EXECUTION COPY
_____________________________________
PC-1
_____________________________________
PROJECT DEVELOPMENT
AND
CONSTRUCTION CONTRACT
BETWEEN
TYCO SUBMARINE SYSTEMS LTD.
AND
GCT PACIFIC HOLDINGS, LTD.
_____________________________________
DATED AS OF APRIL 21, 1998
_____________________________________
TABLE OF CONTENTS
GENERAL TERMS AND CONDITIONS
Article PAGE
------- ----
1 Provision of System........................................... 1
2 Documents Forming the Entire Contract......................... 2
3 Definitions................................................... 2
4 Contract Price................................................ 12
5 Terms of Payment by Purchaser................................. 16
6 Contract Variations........................................... 18
6A. Optional Upgrades............................................. 19
7 Responsibilities for Permits.................................. 22
8 Route Survey.................................................. 23
9 Acceptance.................................................... 24
10 Warranty...................................................... 28
11 Contractor Support............................................ 32
12 Purchaser's Obligations....................................... 32
13 Termination for Default....................................... 33
14 Termination for Convenience................................... 35
15 Suspension.................................................... 37
16 Title and Risk of Loss........................................ 38
17 Force Majeure................................................. 38
18 Intellectual Property......................................... 39
19 Infringement.................................................. 45
20 Safeguarding of Information and Technology.................... 46
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Article PAGE
------- ----
21 Export Control................................................ 47
22 Liquidated Damages............................................ 47
23 Limitation of Liability/Indemnification....................... 48
24 Counterparts.................................................. 50
25 Design and Performance Responsibility......................... 50
26 Product Changes............................................... 50
27 Risk and Insurance............................................ 50
28 Plant and Work Rules.......................................... 54
29 Right of Access............................................... 54
30 Quality Assurance............................................. 55
31 Documentation................................................. 55
32 Training...................................................... 55
33 Settlement of Disputes/Arbitration............................ 56
34 Applicable Law................................................ 58
35 Notices....................................................... 58
36 Publicity and Confidentiality................................. 59
37 Assignment; Subcontractors.................................... 59
38 Relationship of the Parties................................... 61
39 Successors Bound.............................................. 61
40 Article Captions.............................................. 61
41 Severability.................................................. 61
42 *............................................................. 61
43 Survival of Obligations....................................... 61
44 Non-Waiver.................................................... 62
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
ii
Article PAGE
------- ----
45 Language....................................................... 62
46 Entire Agreement.............................................. 62
47 Coming into Force............................................. 62
EXHIBITS
--------
Exhibit A ...................................................... *
Exhibit B .................................. Consent and Agreement
Exhibit C ..................................... Opinion of Counsel
Exhibit D ....................................... Escrow Agreement
Exhibit E ................................ Approved Subcontractors
Exhibit F .................................. Intellectual Property
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
iii
PROJECT DEVELOPMENT AND
CONSTRUCTION CONTRACT
BETWEEN
TYCO SUBMARINE SYSTEMS LTD. AND
GCT PACIFIC HOLDINGS, LTD.
This Project Development and Construction Contract ("Contract") is
made as of this 21st day of April 1998 between Tyco Submarine Systems Ltd., a
corporation organized and existing under the laws of the State of Delaware,
United States, ("TSSL" or "Contractor") and GCT Pacific Holdings, Ltd., a
company organized and existing under the laws of Bermuda (hereinafter referred
to as "Purchaser").
WHEREAS, Purchaser desires to establish a fiber optic submarine cable
system, to be known as the Pacific Crossing 1 Submarine Cable System
(hereinafter, and as more fully defined herein, the "System"), which will be
used to provide service between the United States mainland and Japan; and
WHEREAS, the System will consist of the following Segments:
Segment N: From Norma Beach, Washington, United States to Ajigaura,
Japan;
Segment W: From Ajigaura, Japan to Shima, Japan;
Segment S: From Shima, Japan to Toro Creek, California, United
States; and
Segment E: From Toro Creek, California, United States to Norma
Beach, Washington, United States; and
WHEREAS, Contractor is in the business of designing, constructing,
installing, supplying, delivering and manufacturing fiber optic submarine cable
systems and is familiar with the general business of the fiber optic submarine
cable system industry; and
WHEREAS, Purchaser seeks to purchase and own the System and wishes to
engage Contractor to perform the Work and Upgrade Work; and
WHEREAS, Contractor is willing to perform the Work and the Upgrade
Work on a turn-key, fixed-price basis in accordance with and subject to the
terms hereof.
NOW THEREFORE, IT HAS BEEN AGREED AS FOLLOWS
ARTICLE 1 PROVISION OF SYSTEM
------------------------------
In consideration of the Contract Price and the Upgrade Prices, the
Contractor agrees to undertake the Work and the Upgrade Work and to provide the
Purchaser with the
2
System meeting the System Performance Requirements on or before the Scheduled
System RFS Date and the System Upgrades meeting the requirements of Article 6A,
all in accordance with the terms hereof.
ARTICLE 2 DOCUMENTS FORMING THE ENTIRE CONTRACT
------------------------------------------------
This Contract consists of these commercial Terms and Conditions,
Exhibits E and F hereto, and the following documents (in the form of
attachments, including appendices, attached hereto), which shall be read and
construed as part of the Contract:
. Technical Volume (includes Route Information), Appendix 6
. Plan of Work, Appendix 3, Upgrade Plan of Work, Appendix 3A
. Provisioning Schedule, Appendix 1, Upgrade Provisioning Schedule,
Appendix 1A
. Billing Schedule, Appendix 2, Upgrade Billing Schedule, Appendix 2A
. Invoice Format, Appendix 4, Form of Contractor's Certificate,
Appendix 4A
. Progress Schedule, Appendix 5
In the event of any inconsistency between the Terms and Conditions
and the above listed documents, the Terms and Conditions shall prevail. The
Appendices listed above have no order of precedence.
ARTICLE 3 DEFINITIONS
----------------------
Definitions are as described in the specific Articles. Except as
otherwise defined the following definitions shall apply throughout the Contract:
AAA has the meaning set forth in Sub-Article 33(B).
ACCEPTANCE TESTING means (i) with respect to a Segment or the System,
the tests described in the Commissioning and Acceptance section of the
Technical Volume or developed pursuant to such section by mutual agreement
of the Parties (with 15 days prior notice to the Independent Engineer) and
reasonably designed to verify that such Segment or the System meets the
applicable Performance Requirements and (ii) with respect to any System
Upgrade, the tests described in the Commissioning and Acceptance section of
the Technical Volume or developed pursuant to such section by mutual
agreement of the Parties (with 15 days notice to the Independent Engineer)
and reasonably designed to verify that the System Upgrade meets the
applicable Performance Requirements.
ACCESS RIGHTS means all ownership, easement and/or other property
rights, from both private and governmental entities, both on land and below
the surface of the water (including, without limitation, agreements to use
conduits, install manholes and to lease space in cable stations) necessary
to access, use and occupy cable stations and the sites for cable stations
(including, without limitation, to land and install the
3
submarine cable and related equipment and to bring such cable from the
ocean to the cable stations) in order for the Purchaser to own, operate and
maintain the System.
ACTUAL KNOWLEDGE means the actual knowledge of any executives with
management responsibility for the Contract.
ASSIGNMENT has the meaning set forth in Sub-Article 37(A).
BANKRUPTCY EVENT means an event specified in Sub-Article 13(A)(3) or
13(A)(4) with Contractor as the "other Party".
BILLING SCHEDULE means a billing schedule attached hereto as Appendix
2.
CERTIFICATE OF COMMERCIAL ACCEPTANCE means a certificate issued by
Purchaser in accordance with Sub-Article 9(D) to Contractor certifying that
a Segment, the System or a System Upgrade is Ready for Commercial
Acceptance.
CERTIFICATE OF FINAL ACCEPTANCE means a certificate issued by
Purchaser in accordance with Sub-Article 9(E) to Contractor certifying that
the System or a System Upgrade is Ready for Final Acceptance.
CERTIFICATE OF PROVISIONAL ACCEPTANCE means a certificate issued by
Purchaser in accordance with Sub-Article 9(C) to Contractor certifying that
a Segment, the System or a System Upgrade is Ready for Provisional
Acceptance.
CIF means cost, insurance and freight as defined in the International
Chamber of Commerce, Guide to Incoterms (1990).
COMMISSIONING REPORT has the meaning set forth in the Commissioning
and Acceptance section of the Technical Volume.
CONFIDENTIAL INFORMATION has the meaning set forth in Sub-Article
36(B).
CONSENT means a Consent and Agreement to be entered into among
Contractor, Purchaser and the financing parties described in Sub-Article
37(C) and substantially in the form of Exhibit B hereto, with such changes
therein as made pursuant to Sub-Article 37(C) hereto.
CONTRACT means this agreement, specifically consisting of the
documents described in Article 2, and shall be deemed to include any
amendments thereto or Contract Variations pursuant to Article 6 (Contract
Variations).
CONTRACTOR means the entity that has executed this Contract as
Contractor (TSSL) and that will be responsible for the performance of the
Work (and if applicable, Upgrade Work) under this Contract and shall
include its permitted successors and/or assigns.
4
CONTRACT PRICE means the Initial Contract Price, plus any variations
pursuant to Article 6 (Contract Variations), Taxes as set forth in Sub-
Article 4(B) and other adjustments to the Contract Price provided for in
this Contract.
CONTRACT TAXES has the meaning set forth in Sub-Article 4(B)(1).
CONTRACT VARIATION has the meaning set forth in Sub-Article 6(A).
DATE OF COMMERCIAL ACCEPTANCE, PROVISIONAL ACCEPTANCE OR FINAL
ACCEPTANCE means the date that Purchaser receives a Commissioning Report or
an Upgrade Commissioning Report, as the case may be, demonstrating that a
Segment or the System or a System Upgrade, as the case may be, is Ready for
Commercial Acceptance, Ready for Provisional Acceptance or Ready for Final
Acceptance in accordance with Article 9 (Acceptance).
DDP means delivered duty paid as defined in the International Chamber
of Commerce, Guide to Incoterms (1990).
DEFAULT means an Event of Default or any event, condition or
occurrence which with the giving of notice or passage of time or both would
be an Event of Default.
DELIVERABLE SOFTWARE has the meaning set forth in Sub-Article 18(C).
DELIVERABLE TECHNICAL MATERIAL has the meaning set forth in Sub-
Article 18(B).
DISPUTE ACCOUNT means the Dispute Account to be created under the
Escrow Agreement.
ESCROW AGENT means Citibank, N.A., in its capacity as escrow agent
under the Escrow Agreement, and its successors in such capacity.
ESCROW AGREEMENT means that Escrow Agreement to be entered into, in
the event of a dispute as described in Sub-Article 5(C)(5), by and among
the Contractor, the Purchaser and the Escrow Agent, substantially in the
form of Exhibit D hereto, with such changes therein as are reasonably
requested by the Escrow Agent, as amended modified or supplemented from
time to time.
EVENT OF DEFAULT has the meaning set forth in Sub-Article 13(A).
EXCLUDED TAX means (i) any franchise, excess profits, net worth,
capital or capital gains Tax, as well as any Tax on doing business or
imposed on net or gross income or receipts (including minimum and
alternative minimum Taxes measured by any items of Tax preference), but in
each case excluding Taxes that are or are in the nature of sales, use,
excise, license, stamp, rental, ad valorem, value added or property
5
Taxes; (ii) any Taxes imposed by a jurisdiction other than one in which (a)
the Contractor is or is treated as engaged in activities contemplated by or
in fulfillment of the Contract or (b) the Purchaser or its affiliates has a
nexus to such jurisdiction and the Tax imposed is attributable to that
nexus, (iii) Taxes imposed on the Contractor as a result of Contractor's
gross negligence or willful misconduct and (iv) any import duty, other
import related charges, sales or use tax, VAT or property tax imposed by
the United States or any political subdivision thereof or Taxing authority
therein in respect of Supplies brought into the United States for testing,
modification or other similar purposes prior to being installed or used
outside the United States.
EXPEDITED UPGRADE has the meaning set forth in Sub-Article 6A(L).
FINAL COMMISSIONING REPORT has the meaning set forth in Section 7,
Commissioning and Acceptance section of the Technical Volume.
FINAL SURVEY REPORT means the final survey report described in Section
5 of the Marine Installation section of the Technical Volume.
FOB means free on board as defined in the International Chamber of
Commerce, Guide to Incoterms (1990).
FORCE MAJEURE has the meaning set forth in Sub-Article 17(A).
*
*
INDEPENDENT ENGINEER means Conexart Technologies, Inc. or a similarly
qualified successor in the capacity as the engineer to the financing
sources specified in Sub-Article 37(C) who has agreed to be bound by the
confidentiality provisions of this Contract and who is not affiliated with
a competitor of Contractor.
INFORMATION has the meaning set forth in Sub-Article 20(A).
INITIAL CONTRACT PRICE has the meaning set forth in Sub-Article
4(A)(1).
INITIAL UPGRADE PRICE has the meaning set forth in Sub-Article
4(A)(2).
INTELLECTUAL PROPERTY has the meaning set forth in Sub-Article 18(A).
LAWS means any laws, ordinances, regulations, rules, orders,
proclamations, requirements of governmental authorities or treaties.
MANUFACTURING MATERIALS has the meaning set forth in Sub-Article
13(B).
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
6
MILESTONES means the milestones set forth in the Progress Schedule
attached as Appendix 5 to this Contract.
NEXUS TAX means any Tax imposed by way of withholding in respect of or
in lieu of an Excluded Tax, but only to the extent such Tax would not have
been imposed but for the nexus (other than as a consequence of the
activities of the Contractor) of the Purchaser or its affiliate to the
jurisdiction imposing the Tax.
NON-SHIP COSTS has the meaning set forth in Sub-Article 10(A)(2).
NOTICE OF TERMINATION has the meaning set forth in Sub-Article 14(A).
OPTION PERIOD has the meaning set forth in Sub-Article 6A(B).
PARTY(IES) means either of the Purchaser and/or the Contractor, as
appropriate.
PERFORMANCE REQUIREMENTS means (i) with respect to a Segment or the
System, the applicable System Performance Requirements set forth or to be
developed by mutual agreement pursuant to the System Performance and
Availability section of the Technical Volume, (ii) with respect to any
System Upgrade, the applicable System Performance Requirements set forth in
or to be developed by mutual agreement pursuant to the Technical Volume or
(iii) in each case, such other Segment, System or System Upgrade
performance levels as mutually agreed by the Parties.
PERMITS means all Access Rights, permits, pipeline and cable crossing
agreements, approvals, "no objections", permissions-in-principle,
authorizations, consents, customs clearances, registrations, certificates,
rights-of-way, certificates of occupancy, licenses, including without
limitation, landing licenses, orders, vessel and crew authorizations/visas,
permission for the operation of navigational aids and radio systems and
similar authorizations necessary to complete the Work and operate and
maintain the System (other than any of the foregoing (i) relating to the
ownership, operation and maintenance of the System and not necessary until
after the System is Ready for Final Acceptance, (ii) which is or would be
needed by Purchaser to engage in any business outside the business of
developing, owning and operating a submarine cable system or (iii) which is
or would be needed at any time by any purchaser or lessee of capacity on
the System).
PROVISIONING SCHEDULE means the price schedule attached hereto in
Appendix 1.
PURCHASER means GCT Pacific Holdings, Ltd. and shall include its
permitted successors and assigns.
READY FOR COMMERCIAL ACCEPTANCE means
(i) for any Segment, that
7
(a) if the System is not at the same time also Ready for
Commercial Acceptance, the Purchaser has consented, in its sole
discretion, to accept such Segment as Ready for Commercial
Acceptance,
(b) such Segment has the ability to carry commercial
traffic between the two landing points of such Segment meeting
performance criteria of ITU-T G.826 as defined in the System
Performance section of the Technical Volume and has line
monitoring and protection switching capability,
(c) Contractor has tested and provided for STM-1
interconnectivity capability (or such other interconnectivity
capability as may be mutually agreed) to the Segment terminal
equipment according to ITU-T G.826,
(d) Contractor has substantially performed its obligations
under Article 18 (Intellectual Property) then required to be
performed by it, and
(e) all Permits are obtained for such Segment, and
(ii) for the System,
(a) that the System has the ability to carry commercial
traffic throughout the System (operating at 20 Gb/s per fiber
pair) meeting performance criteria of ITU-T G.826 as defined in
the System Performance section of the Technical Volume with self
healing ring protection capability and per Segment protection
capability, has line monitoring and per Segment protection
switching capability and has network management capability,
(b) Contractor has tested and provided for STM-1
interconnectivity capability (or such other interconnectivity
capability as may be mutually agreed) to the System terminal
equipment according to ITU-T G.826,
(c) Contractor has substantially performed its obligations
under Article 18 (Intellectual Property) then required to be
performed by it and
(d) all Permits are obtained for the System and
(iii) for any System Upgrade, the System is Ready for Commercial
Acceptance at the capacity specified for such System Upgrade.
