Indefeasible Right of Use (IRU) Agreement between Pathnet Operating, Inc. and Enron Broadband Services (January 18, 2001)

 * IMPORTANT NOTE: CERTAIN MATERIAL, INDICATED BY AN ASTERISK ("*"), HAS BEEN OMITTED FROM THIS DOCUMENT PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. CONFIDENTIAL AND PROPRIETARY - ---------------------------- IRU AGREEMENT BY AND BETWEEN PATHNET OPERATING, INC., AS GRANTOR AND ENRON BROADBAND SERVICES, AS GRANTEE DATE: January 18, 2001 IRU AGREEMENT THIS IRU AGREEMENT (this "Agreement") is made and entered into as of January 18, 2001 (the "Effective --------- ---------- Date") by and between Pathnet Operating, Inc., a Delaware corporation ("Pathnet"), and Enron Broadband Services, - ---- ------- Inc., an Oregon corporation ("Customer"). -------- RECITALS -------- A. Pathnet owns or is planning to construct a fiber optic communication system (the "Pathnet -------- System") between the city pairs and locations identified in Exhibit A, which is attached hereto and incorporated --------- herein by this reference (the "System Route"). ------------ B. Customer desires to be granted the right to use, and Pathnet is willing to grant to Customer an indefeasible right to use certain dark fibers and Associated Conduit in the Pathnet System, on the terms and conditions set forth below. C. Each defined term shall have the meaning set forth in this Agreement where such term is first used, or, if no meaning is so set forth, the meaning ascribed to such term in the Glossary of Terms which is attached hereto and incorporated herein by this reference. Accordingly, in consideration of the mutual promises set forth below, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: ARTICLE 1. GRANT OF IRU ------------ 1.1 Pathnet hereby grants to Customer, and Customer hereby accepts from Pathnet, an indefeasible right to use (the "IRU"): --- (a) Six (6) dark fibers on the segment from Chicago, IL to Denver, CO, which will be specifically identified by Pathnet in the Pathnet System, as more particularly described in Exhibit A, attached hereto and incorporated herein, and meeting the specifications set forth in Exhibit D, attached hereto and incorporated herein (the "Customer Fibers"); and in --------------- (b) an undivided interest in the Conduit containing the Customer Fibers, calculated pro rata and based upon the ratio of the number of Fibers in the Conduit to the total number of fibers in the Conduit (the "Associated Conduit"). ------------------ 1.2 The IRU is granted on the terms and subject to the covenants and conditions set forth in this Agreement. The IRU shall be exclusive as to the Customer Fibers, and nonexclusive as to the Associated Conduit. The IRU does not include the right of Customer to own, control, maintain, modify or revise the Customer Fibers or Associated Conduit, or the right of physical access to, the right to encumber in any manner, or other use of the Pathnet System except as expressly set forth herein. Customer's rights in the Customer Fibers and Associated Conduit are hereinafter referred to as the "Customer System"). 1.3 Each party shall have full and complete control and responsibility for determining any network and service configuration or designs, routing configurations, regrooming, rearrangement or consolidation of channels or circuits and all related functions with regard to the use of that party's fiber. 1.4 Customer acknowledges and agrees that, except as provided in section 7.2, Pathnet is not supplying nor is Pathnet obligated to supply to Customer any optronics or electronics or optical or electrical equipment or other facilities, including without limitation, generators, batteries, air conditioners, fire protection and monitoring and testing equipment, all of which are the sole responsibility of Customer, nor is Pathnet responsible for performing any work other than as specified in this Agreement. 1.5 The Acceptance Date shall be as set forth in Section 4.1. 1.6 [Intentionally omitted.] ARTICLE 2. CONSIDERATION FOR GRANT ----------------------- 2.1 In consideration of the grant of the IRU hereunder by Pathnet to Customer, Customer agrees to pay to Pathnet, within five (5) days after the Acceptance Date, an IRU fee (the "IRU Fee") of the amount of -------- "*", payable on the Delivery Date. Payment shall be made to an escrow account specified by Pathnet.. 2.2 In addition to the amounts payable under Section 2.1, Customer shall pay directly or reimburse Pathnet for all costs and expenses to be paid by Customer as set forth in this Agreement, including, without limitation, the costs and expenses described in Articles 7, 8 and 13. 2.3 The consideration for the use of the space in Pathnet's facilities described in section 7.2 shall be as provided in the Collocation Agreement attached hereto as Exhibit H, and payable as set forth therein. 2.4 Customer shall pay the IRU Fee by wire transfer of immediately available funds to the account or accounts designated by Pathnet. 2.5 If Customer fails to make any payment under this Agreement when due, such amount shall accrue interest from the date such payment is due until paid, including accrued interest compounded monthly, at an annual rate of twelve percent (12%) or, if lower, the highest percentage allowed by law. If a dispute arises concerning an amount due by Customer, and it is later determined that the amount is due and owing to Pathnet, such amount shall bear interest from the date when due until paid, at the foregoing rate. ARTICLE 3 INTENTIONALLY OMITTED ARTICLE 4. TESTING AND WARRANTY - -------------------- 4.1. Testing. ------- (a) Pathnet shall test all Customer Fibers in accordance with the procedures specified in Exhibit C --------- ("Fiber Testing") to verify that the Customer Fibers have been installed and operating in accordance with the -------------- specifications described in Exhibit C. Pathnet shall deliver a copy of the test results to Customer no later --------- than ten (10) days after completion of testing. If, within ten (10) days after receipt by Customer from Pathnet of the initial test results or of the results of re-testing as set forth below, Customer reasonably determines that the test results are unacceptable, Customer shall, within such ten (10) day period, notify Pathnet of such determination and Customer shall have the right, but not the obligation, at its sole expense, to conduct its own fiber acceptance testing of the Customer Fibers to verify that they are operating in accordance with the specifications in Exhibit C ("Fiber Acceptance Testing"). Customer shall commence its Fiber Acceptance Testing ---------------------------------------- of the Customer Fibers within ten (10) days of such notice to Pathnet and shall complete such testing within fourteen (14) days thereafter. Pathnet shall have the right, but not the obligation, to have a person or persons present to observe and validate Customer's Fiber Acceptance Testing. Within ten (10) days of the conclusion of Customer's Fiber Acceptance Testing of the Customer Fibers, Customer shall provide Pathnet with a copy of the test results and notify Pathnet in writing of acceptance of the Customer Fibers or that the Customer Fibers are unacceptable. (b) In the event the results of Customer's tests of the Customer Fibers show the Customer Fibers are not operating within the parameters of the applicable specifications and Customer has so notified Pathnet in writing, Pathnet shall expeditiously take such action as shall be reasonably necessary with respect to such portion of the Customer Fibers that do not operate within the parameters of the specifications to bring the operating standards of such portion of the Customer Fibers within such parameters. After taking such actions and re-testing of the Customer Fibers, Pathnet shall provide Customer with a copy of the new test results and Customer shall again have the right to conduct its own Fiber Acceptance Testing as set forth above. The cycle described above of testing, taking corrective action and re-testing shall take place as many times as necessary to ensure that the Customer Fibers operate within the parameters of the applicable specifications. (c) Customer shall be deemed to have accepted the Customer Fibers unless it notifies Pathnet within ten (10) days of receipt of the test results, as specified in this Section 4 that such results are unacceptable. If the test results of Customer's Fiber Acceptance Testing are within the parameters of the specifications in Exhibit C, Customer shall, within ten (10) days of receipt of Customer's test results, provide --------- Assignor with a written notice accepting the Customer Fibers. The date of this notice or the date of deemed acceptance, as the case may be, of the Customer Fibers for all Assigned Segments shall be the "Acceptance Date." (d) The Customer Fibers will be terminated at a fiber distribution panel in the Facilities. Customer shall provide its own stub cables from the fiber distribution panel to Customer's equipment. 