Check functional operation of the dehydrator
low-pressure alarm, both local and remote indications. Use
dehydrator regulator valve to create alarms. (Low alarm
< .5lb/iN2).
2.1.3 ANNUAL INSPECTION.
At least once every 24 months, Texaco shall perform the following
inspections:
a. Physically inspect antenna stiff arms (struts) for
indications of antenna movement, i.e., gouges in metal
around lock down bolts.
b. Physically inspect each antenna feedhorn guy wires by
spring tension at back of antenna. Broken feedhorn guy
lines will pull out from back of dish.
c. Check for loose, broken or missing waveguide hangers.
Repair or replace such waveguide hangers as required.
d. Visually inspect waveguide grounds near antennas.
A-2
<PAGE>
2.2 MULTIPLEXER MAINTENANCE
Texaco shall perform the following inspections and after consultation
with Pathnet, perform any and all corrective actions, if authorized:
2.2.1 MONTHLY INSPECTION.
At least once a month, Texaco shall perform the following inspections:
a. Wipe off or dust top of multiplexer shelves as
required.
b. Push LED TST button and verify all red, yellow and
green indicators are lit. Replace any module unit that has
an un-lit indicator. (LED)
2.2.2 ANNUAL INSPECTION.
At least once a year, Texaco shall perform the following inspections:
a. Measure main and standby power supply unit's DC output
voltages. Verify measurements are within manufacturer's
tolerances.
b. Measure and record the main and protection, optical TX
laser bias current. Verify measurements are within
manufacturer's tolerances.
c. Check functional operation of the local and remote
major and minor alarms set forth in the Preventive
Maintenance Checklist.
2.3 RADIO MAINTENANCE
Texaco shall perform the following inspections and any and all corrective
actions, if required:
2.3.1 MONTHLY INSPECTION.
At least once a month, Texaco shall perform the following inspections:
a. Wipe off or dust the top shelves in the radio equipment
racks as required.
b. Push LED TST switch on each TX/RX logic control and
verify all red, yellow and green indicators are lit.
Replace any module that has an un-lit indicator.
c. Check and record on the Preventive Maintenance
Checklist all TX/RX meter readings for TX power,
A-3
<PAGE>
AFC correction, RX in level, If level etc. Verify readings
are within manufacturer's tolerances.
2.3.2 QUARTERLY INSPECTION.
At least once each quarter, Texaco shall perform the following to
supplement the monthly inspection:
a. Measure and record the DC-DC power converter and TX FET
power supply DC output voltages for each TX/RX unit. Verify
that measured voltages are within manufacturer's tolerances.
b. Measure and record the RF output power of each
transmitter at the TX monitor connector. (This may require
disabling of automatic power level control). Level should
be within 1.0 dB of nominal.
c. Measure and record the TX RF frequency on each
transmitter at the TX monitor connector. Measured frequency
should be within +/- .005% of assigned value.
d. Measure and record the receiver AGC voltage. Correlate
AGC voltage to receive signal level. Verify actual RSL is
within 3 dB of calculated.
2.3.3 ANNUAL INSPECTION.
At least once a year, Texaco shall perform the following inspections:
a. Measure and record each TX local oscillator frequency.
Measured value should be within +/- .001% of assigned value.
b. Measure and record each RX local oscillator frequency.
Measured value should be within +/- .001% of assigned value.
c. Perform "Transmit Fade Margin Test" to verify receiver
fade margin on the path. The measured value should be
within +/- 2 dB of calculated.
d. Check all alarm points for proper functionality as set
forth on Preventive Maintenance Checklist.
3. REMEDIAL MAINTENANCE AND NETWORK OPERATING CENTER
In addition to Preventive Maintenance, Texaco shall perform Remedial
Maintenance as required under this Agreement. Such Remedial Maintenance
shall supplement and be in
A-4
<PAGE>
addition to Preventive Maintenance. Remedial Maintenance shall generally
be initiated by Dispatch of a Trouble Ticket by the Network Operating
Center.
3.1 NETWORK OPERATING
3.1.1 NETWORK OPERATING CENTER.
a. Pathnet shall operate a Network Operating Center twenty-four
(24) hours a day, seven (7) days a week to handle all
problem and trouble reports and to monitor the Equipment and
System. Pathnet shall monitor both alarm and operations
information to identify and to correct degradation or
interruption of the System. Upon receipt of knowledge of
any degradation or interruption, Pathnet will open a Trouble
Ticket to initiate Remedial Maintenance, dispatch a call for
maintenance in accordance with the dispatch procedures
agreed to be by the Parties and monitor such degradation or
interruption through correction. Pathnet will maintain
monitoring logs of all Trouble Tickets opened, types of
Remedial Maintenance undertaken, technician response times
and other significant information concerning the System and
will issue to Texaco periodic reports describing such
information.
b. Pathnet's Network Operating Center will collect performance
data (Errored Seconds, Severely Errored Seconds, frame loss,
Failed Seconds, etc.) consistent with manufacturer's
specifications and issue periodic reports, as set forth in
the FPM Agreement.
c. Pathnet's Network Operating Center will coordinate and
provide technical support Remedial Maintenance efforts by
Texaco's Field Technicians provided that Texaco has final
responsibility for such Remedial Maintenance. As reasonably
requested by Texaco, Pathnet shall assist Texaco, to the
extent within Pathnet's reasonable control, in restoring
operations including locating Spare Parts or other supplies.
3.1.2 PERFORMANCE DATA.
a. The Network Operating Center shall monitor performance data
that will provide information regarding the performance
transport system and will localize any trouble or
degradation of service.
b. Performance data will be collected and maintained as
follows:
(i) Collect performance data in real time and submit
in 15-minute increments for each sites of data; and
A-5
<PAGE>
(ii) Historic performance data will provide a minimum
of sixteen (16) 15-minute and seven (7) 24-hour sets of
data.
c. Through the Network Operating Center, Pathnet shall
establish a network management system (the "Network
Management System"). Such Network Management System shall
collect, monitor and manage:
(i) all network elements within the System;
(ii) performance data such as Errored Seconds, Severely
Errored Seconds, frame loss and Failed Seconds
consistent with the manufacturer's specifications; and
(iii) the shelter environments (including commercial
power failure, door alarms, charger failures, low
waveguide pressure, air conditioner failure, tower
light alarms, generator runs (if any), waveguide
dehydrator excessive runs, smoke alarms, high
temperature and low temperature) for radio equipment
and multiplexing equipment.
