EXHIBIT 10.4
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OPTICAL FIBER LEASE AGREEMENT
DATED EFFECTIVE AS OF SEPTEMBER 11, 1996
BETWEEN
ELECTRIC LIGHTWAVE, INC.
AND
SALT RIVER PROJECT AGRICULTURAL
IMPROVEMENT AND POWER DISTRICT
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[Asteriks herein denote confidential material which has been omitted pursuant to
a request for confidential treatment. Such material has been filed separately
with the Securities and Exchange Commission]
TABLE OF CONTENTS
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Page
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ARTICLE I: DEFINITIONS......................................... 1
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ARTICLE II: SYSTEM.............................................. 13
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2.1 Existing SRP Operations and Network................. 13
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2.2 Existing ▇▇▇ Operations and Network................. 14
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2.3 SRP Build-Out....................................... 14
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2.4 ▇▇▇ Build-Out....................................... 14
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ARTICLE III: LEASE OF FIBER...................................... 15
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3.1 Lease of Fiber to ▇▇▇............................... 15
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3.2 Use of Leased Fiber................................. 15
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3.3 Term of Lease....................................... 16
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3.4 Operating Lease Payments............................ 16
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ARTICLE IV: RESERVED FIBER...................................... 16
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4.1 Reserved Fiber...................................... 16
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4.2 Dark Fiber Reservation.............................. 17
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4.3 Amount of Reserved Fiber............................ 17
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4.4 Sale of Network Services and Elements............... 17
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ARTICLE V: FINANCIAL TERMS..................................... 17
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5.1 Operating Revenues.................................. 17
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5.2 Base Case Financial Model........................... 18
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5.3 Annual Budgeting Process............................ 19
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5.4 Operating Lease Percentage.......................... 19
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5.5 Operating Lease Payment............................. 20
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5.6 Annual Adjustment for Past Operating Lease Payments. 24
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5.7 SRP Direct Operating Services....................... 25
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5.8 Minimum Performance Standards....................... 26
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5.9 Books, Records and Audit Rights..................... 27
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ARTICLE VI: UTILICOM SERVICES............................................27
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6.1 Right of SRP to Provide Utilicom Services Over the System....27
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6.2 System Costs and Charges for Utilicom Services...............27
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6.3 Tracking of Utilicom Services................................29
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6.4 Quarterly Review of Utilicom Services........................29
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ARTICLE VII: SYSTEM DESIGN................................................29
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7.1 Integrated Design............................................29
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7.2 Design Responsibilities......................................30
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7.3 Information Requests.........................................31
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ARTICLE VIII: CONSTRUCTION OF SEGMENTS.....................................33
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8.1 Construction of Segments.....................................33
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8.2 Future Segments..............................................34
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8.3 Work Standards...............................................36
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8.4 Supply of System Materials...................................36
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8.5 Changes......................................................37
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8.6 Use of Contractors...........................................38
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8.7 Inspection of Work and Acceptance of Construction............39
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8.8 As-Built Drawings............................................40
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8.9 Correction of Work...........................................42
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8.10 Title and Risk of Loss.......................................43
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8.11 Customer Installations.......................................43
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ARTICLE IX: MAINTENANCE..................................................44
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9.1 General Responsibilities.....................................44
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9.2 Maintenance Procedures.......................................45
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9.3 Maintenance Supplies.........................................45
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9.4 Repair Timing................................................45
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9.5 Staff Training...............................................46
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ARTICLE X: PROPERTY RIGHTS AND OBLIGATIONS..............................46
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10.1 Rights of Way and Building Entrances.........................46
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10.2 Cross Licenses...............................................47
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10.3 Route Designations...........................................48
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10.4 Right of Entry...............................................48
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10.5 Entry Conditions.............................................49
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10.6 Property Right Obligations...................................50
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10.7 Property Interest Documentation..............................52
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10.8 Memorandum of Agreement......................................52
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10.9 Incremental Property Rights Costs............................52
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10.10 Franchise Rights and Licensing Costs.........................53
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10.11 Liens........................................................54
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10.12 Discontinuance and Relocation................................57
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ARTICLE XI: SYSTEM OPERATIONS AND COORDINATION...........................57
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11.1 Operations...................................................57
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11.2 Coordinating Committee.......................................59
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11.3 Network Deployment Committee.................................62
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11.4 Staffing.....................................................64
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ARTICLE XII: REPRESENTATIONS, WARRANTIES AND COVENANTS....................64
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12.1 Representations, Warranties and Covenants of ▇▇▇.............64
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12.2 Representations, Warranties and Covenants of SRP.............67
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12.3 Confidentiality..............................................69
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12.4 Cooperation..................................................72
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12.5 Regulatory Compliance........................................73
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12.6 Certificates.................................................73
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12.7 Independent Contractor Status................................74
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12.8 Transactions with Affiliates.................................74
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12.9 Further Assurances...........................................74
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12.10 Nonexclusive Agreement.......................................75
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12.11 Damage and Destruction.......................................75
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ARTICLE XIII: INSURANCE....................................................76
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13.1 Required Insurance Coverage..................................76
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13.2 General Conditions...........................................76
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ARTICLE XIV: ASSIGNMENT, SUBLETTING AND OTHER TRANSFERS...................77
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14.1 Transfers....................................................77
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14.2 ▇▇▇ or SRP Financing.........................................78
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14.3 SRP and ▇▇▇ Recognition of Transferees.......................78
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14.4 No Assumption or Release.....................................79
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14.5 Mergers and Acquisitions.....................................79
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14.6 No Third Party Beneficiaries.................................79
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ARTICLE XV: CONDEMNATION.................................................79
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15.1 Taking.......................................................79
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15.2 Taking Awards................................................80
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15.3 Notice of Taking.............................................80
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ARTICLE XVI: ENVIRONMENTAL HAZARD LIABILITY...............................81
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16.1 Representations..............................................81
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16.2 Responsibilities of Parties..................................81
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16.3 Alternate Locations..........................................82
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ARTICLE XVII: LIABILITY AND INDEMNITY......................................82
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17.1 ▇▇▇ Indemnity................................................82
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17.2 SRP Indemnity................................................83
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17.3 No Consequential Damages.....................................83
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17.4 Waiver of Subrogation........................................84
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17.5 Defense of Claims............................................84
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17.6 Third Party Claims...........................................84
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17.7 Survival.....................................................84
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17.8 Limitation of ▇▇▇ Liability..................................85
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17.9 Limitation of SRP Liability..................................85
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17.10 Applicability of Liability Limitations.......................85
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ARTICLE XVIII: FORCE MAJEURE................................................86
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18.1 Excuse of Performance........................................86
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18.2 Definition...................................................86
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18.3 Continuance after Force Majeure Event........................87
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ARTICLE XIX: BREACH AND TERMINATION.......................................88
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19.1 Termination Events...........................................88
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19.2 Actions Following Occurrence of Termination Event............90
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19.3 Rights of ▇▇▇ and SRP Upon Termination.......................91
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ARTICLE XX: MISCELLANEOUS................................................93
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20.1 Amendments...................................................93
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20.2 Binding Effect...............................................93
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20.3 Waivers......................................................93
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20.4 Notices......................................................93
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20.5 Severability.................................................94
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20.6 Interpretation...............................................95
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20.7 Governing Law and Choice of Forum............................95
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20.8 Commissions..................................................95
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20.9 Counterparts.................................................95
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20.10 Attorney Fees................................................96
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20.11 Costs........................................................96
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EXHIBITS
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Exhibit "A" ▇▇▇ Construction Plan
Exhibit "B" Network Maps
Exhibit "C" Initial Base Case Financial Model
Exhibit "D" SRP Construction Plan
Exhibit "E" Existing SRP Network Contracts
Exhibit "F" Reserved Fiber Allocation for Existing Segments
Exhibit "G" Operating Lease Payment Calculation Examples
Exhibit "H" Coordinating Committee
Exhibit "I" Network Deployment Committee
Exhibit "J" Staffing
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OPTICAL FIBER LEASE AGREEMENT
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THIS OPTICAL FIBER LEASE AGREEMENT ("Agreement") is made and entered
into effective as of September 11, 1996, by and between ELECTRIC LIGHTWAVE,
INC., a Delaware corporation ("▇▇▇"), and SALT RIVER PROJECT AGRICULTURAL
IMPROVEMENT AND POWER DISTRICT, an Agricultural Improvement District organized
and existing under the laws of the State of Arizona ("SRP").
R E C I T A L S
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A. ▇▇▇ is a supplier of telecommunications services in the Phoenix,
Arizona metropolitan area.
B. SRP is a supplier of electric power and communications-enabled power
related products and services in portions of Maricopa County, Gila County and
Pinal County, Arizona.
C. ▇▇▇ and SRP are each in the process of deploying fiber optic cable in
the Phoenix, Arizona metropolitan area to expand their existing communications
networks.
D. ▇▇▇ desires to lease optical fibers from SRP, and SRP, upon the terms,
covenants and conditions set forth in this Agreement, is willing to lease
optical fiber to ▇▇▇.
NOW, THEREFORE, in consideration of the mutual promises contained in
this Agreement and for good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged, ▇▇▇ and SRP agree as follows:
ARTICLE I
DEFINITIONS
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As used in this Agreement, the following terms shall have the meanings
specified below:
"Acceptance of Construction" shall mean the written notification from
▇▇▇ to SRP, or from SRP to ▇▇▇, pursuant to Section 8.7, that specified work has
been inspected by such party and found to have been performed substantially in
accordance with the requirements of this Agreement.
"Additional Segment" shall mean those Segments identified on the ▇▇▇
Construction Plan and the SRP Construction Plan for construction after the date
of this Agreement by ▇▇▇ or by SRP.
"Ad Valorem Taxes" shall mean ad valorem property taxes, special
assessments, local improvement district levies and other levies assessed against
the Facilities, the System or any Right of Way.
"Affected Portion" shall mean the portion of any Segment that is or
may: (1) be affected by a Taking; (2) become the subject of a lien or transfer;
or (3) be damaged or destroyed as the result of the occurrence of an event of
casualty.
"Affiliate" shall mean, with respect to either ▇▇▇ or SRP, any
corporation that controls such party, is controlled by such party, or is with
such party under common control of another entity.
"Agent" shall mean the agent of any permitted Transferee who, pursuant
to Section 14.2, is entitled to receive any notices required to be given under
the terms of this Agreement.
"Agreement" shall mean this Optical Fiber Lease Agreement.
"Approvals" shall mean all permits, approvals and licenses from all
government authorities or other parties having jurisdiction or approval rights
respecting: (1) the use and
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occupation of any Right of Way where Facilities are located or to be
constructed; and (2) the use of Facilities.
"Base Case Financial Model" shall mean the economic analysis of the
revenues, expenses, capital outlays, income and cash flows projected over a
period beginning on the effective date of this Agreement and ending December 31,
2011. The Base Case Financial Model determines the present value of existing
and projected future capital investment (less Residual Value at the end of the
Term), then applies a formula to determine an Operating Lease Payment to
equalize the return of ▇▇▇ and SRP on the present value of their respective
capital investments over the Term. The Base Case Financial Model will be
reevaluated from time to time as provided in Article V.
"Building Entrance" shall mean that portion of the System which runs
from a connection point on the System to the point-of-presence inside a
customer's building, including all Rights of Way, conduit, Fiber, fiber optic
patch panel and other Facilities necessary to establish the connection from a
connection point on the System to the customer's building.
"Changes" shall mean changes, additions to, deletions from or other
modifications to the construction plans for a Segment.
"Construction Plans" shall mean, collectively, the ▇▇▇ Construction
Plan and the SRP Construction Plan.
"Coordinating Committee" shall mean the committee comprised of
representatives of ▇▇▇ and SRP, as described in Section 11.2.
"Cost of Goods Sold" shall mean the actual cost of services purchased
for resale and the cost of leased Facilities.
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"Dark Fiber" shall mean Fiber through which no light is transmitted.
"Deferred Operating Lease Payment" shall mean the difference between
the hypothetical Operating Lease Payment, calculated as described in Section
5.5(a)(4), and the actual Operating Lease Payment paid by ▇▇▇ to SRP in any of
the 15 consecutive calendar quarters beginning with year 1 of the Base Case
Financial Model. In no event will the Deferred Operating Lease Payment be less
than zero.
"Direct Operating Costs" shall include ▇▇▇ Phoenix Direct Operating
Expenses and SRP Phoenix Direct Operating Expenses.
"Electric Services" shall mean those electric power generation,
transmission services, distribution services and other services relating to the
use of electric power, other than Utilicom Services, that SRP supplies to
customers.
"▇▇▇ Capital" shall include: (1) all capital expenditures ▇▇▇ has
already incurred or, pursuant to the terms of this Agreement, will incur to
complete the ▇▇▇ Construction Plan, including, without limitation, expenditures
to: (a) connect the existing ▇▇▇ Network with the existing SRP Network; (b)
install a switch to provide Telecommunications Services; and (c) provide System
Electronics needed to deliver Telecommunications Services; (2) all ▇▇▇
expenditures to construct Future Segments, including the reasonable market value
of all Rights of Way and Building Entrances acquired to construct a Future
Segment; (3) any other capital expenditures approved by the Coordinating
Committee; and (4) ELI's Unreimbursed Direct Operating Expenses.
"▇▇▇ Construction Plan" shall mean the build-out plan for the
deployment by ▇▇▇ of Additional Segments, including preliminary route
designations, construction schedule and Fiber
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capacity. A copy of the ▇▇▇ Construction Plan is attached to and incorporated by
reference in this Agreement as Exhibit "A."
"▇▇▇ Facilities" shall mean those components of the System, other than
the SRP Facilities, whether located on or off a Right of Way, now owned or
hereafter (pursuant to the terms of this Agreement) acquired by ▇▇▇, including,
without limitation, Fiber, System Electronics, Building Entrances, Main Hubs,
Minihubs, junctions, terminals, regenerators, power sources, fault alarm
systems, structures and shelters, any conduit, poles or pole line attachments
associated with any of the foregoing, and all articles of personal property
owned or used by ▇▇▇ connected with, necessary for, or useful to the
construction, installation, operation, maintenance, repair, reinstallation,
replacement, relocation and removal of any of the foregoing.
"▇▇▇ Network" shall mean the Fiber described on Exhibit "B" and ▇▇▇-
owned Future Segments deployed by ▇▇▇, including Fiber, System Electronics and
other ▇▇▇ Facilities.
"▇▇▇ Operating Division" shall mean a regional office or service
center of ▇▇▇ that, for internal accounting or regulatory purposes, has been
identified and designated as a separate division. An ▇▇▇ Operating Division
shall be a geographic area reasonably consistent in size and population with
ELI's current operating divisions.
"▇▇▇ Phoenix Direct Operating Expenses" shall include the following
cost categories of the ▇▇▇ Operating Division in Phoenix, Arizona that are
incurred consistent with the terms and provisions of this Agreement: (1)
corporate sales, carrier sales, marketing, technicians, maintenance,
engineering, real estate (including land rights acquisition), legal, insurance
(including all expenses incurred for loss, damage or liability not covered by
insurance), regulatory, facilities and property
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taxes; (2) SRP Direct Operating Services; and (3) a cost factor equal to the ▇▇▇
Vancouver Operating Expenses for the relevant accounting period divided by the
total number of ▇▇▇ Operating Divisions existing at the end of such accounting
period, but in no event less than the number of ▇▇▇ Operating Divisions shown on
the Initial Base Case Financial Model. If applicable, a reasonable component for
▇▇▇ overhead (other than a duplication for ▇▇▇ Vancouver Operating Expenses) may
be included in the foregoing cost categories.
"▇▇▇ Vancouver Operating Expenses" shall mean the following services
and activities provided by ELI's home office in Vancouver, Washington for all
▇▇▇ Operating Divisions, wherever located: network control center, network
support, provisioning, customer service, system engineering and support,
telemarketing, sales support, carrier sales, marketing, accounting, finance,
billing, facilities, purchasing, legal, regulatory, and information systems, and
may include expenses of ELI's parent corporation or any ▇▇▇ Affiliate directly
related to the System, but shall not include an allocation of overhead of ELI's
parent corporation or any ▇▇▇ Affiliate.
"ELI's Preferred Rates" shall mean, from time to time during the Term,
the lowest prices then charged by ▇▇▇ to similarly situated commercial
Telecommunications Services customers for a similar service or group of
services.
"Existing Segment" shall mean Segments owned by SRP or ▇▇▇ existing as
of the date of this Agreement and identified on the ▇▇▇ Construction Plan and
the SRP Construction Plan.
"Facilities" shall mean, collectively, the ▇▇▇ Facilities and the SRP
Facilities.
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"Fiber" shall mean the fiber optic strands that, pursuant to the terms
of this Agreement, are designed, deployed, interconnected and used to create the
System for the transmission of Telecommunications Services and Utilicom Services
by ▇▇▇ and SRP.
"Force Majeure" shall have the meaning given in Section 18.2.
"Future Segments" shall mean any Segments other than Additional
Segments that, after the date of this Agreement, may be proposed by either ▇▇▇
or SRP for addition to their respective networks and approved as described in
Section 8.2.
"Gross Margin" shall mean, for any accounting period, the difference
between the Gross Revenues generated from the sale of Telecommunications
Services for such period, and the Cost of Goods Sold for the corresponding
period.
"Gross Revenues" means all revenues billed by ▇▇▇ for
Telecommunications Services provided by means of the System, less actual
uncollectibles (as determined consistent with ELI's business practices).
"Hazardous Substances" shall mean any waste, pollutant (as that term
is defined in 42 U.S.C. (S) 9601(33) or in 33 U.S.C. (S) 1362(13) or any
successor statutes thereto), hazardous substance (as that term is defined in 42
U.S.C. (S) 9601(14) or any successor statute thereto), hazardous chemical (as
that term is defined by 29 CFR Part 1910.1200(c) or any successor regulation
thereto), toxic substance, hazardous waste (as that term is defined in 42 U.S.C.
(S) 6901 or any successor statute thereto), radioactive material, special waste,
petroleum, including crude oil or any other hydrocarbon based substance, waste,
or breakdown or decomposition product thereof, or any
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constituent of any such substance or waste, including, but not limited to
polychlorinated biphenyls, and asbestos.
"Hub Site" shall mean the location of any Main Hub or Minihub.
"Initial Base Case Financial Model" shall mean the Base Case Financial
Model attached to and incorporated by reference in this Agreement as Exhibit
"C".
"Key Accounts" shall mean the customer accounts of SRP which are high
volume users of SRP's Electric Services which have been identified and
classified by SRP for special billing, accounting, customer service, marketing
or other purposes pursuant to the established Key Account program offered by SRP
to its customers, as now constituted or as it may hereafter be amended.
"Leased Fiber" shall mean all of the Fiber now or hereafter deployed
in the SRP Network.
"License" shall mean a license to exercise the rights granted to ▇▇▇
and SRP in Section 10.2 and elsewhere in this Agreement.
"Main Hub" shall mean any Hub Site, other than a Minihub, where
Facilities have been or are proposed to be constructed or installed to provide
the central point within the System to cross-connect traffic between end-users.
"Maps" shall mean: (1) the maps or drawings attached to and
incorporated by reference in this Agreement as Exhibit "B" which depict ELI's
and SRP's Existing Segments and Additional Segments; (2) any updates to the
foregoing; and (3) any other drawings or maps that either ▇▇▇ or SRP is required
to prepare, update or submit to the Network Deployment Committee pursuant
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to the terms of this Agreement, or to any state or federal regulatory agency as
required by applicable statute, rule or regulation.
"Minihub" shall mean any Hub Site, other than a Main Hub site, where
Facilities have been or are proposed to be constructed or installed to provide a
network traffic concentration point for distribution to a Main Hub.
"Minimum Performance Standards" shall mean the performance criteria
and targets for the sale of Telecommunications Services over the System during
the Term identified in Section 5.8.
"Net Operating Income" shall mean, generally, Gross Margin less Direct
Operating Costs. However, as described in Section 5.5, the calculation of Net
Operating Income may also include a reduction for Unreimbursed Direct Operating
Expenses and for Deferred Operating Lease Payments for purposes of calculating
the Operating Lease Payment in certain years of the Term.
"Network Deployment Committee" shall mean the committee comprised of
representatives of ▇▇▇ and SRP, as described in Section 11.3, whose primary
function shall be the coordination of efforts between ▇▇▇ and SRP relating to
the design, construction and maintenance of the System.
"Operating Lease Payment" shall mean the quarterly lease payment of
▇▇▇ to SRP for use of the Leased Fiber.
"Operating Lease Percentage" shall mean the percentage factor
generated under the terms and assumptions of the Base Case Financial Model as
part of the annual budgeting process
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described in Section 5.4 that, when multiplied against the Net Operating Income
for any quarter, establishes the Operating Lease Payment (if any) for such
quarter.
"Reserved Fiber" shall mean that portion of the Fiber in the SRP
Network, now or hereafter deployed, which is allocated to the exclusive use of
SRP.
"Residual Value" shall mean the value of SRP Capital and ▇▇▇ Capital
(not including Unreimbursed Direct Operating Expenses and Unreimbursed Deferred
Operating Lease Payments) remaining at the end of the Term, determined on a ten-
year straight-line depreciation schedule, using a mid-year convention.
"Right of Way" shall mean the real property and rights related thereto
used by ▇▇▇ for its Telecommunications Services transmission system or by SRP
for its Electric Services and Utilicom Services transmission systems that are
used, owned, operated, leased or controlled by ▇▇▇ or SRP, as applicable,
pursuant to either: (1) an historical use that is not based on a direct grant
of authority from the applicable property owner; or (2) a subsisting grant,
easement, lease, franchise, license or other agreement.
"Segment" shall mean a portion of the System with defined beginning
and end points.
"SONET" shall mean a synchronous optical network that is capable of
high speed transmission of digital signals.
"SRP Capital" shall include: (1) all capital expenditures SRP has
already incurred as shown on Exhibit "C" or, pursuant to the terms of this
Agreement, will incur to complete the SRP Construction Plan, including, without
limitation, all reasonable capital expenditures for the deployment of Fiber,
including the Reserved Fiber; (2) all SRP expenditures to construct Future
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Segments, including the reasonable market value of all Rights of Way and
Building Entrances contributed by SRP to construct a Future Segment; (3) any
other capital expenditures approved by the Coordinating Committee; and (4) SRP's
Unreimbursed Direct Operating Expenses.