8
READY FOR FINAL ACCEPTANCE means
(i) for the System, that
(a) (I) the System has successfully and continuously
(other than by reason of Force Majeure in which case the test
period shall be extended for a time period equal to the time
period of such Force Majeure) functioned in compliance with the
System Performance Requirements during the period of ninety (90)
consecutive days after the Date of Provisional Acceptance or
(II) if the System shall have failed to meet the
System Performance Requirements at any time during such period
(other than by reason of Force Majeure), the Contractor has
corrected such failure and the System has successfully and
continuously (other than by reason of Force Majeure in which case
the test period shall be extended for a time period equal to the
time period of such Force Majeure) functioned in compliance with
the System Performance Requirements for such additional period of
time not to exceed ninety (90) days (and not to end prior to the
date 90 days after the Date of Provisional Acceptance) as
reasonably determined by the Independent Engineer as being
sufficient to confirm that such failure has been corrected and
that no other failures are likely to appear and
(b) all deficiencies noted in the Certificate of
Provisional Acceptance have been corrected (other than minor
deficiencies which will not affect the operation of the System,
in respect of which an equitable adjustment to the Contract Price
will be made) and
(c) Contractor has complied in all material respects with
Article 18 (Intellectual Property) and
(ii) for any System Upgrade, that
(a) (I) the System Upgrade has successfully functioned in
compliance with the System Performance Requirements during the
period of ninety (90) days after the Date of Provisional
Acceptance of the System Upgrade or (II) if the System Upgrade
shall have failed to meet the System Performance Requirements
during such period, the Contractor has corrected such failure and
the System Upgrade has successfully functioned in compliance with
the System Performance Requirements for such additional period of
time not to exceed ninety (90) days as reasonably determined by
the Independent Engineer as sufficient to confirm that such
failure has been corrected and
9
(b) all deficiencies noted in the Certificate of
Provisional Acceptance have been corrected (other than minor
deficiencies which will not affect the operation of the System,
in respect of which an equitable adjustment of the Contract Price
will be made) and
(c) Contractor has complied in all material respects with
Article 18 (Intellectual Property).
READY FOR PROVISIONAL ACCEPTANCE means
(i) with respect to any Segment,
(a) in the case of all Segments other than Segment S, if
the System is not, at the same time, also Ready for Provisional
Acceptance, the Purchaser has consented, in its sole discretion,
to accept such segment as Ready for Provisional Acceptance,
(b) such Segment is complete in all material respects (and
in any event is Ready for Commercial Acceptance),
(c) the results of Acceptance Testing of such Segment
demonstrate that such Segment has satisfied the System
Performance Requirements,
(d) Contractor has substantially performed its obligations
under Article 18 (Intellectual Property) then required to be
performed by it,
(e) all Permits are obtained for such Segment, and
(ii) with respect to the System, the System is complete in all
material respects (and in any event is Ready for Commercial
Acceptance), all Segments are Ready for Provisional Acceptance with
self-healing ring protection capability and per Segment protection
capability and line monitoring and network management capability and
(iii) with respect to any System Upgrade, the results of
Acceptance Testing of such System Upgrade demonstrate that such System
Upgrade is complete in all material respects and is sufficient to
realize the Performance Requirements.
REPRESENTATIVES has the meaning set forth in Article 36(B).
RETAINAGE means an amount equal to * of the Initial Contract Price.
RETESTING has the meaning set forth in Sub-Article 9(B)(3).
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
10
ROUTE SURVEY means the route survey described in the Marine section of
the Technical Volume.
SCHEDULED SEGMENT S RFS DATE has the meaning set forth in Sub-Article
9(A).
SCHEDULED SYSTEM RFS DATE has the meaning set forth in Sub-Article
9(A).
SCHEDULED UPGRADE DATE means for any System Upgrade, the date by which
the Contractor agrees such System Upgrade will be Ready for Provisional
Acceptance pursuant to Sub-Article 6A(K) hereof.
SEGMENT means Segment N, Segment S, Segment E or Segment W, as the
case may be.
SEGMENT E means the Segment of the System from Toro Creek, California,
United States to Norma Beach, Washington, United States and landing in
locations capable of interconnecting with major telecommunications
carriers.
SEGMENT N means the Segment of the System from Norma Beach,
Washington, United States to Ajigaura, Japan and landing in locations
capable of interconnecting with major telecommunications carriers.
SEGMENT S means the Segment of the System from Shima, Japan to Toro
Creek, California, United States and landing in locations capable of
interconnecting with major telecommunications carriers.
SEGMENT W means the Segment of the System from Ajigaura, Japan to
Shima, Japan and landing in locations capable of interconnecting with major
telecommunications carriers.
SHIP COSTS has the meaning set forth in Sub-Article 10(A)(2).
SHIP PERIOD has the meaning set forth in Sub-Article 10(A).
SUPPLIES means any and all materials, plant, machinery, equipment,
hardware and items supplied by the Contractor under this Contract.
SUSPENSION means a suspension in pursuant to Sub-Article 15(A) or
15(B).
SYSTEM means the four fiber pair submarine cable system consisting of
Segments N, S, E and W (at a per fiber pair capacity of * Gb/s at the Date
of Commercial Acceptance or the Date of Provisional Acceptance, as the case
may be, of the System, with each Segment having the capability of being
upgraded to * Gb/s per fiber pair at the Date of Provisional Acceptance),
including the cable stations, as more fully described in the System
Description section of the Technical Volume.
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
11
SYSTEM PERFORMANCE REQUIREMENTS has the meaning set forth in the
System Description section of the Technical Volume.
SYSTEM UPGRADE has the meaning set forth in Sub-Article 6A(A).
TAX means any tax, duty, levy, charge or custom (including, without
limitation, any sales or use tax, VAT or octroi duty relating to the
Contract items and fiscal stamps connected with Contract legalization)
imposed or collected by any taxing authority or agency (domestic or
foreign).
TECHNICAL VOLUME means the Technical Volume attached hereto as
Appendix 6.
TRANSFEREE means any entity to which purchaser assigns rights
hereunder pursuant to Sub-Article 37(D) hereof.
UPGRADE BILLING SCHEDULE means the billing schedule attached hereto as
Appendix 2A.
UPGRADE COMMISSIONING REPORT has the meaning set forth in the
Commissioning and Acceptance section of the Technical Volume.
UPGRADE PERIOD has the meaning set forth in Sub-Article 6A(E).
UPGRADE PLAN OF WORK means the plan of work attached hereto as
Appendix 3A.
UPGRADE PRICE means, for any System Upgrade, the Initial Upgrade Price
for such System Upgrade, plus any variations pursuant to Article 6
(Contract Variations), Taxes as set forth in Sub-Article 4(B) and other
adjustments to such Upgrade Price provided for in this Contract.
UPGRADE PROVISIONING SCHEDULE means the provisioning schedule attached
hereto as Appendix 1A.
UPGRADE WARRANTY PERIOD has the meaning set forth in Sub-Article
10(A).
UPGRADE WORK means the activities and services to be performed or
provided by Contractor under Article 6A (Optional Upgrades).
*
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
12
WARRANTY PERIOD has the meaning set forth in Sub-Article 10(A).
WORK means all activities and services (other than the activities and
services specified in this Contract to be provided by Purchaser) necessary
to be performed or provided in developing, planning, designing,
manufacturing, constructing, delivering, installing and testing the System,
until the System is Ready for Final Acceptance, including without
limitation, designating, coordinating, obtaining and paying for on behalf
of Purchaser the Access Rights and obtaining all Permits except landing
licenses. Whether or not used in conjunction with the term "Supplies", the
term "Work" shall always be deemed to include the provision of the relevant
Supplies, unless the context requires otherwise.
YEAR 2000 COMPLIANT means, when used with respect to any software or
materials, that such software or materials will operate accurately and,
without interruption, accept, possess and in all manner retain full
functionality when referring to, or involving, any year or date in the
twentieth or twenty-first centuries.
ARTICLE 4 CONTRACT PRICE
-------------------------
A. Contract Price
1. The initial Contract Price for the Work, in United States Dollars
(US$) is a fee of * (the "Initial Contract Price") which includes
a fixed component of * (the "Fixed Component") and a variable
component of * (which is subject to adjustment to correspond to
the actual cost (including out-of-pocket fees and expenses)
incurred by Contractor in obtaining land in Japan on which two
cable stations, and any parking lots thereto, are built pursuant
to Sub-Article 6(D) (the "Variable Component"). The Initial
Contract Price does not include the cost of optional upgrades
which are described in Article 6A (Optional Upgrades), any
contract variations as provided for in Article 6 (Contract
Variations), or any Taxes. The Fixed Component of the Initial
Contract Price includes all costs and expenses incurred in
obtaining all Permits (including Access Rights) including those
incurred with respect to cable stations (excluding the cost of
acquiring land in Japan on which the two cable stations, and any
parking lots thereto, are built pursuant to Sub-Article 6(D)).
The Fixed Component of the Initial Contract Price includes all
the Work except for the Work described in the Variable Component.
The Fixed Component includes all charges for CIF.
2. The Initial Upgrade Price for any Upgrade Work, in United States
Dollars (US$) is the fixed fee set forth in Appendix 2A (the
"Initial Upgrade Price"). No Initial Upgrade Price includes the
cost of any contract variations as provided for in Article 6
(Contract Variations) or any Taxes.
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
13
3. The Provisioning Schedule sets forth the Contractor's estimate of
the breakdown of the Initial Contract Price among various aspects
of the Work. If the actual cost of any aspect of the Work is
greater or less than that set forth in the Provisioning Schedule,
such fact shall not cause any change in the Initial Contract
Price, except for the Variable Component.
4. Without the prior written consent of the Purchaser, which consent
shall not be unreasonably withheld or delayed, the Contractor
shall not arrange for any
(a) Access Right which requires payments to be made by the
Purchaser or made after the System is Ready for Provisional
Acceptance or
(b) Permit which requires aggregate payments in excess of
* to be made by Purchaser or made after the System is Ready
for Provisional Acceptance.
B. Taxes, Levies and Duties
1. The Initial Contract Price and each Initial Upgrade Price, as
stated in Sub-Article 4(A) above, excludes any Tax. The Contract
Price and each Upgrade Price shall without duplication be
adjusted for any Tax imposed on or in connection with this
Contract (including, without limitation, the execution and
delivery of this Contract, the Work, the Upgrade Work and the
Supplies, but excluding any Excluded Taxes) (any such Taxes,
other than Excluded Taxes, are hereinafter referred to as
"Contract Taxes"). Contractor has provided a good faith estimate
of the Contract Taxes payable by the Purchaser; it being
understood that the Contractor shall have no liability under this
Contract or otherwise to the Purchaser for any errors or
omissions in such estimate or any losses arising therefrom. The
Contractor shall be responsible for any Excluded Tax that might
be incurred by the Contractor as well as any Tax described in
clause (iv) of the definition of Excluded Tax.
2. The Purchaser will be ultimately responsible for the payment of
all Contract Taxes (including, without limitation, Contract Taxes
that are VAT, octroi duties relating to Contract items and fiscal
stamps, etc. connected with Contract legalizations to the
authorities in their countries). In the case of any Contract
Taxes paid by the Contractor, the Contractor shall submit payment
on the Purchaser's behalf and Contractor will be reimbursed by
the Purchaser in accordance with Article 5 (Terms of Payment by
Purchaser).
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
14
3. The Contractor agrees to use reasonable efforts including,
without limitation, by registering for VAT and any applicable
sales Taxes in any country, state or other jurisdiction where
legally required, to cooperate with and assist Purchaser in its
efforts (i) to have Supplies which are the subject of this
Contract made exempt from Contract Taxes, whether in the
manufacture of the Supplies or related to the importation or
location or installation of the Supplies, (ii) to request
revisions, drawbacks, remissions, reclassifications or the like
to the jurisdictions identified by the Purchaser; or (iii) to
reduce or eliminate Contract Taxes (including the provision of
applicable certifications and forms) and to obtain any available
refunds of Contract Taxes, provided that the Contractor shall not
--------
be required to act other than in accordance with the relevant
Laws then in force. The Purchaser shall reimburse the Contractor,
in accordance with Article 5, for any reasonable costs (including
the reasonable fees and expenses of legal counsel, accountants
and other advisors) incurred by the Contractor under this Sub-
Article 4(B)(3) provided that Purchaser was notified and has
--------
consented to the incurrence of such costs, fees and expenses.
Contractor shall not be required to cooperate with and assist
Purchaser in its efforts under this Sub-Article 4(B)(3) or to
take any action hereunder which in the Contractor's good faith
judgment would incur any costs or if in Contractor's good faith
judgment it would be advisable to obtain the advice of counsel,
accountants or other advisors prior to cooperating with or
assisting purchaser or taking any action, unless in each case,
Purchaser has agreed to reimburse Contractor under the foregoing
proviso.
4. Prior to the Date of Provisional Acceptance with respect to the
System or any System Upgrade, the Contractor shall provide
evidence of having made all payments for Taxes included in the
Contract Price or Upgrade Price or described in clause (iv) of
the definition of Excluded Taxes, other than VAT due on payments
of the Contract Price or Upgrade Price made on or after the Date
of Provisional Acceptance of the System or System Upgrade, which
evidence shall be provided within sixty (60) days of the date of
each such payment.
5. As part of Work or any Upgrade Work, the Contractor shall obtain
at its expense, on Purchaser's behalf, any import license or
other official authorization and carry out all customs
formalities necessary for the importation or exportation of goods
in connection with such Work or Upgrade Work. The Purchaser
agrees to be the Importer or Exporter of Record or designate an
Importer or Exporter of Record/Consignee on its behalf. Purchaser
must provide a Letter of Authorization from any third party
designate stating it agrees to be the Importer or Exporter of
Record on Purchaser's behalf and identify the name and address of
the designated Importer or Exporter of Record.
15
6. The Supplies to be installed or held on land shall be delivered
to the agreed point at the named place of destination and shall
be consigned to the Purchaser.
C. Withholding Tax
1. If withholding for any Tax is required in respect of any payment
to the Contractor, the Purchaser shall (i) withhold the
appropriate amount from such payment, (ii) pay such amount to the
relevant authorities in accordance with the applicable Laws and
(iii) in the case of any such withholding in respect of a
Contract Tax or a Nexus Tax and subject to the Contractor's
satisfying the obligations set forth in the last sentence of this
Sub-Article 4(C)(1), pay the Contractor an additional amount such
that the net amount received by the Contractor is the amount the
Contractor would have received in the absence of such
withholding. In such a case, the Purchaser shall provide to the
Contractor, as soon as reasonably practicable, a certified copy
of an official tax receipt for any Tax which is retained from any
payment due to the Contractor or for any Tax which is paid on
behalf of the Contractor. All such receipts shall be in the name
of the Contractor. The Contractor agrees to complete accurately
and timely provide to the Purchaser or, if required, to the
applicable Taxing authority, such forms, certifications or other
documents as may be requested in timely manner by Purchaser, in
order to allow it to make payments to the Contractor without any
deduction or withholding on account of withholding Taxes (or at a
reduced rate thereof) or to receive a refund of any amounts
deducted or withheld on account of withholding Taxes.
2. If the Contractor shall become aware that it is entitled to
receive a refund or credit from a relevant taxing or governmental
authority in respect of a Contract Tax or Nexus Tax as to which
the Purchaser has paid an additional amount pursuant to Sub-
Article 4(C)(1) above, the Contractor shall promptly notify the
Purchaser of the availability of such refund or credit and shall,
within 30 days after receipt of a request by the Purchaser
(whether as a result of notification that it has made to the
Purchaser or otherwise), make a claim to such taxing or
governmental authority for such refund or credit at the
Purchaser's expense. If the Contractor receives a refund or
credit in respect of a Contract or Nexus Tax as to which the
Purchaser has paid an additional amount pursuant to Sub-Article
4(C)(1) above, or if, as a result of the Purchaser's payment of
such additional amounts, the Contractor or any other member of an
affiliated group, as defined in section 1504(a) of the Code, of
which the Contractor is a member, receives a credit against Taxes
imposed on its income or franchise taxes imposed on it by the
country under the laws of which it is organized or any political
subdivision thereof, the Contractor shall promptly notify the
Purchaser
16
of such refund or credit and shall within 30 days from the date
of receipt of such refund or benefit of such credit pay over the
amount of such refund or benefit of such credit (including any
interest paid or credited by the relevant taxing or governmental
authority with respect to such refund or credit) to the Purchaser
(but only to the extent of the additional payments made by the
Purchaser under Sub-Article 4(C)(1) above with respect to the
Contract or Nexus Tax giving rise to such refund or credit), net
of all out-of-pocket expenses of the Contractor; provided,
--------
however, that the Purchaser, upon the request of the Contractor
-------
agrees to repay the amount paid over to the Purchaser (plus
penalties, interest or other charges due to the appropriate
authorities in connection therewith) to the Contractor in the
event the Contractor is required to repay such refund or credit
to such relevant authority.
