COST SHARING AND IRU AGREEMENT
between
LEVEL 3 COMMUNICATIONS, LLC
and
INTERNEXT, LLC
Dated July 18, 1998
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COST SHARING AND IRU AGREEMENT
THIS COST SHARING AND IRU AGREEMENT ("Agreement") is made and entered into
as of the 18th day of July, 1998, by and between LEVEL 3 COMMUNICATIONS, LLC, a
Delaware limited liability company ("Grantor") and INTERNEXT, LLC, a Delaware
limited liability a company ("Grantee").
RECITALS
A. Grantor intends to construct a nationwide multiconduit (currently
estimated at eight 1 1/4" conduits, taking into account this Agreement) fiber
optic communications system, including certain Opamp Facilities and Regeneration
Facilities (as such terms are defined herein) as generally depicted on Exhibit
"A-1" attached hereto and which will connect the cities described on Exhibit
"A-2" attached hereto (the "Grantor System").
B. Grantor further intends to install within one of the conduits of the
Grantor System a high fiber count (currently estimated at 96 fibers, taking into
account this Agreement) fiber optic cable (as more fully described in Exhibit
"H", the "Cable").
C. Grantee desires to own or to possess an indefeasible right to use and
control a network consisting of 24 conduit-protected fibers and one spare
conduit connecting the cities described on Exhibit "A-2" attached hereto. D.
Grantor and Grantee can complete their desired networks less expensively if such
networks are constructed as part of a single project than if each network were
constructed independently. E. Grantor and Grantee therefore desire to share the
costs of constructing the Grantor System, and, pursuant to such sharing of
costs, Grantor desires to grant to Grantee ownership of and/or an indefeasible
right to use certain facilities in the Grantor System, all upon and subject to
the terms and conditions set forth below.
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ARTICLE 1.
DEFINITIONS
1.01 "Acceptance Date" shall mean the date when Grantee delivers (or is
deemed to have delivered) notice of acceptance of a Completion Notice with
respect to a Segment in accordance with Article 9.
1.02 "Acceptance Testing" shall have the meaning set forth in Section 9.01.
1.03 "Access Points" shall have the meaning set forth in Section 10.01.
1.04 "Actual Operating Expenses" shall mean, without duplication, the
actual out-of-pocket costs and expenses reasonably and necessarily incurred by
Grantor in connection with the operation of the Grantor System, as more fully
described in Exhibit "L" hereto.
1.05 "Additional Grantee Fibers" shall have the meaning set forth in
Section 3.01.
1.06 "Affiliate" shall mean, with respect to any specified Person, any
other Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person. "Control" (including the terms "controlled by" and "under common control
with") means the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of a Person, whether through
the ownership of voting securities, by contract or credit arrangement, as
trustee or executor, or otherwise, provided that, with respect to Grantor and
for the purpose of Sections 3.04(i), 6.04 and 7.02 only, the term "Affiliates"
shall not include the following Persons if they would otherwise be Affiliates:
(A) Cable Michigan, Inc., RCN Corporation and Commonwealth Telephone
Enterprises, Inc. (and any intermediate holding companies or other entities
formed solely for the purpose of owning stock in such Persons), unless Grantor
or its other Affiliates shall acquire more than fifty percent of the voting
control of such Persons, and (B) California Private Transportation Company,
L.P., to the extent California Private Transportation Company, L.P. has been
required to construct or install fibers or conduits pursuant to the requirement
of any Governmental Authority.
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1.07 "Associated Property" shall mean the tangible and intangible property
needed for the use of the Grantee Fibers and Grantee Conduit as permitted by
this Agreement, including the Regeneration Facilities and Opamp Facilities, but
excluding in any and all events any electronic and/or optronic equipment.
1.08 "Authorization" shall mean any consent, registration, filing,
agreement, notarization, certificate, license, approval, permit, authority or
exemption from, by or with any Governmental Authority or other Person.
1.09 "Canadian Person" shall mean any Person which is permitted under
applicable Canadian telecommunications laws to own or operate a
telecommunications system located in Canada.
1.10 "CBD" shall mean the commonly referred to central business district of
a city.
1.11 "Commencement Date" shall mean the date on which Grantor commences
construction of the Grantor System, provided that if Grantor has not commenced
such construction on or prior to December 31, 1998, then the "Commencement Date"
shall mean December 31, 1998.
1.12 "Commencement Contribution" shall have the meaning set forth in
Section 4.01.
1.13 "Completion Date" shall mean (i) in the case of all Segments within
Phase One and Phase Two, the (***) anniversary of the Commencement Date and (ii)
in the case of all Segments within Phase Three, the earlier to occur of (a)
(***) months from the date that Grantor commences construction of Phase Three
and (b) the (***) anniversary of the Commencement Date, subject in each case to
any Force Majeure Event or Grantee Delay Event.
1.14 "Completion Contribution" shall have the meaning set forth in Section
4.01.
1.15 "Completion Notice" shall have the meaning set forth in Section 9.02.
1.16 "Costs" shall mean actual, direct costs paid or payable in accordance
with the established accounting procedures generally used by Grantor and which
it utilizes in billing third parties for reimbursable projects which costs shall
be limited to the following: (i) internal labor costs, including wages and
salaries, and benefits and
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overhead (provided that the costs of such benefits and overhead do not exceed
thirty percent (30%) of such wages and salary), and (ii) other direct costs and
out-of-pocket expenses on a pass-through basis (e.g., equipment, materials,
supplies, contract services, etc.).
1.17 "Dark Fiber" shall have the meaning set forth in Section 15.03.
1.18 "Designated Party" shall mean (i) Eagle River, Inc., Teledesic Corp.,
Nextel Communications, Inc., (***).
1.19 "Dispute Notice" shall have the meaning set forth in Article 24.
1.20 "Effective Date" shall have the meaning set forth in Section 5.01.
1.21 "Execution Contribution" shall have the meaning set forth in Section
4.01.
1.22 "Final Contribution" shall have the meaning set forth in Section 4.01.
1.23 "Force Majeure Event" shall have the meaning set forth in Article 19.
1.24 "Governmental Authority" shall mean any federal, state, regional,
county, city, municipal, local, territorial or tribal government, whether
foreign or domestic, or any department, agency, bureau or other administrative
or regulatory body obtaining authority from any of the foregoing, including,
without limitation, courts, public utilities and sewer authorities.
1.25 "Grantee Conduit" shall have the meaning set forth in Section 3.01.
1.26 "Grantee Delay Event" shall mean the failure of Grantee to timely
observe and perform its obligations and agreements hereunder, which failure
delays the construction and installation of the Grantor System with respect to
one or more segments.
1.27 "Grantee Fibers" shall have the meaning set forth in Section 3.01.
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1.28 "Grantor System" shall have the meaning set forth in the Recitals.
1.29 "Grantor Termination Point" shall have the meaning set forth in
Section 2.02.
1.30 "Hotel" shall mean a building in which points of presence of
interexchange carriers are found.
1.31 "Impositions" shall mean all taxes, fees, levies, imposed duties
charges or withholdings of any nature (including without limitation gross
receipts, taxes and franchise, license and permit fees), together with any
penalties, fines or interest thereon arising out of the transactions
contemplated by this Agreement and/or imposed upon the Grantor System, or any
part thereof, by any Governmental Authority.
1.32 "Incremental Costs" shall mean, with respect to Sections 7.02 and
7.06, the Costs of construction and installation of the Additional Grantee
Fibers but shall not include the cost of constructing and installing the conduit
in which such fibers are installed, the cost of constructing and installing the
Initial Grantee Fibers or any other costs associated with the Grantor System.
1.33 "Initial Grantee Fibers" shall have the meaning set forth in Section
3.01.
1.34 "IRU" shall have the meaning set forth in Section 3.01.
1.35 "IRU Contribution" shall have the meaning set forth in Section 4.01.
1.36 "Lien" shall mean any mortgage, pledge, hypothecation, claim,
assessment, security interest, lease, sublease, license, lien, conditional sale
contract, title retention contract, adverse or infringing claim or interest,
easement, encroachment, voting trust agreement, option, charge, right of first
refusal or other encumbrance or restriction of any kind, or rights of others or
other contract to give any of the foregoing, excluding any of the foregoing (i)
in favor of the grantor of any Required Right, or granted by the grantor of a
Required Right independent of the transactions contemplated by such Required
Right, (ii) arising under or resulting from the terms and provisions of, and the
execution by, Grantor of the instrument evidencing such Required Right, and
(iii) which are customary for agreements of that type.
1.37 "Major Cities" shall mean the cities designated as Major Cities listed
on Exhibit A-2.
1.38 "Minimum Period" shall mean, with respect to each Segment, a period of
(***) years from the Acceptance Date for such Segment.
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1.39 "Node Site" shall mean the facilities (other than long-distance
backbone Regeneration Facilities and Opamp Facilities) which accommodate or
house switch equipment, fiber optic transmission and associated ancillary
equipment to serve as a switch terminal, transport concentrator, hub terminal,
junction or end user pop location.
1.40 "Operating Expense Charge" shall have the meaning set forth in Section
13.02.
1.41 "Operating Expense Estimate" shall have the meaning set forth in
Section 13.05.
1.42 "Opamp Facilities" shall mean facilities to optically amplify lit
fibers as more particularly described on Exhibit "I".
1.43 "Option Right" shall have the meaning set forth in Section 6.01.
1.44 "Person" shall mean any natural person, corporation, partnership,
limited liability company, business trust, joint venture, association, company
or government, or any agency or political subdivision thereof.
1.45 "Phase" shall mean Phase One, Phase Two or Phase Three.
1.46 "Phase One" shall have the meaning set forth in Section 2.04.
1.47 "Phase Two" shall have the meaning set forth in Section 2.04.
1.48 "Phase Three" shall have the meaning set forth in Section 2.04.
1.49 "Pinch Event" shall have the meaning set forth in Section 7.02.
1.50 "Proprietary Information" shall have the meaning set forth in Section
23.01.
1.51 "Recurring Charges" shall mean the ROW Charge and the Operating
Expense Charge.
1.52 "Regeneration Facilities" shall mean facilities to regenerate the
signal of lit fibers as more particularly described on Exhibit "I".
1.53 "Required Rights" shall have the meaning set forth in Section 6.01.
1.54 "Required Right Payment" shall mean any payment which Grantor is
required to make to the grantor or provider of a Required Right pursuant to the
terms of the instrument governing such Required Right.
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1.55 "Route Miles" shall mean, for each Segment, the actual number of route
miles for such Segment as constructed, provided that, if the Grantor System
follows more than one route for all or any portion of a Segment, only the actual
route miles for the route containing the Initial Grantee Fibers shall be
included.
1.56 "ROW Charge" shall have the meaning set forth in Section 13.02.
1.57 "RRG" shall have the meaning set forth in Section 2.02.
1.58 "Segments" shall have the meaning set forth in Section 2.01.
1.59 "Segment End Points" shall have the meaning set forth in Section 2.01,
as the same may be extended and terminated pursuant to Section 2.02.
1.60 "System Route" shall have the meaning set forth in Section 2.01.
1.61 "Term" shall have the meaning set forth in Section 5.01.
ARTICLE 2.
SYSTEM ROUTE
2.01 Grantor shall cause the Grantor System to connect the city pairs
identified on Exhibit "B" attached hereto (each city identified on Exhibit "B"
is herein called a "Segment End Point", the route between the applicable Segment
End Points is herein called a "Segment", and all of the Segments together are
herein called the "System Route").