"SRP Construction Plan" shall mean the build-out plan for the
deployment by SRP of Additional Segments, including preliminary route
designations, construction schedule and Fiber capacity. A copy of the SRP
Construction Plan is attached to and incorporated by reference in this Agreement
as Exhibit "D."
"SRP Direct Operating Services" shall mean those services provided by
SRP to ▇▇▇ as described in Section 5.7.
"SRP Facilities" shall mean those components of the SRP Network, other
than the ▇▇▇ Facilities now owned or hereafter (pursuant to the terms of this
Agreement) acquired by SRP, including, without limitation, Fiber, Building
Entrances, junctions, terminals, regenerators, power services, fault alarm
systems, structures and shelters, any conduit, poles or pole line attachments
associated with any of the foregoing, and all articles of personal property
owned or used by SRP connected with, necessary for, or useful to the
construction, installation, operation, maintenance, repair, reinstallation,
replacement, relocation and removal of any of the foregoing.
"SRP Network" shall mean the Fiber described in Exhibit "B" and SRP-
owned Future Segments, including Fiber and the other SRP Facilities.
"SRP Phoenix Direct Operating Expenses" shall include the following
cost categories of SRP associated with Telecommunications Services offered or
provided by ▇▇▇, or jointly by SRP and ▇▇▇, by means of the System, and that are
incurred consistent with the terms and provisions of
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this Agreement: business development, marketing, sales and sales support,
technicians, maintenance, engineering, real estate (including land rights
acquisition), legal, insurance (including all expenses incurred for loss, damage
or liability not covered by insurance) and property taxes. If applicable, a
reasonable component for SRP overhead may be included in the foregoing cost
categories.
"System" shall mean the combination of the ▇▇▇ Network and the SRP
Network currently installed or to be deployed by ▇▇▇ and SRP pursuant to the
terms of this Agreement, including all Segments, all improvements, Facilities,
Building Entrances and other equipment which creates the Fiber communications
system contemplated by this Agreement. The System shall not include the
Reserved Fiber or any equipment currently owned or hereafter purchased by or for
SRP solely for use in connection with the Reserved Fiber or SRP's Electric
Services transmission system.
"System Electronics" shall mean all items of equipment, hardware,
software, electronics, optronics and any components thereof owned by ▇▇▇ that
are used to transmit or monitor Telecommunications Services or Utilicom Services
over the Leased Fiber or the System, including, without limitation, routers,
access nodes, MSDTs, channel banks, digital system cross connect equipment,
fiber optic terminals, fiber optic patch panels, multiplexers and switches.
"System Materials" shall mean all Fiber, System Electronics, equipment
and other materials obtained by ▇▇▇ or SRP under the terms of this Agreement to
construct any Segment.
"Taking" shall mean the exercise of the power of eminent domain by any
public or quasi-public authority, other than an exercise by ▇▇▇ or SRP in
accordance with statutory authority.
"Telecommunications Services" shall mean all services delivered by
means of the System (other than Utilicom Services), including, without
limitation, the two-way transmission of
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signals, messages, images, sounds, data and other information of any nature
transmitted to customers by means of the System.
"Term" shall mean the period of time beginning on the effective date
of this Agreement and terminating on December 31, 2011.
"Transferee" shall mean any individual or entity to which either ▇▇▇
or SRP, pursuant to Article XIV, transfers or assigns any interest in this
Agreement or, as applicable, in the ▇▇▇ Facilities or the SRP Facilities.
"Unreimbursed Direct Operating Expenses" shall mean all ▇▇▇ Phoenix
Direct Operating Expenses and SRP Phoenix Direct Operating Expenses that are not
recovered by the parties under the terms of the Base Case Financial Model in the
quarter in which they are incurred.
"Utilicom Services" shall mean all services delivered by means of the
System including, without limitation, the two-way transmission of signals,
messages, images, sounds, data and other information of any nature transmitted
to customers by means of the System (other than Telecommunications Services),
that are incidental to Electric Services and water services provided by SRP and
its Affiliates, to their customers.
ARTICLE II
SYSTEM
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2.1 Existing SRP Operations and Network. SRP maintains an extensive
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water delivery system and is a provider of electric power and water. As part of
its electrical power delivery system, SRP has installed a communications network
consisting of approximately 165.6 miles of 20-strand, 24-strand and 48-strand
Fiber cable.
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2.2 Existing ▇▇▇ Operations and Network. ▇▇▇ provides
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Telecommunications Services in the States of Washington, Oregon, California,
Arizona and Utah. ELI's Arizona operations are centered in the Phoenix
metropolitan area and consist of: (a) special access service types such as:
▇▇-▇, ▇▇-▇, and DS-3; and (b) frame relay, FDDI, and other data related
services. ▇▇▇ has applied for operating authority from the Arizona Corporation
Commission to provide intrastate Telecommunications Services, including local
exchange services, in Arizona. ▇▇▇ has installed a metropolitan area network in
downtown Phoenix, Arizona consisting of approximately 8 miles of 96-strand Fiber
cable.
2.3 SRP Build-Out. Over the next four (4) fiscal years of SRP (May 1
-------------
to April 30), starting with SRP's 1996/1997 fiscal year, SRP, at its own
expense, shall construct the Additional Segments described in the SRP
Construction Plan, approximately along the routes identified on the Map attached
to this Agreement as Exhibit "B". SRP's total Fiber cable deployment commitment
consists of an additional approximately 324 miles of Fiber cable. It is
anticipated that SRP will expend approximately [*] to complete the SRP
Construction Plan. The Additional Segments to the SRP Network shall be
designed, constructed and maintained in accordance with the terms, covenants and
conditions of this Agreement.
2.4 ▇▇▇ Build-Out. Over the next three (3) calendar years (including
-------------
1996), ▇▇▇, at its own expense, shall construct and install:
(a) Additional Segments. The Additional Segments described in
-------------------
the ▇▇▇ Construction Plan, approximately along the routes identified on the
Map attached to this Agreement as Exhibit "B." ELI's total Fiber cable
deployment commitment consists of an
- 14 -
* Confidential material has been omitted pursuant to a request for confidential
treatment. Such material has been filed separately with the Securities and
Exchange Commission.
additional approximately 54.74 miles of Fiber cable. It is estimated that
▇▇▇ will expend approximately $3,350,000.00 to complete the Additional
Segments.
(b) System Electronics. The System Electronics and related
------------------
Facilities (other than Fiber in the SRP Network) as described in Section
8.1. It is anticipated that ▇▇▇ will expend approximately $27,008,700 to
install the System Electronics and related Facilities.
The Additional Segments to the ▇▇▇ Network and the ▇▇▇ System Electronics shall
be designed, constructed and maintained in accordance with the terms, covenants
and conditions of this Agreement.
ARTICLE III
LEASE OF FIBER
--------------
3.1 Lease of Fiber to ▇▇▇. SRP hereby leases to ▇▇▇, and ▇▇▇ leases
---------------------
from SRP, all of the Leased Fiber during the Term in accordance with and subject
to the provisions of this Agreement. The Leased Fiber will be for the exclusive
use of ▇▇▇, with the exception of the Reserved Fiber as set forth in Article IV.
The Leased Fiber subject to this Agreement shall be Dark Fiber. ▇▇▇, at its
expense, shall supply all System Electronics and related Facilities (other than
Fiber in the SRP Network) needed to supply Telecommunications Services over the
System. All such System Electronics, and related Facilities shall be designed,
purchased, installed and maintained in accordance with the terms, covenants and
conditions of this Agreement.
3.2 Use of Leased Fiber. ▇▇▇ may use the Leased Fiber solely for the
-------------------
purpose of providing Telecommunications Services. ▇▇▇ shall use the Leased
Fiber in accordance with applicable laws, rules, regulations, orders and other
regulatory requirements, now or hereafter in effect, of any governmental
authority having jurisdiction over ▇▇▇, the Leased Fiber or the use
- 15 -
thereof. ▇▇▇ shall not use the Leased Fiber in connection with the marketing of
electric power, other than electric power supplied by SRP.
3.3 Term of Lease. The lease of the Leased Fiber to ▇▇▇ shall
-------------
commence on the effective date of this Agreement and shall continue for the
Term, unless sooner terminated pursuant to the express provisions of this
Agreement
3.4 Operating Lease Payments. To the extent payable under the terms
------------------------
of the Base Case Financial Model, ▇▇▇ shall make Operating Lease Payments to SRP
consistent with the following: (a) Operating Lease Payments shall be due and
payable thirty (30) days after the end of each calendar quarter; (b) an
Operating Lease Payment shall not be considered late if paid within fifteen (15)
days after it is due; and (c) each late payment will bear interest at the rate
of 12% per annum until paid. The Operating Lease Payment amount, if any, shall
be recalculated each year throughout the Term as part of the annual budgeting
process described in Section 5.3.
ARTICLE IV
RESERVED FIBER
--------------
4.1 Reserved Fiber. SRP reserves for its own use the Reserved Fiber.
--------------
SRP may use the Reserved Fiber solely for the following purposes: (a) to
provide electric and water system communications services; (b) to provide SRP
corporate telecommunications services; (c) to provide Utilicom Services; and (d)
to provide for other uses as identified in Exhibit "E" attached to and
incorporated in this Agreement by reference. Notwithstanding the foregoing, SRP
may use the Reserved Fiber for any purpose, to the extent that the Reserved
Fiber is no longer needed for the purposes set forth in subparts (a) through (d)
above. SRP shall use the Reserved Fiber in accordance with applicable laws,
rules, regulations, orders and other regulatory requirements, now or hereafter
- 16 -
in effect, of any governmental authority having jurisdiction over SRP, the
Reserved Fiber or the use thereof.
4.2 Dark Fiber Reservation. SRP's Reserved Fiber shall be Dark
----------------------
Fiber. SRP shall not have the right to use System Electronics installed by ▇▇▇
for use in connection with the System for SRP's Reserved Fiber. However, ▇▇▇,
at SRP's request, may sell System services to SRP as provided in Section 4.4 and
in other sections of this Agreement.
4.3 Amount of Reserved Fiber. The amount of Reserved Fiber to which
------------------------
SRP shall be entitled for all Existing Segments and Additional Segments in the
SRP Network is identified on Exhibit "F" attached to and incorporated by
reference in this Agreement. The Coordinating Committee shall specify the
number of Reserved Fibers for Future Segments. Reserved Fiber shall be fixed
for the Term.
4.4 Sale of Network Services and Elements. To the extent it is
-------------------------------------
economically and technically feasible, SRP and its Affiliates may purchase
unbundled network elements, facilities or functions from ▇▇▇. In addition, SRP
and its Affiliates may resell all finished services sold or offered by or
through ▇▇▇. The price charged to SRP or any SRP Affiliate for all such services
and network elements shall be based on ELI's Preferred Rates.
ARTICLE V
FINANCIAL TERMS
---------------
5.1 Operating Revenues. Within the general parameters of this
------------------
Agreement, ▇▇▇ and SRP shall cooperate with each other, in good faith, and shall
use their best efforts to maximize the revenues generated by the System to
provide Telecommunications Services. In addition, throughout the Term:
- 17 -
(a) SRP Revenues. SRP shall be entitled to collect and retain
------------
all revenues generated by use of the System or the Reserved Fiber to
deliver services, including, without limitation, Utilicom Services, to SRP
customers.
(b) ▇▇▇ Revenues. Except for SRP resale of Telecommunications
------------
Services, ▇▇▇ shall collect all revenues generated by use of the System to
deliver Telecommunications Services. However, as consideration for ELI's
use of the SRP Network, ▇▇▇ shall pay to SRP an Operating Lease Payment in
accordance with the terms and assumptions set forth in the Base Case
Financial Model.
5.2 Base Case Financial Model. The Base Case Financial Model
-------------------------
provides a method to calculate the Operating Lease Payment in an amount that
[*]. The Base Case Financial Model:
(a) Is based on a calendar year cycle, and starts with a year "0"
to reflect capital investments of ▇▇▇ and SRP which predate the effective
date of this Agreement, and capital investments and Direct Operating Costs
of ▇▇▇ and SRP after the effective date of this Agreement through December
31, 1996, and has a year "1" beginning January 1, 1997 and ending December
31, 1997;
(b) Projects expected capital expenditures by ▇▇▇ and SRP over
the Term;
(c) Determines the Residual Value of capital investment at the
end of the Term;
- 18 -
* Confidential material has been omitted pursuant to a request for confidential
treatment. Such material has been filed separately with the Securities and
Exchange Commission.
(d) Determines a present value in year "0" of total capital
investment of each party, less Residual Value, using an adjustable annual
discount rate which is ten percent (10%) in year "1"; and
(e) Determines a ratio of the present value of SRP Capital and
the present value of the sum of SRP Capital and ▇▇▇ Capital.
The Initial Base Case Financial Model is attached to this Agreement as Exhibit
"C." Each party certifies that the Initial Base Case Financial Model represents
the party's good faith best estimate of existing and future conditions.
5.3 Annual Budgeting Process. Each year during the Term, ▇▇▇, using
------------------------
the Base Case Financial Model, will develop a Telecommunication Services
capital, operating and maintenance budget for the coming calendar year. The
budgeting process shall occur during the fourth quarter of the calendar year.
The Base Case Financial Model shall be updated with cost and revenue results for
any prior year, and the current year actual results for the first three calendar
quarters. In addition, ▇▇▇ shall incorporate projections for the fourth quarter
of the current calendar year and for all remaining years of the Term. The
discount rate to be applied to the current year will be readjusted to 300 basis
points over the ten year Treasury Bond Rate established at the most recent
August Treasury auction. The results of the budgeting process and Base Case
Financial Model update shall be the basis for calculating the Operating Lease
Payment for the coming year.
5.4 Operating Lease Percentage. The Operating Lease Payment is
--------------------------
calculated by multiplying the Net Operating Income by the Operating Lease
Percentage. The Operating Lease Percentage is calculated according to this
formula:
- 19 -
[*]
-------------------------------------
[*]
Initially, the Operating Lease Percentage shall be [*] as shown on the
Initial Base Case Financial Model attached to this Agreement as Exhibit "C."
However, subject to the terms and assumptions of the Base Case Financial Model,
the Operating Lease Percentage may be adjusted each year as part of the annual
budgeting and Base Case Financial Model update.
5.5 Operating Lease Payment. For any given quarter during the Term,
-----------------------
including the period between the effective date of this Agreement and December
31, 1996, the amount of the Operating Lease Payment, if any, shall be the
Operating Lease Percentage multiplied by Net Operating Income for the quarter,
plus or minus any adjustments required by Section 5.6(b).
(a) Variation of Calculation of Net Operating Income During First
-------------------------------------------------------------
15 Quarters of the Base Case Financial Model. The following formula shall
--------------------------------------------
be used at the end of Year 0 and at the end of each of the first 15
calendar quarters of the Base Case Financial Model to compute Net Operating
Income for the purpose of calculating the Operating Lease Payment:
Gross Margin
Less: Current Direct Operating Costs
Less: Accumulated Unreimbursed Direct Operating Expenses
--------------------------------------------------
Equals: Net Operating Income or (Unreimbursed Direct Operating Expenses)
Based on the foregoing calculation of Net Operating Income, the following
payment priorities and principles shall apply:
(1) The Gross Margin will first be used to pay current
Direct Operating Costs. If the Gross Margin is insufficient to pay
all current Direct
- 20 -
* Confidential material has been omitted pursuant to a request for confidential
treatment. Such material has been filed separately with the Securities and
Exchange Commission.
Operating Costs, the Gross Margin will be used to pay each party's
current Direct Operating Costs on a prorated basis. Any resulting
Unreimbursed Direct Operating Expenses will be added to ▇▇▇ Capital or
to SRP Capital, as applicable.
(2) If there is Gross Margin remaining after paying all
current Direct Operating Costs, the remaining Gross Margin will next
be used to repay any then accumulated Unreimbursed Direct Operating
Expenses, on a prorated basis, until all such Unreimbursed Direct
Operating Expenses have been fully repaid to ▇▇▇ and SRP. The
proration will be based on the percentage that each party's
Unreimbursed Direct Operating Expenses bears to the total of
Unreimbursed Direct Operating Expenses.
(3) Any Net Operating Income remaining after paying all
current Direct Operating Costs and repaying all then accumulated
Unreimbursed Direct Operating Expenses, will be used to pay an
Operating Lease Payment to SRP.
(4) At the end of each quarter during the first 15 calendar
quarters of the Base Case Financial Model, an Operating Lease Payment
shall be hypothetically calculated as though all Unreimbursed Direct
Operating Expenses were added to capital at the end of each quarter.
In the event the hypothetical calculation produces an Operating Lease
Payment greater in amount than that actually paid, the difference is a
Deferred Operating Lease Payment and will be added to SRP Capital.
- 21 -
(5) At the end of the 15th calendar quarter of the Base Case
Financial Model, any then Unreimbursed Direct Operating Expenses will
become a permanent addition to ▇▇▇ Capital or SRP Capital, as
applicable.
(b) Variation of Calculation of Net Operating Income During the
-----------------------------------------------------------
16th through the 35th Quarters. The following formula shall be used at the
------------------------------
end of each of the 16th through the 35th calendar quarters of the Base Case
Financial Model to compute Net Operating Income for the purpose of
calculating the Operating Lease Payment:
Gross Margin
Less: Current Direct Operating Costs
------------------------------
Equals: Subtotal Net Operating Income, if positive
or (Unreimbursed Direct Operating Expenses), if negative.
If Subtotal Net Operating Income is positive, then:
If Subtotal Net Operating Income is greater than Prorated Portion of
Accumulated Deferred Operating Lease Payments, then:
Subtotal Net Operating Income
Less: Prorated Portion of Accumulated Deferred Operating Lease
--------------------------------------------------------
Payments
--------
Equals: Net Operating Income.
If Subtotal Net Operating Income is less than Prorated Portion of
Accumulated Deferred Operating Lease Payments, then:
Subtotal Net Operating Income
-----------------------------
Equals: Partial Payment of Prorated Portion of Accumulated Deferred
Operating Lease Payments; and
Net Operating Income is Zero.
Based on the foregoing calculation of Net Operating Income, the following
payment priorities and principles shall apply:
- 22 -
(1) The Gross Margin will first be used to pay current
Direct Operating Costs. If the Gross Margin is insufficient to pay
all current Direct Operating Costs, the Gross Margin will be used to
pay each party's current Direct Operating Costs on a prorated basis.
The proration will be based on the percentage that each party's
current Direct Operating costs bears to the total of current Direct
Operating Costs. Any resulting Unreimbursed Direct Operating Expenses
will become a permanent addition to ▇▇▇ Capital or to SRP Capital, as
applicable.
(2) If there is Gross Margin remaining after paying all
current Direct Operating Costs, the remaining Gross Margin will next
be used to pay a prorated portion of SRP's accumulated Deferred
Operating Lease Payments (on a quarterly basis), based on the
following table:
Percent of Total Remaining Accumulated Deferred
Quarters Operating Lease Payments Paid in Period
-------- ---------------------------------------
16 through 19 20%
20 through 23 25%
24 through 27 33%
28 through 31 50%
32 through 35 100%
(3) After paying all current Direct Operating Costs and the
prorated portion of SRP's accumulated Deferred Operating Lease
Payments, any remaining Net Operating Income will be used to pay an
Operating Lease Payment.
(4) At the end of the 35th calendar quarter of the Base Case
Financial Model, any then accumulated Deferred Operating Lease
Payments will become a permanent part of SRP Capital.
- 23 -
(c) Calculation of Net Operating Lease Payment in Subsequent
--------------------------------------------------------
Quarters. Throughout the balance of the Term, Net Operating Income, for
--------
purposes of calculating the Operating Lease Payment, will be computed as
follows:
Gross Margin
Less: Current Direct Operating Costs
------------------------------
Equals: Net Operating Income or (Unreimbursed Direct Operating Expenses)
Based on the foregoing calculation of Net Operating Income, the following
payment priorities and principles shall apply:
(1) The Gross Margin will first be used to pay current
Direct Operating Costs. If the Gross Margin is insufficient to pay
all current Direct Operating Costs, the Gross Margin will be used to
pay each party's current Direct Operating Costs on a prorated basis.
The proration will be based on the percentage that each party's
current Direct Operating Costs bears to the total of current Direct
Operating Costs. Any resulting Unreimbursed Direct Operating Expenses
will become a permanent addition to ▇▇▇ Capital or to SRP Capital, as
applicable.
(2) After paying all current Direct Operating Costs, any
remaining Net Operating Income will be used to pay an Operating Lease
Payment.
(d) Operating Lease Payment Examples. Examples of the
--------------------------------
calculation of the Operating Lease Payment under the principles described
in this Article V are attached to and incorporated by reference in this
Agreement as Exhibit "G."
5.6 Annual Adjustment for Past Operating Lease Payments. In the
---------------------------------------------------
event that the annual redetermination of the Base Case Financial Model changes
the Operating Lease Percentage:
- 24 -
(a) The parties shall recalculate the Operating Lease Payment for
all prior years;
(b) An adjustment figure shall be calculated which in current
dollar terms (using the annual discount rate of 300 basis points above the
ten year Treasury Bond Rate as determined in Section 5.3) adjusts the prior
year payments to reflect the new Operating Lease Percentage;
(c) The Operating Lease Payments for the next four quarters shall
be proportionately increased or decreased to make the adjustment determined
in part (b); and
(d) At the end of the Term or earlier termination of this
Agreement, the parties shall determine a final, actual Operating Lease
Percentage, and ▇▇▇ or SRP, as the case may be, shall make a final payment
to the other so that actual Operating Lease Payments match the final
Operating Lease Percentage.
It is the goal of this section to produce at the expiration of the Term or the
earlier termination of this Agreement equal returns on the invested capital of
▇▇▇ and SRP.
