Exhibit 10.75
HUNGAROTEL TAVKOZLESI RESZVENYTARSASAG
ERICSSON KORLATOLT FELELOSSEGU TARSASAG
TURN-KEY CONTRACT
May 17, 1996
1 INTRODUCTION
1.1 Purpose
This document constitutes the agreement between Hungarotel Rt. and
Ericsson Kft., governing the latter's provision, on a Turn-key basis,
of a telephone network of 7,500 telephone lines for the Oroshaza and
Bekescsaba Primary Regions based upon the tender invitation dated 1
October, 1995 from Owner.
1.2 Parties declare they have all the necessary authorizations to
conclude the present Contract.
2 DEFINITIONS
"Building(s)" means the premises as described in Attachment V used for
technical purposes which are necessary and suitable for the
accommodation of the telecommunication equipment and system included in
the Contract. The building can be ordinary construction or container.
"Change Order" means the process to handle the changes requested by
Owner or Contractor that will affect the value, schedule, or design of
the Contract.
"Connected Capacity/Connected Lines" means those Ordered Lines where
the connection to particular subscribers actually occurred and by
connecting a telephone set to it voice grade telephone calls can be
originated and terminated.
"Contract" means this Contract concluded between Owner and Contractor,
including all the documents being referred there as well as the
mutually accepted modifications and/or alterations.
"Contractor" means Ericsson Kft and includes its successors.
"Customer Premise Equipment" (CPE) means the subscriber
telephone instrument.
"Day" means calendar day unless stated otherwise.
"Goods" means all the equipment, material, components, software, or any
other component, which must be fully or provisionally type approved in
Hungary, where applicable, to be supplied by Contractor to Owner in
accordance with the Contract necessary for the normal, commercial
operation of the lines ordered for this Contract.
"Installation" an all inclusive term referring to the
placement of equipment and material and encompassing all
related general (e.g. construction, erection) and specific
(e.g. splicing, connecting, and testing) terms employed to
describe such activities.
"Line Connection Certificate" means the form statement as defined as
Attachment VI/11 duly signed by the subscriber upon installation and
testing, as described in Attachment VI of a Connected Line which will
certify the full capability of the connection and for normal commercial
operation of the Connected Line.
"Line Price" means the fixed price of USD 1,300 per Ordered
Line.
"Ordered Capacity/Ordered Lines" mean any and all particular telephone
lines which Owner requested Contractor to build under the Contract
including those requested via Change Orders; the term comprises
Connected Lines and Rejected Lines.
"Ordered Spare Capacity/Ordered Spare Lines" means prospective
telephone lines which Owner requested Contractor to build under the
Contract where it is not required to implement the subscriber premises
radio equipment (FAU/SRT).
"Owner" means Hungarotel Rt. and includes its successors.
"Parties" mean the Owner and the Contractor together.
"Permit" means all official documents necessary for the implementation
and turning into commercial operation of the Project with special
regard to network and building construction, access to public
utilities, type approval if applicable, of all the Goods, radio
licenses for all relevant Goods required by law, or other access from
all government agencies or third parties.
"Project" means all Goods and Services to be delivered and
performed for the PRTN
"Project Manager" means the authorized representative of Owner and
Contractor being entitled to control all the activities to be performed
by Owner and Contractor as well as to give instructions and/or
approvals, including the express authority to hand over/take over of
completed work products of Contractor, which are necessary regarding
the daily completion of the Contract.
"Project Executive" means the authorized officers of both parties
having full authority to execute the Project.
"Project Schedule" A comprehensive, computer based schedule employing
Critical Path methodology, which identifies relationships between
project tasks and, based on the quantity of work required, resources
assigned, and expected productivity, predicts the achievement of key
project milestones.
"PRTN" Primary Region Telephone Network, (Bekescsaba and Oroshaza
Primary region) including the telephone infrastructure to be provided
under this Contract.
"Rejected Lines" mean those Ordered Lines where Contractor was unable
to connect a subscriber even after Contactor's best effort, the minimum
of which is provided for in the Contract; the Rejected Lines shall in
effect be considered as additional Ordered Spare Capacity/Ordered Spare
Lines.
"Services" mean all the activities which appear in non-objectified form
(therefore are not "Goods") but form an integral, inseparable part of
the Project, assembly, commissioning, design, installation,
commissioning, and project management necessary to put the Ordered
Lines into commercial operation.
"Site" means locations, building and other places where the
implementation work will take place.
"Sub-Contractor" means those corporate bodies or entrepreneurs licensed
or qualified to perform activities on the commission of Contractor and
with the full and unlimited responsibility of the Contractor to fulfill
the Project.
"System Acceptance" Owners statement declaring that all contractual
obligations of the Contractor, except where explicitly provided
otherwise are fulfilled.
"System Integration" means those activities of Contractor which are
necessary for the connection and communication of the existing and the
new telephone system to be implemented by Contractor in the PRTN on the
level of the host exchanges within the relevant primary region.
"Technical Documentation" means all the technical documents for all
components and the network installed in accordance with the Contract
that Contractor has to deliver to Owner for the normal commercial
operation of the Project as required by law.
"Telecommunications Authority of Hungary" (HIF) means a government
agency authorized to issue telecommunication- related licenses and/or
related permits.
"Test" means the procedures and other measurements carried out by
Contractor on units of the Project according to the manufacturers'
instructions and the internal proceedings and practices of Contractor
and applicable Hungarian rules and regulations aimed to check the
compliance with the relevant technical and functional parameters for
the commercial operation of the Project delivered to the Owner in a
format approved in the Contract.
"Technological Spare Capacity" means an excess number of prospective
telephone lines which were not ordered by Owner but instead arise from
technological circumstances and are therefore neither chargeable
against nor useable by Owner.
"Turn-key Project" The delivery of a complete and functioning telephone
system which provides normal commercial telephone services for the
Primary Regions (Bekescsaba and Oroshaza) capable of commercial
operation for public telephone services by Owner's employees capable of
operation for the purpose intended by Owners and in compliance with the
technical documentation of this Contract. This includes Engineering,
Furnishing, Installing and Testing (EFIT) of all system equipment and
components excluding Customer Premise Equipment with the exception of
installation and testing.