2.02 In the case of the Major Cities, Grantor shall cause the Grantor
System, or at a minimum the portion thereof in which Grantee shall receive the
IRU, to extend to (***) the serving manholes or access points located adjacent
to the building containing Grantee's Node Site as specified by Grantee in each
such Major City, in accordance with Exhibit "M" attached hereto, provided that
Grantee shall obtain all necessary permits or waivers for such extension from
the owner of such building and/or the owner of the real property on which such
building is located, and provided further that all end-point locations with
respect to the Major Cities will have diverse routing from the main backbone of
the Grantor System. In the event that, for any Major City, Exhibit "M" does not
contain the address of the building in which Grantee's Node Site will be
located,
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Grantee shall provide Grantor with such address, which will be within (***)
miles of the center point of the CBD, no later than (***) months prior to the
targeted completion date for such Major City set forth in Exhibits "B", "D" and
"E", except that Grantee shall have a 30-day grace period in circumstances where
Grantee has made substantial efforts to locate real estate to house its Node
Site. For all Segment End Points which are not Major Cities, the Grantor System,
or at a minimum the portion thereof in which Grantee shall have received the
IRU, shall connect to and terminate at a splice point contained in any of the
following, in Grantor's sole discretion: (i) a Node Site of Grantee or one of
its Affiliates in the CBD of such city, (ii) the primary or secondary Hotel for
such city, or (iii) a Regeneration Facility, Opamp Facility or a Node Site of
Grantor or one of its Affiliates in such city (each such Regeneration Facility,
Opamp Facility or Node Site of Grantor or one of its Affiliates, a "Grantor
Termination Point"), provided that (A) such Grantor Termination Point is located
within (***) miles of the center point of such city's CBD and (B) Grantor shall
return the Grantor System or such portion thereof in which Grantee shall receive
the IRU to a publicly dedicated street adjacent to such Grantor Termination
Point, provided that all end-point locations for cities other than Major Cities
will have diverse routing from the main backbone of the Grantor System to the
extent the Grantor System provides such diverse routing to Grantor or its
Affiliates. (***).
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The Grantor Termination Point in any Segment End Point shall be the same for all
Segments ending at such Segment End Point. 2.03 The specific location of the
System Route between Segment End Points is subject to Grantor obtaining the
Required Rights, provided that in any event Grantor shall cause the System Route
to connect the Segment End Points for each Segment. The Grantor System will be
constructed and installed in three phases (the "Phases"). The first Phase of the
Grantor System ("Phase One"), estimated at approximately 11,411 route miles,
shall include the Segments described on Exhibit "C"; the second Phase of the
Grantor System ("Phase Two"), estimated at approximately 3,714 route miles,
shall include the Segments described on Exhibit "D"; and the third Phase of the
Grantor System ("Phase Three"), estimated at approximately 910 route miles,
shall include the Segments described on Exhibit "E" provided that (i)
construction of each of (A) the Seattle to Vancouver Segment in Phase Three and
(B) the aggregate of the Albany to Montreal, Montreal to Toronto and Toronto to
Buffalo Segments in Phase Three, shall be optional in the sole discretion of
Grantor, and (ii) in the event Grantor elects to not construct the Seattle to
Vancouver Segment, the Final Contribution shall be reduced by the sum of (***)
and Grantee will not be required to pay the Completion Contribution set forth in
Exhibit "F" for the Seattle to Vancouver Segment, and (iii) in the event Grantor
elects not to construct the Albany to Montreal, Montreal to Toronto and Toronto
to Buffalo Segments in Phase Three, (A) the Final Contribution shall be reduced
by the sum of (***), and (B) an Albany to Buffalo Segment shall be added to
Phase One with a Completion Contribution equal to the aggregate amount set forth
in Exhibit "F" for the Albany to Montreal, Montreal to Toronto and Toronto to
Buffalo Segments less the sum of (***). Grantor shall provide Grantee with
written notice of the commencement of construction of each Phase promptly upon
commencement thereof and of any determination not to construct Phase Three. 2.05
Notwithstanding anything to the contrary contained herein, Grantor may elect, at
its option, to acquire any portions of the Grantor System from third parties
(whether under a lease, sublease, indefeasible right of use, or otherwise) in
lieu of constructing and installing the Grantor System respecting such portions;
(***).
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ARTICLE 3.
GRANT OF IRU
3.01 Subject to the terms of Article 7 below, as of the Effective Date for
each Segment delivered by Grantor to Grantee hereunder, Grantor hereby grants to
Grantee, and Grantee hereby acquires from Grantor for the purposes described
herein (i) an exclusive indefeasible right of use in (or, if and to the extent
provided in Section 3.02 hereof, ownership of), twenty-four (24) fibers (the
"Initial Grantee Fibers") plus (a) to the extent Grantee exercises its option
pursuant to Section 7.06, the fibers acquired by Grantee pursuant to such
option, (b) the fibers in excess of 24 delivered to Grantee pursuant to Section
7.02 and (c) fibers installed in the Grantee Conduit (the fibers described in
clauses (a), (b) and (c) are herein referred to as the "Additional Grantee
Fibers"), in each case to be specifically identified in the Cable or cables
between the Segment End Points for such Segment (the "Initial Grantee Fibers"
and the "Additional Grantee Fibers", together with all substitutions and
replacements thereof, are herein referred to as the "Grantee Fibers"), (ii) an
exclusive indefeasible right of use in (or, if and to the extent provided in
Section 3.02 hereof, ownership of) one specifically identified unoccupied
conduit in the Grantor System between the Segment End Points for
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each Segment (the "Grantee Conduit"), and (iii) an associated and non-exclusive
indefeasible right of use in the Associated Property with respect to such
Segment, all upon and subject to the terms and conditions set forth herein
(collectively the "IRU").
3.02 Notwithstanding anything contained herein to the contrary: (a) if and
to the extent not prohibited by the Required Right(s)for a particular Segment,
and (b) if the Required Right(s) with respect to such Segment do not and will
not impose upon Grantor any additional fees, costs or charges as a result
thereof (unless Grantee shall pay the same or make arangements satisfactory to
Grantor to assure such payment), Grantor shall, upon the request of Grantee and
on a Segment-by-Segment basis on the Acceptance Date with respect to such
Segment and without the need for any further action or execution of documents by
Grantor to Grantee: (i) transfer title to the Grantee Fibers and the Grantee
Conduit to Grantee free and clear of all Liens attributable to Grantor;
(ii)grant to Grantee a lease, subeasement or similar agreement providing
rights (at no additional cost to or monetary obligations of Grantee, except to
the extent provided in clause (b) above) to Grantee substantially identical to
the rights held by Grantor under the relevant Required Right(s) (a
"Sublease"); and (iii) continue the grant of the IRU in the Associated
Property. Nothing in this Section 3.02 or in any such Sublease shall
relieve Grantor or Grantee of its rights, duties and obligations set forth
in this Agreement or diminish, enlarge or otherwise affect such rights,
duties and obligations (except that, to the extent applicable under this
Section 3.02, Grantee's property interest will consist of title in the Grantee
Fibers and the Grantee Conduit and a grant of a Sublease) and if any Sublease
shall terminate or Grantee shall be otherwise subsequently prohibited from
owning title to the Grantee Fibers and the Grantee Conduit, Grantor shall
maintain the Required Rights in accordance with and pursuant to Article 6, title
to such Grantee fibers and Grantee Conduit shall revert and be reconveyed to
Grantor and Grantee shall have and retain the IRU in such Grantee Fibers and
Grantee Conduit under and subject to the terms and conditions of this Agreement.
3.03 Except to the extent not permitted by any Required Right, Grantor
hereby grants to Grantee a security interest and lien in all of Grantor's right,
title and interest in
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the Grantee Fibers and the Grantee Conduit, whether now or hereafter acquired,
in order to secure performance of Grantor's obligations to Grantee in this
Agreement.
3.04 Grantor shall use commercially reasonable best efforts to cause
construction and Acceptance Testing for all Segments to be successfully
completed no later than (***) (or in the case of Phase Three, the earlier of
(***) and (***) months after the commencement of construction thereof) and, if
not so completed by such date, then as soon as practicable thereafter. Grantor
acknowledges that time is of the essence in this Agreement and that Grantee is
relying on delivery of all Segments by such date. In light of the fact that it
would be impossible to calculate the reduction in the value of the IRU that
Grantee bargained for in the event that construction or Acceptance Testing for
any Segment is not completed by such date, or if Grantor fails to deliver any
Segment altogether, Grantor and Grantee hereby agree to the following payments
and/or reductions (which constitute adjustments to the IRU Contribution), which
except as otherwise specifically provided for in paragraph (i) below, shall be
the sole remedy of Grantee in the event of the late delivery or non-delivery of
any Segment:
(a) At any time that Grantor determines, in its best judgment, that the
Acceptance Date for any Segment will be delayed past (***), it shall deliver to
Grantee a notice in writing (a "Delay Notice"), specifying the Segment or
Segments affected, stating that the Acceptance Date(s) for such Segments will be
delayed past (***), and setting forth a new firm delivery date(s) for such
Segments. Grantor may not deliver more than two Delay Notices in respect of any
segment, and may only deliver a second Delay Notice in respect of any Segment if
the second Delay Notice sets forth an earlier firm delivery date for such
Segment Date. Such firm delivery date, as it may be revised in a second Delay
Notice, is hereinafter referred to as the "Revised Delivery Date" for such
Segment.
(b) If Grantor delivers to Grantee a Delay Notice for any Segment, then the
following provisions shall apply: (i) Grantee may terminate this Agreement as to
such Segment at any time on or prior to (x) the date which is the later of (A)
ninety (90) days following the date of delivery of such Delay Notice and (B) six
(6) months prior to the Revised Delivery Date
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for such Segment or (y) the Acceptance Date with respect to such Segment, if the
Acceptance Date for such Segment does not occur on or prior to its Revised
Delivery Date. Upon any such termination pursuant to this paragraph (b), Grantor
shall pay Grantee, in respect of the non-delivery of such Segment, an amount
equal to the Total Contribution for such Segment multiplied, in the case of
termination pursuant to clause (x) above, by the First Adjustment Factor, and in
the case of termination pursuant to clause (y) above, by the Second Adjustment
Factor.
(ii) If Grantee does not terminate this Agreement as to such
Segment, the Completion Contribution for such Segment shall be reduced by an
amount equal to the sum of (x) the Total Contribution for such Segment
multiplied by the sum of (A) either (1) if the Revised Delivery Date for such
Segment is on or prior to (***) multiplied by the number of whole or partial
months occurring during the period from and including (***) and to and including
the month in which the Revised Delivery Date occurs, or (2) if the Revised
Delivery Date for such Segment is on or after (***), the sum of (***) multiplied
by the number of whole or partial months occurring during the period from and
including (***) and to and including the month in which the Revised Delivery
Date occurs plus (***), plus (B) (***) multiplied by the number of whole or
partial months during the period from and including the Revised Delivery Date
and to and including the month in which the Acceptance Date occurs, plus (C) the
Additional Percentage, if any, based on the date of delivery of the Delay Notice
as to such Segment, plus (y) the Second Notice Amount, if any, arising out of
the delivery of a second Delay Notice as to such Segment. Grantee shall notify
Grantor of the Second Notice Amount at the time of payment of such Completion
Contribution.
(c) If Grantor fails to deliver a Delay Notice as to any Segment, then the
following provisions shall apply: (i) If the Acceptance Date for such Segment
occurs after (***), and on or prior to (***), the Completion Contribution for
such Segment shall be reduced by an amount equal to the Total Contribution for
such Segment multiplied by (***) multiplied by the number of whole or partial
months occurring during
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the period from and including (***) and to and including the month in which such
Acceptance Date occurs.
(ii) If the Acceptance Date for such Segment has not occurred
on or prior to (***), Grantee may terminate this Agreement with respect to such
Segment at any time on or prior to such Acceptance Date, in which case Grantor
shall pay Grantee, in respect of the non-delivery of such Segment, an amount
equal to the Total Contribution for such Segment multiplied by (x) if Grantee
has sent Grantor a Reminder with respect to such Segment at least 10 days prior
to the date of such termination, (***) or (y) if Grantee has not sent Grantor a
Reminder with respect to such Segment at least 10 days prior to the date of such
termination, the amount that would have been payable in respect of such
termination under paragraph (b)(i)(x) above as if Grantor had sent a Delay
Notice on (***) specifying a Revised Delivery Date the same as the date of
termination.