3.1.3 ALARM/EVENT LOGGING AND REPORTS.
Pathnet shall promptly forward all alarms, event logs, and related
reports to Texaco upon compilation of such reports by Pathnet as set
forth in the FPM Agreement.
4. CIRCUIT PROVISIONING
During the term of this Maintenance Agreement, Texaco shall perform Circuit
Provisioning in accordance with the procedures set forth below.
4.1 GENERAL
Texaco shall dispatch Field Technicians to perform the following
functions associated with the Circuit Provisioning for both Texaco and
Pathnet.
a. Upon receipt of a Work Order, Texaco shall schedule and
coordinate a Field Technician to perform the work function by the
date designated in the Work Order.
b. Such work functions shall include the completion of the
following site related functions: (i) placement of circuit packs;
(ii) placement of all cross
A-6
<PAGE>
wiring and cabling between radio, multiplexer and site circuit
termination points designated by Pathnet; (iii) placement of new
circuit termination interfaces such as cross connect blocks, DSX
terminations and any associated cabling; (iv) labeling of cross
connect points with the circuit identification numbers shown on
the work order; (v) verbal notification of Pathnet from the site
to confirm completion of Circuit Provisioning; and (vi) conduct
joint circuit level acceptance testing with Pathnet and customer
contacts. Specific DS-1, DS-3 and OC-3 acceptance tests and
parameters are set forth in Schedule B.
4.2 PROVISIONING AT NON-TEXACO SITES
4.2.1. NON-TEXACO SITES
In the event Pathnet elects to connect the Texaco System through the
addition of spurs and paths to Pathnet's backbone network or to a
customer POP, Pathnet may request that Texaco perform Circuit
Provisioning, as set forth in this Maintenance Agreement, at the
Non-Texaco Site locations and points of interconnections. Within
fifteen (15) days of such proposal, Texaco shall respond regarding its
intent to perform the Circuit Provisioning. Pathnet reserves the
right to contract with and direct additional third parties to perform
certain provisioning functions based upon the nature of the
interconnection agreements associated with specific sales. In such
case, Texaco may or may not be the sole provider of provisioning
services at any Non-Texaco Site.
4.2.2 PROVISIONING EQUIPMENT
In the event Circuit Provisioning functions to be performed by Texaco
require the use of equipment configurations other than those which
Texaco Field Technicians are familiar, Pathnet shall arrange for
training Texaco's for Field Technicians responsible for each of those
specific sites. Texaco shall be responsible for all tower travel
costs and other out-of-pocket expenses incurred by Texaco in
connection with such training and Pathnet shall pay for any tuition,
materials or other direct costs of training.
4.3 PROVISIONING INTERFACES
Upon Commissioning, both Texaco and Pathnet shall operate the System
using a manual provisioning interface arrangement. Pathnet shall
develop operations support systems to automate the work order
transmission, work force management and completion reporting in order
to enhance the efficiency of the process. Texaco shall perform the
following interface functions:
4.3.1 MANUAL PROVISIONING INTERFACE
A-7
<PAGE>
a. Provide designated access and delivery points to which
Pathnet can distribute work related documents by telecopier or by
e-mail.
b. Provide for redistribution and coordination of scheduled
site work with Field Technicians.
c. Provide Pathnet with a point of contact for verbal contact
between the Texaco and Pathnet for the purpose of:
1. Daily pre- and post-Work Order status and verification;
2. Circuit escalations;
3. Service date negotiation for expedited service requests; and
4. Provisioning coordination (both pre- and post-circuit turnup
including coordination of acceptance testing).
4.3.2 AUTOMATED PROVISIONING INTERFACES
a. Specific interface arrangements will be negotiated prior to
system implementation.
b. Texaco shall be responsible for providing PC access capabilities
to its Field Technician in order to:
1. Identify and retrieve work lists;
2. Retrieve site related work documents; and
3. Report work completion information.
4.3.3 TEXACO CAPACITY EXPANSION
Texaco shall contact Pathnet for the provisioning of any capacity
addition, disconnection or grooming for Texaco's internal network.
The provisioning process will follow the standard work steps outlined
in this Section 4.
4.3.4 NETWORK ELEMENT SOFTWARE CHANGES
Texaco shall not program or reprogram any software changes into any
network element on the system unless such change is coordinated and
directed by the Network Operating Center.
A-8
<PAGE>
4.4 CIRCUIT PACK ADMINISTRATION
Pathnet shall be responsible for providing provisioning related
circuit packs to Texaco's designated Storage Depots prior to the
required Field Technician dispatch date for provisioning. Texaco
shall notify Pathnet, either electronically or by facsimile, of
receipt of circuit packs. In the event that circuit packs are not
received on time, Texaco shall notify Pathnet promptly. A decision
will then be made as to the use of available Spare Parts in which case
Pathnet shall be responsible to immediately replenish the maintenance
spare inventory.
4.5 CIRCUIT DISCONNECTS
Texaco shall perform the following site work related to circuit
disconnect orders in order to maintain a high quality and cost
effective site environment and network:
a. Pathnet shall perform the physical termination of
service through the remote provisioning capabilities of the
Network Operating Center.
b. Pathnet shall forward disconnect Work Orders to Texaco
which, except in the case of emergency, will be scheduled
for the next time Texaco is at the subject Site.
c. Texaco shall be responsible for the scheduling of a
Field Technician site visit and coordinating the site visit
with other scheduled visits to the site or adjacent sites in
order to minimize duplicative travel time.
d. Texaco shall perform the following disconnect
functions:
i. The Field Technician will call the Network
Operating Center to revalidate the disconnect request
prior to performing any physical removal work.
ii. Removal of all circuit related cross wire.
iii. Removal of all circuit identification markings
from cross connect points.
iv. Removal of circuit packs as designated on the
disconnect work order.
