Portions of this exhibit (indicated by brackets) have been omitted pursuant to a
request for confidential treatment.
EXECUTION COPY
--------------
PURCHASE AND SUPPLY AGREEMENT
-----------------------------
Between
SPRINT SPECTRUM L.P.,
Owner
and
QUALCOMM Personal Electronics,
Vendor
and
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇,
Guarantor
and
SONY ELECTRONICS INC.
Guarantor
Dated as of June 21, 1996
PURCHASE AND SUPPLY AGREEMENT
-----------------------------
This Purchase and Supply Agreement (the "Agreement") dated as of
June 21, 1996 (the "Effective Date") by and between QUALCOMM Personal
Electronics, a California general partnership (the "Vendor"), Sprint Spectrum
L.P., a Delaware limited partnership (the "Owner"), ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, a
Delaware corporation ("QUALCOMM"), and SONY Electronics Inc., a Delaware
corporation ("Sony" and together with QUALCOMM, the "Guarantors," each a
"Guarantor").
RECITALS:
--------
WHEREAS, the Vendor has certain rights to use certain proprietary
Code Division Multiple Access ("CDMA") technology;
WHEREAS, the Federal Communications Commission ("FCC") has defined
six spectral bands near 1.9 Ghz for use in Personal Communications Services
("PCS") for auction to bidders;
WHEREAS, the FCC granted to the Owner or certain of its Affiliates
PCS licenses to build and operate PCS systems in specified geographic areas in
the United States;
WHEREAS, the Owner desires to purchase certain CDMA subscriber
equipment from the Vendor and the Vendor desires to sell such equipment to the
Owner in accordance with the terms and conditions of this Agreement;
WHEREAS, in consideration for the Owner entering into this
Agreement the Guarantors as the owners of the Vendor have agreed to guaranty
the obligations of the Vendor under this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and
covenants set forth in this Agreement, the Owner and the Vendor hereby agree as
follows:
SECTION 1. HEADINGS AND DEFINITIONS
All headings used in this Agreement are inserted for convenience
only and are not intended to affect the meaning or interpretation of this
Agreement or any section or clause of this Agreement. References to "third
party" or "third parties" will not mean either Party. The meanings given to
terms defined in this Agreement are equally applicable to both the singular and
the plural forms of such terms. Terms used and/or defined in the Exhibits,
appendices or Schedules attached hereto that are not otherwise defined in this
Agreement, will have the meanings as set forth in those Exhibits, appendices or
Schedules for the purposes of those Exhibits, appendices or Schedules only.
For the purposes of this Agreement, the following definitions apply:
"AAA" means the American Arbitration Association.
---
"Accessories" mean those accessories for the Subscriber Units
-----------
and made generally available to Customers and will include, without limitation,
a car kit, cigarette lighter adapter, desktop charger, travel charger, leather
case, hand strap and extra batteries (all in accordance with and pursuant to
the Specifications) and such other items as are specified in the Specifications
or agreed upon by the Parties from time to time. Individually, an
"Accessory".
---------
"Additional Affiliate" has the meaning ascribed thereto in
--------------------
subsection 12.2.
"Additional Affiliate Agreement" has the meaning ascribed
------------------------------
thereto in subsection 12.3.
"Additional Affiliate Arrangement" means a formal arrangement
--------------------------------
between the Owner and a Person to be designated an Additional Affiliate under
the terms of this Agreement, which arrangement will include, but not be limited
to, agreements on marketing, backhaul, common billing, resale agreements and/or
revenue sharing.
"Affected Products" has the meaning ascribed thereto in
-----------------
subsection 3.6(b).
"Affiliates" means the collective reference to the Initial
----------
Affiliates and the Additional Affiliates.
"Agents" means the Owner's agents with resale capability in the
------
Territory.
"Agreement" means this written contract together with all
---------
appendices, exhibits and schedules attached hereto, as this Agreement may be
amended, supplemented or otherwise modified from time to time in accordance
with the provisions of subsection 11.13 of this Agreement.
"Annual Minimum Commitment" has the meaning ascribed thereto in
-------------------------
subsection 3.2(b).
"Annual Supply Period" has the meaning ascribed thereto in
--------------------
subsection 3.2(b).
"Applicable Laws" means, as to any Person, the certificate of
---------------
incorporation and by-laws or other organizational or governing documents of
such Person, all laws (including, but not limited to, any Environmental Laws),
treaties, ordinances, judgments, orders and stipulations of any court or
governmental agency or authority and statutes, rules, regulations, orders and
interpretations thereof of any federal, state, provincial, county, municipal,
regional, environmental or other Governmental Entity, instrumentality, agency,
authority, court or other body (i) applicable to or binding upon such Person or
any of its property or to which such Person or any of its property is subject
or (ii) having jurisdiction over all or any part of the Products or otherwise
in connection with the Vendor's obligations under this Agreement.
-2-
"Beta Software" has the meaning ascribed thereto in subsection
-------------
3.2(a).
"Buffer Stock" has the meaning ascribed thereto in subsection
------------
5.1(b).
"Buffer Stock Commencement Date" has the meaning ascribed
------------------------------
thereto in subsection 5.2(d).
"Business Day" means any day of the year other than a Saturday
------------
or Sunday or a United States national public holiday.
"Catastrophic Defect" has the meaning ascribed thereto in
-------------------
subsection 3.10.
"Catastrophic Defect Cure Period" has the meaning ascribed
-------------------------------
thereto in subsection 3.10(a).
"Change Order" has the meaning ascribed thereto in subsection
------------
3.23.
"Commencement" has the meaning ascribed thereto in subsection
------------
4.2(d).
"Commencement Date" has the meaning ascribed thereto in
-----------------
subsection 3.2(a).
"Consumer Warranty" has the meaning ascribed thereto in
-----------------
subsection 3.8.
"Contract Vendors" means the counterparties to Procurement and
----------------
Services Contracts.
"Co-op Marketing Fund" has the meaning ascribed thereto in
--------------------
subsection 3.4(c).
"Customer" means any CDMA customer of the Vendor offering
--------
Products for sale within the Territory (including any CDMA customer outside of
the Territory who intends to use or resell Products within the Territory) or
any CDMA customer of any of the Vendor's affiliates or subsidiaries offering
Products for sale within the Territory.
"Custom Material" has the meaning ascribed thereto in
---------------
subsection 7.9.
"Defects and Deficiencies," "Defects or Deficiencies" or
--------------------------------------------------------
"Defective"" means when used with respect to any Products, such items that
- - -----------
are not (i) new (unless otherwise as specifically set forth in this Agreement)
and of good quality and free from improper or inferior workmanship and defects
or (ii) otherwise in conformance with the Specifications; provided that
-------- ----
any Product defect or deficiency caused by the misuse, neglect or other
improper handling of a Product or Products by any Person other than the Vendor
as described in subsection 3.7(c) will not be deemed a Defect or Deficiency for
the purposes hereof.
-3-
"▇▇▇▇▇ ▇▇▇▇▇ Period" has the meaning ascribed thereto in
------------------
subsection 4.2.
"Delay Period" has the meaning ascribed thereto in subsection
------------
4.2(d).
"Delayed Products" has the meaning ascribed thereto in
----------------
subsection 4.2(d).
"End Date" has the meaning ascribed thereto in Section 2.
--------
"Environmental Laws" means any and all federal, state, local
------------------
or municipal laws, rules, orders, regulations, statutes, ordinances, codes,
requirements of any Governmental Entity, or requirements of law (including,
without limitation, common law) relating in any manner to contamination,
pollution, or protection of human health or the environment.
"Excess Purchase Order" has the meaning ascribed thereto in
---------------------
subsection 5.2.
"Exchange Act" has the meaning ascribed thereto in subsection
------------
11.18.
"FCC Rules and Regulations" has the meaning ascribed thereto in
-------------------------
subsection 3.20.
"Financing Interim Period" has the meaning ascribed thereto in
------------------------
subsection 10.10.
"First Annual Minimum Commitment" has the meaning ascribed
-------------------------------
thereto in subsection 3.2(b).
"First Sale Date" has the meaning ascribed-thereto in
---------------
subsection 3.10(a).
"First System" has the meaning ascribed thereto in subsection
------------
4.2(d).
"FOB point" means the dock or other distribution point of the
---------
Vendor's then applicable manufacturing facility or facilities or as otherwise
mutually agreed between the Parties from time to time.
"Force Majeure" has the meaning ascribed thereto in subsection
-------------
11.17.
"Forecast" has the meaning ascribed thereto in subsection 5.1.
--------
"Forecast Period" has the meaning ascribed thereto in
---------------
subsection 5.1.
"Governmental Entity" means any nation or government, any
-------------------
state, province or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government within the Territory.
-4-
"Independent Auditor" means any of the Persons set forth on
-------------------
Schedule 1 or any Person otherwise mutually agreeable to the Parties other than
the then acting Independent Public Accountant.
"Independent Public Accountant" has the meaning ascribed
-----------------------------
thereto in subsection 3.3(b).
"Infrastructure Equipment" means any radio subsystem or any
------------------------
combination of radio subsystems that handle the Owner's PCS radio traffic in a
cell or cells within any given Owner PCS System and all other
telecommunications equipment which is necessary to the functioning of any such
radio subsystem(s) (i) with any other radio subsystem or (ii) otherwise within
the Nationwide Network or any part thereof.
"Initial Affiliates" means the collective reference to each of
------------------
the Persons set forth on Schedule 2.
"Initial Affiliate Agreement" has the meaning ascribed thereto
---------------------------
in subsection 12.1
"Initial Subscriber Units" has the meaning ascribed thereto in
------------------------
subsection 3.2(a).
"Initial Term" has the meaning ascribed thereto in Section 2.
------------
"Intellectual Property Rights" has the meaning ascribed thereto
----------------------------
in subsection 7.1.
"Late Amount" has the meaning ascribed thereto in subsection
-----------
3.4(a).
"Late Postponement" has the meaning ascribed thereto in
-----------------
subsection 5.2(c).
"Launch Units" has the meaning ascribed thereto in subsection
------------
4.2(a).
"▇▇▇▇" has the meaning ascribed thereto in subsection 3.15.
----
"Material Accessories" means, with respect to each Subscriber
--------------------
Unit, the desktop charger (and the plug therefor), handstrap and the battery.
"MFC Certificate" has the meaning ascribed thereto in
---------------
subsection 3.3(b).
"Nationwide Network" means all of the PCS Systems built or to
------------------
be owned and/or operated by the Owner or its Affiliates in North America.
"NDAB" means the New Development Advisory Board established
----
pursuant to subsection 3.18.
-5-
"New Products" has the meaning ascribed thereto in subsection
------------
3.11.
"Non-Conforming Products" has the meaning ascribed thereto in
-----------------------
subsection 3.22(b).
"North America" means the United States, Canada (including the
-------------
Province of Quebec) and Mexico.
"NTF Products" or "No Trouble Found Products" means Products
-------------------------------------------
returned to the Vendor pursuant to subsection 3.9(a) which the Vendor has, in
good faith and only after applicable testing, found not to be Defective.
"OEM Customer" means (i) QUALCOMM and Sony Corporation and
------------
their respective subsidiaries and affiliates, (ii) any foreign affiliate of the
Vendor which is selling Products outside of the Territory for use and/or resale
outside of the Territory and (iii) a manufacturer of telecommunications
equipment and a purchaser of products from the Vendor that is not a provider of
cellular and/or PCS services (other than such a manufacturer and purchaser that
holds only a minority non-controlling interest in any such provider) in the
Territory or elsewhere, and that either (i) purchases private-labelled products
(i.e., labelled with the OEM Customer's brand name or trademark) from the
----
Vendor for the primary purpose of reselling such products on a wholesale basis
into channels of distribution, or (ii) is purchasing products from the Vendor
primarily for the purpose of supplying and/or reselling such products to its
customers that purchase telecommunications equipment for resale and use outside
the Territory.
"Operating Subsidiary" means an entity (i) at least fifty-one
--------------------
percent (51%) owned or controlled by an other entity, (ii) operating in the
telecommunications industry and (iii) having assets of at least twenty five
million dollars ($25,000,000).
"Originally Scheduled Supply Period" has the meaning ascribed
----------------------------------
thereto in subsection 3.2(c).
"Owner Defined Feature" means (a) the features listed on
---------------------
Schedule 5 and (b) any feature, enhancement, modification or upgrade to or to
be added to any Product (i) which is not currently listed on or described in
Exhibit A1 or Exhibit A2, (ii) which is, after the Effective Date, specifically
requested in writing by the Owner to the Vendor to be added to any Product
pursuant to and in accordance with the terms of this Agreement, (iii) which is
not otherwise made generally available to the Vendor's Customers and (iv) which
is developed by the Vendor for the Owner based solely upon the initiation of
the Owner.
"Owner Event of Default" has the meaning ascribed thereto in
----------------------
subsection 10.8.
-6-
"Owner's Succeeding Entity" has the meaning ascribed thereto in
-------------------------
subsection 11.19.
"Parties" means, collectively, the Owner and the Vendor, and
-------
"Party" will individually mean the Owner or the Vendor.
-----
"Partners" means the collective reference to Sprint
--------
Corporation, a Delaware corporation ("Sprint"), Sprint Enterprises, L.P., a
Delaware limited partnership, Tele-Communications Inc., a Delaware corporation,
TCI Network Services, a Delaware general partnership ("TCI"), Comcast
Corporation, a Delaware corporation, Comcast Telephony Services, a Delaware
general partnership ("Comcast"), ▇▇▇ Communications, Inc., a Delaware
corporation, and Cox Telephony Partnership, a Delaware general partnership
("Cox").
"PCS" has the meaning ascribed thereto in the second Recital.
---
"PCS System" means all products and other equipment, tools and
----------
software, all system element sites and any property located there necessary or
desirable to provide PCS in a given specified System Area.
"Person" means an individual, partnership, limited partnership,
------
corporation, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Entity or other entity of whatever
nature.
"Previously Existing Products" has the meaning ascribed thereto
----------------------------
in subsection 3.12.
"Procurement and Services Contract" means a procurement and
---------------------------------
services contract entered into, or to be entered into, between the Owner and
the counterparty or counterparties thereto in connection with the engineering
and construction of PCS Systems or any part thereof, as the same may be
amended, supplemented or otherwise modified from time to time.
"Product Class" has the meaning ascribed thereto in subsection
-------------
3.10(a).
"Product Depreciation" means the depreciation in the value of
--------------------
the relevant Product (based on the prices set forth in Appendix 1) over a
straight line five (5) year term from the date of shipment of such Product.
"Product Enhancements" means modifications or improvements made
--------------------
to the Products which improve performance of such Products.
"Products" means all of the Subscriber Units and the
--------
Accessories provided by the Vendor pursuant to and in accordance with this
Agreement.
-7-
"Proprietary Information" has the meaning ascribed thereto in
-----------------------
subsection 8.2.
"Proprietary Marks" has the meaning ascribed thereto in
-----------------
subsection 3.17(b).
"Purchase Order" means a written order by the Owner to purchase
--------------
Products pursuant to and in accordance with the terms of this Agreement, each
of which will be deemed to incorporate all terms, conditions and provisions of
this Agreement unless the Parties expressly agree otherwise.
"Purchaser" means a Person who purchases Products from the
---------
Owner or an Agent as an initial end user of the Product or Products
(provided that an Agent that uses the Product will in no event be a
----
Purchaser).
"RF Interference Condition" has the meaning ascribed thereto in
-------------------------
subsection 3.20.
"Purchasing Credits" has the meaning ascribed thereto in
------------------
subsection 3.6(c).
"RFP" has the meaning ascribed thereto in subsection 7.9.
---
"Second Annual Minimum Commitment" has the meaning ascribed
--------------------------------
thereto in subsection 3.2(b).
"Shipped-to Location" has the meaning ascribed thereto in
-------------------
subsection 5.2.
"Shortfall" has the meaning ascribed thereto in subsection
---------
3.2(c).
"Software" has the meaning ascribed thereto in subsection
--------
7.5(a).
"Software Enhancements" means modifications or improvements
---------------------
made to the Software relating to PCS Products which improve performance of the
Software or which provide additional functions to the Software.
"Sony Branded Product" means any Product which bears a
--------------------
trademark, insignia, logo or other proprietary ▇▇▇▇ listed on Schedule 6 if
such trademark, insignia, logo or other ▇▇▇▇ consists of or incorporates the
term "Sony" and/or any variations thereof.
"Sony Corporation" means Sony Corporation, a Japanese
----------------
corporation, the parent company of Sony.
"Specifications" means the specifications and performance
--------------
standards of the Products contemplated by this Agreement and includes any
amendments, modifications
-8-
and/or other revisions thereto made in accordance with the terms of this
Agreement and as more fully set forth in the Exhibits.
"Stub Period" has the meaning ascribed thereto in subsection
-----------
3.2(b).
"Subscriber Unit" means (i) the Vendor's QCP-1900 hand held
---------------
portable phone that provides CDMA service in the PCS band, (ii) the Vendor's
CM-D600 hand held portable phone that provides CDMA service in the PCS band,
and (iii) subsequent portable phone models added pursuant to this Agreement,
all in accordance with and pursuant to the Specifications.
"Succeeding ▇▇▇▇▇ ▇▇▇▇▇ Period" has the meaning ascribed
-----------------------------
thereto in subsection 4.2(b).
"System Area" means a major trading area to which the Owner has
-----------
FCC Licenses to operate PCS services.
"System Managers" means each of the managers designated by the
---------------
Owner and the Vendor, respectively, for the purposes of subsection 11.8.
"Term" has the meaning ascribed thereto in Section 2.
----
"Territory" means (i) with respect to the Vendor's QCP-1900
---------
Subscriber ▇▇▇▇, ▇▇-▇▇▇▇ Subscriber Unit and Accessories therefor, the United
States and Canada (including the province of Quebec) and (ii) with respect to
subsequent hand held portable models and Accessories therefor added pursuant to
this Agreement, such geographical areas as will be mutually agreed to by the
Parties (but in any event not less than the United States); provided
--------
that for Sony Branded Products only, Territory shall not include Canada.
- - ----
"Third Annual Minimum Commitment" has the meaning ascribed
-------------------------------
thereto in subsection 3.2(b).
"Total Minimum Commitment" has the meaning ascribed thereto in
------------------------
subsection 3.2(b).
"Training" has the meaning ascribed thereto in subsection 6.1.
--------
"United States" means the fifty states of the United States,
-------------
the District of Columbia and all United States territories and possessions;
provided that for Sony Branded Products only, the term "United States"
----
shall mean only the continental United States, Alaska and the District of
Columbia.
"UPC" means the Universal Product Code.
---
-9-
"Vendor Event of Default" has the meaning ascribed thereto in
-----------------------
subsection 10.2.
"Vendor Indemnities" has the meaning ascribed thereto in
------------------
subsection 9.3(a).
"Vendor Liabilities" has the meaning ascribed thereto in
------------------
subsection 9.3(a).
"Vendor's affiliate","affiliate of the Vendor" or "Vendor's
------------------------------------------------------------
affiliates" or the like means any Person which directly or indirectly
- - -----------
controls, or is controlled by, or is under common control with, the Vendor,
Sony Corporation or any of Sony Corporation's affiliates and subsidiaries. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person.
"Vendor's Succeeding Entity" has the meaning ascribed thereto
--------------------------
in subsection 11.18.
"Warranty Period" means (x) as to each Subscriber Unit the
---------------
period expiring (i) with respect to the Owner, twenty four (24) months after
the respective date of delivery of such Subscriber Unit to the FOB point, and
(ii) with respect to a Purchaser, either twenty four (24) months or twelve (12)
months (at the election of the Owner in accordance with subsection 3.8) after
the respective date of first sale of such Subscriber Unit to such Purchaser and
(y) as to each Accessory, the period expiring (i) with respect to the Owner,
twelve (12) months after the respective date of delivery of such Accessory to
the FOB point and (ii) with respect to a Purchaser, twelve (12) months after
the respective date of first sale of such Accessory to such Purchaser.
SECTION 2. TERM
This Agreement will commence on the date first set forth above and will
continue for a period of three (3) years (the "Initial Term") following the
initial purchase of production Subscriber Units by the Owner (the "End Date").
The Initial Term of this Agreement may be extended beyond the End Date for
successive periods by mutual agreement of the Parties hereto (all such periods
plus the Initial Term, the "Term"). The terms, conditions and provisions of
this Agreement will apply to all Purchase Orders issued by the Owner for any
Products during the Term, unless otherwise agreed by the Parties.
SECTION 3. PRODUCT PURCHASES
3.1 Right to Purchase, Resell and Use. (a) During the Term of this
---------------------------------
Agreement, the Owner will purchase Subscriber Units and Accessories on a
non-exclusive basis from the Vendor pursuant to and in accordance with the
terms and conditions of this Agreement. The Vendor understands and agrees that
the Owner will purchase Products from the Vendor pursuant to this Agreement for
the purpose of reselling such Products
-10-
to the Owner's Agents and/or Purchasers in accordance with the applicable terms
of this Agreement. The Vendor further understands, acknowledges, and agrees
that the Products sold hereunder will be used in accordance with their intended
purpose on and within the Owner's Nationwide Network. The Owner will use its
reasonable efforts to ensure that it will not modify the form, fit, function,
specifications, performance or design of the Products (or components or
subcomponents thereof) without the express authorization of the Vendor, which
authorization, if any, will be provided by the Vendor pursuant to and in
accordance with the terms of this Agreement.
(b) The Vendor hereby grants to the Owner a nonexclusive right to resell
the Products within the Territory by means of (i) the Owner's own direct sales
utilizing its outbound sales force and/or through retail outlets owned or
operated by the Owner, and (ii) resales to Agents, all upon the terms and
conditions set forth herein. Subject to Applicable Law, the Owner agrees that,
in each contract between the Owner and an Agent, the Owner will use its
reasonable commercial efforts to require the Agent to which it supplies,
directly or indirectly, Products to resell such Products only to bona fide end
users, Purchasers or other Agents and only within the Territory. For the
purposes hereof a "bona fide end user" means any Person who is purchasing
Products without the intent to resell such Products.
3.2 Availability of Subscriber Units and Accessories; Minimum
----------------------------------------------------------
Commitment. (a) Subscriber Units and the Accessories therefor may be ordered
- - ----------
by the Owner for delivery at any time during the Term on or after (i) for
Subscriber Units (with accompanying Material Accessories), July 1, 1996 (the
"Commencement Date"), and for other additional Accessories, the respective
dates set forth on APPENDIX 1, in accordance with the lead times and
----------
forecasts set forth in Sections 4 and 5 below; provided that the
----
Accessories specifically listed in APPENDIX 1 hereto shall be available
----------
no later than the dates set forth for such accessories in APPENDIX 1.