(iii) If the Acceptance Date for such Segment has not occurred
on or prior to (***), and if Grantee does not terminate this Agreement as to
such Segment, the Completion Contribution for such Segment shall be reduced by
an amount equal to the Total Contribution for such Segment multiplied by (x) if
Grantee has sent Grantor a Reminder with respect to such Segment at least 10
days prior to the Acceptance Date, (***) or (y) if Grantee has not sent Grantor
a Reminder with respect to such Segment at least 10 days prior to the Acceptance
Date, the amount of such reduction that would have been applicable in respect of
such Completion Contribution under paragraph (b) above as if Grantor had sent a
Delay Notice on (***) specifying a Revised Delivery Date the same as the
Acceptance Date.
(d) In the event the Acceptance Date for a Segment has not occurred by
(***) and Grantee has not terminated this Agreement as to such Segment prior to
such date, this Agreement shall be deemed terminated as to such Segment on
(***), in which case Grantor shall pay Grantee, in respect of the non-delivery
of such Segment, an amount equal to the Total Contribution for such Segment
multiplied by (***).
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(e) Grantor shall pay Grantee any amounts required by the foregoing
paragraphs to be paid within thirty (30) days after termination of this
Agreement as to any Segment. Any sums not paid by Grantor when due shall bear
interest at the rate of eighteen percent (18%) per annum. Grantee shall have the
right to set off against any other amounts payable to Grantor under this
Agreement the amount of any payment due Grantee pursuant to this Section 3.04.
All payments by Grantor pursuant to this Section 3.04, and all adjustments to
the Completion Contributions payable by Grantee on the Acceptance Date of
Segments, shall be treated by both Grantor and Grantee as adjustments to the IRU
Contribution payable hereunder. Grantor and Grantee shall file (and shall cause
their respective parents to file) their respective income tax returns and other
returns and reports for their respective businesses on such basis and, except as
otherwise required by law, not take any positions inconsistent therewith.
(f) In the event that Grantor breaches its obligations in the first
sentence of this Section 3.04 as to any Segment, Grantee may terminate this
Agreement as to such Segment. Upon any such termination pursuant to this
paragraph (f), Grantor shall pay Grantee, in respect of the non-delivery of such
Segment, an amount equal to the Total Contribution for such Segment multiplied
by (***).
(g) As used in this Section 3.04, the following terms shall have the
meanings set forth below:
(i) "Additional Percentage" shall be (***) and (***),
respectively, with respect to any Segment if the Delay Notice for such Segment
is delivered on or before (***) and at any time on or after (***), respectively.
(ii) "First Adjustment Factor" shall equal, as to any Segment,
(w) (***) multiplied by the number of whole or partial months in the period from
and including (***) and to and including the month in which the Revised Delivery
Date occurs, if the Revised Delivery Date is on or before (***), (x) (***), if
the Revised Delivery Date is on or after (***) and on or before (***), (y)
(***), if the Revised Delivery Date is on or after (***) and on or before (***),
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or (z) (***), if the Revised Delivery Date is on or after (***), in each case
plus the Additional Percentage, if any, based on the date of delivery of the
Delay Notice.
(iii) "Reminder" shall mean a written notice sent on or after
(***) by Grantee to Grantor reminding Grantor of Grantee's termination rights
under paragraph (d) of this Section 3.04 as to any Segments not for which the
Acceptance Date has not occurred and Grantor has not prior thereto delivered a
Delay Notice.
(iv) " Second Adjustment Factor" shall equal, as to any
Segment, (x) (***) plus (y) (***) multiplied by the number of whole or partial
months in the period from and including (***) and to and including the month in
which Grantee notifies Grantor in writing of the termination of this Agreement
as to such Segment.
(v) "Second Notice Amount" shall mean, as to any Segment
regarding which Grantor has delivered a second Delay Notice, an amount, not to
exceed the product of (***) multiplied by the number of whole or partial months
occurring during the period from and including the Acceptance Date for such
Segment and to and including the month in which the Revised Delivery Date set
forth in the original Delay Notice occurs, determined by Grantee, absent bad
faith, to be necessary to compensate it for costs incurred, business
opportunities foregone or damages otherwise suffered based upon the initial
notification of the Revised Delivery Date which are not fully compensated for by
the earlier delivery of such Segment.
(vi) "Total Contribution" for any Segment shall be deemed to
equal, for purposes of convenience in this Section 3.04 only, and for no other
purposes whatsoever, an amount equal to 70/60.375 multiplied by the Completion
Contribution due upon the Acceptance Date for such Segment as set forth in
Exhibit "F".
(h) Under circumstances where more than one of the foregoing paragraphs may
apply to the termination of this Agreement as to any Segment, Grantee shall not
be entitled to payment under more than one of the such paragraphs. Each of the
foregoing paragraphs shall be limited by the provision that in no event shall
the payments in respect of the non-delivery of any Segment, or the reductions in
the amount of the Completion Contribution with respect to any Segment, required
under this Section 3.04 exceed (***) of the Total Contribution for such
Segments.
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(i) (i) (***).
(ii) If Grantee accepts such offer, the amount of the Completion
Contribution and/or Recurring Charges payable with respect to such Segment upon
acceptance of such fibers and/or conduit shall be reduced by an amount (not to
exceed (***) of 70/60.375 of the Completion Contribution), as Grantor and
Grantee shall agree, in good faith, to reflect the reduced value of the fibers
and/or conduit accepted as compared to what Grantee had bargained for hereunder,
taking into account, if this Agreement has been terminated as to such Segment
prior to the acceptance of such offer by Grantee, any amounts already paid by
Grantor in respect of the non-delivery of such Segment. The amounts of the
Execution Contribution, Commencement Contribution and Final Contribution shall
also all be reduced by an amount equal to, in each case, the original amount
thereof multiplied by the products of 17.5/700, 8.75/700 and 70/700,
respectively, multiplied by the percentage reduction in the Completion
Contribution for such Segment. If Grantor and Grantee shall be unable to agree
upon the appropriate reductions in the Completion Contribution and Recurring
Charges payable hereunder within the thirty (30) day period following acceptance
by Grantee of such offer, the amount of the reductions shall be determined
through an arbitration procedure in accordance with Section 24.01(iv).
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(iii) If Grantee rejects such offer, the preceding provisions
of this Section 3.04 shall continue to apply as to such Segment, provided that
this paragraph (i) shall continue to apply to other fibers and or conduits
constructed or acquired by Grantor or its Affiliates prior to (***).
(iv) If this Agreement has been terminated as to any Segment
prior to the time that the payments and/or reductions provided for in this
Section 3.04 no longer constitute the sole remedy of Grantee in respect of the
non-delivery of such Segment, then even if Grantor has prior thereto made a
payment to Grantee in respect of the non-delivery of such Segment, Grantee may
nevertheless bring an action for damages for the non-delivery of such Segment,
in which case the amount of any damages awarded shall be reduced by the amount
previously paid by Grantor to Grantee.
(j) The determination as to whether the delivery of any Segment is late
shall be made after taking into consideration the effect of any Grantee Delay
Events or Force Majeure Events applicable to such Segment.
(k) In the event that this Agreement has been terminated with respect to
one or more Segments, the amount of the Final Contribution shall be reduced by
an amount equal to (x) the original Final Contribution set forth on Exhibit "F"
multiplied by (y) a fraction, the number of which is the total of the amounts of
the Completion Contributions set forth on Exhibit "F" for all such terminated
Segments divided by the total original Completion Contribution set forth on
Exhibit "F" and Grantor shall reimburse Grantee in an amount equal to (A) the
sum of the original Execution Contribution and Commencement Contribution set
forth on Exhibit "F" multiplied by (B) the fraction set forth in clause (y)
above.
ARTICLE 4.
CONSIDERATION
4.01 Grantee agrees to make contributions to Grantor for the construction
of the Grantor System as set forth in Exhibit "F", as such amount may be
adjusted as provided herein (the "IRU Contribution"). The IRU Contribution shall
consist of a contribution to
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be made upon execution of this Agreement (the "Execution Contribution"), a
contribution to be made upon Grantor's commencement of construction of the
Grantor System (the "Commencement Contribution"), a contribution to be made with
respect to each Segment on the Acceptance Date for such Segment (the "Completion
Contribution") and a contribution to be made upon final completion of the
Grantor System, excluding any Segments terminated by Grantee pursuant to Section
3.04 or otherwise undelivered by Grantor (the "Final Contribution"), all as more
particularly described in Exhibit "F".
4.02 In addition to the IRU Contribution, Grantee shall pay directly or
reimburse Grantor for all other sums, costs, fees and expenses which are
expressly provided to be paid by Grantee under this Agreement, including without
limitation, the Recurring Charges. Except as expressly set forth in this
Agreement, Grantee shall have no obligation to pay any amounts in respect of the
IRU granted hereunder.
4.03 Grantor will deliver to Grantee invoices for payments of the IRU
Contribution and all other sums, costs, fees and expenses owed by Grantee to
Grantor hereunder and Grantee shall pay such invoiced amounts, less any
reasonably disputed amounts, within thirty (30) days after receipt of such
invoice. Grantee shall provide Grantor with written notice by the payment due
date describing in reasonable detail the basis for any disputed amounts;
provided that any disputed amounts resolved in favor of Grantor shall thereafter
be paid promptly by Grantee. Any sums not paid by Grantee when due shall bear
interest at the rate of eighteen (18%) per annum, other than reasonably disputed
amounts, which shall bear interest at the rate of twelve percent (12%) per
annum.
4.04 Grantor agrees that it will not, for a period of (***) years after the
Acceptance Date of the last Segment delivered hereunder, sell, transfer or grant
rights of use or similar rights to use any facilities, in whole or in part, in
the Grantor System (other than to an Affiliate of Level 3 Communications, Inc.
or an RRG) upon economic or other material terms more beneficial than those
provided to Grantee hereunder. Prior to entering into any agreement or other
arrangement with any other Person (other than such a subsidiary or such an RRG)
regarding the use or transfer of all or part of the Grantor System, (i) Grantor
will provide Grantee with sufficient detail of the terms thereof (the
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confidentiality of which information shall be maintained by Grantee as provided
in Article 23) in order to enable Grantee to compare such terms to those
provided to Grantee hereunder and (ii) at Grantee's option, this Agreement shall
be modified to give Grantee the benefits of the more beneficial economic or
other material terms contained in such other agreement or arrangement. In the
event that Grantor and Grantee are unable to agree whether such terms are more
beneficial or have been appropriately incorporated in this Agreement, if Grantee
so requests, the parties shall submit such disagreement to arbitration in
accordance with Section 24.01(iv). The provisions of this Section 4.04 shall
survive any modification of this Agreement pursuant to this Section 4.04. A
merger or consolidation of Grantor or a sale by Grantor of all or substantially
all of its assets shall not be considered a sale, transfer or grant of rights to
use the Grantor System covered by this Section 4.04.
ARTICLE 5.
TERM
5.01 The IRU with respect to each Segment shall become effective (and the
transfer of title to the Grantee Fibers and the Grantee Conduit for each
Segment, if applicable, shall occur) on the first day when both (i) the
Acceptance Date with respect to the Segment has occurred and (ii) Grantor has
received payment of all of the IRU Contribution then due to Grantor for such
Segment (as to such Segment, its "Effective Date"). Subject to the provisions of
Article 6 and Article 7, the IRU with respect to each Segment shall terminate at
the end of the economically useful life of both the Grantee Fibers and Grantee
Conduit within such Segment, as determined pursuant to Section 5.03 (the
"Term").
5.02 Notwithstanding anything in this Agreement to the contrary, the Term
with respect to each Segment shall not be less than the Minimum Period. Grantor
shall take all such actions as may be necessary to cause each Required Right to
remain in effect so that the Term for each Segment shall be not less than the
Minimum Period (including, without limitation, exercising any renewal rights
under any Required Right, or otherwise
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acquiring at no cost to Grantee such extensions or additions of any Required
Right and/or obtaining replacements or substitutions of any Required Right (and
relocating such Segment or portions thereof at Grantor's sole cost under Section
6.05) as may be necessary, in order to cause the term of each such Required
Right, or such replacement or substitution thereof, to be continued until a date
that is not earlier than the last day of the Minimum Period for such Segment).