5.7 SRP Direct Operating Services. ▇▇▇ may purchase from SRP certain
-----------------------------
SRP Direct Operating Services to satisfy ELI's maintenance and operating
obligations with respect to the System. A list of services SRP is willing to
provide and a projection of the annual cost of providing such services shall be
developed by SRP and submitted to ▇▇▇ and the Coordinating Committee no later
than July 31 of each year. ▇▇▇ may purchase all or any portion of such services
from SRP, but ▇▇▇ shall approve the purchase of all such services to the extent
they are offered at market prices and at market quality. To facilitate payment
to SRP for the services selected by ELI, ELI shall include
- 25 -
such services in the annual budget update. Services shall be paid on a monthly
basis and shall be in addition to any quarterly Operating Lease Payment payable
by ▇▇▇ to SRP. SRP shall provide ▇▇▇ with a monthly invoice describing the
services actually provided by SRP. The services that may be offered by SRP
include:
(a) Field technicians required to perform installation and
servicing duties as included in the annual budget;
(b) Services related to the procurement of Rights of Way,
Building Entrances and permits; and
(c) Network and customer project design and engineering.
5.8 Minimum Performance Standards. During the Term, ▇▇▇ shall comply
-----------------------------
with the Minimum Performance Standards described in this Section 5.8. The
Minimum Performance Standards shall be calculated for each year of the Term
based on the Initial Base Case Financial Model. The Minimum Performance
Standards shall be measured on an annual basis consistent with the following:
Years of Term Performance Criteria
------------- --------------------
1 through 2 50% of projected Gross Revenues from the sale of
Telecommunications Services for such year
3 through 4 75% of projected Gross Revenues from the sale of
Telecommunications Services for such year
5 through 6 50% of the Operating Lease Payment amount in
effect for such year
7 through 15 75% of the Operating Lease Payment amount in
effect for such year
- 26 -
5.9 Books, Records and Audit Rights. Each of ▇▇▇ and SRP shall keep
-------------------------------
and maintain adequate books and records relating to services provided by,
revenues generated from, and costs expended with respect to the System. Each
party shall have the right, upon reasonable notice and during normal business
hours to: (a) audit the other's books and records pertaining to the operation
and performance of the System; (b) compare the System's operation to applicable
Minimum Performance Standards, budgets and the Base Case Financial Model; and
(c) monitor compliance with the terms, covenants and conditions of this
Agreement. The Coordinating Committee shall develop and approve accounting and
auditing procedures relating to the System, which procedures shall be consistent
with Generally Accepted Accounting Principles. The Coordinating Committee shall
develop standards for capitalization which will reasonably standardize the
capitalization procedures (with respect to the capitalization determinations
under this Agreement) of ▇▇▇ and SRP.
ARTICLE VI
UTILICOM SERVICES
-----------------
6.1 Right of SRP to Provide Utilicom Services Over the System. SRP
---------------------------------------------------------
and its Affiliates shall have System-wide access to provide Utilicom Services to
its customers. Revenues generated from the sale of Utilicom Services shall be
excluded from the calculations of the Base Case Financial Model. Use of the
System by SRP and its Affiliates for Utilicom Services, however, is subject to
the limitations described in this Article VI.
6.2 System Costs and Charges for Utilicom Services.
----------------------------------------------
(a) Budgeting Process. During the annual budgeting process, ▇▇▇
-----------------
shall project ▇▇▇▇▇▇▇▇ for the sale of Telecommunications Services over the
System for the coming year, as described in Section 5.3. In addition, SRP
and its Affiliates shall project the type and
- 27 -
quantity of Utilicom Services that will be provided over the System in the
coming year. ▇▇▇ shall calculate the total charges that SRP and its
Affiliates, or their Utilicom Services customers, would be billed for the
projected Utilicom Services if such services were treated as
Telecommunications Services sold by ▇▇▇ to its Telecommunications Services
customers. The charges shall be calculated using ELI's Preferred Rates to
be in effect for the coming year. The charges shall be calculated as
additional marginal costs to a customer. For example, the use of an
existing customer line for Utilicom Services shall not be considered in the
calculation, because this use would not create additional charges to the
customer. If the calculation of total Utilicom Services charges based on
the SRP budget (at ELI's Preferred Rates) exceeds five percent (5%) of the
total projected ▇▇▇▇▇▇▇▇ for the sale of Telecommunications Services for
such year, SRP and its Affiliates, shall reduce their projected Utilicom
Services to a level that does not exceed such five percent (5%) limit.
Alternatively, upon request by SRP and its Affiliates, ▇▇▇ shall sell at
ELI's Preferred Rates in effect for such coming year the excess volume of
services desired by them for their Utilicom Services customers to the
extent that ▇▇▇ reasonably has available capacity.
(b) Provisioning and Installations for Utilicom Services. SRP
----------------------------------------------------
shall notify ▇▇▇ in writing of all orders obtained by SRP and its
Affiliates, for Utilicom Services. In the normal course of business
following receipt of notification from SRP, ▇▇▇ shall provision all
Utilicom Services to be delivered over the System. ▇▇▇ shall use existing
System Electronics, Fiber, circuits and customer premises equipment to
complete the provisioning requirements for the customer. If the Utilicom
Services cannot be provisioned using existing System
- 28 -
Electronics, Fiber, circuits and customer premises equipment, SRP or ▇▇▇ at
SRP's request, shall provision and install the necessary System
Electronics, Fiber, circuits and customer premises equipment. SRP and its
Affiliates shall pay for any additional System Electronics, Fiber, circuits
and customer premises equipment needed to supply the Utilicom Services. If
no additional provisioning is required, SRP and its Affiliates shall not be
charged for the addition of new Utilicom Services customers to the System.
6.3 Tracking of Utilicom Services. ▇▇▇ shall track use of the System
-----------------------------
to provide Utilicom Services through billing or another mechanism. The
mechanism shall calculate the charges that SRP, and its Affiliates, or their
Utilicom Services customers, would be required to pay for the use of the System,
at ELI's Preferred Rates. SRP shall cooperate reasonably with ▇▇▇ to measure
Utilicom Services traffic on the System. ▇▇▇ shall not ▇▇▇▇ SRP or its
Affiliates for Utilicom Services provided over the System except as described in
Section 6.4.
6.4 Quarterly Review of Utilicom Services. On a calendar quarter
-------------------------------------
basis, ▇▇▇ shall compare actual use of the System by SRP and its Affiliates for
Utilicom Services with the projected use of the System set forth in the budget
described in Section 6.2(a). If charges for Utilicom Services actually provided
during such quarter (based on ELI's Preferred Rates then in effect) would exceed
five percent (5%) of the total ▇▇▇▇▇▇▇▇ for all Telecommunications Services
delivered over the System for the same quarter, ▇▇▇ may ▇▇▇▇ SRP and its
Affiliates the amount of the excess charges.
ARTICLE VII
SYSTEM DESIGN
-------------
7.1 Integrated Design. The System shall be integrated and designed
-----------------
to provide a seamless interconnection to customers. The System shall also be
integrated to the ▇▇▇ regional
- 29 -
network and physically interconnected with local exchange and interexchange
networks. The design of the System shall be consistent with the standards and
policies adopted by the Network Deployment Committee pursuant to the provisions
of Section 11.3(a).
7.2 Design Responsibilities.
-----------------------
(a) ▇▇▇ Design Responsibilities. ▇▇▇ shall design the
---------------------------
telecommunications transport network and shall design, engineer and specify
all System Electronics. ▇▇▇ design specifications shall be shared with SRP
personnel to ensure consistency with System operational parameters. ▇▇▇
shall also design all Hub Sites.
(b) SRP Design Responsibilities. SRP shall design the SRP
---------------------------
Segments and shall do so in a manner that allows capacity to be readily
deployed for telecommunications purposes.
(c) Design Coordination Efforts. Throughout the Term, ▇▇▇ and
---------------------------
SRP, through the Network Deployment Committee, shall:
(1) Coordinate the design of the telecommunications
transport and electric communications networks to ensure consistency
with each other's design specifications;
(2) Wherever possible, design the System to provide for
diverse routing, including, without limitation, use of a ring/sub-ring
architecture and use of SONET equipment, and for consistency with
ELI's telecommunications network practices and procedures;
- 30 -
(3) Jointly design the integrated aspects of the System,
including, without limitation, Facilities, and all System Electronics
and Fiber;
(4) Jointly develop an overall System architecture and Fiber
backbone design that is consistent with ELI's network architecture and
design standards;
(5) Jointly design service laterals, Building Entrances, and
other Facilities for the System as required; and
(6) Wherever possible, use common design standards for all
System assets and Facilities.
(d) Joint Responsibilities. ▇▇▇ and SRP shall follow the
----------------------
prioritization schedules for the construction of Segments as outlined in
their respective Construction Plans. Before beginning construction of any
Additional Segment, ▇▇▇ and SRP shall present the Segment to the Network
Deployment Committee. The Network Deployment Committee may direct the
construction of additional Fiber or choose, within reason, a different
construction schedule, route or alignment. Changes in the timing of the
construction of a Segment may be based on market conditions, such as the
demand for Telecommunications Services in the general vicinity to be served
by the Segment. To the extent any change in a proposed route or alignment
forces ▇▇▇ or SRP to incur additional Right of Way expense, the amount of
the additional Right of Way expense shall be added to capital.
7.3 Information Requests. To facilitate planning and design of the
--------------------
System, ▇▇▇ and SRP shall furnish or make available to each other and to the
Coordinating Committee or Network
- 31 -
Deployment Committee, as applicable, with reasonable promptness after request,
and at the reasonable cost of the requesting party:
(a) Engineering Data. Copies of all available Maps, charts and
----------------
other engineering data and documentation pertaining to specified sections
and the physical condition of any Right of Way needed for any Segment,
including, without limitation, the nature and location of all improvements
and Facilities thereon, and all relevant engineering data and plans related
thereto;
(b) Right of Way Documents. Right of Way documents shall
----------------------
include:
(1) Copies of all available documentation pertaining to
ownership or right to use any specified Right of Way (including
existing easements, rights of use or other use or occupancy rights, if
any, previously granted to others), and other existing agreements
respecting the Right of Way (including, without limitation, utility
crossings) and restrictions on the right to use or to occupy the Right
of Way for the purposes intended by this Agreement;
(2) Copies of maps and other available documentation
sufficient to describe the identity and location of any other users of
the specified portions of any Right of Way, as well as identification
of areas within the specified Right of Way which might involve title
or possession problems due to the nature of the ownership or any
third-party right of way ownership (including, without limitation,
reversionary or re-entry rights of underlying fee owners); and
- 32 -
(3) Any available information on pending relocation projects
by ▇▇▇ or SRP, as applicable, or others along the specified Right of
Way, and information regarding material scheduling constraints
resulting from temporarily taking out-of-service any particular
segment of the Right of Way;
(c) Building Entrances Documents. Copies of all available
----------------------------
documentation pertaining to ownership or right to use any specified
Building Entrance, and other existing agreements respecting the Building
Entrance and restrictions on the right to use or to occupy Building
Entrances for the purposes intended by this Agreement; and
(d) Maps. A copy of each Map each year throughout the Term, when
----
prepared for or filed with any governmental agency, and copies of any
amendments or supplements to each Map which may be prepared and so filed
from time to time.
ARTICLE VIII
CONSTRUCTION OF SEGMENTS
------------------------
8.1 Construction of Segments. Additional Segments and Future
------------------------
Segments shall be constructed consistent with the design standards described in
Article VII. ▇▇▇ shall install all System Electronics, wherever located, at
ELI's sole cost and expense. With respect to Future Segments, SRP shall have
the option of installing all Fiber, wherever located, at SRP's sole cost and
expense. However, with respect to a Future Segment proposed by SRP, ▇▇▇ shall
have the option to direct that SRP install System Electronics and Fiber at SRP's
sole cost and expense. The party responsible for the construction of a Segment
shall obtain necessary Approvals to undertake and complete the construction.
▇▇▇ and SRP shall cooperate with each other in obtaining necessary Approvals.
- 33 -
8.2 Future Segments. From time to time throughout the Term, either
---------------
▇▇▇ or SRP may make proposals to the Coordinating Committee for the construction
of one or more Future Segments. Review of any such proposal shall be made in
accordance with the following:
(a) Review. The Coordinating Committee or the Network Deployment
------
Committee, if delegated such responsibility by the Coordinating Committee,
shall review preliminary route designations and the construction schedule
for a proposed Future Segment, and shall make such physical inspections of
the Right of Way associated with such Future Segment as it deems necessary
or appropriate for the purpose of: (1) identifying problem areas; (2)
arriving at suitable and economically viable alternatives; (3) establishing
a schedule for the commencement and completion of the work; and (4)
defining the final routes and any specialized construction or operational
considerations, including, without limitation, points of interconnection
and new Facilities required to make the Future Segment operational.
(b) Review Factors. The Coordinating Committee shall be
--------------
responsible for approving the construction of any proposed Future Segment.
In addition to the design standards described in Article VII, the following
factors shall be considered in making a decision to approve a proposed
Future Segment:
(1) The effect of the proposed construction on the Base Case
Financial Model;
(2) The difficulty of integrating the proposed Future
Segment into the then existing System;
- 34 -
(3) The estimated cost to construct and equip the proposed
Future Segment;
(4) The timing of the proposed construction in relation to
the phases identified in the parties' Construction Plans;
(5) The compatibility of the proposed Future Segment with
the then existing construction and marketing plans of ▇▇▇, SRP and the
System;
(6) The amount of Reserved Fiber to be allocated to SRP, for
the proposed Future Segment;
(7) Existing or anticipated customer demand for Telecommuni
cations Services and Utilicom Services in the area to be served by the
proposed Future Segment; and
(8) Such other factors as may be developed by the
Coordinating Committee relative to the approval of Future Segments.
(c) Decision by Coordinating Committee. Within ten (10) days
----------------------------------
after receipt of a proposal to approve the construction of a Future
Segment, the Coordinating Committee shall approve the same in whole or in
part, or raise any objections thereto, which objections shall be stated in
writing and in reasonable detail and shall include a statement of the
necessary modifications required to obtain approval. If the Coordinating
Committee does not respond in such ten (10) day period to a proposal to
construct a Future Segment, the Coordinating Committee shall be deemed to
have approved the same.
- 35 -
8.3 Work Standards. All work performed under this Agreement shall be
--------------
performed in a good, workmanlike manner, in accordance with generally accepted
professional standards of sound construction practices and shall comply with all
applicable requirements of federal, state and local laws, regulations, licenses,
permits and applicable engineering and construction codes and standards.
8.4 Supply of System Materials.
--------------------------
(a) Standards. All System Materials used to construct or equip
---------
an Additional Segment or a Future Segment shall meet or exceed the minimum
specifications developed by the Network Deployment Committee for System
Materials, which specifications shall be based on the more stringent of
ELI's specifications or industry specifications. ▇▇▇ shall be responsible
for inspecting and testing all System Electronics and may reject any System
Electronics component that is defective or does not conform to approved
specifications. Similarly, SRP shall be responsible for inspecting and
testing any equipment relating to Electric Services and Utilicom Services
transmission and may reject any component that is defective or does not
conform to approved specifications. ▇▇▇ shall have the right to select all
vendors and suppliers for System Electronics, wherever located, and
construction activities over which ▇▇▇ has primary responsibility. SRP
shall have the right to select all vendors and suppliers for construction
activities over which SRP has primary responsibility.
(b) Manufacturer Warranties. In procuring and obtaining System
-----------------------
Materials under paragraph (a) above, each of ▇▇▇ and SRP, as applicable,
shall use reasonable
- 36 -
efforts to obtain from the vendors and suppliers thereof, for the mutual
benefit of ▇▇▇ and SRP, warranties that such System Materials are: (1) of
the kind and quality described in the purchase order or supply contract;
(2) free of defects in workmanship, material, design and title; (3) of good
and merchantable quality; and (4) where appropriate, fit for their intended
purpose. In addition, ▇▇▇ and SRP, as applicable, shall attempt to obtain
standard warranty periods for all System Materials (it being understood
that standard materials warranties are in the range of one to two years
from the date of delivery), and shall use reasonable efforts to obtain
longer warranty periods, if such extended warranties do not materially
increase the cost of the System Materials. ELI's and SRP's sole obligation
and liability to each other with respect to the System Materials warranties
shall be to administer such warranties for and on behalf of the System and
to use reasonable efforts in enforcing such warranties. In no event shall
either ▇▇▇ or SRP be deemed to have warranted to each other or to any third
party user any System Materials, or to have guaranteed any such warranties
provided by vendors or suppliers.
8.5 Changes. After work on a Segment has begun, material Changes to
-------
the design or construction plans for such Segment may be made only in accordance
with the terms of this Section 8.5.
(a) Grounds for a Change. A Change may result from any of the
--------------------
following:
(1) An event of Force Majeure;
- 37 -
(2) A failure by the constructing party's designated
representatives, contractors or agents to fulfill their obligations
under contracts or subcontracts with the contracting party;
(3) A failure, defect or delay in delivery with respect to
any System Materials which materially and adversely affects the cost
of ▇▇▇ or SRP, as applicable, to perform its work under the terms of
this Agreement, or to meet its construction schedule or other
performance standards under this Agreement;
(4) A request by either ▇▇▇ or SRP for a Change; or
(5) In the event of an emergency affecting the safety of
persons or property.
(b) Changes. ▇▇▇ and SRP shall cooperate reasonably with each
-------
other and shall use the Network Deployment Committee to review and approve
Changes. No prior approval shall be required to make a Change resulting
from an emergency. Except to the extent a Change specifically amends one
or more provisions hereof, all provisions of this Agreement shall apply to
all Changes, and no Change shall be implied as a result of any other
Change.
8.6 Use of Contractors. Each of ▇▇▇ and SRP shall have the right to
------------------
have any of the construction and installation work it is required to provide
under the terms of this Agreement performed by one or more contractors pursuant
to written agreements with such contractors. No agreement with any contractor
entered into by ▇▇▇ shall create a contractual relationship between such
contractor and SRP, and ▇▇▇ shall be solely responsible for the engagement and
management
- 38 -
of such contractors, for all work performed by such contractors, and for all
acts and omissions of such contractors in providing service or performing work
as contemplated by the terms of this Agreement. Similarly, no agreement with any
contractor entered into by SRP shall create a contractual relationship between
such contractor and ▇▇▇, and SRP shall be solely responsible for the engagement
and management of such contractors, for all work performed by such contractors,
and for all acts and omissions of such contractors in providing service or
performing work as contemplated by the terms of this Agreement.
8.7 Inspection of Work and Acceptance of Construction.
-------------------------------------------------
(a) Inspection. When work on any Segment has been completed, ▇▇▇
----------
or SRP, depending on which party had primary responsibility for
constructing the Segment, shall give notice to the other that work has been
completed. Within five (5) working days following receipt of such notice,
the party receiving notice shall make an inspection of such Segment for
conformance with the construction requirements of this Agreement, and may
perform operational readiness tests, as deemed necessary, in accordance
with standard operating procedures approved by the Network Deployment
Committee. Within five (5) working days following such inspection, the
inspecting party shall furnish the other party with either: (1) an
Acceptance of Construction respecting such Segment; or (2) a written
statement setting forth in reasonable detail any objections to or defects
in the construction of such Segment. Failure of the inspecting party to
respond by written notification within the time period specified in the
preceding sentence shall be deemed an Acceptance of Construction for
purposes of this Agreement.
- 39 -
(b) Response to Objections. Upon receipt of any such statement
----------------------
of objections, the party that had primary responsibility for constructing
the Segment shall either: (1) promptly correct the objections or defects,
whereupon the other party may re-inspect the same within ten (10) working
days following receipt of notice that the work has been corrected and, if
found corrected, issue an Acceptance of Construction; or (2) dispute such
statement of objections or defects by referring the disputed issues for
determination, without thereby waiving any rights with respect to any
matter in controversy, to the Network Deployment Committee.
(c) Effect of Acceptance of Construction. ELI's issuance of an
------------------------------------
Acceptance of Construction for work performed by or under the direction of
SRP shall signify approval of the construction of ELI's Telecommunications
Services transmission system only and shall in no way be deemed to
represent an opinion or guarantee of ▇▇▇ concerning the adequacy of such
construction with respect to SRP's Electric Services and Utilicom Services
transmission systems. Similarly, SRP's issuance of an Acceptance of
Construction for work performed by or under the direction of ▇▇▇ shall
signify approval of the construction of SRP's Electric Services and
Utilicom Services transmission systems only and shall in no way be deemed
to represent an opinion or guarantee of SRP concerning the adequacy of such
construction with respect to ELI's Telecommunications Services transmission
system.
8.8 As-Built Drawings.
-----------------
(a) Review of As-Built Drawings. Within ten (10) working days
---------------------------
following Acceptance of Construction of each Segment (or any alteration or
relocation thereof), the
- 40 -
party that had primary responsibility for constructing such Segment, as a
cost of construction to be paid by such party, shall furnish the other
party with "as-built" drawings of such Segment. The "as-built" drawings, as
the same may be amended from time to time, shall establish the locations of
the applicable Right of Way, any applicable Building Entrances and any
Facilities associated therewith. Within five (5) working days following the
delivery of the "as-built" drawings for any Segment, the non-constructing
party shall inspect the Segment for conformance with the "as-built"
drawings and the other construction requirements of this Agreement. Within
five (5) working days following such inspection, the inspecting party shall
furnish the other party with either: (1) an acceptance of the "as-built"
drawings for such Segment; or (2) a statement setting forth in reasonable
detail any reasonable objections to or defects in such "as-built" drawings.
Failure of the inspecting party to respond by written notification within
the time period specified in the preceding sentence shall be deemed an
acceptance of such "as-built" drawings for purposes of this Agreement.
(b) Response to Objections. Upon receipt of any such statement
----------------------
of objections, the party that had primary responsibility for constructing
the Segment shall either: (1) promptly amend the "as-built" drawings; (2)
correct the defects, whereupon the other party may re-inspect the same
within five (5) working days following receipt of notice that the work has
been corrected and, if found corrected, issue an acceptance of the "as-
built" drawings; or (3) dispute such statement of objections or defects by
referring the disputed issues for determination, without thereby waiving
any rights with respect to any matter in controversy, to the Network
Deployment Committee.
- 41 -
(c) Effect of Approvals. Notwithstanding the foregoing, ELI's
-------------------
approval of "as-built" drawings or statement of any objections to such "as-
built" drawings shall signify approval of or objections with respect to
ELI's Telecommunications Services transmission system only and shall in no
way be deemed to represent an opinion with respect to the adequacy of SRP's
Electric Services and Utilicom Services transmission systems. Similarly,
SRP's approval of "as-built" drawings or statement of any objections to
such "as-built" drawings shall signify approval of or objections with
respect to SRP's Electric Services and Utilicom Services transmission
systems only and shall in no way be deemed to represent an opinion with
respect to the adequacy of ELI's Telecommunications Services transmission
system.