----------
Notwithstanding the above, the Owner acknowledges and agrees that, unless the
Vendor otherwise notifies the Owner in writing to the contrary, the Software
contained in any Subscriber Unit manufactured by the Vendor prior to September
24, 1996 may contain "bugs" that may adversely impact the functionality,
performance and/or compliance of the Subscriber Unit with the Specifications
(such Software being hereinafter referred to as the "Beta Software"). With
respect to Subscriber Units forecasted pursuant to subsection 5.1(a) for
delivery on or before October 1, 1996 (the "Initial Subscriber Units"), the
Vendor will build and hold the Initial Subscriber Units in the Vendor's
inventory and will deliver such Initial Subscriber Units in accordance with the
provisions of this subsection 3.2(a). Commencing on September 24, 1996 (and
assuming that the Owner will have placed Purchase Orders for such Products with
the Vendor in accordance with the lead times set forth in this Agreement), the
Vendor will deliver to the FOB point on a daily basis (or such other longer
time intervals ending before October 8, 1996 as the Vendor may request in
writing) those Initial Subscriber Units in which the Vendor has upgraded to the
Specifications the Beta Software. On October 8, 1996, the Vendor will deliver
to the FOB point any then remaining Initial Subscriber Units still in the
Vendor's inventory as of such date (and the Owner will have placed Purchase
Orders for such Products with the Vendor in accordance with the lead times set
forth in this Agreement). Prior to
-11-
their respective delivery to the FOB point pursuant to the prior two sentences,
the Vendor will upgrade to the Specifications the Beta Software in the subject
Initial Subscriber Units. For each of the Initial Subscriber Units so held in
the Vendor's inventory and upgraded, the Owner will pay to the Vendor a fee of
[ ] Initial Subscriber Unit to be upgraded to the Specifications, such
fee due and payable on the date the invoice for such Products is due and
payable. The Owner may request in writing that up to [ ] of the Initial
Subscriber Units be delivered (with their accompanying Material Accessories)
prior to the dates specified above. Upon such written request, the Vendor will
use its reasonable commercial efforts to comply with the dates and quantities
specified by the Owner in such request forsuch Initial Subscriber Units to be
delivered prior to September 24, 1996; provided that between September 24, 1996
-------- ----
and October 8, 1996, the Owner may request the delivery of any remaining Initial
Subscriber Units (subject to the [ ] limitation set forth above) that have not
been upgraded and were not earlier delivered prior to September 24, 1996. During
the period from September 24, 1996 to October 8, 1996 the Owner may request and
the Vendor will deliver as many upgraded Specification compliant Subscriber
Units as it has so upgraded and otherwise made available pursuant to and in
accordance with the forecasting and ordering requirements set forth in this
Agreement. With respect to any such Initial Subscriber Unit delivered prior to
the dates specified above, (i) acceptance of such Initial Subscriber Units with
the Beta Software will be deemed to have occurred upon delivery, (ii) the Vendor
makes no warranty with respect to the Beta Software (such Beta Software being
delivered on an "AS IS" basis), nor does the Vendor make any warranty with
respect to compliance of such Initial Subscriber Units with the Specifications
as a result of the fact that such Initial Subscriber Units contain Beta
Software; provided that any such Initial Subscriber Unit will be fully
-------- ----
compliant with all other applicable Specifications and the Vendor's warranties
pursuant to subsections 3.7 and 3.8 shall remain in full force and effect except
with respect to the effects of such Beta Software, and (iii) the Vendor shall
have no obligation to upgrade the Beta Software in such delivered Initial
Subscriber Units, but the Vendor agrees to cooperate, to the extent set forth in
the next sentence, with the Owner to assist the Owner to upgrade such Beta
Software in the field. In the event that there are Initial Subscriber Units
containing Beta Software delivered by the Vendor, the Vendor will supply to the
Owner, at no charge to the Owner, the computer disks containing the software
upgrades and reasonable amounts of training and assistance to permit the Owner
to implement a field upgrade of such Beta Software. The provisions of subsection
5.2(c) and subsection 5.2(d) will not apply to Initial Subscriber Units unless
and only to the extent that the Owner postpones delivery of any Initial
Subscriber Units to a date after October 8, 1996 (in which event, for purposes
of applying the provisions of subsection 5.2(c) and subsection 5.2(d), the
initial shipment date for such Initial Subscriber Units will be deemed to be
October 8, 1996). For the purposes hereof, a "bug" or "bugs" means a Software
imperfection, but in any event such Initial Subscriber Units with Beta Software
will be able to at least perform the following basic functions: which are
"power-up," "power-down," placing calls, receiving calls, perform self-check on
power-up, store phone numbers, recall phone numbers and speed dial phone
numbers.
-12-
(b) Pursuant to and in accordance with the terms of this Agreement,
during the Initial Term of this Agreement the Owner will purchase from the
Vendor not less than [ ] Subscriber Units (the "Total Minimum Commitment").
During the first six (6) months from the Commencement Date (such first six month
period and each succeeding twelve (12) month period during the Term an "Annual
Supply Period") the Owner will only be required to purchase from the Vendor
[ ] Subscriber Units (the "First Annual Minimum Commitment"). During the
second Annual Supply Period the Owner will only be required to purchase from the
Vendor [ ] Subscriber Units (the "Second Annual Minimum Commitment"). During
the third Annual Supply Period the Owner will only be required to purchase from
the Vendor [ ] Subscriber Units (the "Third Annual Minimum Commitment"; each
of the First Annual Minimum Commitment, Second Annual Minimum Commitment, and
Third Annual Minimum Commitment, an "Annual Minimum Commitment").
Notwithstanding anything stated in this subsection 3.2(b) to the contrary, in
any given Annual Supply Period the Owner will only have to purchase [ ] of the
respective amounts set forth in the second, third and fourth sentences of this
subsection 3.2(b), provided that at any time prior to the termination of the
-------- ----
Initial Term (unless earlier terminated in accordance with Section 10) the Owner
will have fulfilled its Total Minimum Commitment pursuant to and in accordance
with the terms of this Agreement. Pursuant to and in accordance with the
immediately preceding sentence, any amounts (up to [ ]) not purchased, or
otherwise subject to firm Purchase Orders in accordance with this Agreement, by
the Owner in any given Annual Supply Period will increase the Annual Minimum
Commitment in the next succeeding Annual Supply Period (without any penalty or
Shortfall payment by the Owner to the Vendor); provided that for the third
-------- ----
Annual Supply Period any such amounts [ ] will be carried over and into the
remaining period within the Initial Term (the "Stub Period") and must be
purchased by the Owner in accordance with the terms of this Agreement during the
Stub Period. Prior to the end of the first Annual Supply Period, the second
Annual Supply Period and the third Annual Supply Period, the Owner will give the
Vendor prior written notice of any election by the Owner to exercise the Owner's
rights under the preceding sentence to purchase less than [ ] of the amount of
the First Annual Minimum Commitment, the Second Annual Minimum Commitment and
the Third Annual Minimum Commitment, as applicable, in the respective first
Annual Supply Period, second Annual Supply Period and the third Annual Supply
Period, as the case may be.
(c) In the event that the Owner elects, in its sole discretion, not to
place Purchase Orders for delivery of Subscriber Units in accordance with the
terms of this Agreement in the amounts as set forth in subsection 3.2(b) above
(the difference between each of the Annual Minimum Commitments and the amount
actually ordered for delivery during each of the relevant Annual Supply Periods
set forth in subsection 3.2(b) or otherwise during the Stub Period by the Owner
herein referred to as the "Shortfall"), then the amount of the relevant Annual
Minimum Commitment for such period (or the residual amount to be purchased in
the Stub Period, as applicable) will be reduced (by an amount equal to the
amount of the Shortfall for such Annual Supply
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Period or the Stub Period, as the case may be) by paying to the Vendor the
following amounts per Subscriber Unit which are in any such Shortfall, as full
compensation to the Vendor for such a reduction in the applicable Annual
Minimum Commitments:
Charge per Subscriber
Amount of Shortfall Unit in the Shortfall
- - ------------------- ---------------------
Shortfall greater than or equal to [ ] [ ] per Subscriber Unit in
of the applicable Annual Minimum Shortfall
Commitment
Shortfall greater than or equal to [ ] [ ] per Subscriber Unit in
and less than [ ] of the applicable Shortfall
Annual Minimum Commitment
Shortfall greater than or equal to [ ] [ ] per Subscriber Unit in
and less than [ ] of the applicable Shortfall
Annual Minimum Commitment
Shortfall less than [ ] of the applicable [ ] per Subscriber
Annual Minimum Commitment Unit in Shortfall
To the extent there is a Shortfall in any Annual Supply Period or the
Stub Period, as the case may be, the Vendor may invoice the Owner for any
amounts owed by the Owner to the Vendor pursuant to this subsection 3.2(c) no
earlier than 5:00 p.m. on the last Business Day of such period and no later
than ninety (90) days from the last Business Day of such period and the Owner
will have sixty (60) days to pay any such invoice to the extent the amount of
any such invoice is not in good faith dispute between the Parties pursuant to
subsection 11.8. To the extent the Owner is required to pay the Vendor amounts
as set forth in this subsection 3.2(c) for any Shortfall during any Annual
Supply Period, or during the Stub Period, as the case may be, any such amounts
once paid by the Owner will be full compensation to the Vendor for such
reduction in the Annual Minimum Commitments and the Owner will have no further
liability or obligation of any kind to the Vendor for any such reductions in
the Annual Minimum Commitments and any such payment will be the Vendor's sole
remedy (at law or in equity) for any such reductions in the Annual Minimum
Commitments. Nothing set forth in subsections 3.2(b) or 3.2(c) will be
construed or interpreted as relieving the Owner of purchasing those amounts of
Products projected by the Owner in the first five (5) months of a Forecast
which are subject to a firm Purchase Order in accordance with subsection 5.1.
For the purpose of subsections 3.2(b) and 3.2(c), any Purchase Order or Excess
Purchase Order postponed by the Owner pursuant to subsection 5.2(c) which, as a
result of such postponement, would cause the Products subject to such Purchase
Order or Excess Purchase Order not to be purchased in the Annual Supply Period
(the "Originally Scheduled Supply Period") in which such Products otherwise
were to be purchased (but for such postponement), will not be considered to be
Purchase Orders for Products ordered for delivery in the Originally Scheduled
Supply Period and such Products may be considered as part of any such Shortfall
during the Originally Scheduled Supply Period.
-14-
3.3 Most Favored Customer Status. (a) With respect to all Products
----------------------------
(including any New Products ordered by the Owner pursuant to the terms of this
Agreement), the Owner will be deemed the most important and favored Customer of
the Vendor and will always throughout the [ ]. Notwithstanding the
above, the Vendor will not be obligated to provide such priority to Owner if
providing such priority either (i) would cause the Vendor, QUALCOMM or Sony
(including their respective affiliates) to breach any of their then-existing
contracts and/or any Applicable Law, or (ii) if the Owner elects to exercise
any of its remedies, as specified in subsection 4.2. At any time during the
Term, the Owner will receive Products (including any New Products ordered by
the Owner pursuant to the terms of this Agreement) at prices (prior to taking
into account price increases due to customization specific to the Owner;
[ ]. For the purposes of subsection 3.3 only, "Customer" will not include any
(i) OEM Customer or (ii) any other Customer who is only receiving Products from
the Vendor (or its affiliates) as a piece of a larger telecommunications,
engineering and/or design contract (other than with respect to Products sold
under a contract(s) with a third party to the extent that (x) the price
differential between the Product(s) sold under such third party contract (taking
into account corresponding time periods) multiplied by the number of units of
---------- --
Product(s) to be sold under such third party contract (at a lower price), is (y)
greater than [ ] of the total contract value of such third party contract), the
primary purpose of which is not the sale or supply of Subscriber Units.
(b) On an annual basis throughout the Term of this Agreement commencing
on the Effective Date, each of the Vendor, Sony and QUALCOMM will be required
to audit their pricing of all similar products provided to all of their
customers selling or using or intending to sell or use the Products in the
Territory in the preceding calendar year and certify to the Owner in a
certificate (or in separate certificates) executed by a duly authorized officer
of each such entity (the "MFC Certificate") that the Owner has in fact received
the prices and availability of Products in accordance with the terms of
-15-
clause (a) of this subsection 3.3. The annual MFC Certificate delivered to the
Owner in accordance with this subsection 3.3(b) will be subject to
verification, at the election of the Owner, by any public accounting firm
reasonably acceptable to the Owner and listed on Schedule 1 (the "Independent
Public Accountant") and at the sole cost and expense of the Party whose
position is not supported by the report of the Independent Public Accountant
or, if contested, the report of the Independent Auditor. The Independent
Public Accountant will in no event disclose to the Owner or any other third
party the details of any contract or amendment between the Vendor and any
Customer (or between QUALCOMM and any of QUALCOMM's customers or between Sony
and any of Sony's customers or between any affiliate and such affiliate's
customers) other than details as necessary to summarize terms including, but
not limited to, pricing relevant to determinations under subsections 3.3(a) and
(b).
(c) To the extent that it is determined pursuant to subsection 3.3(b)
that the provisions of subsection 3.3(a) have not been complied with, the Owner
will have thirty (30) Business Days from receipt of the MFC Certificate (as
verified by the Independent Public Accountant, if the MFC Certificate(s) was so
subject to verification) to provide the Vendor with a written claim for Product
pricing rebates (as measured from the date any Product is delivered at any such
lower prices in violation of this subsection 3.3) on future purchases under
this Agreement based upon (i) the Independent Public Accountant's calculation
of the price differentials between the Vendor's prices for Products (including
any New Products) under this Agreement and any lower prices charged by the
Vendor, Sony or QUALCOMM, as the case may be, to any other Customer (including
customers of either QUALCOMM or Sony (including their respective affiliates)
who intend to use or resell, or who actually use or resell, such Products
within the Territory) in violation of clause (a) of this subsection 3.3. To
the extent that the Vendor, Sony or QUALCOMM, as the case may be, disagrees
with any such claim for such pricing rebates made by the Owner pursuant to this
subsection 3.3(c), the Vendor will have the right within ten (10) Business Days
of receiving the Owner's written rebate claim to submit such claim (including,
but not limited to, the Independent Public Accountant's report on which it as
based) and the Vendor's written response thereto to an Independent Auditor
(other than the Independent Public Accountant) who will have the authority to
determine whether, based on the information provided by the Owner and the
Vendor, the provisions of subsection 3.3(a) have been complied with. As part
of any such submission to the Independent Auditor, either Party may dispute the
validity or accuracy of the Independent Public Accountant's report. If the
Independent Auditor finds that the Owner's pricing rebate claim is incorrect
but that the provisions of subsection 3.3(a) have been violated, then the
Independent Auditor will have the right to adjust any such claim as appropriate
under such circumstances. The Independent Auditor's determination must be made
and delivered to both the Vendor and the Owner within ten (10) Business Days of
receiving the request from the Vendor. Such determination once made by the
Independent Auditor will be final and binding on the Parties and will not be
subject to further modification. The costs and expenses of the Independent
Auditor will be borne by the Party whose position is not supported by the
Independent Auditor or otherwise equitably under the circumstances.
-16-
3.4 Payment Terms, Taxes and Co-op Marketing Fund. (a) Pursuant to
---------------------------------------------
and in accordance with the terms of this Agreement, the Vendor will invoice the
Owner for Products purchased upon delivery of such Products to the FOB point,
and the Owner will pay all such invoices within [ ] days after the
invoice date unless the Owner disputes (in accordance with subsection 11.8) in
good faith either the Vendor's entitlement to, or the amount of, any such
invoiced amount. The Owner agrees to pay to the Vendor a late charge for
amounts actually due and not paid when due in accordance with the terms of this
Agreement (a "Late Amount") equal to the lesser of [ ] per month,
pro-rata, of the Late Amount, or the maximum amount permitted by Applicable
Law; provided that any such late payment penalties will not accrue
----
until amounts owed by the Owner to the Vendor are actually late and outstanding
and will stop accruing immediately upon the Owner's payment of such Late Amount
plus any such accrued late payment penalties. All amounts stated herein and/or
otherwise required to be paid under or pursuant to this Agreement are stated
in, and will be paid in, U.S. Dollars. In the event that, at any given time,
there are undisputed amounts, in aggregate, of [ ] or more, which the Owner
has failed to pay when due in accordance with the terms of this Agreement, then
the Vendor, upon five Business Days prior written notice to the Owner, shall be
entitled to, without any penalty or payment obligations, suspend shipping
Products.
(b) The amounts to be paid by the Owner under this Agreement do not
include any state, provincial or local sales and use taxes, however designated,
which may be levied or assessed on the Products to be sold hereunder. With
respect to such taxes, the Owner will either furnish the Vendor with an
appropriate exemption certificate applicable thereto or pay to the Vendor, upon
presentation of invoices therefor, such amounts thereof as the Vendor may by
law be required to collect or pay; provided, however, that the Vendor
-------- -------
will use its reasonable efforts to minimize the amount of any such taxes. The
Owner has no obligation to the Vendor with respect to other taxes, including,
but not limited to, those relating to franchise, net or gross income or
revenue, license, occupation, other real or personal property, and fees
relating to importation or exportation of the Products to the FOB point.
(c) Throughout the Term the Vendor will contribute cash amounts equal
to [ ] of the invoiced FOB point price of any Subscriber Units (and their
included accompanying Material Accessories) so invoiced by the Vendor to the
Owner for such Products purchased and paid for by the Owner pursuant to the
terms of this Agreement to a separate fund owned by the Owner and designated in
writing to the Vendor from time to time by the Owner (the "Co-op Marketing
Fund"). Any and all amounts in the Co-op Marketing Fund may be used by the Owner
in its sole and absolute discretion for any purpose in connection with the
marketing and/or advancement of the Nationwide Network or any part thereof,
subject only to the terms of subsection 3.17(b) and Section 8. In accordance
with the terms of this subsection 3.4(c), the Vendor must make any such
contribution to the Co-op Marketing Fund within ten (10) Business Days of
receipt by the Vendor of full payment by the Owner of amounts due under any such
invoice for Subscriber Units (and their included Material Accessories). The
amount of any such contribution to be made by the Vendor pursuant
-17-
to this subsection 3.4(c) will be calculated based upon [ ] of the invoiced
FOB point price for Subscriber Units (and their included Material Accessories)
invoiced by the Vendor to the Owner. The failure of the Vendor to make the
contributions in cash to the Owner's Co-op Marketing Fund in accordance with and
subject to the terms of this subsection 3.4(c) will entitle the Owner to
withhold any such amounts from any future Vendor invoices (until such time as
the Vendor does make any such required contributions).
3.5 Delivery. (a) All deliveries of Products will be made to the
--------
FOB point. The Owner will specify the desired method of shipping. Unless
otherwise agreed in writing, the Owner will pay for all shipping, freight,
insurance and other similar charges incurred in connection with such
deliveries. In the absence of written shipping instructions from the Owner,
the Vendor will select the carrier and insurance company at the Owner's
expense, taking into account the charges levied by the carriers and insurance
companies under consideration, and will ship Products utilizing ground
transportation; provided that, in the absence of prior shipping
-------- ----
instructions, the Vendor will use reasonable efforts to contact the Owner to
request such shipping instructions prior to making any such selections.
(b) The Owner will inspect and either accept or reject all Products in
whole or in part within ten (10) Business Days after the date of receipt at the
delivery location applicable to such Products pursuant to the terms of this
Agreement. If the Owner fails to reject any Product delivered within such
period, the Owner shall be deemed to have accepted such Product; provided,
--------
however, that any such acceptance will in no event limit, modify, waive or
- - -------
otherwise restrict the Owner's rights under the terms, including without
limitation the warranty provisions, of this Agreement.
(c) The Owner may request that the Vendor provide more extensive
logistical and distribution capabilities to the Owner, which capabilities the
Vendor will use its reasonable commercial efforts to provide. If the Vendor
agrees to provide such services, there may be, depending on the level and scope
of such services, additional charges to the Owner on a per Product basis. Any
such charges will be mutually agreed upon by the Parties during negotiations
between the Parties on the provision of any such additional logistical and
distribution services beyond those outlined in this subsection 3.5;
provided that, in determining any such charges, the Owner will be
- - -------- ----
deemed the Vendor's most important and favored Customer and will receive such
services at prices, on payment terms and subject to all other contract terms on
terms no less favorable to the Owner than those offered or available to any
other Customer subject to and in accordance with the terms of subsection 3.3.
3.6 Pricing. (a) The Owner will purchase Products from the Vendor
-------
in accordance with the Product pricing set forth on Appendix 1. The price for
Products will be the price in effect on the date of the applicable Purchase
Order. Notwithstanding anything to the contrary contained in subsection 3.2(b)
or subsection 5.2(c), to the extent the Owner orders or is required to order
Subscriber Units during 1996, the Owner will be required to pay the 1996 price
(as set forth in Appendix 1) for
-18-
such Subscriber Units, even if and notwithstanding the fact that the Owner will
have moved, or delayed the delivery (pursuant to subsection 3.2(b) or
subsection 5.2(c)) of any such first Annual Supply Period Subscriber Units into
a succeeding Annual Supply Period or the Stub Period, as the case may be;
provided, however, that nothing contained in this sentence will in any
- - -------- -------
way limit or modify the Owner's right to reduce its First Annual Minimum
Commitment pursuant to the shortfall mechanisms in subsection 3.2(c);
provided further, however, in the event the Owner so reduces its
- - -------- ------- -------
First Annual Minimum Commitment but does purchase Subscriber Units subsequent
to December 31, 1996, then the Owner will be required to pay, for each
Subscriber Unit until such time as the Owner has purchased, in aggregate, [ ]
Subscriber Units, an amount equal to (i) the 1996 price (as set forth in
Appendix 1) for such Subscriber Units, less (ii) the amount paid by the Owner to
the Vendor (calculated on a per Subscriber Unit basis) pursuant to subsection
3.2(c) as a result of there being a Shortfall in the First Annual Supply Period.
Pursuant to the terms of this Agreement the Vendor may, upon not less than sixty
(60) days prior written notice to the Owner, increase its pricing for any of its
Products covered by the terms of this Agreement as set forth in Appendix 1 only
once in any given Annual Supply Period, in accordance with the most favored
customer provisions set forth herein; provided that any such price increase will
-------- ----
in no event be in excess of [ ] above the previously established price as set
forth in Appendix 1 for any such Product; and provided further, that nothing in
-------- -------
this subsection 3.6 will limit or otherwise pertain to a price increase
implemented pursuant to a Change Order pursuant to and in accordance with
subsection 3.23. In the event of any such price increase the Owner will have the
right, but not the obligation, by written notice to the Vendor, to reduce the
then remaining unpurchased portion of the applicable Annual Minimum Commitment
by the same percentage [ ] as such price increase in such Annual Supply
Period. For example, if the Vendor pursuant to the terms of this subsection
3.6(a) chose to increase its prices during the First Annual Supply Period by
[ ], then the Owner would have the corresponding right to decrease the then
remaining unpurchased portion of the First Annual Minimum Commitment by [ ].
Initial pricing for new Products not otherwise covered by Appendix 1 or the
terms of this Agreement will be established by mutual good faith agreement
between the Parties, such agreement to be reached no less than ninety (90) days
prior to the commercial availability of any such new Products to any Customer.
All such pricing for such new Products will be determined in accordance with the
terms of this Agreement, including, but not limited to, the most favored
customer provisions set forth herein.
(b) In the event that the Vendor reduces the price (other than the
automatic annual price reductions set forth in Appendix 1 or any price reduction
due to a violation of subsection 3.3) of any Product, the Vendor will credit the
Owner's accounts payable with an amount equal to the difference between the
reduced price (less the applicable [ ] Co-op Marketing Fund contribution
referenced in subsection 3.4(c)) and the price (less the applicable [ ] Co-op
Marketing Fund contribution referenced in subsection 3.4(c)) in effect
immediately prior to such reduction multiplied by the number of units of such
Product which were shipped to the Owner during the thirty (30) days immediately
prior to such price reduction and which remain in the
-19-
Owner's inventory at such time (the "Affected Products"). Within thirty (30)
days of such price reduction taking effect, the Vendor will notify the Owner of
such price reduction. If the Vendor fails to provide the Owner with such a
credit within such thirty (30) day period after notification by the Owner of
such quantities remaining in the Owner's inventory, the Owner will be entitled
to offset the amount of such credit (calculated in accordance with the
immediately preceding sentence) first against the amounts owed for any of the
Affected Products, and second against any other amounts due to the Vendor by
the Owner pursuant to this Agreement. The Vendor will have the right, but not
the obligation, to have an Independent Auditor audit the Owner's calculation of
the quantity of Products that remain in the Owner's inventory immediately prior
to such price reduction, provided that the Party whose position is not
-------- ----
supported by the Independent Auditor will be responsible for the costs and
expenses of the Independent Auditor designated pursuant to this subsection
3.6(b).