A-9
<PAGE>
v. Proper handling and shipping of circuit packs
using ESD (Electro Static Discharge) protection.
vi. Packaging and shipping of circuit pack cards to
either the local Texaco Storage Depot or to Pathnet
central stock location as designated on the Work Order.
vii. Complete proper circuit pack shipping notice.
4.6 CIRCUIT REARRANGEMENTS/GROOMING
Texaco and Pathnet shall perform grooming or re-arranging of circuits
within particular systems pursuant to the requirements of this Section
4. Scheduling of such work shall be as arranged by Pathnet or its
customers and may require such work to be performed out of normal
business hours. Texaco shall coordinate the scheduling of Field
Technicians to support these requirements. Pathnet shall coordinate
the specific scheduling arrangements with Texaco in an effort to
minimize the impact from such schedules.
5. FIELD TECHNICIAN REQUIREMENTS
5.1 CERTIFICATION
Texaco shall ensure that each Texaco Field Technician providing Services
under this Agreement is certified pursuant to the Training Procedures set
forth in Section 2 of Schedule G.
5.2 EQUIPMENT
Texaco shall, at its expense, equip each Field Technician to be dispatched
with the necessary Maintenance Test Equipment as provided in Schedule E-2.
5.3 PERSONNEL
Texaco shall utilize adequate numbers of qualified personnel with suitable
training (as, in part, provided by Pathnet), education, experience and
skill mix to perform the Services.
5.4 LOCATION
Texaco Field Technicians shall be assigned and located at adequate
distances to meet the requirements for dispatch and restoration set forth
in Schedule A-2.
A-10
<PAGE>
5.5 RIGHTS TO OPERATE THE NETWORK
The Parties acknowledge that from time to time, Texaco Field Technicians
may not be available to meet Circuit Provisioning or Maintenance
obligations or service demands. In these instances, Texaco shall use
reasonable efforts to locate replacement employees to perform critical work
functions. Priority of work functions shall be as follows:
a. Remedial Maintenance
b. Circuit Provisioning
c. Grooming
d. Preventative Maintenance
e. Circuit Disconnects
Pathnet may supplement the replacement employees with qualified Pathnet
employees in the event of a prolonged force unavailability.
A-11
<PAGE>
EXHIBIT A-1
TEXACO DISPATCH PROCEDURES
[To be Provided]
1. REMEDIAL MAINTENANCE
2. CIRCUIT PROVISIONING
A-12
<PAGE>
SCHEDULE A-2
RESPONSE TIMES
<TABLE>
<CAPTION>
UP TO DS-1 OF CAPACITY AFFECTED MORE THAN DS-1 OF CAPACITY AFFECTED
(MINOR) (MAJOR)
------------------------------- -----------------------------------
<S> <C> <C>
TIER ONE RMS On Site within 2 hours of Dispatch On Site within 2 hours of Dispatch of
of Trouble Ticket. Situation corrected Trouble Ticket. Situation corrected within
within 2.5 hours from Dispatch of 2.5 hours from Dispatch of Trouble Ticket.
Trouble Ticket.
TIER TWO RMS BETWEEN Situation corrected before midnight. On Site within 3 hours of Dispatch of
8:00 A.M. AND 5:00 P.M. Trouble Ticket. Situation corrected within
MONDAY THROUGH FRIDAY: 4.5 hours from Dispatch of Trouble Ticket.
TIER TWO RMS BETWEEN Situation corrected by next 10:00 a.m. On Site within 3 hours of Dispatch of
5:00 P.M. TO 8:00 A.M. Trouble Ticket. Situation corrected within
MONDAY THROUGH FRIDAY, 4.5 hours from Dispatch of Trouble Ticket.
OR ON WEEKENDS OR
FEDERAL HOLIDAYS:
TIER THREE RMS: On Site next business day; Situation corrected as promptly as commercially practicable.
</TABLE>
Note: The Network Operating Center reserves the right to escalate Tier 2 and
Tier 3 Response Times when necessary to accommodate the requirements
of capacity customers or when, in the reasonable judgment of the
Network Operating Center, a faster response time is necessary.
All response and repair times are measured as mean response and repair
times.
A-13
<PAGE>
SCHEDULE B
CRITICAL SERVICE LEVELS
1. INTRODUCTION
1.1 GENERAL
1.1.1 This Schedule B provides the Critical Service Levels to
which Texaco shall maintain the System. These Critical Service Levels
are derived from and are as required by IXCs or other customers for
capacity and may be amended from time to time as such requirements may
change.
1.1.2 The Critical Service Levels are defined by the following
parameters: Errored Seconds ("ES"), Severely Errored Seconds ("SES"),
and Error Free Seconds ("EFS"). The ES, SES, and the EFS are the only
criteria for determining operations above or below Critical Service
Levels.
1.1.3 The System has been designed by Pathnet to meet or exceed
these Critical Service Levels based on the equipment manufacturers
stated specifications and good system design practices. Schedule H
includes verification testing information. The Critical Service
Levels within this document are subject to change as network design
enhancements are implemented and as equipment improvements become
available. In the event these specifications are changed, Pathnet
shall notify Texaco and amend this Schedule B to include revised
Critical Service Levels provided that such change in the Critical
Service Levels shall not materially degrade the performance of the
System.
2. PARAMETER DEFINITIONS
2.1 CERTAIN DEFINITIONS
2.1.1 "AVAILABILITY" shall mean the time in which the circuit is
available and is not experiencing an Outage. Usually this term is
expressed as percent availability by taking the ratio of the available
time during a given interval to the total interval and multiplying it
by 100.
2.1.2 "BIT ERROR RATE" ("BER") shall mean the number of bits
received in error over a specified period of time compared to the
total number of bits that could be received on an ideal connection at
the same transmission rate over that same period of time.