ARTICLE 5 TERMS OF PAYMENT BY PURCHASER
----------------------------------------
A. General Conditions of Payment
1. All payments shall be made and all invoices shall be rendered in
US Dollars (US$). The Purchaser shall be responsible for and
shall pay all costs and fees for payment, as well as the banking
and wiring costs. All banking documents and correspondence must
be in English.
B. Invoice Procedures
1. All invoices for Work shall be submitted according to the Billing
Schedule, provided, that at the time of any such Invoice the
--------
relevant Milestones have been achieved. All invoices for Work
shall have a certificate addressed to Purchaser in the form of
Appendix 4A attached.
2. Any Contract Variations shall be invoiced and paid in accordance
with the terms of the Contract Variation as specified in Article
6 (Contract Variations).
3. Invoices for Upgrade Work shall be submitted according to the
Upgrade Billing Schedule and shall be paid in accordance with
this Article 5.
4. Invoices for amounts not described in Sub-Sections 1-3 above,
which may become payable hereunder shall be submitted after
applicable costs have been incurred or such other time as may be
specified in this Contract. Such invoices shall be accompanied by
a certificate of the Contractor explaining such amount and
certifying that it is payable.
5. The Contractor shall render all invoices to the following address
or facsimile number:
17
GCT Pacific Holdings Ltd.
Wessex House
45 Reid Street
Hamilton HM12
Bermuda
Facsimile: 441-296-6749/8606
Attn: Cameron Adderly
with a copy to
Conexart Technologies, Inc.
124 de Charante
Saint Lambert
Quebec, Canada
J4S 1K3
Facsimile: 514-466-1093
Attn: Mr. Martin Fournier
C. Payment Procedures
1. The Purchaser shall pay the Contractor, and the Contractor shall
accept payment, in accordance with this Article 5 (Terms of
Payment by Purchaser).
2. Purchaser agrees to pay an initial payment to Contractor in the
amount of *. Within three business days of the time this Contract
comes into force pursuant to Article 47 hereof, the first portion
of the initial payment, in the amount of *, shall be paid by
Purchaser to Contractor. Failure to receive this payment shall
entitle Contractor to immediately suspend Work hereunder. The
second portion of the initial payment, in the amount of *, shall
be paid by Purchaser to Contractor on June 30, 1998.
3. Invoices given to the Purchaser (and the Independent Engineer) on
or before the last day of any month shall, subject to Sub-Article
5(C)(5) below, be due and payable on the last day of the next
month or such other time as may be specified in this Contract;
provided that invoices given to Purchaser on or before April 30,
--------
1998 shall be due and payable no earlier than June 30, 1998.
4. Invoices not paid when due shall accrue late payment charges from
the day, following the day, on which payment was due until the
day on which it is paid. Invoices for such extended payment
charges shall not be issued for an amount less than U.S. $1,000.
Extended payment charges shall be computed at the rate of one
percent (1%) per month.
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
18
5. In the event that the Purchaser has an objection to any invoice
or other payment obligation or any amount owing by Contractor to
Purchaser shall not have been paid when due, the Purchaser shall
promptly notify the Contractor of such objection and such amount,
and the Purchaser and Contractor shall make every reasonable
effort to settle promptly the dispute concerning the payment(s)
in question. In the event such dispute cannot be settled, the
Purchaser will have the right to withhold payment of the disputed
amount(s) (or withhold from the invoice amount a sum equal to the
amount purportedly owing by Contractor) so long as it deposits,
in full, such disputed amount(s) into the Dispute Account.
(a) Provided such disputed amount is placed into the Dispute
Account in a timely manner, the Purchaser shall not be
deemed to be in breach of or in default for failing to pay
Contractor.
(b) The Escrow Agent will distribute the disputed amount in
accordance with the terms of the Escrow Agreement.
(c) In addition, the prevailing Party shall be entitled to
receive from the Dispute Account an amount equal to the
interest earned by the Escrow Agent on the distributed,
disputed amount, which shall be distributed by the Escrow
Agent under clause (b) above.
The Contractor and the Purchaser will share equally the costs and
expenses of the Escrow Agent.
The Contractor and the Purchaser will execute and deliver an
Escrow Agreement substantially in the form of Exhibit D hereto,
with such changes therein as the Escrow Agreement may reasonably
request.
6. The Purchaser shall make timely payments for that portion of the
invoice not in dispute in accordance with Sub-Article 5(C) or
such payments will be assessed extended payment charges as set
forth in Sub-Article 5(C)(4). Pending resolution of the dispute,
the Purchaser may not withhold payment (unless also subject to
dispute) on any other invoice concerning different goods and/or
services submitted by Contractor.
ARTICLE 6 CONTRACT VARIATIONS
-----------------------------
A. Either Party may request, during construction of the System or any
System Upgrade, by written order, a contract variation requiring additions or
alterations to, deviations or deductions from the System or System Upgrade
("Contract Variation"). If the other Party consents, in its sole discretion,
this change will be formalized as an amendment to this Contract by a Contract
Variation; provided, that the Contractor will not unreasonably withhold
--------
19
its consent to a Contract Variation requested by the Purchaser; and provided
--------
further, that Purchaser will not unreasonably withhold its consent to a Contract
-------
Variation requested by the Contractor so long as such Contract Variation does
not affect the Contract Price, any Upgrade Price, the Scheduled System RFS Date,
the Scheduled Segment S RFS Date, any Scheduled Upgrade Date, any warranties or
the Performance Standards.
B. A Contract Variation shall not become effective unless and until the
price adjustment, the terms and schedule of payment and the extension of time
and all other terms have been mutually agreed upon by the Parties (and the
Parties shall act reasonably and in good faith in connection with all such
terms) and such Contract Variation is signed by an authorized representative of
each Party. Each Contract Variation shall be incorporated as an amendment to the
Contract.
C. Contractor may seek a Contract Variation for any change, after the
date hereof, of any Law (except, and to the extent, affecting Taxes or wages)
which requires a change in the Work or the Upgrade Work or affects the costs
(other than wages) incurred or to be incurred by the Contractor or any
combination of the foregoing and Purchaser shall agree to any such change in
Work or Upgrade Work as may be required and to an equitable adjustment to the
Contract Price or the applicable Upgrade Price. As of the date hereof, neither
Party has Actual Knowledge of any proposed change in any Law that would require
a change in the Work or the Upgrade Work.
D. The Parties will execute a Contract Variation to confirm the actual
amount of the Variable Component, after final adjustment, if any, pursuant to
Sub-Article 4(A)(1) hereof.
E. The Initial Contract Price is based on the assumption that
Contractor will acquire ownership of land and build, on such land, two cable
stations in Japan and two cable stations in the United States. To the extent
that such assumption is incorrect (if, for example, the Contractor shall lease
space in one or more existing cable stations) both Parties will agree to an
equitable adjustment, up or down, to the Contract Price and the terms and
schedule of payments. The Contractor will consult with, and obtain the consent
of the Purchaser (not to be unreasonably withheld or delayed) regarding the
location of cable stations and whether to acquire, build, or lease such cable
stations. Any lease for space in a cable station shall be reasonably
satisfactory in form and substance to the Purchaser.
ARTICLE 6A. OPTIONAL UPGRADES
-----------------------------
A. This Article includes the terms and conditions governing an option
for future upgrades to the System (each a "System Upgrade") that may be
exercised by Purchaser during the Option Period.
B. *
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
20
C. *
D. *
E. *
F. *
G. *
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
21
*
H. *
I. *
J. *
K. *
L. *
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
22
*
ARTICLE 7 RESPONSIBILITIES FOR PERMITS; COMPLIANCE WITH LAWS
-------------------------------------------------------------
A. The Purchaser shall reasonably cooperate with and assist the
Contractor to obtain all Permits (except those specified in paragraph C below),
to the extent that Purchaser's cooperation and assistance are necessary for
Contractor to expeditiously and cost-efficiently obtain such Permits. The
Purchaser agrees to respond promptly to any such request from Contractor.
Further, the Purchaser agrees that it will not impede or interfere with
Contractor's activities or Contractor's abilities to perform its obligations.
Upon notice from Contractor with respect to a Permit or receipt by Purchaser of
a copy of a Permit, Purchaser shall fulfill all conditions of such Permit and
perform all responsibilities thereunder, except to the extent that such
conditions or responsibilities are those of the Contractor under Work.
Contractor will inform Purchaser as to any such conditions or responsibilities
that, in the Contractor's reasonable judgment, are not ordinary and routine and
obtain Purchaser's consent, which consent shall not be unreasonably withheld,
thereto prior to arranging for any such Permit.
B. Subject to paragraph C below, the Contractor shall have the
responsibility for obtaining, at Contractor's sole cost and expense, all Permits
on Purchaser's behalf. The Contractor will cause all Permits not issued in the
name of Purchaser to be assignable to Purchaser, and to be assigned to Purchaser
at the time title to the System is transferred to Purchaser pursuant to this
Contract. Subject to Sub-Article 4(A)(4), Purchaser shall be
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
23
responsible for payment of all Permit fees and other costs and expenses due with
respect to any Permit after the Date of Provisional Acceptance of the System.
C. The Purchaser shall be responsible for obtaining, at its expense,
landing licenses in the United States and Japan. The Contractor will cooperate
with the Purchaser in connection therewith. Purchaser shall reimburse
reasonable outside counsel fees, reasonable independent consultant fees and
other reasonable out-of-pocket expenses incurred by Contractor in connection
with such cooperation.
D. Any delay in obtaining or failure to obtain any Permit shall
constitute a Force Majeure and be treated as described in Article 17 (Force
Majeure), except to the extent such delay is a result of Contractor's negligence
or willful misconduct.
E. Except with respect to variations necessitated by complying with any
changes, enacted after the date hereof, in any Laws (the costs with respect to
which shall be borne by the Purchaser), the Contractor shall be responsible for
the payment of any and all costs incurred as a result of the need to vary
design, drawings, plans or procedures to comply with any of the circumstances
set forth in this Article. The Contractor shall, before making any variations
from the designs, drawings, plans or procedures that may be necessitated by so
complying with any Laws and that would represent a material change to the
overall design of the System, give to the Purchaser written notice, specifying
the variations proposed to be made, and the reasons for making them. As of the
date hereof, neither Party has Actual Knowledge of any proposed changes in the
Laws which would necessitate any such variation.
F. The Contractor shall (i) give all notices required by any Laws to be
given to any authority and (ii) perform or permit the performance by authorized
persons of any inspection required by the said Laws, subject to Sub-Article
6(C).
G. Within 30 days after the date of execution of this Contract, the
Contractor will prepare and deliver to the Purchaser a detailed list of Permits
that to its knowledge are required to be obtained under current law in order to
complete the Work and shall update such list from time to time if it becomes
aware of changes in Permit requirements. Such list, as updated from time to
time, shall set forth the projected dates of filing for such Permits and an
estimate of when such Permits are expected to be obtained. Without limiting
Contractor's liabilities in respect of Sub-Articles 7(B), Contractor shall have
no liability in respect of the accuracy of the information furnished under this
Sub-Article, except in the case of gross negligence or willful misconduct.
ARTICLE 8 ROUTE SURVEY
-----------------------
A. The Contractor shall conduct the Route Survey and select the cable
route for the System in accordance with the information in the Final Survey
Report. Contractor shall be permitted to make changes, at its discretion, to the
route selection, if necessary for operational reasons without additional cost to
Purchaser.
24
B. Any changes to the route selection requested by Purchaser (such as a
change of location for, or an addition of, a cable station) shall be treated as
a Contract Variation in accordance with Article 6 (Contract Variations).
ARTICLE 9 ACCEPTANCE
---------------------
A. General
1. The Acceptance Testing shall be performed by the Contractor. The
Purchaser and its designated representatives (including the
Independent Engineer) may observe, at their own expense, the
Contractor's tests and review the test results. Purchaser may
request and conduct any additional tests, at its own expense,
but any delay caused by such process shall be a Force Majeure
event.
2. Until the Date of Final Acceptance of the System or if a System
Upgrade is requested by Purchaser, the Date of Final Acceptance
of such System Upgrade, the Purchaser agrees to allow Contractor
access to all Segments of the System.
3. The Purchaser shall issue a Certificate of Commercial Acceptance
in accordance with the provisions of Sub-Article 9(D)(1).
4. Once a Segment of the System, the System, or a System Upgrade is
Ready for Provisional Acceptance, the Purchaser shall issue a
Certificate of Provisional Acceptance; provided, that it is
--------
within the Purchaser's sole discretion as to whether to accept a
Segment (other than Segment S) instead of the System.
5. Once the System or a System Upgrade is Ready for Final
Acceptance, the Purchaser shall issue a Certificate of Final
Acceptance.
6. The Purchaser shall not unreasonably withhold or delay issuance
of a Certificate of Commercial Acceptance, a Certificate of
Provisional Acceptance or a Certificate of Final Acceptance.
7. The Contractor agrees that the Date of Provisional Acceptance or
Commercial Acceptance of Segment S will occur by March 31, 2000
(as such date may be extended under Article 6 (Contract
Variations) Article 17 (Force Majeure) or otherwise under this
Contract or by agreement of the Parties, the "Scheduled Segment
S RFS Date").
8. The Contractor agrees that the Date of Provisional Acceptance or
Commercial Acceptance of the System will occur by July 31, 2000
(as such date may be extended under Article 6 (Contract
Variations),
25
Article 17 (Force Majeure) or otherwise under this Contract or
by agreement of the Parties, the "Scheduled System RFS Date").
9. The Date of Commercial Acceptance, Provisional Acceptance and
Final Acceptance, as the case may be, shall be deemed to have
occurred with respect to a Segment, the System or a System
Upgrade if a Certificate of Commercial Acceptance, a Certificate
of Provisional Acceptance or a Certificate of Final Acceptance
is issued with respect thereto.
B. Notice of Acceptance or Rejection
1. Within thirty (30) days of receipt by Purchaser and Independent
Engineer of the Commissioning Report or Upgrade Commissioning
Report, as the case may be, the Purchaser must issue
notification to the Contractor of the following:
(a) issuance of a Certificate of Provisional Acceptance in
accordance with Sub-Article 9(C); or
(b) rejection of a Certificate of Provisional Acceptance, but
instead issuance of a Certificate of Commercial Acceptance
in accordance with Sub-Article 9(D) below; or
(c) rejection of the Segment, the System or System Upgrade in
its existing condition and issuance of neither a
Certificate of Provisional Acceptance nor a Certificate of
Commercial Acceptance, with in the case of the System or
System Upgrade a written explanation of reasons for
rejection (it being understood that acceptance of a Segment
instead of the System (other than Provisional Acceptance of
Segment S) is at the sole discretion of the Purchaser).
If the Purchaser (or the Independent Engineer on its behalf)
fails to respond with such notification within thirty (30) days,
then the Date of Provisional Acceptance of the Segment (subject
to Purchaser's consent), the System or System Upgrade shall be
deemed to be the date such Commissioning Report or Upgrade
Commissioning Report, as the case may be, was received by the
Purchaser.
2. On receipt of a notice from the Purchaser pursuant to Sub-
Articles 9(B)(1)(b) or (c) above, the Contractor shall be
entitled to address any disputes and explain any discrepancies
to the Purchaser regarding the results of the Acceptance
Testing. Unless Purchaser, for good cause, rejects such
explanation, it shall issue a new notice pursuant to Sub-Article
9(B)(1) above, which shall be deemed to have been issued on the
date of the original notice.
26
3. In case of rejection, and if the explanation by the Contractor as
in Sub-Article 9(B)(2) above is not accepted, for good cause, by
the Purchaser, the Contractor shall carry out the necessary
corrective actions and will effect a new series of Acceptance
Testing ("Retesting"). After receipt by Purchaser and Independent
Engineer of the new Commissioning Report or Upgrade Commissioning
Report, as the case may be, describing the results of Retesting,
the Purchaser will be granted a new period of thirty (30) days to
analyze the new Report according to the provisions of Sub-Article
9(B)(1) and any new notice of the Purchaser shall apply from the
date the Purchaser receives such new Commissioning Report or
Upgrade Commissioning Report, as the case may be.