8.9 Correction of Work. If following the issuance of an Acceptance
------------------
of Construction and an acceptance of the "as-built" drawings for any Segment, a
defect in the work performed to construct the Segment or a defect in the design
of the Segment is discovered which breaches the work standards set forth in
Section 8.3, the sole and exclusive remedy of ▇▇▇ and SRP shall be as set forth
in this Section 8.9. As soon as reasonably possible following discovery of the
defect, but in no event later than one (1) year following the issuance of the
Acceptance of Construction for such Segment, the party that had primary
responsibility for the construction of the Segment shall be given written notice
of the defect. As soon as reasonably possible following receipt of notice of
the defect, the receiving party, at its sole cost and expense, shall: (a)
reperform any deficient services; and (b) repair, or if necessary, replace or
modify any deficient construction or installation work. THE WARRANTY SET FORTH
IN SECTION 8.3 AND THE WARRANTY
- 42 -
REMEDIES SET FORTH IN THIS SECTION 8.9 ARE EXCLUSIVE AND IN LIEU OF ALL OTHER
WARRANTIES AND WARRANTY REMEDIES, EXPRESS OR IMPLIED, WITH RESPECT TO WORK
PERFORMED AND ITEMS PROVIDED BY EITHER ▇▇▇ OR SRP UNDER THE TERMS OF THIS
AGREEMENT, AND ALL OTHER IMPLIED WARRANTIES OR WARRANTIES IMPOSED BY LAW,
INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE, AND WARRANTIES ARISING FROM COURSE OF DEALING OR USAGE OR TRADE, ARE
HEREBY WAIVED AND DISCLAIMED BY ▇▇▇ AND SRP.
8.10 Title and Risk of Loss. Legal title to and beneficial
----------------------
ownership of all ▇▇▇ Facilities shall be and remain with ▇▇▇, and ▇▇▇ shall at
all times have care, custody and control of the ▇▇▇ Facilities, subject to the
provisions of this Agreement. Similarly, legal title to and beneficial
ownership of all SRP Facilities shall be and remain with SRP, and SRP shall at
all times have care, custody and control of the SRP Facilities, subject to the
provisions of this Agreement. Except as otherwise provided in this Agreement,
each of ▇▇▇ and SRP shall be responsible for and shall be obligated to replace,
repair or reconstruct at its own expense all or any portion of any Facility
which it owns or controls that is lost, damaged or destroyed regardless of how
such loss or damage occurred. Notwithstanding the foregoing, each party shall
be responsible for any loss, damage or destruction caused by its own acts or
omissions.
8.11 Customer Installations. Notwithstanding any provision of
----------------------
Article VII or this Article VIII to the contrary, when either ▇▇▇ or SRP
receives an order to make the necessary
- 43 -
installations to expand the System, by not more than 500 feet in length,
including a Building Entrance, the following provisions shall apply:
(a) Telecommunications Services Customers. With respect to all
-------------------------------------
Telecommunications Services customers, wherever located, ▇▇▇ shall design,
provision, purchase, install and own all System Electronics. ▇▇▇ and SRP
shall each design, provision, purchase, install and own all Fiber and other
Facilities necessary to connect Telecommunications Services customers to
its own network.
(b) Utilicom Services Customers. Utilicom Services shall be
---------------------------
provisioned in accordance with the provisions of Section 6.2(b).
(c) Other Approvals. No approval from the Network Deployment
---------------
Committee, the Coordinating Committee or from each other shall be required
for ▇▇▇ or SRP to complete a customer installation in accordance with the
terms of this Section 8.11.
(d) Design Plans. Promptly after completing a customer
------------
installation, ▇▇▇ or SRP, as applicable, shall furnish to the other a
complete set of the design and installation plans used to connect the
customer to the System.
ARTICLE IX
MAINTENANCE
-----------
9.1 General Responsibilities. ▇▇▇ shall be responsible for
------------------------
maintaining the ▇▇▇ Network and all System Electronics. SRP shall be
responsible for maintaining the Fiber used in connection with SRP Network.
Maintenance costs shall be included in the calculation of Direct Operating
Expenses. Where the ▇▇▇ Network and the SRP Network interconnect, the fiber
optic patch panel shall be the point of demarcation between the maintenance
responsibilities of ▇▇▇ and
- 44 -
SRP. SRP shall be responsible for maintenance of all Fiber and the fiber optic
patch panel. ▇▇▇ shall be responsible for maintenance of all Fiber and System
Electronics on the ▇▇▇ side of the fiber optic patch panel. Maintenance services
shall be available on an on-call basis twenty-four (24) hours a day.
9.2 Maintenance Procedures. The Network Deployment Committee shall
----------------------
coordinate maintenance procedures and protocols for use by ▇▇▇ and SRP,
including, without limitation, direct measure of quality tests to be performed
no less frequently than on a quarterly basis. Standards developed for
preventative maintenance by the Network Deployment Committee shall meet or
exceed the more stringent of industry or ▇▇▇ standards and practices then in
existence. Within one hundred twenty (120) days after the effective date of
this Agreement, the Network Deployment Committee shall adopt standard
maintenance procedures and practices for the System.
9.3 Maintenance Supplies. ▇▇▇ and SRP shall purchase and maintain
--------------------
adequate inventories of maintenance supplies and spare parts for their own
Facilities.
9.4 Repair Timing. ▇▇▇ and SRP shall cooperate with each other to
-------------
restore damaged or malfunctioning portions of the System as soon as reasonably
possible. ▇▇▇ and SRP agree to use their reasonable efforts to do emergency
repair work affecting Telecommunications Services and Utilicom Services
simultaneously so that both networks experience minimal downtime. ▇▇▇ and SRP
acknowledge the importance of uninterrupted operation of the System and agree to
use good faith efforts to arrive at repair sites with necessary personnel,
equipment and materials promptly after receiving notice of the existence of a
problem. Further, ▇▇▇ and SRP acknowledge the importance of restoring electric
service, and understand that restoration of electric service may take priority
over the restoration of the System according to customary industry practices.
To the extent
- 45 -
repairs are required to the System to fix damage caused by a customer, ▇▇▇ and
SRP shall recover repair costs from the customer.
9.5 Staff Training. Each of ▇▇▇ and SRP, at its own expense, shall
--------------
train and obtain industry certifications for all field technicians used to
maintain Facilities. In addition, all field technicians shall be familiar with
System maintenance procedures and standards adopted by the Network Deployment
Committee.
ARTICLE X
PROPERTY RIGHTS AND OBLIGATIONS
-------------------------------
10.1 Rights of Way and Building Entrances.
------------------------------------
(a) Existing SRP Rights of Way and Building Entrances. Subject
-------------------------------------------------
to the provisions of this Section 10.1, SRP's existing Rights of Way and
Building Entrances may be used to deploy Fiber or to install System
Electronics. On a case-by-case basis, ▇▇▇ and SRP shall jointly review and
determine the availability of SRP Rights of Way and Building Entrances for
use by the System. Any use of SRP's Rights of Way and Building Entrances
shall be based on the mutual determination of ▇▇▇ and SRP that such use:
(1) is within the scope of the original grant of the Right of Way or
Building Entrance; (2) is legally permissible; and (3) is economically
feasible. SRP does not warrant that any of its Rights of Way or Building
Entrances may be legally used for telecommunications purposes. ▇▇▇
expressly acknowledges that it has been or will be given the opportunity to
inspect all documents and information in SRP's possession regarding the
value of SRP's interest in the Right of Ways, and that SRP's Rights of Way
and Building Entrances may not be usable for telecommunications purposes.
- 46 -
(b) Additional Rights of Way and Building Entrances. It is
-----------------------------------------------
anticipated that SRP will use existing SRP Rights of Way to complete the
SRP Construction Plan. However, in the event SRP's existing Rights of Way
cannot be used to complete the SRP Construction Plan, and there is no other
reasonable alternative, SRP, at its own cost and expense, shall acquire any
additional Rights of Way needed to complete the SRP Construction Plan.
However, SRP is not obligated to use its power of eminent domain to acquire
additional Rights of Way and Building Entrances. ▇▇▇, at its own cost and
expense, shall acquire all additional Rights of Way needed to complete the
▇▇▇ Construction Plan. On a case-by-case basis as needed, ▇▇▇ may request
assistance from SRP to acquire Rights of Way if existing SRP Rights of Way
are not available for telecommunications purposes. ▇▇▇ shall reimburse SRP
for SRP's costs to obtain such additional Rights of Way. If either ▇▇▇ or
SRP expends funds to acquire necessary Building Entrances to complete a
customer connection, such acquisition costs shall be added, as applicable,
to ▇▇▇ Capital or SRP Capital.
10.2 Cross Licenses.
--------------
(a) Grant of License to SRP. ▇▇▇ hereby grants to SRP a
-----------------------
nonexclusive License to use Rights of Way which are used by the System for
System purposes consistent with the requirements of Section 10.1. System
purposes may include design, engineering, construction, installation,
inspection, maintenance, repair, testing and replacement, relocation,
operation and removal of Segments, Facilities and System Materials on the
terms and subject to the covenants and conditions specified in this
Agreement.
- 47 -
(b) Grant of License to ▇▇▇. SRP hereby grants to ▇▇▇ a
-----------------------
nonexclusive License to use Rights of Way which are used by the System for
System purposes consistent with the requirements of Section 10.1. System
purposes may include design, engineering, construction, installation,
inspection, maintenance, repair, testing and replacement, relocation,
operation and removal of Segments, Facilities and System Materials on the
terms and subject to the covenants and conditions specified in this
Agreement.
10.3 Route Designations. ▇▇▇ and SRP have reviewed the Maps
------------------
attached to this Agreement depicting their respective existing and currently
planned communications networks and have approved such Maps for the purposes set
forth in Section 10.2.
10.4 Right of Entry. The cross Licenses granted in Section 10.2
--------------
shall include the right for each of ▇▇▇ and SRP to enter the Right of Way or
other real property, as applicable, with its employees, agents and contractors
in order to exercise the rights granted under this Agreement, subject to the
following notice requirements:
(a) Engineering and Design Inspections. ▇▇▇ and SRP shall give
----------------------------------
each other not less than two (2) hours prior notice by telephone before
entering any Existing Segment in the other's service territory for the
purpose of surveying and inspecting or making such engineering and other
tests as may be necessary or advisable to enable the notifying party to
determine the feasibility of using the Segment in the System or to evaluate
and approve engineering, design and installation plans and cost estimates
to upgrade such Segment.
(b) Inspection of Construction. During the actual performance of
--------------------------
any construction of the System, ▇▇▇ and SRP shall each have the right to
enter the job site to
- 48 -
observe each other's performance of work under this Agreement, provided
that all observers shall adhere to such reasonable work safety rules as may
be promulgated by ▇▇▇ and SRP for such job sites. After completion of
construction of a particular portion of a job for which ▇▇▇ or SRP has
given the other notice of completion pursuant to Section 8.7, prior to
entering the relevant Segment to perform the inspection, the inspecting
party shall give the other party not less than two (2) hours prior notice
by telephone.
(c) Segments. ▇▇▇ and SRP shall give each other not less than
--------
two (2) hours prior notice by telephone before entering any Segment inside
the other's service territory for the purpose of inspection, maintenance,
repair or to exercise of any other right with respect to a Segment
provided under the terms of this Agreement.
(d) Emergencies. In the case of an emergency with respect to a
-----------
Segment, each of ▇▇▇ and SRP shall have the right to enter such Segment
without the need or requirement to give the other prior notice, provided
that notice of the entry shall be given as soon as practicable thereafter.
10.5 Entry Conditions. Notwithstanding the provisions of Section
----------------
10.4, each of ▇▇▇ and SRP may from time to time by notice to the other specify
additional entry conditions or requirements arising out of a relationship with a
particular Right of Way or Building Entrance grantor or Hub Site lessor,
including, without limitation: (a) the need to give prior notice to such
grantor or lessor; (b) the requirement that no entry be made unless accompanied
by personnel of the party that has the relationship with such grantor or lessor;
and (c) the requirement that entry be made only through a specified route. In
addition, ▇▇▇ shall not make any physical contact with the towers,
- 49 -
cables or other elements of the SRP power transmission system (except as
required to access the Telecommunications Services transmission system utilizing
procedures approved by SRP). Further, each of ▇▇▇ and SRP shall indemnify the
other with respect to such entry as provided in Article XVII. Each notice given
as provided in Section 10.4 shall disclose the scope and estimated duration of
the entry. If such scope or duration changes, additional notice shall be given.
Any required telephonic notice shall be given at the telephone numbers specified
in Section 20.4 (or at such other number or relevant local office number that
▇▇▇ and SRP may from time to time specify).
10.6 Property Right Obligations. Throughout the Term, ▇▇▇ and
--------------------------
SRP shall have the following obligations pertaining to the property rights
described in this Agreement:
(a) Avoid Encumbrances. Subject to the provisions of Section
------------------
10.11(c), neither ▇▇▇ nor SRP shall create or grant any lien or other
property interest against any of the Facilities, Rights of Way or Building
Entrances the foreclosure or enforcement of which could terminate or
prevent the exercise of the rights of the other under this Agreement.
(b) Maintain Property Rights. With respect to any Right of Way
------------------------
or Building Entrance, while designated a part of a Segment, ▇▇▇ and SRP,
subject to the provisions of Section 10.12, shall timely perform all of
their respective obligations pertaining to the use of such Right of Way or
Building Entrance, in accordance with all applicable terms and conditions
of the grants and property conveyances by which they hold a property
interest therein, and shall take such other actions as may reasonably be
necessary to prevent the lapse, forfeiture or termination of any such
property interests.
- 50 -
(c) Payment of Taxes. With respect to any Right of Way or
----------------
Building Entrance, while designated a part of a Segment, each of ▇▇▇ and
SRP, as applicable, shall timely pay any and all Ad Valorem Taxes assessed
to it, the nonpayment of which could result in a lien upon such property.
Notwithstanding the foregoing, either party may withhold payment of
disputed amounts if such withholding is conducted in accordance with the
provisions of applicable law.
(d) Defense of Property Interest. Should the right of ▇▇▇ or SRP
----------------------------
to use, in accordance with the terms and conditions of this Agreement, any
Right of Way or Building Entrance then designated a part of a Segment be
challenged by the holder or alleged holder of a property interest in such
Right of Way or Building Entrance, ▇▇▇ or SRP, depending on which party has
the primary right to use the Right of Way and subject to the provisions of
Sections 10.9 and 10.10 shall defend the right to so use the Right of Way
or Building Entrance. Notwithstanding the foregoing, ▇▇▇ shall defend its
ability to use the Right of Way, to the extent the challenge relates only
to the use of the Right of Way by ▇▇▇. The other party, subject to the
provisions of Sections 10.9 and 10.10, shall take all actions and execute
such additional documents as are deemed reasonably necessary in connection
with the establishment or defense of the challenged rights. All costs and
expenses of such defense shall be considered ▇▇▇ Phoenix Direct Operating
Expenses or SRP Phoenix Direct Operating Expenses, as the case may be.
Neither ▇▇▇ or SRP makes any warranty to the other regarding the adequacy
of any Right of Way or Building Entrance.
- 51 -
10.7 Property Interest Documentation. From time to time upon
-------------------------------
request, ▇▇▇ and SRP shall make available to each other for review at the ▇▇▇
regional office in Phoenix, Arizona or at SRP's main office, as applicable, all
agreements and other documents in their possession with respect to their
respective rights, titles and interests in and to Rights of Way and Building
Entrances which they own or have the right to use in connection with the System.
In addition, ▇▇▇ and SRP shall inform each other of any facts relating to such
rights, titles and interests of which they have knowledge and which are material
to the exercise or defense of the rights granted under this Agreement.
10.8 Memorandum of Agreement. Upon request of ▇▇▇ or SRP and at
-----------------------
the expense of the requesting party, the other party shall execute in form
appropriate for recordation a Memorandum or Short Form of the Licenses granted
by this Agreement (or similar document appropriately styled to permit
recordation) to give notice of the existence of the rights of ▇▇▇ and SRP under
this Agreement. Such a recordation may be made in any county in which a
Segment, or portion thereof, is located. Such document shall not be styled as a
grant of an easement or a leasehold interest.
10.9 Incremental Property Rights Costs. If at any time during
---------------------------------
the Term, a third party Right of Way or Building Entrance grantor of either ▇▇▇
or SRP makes a demand for additional compensation or indicates its intent to
reopen, renegotiate or terminate the easement, license or other agreement
establishing rights in a Right of Way or Building Entrance as a result of the
existence of this Agreement, ▇▇▇ or SRP, as applicable, shall promptly notify
the other in writing of such demand. After conferring with each other and
allowing the party that owns or has been granted the right to
- 52 -
use the Right of Way or Building Entrance in question an opportunity to resolve
the issue, the other party may attempt at its expense to resolve the issue with
such grantor through negotiation or settlement. Any decision to commence
litigation on behalf of or in the name of either ▇▇▇ or SRP shall be in the sole
discretion of such party, and any subsequent litigation, whether brought by ▇▇▇,
at SRP's request, or by SRP, at ELI's request, or by such third party Right of
Way or Building Entrance grantor, shall be conducted at the expense and under
the direction and control of the party named in the action. If the dispute is
resolved either through negotiation, settlement or litigation, and such
resolution requires the payment of additional consideration for such additional
or expanded use: (a) ▇▇▇ shall be required to pay such additional compensation
and litigation expenses with respect to a Right of Way or Building Entrance the
original grant of which ran to SRP; and (b) SRP shall be required to pay such
additional compensation and litigation expenses with respect to a Right of Way
or Building Entrance the original grant of which ran to ▇▇▇. The terms of any
settlement must be approved by both ▇▇▇ and SRP before it becomes binding. If
either ▇▇▇ or SRP possesses the power of eminent domain within the relevant
jurisdiction, it shall have the right, in its sole discretion, independently of
the consent of the other to seek resolution of such a dispute by exercising such
power of eminent domain, provided that the condemning party shall pay all costs
of such exercise.
10.10 Franchise Rights and Licensing Costs. ▇▇▇ and SRP
------------------------------------
shall each be responsible for all franchises and licenses as may be necessary
for their respective operations. If at any time during the Term, a governmental
authority having or asserting franchise or licensing authority over either ▇▇▇
or SRP makes a demand, as a result of this Agreement, for a new franchise or
license, for additional compensation under an existing franchise or license, or
indicates its intent to reopen,
- 53 -
renegotiate or terminate an existing franchise or license or gives notice of a
forfeiture thereof, ▇▇▇ or SRP, as applicable, shall promptly notify the other
in writing of such demand. After conferring with each other and allowing the
party under the jurisdiction or claimed jurisdiction of such governmental
authority an opportunity to resolve the issue, the other party may attempt at
its expense to resolve the issue with such governmental authority through
negotiation or settlement. Any decision to commence litigation on behalf of or
in the name of either ▇▇▇ or SRP shall be in the sole discretion of such party,
and any subsequent litigation, whether brought by ▇▇▇, at SRP's request, or by
SRP, at ELI's request, or by such governmental authority, shall be conducted at
the expense and under the direction and control of the party names in the
action. If the dispute is resolved either through negotiation, settlement, or
litigation, and such resolution requires the payment of additional consideration
for such additional or expanded use: (a) ▇▇▇ shall be required to pay such
additional compensation with respect to a franchise or license relating to the
SRP Network; and (b) SRP shall be required to pay such additional compensation
with respect to a franchise or license relating to the ▇▇▇ Network. The terms of
any settlement must be approved by both ▇▇▇ and SRP before it becomes binding.
10.11 Liens.
-----
(a) Release of Liens. In the event any of the ▇▇▇ Facilities or
----------------
the SRP Facilities becomes subject to any mechanics', artisans' or
materialmen's lien the following provisions shall apply:
(1) If such a lien is chargeable to or through ELI, ELI
shall promptly cause the same to be discharged and released of record
(by payment, posting
- 54 -
of bond, court deposit or other means) without cost to SRP. ▇▇▇ shall
indemnify SRP against all costs and expenses (including reasonable
attorney fees) reasonably incurred in discharging and releasing such
lien. If any such lien is not so discharged and released within ninety
(90) days after notice thereof by SRP to ▇▇▇, then SRP may pay or
secure the release or discharge thereof at the expense of ▇▇▇.
(2) If such a lien is chargeable to or through SRP, SRP
shall promptly cause the same to be discharged and released of record
(by payment, posting of bond, court deposit or other means) without
cost to ▇▇▇. SRP shall indemnify ▇▇▇ against all costs and expenses
(including reasonable attorney fees) reasonably incurred in
discharging and releasing such lien. If any such lien is not so
discharged and released within ninety (90) days after notice thereof
by ▇▇▇ to SRP, then ▇▇▇ may pay or secure the release or discharge
thereof at the expense of SRP.
(b) Contest of Liens. Nothing in this Agreement shall preclude
----------------
▇▇▇ or SRP from contesting any lien described in paragraph (a) above or the
contract or action upon which the same arose after the same shall have been
bonded or otherwise released of record, as provided above.