5.03 Grantee shall determine, in its sole discretion, when the Grantee
Fibers and/or Grantee Conduit with respect to any Segment shall have reached the
end of their economically useful life and shall give written notice of such
determination to Grantor. Upon any such determination by Grantee after the
Minimum Period, the Term shall expire with respect to such Grantee Fibers and/or
Grantee Conduit in such Segment and all title to and/or rights to the use
thereof shall revert to Grantor without reimbursement of any of the IRU
Contribution or other sums, costs, fees or expenses previously made with respect
thereto, and from and after such time Grantee shall have no further rights,
obligations or liabilities hereunder or any other liability with respect thereto
unless such rights, obligations or liabilities are specifically provided herein
to survive the Term.
5.04 Absent a determination by Grantee under Section 5.03, at the end of
the Term for each Segment, at Grantee's option, (i) Grantor shall transfer all
of Grantor's right, title and interest to the Grantee Fibers and the Grantee
Conduit within such Segment not then owned by Grantee to Grantee for $1.00
(except if Grantee has given written notice as to such Segment described in
Section 5.03), in which case Grantee shall assume, and Grantor shall be relieved
of, all obligations in connection therewith, or (ii) Grantee shall transfer all
of Grantee's right, title and interest to the Grantee Fibers and the Grantee
Conduit within such Segment not then owned by Grantor to Grantor for $1.00.
5.05 Grantor and Grantee acknowledge and agree that Grantee shall be
treated for accounting and federal and all applicable state tax purposes as the
exclusive beneficial owner of all Grantee Fibers and Grantee Conduit (each of
which constitutes an interest in real property) with respect to which it has
received an IRU hereunder, and as the holder of an associated non-exclusive
indefeasible right of use in the Associated Property (which constitutes a
leasehold interest in real property). Grantor and Grantee further agree that
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the transactions contemplated in this Agreement constitute, for accounting and
federal and applicable state tax purposes, a joint undertaking to share and
minimize the expenses of constructing of each party's respective
telecommunications network, and not as a separate entity or as a sale or lease
(except with respect to lease of the Associated Property). Grantor and Grantee
shall file (and shall cause their respective Parents to file) their respective
income tax returns and other returns and reports for their respective
Impositions on such basis and, except as otherwise required by law, not take any
positions inconsistent therewith.
5.06 This Agreement shall become effective on the date hereof, subject to
Section 20.04 hereof, and shall terminate on the date when, after completion and
delivery of the Segments all the Terms of all such Segments shall have expired
or terminated, except that Articles 16, 24 and those provisions of this
Agreement which are expressly provided herein to survive such termination shall
remain binding on the parties hereto.
5.07 If (i) Grantee or an entity which directly or indirectly controls
Grantee (each a "Grantee Parent") makes a general assignment for the benefit of
its creditors, files a voluntary petition in bankruptcy or any petition or
answer seeking, consenting to, or acquiescing in reorganization, arrangement,
adjustment, composition, liquidation, dissolution, or similar relief, (ii) an
involuntary petition in bankruptcy or other insolvency protection against
Grantee or any Grantee Parent is filed and not dismissed within one hundred
twenty (120) days, (iii) Grantee or any Grantee Parent defaults with respect to
any borrowed money indebtedness of Grantee or such Grantee Parent having a
principal amount in excess of (***), which indebtedness is already due and
payable in full or which default has resulted in, or would permit, the
acceleration of the maturity of such indebtedness, (iv) except as provided in
(v) below, Grantee materially breaches this Agreement and such breach remains
uncured for 30 days (or, if not susceptible of cure within such period, cure has
not been commenced and diligently pursued thereafter) after written notice
thereof by Grantor, (v) Grantee fails, for a period of ten (10) days following
written notice by Grantor of such failure, to make payment in excess of an
aggregate of (***) due hereunder (unless the unpaid sum is being disputed in
good faith), or (vi) any Permitted Guarantor shall materially breach Section 16
of its guaranty
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referred to in Section 20.06 and such breach shall have a material adverse
effect or such Permitted Guarantor's ability to perform under such Guaranty, and
such breach remains uncured (or Grantee has not substituted a new Guaranty
therefor) for 30 days (or, if not susceptible of cure within such period, cure
has not been commenced and diligently pursued thereafter) after written notice
thereof by Grantor, Grantor may, upon twenty (20) days prior written notice to
Grantee and while such event is continuing, terminate this Agreement as to all
Segments as to which Grantee has not yet paid the Completion Contribution, in
which case Grantee shall have no further obligation to make any payments
hereunder as to the Segments terminated. In addition, upon the occurrence of any
event described in clauses (iv) or (v) above, in addition to any other remedies
available to Grantor at law or in equity, including specific performance and
injunctive relief, Grantor shall have no obligations under Article 12 hereunder
as to any Segments as to which Grantee has paid the Completion Contribution,
unless and until such default is cured. Except as provided in the immediately
preceding sentence, and notwithstanding other provisions in this Agreement to
the contrary, Grantor acknowledges and agrees that Grantor shall have no right
under any circumstances to terminate the IRU, in whole or in part, or any of the
rights and interests of Grantee hereunder, with respect to any Segment for which
the Completion Contribution relating thereto has been fully paid in accordance
with the terms hereof prior to the termination of the Term of such Segment. 5.08
If (i) Grantor or an entity which directly or indirectly controls Grantor (each
a "Grantor Parent") makes a general assignment for the benefit of its creditors,
files a voluntary petition in bankruptcy or the filing by Grantor or any Grantor
Parent of any petition or answer seeking, consenting to, or acquiescing in
reorganization, arrangement, adjustment, composition, liquidation, dissolution,
or similar relief, (ii) an involuntary petition in bankruptcy or other
insolvency protection against Grantor or any Grantor Parent is filed and not
dismissed within one hundred twenty (120) days, (iii) Grantor or any Grantor
Parent defaults with respect to any borrowed money indebtedness of Grantor or
such Grantor Parent having a principal amount in excess of (***), which
indebtedness is already due and payable in full or which default has resulted
in, or would permit, the acceleration of the maturity of such indebtedness, (iv)
Grantor materially
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breaches this Agreement (except breaches covered by Section 3.04) and such
breach remains uncured 30 days (or, if not susceptible of cure within such
period, cure has not been commenced and diligently pursued thereafter) after
written notice thereof by Grantee, or (v) Level 3 Communications, Inc. (or any
successor guarantor thereunder) shall materially breach Section 16 of its
guaranty referred to in Section 20.05 and such breach shall have a material
adverse effect on its ability to perform under such guaranty, and such breach
remains uncured for 30 days (or, if not susceptible of cure within such period,
cure has not been commenced and diligently pursued thereafter) after written
notice thereof by Grantee, then, after written notice thereof from Grantee,
Grantee may (i) terminate this Agreement, in whole or in part, in which case
Grantee shall have no further obligation to make any payments hereunder as to
the portion terminated, and (ii) subject to Article 17, pursue any legal
remedies it may have under applicable law or principles of equity relating to
such default, including specific performance and injunctive relief.
ARTICLE 6.
REQUIRED RIGHTS
6.01 Grantor covenants and agrees that, during the Term of each Segment, it
shall obtain and maintain in full force and effect all rights, licenses,
permits, authorizations, rights-of-way, easements and other agreements which are
necessary in order to permit Grantor to construct, install, keep installed and
maintain the Grantee Fibers and Grantee Conduit comprising such Segment, to
grant the IRU and to provide Grantee with all other rights and privileges (it
being understood that Grantee's option rights under Section 7.06, prior to the
exercise thereof, shall not be considered for this purpose) under this Agreement
(collectively, the "Required Rights"). Grantor shall use its commercially
reasonable best efforts to cause each such Required Right to provide (a) Grantee
with notice of any default on the part of Grantor thereunder and to permit
Grantee to cure, on behalf of and at the expense of Grantor, any such default
and, thereafter, to continue the use of such Required Right in accordance with
Grantor's rights and interests thereunder, (b) subject to the last sentence of
this Section 6.01, option or
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renewal rights ("Option Rights") permitting the stated term of each Required
Right to be continued until the end of the economically useful life of the
Grantee Fibers and Grantee Conduit located in the Segment to which such Required
Right relates or otherwise beyond the scheduled expiration date of such Required
Right and (c) provide Grantee with non-disturbance agreements (in form and
substance reasonably satisfactory to Grantee) relating to the Grantee Fibers,
the Grantee Conduit, the Associated Property and Grantee's interest in, and/or
ownership and use thereof. Each Required Right shall by its terms, or by the
terms of an option or similar renewal right exercisable at the sole discretion
of Grantor, remain in effect for the Minimum Period for each Segment covered
thereby, (***), provided further that Grantor shall nevertheless remain bound by
the provisions of Section 5.02 with respect to such Required Rights.
6.02 Grantor further covenants and agrees that during the Term of the IRU
with respect to each Segment:
(a) Grantor shall observe and perform each and every of its obligations
under each Required Right if the failure to observe and perform any such
obligation or obligations would permit the grantor or provider of such Required
Right to terminate such Required Right prior to its stated expiration date or to
increase the fees, charges or assessments due to such grantor or provider, or
would otherwise adversely impair or affect Grantee's rights to use the Grantee
Fibers, the Grantee Conduit and the Associated Property hereunder;
(b) in the event Grantor shall receive notice from any grantor or provider
of a Required Right that Grantor has failed to observe or perform its
obligations under such Required Right (unless Grantor is contesting the validity
of such claimed or alleged failure in good faith, provided such contest does not
adversely impair or affect Grantee's rights hereunder ), Grantor shall give
written notice of such failure to Grantee (promptly following the date Grantor
shall have received notice of such failure) and Grantee may, at its option
(subject to the terms and provisions of the Required Right and
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the ability of third parties to cure defaults of Grantor thereunder), (i) cure
or correct any such failure and (ii) pay any subsequent amounts due under such
Required Right to the grantor or provider if such Required Right unless Grantee
shall have received written notice from Grantor that Grantor will pay timely all
such amounts;
(c) in the event Grantor is in default of any of its obligations under any
Required Right and Grantee cures such default pursuant to Section 6.02(b)(i) or
Grantee exercises its rights pursuant to Section 6.02 (b)(ii) , Grantor shall
reimburse Grantee promptly upon demand for any and all amounts reasonably paid
by Grantee;
(d) Grantor shall at its sole reasonable cost and expense defend and
protect Grantor's rights in and interests under each Required Right, and
Grantee's rights under this Agreement and Grantee's interest in the Grantee
Fibers, the Grantee Conduit, any Sublease and the Associated Property, against
all Liens attributable to Grantor;
(e) Grantor shall not exercise any right or otherwise take any action under
a Required Right which is inconsistent with its obligations, or Grantee's rights
under this Agreement, nor shall Grantor fail to exercise any such rights if such
failure would be inconsistent with such obligations or rights or would otherwise
adversely affect Grantee's ownership of and/or indefeasible right to use the
Grantee Fibers, the Grantee Conduit and the Associated Property hereunder;
(f) Grantor shall not take any action which would result in the termination
of a Required Right prior to its scheduled expiration (including any extended
term pursuant to an exercised option); and
(g) In the event that (i) the grantor or provider of a Required Right is in
default under such Required Right, (ii) such grantor or provider makes a general
assignment for the benefit of its creditors, files a voluntary petition in
bankruptcy or any petition or consider seeking, consenting to, or acquiescing in
reorganization, arrangement, adjustment, composition, liquidation, dissolution
or similar relief, (iii) an involuntary petition in bankruptcy or other
insolvency protection against such grantor or provider is filed or (iv) any
other event or condition arises which may materially adversely affect Grantor's
rights under such Required Right or Grantee's rights under this Agreement, then
Grantor shall provide Grantee with prompt written notice of each such event or
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condition and keep Grantee reasonably informed with respect to any subsequent
developments relating thereto.