C. Provisional Acceptance
1. The Certificate of Provisional Acceptance may have annexed to it
a list of any outstanding deficiencies to be corrected by the
Contractor.
2. The Contractor shall, as soon as reasonably practicable, correct
such deficiencies and complete the Work or Upgrade Work indicated
on all such listed items so as to comply in all material respects
with the requirements of this Contract, provided that the
Purchaser allows Contractor the necessary access to the
Segment(s) as the Contractor needs to correct such deficiencies
and complete the Work or Upgrade Work. The Contractor shall give
the Purchaser reasonable notice of its requirement for such
access.
D. Commercial Acceptance
1. A Certificate of Commercial Acceptance shall be issued by
Purchaser with respect to a Segment, the System or System Upgrade
if the results of the Acceptance Testing demonstrate that such
Segment, the System or such System Upgrade does not justify the
issuance of a Certificate of Provisional Acceptance, but
nevertheless, such Segment, the System or such System Upgrade is
Ready for Commercial Acceptance; provided, that such acceptance
--------
of a Segment instead of the System shall be in the sole
discretion of the Purchaser.
2. Each Certificate of Commercial Acceptance shall have annexed to
it a mutually agreed list of all outstanding items to be
completed by the Contractor.
3. The Contractor shall, as soon as reasonably practicable, remedy
the outstanding items, provided that the Purchaser allows
Contractor the necessary access to the Segment(s) as the
Contractor needs to remedy such outstanding items. The Contractor
shall give the Purchaser
27
reasonable notice of its requirement for such access.
Notwithstanding the above, provided that Contractor has been
allowed access to the Segment(s) as required in Sub-Article
9(A)(2), the Contractor shall continue to carry the risk of loss
for any outstanding item until such item is no longer
outstanding.
4. When the outstanding items referenced in Sub-Article 9(D)(3)
above have been remedied, and the Segment(s) or System Upgrade is
otherwise Ready for Provisional Acceptance, the Purchaser will
promptly issue a Certificate of Provisional Acceptance; provided,
--------
that acceptance of a Segment instead of the System shall be in
the sole discretion of the Purchaser.
5. The issuance of a Certificate of Commercial Acceptance with
respect to a Segment or System Upgrade shall in no way relieve
the Contractor from its obligation to provide a Segment or System
Upgrade conforming with the Performance Requirements at the time
of the issuance of a Certificate of Commercial Acceptance.
E. Final Acceptance
1. Within thirty (30) days of the date of receipt by Purchaser and
Independent Engineer of the Final Commissioning Report, the
Purchaser shall issue a Certificate of Final Acceptance or reject
such Report. If the Purchaser neither issues a Certificate of
Final Acceptance nor rejects such Report within such thirty (30)
day period, then the Date of Final Acceptance of the System shall
be deemed to be the date such Final Commissioning Report was
received by the Purchaser.
F. Title and Risk of Loss
1. If the Purchaser, in its sole discretion, chooses to accept a
Segment prior to accepting the System, then upon payment of all
amounts listed in the Billing Schedule with respect to a Segment
(other than the Retainage with respect thereto) and the issuance
of a Certificate of Commercial Acceptance or a Certificate of
Provisional Acceptance with respect to such Segment by the
Purchaser in accordance with this Contract, title (free and clear
of all liens other than those deriving through or from the
Purchaser) to such Segment shall vest in the Purchaser.
2. Upon (i) payment of all amounts listed in the Billing Schedule
with respect to the System (other than the Retainage) and (ii)
the issuance of a Certificate of Commercial Acceptance or a
Certificate of Provisional Acceptance with respect to the System
by the Purchaser in accordance with this Contract, title (free
and clear of all liens other than those
28
deriving through or from the Purchaser) to the System shall
vest in the Purchaser.
3. Upon payment of the Upgrade Price with respect to a System
Upgrade and the issuance of a Certificate of Commercial
Acceptance or a Certificate of Provisional Acceptance with
respect to such System Upgrade by the Purchaser in accordance
with this Contract, title to such System Upgrade shall vest in
the Purchaser.
4. As from the date of vesting of title in a Segment, the System
or a System Upgrade, the Purchaser shall, except as set forth
in the following sentence, assume the risk of loss in respect
of all parts of such Segment, the System or System Upgrade and
responsibility for its maintenance. As stated in Sub-Article
9(A)(2), the Contractor will be allowed access to such Segment,
and, so long as the Contractor has been allowed access to such
Segment as may be required, the Contractor shall continue to
carry the risk of loss with respect of each item outstanding
under Sub-Article 9(C)(1) and 9(D)(2) until such item is no
longer outstanding.
ARTICLE 10 WARRANTY
--------------------
A. The Contractor warrants that the System and each System Upgrade,
including its spares, shall be free from defects in supplies, workmanship and
design for a period of * years commencing from the Date of Provisional
Acceptance of the System or such System Upgrade, as the case may be,
(hereinafter "Warranty Period" and "Upgrade Warranty Period"), with Ship Costs
being covered for the first * years of the Warranty Period (the "Ship Period")
and the Purchaser being responsible for all Ship Costs thereafter.
1. During the Warranty Period for the System or the Upgrade
Warranty Period for a System Upgrade, the Contractor shall make
good, by repair or replacement, at its sole option, any defects
in the System or such System Upgrade, as the case may be,
including any spares, which may become apparent or be
discovered due to imperfect workmanship, faulty design or
faulty material supplied by the Contractor, or any act, neglect
or omission on the Contractors part.
(a) If at any time within the Warranty Period or the Upgrade
Warranty Period for a System Upgrade any defect occurs
which causes the System or such System Upgrade, as the
case may be, to fail to meet its overall Performance
Requirements, the Contractor shall repair or replace such
part or parts. In making such repairs, Contractor may make
changes to the System or such System Upgrade, as the case
may be, or substitute equipment of later or comparable
design, provided the changes, modifications, or
substitutions under normal and proper use do
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
29
not cause the System or such System Upgrade as the case
may be to fail to meet the Performance Requirements.
(b) The Contractor shall use reasonable efforts to minimize
the period of time that any Segment or the System is out
of service for testing and repair. The Purchaser agrees to
cooperate with the Contractor to facilitate the
Contractor's repair activity.
(c) It is understood that if there is a problem on the System,
the Purchaser may immediately dispatch the maintenance
authority to effect repairs. If and to the extent that
such problem is determined to be caused by a defect in the
System covered by this warranty, the Contractor shall
reimburse the Purchaser for its actual Non-Ship Costs
incurred and, with respect to any such repair relating to
a defect identified in good faith by Purchaser in writing
prior to the end of the Ship Period, actual Ship Costs
incurred.
(i) The Contractor shall be given advance notice and be
entitled to have a representative on board ship to
observe at sea repairs and shall be given the
earliest possible notice of any such repair.
(ii) Subject to the foregoing and to Sub-Article 10(D),
any repair by the Purchaser shall not in any way
diminish the Contractor's obligation under the
warranty. Any equipment discovered to be defective
or faulty and recovered during a warranty repair
shall be returned to the Contractor at its request.
(d) In the event that the Contractor fails to make the repair
or to make reasonable efforts to minimize the period of
time that the System is out of service for repair, the
Purchaser may repair the System or the System Upgrade and
the Contractor shall reimburse the Purchaser for Non-Ship
Costs and, with respect to any such repair relating to a
defect identified in good faith by Purchaser in writing
prior to the end of the Ship Period, Ship Costs.
(i) The Contractor shall be given advance notice and be
entitled to have a representative on board ship to
observe at sea repairs and shall be given the
earliest possible notice of any such repair.
(ii) Subject to the foregoing, any repair by the
Purchaser shall not in any way diminish the
Contractor's obligation
30
under the warranty. Any equipment discovered to be
defective or faulty and recovered during a warranty
repair shall be returned to the Contractor at its
request.
2. Contractor shall bear the Ship Costs of only those repairs of
the defects identified in good faith by Purchaser in writing
prior to the end of the Ship Period. However, the Contractor
shall bear the Non-Ship Costs of each repair, replacement or
improvement required during the Warranty Period.
As used herein, "Ship Cost" means the costs of operating a
vessel, including but not limited to running and standing
charges for the vessel (including but not limited to labor
charges for the vessel's crew, at sea insurance, port charges,
fuel and lube oils, consumables, cable loading, cable
unloading, navigation and maritime communications) as well as
the costs associated with the use and operation of a remotely
operated vehicle and the tracked self-propelled burial tool,
and "Non-Ship Costs" means the costs of making a repair,
including the cost of components, equipment or materials
requiring replacement, the cost of any additional equipment
necessary to effect the repair, the cost of making the repair,
including the cost of reburying any previously buried portion,
the cost of labor and engineering assistance or development
required to make the repair and all necessary associated costs,
such as, but not limited to, shipping and customs and services
that may be required to make the repair, but excluding any of
the foregoing which are Ship Costs.
3. The Contractor shall effect all warranty repairs of the System
and shall supply all necessary repair materials. However, the
Contractor may use, with the consent of the Purchaser, which
shall not be unreasonably withheld, the materials needed to
effect a repair from the Purchaser's available spare materials.
The Contractor shall promptly replace in kind such materials
supplied from the Purchaser's spare materials, or at the option
of the Purchaser, reimburse the Purchaser for such materials at
its original purchase price. The replacement of or
reimbursement for such materials shall be made at a time
mutually agreed to by the Purchaser and the Contractor.
4. The Contractor warrants that services furnished hereunder will
be performed in a workmanlike manner using materials free from
defects except when such materials are provided by the
Purchaser (it being understood that all materials arranged for
directly by Contractor, whether or not purchased in the name of
Purchaser, are not materials provided by the Purchaser). If
such services prove to be not so performed and Purchaser
notifies the Contractor within six (6) months from the
completion of the service, the Contractor will promptly correct
the defect.
31
5. Any part which replaces a defective part during the applicable
Warranty Period or Upgrade Warranty Period, shall be subject to
the remaining Warranty Period and Ship Period, if any, or Upgrade
Warranty Period, as the case may be, of the part which was
replaced. However, the Warranty Period shall never exceed * years
from the Date of Provisional Acceptance of the System and the
Upgrade Warranty Period for any System Upgrade shall never exceed
* years from the Date of Provisional Acceptance of such System
Upgrade. Further, Ship Costs shall be included only with respect
to defects identified in good faith by Purchaser in writing during
the first * years from the Date of Provisional Acceptance of the
System.
B. *
C. The Contractor warrants that all Deliverable Software and Deliverable
Technical Materials are Year 2000 Compliant.
D. The warranties provided above in Sub-Articles 10(A) and (B) by the
Contractor shall not apply to defects or failures of performance, which result
from damage caused by acts or omissions of the Purchaser or its agents,
employees or representatives or third parties (other than the Contractor), or
which result from modifications, misuse, neglect, accident or abuse, repair,
storage or maintenance by other than the Contractor or its agents or use in a
manner not in accordance with the System Description or other causes set forth
in Article 12 (Purchaser's Obligations) or Article 17 (Force Majeure).
E. THE FOREGOING WARRANTY IS EXCLUSIVE AND IS IN LIEU OF ALL OTHER
EXPRESS AND IMPLIED WARRANTIES INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE WHICH ARE SPECIFICALLY
DISCLAIMED. THE PURCHASER'S SOLE AND EXCLUSIVE REMEDY WITH RESPECT TO DEFECTS
COVERED BY THE FOREGOING WARRANTY SHALL (EXCEPT AS SET FORTH IN SUB-ARTICLE B
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
32
ABOVE) BE THE CONTRACTOR'S OBLIGATION TO MAKE REPAIRS OR REPLACEMENTS AS SET
FORTH IN THIS ARTICLE; PROVIDED, THAT CONTRACTOR'S FAILURE TO SO PERFORM SHALL
--------
BE SUBJECT TO ARTICLE 13 HEREOF.
F. The Contractor shall, in accordance with its normal operating
practices, investigate any defective part or parts repaired or replaced pursuant
to this Article 10 to determine the type of defect and the cause of failure of
the part or parts. The Contractor shall provide a written report to the
Purchaser on the results of the investigation, if any.
ARTICLE 11 CONTRACTOR SUPPORT
------------------------------
A. For a period of ten (10) years from the applicable Date of Provisional
Acceptance or Date of Commercial Acceptance of the System whichever is earlier,
the Contractor will make available to the Purchaser replacement parts and repair
service for the System as may be reasonably necessary for its operation,
maintenance or repair. Where identical parts cannot be supplied, the Contractor
shall provide fully compatible parts with characteristics equal or superior to
those originally provided by the Contractor. Such parts and services shall be
provided under commercially reasonable conditions of price and delivery.
B. Notwithstanding Sub-Article 11(A), if for any reason the Contractor or
Contractor's suppliers intend to cease or ceases manufacturing or having
manufactured identical or fully compatible replacement parts, the Contractor
shall use reasonable efforts to give one year's prior written notice to the
Purchaser to allow the Purchaser to order from the Contractor any required
replacement parts and shall provide full details of the arrangements to provide
equivalents.
ARTICLE 12 PURCHASER'S OBLIGATIONS
-----------------------------------
A. Purchaser agrees to pay all amounts payable by it when due under this
Contract and to perform all of its other obligations under this Contract.
B. In the event the Purchaser establishes a branch office in any of the
relevant jurisdictions, the Purchaser shall be solely responsible to perform all
activities necessary to establish such branch office.
C. If any loss, damage, delay or failure of performance of the System or
a System Upgrade results from the Purchaser's failure to perform its obligations
under this Contract and results in an increase in the costs of performance or
the time required for performance of any of the Contractor's duties or
obligations under this Contract, the Contractor shall be entitled, as
appropriate, to (i) an equitable adjustment in the Contract Price or applicable
Upgrade Price, (ii) an equitable extension of time for completion of its Work or
the Upgrade Work, (iii) reimbursement for all such additional costs incurred,
and (iv) to the extent necessary in light of Purchaser's failure and the
adjustments made in accordance with clauses (i), (ii) and (iii) above, an
equitable adjustment of the Work and/or Upgrade Work.
33
1. The Contractor shall inform the Purchaser promptly of any
occurrence covered under this Sub-Article 12(C), and shall use
reasonable efforts to minimize any such additional costs or
delay.
2. The Contractor shall promptly provide to the Purchaser an
estimate of the anticipated additional costs and time required to
complete the Work or Upgrade Work and request relief from
contractual obligations or duties, as appropriate. Purchaser
shall, upon notification, make advance payment to Contractor for
the estimated amount of anticipated additional costs; provided
--------
that Purchaser may deposit such amount into the Dispute Account
and Sub-Article 5(C)(5) shall apply. Contractor shall without
limiting Purchaser's obligations in the foregoing sentence,
discuss such costs with Purchaser upon Purchaser's request.
3. As soon as reasonably practicable after the actual costs become
known to the Contractor, the Contractor shall provide a statement
of such actual costs to the Purchaser.
4. If the estimated amount is greater than the amount of actual
costs, then the Contractor shall reimburse the Purchaser. If the
amount of actual costs incurred is greater than the estimated
amount, then the Purchaser shall reimburse the Contractor for any
shortfall in accordance with Article 5 (Terms of Payment of
Purchaser).
ARTICLE 13 TERMINATION FOR DEFAULT
-----------------------------------
A. Either Party may, by written Notice of Termination for Default,
immediately upon receipt or such later date as specified in the notice,
terminate the whole or any part of this Contract in any one of the following
circumstances (each an "Event of Default"):
1. In the case of the Purchaser, (a) if Contractor materially fails
to comply with the terms and conditions of this Contract and, if
such failure occurs prior to the Date of Commercial Acceptance or
the Date of Provisional Acceptance, it would not be reasonable to
believe that the Contractor will be able to provide the System
which is Ready for Provisional Acceptance, within 200 days after
the Scheduled System RFS Date or (b) the Contractor fails to
cause the System to be Ready for Commercial Acceptance or
Provisional Acceptance within 200 days after the Schedule RFS
Date;
2. If the other Party defaults on any of its payment obligations and
does not cure such default within a period of thirty (30) days
(or such longer period as the non-breaching Party may authorize
in writing) after receipt of written notice demanding cure
(subject to dispute provisions);
34
3. If the other Party shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part
of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an
involuntary case or other proceeding commenced against it, or
shall make a general assignment for the benefit of creditors, or
shall fail generally to pay its debts as they become due, or
shall take any corporate action to authorize any of the
foregoing;
4. If an involuntary case or other proceeding shall be commenced
against the other Party seeking liquidation, reorganization or
other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or
other proceeding shall remain undismissed and unstayed for a
period of 60 days; or an order for relief shall be entered
against the other Party.