4.2 Warranty. Beginning on the Effective Date, and ending twelve months following the Effective Date, -------- Pathnet shall warrant that, except for those items that are supplied or specified by Customer the Customer Fibers shall comply with the specifications set forth in Exhibit C. If within one year following the Effective Date, --------- Customer discovers that the Customer Fibers do not meet the warranty described above, Pathnet shall, within fifteen (15) days of receipt of written notice of such defect from Customer, inspect such Customer Fibers and promptly thereafter, and at no cost to Customer, correct any such defect or notify Customer of its dispute as to any defects recited in Customer's notice. EXCEPT AS SET FORTH IN THIS SECTION OR IN ARTICLE 21, PATHNET MAKES NO WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE CUSTOMER FIBERS OR OTHER ASSOCIATED MATERIALS FOR THE CUSTOMER FIBERS, INCLUDING ANY WARRANTY OF MERCHANTABILITY AND FITNESS FOR PARTICULAR PURPOSE, AND ALL SUCH WARRANTIES ARE EXPRESSLY DISCLAIMED. IN ADDITION, PATHNET MAKES NO WARRANTIES OR REPRESENTATIONS OF ANY TYPE CONCERNING THE INTEGRITY OR PERFORMANCE OF THE MATERIALS FURNISHED OR DESIGNATED BY CUSTOMER. (a) With respect to items of materials furnished or specified by Customer, Pathnet agrees to pass on and assign to Customer any warranty it may have received from the manufacturer or supplier, to the extent that it is assignable. (b) Customer's sole and exclusive remedy for breach of the warranty, shall be repair and replacement, at Pathnet's expense, of the portions of Customer Fibers found to be defective. In no event shall Pathnet be liable to Customer for any indirect, exemplary, special or consequential damages, including but not limited to lost profits or the cost of providing or obtaining alternative service. ARTICLE 5. DOCUMENTATION ------------- Not later than sixty (60) days after the Facilities Delivery Date, Pathnet shall provide Customer with the following documentation: (a) As-built drawings in accordance with the requirements described in Exhibit B --------- ("As-Builts"). - ----------- (b) Technical specifications of the optical fiber cable and associated splices and other equipment placed in the Pathnet System. ARTICLE 6. TERM ---- 6.1 The grant of the IRU shall become effective on the Effective Date and shall extend until June 30, 2020. The period of the IRU is herein defined as the "Initial Term." Subject to the conditions and limitations set ------------- forth below, and subject to the extension of the Underlying Rights, Customer may, by written notice, extend the IRU grant and this Agreement for an additional ten (10) year period or such shorter period as required by the Underlying Rights, and, if it has so elected to so extend, it may, by written notice, extend the IRU grant and this Agreement for a second ten (10) year period or such shorter period as required by the Underlying Rights (each of such periods being referred to herein as a "Renewal Term"). Customer shall provide such written notice ------------- at least one (1) year in advance of the date the Initial Term or the extension thereof would expire absent such notice. Within thirty (30) days after the date on which Pathnet has received Customer's written notice electing to extend the term of this IRU and requesting a report on the remaining term of the Underlying Rights, Pathnet will advise Customer of the remaining term of all applicable Underlying Rights, and, if such Underlying Rights do not extend for the entire length of the extended term, Customer shall have the right to (i) extend this Agreement for the entire renewal term or for less than the renewal term (but in either of such events Customer shall obtain renewals of such Underlying Rights, in Customer's name, at Customer's sole cost, prior to such renewal term), or, at Pathnet's option, in Customer's and Pathnet's names, in which latter case Customer and Pathnet shall share the costs, with Pathnet paying the costs attributable to all IRU holders in the same Cable who claim through Pathnet (except Customer and its assignees)), or (ii) withdraw its election to extend the term of this Agreement. Customer shall not be responsible for any IRU for any Renewal Term, but shall be liable for its Proportionate Share (as defined in Section 9.3) of the costs incurred under all Underlying Rights, and all other charges incurred under this Agreement during any such Renewal Term, including, without limitation, charges for maintenance, collocation services and Impositions. Customer shall have the right (but not the obligation) to extend or obtain modification of any Underlying Right, on Customer's own behalf and at its sole cost, to the extent Customer deems appropriate in connection with any extension of the Term. 6.2 At the end of the Initial Term or the last Renewal Term, as applicable, Pathnet shall transfer title to the Customer Fibers and Associated Conduit to Customer pursuant to a bill of sale reasonably acceptable to both parties. Upon such conveyance the IRU in the Customer Fibers shall immediately terminate and all rights of Customer pursuant to this Agreement shall cease and, except as to liabilities or obligations that accrue prior to such termination, expressly survive termination or expiration of this Agreement, or are incurred pursuant to Articles XI, XII, XIII, XV, or Article XIX, neither Party shall owe the other any additional duties or consideration hereunder. Unless Pathnet and Customer shall have entered into an Operation, Maintenance and Repair Agreement substantially in the form of Exhibit I, Customer shall, within sixty (60) days after the end of --------- the Term (unless the Parties agree to a longer period), remove all electronics and equipment from the System, including any Pathnet facilities, at Customer's sole cost, under Pathnet's supervision. In the event of failure of Customer to remove same within said period, Pathnet may remove same at Customer's sole expense, to be reimbursed by Customer within thirty (30) days of receipt of Pathnet's invoice therefor. In order for the equipment or facilities of Customer to be or remain connected to the System, Customer and Pathnet must have entered into an Operation Maintenance and Repair Agreement substantially in the form of Exhibit I. --------- 6.3 It is understood and agreed that Pathnet must and does maintain legal title to the entire Pathnet System, subject to the IRU hereunder. Notwithstanding the foregoing, it is understood and agreed as between the parties that the grant of the IRU hereunder shall be treated for accounting and federal and all applicable state and local tax purposes as the sale and purchase of the Customer Fibers, and that on or after the Effective Date, Customer shall be treated as the owner of the Customer Fibers for such purposes. The parties agree to file their respective income tax returns, property tax returns, and other returns and reports for their respective Impositions on such basis and, except as otherwise required by law, not to take any positions inconsistent therewith. Notwithstanding the foregoing, if a party's third-party financial auditors, in the exercise of their good faith judgment, determine that a different treatment is more appropriate, such party may use the treatment recommended by its auditors. In that event, such party will give written notice to the other party of the reasons for such requirement as provided by its auditors. ARTICLE 7. NETWORK ACCESS; REGENERATION FACILITIES --------------------------------------- 7.1 (a) The locations along the Pathnet System right-of-way where Pathnet regenerator, amplifier, junction and POP facilities are located are set forth in Exhibit E, that is attached hereto and --------- incorporated herein by this reference (the "Facility Locations"). Provided that Pathnet has received