(c) The Owner will receive from the Vendor purchasing credits to be
applied as a reduction in the purchase price of Subscriber Units (with
accompanying Material Accessories) purchased by the Owner in 1998 as follows:
for each Subscriber Unit (with accompanying Material Accessories) purchased by
the Owner in 1997, the Owner will receive from the Vendor [ ] credit (the
"Purchasing Credits"). The Purchasing Credits will be applied by the Vendor
against purchases by the Owner of Subscriber Units in 1998 as a
reduction in the purchase price of such Subscriber Units; provided,
--------
however the amount of the Purchasing Credits to be applied to reduce the
- - -------
purchase price of any individual Subscriber Unit (with accompanying Material
Accessories) purchased in 1998 will be [ ] or such lesser then remaining
unused amount (if the amount of remaining unused Purchasing Credits is then
less than [ ].
3.7 Warranty to the Owner. (a) The Vendor warrants to the Owner
---------------------
that each Product will be, during the applicable Warranty Period, free from
Defects or Deficiencies in material and workmanship.
(b) In the event of any breach of the warranty set forth in subsection
3.7(a) during the applicable Warranty Period, the Vendor will, in accordance
with the terms of this subsection 3.7, promptly repair or replace (in
accordance with subsection 3.9) the defective or nonconforming Product or
otherwise cure any Defects and Deficiencies so that the defective or
nonconforming Product will perform in accordance with the Specifications. If
the Vendor fails to promptly repair, replace and/or cure such defect or
nonconformance, the Vendor will promptly refund any monies paid by the Owner
for such Defective Product, less any amounts contributed by the Vendor to the
Co-op Marketing Fund relating to such defective Product (such refund to be made
no later than the notice to the Owner that it will not repair and replace).
The remedies set forth in this subsection 3.7(b) will be the sole and exclusive
remedies in the event of a breach by the Vendor of its obligation under this
subsection 3.7.
(c) No warranty will extend to any Product which has been subjected to
misuse, neglect or improper storage or installation by any Person other than
the Vendor, its
-20-
agents, employees, subsidiaries and/or affiliates or which has been used with
accessories other than Accessories provided by the Vendor (or expressly
authorized in writing by the Vendor for use with the subject Product) or any
Product which has been opened, repaired, modified or altered by anyone other
than the Vendor or a Vendor authorized repair facility.
(d) The Owner hereby acknowledges and agrees that it has not relied on
any representations or warranties other than those expressly set forth in this
Agreement. During the applicable Warranty Period (in no event less than the
Term), Vendor will provide, at Vendor's sole expense, to the Owner telephonic
technical support, including a hotline staffed from 7:00 a.m to 10:00 p.m.
Eastern time seven (7) days a week.
3.8 Consumer Warranty. (a) In addition to the warranty provided in
-----------------
subsection 3.7, the Vendor will provide a warranty ("Consumer Warranty") to
Purchasers of Sony Branded Products, on the terms and conditions set forth on
APPENDIX 3, and to Purchasers of all other Products, on the terms and
- - ----------
conditions set forth on APPENDIX 2. At the election of the Owner and
----------
upon prior written notice to the Vendor, the Consumer Warranty for Subscriber
Units not yet delivered to the FOB point can be extended from twelve (12)
months to twenty four (24) months from the date of sale and the forms of the
Consumer Warranty set forth on Appendices 2 and 3 (which shall accompany such
Subscriber Units, as applicable) shall be appropriately modified to implement
the warranty extension for such Subscriber Units. The amount of prior written
notice which the Owner must give to the Vendor to implement such a warranty
extension shall be mutually agreed upon (in any event not in excess of ninety
(90) days) in each instance, taking into account such factors as printing and
packaging lead times, which may vary depending on the number of phones to be
subject to such warranty extension, and any other relevant factor. The Parties
agree that the Consumer Warranty is made solely by the Vendor and that the
Owner makes no warranties with respect to the Products pursuant to this
Agreement. In the event any such Purchaser inadvertently or otherwise forwards
Products subject to the Consumer Warranty to the Owner, the Owner will have the
right to forward such Products to the Vendor and the Vendor will perform its
obligations under the Consumer Warranty as if such Purchaser forwarded such
Products directly to the Vendor.
(b) During the Consumer Warranty period the Vendor agrees to allow a
Purchaser to return a Subscriber Unit (with the original accompanying Material
Accessories) to the Owner or to the locations described in Schedule 4 (or, with
respect to Sony Branded Product, to any authorized dealer or service facility,
as contemplated by APPENDIX 3) for a replacement thereof by the Vendor
----------
in the event that such Subscriber Unit or any such accompanying Material
Accessory suffers from a Defect or Deficiency within ten (10) days after the
purchase of such Subscriber Unit (with such accompanying Material Accessories).
Upon the Owner's receipt of a Defective Product (and prescribed accompanying
Products, if required) from a Purchaser the Owner will have the right to
deliver any such Defective Product (and prescribed accompanying Products, if
required) to the Vendor and the Vendor will within ten (10) days of its receipt
of such Defective Product (and prescribed accompanying Products, if required)
from the Owner replace
-21-
such Defective Product by sending a replacement Product directly to the Owner
or its designated agents, or as otherwise mutually agreed by the Parties.
3.9 Repair and Replacement Services. (a) If the Owner claims a
-------------------------------
breach of warranty under subsection 3.7, it must notify the Vendor of the
claimed breach within a reasonable time (in any event during the applicable
Warranty Period) after its determination that a breach has in fact occurred.
The Owner will allow the Vendor to inspect the Products, at the Owner's
location designated for such purpose, or, upon the Vendor's issuance of a
return authorization number and at the Vendor's sole expense, the Owner will
return via ground transportation such Products to any of the Vendor's
designated repair facilities located in the United States and listed on
Schedule 4. Notwithstanding anything to the contrary in this subsection
3.9(a), the Owner agrees to pay to the Vendor the lesser of (i) the Vendor's
then current standard cost to refurbish and transport the NTF Product or (ii)
thirty daollars ($30) per NTF Product for each NTF Product actually replaced
with a refurbished or new Product by the Vendor, provided that the Owner will
have the right, but
-------- ----
not the obligation, to designate an Independent Auditor to verify the Vendor's
calculation of the quantity of and the Vendor's standard cost to refurbish and
transport any such NTF Products received by the Vendor pursuant to this
subsection 3.9; provided further that the costs and expenses of the Independent
-------- -------
Auditor will be borne by the Party whose position is not supported by the
Independent Auditor or otherwise equitably under the circumstances.
(b) Upon request by the Owner for a return authorization, pursuant to
subsection 3.7 or 3.8, whether for replacement or for repair of a Product, the
Vendor agrees that, within thirty (30) days of such Owner request, it will
either issue such return authorization number or provide the Owner in writing
with reasons for refusing to issue such return authorization number. In the
event that the Vendor fails to provide the return authorization number, or
provide written reasons for refusing to do so, the Owner will be permitted to
offset the value of any amount paid for the Product against any other amounts
owed by the Owner to the Vendor pursuant to this Agreement; provided
--------
that in the event of any such offset the Vendor may request the return of
- - ----
the subject Product and, in the event of such request, the Owner will return
such Product.
(c) The Vendor will repair Products as soon as practicable after receipt
of the Defective Product giving rise to the warranty claim and will maintain a
maximum ten (10) day turn-around time to either repair or replace Products.
Turn-around time is the time between receipt by the Vendor of the Defective
Product and shipment for return by the Vendor of the repaired or replacement
Product. When repairing or replacing any Defective Product, the Vendor will
maintain the quality of the Product and will not substitute any component
thereof with a component of lesser quality or with a component that has a
lesser performance standard or capability. Subject to the immediately
preceding sentence, the Vendor will be entitled to repair or replace defective
Products using refurbished components and refurbished Products.
-22-
3.10 Catastrophic Defects (a) Throughout the applicable Warranty
--------------------
Period for each Product, as applicable to each Product, in the event that (i) in
excess of [ ] of the Products in any class, category or type of Products (a
"Product Class") shipped to the Owner in the initial [ ] period following the
first commercial sale by the Vendor to the Owner of such Product (a "First Sale
Date") (provided that in any event at least [ ] separate Products) are found to
-------- ----
be Defective within any consecutive [ ] month period, (ii) in excess of [ ] of
the Products in any Product Class shipped to the Owner in the second [ ] month
period following the First Sale Date (provided that in any event at least
-------- ----
[ ] separate Products) are found to be Defective within any consecutive [ ]
month period or (iii) in excess of [ ] of the Products in any Product Class
shipped to the Owner after the [ ] month period following the First Sale Date
(provided that in any event at least [ ] separate Products) are found to be
-------- ----
Defective within any consecutive six (6) month period (any such defect described
in clauses (i), (ii) or (iii) above hereinafter referred to as a "Catastrophic
Defect") the Owner will notify the Vendor thereof. Upon receipt of such
notification, the Vendor will have ninety (90) days in which to determine the
cause of and to remedy such Defect (the "Catastrophic Defect Cure Period"). Upon
such remediation, the Vendor will promptly repair or replace any and all
Products that were subject to the same or similar condition(s) causing such
Catastrophic Defect (in the Owner's inventory and any such Products sold by the
Owner to Purchasers) with repaired or otherwise replaced Products at the
Vendor's sole expense (including, without limitation, all freight and duty
payments applicable thereto). In order to accurately determine that any
Catastrophic Defect has in fact been cured by the Vendor in accordance with the
terms of this subsection 3.10, the Owner will not exercise any of its remedies
under this subsection 3.10 against the Vendor until and unless the Defect
percentages for any such class, category or type of Products subject to such a
Catastrophic Defect, as measured during a ninety (90) day period starting on the
date the Vendor commences any such remediation, has failed to fall below the
applicable threshold percentages set forth in clauses (i), (ii) or (iii) above.
(b) In the event that such Catastrophic Defect is not remedied within
the Catastrophic Defect Cure Period in accordance with this subsection 3.10,
the Owner will have the right, but not the obligation, to terminate this
Agreement and to resell to the Vendor for cash payment any and all Products
which are then in the Owner's inventory and which are subject to such
Catastrophic Defect or which are subject to the same or similar condition(s)
causing such Catastrophic Defect at the price paid (less any applicable amounts
contributed by the Vendor to the Co-op Marketing Fund for such Product and less
any Product Depreciation) to the Vendor by the Owner, without charge
(including, without limitation, any restock charge) or penalty; provided
--------
that if the Vendor is diligently pursuing a cure, prior to any such
- - ----
termination the Owner will allow the Vendor an additional fifty (50) days to
remedy such Catastrophic Defect (provided further that any such resale
-------- -------
will be implemented at the end of the initial ninety (90) day cure period for
such Catastrophic Defect). Regardless of whether the Owner exercises the
rights set forth in the immediately preceding sentence, in the event that such
Catastrophic Defect is not remedied, the Vendor agrees to reimburse the Owner
for any
-23-
and all reasonable direct out of pocket expenses and costs in excess of any
expenses and costs the Owner would have otherwise incurred hereunder in
reasonably replacing (using replacement Products with the most comparable
features and functionality available at such time) the Owner's or any
Purchasers' Products as a result of such Catastrophic Defect and to repurchase
from the Owner any Vendor Products repurchased or otherwise recalled by the
Owner due to the Vendor's failure to remedy any such Catastrophic Defect.
(c) In the event the Vendor has failed to perform any of its warranty
obligations under the terms of this Agreement and if the Vendor purchases or
subcontracts for the manufacture of any part of any Product to be provided
hereunder from a third party, the warranties given to the Vendor by such third
party will inure, to the extent applicable, permitted by such warranties and
permitted by Applicable Law, to the benefit of the Owner, and the Owner will
have the right, to the extent permitted by such warranties and Applicable Law,
in its sole discretion, to enforce such warranties directly against such third
party. The remedies set forth in subsections 3.10(b) and (c) will be the sole
and exclusive remedies in the event of a breach by the Vendor of its obligation
under subsection 3.10(a) above.
(d) Notwithstanding that the applicable Warranty Period in respect
thereof may have expired, the Vendor will provide repair and maintenance (but
not replacement) services as set forth in subsection 3.9 with respect to any
Product purchased under this Agreement for a period of five (5) years following
the purchase of such Product at its standard commercial prices which will be
reasonable, unless (i) such Product has been subjected by a Person other than
the Vendor (or any of its subcontractors or suppliers) to misuse, neglect or
improper storage or installation or (ii) is in such deteriorated or damaged
condition that it cannot reasonably be repaired. In the event that a Product
is not repairable, the Vendor will return such Product to the Person who
returned such Product (at such Person's cost), with a statement certifying the
reasons why such Product cannot be repaired.
3.11 New Generation of Products. The Vendor may, from time to time
--------------------------
during the Term of this Agreement, modify, update or enhance existing or
produce new generations, or updated, modified or enhanced versions, of Products
sold hereunder ("New Products"). In the event that the Vendor makes such New
Products generally available to any of its other Customers, the Vendor will
offer to sell such New Products to the Owner on terms and conditions pursuant
to and in accordance with subsection 3.3. Notwithstanding anything stated
herein to the contrary, no Product subject to a modification which in no way
affects the form, fit or functionality of the Product will be deemed a New
Product and any such Product will remain a Previously Existing Product.
3.12 Right to Cease Supply of Obsolete Products. If the Vendor
------------------------------------------
begins selling and making generally available New Products or products to
replace or as a substitute for previously existing Products ("Previously
Existing Products"), the Vendor may, with the Owner's prior written consent,
such consent not to be unreasonably withheld, cease supplying the Previously
Existing Products to the Owner under this Agreement by
-24-
delivering six (6) months' prior written notice to the Owner regarding such
cessation; provided that the Vendor will offer to supply to the Owner
-------- ----
such replacement or substitute Products on terms and conditions pursuant to and
in accordance with subsection 3.3; and provided further that the
-------- -------
New Products or replacement or substitute Products maintain performance and
functionality equivalent to that previously provided by the Previously Existing
Products (unless any such lower performance and/or functionality has been
consented to by the Owner, such consent not to be unreasonably withheld).
Notwithstanding anything stated herein to the contrary, the Vendor will not be
required to provide the Owner notice under this subsection 3.12 or otherwise of
any modification to a Product or a component thereof which in no way affects
the form, fit and/or functionality of such Product. The Vendor will under no
circumstances be entitled to cease supplying such Previously Existing Products
which are covered under a then unfilled Purchase Order from the Owner. The
Vendor will have no right to cease supplying the Owner under this subsection
3.12 with any such Previously Existing Products so long as the Vendor continues
to supply and make available such Previously Existing Products to any other
Customer. It is expressly understood by the Owner that the Vendor does intend,
not earlier than April 1997, to obsolete the QCP-1900 and the CM-D600 models of
Subscriber Units and replace them with a New Product (at the same prices set
forth in Appendix 1) in accordance with this subsection 3.12. Such New Product
will comply with the specifications as set forth in Exhibit A3. In accordance
with this subsection 3.12, the Owner does hereby give its written consent to
the substitution of the New Product as specified in Exhibit A3 for any QCP-1900
and/or CM-D600 models of Subscriber Units ordered by the Owner under this
Agreement.
3.13 [Intentionally Omitted].
---------------------
3.14 Right to Return Products. The Vendor agrees that at any time within
------------------------
ninety (90) days immediately prior to the End Date (or the last Business Day of
the Term in the event the End Date should be extended pursuant to the terms of
this Agreement), in the event that items of a Product are not purchased by
Purchasers and remain in the Owner's inventory at such time, the Owner will be
permitted, but not required, to return such items to the Vendor; provided that
the aggregate value of any such Products will not exceed three hundred seventy
five thousand dollars ($375,000) minus the reasonable actual rework costs
incurred by the Vendor for any such Products which were customized for the Owner
pursuant to and in accordance with the terms of this Agreement. Upon return of
such items to the Vendor, the Vendor will refund to the Owner the price paid for
such items (less such rework costs and less any amounts contributed by the
Vendor to the Co-op Marketing Fund relating to such returned Products) without
charge or penalty or offsetting such returned items are new, unused, in the
original as shipped by the Vendor to the Owner and are not Previously Existing
Products. Such refund (less such rework costs and less any amounts contributed
by the Vendor to the Co-op Marketing Fund relating to such returned Products)
will be offset against outstanding invoices or, if there are no such invoices,
in cash. Any freight and other charges incurred in connection with returning
such items to the Vendor within such ninety (90) day period will be paid by the
Owner.
-25-
3.15 Labeling and Logo Changes. (a) The exterior of each
-------------------------
Subscriber Unit and its packaging will bear the technology ▇▇▇▇, as specified
in Appendix 4, or such other substantially equivalent technology ▇▇▇▇ as
mutually agreed upon by the Parties (a "▇▇▇▇"). The ▇▇▇▇ will be positioned in
accordance with Appendix 4. At the Owner's option, and at the Vendor's sole
expense, and with appropriate lead times agreed to by the Parties, each
Subscriber Unit may be otherwise labeled and/or logoed on the front of the
Subscriber Unit below the key pad in accordance with the Specifications.
(b) The Parties acknowledge that the Owner may want to participate in
certain aspects of the Product labeling and the Vendor agrees to design, upon
mutual agreement with the Owner as to feasibility, timing and additional cost
(subject to the Vendor's obligations as to prices and costs pursuant to
subsection 3.3), if any, associated with any such labeling change not otherwise
at the Vendor's expense pursuant to the terms of this Agreement including, but
not limited to, the Specifications, Product labeling to complement the Owner's
marketing effort in accordance with the Owner's instructions.
3.16 Materials and Equipment. Whenever materials are specified or
-----------------------
described in this Agreement (including the Specifications) by using the name of
a proprietary item or the name of a particular supplier, the naming of the item
is intended to establish the type, function and quality required, and
substitute materials may nonetheless be used, provided that such
-------- ----
materials are equivalent or equal to that named. If the Vendor wishes to
furnish or use a substitute item, the Vendor must first certify that the
proposed substitute will perform at least as well as the intended functions and
achieve the results called for by this Agreement (including but not limited to
the Specifications), will be substantially similar or of equal substance to
that specified and be suited for the same use as that specified. The Owner may
require the Vendor to furnish, at the Vendor's expense, additional data about
the proposed substitute as required to evaluate the substitution. The Owner
will be allowed a reasonable time within which to evaluate each proposed
substitute. Notwithstanding the foregoing, prior to the shipment of Products
pursuant to the terms of this Agreement, the Vendor may at any time without
notice to or consent of the Owner make changes in a Vendor Product furnished
pursuant to this Agreement, or modify the drawings and published specifications
relating thereto, or substitute Products of similar or later design to fulfill
its obligations under this Agreement or otherwise fill an order, provided
--------
that any such changes, modifications or substitutions will in no way have
- - ----
an adverse affect or otherwise adversely impact upon the form, fit, or function
of an ordered Product pursuant to and in accordance with the applicable
Specifications. With respect to changes, modifications and substitutions which
do in fact adversely affect the form, fit, or function of an ordered Product
pursuant to and in accordance with the Specifications, the Vendor must notify
the Owner in writing at least ninety (90) days prior to the effective dates of
any such changes, modifications or substitutions. In the event that any such
change, modification or substitution is not desired by the Owner, the Owner
will notify the Vendor within thirty (30) days from the date of notice and the
Vendor will not furnish any such changed Products to the Owner on any orders in
process at the time the Owner is so notified; provided further, nothing
-------- -------
contained herein will otherwise modify Vendor's obligations under the terms of
this Agreement.
-26-
3.17 Logos. (a) The Products will bear only those logos as agreed
-----
to by the Owner pursuant to the terms of this Agreement (other than the ▇▇▇▇
pursuant to subsection 3.15). The Products will bear the "Sprint" label or
logo and/or such other labels or logos as the Owner shall require from time to
time, in such size and position on the Products as the Owner shall notify to
the Vendor from time to time pursuant to and in accordance with subsection
3.15.
(b) Throughout the Term of this Agreement, the Owner may use only those
trademarks, insignias, logos or other proprietary marks listed on Schedule 6 or
as otherwise consented to in writing by the Vendor ("Proprietary Marks") in
connection with the Owner's sales, advertisements and marketing of the
Products; provided that the Owner's use thereof shall be in accordance
-------- ----
with the Vendor's, Sony's or Qualcomm's, as applicable, reasonable directions
and policies. The Owner agrees that it has no rights with respect to the
Proprietary Marks, except as expressly provided in this subsection 3.17(b), and
will not use the Proprietary Marks as part of the business name of the Owner.
(c) The Vendor will use its reasonable efforts to cooperate with the
Owner in the development of Product packaging that is fully integrated with the
Owner's branding strategy and which supports the Owner's marketing
communication and segmentation strategy as reasonably communicated to the
Vendor by the Owner from time to time. Such cooperation will focus on the
contents of Product packaging, the configuration, physical dimensions and
materials of such packaging, communications, colors, graphics and descriptive
language used in connection with such Products and such other items as the
Parties shall agree upon from time to time.
(d) If the Vendor is itself unable to meet the Owner's packaging needs
as set forth in subsection 3.17(c) or as otherwise reasonably communicated by
the Owner to the Vendor from time to time, the Vendor agrees to supply the
Products in specified configurations and bulk packaging to the Owner's
designated packager for the required packaging; provided that in such
-------- ----
case the Vendor will credit the Owner against the purchase price for the
subject Products with any amounts saved by the Vendor for not having had to
perform the packaging services as required by the Specifications.
3.18 New Development Advisory Board; Notice of New Developments.
----------------------------------------------------------
The Owner and the Vendor will establish an NDAB within sixty (60) days of the
Effective Date. The purpose of the NDAB will be to review the development
requirements and high level development milestones, to ensure that the Vendor
understands the Owner's requirements for each Product (including New Products)
and/or enhancements. The NDAB will provide an executive forum to discuss
product ideas, Owner requirements and its recommended development
prioritization for improved infrastructure-based subscriber features. The
focus of the NDAB will be on Product features, new CDMA products, Product
Enhancements, critical operational issues, future developments beyond CDMA
cellular without the need for System additions and on such other matters as the
Parties mutually agree upon from time to time. Throughout the Term, the Vendor
will use its reasonable efforts to provide the Owner notice of its
technological innovations
-27-
and advancements relevant to the Products within a time reasonably prior to
making any such information generally available to its Customers, provided
--------
that nothing herein will require the Vendor to disclose any information
- - ----
proprietary to any other Customer.
3.19 Market Development Manager. The Vendor will provide a market
--------------------------
development manager to coordinate the efforts of the Vendor in meeting its
obligations relating to the NDAB who will specifically focus on new Products,
CDMA services and features. Such market development manager must be reasonably
knowledgeable in CDMA technology and the Owner's Nationwide Network and must
work closely, and on a regularly scheduled basis, with the Owner's senior
engineering and marketing personnel on feature development, feature roll-out,
future road maps for CDMA Products, and any other marketing aspect of providing
PCS that the Owner believes is beneficial to the Nationwide Network and/or any
PCS System and/or Products at such time. The Vendor's market development
manager and the manager's staff will serve as the Owner's direct liaison with
the Vendor to advise the Vendor's product development teams of the Owner's
priorities as described to the Vendor by the Owner from time to time either
through the NDAB or by any other means acceptable to the Parties. Nothing
contained in this subsection 3.19 will in any way limit and/or modify the
Owner's ability to enforce its rights under this Agreement or to otherwise
maintain contacts with the Vendor in any other way it sees fit. Within a
reasonable time after the Effective Date the Owner will use reasonable efforts
to designate appropriate personnel to coordinate with the Vendor's market
development manager pursuant to this subsection 3.19.