B. If this Contract is terminated by the Purchaser as provided in Sub-
Article 13(A), the Purchaser, in addition to any other rights provided in this
Article and upon payment to Contractor of all monies due and owing as set forth
in clauses 1 and 2 of Sub-Article 13(C) below, may require the Contractor to
transfer title and deliver to the Purchaser in the manner and to the extent
directed by the Purchaser any completed equipment, material or supplies, and
such partially completed cable and materials, parts, tools, dies, jigs,
fixtures, plans, drawings, information, and contract rights (hereinafter
collectively "Manufacturing Materials") as the Contractor has had specifically
produced or specifically acquired for the performance of such part of this
Contract as has been terminated and which, if this Contract had been completed,
would have been required to be furnished to the Purchaser; and the Contractor
shall, upon the direction of the Purchaser, protect and preserve property in the
Contractor's possession in which the Purchaser has an interest.
C. If the Contract is terminated by Contractor as provided in Sub-Article
13(A), the Purchaser shall pay, in addition to any other damages payable
pursuant to Sub-Article 13(E) below, the total of:
1. the cost of settling and paying claims rising out of the
termination of Work under the contracts in orders, as provided in
Sub-Article 13(C)(2) below which are properly chargeable to the
terminated portion of this Contract; and
2. the reasonable costs of settlement including accounting, legal,
clerical and other expenses necessary for the preparation of
settlement claims and supporting data with respect to the
terminated portion of this
35
Contract and for termination and settlement of contracts
thereunder, together with reasonable storage, transportation and
other costs incurred in connection with the protection,
preservation and disposition of property proper to this Contract.
D. Force Majeure events pursuant to Article 17 (Force Majeure) shall not
constitute a default or provide a basis for termination under this Article.
E. Regardless of any termination of this Contract as provided in Sub-
Article 13(A), neither Party shall be relieved from any liability for damages or
otherwise which may have been incurred by reason of any breach of this Contract.
F. Without limitation to the foregoing, in the event that Purchaser
terminates this Contract pursuant to Sub-Article 13(A), the Contractor shall be
liable to Purchaser (without duplication) for the total of all costs and
expenses reasonably incurred by Purchaser in completing the Work or in
correcting deficiencies in the Work to the extent that the payments made to
Contractor pursuant to this Contract, together with such costs and expenses,
exceed the Contract Price.
ARTICLE 14 TERMINATION FOR CONVENIENCE
---------------------------------------
A. The performance of Work under this Contract may be terminated by the
Purchaser in whole, or in part, at its discretion. The Purchaser shall deliver
to the Contractor a written notice specifying the extent to which performance of
Work under this Contract is terminated, and the date upon which such termination
becomes effective (a "Notice of Termination"). Upon termination, the Purchaser
will make payment to Contractor of all monies due and owing as set forth in Sub-
Article 14(D) below.
B. After receipt of such Notice of Termination, and except as otherwise
directed by the Purchaser, the Contractor shall:
1. Stop Work under this Contract on the date and to the extent
specified in the Notice of Termination;
2. Place no further orders or contracts for materials, services or
facilities except as may be necessary for completion of such
portion of Work under this Contract as is not terminated;
3. Use reasonable efforts to terminate all orders and contracts to
the extent that they relate to the performance of Work terminated
by the Notice of Termination;
4. Assign to the Purchaser, in the manner, at the time, and to the
extent directed by the Purchaser, all of the Contractor's rights,
title and interest under the orders and contracts so terminated;
36
5. Use reasonable efforts to settle all outstanding liabilities and
all claims arising out of such termination of orders and
contracts, with the Purchaser's approval or ratification to the
extent required;
6. Transfer title and deliver to the Purchaser in the manner, at the
time and to the extent (if any) directed for the fabricated or
unfabricated parts, work in process, completed work, supplies and
other material produced as a part of, or acquired in connection
with, the performance of the Work terminated by the Notice of
Termination;
7. Use reasonable efforts to sell, in the manner, at the time, to
the extent and at the price or prices directed or authorized by
the Purchaser, any property of the types referred to in Sub-
Article 13(B)(6) above provided, however, that the Contractor:
-------- -------
(a) shall not be required to extend credit to any buyer; and
(b) may acquire any such property under the conditions
prescribed by and at a price approved by the Purchaser;
and provided further that the net proceeds of any such transfer
-------- -------
or disposition shall be applied in reduction of any payments to
be made by the Purchaser to the Contractor under this Contract
or, if no such payments are due, paid in such other manner as the
Purchaser may direct;
8. Complete performance of such part of the Work which was not
terminated by the Notice of Termination; and
9. Take such action as may be necessary, or as the Purchaser may
reasonably direct, for the protection and preservation of the
property related to this Contract which is in the Contractor's
possession and in which the Purchaser has acquired or may acquire
an interest.
C. After such Notice of Termination, the Contractor shall submit to the
Purchaser a written termination claim. Such claim shall be submitted promptly,
but, unless otherwise extended, in no event later than six months from the
effective date of termination.
D. In the settlement of any such partial or total termination claim, the
Purchaser shall pay to the Contractor the total of:
1. (i) all amounts invoiced in accordance with the Contract plus,
for Work or Supplies which have been done or provided but which
have not been invoiced, an amount calculated by reference to the
prices set forth in the Provisioning Schedule and to the amount
of such Work or Supplies done or provided;
37
2. the cost of settling and paying claims arising out of the
termination of Work under the contracts in orders, as provided in
Sub-Article 14(D)(4) below which are properly chargeable to the
terminated portion of this Contract; and
3. the reasonable costs of settlement including accounting, legal,
clerical and other expenses necessary for the preparation of
settlement claims and supporting data with respect to the
terminated portion of this Contract and for termination and
settlement of contracts thereunder, together with reasonable
storage, transportation and other costs incurred in connection
with the protection and disposition of property proper to this
Contract.
E. In arriving at the amount due to the Contractor under this Article 14,
all unliquidated payments made to the Contractor, any liability which the
Contractor may have to the Purchaser, and the agreed price for, or the proceeds
of sale of any materials, supplies or other things acquired by the Contractor or
sold, pursuant to the provisions of this Article 14, and not otherwise recovered
by or credited to the Purchaser shall be deducted.
F. The Purchaser may, from time to time, under such terms and conditions
as they prescribe approve partial payments and payments on account against costs
incurred by the Contractor in connection with the terminated portion of this
Contract. If such payments total in excess of the amount finally agreed or
determined to be due under this Article 14, such excess shall be refunded, upon
demand, by the Contractor to the Purchaser.
G. For a period of one year after final settlement under this Contract,
the Contractor shall preserve and make available to the Purchaser at reasonable
times at the Contractor's office, but without direct charge to the Purchaser,
all supporting books, records and documents required to be kept relating to the
terminated Work.
ARTICLE 15 SUSPENSION
----------------------
A. The Purchaser may, at its convenience, order the Contractor to suspend
all or part of the Work for such period of time as the Purchaser determines to
be appropriate. If, as a result of such Suspension, the Contractor incurs
additional costs or losses in the discharge of its responsibilities under this
Contract, and where such suspension, losses or costs are not caused by the
Contractor's act or omission and could not have been reasonably prevented by the
Contractor, the Contractor shall be allowed an equitable adjustment to the
Contract Price or the Provisioning Schedule in Appendix 1 and an equitable
extension in the time required for performance.
B. Upon the occurrence of:
(i) an Event of Default by the Purchaser;
38
(ii) any transfer prior to the Date of Final Acceptance of any portion
of the System except in accordance with Article 37; or
(iii) any supplement executed by a Transferee shall not be in full
force and effect;
the Contractor, in addition to any other rights provided in Article 13, may
suspend performance of its obligations and all Work and (in the case of clause
(i)) Upgrade Work.
C. Every forty-five (45) days, during the period of Suspension, the
Parties shall meet formally and review the circumstances surrounding the
Suspension including without limitation, the anticipated date of re-commencing
Work.
D. Thereafter, if the Suspension continues for a total of one hundred and
eighty (180) days, the Contractor may terminate the Contract by notice to the
Purchaser and the Contract shall be deemed to have been terminated by Purchaser,
effective on the date of Contractor's notice, in accordance with Sub-Article
13(A) and the remaining provisions of Article 13 shall apply.
ARTICLE 16 TITLE AND RISK OF LOSS
----------------------------------
A. Except as provided in Article 18 (Intellectual Property), Article 20
(Safeguarding of Information and Technology) and Article 21 (Export Control),
title to all Supplies provided by the Contractor hereunder for incorporation in
or attachment to a Segment shall pass to and vest in the Purchaser in accordance
with Article 9 (Acceptance). Risk of loss or damage to all Supplies provided by
the Contractor for incorporation in or attachment to such Segment shall pass to
and vest in the Purchaser in accordance with Article 9. Upon termination of this
Contract pursuant to Article 13 (Termination for Default) or 14 (Termination for
Convenience), the Purchaser may require, upon full payment of all amounts due
thereunder (provided that, without limiting Purchaser's obligation to make any
--------
such payment, if this Contract is terminated by Purchaser because of a
Bankruptcy Event full payment shall not be required prior to the transfer of
title), that title to the equipment, materials and supplies, which has not
previously passed to the Purchaser, pass to the Purchaser, free and clear of all
liens, claims, charges and other encumbrances other than those deriving through
Purchaser.
B. Upon the passage of title in accordance with the terms of Article 13
(except a transfer described in the proviso of the last sentence of Sub-Article
16(A)), the Contractor warrants that all parts, materials, and equipment to
which title has passed will be free and clear of all liens, claims, charges and
other encumbrances other than those deriving through the Purchaser.
ARTICLE 17 FORCE MAJEURE
-------------------------
A. The Contractor shall not be responsible for any loss, damage, delay or
failure of performance resulting directly or indirectly from any cause which is
beyond its reasonable control ("Force Majeure"), including but not limited to:
delay in obtaining or failure to obtain
39
any Permits (subject to the provisions of Sub-Article 7(D)); acts of God or of
the public enemy; acts or failure to act of any governmental authority; war or
warlike operations, civil war or commotion, mobilizations or military call-up,
and acts of similar nature; revolution, rebellions, sabotage, and insurrections
or riots; fires, floods, epidemics, quarantine restrictions; strikes, and other
labor actions; freight embargoes; unworkable weather; trawler or anchor damage;
damage caused by other marine activity such as fishing, marine research and
marine development; acts or omissions of transporters; or the acts or failure to
act of any of the Purchaser, of its representatives or agents, provided that (i)
--------
a loss by Contractor of employees (other than by reasons of Force Majeure), (ii)
strikes and other labor actions involving the Contractor's own work force, (iii)
the first 5 days of unworkable weather (unless any such day occurs during the 30
days immediately preceding the then Scheduled System RFS Date or Scheduled
Segment S RFS Date), (iv) the failure (other than by reason of force majeure) of
any subcontractor, supplier or transporter to perform its obligations to
Contractor (including on account of insolvency) unless such supplies or
transportation or other services are generally unavailable in the marketplace,
(v) the unavailability of any raw materials or components, unless such raw
materials or components are generally unavailable in the marketplace or are
unavailable by reason of force majeure or (vi) any increase in Contractor's
costs, shall not in and of itself constitute Force Majeure.
B. If any such Force Majeure causes an increase in the time required for
performance of any of its duties or obligations, the Contractor shall be
entitled to an equitable extension of time for completion of the Work or the
Upgrade Work, as the case may be.
C. Increase in cost due to Purchaser will be as provided for in Article
12, Purchaser's Obligations.
D. The Contractor shall inform the Purchaser promptly with written
notification, and in all cases within fourteen (14) days of discovery and
knowledge, of any occurrence covered under this Article and shall use its
reasonable efforts to minimize such additional delays. The Contractor shall
promptly provide an estimate of the anticipated time required to complete the
Work or the Upgrade Work. Contractor shall be entitled to an extension of time
equal to at least one day for each day of delay resulting from the Force Majeure
condition.
E. Within thirty (30) days of receipt of such a notice from Contractor,
the Purchaser and the Independent Engineer may provide a written response. The
absence of a response shall be deemed as acceptance of Contractor's notice and
request for additional time.
F. If a Force Majeure continues for a total of two hundred (200) days,
either Party may terminate the Contract by notice to the other and the Contract
shall be deemed to have been terminated by Purchaser, effective on the date of
the terminating Party's notice, in accordance with Sub-Article 14(A) and the
remaining provisions of Article 14 shall apply to such termination.
ARTICLE 18 INTELLECTUAL PROPERTY
---------------------------------
A. Ownership
40
All right, title, and interest in and to all Intellectual Property
(excluding Project Patent Rights) created or developed by Contractor in the
course of its performance under this Contract that is (a) specifically and
exclusively applicable to the System or a System Upgrade; and (b) either (i)
embodied in Deliverable Technical Material (as that term is defined in Sub-
Article 18(B) below) or (ii) embodied in the System or a System Upgrade (the
"Project Intellectual Property"), is and shall remain the sole property of
Purchaser. All right, title and interest in and to all Intellectual Property
created or developed by Contractor before commencing its performance under this
Contract, or created or developed by Contractor exclusively in connection with
activities other than its performance under this Contract, or created or
developed by Contractor in the course of its performance under this Contract
that is not Project Intellectual Property, and all Project Patent Rights
(collectively, the "Contractor Intellectual Property"), is and shall remain the
sole property of Contractor. Unless otherwise expressed in this Contract, no
license is implied or granted herein to Purchaser to any Contractor Intellectual
Property by virtue of this Contract, nor by the transmittal or disclosure of any
such Contractor Intellectual Property to Purchaser. Any Contractor Intellectual
Property disclosed, furnished, or conveyed to Purchaser that is marked as
"Proprietary" or "Confidential" (or if transmitted orally is identified as being
proprietary or confidential in a subsequent writing) shall be treated in
accordance with the provisions of Article 20 (Safeguarding of Information and
Technology). As used herein, "Intellectual Property" means any information,
computer or other apparatus programs, software, specifications, drawings,
designs, sketches, tools, market research or operating data, prototypes,
records, documentation, works of authorship or other creative works, ideas,
concepts, methods, inventions, discoveries, improvements, or other business,
financial and/or technical information (whether or not protectable or
registrable under any applicable intellectual property law). As used herein,
"Project Patent Rights" means all inventions, discoveries, methods and
improvements of a patentable nature created or developed by Contractor in the
course of its performance under this Contract. Project Intellectual Property
will include the materials to be listed in a Schedule to be created mutually by
the Parties within thirty (30) days of execution of this Contract, as it may be
amended from time to time by mutual agreement of the Parties.
B. Licenses
Contractor shall furnish to Purchaser, upon the transfer of title to
any portion of the System or a System Upgrade pursuant to Article 9, copies of
all technical information, specifications, drawings, designs, sketches, tools,
operating data, records, documentation and/or other types of engineering or
technical data or information reasonably relating to the operation, maintenance
or repair of each component of such portion of the System or System Upgrade as
delivered by Contractor (the "Deliverable Technical Material"). Contractor
grants to Purchaser a perpetual, royalty-free, non-transferable (except under
the circumstances specified in Sub-Article 18(F) below) license to use and
reproduce those Deliverable Technical Materials owned, controlled, or developed
by Contractor and all Contractor Intellectual Property included in or necessary
to use all the Deliverable Technical Materials for purposes of fulfilling
Purchaser's obligations under this Contract and using and operating the System
(as upgraded by any System Upgrades) supplied by Contractor with the right to
employ third parties (under appropriate written obligations respecting
confidentiality) to assist Purchaser in fulfilling its obligations under this
Contract and in using and operating the
41
System (as upgraded by any System Upgrades), but with no right to sublicense.
Contractor grants to Purchaser a perpetual, royalty-free, non-transferable
(except under the circumstances specified in Sub-Article 18(F) below) license to
use and reproduce those portions of Deliverable Technical Materials owned or
controlled by third parties (but only to the extent of any rights which may have
been granted to Contractor by such third parties) for the purpose of fulfilling
Purchaser's obligations under this Contract and using and operating the System
supplied by Contractor with the right to employ third parties (under appropriate
written obligations respecting confidentiality) to assist Purchaser in
fulfilling its obligations under this Contract and in using and operating the
System (as upgraded by any System Upgrades), but with no right to sublicense.