(c) Facilities as Collateral. ▇▇▇ hereby recognizes and agrees
------------------------
that the SRP Facilities, the Rights of Way and Building Entrances shall be
and remain at all times the property of SRP, its successors and assigns,
and shall at no time be or become subject to or collateral under any
mortgage, bond, indenture or other financing arrangement of ▇▇▇. Similarly,
SRP hereby recognizes and agrees that the ▇▇▇ Facilities, the Rights of Way
and
- 55 -
Building Entrances shall be and remain at all times the property of ▇▇▇,
its successors and assigns, and shall at no time be or become subject to or
collateral under any mortgage, bond, indenture or other financing
arrangement of SRP. In addition, if either ▇▇▇ or SRP pledges any of its
Facilities, Rights of Way or Building Entrances to a creditor under any
mortgage, bond, indenture or other financing arrangement, such pledging
party shall use its reasonable efforts to provide to the non-pledging party
written agreements in favor of the non-pledging party from such creditor to
the effect that: (1) the non-pledging party shall not be named or joined in
any proceeding to enforce any such mortgage, bond, indenture or other
financing arrangement unless such joining is required by law in order to
perfect the proceeding; (2) enforcement of any such mortgage, bond,
indenture or other financing arrangement shall not terminate this Agreement
nor disturb or interfere with the non-pledging party's use of the System
(except in the case where the non-defaulting party is in default beyond the
period, if any, provided in this Agreement to cure such default); (3) any
party succeeding to the interests of the pledging party as a result of the
enforcement of any such mortgage, bond, indenture or other financing
arrangement shall be bound to the non-pledging party, and the non-pledging
party shall be bound to such successor, under all the terms, covenants and
conditions of this Agreement, for the balance of the Term, including any
extensions thereof (if exercised by the non-pledging party), with the same
force and effect as if such successor were an original signatory to this
Agreement; and (4) whenever any provision of such mortgage, bond, indenture
or other financing arrangement is in conflict with or purports to
- 56 -
limit the rights or increase the obligations of the non-pledging party
under this Agreement, the provisions of this Agreement shall control.
10.12 Discontinuance and Relocation.
-----------------------------
(a) SRP Discontinuance of Electric Services. SRP shall be
---------------------------------------
entitled to discontinue its use of any part of its electrical power system
or any Right of Way for electric power transmission or distribution
purposes. However, SRP shall not take any action to release or relinquish
voluntarily its underlying property interests, which shall be protected as
provided in Section 10.6. In the event of any such discontinuance, SRP
shall give written notice to ▇▇▇ as soon as reasonably practicable. The
notice of discontinuance shall be accompanied by a plan of any alternative
route, if available.
(b) Relocations. If ▇▇▇ relocates any ▇▇▇ Facilities or SRP
-----------
relocates any SRP Facilities, the relocating party shall grant the other
party permission to utilize the alternate location under the terms,
covenants and conditions contained in this Agreement. The relocating party
shall bear the cost of relocating the portion of the System affected by
such relocation. Further ▇▇▇ and SRP shall have the right to seek
compensation from any third party that may have made such relocation
necessary.
ARTICLE XI
SYSTEM OPERATIONS AND COORDINATION
----------------------------------
11.1 Operations.
----------
(a) System Management and Control. ▇▇▇ shall provide primary
-----------------------------
network management and control for the System from Vancouver, Washington.
▇▇▇ shall be responsible for circuit turn-ups and end-user service
deployment. SRP shall be provided its
- 57 -
own operations, administration, maintenance and provisioning gateway into
the System so that proper functioning of SRP's System operations may be
monitored independently.
(b) Troubleshooting. System difficulties will be detected, in
---------------
most instances, by ▇▇▇ at its network control center. SRP and ▇▇▇ shall
respond according to their respective maintenance responsibilities set
forth in Section 9.1. ▇▇▇ and SRP, through the Network Deployment
Committee, shall coordinate efforts to establish minimum system service
standards applicable to both ▇▇▇ and SRP. Such standards shall meet or
exceed the more stringent of ELI's existing service standards or applicable
industry standards, and shall include procedures for notification and
documentation of trouble reports, service priorities and response levels.
(c) Customer Service. ▇▇▇ and SRP customer service personnel
----------------
will be trained to handle all customer inquiries through the first point of
contact, as viewed by the customer. Therefore, ▇▇▇ and SRP shall rely on
each other and coordinate efforts as needed to address Telecommunications
Services, Electric Services and Utilicom Services questions effectively.
▇▇▇ shall provide primary call center support for Telecommunications
Services customers as follows: (1) full customer service from 7:00 a.m. to
7:00 p.m. P.T. Monday through Friday; (2) on-call service from 7:00 p.m. to
7:00 a.m. P.T. Monday through Friday; and (3) on-call service twenty-four
(24) hours a day Saturday, Sunday and holidays. SRP shall provide primary
call center support for Electric Services and Utilicom Services issues. In
cases where SRP has installed or maintains service or equipment, SRP shall
meet or exceed the more stringent of ELI's standards or industry standards
for response time, restoral and
- 58 -
other metrics. Key Account customers shall receive relationship management,
provisioning and customer service priority in accordance with Key Account
management and customer service systems developed by ▇▇▇ and SRP. ▇▇▇ shall
not market to a Key Account without participation by SRP.
(d) Billing. ▇▇▇ shall provide billing services for all
-------
Telecommunications Services. Similarly, SRP shall provide billing services
for all Electric Services and Utilicom Services.
(e) Mapping. ▇▇▇ shall provide and maintain network mapping
-------
systems for the System. ▇▇▇ and SRP shall share mapping data, and shall
cooperate with each other and coordinate efforts to produce all maps
required for maintenance, provisioning or regulatory purposes.
(f) Information Sharing. Except as provided in this Agreement,
-------------------
there shall be no general requirement for either party to share marketing,
customer or other information. However, ▇▇▇ and SRP may negotiate with each
other to share information as needed to enhance Telecommunications Services
operations, profitability and service offerings. Whenever information is
shared, ▇▇▇ and SRP shall take reasonable precautions to protect each
other's confidential information, as provided in Section 12.3 of this
Agreement.
11.2 Coordinating Committee. The Coordinating Committee shall be
----------------------
established by ▇▇▇ and SRP to coordinate efforts between ▇▇▇ and SRP relating to
the deployment and operation of the System during the Term.
- 59 -
(a) Roles and Responsibilities. The Coordinating Committee shall
--------------------------
perform the functions described in this Agreement and shall have the
following roles and responsibilities:
(1) Provide a forum for exchanging ideas and information
relating to the System, its operation and profitability, and the
marketing of services offered by means of the System;
(2) Review of the annual budgets prepared by ▇▇▇ and SRP,
and the Base Case Financial Model updates prepared by ▇▇▇;
(3) Review and approval of the initial capital deployment
plan for the System and annual updates to the plan;
(4) Defining the amount of Reserved Fiber to be allocated to
SRP;
(5) Review and approval of the project life and annual
capital and maintenance budgets for the System;
(6) Review and approval of performance objectives and
metrics for the System;
(7) Due diligence in accordance with the terms of this
Agreement including: (i) oversight of accounting and operations audit
procedures; and (ii) review of audit results and recommendations for
adjustments to operations and financial mechanisms for allocation of
benefits to each of ▇▇▇ and SRP;
(8) Definition of the scope of decision making by the
Network Deployment Committee;
- 60 -
(9) Liaison with the senior managements of ▇▇▇ and SRP;
(10) Appointment of additional committees as necessary; and
(11) Conduct of periodic Coordinating Committee meetings.
(b) Decision Making. ▇▇▇ and SRP intend that the members of the
---------------
Coordinating Committee, in good faith and with the mutual benefit of both
parties in mind, shall negotiate and deliberate on all issues that come
before the Coordinating Committee. Actions by the Coordinating Committee
shall be governed by the following:
(1) ▇▇▇ and SRP shall each be entitled to one vote;
(2) All actions of the Coordinating Committee shall be on
the basis of one vote for ▇▇▇ and one vote for SRP;
(3) One member from SRP and one member from ▇▇▇ shall
constitute a quorum;
(4) The Coordinating Committee may meet in person, by
telephone, video conference or other means by which all persons
present can hear and communicate with each other; and
(5) Any action that may be taken at a meeting of the
Coordinating Committee may be taken without a meeting, by a written
consent, setting forth the action so taken, signed by all the members
of the Coordinating Committee.
(c) Composition of Coordinating Committee. Each of ▇▇▇ and SRP
-------------------------------------
shall have the right to appoint two members of the Coordinating Committee.
Such appointments do not need the consent or approval of the other party,
and unless otherwise agreed, shall not
- 61 -
be for any particular term or duration. Attached to and incorporated by
reference in this Agreement as Exhibit "H" is the initial list of the
members of the Coordinating Committee appointed by ▇▇▇ and SRP.
(d) Deadlocks. In the event the Coordinating Committee is
---------
deadlocked with respect to any issue over which it has decision making
authority, the issue shall be presented to the President of ▇▇▇ and to the
General Manager of SRP for decision. If the President of ▇▇▇ and the SRP
General Manager cannot resolve the deadlock, they shall select a mutually
acceptable independent third party mediator, and both ▇▇▇ and SRP shall
work in good faith to resolve the issue through mediation (which mediation
shall be conducted in accordance with the Rules of Commercial Mediation
established by the American Arbitration Association). If a good faith
effort to mediate the issue fails to achieve a mutually satisfactory
result, either party may demand arbitration (which shall be conducted in
accordance with the Rules of Commercial Arbitration established by the
American Arbitration Association).
11.3 Network Deployment Committee. The Network Deployment
----------------------------
Committee shall be established by ▇▇▇ and SRP to coordinate efforts between ▇▇▇
and SRP relating to the design, construction and maintenance of the System.
(a) Roles and Responsibilities. The Network Deployment Committee
--------------------------
shall perform the functions described in this Agreement and shall have the
following roles and responsibilities:
(1) Development and execution of the annual network
construction plan and associated action plans;
- 62 -
(2) Coordinating the build-out of the System;
(3) Establishment of uniform policies, standards and
procedures for System design criteria, System Materials, customer
service and testing the operational readiness of Segments, performing
validation tests for installed System Electronics, System maintenance,
and management and periodically renewing System capacity;
(4) Budgeting decisions for customer projects;
(5) Technical support for new communications-enabled product
development;
(6) Staff support for the Coordinating Committee; and
(7) Appointment of "Project Management Teams" as necessary.
(b) Meetings. The Network Deployment Committee shall meet at
--------
least quarterly. The Network Deployment Committee shall promptly review
issues and items over which it has review obligations under the terms of
this Agreement. The Network Deployment Committee shall keep and provide
minutes of each meeting. Meeting minutes shall be distributed to members
of the Network Deployment Committee and to the engineering departments of
both ▇▇▇ and SRP. Each of ▇▇▇ and SRP shall designate one of its
representatives on the Network Deployment Committee as a prime contact
person with signature authority to take action on its behalf at committee
meetings.
(c) Decision Making. Generally, the Network Deployment Committee
---------------
shall use a consensus decision making approach for all decisions over which
it has
- 63 -
responsibility, whether under the express terms of this Agreement or by
delegation from the Coordinating Committee. In the event the Network
Deployment Committee cannot reach a consensus on any particular issue, the
issue shall be referred to the Coordinating Committee for resolution.
(d) Composition of Network Deployment Committee. Each of ▇▇▇ and
-------------------------------------------
SRP shall have the right to appoint an equal number of members to the
Network Deployment Committee. Such appointments do not require the consent
or approval of the other party, and, unless otherwise agreed, shall not be
for any particular term or duration Attached to and incorporated by
reference in this agreement as Exhibit "I" is the initial list of the
members of the Network Deployment Committee appointed by ▇▇▇ and SRP.
11.4 Staffing. Attached to and incorporated by reference in this
--------
Agreement as Exhibit "J" is a list of the general staffing obligations of ▇▇▇
and SRP to support the services and obligations they have each agreed to provide
under the terms of this Agreement. Each of ▇▇▇ and SRP shall maintain such
staffing support throughout the Term.
ARTICLE XII
REPRESENTATIONS, WARRANTIES AND COVENANTS
-----------------------------------------
12.1 Representations, Warranties and Covenants of ▇▇▇. ▇▇▇
------------------------------------------------
represents and warrants to SRP, and covenants with SRP, as follows:
(a) Authority. ▇▇▇ is a corporation duly organized, validly
---------
existing and in good standing under the laws of the State of Delaware, and
has all requisite corporate power and authority to enter into this
Agreement and to perform according to the terms, covenants and conditions
contained in this Agreement.
- 64 -
(b) Restrictions. To the best of ELI's knowledge, the execution
------------
of this Agreement, any instrument or document required by this Agreement,
and the consummation of the transactions contemplated by this Agreement
will not violate any article, bylaw or other corporate restriction, or any
statute, ordinance, law, order, ruling, certificate or license, regulation
or demand of any court, regulatory agency or other tribunal to which ▇▇▇ is
subject.
(c) Binding Obligation. This Agreement, when duly executed by
------------------
▇▇▇, shall constitute a valid, legal and binding obligation of ▇▇▇, and
shall be enforceable in accordance with its terms.
(d) Governmental Approvals. ▇▇▇ has all necessary governmental
----------------------
approvals to enter into and to perform its obligations under this
Agreement, excepting approvals, if any, required: (1) from local
governmental authorities regarding ELI's use of the SRP Network located
within the jurisdiction of any such governmental authority, which approvals
▇▇▇ shall use reasonable efforts to obtain; (2) by the Arizona Corporation
Commission for ▇▇▇ to provide intrastate services in the State of Arizona;
and (3) any local government permits necessary to construct Additional
Segments and Future Segments.
(e) Proceedings. Except for U S West Communications, Inc. v.
-----------
Arizona Corporation Commission, Case No. CV95-14284 (Arizona Superior
Court), U S West Communications, Inc. ▇. ▇▇▇▇▇▇▇▇, Case No. CIV-95-1832-
PHX-SMM (D. Ariz.), and ELI's pending application for intrastate authority
before the Arizona Corporation Commission, no litigation or governmental
proceeding, including, without limitation, any docket before the
- 65 -
Arizona Corporation Commission, is pending, or to ELI's knowledge,
threatened which might adversely affect this Agreement, the transactions
contemplated by this Agreement, or ELI's rights under, or ability to
perform pursuant to the terms of, this Agreement. ▇▇▇ shall promptly notify
SRP of any material adverse claims, actual or threatened, affecting any
part of the System or ELI's telecommunication's business in Arizona.
(f) ▇▇▇ Facilities. The existing ▇▇▇ Facilities are operational
--------------
and function in accordance with the design specifications thereof provided
by ▇▇▇ to SRP. The ▇▇▇ Facilities are and will be operated in a safe
manner and in compliance in all material respects with all applicable laws,
regulations and governmental orders.
(g) Compliance with Governmental Requirements. To its knowledge,
-----------------------------------------
subject to the approvals to be sought by ▇▇▇ as set forth in Section
12.1(d), ▇▇▇ has not violated any rule, order or regulation issued by any
governmental authority with respect to any license, permit, franchise or
right of way which may materially and adversely affect SRP's use thereof or
ELI's right to grant a License to SRP, or to execute and perform this
Agreement.
(h) Financing Restrictions. This Agreement does not violate any
----------------------
terms, covenants, conditions or restrictions in any mortgages, bonds and
other indentures of ▇▇▇, and the SRP Facilities will not be subject to or
deemed to be collateral under any such agreements of ▇▇▇.
- 66 -
(i) Resources and Capacity. ▇▇▇ possesses sufficient financial,
----------------------
managerial, and technical capacity and resources to perform its obligations
under the terms of this Agreement.
12.2 Representations, Warranties and Covenants of SRP. SRP
------------------------------------------------
represents and warrants to ▇▇▇, and covenants with ▇▇▇, as follows:
(a) Authority. SRP is an Agricultural Improvement District duly
---------
organized, validly existing and in good standing under the laws of the
State of Arizona and believes in good faith that it has all requisite power
and authority to enter into this Agreement or to perform according to the
terms, covenants and conditions contained in this Agreement.
(b) Restrictions. Subject to paragraph 12.2(a), to the best of
------------
SRP's knowledge, the execution of this Agreement, any instrument or
document required by this Agreement, and the consummation of the
transactions contemplated by this Agreement will not violate any article,
bylaw or other organizational restriction, or any statute, ordinance, law,
order, ruling, certificate or license, regulation or demand of any court,
regulatory agency or other tribunal to which SRP is subject.
(c) Binding Obligation. This Agreement, when duly executed by
------------------
SRP, shall constitute a valid, legal and binding obligation of SRP, and
shall be enforceable in accordance with its terms.
(d) Governmental Approvals. SRP has all necessary governmental
----------------------
approvals to enter into and to perform its obligations under this
Agreement, except that SRP
- 67 -
has not obtained all local government permits necessary to construct
Additional Segments and Future Segments.
(e) Proceedings. No litigation or governmental proceeding,
-----------
including, without limitation, before the Arizona Corporation Commission,
is pending, or to SRP's knowledge, threatened which might adversely affect
this Agreement, the transactions contemplated by this Agreement, or SRP's
rights under, or ability to perform pursuant to the terms of, this
Agreement. SRP shall promptly notify ▇▇▇ of any material adverse claims,
actual or threatened, affecting any Segment.
(f) SRP Facilities. The existing SRP Facilities are operational
--------------
and function in accordance with the design specifications thereof provided
by SRP to ▇▇▇. The SRP Facilities are and will be operated in a safe
manner and in compliance in all material respects with all applicable laws,
regulations and governmental orders.
(g) Compliance with Governmental Requirements. To its knowledge,
-----------------------------------------
SRP has not violated any rule, order or regulation issued by any
governmental authority with respect to any license, permit, franchise or
right of way which may materially and adversely affect ELI's use thereof or
SRP's right to grant a License to ▇▇▇, or to execute and perform this
Agreement.
(h) Financing Restrictions. This Agreement does not violate any
----------------------
terms, covenants, conditions or restrictions in any mortgages, bonds and
other indentures of SRP. The ▇▇▇ Facilities will not be subject to or
deemed to be collateral under any such agreements of SRP.
- 68 -
(i) Resources and Capacity. SRP possesses sufficient financial,
----------------------
managerial, and technical capacity and resources to perform its obligations
under the terms of this Agreement.
12.3 Confidentiality. All information furnished by ▇▇▇ and SRP
---------------
to each other, or by or to their respective representatives, whether or not
reduced to writing or specifically identified as non-public, confidential, or
proprietary, and all analyses, compilations, data, studies, or other documents
prepared by ▇▇▇ or SRP containing, or based in whole or in part on, any such
furnished information, or reflecting review of, or interest in, all or part of
such information are hereinafter collectively referred to as the "Information."
As used in this Agreement, a "representative" of ▇▇▇ or SRP, as the case may be,
shall mean any and all directors, officers, employees, agents or
representatives, including, without limitation, attorneys, accountants,
consultants and financial advisors of ▇▇▇ or SRP, as the case may be. In
consideration of being furnished with the Information, ▇▇▇ and SRP agree that:
(a) Nondisclosure. The Information will be kept confidential and
-------------
will not, without the prior written consent of the party providing the
information, be disclosed by the other party or any of its representative,
in any manner whatsoever, in whole or in part, and will not be used by a
party or any of its representatives directly or indirectly for any purpose
other than activities contemplated by this Agreement. Moreover, ▇▇▇ and
SRP will transmit the Information only to those representatives who need to
know the Information for the purpose of performing or exercising each
party's obligations and rights under this Agreement,
- 69 -
who have been informed of the confidential nature of the Information, and
who have agreed to be bound by the terms of this Agreement.
(b) Authorized Disclosure. Without the prior written consent of
---------------------
the other party, neither party or its representatives will disclose to any
other person the fact that the Information has been made available, or any
of the terms, conditions or other facts with respect to this Agreement,
except as required by law and then only with prior written notice given, as
soon as possible, to the other party and in compliance with the provisions
of Section 20.4 of this Agreement. The term "person" as used in this
Agreement shall be interpreted broadly to include, without limitation, any
corporation, company, group, partnership or individual.
(c) Nonconfidential Information. This Section 12.3 shall be
---------------------------
inoperative as to any portion of the Information which: (1) is or becomes
generally available to the public other than as a result of a disclosure by
a party or its representatives; (2) becomes available to a party in good
faith from a third-party no subject to a confidential obligation to the
party; or (3) was known to a party on a nonconfidential basis prior to its
disclosure by the other party or one of its representatives.
(d) Compelled Disclosure. In the event that either party or
--------------------
anyone to whom the party transmits the Information relating to this
Agreement is requested or becomes legally compelled (by oral questions,
interrogatories, requests for information or documents, subpoena, civil
investigative demand, or any similar process) to disclose any of the
Information, the party so compelled will provide prompt written notice of
such event to the
- 70 -
other party so that the notified party may seek a protective order or other
appropriate remedy, waive compliance with the provisions of this Agreement
or both. In the event that such protective order or other remedy is not
obtained or that the notified party waives compliance with the provisions
of this Agreement, the legally compelled party will furnish only that
portion of the Information which is legally required and will exercise its
best efforts to obtain reliable assurance that confidential treatment will
be accorded the Information.
(e) Public Records Law. It is understood that ▇▇▇ and SRP are or
------------------
may be subject to in the future, public records disclosure laws, and that
these laws will govern the disclosure responsibilities of ▇▇▇ and SRP
notwithstanding the terms of this Agreement. ▇▇▇ and SRP each agree that
to the extent reasonably practical, it will notify the other of any public
records requests of any part of the Information, and will give the other
party a reasonable opportunity to contest the public records request.
(f) Non-Waiver. It is understood and agreed that no failure or
----------
delay by a party in exercising any rights, power or privilege under this
Agreement shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise of any right, power
or privilege hereunder.
(g) Equitable Relief. A party shall be entitled to equitable
----------------
relief, including injunctive relief and specific performance, in the event
of any breach of the provisions of this Agreement. Such remedies shall not
be deemed to be the exclusive remedies for a breach of this Agreement by a
party or its representatives, but shall be in addition to all other
remedies available by law or equity. For purposes of equitable relief, ▇▇▇
and SRP agree that breach
- 71 -
of the provisions of this Agreement may subject that party who has provided
Information to irreparable harm and injury.
(h) Ownership of Information. The Information acquired from the
------------------------
other party or any of its representatives shall be and shall remain the
exclusive property of the disclosing party. Neither the disclosure of
Information, or the execution of this Agreement shall be construed as a
license to the party receiving Information, or to make use of, or sell the
Information or products derived from the Information, or to make use of it
in any way that damages or competitively disadvantages the party disclosing
the Information.