B-1
<PAGE>
2.1.3 "CIRCUIT ACCEPTANCE LIMIT" ("AL") shall mean the standard at
which a circuit is deemed acceptable for initial service. Upon
acceptance, the facilities and/or circuits are transferred to a
performance measuring state to track and insure their continued proper
operation.
2.1.4 "ERRORED SECONDS" ("ES") shall mean any one-second interval
during which one or more bit errors occurs. For example, at the DS-1
rate, an ES will contain 1 to 1,544,000 bit errors.
2.1.5 "ERROR FREE SECONDS" ("EFS") shall mean any one-second time
interval which does not contain a measurable bit error. This term may
be expressed as a percent EFS by taking the ratio of non-errored to
total seconds and multiplying by 100.
2.1.6 "FAILED SECONDS" shall mean a one-second interval that has
1,544 bit errors at a DS-1 rate.
2.1.7 "IN-SERVICE" shall mean the period when the System is
operating above Critical Service Levels .
2.1.8 "MAINTENANCE LIMIT" ("ML") shall mean the threshold below
which the performance of the facility and/or circuit is characterized
by degraded performance.
2.1.9 "OUTAGE" shall mean an unscheduled interruption in
telecommunications services on the System, including any ten (10)
consecutive Severely Errored Seconds.
2.10 "SEVERELY ERRORED SECONDS" ("SES") shall mean (i) at the DS-1
rate, any one-second interval during which the BER is greater than or
equal to 1 x 10-3 errors per second. At the DS-1 rate, this equates
to 1,544 or more bit errors occurring within one second, and (ii) at
the DS-3 rate, any one-second interval during which the BER is equal
to or worse than l x 10-6 errors per seconds.
3. DS-1 CRITICAL SERVICE LEVELS
3.1 GENERAL
Texaco shall maintain the System to perform at or above the Critical
Service Levels set forth below. The DS-1 interface shall at all times
meet the IXC generic DS-1 requirements that are customary in the
industry as indicated by the publications set forth in the Industry
Standards Compliance List in Section 7 of this Schedule B.
B-2
<PAGE>
3.2 DS-1 ELECTRICAL INTERFACE SPECIFICATIONS
Texaco shall perform the services so that the DS-1 signal at the
cross-connect (DSX-1) meets each of the following Critical Service Levels:
3.2.1 LINE RATE: 1.544 Mb/s.
3.2.2 TOLERANCE: Source timing for self-timed DS-1 bit streams
shall not exceed plus or minus 32 ppm with respect to the basic rate.
DS-1 synchronizations should be capable of accepting a rate deviation
of plus or minus 130 ppm.
3.2.3 LINE CODE:
a. Bipolar with at least 12.5 percent average ones density and
no more than 15 consecutive zeros.
b. Bipolar with Eight Zero Substitution (B8ZS).
3.2.4 FORMAT: ESF with AT&T 54016 & ANSI T1.403 messages,
concurrently.
3.2.5 TEST LOAD: A pure resistive termination of 100 ohms plus or
minus 5% shall be used for evaluation of pulse shape and electrical
parameters.
3.2.6 PULSE SHAPE: The pulse amplitude shall be between 2.4V and
3.6V measured at the center of the pulse, and may be scaled by a
constant factor to fit the template. The source of the above
information is ANSI T1.102.
3.2.7 POWER LEVEL:
a. For Equipment added by Pathnet, for an all-ones
transmitted pattern, the power in a band that is no wider
than 3 KHz centered at 772 KHz shall be between 12.6 and
17.9 dBm.
b. For pre-existing equipment remaining at a Site after
Cutover, the power in a band no wider than 3 KHz centered at
772 KHz shall be between 12.4 and 18.0 dBm.
c. In any case, the power in a band no wider than 3 KHz
centered at 1544 KHz shall be at least 29 db below that at
772 KHz.
3.3 JITTER REQUIREMENTS
Texaco shall meet each of the Critical Service Levels at the DS-1 interface
for Jitter Tolerance, Jitter Transfer, Jitter Generation, and Jitter
Enhancement as set forth in this Section 3.3. The jitter requirements are
set by industry standards as referenced in the
B-3
<PAGE>
Industry Standards Compliance List.
3.3.1 JITTER TOLERANCE.
Jitter Tolerance is the maximum input jitter that any equipment can
tolerate without causing errors. It is specified in terms of the
amount of sinusoidal jitter (peak-to-peak) versus the frequency of
that jitter. IXC generic requirements describe the mask as well as
the lower limit of the jitter tolerance at each standard interface
level. To meet the jitter tolerance specifications, the actual
tolerance of the equipment shall be above the mask and the difference
between this and the lower limit represents the safety margin of the
equipment.
3.3.2 JITTER TRANSFER.
Jitter Transfer is the jitter gain measurement which is the
relationship between the applied input jitter and resulting output
jitter as a function of frequency.
3.3.3 JITTER GENERATION.
a. Jitter Generation is defined as the process whereby
jitter appears at the output port of an individual unit of
digital equipment in the absence of applied input jitter.
b. When looped back at the high speed rate, the Equipment
shall produce less than 0.3 Unit Interval (UI) of rms timing
jitter and less than 1.0 UI of peak-to-peak timing jitter at
the output of the terminal receiver. The measurement
interval must include all frequencies between F1 and F4 of
the Network Jitter Interface requirements, as shown in the
Table below. This requirement shall apply over the entire
range of permissible input bit-rate offsets.
3.3.4 JITTER ENHANCEMENT.
The requirement for jitter enhancement is that a system of up to 250
miles in length shall add less than 1.0 UI of peak-to-peak jitter to a
DS-3 input signal having 4.0 UI of sinusoidally modulated peak-to-peak
jitter for all frequencies up to 2300 Hz.