6.03 In the event any Required Right shall contain, or shall otherwise be
subject to, an Option Right in favor of Grantor with respect to any portion of
the Grantor System, Grantor shall give Grantee written notice thereof at least
90 days prior to the last date required for exercise thereof and either (i)
exercise such Option Right (provided that (a) Grantor shall not be required to
expend, as consideration for exercising any such Option Right, more than the
fair market rate payable at such time for similar rights and terms, except to
the extent that Grantee and the other users of the Grantor System agree at their
option to pay directly or reimburse Grantor for any amounts required to be paid
in excess of such fair market rate, and (b) any such extension shall not modify
the rights or obligations of Grantor or Grantee under this Agreement (including,
without limitation, the amount of fees payable by Grantee pursuant to Article
13)) or (ii) if Grantor elects not to exercise such Option Right and Grantee
wishes to exercise such Option Right and continue to use the portion of the
Grantor System to which such Option Right relates, then Grantor shall (a) if
such Option Right and the Required Right relating thereto are assignable, assign
its interest therein and in such portion of the Grantor System (including,
without limitation, all facilities and rights therein) to Grantee for $1.00 or
(b) if such Option Right or the Required Right relating thereto are not
assignable, exercise such Option Right on behalf of Grantee pursuant to this
Section 6.03, whereupon Grantor shall have no further right, title, interest or
obligation (and Grantee shall have all such right, title, interest and
obligation) under this Agreement to or with respect to such affected portion of
the Grantor System during the period of extension or renewal, provided, and on
the condition, that Grantee shall assume and agree to pay, observe and perform
all of the duties, obligations and liabilities associated with such Required
Right relating to such affected portion arising after the date of such
assumption and shall indemnify Grantor in accordance with Article 16 with
respect to any Losses suffered by Grantor relating to the duties, obligations
and liabilities assumed by Grantee pursuant to this sentence.
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6.04 Subject to Grantor's compliance with Sections 6.01, 6.02 and 6.03,
then notwithstanding any other provision of this Agreement to the contrary, if a
Required Right expires or otherwise terminates at any time after the Minimum
Period, the Term (with respect to the Segment or Segments or portions thereof
affected thereby) shall likewise automatically expire; provided that, in the
event Grantor or any of its Affiliates shall extend, renew or enter into a new
agreement with respect to such Required Right, the Term shall continue with
respect to such Segment or Segments or portions thereof until the subsequent
expiration or termination of such Required Right; provided further that any such
extension, renewal or new agreement shall not modify the rights or obligations
of Grantor or Grantee under this Agreement (including, without limitation, the
amount of fees payable by Grantee pursuant to Article 13).
6.05 If, after the Acceptance Date with respect to a Segment, Grantor is
required by any Governmental Authority, or by any grantor or provider of a
Required Right prior to the scheduled expiration of such Required Right, to
surrender, cease using or relocate such Segment or portion thereof, including
any of the facilities used or required in providing the IRU, Grantor shall
relocate such Segment of portion thereof and shall have the right, in good
faith, to reasonably determine the extent and timing of, and methods to be used
for such relocation; provided that (i) Grantee shall be kept fully informed of
all actions to be taken and determinations made by Grantor in connection with
such relocation, (ii) any such relocated Segment or portion thereof shall (a) be
constructed in accordance with the construction specifications set forth in
Exhibits "G" and "J" and incorporate fiber and conduit meeting the
specifications set forth in Exhibit "H" (b) be subject to successful completion
of Acceptance Testing (which shall be completed, if practicable, prior to
termination of service on the affected portion of the Grantor System) and (c)
contain the same number of Grantee Fibers as the Segment or portion thereof
being relocated and, if the Segment or portion thereof being relocated contains
the Grantee Conduit, any such relocated Segment or portion thereof shall contain
the Grantee Conduit and (iii) Grantor shall use its commercially reasonable best
efforts to minimize any disruption resulting from such relocation to Grantee's
telecommunication operations. Unless such relocation is the result of a failure
by Grantor to observe and
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perform its obligations under any Required Rights or this Agreement (e.g.,
failure to obtain a Required Right with a scheduled term at least equal to the
Minimum Period or failure to comply with the terms thereof in order to maintain
such Required Right in effect for the Minimum Period), Grantee shall reimburse
Grantor for its proportionate share of the Costs of such relocation of such
Segment or portion thereof (to the extent Grantor has not been reimbursed or
otherwise compensated by any other Person) as follows: (i) if the affected
Segment or portion thereof includes any conduits (whether or not occupied), the
total Costs of relocation of the affected conduits shall be allocated (***).
6.06 Notwithstanding anything in this Agreement to the contrary, the IRU
and Grantee's rights are subject to the terms of the Required Rights, provided
that the Required Rights shall not contain terms, provisions or obligations
which conflict or are inconsistent with Grantee's rights (it being understood
that Grantee's option rights under Section 7.06, prior to the exercise thereof,
shall not be considered for this purpose) under the IRU or this Agreement or
Grantor's obligations thereunder or hereunder or which impose any other material
obligations or duties on Grantee, and provided further that the Required Rights
may contain customary provisions regarding access and other customary
restrictions and limitations. Except as otherwise provided in this Agreement,
Grantor will not obtain for itself or any of its Affiliates any material rights
or benefits in respect of the Grantor System from the grantor or provider of any
Required Right that it does not make available or cause to be made available to
Grantee on comparable terms.
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ARTICLE 7.
CONDUIT
7.01 Grantor shall use its commercially reasonable best efforts to have the
IRU for each Segment of the Grantor System consist of 24 fibers and one
unoccupied conduit (or comparable aerial segment).
7.02 (***).
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7.03 Grantor shall give written notice to Grantee of the likely occurrence
of a Pinch Event with respect to a Segment or a portion thereof, promptly
following Grantor's knowledge of the likelihood of such Pinch Event, which
notice shall certify that, in Grantor's good faith determination, either (i)
such Pinch Event will be temporary and Grantor will deliver the Grantee Conduit
in such Segment or portion thereof by the date specified in such notice (which
date shall not be later than the applicable Completion Date) or (ii) such Pinch
Event will be permanent and Grantor will not deliver the Grantee Conduit by the
applicable Completion Date. Notwithstanding anything in this Agreement to the
contrary, (a) in the event that Grantor delivers a notice pursuant to clause (i)
above, for purposes of determining the Minimum Period with respect to such
Segment only, the Acceptance Date for the Segment or portion thereof to which
such notice relates shall not commence until the date that the Grantee Conduit
has been delivered and (b) in the event that Grantor delivers a notice pursuant
to clause (ii) above, then Grantor shall have no obligation to deliver, and
Grantee shall have no obligation to accept or pay for, the Grantee Conduit in
the Segment or portion thereof to which such notice relates after the date of
such notice. In each of clauses (a) and (b) above, the IRU Contribution and the
Recurring Charge for such Segment shall be adjusted in accordance with Section
7.04 below. If, prior to the later of the third anniversary of the Commencement
Date and the delivery of the last Segment delivered hereunder, such Segment or
portion thereof includes at least three conduits, (A) in the event that a notice
has been delivered pursuant to clause (i) above, Grantee shall take delivery of
and pay for the Grantee Conduit in accordance with the terms of this Agreement,
and (B) in the event that a notice has been delivered pursuant to clause (ii)
above, Grantee shall have the option (which option shall
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be exercisable within 30 days following receipt of written notice of proposed
delivery by Grantor) to take delivery of and pay for the Grantee Conduit in
accordance with the terms of this Agreement. In either such case, if Grantee
takes delivery of and pays for the Grantee Conduit, the IRU Contribution and
Recurring Charge for such Segment shall be adjusted as provided in Section 7.05
below.
7.04 (***).
7.05 In the event that (i) Grantor delivers a notice pursuant to Section
7.03(i) and Grantee takes delivery of the Grantee Conduit in the Segment or
portion thereof to which such notice relates by the applicable Completion Date
or (ii) Grantee exercises its
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option pursuant to clause (B) of the last sentence of Section 7.03, then (a)
Grantee shall reconvey to Grantor, or relinquish the use of, any fibers in
excess of the Initial Grantee Fibers granted to Grantee pursuant to Section
7.02, (b) Grantor shall reimburse Grantee for all Incremental Costs paid by
Grantee pursuant to Section 7.02 and (c) Grantee shall pay Grantor the excess of
the IRU Contribution for such Segment over the amount of the fee paid by Grantee
with respect thereto pursuant to Section 7.04 and the Recurring Charge shall be
restored from and after the date of such delivery to what it would have been if
such Pinch Event had not occurred.
7.06 Grantor agrees that in the event the Grantor System in any Segment
shall include six or more conduits (inclusive of the Grantee Conduit and the
conduit housing the Cable), Grantee shall have the option to elect that the IRU
with respect to the Grantee Fibers in such Segment be increased to include
twenty-five percent (15%) of the fibers installed (rounded up to the nearest
whole fiber) in every conduit after the first five conduits (inclusive of the
Grantee Conduit and the conduit housing the Cable), provided that if
Grantorgrants to an unrelated party an indefeasible right to use all of the
fibers installed in any such conduit, Grantee shall not have such option but in
lieu thereof Grantor shall pay Grantee, simultaneously with the grant of such
right, an amount in cash equal to 25% of the value of the consideration received
by Grantor for such indefeasible right to use such fibers (it being understood
that, if such indefeasible right to use such fibers is part of a larger
transaction, any allocation of consideration in such transaction shall not be
relevant for purposes of this Section 7.06 and, if Grantor and Grantee are
unable to agree on the amount of the total consideration allocable to such
indefeasible right to use, such amount shall be determined by the procedures set
forth in Article 24). Grantor shall give written notice to Grantee prior to
installing any fiber in such sixth conduit and any subsequent conduit, which
notice shall contain Grantor's good faith estimate of Grantee's proportionate
share of the costs and other amounts described below which will be payable by
Grantee. If Grantor installs fiber in one or more conduits contemporaneously
under circumstances where at least one of such conduits would be subject to this
Section 7.06, Grantee may select which of those conduits is subject to its
option rights under this Section 7.06. Grantee shall have a period of ninety
(90) days
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after receipt of such notice to exercise its option under this Section 7.06 by
written notice to Grantor. In the event Grantee shall exercise its option with
respect to such a conduit in any Segment, all fibers installed therein for
Grantee's use shall be deemed to be and constitute Additional Grantee Fibers
hereunder and Grantee shall be responsible for, and Grantee shall pay to Grantor
from time to time during the Term (at least five (5) days prior to the date
Grantor is required to make payments as a result of the occupancy of such
conduit), Grantee's proportionate share (based on the number of fibers in such
conduit which will become Additional Grantee Fibers and the total fiber count in
such conduit) of each of: (i) the Incremental Costs incurred by Grantor in
connection with the installation of the Additional Grantor Fibers in such
conduit; (ii) the operating expenses incurred by Grantor in connection with the
fibers in such conduit; and (iii) the fees, costs or charges payable under the
terms of any related Required Right(s) as a result of the placement or use of
fiber in such conduit. In the event Grantee shall fail to timely exercise the
option provided in this Section 7.06 with respect to a conduit, or if Grantee
notifies Grantor in writing of its desire to surrender such option with respect
to any conduit in any Segment, Grantee's option with respect to such conduit
shall terminate, but Grantee's option with respect to any subsequent conduits or
other Segments shall continue in full force and effect. Notwithstanding anything
contained in this Agreement to the contrary, Grantor shall never be obligated to
cause six or more conduits to be installed as a part of the Grantor System and
Grantor shall not be in breach or default hereunder or otherwise liable to
Grantee if the Grantor System does not include six or more conduits. The rights
granted to Grantee under this Section 7.06 shall not apply to (x) any inner city
or local loop conduit constructed or installed by Grantor in a city in the form
of a spur (which may have two or more connection points) to the Grantor System,
provided that this sentence shall not modify Grantor's obligations under Section
2.02 or (y) if the Grantor System consists of (***) conduits, any conduits in
excess of (***) conduits constructed or installed by Grantor, simultaneously
with and adjacent to the other conduits constituting part of the Grantor System,
expressly for exchange for conduits in another Segment or portion of the Grantor
System provided by an unrelated third party (and no more than a de minimis
amount of other consideration).
