PROJECT DEVELOPMENT
AND
CONSTRUCTION CONTRACT
BETWEEN AT&T SUBMARINE SYSTEMS, INC.
AND
GLOBAL TELESYSTEMS LTD.
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........................................................ 11
5 Terms of Payment by Purchaser......................................... 14
6 Contract Variations................................................... 17
6A. Optional Upgrades..................................................... 18
7 Responsibilities for Permits.......................................... 19
8 Route Survey.......................................................... 20
9 Acceptance............................................................ 21
10 Warranty.............................................................. 25
11 Contractor Support.................................................... 28
12 Purchaser's Obligations............................................... 28
13 Termination for Default............................................... 29
14 Termination for Convenience........................................... 31
15 Suspension............................................................ 34
16 Title and Risk of Loss................................................ 35
17 Force Majeure......................................................... 36
18 Intellectual Property................................................. 38
19 Infringement.......................................................... 43
20 Safeguarding of Information and Technology............................ 44
21 Export Control........................................................ 45
22 Liquidated Damages.................................................... 45
23 Limitation of Liability/Indemnification............................... 46
24 Counterparts.......................................................... 47
25 Design and Performance Responsibility................................. 47
26 Product Changes....................................................... 48
27 Risk and Insurance.................................................... 48
28 Plant and Work Rules.................................................. 51
29 Right of Access....................................................... 51
30 Quality Assurance..................................................... 53
31 Documentation......................................................... 53
32 Training.............................................................. 53
33 Settlement of Disputes/Arbitration.................................... 53
34 Applicable Law........................................................ 54
35 Notices............................................................... 54
36 Publicity and Confidentiality......................................... 55
37 Assignment............................................................ 55
38 Relationship of the Parties........................................... 56
39 Successors Bound...................................................... 56
40 Article Captions...................................................... 57
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Article PAGE
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41 Severability......................................................... 57
42 Survival of Obligations.............................................. 57
43 Non-Waiver........................................................... 57
44 Language............................................................. 57
45 Entire Agreement..................................................... 57
46 Coming into Force.................................................... 58
ii
EXHIBIT 10.2
PROJECT DEVELOPMENT AND
CONSTRUCTION CONTRACT
BETWEEN AT&T SUBMARINE SYSTEMS, INC.
AND GLOBAL TELESYSTEMS LTD.
This Project Development and Construction Contract ("Contracts) is
made this 18th day of March 1997 between AT&T Submarine Systems, Inc., a
corporation organized and existing under the laws of the State of Delaware, of
the United States of America, and having an office at 340 Mt. Kemble Avenue,
Morristown, New Jersey, 07962-1923 of the United States of America (hereinafter
"Contractor") and Global Telesystems Ltd., a corporation organized and existing
under the laws of Bermuda, and having an office at Cedar House, 41 Cedar Avenue,
Hamilton HM12 Bermuda (hereinafter "Purchaser").
WHEREAS, Purchaser desires to establish a fiber optic submarine cable
system, to be known as the Atlantic Crossing 1 Submarine Cable System
(hereinafter, and as more fully defined herein, the "System"), which will be
used to provide service between and among the United States mainland, United
Kingdom and Germany; and
WHEREAS, the System will consist of the following Segments:
Segment 1: From United Kingdom to New York, United States;
Segment 2: From New York, United States to Germany; and
Segment 3: From Germany to United Kingdom; and
WHEREAS, Contractor is in the business of designing, constructing,
installing, supplying, delivering, manufacturing, operating, and maintaining
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 on a turn-key,
fixed-price basis in accordance with and subject to the terms hereof; and
WHEREAS, Contractor is willing to perform 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
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 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 5
. 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
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 System 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 System Commissioning and
Acceptance section of the Technical Volume or developed pursuant to such
section by mutual agreement (with 15 days prior notice to the Independent
Engineer) of the Parties 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 necessary to access and occupy the sites for cable stations in order
to own, operate and maintain the System.
ACTUAL KNOWLEDGE means the actual knowledge of any executives with
management responsibility for the Contract.