"Unit Price" means the price of goods and services listed in Attachment
I. Should the need of any unit price not listed in the Attachment I
mentioned above arise during implementation, Contractor shall define an
appropriate unit as approved by Owner.
3 SCOPE OF WORK
3.1 General
Contractor shall provide Goods and Services to be supplied in a
Turn-key Project for the development of a fully functional telephone
system of 7,500 new subscriber lines in the following priority: 64 pay
telephones in 32 settlements, the connection of subscribers in defined
6 villages, LB subscribers, and the exceeding amount of the Ordered
Lines shall be connected to subscriber selected by Contractor from the
waitlisted and CB subscribers at the Contractor's discretion and shall
take into account the technical conditions and subscriber ranking as
defined in Attachment V. The Project shall be implemented such that at
least 80% of the implemented Ordered Lines shall be Radio in the Local
Loop (RLL) technology comprising the Connected Lines and the Ordered
Spare Capacity in accordance with the requirements of Owner as set
forth in Attachment V hereof. Furthermore, the Project shall satisfy
the System Integration requirement as defined herein as well as the
satisfaction of Change Orders which are accepted pursuant to the
Contract. These activities and responsibilities of Contractor include
without limitation, regarding the content of this contract, the design,
engineering, manufacturing, supply, installation, obtaining of all
relevant permits and licenses, commissioning, testing, delivery of
technical documentation, and warranty of the following:
3.1.1 Switching - AXE
3.1.2 Wired and Optical Transmission Equipment
3.1.3 RAS 1000 Radio Access System
3.1.4 DRA 1900 DECT/RLL
3.1.5 Microwave Transmission
3.1.6 Main Distribution Frame (MDF)
3.1.7 Power Supply to the Equipment
3.1.8 Digital Distribution Frame (DDF)
3.1.9 Trunk Network
3.1.10 Connection to the backbone network
3.1.11 Pay phones and booths
3.1.12 Buildings and environmental systems
3.1.13 Structures
3.1.14 Copper based network.
3.2 Network boundaries
On one side of the connection of the host exchanges to the DDF of the
existing EWSD exchange in Bekescsaba region, and connection to the DDF
of the secondary network in Oroshaza, and on the other side the wall
socket of the Customer Premise Equipment including testing and
installation of the CPE if provided by the Owner. The scope of work
excludes the extension and/or improvement of the existing telephone
network in the PRTN and the extension of the secondary exchanges.
3.3 Grade of service for the Project
The Grade of Service shall be P. 01 and the traffic
performance shall be .00 Xxxxxx per subscriber.
3.4 Attachments
The following Attachments are considered, read and interpreted
as inseparable part of the Contract:
3.4.1 I Unit Prices
3.4.2 II Ericsson Retention Guarantee
3.4.3 III (Not used)
3.4.4 IV Text of Corporate Guarantee
3.4.5 V Owner Information
3.4.6 VI Technical Appendices (specifications and
descriptions), Tests Procedures
3.4.6.1 VI/1 Switching
3.4.6.2 VI/2 Wired Transmission (PDH)
3.4.6.3 VI/3 Microwave Transmission (MINILINK)
3.4.6.4 VI/4 Power Supply
3.4.6.5 VI/5 Main Distribution Frame (MDF)
3.4.6.6 VI/6 Digital Distribution Frame (DDF)
3.4.6.7 VI/7 Network Management (XMATE) - optional
3.4.6.8 VI/8 RAS 1000 RLL
3.4.6.9 VI/9 DRA 1900 (DECT) RLL
3.4.6.10 VI/10 Network Construction
3.4.6.11 VI/11 Training
3.4.6.12 VI/12 Line Connection Certificate
3.4.6.13 VI/13 Pay phones and booths
3.4.6.14 VI/14 General notes
3.4.7 VII Warranty Response Obligations
3.4.8 VIII Change Order Form
4. CONTRACTOR'S OBLIGATIONS AND RESPONSIBILITY
4.1 Project Manager
Contractor will designate a Project Manager (with deputies for project
sub-elements, as appropriate) with overall responsibility for the day
to day conduct of the project. The Project Manager's responsibilities
and authority will be provided in writing. Contractor will not reassign
this responsibility without notifying the Owner. The Project Manager
will be replaced upon the Owner's request where such request
demonstrates due cause (including chronic delays, missed project
milestones, failure to be fully informed of project activities, and
failure to properly conduct progress meetings or provide agreed upon
project reports) for that replacement.
4.2 Project Schedule
Contractor shall supply to the Owner for information purposes only,
within fifteen (15) calendar days of contract signing, a preliminary
calendar of the Project and within forty-five (45) days a digitized
copy of the Project Schedule in a format compatible with Microsoft
Project, and a hard, paper copy of the Project Schedule XXXXX chart.
4.3 Installation plan and technical content
Parties agree that the planning and completion of the Project shall be
performed in accordance with an installation plan reviewed by the
Owner. Contractor shall inform Owner in writing of the technical
content of the Project no later than forty-five (45) days from the
coming into force of the Contract. In case Contractor changes the
content of the documents on which information was given to Owner,
Contractor shall inform Owner on such changes in writing within five
(5) days.
4.4 Subcontracting
The Contractor may subcontract portions of the work to qualified
subcontractors. Use of Sub-Contractors does not relieve Contractor of
overall responsibility for the quality and timeliness of project
activities. Contractor shall be responsible for the subcontracted work
as if Contractor would have performed it.
4.5 Products and Services of Hungarian Origin
4.5.1 The Contractor will use best effort to ensure that
not less than 30% of the total value of products
purchased and services provided for the purposes of
the Project shall be fulfilled with products and
services of Hungarian origin.
4.5.2 Contractor shall provide a certificate describing
the actual percentage of Goods and Services of
Hungarian origin prior to System Acceptance. Such
certificate can be adjusted by Contractor no later
than 28 February 1997. In the absence of an
adjusted certificate, the one provided by
Contractor shall be deemed final.