payment in ------------------- full of the IRU Fee, Pathnet shall provide Customer with: (1) access to the Pathnet fiber distribution panels at those locations described in Exhibit E-1; ----------- (2) the right to space in the Facilities as described in Exhibit E-2 and Exhibit H. Customer's use of ------------ --------- Facility Locations is subject to the Underlying Rights Requirements. A description of the material specifications for the Facility Locations is set forth in Exhibit F. --------- (b) Pathnet shall provide Customer with access to the Customer Fibers by cable stub taken by Pathnet from the Pathnet System and delivered to Customer's system at fiber distribution panels at the Facilities (the "Connecting Points"). Customer shall provide its own cable from the fiber distribution panel to ------------------ Customer's equipment. (c) If Customer desires additional Connecting Points on the Pathnet System, the parties will negotiate in good faith the terms and conditions for such additional Connecting Points. All Connecting Points shall be placed at splice points. (d) All connections shall be performed by Pathnet, in accordance with Pathnet's applicable specifications and operating procedures. The cost of such connections will be borne by Customer. It is the responsibility of Customer to obtain all governmental and other approvals and consents necessary for the delivery of the cable stub. (e) Customer shall pay Pathnet's Costs for each connection within thirty (30) days of the date of Customer's receipt of Pathnet's invoice therefor. In order to schedule a connection of this type, Customer shall request and coordinate such work not less than ninety (90) days in advance of the date the connection is requested to be completed. Such work will be restricted to a Planned System Work Period, unless otherwise agreed to in writing for specific projects. Subject to all applicable Underlying Rights Requirements, Pathnet shall provide Customer with reasonable access to the Connecting Points at all times. Neither Pathnet nor Customer shall have any limitations on the types of electronics or technologies employed to utilize its fibers, subject to Pathnet safety procedures and so long as such electronics or technologies do not interfere with the use of or present a risk of damage to any portion of the other party's system. (f) Pathnet may route the Customer Fibers through Pathnet's separate terminal, end link, POP or regeneration facilities at its sole discretion, and Pathnet shall be responsible for all costs and expenses associated therewith. 7.2 If Pathnet makes available to Customer space in any Facility Location, Customer's occupancy of such space shall be governed by the terms of Pathnet's standard form of collocation agreement, attached hereto as Exhibit H, as well as the terms of this Agreement. In addition, the provisions of Section 8.2 shall apply with - --------- respect to sharing of operating costs. Customer shall execute and deliver the collocation agreement contemporaneously with the execution and delivery of this Agreement. ARTICLE 8. MAINTENANCE AND REPAIR OF THE PATHNET SYSTEM -------------------------------------------- 8.1 From and after the Fiber Testing, the maintenance of the Pathnet System shall be provided in accordance with the maintenance requirements and procedures set forth in Exhibit G hereto. Customer agrees to pay --------- maintenance fees in accordance with the provisions of Exhibit G. --------- 8.2 Customer shall pay its share of all set-up charges and operating costs incurred by Pathnet in connection with the operation or maintenance of the regeneration, amplifier, junction and POP or terminal facilities, in accordance with the form of collocation agreement that is attached hereto as Exhibit G, and incorporated herein by this reference. ARTICLE 9. PERMITS; UNDERLYING RIGHTS; RELOCATION -------------------------------------- 9.1 Pathnet shall obtain and maintain throughout the Initial Term all Underlying Rights necessary to permit Customer to use and enjoy the IRU Fibers, its share in the Associated Conduit and collocation space as provided herein. The IRU granted hereunder is further subject and subordinate to the prior right of the grantor of the Underlying Rights to use the right of way for other business activities, including railroad operations, telecommunications uses, pipeline operations or any other purposes, and to the prior right of Pathnet to use its rights granted under the Underlying Rights. 9.2 On Customer's written request, Pathnet shall make available for inspection by Customer, at the location where such records are kept, copies of all information, documents, agreements, reports, permits, drawings and specifications that are material to the grant of the IRU to Customer, including, without limitation and to the extent available, the Underlying Rights, to the extent that their terms or other legal restrictions permit disclosure. Pathnet may redact confidential or proprietary business terms. 9.3 If during the Term, Pathnet is required, by a party with the contractual or legal right to so require, to relocate any part of the Customer System, including any of the facilities used or required in providing the IRU, Pathnet shall proceed with such relocation, including, but not limited to, the right, in good faith, to reasonably determine the extent of, the timing of, and methods to be used for such relocation; provided that (a) any such relocation shall be constructed and tested in accordance with the specifications and drawings set forth in Exhibits B and C, and incorporate fiber meeting the specifications set forth in Exhibit D; ---------- - ---------- (b) Pathnet shall maintain the same end points and Facility locations of the Customer System; (c) the relocation shall be coordinated with Customer to minimize any effect on the Customer's System; and (d) (i) if the relocation is due to circumstances beyond the control of Pathnet, then Customer shall be responsible for its Proportionate Share (as hereinafter defined) of any costs in excess of $"*"; (ii) if the relocation is due to the negligence or willful misconduct of Pathnet, or for the convenience of Pathnet, or if it is required due to Pathnet's failure to maintain an Underlying Right during the Initial Term, the relocation shall be conducted at the sole cost and expense of Pathnet; and (iii) otherwise, the parties will negotiate in good faith to determine whether relocation is appropriate and how costs should be allocated. For purposes of determining Customer's Proportionate Share, applicable costs (net of reimbursements from third-persons not having an interest in the System) shall be allocated equally across all the conduits in the affected segment of the System, and then, with respect to a conduit, equally among the fibers (whether sold or unsold, dark or lit) in such conduit. Customer's "Proportionate Share" shall be the costs allocated to its individual fibers in such manner. 9.4 Pathnet shall deliver to Customer updated As-Builts with respect to the relocated segment not later than ninety (90) days following the completion of such relocation. 9.6 Pathnet has obtained or will obtain Underlying Rights that have a stated term of not less than the Initial Term. ARTICLE 10. USE OF PATHNET SYSTEM --------------------- 10.1 The requirements, restrictions, and/or limitations on Customer's right to use the Customer Fibers and Associated Conduit, and safety, operational and other rules and regulations imposed in connection with the Underlying Rights are referred to collectively as the "Underlying Rights Requirements." ------------------------------ 10.2 Customer represents, warrants and covenants that it will use the Customer Fibers and Associated Conduit in compliance with and subject to the Underlying Rights Requirements and all applicable government codes, ordinances, laws, rules and regulations, provided that such Underlying Rights Requirements do not unreasonably and materially interfere with Customer's use and enjoyment of the Customer Fibers and Associated Conduit. 