3
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.
CAPACITY PURCHASE AGREEMENT means the Capacity Purchase Agreement
substantially in the form agreed by the Parties on the date this Contract
comes into force in accordance with Article 46.
CERTIFICATE OF COMMERCIAL SERVICE means a certificate issued by
Purchaser to Contractor certifying that a Segment, the System or a System
Upgrade is Ready for Commercial Service.
CERTIFICATE OF FINAL ACCEPTANCE means a certificate issued by
Purchaser 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 to Contractor certifying that a Segment, the System or a System
Upgrade is Ready for Provisional Acceptance.
CIBC COMMITMENT LETTER means the Atlantic Crossing 1 Commitment Letter
to be entered into among the Purchaser, CIBC Wood Gundy Securities Corp.
and CIBC Inc. providing for loans to Purchaser in an aggregate amount of
$410,000,000.
COMMISSIONING REPORT has the meaning set forth in the System
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 agreed by the Parties on the date this
Contract comes into force in accordance with Article 46.
CONTINGENCY ACCOUNT means the Contingency Account to be created under
the Escrow and Security Agreement.
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 the
Contractor (AT&T Submarine Systems, Inc.) and that will be responsible for
the performance of
4
the Work (and if applicable, Upgrade Work) under this
Contract and shall include its permitted successors and/or assigns.
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 SERVICE, 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
Service, Ready for Provisional Acceptance or Ready for Final Acceptance.
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 and Security Agreement.
ESCROW AGENT means The Chase Manhattan Bank, in its capacity as escrow
agent and security agent under the Escrow and Security Agreement, and its
successors in such capacity.
ESCROW AND SECURITY AGREEMENT means that Escrow and Security Agreement
to be entered into by and among AT&T Submarine Systems, Inc., Global
Telesystems Ltd. and The Chase Manhattan Bank, as amended 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 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
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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.
FINAL COMMISSIONING REPORT has the meaning set forth in the System
Commissioning and Acceptance section of the Technical Volume.
FINAL SURVEY REPORT means the final survey report described in Section
1.1.4.2 of the Route Survey, Cable Loading and Marine Operations section of
the Technical Volume.
FINANCING DOCUMENTS means the agreements relating to the financing
referred to in Sub-Article 37(C), including without limitation the
financing, security and related documentation referred to in the CIBC
Commitment Letter and the Holding Company Note Purchase Agreement and
related documents.
FINANCING EVENT OF DEFAULT means any event, condition or occurrence
which would permit any party or parties to a Financing Document to
terminate its commitments thereunder or accelerate Purchaser's obligations
thereunder.
FORCE MAJEURE has the meaning set forth in Sub-Article 17(A).
*
HOLDING COMPANY means Global Telesystems Holdings Ltd., a corporation
organized and existing under the laws of Bermuda.
HOLDING COMPANY NOTE PURCHASE AGREEMENT means a Note Purchase
Agreement to be entered into between the Holding Company and the purchasers
named therein providing for $150,000,000 in loans to Holding Company, as
amended from time to time.
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).
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
6
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).
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).
OPERATIONS, ADMINISTRATION AND MAINTENANCE AGREEMENT means the
Operations, Administration and Maintenance Agreement to be entered into
between AT&T Submarine Systems, Inc. and Global Telesystems Ltd., as
amended from time to time.
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.
PAYMENT ACCOUNT means the Payment Account to be created under the
Escrow and Security Agreement.
PAYMENT ESCROW DATE means the first date after the date hereof on
which no funds remain in the Payment Account (or on which Contractor has
invoiced an aggregate amount equal to the lesser of $275,000,000 and the
aggregate amount deposited into the Payment Account and such amount has
been paid (or deposited into the Dispute Account) or is due (or required to
be deposited into the Dispute Account)).
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 Transmission Performance
section of the System Description section of the Technical Volume, (ii)
with respect to any System Upgrade, the 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, including impairment
budgets.
7
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).
PHASE 2 SEGMENT means Segment 2 or Segment 3.