4.5.3 A product shall be deemed to be of Hungarian origin
if, (i) either 25% of the total value thereof was
produced in Hungary, or, (ii) proof can be given that
due to the manufacturing process having been carried
out in Hungary, the added value of such product
increased by 25%.
4.5.4 The Contractor acknowledges that an inspection may
be carried out by the Ministry of Transportation,
Telecommunication and Water Management (the
"Ministry") or by a competent agency at any time to
ensure compliance with such provision and
undertakes to fully cooperate with the Ministry or
the competent agency during such an inspection.
4.6 Test Procedures
As set forth in detail in Attachment VI hereto, Contractor shall carry
out formal Tests of all implemented Goods, where applicable. The
manufacturers' testing instructions for installation for the
implemented equipment and system shall be made available for Owner in
advance. Contractor shall invite Owner to these Tests in writing at
least five (5) days earlier unless the Test concerned was duly
indicated in the Project Schedule including its objective, exact time,
date and location. Owner shall have the right to participate in the
Tests and make comments on the test procedure and the results. Any
objection of the Owner must be recorded in the relevant Test protocol
(record) or attached thereto. All Test protocols shall be furnished to
Owner regardless of Owner's participation at the Test.
4.7 Insurance
4.7.1 Property
The Contractor and any associated subcontractors shall be
covered by insurance for the joint benefit of the Owner and
the Contractor in respect of the Project (including for the
purpose of this clause any unfixed materials or other
equipment delivered to the Site for incorporation therein) to
their full value against all loss or damage arising from any
cause for which the Contractor is
responsible under the terms of the Contract.
4.7.2 Liability
The Contractor shall throughout the execution of the Project
maintain insurance against damage, loss, or injury for which
the Contractor is liable. The terms of such insurance shall
include a provision whereby in the event of any claim, being
brought or made against the Owner, for which the Contractor is
entitled to receive indemnity under the policy, the insurer
will indemnify the Owner against any such claims and any
costs, charges, and expenses in respect thereof. The liability
insurance of Contractor shall also cover the Warranty Period.
4.7.3 Term
Insurance shall be effected in such a manner that the Owner
and the Contractor are covered for the entire period of this
Contract.
4.7.4 Evidence of coverage
The Contractor shall comply with the terms of any policy
issued in connection with the Contract and shall, whenever
required, produce to the Owner the policy or policies of
insurance and notification of any changes to such policies.
4.8 Contractor Employee Conduct
The Contractor must take the expected and reasonable precautions at any
time, to forestall illegalities or any other kind of untolerated
misconduct on the part of the employee, and to avoid any kind of damage
to the property or to personal safety, during the process of
implementation of the project.
4.9 Indemnification
The Contractor shall indemnify and hold the Owner harmless against all
losses and claims for injury or damage to any person or property
whatsoever which may arise out of or in consequence of the Contractor's
action or inaction. The Contractor shall also indemnify the Owner
against all claims, demands, proceedings, damages, costs, charges, and
expenses whatsoever in respect thereof or in relation thereto.
4.10 Training
Contractor agrees to provide training to the extent needed for Owner's
employees to enable them to operate the system in accordance with a
separate agreement which the Parties shall make within 30 days after
the execution of the Contract.
4.11 Additional Orders of Owner
In case Owner, beyond the scope of this Contract and subject to one or
more separate contracts, engages Contractor in deliveries and services
in addition to this Project provided that Owner's order for additional
lines will be made no later than 30 June, 1997, Contractor undertakes
to satisfy such order(s) for a line price not exceeding the limits set
forth below:
10-20 thousand Ordered Linesfor USD 1,175/line
20-30 thousand Ordered Linesfor USD 1,100/line
30-40 thousand Ordered Linesfor USD 1,050/line
40-50 thousand Ordered Linesfor USD 1,000/line
50-60 thousand Ordered Linesfor USD 975/line
4.12 Safety Management
The Contractor will provide to the Owner, within thirty (30) days after
execution of the Contract, a Safety Management program which is
designed to protect employees, the Owner, the general public,
subscribers, and public and private property from hazards which will
cause injury or damage. The program will be based on the following:
-national and local regulations
-hazardous materials, including disposition
-additional site precautions
4.13 Construction Book
The construction book is a basic document for the implementation of the
Contract. It shall be maintained on the site by the Contractor, and
shall be available any time for review by Owner's representative. The
book shall contain three copies for each page and only a representative
of the Contractor or the Owner are entitled to make entries. One copy
belongs to the Contractor and the other copy to the Owner: the original
copy shall be kept on the site. Contractor shall deliver the Owner copy
to the Owner each week.
4.14 Customer Service Agreement
Parties agree that a Customer Services Agreement, for value added
services provided by the Contractor, may be signed within ninety (90)
days following the execution of the Contract.
4.15 System documentation
Contractor shall provide to the Owner three copies of all installation,
maintenance, and operations documentation for all network components
necessary for Owner to manage and maintain the commercial operation of
the Project as
implemented in accordance with the Contract.
4.16 Rejected Lines
Contractor shall use best efforts to connect all Ordered Lines to
subscribers. Where Contractor cannot have access to a subscriber's
premises upon a notice sent to the subscriber, Contractor shall mail a
second notice to same. Both notices shall be sent by registered mail
with a return receipt. If the subscriber fails to permit access to
Contractor upon such second notice, the line concerned shall be deemed
as a Rejected Line provided that Contractor provides evidence of both
notices sent. Upon request of Contractor, Owner may approve different
methods of evidencing a Rejected Line. However, Contractor shall notice
Owner on any of such failure of access and in case Owner subsequently
reports that Owner's representatives succeeded to secure access to said
subscriber's premises in five (5) days, Contractor shall complete the
subscriber line concerned.
4.17 Corporate Guarantee
Contractor will provide a Corporate Guarantee, as defined in Attachment
IV, issued by the Ericsson parent company which is binding and
enforceable according to Hungarian and/or the law of the seat of
guarantor company of Ericsson under which the guarantor undertakes to
guarantee the Owner complete fulfillment of Contractor's obligations
under this Contract and such Corporate Guarantee shall be valid from
the date of coming into force of this Contract until the complete
fulfillment of such obligation and be released upon System Acceptance .