Except as set forth in this provision, no license under Contractor's patents,
copyrights, trade or service marks, trade secrets or other intellectual property
rights protectable under law in the United States or any foreign country is
granted to Purchaser. It is expressly understood that it shall not be a
violation of this license for Purchaser, on its own behalf or through third
parties (under appropriate written obligations respecting confidentiality)
specifically employed for the purpose, to use and reproduce Deliverable
Technical Material that is not Project Intellectual Property to modify the
System (as upgraded by any System Upgrades) or connect the System (as upgraded
by any System Upgrades) to other systems, provided that Purchaser may not use
the Deliverable Technical Materials that is not Project Intellectual Property in
achieving such modification or interconnection for any purpose other than
determining the technical configuration, systems interface and/or
interoperability requirements of the System (as upgraded by any System Upgrades)
as delivered by Contractor (subject to the rights of third parties therein and
thereto), and subject to the limitations on Contractor's obligations as set
forth in Articles 10(D) and 19(A) concerning any such modification or
interconnection.
C. Deliverable Software
Contractor shall furnish to the Purchaser, upon transfer of title to
any portion of the System or System Upgrade pursuant to Article 9, copies of all
computer or other apparatus programs and software, in executable form, and
related documentation relating to the operation, maintenance, or repair of the
computer systems of such portion of the System or System Upgrade, as the case
may be, as delivered by Contractor (the "Deliverable Software"). In the case of
Contractor Intellectual Property, such copies of programs and software shall
consist solely of executable code provided in offline media (e.g., tapes, or
diskettes) for restoration purposes, sufficient to operate, maintain or repair
the computer systems of such portion of the System or System Upgrade, as the
case may be, as delivered by Contractor, and in the case of Project Intellectual
Property, such programs and software shall be delivered in both source and
object code forms. Contractor shall furnish to Purchaser, from time to time
during the Warranty Period or any Upgrade Warranty Period, copies of all
computer or other apparatus programs and software, in executable form (and in
the case of Project Intellectual Property, in source code form), and related
documentation that Contractor may develop to correct errors or to maintain
Deliverable Software previously furnished to Purchaser, which shall also be
treated as Deliverable Software for purposes of this Contract upon delivery
thereof to Purchaser. Contractor grants to Purchaser a perpetual, royalty-free,
non-transferable (except under the circumstances specified in Sub-Article 18(F)
below) license to use and reproduce the Deliverable Software Materials owned,
controlled, or
42
developed by Contractor for the purpose of fulfilling Purchaser's obligations
under this Contract and using and operating the System (as upgraded by any
System Upgrades) supplied by Contractor with the right to employ third parties
(under appropriate written obligations respecting confidentiality) to assist
Purchaser in fulfilling its obligations under this Contract and in using and
operating the System (as upgraded by any System Upgrades), but with no right to
sublicense. Contractor grants to Purchaser a perpetual, royalty-free, non-
transferable (except under the circumstances specified in Sub-Article 18(F)
below) license to use and reproduce those portions of Deliverable Software owned
or controlled by third parties (but only to the extent of any rights which may
have been granted to Contractor by such third parties) for the purpose of
fulfilling Purchaser's obligations under this Contract and using and operating
the System (as upgraded by any System Upgrades) supplied by Contractor with the
right to employ third parties (under appropriate written obligations respecting
confidentiality) to assist Purchaser in fulfilling its obligations under this
Contract and in using and operating the System (as upgraded by any System
Upgrades), but with no right to sublicense. These licenses shall be limited to
the right to use Deliverable Software that is not Project Intellectual Property
only with the particular type of computer equipment or substantially similar
replacement equipment for which such Deliverable Software was provided in the
System (as upgraded by any System Upgrades) as supplied by Contractor.
1. Confidentiality
Purchaser shall keep the Deliverable Software that is not Project
Intellectual Property confidential in accordance with Article 20
(Safeguarding of Information and Technology) and Article 21
(Export Control) to the extent that such Deliverable Software is
designated as Confidential Information by its owner and agrees to
use its best efforts to see that its employees, consultants, and
agents, and other users of such software, comply with the
provisions of this Contract. Purchaser also agrees to refrain
from taking any steps, such as reverse assembly or decompilation,
to derive a source code equivalent of any object code that is
furnished by Contractor, provided that Contractor continues to
maintain the Deliverable Software that is not Project
Intellectual Property in accordance with the terms of a support
and maintenance agreement to be entered into on such terms to be
agreed upon by the Parties, which terms shall in all events
contain assurances of support and maintenance at least as
favorable to Purchaser as those contained in the Operating,
Administration and Maintenance Agreement concerning AC-1 or is
willing and able to enter into an agreement to maintain the
Deliverable Software upon terms reasonably comparable to the
pertinent terms of the initial agreement to be entered into by
the Parties with regard to support and maintenance after the
expiration or termination thereof or does not go insolvent or
bankrupt to thereby trigger *. In the case of insolvency or
bankruptcy of Contractor, Purchaser shall limit any derivation of
a source code equivalent to that portion of the Deliverable
Software that is Contractor Intellectual Property. Purchaser
shall not under any circumstances take any steps to derive a
source code
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
43
equivalent from that portion of the Deliverable Software
comprising commercial, off-the-shelf software developed or
provided by third parties.
2. Backup Copies
Purchaser may make and retain two archive copies in executable
form of the Deliverable Software that is not Project Intellectual
Property. Any copy will contain the same copyright notice and
proprietary markings as are on the original software and shall be
subject to the same restrictions as the originals.
3. Termination of Software Licenses
In the event of (i) use by the Purchaser of Deliverable Software
that is not Project Intellectual Property in a manner other than
that permitted in Sub-Article 18(C) or (ii) any other material
breach of this Article 18 by Purchaser that in either event is
not cured within sixty (60) days from receipt by Purchaser of
written notice of such impermissible use or breach, Contractor,
at its option, may terminate the rights granted to Purchaser
pursuant to this Article, upon written notice to Purchaser, which
termination shall take effect no sooner than sixty (60) days
following receipt by Purchaser of a subsequent written notice of
termination. Upon termination, Purchaser shall either return or
destroy, at Contractor's option, all copies of Deliverable
Software that is not Project Intellectual Property furnished
under this Contract.
4. Indemnification
In the event of (i) use by Purchaser of Deliverable Software that
is not Project Intellectual Property furnished hereunder other
than that permitted in Sub-Article 18(C) or (ii) any other
material breach of this Article 18 by Purchaser, the Purchaser
shall indemnify and hold Contractor harmless from any and all
third party claims resulting therefrom whether arising from a
defect in the software or otherwise.
D. Trademarks, Tradenames, etc.
No rights are granted herein to either Party to use any identification
(such as, but not limited to tradenames, trademarks, service marks or symbols,
and abbreviations, contractions, or simulations thereof) owned or used by the
other Party or its parent company or its affiliates to identify itself or its
affiliates or any of its products or services. Each Party agrees that it will
not, without the prior written permission of the other Party, use such
identification in advertising, publicity, packaging, labeling, or in any other
manner to identify itself or any of its products, services, or organizations, or
represent directly or indirectly that any product, service, or organization of
it is a product, service, or organization of the other Party or its affiliates,
or that any product or service of a Party is made in accordance with or utilizes
any intellectual property of the other Party or its affiliates.
44
E. DISCLAIMER, LIMITATION OF LIABILITY
CONTRACTOR REPRESENTS THAT ANY INFORMATION OR INTELLECTUAL PROPERTY
FURNISHED IN CONNECTION WITH THIS CONTRACT SHALL BE TRUE AND ACCURATE TO THE
BEST OF ITS KNOWLEDGE AND BELIEF, BUT CONTRACTOR SHALL NOT BE HELD TO ANY
LIABILITY FOR UNINTENTIONAL ERRORS OR OMISSIONS THEREIN. EXCEPT AS EXPRESSLY
PROVIDED, CONTRACTOR MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESSLY OR
IMPLIEDLY. BY WAY OF EXAMPLE, BUT NOT OF LIMITATION, CONTRACTOR AND ITS PARENT
COMPANY AND AFFILIATES MAKES NO REPRESENTATIONS OR WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE, OR THAT THE USE OF INFORMATION OR
INTELLECTUAL PROPERTY DISCLOSED OR PROVIDED HEREUNDER WILL NOT INFRINGE ANY
PATENT OR OTHER INTELLECTUAL PROPERTY RIGHT OF A THIRD PARTY. EXCEPT AS
OTHERWISE PROVIDED IN THIS CONTRACT, CONTRACTOR AND ITS PARENT AND AFFILIATES
SHALL NOT BE HELD TO ANY LIABILITY WITH RESPECT TO ANY CLAIM BY PURCHASER OR ANY
THIRD PARTY CLAIM AGAINST PURCHASER ON ACCOUNT OF, OR ARISING FROM, PURCHASER'S
USE OF INFORMATION OR INTELLECTUAL PROPERTY DISCLOSED OR PROVIDED BY CONTRACTOR.
F. Transferability
The licenses granted to Purchaser by Contractor in the Deliverable
Technical Materials and Deliverable Software are personal and non-transferable,
except that Purchaser may assign or transfer such licenses to an affiliated
entity under common control with the Purchaser or to any entity succeeding to
Purchaser's entire interest in the System (as upgraded by any System Upgrades)
as a result of reorganization or restructuring of the Purchaser or in the event
of a change of control of the Purchaser.
G. *
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
45
*
ARTICLE 19 INFRINGEMENT
-----------------------
A. The Contractor agrees to defend or settle at its own expense all suits
for infringement of any patent, copyright, trademark or other form of
intellectual property right in any country of the world, for the use and
operation of the System (as upgraded by any System Upgrades) as supplied by
Contractor and for any component part thereof or material or equipment used
therein (or the manufacture of any material or the normal use thereof) provided
by the Contractor or on its behalf pursuant to this Contract and will hold the
Purchaser harmless from all expense of defending any such suit and all payments
for final judgment assessed on account of such infringement, except such
infringement or claim arising from:
1. The Contractor's adherence to the Purchaser's directions in the
design and configuration of the System (as upgraded by any System
Upgrades) or to use materials, parts or equipment of the
Purchaser's selection; or
2. Such material, parts or equipment furnished to the Contractor by
the Purchaser, other than in each case, items of the Contractor's
design or selection or the same as any of the Contractor's
commercial merchandise or in processes or machines of the
Contractor's design or selection used in the manufacture of such
standard products or parts; or
3. Use of the System (as upgraded by any System Upgrades) or the
materials, parts or equipment furnished by Contractor other than
for the purposes indicated in, or reasonably to be inferred from,
this Contract or in conjunction with other products; or
4. Modification of the System (as upgraded by any System Upgrades)
or the materials, parts or equipment furnished by the Contractor,
or connection of the System to another system by any person or
entity other than Contractor, without prior expressed written
approval by Contractor.
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
46
B. The Purchaser will, at its own expense, defend all suits against the
Contractor for such excepted infringement and hold the Contractor harmless from
all expense of defending any such suit and from all payments by final judgment
assessed against the Contractor on account of such excepted infringement.
C. The Contractor and the Purchaser agree to give each other prompt
written notice of claims and suits for infringement, full opportunity and
authority to assume the sole defense, including appeals and, upon request and at
its own expense, the other agrees to furnish all information and assistance
available to it for such defense.
D. If all or any portion of the System (as upgraded by any System
Upgrades) or any material, part or equipment provided by the Contractor or on
its behalf is held to constitute an infringement (excluding such excepted
infringements specified in Sub-Article 19(A)) and is subject to an injunction
restraining its use or any order providing for its delivery up to or
destruction, or if in respect of any such claim of infringement the Contractor
deems it advisable to do so, the Contractor shall at its own expense either:
1. Procure for the Purchaser the right to retain and continue to use
the System, the affected portion thereof, or any such material,
part or equipment without interruption for the Purchaser;
2. Replace or modify the System, the affected portion thereof, or
any material, part or equipment so that it becomes noninfringing
while continuing to meet the Performance Requirements or
3. If the remedies specified in Sub-Articles 19(D)(1) an 19(D)(2)
are not feasible, refund to the Purchaser the full purchase price
paid for the System, the affected portion thereof, or any
material, part or equipment found to be infringing.
E. In no event shall the Purchaser make any admission or settle any claim
in relation with any claim for infringement without Contractor's consent.
ARTICLE 20 SAFEGUARDING OF INFORMATION AND TECHNOLOGY
------------------------------------------------------
A. In performance of this Contract, it may be mutually advantageous to
the Parties hereto to share certain specifications, designs, plans, drawings,
software, market research or operating data, prototypes, or other business,
financial, and or/technical information related to products, services, or
systems which are proprietary to the disclosing Party or its affiliates (and in
the case of Contractor, Contractor's parent company) (together with this
Contract and related documents, "Information"). The Parties recognize and agree
that Information includes information that was supplied in contemplation hereof
prior to execution of this Contract, and further agree that Information includes
information in both tangible and intangible form.
B. Unless such Information was previously known to the Party receiving
such Information free of any obligation to keep it confidential, or such
Information has been or is
47
subsequently made public through other than unauthorized disclosure by the
receiving Party or is independently developed by the receiving Party (as
documented by the records of the receiving Party), it shall be kept confidential
by the Party receiving such Information, shall be used only in the performance
of this Contract, and may not be used for any other purposes except upon such
terms as may be agreed upon in writing by the Party owning such Information. The
receiving Party may disclose such Information to other persons, upon the
furnishing Party's prior written authorization, but solely to perform acts which
this Article expressly authorizes the receiving Party to perform itself and
further provided such other person agrees in writing (a copy of which writing
will be provided to the furnishing Party at its request) to the same conditions
respecting disclosure and use of Information contained in this Article and to
any other reasonable conditions requested by the furnishing Party. Nothing
herein shall prevent a Party from disclosing Information (a) upon the order of
any court or administrative agency, (b) upon the request or demand of, or
pursuant to any regulation of, any regulatory agency or authority, (c) to the
extent reasonably required in connection with the exercise of any remedy
hereunder and (d) to a Party's legal counsel or independent auditors.
C. The Purchaser may disclose Information to its lenders and their
representatives in connection with obtaining financing for the System, provided
that each such lender or third party enters into a confidentiality agreement
containing terms and conditions similar to those in this Contract. Any such
disclosure of Information shall be subject to the restrictions in Sub-Article
20(B).
ARTICLE 21 EXPORT CONTROL
-------------------------
The Parties acknowledge that any products, software, and technical
information (including, but not limited to, services and training) provided by
either Party under this Contract are or may be subject to export laws and
regulations of the United States and destination countries and any use or
transfer of such products, software and technical information must be authorized
under those Laws. The Parties agree that they will not use, distribute, transfer
or transmit the products, software or technical information (even if
incorporated into other products) except in compliance with export Laws. If
requested by either Party, the other Party agrees to sign all necessary export-
related documents as may be required to comply with export Laws.
ARTICLE 22 LIQUIDATED DAMAGES
-----------------------------
A. If the System is not Ready for Commercial Acceptance or Provisional
Acceptance by the Scheduled System RFS Date, as it may have been extended under:
1. Article 6 (Contract Variations);
2. Article 17 (Force Majeure); or
3. Other arrangements as agreed between the Purchaser and the
Contractor;
48
then Contractor shall pay to Purchaser for each day of delay, for up to 200
days, by way of pre-estimated and liquidated damages for the delay and not as a
penalty, an amount equal to * of the Initial Contract Price for the System less
that portion of the Initial Contract Price allocable to Segment S, provided that
prior to the Scheduled System RFS Date, the Date of Provisional Acceptance for
Segment S has occurred.
B. If Segment S is not Ready for Commercial Acceptance or Provisional
Acceptance within fifteen (15) days (the "Grace Period") following the Scheduled
Segment S RFS Date, as it may have been extended under:
1. Article 6 (Contract Variations)
2. Article 17 (Force Majeure); or
3. Other Arrangements as agreed between the Purchaser and Contractor;
then Contractor shall pay to Purchaser for each day of delay following the
expiration of the Grace Period, for up to 200 days, by way of pre-estimated and
liquidated damages for the delay and not as penalty, an amount equal to * of
that portion of the Initial Contract Price of the System allocable to Segment S.
C. If a System Upgrade is not Ready for Commercial Acceptance or
Provisional Acceptance by the Scheduled Upgrade Date, as it may have been
extended under:
1. Article 6 (Contract Variations);
2. Article 17 (Force Majeure); or
3. Other arrangements as agreed between the Purchaser and the
Contractor;
then Contractor shall pay to Purchaser for each day of delay, for up to 90 days,
by way of pre-estimated and liquidated damages for the delay and not as a
penalty, an amount equal to * of the Initial Upgrade Price for such System
Upgrade.