PROVISIONING SCHEDULE means the price schedule attached hereto in
Appendix 1.
PURCHASER means Global Telesystems Ltd. and shall include its
permitted successors and assigns.
READY FOR COMMERCIAL SERVICE means (i) for any Segment, that (a) such
Segment has the ability to carry commercial traffic between the two landing
points of such Segment (at 5 Gb/s per fiber pair in the case of Segment 1
and at 10 Gb/s per fiber pair in the case of a Phase 2 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, (b) Contractor has tested and provided for STM-1
interconnectivity capability to the Segment 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, (d) all Permits are obtained for such Segment, and (e) unless both
Parties agree otherwise, with respect to a Phase 2 Segment, the other Phase
2 Segment shall have satisfied the conditions set forth above, (ii) for the
System, that the System has the ability to carry commercial traffic
throughout the System (at 10 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
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, (d) an interconnect
agreement is in place with a bona fide carrier at each landing point, and
(e) all Permits are obtained for the System and (iii) for any System
Upgrade, the System is Ready for Commercial Service at the capacity
specified for such System Upgrade.
8
READY FOR FINAL ACCEPTANCE means (i) for the System, that (a)(l) 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)(l) 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 (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) such Segment is complete in all material respects (and in any
event is Ready for Commercial Service), (b) the results of Acceptance
Testing of such Segment demonstrate that such Segment has satisfied the
System Performance Requirements, (c) Contractor has substantially performed
its obligations under Article 18 (Intellectual Property) then required to
be performed by it, (d) all Permits are obtained for such Segment, and (e)
unless both Parties agree otherwise, with respect to a Phase 2 Segment, the
other Phase 2 Segment shall have satisfied the conditions set forth above,
(ii) with respect to the System, the System is complete in all material
respects (and in any event is Ready for Commercial Service), all three
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
9
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).
REQUIRED AMOUNT means initially *.
RETAINAGE means an amount equal to * of the Initial Contract Price.
RETAINAGE LETTER OF CREDIT means a letter of credit issued by a bank
reasonably satisfactory to Contractor with a face amount equal to the
amount of the Retainage and substantially in the form agreed by the Parties
on the date this Contract comes into force in accordance with Article 46.
RETESTING has the meaning set forth in Sub-Article 9(B)(3).
ROUTE SURVEY means the route survey described in the Route Survey,
Cable Loading and Marine Operations section of the Technical Volume.
SALES AGENCY AGREEMENT means the Sales Agency Agreement to be entered
into between AT&T Submarine Systems, Inc. and Global Telesystems Ltd., as
amended from time to time.
SCHEDULED 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 or Commercial Service.
SEGMENT means Segment 1, Segment 2 or Segment 3, as the case may be.
SEGMENT 1 means Segment C as defined in the Technical Volume from
United Kingdom to New York, United States and landing in locations capable
of interconnecting with major telecommunications carriers.
SEGMENT 2 means Segment A as defined in the Technical Volume from New
York, United States to Germany and landing in locations capable of
interconnecting with major telecommunications carriers.
SEGMENT 3 means Segment B as defined in the Technical Volume from
Germany to United Kingdom 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).
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
10
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 1, 2 and 3 (at a per fiber pair capacity of * Gb/s at the Date of
Commercial Service or the Date of Provisional Acceptance, as the case may
be, of the System, with each Segment upgradeable to * Gb/s per fiber pair
at the Date of Provisional Acceptance) as more fully described in the
System Description section of the Technical Volume.
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 5.
UPGRADE BILLING SCHEDULE means the billing schedule attached hereto as
Appendix 2A.
UPGRADE COMMISSIONING REPORT has the meaning set forth in the System
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).
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
11
UPGRADE WORK means the activities and services to be performed or
provided by Contractor under Article 6A.
UPGRADEABILITY LIABILITY LIMIT means at any time, the (i) the sum of
the Initial Contract Price plus all of the Initial Upgrade Prices less, if
----
the System shall have been upgraded to a capacity of * Gb/s or more per
fiber pair, (ii) the product of (A) the sum of the Initial Contract Price
plus all of the Initial Upgrade Prices and (B) the ratio of (I) the
aggregate capacity (for all four fiber pairs) to which the System has been
upgraded by System Upgrades to (II) * Gb/s.