3.20 Applicable Law and Radio Frequency Energy Standards. All
---------------------------------------------------
Products must comply, to the extent applicable, with all Applicable Law as of
their respective date of delivery to the FOB point including, but not limited
to, the requirements of Subpart J of Part 15 of the rules and regulations
promulgated by the FCC, as the same may be amended from time to time (the "FCC
Rules and Regulations"), including, without limitation, those provisions
concerning the labeling of Products and the suppression of radio frequency and
electromagnetic radiation to specified levels. In the event that the Products
produce radio frequency interference, notwithstanding that such Products comply
with the FCC Rules and Regulations, the Vendor will use reasonable efforts to
provide the Owner with reasonable technical information in its possession on
the methods to suppress such interference and will exercise reasonable
commercial efforts to isolate and remediate any such radio frequency
interference caused by the Products which constitutes a condition materially
adversely affecting the Nationwide Network (a "RF Interference Condition") or
any part thereof, provided that the Owner will cooperate to the extent
-------- ----
reasonable with the Vendor to achieve such remediation. Nothing in this
subsection 3.20 will be deemed to diminish or otherwise limit the Vendor's
warranty obligations pursuant to this Agreement.
-28-
3.21 [Intentionally Omitted].
-----------------------
3.22 Test Products; Product Verification and Testing. (a) The
-----------------------------------------------
Vendor agrees to supply the Owner with ten (10) pre-production items of each
Subscriber Unit and Material Accessory no later than five (5) Business Days
after the Effective Date and ten (10) additional pre-production items of each
Subscriber Unit and Material Accessory no later than July 31, 1996 in order to
allow the Owner to test such items to determine whether such Subscriber Units
and Material Accessories comply with the requirements of this Agreement,
including the Specifications; provided that no such tests or any such
-------- ----
knowledge or experience gained or otherwise acquired from such tests or
otherwise will in any way be deemed a waiver of or to reduce or affect the
Vendor's obligations with respect to the provision of warranties pursuant to
this Agreement. The Owner will use reasonable efforts to provide the Vendor
with the results of such tests. In the event of the Vendor's introduction of
New Products pursuant to the terms of this Agreement, the Vendor will provide
the Owner reasonably sufficient numbers of pre-production units (in any event
not more than ten (10)) of any such New Product for the purposes of Owner
testing at least ninety (90) days prior to the general market availability of
any such New Products. Notwithstanding anything stated herein to the contrary,
the warranties set forth in subsections 3.7 and 3.8 will not apply to any
pre-production Subscriber Units required to be delivered by the Vendor pursuant
to this subsection 3.22(a) or otherwise purchased by the Owner. Exhibits B1
and B2 are preliminary and subject to final revision as mutually agreed to by
the Parties in good faith; provided that Exhibits B1 and B2 will be
-------- ----
finalized no later than July 15, 1996; provided further that in the
-------- -------
event the Parties are unable to mutually agree in good faith by July 15, 1996
such disagreement will be immediately referred to dispute resolution pursuant
to and in accordance with the terms of subsection 11.8.
(b) The Vendor will test the Products and verify to the Owner their
performance in accordance with the Specifications pursuant to and in accordance
with the requirements and milestones set forth in Exhibits B1, B2 and B3. The
failure of the Vendor to verify the performance of the Products pursuant to the
requirements of Exhibits B1, B2 and B3 will result in the Owner having the
absolute right to suspend or cancel (in its sole and absolute discretion) any
then existing or future Purchase Orders for any such Products which have not in
fact complied with the requirements of Exhibits B1, B2 and B3. To the extent
any class, category or type of Products do not comply with the requirements of
Exhibits B1, B2 and B3 within ninety (90) days (one hundred forty (140) days in
the event a semiconductor component modification is required) of the testing
dates provided for any such verifications pursuant to ▇▇▇▇▇▇▇▇ ▇▇, ▇▇ ▇▇▇ ▇▇
(▇▇ the case of Exhibit B3 at the Vendor's testing facility), the Owner will
have the right, but not the obligation, to terminate this Agreement without
payment or penalty of any kind; provided that at any time after the
-------- ----
first thirty (30) days of any such applicable cure period as set forth above in
this sentence, the Owner will have the right, in addition to any other rights
set forth in the immediately preceding sentence, to cancel (in its sole and
absolute discretion) any then existing Purchase Orders for Products delivered
or required to be delivered on such date which have not in fact complied with
the requirements of Exhibits B1, B2 or B3 and the Vendor agrees to reimburse
the Owner
-29-
for any and all reasonable direct out of pocket expenses and costs in excess of
any expenses and costs the Owner would have otherwise incurred hereunder in
reasonably replacing (using replacement Products with the most comparable
specified features and functionality available at such time) any such Products.
In the event that the Owner chooses to terminate this Agreement pursuant to
this subsection 3.22(b) such termination will be the Owner's sole and exclusive
remedy; provided that in the event the Owner does not terminate under
-------- ----
this subsection 3.22(b), the Owner will retain all rights to enforce any and
all delay penalties against the Vendor pursuant to and in accordance with
subsection 4.2 as its sole and exclusive remedy in such case; provided
--------
further that nothing contained herein will be deemed to diminish or
- - -------
otherwise limit the Vendor's warranty obligations pursuant to this Agreement.
Notwithstanding anything to the contrary stated herein above, to the extent
that the Owner decides (in its sole and absolute discretion) to take, delivery
of and place into service any such Products which have failed to pass the
testing required by Exhibits B1, B2 or B3 ("Non-Conforming Products"), the
Owner will be deemed to have accepted any such Non-Conforming Products with any
such non-conformance; provided that, in such case, the Owner will in no
-------- ----
way be deemed to have waived any of its rights to enforce the Vendor's complete
conformance (including, but not limited to, conformance with any requirement
not otherwise met by such Non-Conforming Products) with the testing
requirements set forth in Exhibits B1, B2 and B3 and the Specifications on all
other Products (except for previously delivered and accepted Non-Conforming
Products) already then delivered or yet to be delivered by the Vendor pursuant
to the terms of this Agreement.
3.23 Change Orders. From time to time the Owner may request changes
-------------
or modifications to the Products or packaging and/or the Specifications
("Change Orders"). All such Change Orders requested in writing by the Owner to
the Vendor will be subject to the reasonable good faith and timely agreement
(including, but not limited to, agreement on terms such as one-time charges,
price increases, minimum purchase commitments and schedule impacts) of the
Vendor and the Owner which agreement will be evidenced by a writing executed by
an authorized representative of each of the Parties.
SECTION 4. LEAD TIMES AND DELAY
4.1 Lead Times. Provided that the Owner submits Forecasts to the
----------
Vendor and places Purchase Orders for Products in accordance with Section 5
below and subject to the provisions of subsection 3.2(a), the Vendor will ship
Products (other than as specified in the last sentence of this subsection 4.1)
ordered by the Owner against such Forecasts within the later of (i) ten (10)
Business Days after receipt and the Vendor's acknowledgement of the Owner's
Purchase Order therefor, and (ii) the shipment date specified by the Owner in
such Purchase Order pursuant to subsection 5.2(a); provided that the
-------- ----
Vendor has acknowledged receipt of such Purchase Order, and the time period
from the date of the Vendor's acknowledgement and the specified shipment date
is longer than ten (10) Business Days. The Vendor will be able to provide the
Owner with specific lead times (which will in no event be in excess of ten (10)
days from receipt and acknowledgement by the Vendor of the Owner's Purchase
Order subject to the terms of
-30-
the first sentence of this subsection 4.1) applicable to each Purchase Order
for Products at the time the Vendor receives and acknowledges the Owner's
Purchase Order therefor. The Vendor will ship Products maintained in the
Buffer Stock ordered by the Owner against Forecasts for such Buffer Stock in
accordance with the provisions set forth in subsection 5.2.
4.2 Delivery Delay. (a) With respect to the first [ ] Subscriber Units
--------------
(and their included Material Accessories) purchased hereunder (the "Launch
Units"), in the event that the Vendor fails to deliver the Launch Units within
[ ] days (the "▇▇▇▇▇ ▇▇▇▇▇ Period") of the applicable dates for shipment
referred to in subsection 4.1, the Vendor will pay to the Owner as liquidated
damages for such late performance (i) for each of the first [ ] days
beyond such ▇▇▇▇▇ ▇▇▇▇▇ Period, an amount equal to [ ] per day (for such
[ ] day period) of the total price of such undelivered Launch Units and
(ii) on the thirty fourth day after the date set for shipment pursuant to
subsection 4.1, an amount equal to [ ] of the total price of such undelivered
Launch Units; provided that in no event will the Vendor incur aggregate damages
-------- ----
with respect to Launch Units under this subsection 4.2(a) in excess of [ ] and
further, in no event will the Vendor incur damages with respect to Launch Units
on any given day pursuant to this subsection 4.2(a) in excess of [ ] per day;
provided further, that no such liquidated damages for delivery delay will be due
- - -------- -------
if the delay is attributable solely to (i) an event constituting a Force Majeure
pursuant to the terms of this Agreement or (ii) an act or omission of the Owner.
The Owner may offset the amount of such delay penalty against any amounts owed
to the Vendor for Products supplied under this Agreement.
(b) With respect to Subscriber Units (and their included Material
Accessories) that do not constitute Launch Units, for each of the first [
] days beyond the applicable "Succeeding ▇▇▇▇▇ ▇▇▇▇▇ Period" that the Vendor
fails to deliver any Subscriber Units (and their included Material
Accessories), the Vendor will pay to the Owner as liquidated damages for such
late performance an amount equal to [ ] per day (for such [ ] day period)
of the total price of such Subscriber Units (and included Material Accessories)
up to an amount not to exceed, in aggregate, [ ] of the total price of such
Subscriber Units (and included Material Accessories); provided that no such
-------- ----
liquidated damages for delivery delay will be due if the delay is attributable
solely to (i) an event constituting a force majeure pursuant to the terms of
this Agreement or (ii) an act or omission of the Owner. The Owner may offset the
amount of any delay penalty against any amounts owed to the Vendor for Products
supplied under this Agreement. For the purposes hereof, Products that will have
been rightfully rejected by the Owner in accordance with the terms of this
Agreement will not be deemed to be delivered by the Vendor; provided that
-------- ----
liquidated damages for delivery delay will not accrue during the time it takes
the Owner to inspect and reject any such Products. For the purposes of this
subsection 4.2(b) "Succeeding ▇▇▇▇▇ ▇▇▇▇▇ Period" shall mean [ ] days
beyond the applicable dates for shipment referred to in subsection 4.1.
-31-
(c) Notwithstanding anything stated in this subsection 4.2 to the
contrary, during any time that the Owner is in default under this Agreement for
undisputed payments owed to the Vendor, the Owner will not be entitled to any of
the delay penalties set forth in this subsection 4.2, nor shall any such delay
penalties accrue during the period any such default remains outstanding.
Furthermore, in the event that on the last day of the Initial Term the Owner's
aggregate Shortfall over the Initial Term exceeds [ ] of the Total Minimum
Commitment, the Owner will, within (30) days of receiving an invoice from the
Vendor, refund to the Vendor any delay penalties collected by the Owner pursuant
to this subsection 4.2 (or if such delay penalties have accrued but have not yet
been paid, the obligation to pay such penalties shall be absolved); provided
--------
that in no event will the Owner be obligated to make any such refund if the
- - ----
Owner's Shortfall was reasonably due to the Vendor's delivery delays throughout
the Initial Term.
(d) No liquidated damages for delivery delays under subsection 4.2 will
accrue (nor will the Owner be entitled to exercise any other remedies set forth
herein with respect to the enforcement of timely delivery) with respect to any
Subscriber Units not timely delivered by the Vendor (the "Delayed Products")
(i) to the extent, and only to the extent, that the Delayed Products were
intended for distribution and use in the first System Area in which the Owner
plans (in its sole and absolute discretion) to commence commercial operation
("Commencement") having more than [ ], (ii) if the Commencement of the First
System would have been delayed, even with timely delivery of the Delayed
Products beyond that date the Owner anticipated Commencement was to occur when
the Owner ordered the Delayed Products (the length of such delay being the
"Delay Period"), (iii) the Delayed Products are delivered before the end of the
Delay Period and (iv) the Owner, in such instance, will have given the Vendor
prior written notice of such Commencement delay. The Owner agrees to promptly
give the Vendor written notice of any delay in Commencement. It is the intent of
the Parties that the length of the Delay Period be equal to the number of days
from the date the Owner anticipated Commencement was to occur when the Owner
ordered the Delayed Products until the date Commencement would have occurred
assuming that the Owner had received the Delayed Products. For the purpose of
subsection 4.2(a), liquidated damages for delivery delays will be calculated
with respect to Delayed Products by using the day following the last day of the
Delay Period as the date on which the Delayed Products were to have been
delivered by the Vendor. It is expressly understood and agreed that this
subsection 4.2(d) will only apply to Products ordered by the Owner for the First
System and that the Vendor will not be entitled to the benefits of this
subsection 4.2(d) for any other Products or any other System Area to or for
which Products are to be shipped pursuant to the terms of this Agreement.
(e) In the event (i) there are delivery delays in any given Annual
Supply Period, or the Stub Period, as the case may be, which Vendor fails to
cure within the applicable ▇▇▇▇▇ ▇▇▇▇▇ Period, which delivery delays involve
the Vendor's failure to timely deliver more than [ ] Subscriber Units, in
aggregate, and (ii) the percentage of deliveries of Subscriber Units which are
subject to delivery delays in any given Annual Supply Period, or the Stub
Period, as the case may be, and which Vendor fails to cure
-32-
within the applicable ▇▇▇▇▇ ▇▇▇▇▇ Period, exceeds [ ], provided that in any
-------- ----
event the actual number of delivery delays referenced in the immediately
proceeding clause (ii) will be at least [ ] of the number of scheduled
deliveries, then the Owner will have the right, but not the obligation, to
terminate this Agreement without any payment or penalty. In the event the Vendor
fails to cure any delivery delay within thirty (30) days from the date delivery
was due, the Owner will have the right, but not the obligation, to cancel the
Purchase Order subject to such delay without any payment or penalty. With
respect to any such cancelled Purchase Order, the Owner will be entitled to
receive from the Vendor any and all reasonable direct out of pocket expenses and
costs in excess of any expenses and costs the Owner would have otherwise
incurred hereunder in order to reasonably fulfill (using replacement products
with the most comparable features and functionality) such cancelled Purchase
Order with any third party supplier acceptable to the Owner.
(f) Notwithstanding anything in this subsection 4.2 to the contrary, the
Vendor will only be obligated to pay to the Owner one-half (1/2) of the Delay
Penalties otherwise applicable to the late delivery of Products ordered
pursuant to an Excess Purchase Order.
(g) In the event the Owner exercises its rights under this subsection
4.2 due to a Vendor delivery delay, the remedies for any such Vendor delivery
delay as set forth in this subsection 4.2 will be exclusive.
SECTION 5. FORECASTS AND ORDERING
5.1 Forecasts. (a) Upon execution of this Agreement and on the
---------
first of each month thereafter, the Owner will deliver to the Vendor written
forecasts (a "Forecast") specifying its estimate of the quantity of each type
of Product that it expects to purchase on a month to month basis during the
twelve (12) months following the date of such Forecast (a "Forecast Period"),
which shall, subject to the provisions of subsection 3.2(a), be treated as
follows;
(i) quantities forecasted to be ordered during the first three
(3) months of each Forecast Period will be a firm Purchase
Order which, pursuant to the terms of this Agreement, must be
taken by the Owner in the month indicated. The Owner will
place one or more Purchase Orders to purchase Products in
accordance with the applicable Forecast;
(ii) quantities forecasted to be ordered during month four (4) of
each such Forecast Period shall be considered reasonably
accurate estimates of prospective Purchase Orders and
accordingly, the Owner will issue the Vendor firm Purchase
Orders to ensure that at least eighty percent (80%) and not
more than one hundred twenty percent (120%)
of the quantities specified during this segment of
-33-
the Forecast Period are covered by firm Purchase Orders from
the Owner;
(iii) quantities forecasted to be ordered during month five (5) of
each such Forecast Period shall be considered reasonably
accurate estimates of prospective Purchase Orders, and
accordingly, the Owner will issue the Vendor firm Purchase
Orders to ensure that at least sixty percent (60%) and not
more than on hundred forty percent (140%)
of the quantities specified during this segment of the
Forecast Period are covered by firm Purchase Orders from the
Owner; and
(iv) quantities forecasted to be ordered during months six (6)
through twelve (12) of each such Forecast Period will only be
estimates of prospective Purchase Orders, and subsequent
Forecasts and actual Purchase Orders may completely vary and
be completely changeable by the Owner in its absolute
discretion.
Any reductions in firm Purchase Orders below the specified
forecasted amounts or any increases in firm Purchase Orders above the specified
forecasted amounts pursuant to clause (iii) of this subsection 5.1(a) may, in
the Owner's sole discretion, be cumulative with any such increase or decrease
pursuant to clause (ii) of this subsection 5.1(a). For example, if a
forecasted amount for month five in any forecast is subsequently reduced by the
Owner by forty percent (40%) pursuant to clause (iii) of this subsection 5.1(a)
the Owner will have the right, but not the obligation, to further reduce such
reduced amount by an additional twenty percent (20%) pursuant to clause (ii) of
this subsection 5.1(a). The first Forecast to be delivered by the Owner to the
Vendor is attached hereto as Schedule 8 and is expressly accepted by the Vendor.
Except with respect to such first Forecast, in no event will the Vendor be
required to accept an amount in any given month of a Forecast which is greater
than one hundred fifty percent (150%)of the average amount forecasted by the
Owner for the five months immediately preceding the subject month. In the event
the Owner fails to deliver to the Vendor a new Forecast by the first Business
Day of any given month, then the new Forecast for such new twelve month period
shall be deemed to be the prior Forecast, adjusted by shifting the monthly
quantities up one month (i.e, the quantity that used to be forecasted for month
two will instead be the quantity for month one) with the new amount forecasted
for month twelve being the same as the amount for the new month eleven.
Notwithstanding anything set forth in this Agreement, in no event shall the
Owner be entitled to increase the amount of Products forecasted in the months of
July through December, 1996 above the amounts forecasted for any such month in
the first Forecast.
(b) Within any Forecast provided to the Vendor by the Owner
pursuant to and in accordance with the terms of this subsection 5.1, the Owner
may designate to the Vendor a certain percentage of each type of the Product
requirements so forecasted ((i) up to fifteen percent (15%) in the Owner's sole
discretion during the first Annual Supply
-34-
Period and (ii) up to ten percent (10%) in the Owner's sole discretion during
any succeeding Annual Supply Period, or the Stub Period, as the case may be) to
be held by the Vendor in separate buffer stock ("Buffer Stock") for accelerated
ordering and shipment of such Products within such Buffer Stock. In the event
of any such designation pursuant to this clause (b) of subsection 5.1, the
Vendor will maintain such Buffer Stock and deliver to the Owner any Products
within such Buffer Stock in accordance with the lead times and ordering
provisions for such Buffer Stock set forth in this Agreement.
(c) The Forecasts will be in a format mutually acceptable to the
Parties; provided that the format of the first Forecast as set forth in
-------- ----
Schedule 8 will at all times be deemed in a format acceptable to both Parties.
5.2 Ordering. (a) In order to be effective, all orders by the
--------
Owner for Products will be made by the Owner in the form of written Purchase
Orders, specifying the quantity of each type of Product to be purchased and the
date or dates on which such Products are required to be shipped to the Owner,
the shipping method and the location to which such Products should be shipped;
provided that such shipment date will be no earlier than (i) ten (10)
- - -------- ----
Business Days after the date of such Purchase Order in the event of Purchase
Orders for Products not in Buffer Stock, (ii) one (1) Business Day for not more
than (x) [ ] Subscriber Units (with accompanying Accessories) and not
exceeding (y) [ ] separate destinations to which Products will be shipped as
designated by the Owner in Purchase Orders (each such destination a
"Shipped-to Location") for Products in Buffer Stock and (iii) two Business Days
for not more than (x) [ ] Subscriber Units (with accompanying Accessories)
and not exceeding (y) [ ] separate Shipped-to Locations for Products in
Buffer Stock; and provided further that the Vendor will use its reasonable
-------- -------
efforts to fulfill Purchase Orders in excess of forecasted quantities that the
Owner is entitled to turn into firm Purchase Orders pursuant to and in
accordance with subsection 5.1 (each an "Excess Purchase Order"). Each Purchase
Order will be submitted to the Vendor, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇
▇▇▇▇▇, Attn: Sprint Spectrum L.P. Account Manager (or any other authorized
representative of the Vendor designated to the Owner in writing by the Vendor
from time to time) and will be subject to the acknowledgement by the Vendor in
writing to the designated authorized representative of the Owner within two (2)
Business Days of receipt of Purchase Orders for Products in Vendor stock and
within one (1) Business Day of receipt of Purchase Orders for Products in Buffer
Stock. The Vendor will acknowledge Purchase Orders that the appropriate
personnel of the Vendor have actual knowledge of. Subject to the immediately
preceding sentence, failure of the Vendor to acknowledge to the Owner in writing
receipt of any Purchase Order or Excess Purchase Order shall be deemed to render
any such Purchase Order or Excess Purchase Order null and void. Within ten (10)
Business Days of receipt of Purchase Orders for Products in Vendor stock and
within one (1) Business Day of receipt of Purchase Orders for Products in Buffer
Stock, the Vendor will (subject to the terms of the last three sentences of this
subsection 5.2(a)) have the right to reject for non-conformance with the terms
of this Agreement any such Purchase Orders the receipt of which it has
-35-
acknowledged pursuant to the terms set forth above; provided that for
-------- ----
any acknowledged Purchase Orders which must be fulfilled within one (1)
Business Day pursuant to clause (ii) above, the Vendor must reject for such
non-conformance any such Purchase Order on the same day as the acknowledgment
of such Purchase Order. The failure of the Vendor to so reject Purchase Orders
within the time frames above will be deemed acceptance by the Vendor of any
such acknowledged Purchase Orders. The Vendor will not have the right to
disagree with, reject, modify or otherwise amend any Purchase Order in
conformance with the terms of this Agreement including, but not limited to,
quantities which have already been the subject of Forecasts by the Owner
pursuant to the terms of subsection 5.1; provided that subject to the
-------- ----
terms of the immediately preceding sentence of this subsection 5.2(a), the
Vendor may reject or otherwise respond to any Excess Purchase Order,
provided that failure of the Vendor to respond to any such acknowledged
- - -------- ----
Excess Purchase Order within ten (10) days of receipt thereof will be deemed
acceptance thereof. Any Vendor rejection of or modification to a Purchase
Order (other than Excess Purchase Orders) in conformance with the terms of this
Agreement pursuant to and in accordance with subsection 5.1 will be deemed a
material breach of this Agreement by the Vendor. Notwithstanding subsection
5.2(f) below, to the extent that the Vendor is actually aware that any Purchase
Order in any way contradicts or is not otherwise in conformance with the terms
of this Agreement, the Vendor agrees to promptly notify the Owner of any such
contradiction or non-conformance as soon as possible upon becoming actually
aware of such contradiction or non-conformance so that the Owner will have a
reasonable opportunity to correct any such contradiction or non-conformance and
furthermore to the extent reasonable under the circumstances the Vendor will
endeavor to fulfill any such non-conforming Purchase Order ignoring any such
non-conformity unless the Owner, after notification from the Vendor, will have
expressly refused to accept the fulfillment of such Purchase Order with any
such correcting modification.