B-4
<PAGE>
- --------------------------------------------------------------------------------
MAXIMUM PERMISSIBLE NETWORK OUTPUT JITTER AT ANY HIERARCHICAL INTERFACE
- --------------------------------------------------------------------------------
Network Limit Measurement Filter Bandwidth (Hz)
Peak-to-Peak UI Bandpass filter having a low Cut-off
Bit Rate Mb/s (Note 1) Frequency F1 or F3 and Minimum Upper
Cut-off Frequency F4
- -------------- ------------------------ ----------------------------------------
B1 B2 F1 F3 F4
(F1-F4) (F3-F4) (Note 2)
- -------------- --------- -------------- -------------- -------------- ----------
1.544 5 0.1 10 Hz 8 KHz 40 KHz
- -------------- --------- -------------- -------------- -------------- ----------
3.152 5 0.1 10 Hz 1.5 KHz 40 KHz
- -------------- --------- -------------- -------------- -------------- ----------
6.312 3 0.1 10 Hz 3 KHz 60 KHz
- -------------- --------- -------------- -------------- -------------- ----------
44.736 5 0.1 10 Hz 30 KHz 400 KHz
- -------------- --------- -------------- -------------- -------------- ----------
Notes:
1. UI = Unit Interval
For 1.544 Mb/s:1 UI = 648 ns
For 3.152 Mb/s:1 UI = 317 ns
For 6.312 Mb/s:1 UI = 158 ns
For 44.736 Mb/s:1 UI = 22.35 ns
2. F3: F3, the lower cut-off frequency of one of the bandpass filters,
represents the jitter half-bandwidth of the timing extraction circuits.
The frequency F3 is determined from: F3 = Fo /2Q where F and Q represent
the digital signal rate and the Q-factor of the timing recovery circuit,
respectively.
3.4 DS-1 ACCESS PERFORMANCE AND AVAILABILITY OBJECTIVES
3.4.1 GENERAL.
DS-1 performance and availability objectives for IXC digital transport
facilities are based on mileage bands. All performances data (ES,
SES, etc.) is the same throughout the given mileage band. The
performance objective values are based on a 24-hour period with the
exception of Availability, which is an annual objective.
3.4.2 SERVICE OBJECTIVES.
a. Texaco shall perform the Services to meet the Critical
Service Levels defined as Availability of 99.98% per year per
4,000 mile System.
B-5
<PAGE>
b. The data set forth below in Tables 1, 2, 3 and 4 is based on
a 24-hour period.
Table 1. DS-1, Nx64 kb/s, & Kx56 kb/s IOC Circuit Acceptance Levels
------------------------ --------- -------------- ----------------
Route Mileage ES %EFS SES
------------------------ --------- -------------- ----------------
0-500 1 99.998 0
------------------------ --------- -------------- ----------------
501-1500 1 99.998 0
------------------------ --------- -------------- ----------------
1501-4000 2 99.998 0
------------------------ --------- -------------- ----------------
Mileage used is based on actual one-way route mileage. 0 outage
seconds are allowed for test
------------------------------------------------------------------
Table 2. E-1 IOC Circuit Acceptance Levels
------------------------ --------- -------------- ----------------
Route Mileage ES %EFS SES
------------------------ --------- -------------- ----------------
0-500 1 99.998 0
------------------------ --------- -------------- ----------------
501-1500 1 99.998 0
------------------------ --------- -------------- ----------------
1501-4000 2 99.998 0
------------------------ --------- -------------- ----------------
Mileage used is based on actual one-way route mileage.
0 outage seconds are allowed for test.
------------------------------------------------------------------
Table 3. DS-1, Nx64kb/s, & Nx56 kb/s IOC Maintenance Limit Performance Levels
------------------------ --------- -------------- ----------------
Route Mileage ES %EFS SES
------------------------ --------- -------------- ----------------
0-500 5 99.99 2
------------------------ --------- -------------- ----------------
501-1500 10 99.98 4
------------------------ --------- -------------- ----------------
1501-4000 15 99.98 6
------------------------ --------- -------------- ----------------
Mileage used is based on actual one-way route mileage.
------------------------------------------------------------------
B-6
<PAGE>
Table 4. E-1 IOC Maintenance Limit Performance Levels
------------------------ --------- -------------- ----------------
Route Mileage ES %EFS SES
------------------------ --------- -------------- ----------------
0-500 5 99.99 2
------------------------ --------- -------------- ----------------
501-1500 10 99.98 4
------------------------ --------- -------------- ----------------
1501-4000 15 99.98 6
------------------------ --------- -------------- ----------------
Mileage used is based on actual one-way route mileage.
------------------------------------------------------------------
4. DS - 3 CRITICAL SERVICE LEVELS
4.1 GENERAL
Texaco shall maintain the System to perform at or above the Critical
Service Levels set forth below. Such Critical Service Levels for DS-3
interface shall meet the generic DS-3 requirements that are customary in
the industry, as set forth in the Publications described in the Industry
Standards Compliance List in Section 7 of this Exhibit B.
4.2 DS-3 ELECTRICAL INTERFACE SPECIFICATIONS
Texaco shall perform the Service so that the DS-3 signal at the
cross-connect shall meet each of the following Critical Service Levels:
4.2.1 LINE RATE: 44.736 Mb/s plus or minus 20 ppm.
4.2.2 LINE CODE: Bipolar with 3 Zero Substitution (B3ZS).
4.2.3 TEST LOAD: A pure resistive termination of 75 ohms plus or
minus 5% shall be used at the interface for evaluation of pulse shape
and electrical parameters.
4.2.4 PULSE SHAPE: The pulse amplitude shall be between 0.36V and
0.85V peak measured at the center of the pulse, and may be scaled by a
constant factor to fit the template.
4.2.5 POWER LEVEL: For an all ones transmitted pattern, the power
in a band no wider than 3 KHz centered at 22.368 MHZ shall be -1.8 to
+5.7 Dbm. The power in a band no wider than 3 KHz centered at 44.736
MHZ shall be at least 20 Db below that at 22.368 MHZ.
B-7
<PAGE>
4.3 JITTER REQUIREMENTS
Texaco shall perform Service to meet the Jitter requirements set forth in
Section 3.3 of this Schedule B for the following parameters: Jitter
Tolerance, Jitter Transfer, Jitter Connection, and Jitter Enhancement.