12.4 Cooperation. ▇▇▇ and SRP shall cooperate with each other,
-----------
in good faith, and shall use their best efforts to:
(a) Committees. Establish and make staffing assignments to the
----------
Coordinating Committee, the Network Deployment Committee and such other
committees as may, from time to time, be established to implement the
understandings, agreements and intents set forth in this Agreement;
(b) Network Design and Deployment. Expeditiously complete the
-----------------------------
design, deployment and construction of the Facilities as provided in this
Agreement;
(c) Conflicts Resolution. Negotiate reasonable and mutually
--------------------
beneficial resolutions to all conflicts that may arise between ▇▇▇ and SRP
relating to the design, deployment, construction, maintenance, operation
and use of the Facilities or any other duty, right or obligation of either
of them relating to or arising out of this Agreement;
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(d) Operating Plans. Develop budgets, cost estimates, operating
---------------
plans, marketing plans, and maintenance plans for the Facilities consistent
with the terms, covenants and conditions of this Agreement and to give and
receive information pertaining to the efficient design, deployment, use,
maintenance and performance of the System; and
(e) Approvals and Consents. Obtain all regulatory, governmental,
----------------------
third-party and shareholder approvals, consents, permits and franchises as
may be necessary or prudent for the operation of the Facilities and the
implementation of any operating plan for the use of the System as described
in this Agreement.
12.5 Regulatory Compliance. Each of ▇▇▇ and SRP shall be
---------------------
responsible to comply with the regulatory requirements relating to its own
business practices and operations.
12.6 Certificates. Upon request of either ▇▇▇ or SRP, at any
------------
time and from time to time hereafter, the other party without charge and within
thirty (30) days following receipt of such request, shall certify and confirm in
writing to the requesting party: (a) that this Agreement is in full force and
effect and has not been supplemented, modified or amended (or if there have been
supplements, modifications or amendments, specifying same); (b) whether, to the
best knowledge of the party issuing such certificate, any other sums then due
and payable by ▇▇▇ to SRP or by SRP to ▇▇▇ pursuant to any provisions of this
Agreement are then unpaid (and if such sums remain unpaid, the amount thereof);
(c) whether, to the best knowledge of the party issuing such certificate, the
other party is in default in the performance of any of the covenants or
agreements on its part to be performed under the terms of this Agreement (or, if
defaults exist, specifying each particular in which it is asserted such other
party is in default); (d) if such certificate is issued in connection with any
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financing of any Segment, that, subject to the provisions of Section 14.1, the
requesting party is authorized to enter into such financing transaction and that
the other party will adhere to and perform its obligations under Article XIV
hereof, following its receipt of notice of the Transfer; and (e) as to such
other matters in respect of this Agreement as the party requesting such
certificate may reasonably request.
12.7 Independent Contractor Status. ▇▇▇ and SRP acknowledge and
-----------------------------
agree that they reserve no control whatsoever over the employment, discharge,
compensation of or services rendered by the employees or contractors of each
other, notwithstanding the ability of ▇▇▇ and SRP under this Agreement to
exercise certain rights to enforce the various standards and specifications
agreed upon pursuant to the terms of this Agreement. Nothing in this Agreement
shall be construed as inconsistent with the foregoing independent status and
relationship or as creating or implying a partnership or joint venture between
▇▇▇ and SRP.
12.8 Transactions with Affiliates. From and after the effective
----------------------------
date of this Agreement, all transactions with an Affiliate involving the System
entered into by either ▇▇▇ or SRP shall be at arm's-length and shall comply with
applicable regulatory requirements. Services purchased from or sold to an
Affiliate shall be evidenced by a written contract, the terms of which shall be
subject to then existing market rates, terms and conditions.
12.9 Further Assurances. Each of ▇▇▇ and SRP, with reasonable
------------------
promptness, shall execute and deliver such further instruments, documents,
applications and requests or petitions for authority as may be necessary or
prudent to implement or carry out more effectively the understandings, purposes
and intents of this Agreement.
- 74 -
12.10 Nonexclusive Agreement. Nothing in this Agreement shall be
----------------------
construed to prohibit SRP from making agreements with other telecommunications
carriers, not involving the SRP Network, or from competing with ▇▇▇.
Notwithstanding the generality of the immediately preceding sentence, to the
extent the System is available at competitive prices and terms, SRP shall use
the System in connection with the sale by SRP of telecommunications services.
In addition, SRP shall not compete with ▇▇▇ in selling to the Key Accounts,
provided that ▇▇▇ meets SRP's requirements (in SRP's sole but reasonable
discretion) in providing service to the Key Account customers. SRP's
requirements could include branding an ▇▇▇-provided service with a SRP brand.
12.11 Damage and Destruction. In the event any Segment is damaged
----------------------
or destroyed, ▇▇▇ or SRP, as applicable, shall give immediate notice to the
other party of the occurrence of such damage or destruction. ▇▇▇ and SRP shall
cooperate with each other to reroute or substitute services delivered by means
of the Affected Portion to allow for continued and uninterrupted service to
customers. Unless mutually agreed otherwise, ▇▇▇ and SRP shall use any
available insurance proceeds to repair or reconstruct the damaged or destroyed
Affected Portion and to restore the Affected Portion to its full and proper use.
The Network Deployment Committee shall be notified of any temporary re-routings
or arrangements pending repair or reconstruction. The Network Deployment
Committee shall coordinate efforts to minimize any disruption of service that
may result from the occurrence of the damage or destruction. In the event the
damage or destruction renders the Affected Portion entirely unusable, the
decision to reconstruct the Affected Portion shall be treated as a Future
Segment, subject to the review and construction processes and procedures for
Future Segments set forth in Article VIII of this Agreement.
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ARTICLE XIII
INSURANCE
---------
13.1 Required Insurance Coverage. Without limiting any of the
---------------------------
liabilities or other obligations of SRP or ▇▇▇, both parties shall procure and
cause their respective contractors to procure and maintain in force at their own
cost and expense the following insurance coverages:
(a) Workers Compensation and Employers Liability Insurance.
------------------------------------------------------
Workers Compensation Insurance to cover obligations imposed by applicable
federal and state statutes and Employers Liability Insurance with a minimum
limit of $1,000,000.00.
(b) Commercial Liability Insurance. Commercial Liability
------------------------------
Insurance with a minimum combined single limit of $1,000,000.00 each
occurrence. The policy shall include coverage for bodily injury liability,
property damage liability, personal injury liability, and contractual
liability for liability assumed under this Agreement. The policy shall
contain a severability of interest provision.
13.2 General Conditions.
------------------
(a) ▇▇▇ Policies. The policies required to be maintained by ▇▇▇
------------
and its contractors pursuant to Section 13.1(b) shall: (1) include SRP as
an additional insured; (2) provide that SRP shall not by reason of its
inclusion as an additional insured, incur liability to the insurer for
payment of premiums for such insurance; and (3) provide that such insurance
is primary and not excess without right of contribution from any other
insurance which might be otherwise available to SRP.
(b) SRP Policies. The policies required to be maintained by SRP
------------
and its contractors pursuant to Section 13.1(b) shall: (1) include ▇▇▇ as
an additional insured; (2)
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provide that ▇▇▇ shall not by reason of its inclusion as an additional
insured, incur liability to the insurer for payment of premiums for such
insurance; and (3) provide that such insurance is primary and not excess
without right of contribution from any other insurance which might be
otherwise available to ▇▇▇.
(c) Evidence of Insurance. Prior to commencing work at
---------------------
Facilities owned by the other party, SRP, ▇▇▇ and their respective
contractors shall furnish a certificate of insurance as evidence attesting
that the insurance required under this Article XIII is in effect.
(d) Blanket Policies. Nothing in this Article XIII shall be
----------------
construed to prevent either ▇▇▇ or SRP from satisfying its insurance
obligations pursuant to this Agreement under a blanket policy or policies
of insurance which meet or exceed the requirements of this Article XIII.
(e) Self-Insurance. Notwithstanding any provision in this
--------------
Article XIII to the contrary, ▇▇▇ and SRP may self-insure all or any
portion of the insurance required under this Agreement.
ARTICLE XIV
ASSIGNMENT, SUBLETTING AND OTHER TRANSFERS
------------------------------------------
14.1 Transfers. This Agreement and the rights granted under this
---------
Agreement are being granted in reliance on the financial standing and technical
experience of ▇▇▇ and SRP and are thus granted personally to ▇▇▇ by SRP and to
SRP by ▇▇▇. Neither ▇▇▇ nor SRP may assign any right under this Agreement,
whether in whole or in part, without the prior written consent of the other,
which consent shall not be unreasonably withheld. Notwithstanding the
generality of the foregoing, either party may assign its rights in this
Agreement in whole or in part without the consent
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of the other party to an Affiliate, provided that such assignment shall not
relieve the assigning party of any of its obligations under this Agreement. Any
assignment which does not comply with the provisions of this Article XIV shall
be null and void.
14.2 ▇▇▇ or SRP Financing. In the event that ▇▇▇ or SRP, after
--------------------
obtaining the consent of the other pursuant to Section 14.1, assigns its
interest under this Agreement pursuant to a sale-leaseback or other financing
transaction, the other party agrees that, upon written notice to it specifying:
(a) the name and address of the Transferee; and (b) the name and address of the
Transferee's Agent, the other party will simultaneously give to the Agent any
notices required to be given to the financing party under this Agreement. ▇▇▇
and SRP shall accept payment or performance by the Agent of any obligation of
the other party provided such payment or performance shall be made within the
applicable cure periods allowed by this Agreement. The Agent shall have the
right to cure any default by SRP or ▇▇▇, as the case may be, within the
applicable cure periods allowed by this Agreement. Subject to the terms of this
Section 14.2, the Transferee may further assign or transfer any rights or
interests it may have under this Agreement from time to time, in whole or in
part, with the consent of ▇▇▇ or SRP, as the case may be, which consent shall
not be unreasonably withheld or delayed.
14.3 SRP and ▇▇▇ Recognition of Transferees. If any such
--------------------------------------
Transferee shall obtain use of all or any part of the Affected Portion of the
Facilities, through enforcement of any agreement with ▇▇▇ or SRP, then, so long
as all of the obligations of the other party under this Agreement are being
performed and such Transferee agrees to be bound by and to observe and perform
the obligations of the financing party under this Agreement with respect to the
Affected Portion, the other
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party shall not disturb the use of the Affected Portion by such Transferee and
shall recognize such Transferee's right to use thereof, subject to the terms of
this Agreement.
14.4 No Assumption or Release. Except as set forth in Section
------------------------
14.3, no assignment under this Article XIV shall be deemed to be an assumption
by the Transferee of the obligations of ▇▇▇ under this Agreement, and ▇▇▇ or
SRP, as the case may be, shall not in any event be released, relieved or
discharged of or from any of the obligations assumed under this Agreement unless
specifically agreed to by the other.
14.5 Mergers and Acquisitions. Notwithstanding any provision of
------------------------
this Agreement to the contrary, neither ▇▇▇ nor SRP shall be restricted or
prohibited by this Agreement from participating in or completing any mergers
with or acquisitions of businesses similar to or comparable in nature with the
business in which they are now engaged, provided that the successor by merger to
either ▇▇▇ or SRP shall be subject to the terms, covenants and conditions of
this Agreement and shall be deemed to have assumed all obligations of the
merging party hereunder, including, with respect to a successor to ▇▇▇, the
obligation to pay to SRP the Operating Lease Payment for all Net Operating
Income its generated by the merged entity from the operation of the System.
14.6 No Third Party Beneficiaries. Except as otherwise expressly
----------------------------
provided in this Agreement, neither this Agreement, nor any of its terms or
provisions, nor any inclusion by reference herein, shall be construed as being
for the benefit of any signatory not a party to this Agreement.
ARTICLE XV
CONDEMNATION
------------
15.1 Taking. Should any Segment be made the subject of a Taking,
------
the rights of ▇▇▇ and SRP relative to the property and interest in such property
shall be as set out below.
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(a) Taking Affecting ▇▇▇ Interests. If the Taking affects ▇▇▇
------------------------------
Facilities, or Rights of Way or Building Entrances owned or controlled by
▇▇▇, or any other interest belonging to ▇▇▇, the License granted to SRP
under the terms of this Agreement, to the extent appropriated by such
Taking, shall terminate.
(b) Taking Affecting SRP Interests. If the Taking affects SRP
------------------------------
Facilities, or Rights of Way or Building Entrances owned or controlled by
SRP, or any other interest belonging to SRP, the License granted to ▇▇▇
under the terms of this Agreement, to the extent appropriated by such
Taking, shall terminate.
15.2 Taking Awards. In the proceeding for any such Taking (or an
-------------
involuntary discontinuance of the use of a Segment in anticipation of a Taking),
the interests of ▇▇▇ and SRP in and to the Affected Portion of the Segment shall
be severed. Any awards resulting from the proceeding shall be allocated between
and payable in accordance with the respective interests of ▇▇▇ and SRP (both
physical and occupational, including any incremental value of the Right of Way
by virtue of the installation therein of the System). In addition, each of ▇▇▇
and SRP shall be entitled to claim and receive the portion of the total award
attributable to its interest in the System and may claim damages payable on
account of relocation or re-routing expenses relating to the System.
15.3 Notice of Taking. Each of ▇▇▇ and SRP shall notify the
----------------
other immediately of any Taking threatened or filed against any portion of a
Right of Way or Building Entrance which includes (or, based upon preliminary
route designations approved by the Network Deployment Committee, could include)
any part of the System. In addition, each of ▇▇▇ and SRP agree not to sell or
convey any portion of a Right of Way or Building Entrance containing (or, based
upon
- 80 -
preliminary route designations approved by the Network Deployment Committee,
could contain) any Facilities to such acquiring authority in lieu of
condemnation without giving prior notice to and the opportunity to the other
party to participate in the negotiations with respect to such conveyance. Upon
giving any such notice of a proposed or pending Taking, ▇▇▇ and SRP, to the
extent reasonably available, shall procure alternate Rights of Way or Building
Entrances within which or to which the System may be relocated following such
Taking. Each of ▇▇▇ and SRP shall bear its share of the cost of relocating the
System affected by such relocation.
ARTICLE XVI
ENVIRONMENTAL HAZARD LIABILITY
------------------------------
16.1 Representations. Neither ▇▇▇ nor SRP has any knowledge of,
---------------
nor has either of them received any notice from any governmental agency
concerning the existence of, any Hazardous Substances on or under any Rights of
Way or Building Entrances controlled or used by either of them (including any
proposed Additional Segment or any Future Segment) or relating to any existing
Facilities which would: (a) materially and adversely affect or interfere with
the deployment or use of the System or the respective rights of ▇▇▇ and SRP
under the terms of this Agreement; or (b) require any corrective action or any
form of remediation respecting an affected or contaminated area, except that SRP
has knowledge of groundwater contamination and other contamination in certain of
its Rights of Way.
16.2 Responsibilities of Parties. If any Hazardous Substance is
---------------------------
introduced or released by either ▇▇▇ or SRP which affects a Right of Way,
Building Entrance, Hub Site or other Facility, the responsible party shall
defend, indemnify and hold the other party harmless from and against any and all
expenses, claims, fines and actions arising out of the existence, introduction
or
- 81 -
release of any such Hazardous Substance. In addition, the responsible party
shall also bear all costs of removing, neutralizing, containing or otherwise
remediating any such Hazardous Substance. In cases where both ▇▇▇ and SRP have
caused or contributed to the existence, introduction or release of any such
Hazardous Substance, each party shall be liable therefor and shall indemnify and
hold the other harmless to the extent of such party's contribution to the
release or contamination.
16.3 Alternate Locations. Upon learning of the existence,
-------------------
introduction or release of Hazardous Substances on Right of Way areas within
which the System is or is intended to be located, ▇▇▇ and SRP, to the extent
available, shall use alternate contiguous areas within which the System may be
relocated to avoid the contaminated areas.
ARTICLE XVII
LIABILITY AND INDEMNITY
-----------------------
17.1 ▇▇▇ Indemnity. ▇▇▇ shall indemnify, defend and hold
-------------
harmless SRP, its officers, agents and employees of and from any claim, demand,
lawsuit, or action of any kind for injury to or death of persons, including, but
not limited to, employees of ▇▇▇ or SRP, and damage or destruction of property,
including, but not limited to, property of either ▇▇▇ or SRP, arising out of:
(a) negligent or willful acts or omissions of ▇▇▇, its agents, officers,
directors, employees or contractors; (b) the exercise by ▇▇▇ of the privileges
or rights given herein; and (c) the performance by ▇▇▇ of any of its obligations
under this Agreement. Such obligation to indemnify shall extend to and
encompass all costs incurred by SRP in defending such claims, demands, lawsuits
or actions, including, but not limited to, attorney, witness and expert witness
fees, and any other litigation related expenses. ELI's obligations pursuant to
this Section 17.1 shall not extend to claims, demands, lawsuits or actions for
liability attributable to the active negligence or willful action of SRP, its
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directors, officers, employees, contractors, successors or assigns. ▇▇▇ shall
pay any cost that may be incurred by SRP in enforcing this indemnity, including
reasonable attorney fees.
17.2 SRP Indemnity. SRP shall indemnify, defend and hold
-------------
harmless ▇▇▇, its officers, agents and employees of and from any claim, demand,
lawsuit, or action of any kind for injury to or death of persons, including, but
not limited to, employees of SRP or ▇▇▇, and damage or destruction of property,
including, but not limited to, property of either SRP or ▇▇▇, arising out of:
(a) negligent or willful acts or omissions of SRP, its agents, officers,
directors, employees or contractors; (b) the exercise by SRP of the privileges
or rights given herein; and (c) the performance by SRP of any of its obligations
under this Agreement. Such obligation to indemnify shall extend to and
encompass all costs incurred by ▇▇▇ in defending such claims, demands, lawsuits
or actions, including, but not limited to, attorney, witness and expert witness
fees, and any other litigation related expenses. SRP's obligations pursuant to
this Section 17.2 shall not extend to claims, demands, lawsuits or actions for
liability attributable to the active negligence or willful action of ▇▇▇, its
directors, officers, employees, contractors, successors or assigns. SRP shall
pay any cost that may be incurred by ▇▇▇ in enforcing this indemnity, including
reasonable attorney fees.
17.3 No Consequential Damages. Notwithstanding any provision in
------------------------
this Agreement to the contrary, neither ▇▇▇, SRP nor their respective
contractors or subcontractors shall be liable to the other for incidental,
consequential, special, punitive or indirect damages, including without
limitation, loss of use, loss of profits or revenue, cost of capital or
increased operating costs, arising out of this transaction whether by reason of
contract, indemnity, strict liability, negligence, intentional conduct, breach
of warranty or from breach of this Agreement.
- 83 -
17.4 Waiver of Subrogation. To the extent that such insurance is
---------------------
in force and collectible and to the extent permitted by law, each of ▇▇▇ and SRP
hereby releases and waives all right of recovery against the other or anyone
claiming through or under each of them by way of subrogation or otherwise. The
foregoing release and waiver shall be in force and effect only if the releasing
party's insurance policies contain provisions to the effect that such a release
and waiver shall not invalidate the insurance, and each of ▇▇▇ and SRP shall use
its best efforts to secure such provisions in its policies.
17.5 Defense of Claims. Either ▇▇▇ or SRP as the indemnifying
-----------------
party hereunder shall have the right to defend the other by counsel of the
indemnifying party's selection reasonably satisfactory to the indemnified party,
with respect to any claims within the indemnification obligations of this
Article XVII. ▇▇▇ and SRP shall give each other prompt notice of any asserted
claims or actions indemnified against, shall cooperate with each other in the
defense of any such claims or actions, and shall not settle any such claims or
actions without the prior written consent of the other.
17.6 Third Party Claims. Except as set forth in Sections 14.2,
------------------
17.1 and 17.2, nothing in this Agreement shall be construed to create rights in,
or duties or liabilities to, or any standard of care with reference to, or to
grant remedies to, any person or entity not a party to this Agreement. ▇▇▇ and
SRP by entering into this Agreement do not hold themselves out as furnishing
like or similar services to any other person or entity.
17.7 Survival. The obligations of the respective parties under
--------
this Article XVII shall survive the expiration or earlier termination of this
Agreement.
- 84 -
17.8 Limitation of ▇▇▇ Liability. Notwithstanding anything to
---------------------------
the contrary in this Agreement, SRP alone shall have the responsibility for:
(a) the SRP Utilicom Services or Reserved Fiber transmission systems; (b) the
fitness of the SRP Facilities as and when constructed; and (c) the correctness
of the "as-built" drawings of the SRP Facilities. ELI's issuance of an
acceptance or approval of the foregoing shall signify approval of or objections
with respect to ELI's Telecommunications Services transmission system only and
shall in no way be deemed to represent an opinion or guarantee with respect to
the adequacy of SRP's Electric Services, Utilicom Services and Reserved Fiber
transmission systems or the support thereof.
17.9 Limitation of SRP Liability. Notwithstanding anything to
---------------------------
the contrary in this Agreement, ▇▇▇ alone shall have responsibility for: (a)
the ▇▇▇ Telecommunications Services transmission system; (b) the fitness of the
▇▇▇ Facilities as and when constructed; and (c) the correctness of the "as-
built" drawings of the ▇▇▇ Facilities. SRP's issuance of an acceptance or
approval of any of the foregoing shall signify an approval of or objections to
SRP's Electric Services, Utilicom Services and Reserved Fiber transmission
systems only and shall in no way be deemed to represent an opinion or guarantee
with respect to the adequacy of ELI's Telecommunications Services transmission
system or the support thereof.
17.10 Applicability of Liability Limitations. ▇▇▇ and SRP intend
--------------------------------------
that the waivers and disclaimers of liability, releases from liability,
exclusive remedy provisions, and (except as expressly stated to the contrary
therein) indemnity and hold harmless provisions expressed throughout this
Agreement shall apply even in the event of the fault, negligence (in whole or in
part), strict liability, or breach of contract of the party released or whose
liability is waived, disclaimed, limited,
- 85 -
apportioned or fixed by such exclusive remedy provision, or who is indemnified
or held harmless, and shall extend to their respective Affiliates and its and
their partners, directors, officers, employees and agents. ▇▇▇ and SRP also
intend and agree that such provisions shall continue in full force and effect
notwithstanding the completion, termination, suspension, cancellation or
rescission of this Agreement, or termination of the rights and privileges
granted by this Agreement. No officer, director, employee, agent or other
individual representative of either ▇▇▇ or SRP shall be personally responsible
for any liability arising under this Agreement.
ARTICLE XVIII
FORCE MAJEURE
-------------
18.1 Excuse of Performance. Notwithstanding anything in this
---------------------
Agreement to the contrary, neither ▇▇▇ or SRP shall be liable or responsible for
a delay or failure in performing or carrying out any of its obligations (other
than obligations to make payments) under this Agreement caused by Force Majeure
(as defined below).