(b) [Intentionally Omitted]
(c) Subject to subsections 3.2(b) and 3.2(c), any Purchase Order or
Excess Purchase Order may, in the Owner's sole and absolute discretion, be
postponed once without penalty by written notice from the Owner to the Vendor
at any time prior to ninety (90) days immediately prior to the initial shipment
date established for such Purchase Order pursuant to the terms of this
Agreement for a period not in excess of ninety (90) days from such initial
shipment date. If the Owner chooses to postpone a Purchase Order (for a period
not in excess of ninety (90) days from the initial shipment date for such
Purchase Order) at any time within the ninety (90) days immediately prior to
the initial shipment date (a "Late Postponement"), the Owner will pay to the
Vendor an amount equal to [ ] of the value (based upon the prices set forth in
Appendix 1) of any increased Product inventory for each month or portion of a
month (such amount to be prorated if such time periods are not whole months) the
Vendor is required to carry such increased Product inventory due to such Late
Postponement. The Vendor will invoice any such amounts on a monthly basis. In
any event and notwithstanding anything to the contrary in this clause (c) of
subsection 5.2, no Purchase Order or Excess Purchase Order may be postponed by
the Owner (i) within (10)
-36-
Business Days of the initial shipment date for such Purchase Order or Excess
Purchase Order or (ii) if an Owner Event of Default has occurred or is
continuing pursuant to subsection 10.8.
(d) In accordance with the terms of subsection 5.1(b), the Vendor will
maintain Buffer Stock of Products which, when ordered by the Owner from the
Vendor in accordance with the Owner's Forecasts, will be delivered to the Owner
in accordance with the terms of subsection 5.2(a). The Owner will be liable
for and will pay to the Vendor an amount equal to [ ] of the value
(based upon the prices set forth in Appendix 1) of such Buffer Stock held in the
Vendor's inventory for each month or portion of a month (such amount to be
prorated if such time periods are not whole months) such Buffer Stock is so held
by the Vendor in its inventory in excess of thirty (30) days from the date the
Vendor commenced holding any such Buffer Stock for the Owner pursuant to and in
accordance with subsection 5.1 (each such date a "Buffer Stock Commencement
Date"); provided that during the first Annual Supply Period the Owner will
-------- ----
not be liable for any such amounts during the first thirty (30) day period
commencing upon the applicable Buffer Stock Commencement Date.
(e) The Vendor will reasonably cooperate with the Owner, and/or any
Person designated by the Owner for such purpose, (i) to utilize UPC stock
control numbering and other bar-coding requirements relating to inventory
processes and systems, and (ii) to develop processes and systems that will
maximize delivery logistics. Metric targets will be defined by the mutual good
faith agreement of the Parties for acceptable stock out percentages, delivery
times and total logistics costs.
(f) Unless the Parties otherwise expressly agree in writing, each
Purchase Order will be deemed to incorporate by reference all of the terms and
conditions of this Agreement. Should the terms of any Purchase Order conflict
with the terms of this Agreement, the terms of this Agreement will govern
unless the Parties expressly agree in writing (signed by a duly authorized
representative of both Parties) to the contrary. This Agreement will continue
to apply to a Purchase Order during the Term of this Agreement until all
obligations herein and thereunder are performed.
SECTION 6. SALES AND TECHNICAL SUPPORT
6.1 Sales Training. The Vendor will work with the Owner, at the
--------------
Vendor's sole expense, to agree on a sales training program for the
distribution channel used by the Owner for Subscriber Units. The goal of this
program will be to provide sales training ("Training") to the Owner's personnel
on CDMA and the features of the Subscriber Units, as well as to provide
appropriate Product related collateral material. The training program will
include, but will not be limited to, the following topics: CDMA; Product
features and usage; Subscriber Unit programming, installation and
troubleshooting; and such other matters as the Parties may reasonably agree
upon from time to time. The target audiences for the training will be the
Owner's marketing and sales personnel. These training programs will take place
at mutually agreeable locations (such locations to be provided at the Owner's
sole expense) in each of the Owner's System Areas at
-37-
least once a year for the first two (2) years after introduction of the
Subscriber Units, at no charge to the Owner. Such training program will last
for a period of time as reasonably agreed upon by the Parties. The Vendor
anticipates that the Owner may want to influence aspects of the training and
will design the CDMA training program to complement the Owner's marketing and
sales effort. Should the Owner request the Vendor to modify the program in
such a way as to increase the Vendor's actual expenses, the Owner and the
Vendor will negotiate the terms and conditions of implementing the Owner's
request in good faith.
6.2 Sales and Promotional Efforts. (a) In order to ensure that the
-----------------------------
relationship between the Parties contemplated by this Agreement will be
mutually advantageous, and in recognition of the expertise and commitment by
the Parties necessary for the effective marketing and support of the Products,
the Owner agrees to encourage and develop the sales potential for such
Products, to employ competent personnel to meet the demands and needs for
marketing and support of the Products, and to encourage the purchase of
Products by Agents and Purchasers. Nothing contained in this subsection 6.2(a)
will in any way limit or otherwise modify the Vendor's obligations under this
Agreement.
(b) In order to assist the Owner to promote sales of the Products, the
Vendor will furnish the Owner, at the Vendor's sole expense, Vendor catalogs,
point of sales literature, training documentation, printed technical
information, data sheets and other reasonable advertising materials in such
quantities and at such time as may be reasonably agreed to by the Parties.
(c) If the Owner reasonably requires customized Vendor sales and
training literature, the content of the Vendor's appropriate existing
literature will be provided to the Owner, in the Owner's discretion, at the
Vendor's sole expense, in electronic form, or CD-ROM format or artwork to allow
the Owner to produce literature and promotional pieces that are of the Owner's
style and name. The use of any such literature will be subject to the
guidelines established between the Parties pursuant to subsection 8.1(b). In
addition, the Vendor agrees to grant the Owner a world-wide non-exclusive
royalty-free license to reprint any Vendor-owned sales literature in connection
with the Owner's sales, advertising and promotion of the Products. In
addition, the Vendor agrees to grant the Owner a non-exclusive royalty-free
license to distribute within the Territory any of the Vendor's own sales
literature in connection with the Owner's sales, advertising and promotion of
the Products; provided that in the event any such literature is in fact
-------- ----
distributed outside of the Territory by any Person other than the Owner (or by
an agent or affiliate of the Owner acting on the Owner's behalf or upon the
Owner's direction), the Vendor will not, in such event, take any action for
damages of any nature against the Owner under this Agreement or otherwise.
(d) The Vendor and the Owner agree to reasonably cooperate with each
other in the areas of sales and marketing in support of sales of the Vendor's
Products to customers of the Owner's telecommunications services.
-38-
SECTION 7. INTELLECTUAL PROPERTY
7.1 Intellectual Property Rights Infringement. Subject to the
-----------------------------------------
provisions of subsections 7.3 and 7.4, the Vendor agrees that it will defend,
at its own expense, all suits and claims against the Owner, its affiliates,
directors, officers, agents and employees for infringement or violation
(whether by use, sale or otherwise) of any patent, trademark, copyright, trade
secret or other intellectual property rights of any third party (collectively,
"Intellectual Property Rights"), arising under or in connection with Applicable
Law within the Territory covering, or alleged to cover, the Products or any
component thereof for its intended use, in the form furnished or as
subsequently modified by the Vendor. The Vendor agrees that it will pay all
sums, including, without limitation, attorneys' fees and other costs, which, by
final judgment or decree, or in settlement of any suit or claim to which the
Vendor agrees, may be assessed against the Owner on account of such
infringement or violation, provided that:
-------- ----
(i) the Vendor will be given prompt written notice of all claims
of any such infringement or violation and of any suits or
claims brought or threatened against the Owner or the Vendor
of which the Owner has actual knowledge;
(ii) the Vendor is given full authority to assume control of the
defense (including appeals) thereof through its own counsel
at its sole expense and will have the sole right to settle
any suits or claims without the consent of the Owner;
provided that the Vendor has no right and will have
-------- ----
no right to agree to injunctive relief against the Owner;
provided further that the Vendor will notify the
-------- -------
Owner of any proposed settlement prior to the Vendor's
acceptance of such settlement; and
(iii) the Owner will cooperate fully with the Vendor in the defense
of such suit or claims and provide the Vendor, at the
Vendor's expense, such assistance as the Vendor may
reasonably require in connection therewith.
7.2 The Vendor's Obligation to Cure. If in any such suit so
-------------------------------
defended all or any part of the Products or the Software or any component
thereof is held to constitute an infringement or violation of Intellectual
Property Rights and its use is enjoined, or if in respect of any claim of
infringement or violation the Vendor deems it advisable to do so, the Vendor
will, within one hundred twenty (120) days, at its sole cost, expense and
option take one or more of the following actions: (i) procure the right to
continue the use of the same without interruption for the Owner; (ii) replace
the infringing Product, Software or component with a noninfringing product,
noninfringing Software or a non-infringing component, as applicable, that meets
the Specifications; or (iii) modify said Product, Software or any component
thereof so as to be noninfringing, provided that the Product, Software
-------- ----
or any component thereof as modified meets all of the Specifications. In the
event that the Vendor is not able, using reasonable commercial efforts, to cure
-39-
the infringement pursuant to clause (i), (ii) or (iii) in the immediately
preceding sentence, the Vendor will refund to the Owner the full purchase price
paid (less Product Depreciation and less any amounts contributed by the Vendor
to the Co-op Marketing Fund relating to such Products) by the Owner for such
infringing Product, and the Owner will, if requested by the Vendor, use
reasonable efforts to return, at the Vendor's sole cost and expense, any such
infringing Products which are then available to it; provided that the
-------- ----
Vendor will have first refunded any such monies for such infringing
Products to the Owner. The obligations of the Vendor under subsection 7.1 and
the remedies under this subsection 7.2 will be the sole and exclusive
obligations of the Vendor and the sole and exclusive remedies available to the
Owner against the Vendor in the event of a claim against the Owner which is
covered by subsection 7.1 above.
7.3 The Vendor's Obligations. The Vendor's obligations under this
------------------------
Section 7 will not apply to (i) any infringement or violation of Intellectual
Property Rights caused by modification of any Product, Software or any
component thereof by any Person other than the Vendor, its employees or agents
acting on the Vendor's behalf or at its direction, or (ii) any infringement
caused directly by any such Person's use and maintenance of such Product other
than in accordance with the Specifications and the purposes contemplated by
this Agreement for use in the Owner's Nationwide Network, except as expressly
authorized in writing by the Vendor. The Vendor's obligations under subsection
7.1 will not extend to alleged infringements or violations that arise because
the Products provided by the Vendor are used in combination with other products
(other than Infrastructure Equipment) furnished by third parties and where any
such combination was not installed, recommended or approved, expressly in
writing by the Vendor; provided that in no event will the Owner seek
-------- ----
indemnification against the Vendor under this Section 7 for an infringement
claim based upon any such combination of Products with Infrastructure Equipment
to the extent and only to such extent the Owner is covered by an indemnity
under a then existing Procurement and Services Contract. The Vendor's
indemnification obligations specified in this Section 7 will not apply to any
intellectual property infringement caused directly by an Owner Defined Feature.
Nothing contained herein to the contrary will in any way constitute a waiver or
modification of the Vendor's rights to enforce its intellectual property rights
against third parties.
7.4 The Owner's Obligations. The Owner agrees that it will defend,
-----------------------
at its own expense, and indemnify and hold harmless the Vendor, its affiliates,
directors, officers, agents, employees and successors, from and against all
suits and claims for infringements or violations of any patent, trademark,
copyright, trade secret or other intellectual property rights of any third
party (i) caused directly by the Owner's (or by an affiliate's or agent's if
done at the direction of the Owner) modification, use or maintenance of any
Product other than in accordance with the Specifications and the terms of this
Agreement or the Vendor's written authorization, (ii) to the extent that any
Owner Defined Feature directly gives rise to an intellectual property
infringement claim against the Vendor, its affiliates, directors, officers,
agents, employees and successors, or (iii) to the extent, but only to such
extent, that an intellectual property infringement claim involves any markings
or logos specifically requested by the Owner in writing. The
-40-
Owner agrees that it will pay all sums, including, without limitation,
attorneys' fees, damages, losses, liabilities, expenses and other costs, which,
by final judgment or decree, or in settlement of any suit or claim to which the
Owner agrees, may be assessed against the Vendor on account of such matters,
provided that:
- - -------- ----
(a) the Owner will be given prompt written notice of all claims of
any such infringement or violation and of any suits or claims brought or
threatened against the Vendor or the Owner of which the Vendor has actual
knowledge;
(b) the Owner is given full authority to assume control of the
defense (including appeals) thereof through its own counsel at its sole
expense and will have the sole right to settle any suits or claims
without the consent of the Vendor, provided that the Owner has no
-------- ----
right to agree to injunctive relief against the Vendor; provided
--------
further that the Owner will notify the Vendor of any proposed
-------
settlement prior to the Owner's acceptance of such settlement; and
(c) the Vendor will cooperate fully with the Owner in the defense
of such suit or claims and provide the Owner, at the Owner's expense,
such assistance as the Owner may reasonably require in connection
therewith, including, but not limited to, implementation of modifications
to Products or other manufacturing fixes pursuant to the provisions of
subsection 3.23.
7.5 Software License. (a) Certain Products sold to the Owner
----------------
hereunder may contain software in executable code form ("Software"), and,
except as otherwise expressly provided herein, all references to "Products" in
this Agreement will be deemed to include the accompanying Software,
provided that nothing herein will be construed as the sale of any
- - -------- ----
Software to the Owner. The Vendor hereby grants to the Owner a non-exclusive
royalty-free world-wide license to use (for the period of time the Product is
in use in accordance with its intended use), and sublicense to the Owner's or
its Agents' Purchasers or end user customers (in object form only), the
Software solely in each of the Products purchased by the Owner from the Vendor
and for use only in the manner in which such Products are intended to be used
pursuant to the terms of this Agreement, including, without limitation, the
Specifications.
(b) The Owner will not, without the prior written consent of the Vendor:
(i) alter, modify, translate or adapt any Software or create any derivative
works based thereon; (ii) copy any Software; (iii) assign, sublicense or
otherwise transfer the Software in whole or in part, except as permitted
herein; (iv) use the Software except as specifically contemplated in this
Agreement; or (v) disclose the Software to any third party except as required
by Applicable Law or pursuant to an order of a court of competent jurisdiction
or other similar requirement of a Governmental Entity; provided that
-------- ----
the Owner will use reasonable efforts to provide the Vendor prior written
notice prior to any such disclosure. The entire right, title and interest in
the Software will remain with the Vendor, and the Owner will not remove any
copyright notices or other legends from the Software or any accompanying
documentation, without the prior written consent of the Vendor.
-41-
7.6 Sublicense of Software. The Owner may sub-license to Agents,
----------------------
Purchasers or other end-user customers the right to use the Software in object
form only with the use of the Products resold by the Owner to such customers,
and such right will survive termination of this Agreement.
7.7 Ownership of Intellectual Property Rights. (a) Except for
-----------------------------------------
licenses expressly granted under this Agreement, the sale of Products and the
license of Software to the Owner does not convey to the Owner any intellectual
property rights in such Products or Software. Neither the sale of Products,
the license of any Software, nor any provision of this Agreement will be
construed to grant to the Owner, either expressly, by implication or by way of
estoppel, any license under any patents or other intellectual property rights
of the Vendor covering or relating to any other product or invention of the
Vendor or any combination of Product or Software with any other product of the
Vendor. The foregoing notwithstanding, the Parties understand and agree that
from time to time the Owner may devise, develop or otherwise create ideas or
other concepts for services or new products which are patentable or otherwise
capable of receiving protection from duplication. In such event, the Owner
will have the right to patent or otherwise protect such ideas or concepts for
its own use and benefit.
(b) The Owner hereby acknowledges and agrees that nothing herein gives
it any right, title or interest in the ▇▇▇▇ and that upon termination of this
Agreement, by expiration or termination in accordance with this Agreement, the
Owner will no longer use the ▇▇▇▇ in advertising or in any other manner,
provided that such termination will not affect any use by the Owner's
- - -------- ----
Agents, Purchasers or other customers of Products sold by the Owner and
provided further that nothing in this subsection 7.7 will prohibit or
- - -------- -------
otherwise inhibit in any way the sale following such termination by the Owner
of inventory held by it at the time of such termination. The Owner will not
challenge the validity of the Vendor's ownership of or right to use of the ▇▇▇▇
or the Vendor's copyrights, nor otherwise impair the interest of the Vendor in
the ▇▇▇▇ or such copyrights. Except as specifically provided for under this
Agreement, the Owner will not use any ▇▇▇▇ which is confusingly similar to, or
a colorable imitation of the ▇▇▇▇. The Owner will use the Products and
Software furnished by the Vendor solely in accordance with the terms of this
Agreement, and the Owner will not, directly or indirectly, disassemble,
decompile, reverse engineer, or analyze or copy the physical construction of,
any of the Products or Software or any component thereof for any purpose other
than as expressly permitted by the Vendor in writing.
7.8 Intellectual Property. Subject to the Vendor's then existing
---------------------
reasonable marketing policies, if any, with respect to Products sold hereunder,
the Vendor grants the Owner rights to state that it is using the Vendor's
Products in the Owner's marketing, advertising or promotion of the Nationwide
Network, any PCS System, any part thereof or any Product. Subject to the
Vendor's then existing reasonable marketing policies, if any, with respect to
Products sold hereunder the Owner has the right to use for such marketing,
advertising or promotion the Vendor's advertising and marketing materials
(including pamphlets and brochures) provided to the Owner by the Vendor
describing the Nationwide Network, any PCS System, any part thereof or any
Product.
-42-
Other than as set forth in this subsection 7.8 or subsections 3.17 or 6.2, the
Owner has the right to use the trademarks and service marks of the Vendor in
the Owner's marketing, advertising and promotion of the Nationwide Network, any
PCS System, any part thereof or any Product only with the written consent of
the Vendor, such consent not to be unreasonably withheld, subject to and in
accordance with the terms of subsection 8.1.
7.9 Request for Custom Development. (a) From time to time, the
------------------------------
Owner may have requirements for custom Software (including, but not limited to,
development of identified features or modifications to Software or Software
Enhancements) or custom development of Products (including, but not limited to,
development of identified features or modifications to Products or Product
Enhancements) to be provided by the Vendor under this Agreement (the "Custom
Material"). If the Owner has a requirement for Custom Material that is a
specific enhancement or modification of a previously licensed feature or of
previously purchased Products, the Owner will identify to the Vendor in writing
a summary of any such proposed development of Custom Material. Such summary
will provide a description of any proposed Custom Material sufficient to enable
the Vendor to determine the general demand for, and its plans, if any, to
develop the same or similar Products. The Vendor will respond to such summary
within thirty (30) days after receipt thereof and indicate if it has the
ability to fulfill a subsequent Request for Proposal ("RFP") from the Owner for
such development of Custom Material. The Owner acknowledges that the Vendor
shall have no obligation to develop any proprietary materials for Owner other
than as expressly set forth in this subsection 7.9.
(b) If the Vendor decides that it does not have the technical ability or
the capacity to fulfill a RFP for such Custom Material development, the
Vendor's response pursuant to subsection 7.9(a) will (i) provide the Owner an
explanation of why it cannot fulfill such RFP and (ii) use reasonable diligence
to work with the Owner to identify an alternative source for such development
reasonably acceptable to the Owner. In determining whether the Vendor has the
technical ability or the capacity to fulfill the RFP, the Vendor may consider
factors including, but not limited to, (i) the Vendor's likelihood of
recovering the costs for performing such development, (ii) the impact of such
development on the Vendor's actual outstanding commitments to perform work for
other Customers and to pursue strategic development activities; and (iii)
whether the Vendor can perform the work utilizing existing software development
staff without stopping work underway.
7.10 Vendor Response. After reviewing an RFP issued to the Vendor
---------------
from the Owner for such Custom Material, the Vendor will respond to the Owner
within thirty (30) days, unless otherwise agreed by the Parties, stating the
terms and conditions upon which the Vendor would be willing to undertake such
development, including, but not limited to, a listing of specifications, custom
development charges, planned license fees and a proposed delivery schedule.
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SECTION 8. PROPRIETARY INFORMATION
8.1 Public Statements and Advertising. (a) Except to the extent
---------------------------------
specifically set forth herein, the Vendor will not issue any public statement
(or any private statement unless required in the performance of the work
contemplated by this Agreement) relating to or in any way disclosing any aspect
of the work contemplated by this Agreement, the Nationwide Network, any Owner
PCS System or any Product (other than statements regarding the Vendor's
products generally) including the scope, the specific terms of this Agreement,
extent or value of the work contemplated by this Agreement, the Products (other
than statements regarding the Vendor's products generally) and/or the
Nationwide Network or any Owner PCS System. The Owner will not issue any
public statement (or any private statement unless required in the performance
of the work contemplated by this Agreement) relating to or in any way
disclosing any aspect of the work contemplated by this Agreement or any Product
(other than statements regarding the Vendor's products generally), including
the scope, the specific terms of this Agreement, the extent or value of the
work contemplated by this Agreement and/or the Products (other than statements
regarding the Vendor's products generally). The Vendor agrees not to use for
publicity purposes any photographs, drawings and/or materials describing any
PCS System or any part of the Nationwide Network (other than Vendor Products),
without obtaining the prior written consent of the Owner, such consent not to
be unreasonably withheld. The obligations of the Parties under this subsection
8.1 are in addition to their respective obligations pursuant to subsection 8.2
but in no way limit the exceptions to public disclosure specifically referred
to in subsection 8.2(a) clauses (i) through (vii). This subsection 8.1 will in
no way limit (i) either Party from responding to customary press inquiries or
otherwise making public or private statements not otherwise disclosing
Proprietary Information or the specific terms of this Agreement in the normal
course of its business and/or in connection with the obligations hereunder or
(ii) the provision of necessary information to prospective suppliers and the
Vendor's or the Owner's personnel, agents or consultants.
(b) Each Party will submit to the other proposed copies of all
advertising (other than public statements or press releases pursuant to and in
accordance with the last sentence of subsection 8.1(a) above) wherein the name,
trademark or service ▇▇▇▇ of the other Party or its Affiliates or affiliates is
mentioned; and neither Party will publish or use such advertising without the
other Party's prior written approval. Such approval will be granted as
promptly as possible and will not be unreasonably withheld. The Parties
acknowledge that the obtaining of prior written approval for each such use
pursuant to this subsection 8.1(b) may be an administrative burden. From time
to time at the request of either Party, the Owner and the Vendor will establish
mutually acceptable guidelines that will constitute pre-authorization for the
uses specified therein. Such guidelines will be subject to change from time to
time at the reasonable request of either Party subject to the mutual agreement
of the Parties.