The language of the Corporate Guarantee is attached hereto as
Attachment IV.
4.18 Permits and licenses
4.18.1 Government Permits and licenses
Contractor is responsible for obtaining the Construction
Permit and other permissions and/or licenses related to the
Project, including but not limited to microwave radio
frequency licenses, RLL frequency licenses, and the Project
commissioning license (in Hungarian: hasznalatbaveteli and/or
rendszeresitesi engedely) in the name of Owner to be issued by
Government Authorities including the approvals of the
Telecommunication Authority of Hungary where needed for
construction, right of way, and system operation of the
Project for commencing commercial traffic. The costs related
to this responsibility of the Contractor shall be borne by the
Contractor with the exceptions of the commissioning license
fees required by government agencies for the commercial
operation of the network which will be directly paid by the
Owner, and the documented Contractor
costs related to the commissioning licenses.
4.18.2 Third Party Permits
The Contractor is obliged to apply for and obtain the Permits
of third parties not mentioned above (e.g. owners of affected
real properties). All compensations to be paid directly to
such third parties shall be borne by Owner. The Contractor in
consultation with the Owner shall identify third party-owned
real properties and leaseholds including their owners and
holders which are affected by the project during the designing
period. The process for third party approvals is as follows:
4.18.2.1 Contractor is responsible for third party
approvals;
4.18.2.2 Contractor will optimize network locations
for both PRTN and Contractor;
4.18.2.3 Contractor will take into account the
availability of free real estate, provided
either by Owner or local municipalities,
during equipment site selection;
4.18.2.4 Owner will approve or disapprove the
Contractor proposed solution
4.18.2.5 If Owner disapproves, Contractor may proceed
of its own accord
4.18.2.6 Owner has 15 days to prove that Contractor
site was more expensive while no less
beneficial to the Contractor than an
alternate, suitable site identified by Owner
4.18.2.7 If Owner meets the requirements of 4.18.2.6,
Contractor will compensate the Owner in an
amount equal to the difference between the
two sites. Compensation to be in kind or
performance at Contractor's resolution.
4.19 Handing over/taking over
The Contractor, at completion of the Project, but prior to System
Acceptance, shall deliver to Owner all related documents including but
not limited to:
- Statement of the Contractor,
- high quality of completion of implementation,
- conformance to applicable standards and related
requirements,
- delivery of a complete, detailed, and revised
documentation in three (3) copies of the Project as
completed,
- final test measurement records and documents,
- geodetic survey documentation in three (3) copies
(if applicable),
4.20 Change Order
The Contractor may initiate a change in the value, schedule, or design
of the Contract via Change Order subject to the approval of Owner.
Owner's approval shall not be unreasonably withheld.
5 OWNER'S RIGHTS AND OBLIGATIONS
5.1 Owner's Representatives
The Owner will assign a Project Executive, Project Manager, Engineering
Manager, and such supporting staff as appropriate to maintain liaison
with the Contractor during the course of the project. Written
designation of such persons and their responsibility and authority
shall be provided within 15 days after the signing of the Contract. The
Project Manager shall be located at the project site and will provide
daily inspections of the work site, contract performance, and contract
compliance.
5.2 Information to be Provided
Owner shall provide necessary information as requested by the
Contractor for the successful design and installation of the Project as
set forth in Attachment V and agrees to provide further information
reasonably requested by the Contractor. Owner shall provide to
Contractor within five (5) days or earlier of coming into force of the
Contract the current waiting list and CB/LB subscribers with names,
addresses and type of service residential or business.
5.3 Access
Unless specially requested, Owner premises will be available only
during normal business hours. In the case of work requiring Contractor
access beyond such hours, access will be requested no less than 24
hours prior to expected use. Contractor staff working on Owner premises
will be supervised,
carry appropriate identification, and conform with the dress and
demeanor of Owner staff at that activity. Owner is obliged to issue
and/or obtain all permits for Contractor and/or its Subcontractors to
enter the premises owned and/or directed by Owner so that their
contractual obligations can be performed. The above permit shall enable
Contractor's or its Sub-contractor's authorized personnel to enter the
premises when necessary.
5.4 Owner Review and Approval
The Owner is responsible for the timely review and approval of
documents submitted by the Contractor, at its discretion, in accordance
with this Contract. Owner's approvals or the reason if one or any of
them is being withheld, if any, shall
be passed to Contractor within 5 business days from the date of the
confirmed receipt, as defined under Article 12.8 Notification, of
application for approval.
5.5 Owner delay (other than financial)
Owner shall meet obligations under this Contract for only those
requirements specified in this Contract or in the latest version of the
Project Schedule received at least 15 days in advance of scheduled
obligations so that Contractor is able to follow and keep the timing.
In case of delay of Owner relating only to those requirements specified
in this Contract or in the Project Schedule, Contractor shall be
entitled to a reasonable extension of the performance deadline which
cannot exceed twice the duration of the Owner's delay. Contractor shall
be entitled to request an extension of the affected Contractor deadline
only within five (5) days of Owner's delay provided that such delay
affects Contractor's deadlines.
5.6 Authorization
After the Contract has come into force, Owner shall issue an
authorization for Contractor within fifteen (15) days. This
authorization shall entitle Contractor to act on Owner's behalf for
obtaining Permits and licenses.
5.7 Payment obligation
Owner shall be responsible for all the payments to be settled to
Contractor in accordance with Article 6 of this Contract.
5.8 Purchase of imports
The Owner hereby declares that the equipment to be supplied by the
Contractor will serve for investment purposes in the meaning according
to the Hungarian regulation. The Owner upon the request of the
Contractor shall provide the Contractor with a written declaration of
the above in the form required by the Contractor.
5.9 System Acceptance
The Owner will provide to the Contractor a written notice of System
Acceptance upon compliance with the terms and conditions of this
Contract including but not limited to receipt of all deliverables
including documentation, test records, or other requirements of Article
3.2 herein.