10.3 Subject to the limitations set forth in this Agreement, Customer may use the Customer Fibers and the Associated Conduit for any lawful telecommunications purpose. Customer agrees and acknowledges that it has no right to use any of the fibers that are part of the Pathnet System, other than the Customer Fibers. Customer shall keep all portions of the Pathnet System free from any liens, rights or claims of any third party attributable to Customer, except that Customer may encumber the IRU granted to Customer in the Customer Fibers and Customer's interest in Associated Conduit, on the condition that the interest of any lien holder is subordinate to the interest of Pathnet and other interests and rights in and to the Customer Fibers and the Associated Conduit. 10.4 Pathnet acknowledges and agrees that it has no right to use the Customer Fibers during the Term hereof. 10.5 Customer and Pathnet shall promptly notify each other of any matters pertaining to, or the occurrence (or impending occurrence) of, any event which would be reasonably likely to give rise to any damage or impending damage to or loss of the Pathnet System that are known to such party. 10.6 Customer shall not use its systems in a way that interferes in any way with or adversely affects the use of the fibers or cable of any other person using the Pathnet System. The parties acknowledge that the Pathnet System includes or will include other participants, including Pathnet and other owners and users of telecommunication systems. 10.7 Customer and Pathnet each agrees to cooperate with and support the other in complying with any requirements applicable to their respective rights and obligations hereunder. ARTICLE 11 INDEMNIFICATION; ----------------- LIMITATION OF LIABILITY. ----------------------- 11.1 Subject to the provisions of Section 11.4, Customer hereby releases and agrees to indemnify, defend, protect and hold harmless Pathnet, its Affiliates, and its and their employees, officers, directors, agents, contractors, and shareholders ("Indemnified Persons"), from and against any third party claims, suits, proceedings and actions ("Claims") for: (a) Any injury, death, loss or damage to any person, tangible property or facilities of any person or entity (including reasonable attorney fees and costs at trial and appeal) to the extent arising out of or resulting from the acts or omissions, negligent or otherwise, of Customer, its officers, directors, employees, agents or contractors in connection with its performance or non-performance under this Agreement; (b) Any liabilities or damages (including reasonable attorney fees and costs at trial and appeal) arising out of any violation by Customer of regulations, rules, statutes or court orders of any local, state or federal governmental agency, court or body in connection with its performance under this Agreement; and (c) Any liabilities or damages asserted by Customer's telecommunications clients and arising directly or indirectly from any outages, disruptions or interruptions of service in the operation of the Customer Fibers or any failure of such fibers to transmit accurately any message. 11.2 Subject to the provisions of Section 11.4, Pathnet hereby releases and agrees to indemnify, defend, protect and hold harmless Customer and its Indemnified Persons from and against any third party Claims for: (a) Any injury, death, loss or damage to any person, tangible property or facilities of any person or entity (including reasonable attorney fees and costs at trial and appeal), to the extent arising out of or resulting from the acts or omissions, negligent or otherwise, of Pathnet, its officers, directors, employees, agents or contractors in connection with its performance or non-performance under this Agreement; (b) Any liabilities or damages (including reasonable attorney fees and costs at trial and appeal) arising out of any violation by Pathnet of regulations, rules, statutes or court orders of any local, state or federal governmental agency, court or body in connection with its performance under this Agreement; and (c) Any failure by Pathnet to obtain and/or maintain, throughout the Initial Term, all Underlying Rights reasonably necessary or appropriate to permit Customer to use and enjoy the Customer Fibers, Associated Conduit and collocation space, as provided herein. Customer shall be permitted to participate in any such defense at its sole cost and expense, provided it conducts such participation in a manner that does not interfere with Pathnet's defense. 11.3 Pathnet and Customer hereby expressly recognize and agree that each Party's obligation to indemnify, defend, protect and save harmless Indemnified Persons is a material obligation to the continuing performance of the Parties' other obligations, if any, hereunder. However, in the event that either Pathnet or Customer fails for any reason to so indemnify, defend, protect and save harmless, the injured Party's sole remedy in such event shall be the right to bring an arbitration proceeding pursuant to the terms of this Agreement against the other for damages as a result of such failure to indemnify, defend, protect and save harmless. The obligations of this Section 11.3 shall survive the expiration or earlier termination of this Agreement. Pathnet and Customer each affirmatively state and warrant to the other that its indemnity obligation as to property damage or personal injury will be supported by liability insurance to be furnished by it; provided that recovery -------- under or in respect of this indemnity shall not be limited to the proceeds of any such insurance. 11.4 Notwithstanding any provision of this Agreement to the contrary, neither party shall be liable to the other party for any special, incidental, indirect, punitive or consequential costs, liabilities or damages, whether foreseeable or not, arising out of, or in connection with, such party's performance of its obligations under this Agreement. Nothing contained herein shall operate as a limitation on the right of either Pathnet or Customer to bring an action for damages against any third party, including indirect, special, or consequential damages, based on any acts or omissions of such third party as such acts or omissions may affect the construction, operation or use of the Customer Fibers or the System or any portion thereof; provided, -------- however, the above limitation of liability shall apply to indirect liability including Claims against third parties who, directly or through one or more other parties, have a right of indemnification, impleader, cross-claim, contribution or other right of recovery against a Party to this Agreement. Each of Pathnet and Customer shall assign such rights or claims, execute such documents and do whatever else may be reasonably necessary to enable the other to pursue any such action against such third party. ARTICLE 12. INSURANCE --------- 12.1 At all times during the Term each party shall procure and maintain in force, at its own expense: (a) not less than $10,000,000 (which may include umbrella liability coverage) combined single limit liability insurance, on an occurrence basis, for personal injury and property damage, including, without limitation, injury or damage arising from the operation of vehicles or equipment and liability for completed operations; (b) workers' compensation insurance in amounts required by applicable law and employers' liability insurance with a limit of at least $1,000,000 per occurrence; (c) automobile liability insurance covering death or injury to any person or persons, or damage to property arising from the operation of vehicles or equipment, with limits of not less than $2,000,000 per occurrence; and (d) any other insurance coverages specifically required of such party pursuant to Pathnet's right-of-way agreements with railroads or other third parties. 12.2 Both parties expressly acknowledge that a party shall be deemed to be in compliance with the provisions of this Article if it maintains a self-insurance program providing for a retention of up to $1,000,000. If either party provides any of the foregoing coverages on a claims-made basis, such policy or policies shall be for at least a three-year extended reporting or discovery period. Unless otherwise agreed, Customer's and Pathnet's insurance policies shall be obtained and maintained with companies rated "A" or better by Best's Key Rating Guide and each party shall provide the other with an insurance certificate confirming compliance with this requirement for each policy providing such required coverage. 