8.2 Confidentiality. (a) All information, including without
---------------
limitation all oral and written information (including, but not limited to,
determinations or reports by arbitrators pursuant to the terms of this
Agreement), disclosed to the other Party is
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deemed to be confidential, restricted and proprietary to the disclosing Party
(hereinafter referred to as "Proprietary Information"). Each Party agrees to
use the Proprietary Information received from the other Party only for the
purpose of this Agreement. Except as specified in this Agreement, no other
rights, and particularly licenses, to trademarks, inventions, copyrights,
patents, or any other intellectual property rights are implied or granted under
this Agreement or by the conveying of Proprietary Information between the
Parties. Proprietary Information supplied is not to be reproduced in any form
except as required to accomplish the intent of, and in accordance with the
terms of, this Agreement. The receiving Party must provide the same care to
avoid disclosure or unauthorized use of Proprietary Information as it provides
to protect its own similar proprietary information but in no event will the
receiving Party fail to use reasonable care under the circumstances to avoid
disclosure or unauthorized use of Proprietary Information. All Proprietary
Information must be retained by the receiving Party in a secure place with
access limited to only such of the receiving Party's employees, subcontractors,
suppliers or agents who need to know such information for purposes of this
Agreement and to such third parties as the disclosing Party has consented to by
prior written approval. All Proprietary Information, unless otherwise
specified in writing (i) remains the property of the disclosing Party, (ii)
must be used by the receiving Party only for the purpose for which it was
intended, and (iii) such Proprietary Information, including all copies of such
information, must be returned to the disclosing Party or destroyed after the
receiving Party's need for it has expired or upon request of the disclosing
Party, and, in any event, upon termination of this Agreement. At the request
of the disclosing Party, the receiving Party will furnish a certificate of an
officer of the receiving Party certifying that Proprietary Information not
returned to the disclosing Party has been destroyed. For the purposes hereof,
Proprietary Information does not include information that:
(i) is published or is otherwise in the public domain through no
fault of the receiving Party at the time of any claimed
disclosure or unauthorized use by the receiving Party;
(ii) prior to disclosure pursuant to this Agreement is properly
within the legitimate possession of the receiving Party as
evidenced by reasonable documentation to the extent
applicable;
(iii) subsequent to disclosure pursuant to this Agreement is
lawfully received from a third party having rights in the
information without restriction of the third party's right to
disseminate the information and without notice of any
restriction against its further disclosure;
(iv) is independently developed by the receiving Party or is
otherwise received through parties who have not had, either
directly or indirectly, access to or knowledge of such
Proprietary Information;
(v) is transmitted to the receiving Party after the disclosing
Party has received written notice from the receiving Party,
after termination
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or expiration of this Agreement, that it does not desire to
receive further Proprietary Information;
(vi) is obligated to be produced under order of a court of
competent jurisdiction or other similar requirement of a
Governmental Entity, so long as the Party required to
disclose the information provides the other Party with prior
notice of such order or requirement and its cooperation to
the extent reasonable in preserving its confidentiality; or
(vii) the disclosing Party agrees in writing is free of such
restrictions.
(b) Because damages may be difficult to ascertain, the Parties agree
that, without limiting any other rights and remedies specified herein, an
injunction may be sought against the Party who has breached or threatened to
breach this subsection 8.2. Each Party represents and warrants that it has the
right to disclose all Proprietary Information which it has disclosed to the
other Party pursuant to this Agreement, and each Party agrees to indemnify and
hold harmless the other from all claims by a third party related to the
wrongful disclosure of such third party's proprietary information. Otherwise,
neither Party makes any representation or warranty, express or implied, with
respect to any Proprietary Information.
SECTION 9. INDEMNIFICATION/LIMITATION OF LIABILITY
9.1 Vendor Indemnity. (a) The Vendor will indemnify and hold the
----------------
Owner and its affiliates, partners, directors, officers, agents and employees
(the "Indemnitees") harmless from and against all third party claims, demands,
suits, proceedings, damages, costs, expenses, liabilities, including, without
limitation, reasonable legal fees (collectively, "Liabilities") brought against
or incurred by any Indemnitee for (i) injury to persons (including physical or
mental injury, libel, slander and death), or (ii) loss or damage to any
property, or (iii) any other liability, in each instance resulting from the
negligence, willful misconduct or gross negligence, of the Vendor in the
performance of this Agreement. If the Vendor and the Owner jointly cause such
Liabilities, the Parties will share the liability in proportion to their
respective degree of causal responsibility.
(b) The Vendor's obligation to indemnify under subsection 9.1(a) with
respect to any Liability will not arise unless the Indemnitee (i) notifies the
Vendor in writing of such potential Liability within a reasonable time after
the Indemnitee is aware of such potential Liability; provided that the
-------- ----
lack of providing such notice will not affect the Vendor's obligation hereunder
(A) if the Vendor otherwise has actual knowledge of such Liability and (B)
unless such lack of notice is the cause of the Vendor being unable to
adequately and reasonably defend such Liability, (ii) gives the Vendor the
opportunity and authority to assume the defense of and settle such Liability,
subject to the provisions of the next two sentences, and (iii) furnishes to the
Vendor all such reasonable information and assistance available to the Owner
(or other Indemnities) as may be reasonably requested by the Vendor and
necessary for the defense against such Liability.
-46-
The Vendor will assume on behalf of the Indemnitee and conduct in good faith
the defense of such Liability with counsel (including in-house counsel)
reasonably satisfactory to the Indemnitee; provided that the Indemnitee
-------- ----
will have the right to be represented therein by advisory counsel of its own
selection and at its own expense. If the Indemnitee will have reasonably
concluded that there may be legal defenses available to it which are different
from or additional to, or inconsistent with, those available to the Vendor, the
Indemnitee will have the right to select separate counsel reasonably
satisfactory to the Vendor to participate in the defense of such action on its
own behalf at such Indemnitee's expense. In the event the Vendor fails, after
written demand by such Indemnitee, to defend any Liability as to which an
indemnity should be provided under subsection 9.1(a), then the Indemnitee may,
at the Vendor's expense, contest or settle such matter without the Vendor's
consent. All payments, losses, damages and reasonable costs and expenses
incurred in connection with such contest, payment or settlement controlled by
such Indemnitee will be to the Vendor's account. The Vendor will not settle
any such Liability without the consent of the Indemnitee, which consent will
not be unreasonably withheld. Any such Indemnitee will exercise its best
efforts to respond to any request for a consent prior to the expiration of any
such settlement offer. This indemnity is in lieu of all other obligations of
the Vendor, expressed or implied, in law or in equity, to indemnify the
Indemnitees (except those other indemnity obligations expressly set forth in
this Agreement).
(c) EXCEPT AS EXPRESSLY SET FORTH IN SUBSECTIONS 3.7 AND 3.8 OF THIS
AGREEMENT, THE VENDOR MAKES NO WARRANTIES AS TO PRODUCTS, SOFTWARE, TECHNOLOGY,
MATERIALS, SERVICES, INFORMATION OR OTHER ITEMS IT FURNISHES TO THE OWNER,
AGENTS OR PURCHASERS, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, OR THAT
SUCH ITEMS ARE FREE FROM THE RIGHTFUL CLAIM OF ANY THIRD PARTY, BY WAY OF
INFRINGEMENT OR THE LIKE.
(d) EXCEPT AS PROVIDED IN SUBSECTIONS 3.2(c), 4.2, 5.2(c), 5.2(d), 7.1,
7.4, 9.2 AND 9.4 HEREOF, NEITHER PARTY WILL BE LIABLE TO THE OTHER (ITS AGENTS
OR, IN THE CASE OF THE VENDOR, THE PURCHASERS) FOR ANY INCIDENTAL,
CONSEQUENTIAL OR SPECIAL DAMAGES OR ANY OTHER INDIRECT LOSSES OR DAMAGES
ARISING OUT OF THIS AGREEMENT, THE DELIVERY OR THE FAILURE TO DELIVER ANY OF
THE PRODUCTS OR ANY COMPONENT THEREOF, ANY BREACH OF THIS AGREEMENT, THE
FAILURE OF THE PRODUCTS TO PERFORM AS WARRANTED OR OTHERWISE OR ANY RESULTING
OBLIGATION, OR THE USE OR INABILITY TO USE OF ANY PRODUCTS DELIVERED PURSUANT
TO THIS AGREEMENT, WHETHER IN AN ACTION FOR OR ARISING OUT OF BREACH OF
CONTRACT, FOR TORT, OR ANY OTHER CAUSE OF ACTION.
EXCEPT AS PROVIDED IN SUBSECTIONS 3.2(c), 4.2, 5.2(c), 5.2(d), 7.1, 7.4,
9.2 AND 9.4 HEREOF, IN NO EVENT WILL EITHER PARTY BE LIABLE TO
-47-
THE OTHER (ITS AGENTS OR, IN THE CASE OF THE VENDOR, THE PURCHASERS) FOR ANY
SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGE OR LOSS OF ANY NATURE
WHICH MAY ARISE IN CONNECTION WITH THE USE, DISTRIBUTION, INSTALLATION,
REMOVAL, MAINTENANCE OR SUPPORT OF PRODUCTS AND/OR SOFTWARE (SEPARATELY OR IN
COMBINATION WITH EACH OTHER OR WITH OTHER PRODUCTS AND/OR SOFTWARE NOT PROVIDED
BY VENDOR) BY OWNER, AGENTS AND ANY PURCHASER PURSUANT TO OR UNDER THIS
AGREEMENT, REGARDLESS OF WHETHER SUCH CLAIMS ARE BASED OR REMEDIES ARE SOUGHT
IN WARRANTY, CONTRACT, NEGLIGENCE, STRICT LIABILITY, TORT, PRODUCTS LIABILITY
OR OTHERWISE, EVEN IF THE PARTY SOUGHT TO BE HELD LIABLE HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGE OR LOSS.
(e) IN NO EVENT WILL THE TOTAL LIABILITY OF THE VENDOR UNDER THIS
AGREEMENT, WHETHER SUCH LIABILITY BE IN CONTRACT, STRICT LIABILITY, PRODUCTS
LIABILITY OR TORT (INCLUDING NEGLIGENCE), EXCEED THE GREATER OF (x) [ ] AND
[ ] PROVIDED THAT ANY SUCH PURCHASE ORDERS ARE IN FACT PAID FOR PRIOR TO
-------- ----
OR OFFSET AGAINST THE PAYMENT OF ANY AMOUNTS OWED BY THE VENDOR TO THE OWNER
PURSUANT TO THE VENDOR INDEMNITIES UNDER THIS AGREEMENT. NOTWITHSTANDING
ANYTHING TO THE CONTRARY SET FORTH IN THIS AGREEMENT, IN THE EVENT THE OWNER
EXERCISES ITS RIGHTS TO PURCHASE REPLACEMENT PRODUCTS IN CONNECTION WITH THE
CANCELLATION OF A PURCHASE ORDER, THE TERMINATION OF THIS AGREEMENT OR THE
REPURCHASE OR RECALL OF ANY PRODUCTS (WHETHER PURSUANT TO SUBSECTION 3.10(b),
3.22(b), 4.2(e), 10.2, 10.3, 10.6, 11.10 OF OTHERWISE), THE AMOUNT THAT THE
VENDOR SHALL BE LIABLE TO THE OWNER WITH RESPECT TO THOSE ADDITIONAL EXPENSES
AND COSTS INCURRED BY THE OWNER (IN CONNECTION WITH ACQUIRING SUCH REPLACEMENT
PRODUCTS) IN EXCESS OF ANY EXPENSES AND COSTS THE OWNER WOULD HAVE OTHERWISE
INCURRED UNDER THIS AGREEMENT IN PURCHASING THE SUBJECT PRODUCTS, SHALL NOT
EXCEED (I) IF THE SUBJECT PRODUCTS TO BE REPLACED ARE PRODUCTS THAT CONSTITUTE
PART OF THE FIRST [ ] OF THE TOTAL MINIMUM COMMITMENT, [ ] OF THE PURCHASE
PRICE OF THE SUBJECT PRODUCTS SO REPLACED, AND (II) WITH RESPECT TO ALL OTHER
PRODUCTS, [ ] OF THE PURCHASE PRICE OF THE SUBJECT PRODUCTS SO REPLACED.
-48-
(f) IN NO EVENT WILL THE TOTAL LIABILITY OF THE OWNER UNDER THIS
AGREEMENT, WHETHER SUCH LIABILITY BE IN CONTRACT, STRICT LIABILITY, PRODUCTS
LIABILITY OR TORT (INCLUDING NEGLIGENCE), EXCEED THE GREATER OF (x) [ ] AND
[ ].
9.2 Vendor Damages for Fraud. The Vendor will be responsible for
------------------------
all actual damages incurred by the Owner as a result of any damage or injury
caused by or resulting from the fraud of the Vendor; provided, however,
-------- -------
if the senior management of the Vendor knew or should have known of such fraud,
then the Vendor will be responsible for all damages (including, but not limited
to, actual, consequential, incidental and special) so incurred by the Owner for
such fraud.
9.3 Owner Indemnity. (a) The Owner will indemnify and hold the
---------------
Vendor and its affiliates, partners, directors, officers, agents and employees
(the "Vendor Indemnitees") harmless from and against all third party claims,
demands, suits, proceedings, damages, costs, expenses, liabilities, including,
without limitation, reasonable legal fees (collectively, "Vendor Liabilities")
brought against or incurred by any Vendor Indemnitee for (i) injury to persons
(including physical or mental injury, libel, slander and death), or (ii) loss
or damage to any property, or (iii) any other liability, in each instance
resulting from the negligence, willful misconduct or gross negligence, of the
Owner in the performance of this Agreement. If the Vendor and the Owner
jointly cause such Vendor Liabilities, the Parties will share the liability in
proportion to their respective degree of causal responsibility.
(b) The Owner's obligation to indemnify under subsection 9.3(a) with
respect to any Vendor Liability will not arise unless the Vendor Indemnitee (i)
notifies the Owner in writing of such potential Vendor Liability within a
reasonable time after the Vendor Indemnitee is aware of such potential Vendor
Liability; provided that the lack of providing such notice will not
-------- ----
affect the Owner's obligation hereunder (A) if the Owner otherwise has actual
knowledge of such Vendor Liability and (B) unless such lack of notice is the
cause of the Owner being unable to adequately and reasonably defend such Vendor
Liability, (ii) gives the Owner the opportunity and authority to assume the
defense of and settle such Vendor Liability, subject to the provisions of the
next two sentences, and (iii) furnishes to the Owner all such reasonable
information and assistance available to the Vendor (or other Vendor
Indemnitees) as may be reasonably requested by the Owner and necessary for the
defense against such Vendor Liability. The Owner will assume on behalf of the
Vendor Indemnitee and conduct in good faith the defense of such Liability with
counsel (including in-house counsel) reasonably satisfactory to the Vendor
Indemnitee; provided that the Vendor Indemnitee will have
-------- ----
-49-
the right to be represented therein by advisory counsel of its own selection
and at its own expense. If the Vendor Indemnitee will have reasonably
concluded that there may be legal defenses available to it which are different
from or additional to, or inconsistent with, those available to the Owner, the
Vendor Indemnitee will have the right to select separate counsel reasonably
satisfactory to the Owner to participate in the defense of such action on its
own behalf at such Vendor Indemnitee's expense. In the event the Owner fails,
after written demand by such Vendor Indemnitee, to defend any Vendor Liability
as to which an indemnity should be provided under subsection 9.3(a), then the
Vendor Indemnitee may, at the Owner's expense, contest or settle such matter
without the Owner's consent. All payments, losses, damages and reasonable
costs and expenses incurred in connection with such contest, payment or
settlement controlled by such Vendor Indemnitee will be to the Owner's account.
The Owner will not settle any such Vendor Liability without the consent of the
Vendor Indemnitee, which consent will not be unreasonably withheld.
Furthermore, the Owner will indemnify and hold the Vendor Indemnitees harmless
from and against all Vendor Liabilities brought against or incurred by any
Vendor Indemnitee for (i) injury to persons (including physical or mental
injury, libel, slander and death), or (ii) loss or damage to any property, or
(iii) any other liability resulting directly and solely from the unauthorized
modification by the Owner of the Products or by the Owner's use of any Product
in combination with any other Subscriber Unit accessory not furnished and/or
authorized in writing for such use by the Vendor. This indemnity is in lieu of
all other obligations of the Owner, expressed or implied, in law or in equity,
to indemnify the Vendor Indemnitees (except those other indemnity obligations
expressly set forth in this Agreement).
9.4 Owner Damages for Fraud. The Owner will be responsible for
-----------------------
actual damages incurred by the Vendor as a result of any damage or injury
caused by or resulting from the fraud of the Owner; provided, however,
-------- -------
if the senior management of the Owner knew or should have known of such fraud,
then the Owner will be responsible for all damages (including, but not limited
to, actual, consequential, incidental and special) so incurred by the Vendor
for such fraud.
SECTION 10. TERMINATION
10.1 Termination. This Agreement will terminate on the End Date,
-----------
unless extended by mutual agreement of the Parties hereto, in accordance with
Section 2, or unless sooner terminated as provided herein. Any such
termination in accordance with the terms of this Section 10 will in no way
terminate, modify, amend or otherwise affect the Vendor's warranties hereunder
(or the enforceability thereof) in connection with Products sold pursuant to
the terms of this Agreement.
10.2 Termination For Cause. The Owner has the right to terminate
---------------------
this Agreement in its entirety without any penalty or payment obligation upon
the occurrence of any Vendor event of default (each a "Vendor Event of
Default") as set forth below. The occurrence of any of the following will
constitute a Vendor Event of Default:
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(a) the Vendor (i) files a voluntary petition in bankruptcy or has an
involuntary petition in bankruptcy filed against it that is not dismissed
within sixty (60) days of such involuntary filing, (ii) admits the material
allegations of any petition in bankruptcy filed against it, (iii) is adjudged
bankrupt, or (iv) makes a general assignment for the benefit of its creditors,
or if a receiver is appointed for all or a substantial portion of its assets
and is not discharged within sixty (60) days after his appointment; or
(b) the Vendor commences any proceeding for relief from its creditors in
any court under any state insolvency statutes; or
(c) the Vendor violates any Applicable Law and the effect of such
violation materially impairs the Vendor's ability to perform its obligation
under this Agreement; or
(d) the Vendor fails to perform this Agreement in any material respect
and thereby prejudices in any way deemed material by the parties providing
financing in connection with the build-out of the Nationwide Network, in such
parties' reasonable opinion, the Owner's efforts to obtain financing for the
Nationwide Network; or
(e) the Vendor fails to comply with subsection 11.18; or
(f) the Vendor breaches any other provision of this Agreement and the
effect of such breach materially impairs the Vendor's ability to perform its
obligations under this Agreement.
10.3 Remedies. If any of the Vendor Events of Default exists, the
--------
Owner may, without prejudice to any other rights or remedies of the Owner in
this Agreement or at law or in equity (except as such legal or equitable
remedies may be limited by this Agreement), terminate this Agreement upon
written notice to the Vendor; provided, however, that the Owner will
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have first provided to the Vendor the following periods of notice and
opportunity to cure:
(i) in the case of an Event of Default specified in subsections
10.2(a) and 10.2(b), no notice or opportunity to cure will be required
from the Owner; and
(ii) in the case of any other Event of Default by the Vendor, the
Owner will have provided thirty (30) days' prior written notice, and the
Vendor will have failed to diligently pursue such cure and remedy the
breach entirely by the end of said thirty (30) day notice period.
10.4 Discontinuance of Supply. Upon such notification of
------------------------
termination, the Vendor must immediately discontinue all supply of Products.
10.5 Payments. When the Owner terminates this Agreement for cause
--------
pursuant to subsection 10.2, notwithstanding anything herein to the contrary,
the Owner may
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withhold payments in amounts that it reasonably believes are in dispute, if
any, at such time to the Vendor for the purposes of offset of amounts owed to
the Owner pursuant to the terms of this Agreement, until such time as the exact
amount of damages due to the Owner from the Vendor is fully determined;
provided that in the event that any such disputed amounts are
----
determined to in fact be owed by the Owner to the Vendor, such amounts will be
increased by the late payment penalties, if any, applicable thereto pursuant to
subsection 3.4.
10.6 Costs. In the event of a termination due to a Vendor Event of
-----
Default, the Owner will be entitled to receive from the Vendor the following:
(i) with respect to those costs and expenses incurred by the Owner in procuring
substitute subscriber units (and their included accessories) for the Products
not delivered by the Vendor, only those reasonable direct out of pocket costs
and expenses incurred by the Owner in reasonably procuring substitute
subscriber units (and their included accessories) having the most comparable
features and functionality available at such time, in excess of the costs and
expenses the Owner would have otherwise incurred hereunder in purchasing such
undelivered Products; and (ii) with respect to any other costs and expenses
incurred by the Owner, only those reasonable direct out-of-pocket costs and
expenses incurred by the Owner that the Owner would not otherwise have incurred
under this Agreement which arise as a result of the Vendor's failure to perform
any other obligation under this Agreement. For the purpose of clause "(i)" of
this subsection 10.6, the Owner shall be entitled to recover only those
reasonable direct out of pocket costs and expenses pertaining to procuring that
number of substitute subscriber units (and their included accessories) equal to
(x) the amount of the Total Minimum Commitment (as such amount may be increased
or decreased from time to time pursuant to the terms of this Agreement), minus
(y) that number of Subscriber Units purchased by the Owner as of the date of
any such termination. The amount to be paid by the Vendor pursuant to this
subsection 10.6 will survive termination of this Agreement and will be subject
to the limitations of liability set forth in this Agreement.
10.7 Continuing Obligations. Termination of this Agreement for any
----------------------
reason (i) will not relieve either Party of its obligations with respect to the
confidentiality of the Proprietary Information as set forth in subsection 8.2,
(ii) will not relieve either Party of any obligation which applies to it and
which expressly or by implication survives termination, and (iii) except as
otherwise provided in any provision of this Agreement expressly limiting the
liability of either Party, will not relieve either Party of any obligations or
liabilities for loss or damage to the other Party arising out of or caused by
acts or omissions of such Party prior to the effectiveness of such termination.
10.8 The Vendor's Right to Terminate. The Vendor has the right to
-------------------------------
terminate this Agreement in its entirety without any penalty or payment
obligations, upon the occurrence of any of the following (each an "Owner Event
of Default"):
(a) the Owner (i) files a voluntary petition in bankruptcy or has an
involuntary petition in bankruptcy filed against it that is not dismissed
within sixty (60) days of such involuntary filing, (ii) admits the material
allegations of any petition in bankruptcy filed
-52-
against it, (iii) is adjudged bankrupt, or (iv) makes a general assignment for
the benefit of its creditors, or if a receiver is appointed for all or a
substantial portion of its assets and is not discharged within sixty (60) days
after his appointment; or
(b) the Owner commences any proceeding for relief from its creditors in
any court under any state insolvency statutes; or
(c) the Owner fails to (i) make payments of undisputed amounts
(considered separately and not in aggregate) of less than five million
($5,000,000) due to the Vendor pursuant to the terms of this Agreement,
provided that such failure has continued for at least fifteen (15) days
- - -------- ----
after the Vendor has provided the Owner with written notice of its intent to so
terminate on account of such overdue amount, or (ii) make payments of
undisputed amounts in excess of five million ($5,000,000) due to the Vendor
pursuant to the terms of this Agreement, provided that such failure has
-------- ----
continued for at least thirty (30) days after the Vendor has provided the Owner
with written notice of its intent to so terminate on account of such overdue
amount; and provided further that if the Vendor notice provided to the
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Owner pursuant to and in accordance with either clause (i) or (ii) is the first
such notice provided to the Owner by the Vendor in any rolling twelve (12)
month period, the Owner will have an additional thirty (30) days to cure any
such default prior to the Vendor having the right to terminate this Agreement
pursuant to this subsection 10.8(c); or
(d) the Owner repeatedly and materially breaches subsection 8.2
notwithstanding the fact that the Vendor will have provided the Owner with
prior written notice describing the alleged material breaches and will have
given the Owner a reasonable time (not less than thirty (30) days) to cure any
such breaches; or
(e) the Owner fails to comply with subsection 11.19; or
(f) the Owner violates any Applicable Laws, and the effect of such
violation materially impairs the Owner's ability to perform its obligations
under this Agreement; or
(g) the Owner fails to purchase in any of the respective Annual Supply
Periods or the Stub Period, as applicable, the First Annual Minimum Commitment,
the Second Annual Minimum Commitment, the Third Annual Minimum Commitment or
the residual amount to be purchased in the Stub Period, as applicable and as
such Annual Minimum Commitments may reduced from time to time in accordance
with the terms of this Agreement; or
(h) the Owner fails to issue Purchase Orders for those amounts of
Products which are considered to be under firm Purchase Orders pursuant to any
Forecast and in accordance with the terms of this Agreement; or
-53-
(i) the Owner fails to pay when due more than ten (10) undisputed
payment amounts in aggregate value in excess of seven million five hundred
thousand dollars ($7,500,000) in any given consecutive nine (9) month period;
or
(j) the Owner otherwise materially breaches any provision of this
Agreement which such material breach it has not cured within a reasonable time
after notification by the Vendor thereof.