5.10 Change Order
The Owner may initiate a change in the value, schedule, or design of
the Contract via Change Order subject to the approval of Contractor.
Contractor's approval shall not be unreasonably withheld.
6 FINANCIAL TERMS
6.1 Contract Price
The Owner shall pay as compensation to the Contractor the
Contract Price of
USD 14,175,000
which is the Line Price of USD 1,300 multiplied by 10,000 Ordered Lines
plus USD 1,175 multiplied by 1,000 Ordered Lines. The final Contract
Price will be adjusted according to the number of the Ordered Lines as
their price will be adjusted pursuant to this Article. If the
Contractor implements less than 80% RLL technology, the line price will
be equal to USD 1,000 per line for those lines between the actual
number of RLL lines and 80% of Ordered Lines.
6.2 Advance Payment
Advance Payment will be fifteen (15) percent of the calculated Contract
value i.e. USD 2,126,250 that is
Two-million-one-hundred-twenty-six-thousand-two-hundred-fifty US
dollars net shall be paid against Contractor's invoice at the execution
of this Contract.
6.3 Invoicing
The Price for Ordered Lines, Ordered Spare Lines, and accepted Change
Orders for Connected Lines shall be computed and invoiced weekly as the
payable amount was adjusted pursuant to Article 6.5 and then the actual
amount payable reduced in proportion to the Advance Payment (in
accordance with Article 6.2 which is 15%).
6.4 Invoice attachment
6.4.1 The Parties agree that the following documents
shall be, without exception, attached to the
invoices:
(i) Line Connection Certificates for each
Connected Line,
(ii) Contractor statements and supporting
documents as set forth in Article 4.16
pertaining to
Rejected Lines;
(iii) Contractor's statement pertaining to Ordered
Spare Lines stating appropriate
implementation;
(iv) Test documents and Contractor's statement
evidencing and stating complete and proper
delivery of Goods and/or provision of
Services furnished upon an accepted Change
Order in accordance with (i), (ii) or (iii)
above, as applicable.
6.4.2 Contractor acknowledges that no payment (save the
Advance Payment) will be made by Owner without the
foregoing documents.
6.5 Price adjustment
Prices shall be applied only as adjustment in the following cases:
(i) Change Orders shall be priced on the basis of the
Unit Price List, or the per Line Price for
additional Ordered Lines.
(ii) Ordered Spare Lines shall be paid by Owner in
accordance with the Line Price less the price of
house wiring and FAU/SRT. Owner will order
FAU/SRT's for Ordered Spare Lines at Owner's
discretion.
(iii) Rejected Lines shall be priced as Connected Lines
less the Unit Price of house wiring; Contractor will
deliver and Owner will accept the FAU/SRT's as spare
parts.
6.6 Currency of invoice
Invoices shall be issued in Hungarian Forint (HUF). Therefore, the
invoiced HUF amount will be adjusted to the current USD/HUF foreign
exchange (in Hungarian:"deviza") middle rate valid on the date of issue
but not later than the Friday following the previous Sunday closing
date for billing of Connected Lines as evidenced by the latest date of
the Line Connection Certificate included in the supporting
documentation forwarded to Owner with the invoice. Notwithstanding the
foregoing, if a turn of calendar months occurs on such a Friday, the
exchange rate of the preceding Thursday i.e. the last day of the
preceding month shall apply. For the current rate of exchange the rate
defined by Hungarian Foreign Trade Bank (Magyar Kulkereskedelmi Bank)
shall be taken.
6.7 Payment deadline
Payments shall be effected against Contractor's invoice within five (5)
banking days upon receipt of an invoice. Any overdue payment shall
carry double (200 percent) the Hungarian National Bank base interest
rate for the actual period of delayed payment.
6.8 Payment Guarantee
Owner shall deposit as security USD 4,400,000 i.e. Four
million-four-hundred-thousand US dollars into an escrow account. The
escrow account will be used for approved payments pursuant to Article
6.3. Whenever the balance in the escrow account reaches USD 750,000 or
less the Owner shall
deposit within five (5) banking days an amount of the USD equivalent to
the value of the amount necessary to restore the funds to the original
amount or the calculated balance of the Contract whichever is the
lesser.
6.9 Suspension of work
Contractor may suspend further performance on or after the eighth day
subsequent to a Payment Notice if Owner failed to settle the invoice
concerned. Contractor shall restart work no later than the third
business day after Owner's effecting payment of the invoice concerned,
but affected deadlines will be considered as extended by the duration
of such suspension.
6.10 Retention
6.10.1 Retention Guarantee
Contractor shall provide, upon final deposit of Owner to the
escrow account as defined in Article 6.8, an unconditional,
irrevocable bank guarantee (the "Retention Guarantee") as set
out in Attachment II in an amount not greater than five (5)
percent of the Contract Price as defined in Article 6.1 i.e.
USD 708,750 payable upon first demand, for retention against
uncorrected deficiencies including but not limited to
documentation to be provided to Owner, installation, waste
removal, restoration, or other deliverables including the
costs of the obtaining of license, and excluding Government
fees. Contractor and Corporate Guarantor shall, within fifteen
(15) days Notice given respectively by Owner correct all
Project with the exception of non-service affecting or
hazardous deficiencies which shall be corrected immediately
upon notice to the Contractor. Failure to correct said
deficiencies shall entitle the Owner to correct such
deficiencies and draw against the Retention Guarantee for all
associated costs. The Retention Guarantee shall be released
upon System Acceptance.
6.10.2 Failure to provide Retention Guarantee
Parties agree that should Contractor fail to provide the
Retention Guarantee as provided for in 6.10.1, upon final
deposit of Owner to escrow account as defined in Article 6.8,
Owner shall have the right to withhold as retention an amount
equal to USD 708,750 from any and all invoices payable to
Contractor.
6.11 Owner performed work
Owner reserves the right to complete the house wiring and SRT/FAU
installation. Owner shall notify Contractor of the intention to perform
such work within thirty (30) days of the Contract coming into force.