4.4 DS-3 ACCESS PERFORMANCE AND AVAILABILITY LEVELS
4.4.1 GENERAL.
DS-3 performance and availability objectives for IXC digital transport
facilities are based on mileage. All performance data (ES, SES, etc.)
is the same throughout the given mileage band. The performance
objective values are based on a 24-hour period with the exception of
availability, which is an annual objective
4.4.2 SERVICE OBJECTIVES.
a. Texaco shall perform the services to meet the Critical
Service Levels defined as Availability of 99.98% per year
for 4,000 mile system.
b. The data set forth below in Tables 5 and 6 is based on a
24-hour period.
TABLE 5. DS-3 IOC CIRCUIT ACCEPTANCE LEVELS
------------------------ --------- -------------- ----------------
Route Mileage ES %EFS SES
------------------------ --------- -------------- ----------------
0-500 3 99.99 0
------------------------ --------- -------------- ----------------
501-1500 4 99.99 0
------------------------ --------- -------------- ----------------
1501-4000 6 99.99 0
------------------------ --------- -------------- ----------------
Mileage used is based on actual one-way route mileage.
0 outage seconds are allowed for test.
------------------------------------------------------------------
B-8
<PAGE>
TABLE 6. DS-3 IOC MAINTENANCE LIMITS PERFORMANCE LEVELS
------------------------ --------- -------------- ----------------
Route Mileage ES %EFS SES
------------------------ --------- -------------- ----------------
0-500 20 99.97 2
------------------------ --------- -------------- ----------------
501-1500 30 99.96 4
------------------------ --------- -------------- ----------------
1501-4000 50 99.94 6
------------------------ --------- -------------- ----------------
Mileage used is based on actual one-way route mileage.
------------------------------------------------------------------
5. SYSTEM AVAILABILITY
At all times, the Services shall be performed in order that the System meets the
following Critical Service Level:
5.1 SYSTEM AVAILABILITY
The system System shall operate at 99.98% Availability on an annual basis
for a 4,000 mile systemSystem. The Pathnet Network Operation Center will
advise Texaco if this criteria is not met.
5.2 SYSTEM OUTAGE
The system shall operate to the level of a one-way System outage of less
than 0.39 seconds/mile/year.
6. CIRCUIT PROVISIONING PERFORMANCE
6.1 REPORTS
Pathnet shall provide monthly reports to Texaco to measure:
1. Percentage site Circuit Provisioning performed on time.
2. Percentage end-to-end Circuit Provisioning turn ups performed on
time.
3. Percentage multiple Dispatches to perform site specific Circuit
Provisioning.
4. Percentage Circuit Provisioning with reported trouble within
seven (7) days of turnup.
B-9
<PAGE>
6.2 SERVICE LEVELS
Texaco shall perform Circuit Provisioning to the following objectives and
Critical Service Levels:
- ---- -------------------------------------------- -------------- ---------------
CRITICAL
FUNCTIONALITY OBJECTIVE SERVICE LEVEL
- ---- -------------------------------------------- -------------- ---------------
1 Percentage Site Provisioning on Time 99% 96%
- ---- -------------------------------------------- -------------- ---------------
2 Percentage Circuit Prov. On Time 99% 96%
- ---- -------------------------------------------- -------------- ---------------
3 Percentage Multiple Site Dispatches 5% 7%
- ---- -------------------------------------------- -------------- ---------------
4 Percentage Failed In 7 Days 1% 2%
- ---- -------------------------------------------- -------------- ---------------
5 Percentage Disconnect Work Orders On Time 98% 95%
- ---- -------------------------------------------- -------------- ---------------
6.3 CORRECTIVE ACTION
Both Parties acknowledge that the Critical Service Levels will be used as a
benchmark for minimum acceptable performance. For each monthly performance
below Critical Service Level, Texaco shall provide to Pathnet by the tenth
(10th) day of the subsequent month, a corrective action plan to include
root cause analysis, action steps and time frames.
2.
B-10
<PAGE>
SCHEDULE C
CHARGES
1. INTRODUCTION
The Monthly Services Charges and Dispatch Charges, as adjusted by the
cost-of-living adjustment ("COLA") set forth in Section 2.2.1, when aggregated
with charges for New Services and Pass-Through Expenses as well as any
consideration by and between Pathnet and Texaco provided in the FPM Agreement,
shall fully compensate Texaco for all obligations pursuant to this Maintenance
Service Agreement.
2. CHARGES
2.1 MONTHLY SERVICES CHARGE
Upon Commissioning of each Segment, Pathnet shall pay to Texaco two hundred
dollars ($200.00) per Site per month, payable in equal quarterly
installments, for providing the Services in accordance with this Agreement.
Notwithstanding the foregoing, the Dispatch Charge set forth in Section 2.2
below will be payable for dispatches for Remedial Maintenance resulting
from a failure in any of the Equipment (hereinafter, an Equipment
Dispatch) (excluding failures arising from human error, failure to conduct
preventive maintenance as required hereunder, or failure due to problems in
an environmental control or other Facility-based problem) that exceed the
following limits:
Commissioning to end of first calendar month: unlimited Equipment dispatches
Beginning of second calendar month to
end of fourth calendar month: 19 Equipment Dispatches per month
Beginning of fifth calendar month to
end of seventh calendar month: 14 Equipment Dispatches per month
Beginning of eighth calendar month to
end of twelfth calendar month: 9 Equipment Dispatches per month
2.2 DISPATCH CHARGE
Pathnet shall pay Texaco a maximum on-site time of 2 hours plus travel time
and mileage to and from the installation site _______ per each Circuit
Provisioning dispatch; PROVIDED, HOWEVER, Texaco shall not be compensated
for any second dispatch to a site as required
C-1
<PAGE>
by poor Texaco quality or coordination (i.e. if Field Technician fails to
transport required Equipment to perform Circuit Provisioning or a circuit
fails to operate in accordance with the Specifications as set forth in
Schedule B.) The hourly rates and mileage costs are set forth in Exhibit
C-1.