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 and obtaining on behalf of Purchaser
the Access Rights and obtaining all Permits. 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.
ARTICLE 4 CONTRACT PRICE
--------------------------
A. Contract Price
1. The initial Contract Price for the Work, in United States
Dollars (US$) is a fixed fee of 625,909,438 dollars (the "Initial
Contract Price"). 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), any Taxes, services performed
pursuant to the Operations, Administration and Maintenance
Agreement, or services performed pursuant to the Sales Agency
Agreement.
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 any contract variations as provided for in Article 6
(Contract Variations), any Taxes, services performed pursuant to
the Operations, Administration and Maintenance Agreement, or
services performed pursuant to the Sales Agency Agreement.
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
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
12
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).
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 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
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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,
13
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, 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.
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
14
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 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 cabling costs. All banking documents and correspondence must
be in English.
15
B. Invoice Procedures
1. All invoices for Work shall be submitted according to the
Billing Schedule. All invoices for Work shall have a certificate
in the form of Appendix 4-1 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:
Global Telesystems Ltd.
Cedar House
41 Cedar Avenue
Hamilton HM12 Bermuda
Facsimile: 441-292-8666
Attn: Mr. David Lee
with a copy to
Conexart Technologies, Inc.
124 de Charante
Saint Lambert
Quebec, Canada J451 K3
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).
16
2. At the time this Contract comes into force pursuant to Article
46 hereof, the initial payment of * shall be paid by Purchaser to
Contractor, and Purchaser shall deposit with the Escrow Agent the
amount to be deposited pursuant to the Escrow Agreement to be
applied in accordance with the terms of the Escrow and Security
Agreement.
3. Invoices given to the Purchaser (and the Independent Engineer
and, until no funds remain in the Payment Account, the Escrow
Agent) 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.
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 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.
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 (and, until no funds remain in the
Payment Account, the Escrow Agent) 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
(i) it provides a statement from the Independent Engineer (or,
prior to the date of the first draw under the Financing
Documents, the Purchaser) disputing the invoice or specifying
such amount owing by Contractor and (ii) it deposits, in full,
such disputed amount(s) into (or such amount is deposited,
pursuant to the Escrow and Security Agreement, 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 and Security
Agreement.
(c) In addition, the prevailing Party shall be entitled to
receive from the other Party an amount equal to (i) interest
on the distributed,
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
17
disputed amount at a rate of one percent (1%) per month less
(ii) interest distributed by the Escrow Agent under clause
(b) above.
Purchaser shall not set off against Contractor's obligations
except in accordance with this Sub-Article 5(C)(5).
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.
7. The Contractor will accept a letter of credit, to be issued in
form and substance satisfactory to it and issued by an
institution satisfactory to it, in lieu of the amount required to
be deposited in the Contingency Account.
ARTICLE 6 CONTRACT VARIATIONS
-----------------------------
A. Either Party may request, during construction of the System or any
System Upgrade, by written order (with a copy to the Independent Engineer), 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.
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 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 those affecting only 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 Initial Contract Price is based on the assumption that Contractor
will acquire or build two cable stations and lease space in one cable station.
If fewer or more cable stations need to be built or acquired, both Parties will
agree to an equitable adjustment
18
to the Contract Price and the terms and schedule of payments. No extension of
time will be granted solely because three cable stations will be built, unless
the Purchaser consents thereto.
E. Contractor may seek a Contract Variation to replace Germany as a
landing site with a landing site in the Netherlands and, so long as (i) the
Scheduled RFS Date is not delayed as a result thereof, (ii) the Contract Price
is equitably increased, if necessary, by no more than $3,000,000 and (iii) it is
reasonable to assume that the Netherlands landing license will be obtained by
the time required by the Financing Documents, the Purchaser shall agree to such
Contract Variation.