12.3 If either party fails to obtain the required insurance or fails to obtain the required certificates from any contractor and a claim is made or suffered, such party shall indemnify and hold harmless the other party from any and all claims for which the required insurance would have provided coverage. Further, in the event of any such failure which continues after seven (7) days' written notice thereof by the other party, such other party may, but shall not be obligated to, obtain such insurance and will have the right to be reimbursed for the cost of such insurance by the party failing to obtain such insurance. 12.4 In the event coverage is denied or reimbursement of a properly presented claim is disputed by the carrier for insurance provided above, the party carrying such coverage shall make good-faith efforts to pursue such claim with its carrier. 12.5 Customer and Pathnet hereby mutually waive their respective rights of recovery against each other and the officers, directors, shareholders, partners, joint venturers, employees, agents, customers, invitees, or business visitors of either party, for any loss arising from any cause covered or that would be covered by fire, extended coverage, All Risks or other insurance required to be carried under this Agreement or now or hereafter existing for the benefit of the respective party. Customer and Pathnet will cause from time to time their respective insurers to issue appropriate waiver of subrogation rights endorsements to all property insurance policies carried in connection with their respective property. ARTICLE 13. TAXES, FEES AND OTHER GOVERNMENTAL IMPOSITIONS ---------------------------------------------- 13.1 The parties acknowledge and agree that it is their mutual objective and intent to (a) minimize the aggregate Impositions payable with respect to the Pathnet System, and (b) share such Impositions according to their respective interests in the Pathnet System. They agree to cooperate with each other and coordinate their efforts to achieve such objectives in accordance with the provisions of this Article. 13.2 Pathnet shall be responsible for and shall timely pay any and all Impositions with respect to the construction or operation of the Pathnet System which Impositions are (a) imposed or assessed prior to the Effective Date; or (b) imposed or assessed in exchange for the approval of the original construction of the Pathnet System; or (c) that were assessed in return for the original right to install the Pathnet System on public property or in public right of way. 13.3 Except as to Impositions described in section 13.2, following the Effective Date Customer shall be responsible for and shall pay all Impositions (a) imposed on, based on, or otherwise measured by the gross receipts, gross income, net receipts or net income received by or accrued to Customer with respect to the ownership (consistent with Section 6.3) or use of the Customer Fibers; or (b) which have been separately assessed, allocated to, or imposed on the Customer Fibers. If the Customer Fibers are the only fibers located in a segment from the point where the segment leaves the Pathnet System right-of-way to a Customer POP, Customer shall be solely responsible for any and all Impositions imposed on or with respect to such segment. (a) To the extent such Impositions are not separately assessed, allocated to or imposed on the Customer Fibers, Pathnet will pay all such Impositions. Pathnet shall notify Customer of such Imposition, and Customer shall promptly reimburse Pathnet for Customer's Proportionate Share of all such Imposition. 13.4 Pathnet shall have the right to contest any Imposition (including by nonpayment of such Imposition). The out-of-pocket costs and expenses (including reasonable attorneys' fees) incurred by Pathnet in any such contest shall be shared by Pathnet and Customer in the same proportion as to which the parties would have shared in such Impositions as they were assessed. Any refunds or credits resulting from a contest brought pursuant to this Section shall be divided between Pathnet and Customer in the same proportion as separately determined or as originally assessed. In any such event, Pathnet shall provide timely notice of such challenge to Customer. 13.5 Customer shall have the right to protest by appropriate proceedings any Imposition. In such event, Customer shall indemnify and hold Pathnet harmless from any expense, legal action or cost, including reasonable attorneys' fees, resulting from Customer's exercise of its rights hereunder. (a) The foregoing notwithstanding, Pathnet, at its option and at its own expense, shall have the right to direct and manage any contest regarding an Imposition that relates to the Pathnet System that affects the interest of Pathnet; subject, however, to reasonable and appropriate consultation with Customer. Customer agrees to cooperate with Pathnet in any such contest. (b) If Customer has exhausted all its rights of appeal in protesting any Imposition and has failed to obtain the relief sought in such proceedings or appeals ("Finally Determined Taxes and Fees"), Customer and Pathnet may ---------------------------------- agree to relocate a portion of the Pathnet System to avoid the jurisdiction that imposes or assesses such Finally Determined Taxes and Fees (subject to the consent and participation of the other interest holders in the affected portion of the Pathnet System). If Customer and Pathnet do not determine to relocate the affected portion of the Pathnet System, Customer shall have the right to terminate its use of the Customer Fibers in the affected portion of the Pathnet System. Such termination shall be effective on the date specified by Customer in a notice of termination, but not earlier than ninety (90) days after the notice. Upon such termination, the IRU in the affected portion of the Pathnet System shall immediately terminate, and the Customer Fibers in the affected portion of the Pathnet System shall thereupon revert to Pathnet without reimbursement of any of the IRU Fee or other payments previously made with respect thereto. 13.6 Pathnet and Customer agree to cooperate fully in the preparation of any returns or reports relating to the Impositions. Pathnet and Customer further acknowledge and agree that the provisions of this Article are intended to allocate the Impositions on procedures and methods of computation that are in effect on the date of this Agreement. Material changes in such procedures and methods could significantly alter the fundamental economic assumptions of the parties underlying this Agreement. Accordingly, the parties agree that, if such procedures or methods of computation change materially, the parties will negotiate in good faith an amendment to this Article to preserve, to the extent reasonably practicable, the economic intent and effect of this Article. ARTICLE 14. NOTICES ------- All notices and other communications required or permitted under this Agreement shall be in writing and shall be given by United States first class mail, postage prepaid, registered or certified, return receipt requested, or by hand delivery (including by means of a professional messenger service or overnight mail) addressed as follows: All notices and other communications shall be given to Customer at: Enron Broadband Services, Inc. 1400 Smith Street Houston TX 77002 Attn: Vice President, IRU Transactions with a copy to: Enron Broadband Services, Inc. 1400 Smith Street Houston TX 77002 Attn: General Counsel All notices and other communications shall be given to Pathnet at: Pathnet 11720 Sunrise Valley Drive Reston, Virginia 20191 Attn: Vice President, Network Operations Attn: General Counsel Any such notice or other communication shall be deemed to be effective when actually received or refused. Either party may by similar notice given change the address to which future notices or other communications shall be sent. ARTICLE 15. CONFIDENTIALITY --------------- 15.1 As used herein, "Confidential Information" shall mean this Agreement and all materials, maps, ------------------------- and other documents that are marked confidential and disclosed by one party to the other in fulfilling the provisions and intent of this Agreement, as well as confidential or proprietary information that is orally disclosed, provided that, for information that is orally disclosed, the disclosing party indicates to recipient at the time of disclosure the confidential or proprietary nature of the information and confirms in writing to the recipient within 30 days after such disclosure that such information is confidential. Each party agrees to hold the Confidential