2.3 ADJUSTMENTS
2.3.1 COST OF LIVING ADJUSTMENTS.
a. GENERAL. Beginning on the second anniversary of the
Effective Date, and on each subsequent anniversary
thereafter, the Monthly Service Charges will be increased by
an amount equal to the product of (i) the Monthly Service
Charges then in effect; (ii) Actual Inflation (as
hereinafter defined) and (iii) the COLA Percentage (as
hereinafter defined).
b. INDEX. The Parties agree to use the Historical
Consumer Price Index published as final by the Bureau of
Labor Statistics, U.S. Department of Labor for all urban
consumers, U.S. City Average, All Items, Annual Average
1982-84 = 100 ("CPI-U") for purposes of calculating actual
inflation. In the event the Bureau of Labor Statistics
stops publishing the CPI-U or substantially changes its
content and format, the Parties will substitute another
comparable index published at least annually by a
mutually-agreeable source. If the Bureau of Labor
Statistics merely redefines the base year for the CPI-U from
1982-84 to another year, the Parties will continue to use
the CPI-U, but will convert the index to the new base year
by using an appropriate conversion formula.
c. The Actual Inflation and the COLA Percentage are as
follows:
Actual Inflation = Increase in the CPI-U for the prior
twelve (12) month period.
COLA Percentage = seventy-five (75%) percent.
2.4 ADDITIONAL CHARGES
2.4.1 NEW SERVICES.
In the event that Pathnet requests Texaco to perform functions that
are materially different from and in addition to the Services ("New
Services"), the Parties' obligations with respect to such functions
shall be as follows:
C-2
<PAGE>
a. To the extent that the Parties agree that such
functions may be performed with existing resources and
existing allocation of personnel time under this Maintenance
Agreement, the additional functions shall then be considered
"Services" and shall be subject to the provisions of this
Agreement without further compensation to Texaco.
b. To the extent that such functions require additional
resources or can not reasonably be performed with the
existing allocation of personnel time under this Agreement,
then prior to performing such additional functions, Texaco
shall quote to Pathnet:
(i) a charge for such additional functions that is
reasonable within the industry.
(ii) the reasonable number of hours to perform such
additional functions and such additional functions
shall be performed at the rates set forth in Exhibit
C-1 to this Schedule C.
(iii) in the case of Maintenance requested for an
interconnection Site, the additional charge shall be
one hundred percent (100%) of the current Monthly
Service Charge for such site.
c. Pathnet, upon receipt of such quote, may but shall have
no obligation to elect to have Texaco perform the additional
functions and if Pathnet elects to use Texaco for such
additional charges, then the charges under this Agreement
shall be adjusted if appropriate to reflect such functions.
If Pathnet so elects, such service shall then be deemed
"Services" and shall be subject to the provision of this
Maintenance Agreement.
d. Pathnet may elect to solicit and receive bids from
third parties to perform such additional functions. If
Pathnet elects to contract for such third-party services,
Texaco shall reasonably cooperate with those third parties
with respect to the provision of such service.
e. The Parties anticipate that the Services will evolve
and be supplemented, modified, enhanced or replaced over
time to keep pace with technological advancements and
improvements in the methods of delivering services, and the
Parties acknowledge that these will not be deemed to result
in functions materially different from and in addition to
the Services.
f. If Pathnet's request for additional functions, pursuant
to this Section 2.4.1, includes a request for Texaco to
C-3
<PAGE>
correspondingly reduce or eliminate Services it is
providing, then such additional functions will be considered
"Replacement Service". In such event, the Parties shall
determine the resources and expenses required to provide the
Replacement Services, including implementation and ongoing
support, and the reduction in resources and expenses related
to the Services being replaced. The net increase or
decrease in resources and expenses will be the basis on
which Texaco shall quote a price for Replacement Services
pursuant to subsection (b). Notwithstanding the foregoing,
any Replacement Services shall not materially degrade the
System below Critical Service Levels.
2.4.2 PASS-THROUGH EXPENSES.
Pass-Through Expenses in excess of five hundred ($500) dollars may not
be added to the Monthly Services Charge without Pathnet's prior
written or electronically transmitted consent, which Pathnet may
withhold in its sole discretion. Texaco shall promptly provide
Pathnet with the original or a copy of the third-party invoice for
such expenses, together with a statement that Texaco has reviewed the
invoiced charges and made a determination of which charges are proper
and valid and shall be paid by Pathnet. Pass-Through Expenses shall
continue to be booked to the Pathnet office.
C-4
<PAGE>
EXHIBIT C-1
TEXACO PRESUMPTIVE LABOR RATES
[Texaco to Provide]
The hourly rate for Services is $55/hour for a standard 8:00 AM to 5:00 PM
business day. All other hours worked will be charged at a $75/hour rate.
Vehicle expenses will be charged on a per mile basis on a $.045/mile.
C-5
<PAGE>
SCHEDULE D
MAINTAINED EQUIPMENT
[Pathnet to Provide]
D-1
<PAGE>
SCHEDULE E
SPARE PARTS AND MAINTENANCE TEST EQUIPMENT
1. SPARES
1.1 GENERAL
Pathnet shall provide to Texaco a full set of Spare Parts with quantities
reflective of (i) the number of units in service and (ii) manufacturers'
recommendations adjusted based on Texaco's and Pathnet's actual field
experience. Texaco shall store such Spare Parts at the Stocking Depot at
locations reasonably situated to perform the Services, but each Facility
shall have a full set of Spare Parts stored in a Stocking Depot close
enough to such Facility to enable Texaco to comply with the response and
repair times set forth in Schedule A-2. Texaco shall be responsible for
notifying Pathnet promptly if the Spare Parts inventory falls below the
recommended inventory levels set forth in this Schedule E. Texaco, upon
replacing a degraded part or module with a Spare Part, shall send such
degraded part or module to Pathnet as soon as possible for a replacement
Spare Part. Pathnet shall be responsible for promptly providing a
replacement for any such Spare Part sent from Texaco to Pathnet or
identified by Texaco as requiring replacement. Pathnet shall not be
responsible for replacing any Spare Part damaged or harmed as a result of
Texaco's negligence.