18.2 Definition. The term "Force Majeure" as used in this
----------
Agreement shall mean any cause beyond the reasonable control of ▇▇▇ or SRP, as
applicable, or beyond the reasonable control of any of their respective
contractors, subcontractors, suppliers or vendors, including without limitation:
(a) Acts of God. Acts of God, including, but not necessarily
-----------
limited to, lightning, earthquakes, adverse weather of greater duration or
intensity than normally expected for the job area and time of year, fires,
explosions, floods, other natural catastrophes, sabotage, acts of a public
enemy, acts of government or regulatory agencies, wars, blockades,
embargoes, insurrections, riots or civil disturbances;
- 86 -
(b) Labor Disputes. Labor disputes, including, but not
--------------
necessarily limited to, strikes, work slowdowns, work stoppages or labor
disruptions, labor or material shortages, or delays or disruptions of
transportation;
(c) Court Orders. Orders and judgments of any federal, state or
------------
local court, administrative agency or governmental body;
(d) Change in Law. The adoption of or change in any federal,
-------------
state or local laws, rules, regulations, ordinances, permits or licenses,
or changes in the interpretation of such laws, rules, regulations,
ordinances, permits or licenses, by a court or public agency having
appropriate jurisdiction after the date of the execution of this Agreement;
or
(e) Government Approvals. Any suspension, termination,
--------------------
interruption, denial or failure to issue or renew by any governmental
authority or other party having approval rights of any Approval required or
necessary hereunder for the construction, installation or operation of the
Facilities or for either party to perform its obligations hereunder, except
when such suspension, termination, interruption, denial or failure to issue
or renew results from the negligence or failure to act of the party
claiming the occurrence of an event of Force Majeure.
18.3 Continuance after Force Majeure Event. Subject to the
-------------------------------------
provisions of Section 8.5, if either ▇▇▇ or SRP is rendered unable to fulfill
any of its obligations under this Agreement by reason of Force Majeure, such
party shall promptly notify the other and shall exercise due diligence to remove
such inability with all reasonable dispatch; provided, that nothing contained in
this Section 18.3 shall be construed as requiring ▇▇▇ or SRP to settle any
strike, work stoppage or other labor
- 87 -
dispute in which it may be involved, or to accept any permit, certificate,
license or other Approval on terms deemed unacceptable to such party, or to
enter into any contract or other undertaking on terms which the party deems to
be unduly burdensome or costly.
ARTICLE XIX
BREACH AND TERMINATION
----------------------
19.1 Termination Events. The occurrence and continuance of the
------------------
following events may result in the termination of this Agreement, subject to the
provisions of this Article XIX:
(a) Change of Conditions. A change of conditions under which
--------------------
▇▇▇, SRP or the System operates which is beyond the control of the parties
such that the System cannot continue to operate as contemplated by the
terms of this Agreement, or meet the Minimum Performance Standards for the
sale of Telecommunications Services, including, without limitation:
(1) Adverse Change in Financial Condition. A change in the
-------------------------------------
financial condition of ▇▇▇ or SRP that materially and adversely
affects the ability of ▇▇▇ or SRP to perform in accordance with the
terms, covenants and conditions of this Agreement;
(2) Change in Ownership. An unsolicited change in the
-------------------
controlling ownership of ▇▇▇, SRP or Citizens Utilities Company, which
for purposes hereof means a change in the direct or beneficial
ownership of any such entity in excess of 50%; or
(3) Adverse Change in Law. Changes in law or in the
---------------------
regulatory environment materially affecting ▇▇▇, SRP or the use of the
System.
- 88 -
(b) Breach or Default. A material breach or material default
-----------------
under the terms, covenants or conditions of this Agreement by either ▇▇▇ or
SRP, including, without limitation:
(1) Failure to Pay. The failure of either ▇▇▇ or SRP to
--------------
make any payment required under the terms of this Agreement when due;
and
(2) Failure to Satisfy Minimum Performance Standards. The
------------------------------------------------
revenues generated from the sale of Telecommunications Services fails
to satisfy the Minimum Performance Standards.
(c) Intentional Termination. An intentional termination of this
-----------------------
Agreement by either ▇▇▇ or SRP, including, without limitation:
(1) Intentional Termination. Either ▇▇▇ or SRP announces to
-----------------------
the other its intention to terminate this Agreement for strategic or
other reasons that are unrelated to the parties' performance under
this Agreement;
(2) Willful Failure to Perform. The willful failure by
--------------------------
either ▇▇▇ or SRP to perform its obligations under the terms of this
Agreement; and
(3) Termination Effected by Willful Acts or Omissions.
-------------------------------------------------
Either ▇▇▇ or SRP, by willful acts or omissions, places either itself
or the System in a position or condition which breaches the terms,
covenants and conditions of this Agreement or effectively terminates
this Agreement, including, without limitation, a willful failure to
cure a breach or default after having received written notice thereof
from the other party.
- 89 -
19.2 Actions Following Occurrence of Termination Event. Should
-------------------------------------------------
any termination event described in Section 19.1 occur, ▇▇▇ and SRP shall have
the following rights and obligations:
(a) Change of Conditions. If the termination event is a change
--------------------
in conditions described in Section 19.1(a), ▇▇▇ and SRP covenant and agree
to meet expeditiously and to discuss and negotiate in good faith the effect
of the changed condition on this Agreement, their respective performance
obligations hereunder, and their ability to perform under the terms,
covenants and conditions of this Agreement. By mutual consent, ▇▇▇ and SRP
may terminate this Agreement, or modify this Agreement to address and
account for the changed condition in a mutually acceptable manner. If ▇▇▇
and SRP cannot agree on a solution to the effect of the changed condition,
either party, by written notice to the other, may elect to terminate this
Agreement.
(b) Breach or Default. If the termination event is a breach or
-----------------
default described in Sections 19.1(b) and 19.1(c), the non-defaulting party
shall give written notice of such occurrence to the defaulting party. The
defaulting party shall be given a reasonable time to cure any breach or
default as follows:
(1) Monetary Default. In the case of a monetary default,
----------------
the defaulting party shall have thirty (30) days after receipt of the
written notice in which to effectuate a cure.
(2) Nonmonetary Default. In the case of a nonmonetary
-------------------
default, the defaulting party shall have sixty (60) days after receipt
of the written notice in which to effectuate a cure. If the
nonmonetary default cannot be corrected within such sixty (60) day
period, the defaulting party shall have an additional reasonable
- 90 -
time in which to effectuate a cure, provided the defaulting party
commences corrective action within the original sixty (60) day period
and thereafter diligently prosecutes the corrective action to
completion. If the defaulting party does not timely cure the breach or
default within the time periods specified above, the non-defaulting
party may elect to terminate this Agreement by providing written
notice of such election to the defaulting party.
In the event of an uncured breach or default described in Section 19.1(b)
or 19.1(c), the non-breaching party, in addition to the remedies and
obligations set forth in Section 19.3, shall have available to it all legal
remedies available for breach of contract.
19.3 Rights of ▇▇▇ and SRP Upon Termination. Upon the
--------------------------------------
termination of this Agreement, for any reason:
(a) Transition Period. At termination, ▇▇▇ and SRP shall
-----------------
continue to abide by the terms of this Agreement, including the methods
established hereunder and in the Base Case Financial Model for the
accounting and distribution of profits from the sale of Telecommunications
Services. The transition period shall last a maximum of two (2) years
following the effective date of termination. During such transition
period, SRP and ▇▇▇ may seek alternative suppliers for Fiber and services
needs. ELI's and SRP's rights to use the System shall continue for the
duration of the transition period, however, the exclusivity of ELI's rights
in the Leased Fiber shall terminate. If at the conclusion of the
transition period SRP has not found replacement suppliers of the services
previously provided by ▇▇▇, SRP shall have the right to purchase such
services from ▇▇▇, for resale or otherwise, to permit continued service to
SRP's customers. SRP's purchase of such services from ▇▇▇, for resale
- 91 -
or otherwise, shall be subject to then existing market rates, terms and
conditions. If at the conclusion of the transition period, ▇▇▇ has not
found replacement suppliers of the services previously provided by SRP, ▇▇▇
shall have the right to lease Dark Fiber from SRP, at then existing market
rates, terms and conditions, including, without limitation, length of term,
and with sufficient capacity to service, without interruption, ELI's
customers, but in no event shall this provision obligate SRP to provide
greater capacity than the capacity being used by ▇▇▇ at termination. In no
event shall the purchase and lease rights set forth in this section extend
beyond five (5) years following termination.
(b) Valuation of Telecommunications Services Customer Base. As
------------------------------------------------------
of the effective date of the termination of this Agreement, the goodwill
and other intangible value of the Telecommunications Services customer base
shall be appraised, by independent appraisal. If ▇▇▇ and SRP cannot agree
on an appraiser to perform the appraisal, each party may select its own
appraiser and, except as provided in below, the arithmetic mean of the two
appraisals shall be deemed to be the value of such goodwill and other
intangibles. However, if the value established by the higher of the two
appraisals is more than fifteen percent (15%) higher than the lower of the
two appraisals, the two appraisers shall select a third appraiser. The
value of the goodwill and other intangibles relating to the
Telecommunications Services customer base shall then be established by
calculating the arithmetic mean of the value given by the third appraiser
with the next closest value given by one of the other two appraisers. ▇▇▇
shall pay to SRP, as SRP's share of the value of goodwill and other
intangibles associated with the Telecommunications Services customer base
of the System, one-half (50%) of the final appraised value obtained as
provided in this Section 19.3(b).
- 92 -
ARTICLE XX
MISCELLANEOUS
-------------
20.1 Amendments. Neither this Agreement nor any provisions
----------
hereof may be changed, waived, discharged or terminated orally and may only be
modified or amended by an instrument in writing, singed by both ▇▇▇ and SRP.
20.2 Binding Effect. This Agreement shall be binding upon and
--------------
shall inure to the benefit of ▇▇▇, SRP and their respective successors and
assigns.
20.3 Waivers. The failure by ▇▇▇ or SRP at any time or times
-------
hereafter to require strict performance by the other of any of the undertakings,
agreements or covenants contained in this Agreement shall not waive, affect or
diminish any right of ▇▇▇ or SRP hereunder to demand strict compliance and
performance therewith. None of the undertakings, agreements or covenants of ▇▇▇
and SRP under this Agreement shall be deemed to have been waived unless such
waiver is evidenced by an instrument in writing signed by the party to be
charged specifying such waiver.
20.4 Notices. Unless otherwise specifically provided in this
-------
Agreement, any notice or other communication herein required or permitted to be
given shall be in writing and may be personally served, telecopied, telexed or
sent by courier or United States certified mail and shall be deemed to have been
given when delivered in person or by courier service, upon receipt of a telecopy
or telex, or five (5) days after deposit in the United States mail, with postage
prepaid and properly addressed, as follows:
If to ▇▇▇, to: Electric Lightwave, Inc.
▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇, #▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Legal Department
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
- 93 -
and to: Electric Lightwave, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: General Manager
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
If to SRP, to: Salt River Project Agricultural and
Improvement District
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Corporate Secretary
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
and to: Salt River Project Agricultural and
Improvement District
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Manager SRP Telecom
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
and to: Salt River Project Agricultural and
Improvement District
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Legal Department
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Such addresses may be changed by notice to the other party given in the same
manner as above provided.
20.5 Severability. If any term or provision of this Agreement
------------
shall, to any extent, be determined by a court of competent jurisdiction to be
void, voidable or unenforceable, such void, voidable or unenforceable term or
provision shall not affect any other term or provision of this Agreement.
- 94 -
20.6 Interpretation. Whenever the context shall require, the
--------------
plural shall include the singular, the whole shall include any part thereof, and
any gender shall include both other genders. The article, section and paragraph
headings contained in this Agreement are for purposes of reference only and
shall not limit, expand or otherwise affect the construction of any provisions
hereof. All references in this Agreement to articles, sections and paragraphs,
unless expressly noted otherwise, are to articles, sections and paragraphs
contained in this Agreement.
20.7 Governing Law and Choice of Forum. This Agreement and all
---------------------------------
matters relating hereto shall be governed by, construed and interpreted in
accordance with the laws of the State of Arizona. Any arbitration or mediation
under this agreement shall be held in the State of Arizona, County of Maricopa.
Jurisdiction for any disputes arising out of this agreement shall be exclusively
in the courts of the State of Arizona, state or federal, and any litigation
shall be brought in Maricopa County, Arizona.
20.8 Commissions. No brokerage, finder's or other fee,
-----------
commission or compensation shall be paid by ▇▇▇ or SRP in connection with the
transaction contemplated by this Agreement. ▇▇▇ and SRP shall indemnify and
hold each other harmless (including attorney fees and costs) from and against
any and all claims for brokerage and finder's fees or commissions which may be
asserted against the other based on the actions or omissions of the indemnifying
party.
20.9 Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which when so executed and delivered, shall be deemed
an original, but all such counterparts taken together shall constitute only one
instrument.
- 95 -
20.10 Attorney Fees. ▇▇▇ and SRP agree that should either of them
-------------
default in any of the covenants or agreements contained herein, the defaulting
party shall pay all costs and expenses, including reasonable attorney fees and
costs, incurred by the non-defaulting party to protect its rights hereunder,
regardless of whether an action is commenced or prosecuted to judgment.
20.11 Costs. Except as otherwise set forth in this Agreement, ▇▇▇
-----
and SRP shall each be responsible for its own costs, including legal fees,
incurred in negotiating and finalizing this Agreement.
DATED effective as of the date first above written.
▇▇▇:
ELECTRIC LIGHTWAVE, INC., a Delaware
corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
Title: President
-----------------------------------
SRP:
SALT RIVER PROJECT AGRICULTURAL
IMPROVEMENT AND POWER DISTRICT, an Agricultural
Improvement District organized and existing
under the laws of the State of Arizona
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------
Title: President
-----------------------------------
- 96 -
Approved as to form:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Salmon, P.L.C.
Date: September 9, 1996
---------------------------------
EXHIBIT A [*]
▇▇▇ CONSTRUCTION PLAN
---------------------
--------------------
[*] Confidential material has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with the
Securities and Exchange Commission.
EXHIBIT B [*]
NETWORK MAPS
------------
--------------------
[*] Confidential material (2pgs) has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with the
Securities and Exchange Commission.
2
EXHIBIT C [*]
ECONOMIC ANALYSIS
-----------------
--------------------
[*] Confidential material (6pgs) has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with the
Securities and Exchange Commission.
3
EXHIBIT D: SRP CONSTRUCTION PLAN
Segment Description/Approximate Route Miles[*]
▇▇▇ Connections/Upgrades: (FY '96/97 or as needed)
96 fiber [*] 6.25 miles
96 fiber [*] 4.0 miles
48 fiber [*]
5.3 miles
48 fiber [*] 1.8 miles
48 fiber [*] 2.0 miles
96 fiber [*] 4.2 miles
48 fiber [*] 1.9 miles
48 fiber [*] 2.0 miles
48 fiber [*] 2.0 miles
48 fiber [*] 4.4 miles
-----------------------------------------------------------------
Total 33.85 miles
SRP Substation Buildout
Fiscal Year `96/97
------------------
Ring [*]
72 fiber [*] 2.0 miles
48 fiber [*] 3.0 miles
24 fiber [*] 2.3 miles
96 fiber [*] 0.7 miles
48 fiber [*]
Ring [*]
48 fiber [*] 4.0 miles
48 fiber [*] 2.0 miles
Ring [*]
48 fiber [*] 2.5 miles
48 fiber [*] 2.2 miles
48 fiber [*] 3.0 miles
48 fiber [*] 2.0 miles
48 fiber [*] 2.5 miles
48 fiber [*] 2.5 miles
24 fiber [*] 2.0 miles
Ring [*]
48 fiber [*] 5.0 miles
48 fiber [*] 2.0 miles
48 fiber [*] 1.5 miles
24 fiber [*] 2.0 miles
24 fiber [*] 1.2 miles
Ring [*]
48 fiber [*] 2.0 miles
24 fiber [*] 1.5 miles
24 fiber [*] 1.1 miles
24 fiber [*] 1.3 miles
24 fiber [*] 2.0 miles
24 fiber [*] 0.5 miles
Ring [*]
48 fiber [*] 4.0 miles
24 fiber [*] 1.0 miles
24 fiber [*] 1.3 miles
24 fiber [*] 2.5 miles
48 fiber [*] 1.7 miles
48 fiber [*] 3.0 miles
Ring [*]
48 fiber [*] 1.5 miles
-----------------------------------------------------------------
Total '96-'97 65.80 miles
--------------------
* Confidential material has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with the
Securities and Exchange Commission.
Fiscal Year `97/98[*]
---------------------
Ring [*]
48 fiber [*] 1.3 miles
48 fiber [*] 3.0 miles
48 fiber [*] 2.1 miles
48 fiber [*] 0.2 miles
48 fiber [*] 2.0 miles
48 fiber [*] 2.3 miles
Ring [*]
24 fiber [*] 2.0 miles
24 fiber [*] 1.1 miles
24 fiber [*] 0.6 miles
24 fiber [*] 0.3 miles
24 fiber [*] 2.4 miles
24 fiber [*] 3.5 miles
24 fiber [*] 0.8 miles
24 fiber [*] 0.4 miles
Ring [*]
24 fiber [*] 2.1 miles
24 fiber [*] 2.7 miles
24 fiber [*] 8.5 miles
48 fiber [*] 0.5 miles
Ring [*]
24 fiber [*] 2.1 miles
24 fiber [*] 3.4 miles
48 fiber [*] 1.3 miles
24 fiber [*] 2.5 miles
24 fiber [*] 2.0 miles
24 fiber [*] 1.0 miles
24 fiber [*] 1.6 miles
Ring [*]
24 fiber [*] 3.2 miles
24 fiber [*] 2.0 miles
24 fiber [*] 1.2 miles
24 fiber [*] 2.0 miles
24 fiber [*] 2.5 miles
24 fiber [*] 0.6 miles
24 fiber [*] 5.3 miles
Ring [*]
24 fiber [*] 3.6 miles
24 fiber [*] 2.0 miles
24 fiber [*] 2.8 miles
48 fiber [*] 4.1 miles
24 fiber [*] 0.1 miles
Ring [*]
24 fiber [*] 1.3 miles
24 fiber [*] 2.2 miles
24 fiber [*] 2.0 miles
24 fiber [*] 2.5 miles
24 fiber [*] 2.3 miles
24 fiber [*] 4.1 miles
24 fiber [*] 1.0 miles
Ring [*]
24 fiber [*] 1.2 miles
24 fiber [*] 2.0 miles
24 fiber [*] 2.0 miles
-----------------------------------------------------------------
Total '97-'98 99.70 miles
--------------------
* Confidential material has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with the
Securities and Exchange Commission.
Fiscal Year `98/99[*]
---------------------
Ring [*]
24 fiber [*] 4.0 miles
24 fiber [*] 2.0 miles
24 fiber [*] 1.5 miles
24 fiber [*] 1.0 miles
24 fiber [*] 2.8 miles
24 fiber [*] 2.2 miles
Ring [*]
24 fiber [*] 7.5 miles
24 fiber [*] 3.0 miles
24 fiber [*] 2.0 miles
48 fiber [*] 3.0 miles
48 fiber [*] 9.5 miles
Ring [*]
24 fiber [*] 2.2 miles
24 fiber [*] 3.3 miles
24 fiber [*] 1.8 miles
24 fiber [*] 3.5 miles
24 fiber [*] 2.8 miles
Ring [*]
48 fiber [*] 1.5 miles
24 fiber [*] 1.3 miles
24 fiber [*] 2.3 miles
24 fiber [*] 2.1 miles
24 fiber [*] 3.0 miles
24 fiber [*] 3.0 miles
24 fiber [*] 2.3 miles
24 fiber [*] 4.0 miles
Ring [*]
24 fiber [*] 3.3 miles
24 fiber [*] 2.2 miles
24 fiber [*] 4.0 miles
24 fiber [*] 2.0 miles
Ring [*]
48 fiber [*] 1.0 miles
24 fiber [*] 2.0 miles
24 fiber [*] 1.0 miles
24 fiber [*] 1.5 miles
24 fiber [*] 2.1 miles
-----------------------------------------------------------------
Total '98-'99 90.70 miles
--------------------
* Confidential material has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with the
Securities and Exchange Commission.
3
Fiscal Year `99/00[*]
---------------------
Ring [*]
24 fiber [*] 2.0 miles
24 fiber [*] 5.0 miles
24 fiber [*] 6.0 miles
24 fiber [*] 3.0 miles
24 fiber [*] 5.0 miles
24 fiber [*] 2.3 miles
Ring [*]
48 fiber [*] 3.0 miles
24 fiber [*] 6.0 miles
24 fiber [*] 2.0 miles
-----------------------------------------------------------------
Total '99 - '00 34.30 miles
--------------------
* Confidential material has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with the
Securities and Exchange Commission.
4
EXHIBIT "E"
EXISTING OR PENDING SRP NETWORK CONTRACTS
-----------------------------------------
MESA UNIFIED SCHOOL DISTRICT #4
A pending bid for bandwidth and transmission services for a district wide
communications network. If accepted this bid requires that SRP deploy a private
fiber optic network connecting all Mesa Public School facilities utilizing
reserved fiber on the SRP Network backbone and additional fiber for spurs and
building entrances. In addition, SRP will lease T-1 circuits and resell dial
tone services from US WEST Communications. This bid was submitted in conjunction
with Fujitsu Business Communications Systems, Inc., on May 30, 1996.
MOTOROLA
A month-to-month service agreement with Motorola, Inc. (an Illinois corporation
located at ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇) for point-to-point
Digital Signal-3 service between Motorola facilities located at ▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, and Motorola operations located at the Orbital Sciences
Center facility located at 3380 S. Price Road, Chandler, Arizona. This service
was initiated July 1, 1996.
TELEPORT COMMUNICATIONS GROUP
A ten-year license for fiber optic telecommunications facilities for use by TCG
Phoenix (a New York general partnership having its principal place of business
at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇) to provide telecommunications
services. These fiber optic cable facilities are located along SRP Arizona Canal
right-of-way between ▇▇▇▇ ▇▇▇▇▇▇ and 40th Street in Phoenix, Arizona.