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7.07 Grantee may elect at any time during the Term of a Segment to have
fibers installed within all or any part of the Grantee Conduit in such Segment,
on such reasonable schedule as may be specified by Grantee and approved by
Grantor (which approval shall not be unreasonably withheld), and, subject to
Article 19, Grantor shall install such fibers in accordance with such schedule,
subject to the following: (i) Grantee shall provide to Grantor for Grantor's
reasonable approval and, if applicable, to the grantors or providers of any
Required Rights, detailed installation plans and specifications, the proposed
contractor or contractors, the schedule for installation, and such other
information or documentation as may be reasonably requested by Grantor or as may
be required under any Required Right, and (ii) Grantee shall reimburse Grantor
for all Costs incurred by Grantor in connection with such installation (but not
including the cost of construction of the Grantee Conduit itself). 7.08 Any
installation of fiber for Grantee's use within a Segment under Sections 7.06 or
7.07 shall not extend the Minimum Period with respect to such Segment.
ARTICLE 8.
CONSTRUCTION OF THE GRANTOR SYSTEM
8.01 Grantor will design, engineer, install and construct the Grantor
System (including any portion of the Grantor System delivered pursuant to
Article 7) in conformity with the construction specifications set forth in
Exhibit "G" and all applicable manufacturer specifications and in a workmanlike
manner and in accordance with industry standards and building, construction and
safety codes, as well as any and all other applicable governmental laws, codes,
ordinances, statutes and regulations. Such responsibilities shall include,
without limitation, preparation of construction drawings, materials
specifications and materials requisitions. The Grantee Fibers shall meet or
exceed the applicable fiber specifications set forth in Exhibit "H". The Grantee
Conduit, and all other conduits in which Grantee Fibers are located, shall meet
the applicable specifications set forth in Exhibit "H".
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8.02 Grantor will provide Regeneration Facilities and Opamp Facilities to
be located along the Grantor System, in each case consisting of and providing
space and amenities as described in Exhibit "I".
8.03 Grantor will undertake the Acceptance Testing of each of the Segments.
8.04 Subject to Sections 7.02 and 7.07, Grantor will procure all materials
to be incorporated in and to become a permanent part of the Grantor System
(other than fibers to be installed in the Grantee Conduit which may be procured
by Grantee at Grantee's option).
8.05 Subject to the provisions of Article 6, Grantor will obtain and
maintain in full force and effect the Required Rights without default by Grantor
thereunder.
8.06 Grantor and Grantee will mutually consult with each other (on a
monthly basis and at such other times upon request of either party) to attempt
to coordinate construction of the Grantor System with other network construction
which may be undertaken by, or on behalf of, Grantee.
8.07 During the course of construction of each Segment, Grantor will
prepare and provide to Grantee (***) a construction schedule and progress
reports, including notice regarding whether Grantor reasonably believes that
such Segment may be subject to a Pinch Event. Subject to the terms and
provisions of any applicable Required Right, Grantee shall have the right, but
not the obligation, on at least twenty four (24) hours prior notice to Grantor,
to inspect and be present at the construction and installation of each Segment
(which may consist of continuous or regular on-site inspections by dedicated
representatives of Grantee), including the installation, splicing and testing of
the Grantee Fibers and the installation of the Grantee Conduit incorporated
therein; provided that no inspection or failure to inspect by Grantee shall
impair or invalidate any rights and remedies of Grantee under this Agreement or
modify, amend or otherwise affect any of the representations, warranties,
covenants or agreements of Grantor under this Agreement. If, during the course
of any such construction, installation, splicing or testing, any deviation from
the specifications set forth in any Exhibit hereto is discovered, the
construction or installation of the affected portion of the
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Segment shall be repaired promptly to such specifications in such Exhibit at
Grantor's sole cost and expense.
8.08 Grantor shall make available to Grantee for inspection by Grantee
copies of all information, documents, agreements, reports, permits, drawings and
specifications generated, obtained or acquired by Grantor in performing its
duties pursuant to this Article 8 that are material to the grant of the IRU to
Grantee, including the Required Rights, subject only to the condition that the
terms of each such document or the legal restrictions applicable to such
information or document permits disclosure to Grantee; provided that Grantor
will use its commercially reasonable best efforts to obtain a waiver of any
existing confidentiality and/or non-disclosure restrictions, and to exempt
Grantee from subsequent confidentiality and/or non-disclosure restrictions, that
would restrict Grantor's ability to make such documents and/or information
available to Grantee for inspection.
8.09 For purposes of the foregoing, Grantor shall be deemed to have
complied with any Exhibit notwithstanding deviations to such Exhibit, provided
that Grantor (i) notifies Grantee of such deviation (which may be given in a
general format at monthly intervals unless Grantee requests more specific
details), (ii) compliance was not or would not be commercially practicable and
(iii) such deviations do not diminish the value, utility, reliability or
expected useful life of the item or matter concerned or otherwise adversely
affect Grantee's rights or obligations under this Agreement.
8.10 The parties acknowledge that Grantee's contributions to the cost of
constructing the Grantor System are limited to the payment of the IRU
Contribution. Without limitation, Grantee will not have any obligation, over and
above payment of the IRU Contribution as contemplated hereunder, with respect to
Grantor's responsibilities set forth in Sections 8.01, 8.02, 8.03, 8.04 or 8.05.
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ARTICLE 9.
ACCEPTANCE TESTING
9.01 Grantor shall test the Grantee Fibers and the Grantee Conduit in
accordance with the procedures and standards specified in Exhibit "J"
("Acceptance Testing"). Acceptance Testing shall progress span by span along
each Segment as cable splicing progresses or, in the case of the Grantee
Conduit, as set forth in Exhibit "J", so that test results may be reviewed in a
timely manner. Grantor shall provide Grantee with at least 14 days' prior notice
of the date and time of each Acceptance Testing and Grantee shall have the
right, but not the obligation, to be present to observe the Acceptance Testing.
9.02 When Grantor reasonably determines the Grantee Fibers and the Grantee
Conduit with respect to an entire Segment are installed and operating in
conformity with the applicable specifications set forth in Exhibits "G", "H",
and "J", and Grantor is otherwise in compliance with the other provisions of
this Agreement with respect to such Segment, Grantor shall provide written
notice of same to Grantee (a "Completion Notice"), together with a copy of the
results of the Acceptance Testing for such Segment. Grantee shall, within
fifteen (15) days of receipt of the Completion Notice, either accept or reject
the Completion Notice (specifying, if rejected, the defect or failure in such
Acceptance Testing and/or the items required to be remedied and/or replaced in
order for such Segment to be in conformity with the applicable specifications
set forth in Exhibit "J" and other provisions of this Agreement) by delivery of
written notice to Grantor. In the event Grantee rejects the Completion Notice,
Grantor shall promptly, and at no cost to Grantee, commence to remedy the defect
or failure. Thereafter, Grantor shall again give Grantee a Completion Notice
with respect to such Segment. The foregoing procedure shall apply again and
successively thereafter until Grantor has remedied all defects or failures. Any
failure by Grantee to timely reject a Completion Notice shall be deemed to
constitute acceptance for purposes of this Agreement, and in that event Grantee
shall be deemed to have delivered a notice of acceptance on the thirtieth day
after delivery of the Completion Notice. The successful completion of Acceptance
Testing, and the
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occurrence of an Acceptance Date, with respect to the Grantee Fibers and the
Grantee Conduit in accordance with this Article 9 shall not relieve Grantor of
its obligation to repair defects in the Grantor System in accordance with
Section 12.02.
ARTICLE 10.
ACCESS
10.01 Grantor shall provide Grantee with access to, and Grantee shall have
the right to interconnect with, the Grantee Fibers and the Grantee Conduit at
Segment End Points and, subject to the terms and provisions of the Required
Rights, at other technically feasible access points along the Grantor System
(the "Access Points"). The specific location of such Access Points shall be
determined by Grantor during the design, engineering and permitting phases of
construction and after consultation and coordination with Grantee, and, at a
minimum, Access Points will be provided at the intervals specified in Exhibit
"I".
10.02 Grantor may route the Grantee Fibers through Grantor's space in the
Regeneration Facilities or Opamp Facilities in its sole discretion (so long as
such routing does not materially adversely affect the security, safety or use of
the Grantee Fibers or the Associated Property). Grantee Fibers may, upon
Grantee's written consent (which shall not be unreasonably withheld), be routed
through Grantor's terminal, endlink or pop sites. In each case, Grantor shall be
responsible for all costs and expenses associated therewith.
10.03 Grantor shall have the right to control all activities concerning the
Grantor System at all of the Access Points, provided that after the Acceptance
Date for each Segment, Grantor shall not splice Grantee Fibers located in any
Segment or otherwise undertake any activities with respect to the Grantee Fibers
or the Grantee Conduit located in such Segment except in connection with a
relocation pursuant to Section 6.05, as required to perform maintenance as
described in Exhibit "K" or as otherwise directed by Grantee. In the event
Grantor shall undertake any such activities (including splicing) related to the
Grantee Fibers and/or Grantee Conduit at any Access Point at Grantee's request,
such activities shall be conducted in accordance with requirements as agreed to
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by the parties and Grantee shall reimburse Grantor for all Costs incurred by
Grantor in connection with such activities.
10.04 Grantor shall determine the exact locations of the Regeneration
Facilities and Opamp Facilities after consultation and coordination with
Grantee. Grantee shall have access to the Regeneration Facilities and Opamp
Facilities 24 hours per day, 7 days per week, provided that Grantee shall comply
with such customary access requirements consistent therewith as provided in the
Required Rights.
10.05 Following the initial construction of the Grantor System in a
Segment, Grantor agrees to allow Grantee, subject to customary access and other
customary restrictions and limitations of any applicable Required Rights, to
establish additional technically feasible Access Points along the Grantor
System. Grantor agrees to use commercially reasonable good faith efforts to
obtain the consent or approval, if necessary, of a grantor or provider of any
applicable Required Right in connection with such additional Access Points. Any
additional Access Points shall be constructed or installed by Grantor and all
Costs associated therewith shall be paid by Grantee.
10.06 Grantor shall (i) make available to Grantee such dedicated space and
amenities (e.g., power, caging, lighting, etc.) in Regeneration Facilities and
Opamp Facilities (***) and (ii) cause such Regeneration and Opamp Facilities to
be located at such intervals as set forth on Exhibit "I" along the Grantor
System as are necessary to light the Initial Grantee Fibers using equipment
requiring facility space similar to industry-standard equipment like that used
by Grantor to provision similar capacity over the same number of fibers, (***).
10.07 If after the Acceptance Date for a Segment, Grantee requires
additional space within a Regeneration Facility or Opamp Facility in order to
utilize the Grantee Fibers (including any fibers which may be subsequently
installed in the Grantee Conduit), Grantor shall use commercially reasonable
best efforts to provide such additional space (which may include the
construction of new regeneration or opamp facilities or the
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enlargement of existing Regeneration Facilities and Opamp Facilities); provided,
in no event shall Grantor be required to provide Grantee with any additional
space which, with the initial Grantee space, is greater than the space required
by Grantor to provide similar capacity utilizing an equivalent number of its own
fibers, provided further that Grantor shall have no obligations under this
Section 10.07 for any additional space located outside Grantor System right of
way unless Grantee has no other commercially reasonable alternative. To the
extent any such additional space shall require the consent or approval of a
grantor or provider or a Required Right, Grantor will use commercially
reasonable best efforts to obtain such consent or approval. Grantee shall pay
all Costs relating to any such additional space.