Information of the other party in confidence. Neither party shall divulge or otherwise disclose the provisions of this Agreement to any third party without the prior written consent of the other party, except that either party may make disclosure to those required for the implementation of this Agreement, and to customers and prospective customers, purchasers and prospective purchasers, auditors, attorneys, financial advisors, lenders and prospective lenders, investors and prospective investors, provided that in each case the recipient agrees in writing to be bound by the confidentiality provisions set forth in this section. In addition, either party may make disclosure as required by a court order or as otherwise required by law or in any legal or arbitration proceeding relating to this Agreement. If either party is required by law or by interrogatories, requests for information or documents, subpoena, civil investigative demand or similar process to disclose the provisions of this Agreement or the design information referred to in this Section, it will provide the other party with prompt prior written notice of such request or requirement so that such party may seek an appropriate protective order and/or waive compliance with this Section. The party whose consent to disclose information is requested shall respond to such request, in writing, within five (5) working days of the request by either authorizing the disclosure or advising of its election to seek a protective order, or if such party fails to respond within the prescribed period the disclosure shall be deemed approved. (a) Nothing herein shall be construed as granting any right or license under any copyrights, inventions, or patents now or hereafter owned or controlled by Pathnet. (b) Upon termination of this Agreement for any reason or upon request of Pathnet, Customer shall return all Confidential Information, together with any copies of same, to Pathnet. The requirements of confidentiality set forth herein shall survive return of such Confidential Information. (c) Customer shall not, without first obtaining written consent of Pathnet, use any trademark or trade name of Pathnet or refer to the subject matter of this Agreement or Pathnet in any promotional activity or otherwise, nor disclose to others any specific information about the subject matter of this Agreement. 15.2 The provisions of this Article shall survive expiration or other termination of this Agreement. ARTICLE 16. DEFAULT ------- 16.1 A party shall be in default under this Agreement in the following events: (a) in the case of a failure to pay any amount when due under this Agreement, such party fails to pay such amount within ten (10) days after written notice specifying such breach, or (b) the making by such party of a general assignment for the benefit of its creditors; (c) the filing of a voluntary petition in bankruptcy or the filing of a petition in bankruptcy or other insolvency protection against such party that is not dismissed within ninety (90) days thereafter; (d) the filing by such party of any petition or answer seeking, consenting to, or acquiescing in reorganization, arrangement, adjustment, composition, liquidation, dissolution or similar relief, (e) in the case of any other material breach of this Agreement, a party fails to cure such within thirty (30) days after notice specifying such breach, provided that if the breach is of a nature that cannot be cured within thirty (30) days, a default shall not have occurred so long as the breaching party has commenced to cure within said time period and thereafter diligently pursues such cure to completion, provided that no such cure period shall be permitted in connection with a default that materially interferes with service on the System or otherwise materially and adversely affects the integrity of the System. 16.2 A waiver by either party at any time of any of its rights as to anything herein contained shall not be deemed to be a waiver of any breach of covenant or other matter subsequently occurring. 16.3 Upon the failure by a party to timely cure any such default after notice thereof, the non-default party may: (i) take such action as it determines, in its sole discretion, to be necessary to correct the default; and (ii) pursue any legal remedies it may have under applicable law or principles of equity relating to such breach. ARTICLE 17. INTENTIONALLY OMITTED ARTICLE 18. FORCE MAJEURE ------------- Neither party shall be liable to the other party, and each party's performance under this Agreement shall be excused, if and to the extent that any failure or delay in such party's performance of one or more of its obligations hereunder is caused by any of the following conditions, and such party's performance of such obligation or obligations shall be excused and extended for and during the period of any such delay: act of God; fire; flood; fiber, Cable, or other material failures, shortages or unavailability or other delay in delivery not resulting from the responsible party's failure to timely place orders therefor; lack of or delay in transportation; government codes, ordinances, laws, rules, regulations or restrictions (collectively, "Regulations"); war or civil disorder; strikes or other labor disputes; inability of Pathnet to obtain track time or access to the Pathnet System; or any other cause beyond the reasonable control of such party. The party claiming relief under this Article shall notify the other in writing of the existence of the event relied on and the cessation or termination of said event, and the party claiming relief shall exercise reasonable commercial efforts to minimize the time of any such delay. ARTICLE 19. DISPUTE RESOLUTION ------------------ 19.1 Application. Any claim, controversy or dispute, whether sounding in contract, statute, tort, ----------- fraud, misrepresentation or other legal theory, related directly or indirectly to this Agreement, whenever brought and whether between the parties to this Agreement or between one of the parties to this Agreement and the employees, agents or affiliated businesses of the other party, shall be resolved by arbitration as prescribed in this section. The Federal Arbitration Act, 9 U.S.C.ss.ss.1-15, not state law, shall govern the arbitrability of all claims. 19.2 Arbitrator. A single arbitrator engaged in the practice of law who is knowledgeable about the ---------- subject matter of this Agreement shall conduct the arbitration under the then current rules of the American Arbitration Association (the "AAA"). The arbitrator shall be selected in accordance with AAA procedures from a --- list of qualified people maintained by the AAA. The arbitration shall be conducted in a mutually-agreeable location in the Dallas, Texas area, and all expedited procedures prescribed by the AAA rules shall apply. 19.3 Discovery. Discovery shall be conducted in accordance with the Federal Rules of Civil --------- Procedure. Each party shall bear its own costs and attorneys' fees, and the parties shall share equally the fees and expenses of the arbitrator. The arbitrator's decision and award shall be final and binding, and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. 