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. *
C. *
D. *
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
19
E. *
F. *
G. *
H. *
I. *
J. *
K. *
ARTICLE 7 RESPONSIBILITIES FOR PERMITS
--------------------------------------
A. The Purchaser shall reasonably cooperate with and assist the
Contractor to obtain all Permits, 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
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
20
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.
B. Subject to paragraph C below, the Contractor shall have the
responsibility for obtaining all Permits on Purchaser's behalf.
C. 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 gross
negligence or willful misconduct.
D. 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. Except with respect to variations
necessitated by complying with any changes, 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.
E. As of the date hereof, neither Party has Actual Knowledge of any
proposed changes in the foregoing 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, in each case as in effect
on the date hereof.
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) and 7(C), Contractor
shall have no liability in respect of the information furnished under this Sub-
Article.
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.
21
B. Any changes to the route selection requested by Purchaser 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 Service 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.
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 Service, a Certificate of
Provisional Acceptance or a Certificate of Final Acceptance.
7. The Contractor agrees that the Date of Provisional Acceptance or
Commercial Service of the System will occur by November 30, 1998
(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 RFS
Date"). The Contractor shall use reasonable efforts to be Ready
for Provisional Acceptance or Commercial Service with respect to
Segment 1 with a capacity of 5Gb/s per fiber pair by May 31,
1998.
8. The Date of Commercial Service, 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
22
of Commercial Service, 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 Service 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
Service, with a written explanation of reasons for
rejection.
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, 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.
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
23
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 Service
1. A Certificate of Commercial Service 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 Service.
2. Each Certificate of Commercial Service 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 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.
24
5. The issuance of a Certificate of Commercial Service 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 Service.
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. Upon payment of all amounts listed in the Billing Schedule with
respect to a Segment (other than in the case of a Phase 2
Segment, the Retainage with respect thereto) and the issuance of
a Certificate of Commercial Service 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 deriving through or from Contractor (including any
subcontractor)) 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 the
issuance of the Retainage Letter of Credit and (ii) the issuance
of a Certificate of Commercial Service 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 deriving through or from Contractor (including any
subcontractor)) 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 Service
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
25
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 two * 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 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) 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
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
26
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 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
Marisat) as well as the costs associated with the use and
operation of the SCARAB and the sea bed tractor, 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.
27
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.
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 five
(5) years from the Date of Provisional Acceptance of the System
and the Upgrade Warranty Period for any System Upgrade shall
never exceed five (5) 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 two (2) years from the Date
of Provisional Acceptance of the System.
B. *
C. 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, use in a
manner not in accordance with the System Description, or other causes beyond the
control of or without the fault of the Contractor or its employees, agents or
subcontractors including, but not restricted to, causes set forth in Article 12
(Purchaser's Obligations) or Article 17 (Force Majeure) hereof.
* MATERIAL OMITTED AND SEPARATELY FILED UNDER AN APPLICATION FOR CONFIDENTIAL
TREATMENT.
28
D. 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 UNDER THIS ARTICLE SHALL
BE THE CONTRACTOR'S OBLIGATION TO MAKE REPAIRS OR REPLACEMENTS AS SET FORTH IN
THIS ARTICLE.
E. 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 Service 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
29
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.
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, 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 Service 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 Commercial Service or Provisional Acceptance,
as the case may be, within 200 days after the Scheduled RFS Date;
2. If the other Party defaults on any of its payment obligations
(or, in the case of the Contractor, if the amount in the
Contingency Account is less than the amount initially deposited
therein) and does not cure such default (or does not increase the
amount on deposit in the Contingency Account to the amount
initially deposited therein or provide the
30
Contractor with a letter of credit for such deficiency in form
and substance and issued by a bank reasonably satisfactory to
Contractor) 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;
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 45 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 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 the total of:
1. the Contract Price (or after the Date of Final Acceptance of the
System, if a System Upgrade has been selected, the Upgrade Price)
less (a) the portion of the Contract Price or Upgrade Price paid
by Purchaser to
31
Contractor under the Billing Schedule and (b) costs that will not
be incurred because of the termination;
2. 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)(3) 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, preservation and disposition of property
proper to this Contract as well as additional costs incurred due
to Purchaser's Default.