10.9 Vendor Remedies. If any of the Owner Events of Default exist,
---------------
the Vendor may, without prejudice to any rights or remedies of the Vendor in
this Agreement or at law or in equity (except as such legal or equitable
remedies may be limited by this Agreement), terminate this Agreement (i)
immediately upon the occurrence of any Owner Event of Default specified in
clauses (a), (b), (c), (d), (i) and (j) and (ii) after thirty (30) days prior
written notice upon the occurrence of any other Owner Event of Default. All
amounts owed by the Owner to the Vendor prior to any such termination shall be
payable immediately upon termination. Notwithstanding anything set forth in
this Agreement, immediately upon the occurrence of any Owner Event of Default
the Vendor shall have the right, without any penalty or payment obligations, to
suspend Vendor's performance with respect to manufacturing Products, to stop
shipment of all Products subject to Purchase Orders, and to recall, if
possible, all Products subject to unfulfilled or undelivered Purchase Orders.
10.10 Special Termination Events. (a) In the event that financing
--------------------------
for the Owner's build-out of the initial phase of the Nationwide Network has
not been finalized with the Contract Vendors on terms and conditions reasonably
satisfactory to the Owner, on or before July 29, 1996, the Owner will have the
right, but not the obligation, to terminate this Agreement in its entirety
without charge or penalty of any kind; provided that the Owner will
-------- ----
only have this right if it has terminated or materially amended (as a result of
a failure to achieve adequate financing) at least one of its then existing
Procurement and Services Contracts; and provided further that in the
-------- -------
event the Owner elects to exercise its rights under this subsection 10.10 and
any Procurement and Services Contract then remains outstanding and in force,
the Vendor and the Owner will negotiate in good faith to make any equitable
modifications in Annual Minimum Commitments and corresponding pricing prior to
and in lieu of any such termination. The "Financing Interim Period" means the
period from the Effective Date to July 29, 1996. In the event of a termination
of this Agreement pursuant to this subsection 10.10, the Owner will remain
liable for amounts due to the Vendor for (i) amounts owed by the Owner to the
Vendor prior to such termination, (ii) all Products which are forecasted in the
first five months of the then current Forecast Period for the then current
Forecast (up to the full amount of such forecasted Products) which are
delivered by the Vendor pursuant to the specific terms of this Agreement to the
FOB point, the Owner and/or any of its facilities or sites in accordance with
the terms of this Agreement and (iii) all such other amounts for customization,
specific engineering or change orders ordered by the Owner prior to such
termination. Any amounts owed by the Owner for Products delivered by the
Vendor during such Financing Interim Period not otherwise invoiced to the Owner
by the Vendor prior to the termination of such Financing Interim
-54-
Period, will be invoiced to the Owner by the Vendor within thirty (30) days
(but failure to so invoice will not excuse the Owner's obligation to otherwise
pay the Vendor pursuant to the terms of this subsection 10.10) of such
termination pursuant to this subsection 10.10 and will be payable by the Owner
within thirty (30) days of receipt of such invoice. Except as specifically set
forth in clause (i), clause (ii) and/or clause (iii) above, in this subsection
10.10, in no event will the Owner be liable to the Vendor due to a termination
of this Agreement pursuant to this subsection 10.10 for any of the Vendor's
direct or indirect costs or expenses incurred in connection with any supplies
or equipment ordered by the Vendor or agreements entered into by the Vendor in
order to enable it to fulfill its obligations hereunder or in connection with
the establishment of and/or upgrade to its manufacturing, personnel,
engineering, administrative or other capacities and/or resources in
contemplation of or pursuant to its performance in accordance with the terms of
this Agreement.
(b) If, prior to May 2, 1997 the Vendor, for any reason whatsoever, fails
or is otherwise unable to commence delivery to the Owner of Subscriber Units
with an average of four (4) hours of continuous talk time based on thirty five
percent (35%) voice activity, ten (10) dBm transmit power at the antenna,and a
standard battery pack, the Owner will be able to, in its sole discretion, on
May 2, 1997 or at any time within the ten (10) Business Day period thereafter,
terminate this Agreement in its entirety without any payment or penalty of
either Party whatsoever; provided that within
-------- ----
thirty (30) days of such termination each Party will pay any and all monies then
actually outstanding, owed, accrued or otherwise due to the other Party up to
the point of such termination including payment for any Purchase Orders or
Excess Purchase Orders from the Owner to the Vendor outstanding at the time of
such termination; and provided further the Owner will still be committed to
-------- -------
submit Purchase Orders and pay for all Products delivered subject to the most
recent then outstanding Forecasts for May, June and July 1997 pursuant to the
terms of this Agreement.
SECTION 11. GENERAL PROVISIONS
11.1 Assignment. Except as otherwise permitted herein, neither this
----------
Agreement nor any portion hereof may be assigned by either Party without the
express prior written consent of the other Party provided that such
-------- ----
consent will not otherwise be unreasonably withheld. The Owner may, without
the consent of the Vendor, (i) assign in whole, but not in part, its rights
hereunder to any direct or indirect wholly owned operating subsidiary of the
Owner or of Sprint Spectrum Holding Company, L.P., a Delaware limited
partnership (provided that any such assignment to any such subsidiary
-------- ----
will not be deemed a release of the Owner's obligations hereunder unless the
Vendor will have given prior written consent to any such release) and/or (ii)
collaterally assign its rights hereunder (including, but not limited to, all
licenses with respect to the Software) to the parties providing financing for
any part of the Nationwide Network under a collateral trust for the benefit of
the Vendor and one or more other entities providing financing for any part of
the Nationwide Network or similar arrangement for the benefit of the entities
providing for the financing for any part of the Nationwide Network, in either
case, which collateral trust or similar arrangement, as the case may be, is
reasonably
-55-
acceptable to the parties providing financing for any part of the Nationwide
Network in accordance with the terms of the financing documents. If requested
by the Owner, the Vendor, will within seven (7) days of such request, provide a
written consent to any such assignment; provided that such consent will
-------- ----
permit reassignment if the financing parties exercise their remedies under the
documents for such financing subject to reasonable standards as to (i) the
creditworthiness of the assignee and (ii) the fact that the assignee is not at
such time a direct competitor of the Vendor or of its affiliates. The
foregoing rights and obligations are in addition to those set forth in
subsection 11.2. Any attempted assignment in violation of the terms of this
Agreement will be null and void.
11.2 Successors and Assigns. This Agreement will bind and inure to
----------------------
the benefit of the Parties to this Agreement, their successors and permitted
assigns.
11.3 Survival of Obligations. The Parties' rights and obligations
-----------------------
which, by their nature, would continue beyond the termination, cancellation, or
expiration of this Agreement, including but not limited to those rights and
obligations of the Parties set forth in subsections 3.7, 3.8, 10.6 and 10.9 and
Sections 7, 8 and 9, will survive such termination, cancellation or expiration.
11.4 Severability. If any provision in this Agreement will be held
------------
to be invalid or unenforceable, the remaining portions will remain in effect.
In the event such invalid or unenforceable provision is considered an essential
element of this Agreement, the Parties will promptly negotiate a replacement
provision.
11.5 Non-waiver. No waiver of the terms and conditions of this
----------
Agreement, or the failure of either party strictly to enforce any such term or
condition on one or more occasions will be construed as a waiver of the same or
of any other term or condition of this Agreement on any other occasion.
11.6 Compliance with United States Regulations.Nothing contained in
-----------------------------------------
this Agreement will require or permit the Owner or the Vendor to do any act
inconsistent with the requirements of (a) the regulations of the United States
Department of Commerce, or (b) the foreign assets controls or foreign
transactions controls regulations of the United States Treasury Department, or
(c) any Applicable Law, regulation or executive order as the same may be in
effect in the Territory from time to time.
11.7 Notices. All notices, requests, demands, consents, agreements
-------
and other communications required or permitted to be given under this Agreement
will be in writing and will be mailed to the party to whom notice is to be
given, by facsimile, and confirmed by first class mail, postage prepaid, and
properly addressed as follows (in which case such notice will be deemed to have
been duly given on the day the notice is first received by the party):
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SPRINT SPECTRUM L.P.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Vice President, Business Development
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇ ▇▇▇▇▇▇▇▇▇▇
General Counsel
Sprint Spectrum L.P.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
QUALCOMM Personal Electronics
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn.:Director of Strategic Accounts, Sony/QUALCOMM CDMA Marketing
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇
Secretary
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn.:Vice President and General Manager, Subscriber Products Division
with a copy to:
SONY ELECTRONICS INC.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
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Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn.:President, Wireless Telecommunications Co.
The above addresses can be changed by providing notice to the other
Party in accordance with this subsection 11.7.
11.8 Dispute Resolution. (a) Subject to subsections 10.2, 10.3,
------------------
10.8, 10.9 and 11.10, in the event any controversy, claim, dispute, difference
or misunderstanding arises out of or relates to this Agreement, any term or
condition hereof, any of the work to be performed hereunder or in connection
herewith, the respective System Managers of the Owner and the Vendor will meet
and negotiate in good faith in an attempt to amicably resolve such controversy,
claim, dispute, difference or misunderstanding in writing. Such System
Managers must meet for this purpose within ten (10) Business Days, or such
other time period mutually agreed to by the Parties, after such controversy,
claim, dispute, difference or misunderstanding arises. If the Parties are
unable to resolve the controversy, claim, dispute, difference or
misunderstanding through good faith negotiations within such ten (10) Business
Day period, each Party will, within five (5) Business Days after the expiration
of such ten (10) Business Day period, prepare a written position statement
which summarizes the unresolved issues and such Party's proposed resolution.
Such position statement must be delivered by the Vendor to the Owner's Vice
President of Engineering or Operations or then equivalent officer and by the
Owner to the Vendor's corresponding officer or representative for resolution
within (5) Business Days, or such other time period mutually agreed to by the
Parties.
(b) If the Parties continue to be unable to resolve the controversy,
claim, dispute, difference or misunderstanding, either Party may initiate
arbitration in accordance with the provisions of subsection 11.9; provided,
--------
however, that with respect to any controversy, claim, dispute, difference
- - -------
or misunderstanding (other than an undisputed claim with respect to the payment
of money) arising out of or relating to this Agreement by which either Party
seeks to obtain from the other monetary damages in excess of one million dollars
($1,000,000), either Party, in such case, may commence an action in any state or
federal court in accordance
with subsection 11.12 to resolve such matter in lieu of proceeding with an
arbitration pursuant to and in accordance with subsection 11.9. The arbitrators
hired or otherwise chosen pursuant to and in accordance with the terms of this
Agreement will determine issues of arbitrability pursuant to the terms of this
Agreement but may not in any way limit, expand or otherwise modify the terms of
this Agreement nor will they have any authority to award punitive or other
damages in excess of compensatory damages (other than as specifically set forth
in this Agreement) and each Party irrevocably waives any such claim thereto when
invoking the arbitration provisions of subsection 11.9.
11.9 Arbitration. (a) An arbitration proceeding initiated by
-----------
either Party under this Agreement with respect to any controversy, claim,
dispute, difference or misunderstanding will be conducted in New York in
accordance with the Commercial Arbitration rules of the AAA, except that, at
the request of either Party, a stenographic
-58-
transcript of the testimony and proceedings will be taken and the arbitrators
will base their decision upon the records and briefs of the Parties.
(b) Such arbitration will be initiated by either Party by notifying the
other Party in writing and will be settled before three (3) impartial
arbitrators, one of whom will be named by the Owner, one by the Vendor and the
third by the two arbitrators appointed by the Owner and the Vendor,
respectively. All of the named arbitrators will have significant experience in
the wireless telecommunications industry. If either the Owner or the Vendor
fails to select an arbitrator within ten (10) days after notice has been given
of the initiation of the arbitration, the officer in charge of the New York
office of the AAA will have the right to appoint the other arbitrator, and the
two arbitrators thus chosen will then select the third arbitrator.
(c) Except as the Parties may otherwise mutually agree, the arbitration
hearings will commence within fifteen (15) Business Days after a Party's
initiation of the arbitration. The Federal Rules of Evidence will apply and
reasonable discovery, including depositions, will be permitted. Discovery
issues will be decided by the arbitrators and post-hearing briefs will be
permitted.
(d) The arbitrator will render a decision within ten (10) days after the
conclusion of the hearing(s) and submission of post-hearing briefs and a
written opinion setting forth findings of fact and conclusions of law will be
made available to the Parties within that time period. The decision of the
majority of the arbitrators regarding the matter submitted will be final and
binding upon the Parties. Judgment upon the award rendered by the arbitrators
may be entered in any court having jurisdiction thereof.
(e) Each Party will pay for the services and expenses of the arbitrator
appointed by it, its witnesses and attorneys, and all other costs incurred in
connection with the arbitration (including, without limitation, the cost of the
services and expenses of the arbitrator appointed by the two arbitrators
appointed by the Parties) will be paid in equal part by the Parties, unless the
award will specify a different division of the costs. Unless otherwise
specifically stated in this Agreement, during the pendency of any arbitration
proceedings, the Parties agree to continue to perform their obligations
hereunder in the same manner as prior to the institution of arbitration
proceedings.
11.10 Other Remedies. Notwithstanding anything to the contrary
--------------
herein contained, each Party will be entitled to pursue any equitable rights
and remedies that are available at law or in equity without complying with
subsection 11.9.
11.11 Tolling. All applicable statutes of limitation will be tolled
-------
to the extent permitted by Applicable Law while the dispute resolution
procedures specified in subsections 11.8 and 11.9 are pending, and nothing
herein will be deemed to bar any Party from taking such action as the Party may
reasonably deem to be required to effectuate such tolling.
-59-
11.12 Governing Law and Forums. This Agreement is governed by the
------------------------
laws and statutes of the State of New York, exclusive of New York's conflict of
laws rules. This Agreement will be deemed to be made and executed in the State
of New York. If one Party commences a lawsuit in relation to this Agreement
against the other Party, such lawsuit can only be brought in the State of New
York. The Parties hereby waive a trial by jury in any such lawsuit. The
Vendor and the Owner each hereby irrevocably (a) agrees that any suit, action
or other legal proceeding arising out of or relating to this Agreement will be
brought in the Federal District Court for the Southern District of New York
which court will have exclusive jurisdiction over any controversy arising out
of this Agreement, (b) consents to the jurisdiction of such court in any such
suit, action or proceeding and (c) waives any objection which it may have to
the laying of venue of any such suit, action or proceeding in such court and
claim that any such suit, action or proceeding has been brought in an
inconvenient forum. Service of process in any suit, action or proceeding may
be made by mailing or delivering a copy of such process to the Owner or the
Vendor, as the case may be, at the addresses indicated in subsection 11.7
hereof and in the manner set forth in such subsection 11.7. Nothing in this
subsection 11.12 will affect the right of the Owner or the Vendor to serve
legal process in any other manner permitted by law.
11.13 Entire Agreement. This Agreement, together with all
----------------
Appendices, Exhibits and Schedules attached hereto, which are incorporated
herein by this reference, constitutes the entire agreement between the Parties
and supersedes all prior oral or written negotiations and agreements between
the Parties with respect to the subject matter hereof. No modification,
variation or amendment to this Agreement will be effective unless made in
writing and signed by duly authorized representatives of each of the Parties.
Except as otherwise provided in this Agreement, any additional or inconsistent
terms stated by the Owner in any Purchase Order issued hereunder will be of no
force or effect other than to express types and quantities of Products ordered
and shipment destinations.
11.14 Improvements, Inventions and Innovations. All rights in any
----------------------------------------
improvements, inventions, and innovations made by the Owner will vest in the
Owner, and the Owner and its Affiliates will have the right to exploit such
improvements, inventions, and innovations. All rights in any improvements,
inventions and innovations made by the Vendor will vest in the Vendor, and the
Vendor and its affiliates will have the right to exploit such improvements,
inventions and innovations.
11.15 Conflicts. In the event of any conflict or inconsistency
---------
among the provisions of this Agreement and the documents attached hereto and
incorporated herein, such conflict or inconsistency will be resolved by giving
precedence to this Agreement and thereafter to the Exhibits, Schedules and the
Appendices.
11.16 Independent Contractors. The relationship between the Vendor
-----------------------
and the Owner pursuant to this Agreement is that of independent contractors.
The Vendor and the Owner are not joint venturers, partners, principal and
agent, master and servant,
-60-
employer or employee, and have no other relationship pursuant to this Agreement
other than independent contracting parties.
11.17 Force Majeure. If the performance of this Agreement
-------------
(including without limitation any deliveries hereunder) is interfered with by
reason of any circumstance beyond the reasonable control of the Party affected,
including without limitation, fire, acts of God or the public enemy, riots and
insurrections, strikes, boycotts or lockouts, embargoes, judicial action, lack
of or inability to obtain export permits or approvals, necessary labor,
materials, energy, components or machinery, and acts of civil or military
authorities (each an event of "Force Majeure"), then the Party affected will be
excused from such performance on a day-for-day basis to the extent of such
interference (and the other Party will likewise be excused from performance on
a day-for-day basis to the extent such Party's obligations relate to the
performance so interfered with); provided that the Party so affected
-------- ----
will use its best efforts under the circumstances to remove such causes of
nonperformance. In the event of a Force Majeure claimed by the Vendor which
lasts in excess of one-hundred twenty (120) days from the commencement of any
such claim by the Vendor hereunder, the Owner will have the right, but not the
obligation, to terminate this Agreement. The Vendor will not be liable to the
Owner for any damages or other amounts as a result of any termination pursuant
to this subsection 11.17. Notwithstanding anything in this subsection 11.17 to
the contrary, from the Effective Date until July 1, 1997, neither Party will be
entitled to claim an event of Force Majeure pursuant to this subsection 11.17
or otherwise, due to or based upon lack or inability to obtain export permits
or approvals, or lack of necessary labor, materials, energy, components or
machinery, unless such lack or inability to obtain export permits or approvals,
lack of necessary labor, materials, energy, components or machinery is due to a
verifiable force majeure claim from a third party supplier (to the Owner or the
Vendor, as the case may be) based upon a fire, act of God or public enemy, riot
or insurrection, strike, boycott or lockout, embargo, judicial action, and/or
acts of civil or military authorities that is beyond the reasonable control of
such third party supplier.
11.18 Change of Control of the Vendor. The Vendor will not
-------------------------------
consolidate with or merge into any other Person or convey, transfer or lease
(other than in connection with sale leaseback or lease financing transactions
in connection with ongoing Vendor operations) all or substantially all of its
assets to any Person, nor will the Vendor permit any Person or group (as such
term is defined in the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) to own or acquire fifty percent (50%) of the value of the
Vendor's equity interests where such Person or group did not own as of the
Effective Date in excess of ten percent (10%) of such equity interests (any
such Person or group will be referred to as the "Vendor's Succeeding Entity"),
unless:
(i) the Vendor's Succeeding Entity will agree to assume the
obligations of the Vendor under this Agreement; and
(ii) the Owner will have approved the transaction, based solely on
(i) the creditworthiness of the Vendor's Succeeding Entity,
(ii) whether the Vendor's Succeeding Entity is a competitor
of the Owner and
-61-
(iii) whether in the Owner's reasonable judgment the Vendor's
Succeeding Entity will be able to fulfill the obligations of
the Vendor (including, but not limited to, the Vendor's
obligations as to then present or future orders) under this
Agreement.
11.19 Change of Control of the Owner. Except as otherwise permitted
------------------------------
under subsection 11.1, the Owner will not consolidate with or merge into any
other business entity or convey, transfer or lease all or substantially all of
its assets to any Person, nor will the Owner permit any Person or group (as
such term is defined in the Exchange Act) to own or acquire fifty percent (50%)
of the value of the Owner's limited partnership interests or general
partnership interests where such Person or group did not own as of the
Effective Date in excess of ten percent (10%) of either of such partnership
interests (any such Person or group will be referred to as the "Owner's
Succeeding Entity"), unless:
(a) the Owner's Succeeding Entity will agree to assume the obligations
of the Owner under this Agreement; and
(b) the Vendor will have approved the transaction, based solely on (i)
the creditworthiness of the Owner's Succeeding Entity and (ii) whether the
Owner's Succeeding Entity is a direct competitor of the Vendor or any affiliate
of the Vendor in the business of selling wireless telephones.
11.20 Offset. Either Party may deduct or retain out of any moneys
------
which may be due or become due to the other Party hereunder or otherwise any
amounts such other Party owes to such first Party hereunder or otherwise.
11.21 Additional Insured. In addition to any indemnities for
------------------
product liability provided by the Vendor to the Owner hereunder as of the
Effective Date, the Vendor will name the Owner as an additional insured on its
product liability insurance policies to provide the Owner with ten million
dollars ($10,000,000) of coverage under such policies. Such policies will be
with reputable carriers and will have terms reasonably satisfactory to the
Owner. With respect to such policies as of the Effective Date, the Owner
acknowledges that the carriers and the terms of such policies are satisfactory
to the Owner.
SECTION 12. AFFILIATES
12.1 Agreements with Initial Affiliates. During the Initial Term of
----------------------------------
this Agreement, the Owner will have the right, but not the obligation, to
require that the Vendor enter into separate agreements with any Initial
Affiliate designated by the Owner (each, an "Initial Affiliate Agreement") for
the supply of Products pursuant to the same prices as set forth herein and on
similar warranty and indemnity terms and conditions as those set forth in this
Agreement.
-62-
12.2 Additional Affiliates. On a quarterly basis commencing on the
---------------------
Effective Date and during the Initial Term of this Agreement, the Owner may,
upon fifteen (15) days' prior written notice to the Vendor, designate any
Person which has been licensed to use PCS in the Territory but which is not an
Initial Affiliate as an "Additional Affiliate"; provided that the
-------- ----
Vendor will have a reasonable opportunity to review and approve such
designation, such approval not to be unreasonably withheld, based upon (i)
reasonable credit criteria, (ii) the fact that such proposed Additional
Affiliate has not in the past materially breached prior material agreements
with the Vendor or its affiliates, (iii) the fact that the proposed Additional
Affiliate is not, at the time of such determination, a direct competitor to the
Vendor or its affiliates in the wireless telecommunications business and (iv)
the fact that the proposed Additional Affiliate is not, at the time of such
determination, otherwise engaged with the Vendor or its affiliates in a
material agreement for the purchase and/or supply of PCS CDMA wireless
technology; and provided, further, that (x) the Owner, any Partner or
-------- -------
any Initial Affiliate has at least a ten percent (10%) equity ownership in such
Person, (y) such Person is controlled by or under the common control with the
Owner, any Partner or any Initial Affiliate or (z) there exists between the
Owner and such Person an Additional Affiliate Arrangement.