Those portions of the work
completed by the Owner shall be deducted from the Line Price as defined
in 6.1 herein according to the Unit Prices set in Attachment I.
6.12 Value Added Tax
The Contract Prices and the Advance Payment given above do not include
Value Added Tax, therefore, the percentage as applicable from time to
time, as currently twenty-five (25) percent shall be added to all
prices and will be given to all invoices. However, VAT shall be paid
separately by Owner to Contractor thus that Contractor's bank account
shall be credited with the relevant amount no later than the day
preceding the statutory due date by which Contractor must pay such VAT.
6.13 Other payments
All costs, compensations, prices etc. related to real estate purchases,
rents, claims, and disputes of or with owners of real properties
affected by the Project shall be paid or otherwise borne by the Owner,
provided that Owner was duly advised in advance by Contractor and
approved such costs, compensations and prices against Third Parties'
invoices or other documents.
6.14 Taxes and Duties
The Contractor is responsible for all applicable taxes, official and
stamp duties, and authorization fees connected to the Contract and is
obliged to pay them. The Owner shall pay the government fee for the
commissioning license as it is not included in the Contract Price.
6.15 Transfer of Ownership Title
6.15.1 Ownership title of Ordered Lines, which have been
paid for by Owner, shall be deemed as transferred
to Owner on the date of deposit into the escrow
account of the last amount required in accordance
with Article 6.8 of the Contract or in case of the
Parties' failure to comply with the Contract due to
Force Majeure or Owner's termination of the
Contract.
6.15.2 In case the Contractor terminates the Contract for
any reason, the full ownership title over the
assets created by the implementation of the Project
shall be deemed as transferred to the Owner.
However, Contractor shall have the right to
repurchase these assets for a repurchase price
equal to the amount paid by the Owner less the
amount of costs determined by an arbitration award
which is rendered pursuant to Article 11.4 herein
provided that the same arbitration award declares the
cause for Contractor's termination of the Contract
justified on the grounds of Owner's material breach
of the Contract as provided for in Article 10.2
herein.
7 DEADLINES
7.1 Implemented infrastructure
Contractor shall implement all Goods and render all Services other than
those needed for the final line connection of subscribers as soon as
possible but no later than twenty (20) weeks after the coming into
force of this Contract.
7.2 Line connections
Contractor shall complete at least ninety (90) percent the
implementation of the Ordered Lines that is the subscriber line
connections as soon as possible but no later than twenty-six (26) weeks
after the coming into force of this Contract. The remaining Ordered
Lines shall be completed within four (4) weeks.
7.3 System Acceptance Documents
Contractor shall provide to Owner within sixty (60) days of the
completion of Project in accordance with Article 7.2 all documentation
and deliverables as provided for in Article 4.19 and the commissioning
license.
7.4 Delay notification
Contractor shall provide at least thirty (30) days advance notification
of the potential failure to meet the deadlines for performances defined
in Article 7. Owner's claims related to Contractor's failure to meet
the deadlines will be determined pursuant to Article 7.4 hereof.
7.5 Liquidated damages
Contractor is obliged to pay liquidated damages to the Owner if - due
to any reason for which the Contractor or any of the Sub-contractors
are responsible - the relevant contractual obligations of the
Contractor are not fulfilled according to the deadlines for
performances as defined under Articles 7.1 and 7.2, even if no damage
or loss occurred to Owner.
7.5.1 Amount of liquidated damages
The liquidated damages shall be HUF One-hundred (100) per day
to a maximum amount of ten per cent (10%) of the original
contract value plus the value for each Ordered Line ordered
via Change Order which Contractor failed to
implement as would have been required in Article 7.2 or as
agreed in a Change Order.
7.5.2 Payment of liquidated damages
The payment or set off of liquidated damages from any sums due
or becoming due to Contractor shall not relieve Contractor
from the obligation to finish the work and/or from other
obligations under this Contract. In case of Contractor delay,
liquidated damages shall be the exclusive remedying available
for Owners.
8 CONTRACTOR'S WARRANTIES
8.1 Warranty Period
The warranty period, shall be twelve (12) months for the Goods
commencing on the date when ninety (90) percent of the Line Connection
Certificates for Ordered Lines have been received by Owner.
8.2 Reliability
The network will provide the traffic performance and grade of service
as outlined in Article 3.3 herein.
8.3 Warranty claim
During the warranty period, Owner will inform Contractor in written
form and without delay regarding any problems which may require action
by Contractor.
8.4 Warranty response time constraint
During the warranty period, any fault occurring in case of proper use
of the equipment implemented in the frame of this Contract shall be
repaired by the Contractor free of charge for Goods and Services within
the time constraints set out in Attachment VII hereof. Contractor shall
be liable for damages certified by the Owner including the lost revenue
of Owner in case of a failure to meet the correction deadlines referred
to in the previous sentence for the period starting on the next day of
a missed deadline and lasting until the default is actually repaired.
8.5 Warranty exemptions
8.5.1 Extension of network
The warranty shall not apply to the part of the Project where
Owner or its Representatives executed extension, changes or
corrections, except the case of subscriber's connections,
outside the scope of the Contract during the warranty period.
If Owner notifies Contractor about
these works previously, the Parties shall define the network
or system boundary from which the warranty obligations of
Contractor will remain valid.
8.5.2 Owner negligence
Contractor's liability does not cover damages caused by
Owner's failure to follow the technical standards regarding
the operation and maintenance of the Goods as defined in the
Technical Documentation.
8.6 Type Approval
Contractor shall replace any Goods supplied for the Project free of
charge if a competent authority rejects to provide final type approval
or withdraws a relevant type approval previously issued. This provision
shall survive the Warranty Period.
9. INTELLECTUAL PROPERTY
9.1 Contractor's Authorization
Contractor is the owner of the intellectual property rights in and to
all relevant Goods delivered by him under this Contract, or it is duly
authorized by the original owner of the said rights to grant any right
explained below to Owner.