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;
32
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;
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.
33
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) if the Contract is terminated in whole under this Article 14
prior to the Payment Escrow Date, all amounts invoiced in
accordance with the Contract plus, for Work or Supplies 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 and (ii) in all other
cases, the Contract Price (or after the Date of Final Acceptance
of the System, if a System Upgrade has been selected, the Upgrade
Price) less (a) the portion of the Contract Price or Upgrade
Price paid by Purchaser to Contractor under the Billing Schedule
allocable to the terminated Segment(s) of the System or System
Upgrade, (b) the portion of the Contract Price allocable to the
unterminated Segment(s) of the System and (c) costs that will not
be incurred because of the termination.
2. the cost of settling and paying claims rising 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. In addition, if the Contract is only partially terminated, prior to
the settlement of the terminated portion, the Contractor may file with the
Purchaser a request in writing for an equitable adjustment of the Contract Price
for the portion of the Contract not terminated by the Notice of Termination, and
the Purchaser shall grant Contractor an equitable adjustment to the Contract
Price, which shall be reflected in the Provisioning Schedule, Appendix 1.
34
G. 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.
H. 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) (A) a Default by the Purchaser, (B) receipt by Purchaser prior
to the Date of Final Acceptance of a notice of a Financing Event of Default
or (C) on or prior to the Date of Final Acceptance, a failure to satisfy
the conditions precedent under a Financing Document which results in a
failed funding thereunder;
(ii) the termination without in each case reasonably satisfactory
replacement of (A) the CIBC Commitment Letter or (B) prior to the Date of
Final Acceptance (or if all of the notes contemplated to be sold under the
Holding Company Note Purchase Agreement have been sold, prior to the
repayment in full of all amounts outstanding thereunder), the Holding
Company Note Purchase Agreement, unless in each case, such failure is due
to the failure of the Contractor to perform its obligations when required
hereunder;
(iii) the failure to (A) consummate the transactions contemplated
in the CIBC Commitment Letter on substantially the terms set forth in the
summary of terms and conditions attached thereto and with definitive
documentation consistent with the terms of such summary, except for
inconsistencies with respect to terms which are either not material to the
interests of the Contractor or not adverse to the interests of the
Contractor and (B) make a draw under the Working Capital Facility referred
to therein, in each case on or prior to the date three months from the date
hereof unless the delay is due to the failure of the Contractor to perform
its obligations when required hereunder;
35
(iv) the failure of Holding Company to make a draw contemplated by
the Note Purchase Agreement and contribute the net proceeds thereof to
Purchaser or of Purchaser to immediately deposit such net proceeds (net of
mutually agreed upon construction and development expenses of the
Purchaser) into the Payment Account, in each case prior to the time needed
by Purchaser to pay its obligations under this Contract;
(v) any transfer prior to the Date of Final Acceptance of any
portion of the System except in accordance with Article 37;
(vi) any supplement executed by a Transferee shall not be in full
force and effect;
(vii) the amendment of any Financing Document without Contractor's
consent, unless such amendment is with respect to terms which are either
not material to the interests of the Contractor or not adverse to the
interests of the Contractor;
(viii) the termination or reduction of the commitments or the
prepayment of any loans under the Financing Documents if the remaining
commitments, together with amounts on deposit in the Payment Account and
the Contingent Account, would not be sufficient to pay the remaining unpaid
portion of the Contract Price;
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. Purchaser shall deliver a copy of each notice of default or
event of default simultaneously with the delivery thereof to any party to any
Financing Document and shall promptly notify Contractor of the occurrence of any
of the foregoing items listed in clauses (i) through (viii) above or of any
failure to satisfy any condition under any Financing Document which results in a
failed funding thereunder, and Purchaser shall deliver to Contractor a copy of
each Financing Document (other than the Holding Company Note Purchase Agreement
and the Financing Documents relating solely thereto) and each amendment to such
Financing Documents which has an impact on the Contractor promptly after
execution thereof.