10.08 The IRU granted hereunder shall include Grantee's right to install
equipment, or replace existing equipment, in the space located at the Opamp
Facilities and Regeneration Facilities made available to Grantee pursuant to
this Agreement. All such equipment shall be owned by Grantee and Grantor shall
have no right, title or interest therein.
ARTICLE 11.
OPERATIONS
11.01 Subject to Articles 6 and 15, Grantee shall have full and complete
control and responsibility for determining all matters with respect to the use
of the Grantee Fibersand the Grantee Conduit, including, without limitation, any
network and service configuration or designs, routing configurations,
re-grooming, rearrangement or consolidation of channels or circuits and all
related functions with regard to the use of the Grantee Fibers.
11.02 Grantee acknowledges and agrees that except for the items included as
a part of the Regeneration Facilities and Opamp Facilities as described on
Exhibit "I", Grantor is not supplying nor is Grantor obligated to supply to
Grantee any optronics or electronics or optical or electrical equipment or other
facilities, all of which are the sole responsibility of Grantee, nor is Grantor
responsible for performing any work other than as specified in this Agreement.
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11.03 Following the Acceptance Date for any Segment, upon not less than
(***) days written notice from Grantor to Grantee, Grantor may at its option,
subject to Grantee's prior written approval (which approval shall not be
unreasonably delayed or withheld) substitute for the Initial Grantee Fibers in
any Segment or Segments, an equal number of alternative, newer fibers within
another conduit constituting part of the Grantor System (but not fibers acquired
from third parties unless the Grantee Fibers being substituted were delivered
pursuant to Section 2.05), provided that in any such event, such substitution
(i) shall be in accordance with Grantee's applicable operating procedures, (ii)
shall be effected at the sole cost of Grantor, including, without limitation,
all disconnect and reconnect costs, fees and expenses, (iii) shall be
constructed in accordance with the specifications and procedures set forth in
Exhibits "G" and "J", incorporate fiber and conduit meeting the specifications
set forth in Exhibit "H" and successfully tested in accordance with the
Acceptance Testing, (iv) shall not interrupt the operation or adversely affect
the use, operation or performance of Grantee's network or business, or change
any Segment End Points, Access Points, Regeneration Facilities, node or switch
facilities used by Grantee hereunder, all as determined by Grantee in its
reasonable discretion, (v) shall not modify Grantor's obligations under Article
7 and (vi) Grantee shall be reasonably satisfied that any such relocation shall
not otherwise affect its rights, privileges or costs under this Agreement.
ARTICLE 12.
MAINTENANCE AND REPAIR OF THE GRANTOR SYSTEM
12.01 From and after the Acceptance Date with respect to each Segment,
Grantor shall maintain such Segment, or cause such Segment to be maintained in a
workmanlike manner and, in accordance with the maintenance requirements and
procedures set forth in Exhibit "K" attached hereto, all applicable manufacturer
specifications, industry standards and building, construction and safety codes,
as well as any and all other applicable governmental laws, codes, ordinances,
statutes and regulations. The costs of
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all scheduled maintenance of the Grantee Fibers and/or Grantee Conduit shall be
paid by Grantor; provided, however, that Grantee shall reimburse Grantor for its
(***) of the Costs (excluding costs which Grantor would otherwise have incurred
as part of scheduled maintenance e.g., if personnel otherwise on scheduled
maintenance duty attend to the unscheduled situation) of any unscheduled
maintenance and repair of the Grantee Fibers and/or Grantee Conduit as follows:
(i) if the affected portion of the Grantor System includes any conduits (whether
or not occupied), the total Costs of repair of the affected conduits shall be
allocated pro rata among the conduits affected; (ii) such Costs allocated to
each affected conduit carrying the Grantee Fibers shall be further allocated to
Grantee (***).
12.02 Notwithstanding anything in this Agreement to the contrary, if , at
any time prior to the date that is (***) months after the Acceptance Date for a
Segment, Grantee shall notify Grantor in writing of its discovery of a deviation
from the specifications set forth in any Exhibit hereto with respect to such
Segment, the construction or installation of the affected portion of such
Segment shall be repaired promptly to such specification by Grantor at Grantor's
sole cost and expense.
ARTICLE 13.
RECURRING CHARGE
13.01 Except as expressly provided otherwise in this Agreement, Grantor
shall be responsible for the payment of all costs and expenses relating to the
Grantor System, including, without limitation, (i) all fees and charges payable
to the grantors or providers of the Required Rights, (ii) the costs of
constructing and maintaining the Grantor System, (iii) all charges and expenses
(including utility charges) associated with the operation of the Regeneration
Facilities and Opamp Facilities and (iv) all Impositions.
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13.02 In consideration of Grantor's responsibilities in Section 13.01 and
otherwise under this Agreement, subject to the adjustments described in Sections
7.04, 7.06 and 13.03 through 13.07, Grantee shall pay to Grantor each year, with
respect to each Segment, commencing with the Acceptance Date of such Segment and
continuing until the Term of the IRU with respect to such Segment shall have
expired or terminated, the following sums (the "Recurring Charge"): (i) the
product obtained when: (A) (***) is multiplied by (B) the number of Route Miles
in such Segment (the "ROW Charge"), plus (ii) the product obtained when: (A)
(***) is multiplied by (B) the number of Route Miles in such Segment (the
"Operating Expense Charge").
13.03 Commencing on the date of installation of any Grantee Fibers within
the Grantee Conduit, the ROW Charge shall be increased by the product obtained
when: (i) (***) is multiplied by (ii) the number of Route Miles where Grantee
Fibers have been installed in the Grantee Conduit.
13.04 (***).
13.05 (***).
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13.06 The Recurring Charge applicable to each Segment, as the same may be
adjusted from time to time pursuant to the foregoing provisions of this Article
13, the Operating Expense Estimate and the sums described in Section 13.03(i),
13.04(i)(A) and 13.04(ii)(A), shall be adjusted on each anniversary of the
Acceptance Date of such Segment by the change, if any, in the Consumer Price
Index, All Urban Consumers, U.S. City Average, published by the United States
Department of Labor, Bureau of Labor Statistics (the "CPI-U"), for the preceding
twelve month period (or, with respect to the Operating Expense Charge, in the
event such index shall cease to be computed or published, Grantor and Grantee
shall mutually designate a comparable successor index to be used in determining
the adjustment to such Charge); provided that (a) the ROW Charge for a Segment
shall only be adjusted pursuant to this Section 13.06 to the extent the
instrument governing the Required Right for such Segment explicitly provides for
an adjustment based on the CPI-U or a comparable index and (b) the Operating
Expense Charge and the Operating Expense Estimate shall only be adjusted
pursuant to this Section 13.06 if neither Grantee nor Grantor has performed an
audit for the preceding twelve-month periods in accordance with Section 13.05.
13.07 Grantee shall pay the Operating Expense Charge portion of the
Recurring Charge for a Segment monthly on the first day of each month of the
Term of the IRU respecting such Segment (with the Operating Expense Charge for
any partial calendar month prorated). Grantee shall pay the ROW Charge portion
of the Recurring Charge for all Segments in the aggregate on a monthly basis,
with the amount of each month's payment being equal to the amount obtained by
multiplying the total amount of ROW Charges due by Grantee on all Segments by a
fraction, the numerator of which is the total
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amount of Required Right Payments due by Grantor on all Segments during such
month and the denominator of which is the total amount of Required Right
Payments due by Grantor on all Segments during the calendar year.
13.08 Notwithstanding anything in this Agreement to the contrary, if (i)
any Segment is the subject of a Force Majeure Event which results in a
disruption of Grantee's operations or business and (ii) Grantor's obligation to
pay costs and expenses relating to such Segment of the type described in Section
13.01 is relieved or excused, in whole or in part, during the pendency of such
Force Majeure Event, then Grantee's obligation to pay Recurring Charges with
respect to such Segment during the pendency of such Force Majeure Event shall be
proportionately reduced.
13.09 In addition to Grantee's other rights and remedies under this
Agreement and under applicable law, Grantee shall have the right from time to
time, to the fullest extent permitted by law, to set off or deduct amounts owed
to Grantor hereunder (including, without limitations, amounts required to be
reimbursed to Grantee pursuant to Sections 6.02(c) and 14.07) from or against
any and all payments required to be made to Grantor pursuant to this Article 13.
ARTICLE 14.
IMPOSITIONS
14.01 Grantor and Grantee acknowledge and agree that it is their mutual
objective and intent to (i) minimize, to the extent feasible, the aggregate
Impositions payable with respect to the Grantor System and (ii) share such
Impositions according to their respective interests in the Grantor System, and
that they will cooperate with each other and coordinate their mutual efforts to
achieve such objectives in accordance with the provisions of this Article 14.
14.02 Grantor shall be responsible for and shall timely pay any and all
Impositions with respect to the Grantor System which Impositions are imposed or
assessed prior to the Acceptance Date of a Segment. Notwithstanding the
foregoing obligations, Grantor shall have the right to challenge any such
Impositions so long as the
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challenge of such Impositions does not adversely affect Grantee's rights or
interests hereunder.
14.03 After the Acceptance Date for each Segment, Grantor shall timely pay,
or cause to be paid, any and all Impositions imposed upon or with respect to
such Segment to the extent such Impositions (a) have not been separately
assessed or imposed upon or against the interest of Grantee in the Grantor
System or (b) consist of real property or ad valorem taxes relating to the
Grantor System, including, without limitation, real property or ad valorem taxes
on the Initial Grantee Fibers, the Grantee Conduit and the Regeneration and
Opamp Facilities (whether or not such Impositions have been separately assessed
or imposed upon or against the interest of Grantee in the Grantor System), which
real property or ad valorem taxes shall constitute part of the Actual Operating
Expenses and shall be subject to adjustment as described in Article 13. Upon
receipt of a notice of any Imposition after the Acceptance Date for any Segment,
Grantor shall promptly notify Grantee of such Imposition and following payment
of such Imposition by Grantor, Grantee shall, within thirty (30) days of its
receipt of an invoice from Grantor, reimburse Grantor for its proportionate
share of such Imposition (except for the Impositions described in clause (b) of
this Section 14.03, which Impositions shall constitute part of Actual Operating
Expenses and shall be paid in accordance with Article 13), which share shall be
determined (i) to the extent possible, based upon the manner and methodology
used by the particular authority imposing such Impositions (e.g., on the cost of
the relative property interests, historic or projected revenue derived
therefrom, or any combination thereof); or (ii) if the same cannot be so
determined, then based upon Grantee's proportionate share of the total fiber
count in the affected portion of the Grantor System, provided that any such
Imposition which was separately assessed against Grantee or any other Person
using the Grantor System shall be taken into account in determining such
proportionate share. Grantor shall provide Grantee with reasonable supporting
documentation for Impositions for which Grantor seeks reimbursement. If any
Imposition assessed upon Grantor or Grantee is based on assets or business in
any state in addition to its interest in the Grantor System (i.e., central
assessment), Grantor and Grantee shall work together in good faith to allocate a
proper portion of such
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assessment to such interests alone and if Grantor and Grantee are unable to
agree on such allocation within thirty (30) days from the date Grantor or
Grantee delivered notice to the other party regarding such allocation, such
allocation shall be determined by an arbitration procedure in accordance with
Section 24.01(iv).
14.04 Upon notice of the assertion or proposed assertion of any Imposition
described in Section 14.03, Grantor shall promptly and in good faith consult
with Grantee concerning the underlying facts and whether to contest or to
continue to contest such assertion or proposed assertion. Notwithstanding any
provision herein to the contrary, Grantor shall have the right to contest any
Imposition described in Section 14.03 above by any lawful and appropriate means
(including by nonpayment of such Imposition), provided such nonpayment does not
adversely affect the title (if applicable), rights or property delivered or to
be delivered to Grantee pursuant hereto. The out-of-pocket costs and expenses
(including reasonable attorney fees) incurred by Grantor in any such contest
shall be shared by Grantor and Grantee in the same proportion as to which the
parties would have shared in such Impositions, as they were originally assessed.