9.1.1 Patent Rights and Trade Secrets Rights
Contractor shall grant to Owner an irrevocable, non-exclusive,
non-transferable license to use any invention incorporated in
any of the Goods, covered by patent(s). Such license shall be
deemed fully paid up for the purposes of use of the Goods
delivered under this Contract.
9.1.2 Terms of Use
Any other provisions of the Contract notwithstanding, with
respect to any inventions, including patented inventions, that
any person or entity is authorized by the Contract to use or
practice only under certain conditions or limitations, such
use or practice shall be:
9.1.2.1 free, unconditional and unlimited from and
after the time that the rights in inventions
come into the public domain, or
9.1.2.2 at the sole discretion of such person or
entity, on other terms from and after the
time that such rights in inventions become
otherwise lawfully available to such person
or entity on such other terms.
9.1.3 Unaffected Rights and Obligations
This Article shall not be construed as limiting any rights of Owner or
obligations of Contractor under this Contract, including specifically
the right of Owner for no additional compensation to Contractor, to
use, have used, deliver, lease sell or otherwise dispose of, the Goods
or any part thereof, required to be delivered under this Contract.
9.2 Copyright
9.2.1 Ownership and Copyright
The ownership and copyrights in and to any Software, the
associated documentation or the documentation of the Hardware
shall remain with their original owners and/or any other
entities duly authorized by the former.
9.2.2 Use of Copyrighted Software
With the Software packages and documentation, protected by
others' copyright rights under the Hungarian copyright law
and/or international treaty, Owner, by virtue of this
Contract, is allowed to:
9.2.2.1 make copies solely for routine replacement and
back-up purposes, or
9.2.2.2 transfer the Software to a single hard disk,
provided that the Owner keeps the original solely
for back-up and archival purposes. In addition,
Owner shall be granted, via Contractor, by the
original copyright owners an irrevocable,
non-exclusive, non-transferable license to use such
copyrighted materials.
9.3 Copyright Restrictions
The copyright includes, among others, the prohibition of any
modification, alteration, de-compilation, disassembling, reverse
engineering, or making any derivative work such as translation,
recasting, transformation or adaptation.
9.4 Intellectual Property, Patent, and Copyright Indemnity
Contractor shall defend at its expense, suits against Owner upon claim
that the Goods, including the latest unmodified release of Software
supplied under this Contract, infringe property rights granted or
registered in Hungary, provided that
9.4.1 Notification of lawsuit
Owner promptly notifies Contractor in writing on the
suit,
9.4.1.1 Contractor has sole control of the defence
and related settlement negotiations, and
9.4.1.2 Owner gives Contractor information and
assistance for the defence all at
Contractor's expense.
9.4.2 Indemnity
Contractor shall indemnify and hold Owner harmless from all
payments which by final judgments in such suits may be
assessed against Owner on account of such infringement and
shall pay resulting settlements, costs and damages finally
awarded against Owner by a court of law.
9.4.3 Remedy
Owner agrees that if the use, sale or distribution of the
Goods prohibited as a result of such suit, or in Contractor's
option are likely to be prohibited, Owner will permit
Contractor, at his option and expense, either to procure the
right for Owner to continue using such Goods or to replace or
modify same so that they become non-infringing.
10 TERMINATION
10.1 Termination on default
This Contract may be terminated by either Party in the event of default
by the other Party. In either event the Party initiating termination is
required to give the other party fifteen (15) calendar days advance
notice. In the event of termination for default, the initiating Party
agrees that the default notification will be rescinded if, within eight
(8) calendar days of notification, the defaulting Party corrects, to
the notifying Party's satisfaction, the material basis for default.
10.2 Grounds for termination
10.2.1 Owner's Right
Owner may justify Contractor's default on the basis of the
following cases:
10.2.1.1 the Contractor fails to commence the work
over a period of one (1) month,
10.2.1.2 the Contractor disrupted the performance of
its contractual obligations without
justified reasons and does not continue the
work within thirty (30) days,
10.2.1.3 the Contractor gives the whole Project to
sub-contracting,
10.2.1.4 material failure to adequately carry out
Contractor's responsibilities. Such failures
include, but are not limited to:persistently
failing to supply enough properly skilled
workers or proper materials; persistently
disregarding laws or ordinances; or
substantial breach of the provisions of this
Contract,
10.2.1.5 before terminating the Contract pursuant to
the foregoing clauses, Owner shall request
the Ericsson parent company, providing the
Corporate Guarantee, to perform all
outstanding Contractor duties and
obligations in accordance with the Contract.
10.2.2 Contractor's Rights
The Contractor may justify Owner's default on the
basis of the following cases:
10.2.2.1 Owner fails to provide the Advance Payment
and open or refund the escrow account
pursuant to Articles 6.2 and 6.8 herein,
10.2.2.2 the Owner fails to provide or otherwise
ensure the Site(s) or to meet the
requirements as set forth in Article 4 over
a period of one (1) month,
10.2.2.3 the Owner's delay in payment exceeds
thirty-five (35) days provided that
Contractor sent a notice ("Payment Notice")
not earlier than the fifth day after the due
date of an invoice which was not fully paid
by Owner.
10.3 Compensation in Case of Termination
10.3.1 Termination by Owner
Owner will compensate Contractor on the basis of the Unit
Price List for delivered Goods and Contractor's work product
which Owner chooses to keep. Such compensation, however, must
not exceed that calculated on the grounds of the Line Price
set forth herein as it would have been required to be adjusted
under this Contract. Any payment to Contractor under this
Article shall be subject to Owner's claim for damages and/or
lost revenue.
10.3.2 Termination by Contractor
In accordance with the Unit Prices and the Line Price, Owner
will reimburse Contractor for the implemented portion of the
Project, Goods delivered, Services rendered, and expenses
incurred before the date of Contractor's termination and also
for tasks properly
performed after the date of termination of the Contract and
those arising from obligations relating to the Contract if
undertaken bona fide. From the above amount all sums shall be
deducted which Contractor is obliged to pay to and/or which
Contractor owes Owner including the amounts previously paid by
Owner. Contractor shall be entitled to claim damages.