12.3 Agreements with Additional Affiliates. During the Initial Term
-------------------------------------
of this Agreement, the Owner will have the right, but not the obligation, to
require that the Vendor enter into separate agreements with any Additional
Affiliate designated by the Owner (each, an "Additional Affiliate Agreement")
for the supply of Products at similar price and warranty terms as are then
available to the Owner pursuant to the terms of this Agreement. The Vendor
must enter into good faith negotiations for the establishment of such
Additional Affiliate Agreements with any such Additional Affiliate promptly
upon the designation of such Additional Affiliate by the Owner and upon notice
to the Vendor that such Additional Affiliate desires to enter into an
Additional Affiliate Agreement. Any Additional Affiliate that enters into an
Additional Affiliate Agreement with the Vendor will have the right to choose
among the Products offered to the Owner under this Agreement solely for use
within the Nationwide Network.
12.4 Affiliate Rights. Notwithstanding anything herein contained to
----------------
the contrary, Affiliates will not be deemed third party beneficiaries to this
Agreement or otherwise have any rights hereunder. Only the Owner may designate
a Person as an Affiliate in accordance with the terms of this Section 12 and
only the Owner has the right and/or the ability to enforce any rights hereunder
against the Vendor.
SECTION 13. REPRESENTATIONS AND WARRANTIES
13.1 Representations and Warranties of the Vendor and the
-----------------------------------------------------
Guarantors. The Vendor and the Guarantors hereby represent and warrant to
- - ----------
the Owner as follows:
(a) Due Organization of the Vendor and the Guarantors. (i) The
-------------------------------------------------
Vendor is a general partnership, validly existing and in good standing under
the laws of the State of California and has all requisite power and authority
to own and operate its business and
-63-
properties and to carry on its business as such business is now being conducted
and is duly qualified to do business in all jurisdictions in which the
transaction of its business in connection with the performance of its
obligations under this Agreement makes such qualification necessary or
required.
(ii) QUALCOMM is a corporation, validly existing and in good
standing under the laws of the State of Delaware and has all requisite power
and authority to own and operate its business and properties and to carry on
its business as such business is now being conducted and is duly qualified to
do business in all jurisdictions in which the transaction of its business in
connection with the performance of its obligations under this Agreement makes
such qualification necessary or required.
(iii) Sony is a corporation, validly existing and in good standing
under the laws of the State of Delaware and has all requisite power and
authority to own and operate its business and properties and to carry on its
business as such business is now being conducted and is duly qualified to do
business in all jurisdictions in which the transaction of its business in
connection with the performance of its obligations under this Agreement makes
such qualification necessary or required.
(b) Due Authorization of the Vendor and the Guarantors; Binding
------------------------------------------------------------
Obligation. The Vendor and each of the Guarantors have full partnership or
- - ----------
corporate power and authority to execute and deliver this Agreement and to
perform their respective obligations hereunder, and the execution, delivery and
performance of this Agreement by each of the Vendor and the Guarantors has been
duly authorized by all necessary corporate and/or partnership action on the
part of each of the Vendor and the Guarantors; this Agreement has been duly
executed and delivered by the Vendor and is the valid and binding obligation of
the Vendor enforceable in accordance with its terms, except as enforcement
thereof may be limited by or with respect to the following: (i) applicable
insolvency, moratorium, bankruptcy, fraudulent conveyance and other similar
laws of general application relating to or affecting the rights and remedies of
creditors; (ii) application of equitable principles (whether enforcement is
sought in proceedings in equity or at law); and (iii) provided the remedy of
specific enforcement or of injunctive relief is subject to the discretion of
the court before which any proceeding therefore may be brought. This Agreement
has been duly executed and delivered by each of the Guarantors, in their
capacity as guarantors pursuant to Section 14, and is the valid and binding
obligation of each Guarantor enforceable in accordance with its terms, except
as enforcement thereof may be limited by or with respect to the following: (i)
applicable insolvency, moratorium, bankruptcy, fraudulent conveyance and other
similar laws of general application relating to or affecting the rights and
remedies of creditors; (ii) application of equitable principles (whether
enforcement is sought in proceedings in equity or at law); and (iii) provided
the remedy of specific enforcement or of injunctive relief is subject to the
discretion of the court before which any proceeding therefore may be brought.
(c) Non-Contravention. The execution, delivery and performance of
-----------------
this Agreement by the Vendor and the Guarantors and the consummation of the
transactions
-64-
contemplated hereby do not and will not contravene the partnership arrangements
governing the conduct of the partners in the Vendor or corporate arrangements
governing each of the Guarantors and do not and will not conflict with or
result in (i) a breach of or default under any material indenture, mortgage,
instrument, judgment, decree, order or ruling to which the Vendor or any of the
Guarantors are a party or by which it or any of its properties is bound or
affected, or (ii) a breach of any Applicable Law.
(d) Regulatory Approvals. All material authorizations by, approvals
--------------------
or orders by, consents of, notices to, filings with or other acts by or in
respect of any Governmental Entity or any other Person required in connection
with the execution, delivery and performance of this Agreement by the Vendor
and the Guarantors have been obtained or will be obtained in due course.
(e) Non-Infringement. Except as set forth on Schedule 7, the Vendor
----------------
and the Guarantors each represent and warrant that as of the Effective Date
there are no threatened or actual claims or threatened or actual suits in
connection with patents and other intellectual property matters that would or
could materially adversely affect the Vendor's or the Guarantors' ability to
perform their obligations under this Agreement.
(f) Requisite Knowledge. The Vendor has or will obtain all
-------------------
requisite knowledge, know-how, skill, expertise and experience to perform its
obligations in accordance with the terms of this Agreement.
(g) Financial Capacity. The Vendor has the financial, management
------------------
and manufacturing capacity and capabilities to do the work in a timely manner
in accordance with the terms of this Agreement.
13.2 Representations and Warranties of the Owner. The Owner hereby
-------------------------------------------
represents and warrants to the Vendor and each Guarantor as follows:
(a) Due Organization of the Owner. The Owner is a limited
-----------------------------
partnership, validly existing and in good standing under the laws of the State
of Delaware and has all requisite power and authority to own and operate its
business and properties and to carry on its business as such business is now
being conducted and is duly qualified to do business in Delaware and in any
other jurisdiction in which the transaction of its business makes such
qualification necessary or required.
(b) Due Authorization of the Owner; Binding Obligation. The Owner
--------------------------------------------------
has full power and authority to execute and deliver this Agreement and to
perform its obligations hereunder, and the execution, delivery and performance
of this Agreement by each of the Owner have been duly authorized by all
necessary partnership action on the part of the Owner; this Agreement has been
duly executed and delivered by the Owner and is the valid and binding
obligation of the Owner enforceable in accordance with its terms, except as
enforcement thereof may be limited by or with respect to the following: (i)
applicable insolvency, moratorium, bankruptcy, fraudulent conveyance and other
-65-
similar laws of general application relating to or affecting the rights and
remedies of creditors; (ii) application of equitable principles (whether
enforcement is sought in proceedings in equity or at law); and (iii) provided
the remedy of specific enforcement or of injunctive relief is subject to the
discretion of the court before which any proceeding therefor may be brought.
(c) Non-Contravention. The execution, delivery and performance of
-----------------
this Agreement by the Owner and the consummation of the transactions
contemplated hereby do not and will not contravene the partnership arrangements
governing the conduct of the Partners in the Owner and do not and will not
conflict with or result in (i) a breach of or default under any material
indenture, agreement, instrument, judgment, decree, order or ruling to which
the Owner is a Party or by which it or any of its properties is bound or
affected, or (ii) a breach of any Applicable Law.
(d) Regulatory Approvals. All material authorizations by, approvals
--------------------
or orders by, consents of, notices to, filings with or other acts by or in
respect of any Governmental Entity or any other Person required in connection
with the execution, delivery and performance of this Agreement by the Owner
have been obtained or will be obtained in due course.
(e) Requisite Knowledge. The Owner has all requisite knowledge,
-------------------
know-how, skill, expertise and experience to perform its obligations under this
Agreement.
SECTION 14. GUARANTY
14.1 Guaranty. Each of the Guarantors hereby irrevocably and
---------
unconditionally, severally but not jointly, guarantees the punctual payment and
performance of each and every obligation of the Vendor under this Agreement
and agrees that if for any reason whatsoever the Vendor will fail or be unable
duly, punctually and fully to perform any such obligation under this Agreement,
either of the Guarantors will forthwith perform each and every such obligation,
or cause each such obligation to be performed, without regard to any exercise
or nonexercise by the Owner of any right, remedy, power or privilege under or
in respect of the Agreement against the Vendor. The obligations of each of the
Guarantors will be subject to the Owner providing each of the Guarantors
written notice (unless the giving of such notice is prevented by Applicable Law
or court order) of any default of the Vendor in performing any obligation for
which the Owner is seeking the guaranty of either Guarantor. The Guarantors
will cure such default within fifteen (15) Business Days after receipt by the
Guarantors of written notice thereof specifying the nature of such default. In
addition, the Guarantors agree to reimburse the Owner on demand for any and all
expenses (including counsel fees and expenses) reasonably incurred by the Owner
in enforcing or attempting to enforce any rights under this guaranty.
Notwithstanding anything to the contrary stated in this Section 14, QUALCOMM
will only be liable for up to fifty one percent (51%) of the obligations under
this Section 14, including, but not limited, to all payment obligations under
this Section 14 and Sony will only be liable for up to forty
-66-
nine percent (49%) of the obligations under this Section 14, including, but not
limited to, all payment obligations under this Section 14.
14.2 Guaranty Absolute. The liability of each of the
-----------------
Guarantors under this Guaranty with respect to the guaranteed obligations will
be absolute and unconditional, irrespective of:
(a) any lack of validity or enforceability of this Agreement or any
other agreement or instrument relating thereto;
(b) any amendment to, waiver of or consent to departure from, or
failure to exercise any right, remedy, power or privilege under or
in respect of, this Agreement, unless the Owner, and any assignee
of Owner pursuant to Subsection 11.1, shall expressly agree
otherwise in writing, and then only to the extent that such
liability is released in such written agreement;
(c) any exchange, release or nonperfection of any collateral, or any
release or amendment or waiver of or consent to departure from any
other guaranty of or security for the performance of all or any of
the obligations of the Vendor under the Agreement;
(d) the insolvency of the Vendor or any other guarantor or any
proceeding, voluntary or involuntary, involving the bankruptcy,
insolvency, receivership, reorganization, arrangement, dissolution
or liquidation of the Vendor or any other guarantor or any defense
which the Vendor or any other guarantor may have by reason of the
order, decree or decision of any court or administrative body
resulting from any such proceeding;
(e) any change in ownership of the Vendor or any change, whether direct
or indirect, in the relationship of either of the Guarantors to the
Vendor, including, without limitation, any such change by reason of
any merger or any sale, transfer, issuance, or other disposition of
any stock of the Vendor, each of the Guarantors or any other
entity; and
(f) any other circumstance of a similar or different nature that might
otherwise constitute a defense available to either of the
Guarantors as a guarantor.
Except as provided above in this subsection 14.2, in no event shall
the obligations of the Guarantors hereunder exceed the obligations the
Guarantors would have had if either were itself a party to this Agreement, and
each of the Guarantors shall have all rights and defenses of the "Vendor" under
the terms of this Agreement. This Guaranty shall continue to be effective, or
be reinstated, as the case may be, if at any time any payment made, or any
part thereof, to the Owner by the Vendor under this Agreement or by either of
the Guarantors hereunder is ordered rescinded or must otherwise be returned by
the Owner to the Vendor or its representative for any reason,
-67-
including, without limitation, upon the insolvency, bankruptcy, reorganization,
dissolution or liquidation of the Vendor or otherwise, all as though such
payment had not been made.
14.3 Waiver. Each of the Guarantors hereby waives promptness,
------
diligence, notice of acceptance and any other notice with respect to this
guaranty and any requirement that the Owner exhaust any right or take any
action against or with respect to the Vendor or any other person or entity or
any property.
14.4 No Subrogation. Notwithstanding any payment or payments
--------------
made by either of the Guarantors under or pursuant to this Section 14 or any
set-off or application of funds of either of the Guarantors by the Owner,
neither of the Guarantors shall, until all of the Vendor's obligations under
this Agreement (including warranty obligations) shall have been fulfilled, (a)
be entitled to be subrogated to any of the rights of Owner against the Vendor
or any other guarantor or in any collateral security or guaranty or right of
offset held by the Owner for the performance and payment of all of the
obligations of the Vendor under this Agreement, or (b) seek any reimbursement
or contribution from the Vendor or any other guarantor in respect of any
payment, set-off or application of funds made by either of the Guarantors under
or pursuant to this Section 14.
14.5 No Petition. Neither of the Guarantors will, without the
-----------
prior consent of Owner, voluntarily commence, or join with or solicit any other
person or entity in commencing, any case or other proceeding seeking
liquidation, reorganization or other relief with respect to the Vendor 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 the Vendor.
14.6 Continuing Guaranty: Assignments. The Guaranty set forth
--------------------------------
in this Section 14 will be construed as a continuing, absolute and
unconditional guaranty of payment and performance, and, except as specifically
provided in subsection 14.1 above, the obligations of the Guarantors hereunder
will not be conditioned or contingent upon the pursuit by Owner at any time of
any right or remedy against the Vendor or against any other person or entity
which may be or become liable in respect of all or any part of the obligations
of the Vendor under this Agreement or against any collateral security or
guaranty therefor. The Guaranty set forth in this Section 14 will (i) remain
in full force and effect until satisfaction in full of all the Vendor's
obligations under this Agreement, (ii) be binding upon each of the Guarantors
and their respective successors and (iii) inure to the benefit of and be
enforceable by the Owner and its successors, transferees and assigns. Except
as may be necessary to fulfill its obligations hereunder in a timely manner,
and with the consent of Owner, not to be unreasonably withheld or delayed,
neither of the Guarantors will have any right, power or authority to delegate
all or any of its obligations hereunder; provided that upon any such
-------- ----
delegation permitted hereunder, each of the Guarantors will nevertheless remain
liable for the performance of any obligations so delegated.
-68-
14.7 Other Terms. Subsections 11.1, 11.2, 11.3, 11.4, 11.5,
-----------
11.7, 11.8, 11.9, 11.10, 11.11 and 11.12 will apply to and be binding upon each
of the Guarantors to the same extent as such provisions apply to and are
binding upon the Vendor. In executing this Agreement, each of QUALCOMM and
Sony are directly bound by the provisions of subsection 3.3 applicable to them,
in addition to their obligations as Guarantors hereunder. For purposes of this
Agreement, any breach by either Guarantor of any representation or warranty in
this Agreement shall be deemed to only be a breach of such representation and
warranty by the Vendor, and not such Guarantor; provided that this
-------- ----
sentence will in no way limit the Guarantors' obligations under Section 14.
SECTION 15. OTHER
15.1 Owner Liabilities. The Parties understand and agree that
-----------------
none of the Partners, nor any of their affiliates (other than the Owner), have
guaranteed or otherwise are now in any way liable with respect to any
obligations or liabilities of the Owner or any of its subsidiaries pursuant to
or in connection with this Agreement. The Parties further understand and agree
that neither the Owner nor any of its subsidiaries will guarantee or otherwise
be in any way liable for any obligations or liabilities of any of the Partners
or any affiliate of the Owner pursuant to this Agreement unless, and only to
the extent the Owner or any one of its subsidiaries expressly agrees in writing
to guarantee or otherwise be liable for such liability.
15.2 Counterparts. This Agreement may be executed by one or
------------
more of the Guarantors and the Parties to this Agreement on any number of
separate counterparts, and all of said counterparts taken together will be
deemed to constitute one and the same instrument.
-69-
THE OWNER, THE VENDOR AND EACH OF THE GUARANTORS HAVE READ THIS
AGREEMENT INCLUDING ALL APPENDICES, EXHIBITS AND SCHEDULES HERETO AND AGREE TO
BE BOUND BY ALL THE TERMS AND CONDITIONS HEREOF AND THEREOF.
IN WITNESS WHEREOF, the Parties hereto and each of the Guarantors
have caused their authorized representatives to execute this Agreement
effective as of the date first set forth above.
SPRINT SPECTRUM L.P.,
Owner
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
By: _______________________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Chief Business Development Officer
QUALCOMM Personal Electronics,
Vendor
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
By: _______________________________________
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Vice President and General Manager
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇,
Guarantor
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
By: _______________________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President and General Manager
Subscriber Products
SONY ELECTRONICS INC.,
Guarantor
/s/ ▇▇▇▇▇▇ ▇▇▇▇
By: _______________________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇
Title: President WTC
-70-
APPENDIX 1
----------
[ ]
[ ]
SCHEDULE 1
Independent Auditors
- Ernst & Yong LLP
- ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
- Price Wasterhouse LLP
- Deloitte & Touche LLP
- KPMG Peat Marwick LLP
This list at all times throughout the Term or this Agreement specifically
exclude the then current auditors or either the Vendor, the Owner or the
Guarantors.
SCHEDULE 2
- - ----------
Initial Affiliates
(a) Each of the Partners and their Operating Subsidiaries.
(b) APC and its Operating Subsidiaries.
(c) PhillieCo and its Operating Subsidiaries.
(d) TCG and its Operating Subsidiaries.
(e) NewTelCo. And its operating Subsidiaries.
SCHEDULE 3
[Intentionally omitted]
SCHEDULE 4
QUALCOMM Personal Electronics
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
SCHEDULE 5
None.
SCHEDULE 6
List of Proprietary Marks
I. Registered Trademarks (circle R designation)
1. QUALCOMM
2. Digital by QUALCOMM (with stylized Q logo)
3. Sony
II. Unregistered Trademarks (use TM designation)
1. Data on the Go
2. SmartKeys
3. SmartRate
4. Where Digital Comes From
5. Pure Voice
6. Q (with stylized Q logo
SCHEDULE 7
----------
[ ]
Schedule 7 -- Page 1
[ ]
SCHEDULE 8
First Forecast
Owner Product Requirements For Vendor Subscriber Units
with Accompanying Material Accessories
1st Supply Period - 6 mos 2nd Annual Supply Period 3rd Annual Supply Period
1996 1997 1998
Jan -- 85,000 2,500
Feb -- 85,000 2,500
Mar -- 90,000 2,500
Apr -- 70,000 2,500
May -- 55,000 --
Jun -- 55,000 --
Jul -- 45,000 --
Aug -- 55,000 --
Sep 55,000 65,000 --
Oct 50,000 125,000 --
Nov 60,000 125,000 --
Dec 70,000 95,000 --
TOTAL 235,000 950,000 10,00
GRAND TOTAL 1,195,000
Owner Product Requirements Forecast - Non-Accompanying Accessories-
Desktop Charger with RED/GREEN LED (and AC Adapter)
1st Supply Period - 6 mos 2nd Annual Supply Period 3rd Annual Supply Period
1996 1997 1998
Jan -- 8,500 --
Feb -- 8,500 --
Mar -- 9,000 --
Apr -- -- --
May -- -- --
Jun -- -- --
Jul -- -- --
Aug -- -- --
Sep -- -- --
Oct -- -- --
Nov 16,500 -- --
Dec 7,000 -- --
TOTAL 23,500 26,000 0
GRAND TOTAL 49,500
____________________________
o For extra Accessories which are not Material Accessories which are to accompany Subscriber Units.
Owner Product Requirements Forecast - Non-Accompanying Accessories-
Hands Free Car Kit (with audio design improvements)
1st Supply Period - 6 mos 2nd Annual Supply Period 3rd Annual Supply Period
1996 1997 1998
Jan -- 4,250 --
Feb -- 4,250 --
Mar -- 4,500 --
Apr -- -- --
May -- -- --
Jun -- -- --
Jul -- -- --
Aug -- -- --
Sep -- -- --
Oct -- -- --
Nov 8,250 -- --
Dec 3,500 -- --
TOTAL 11,750 13,000 0
GRAND TOTAL 24,750
____________________________
o For extra Accessories which are not Material Accessories which are to accompany Subscriber Units.
Owner Product Requirements Forecast - Non-Accompanying Accessories-
Travel Charger
1st Supply Period - 6 mos 2nd Annual Supply Period 3rd Annual Supply Period
1996 1997 1998
Jan -- 25,500 --
Feb -- 25,500 --
Mar -- 27,000 --
Apr -- -- --
May -- -- --
Jun -- -- --
Jul -- -- --
Aug -- -- --
Sep -- -- --
Oct -- -- --
Nov 49,500 -- --
Dec 21,000 -- --
TOTAL 70,500 78,000 0
GRAND TOTAL 148,500
____________________________
o For extra Accessories which are not Material Accessories which are to accompany Subscriber Units.
Owner Product Requirements Forecast - Non-Accompanying Accessories-
Cigarette Lighter Adapter with Fast Charge
1st Supply Period - 6 mos 2nd Annual Supply Period 3rd Annual Supply Period
1996 1997 1998
Jan -- 63,750 --
Feb -- 63,750 --
Mar -- 67,500 --
Apr -- -- --
May -- -- --
Jun -- -- --
Jul -- -- --
Aug -- -- --
Sep -- -- --
Oct -- -- --
Nov 123,750 -- --
Dec 52,500 -- --
TOTAL 176,250 195,000 0
GRAND TOTAL 371,250
____________________________
o For extra Accessories which are not Material Accessories which are to accompany Subscriber Units.
Owner Product Requirements Forecast - Non-Accompanying Accessories-
Data Adapter Cable
1st Supply Period - 6 mos 2nd Annual Supply Period 3rd Annual Supply Period
1996 1997 1998
Jan -- -- --
Feb -- -- --
Mar -- -- --
Apr -- -- --
May -- -- --
Jun -- -- --
Jul -- -- --
Aug -- -- --
Sep -- -- --
Oct -- -- --
Nov -- -- --
Dec -- -- --
TOTAL 0 0 0
GRAND TOTAL 0
____________________________
o For extra Accessories which are not Material Accessories which are to accompany Subscriber Units.
Owner Product Requirements Forecast - Non-Accompanying Accessories-
Standard Battery (Lithium Ion)
1st Supply Period - 6 mos 2nd Annual Supply Period 3rd Annual Supply Period
1996 1997 1998
Jan -- 25,500 --
Feb -- 25,500 --
Mar -- 27,000 --
Apr -- -- --
May -- -- --
Jun -- -- --
Jul -- -- --
Aug -- -- --
Sep -- -- --
Oct -- -- --
Nov 49,500 -- --
Dec 21,000 -- --
TOTAL 70,500 78,000 0
GRAND TOTAL 148,500
____________________________
o For extra Accessories which are not Material Accessories which are to accompany Subscriber Units.
Owner Product Requirements Forecast - Non-Accompanying Accessories-
Leather Case
1st Supply Period - 6 mos 2nd Annual Supply Period 3rd Annual Supply Period
1996 1997 1998
Jan -- -- --
Feb -- -- --
Mar -- -- --
Apr -- -- --
May -- -- --
Jun -- -- --
Jul -- -- --
Aug -- -- --
Sep -- -- --
Oct -- -- --
Nov 82,500 -- --
Dec 0 -- --
TOTAL 82,500 0 0
GRAND TOTAL 82,500
____________________________
o For extra Accessories which are not Material Accessories which are to accompany Subscriber Units.
Owner Product Requirements Forecast - Non-Accompanying Accessories-
PCMIA Adapter
1st Supply Period - 6 mos 2nd Annual Supply Period 3rd Annual Supply Period
1996 1997 1998
Jan -- -- --
Feb -- -- --
Mar -- -- --
Apr -- -- --
May -- -- --
Jun -- -- --
Jul -- -- --
Aug -- -- --
Sep -- -- --
Oct -- -- --
Nov -- -- --
Dec -- -- --
TOTAL 0 0 0
GRAND TOTAL 0
____________________________
o For extra Accessories which are not Material Accessories which are to accompany Subscriber Units.