ARTICLE 23 LIMITATION OF LIABILITY/INDEMNIFICATION
---------------------------------------------------
A. NOTWITHSTANDING ANY OTHER PROVISION IN THIS CONTRACT, AND IRRESPECTIVE
OF ANY FAULT, NEGLIGENCE OR GROSS NEGLIGENCE OF ANY KIND, IN NO EVENT SHALL
EITHER PARTY OR ANY OF ITS DIRECTORS, OFFICERS, EMPLOYEES OR AGENTS BE LIABLE
FOR ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT, RELIANCE OR SPECIAL (INCLUDING
PUNITIVE) DAMAGES, INCLUDING, BUT NOT LIMITED TO, LOSS OF REVENUE, LOSS OF
BUSINESS OPPORTUNITY OR THE COSTS ASSOCIATED WITH THE USE OF RESTORATION
FACILITIES RESULTING FROM ITS FAILURE TO PERFORM PURSUANT TO THE TERMS AND
CONDITIONS OF THIS CONTRACT.
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
49
B. EXCEPT AS SET FORTH BELOW IN THE LAST TWO SENTENCES OF THIS SUB-
ARTICLE 23(B), THE CONTRACTOR'S MAXIMUM AGGREGATE LIABILITY, WHETHER IN TORT,
CONTRACT OR OTHERWISE, EXCEPT FOR CLAIMS RELATING TO SYSTEM UPGRADES, SHALL NOT
EXCEED * OF THE CONTRACT PRICE. THE CONTRACTOR'S MAXIMUM AGGREGATE LIABILITY FOR
CLAIMS RELATING TO SYSTEM UPGRADES (IF CONTRACTOR CAN PROVE THAT THE SYSTEM WAS
DESIGNED WITH SUFFICIENT TRANSMISSION MARGIN AND THUS SUCH CLAIMS DO NOT ARISE
UNDER CLAUSE (ii) OF SUB-ARTICLE 10(B)) SHALL NOT EXCEED * OF THE APPLICABLE
UPGRADE PRICE. THE FOREGOING LIMITATION SHALL NOT APPLY TO CLAIMS UNDER SUB-
ARTICLES 19(A) AND 23(C). IF CONTRACTOR CANNOT PROVE THAT THE SYSTEM WAS
DESIGNED WITH SUFFICIENT TRANSMISSION MARGIN FOR A SYSTEM UPGRADE, THE
CONTRACTOR'S MAXIMUM AGGREGATE LIABILITY FOR CLAIMS ARISING UNDER CLAUSE (ii) OF
SUB-ARTICLE 10(B) SHALL NOT EXCEED *.
C. Contractor, at its expense, shall defend, indemnify and hold harmless
Purchaser, its agents, subcontractors and employees against any and all claims,
demands, and judgments for losses due to any act or omission, arising out of, or
in connection with this Contract or, prior to risk of loss passing to Purchaser,
the operation and maintenance of the System, to the extent such losses were
caused by the negligence or willful misconduct of the Contractor, its
subcontractors, employees or agents. The defense, indemnification and save
harmless obligation is specifically conditioned on the following: (i) Purchaser
providing prompt notification in writing of any such claim or demand when it
obtains Actual Knowledge thereof, unless such failure shall not have materially
impaired Contractor's ability to defend against such claim; (ii) Contractor
having control of the defense of any such action, claim or demand and of all
negotiations for its settlement or compromise; and (iii) Purchaser cooperating,
at Contractor's expense, in a reasonable way to facilitate the defense of such
claim or demand or the negotiations for its settlement.
D. Purchaser, at its expense, shall defend, indemnify and hold harmless
Contractor, its agents, subcontractors and employees against any and all claims,
demands, and judgments for losses due to any act or omission, arising out of, or
in connection with this Contract or, after risk of loss passes to Purchaser, the
operation or maintenance of the System, to the extent such losses were caused by
the negligence or willful misconduct of the Purchaser, its subcontractors,
employees or agents (other than Contractor). The defense, indemnification and
save harmless obligation is specifically conditioned on the following (i)
Contractor providing prompt notification in writing of any such claim or demand
when it obtains Actual Knowledge thereof, unless such failure shall not have
materially impaired Purchaser's ability to defend against such claim; (ii)
Purchaser having control of the defense of any such action, claim or demand and
of all negotiations for its settlement or compromise; and (iii) Contractor
cooperating, at Purchaser's expense, in a reasonable way to facilitate the
defense of such claim or demand or the negotiations for its settlement.
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
50
ARTICLE 24 COUNTERPARTS
------------------------
This Contract may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
ARTICLE 25 DESIGN AND PERFORMANCE RESPONSIBILITY
-------------------------------------------------
A. The Contractor shall be solely responsible for the design of and for
all details of the System and the System Upgrades and for the adequacy thereof.
B. The Contractor's responsibility for design of the System and the
System Upgrades shall not in any way be diminished nor shall the Contractor's
design approach be restricted or limited by the Purchaser's acceptance of the
Contractor's guidance or recommendations as to engineering standards and design
specifications, or by the Purchaser's suggestions or recommendations on any
aspect of the design.
C. Purchaser shall use reasonable efforts in assisting the Contractor to
obtain in a timely manner accurate information required for the Contractor to
perform the Work and the Upgrade Work, which Contractor cannot expeditiously and
cost-effectively obtain from any source other than the Purchaser.
ARTICLE 26 PRODUCT CHANGES
---------------------------
The Contractor may at any time make changes to the System or System
Upgrades furnished pursuant to this Contract, or modify the drawings and
published specifications relating thereto, or substitute equipment of later
design, provided the changes, modifications, or substitutions under normal and
proper use do not impact upon the form, fit, expected life or function of the
System as provided in the System Performance Requirements.
ARTICLE 27 RISK AND INSURANCE
------------------------------
A. The Contractor shall at all times maintain, after the date which is 30
days from the date hereof, and upon request, the Contractor shall furnish the
Purchaser with certificates, or other reasonable evidence, that Contractor
maintains, the following insurance or has adequate self-insurance (other than as
required to comply with any statutory insurance requirements); provided, that
--------
the following insurance coverages may be combined or in different form so long
as Contractor maintains insurance consistent with the following requirements:
1. Workmen's Compensation and Employers Liability Insurance (with a
limit of not less than * for any one incident or series of
incidents arising from one event or such higher limit as may be
required by the laws of any jurisdiction) covering the officers
and employees of the Contractor for all compensation or other
benefits required of the Contractor by the laws of any nation or
political sub-division thereof to
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
51
which the Contractor and its operations under this Contract are
subject in respect of injury of death of any such employee.
2. Comprehensive General Public Liability Insurance, covering
personal injury and/or property damage, with combined single
limits of not less than * for claims of injury or death of any
persons or loss of or damage to property resulting from any one
accident. This insurance to be extended to provide Marine
Comprehensive General Liability including liabilities arising out
of the operation of subsea equipment.
3. Comprehensive Automobile Liability insurance covering all
vehicles and automotive equipment owned, hired, or in the custody
and control of Contractor and complying with all applicable
legislation with limits not less than * combined single limit for
the death or injury of any person per accident and not less than
* for the loss or damage to property resulting from any one
accident.
4. All Risk Insurance in respect of all property of Contractor, its
respective officers, agents and employees connected with the
performance of the Work against all loss or damage from whatever
cause.
5. Conventional Marine Hull and Machinery Insurance including War
Risks or any vessel(s) owned, operated or chartered by the
Contractor, in an amount equal to the full value thereof. In the
event of damage to or loss of such vessel(s), the Contractor
agrees to look to its insurance carrier for payment of such loss
or damage and hereby releases the Purchaser and waives any claims
against the Purchaser for the loss of such vessel(s) unless due
to the negligence of Purchaser, its agent or representatives
(other than Contractor).
6. All vessels are to be entered in a Mutual Protection and
Indemnity Association with a full and unlimited entry or to have
Marine Protection and Indemnity Insurance with a limit of not
less than * including coverage far illness, injury or death of
crew members (unless covered under Workmen's Compensation
Insurance), Contractual Liability Coverage, Collision and Tower's
Liability, Removal of Wreck and Debris and Third Party Liability.
7. Excess Liability Coverage over that required in Sub-Articles
27(A)(1), (2) and (3) with minimum limits of * for any one
accident or occurrence.
8. Specialist Operations Insurance with a limit of not less than
* as per London Wording 1993 or equivalent.
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
52
9. Transit Insurance including inland, air, and Marine Cargo
coverage including War (other than on land) in an amount
sufficient to cover the expected highest value of any one
shipment. Coverage to include Institute Cargo Clauses, all risks
1.1.63, Institute War Clauses, London Malicious Damage Clause,
and Institute Strikes Riots and Civil Commotion Clauses or their
equivalent.
10. Marine Cargo or equivalent is required to protect, for full cost,
against all risks of physical loss or damage to the plant,
equipment and supplies to be included in the System (other than
War Risks) beginning with when each such item is ready for
shipping and ending when the submersible plant and equipment are
placed overside the cable laying vessel and when the equipment
and supplies are delivered to the cable stations, central
offices, or network operation center. The coverage continues to
cover cable lying on the seabed.
11. Sea Bed or equivalent coverage (including an Old Mines and
Torpedoes Clause, including other derelict weapons of War) is
required to protect, for full cost, against all risks of physical
loss or damage to the submersible plant and equipment described
in Sub-Article 27(A)(10) above. See last paragraph.
12. War Risks or equivalent coverage is required to protect against
damage to, seizure by and/or destruction of the System by means
of war, piracy, takings at sea and other warlike operations until
discharge of the submersible plant and equipment. For the
purposes of this Article "discharge of the submersible plant and
equipment" shall be deemed to take place when the plant and
equipment reaches the sea bottom, as far as the submersible plant
and equipment is concerned, and when the plant is off-loaded in
the respective terminal country, as far as non-submersible plant
is concerned.
13. Pollution Liability (EIL) insurance for installation operations
and as arising from the use of vessels in an amount not less than
* or such higher sum as may be required to meet any legal
requirement in area of operations.
The Comprehensive General Liability Insurance required pursuant to
Sub-Article 27(A)(2) above, shall include Contractual Liability Coverage which
shall specifically apply to the obligations assumed by the Contractor under the
Terms and Conditions of this Contract.
B. 1. All the foregoing insurances shall be effected with a
creditworthy insurer and shall be endorsed to provide Purchaser
with at least thirty (30) days prior written notice of
cancellation or material change.
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
53
2. All the foregoing insurances shall name Purchaser as an
additional insured as to operations hereunder, in which event the
Contractor's insurance shall be primary to any insurance carried
by Purchaser.
3. The limits specified herein are minimum requirements and shall
not be construed in any way as limits of liability or as
constituting acceptance by Purchaser of such responsibility for
financial liabilities in excess of such limits. The Contractor
shall bear all deductibles applicable to any insurance.
4. If it is judicially determined that the monetary limits of
insurance required hereunder or of any indemnity voluntarily
assumed under the Terms and Conditions of this Contact which the
Contractor agrees will be supported either by available liability
insurance or voluntarily self-insured, in part or whole, exceeds
the maximum limits permitted under applicable law, it is agreed
that said insurance requirements or indemnity shall automatically
be amended to conform to the maximum monetary limits permitted
under such law.
5. Contractor shall take reasonable steps to provide that any sub-
contractor engaged by it has in effect or will effect Employer's
Liability, Workmen's Compensation, Hull and Machinery and
Protection and Indemnity insurances and any other insurances
required by law, together with such other insurances as the
Contractor may consider necessary.
6. If the Contractor fails to effect or keep in force any of the
insurances required under this Contract, Purchaser may effect and
keep in force any such insurances and pay such premiums as may be
necessary for that purpose and from time to time deduct the
amount so paid by Purchaser from any money due or which may
become due to the Contractor hereunder or recover the same as a
debt due from the Contractor, provided that Purchaser is not in
Default.
7. Each Party shall give the other prompt notification of any claim
with respect to any of the insurances to be provided hereunder,
accompanied by full details giving rise to such claim. Each Party
shall afford the other all such assistance as may be required for
the preparation and negotiation of insurance claims.
8. Contractor shall report to Purchaser as soon as practicable all
accidents or occurrences resulting in injuries to Contractor's
employees or third parties, or damage to property of third
parties, arising out of our during the course of services for
Purchaser by Contractor.
C. The Contractor may organize such levels of deductibles, excesses and
self-insurance as it considers appropriate and which are within prudent industry
standards.
54
D. The insurance requirements of this Article 27 will remain in place
with respect to each Segment, the System or System Upgrade, as the case may be,
and will not in any way be diminished or reduced until the transfer of title and
risk of loss shall have passed to Purchaser of such Segment, System or System
Upgrade, as the case may be, even in the event of the sale of substantially all
the assets of the Contractor by way of a merger, consolidation or sale of
assets.
ARTICLE 28 PLANT AND WORK RULES
-------------------------------
Employees and agents of each Party shall, while on the premises of the
other or its subcontractors, comply with all plant rules and governmental
regulations.
ARTICLE 29 RIGHT OF ACCESS
--------------------------
A. The Contractor shall, upon reasonable notice of not less than ten (10)
working days, during normal business hours and in a manner to avoid any
disruption of the work on the premises including performance of other contracts,
permit access by the Purchaser or its Quality Assurance (QA) Representative
(other than a competitor of the Contractor or any affiliate of a competitor) to
the Contractor's premises where the work will be performed, and will use its
best endeavors to secure rights of access to premises of its subcontractors
where the work will be performed, having subcontracts or orders in the amount
of, or equivalent to * or more, in accordance with the Contractor's contractual
arrangements with its subcontractors, and allow the Purchaser or its QA
Representative to:
1. audit the Contractor's quality assurance system and its
application to the Work and Upgrade Work, including manufacture,
development and raw materials and components provision;
2. inspect all parts of the Work and Upgrade Work to the extent
reasonably practicable to ensure that their quality meets the
Technical Specification.
This right of access shall allow for the Purchaser and/or its QA representative
(up to a total of three (3) persons). The Purchaser shall provide the name(s),
nationality and title of each such visitor prior to the visit. The Contractor
shall not be responsible for any costs, including travel and accommodation
costs, of the Purchaser or its representatives.
B. The right of access shall also allow for the Purchaser and/or
representatives (up to a total of three (3) persons) to be aboard the vessel(s)
during installation and the route survey, provided accommodations are available.
The Contractor shall not be responsible for any costs of the Purchaser or its
representatives, except for living expenses on board the vessel which includes
one (1) daily telex or fax, all other travel and accommodation costs for the
Purchaser or its QA Representatives shall be for the account of the Purchaser.
C. Any right of access shall not be construed as creating any obligation
requiring the Contractor or its subcontractors to disclose trade secrets or
proprietary information.
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
55
Further, such right of access may be conditioned on the execution of a
confidentiality and non-disclosure agreement and/or subject to routine building
or security rules, regulations or procedures.
D. Any exercise of any right of the Purchaser hereunder to inspect,
audit, visit or to serve any part of the Work or System Upgrades shall not be
construed as limiting any obligation of Contractor hereunder, including without
limitation, under Articles 1 and 10 hereof.
E. Contractor will have access to the System as necessary to accomplish
its responsibilities under this Contract and in order to make repairs and to
make System Upgrades. Contractor will provide reasonable notice of its need for
access and will take reasonable steps to minimize disruptions to the operation
of the System.
F. Contractor shall give the Purchaser reasonable prior written notice of
each monthly project management review meeting with respect to the status of the
construction and/or installation of the System, and Purchaser's representatives
(up to three such representatives) and the Independent Engineer shall at their
cost be permitted to attend and participate in such meetings.
ARTICLE 30 QUALITY ASSURANCE
----------------------------
All equipment, material and supplies provided under this Contract
shall be inspected and tested by representatives designated by the Contractor to
the extent reasonably practical to assure that the quality of the equipment,
materials and supplies being incorporated is sufficient to realize the System
Performance Requirements. The inspection and test program established for such
equipment, materials and supplies shall be consistent with commercial practices
normally employed by the Contractor in the construction of submarine cable
systems. The foregoing shall not be construed as limiting any of the
Contractor's obligations under this Contract.
ARTICLE 31 DOCUMENTATION
------------------------
The Contractor shall furnish to the Purchaser one copy of the standard
documentation in the English language for the System provided hereunder. Such
documentation shall be provided prior to the Acceptance testing. Additional
copies of the documentation are available at additional cost.
ARTICLE 32 TRAINING
-------------------
The Contractor will provide, as part of the Initial Contract Price,
until the Date of Final Acceptance, any and all training, as more particularly
described in the training section of Appendix 6, necessary for the operation and
maintenance of the System.
56
ARTICLE 33 SETTLEMENT OF DISPUTES/ARBITRATION/LITIGATION
--------------------------------------------------------
A. The Parties shall endeavor to settle amicably by mutual discussions
any disputes, differences, or claims whatsoever related to this Contract.