1.2 SPARE EQUIPMENT INVENTORY
1.2.1 GENERAL.
For each system, Spare Parts shall be provided at a ratio sufficient
to enable Texaco to comply with the response and repair times set
forth in Schedule A-2. Such ratio shall be subject to change based
upon the field experience of Pathnet and Texaco.
1.2.2 INVENTORY.
The Spare Parts provided by Pathnet shall be as set forth in Exhibit
E-1 to this Schedule E.
2. MAINTENANCE TEST EQUIPMENT
2.1 GENERAL
Texaco shall be responsible for providing and maintaining at the Stocking
Depot the Maintenance Test Equipment listed by Pathnet in Exhibit E-2 to
this Schedule E. Pathnet will recommend quantities and configurations of
Maintenance Test Equipment appropriate for field alignment and maintenance
of the proposed digital radios. Pathnet
E-1
<PAGE>
has established vendor discounts with Maintenance Test Equipment
manufacturers and shall pass on such discounts to Texaco.
E-2
<PAGE>
EXHIBIT E-1
SPARE PARTS
Quantity Type
- -------- ----
[Pathnet to Provide]
E-3
<PAGE>
EXHIBIT E-2
MAINTENANCE AND PROVISIONING TEST EQUIPMENT
<TABLE>
- ---------------------------------------------------------------------------------------------------------------
Test Equipment Test Type Service Quantity
Category
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Wrist Strap Module Handling 2,3 1 per technician
- ---------------------------------------------------------------------------------------------------------------
Digital Volt Meter Voltage/Continuity Check 1,2,3 1 per technician
- ---------------------------------------------------------------------------------------------------------------
Power Meter/Freq Counter RF TX Power/TX Frequency 2,3 1 per system
- ---------------------------------------------------------------------------------------------------------------
DS-1/DS-3/OC3 BER/SES/ES 2,3 1 per technician
(Note 3)
- ---------------------------------------------------------------------------------------------------------------
Oscilloscope DADE/Phase Lock 2,3 1 per system
- ---------------------------------------------------------------------------------------------------------------
NEC 2000S Extension Card TX Test & Alignment 2,3 1 per system
(Note 2)
- ---------------------------------------------------------------------------------------------------------------
Card Extender Receiver ATCP Card Adjustment 2,3 1 per system
NEC-2000S (Note 2)
- ---------------------------------------------------------------------------------------------------------------
Digital Radio Test System Spectrum Analyzer; DADE; 2,3 1 per system
Freq Counter; Power Meter;
IF and Multipath
- ---------------------------------------------------------------------------------------------------------------
Laptop Personal Computer For PM, Remedial M and 1,2,3 1 per technician
(Note 1) Installation
- ---------------------------------------------------------------------------------------------------------------
NEC| Torque Wrench Transmitter Changeout 2,3 1 per technician
(Note 2)
- ---------------------------------------------------------------------------------------------------------------
VCO Tuning Wrench
(Note 2) Transmitter Adjustments 2,3 1 per technician
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Note 1: Software and connector cables associated with Radio and Multiplexer
will be Provided by Pathnet.
Note 2: Equipment to be provided to supplier by Pathnet.
Note 3: TTC310 Test Set is highly recommended .
E-4
<PAGE>
SCHEDULE F
INTENTIONALLY OMITTED
PATHNET FACILITIES AND SYSTEM
[Pathnet to Provide]
F-1
<PAGE>
SCHEDULE G
CUSTOMER SERVICE AND TRAINING
1. EQUIPMENT REPAIR ASSISTANCE
To assist Texaco in performing the Services, Pathnet shall provide the
following Equipment repair assistance and customer service:
Intentionally Omitted
Intentionally Omitted
1.3 TECHNICAL AND FIELD SERVICE
1.3.1 Pathnet shall provide technical information, troubleshooting
assistance, and, in extreme cases, field repair, as determined by
Pathnet in its sole discretion. These services can be provided by
letter, telephone, e-mail or FAX as appropriate.
1.3.2 After normal working hours, emergency calls will be referred
to the Network Operating Center.
1.4 TROUBLESHOOTING CONSULTATION
Pathnet shall maintain a staff of experienced engineers who shall provide
troubleshooting assistance and coordination and escalation, if required by
telephone.
1.5 WARRANTY AND PRODUCT
Pathnet shall provide warranty and product coordination and support with
the applicable manufacturer.
2. TRAINING AND CERTIFICATION PROCEDURES
Pathnet, after consultation with Texaco. , shall provide and Texaco Field
Technicians shall be required to participate in a training class to train and
Pathnet shall certify Texaco Field Technicians in performing the Services
pursuant to this Agreement. Such training shall be performed at Pathnet's
Washington, D.C. or Texas office or at the office of Pathnet's training vendor
and shall comprise approximately forty (40) hours. Pathnet shall provide all
course training materials to Texaco. Texaco shall pay the out-of-pocket expense
of attending such training classes. Pathnet shall provide materials to support
the training sessions.
G-1
SCHEDULE H
VERIFICATION OF COMMISSIONING
[To be attached from Fixed Point Microwave Services Agreement upon
Commissioning]
H-1
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 (File
No. 333-52247) of our report dated February 20, 1998, except for the information
presented in Note 9 to the financial statements for which the dates are April 8,
1998, April 13, 1998, May 4, 1998 and July 24, 1998, on our audits of the
consolidated financial statements of Pathnet, Inc. and its subsidiary as of
December 31, 1996 and 1997, and for the period August 25, 1995 (date of
inception) to December 31, 1995, the years ended December 31, 1996 and 1997 and
the period August 25, 1995 (date of inception) to December 31, 1997. We also
consent to the references to our firm under the captions "Experts" and "Selected
Consolidated Financial Data".
/s/ PRICEWATERHOUSECOOPERS LLP
McLean, Virginia
July 27, 1998