US WEST COMMUNICATIONS
A ten-year license for fiber optic telecommunications facilities for use by US
WEST Communications (a Delaware corporation having its principal place of
business at ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇) to provide
telecommunications services. These fiber optic cable facilities are located
along SRP Arizona Canal right-of-way between 16th Street and 4Oth Street in
Phoenix, Arizona.
EXHIBIT F
RESERVED FIBER ALLOCATION FOR SEGMENTS IN SRP SERVICE TERRITORY
EXISTING ADDITIONAL ADD STRANDS STRANDS CABLE STRAND-MILES STRAND-MILES STRAND-MILES
FIBER SEGMENT NAME/*/ COUNT COUNT YR RESERVED AVAILABLE MILES RESERVED AVAILABLE TOTAL
/*/ 72 1 54 18 2 108 36 144
/*/ 48 1 30 18 3 90 54 144
/*/ 48 1 30 18 0.2 6 3.6 9.6
/*/ 96 1 24 72 0.2 4.8 14.4 19.2
/*/ 24 8 16 3 24 48 72
/*/ 24 6 18 2.3 13.8 41.4 55.2
/*/ 24 8 16 2 16 32 48
/*/ 24 4 20 2 8 40 48
/*/ 24 10 14 1 10 14 24
/*/ 24 1 12 12 2.3 27.6 27.6 55.2
/*/ 24 14 10 3 42 30 72
/*/ 20 16 4 1.3 20.8 5.2 26
/*/ 6 6 0 3 18 0 18
/*/ 18 16 2 5 80 10 90
/*/ 48 1 10 38 4 40 152 192
/*/ 48 1 10 38 2 20 76 96
/*/ 48 1 10 38 5 50 190 240
/*/ 48 1 10 38 2 20 76 96
/*/ 48 1 10 38 1.5 15 57 72
/*/ 24 1 6 18 2 12 36 48
/*/ 24 1 6 18 1.2 7.2 21.6 28.8
/*/ 20 20 0 2 40 0 40
/*/ 20 20 0 3.3 66 0 66
/*/ 20 20 0 5 100 0 100
/*/ 48 1 6 42 2.2 13.2 92.4 105.6
/*/ 48 1 6 42 3 18 126 144
/*/ 48 1 10 38 2 20 76 96
/*/ 48 1 6 42 2.5 15 105 120
/*/ 48 1 6 42 2.5 15 105 120
/*/ 20 10 10 3 30 30 60
/*/ 20 10 10 4 40 40 80
/*/ 48 1 10 38 2 20 76 96
/*/ 24 1 6 18 1.5 9 27 36
/*/ 24 1 6 18 1.1 6.6 19.8 26.4
/*/ 24 1 6 18 1.3 7.8 23.4 31.2
/*/ 24 1 6 18 2 12 36 48
/*/ 24 1 8 16 0.5 4 8 12
/*/ 48 1 8 40 4 32 160 192
/*/ 48 1 8 40 1.5 12 60 72
/*/ 24 1 8 16 1 8 16 24
/*/ 24 1 8 16 1.3 10.4 20.8 31.2
---------------
/*/ Confidential material has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with the
Securities and Exchange Commission.
EXHIBIT F
RESERVED FIBER ALLOCATION FOR SEGMENTS IN SRP SERVICE TERRITORY
EXISTING ADDITIONAL ADD STRANDS STRANDS CABLE STRAND-MILES STRAND-MILES STRAND-MILE
FIBER SEGMENT NAME/*/ COUNT COUNT YR RESERVED AVAILABLE MILES RESERVED AVAILABLE TOTAL
/*/ 24 1 8 16 2.5 20 40 60
/*/ 48 1 8 40 1.7 13.6 68 81.6
/*/ 48 1 8 40 3 24 120 144
/*/ 24 8 16 3 24 48 72
/*/ 20 10 10 1.3 13 13 26
/*/ 20 12 8 2 24 16 40
/*/ 20 12 8 2 24 16 40
/*/ 20 12 8 2.3 27.6 18.4 46
/*/ 20 12 8 4.6 55.2 36.8 92
/*/ 24 8 16 6 48 96 144
/*/ 24 8 16 3 24 48 72
/*/ 24 6 18 2.5 15 45 60
/*/ 48 2 6 42 1 3 7.8 54.6 62.4
/*/ 48 2 6 42 3 18 126 144
/*/ 48 2 6 42 2.1 12.6 88.2 100.8
/*/ 48 2 6 42 0.2 1.2 8.4 9.6
/*/ 48 2 6 42 2 12 84 96
/*/ 48 2 8 40 2.3 18.4 92 110.4
/*/ 24 12 12 11 132 132 264
/*/ 24 12 12 2 24 24 48
/*/ 24 12 12 4 48 48 96
/*/ 24 12 12 3 36 36 72
/*/ 24 1 6 18 2 12 36 48
/*/ 48 1 12 36 1.25 15 45 60
/*/ 48 1 12 36 1.25 15 45 60
/*/ 24 2 6 18 2.4 14.4 43.2 57.6
/*/ 24 2 12 12 0.6 7.2 7.2 14.4
/*/ 24 2 12 12 0.3 3.6 3.6 7.2
/*/ 24 2 12 12 0.4 4.8 4.8 9.6
/*/ 24 2 6 18 1.1 6.6 19.8 26.4
/*/ 24 2 6 18 0.8 4.8 14.4 19.2
/*/ 24 2 6 18 2 12 36 48
/*/ 24 2 6 18 3.5 21 63 84
/*/ 24 8 16 1.2 9.8 19.2 28.8
/*/ 48 12 36 2.2 26.4 79.2 105.6
/*/ 24 12 12 3.5 42 42 84
/*/ 24 12 12 2 24 24 48
/*/ 24 2 8 16 2.7 21.6 43.2 64.8
/*/ 24 2 6 18 2.1 12.6 37.8 50.4
/*/ 24 2 10 14 2.1 21 29.4 50.4
/*/ 24 2 14 10 3.4 47.6 34 81.6
/*/ 24 2 12 12 1.6 19.2 19.2 38.4
/*/ 24 2 6 18 1 6 18 24
/*/ 24 12 12 1 12 12 24
---------------
/*/ Confidential material has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with the
Securities and Exchange Commission.
EXHIBIT F
RESERVED FIBER ALLOCATION FOR SEGMENTS IN SRP SERVICE TERRITORY
EXISTING ADDITIONAL ADD STRANDS STRANDS CABLE STRAND-MILES STRAND-MILES STRAND-MILES
FIBER SEGMENT NAME/*/ COUNT COUNT YR RESERVED AVAILABLE MILES RESERVED AVAILABLE TOTAL
/*/ 24 2 8 16 2 16 32 48
/*/ 24 2 14 10 2.5 35 25 60
/*/ 48 2 12 36 1.3 15.6 46.8 62.4
/*/ 24 12 12 13 156 156 312
/*/ 48 20 28 2 40 56 96
/*/ 48 18 30 1.7 30.6 51 81.6
/*/ 48 18 30 2 36 60 96
/*/ 48 18 30 3 54 90 144
/*/ 24 2 12 12 3.2 38.4 38.4 76.8
/*/ 24 2 8 16 2 16 32 48
/*/ 24 2 10 14 1.2 12 16.8 28.8
/*/ 24 2 10 14 2 20 28 48
/*/ 24 2 10 14 2.5 25 35 60
/*/ 24 2 10 14 0.6 6 8.4 14.4
/*/ 24 2 12 12 5.3 63.6 63.6 127.2
/*/ 24 2 6 18 3.6 21.6 64.8 86.4
/*/ 24 2 6 18 2 12 36 48
/*/ 24 2 6 18 2.8 16.8 50.4 67.2
/*/ 48 2 12 36 4.1 49.2 147.6 196.8
/*/ 24 2 6 18 0.1 0.6 1.8 2.4
/*/ 24 2 6 18 1.3 7.8 23.4 31.2
/*/ 24 2 6 18 2.2 13.2 39.6 52.8
/*/ 24 2 6 18 2 12 36 48
/*/ 24 2 6 18 2.5 15 45 60
/*/ 24 2 6 18 2.3 13.8 41.4 55.2
/*/ 24 2 6 18 4.1 24.6 73.8 98.4
/*/ 24 2 6 18 1 6 18 24
/*/ 48 12 36 1.5 18 54 72
/*/ 48 12 36 3 36 108 144
/*/ 48 12 36 2 24 72 96
/*/ 48 12 36 1 12 36 48
/*/ 24 2 8 16 1.2 9.6 19.2 28.8
/*/ 24 2 8 16 2 16 32 48
/*/ 24 2 8 16 2 16 32 48
/*/ 48 16 32 1.7 27.2 54.4 81.6
/*/ 48 16 32 4 64 128 192
/*/ 48 16 32 2.2 35.2 70.4 105.6
/*/ 48 16 32 6 96 192 288
/*/ 24 3 6 18 4 24 72 96
/*/ 24 3 6 18 2 8 16.8 50.4 67.2
/*/ 24 3 6 18 2 12 36 48
/*/ 24 3 6 18 1.5 9 27 36
/*/ 24 3 6 18 1 6 18 24
/*/ 24 3 6 18 2.2 13.2 39.6 52.8
---------------
/*/ Confidential material has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with the
Securities and Exchange Commission.
EXHIBIT F
RESERVED FIBER ALLOCATION FOR SEGMENTS IN SRP SERVICE TERRITORY
EXISTING ADDITIONAL ADD STRANDS STRANDS CABLE STRAND-MILES STRAND-MILES STRAND-MILES
FIBER SEGMENT NAME/*/ COUNT COUNT YR RESERVED AVAILABLE MILES RESERVED AVAILABLE TOTAL
/*/ 24 3 6 18 2 12 36 48
/*/ 24 3 6 18 3.3 19.8 59.4 79.2
/*/ 24 3 6 18 2.2 13.2 39.6 52.8
/*/ 24 3 6 18 4 24 72 96
/*/ 12 6 6 3.5 21 21 42
/*/ 12 6 6 3.5 21 21 42
/*/ 48 3 6 42 1 6 42 48
/*/ 24 3 8 16 2 16 32 48
/*/ 24 3 8 16 1 8 16 24
/*/ 24 3 8 16 1.5 12 24 36
/*/ 24 3 8 16 2.1 16.8 33.6 50.4
/*/ 48 12 36 6 72 216 288
/*/ 24 3 8 16 7.5 60 120 180
/*/ 24 3 8 16 3 24 48 72
/*/ 24 3 8 16 3 24 48 72
/*/ 24 3 8 16 2 16 32 48
/*/ 24 3 6 18 2.2 13.2 39.8 52.8
/*/ 24 3 6 18 3.3 19.8 59.4 79.2
/*/ 24 3 8 16 1.8 14.4 28.8 43.2
/*/ 24 3 8 16 3.5 28 56 84
/*/ 24 3 8 16 2.8 22.4 44.8 67.2
/*/ 24 24 0 5 120 0 120
/*/ 48 24 24 2 48 48 96
/*/ 48 24 24 4 96 96 192
/*/ 48 3 8 40 1.5 12 60 72
/*/ 24 3 6 18 1.3 7.8 23.4 31.2
/*/ 24 3 6 18 2.3 13.8 41.4 55.2
/*/ 24 3 6 18 2.1 12.6 37.8 50.4
/*/ 24 3 6 18 3 18 54 72
/*/ 24 3 6 18 3 18 54 72
/*/ 24 3 6 18 2.3 13.8 41.4 55.2
/*/ 24 3 6 18 4 24 72 96
/*/ 24 8 16 2 16 32 48
/*/ 24 4 6 18 2 12 36 48
/*/ 24 4 6 18 5 30 90 120
/*/ 24 4 6 18 6 36 108 144
/*/ 24 4 6 18 3 18 54 72
/*/ 24 4 6 18 5 30 90 120
/*/ 24 4 6 18 2.3 13.8 41.4 55.2
/*/ 48 4 6 42 3 18 126 144
/*/ 24 4 6 18 6 36 108 144
/*/ 24 4 12 12 2 24 24 48
/*/ 24 2 6 18 8.5 51 153 204
/*/ 48 4 10 38 9.5 95 361 456
---------------
/*/ Confidential material has been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with the
Securities and Exchange Commission.
EXHIBIT F
RESERVED FIBER ALLOCATION FOR SEGMENTS IN SRP SERVICE TERRITORY
EXISTING ADDITIONAL ADD STRANDS STRANDS CABLE STRAND-MILES STRAND-MILES STRAND-MILES
FIBER SEGMENT NAME/*/ COUNT COUNT YR RESERVED AVAILABLE MILES RESERVED AVAILABLE TOTAL
/*/ 48 2 12 36 0.5 6 18 24
ADDITIONAL BULLDOUT TO SUPPORT ▇▇▇/SRP JOINT OPERATIONS
/*/ 72 1 12 60 6.25 75 375 450
/*/ 96 1 12 84 4 48 336 384
/*/ 48 1 12 36 5.3 63.6 190.8 254.4
/*/ 48 1 12 36 2 24 72 96
/*/ 48 1 12 36 2 24 72 96
/*/ 48 1 6 42 4.4 26.4 184.8 211.2
/*/ 48 1 12 36 2 24 72 96
/*/ 96 1 12 84 4.2 50.4 352.8 403.2
/*/ 48 1 12 36 1.9 22.8 68.4 91.2
/*/ 48 2 12 36 2 24 72 96
=============================================================================================================================
TOTALS 489.9 4900.4 10932.8 15833.2
PERCENTAGE 31.0 69.0
NOTES: *
---------------
/*/ Confidential material has been omitted pursuant to a request for
confidential treatment. Such material has been filied separately with the
Securities and Exchange Commission.
EXHIBIT "G"
Operating Lease Payment Examples
--------------------------------
FIRST 15 QUARTERS:
------------------
Example #1 Example #2 Example #3
------------------ ------------------ -----------------
CALCULATION OF OPERATING LEASE PAYMENT:
---------------------------------------
Gross Revenue $ 1,000,000 $ 5,000,000 $10,000,000
Cost of Goods Sold (400,000) (2,000,000) (4,000,000)
Gross Margin 600,000 3,000,000 6,000,000
Current Direct Operating Costs (1,000,000) (1,500,000) (2,000,000)
Accumulated Unreimbursed Direct
Operating Expenses 0 (400,000) 0
Deferred Operating Lease Amortization (2) N/A N/A N/A
Net Operating Income (400,000) 1,100,000 4,000,000
Operating Lease Percentage [*] [*] [*]
Operating Lease Payment $ 0 [*] [*]
==========================================================
ACCUMULATED UNREIMBURSED DIRECT OPERATING EXPENSES (1):
-------------------------------------------------------
Beginning of Year $0 ($400,000) $0
Current Year Unreimbursed (400,000) 0 0
Prior Year Deduction 0 400,000 0
End of Year ($400,000) $ 0 $0
==============================
DEFERRED OPERATING LEASE (2):
-----------------------------
Beginning of Year $0 $0 [*]
Current Year Deferred 0 [*] 0
Current Year Amortization N/A N/A N/A
End of Year $0 [*] [*]
=========================
* Confidential material has been omitted pursuant to a request for confidential
treatment. Such material has been filed separately with the Securities and
Exchange Commission.
EXHIBIT "G"
Operating Lease Payment Examples
--------------------------------
DURING 16TH THROUGH 35TH QUARTERS:
----------------------------------
Example #1 Example #2 Example #3
------------ ------------ ------------
CALCULATION OF OPERATING LEASE PAYMENT:
---------------------------------------
Gross Revenue $ 1,000,000 $ 5,000,000 $10,000,000
Cost of Goods Sold (400,000) (2,000,000) (4,000,000)
Gross Margin 600,000 3,000,000 6,000,000
Current Direct Operating Costs (1,000,000) (1,500,000) (2,000,000)
Accumulated Unreimbursed Direct
Operating Expenses N/A N/A N/A
Deferred Operating Lease Amortization (2) 0 [*] [*]
Net Operating Income (400,000) [*] [*]
Operating Lease Percentage [*] [*] [*]
Current Operating Lease Payment $ 0 [*] [*]
=========================================
ACCUMULATED UNREIMBURSED DIRECT OPERATING EXPENSES (1):
-------------------------------------------------------
Beginning of Year $0 $0 $0
Current Year Unreimbursed N/A N/A N/A
Prior Year Deduction N/A N/A N/A
End of Year $0 $0 $0
=========================
DEFERRED OPERATING LEASE (2):
-----------------------------
Quarter (16-19) (20-23) (24-27)
Percent [*] [*] [*]
Beginning of Year [*] [*] [*]
Current Year Deferred N/A N/A N/A
Current Year Amortization 0 [*] [*]
End of Year [*] [*] [*]
================================
* Confidential material has been omitted pursuant to a request for confidential
treatment. Such material has been filed separately with the Securities and
Exchange Commission.
EXHIBIT "G"
Operating Lease Payment Examples
--------------------------------
AFTER 35TH QUARTERS:
--------------------
Example #1 Example #2 Example #3
------------ ------------ ------------
CALCULATION OF OPERATING LEASE PAYMENT:
---------------------------------------
Gross Revenue $ 1,000,000 $ 5,000,000 $10,000,000
Cost of Goods Sold (400,000) (2,000,000) (4,000,000)
Gross Margin 600,000 3,000,000 6,000,000
Current Direct Operating Costs (1,000,000) (1,500,000) (2,000,000)
Accumulated Unreimbursed Direct
Operating Expenses N/A N/A N/A
Deferred Operating Lease Amortization (2) N/A N/A N/A
Net Operating Income (400,000) 1,500,000 4,000,000
Operating Lease Percentage [*] [*] [*]
Operating Lease Payment $ 0 [*] [*]
=========================================
ACCUMULATED UNREIMBURSED DIRECT OPERATING EXPENSES (1):
-------------------------------------------------------
Beginning of Year $0 $0 $0
Current Year Unreimbursed N/A N/A N/A
Prior Year Deduction N/A N/A N/A
End of Year $0 $0 $0
=========================
DEFERRED OPERATING LEASE (2):
-----------------------------------------------------------
Beginning of Year $0 $0 $0
Current Year Deferred N/A N/A N/A
Current Year Amortization N/A N/A N/A
End of Year $0 $0 $0
===============
* Confidential material has been omitted pursuant to a request for confidential
treatment. Such material has been filed separately with the Securities and
Exchange Commission.
EXHIBIT "H"
COORDINATING COMMITTEE
----------------------
ELECTRIC LIGHTWAVE (1) The Vice President with responsibility for sales; and
(2) The Vice President with responsibility for engineering.
SALT RIVER PROJECT (1) The senior-most manager responsible for commercial
telecommunications services; presently ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, Manager of Environmental, Land and Risk
Management Services.
(2) The senior-most manager responsible for internal
telecommunications services; presently ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, Manager of Electric System Operations &
Maintenance.
EXHIBIT "I"
NETWORK DEPLOYMENT COMMITTEE
----------------------------
ELECTRIC LIGHTWAVE (1) The Vice President with responsibility for engineering;
(2) A Senior Engineering Representative Designated by the
Vice President of Engineering; and
(3) The Phoenix General Manager.
SALT RIVER PROJECT (1) The manager responsible for internal
telecommunications; presently ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Manager
of Communications Engineering.
(2) The manager(s) responsible for telecommunications
business management; presently ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Manager of Telecommunications Business Development and
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Manager of SRP Telecom.
(3) A senior telecommunications technical advisor;
presently ▇▇. ▇▇▇ ▇. ▇▇▇▇▇▇, Principal Engineer-
Communications Engineering.
EXHIBIT "J"
STAFFING
--------
ELECTRIC LIGHTWAVE
PHOENIX
General Manager--Phoenix: Responsible for sales operations and overall
direction of the Phoenix office, including budgets and coordination of non-sales
personnel. The General Manager will serve as primary contact to SRP.
Sales Engineer--Phoenix: Assists the Account Executive with the sales process,
technical resource for highly technical and complex customer requirements.
Account Executive: Responsible for producing Telecommunications Services
revenue, as well as account management.
OSP Engineer: Designs OSP and supports the sales process, supports the
implementation of the System, serves as resource to SRP engineering personnel in
design of the System.
Hub Technician: Installs and maintains all services for ▇▇▇ customer base.
Administrative Assistant: Supports the General Manager in the overall
management of the Phoenix office, supports the sales personnel in their sales
efforts as directed by the General Manager.
Receptionist: Supports the Administrative Assistant, serves as primary contact
for visitors to the office, answers phones.
CORPORATE
▇▇▇ corporate headquarters will provide support personnel and other resources
necessary to provide: assistance in design and engineering of communications
outside plant facilities; design and engineering of System electronics and
optronics; System operation and maintenance (including 7x24 monitoring via ELI's
network control center); communications product development and marketing;
service sales and provisioning; customer service; billing and collections; local
area number portability; and compliance with state and federal regulatory
requirements.
SALT RIVER PROJECT
The following describes staff dedicated to the operation of the System as a
telecommunications network ("SRP Telecom"), or having support for SRP Telecom as
a primary objective. This includes those employees, the majority of whose time
will be charged to SRP Telecom direct operating expenses, or to capital projects
within SRP Telecom.
Manager, SRP Telecom: Strategic development of telecommunications initiative;
integration of backbone network and customer lateral decisions; capital budget
management; business interface with engineering, legal, finance, and accounting
departments; development of enhanced energy services.
Manager, Telecommunications Business Development: Strategic development of
telecommunications initiative; business interface with marketing, real estate
and communications departments; development of enhanced energy services; key
trade ally/vendor relationship management.
Secretary, Telecommunications: Secretarial support for SRP Telecom department.
Analyst, Telecommunications: Financial analysis, process design, secondary
research, market analysis; competitive assessment.
Principal Engineer, Communications Engineering: Backbone network design,
project management, customer lateral/CPE network design.
Senior Engineering, Communications Engineering: Network design, CPE equipment
specification, network hardware integration.
Technician/Designer, Communications Engineering: Design, mapping, fiber
tracking.
Designer, Transmission Line Design: Construction design of physical plant,
project coordination of cable construction jobs.
Right of Way Agent, Land Management: Acquisition of rights-of-way, easements as
required to support network completion, research of existing rights.
Business Account Representative, Business Account Management: Coordination of
training, account management systems and product information dissemination.
J-2