B. Failing such amicable settlement, any controversy, claim or dispute
arising under or relating to this Contract, including the existence, validity,
interpretation, performance, termination or breach thereof, shall, if both
Parties agree in writing thereto, finally be settled by arbitration in
accordance with the International Arbitration Rules of the American Arbitration
Association ("AAA"). Unless the Parties agree to a sole arbitrator, there shall
be three (3) arbitrators, with each Party appointing one arbitrator, who
collectively will select a third. The language of the arbitration shall be
English. The Arbitrator will not have authority to award punitive damages to
either Party. Each Party shall bear its own expenses, but the Parties shall
share equally the fees and expenses of the Arbitration Tribunal and the AAA.
This Contract shall be enforceable, and any arbitration award shall be final,
and judgment thereon may be entered in any court of competent jurisdiction. In
any such arbitration, the decision in any prior arbitration under this Contract
shall not be deemed conclusive of the rights as among themselves of the Parties
hereunder. The arbitration shall be held in New York, New York, U.S.A.
C. 1. If both Parties do not agree to arbitration pursuant to paragraph
(B) above, then either Party may institute suit in the Supreme
Court of the State of New York sitting in New York County or the
United States District Court of the Southern District of New
York, or any appellate court from any thereof.
2. Each Party hereby irrevocably and unconditionally submits to the
non-exclusive jurisdiction of any New York State or Federal court
sitting in The City of New York, and any appellate court from any
thereof, in any action or proceeding arising out of or relating
to this Contract, and each Party hereby irrevocably and
unconditionally agrees that all claims in respect of such action
or proceeding may be heard and determined in such New York State
court or, to the extent permitted by law, in such Federal court.
Each Party hereby irrevocably and unconditionally waives, to the
fullest extent it may effectively do so, any defense of an
inconvenient forum to the maintenance of such action or
proceeding in any such court and any right of jurisdiction on
account of the place of residence or domicile of either Party.
The Contractor hereby irrevocably and unconditionally appoints CT
Corporation System (the "New York Process Agent"), with an office
----------------------
on the date hereof at 1633 Broadway, New York, New York, as its
agent to receive on behalf of the Contractor and its respective
property service of copies of the summons and complaint and any
other process which may be served in any such action or
proceeding in any such New York State or Federal court and agrees
promptly to appoint a successor New York Process Agent in The
City of New York (which successor Process Agent shall accept such
57
appointment in a writing prior to the termination for any reason
of the appointment of the initial New York Process Agent). In any
such action or proceeding in such New York State or Federal court
sitting in The City of New York, such service may be made on the
Contractor by delivering a copy of such process to the Contractor
in care of the appropriate Process Agent at such Process Agent's
above address and by depositing a copy of such process in the
mails by certified or registered air mail, addressed to the
Contractor at its address referred to in Article 35 of this
Contract (such service to be effective upon such receipt by the
appropriate Process Agent and the depositing of such process in
the mails as aforesaid). The Contractor hereby irrevocably and
unconditionally authorizes and directs such Process Agent to
accept such service on its behalf. As an alternate method of
service, the Contractor also irrevocably and unconditionally
consents to the service of any and all process in any such action
or proceeding in such New York State or Federal court sitting in
The City of New York by mailing of copies of such process to the
Contractor, as the case may be, by certified or registered air
mail at its address referred to in Article 35 of this Contract.
The Contractor agrees that, to the fullest extent permitted by
applicable law, a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.
3. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
--------------------
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS PARAGRAPH.
D. THE OBLIGATIONS OF EACH PARTY IN RESPECT OF THIS CONTRACT DUE TO ANY
PARTY SHALL, NOTWITHSTANDING ANY JUDGMENT IN A CURRENCY (THE "JUDGMENT
--------
CURRENCY") OTHER THAN DOLLARS, BE DISCHARGED ONLY TO THE EXTENT THAT ON THE
--------
BUSINESS DAY FOLLOWING RECEIPT BY SUCH PARTY OF ANY SUM ADJUDGED TO BE SO DUE IN
THE JUDGMENT CURRENCY SUCH PARTY MAY IN ACCORDANCE WITH NORMAL
58
BANKING PROCEDURES PURCHASE DOLLARS WITH THE JUDGMENT CURRENCY; IF THE AMOUNT OF
DOLLARS SO PURCHASED IS LESS THAN THE SUM ORIGINALLY DUE TO SUCH PARTY IN
DOLLARS, EACH PARTY AGREES, AS A SEPARATE OBLIGATION AND NOTWITHSTANDING ANY
SUCH JUDGMENT, TO INDEMNIFY SUCH PARTY AGAINST SUCH LOSS, AND IF THE AMOUNT OF
DOLLARS SO PURCHASED EXCEEDS THE SUM ORIGINALLY DUE TO ANY PARTY TO THIS
CONTRACT, EACH PARTY AGREES TO REMIT TO SUCH PARTY, SUCH EXCESS.
ARTICLE 34 APPLICABLE LAW
-------------------------
THIS CONTRACT SHALL BE CONSTRUED AND GOVERNED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, UNITED STATES, EXCLUDING ITS CONFLICTS OF LAW
PROVISIONS AND EXCLUDING THE CONVENTION FOR THE INTERNATIONAL SALE OF GOODS.
ARTICLE 35 NOTICES
------------------
A. Any notices, consent, approval, or other communication pursuant to
this Contract shall be in writing, in the English language, and shall be deemed
to be duly given or served on a Party if sent to the Party at the address
stipulated in Sub-Article 35(B) and if sent by any one of the following means
only:
1. Sent by hand: Such communication shall be deemed to have been
received on the day of delivery provided receipt of delivery is
obtained.
2. Sent by facsimile: Such communication shall be deemed to have
been received, under normal service conditions, twenty-four (24)
hours following the time of dispatch or on confirmation by the
receiving Party, whichever is earlier.
3. Sent by registered or certified mail: Such communication shall be
deemed to have been received, under normal service conditions, on
the day it was received or on the tenth day after it was
dispatched, whichever is earlier.
B. For purposes of this Article, the names, addresses and fax numbers of
the Parties are as detailed below. Any change to the name, address, and
facsimile numbers may be made at any time by giving thirty (30) days prior
written notice.
Tyco Submarine Systems Ltd.
340 Mt. Kemble Avenue
Morristown, New Jersey 07960
Tel: 973-326-3500
Fax: 973-326-2711
59
GCT Pacific Holdings Ltd.
Wessex House
45 Reid Street
Hamilton HM12
Bermuda
Fax: 441-296-6749/8606
Attn: Cameron Adderly
C. All provisions in this Contract regarding notices, consents, approvals
and other communications to and from, and other actions taken on behalf of, the
Contractor are subject to the provisions of Article 42 hereof.
ARTICLE 36 PUBLICITY AND CONFIDENTIALITY
----------------------------------------
A. No information relating to this Contract shall be released by either
Party to any newspaper, magazine, journal or other written, oral or visual
medium without the prior written approval of an authorized representative of the
other Party; provided that, subject to Article 20 (Safeguarding of Information
--------
and Technology) and the following Sub-Article, this Article shall not restrict
either Party from (i) responding to customary press inquiries or otherwise
making public or private statements in the normal course of business, so long as
consistent with a mutually agreed press-release and (ii) assisting in the
obtaining of financing in accordance with Sub-Article 37(C), including the
publication of a financial tombstone.
B. This Contract and any non-public information, written or oral, with
respect to this Contract, "Confidential Information", will be kept confidential
and shall not be disclosed, in whole or in part, to any person other than
affiliates, officers, directors, employees, agents or representatives of a Party
(collectively, "Representatives") who need to know such Confidential Information
for the purpose of negotiating and executing this Contract. Each Party agrees to
inform each of its Representatives of the non-public nature of the Confidential
Information and to direct such persons to treat such Confidential Information in
accordance with the terms of this Article. Nothing herein shall prevent a Party
from disclosing Confidential Information (a) upon the order of any court or
administrative agency, (b) upon the request or demand of, or pursuant to any
regulation of, any regulatory agency or authority, (c) to the extent reasonably
required in connection with the exercise of any remedy hereunder, (d) to a
Party's legal counsel or independent auditors, (e) prospective lenders to the
Purchaser or Holding Company, and (f) to any actual or proposed assignee of all
or part of its rights hereunder provided that such actual or proposed assignee
agrees in writing to be bound by the provisions of this Article.
ARTICLE 37 ASSIGNMENT; SUBCONTRACTORS
-------------------------------------
A. Except as provided in this Article, neither Party shall assign this
Contract or any right or interest under this Contract, nor delegate any work or
obligation to be performed under this Contract ("Assignment"), without the other
Party's prior written consent which shall not be unreasonably withheld (it being
understood that it shall be deemed to be reasonable to withhold consent to the
assignment of this Contract or any rights, interest or
60
obligations hereunder to a competitor of Contractor or an affiliate of a
competitor or uncreditworthy party). Nothing herein shall preclude a Party from
employing a subcontractor in carrying out its obligations under this Contract. A
Party's use of such subcontractor shall not release the Party from its
obligations or liability (including warranties) under this Contract. If a
proposed subcontractor of major equipment (i.e., equipment listed on Exhibit E)
is not listed on Exhibit E hereto, Contractor shall obtain approval thereof from
Purchaser, which approval shall not be unreasonably withheld. Purchaser and
Contractor shall agree on the form and substance of Exhibit E by May 1, 1998.
B. The Contractor has the right to assign all of its rights under this
Contract or to delegate all of its duties hereunder at any time without the
Purchaser's consent to any successor to substantially all the assets of the
Contractor by way of a merger, consolidation or sale of assets provided that in
the case of any assignment or delegation pursuant to this Sub-Article 37(B) such
assignee shall assume in writing all warranties, representations and obligations
of Contractor under this Contract. The Contractor shall give the Purchaser
written notice 30 days prior to the assignment.
C. The Parties acknowledge that Purchaser may finance construction of the
System on a "project finance" basis and that in connection therewith the
financing parties will require that such financing be secured by certain assets
of Purchaser (including but not limited to this Contract). The Purchaser may, in
connection with any such project financing grant a collateral assignment of the
System and/or its rights and obligations under this Contract to any such
financing parties, and in connection therewith, the Contractor will execute and
deliver a Consent, substantially in the form of Exhibit B hereto; provided that
Contractor agrees to make such changes or additions to such form as may be
reasonably requested by such financing parties, and Purchaser, and such
financing parties, may transfer in accordance with such Consent. Contractor will
also deliver an Opinion in the form of Exhibit C hereto, * with respect to the
Guaranty, to Purchaser and such financing parties and such other documents as
are reasonably requested by such financing parties.
D. The Purchaser has the right to assign all of its rights and delegate
all of its duties under this Contract to any other entity to whom all of
Purchaser's rights and interests in the System have been transferred. Purchaser
also has the right (i) to assign all of its rights hereunder with respect to any
particular Landing Assets to any Transferee, (ii) to assign Permits with respect
to such Landing Assets, or have Permits with respect to such Landing Assets
issued in the name of, such Transferee and (iii) to transfer such Landing Assets
or have such Landing Assets transferred directly to, such Transferee; provided
--------
that such Transferee shall execute a supplement to this Contract whereby it
becomes jointly and severally liable, together with Purchaser, for all of
Purchaser's obligations under this Contract. "Landing Assets" means, with
respect to each jurisdiction where a portion of the System is located, all or
part of such portion of the System located therein. It is understood that the
Purchaser, at its option, may assign and transfer rights with respect to Landing
Assets in different jurisdictions to different Transferees. Purchaser shall not
transfer any of its rights under this Contract or the System except in
accordance with the foregoing. Any assignment or transfer not expressly
permitted by Sub-Articles 37(D) or 37(E) shall be of no force and
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
61
effect. Any assignment or transfer which results in any increase in costs or any
loss, damage, delay or failure of performance shall constitute a Force Majeure,
and, without limiting the applicability of Article 17 (Force Majeure), Purchaser
shall be responsible for any increase in costs resulting therefrom.
E. GCT may assign all its right, title and interest hereunder, including
all rights, obligations and liabilities, to a subsidiary formed by GCT and
certain other shareholders.
ARTICLE 38 RELATIONSHIP OF THE PARTIES
--------------------------------------
All work performed by a Party under this Contract shall be performed
as an independent contractor and not as an agent of the other and no persons
furnished by a Party shall be considered the employees or agents of the other.
Each Party shall be responsible for its employees' compliance with all Laws
while performing under this Contract. This Contract shall not form a joint
venture or partnership between the Parties.
ARTICLE 39 SUCCESSORS BOUND
---------------------------
This Contract shall be binding on the Contractor and the Purchaser and
their respective successors and permitted assigns.
ARTICLE 40 ARTICLE CAPTIONS
---------------------------
The captions of the Articles do not form part of this Contract and
shall not have any effect on the interpretation thereof.
ARTICLE 41 SEVERABILITY
-----------------------
If any of the provisions of this Contract shall be invalid or
unenforceable, such invalidity or unenforceability shall not invalidate or
render unenforceable the entire Contract, but rather the entire Contract shall
be construed as if not containing the particular invalid or unenforceable
provision or provisions and the rights and obligations of the Contractor and the
Purchaser shall be construed and enforced accordingly. In the event such invalid
or unenforceable provision is an essential and material element of this
Contract, the Parties shall promptly negotiate a replacement provision.
ARTICLE 42 *
------------
*
ARTICLE 43 SURVIVAL OF OBLIGATIONS
----------------------------------
The Parties' rights and obligations, which, by their nature would
continue beyond the termination, cancellation or expiration of this Contract,
including, but not limited to, those contained in Sub-Article 4(B) (Taxes,
Levies and Duties) and Sub-Article 4(C)
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
62
(Withholding Tax), Article 18 (Intellectual Property), Article 20 (Safeguarding
of Information and Technology), Article 21 (Export Control) and Article 23
(Limitation of Liability/Indemnification) shall survive termination,
cancellation or expiration hereof. Article 10 (Warranty) and Article 11
(Contractor Support), shall survive termination, cancellation or expiration
hereof, if and only if, this Contract is terminated by Purchaser pursuant to
Sub-Article 13(A).
ARTICLE 44 NON-WAIVER
----------------------
A waiver of any of the terms and conditions of this Contract, or
the failure of either Party strictly to enforce any such term or condition, on
one or more occasions shall not be construed as a waiver of the same or of any
other term or condition of this Contract on any other occasion.
ARTICLE 45 LANGUAGE
-------------------
This Contract has been executed in the English language and
English will be the controlling language for interpretation of this Contract.
ARTICLE 46 ENTIRE AGREEMENT
----------------------------
This Contract supersedes all prior oral or written understanding
between the Parties and constitutes the entire agreement with respect to the
subject matter herein. Any modification, amendment, waiver, approval or consent
given hereunder must be evidenced by a writing signed by authorized
representatives of all Parties.
ARTICLE 47 COMING INTO FORCE
-----------------------------
A. This Contract between the Purchaser and Contractor will not enter
into force or effect (except that Article 36 is in full force and effect as of
the date hereof) unless and until:
(I) The Guaranty is executed and delivered on or before April 30, 1998,
substantially in the form of Exhibit A hereto;
(II) Purchaser shall have made a draw request to its lenders for the first
portion of the initial payment described in Sub-Article 5(C)(2);
(III) GCT and certain other shareholders shall have formed a Bermuda
subsidiary to be the Purchaser;
(IV) GCT shall have transferred its rights and obligations hereunder to
such Bermuda subsidiary;
(V) GCT and such shareholders shall have executed and delivered equity
contribution agreements satisfactory to such Bermuda subsidiary's lenders;
63
(VI) Such Bermuda subsidiary shall have executed an original counterpart
of this Contract; and
(VII) The Purchaser, in its sole discretion, has decided to allow this
Contract to come into force and effect. For the avoidance of doubt, it is
understood that pursuant to this clause (VII), the Purchaser may
unilaterally decide to effectively cancel this Contract by not permitting
it to come into force by May 5, 1998.
B. When all the conditions indicated in Sub-Article 47(A) above are
complied with, then the Purchaser shall immediately notify the Contractor, and,
so long as the date of such notice is on or before May 5, 1998, the Contract
shall come into force on the date of such notice.
64
This Contract is executed by duly authorized representatives of the
Parties as set forth below.
TYCO SUBMARINE SYSTEMS LTD.
By:/s/ Ronald Armstrong
--------------------
Name: Ronald Armstrong
Title: Vice President
Date: April 21, 1998
GCT PACIFIC HOLDINGS, LTD.
By:/s/ R. Evgene Shutter
---------------------
Name: R. Evgene Shutter
Title: President
Date: April 21, 1998
Project Development and Construction Contract - Tyco Submarine Systems Ltd. and GCT Pacific Holdings Ltd.
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