Any refunds or credits resulting from a contest brought pursuant to this Section
14.04 shall be divided between Grantor and Grantee in the same proportion as to
which such refunded or credited Impositions were borne by Grantor and Grantee.
In any such event, Grantor shall provide timely notice of such challenge to
Grantee. If Grantor chooses to proceed with such challenge after receipt of a
written objection to the challenge from Grantee, Grantor shall conduct such
challenge at its own cost and expense, provided that Grantee shall not receive
the benefit of any refund or credit, if any, obtained as a result of a
successful challenge. If Grantor does not contest an Imposition, Grantee shall
have the right, after notice to Grantor, to contest such Imposition as long as
such contest does not adversely affect the title, property or rights of Grantor.
The out-of-pocket costs and expenses (including reasonable attorney's fees)
incurred by Grantee in any such contest shall be shared by Grantee and Grantor
in the same proportion as to which the parties shared in such Imposition, as it
was originally assessed. Any refunds or credits resulting from a contest shall
be divided between Grantee and Grantor in the same proportion as to which such
refunded or credited Imposition was borne by Grantee and Grantor. If
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Grantee chooses to proceed with such contest after receipt of written objection
to the challenge from Grantor, Grantee shall conduct such challenge at its own
cost and expense, provided that Grantor shall not receive the benefit of any
refund or credit, if any, obtained as a result of a successful challenge;
provided, however, that notwithstanding anything to the contrary in this Article
14, Grantor shall have complete authority over and discretion to control
(including the authority to dismiss or not pursue) any contests relating to
Impositions based upon the computation of Grantor's taxable income under the
Internal Revenue Code or state income or franchise tax laws.
14.05 Following the Acceptance Date for each Segment, Grantor and Grantee,
respectively, shall be separately responsible for any and all Impositions
(except for the Impositions described in clause (b) of Section 14.03, which
shall constitute a part of the Actual Operating Expenses and shall be paid in
accordance with Article 13) (i) expressly or implicitly imposed upon, based
upon, or otherwise measured by the gross receipts, gross income, net receipts or
net income received by or accrued to such party due to its respective interest
in or use of such Segment and/or the Grantee Fibers and/or the Grantee Conduit
located within such Segment, or (ii) which have been separately assessed or
imposed upon the respective interest of such party in such Segment and/or the
Grantee Fibers and/or the Grantee Conduit located within such Segment.
14.06 Grantor and Grantee agree to cooperate fully in the preparation of
any returns or reports relating to the Impositions. Grantor and Grantee further
acknowledge and agree that the provisions of this Article 14 are intended to
allocate the Impositions expected to be assessed against or imposed upon the
parties with respect to the Grantor System based upon the procedures and methods
of computation by which Impositions generally have been assessed and imposed to
date, and that material changes in the procedures and methods of computation by
which such assessments are assessed and imposed could significantly alter the
fundamental economic assumptions underlying the transactions hereunder to the
parties. Accordingly, Grantor and Grantee agree that, if in the future the
procedures or methods of computation by which Impositions are assessed or
imposed against the parties change materially from the procedures or methods of
computation by which they are imposed as of the date hereof, the parties will
negotiate in
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good faith an amendment to the provisions of this Article 14 in order to
preserve, to the extent reasonably possible, the economic intent and effect of
this Article 14 as of the date hereof.
14.07 Notwithstanding anything in this Agreement to the contrary, in the
event that Grantor fails to pay any Imposition it is required to pay under this
Agreement Grantee may, at its option (i) pay such Imposition to the taxing
authority assessing such Imposition and (ii) pay all subsequent Impositions
assessed by such taxing authority, unless Grantee shall have received written
notice from Grantor the Grantee will pay timely all such Impositions. In the
event Grantee makes any payments pursuant to this Section 14.07, Grantor shall
reimburse Grantee promptly upon demand for any and all amounts paid by Grantee.
ARTICLE 15.
USE OF GRANTOR SYSTEM
15.01 Grantee represents and warrants that it will use the Grantee Fibers
and/or Grantee Conduit and the IRU hereunder in compliance with all applicable
government codes, ordinances, laws, rules and regulations. Grantor represents
and warrants that it will use the Grantor System, and shall obtain from each
other user of the Grantor System a representation and warranty that it will use
the Grantor System, in compliance with all applicable government codes,
ordinances, laws, rules and regulations.
15.02 Subject to the provisions of Article 6 and this Article 15, Grantee
may use the Grantee Fibers, the Grantee Conduit and the IRU for any lawful
purpose. Grantee acknowledges and agrees that it has no right to use any fibers,
other than the Grantee Fibers, included or incorporated in the Grantor System,
and that Grantee shall keep any and all of the Grantor System, other than the
Grantee Fibers, the Grantee Conduit and Grantee's interest in and right to use
the Associated Property, free from all Liens attributable to Grantee. Grantor
acknowledges and agrees that it (i) has no right to use the Grantee Fibers or
the Grantee Conduit, (ii) shall keep the portion of the Grantor System in which
Grantee shall receive the IRU free and clear of all Liens attributable to
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Grantor (other than the Liens in favor of Grantee created pursuant to this
Agreement) and (iii) shall obtain an acknowledgment and agreement from each
other Person that uses the Grantor System that such Person has no right to use
the Grantee Fibers or the Grantee Conduit and shall keep the portion of the
Grantor System in which Grantee shall receive the IRU free and clear of all
Liens of any third party attributable to such Person.
15.03 (***).
15.04 Neither Grantor nor Grantee shall use the Grantor System in a way
which physically interferes in any way with or otherwise adversely affects the
use of the fibers, cable or conduit of any other Person using the Grantor
System, provided that customary and normal telecommunications activities will
never be deemed to physically interfere with or otherwise adversely affect the
use of the fibers, cable or conduit of any Person and
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Grantor shall obtain a similar agreement from each other Person that uses the
Grantor System.
15.05 Grantee and Grantor shall promptly notify each other of any matters
pertaining to, or the occurrence (or impending occurrence) of, any event of
which it is aware that could give rise to any damage or impending damage to or
loss of the Grantor System, or any impairment of Grantee's right of use or other
rights and privileges therein.
ARTICLE 16.
INDEMNIFICATION
16.01 Subject to the provisions of Section 3.04, Section 16.07, Article 17
and Section 22.03, Grantor hereby agrees to indemnify, defend, protect and hold
harmless Grantee, its Affiliates, the Designated Parties and their Affiliates,
and their respective employees, officers, directors, agents and representatives
(the "Grantee Indemnified Parties") from and against, and assumes liability for,
any and all claims, injuries, losses, expenses, damages or liabilities of
Grantee or any other Grantee Indemnified Party (including, without limitation,
reasonable attorneys' fees) (collectively, "Losses") which arise out of or
result from, directly or indirectly, in whole or in part: (i) the breach by
Grantor of any of its representations, covenants or other obligations hereunder;
(ii) the negligence or willful misconduct of Grantor, its officers, employees,
servants, Affiliates, agents, contractors, licensees, invitees and vendors
arising out of or in connection with the performance by Grantor or such other
Persons of their respective obligations under this Agreement; (iii) any
violation by Grantor or its Affiliates of any regulation, rule, statute or court
order of any Governmental Authority in connection with the performance by
Grantor of its obligations under this Agreement; and (iv) any interference with
or infringement of the rights of a third party as a result of a Grantee
Indemnified Party's use of the Grantor System in accordance with the provisions
of this Agreement.
16.02 Grantee hereby agrees to indemnify, defend, protect and hold harmless
Grantor and its Affiliates, and their respective employees, officers, directors,
agents and representatives (the "Grantor Indemnified Parties") from and against,
and assumes
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liability for, any and all Losses of Grantor or any other Grantor Indemnified
Party which arise out of or result from, directly or indirectly, in whole or in
part: (i) the breach by Grantee of any of its representations, covenants or
other obligations hereunder; (ii) the negligence or willful misconduct of
Grantee, its officers, employees, servants, Affiliates, agents, contractors,
licensees, invitees and vendors arising out of or in connection with the
performance by Grantee or such other Persons of their respective obligations
under this Agreement; and (iii) any violation by Grantee or its Affiliates of
any regulation, rule, statute or court order of any Governmental Authority in
connection with the performance by Grantee of its obligations under this
Agreement.
16.03 Grantor and Grantee agree to promptly provide each other with notice
of any claim which may result in an indemnification obligation hereunder,
provided, however, that the indemnifying party's obligations hereunder shall not
be affected by the failure to give such notice except to the extent that it can
demonstrate that it was materially prejudiced thereby. The indemnifying party
may defend such claim and, if it so elects, such defense shall be controlled by
the indemnifying party and all costs associated with such defense shall be borne
by the indemnifying party. In any such proceeding, the indemnified party shall
have the right to participate in such defense at its own expense, provided that
the indemnifying party shall pay the reasonable fees and expenses of counsel
retained by the indemnified party in the event that (i) the indemnifying party
and the indemnified party shall have mutually agreed to the retention of such
counsel or (ii) the named parties to any such proceedings (including any
impleaded parties) include both the indemnifying party and the indemnified party
and the representation of both parties by the same counsel would be
inappropriate, in the reasonable opinion of the indemnified party, due to
material, actual or potential differing interests between them. In the event
that the indemnified party retains separate counsel at the indemnified party's
expense in accordance with the foregoing sentence, the indemnified party and its
counsel will reasonably cooperate with the indemnifying party and its counsel in
order to minimize the indemnifying party's overall legal expenses relating to
the claim. In no event shall the indemnifying party be liable for more than one
firm of attorneys (in addition to local counsel with respect to any jurisdiction
in which
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local counsel may be required) for all indemnified parties in any one legal
action or group or related legal actions.
16.04 The indemnifying party shall have the right to settle or compromise
any such claim of which it has assumed the defense only upon the receipt of
written consent to such settlement or compromise from the indemnified party,
which consent shall not be unreasonably withheld or delayed; provided, however,
that the indemnified party shall not be obligated to consent to any settlement
unless it involves claims for money damages only or other relief not involving
or affecting the indemnified party, which are being paid or performed in full by
other than the indemnified party, and any such failure to consent shall not be
deemed unreasonable.
16.05 If the indemnifying party fails to assume the defense of a claim
pursuant to Section 16.03, then, upon twenty (20) days notice to the
indemnifying party setting forth the details thereof, the indemnified party
shall have the right to pay, compromise or defend any such claim (without
further notice to the indemnifying party) and to assert the amount of any
payment on such claim plus the expense of defense or settlement as an indemnity
claim. The indemnified party shall also have the right, exercisable in good
faith and upon reasonable prior notice to the indemnifying party, to take such
action as may be reasonably necessary to avoid a default prior to the assumption
of the defense of the claim by the indemnifying party and any expenses incurred
by so acting shall be paid by the indemnifying party.
16.06 Grantor and Grantee each expressly recognize and agree that its
obligation to indemnify, defend, protect and save the other harmless is not a
material obligation to the continuing performance of its obligations, if any,
hereunder. In the event that a party shall fail for any reason to so indemnify,
defend, protect and save the other harmless, the injured party hereby expressly
recognizes that its sole remedy in such event shall be the right to bring legal
proceedings against the other party for its damages as a result of the other
party's said failure to indemnify, defend, protect and save harmless. These
obligations shall survive the expiration or termination of this Agreement.
16.07 Notwithstanding the foregoing provisions of this Article 16, to the
extent Grantor is required under the terms and provisions of any Required Right
to indemnify
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the grantor or provider thereof from and against any and all claims, suits,
judgments, liabilities, losses and expenses arising out of the service
interruption, cessation or unreliability of the Grantor System, regardless of
whether such claims, suits, judgments, liabilities, losses or expenses arise
from the sole or partial negligence, actions or inaction of such grantor or
provider and its employees, servants, agents, contractors, sub-contra