19.4 Enforcement. If any party files a judicial or administrative action asserting claims subject ----------- to arbitration as prescribed herein, and another party successfully stays such action or compels arbitration of said claims, the party filing said action shall pay the other party's costs and expenses incurred in seeking such stay or compelling arbitration, including reasonable attorneys' fees. 19.5 Limitation on Damages. In no event shall the arbitrator or arbitrators have the power to award --------------------- any damages for lost or prospective profits, or any other special, punitive, exemplary, consequential, incidental or indirect losses or damages as a result of the performance or nonperformance of its obligations under this Agreement, or its acts or omissions related to this Agreement, whether or not arising from sole, joint or concurrent negligence, strict liability, or otherwise, regardless of whether such damages may be available under applicable law. Each party hereby waives its rights, if any, to recover any such damages, whether in arbitration or litigation ARTICLE 20. ASSIGNMENT AND CUSTOMER FIBER TRANSFERS --------------------------------------- 20.1 Subject to Section 6.3, following the Effective Date, Customer may sell, lease, assign or swap an IRU in, or otherwise lease, license, or permit the use of, the Customer Fibers. Customer may not assign or otherwise transfer this Agreement or its rights or obligations hereunder to any other party without the prior written consent of Pathnet, which consent shall not be unreasonably withheld; provided, however, any such -------- ------- assignee or transferee shall agree in writing to be bound and abide by this Agreement. If any such consent is given, Customer nevertheless shall remain fully and primarily liable for all obligations under this Agreement. Customer shall have the right, without Pathnet's consent, to assign or otherwise transfer this Agreement as collateral to any lender, or to any Affiliate of Customer, or to any corporation that purchases all or substantially all of the assets of Customer; provided, however, that: (a) any such assignment or transfer shall -------- ------- be subject to Pathnet's rights under this Agreement and any assignee or transferee shall continue to perform Customer's obligations to Pathnet under the terms and conditions of this Agreement; and (b) such assignee or transferee shall agree in writing to be bound and abide by this Agreement. In the event of any permitted partial assignment of any rights hereunder or in any Customer Fibers, Customer shall remain the sole point of contact with Pathnet. 20.2 Pathnet may not assign or otherwise transfer this Agreement or its rights or obligations hereunder to any other party without the prior written consent of Customer, which consent shall not be unreasonably withheld; provided, however, any such assignee or transferee shall agree in writing to be bound and -------- ------- abide by this Agreement. Pathnet shall have the right, without Customer's consent, to assign or otherwise transfer this Agreement as collateral to any institutional lender or to any Affiliate of Pathnet, or to any entity into which Pathnet may be merged or consolidated or that purchases all or substantially all of the assets of Pathnet; provided, however, that: (a) any such assignment or transfer shall be subject to Customer's rights -------- ------- under this Agreement and any assignee or transferee shall continue to perform Pathnet' obligations to Customer under the terms and conditions of this Agreement; and (b) such assignee or transferee shall agree in writing to be bound and abide by this Agreement. In the event of any permitted partial assignment of any rights hereunder or in any fibers in the Cable, Pathnet shall remain the sole point of contact with Customer. 20.3 A transfer or assignment in violation of this Article shall constitute a material breach of this Agreement. ARTICLE 21. REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGMENTS ----------------------------------------------- 21.1 Each party represents and warrants that: (a) it has the full right and authority to enter into, execute, deliver and perform its obligations under this Agreement; (b) this Agreement constitutes a legal, valid and binding obligation enforceable against such party in accordance with its terms, subject to bankruptcy, insolvency, creditors' rights and general equitable principles; and (c) its execution of and performance under this Agreement shall not violate any applicable existing regulations, rules, statutes or court orders of any local, state or federal government agency, court or body. (d) Subject to Section 21.2(d) below as to Pathnet, neither Party shall cause or permit any portion of its interest in the Customer Fibers or its interest in the Pathnet System to become subject to any material mechanics lien, materialmans' lien, vendor's lien or any similar lien whether by operation of law or otherwise. In the event either Pathnet or Customer breaches its obligations in this Section, it shall immediately notify the other in writing, shall promptly cause such lien to be discharged and released of record without cost to the other, and shall indemnify the other against all costs and expenses (including reasonable attorneys fees and court costs at trial and on appeal) incurred in discharging and releasing such lien; provided -------- that: (a) Pathnet and Customer shall each have the right to contest such lien or the validity thereof in good faith by appropriate proceeding which shall operate to prevent the collection or foreclosure of the contested lien; and (b) the contesting party shall cause any such lien to be discharged prior to the commencement of any foreclosure action on such lien. 21.2 Pathnet represents and warrants to Customer that: (a) Pathnet has obtained all permits and other governmental and third-party approvals required for the installation of the Pathnet System and the performance of its obligations under this Agreement. (b) In its ownership, operation and maintenance of the Pathnet System, Pathnet will comply with all applicable local, municipal, state or federal laws, orders and regulations. (c) Notwithstanding anything to the contrary contained herein, that it has obtained, and shall maintain throughout the term, any and all rights of way, easements, licenses and other agreements relating to the grant of rights and interests, and/or access to the real property underlying the Pathnet System (including the Associated Conduit) and such other rights, licenses, permits, authorizations, and approvals that are necessary in order to permit Pathnet to grant the IRUs, and otherwise to perform its obligations hereunder, in accordance with the terms and conditions hereof, and to permit Customer to use the Associated Conduit and Customer Fibers as dark fibers as provided and permitted hereunder and in accordance with the terms and conditions hereof (collectively, the "Underlying Rights"). Underlying Rights shall not be deemed to include franchises, municipal licenses and other approvals or permits issued by governmental authorities that may be necessary for the creation and sale of telecommunications capacity on the Customer Fibers. In the event that Pathnet receives notice that it has not obtained a necessary Underlying Right, or that an Underlying Right is or may be defective, and such failure or defect poses a significant threat to, or actually interferes with, Customer's continued use and enjoyment of the System, Pathnet will take such steps as it reasonable deems appropriate to confirm the integrity of the Underlying Rights, acquire additional Underlying Rights, or take such other action as may be appropriate to protect Customer's rights to exercise its rights hereunder. Notwithstanding the foregoing, if Customer becomes aware that a failure or defect in an Underlying Right poses an imminent threat to Customer's continued ability to exercise its rights hereunder, including, without limitation, an imminent threat of injunction threatening Customer's right to operate the system, Customer will promptly advise Pathnet, either telephonically or in writing, and will discuss in good faith the appropriate actions to be taken. If, in Customer's sole judgment, Pathnet's proposed actions are not adequate to resolve the situation, or if Pathnet takes action but, in Customer's sole judgment, such actions are not resolving the situation satisfactorily, Customer may take such action that it deems appropriate to ensure its continuing right to exercise its rights hereunder, and Pathnet shall reimburse Customer on demand for all costs and expenses incurred in doing so. (d) Pathnet owns clear, exclusive, legal title to the Customer Fibers and Associated Conduit, free and clear of all liens, security interests or other encumbrances, except that the Pathnet System, including the Customer Fibers and Associated Conduit are subject to a lien in favor of certain lenders as more particularly set forth in that certain Amended and Restated Collateral Agency Agreement and Intercreditor Agreement dated as of September 7, 2000 between Pathnet and certain lenders referenced therein that are currently parties to such Agreement or who may be added in the future. Pathnet has all necessary right and authority to perform its obligations pursuant to this Agreement. 21.3 EXCEPT AS SPECIFICALLY SET FORTH IN THIS ARTICLE AND IN SECTION 4.2, PATHNET MAKES NO WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE CUSTOMER FIBERS, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND ALL SUCH WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED. 21. 