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
36
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 deriving through or in connection
with the Contractor or any supplier or sub-contractor of the Contractor.
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 deriving through or in connection with the Contractor or any
supplier or sub-contractor of the Contractor.
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 any Permits; 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; general unavailability of any raw materials or components;
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 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 or costs
required for performance of any of its duties or obligations, the Contractor
shall be entitled to the
37
following: (i) an equitable adjustment in the Contract Price, (ii) an equitable
extension of time for completion of the Work or the Upgrade Work, as the case
may be, (iii) reimbursement for all such additional costs incurred and (iv) to
the extent necessary in light of such Force Majeure and the adjustments made in
accordance with clauses (i), (ii) and (iii) above, an equitable adjustment to
the Work and/or Upgrade Work; provided that in no event shall the Purchaser be
--------
liable under clause (i) or (iii) of this Sub-Article 17(B) for (a) any loss of
or damage due to Force Majeure, to the extent such loss or damage is required by
Article 27 to be covered by insurance for the benefit of the Contractor or by
self insurance, or is otherwise actually covered by insurance for the benefit of
the Contractor, or (b) the amount by which the replacement cost of physical
assets exceeds the initial cost thereof or the cost of replacement parts
therefor unless such incremental replacement cost is uninsurable, or (c) the
initial cost of any lost or damaged physical assets or the cost of any repair or
replacement thereof (except in the case of replacement, as provided in clause
(b) above) except for losses caused by Purchaser or (d) (without limiting
Purchaser's obligations under any other provision of this Contract) any third
party claims against Contractor.
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 costs or delays. The Contractor
shall promptly provide an estimate of the anticipated additional costs, the time
required to complete the Work or the Upgrade Work and any changes to the Work or
the Upgrade Work, as the case may be. 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. 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. Thereafter, the Purchaser shall reimburse
the Contractor for the actual costs incurred by the Contractor against
submission of corresponding invoices in accordance with Article 5 (Terms of
Payment by Purchaser).
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 costs and time.
F. If a Force Majeure (other than for failure to procure a Permit through
fault of the Contractor) 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, prior to the Payment Escrow Date
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.
38
ARTICLE 18 INTELLECTUAL PROPERTY
---------------------------------
A. Ownership
All right, title, and interest in and to 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) developed by Contractor in the course of
its performance under this Contract, or otherwise furnished by Contractor to
Purchaser as part of the delivery of the System under this Contract, is and
shall remain the sole property of Contractor (hereinafter individually and
collectively referred to as "Intellectual Property"). Unless otherwise expressed
in this Contract, no license is implied or granted herein to Purchaser to any
Intellectual Property by virtue of this Contract, nor by the transmittal or
disclosure of any such Intellectual Property to Purchaser. Any 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), or under the totality of the circumstances
ought to reasonably be treated as being proprietary or confidential to
Contractor even if not so marked or identified, shall be treated in accordance
with the provision of Article 20 (Safeguarding of Information and Technology).
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 that a person of ordinary skill in the relevant
technical field would consider reasonably necessary to operate, maintain or
repair 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(G) below) license to use and
reproduce the Deliverable Technical Materials owned, controlled, or developed by
Contractor to fulfill Purchaser's obligations under this Contract and to use and
operate 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, nontransferable (except under the
circumstances specified in Sub-Article 18(G) 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) to fulfill Purchaser's obligations under this
Contract and to use and operate 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
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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 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 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(C) 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, where 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 (the Deliverable Software). 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 related documentation, where such copies of programs and
software shall consist solely of executable code provided in offline media for
restoration purposes, 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(G) below) license to use and reproduce the Deliverable Software
Materials owned, controlled, or developed by Contractor to fulfill Purchaser's
obligations under this Contract and to use and operate 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,
nontransferable (except under the circumstances specified in Sub-Article 1 8(G)
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) to fulfill Purchaser's
obligations under this Contract and to use and operate 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 ri