11 GOVERNING LAW AND DISPUTE RESOLUTION
11.1 Governing Law
This Contract shall be governed by Hungarian law. For issues not
expressly provided for by the Parties hereof the provisions of the
Hungarian Civil Code (Act No. IV of 1959 as amended) shall apply.
11.2 Amicable dispute resolution
If a dispute of any kind whatsoever arises between the Owner and the
Contractor, in connection with, or arising out of this Contract,
whether during the execution of the Project or after completion and
whether before or after repudiation or other termination of the
Contract, including any dispute as to any opinion, instruction,
determination, certificate or valuation, the Owner and the Contractor
shall, in the first place, seek to resolve the dispute amicably between
them.
11.3 Effect on the project
Unless the Contract has already been repudiated or terminated, the
Contractor shall, in every case, continue to proceed with the Project
with all due diligence and the Contractor and the Owner shall give
effect forthwith to every decision they take to resolve their dispute.
11.4 Arbitration
11.4.1 Notices of arbitration
If no amicable settlement is possible, then either the Owner
or the Contractor may give notice to the other party, of
intention to commence arbitration, as hereinafter provided, as
to the matter in dispute. Such notice shall establish the
entitlement of the party giving the same to commence
arbitration. Unless the parties otherwise agree, arbitration
may be commenced on or after the twentieth calendar day after
the day on which notice of intention to commence arbitration
of such dispute was given, even if no attempt at amicable
settlement thereof has been made.
11.4.2 Arbitration procedure
Any dispute in respect of which amicable settlement has not
been reached shall be finally settled, unless otherwise
specified in the Contract, under Hungarian law and in
accordance with the Rules of Conciliation and Arbitration of
the Hungarian Chamber of Industry and Trade by one or more
arbitrators in Hungary appointed under such Rules. The place
of arbitration shall be Hungary and the language of the
arbitration shall be English. The said arbitrator(s) shall
have full power to open up, review and revise any decision,
opinion, instruction, determination, certificate or valuation
related to the dispute.
12 MISCELLANEOUS TERMS AND CONDITIONS
12.1 Assignment
This Contract or any of its provisions or any receipt of payment shall
not be assigned by either Party without the prior written consent of
the other.
12.2 Force Majeure
Neither party shall be considered in default in the performance of its
obligations under this Contract to the extent that the performance of
such obligation is prevented or delayed by any cause, existing or
future, which is beyond the reasonable control of such party.
12.2.1 Notices
Should any Party be affected by Force Majeure, such Party
shall notify the other Party in a written form within seven
(7) days from the occurrence of the Force Majeure. The
notification shall include details constituting the Force
Majeure as well as the positive evidences which prove that the
case was unavoidable and that it delays the fulfillment of the
contractual obligation of the Party. In the above
notification, the estimated duration of the Force Majeure
shall be included as well as a statement declaring the
inability of the effected Party to perform the concerned
obligation(s) as long as the case of Force Majeure
exists/remains.
12.2.2 Effect on Contract
Should the duration of Force Majeure exceed the period of five
(5) days, Parties shall negotiate the reasonable modification
of the Contract and equitable compensation for Contractor in
respect of work performed but not tested, if applicable, due
to Force Majeure. If Parties cannot come to an agreement
within the above period, they can submit the dispute to be
resolved pursuant to Article 11 herein.
12.2.3 Limitation
The Contractor is not entitled to rely on any event otherwise
qualifying as Force Majeure if the scheduled deadline of the
Project was due before such event.
12.3 Data Ownership and Confidentiality
Any information or data, in the form of specifications, drawings,
technical data or other information, not a work product of this
Contract, furnished by the Owner or Contractor to the other party shall
remain the property of the furnishing party. Work product of this
Contract shall become the property of the Owner under the conditions
stipulated herein.
All work product and information marked as Proprietary by either party
prior to transfer to the other party shall be kept confidential by the
receiving party and receive the same degree of care in handling and
retention as that party applies to its own proprietary information. The
party receiving such proprietary information shall not disclose,
without the furnishing party's written permission, such information to
any other person or use such information itself for any purpose other
than the performance of this Contract. The obligations under this
paragraph shall survive the termination of this Contract for a period
of five (5) years.
12.4 Effect of Waiver
Owner's waiver of any Article of this Contract shall have no effect on
the Contract.
12.5 Severability
If any provision hereof, or the application of any such provision to
any person or circumstance, shall be held invalid or unenforceable by
an arbitration tribunal of competent jurisdiction, then the remainder
of this Contract, or the application of such provision to persons or
circumstances other than those as to which it is held invalid, shall
not be affected thereby and such invalid provisions shall be replaced
by a valid provision (and for this purpose the arbitrator(s) may act as
amiable compositor/s) which most closely gives effect to the intent and
purpose of the parties hereto and the allocation of risks and benefits
reflected in such provision.
12.6 Contract Amendment
Any contract terms can only be amended in written form duly signed by
both Parties.
12.7 Copies
The Contract was prepared in English language and was signed in four
(4) original copies of which each Party keeps two (2).
12.8 Notification
Notices or communications required or permitted to be given under this
Contract will be deemed to be given; a) when delivered by hand, b) when
transmitted by facsimile and confirmed by returned facsimile, c) five
(5)calendar days after being sent by certified mail, in each case, to
the address or facsimile number following:
HUNGAROTEL Rt.
Xxxxx Xxxxxxxx, Chairman
1126 Budapest, Kiralyhago u. 2.
Tel.: 000-0000
Fax: 000-0000
ERICSSON Kft.
Xxxxx Xxxxxx, Xxxxxxxxx
0000 Xxxxxxxx, Xxxxxxxx krt. 162.
Tel: 000-0000
Fax: 000-0000
12.9 Coming into Force
The Contract comes into force on the date when duly signed by the
authorized representatives of the both Parties but not before the
Corporate Guarantee, the advanced payment and the financial security
provided for in Articles 4.17, 6.2 and 6.8 are in place.
Parties have both read this Contract and mutually agreed and understood its
contents.
Budapest, May 17, 1996