4 Pathnet will assign to Customer all manufacturers' warranties that pertain to the Customer Fibers, to the extent that they are assignable. If a manufacturer's warranty is not assignable, Pathnet will exercise reasonable efforts to enforce such warranty on behalf of Customer. ARTICLE 22. GENERAL ------- 22.1 Binding Effect. This Agreement and each of the parties' respective rights and obligations --------------- under this Agreement, shall be binding on and shall inure to the benefit of the parties hereto and each of their respective permitted successors and assigns. 22.2 Waiver1. The failure of either party hereto to enforce any of the ------ provisions of this Agreement, or the waiver thereof in any instance, shall not be construed as a general waiver or relinquishment on its part of any such provision, but the same shall nevertheless be and remain in full force and effect. 22.3 Governing Law. This Agreement shall be governed by and construed in accordance with the -------------- domestic laws of the State of New York, without reference to its choice of law principles. 22.4 Rules of Construction. The captions or headings in this Agreement are strictly for convenience ---------------------- and shall not be considered in interpreting this Agreement or as amplifying or limiting any of its content. Words in this Agreement which import the singular connotation shall be interpreted as plural, and words which import the plural connotation shall be interpreted as singular, as the identity of the parties or objects referred to may require. (a) Unless expressly defined herein, words having well known technical or trade meanings shall be so construed. All listing of items shall not be taken to be exclusive, but shall include other items, whether similar or dissimilar to those listed, as the context reasonably requires. (b) Except as set forth to the contrary herein, any right or remedy of Customer or Pathnet shall be cumulative and without prejudice to any other right or remedy, whether contained herein or not. (c) Nothing in this Agreement is intended to provide any legal rights to anyone not an executing party of this Agreement. (d) This Agreement has been fully negotiated between and jointly drafted by the parties. (e) All actions, activities, consents, approvals and other undertakings of the parties in this Agreement shall be performed in a reasonable and timely manner, it being expressly acknowledged and understood that time is of the essence in the performance of obligations required to be performed by a date expressly specified herein. Except as specifically set forth herein, for the purpose of this Agreement the standards and practices of performance within the telecommunications industry in the relevant market shall be the measure of a party's performance. 22.5 Entire Agreement. This Agreement, together with any Confidentiality Agreement entered into in ---------------- connection herewith, constitutes the entire and final agreement and understanding between the parties with respect to the subject matter hereof and supersedes all prior agreements relating to the subject matter hereof, which are of no further force or effect. The Exhibits referred to herein are integral parts hereof and are hereby made a part of this Agreement. To the extent that any of the provisions of any Exhibit hereto are inconsistent with the express terms of this Agreement, the terms of this Agreement shall prevail. This Agreement may only be modified or supplemented by an instrument in writing executed by each party and delivered to the party relying on the writing. 22.6 No Personal Liability. Each action or claim against any party arising under or relating to ---------------------- this Agreement shall be made only against such party as a corporation, and any liability relating thereto shall be enforceable only against the corporate assets of such party. No party shall seek to pierce the corporate veil or otherwise seek to impose any liability relating to, or arising from, this Agreement against any shareholder, employee, officer or director of the other party. Each of such persons is an intended beneficiary of the mutual promises set forth in this Article and shall be entitled to enforce the obligations of this Article. 22.7 Relationship of the Parties. The relationship between Customer and Pathnet shall not be that ---------------------------- of partners, agents, or joint venturers for one another, and nothing contained in this Agreement shall be deemed to constitute a partnership or agency agreement between them for any purposes, including, but not limited to federal income tax purposes. Customer and Pathnet, in performing any of their obligations hereunder, shall be independent contractors or independent parties and shall discharge their contractual obligations at their own risk subject, however, to the terms and conditions hereof. 22.8 Severability. If any term, covenant or condition contained herein is, to any extent, held ------------ invalid or unenforceable in any respect under the laws governing this Agreement, the remainder of this Agreement shall not be affected thereby, and each term, covenant or condition of this Agreement shall be valid and enforceable to the fullest extent permitted by law. 22.9 Counterparts. This Agreement may be executed in one or more counterparts, all of which taken ------------ together shall constitute one and the same instrument. In confirmation of their consent and agreement to the terms and conditions contained in this IRU Agreement and intending to be legally bound hereby, the parties have executed this IRU Agreement as of the date first above written. PATHNET OPERATING, INC. By: /s/ William R. Smedberg V ----------------------------------------------------- Name:William R. Smedberg V Title: Vice President ENRON BROADBAND SERVICES, INC. By: /s/ Matt Harris ----------------------------------------------------- Name:Matt Harris Title: Vice President  GLOSSARY OF TERMS ----------------- The following terms shall have the stated definitions in this Agreement. "As-Builts" is defined in section 5.01. "Cable" means the fiber optic cable and the fibers contained therein, and associated splicing connections, splice boxes, and vaults to be installed by Pathnet as part of the Pathnet System. "Costs" means all reasonable, actual, direct costs paid or payable in accordance with the established accounting procedures generally used by Pathnet and which it utilizes in billing third parties for reimbursable projects which costs shall include, without limitation, the following: (i) internal labor costs, including wages and salaries, and benefits, and overhead allocable to such labor costs equal to fifteen percent (15%), and (ii) other direct costs and out-of-pocket expenses on a pass-through basis (e.g., equipment, materials, supplies, contract services, etc.). "Effective Date" is defined in the introductory paragraph to this Agreement. "Impositions" means all taxes, fees, levies, imposts, duties, charges or withholdings of any nature (including, without limitation, franchise, license and permit fees), together with any penalties, fines or interest thereon arising out of the transactions contemplated by this Agreement that are imposed upon the Pathnet System by any federal, state or local government or other public taxing authority. "POP" means a point of presence or terminal. "Planned System Work Period" or "PSWP" means a prearranged period of time reserved for performing certain work on the Pathnet System that may potentially impact traffic. Generally, this will be restricted to weekends, avoiding the first and last weekend of each month and high-traffic weekends. The PSWP shall be agreed upon pursuant to Exhibit G. --------- "Pathnet System" shall have the meaning ascribed thereto in Recital A. --------- "Segment" shall mean a city pair described in Exhibit A. --------- "Underlying Rights" is defined in Section 21.2. "Best efforts" and "reasonable commercial efforts", when used herein in connection with a covenant of a party to this Agreement, shall not obligate such party, unless otherwise specifically required by the operative covenant, to make unreimbursed expenditures (other than costs or expenditures that would have been required of such party in the absence of the requirements of such covenant) that are material in amount, in light of the circumstances to which the requirement to use best efforts applies.